Legal Review on the ruling of the Zawiya Court of Appeal in Libya vs TotalEnergies and Conoco Phillips/Hess
On May 4, 2023, the judgment of the Zawiya Court of Appeal in the First Administrative Division, registered under No. 216 – 2022, was issued against the Council of Ministers Resolution No. 918 of 2022, which pertains to the approval procedures for the sale of a share owned by a foreign company in Waha Oil Company, which was the text of the decision as follows:
‘’ Article (1)
The approval procedures for the sale of Hess Libya’s share in Al-Waha Company to Conoco Phillips and Total Energy shall be approved, as presented at the fourteenth ordinary cabinet meeting of 2022 referred to.
This decree shall enter into force from the date of its issuance, and any provision contrary to it shall be repealed, and the competent authorities shall implement it.’’
On April 30, 2021, the French company TotalEnergies submitted an offer to purchase shares from the American company Hess in their joint oil exploration and production contract (EPSA) with the Libyan Oasis Company. The contract provides the Libyan state with the right of pre-emption, and the sale was approved by Cabinet Resolution No. 552 of 2020, attached to Resolution No. 118 of 2022.
The legal concerns that are going to be examined and analysed hereby can be divided into three legal questions in this regard, as follows:
- What is the right of pre-emption in Libyan law and oil contracts in Libya?
- Do Libyan courts have any jurisdiction to look at oil and gas contracts?
- Is a non-interested person entitled to file a lawsuit in Libya?
Although the merits of the judgment touched on the suspension of the implementation of the decision and the consequent sale contract in the urgent apartment, and soon considered its substantive part, there arises a constitutional problem. This stems from the defect of the Government of National Unity’s lack of jurisdiction and its behavior outside its competence as a caretaker government under the legislation in force. This is based on the House of Representatives Resolution No. 10 of 2020 regarding the withdrawal of confidence from the government. The ruling on this matter may involve examining the extent of the legitimacy or lack thereof of the Government of National Unity, which falls within the sole competence of the Constitutional Chamber of the Libyan Supreme Court. This reference, however, does not distract us from discussing and commenting on the three legal inquiries and their legislative rooting.
First: What is the right of pre-emption in Libyan law and oil contracts in Libya? The Libyan Civil Code of 1953 (referred to as ‘The Law’) allows the right of pre-emption according to the requirements and provisions contained in Articles (939-952).
However, Articles 944 and 952 of the Code deal with the procedures related to pre-emption, including deadlines. The person who has the right of pre-emption is required to exercise this right before the seller and buyer by declaring their interest within fifteen days from the date of the official warning given by the seller or buyer. If they fail to do so within this timeframe, they will forfeit their right. The right of pre-emption also lapses if one year has passed from the day of registering the sale contract, regardless of whether the pre-emptor is present or absent.
In the case of oil contracts in Libya (EPSA), the right of pre-emption extends to one hundred and twenty (120) days from the date of notification or extension. After the expiry of this period, the foreign party can start executing the sale thirty (30) days after notifying the Libyan State.
It is worth noting that the provision discussed in this comment does not address the right of pre-emption and its provisions or the parties’ obligations regarding deadlines and requirements. Its focus appears limited to the legitimacy of the administrative decision issued by the Council of Ministers and its effects, as well as the administrative dimension within the competence of the Ministry of Oil or the Council of Ministers. The provision does not address the role and overlapping competencies with the two bodies mentioned regarding the Supreme Council for Energy and Gas Affairs, which was discussed in a previous article available in this link: Legal Analysis Cabinet Resolution No. 790 of 2022 On Reorganization of the Supreme Council for Energy Affairs Preamble – Itkan Law
Second: Is it permissible for the Libyan judiciary to intervene in oil contracts that are subject to international arbitration? The Petroleum Law No. 25 of 1955, with the text of Article 20, subjects oil contracts to Libyan law and international arbitration, and this is what oil contracts with the Libyan state adhere to. Although the judgment is subject to suspension targeting the administrative decision of the Council of Ministers, it clashes with the provisions of the Libyan Petroleum Law and oil contracts, which are exceptions to the legal rule on which the judges based their judgment that is the subject of this suspension. Therefore, it remains for the Supreme Court to decide on the matter.
Third: To what extent is an ordinary person entitled to file a lawsuit in Libyan law? The principle in the Libyan Code of Civil and Commercial Procedure of 1953 is that the interest condition is one of the main requirements for accepting a lawsuit, as it depends on the existence of a direct interest, distinguishing it from the concept of “hisba and grievances” in Islamic law, which constitutes the second source of legislation in Libya according to Article 1 of the Libyan Civil Code.
What draws attention in this judgment is the broad interpretation of the text found in Article (6) of Law No. 88 of 1971 concerning the administrative judiciary, particularly concerning the concept of “direct personal interest.” The judgment said that only “civil servants” have the right to appeal, not workers who are interested in challenging the administrative decision mentioned in the judgment. This exclusion is due to the differing conditions required compared to a civil lawsuit, which does require the condition of interest.
In conclusion, we expect from Libyan jurisprudence and the Libyan Supreme Court to develop a legal view on this case.