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The Provisions of Law No. 9 of 2010 on Promoting Investment

The Provisions of Law No. 9 of 2010 on Promoting Investment

By Albudery Shariha
Co-Author, Huda Tulti

The provisions of Law No. 9 of 2010 on Promoting Investment

Analysis of the Foreigners’ Right to Invest in Libya

This article sheds light on several legal questions raised concerning the right of foreigners to invest in Libya, aiming to provide answers for them and analyse how Law No.9 of 2010 on Promoting Investment is regulated. The questions are as follows:

  • What are the legislations governing investment in Libya?
  • Who is a foreigner?
  • Who is an investor?
  • What are the legal regulations through which a foreigner can practice his/her commercial activity in Libya?

What are the legislations governing investment in Libya?

The investment sector in Libya was initially regulated by Law No. 37 of 1986 on the Investment of Foreign Capital. This law was later revoked by Law No. 5 of 1997 on Encouragement of Foreign Capital. Subsequently, Law No. 5 of 1997 was amended by Law No. 6 of 2003 on Encouraging National Capital Investment. The aforementioned laws were later on entirely revoked, and Law No. 9 of 2010 on Promoting Investment was implemented and is still the governing law to date.  Furthermore, the Council of Ministers issued Executive Regulation No. 499 of 2010.

Who is a foreigner?

According to Law No. 24 of 2010 on Nationality, Law No. 6 of 1987 on Regulating the Entry and Residency and Exist of Foreigners in and out Libya, and Law No. 10 of 1989 on the Rights and Obligations of Arabs in Libya, a foreigner, whether a natural person or a legal person, is every person who does not hold a Libyan nationality including Arabs while taking into consideration the Libyan- Maltese Agreement of 1985 (, and the bilateral agreements on the Rights of movement, Residence, and Ownership- on procedural terms- with Tunisia and Egypt.

Who is an investor?

According to the definition provided under Law No. 9 of 2010 on Promoting  Investment, an investor is “any natural or legal person, national or foreign who invests in accordance with the provisions of this law ”, implying that a foreigner, an individual or a company, may invest in Libya.

Does a foreigner have the right to invest and conduct commercial activities under the Libyan investment law?

In general, there are two pathways to entering the Libyan market:

What fields and commercial activities are a foreigner permitted to establish in Libya?

Under Commercial Law: the fields of commercial activities in which foreigners can invest were determined by the Minister of Economy Decree No. 207 of 2010 and its amendment in 2013, and the Decree of the Council of Ministers No. 248 of 2012 on Prohibiting the Entry of Foreign Security Companies to Libya to Carry out Their Activities. The aforementioned decrees set the areas in which joint companies in which foreigners are prohibited from investing, as well as the commercial activities in which branches of foreign companies are allowed to enter (

Under Investment Law: a foreigner is permitted to invest in the majority of production and service activities in Libya by Article 8 of the Investment Law, except the investment in Oil and Gas projects, pursuant to the exception stipulated by Article 27 of the Law. The Executive Regulation (Decree No. 499 of 2010) in Article 4 delegated the Council of Ministers the power to determine the areas that are permissible for Libyans only or in partnership with foreigners and the percentage of share for each contributor in the investment project based on a proposal from the competent minister. Article 4 of the same Executive Regulation further confirms the exclusion of foreigners from investing in Oil and Gas productions, specifically in areas of:

  • Oil and Gas exploration.
  • Oil and Gas extraction.
  • Marketing of Oil and Gas.

This insinuates that investing in oil services and the fields of petrochemicals, fertilisers, and refineries is permissible, as it is closer to the industrial classification than to oil production. We had a precedent in 2007 when a license was granted to (Libyan-Qatari) oil services companies.

Fortunately, restricting investment in oil fields is limited to the three exceptions mentioned in Article 4 of the Executive Regulation. Even in the oil sector, the Council of Ministers has abated the number of restrictions imposed on foreigners investing in Libya by providing them with the right to invest in oil services and its affiliates. Additionally, there seems to be a movement in the Libyan State calling for the abolition of restrictions in the oil sector. This is a result of the need to develop the infrastructure in the oil sector for money, while it is becoming challenging for the Libyan state to provide the necessary investments, in addition to the low production rates in the oil field, thus requiring investments from the private sector.

Are there any limitations on the percentage of foreigners’ contribution to commercial activities in Libya?

Contrary to the commercial licence under the Commercial Law, which prevents a foreigner from owning more than 49% of the shares in joint companies, a foreigner under investment law and by virtue of investment licence may own up to 100% of the investment project without the need of having a joint Libyan investor. The Council of Ministers has the competence solely to determine the restrictions of the percentage of foreigner share contribution, at the suggestion of the Minister of Economy. The legislator did well by not restricting the percentage of shares a foreigner can own and entitled them with the right to own the entire investment project or to jointly own shares with a Libyan national in any percentage agreed upon by the parties. As a result, a foreigner was given the privilege of having the flexibility that encourages him to enter into investment in Libya, which is consistent with the purpose for which Law No. 9 on Promoting Investment was enacted.

What is the value of the investment capital required for a foreigner to invest in Libya?

According to Article 5 of the Executive Regulation of the Investment Law, the minimum amount of the investment capital for the investment project – project value – for foreigners is five million Libyan Dinars. As for the Libyan investor, the required capital was set at a minimum of two million Libyan Dinars.

In circumstances where a foreigner is entering into a joint investment with a Libyan investor, the legislator seems to have adopted an approach by which they encourage the foreigner to invest with a Libyan by reducing the investment capital fund to a minimum of two million Libyan Dinars. This is evident from the practical application of this philosophy, although Article 5 of the Executive Regulation did not reflect this trend in its text. In addition, the minimum required capital does not encourage owners of small and medium enterprises to take advantage of the recompences of this law to invest under its provisions.

What forms of companies can a foreigner establish in Libya and practice his activity through?

In consonance with Article 8 of the Executive Regulation of Investment Law, a foreigner can register an investment project through any legal forms stipulated under the Commercial Law. The registration should be under the investment registry with the Investment Board. The registration is carried out in accordance with the procedures and rules outlined in Article 9 of Executive Regulation. Additionally, the Executive Regulation defines the legal form of investment as the legal body that owns the investment project or supervises its management.

Since the Investment Law No. 9 of 2010 is a special law that overrides the general provisions of the law, namely, the commercial and civil laws, according to the established general rule, “the private restricts the general”. This implies that the interpretation of a particular text should not be stretched beyond what it bears. In practice, Article 28 of Law No. 9 states that the provisions regulating economic activity shall apply to those subject to the Investment Law’s provisions in matters not provided for in a special provision.

Accordingly, where a provision is mentioned under Investment Law, it shall be applied without any dispute. Moreover, when the law refers to its Executive Regulation in determining the shares between foreigners and nationals and areas of investment, and the Executive Regulation decides that the jurisdiction in this area is entrusted with a decision of the council of ministers, it is not permissible to invoke the validity of the percentages or areas specified in the Commercial Activity Law as this is considered a violation of the established general rules and Law No. 9 and its Executive Regulation.

The commercial entities available in accordance with the Foreigners Commercial Law are branches of foreign companies, joint stock companies, and limited liability companies, given that Article 8 of the Executive Regulation of Investment Law expressly excludes “individual activity and partnerships – partnership companies- and joint venture companies” from the commercial entities available for foreigners.

What are the procedures for establishing and conducting commercial activities?

According to Article 17 of the Executive Regulation, the regulatory body will establish an investor services centre that provides a one-stop service centre through which procedures and investment applications are completed, including services provided by the relevant authorities such as the Tax Authority, the Customs Authority, the Pension Fund, Commercial Banks, the Passports Authority, Nationality, and Foreign Affairs, the Ministry of Labour, and others. The regulation also permits the addition of any entities that the authority proposes to add.

Article 10 of the Executive Regulation guides the documents required for an investment application as follows:

  1.  A Memorandum of Understanding between the founders regarding the investment project notarized by a notary public or the embassy according to the procedures and legislation in force.
  2. The approval of the foreign company’s board of directors in the event that no other partner is investing in the project.
  3. A proposal that includes three options for the name of the investment project.
  4. A memorandum on the investment project that includes the following:
  5. The value and nature of the capital to be invested, denominated in Libyan Dinars or one of the convertible currencies at the time of application.
  6. The products/materials used in the project, whether imported or locally sourced.
  7. Technical specifications for the investment project.
  8. The schedule set for the implementation of the investment project.
  9. National and foreign workforce estimations for the operation of the investment project and the replacement schedule of foreign workers by national workers during the first five years of employment.
  10. A certificate indicating the investor’s nationality issued by the foreign investor’s competent authority in his country.
  11.  A recent official extract from the registration sheet of the Commercial Register in the foreign legal person’s country of origin.

The documents submitted regarding the project mentioned in points 4 and 5 must be original and certified by the embassy.

What are the incentives provided for investment in Libya?

 The IssueCommercial LawInvestment Law
1Taxes (Income, Stamp Duty and Consumption)Subject to Income, Stamp Duty, Jihad, and Consumption taxes apart from Exportation taxesInvestors are exempted from all taxes for a period of 5 years and could be extended to 8 years with the approval of the Council of Ministers
2EmploymentLibyan employment should be a total of no less than 75%  Libyan employment should be a total of no less than 30%
3Real Estate OwnershipIt is not permissibleUtilization rights for a period that does not exceed 70 years
4Custom DutiesIs subject to Custom DutiesIs exempted from Custom Duties for 5 years
5Contribution PercentageNo more than 49% in a joint ventureUp to 100% for foreigners
6Areas of Contribution14 fields prohibited for foreigners Only 3 areas are prohibited in oil and gas projects
7VisasThe normal passport system process; is usually 6 months to a yearA 5 year Work Permit
8Foreign Currency Accounts and LoansPermissiblePermissible
9ArbitrationAccording to the agreement, and for state contracts, it is permissible only with the approval of the Council of MinistersPermissible
10Legal ProtectionIt is not legally protected and is subject to seizure and confiscationIt is not permissible
11Net Profit TransfersAccording to the publications of the Central BankThe investor has the right in transfers
12Choosing an AppraiserBy order of the court from the schedule of experts registered with the courtsBy agreement

Legal Shortcomings of the Investment Promotion Law:

The Investment Promotion Law succeeded Law No. 5 of 1997 on the Promotion of Foreign Capital Investment. Whereas the new law is expected to overcome the weaknesses of the previous law. It was anticipated that Law No. 9 of 2010 would come up with articles that would create a more investment-friendly environment. However, the following legal shortcomings have been noted in Law No. 9:

  1. Unlike Law No. 5, Law No. 9 unified the Commercial Registry with the Investment Registry, causing confusion in practice. While Law No. 5 expressly stipulates in Article 13 the separation of the Commercial Register from the Investment Register specially prepared for the purpose of registering investment projects, the said article stipulates that:

“the investment project shall not be bound by the forms provided for in the legislation in force and shall not be subject to the procedures for registration in the Commercial Registry, the Industrial Register and the Registers of Importers and Exporters. The Executive Regulation shall determine the legal forms of investment projects that may be established in accordance with the provisions of this Law, the controls of incorporation, and the procedures for registration in the Investment Register prepared for this purpose.”

This article undoubtedly distinguishes between the Commercial Registry and the Investment Registry.

On the other hand, the Investment Law No. 9 stipulates in Article 4 that:

“[w]ithout prejudice to the provisions governing the Commercial Registry, a special registry shall be established in the administrative body called the Investment Registry in which all investment projects shall be registered, indicating the legal form of these projects, the size of investments, the type of activity, the names of their owners and shareholders, their nationalities, and the percentage of the presence of foreigners in them. The Executive Regulation shall determine the controls and procedures for registration in the Investment Register.”

The beginning of this article raises doubts about an incomplete separation between the Commercial Registry and the Investment Registry, contrary to Article 13 of Law No. 5.

  • According to Law No. 9, the procedures through which applications for investment registration are considered require that the project be submitted to the Ministry of Economy to obtain final approval, despite the prior approval from the Investment Board, which is surprising as the Investment Board is supposed to be the only body to decide on the Investment project registration. The requirement to obtain the approval of the Ministry prolongs the duration of the proceedings, which is contrary to the spirit of the law and raises difficulties in implementation, especially when the Board approves a registration on the one hand, and the Ministry opposes it on the other.
  • In the past, the law required the Board to respond to investment requests within fifteen days. Accordingly, a lack of response would be considered approval of the investment request by law. This obligation no longer exists in Law No. 9, which opens the door to the abuse of the right and the delay in responding to investment applications. Currently, Law No. 9 in Article 21 provides for the acceptance of grievances against any decision issued against the investor within thirty days of its issuance. Despite the limitation of the duration of the grievance, the law is still considered to be deficient in specifying periods in which decisions related to the investment application must be issued, as it does not oblige the Ministry to issue an approval decision within a certain period, which in practice may last for several months.

Investment Promotion Law, between the objective and the implementation:

Analytical reading of the Investment Promotion Law No. 9 of 2010 that considers the timing of the enactment of this law shows that the legislator of this law aims to encourage investment, especially foreign ones, in Libya. This is confirmed by the designation chosen for this law. Unfortunately, the aforementioned legal shortcomings, as well as the tools used to apply the law and its inaccurate interpretation when implemented, have, in practice, led to a shift from the goals intended to be achieved by its enactment.

For example, on 18th August 2021, the Ministry of Economy issued Decree No. 273 of 2021, according to which the fees that companies – wishing to register under the investment law – must pay to ensure an investment licence were increased. The most prominent of these fees is a fee on the total investment costs of the project at a value of 0.01%.

In practice, such fees have led some companies to retreat from entering Libya and registering investment projects. Not to mention that the decision to increase the fees provided for its effectiveness immediately upon its issuance. Thus, it became applicable to projects approved on the same day as the issuance of Decree No. 273.

In addition to the retreatment of investors, such decisions make it difficult to predict the next movement, discouraging investments as they require a stable environment.  

Another example of a shift from the goals intended to be achieved by Law No. 9, the Legal Department of the Ministry of Economy issued a memorandum addressing the Minister of Economy. This memorandum questioned the validity of a registration application by a foreigner wishing to invest in Libya in the form of a partnership between two foreign companies (an investment project owned 100% by a foreign investor). As a result of this memorandum, the Minister of Economy refrained from approving the application, despite the previous approval of the Investment Board.

The Legal Department’s interpretation is entirely contrary to the Investment Law and its Executive Regulation, in which several articles insinuated the validity of the registration of a foreign investment company wholly owned by two foreign partners. For example, Article 5 of the Executive Regulation stipulates that the minimum value for foreign capital is five million Libyan dinars, which means that the capital may be owned entirely by a foreigner, and the article does not specify specific proportions for the parties’ shares in the investment project, whether the participation is between two foreign parties or a foreign party and a Libyan party. The general rule is that things are legitimate unless otherwise prohibited.   

The Executive Regulation also stipulates that the specifications of fields that are limited to Libyans only or in partnership with foreigners and the share of each side shall be determined by a Council of Ministers’ decision. There was no such decision when the Ministry’s Legal Department issued the above-mentioned legal memorandum. Article 10 of the Executive Regulation, in its first and second paragraphs, also requires the existence of a decision from the Investor’s Board of Directors certified by a notary public or by the Libyan consulate in the investor’s country of origin if he/she is not Libyan, or if he/she is abroad. Moreover, the investors’ agreement to invest will replace the requirement of the Board of Directors’ decision if there is more than one investor, even if they are all foreigners.

The uproar raised by this memorandum and the give-and-take between the Investment Board and the Ministry of Economy led to the referral of the matter to the Law Department of the Ministry of Justice to seek its legal opinion. Unfortunately, this referral was only made seven months after the application was forwarded to the Ministry of Economy. This provoked the foreign investor’s restlessness and certainly reflected negatively on the appearance of the Ministry’s performance.

In conclusion, the question here is, once the Law Department interprets the Investment Law and clarifies how to apply it correctly, will this opinion be the beginning of a practical opening towards investment promotion, or will the situation continue as it is?