North Benghazi Court Terminates Al-Kharafi Contract, Annuls International Arbitration Award and Orders Company to Pay Libya 15 Billion Dinars
Libya – The Civil Chamber of the North Benghazi Court of First Instance ruled on Thursday to terminate a 2006 contract concluded with Mohammed Abdulmohsin Al-Kharafi & Sons Company for a tourism investment project, annul the arbitration award issued in the dispute and order the company to pay the Libyan state a total of 15 billion dinars in compensation.
The ruling came in a lawsuit filed by Osama Hammad, head of the government mandated by the House of Representatives, in his capacity as the legal representative of the executive authority and the public legal entity, against the company over a land lease contract for the development of a tourism investment project.
Court Affirms Jurisdiction of the Libyan Judiciary
In the reasoning for its judgment, the court affirmed Hammad’s legal standing to bring the case as the representative of the public legal entity vested with general authority. It also ruled that the Libyan judiciary had jurisdiction over the dispute because it concerned a real estate investment located within Libyan territory and was therefore subject to national law.
The court issued its judgment in the presence of the claimant and in absentia against the company, terminating the land lease contract concluded on 8 June 2006, deeming it to have never existed and ordering the restoration of the situation that existed before the agreement was signed.
15 Billion Dinars in Compensation for the State
The court ordered the company to pay the Libyan state 10 billion dinars in material damages for losses and lost profits resulting from its breach of contractual obligations and failure to implement the project.
It also awarded five billion dinars in non-pecuniary damages for what the court described as harm to the state’s investment and economic reputation, as well as the reputational damage arising from the dispute.
2013 Arbitration Award Annulled
The court also ruled that the arbitration award issued on 22 March 2013 was null and void in all its provisions and effects. It ordered that the award should not be recognised inside or outside Libya and should be treated as though it had never existed, while also requiring the company to pay the legal costs.
Court: Company Breached Its Obligations and Failed to Implement the Project
According to the judgment’s reasoning, the documents and reports submitted in the case established that the company had breached its essential obligations, failed to begin implementing the project despite the many years that had passed since the contract was signed, and did not take the necessary steps to finance and execute it within the stipulated legal and contractual deadlines and conditions.
The court affirmed that the dispute concerned land and associated rights owned by the Libyan state and an investment located within the country’s territory, placing the matter within the jurisdiction of the Libyan judiciary and linking it to public order and national sovereignty.
Government: Judgment Protects Public Funds and the State’s Rights
The government mandated by the House of Representatives said the judgment affirmed its commitment to protecting public funds, safeguarding state property and preserving the country’s rights. It also said it would confront any measures or arbitration awards that it considers to infringe upon national sovereignty or violate legal rules and the state’s rights to defence and judicial recourse.
