• Force Majeure under Libyan Law
  • September 29, 2011 | Author: Dahmane Ben Abderrahmane
  • Law Firm: Ben Abderrahmane & Partners International Law Firm - Paris Office
  • 1. The Nature of the Force Majeure Rules under Libyan law 

    2. The Conditions of Force Majeure under Libyan law
    2.1 The Definition of Force Majeure under Libyan law
    2.1.1 Execution of the obligation must be impossible
    2.1.2 The case of force majeure must not have been caused by the party owing the obligation
    2.1.3 Absence of conditions for an unforeseeable event
    3 2. Absence of contractual waiver of reliance on force majeure

    3. The effects of Force Majeure under Libyan law

    3.1 Temporary impossibility
    3.2 Permanent impossibility
    3.3   In the event of partial impossibility
    3.4   Potential impossibility

    4.  Force majeure and “hardship”

    Force Majeure under Libyan Law

    Libyan law plays an essential role in economic relations with Libya. The application of the Libyan law is almost systematically stipulated in international contracts to witch that Libyan entities are party to. Contrary to an idea accredited in certain circles Libyan law is not a more or less successful adaptation of other legal systems.

    Libyan law is characterized by its multiple sources. Whilst Libyan law enshrines a certain number of principles common to most Roman-Germanic legal systems, essential concept of Libyan law are inspired by the Islamic law of contracts.

    The anti-government unrests in Libya since the middle of the month of February 2011 have led many foreign companies to declare force majeure. Their contracts are subject mostly to the Libyan law the question is whether the circumstances they invoke can be described as force majeure due to their characteristics and force majeure clauses inserted in their contracts.

    This being, under Libyan law, do these declarations of force majeure release them from their contractual obligations and exonerate them from any liability for non-performance of said obligations?

     In Libyan law, the legal regime of force majeure is marked by specific features not found in other legal systems based at least in part on Roman-Germanic legal tradition.

    1. The Nature of the Force Majeure Rules under Libyan law

    Under Libyan law, the rules on force majeure do not have the binding force of public law. The parties have the possibility of adjusting the conditions and effects of force majeure in contracts governed by Libyan law.  On this point, note that according to Libyan law contracts concluded pursuant to Article 147 Libyan civil Code: «The contract makes the law of the parties. It can be revoked or altered only by mutual consent of the parties or for reasons provided for by the law.”

    A party seeking to rely on force majeure must first of all base its claim on the force majeure clause usually incorporated in the contract. That being the case, in order to be valid, these clauses must not offer a means for a party potentially in default to fail to honor its obligations when expedient. In the same way, force majeure can only be relied on according to the actual provisions of the force majeure clause incorporated in the contract. In this regard, practice indicates a number of these clauses may not produce the effects anticipated by the parties, for reasons of deficiencies in their wording.  

    2.  The Conditions of Force Majeure under Libyan law

    To invoke a case of force majeure, the event concerned must satisfy the definition of force majeure (1) and comply with Libyan law.  Also, the party owing the obligation must not have voluntarily waived the invoking of force majeure (2).

    2.1  The Definition of Force Majeure under Libyan law

    Article 218 of the Libyan Civil Code provides: When specific performance by the debtor is impossible, he will be condemned to pay damages for non-performance of his obligation, unless he establishes that the impossibility of performance arose from a cause beyond his control. The same principle will apply if the debtor is late in the performance of his obligation.”

    This provision does not give a clear definition of force majeure. Nonetheless, its interpretation in the light of Libyan practice allows determining, in the absence of any specific contractual provisions, the characteristics an event must present in order to be considered as a case of force majeure. The event must render execution of the obligation impossible (2.1.1) and not be attributable to the party owing the obligation (2.1.2), but it need not be unforeseeable (2.1.3.).

    2.1.1 Execution of the obligation must be impossible

    This condition is referred to on two occasions at Article 218 of the Libyan Civil Code. It constitutes a fundamental aspect of force majeure in Libyan law.

    First of all, the party owing the obligation must have been prevented from fulfilling said obligation. The impossibility of execution must be absolute. In consequence, an event rendering execution of the defaulting party’s obligation more difficult or more costly does not constitute a case of force majeure.

    In other words, the event must constitute an unavoidable and insurmountable obstacle. If the obstacle could be overcome although its execution would be more difficult and more expensive, the defaulting party would be liable for failing to execute its obligation.

    Although the principle is clear, in practice its application can give rise to difficulties, notably when responding to the question of establishing the moment from which an event becomes unavoidable. To answer this question, the unavoidable nature of the event must be examined in the abstract in relation to a normally diligent economic operator; the specific aspects of the particular company concerned are not taken into account. This being the case, the defaulting party’s inability to execute its obligation will essentially depends on the circumstances and it is up to the judge to declare the event unavoidable or otherwise.

    2.1.2 The case of force majeure must not have been caused by the party owing the obligation

    According to the letter of Article 218 of the Libyan Civil Code, reproduced above, impossibility of executing the disputed obligation must find its origin in a cause which cannot be attributed to the party potentially defaulting on its performance

    In other words, to constitute a case of force majeure the alleged event must be external to the defaulting party. It must be outside the latter's sphere of control

    If the event, although apparently outside the defaulting party's control can be linked to a fault even if non-intentional committed by the latter, it does not constitute a case of force majeure

    2.1.3 Absence of conditions for an unforeseeable event

    Contrary to the assertions of some commentators, Libyan law does not require the event to be unforeseeable.  The absence of the requirement for the event to be unforeseeable is favourable to the party owing the obligation. The contractual commitments, and specifically the act of investment, are always preceded by a risk analysis, and few risks are not provided for.

    2.2  Absence of contractual waiver of reliance on force majeure

    Exceptionally Libyan law expressly provides an option for the party owing the obligation to accept the risks of force majeure. Article 178 paragraph 1 of the Libyan Civil Code provides:

    “It may be agreed that the party responsible for fulfilling the obligation will bear the risks of fortuitous events or cases of force majeure”.

    On the contrary, it can be deduced that force majeure only be invoked by a party responsible for fulfilling an obligation if it has not waived reliance thereon.

    In this regard it can be seen that some force majeure clauses incorporated in contracts governed by Libyan law and manifestly poorly drafted may be interpreted in the sense that by defining the cases of force majeure, it excludes those which are not mentioned thus preventing the defaulting party from relying on them.
     
    3. The effects of Force Majeure under Libyan law

    A distinction is made depending on whether impossibility of execution is temporary (3.1) , permanent (3.2), partial (3.3)  or just  potential (3.4).

    3.1 Temporary impossibility

    If the impossibility of fulfilling an obligation given a case of Force majeure is merely temporary, the alleged event does not in principle constitute a case of force majeure which definitively exonerates the defaulting party.

    Specifically when the contract is performed sequentially, the specific stage of the contract affected by a temporary situation of force majeure is suspended for the duration of the force majeure, This only applies if the contract retains it degree of utility for the parties. If one considers its suspension causes serious damage and is intolerable it may request cancellation of the whole contract.

    3.2   Permanent impossibility
     
    If the party owing the obligation is in a situation of permanent and total impossibility of fulfilling it given a case of force majeure, the contract is retrospectively cancelled.

    This solution derives from Article 161 of the Libyan Civil Code.

    Article 161 of the Libyan Civil Code

    :“ When an obligation arising out of a bi-lateral contract is extinguished by reason of impossibility of performance, correlative obligations are also extinguished and the contract is rescinded ipso  jure.”

    Taken literally this provision goes beyond force majeure. However, impossibility of execution referred to therein requires a situation of force majeure as a pre-condition for its application.
     
    3.3   In the event of partial impossibility

    The alleged impossibility may concern exclusively a part of the defaulter’s obligations.
     
    The question then arises of establishing whether a contract can be divided distinguishing between the part affected by force majeure and thus impossible to perform and the part of the contract not affected by force majeure which in theory remains possible to perform.

    There is no unequivocal answer to this question. The solution depends first of all on the intentions of the parties as expressed in the contract. If the contract is indivisible, it will be suspended or cancelled in its entirety depending on whether the force majeure is temporary or permanent.
     
    If the contract is divisible, it could be maintained that the force majeure concerns only a part of the contract, which is the only part that can be suspended or cancelled. For the remainder, the party owing the obligation would be in default if it failed to execute its obligation according to the terms of the contract.

    3.4   Potential impossibility

    Can the party in default maintain that the contract is at a given moment certainly not affected by force majeure but that the circumstances provide reasonable grounds for believing it will be so affected in the imminent future? In this case would the requirements for adopting precautions allow henceforth declaring the existence of a case of force majeure?

    There is no unequivocal answer to this question either, since everything depends on the specific circumstances of each case.

    4.  Force majeure and “hardship”

    We have seen that the event alleged to constitute a situation of force majeure must render execution of the obligation at issue impossible and that an event which renders the obligation of the party under the obligation more difficult or onerous does not constitute a case of force majeure.

    If the event in question does not satisfy the definition of force majeure, specifically because the company’s obligation can be executed but for a supplementary cost, even if significant, the company can to some extent palliate the consequences by relying on the so called “hardship” theory pursuant to Article 147, paragraph 2 of the Libyan Civil Code according to which:

    If, following an extraordinary and unpredictable event of a general nature, execution of a contractual obligation without being impossible, becomes excessively onerous and threatens to impose an exorbitant loss on the obliged party, the judge may, depending on the circumstances and after considering the  interests of the parties, reduce, insofar as is reasonable, the obligation which has become excessive.

    Any other agreement is null and void.”

    Thus if the nature and sequels of the event impeding execution of the company’s obligation satisfy the provisions of Article 147 paragraph 2 of the Libyan Civil Code, the company concerned may request the judge to amend the contract, with a view to achieving a reasonable balance given the parties’ respective interests and circumstances.

    By reducing the company’s obligation, the judge when dealing with the contract, does not pronounce in equity or exequo et bono, given that power to restore equilibrium to the contract is conferred by the power to do so pursuant to Article 147 paragraph 2 of the Libyan Civil Code

    In litigation, the party relying on force majeure may, as an alternative, rely on events it initially categorized as a case of force majeure; if for some improbable reason the Court does not define the event as a case of force majeure, the execution of the contractual obligation may be considered excessively onerous and a petition lodged with the judge to restore a reasonable balance to the contractual relations.

    Conclusion

    Force majeure is undoubtedly recognized as an instrument of Libyan law. Is effectiveness depends to a large extent on the contractual terms governing cases of force majeure and the circumstances characterizing the event defined as force majeure or consequential thereon.

    That being said, if the conditions constituting a case of force majeure are not satisfied, a company owing a non-executed obligation may petition for amendment of the contract pursuant to aforementioned Article 147 paragraph 2 of the Libyan Civil Code.