Oil and Gas Contracts in Libya: Navigating Legal Risks in a Hybrid Legal System

This article examines oil and gas contracts in Libya, focusing on the legal risks arising from the country's hybrid legal system that blends Civil and Common Law elements. Central to this system is the doctrine of stare decisis, which gives Supreme Court rulings binding authority. These precedents play a critical role in shaping key provisions such as indemnity schemes, liabilities, and compliance requirements within the Libyan energy sector. The article underscores the importance of understanding this unique legal framework to navigate the risks effectively and ensure robust contractual arrangements in Libya's complex but lucrative oil and gas market.

I. Introduction

This article challenges the common characterization of Libya as a purely Civil Law jurisdiction, asserting instead that its legal system incorporates significant features of Common Law. Notably, Libya has long embraced the doctrine of stare decisis[1], under which certain court decisions hold binding authority.[2] This doctrine aligns Libya more closely with Common Law jurisdictions like the United States[3] than with traditional Civil Law systems.

The unique hybrid nature of Libya's legal system has direct implications for its energy sector. Libyan case law plays a pivotal role in shaping indemnity schemes and determining legal liabilities within oil and gas agreements. Failure to recognize and integrate this precedent-driven system poses substantial legal risks for investors operating in the Libyan energy market.

II. Vertical Stare Decisis

Libya employs a vertical and restrictive application of stare decisis. Unlike France, where Supreme Court decisions are persuasive but not binding,[4] the rulings of the Libyan Supreme Court constitute binding legal authority. All courts and state entities in Libya are obligated to follow these decisions.[5]

Libya also adopts a restrictive approach to horizontal stare decisis, akin to the “Law of the Circuit” doctrine in the United States.[6] Within this framework, the Libyan Supreme Court is bound by its own precedents. Individual circuits of the Supreme Court cannot overturn earlier rulings. Only the General Assembly of the Supreme Court convened with all circuits participating, holds the authority to renounce or revise established judicial principles.[7]

III. Libya as a Hybrid Legal System

The principle of stare decisis is traditionally a hallmark of Common Law jurisdictions.[8] Despite its reliance on this doctrine, many Libyan lawyers and scholars continue to describe Libya as a Civil Law system. This misclassification stems from Libya’s codified laws, a defining feature of Civil Law systems. However, Libya’s legal framework also incorporates quintessential concepts of Common Law, creating a hybrid system that blends elements of both traditions.[9]

IV. When Misnomers Become Misconceptions

Mischaracterizing the Libyan legal system as solely Civil Law may seem harmless, but it risks distorting its proper understanding and application. While terminology itself is not inherently problematic, misconceptions about the system's nature can lead to serious practical consequences.

For example, some lawyers may erroneously dismiss the binding authority of Supreme Court decisions, believing them to be merely persuasive. Such misunderstandings can result in flawed legal advice, jeopardizing clients' interests and exposing them to unnecessary risks.

V. The Significance of Case Precedents in Libyan Oil and Gas Agreements

Binding precedents issued by the Libyan Supreme Court have profound implications for legal liabilities in oil and gas agreements. Key provisions, such as liquidated damages, waivers, indemnity schemes, and limitations of liability, are governed by Law No. 6 of 2016 (commonly referred to as Law 6/2016). In 2021, the Supreme Court affirmed the ongoing applicability of Law 6/2016 and classified it as part of Libya’s public order, underscoring its binding nature.[10]

This means that violations of Law 6/2016 can be raised at any stage of litigation and even by the court itself, as these violations are deemed to contradict Libyan public morals and order.[11] Lawyers advising on oil and gas agreements must ensure that their guidance aligns with the Supreme Court’s interpretations and precedents. Ignoring this binding authority could result in distorted advice and expose foreign investors in the Libyan energy sector to significant legal and financial risks.

VI. Conclusion

Libyan oil and gas agreements are profoundly influenced by the binding precedents of the Libyan Supreme Court. For investors in the energy sector, an accurate understanding of Libya's hybrid legal system is not merely academic—it is a practical necessity. Lawyers advising in this sector must remain well-versed in relevant Supreme Court rulings and incorporate them into their legal strategies.

Correctly identifying Libya’s legal system as a hybrid of Civil and Common Law traditions is essential for improving legal practice. This understanding will help lawyers provide more accurate and reliable advice, ultimately benefiting both small and large investors navigating Libya’s lucrative but complex energy market.

Authors

• Mohamed Dikna
• Ritaj Aledrecy (Zahaf & Partners)

References

1. See, infra, note 3.
2. See, infra, note 5.
3. Joseph W. Mead, Stare Decisis in the Inferior Courts of the United States, 12 Nev. L.J. 787 (2011); Lewis Graham, Strong Decisions and Stare Decisis in Co-ordinate Courts, 35 King's L.J. 224, 224–251 (2024); Steve Leben, Disagreeing with Yourself: Horizontal Stare Decisis in State Intermediate Appellate Courts, Kan. L. Rev. (forthcoming 2024); Curtis Bradley & Tara Leigh Grove, Vertical Stare Decisis and Disfavored Precedent: An Empirical and Normative Analysis (2024); Matthew Schreiner, Stare Decisis and Originalism: A Comparative Analysis of Two Legal Appeals (unpublished Ph.D. dissertation, 2024); Susan Yorke, The Curious Case of the Missing Canons (2025); Brian A. Langille & Ben Mayer-Goodman, Don’t Mess with Mr. In-Between, Between, Jan. 17, 2024, at 48; Jason Jarvis, Geometric Federalism, Pepperdine Univ. Legal Studies Research Paper (forthcoming 2025) (to be published in Ala. L. Rev.).
4. Jan Komarek, Precedent and Judicial Lawmaking in Supreme Courts: The Court of Justice Compared to the US Supreme Court and the French Cour de Cassation, 11 Cambridge Y.B. Eur. Legal Stud. 399, 399–433 (2009)
5. Art. 31, Law No. 6, reorganizing the Supreme Court (1982) (stating that “the legal principles adopted by the Supreme Court in its rulings shall be binding for all courts and all other entities within [Libya]”).
6. Joseph W. Mead, Stare Decisis in the Inferior Courts of the United States, 12 Nev. L.J. 787 (2011).
7. See, Art. 23, Law No. 6 (1982)  (as amended by Law No. 17 of 1994) (stating that “the Supreme Court, convened in all its circuits and presided by its President or its substitute shall enjoy sole competence … [and have the final say when] one of the Supreme Court’s circuits sees fit to refer a case to the General Assembly to renounce a legal principle it adopted in previous rulings”).
8. Matthew Schreiner, Stare Decisis and Originalism: A Comparative Analysis of Two Legal Appeals (unpublished Ph.D. dissertation, 2024); Susan Yorke, The Curious Case of the Missing Canons (2025); Brian A. Langille & Ben Mayer-Goodman, Don’t Mess with Mr. In-Between, Between, Jan. 17, 2024, at 48; Jason Jarvis, Geometric Federalism, Pepperdine Univ. Legal Studies Research Paper (forthcoming 2025) (to be published in Ala. L. Rev.).
9. Consider, e.g., the Libyan administrative law: before legislation addressing administrative law was enacted, Libyan courts, particularly the Libyan Supreme Court, created the principles of Libyan administrative law.
10. See Ruling No. 453/64, Libyan Supreme Court (May 26, 2021) (stating that violations of Law No. 6/2016 may be raised by the parties at any stage of litigation, and the Court may raise such violations sua sponte, as they are related to Libyan morals and public order).