All You Must Know Before Doing Business in Libya | Law No. 9 of 2010

Libya, strategically located at the crossroads of Africa and Europe, offers a wealth of opportunities for international investors seeking new markets. The country’s abundant natural resources, particularly in oil and gas, coupled with a growing demand for infrastructure development, make doing business in Libya an attractive prospect.

Central to this investment landscape is Law No. 9 of 2010 on Promoting Investment, which establishes the legal framework for both domestic and foreign investors.

This guide provides an in-depth analysis of Libya’s investment laws, focusing on the provisions of Law No. 9 of 2010, and offers practical insights for those interested in the Libya business environment. By understanding the legal, economic, and procedural aspects of investing in Libya, businesses can navigate the complexities and maximise the opportunities available.

Understanding the Legal Framework

Primary Legislation Governing Investment

The investment climate in Libya is primarily regulated by:

• Law No. 9 of 2010 on Promoting Investment
• Executive Regulation No. 499 of 2010
• Commercial Law No. 23 of 2010 on Commercial Activity
• Law No. 24 of 2010 on Nationality
• Law No. 6 of 1987 on the Entry, Residence, and Exit of Foreigners

These laws collectively define the rights, obligations, and procedures for both national and foreign investors doing business in Libya.

Definition of a Foreigner and an Investor

• Foreigner: Any natural or legal person not holding Libyan nationality. This includes individuals and companies from abroad, irrespective of their country of origin.
• Investor: Under Law No. 9 of 2010, an investor is “any natural or legal person, national or foreign, who invests in accordance with the provisions of this law.” This broad definition ensures that foreign investors are recognised and protected under Libyan investment law.

Rights and Opportunities for Foreign Investors

Equal Treatment Under the Law

Foreign investors are granted the same rights and obligations as Libyan nationals when investing in Libya. This principle of non-discrimination is fundamental to Law No. 9 of 2010, promoting fairness and encouraging foreign participation in Libya.

Permissible Sectors for Investment

Foreign investors can engage in a wide range of sectors, including but not limited to:

• Manufacturing and Industrial Production
• Healthcare and Medical Services
• Education and Training
• Tourism and Hospitality
• Agriculture and Fisheries
• Information Technology and Telecommunications
• Infrastructure and Transportation

These sectors represent significant investment opportunities in Libya, catering to the country’s development needs and market demands.

Excluded Sectors

Despite the broad scope for investment, certain sectors are restricted to protect national interests:

• Oil and Gas Exploration and Extraction
• Marketing and Distribution of Oil and Gas
• Security Services

However, foreign investors are permitted to participate in related fields such as:

• Oil Services and Support Industries
• Petrochemicals and Refinery Operations
• Renewable Energy Projects

These areas offer substantial Libya business prospects, aligning with the government’s efforts to diversify the economy beyond oil and gas.

Ownership and Capital Requirements

Foreign Ownership Flexibility

One of the key advantages of Law No. 9 of 2010 is the flexibility it offers regarding foreign ownership. Foreign investors can own up to 100% of their investment projects without the requirement of a Libyan partner. This provision significantly enhances the attractiveness of doing business in Libya for foreign entities.

Minimum Capital Investment

• Foreign Investors: The minimum investment capital required is five million Libyan Dinars.
• Libyan Investors: The minimum capital is set at two million Libyan Dinars.

This differentiation encourages joint ventures between foreign and Libyan investors, fostering collaboration within the Libya business community.

Legal Forms of Business Entities

Under Libyan investment law, foreign investors can establish various types of companies:

• Joint-Stock Companies: Suitable for large-scale investments, allowing for public or private share offerings.
• Limited Liability Companies (LLCs): Ideal for small to medium-sized enterprises within the Libya business sector.
• Branches of Foreign Companies: Enable foreign corporations to operate directly in Libya without creating a separate legal entity.

Excluded Business Forms

Certain business forms are not available to foreign investors:

• Partnerships: Including general and limited partnerships, are reserved for Libyan nationals.
• Sole Proprietorships: Individual enterprises are restricted to Libyan citizens.
• Joint Venture Companies: Typically unincorporated and not recognised for foreign investment purposes under Libyan investment law.

Procedures for Establishing a Business in Libya

One-Stop Service Centre

To facilitate the process of doing business in Libya, the government has established a one-stop service centre. This centre streamlines interactions with multiple authorities, reducing bureaucratic hurdles for investors. Services include coordination with:

• Tax Authority
• Customs Authority
• Ministry of Labour
• Immigration and Passport Control
• Commercial Banks

Step-by-Step Registration Process

1. Preparation of Documentation: Gather all required documents, including:
   • Memorandum of Understanding or Articles of Association, notarised or certified by the Libyan embassy in the investor’s home country.
   • Board Resolutions approving the investment project.
   • Project Proposal detailing investment value, technical specifications, implementation schedule, and employment plans.
   • Proof of Nationality and Corporate Registration Certificates.
2. Submission to the Investment Promotion Authority: Submit the application along with all documentation to the authority responsible for promoting investment in Libya.
3. Review and Coordination: The authority reviews the application, coordinating with relevant ministries to ensure compliance with Libyan investment laws.
4. Approval by the Ministry of Economy: After initial approval, the application is forwarded to the Ministry of Economy for final endorsement.
5. Registration in the Investment Registry: Upon approval, the investment project is registered, and the investor receives a certificate allowing them to proceed.
6. Obtaining Operational Licences: Secure all necessary licences and permits to commence business operations in the Libya business environment.

Timeframes and Efficiency

While the law aims for prompt processing, investors should be prepared for potential delays due to administrative procedures. Engaging local legal experts familiar with Libyan investment law can expedite the process.

Incentives and Benefits for Investors

Tax Exemptions

• Income Tax: Exemption for five years, extendable to eight years with approval from the Council of Ministers.
• Stamp Duty and Consumption Taxes: Exemptions reduce transaction costs, enhancing the profitability of doing business in Libya.

Customs Duty Benefits

• Importation of Equipment and Materials: Exemption from customs duties for five years on machinery, equipment, and raw materials necessary for the investment project.

Real Estate and Property Rights

• Utilisation Rights: Investors can obtain rights to utilise real estate and land for up to 70 years, providing long-term security for their investment in Libya.

Employment Flexibility

• Libyan Workforce Requirement: Minimum of 30% Libyan employees, lower than the 75% required under the Commercial Law. This allows greater flexibility in staffing for specialised projects.
• Work Permits for Foreign Employees: Issuance of five-year work permits facilitates the hiring of skilled foreign personnel essential for the success of Libya business ventures.

Financial Advantages

• Profit and Capital Repatriation: Investors have the right to transfer net profits, dividends, and capital abroad in convertible currency, a critical factor for foreign investors doing business in Libya.
• Access to Banking Services: Ability to open accounts in local and foreign currencies, aiding in efficient financial management.

Legal Protections

• Protection Against Expropriation: Safeguards against nationalisation or confiscation without fair compensation are enshrined in Law No. 9 of 2010.
• Dispute Resolution Mechanisms: Access to local courts and international arbitration provides assurance to investors concerned about potential legal disputes.

Challenges and Considerations

Regulatory Ambiguities and Administrative Delays

• Unified Registry Confusion: The merging of the Commercial Registry with the Investment Registry can lead to bureaucratic complexities.
• Approval Processes: Additional approvals from the Ministry of Economy may extend timelines, impacting the speed at which businesses can commence operations.

Interpretation Variances

• Differing Legal Interpretations: Inconsistencies in how Libyan investment law is interpreted by various government departments can create uncertainty.
• Recent Fee Increases: Decrees such as No. 273 of 2021 have introduced new fees, potentially affecting the financial viability of certain investment projects.

Risk Management

• Political and Economic Stability: Investors should be cognisant of the broader political and economic context in Libya, which can impact the Libya business environment.
• Legal Counsel: Engaging experienced legal professionals familiar with Libyan investment laws is essential for navigating potential pitfalls.

Best Practices for Successful Investment

Conduct Thorough Due Diligence

• Market Research: Understand the specific sector and market conditions within the Libya business landscape.
• Regulatory Compliance: Ensure full compliance with all aspects of Libyan investment law to avoid legal complications.

Establish Local Partnerships

• Strategic Alliances: Partnering with reputable Libyan companies can provide valuable local insights and facilitate smoother operations.
• Networking: Building relationships with key stakeholders can enhance opportunities and mitigate risks.

Engage in Effective Risk Management

• Contingency Planning: Develop strategies to address potential challenges, including political instability or regulatory changes.
• Insurance: Consider obtaining investment insurance to protect against unforeseen events.

Leverage Incentives

• Maximise Tax Benefits: Take full advantage of the tax exemptions and incentives offered under Law No. 9 of 2010.
• Utilise Government Resources: Engage with the Investment Promotion Authority and other government bodies for support and guidance.

Doing Business in Libya, Doing it Right

Doing business in Libya presents significant opportunities for foreign investors willing to navigate the complexities of the Libyan investment law. Law No. 9 of 2010 on Promoting Investment offers a comprehensive legal framework that encourages foreign investment through generous incentives and protections.

By understanding the legal landscape, engaging in thorough preparation, and adopting best practices, investors can successfully capitalise on the abundant opportunities within the Libya business environment.