All companies with an existing contract or order with GECOL must contact GECOL by 27 October 2012 to resolve legal situation of their contracts.
On 27 September 2012, the General Electricity Company of Libya (GECOL) published a statement on its website requesting all firms with existing contracts or orders to contact the GECOL within 30 days "to resolve the legal situation of their contracts".
According to the statement, the requirement to contact GECOL also applies to those projects which had not yet started, or which had been halted due events leading to the fall of the Gaddafi regime in October 2011.
Failure to contacting GECOL may result in cancellation of contracts or allocation of previously-awarded work to other companies.
It is extremely important for foreign companies that are subject to this requirement to:
- review the background to the negotiation and conclusion of their contracts with GECOL;
- have a clear understanding of their rights and obligations under the existing contracts prior to contacting GECOL;
- contact GECOL prior to the deadline; and
- interact with GECOL during the contract review process with utmost transparency and honesty.
The GECOL review appears to be part of the Libyan Government's corruption probe which officially began after the National Transitional Council (the predecessor to the Libyan General National Congress) announced the inception of an Oil Committee in October last year with the aim of reviewing oil contracts concluded under the previous regime. The expressed mandate of the Oil Committee was to identify malpractice in deals struck under the Gaddafi regime, with the Committee having the power to end, amend or renegotiate current contracts if corruption was discovered. Subsequently, in December 2011, Mr Abu Shagur, the Prime Minister of Libya (then the deputy Prime Minister) stated that Libya would review all contracts signed with foreign companies by the Gaddafi regime "to ensure its best interests are guaranteed".
Considering that the terms of reference of the GECOL review have not been published as at the date of this article, and that the GECOL statement does not specify what is involved in the review process, it is unclear whether the scope of investigation will be limited to corrupt transactions, or it will entail a wider review of the general suitability of the contracts to the political and economic policies of the new Libyan Government.
In the past, under the Gaddafi regime, oil companies in Libya were forced to renegotiate extensions to their oil deals with the NOC in 2008 and to agree to taking lower revenue shares and committing to large upfront costs. While the intention and purpose of the current review seems to be different to those in 2008, it would be advisable for foreign energy companies to approach GECOL with a practical strategy to ensure that both parties can (depending on the circumstances of each contract) maintain the benefits arising from an existing agreement and at the same time reach a fair balance between their respective rights and obligations under the existing arrangements and the political incentives of the Libyan Government in carrying out the contract reviews.
The deadline for contacting GECOL head office in Tripoli or its regional branches is 27 October 2012.
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