Libyan Oil Contracts: Negotiating the Future Generation of EPSA

The main concern with Article 4 of EPSA IV is that the mechanism for decision making is inadequate. For example, if there is no unanimous vote by either the four members of the committee or the senior management of both parties, the issue related to the work program or the budget which was raised for voting shall not be adopted by the management committee. In effect, such mechanism for voting could pose many problems and delay the performance of the obligations under the contract.

EPSA V should avoid this deadlock and propose a viable solution. Deadlocks may be solved by referring the disputed matter to an expert. An expert opinion could be provided by an international consultancy firm appointed by the parties to resolve the issue at hand. Overall, it is advisable to have a detailed and rapid decision mechanism to resolve any issue that may arise.

Force Majeure

In order to claim force majeure under Libyan law as per Article 360 of the Libyan Civil Code and the rulings of the Libyan Supreme court, three conditions must be met: (i) the event must be beyond the control of the parties, (ii) the event must be unforeseeable at the time the agreement is concluded, and (iii) the performance of the obligation must be absolutely impossible to execute. Moreover, Article 22.1 (Excuse of Obligations) of the EPSA agreement excuses a party from its obligations if its nonperformance is attributed to “any unforeseen circumstances and acts beyond the control of such party which renders the performance of its obligations impossible.” The doctrine of unforeseen events or circumstances requires that an event must (i) be exceptional and unpredictable, (ii) be of general nature, and (iii) occur during the performance of the obligation under the contract.

One has to seek a court ruling for termination of a contract as per Article 360 of the Libyan Civil Code which states "[a]n obligation is extinguished if the debtor establishes that his performance has become impossible by reason of causes beyond his control."

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