Who controls Libya’s money?

The international community is struggling to help Libya craft a new unity government acceptable to all the warring factions – and its two existing governments. The country’s institutions meanwhile are trying save the nation from total economic collapse. Responsibility for administrating Libya’s investments falls on the Libyan Investment Authority (LIA), the state sovereign wealth fund, whose executives and representatives recently attended the Economist’s Mediterranean Leadership Summit in Malta, where our chief editor  Gary Lakes spoke with them.

LIBYA’S new UN-sanctioned Government of National Accord faces many seemingly insurmountable tasks. One of the most important is to rebuild and legitimize core institutions like the Central Bank, the National Oil Company (NOC) and the Libyan Investment Authority (LIA). Two rival governments, the Islamist National Salvation Government in Tripoli and the elected House of Representatives, based in Tobruk since 2014, claim these key institutions and for two years have competed for control of Libya’s oil and money.

A halt to fighting is the GNA's foremost priority. [CNN]
A halt to fighting is the top priority for Libya’s new Government of National Accord. [CNN]
The rival governments have yet to fully recognize the new government of Prime Minister Fayez Mustafa al-Sarraj. Established at the end of 2015 by the United Nations, it has only recently positioned itself in Tripoli. Slowly it is acquiring ministerial premises in the Libyan capital and the international community hopes that it can quickly gain the trust of Libyans so that a new general election becomes possible.

The House of Representatives established itself in Tobruk in September 2014, after an Islamist militia seized Tripoli, and it attempted to assert control over the Central Bank and NOC. Both of them remained in Tripoli, now under Islamist control, and both fought to maintain their independence from either government.

Tobruk failed and then attempted to establish new entities outside the country, but that also failed as the international community continued to conduct what little business there was with the existing Central Bank and NOC in Tripoli.

Access to the $67 billion held by the Libyan Investment Authority (LIA), the sovereign wealth fund and prime investment vehicle, has been a main focus of contention. Although it failed with the Central Bank and NOC, Tobruk managed to retain control of the LIA, which is managed from Malta.  “There has yet to be a statement from the GNA recognizing the current leadership of the LIA,” a company representative told Global Sources Magazine in Malta. “The unresolved political situation is clearly holding back progress for the LIA, but it is business as usual as far as it can be with operations being carried out from here.”

Libya's new Prime Minister Fawaz al-Sarraj with EU HIgh Representative Federeica Mogherini in January [Europa.EU]
Libya’s new Prime Minister Fayez al-Sarraj with EU High Representative Federeica Mogherini in January [Europa]
The LIA oversees five subsidiaries through which it owns and holds shares in 550 companies. However, LIA’s assets are largely frozen under UN Security Council sanctions imposed at the express wish of the Libyan government.

“The priority for the chairman is to protect and preserve the assets,” the representative said. “When there is political stability there will be more opportunity for the LIA to be more pro-active. The world is watching to see what Sarraj and national Accord government will do.” As prime minister, Sarraj is now also chairman of the board of trustees.

The LIA did not escape the turmoil of the revolution. Allegations of corruption during the Qadhafi era led to investigations, but they did not yield any credible evidence of wrongdoing. However, the LIA is involved in court cases against Goldman Sachs and Societe Generale worth more than $3 billion over allegations that the banks persuaded LIA officials during the Qaddafi era to make investments that have proved worthless.

Hassan Bouhadi, Chairman of the LIA. [Daniel Jones]
LIA chairman Hassan Bouhadi. [Daniel Jones]
The LIA’s most recent dilemma revolves around the appointment in June 2013 of Libyan international investment banker AbdulMagid Breish to the post of chairman and CEO.  Breish resigned the post in June 2014 while the House of Representatives was still in Tripoli pending an investigation into possible connections between him with the Qadhafi regime. In the interim, Abdulrahman Ben Yezza, a former oil and gas minister, became chairman of the LIA.

As tension mounted between the Islamist government in Tripoli, which seized control of the LIA headquarters in Tripoli in 2014, and the recognized government in Tobruk mounted, Tobruk moved to oust Yezza and appointed Hassan Bouhadi as chairman of the board of directors. Bouhadi is an international businessman who during the revolution coordinated humanitarian activities with the international community as a member of the Libyan Stabilization Team under the National Transitional Council. He now runs the LIA from Malta.

AbdulMagid Breish. [Euromoney]
AbdulMagid Breish. [Euromoney]
In April 2015, the Libyan Court of Appeal in Tripoli cleared Breish of any connection with the old regime and he promptly declared himself reinstated as the CEO and chairman of LIA. Breish challenged Bouhadi’s appointment and the argument found its way to a UK court where in March this year, the English High Court ruled in favor of the LIA office in Malta and recognized Bouhadi as head of the LIA.

The Court said the UK government recognizes the company’s Malta office as the legal entity as its leadership was appointed by the government and House of Representatives in Tobruk, which at the time was Libya’s internationally recognized government. The UN has subsequently recognized the LIA under Bouhadi as the legitimate administrator of Libya’s top investment vehicle. But for his part, Breish remains in the fund’s Tripoli office and continues to operate a website as if he were indeed chairman and CEO of the fund.

 

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