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Construction Arbitration: Turkey
A Presidential Decision (‘’Decision’’) dated 6 July 2021 regarding letters of guarantee issued on behalf of Turkish citizens in Libya has been published in the Official Gazette on 7 July 2021. You can read the Presidential Decision here (available in Turkish only).
Turkish contracting companies’ operations had suffered as a result of the disturbances that took place in Libya in 2011. Business had been brought to a standstill by the possibility of letters of guarantee held by Libyan employers being unjustly liquidated, a situation that had been precluded by a Cabinet Decree dated 21 June 2011. Although this problem seemed to have been resolved, contractors operating in Libya have faced various problems in obtaining letters of guarantee for unfinished and ongoing works.
With the new Decision, new and unfinished projects undertaken in Libya have been exempted from the Cabinet Decision dated 2011. Thus, on the one hand, the protection of the backdated letters of guarantee is maintained, while on the other hand, the Decision paves the way for restarting paused construction projects and issuing letters of guarantee for new projects.
The Decision, which introduces a number of benefits for contractors in Libya, intends to prevent economic uncertainties in the construction industry caused by letters of guarantee and to present an encouraging environment for contractors.
Accordingly, it is expected that new initiatives will be launched by the Libyan authorities to directly accept the letters of guarantee from Turkish banks without the need to obtain counter-guarantees from foreign banks.