LIA Remains Lost in the Legal Labyrinth

Some have likened the Libyan Investment Authority’s attempts to sue Goldman Sachs and Societe Generale for more than $2billion to the Biblical battle of David and Goliath. Now things have got even more complicated. The lawyers originally representing the LIA in the case have walked away, and now two different law firms are claiming to represent the sovereign wealth fund on behalf of two different employers.

The problem is that each of those employers each believes themselves to be in sole charge of managing the LIA and its mostly frozen assets. Those assets are estimated to be valued in the region of some $67 billion.

Until October 2014, the Libyan Investment Authority was run under the leadership of Abdulrahman Benyezza, who acted as Chairman and kept things as stable as possible during the civil war. At that point, the LIA board removed him.

The Two Sides

The first of the competing sides believes the LIA is now run from Malta. The Malta-based board has Hassan Bouhadi as chairman, supported by Faisal Gergab. Faisal is the head of Libyan Post, Telecommunications and Information Technology Co. This side has abandoned Tripoli as a base, and works from the LIA’s Maltese subsidiary offices over fears of intimidation and allegations of violence directed towards them.

On the other side, between October 2014 and April 2015, the fund was also being run from Tripoli, with Benyezza still claiming to be in charge despite his initial replacement by Abdulmagid Breish. Interviews with employees at the Tripoli-based version of the LIA claimed that he was still very much in charge and that the organisation was still operating from the 22nd floor of the Tripoli Tower. Breish returned as chairman after being cleared in an investigation into alleged links to the Gaddafi administration.

The message from the Tripoli side is that they are continuing their long-standing role of representing Libya’s government and the Libyan people internationally. Each side is insistent that the other is not in charge of anything.

Legal Confusions

It is this confusion that seems to have driven Enyo Law to walk away from representing the LIA in both the Goldman and Societe Generale cases. The frequent changes of leadership and competing claims of legitimacy have not been officially cited as reasons, but when Enyo filed their departure from the case with the London High Court in April 2015, it was not believed to be over non-payment but rather because the firm was no longer clear who its client was, or how the client wished to proceed.

As of now, each side has appointed their own separate law firms to work out who represents the fund. Keystone Law has been retained by the Maltese Bouhadi-led side. Keystone have written to Goldman and SG counsel Herbert Smith Freehills to say that they have been “instructed to take over conduct of this action.” The Maltese side also put out a statement that Benyezza’s repeated assertions of his individual authority to represent the LIA were creating a wholly unnecessary impediment to the efficient pursuit of the LIA’s legal claims against the banks.

The Tripoli side has appointed Stephenson Harwood as LIA general counsel in the UK, but maintained that this appointment had nothing to do with the pending cases against Goldman Sachs and Societe Generale. This has already put Stephenson Harwood in a tricky position as they sometimes represent DG, and they put out a statement in May both confirming their ongoing relationship with SG and that they were not in charge of proceedings against the two banks.

With Breish’s return, the Tripoli side reiterated its desire to pursue the case. Breish was the person who initiated the original claim after all. In a statement he said that the litigations were a critical part of LIA’s work, and aimed to recover billions of dollars lost through improper transactions during the Gaddafi regime.

He further said that he was aware that during his absence “there has been an attempt by other persons to take control of the LIA, serving to challenge the independence and neutrality of the organisation”. He said that he looked forward to “demonstrating conclusively that their claim is baseless.”

The Struggle

This whole muddle is representative of the wider power struggle taking place within Libya over anything related to national finances. For example, the phenomenon of more than one person or institution claiming to be in charge can be seen at the central bank too.

The Tripoli LIA says that the European Community, the UN and US have agreed to keep Libyan sovereign institutions, including the LIA, central bank, and the National Oil Corporation, out of the wider power conflict in the country. The overall impact on the LIA funds of all this will be limited as most of its assets remain frozen, but it doesn’t help with the complicated litigation underway against two of the world’s biggest banks.

At this point, questions are being asked about whether it is still possible for the cases to proceed. The Tripoli side seem unsure, despite both sides feeling that the LIA has strong claims. Against SG, there’s $2.1 billion, while the case against Goldman is looking for $1.2 billion. The disruption can only add to the already considerable costs of the case. An estimated $2 million dollar would have been spent already with Enyo, and it could easily take another $500,000 to bring any new firm up to speed. Both cases are due to be heard this year, having already completed extended pre-trial hearings