Al-Kharafi vs. Libya : Failed tourism project
Photo by gordontour CC BY NC ND 2.0
  • Amount demanded : US$1.1 billion
  • Outcome : US$935 million
  • Treaty invoked : Arab Investment Agreement
  • Sector : Services (real estate activities)
  • Issue : Democracy

by IISD (edited by

In 2006, the Libyan Ministry of Tourism approved an investment project proposed by Al-Kharafi & Sons Co. for the construction and operation of a tourism complex. Shortly after, the Kuwaiti company signed a 90-year land-leasing contract with the Tourism Development Authority, comprised of 24 hectares of state-owned land in Tajura, a city in the Tripoli District.

The project was to start in 2007, but construction work never commenced. The Ministry of Economy annulled the project approval in 2010 ; as a result, the land-leasing contract was also invalidated. Libya argued that the four-year delay in construction was in breach of the contract that stated the authority’s right to terminate it if the project was not executed in time.

Al-Kharafi & Sons Co. launched arbitration proceedings against Libya in 2011, claiming that the state did not hand over the property “free of occupancies and persons” as required by the contract and that the cancellation of the land-lease contract was illegal.

In 2013, the investor was awarded US$935 million, even though it had only invested US$5 million. The amount of the compensation was broken down into US$30 million for moral damages, US$5 million for the investor’s losses and expenses, and US$900 million for estimated lost profits (had the project gone ahead).

Last update : May 2021

source: IISD