Libyan Investment Authority

Libyan Investment Authority
Governmental
Industry Sovereign wealth fund
Founded 2006
Headquarters

22nd Floor Tripoli Tower, Tripoli, Libya

26,St. Barbara Bastions, Valletta, Malta
Products Fund management
Oil and gas
Website http://lia.com.mt

The Libyan Investment Authority (LIA) (المؤسسة الليبية للاستثمار) is a government-managed sovereign wealth fund and holding company headquartered in Tripoli, Libya. It was established on August 28, 2006, by Decree 208 of the General People's Committee of Libya (GPC),[1] after the lifting of economic sanctions that had previously precluded foreign investment in Libya.[2] The LIA oversees and manages investments in various areas including agriculture, real estate, infrastructure, oil and gas and in shares and bonds. It is Africa’s largest sovereign wealth fund.[3]

LIA Leadership

The LIA is currently chaired by Hassan Bouhadi who was appointed by a decree from the Board of Trustees on 11 October 2014.[4][5]

Abdulmagid Breish, former BoD Chairman, disputes Hassan Bouhadi’s authority as chairman of the Board of Directors of the LIA.[6][7][8] In 2014, Breish stepped down, replaced in the interim by Abdulrahman Ben Yezza, a former Libyan Minister for Oil and Gas, pending an inquiry under Libya’s Political and Administrative Isolation Law (through decision No.659 of 2014), until a permanent chairman was put in place.[9][10][11]

As of 29 September 2014 when the Board of Trustees removed Mr Ben Yezza from his role (Resolution 7 of 29 September 2014) and appointed Mr Bouhadi as chairman (Resolution 8).[4][12]

Breish appealed against his isolation before the Appeal Court of Tripoli. On 13 April 2015, the Libyan Court of Appeal stated that the Political and Administrative Isolation Law did not apply to Breish – he claims this led to his reinstatement as Chairman and CEO of the LIA on 18 May 2015.[13][14][15] However this decision does not reinstate him, nor does it suggest that any tenure he may have had in the past be reinstated. Mr Breish could have sought to be reinstated and made himself available to the Board of Trustees, but he has not yet done so.[16]

LIA Governance

Deeply rooted in the democratic structures of Libya, the LIA is overseen by the Libyan Government and is managed within strict governance processes, accountable to that government.[17]

Board of Trustees

The Board of Trustees [18] of LIA is:

Board of Directors

Since the inception of the LIA there have been six Chairmen of the Board of Directors.

The Board of Directors is composed of seven directors, including the chairman. The current Board of Directors of the LIA is:[18][19]

Law No. 13 of 2010

The LIA is deeply embedded within democratic structures of Libya and it mandate is defined by Law 13 which became statute in 2010.[26] Law No. 13 of 2010 sets out the LIA’s continuing mandate. The Libyan Investment Authority (“LIA”) was established in 2006 and is regulated under Law No. 13 of 2010 (“Law No. 13”), which continues to be in full force and effect as a matter of Libyan law.

Under Law No. 13, the LIA is composed of:

a. The Board of Trustees, being the ultimate governance body with oversight and control of the LIA. The Board of Trustees comprises: the Prime Minister (as Chairman); the ministers for Planning, Finance, Economy and Trade; the Governor of the Central Bank of Libya; and a number of experts. This structure was established by Decree No. 2 of 2014, the Council of Ministers, the executive branch of the Libyan Government appointed in accordance with the governmental mandate of the elected House of Representatives.[26]

b. The Board of Directors, being the competent body to oversee the management of the LIA (articles 10 and 11 of Law No. 13). The LIA Board of Directors is to be made up of seven members, including a Chairman. They must be appointed by resolution of the Board of Trustees. The Board of Directors oversees three subcommittees, (Nomination & Compensation, Governance, and Audit & Risk Committee), each of which have an agreed mandate of responsibilities and undertake frequent reporting back to the Board of Directors. The Board of Directors frequently report to the Board of Trustees.[26]

Activities

The LIA was established in August 2006 to manage Libya’s mounting oil revenue surplus. The LIA now counts the assets of the Libyan Foreign Investment Company (LAFICO), established in 1982, and Oilinvest, founded in 1988, in its portfolio. The value of the LIA is widely quoted as 70 billion [1] but the LIA's September 2010 management information report valued its own investment portfolio at $64 billion[27] and the Wall Street Journal quoted a value of $53 billion in June 2010.[28]

Offices

The LIA has three offices in London, Malta and Tripoli.

BP production sharing agreement

On May 29, 2007, during a visit to Muammar Gaddafi by British Prime Minister Tony Blair, British Petroleum (BP) signed a $900 million exploration and production agreement with the Libyan National Oil Company. The agreement, which will likely involve an estimated USD $2 billion in investment, covers three massive, largely unexplored tracts. The NOC signed the agreement with the LIA as BP’s 15% partner in a production sharing agreement (PSA).[29]

Economic and Social Development Fund

The LIA also manages the Economic and Social Development Fund (ESDF). Established in February 2006, the ESDF manages substantial assets in Libya across a number of sectors to benefit Libya’s poor. The LIA’s share in BP’s PSA provides a direct conduit via which oil wealth can be recycled. However, some Libya experts believe that the presence of two state-owned companies in BP’s deal reflects divisions and tensions at the executive level in Libya, particularly over who controls the oil wealth.

Libyan-Qatari fund

During August 2007, LIA agreed to establish a Libyan-Qatari joint investment fund for $2 billion equally with the Qatar Investment Corporation (QIC). Also, the General People's Congress secretary signed two agreements in Doha on July 2007 for establishment of a joint investment fund between QIC and LIA as well as establishment of the Libyan-Qatari Bank between QIC and the Central Bank of Libya. Also an agreement was signed concerning establishment of joint company for real estate development between Al-Diar real estate investment company (Qatar) and the Libyan Arab Foreign Investment Company.[30]

Investment in Fortis

In July, 2008, LIA bought a share in the Dutch-Belgian bank of Fortis, which needed additional funds to maintain solvability. LIA would not confirm the investment, since they are not required by Dutch or Belgian law to do so. However, later that week, the Dutch Minister of Finance Wouter Bos admitted that the situation 'had his attention, as well as that of the Dutch Central Bank', considering previous Libyan involvement in international terrorism.[31]

Investments in Juventus

As of June 2010, Lafico holds 7.5% of the total shares of Italian football club Juventus.

Investments in equity and currency trades

Between January and June 2008, the LIA paid $1.3 billion for options on a basket of currencies and options on six stocks (Citigroup Inc., UniCredit SpA, Banco Santander, Allianz, Électricité de France and Eni SpA) via Goldman Sachs. By February 2010, the value of these investments was 0.025 billion - a 98% loss.[28]

Assets

Assets as of 2010

In May 2011, The Washington Post detailed the holdings of the LIA. Despite a severe lack of transparency, the LIA saw an astonishing influx of foreign investment after Libya was removed from the U.S.'s list of state sponsors of terrorism in 2006, thereby lifting previously imposed economic sanctions.[2] The Post reported that investment in Libya "occurred with encouragement from U.S. officials, who wanted to reward Gaddafi for pledging to honor international law, disavow terrorism and compensate relatives of victims of the Pan Am Flight 103 bombing:"[2]

“Sanctions are powerful because of our ability to leverage the U.S. financial system. Immediate access to the U.S. and Western investment upon the removal of sanctions is the ultimate carrot...That carrot is what compels sanctioned narcotics traffickers, proliferators and supporters of terrorism to change their behavior and stop engaging in the illicit conduct that got them cut off from the United States.”
— Unnamed senior U.S. official, The Washington Post, 25 May 2011[2]

As of Q1 of 2010, the LIA held approximately US$56 billion in assets around the world, broken down as follows:[32]

By May 2011, U.S. regulators had frozen $37 billion of the LIA's assets there, including $29 billion in a single bank. The head of the London School of Economics resigned after it was revealed that he had served as an informal adviser to the LIA and accepted a donation from the fund to the school. UniCredit, Italy's largest bank, also froze some of Gaddafi's assets.[2]

Assets as of 2012

Following a validation and evaluation assessment undertaken by Deloitte for the Board of Directors in 2012,[33] the LIA portfolio was valued at $67 billion as of December 31, 2012. The mandate for the LIA based on Law 13 of 2010 to the Board of Directors is to preserve, protect and grow the sovereign wealth investments.[34]

Claims of mismanagement and misappropriation of funds

In 2011, Ali Tarhouni, minister of financial and oil affairs for the rebel National Transitional Council, appointed Mahmoud Badi, formerly a civil servant under Gaddafi, to investigate the Libyan Investment Authority. In August 2011, Badi found "misappropriation, misuse and misconduct of funds" with $2.9 billion missing from the LIA.[35] Mr Badi's report was the first in a series of reports by Gadaffi era technocrats claiming large losses and misconduct. Mr Badi himself was a Gadaffi era technocrat and was removed soon after his claims were made. He now heads the Libyan Economic and Social Fund.

Internal Management Reports were leaked to the Press by sacked staff in June 2010 and September 2012 which showed the Libyan Investment Authority had suffered much smaller losses than expected compared to the huge losses suffered by many sovereign wealth funds in the fallout of the 2008 crash.[36]

The Financial Times interviewed Gadaffi era appointees and directors of LIA, bankers who had never done business with the LIA, and former Gaddafi Libyan officials and reported more rumour and innuendo with no hard evidence generally making vague claims of mismanagement. Farhat Bengdara, a Gaddafi appointee, the former governor of the Central Bank of Libya and member of LIA's board of trustees claimed that there was a "clear lack of governance at the LIA" surprising since he been on its governance board of trustees until the revolution came. On Bengdara's recommendation Sami Rais (another Gaddafi era appointment)had been made chief executive of LIA in October 2009. Rais and Bengdara were subsequently sacked by the new governments of Libya. The accountancy firm KPMG had provided reports and audit in 2010 which showed the LIA asset position steadily improving and made no suggestions of corruption or wrongdoing by any LIA staff member.

As of December 2012 the Libyan Investment Authority following the Deloitte validation and evaluation report and the commitment to meeting the governance of mandate outlined in Law 13, the LIA appears to be operating normally [37] and no responsible investigation has demonstrated any real substantiated evidence of corruption or malfeasance.

Litigation cases

LIA is currently pursuing litigations against Goldman Sachs, Société Générale S.A and others to recover billions of dollars lost through improper transactions done in their dealings with the LIA during the Gaddafi regime.[38][39]

External links

References

  1. 1 2 Libyan Investment Authority. Overview by the Sovereign Wealth Fund Institute
  2. 1 2 3 4 5 The Washington Post - Libyan gold rush followed end to sanctions
  3. ↑ "Libyan sovereign fund happy with investments in Italy". REUTERS.
  4. 1 2 3 "Appointment Decree" (PDF). Libyan Investment Authority Official Website.
  5. ↑ "Libyan investment chief: 'Goldman Sachs squandered a nation's wealth, someone has to answer'". The Telegraph.
  6. ↑ "LIA leadership case adjourned, judge says premature to rule". Reuters UK. Retrieved 2016-03-11.
  7. ↑ Croft, Jane (2015-09-07). "Power struggle over Libya’s LIA spills into UK High Court". Financial Times. ISSN 0307-1766. Retrieved 2016-03-11.
  8. ↑ Braw, Elisabeth. "Following the Money in Libya". The National Interest. Retrieved 2016-03-11.
  9. ↑ "Libya's Sovereign Fund May Hold Key To Country's Civil War". Institutional Investor.
  10. ↑ "Court Decision in the Appeal" (PDF). LIA.
  11. ↑ "Breish back at LIA? Elkaber hints at chairman’s return to office". Emerging Markets.
  12. ↑ "Libyan investment chief: 'Goldman Sachs squandered a nation's wealth, someone has to answer'". The Telegraph.
  13. ↑ "The leadership battle at the top of Libya's sovereign wealth fund".
  14. ↑ "Tripoli Court of Appeal Legal Rulling" (PDF).
  15. ↑ "Abdulmagid Breish resumes leadership of Libyan Investment Authority" (PDF).
  16. ↑ "Inside Libya: The Other Side Of The LIA Story". Forbes.
  17. ↑ "List of LIA Board of Trustees and Directors members". Bloomberg Website.
  18. 1 2 "LIA Governance". Al Youm Al Sabe'e Newspaper (Egypt).
  19. ↑ "Libya steps out of financial wilderness with plan to manage assets". Telegraph.
  20. ↑ "Appointment Decree" (PDF). Libyan Investment Authority Official Website.
  21. ↑ "Appointment Decree" (PDF). Libyan Investment Authority Official Website.
  22. ↑ "Appointment Decree" (PDF). Libyan Investment Authority Official Website.
  23. ↑ "Appointment Decree" (PDF). Libyan Investment Authority Official Website.
  24. ↑ "Appointment Decree" (PDF). Libyan Investment Authority Official Website.
  25. ↑ "Appointment Decree" (PDF). Libyan Investment Authority Official Website.
  26. 1 2 3 "Law No. 13 of 2010". Libyan Investment Authority Official Website.
  27. ↑ Staff (24 August 2011) Depleted Fund May Hamper Libya Rebuild The Tripoli Post, Retrieved 10 September 2011
  28. 1 2 Coker Margaret and Rappaport, Liz (31 May 2011) Libya's Goldman Dalliance Ends in Losses, Acrimony The Wall Street Journal, Retrieved 9 September 2011
  29. ↑ BP Snares Huge Libyan Gas Fields 31 May 2005, Business Week
  30. ↑ Establishment of Libyan Qatari joint investment fund, 29.08.2007 Libyaninvestment.com
  31. ↑ Fortis-Libya deal under investigation, 04.07.2008 Quotenet.nl
  32. ↑ Graphic: Libya's assets - The Washington Post
  33. ↑ "Investment Portfolio". Libyan Investment Authority Official Website.
  34. ↑ "Oversight". Libyan Investment Authority Official Website.
  35. ↑ Libyan sovereign wealth fund 'missing $2.9bn' BBC News Business, Retrieved 29 August 2011
  36. ↑ http://www.globalwitness.org/library/new-leaked-document-reveals-hsbc-held-14bn-libyan-funds
  37. ↑ http://online.wsj.com/article/SB10001424127887323894704578115024134005616.html
  38. ↑ "Libyan Investment Fund plans $5bn of litigation". The Telegraph.
  39. ↑ "SocGen facing bribery lawsuit over Libyan deals". Reuters.
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