LSC 467/64

Libya Law No. 1/2013 Prohibiting Usurious Transactions did not prevent a claim of delay interest in commercial transactions. The court adopted a restrictive interpretation of the law, under which it limited the ban on interest to credit transactions

Background

Libya Law No. 1/2013 prohibited interest in civil and commercial transactions. Article 1(1) of Libya Law No. 1/2013 stated interest on deposits and loans in all civil and commercial transactions between natural and legal persons should be prohibited. All usurious interest, whether evident or concealed, earned from such transactions should be invalidated on an absolute basis.

The Law was part of an effort by Libya's transitional government to bring existing legislation in line with Islamic principles. The ban of interest (or usury) was a fundamental principle of Islamic contract law.1

The broad wording of the Law's provisions resulted in considerable uncertainty, particularly on the scope of application, including if its application was limited to the financial sector, requiring banks to re-organise their business along Islamic principles, or if it also banned interest in commercial transactions in general.