French Court Authorized Asset Seizure in Libyan Debt Case
International firms doing business with state-owned entities should note the risk of assets being held liable for sovereign debt.
Updated on Sept. 29, 2026 in Corporate Finance
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The Paris Court of Justice has authorized the Al-Kharafi Group to seize assets belonging to Libya's National Oil Corporation to satisfy a $960.2 million debt. The ruling affirms that the oil entity acts as an extension of the Libyan state.
Why it matters
The decision clarifies the legal reach of creditors seeking to collect on sovereign state debt by targeting commercial assets held in foreign jurisdictions. This creates significant compliance and credit risk for operators engaged in joint ventures with state-controlled enterprises.
The total debt of $960.2 million stems from a 2006 contract to develop 14 resorts over a 90-year lease. This figure includes the original $900 million arbitration award granted in 2013 following the termination of the project license in 2010.
The players
Al-Kharafi Group
A private construction and investment firm that manages large-scale infrastructure and hospitality development projects.
National Oil Corporation
The state-owned entity responsible for the exploration, production, and marketing of Libyan oil and gas resources.
TotalEnergies
A global multi-energy company engaged in oil, gas, and renewable energy production and distribution.
The details
The court's ruling establishes that the National Oil Corporation is financially responsible for debts incurred by the Libyan government. Consequently, the Al-Kharafi Group has secured the legal right to target state-linked assets, including those managed through a joint venture with TotalEnergies. Operators should note that this enforcement action allows creditors to bypass sovereign immunity protections when courts identify commercial entities as extensions of the state.
Timeline
2006: Al-Kharafi Group signed the original development contract.
2010: The Libyan government terminated the construction license.
2013: An arbitration panel granted a $900 million compensation award.
2022: A French court ruled that the National Oil Corporation is liable for state debt.
September 2026: The Paris Court of Justice rejected the final appeal from Libyan authorities.
Market Landscape
This decision follows the 2022 French court ruling that established the National Oil Corporation as liable for state debt. It marks a significant progression in legal efforts to enforce sovereign liability through the seizure of commercial assets held in foreign states.
Operators should review existing joint-venture structures with foreign state-owned enterprises to identify exposure to sovereign legal disputes. Financial teams should verify the enforceability of arbitration clauses in jurisdictions where state assets are held.
The takeaway
The court's decision confirms that commercial entities tied to foreign governments can be held liable for sovereign debt in international jurisdictions. Review all partnership contracts with foreign state-owned firms to ensure your company has clear protections against secondary enforcement actions.
Further reading
For more information on managing sovereign risk, visit Corporate Finance.
Source note: This article includes information reported by The National.
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