Tuesday, September 06, 2016

Libya’s Rival Sovereign-Wealth Fund Chiefs Seek Truce
Management of the frozen $67 billion fund has been the subject of a power struggle between competing governments

The oil terminal of Marsa al-Hariga in Libya. The country’s sovereign-wealth fund was created during the regime of dictator Moammar Gadhafi to invest the North African nation’s oil wealth.

Sept. 6, 2016 9:07 a.m. ET

Rival chairmen of Libya’s $67 billion sovereign-wealth fund say they want to settle their differences and unify its management, seeking to end a feud that began during the country’s civil war.

The Libyan Investment Authority, or LIA, is suing New York-based Goldman Sachs Group Inc. and Paris-based Société Générale SA for billions of dollars in the High Court in London over failed investments. The chairmen said in interviews with The Wall Street Journal that they want to combine their efforts to cut legal costs and simplify operations.

AbdulMajid Breish, a Tripoli-based chairman of the fund, and Fawzi Omran Farkash, a rival chairman representing a legislature that established itself in the eastern city of Tobruk, said they met in Dubai a week ago and agreed to create a unified board.

“We are in agreement,” Mr. Farkash said in an interview. “We have to manage to create one board of directors.”

At stake is the authority to manage and spend billions of dollars frozen by the United Nations. The fund was created during the regime of dictator Moammar Gadhafi to invest oil wealth on behalf of the 6.3 million citizens of the North African nation. The fund’s management was torn apart in the civil war that followed the death of the dictator in 2011. A legal tussle in the High Court in London ensued over who is the rightful chairman. The court case was adjourned in March when a judge ruled that a recently installed U.N.-backed unity government should decide who is in charge.

The meeting between the rival chairmen took place after the leader of the Government of National Accord, Faiez Serraj, sought to assert his control over the fund. In August, Mr. Serraj appointed an interim steering committee to manage the LIA. Both chairmen oppose this committee, which they say doesn’t comply with Libyan law. Decisions about the LIA should be made by a board of trustees including the Libyan prime minister, said Mr. Breish and Mr. Farkash. Mr. Breish has asked a court in Tripoli to rule on the legality of the steering committee.

“My problem is with its current legal status,” Mr. Breish said in an interview. “The only body which can nominate and dismiss the chairman and the board is the board of trustees,” he said. “If there is a new board of trustees and they ask me to hand over to a legally appointed replacement I will do so immediately. As a public servant I have a legal obligation to hand over to a legally-appointed body.”

Mr. Farkash also said he would resign if asked to do so by a legally appointed board of trustees. Mr. Serraj didn’t respond to a request for comment.

The LIA is suing Goldman for $1.2 billion to cover losses from derivatives it bought from the bank in 2008. The fund alleges that Goldman executives exerted “undue influence” over its officials, who didn’t understand the trades. Goldman denies wrongdoing and has said the Libyan fund understood the risks. The judge will issue a decision this year.

The case against Société Générale is due to be heard in court next year. The fund alleges it lost money on trades with the French bank because of “bribery” and “undue influence.” A spokesman for Société Générale said the bank “firmly refutes the LIA allegations questioning the lawfulness of the investments.”

— Hassan Morajea contributed to this article.

Write to Simon Clark at simon.clark@wsj.com

No comments: