By Zhu Weidong

Chinese enterprises' losses in Libya have aroused great public attention.

Rumors such as "China lost thousands of billions of yuan" and "Chinese investment in Libya was wasted" are widespread, but are short of factual evidence and legal grounds, or even have inconsistency in their data about the losses.

The exact numbers for economic losses of Chinese enterprises in Libya are still unknown. Current statistics reported by the media are only based on total contract amounts in Libya and estimated asset and facility losses, without considering the stage of these contracts' fulfillment or the accuracy of loss estimation.

The Ministry of Commerce has published data showing that the turmoil in Libya has affected 50 projects undertaken by 75 Chinese enterprises, involving a total amount of $18.8 billion.

Chinese companies can get full payment only when the contract is completed. If the contract is halted at time of warfare, investors may only get part of the contract amount. The incompleteness of contracts doesn't mean enterprises' rip-off.

It's both difficult and too early to calculate the exact amounts of losses, as the Libyan situation has not yet cleared.
According to international practices, assessment of damages should be done in accordance with local regulations.

The Libyan Civil Code regulates that compensation for contract losses involves only actual losses and profit losses, and the calculations should exclude foreseeable losses caused directly by breach of contract.

As the contract amount is ascertained, Chinese companies' losses in Libya are mostly actual losses, including asset and facility damages, and account receivable losses.

According to international norms, contractors get an advance from outsourcers to purchase necessary materials and equipments before construction project initiates. Reportedly, a major part of Chinese enterprises in Libya have already received over 15 percent of their payments, which somewhat buffers the losses.

As to the account receivables, mainly referring to payments from Libyan outsourcers, Libyan partners don't owe a large amount to Chinese companies save for perhaps three companies that have finished over 30 percent of the projects, which are Beijing Hongfu Group, Beijing Construction Engineering Group and China State Construction Engineering Group, which completed 50 percent of its contracted project.

The warring parties of Libya, according to treaties on the protection of bilateral investment between Libya and other countries, have an obligation to appropriately protect the equipment and assets of Chinese companies as well as other countries' in Libya.

Some of the companies, before withdrawing from the war-torn nation, took measures necessary to minimize their losses, like handing over equipment and materials to Libyan partners and withdrawing important commercial documents. Reports say that some Libyan residents are guarding the construction sites from being looted or sabotaged.

All these imply that the loss of Chinese companies may be limited.

Although the actual loss of Chinese enterprises in Libya might be reasonable, Chinese merchants still need to claim reimbursement after Libya sort its politics out. Most of the projects were signed with Libyan state-owned companies and public sector.

If Gaddafi's regime finally collapses, the new government will honor its predecessor's good faith debts, but not its bad debts, in accordance with international law practice.

Chinese companies focus on business in infrastructure, housing and communication, which belong to the category of good faith debts that will probably be compensated.

If the country splits, the successor states will negotiate the debt inheritance proportionally and justly. Chinese enterprises should wait to seek compensation when things are clearer.

The author is vice director of the African Law and Society Research Center, Xiangtan University in Hunan Province. opinion@globaltimes.com.cn