The Double-Edged Sword of International Justice: How the ICC Shapes Investment in Conflict Zones

Emerging markets have long been a magnet for capital seeking high-growth opportunities, but they are also riddled with geopolitical and legal risks that can make or break investment strategies. Nowhere is this tension more evident than in conflict-affected regions like Libya, where the interplay between international justice mechanisms—such as the International Criminal Court (ICC)—and domestic governance has created a volatile landscape for investors. From 2020 to 2025, Libya's legal and political developments, particularly its engagement with the ICC, have offered a case study in how international institutions can both signal stability and amplify uncertainty.

The ICC's Role in Libya: A Legal Tightrope

The ICC's involvement in Libya began in 2011, when the UN Security Council referred the country's crisis to the Court. By 2025, the Government of National Unity (GNU) had taken a symbolic step by lodging an Article 12(3) declaration under the Rome Statute, extending the ICC's jurisdiction over crimes committed in Libya from 2011 to 2027. On paper, this move suggested a commitment to accountability and international norms. However, the GNU's track record of non-cooperation—refusing to transfer suspects like Mohamed Salheen and Osama Elmasry Njeem to The Hague—undermines the declaration's credibility.

The ICC's investigations into war crimes, including torture and sexual violence in facilities like Mitiga Prison, have exposed systemic governance failures. While this scrutiny may deter some investors, it also highlights the fragility of Libya's institutions. For capital flows, the ICC's presence acts as a double-edged sword: it signals international engagement but also underscores the lack of domestic capacity to enforce the rule of law.

Geopolitical Risks and Investor Sentiment

The data tells a sobering story. In 2023, Libya reported a negative net FDI inflow of $794.7 million, reflecting outflows driven by political instability and enforcement challenges. The country's reliance on oil (97% of government revenue) and its fragmented governance—where militias often operate outside state control—create a high-risk environment. Even with incentives like the 2010 Investment Law, which allows full foreign ownership for projects over 5 million Libyan Dinars, bureaucratic opacity and corruption (ranked 171/180 by Transparency International) remain major hurdles.

The ICC's role in Libya has also drawn geopolitical friction. Russia and China, permanent UN Security Council members, have criticized the Court as a tool of Western influence. This criticism, while not directly affecting FDI, contributes to a climate of legal uncertainty. Investors must weigh whether the ICC's presence will stabilize Libya or deepen its divisions.

Strategic Implications for Investors

For investors, the key takeaway is that legal and political risk mitigation must be proactive and nuanced. Here's how to navigate the terrain:

1. Sector-Specific Caution: Energy and infrastructure projects in Libya require partnerships with local entities that can navigate the fragmented governance. The National Oil Corporation (NOC) remains a critical player, but political interference in its operations adds layers of risk.

2. Due Diligence on Legal Frameworks: The 2010 Investment Law offers tax exemptions and profit repatriation, but enforcement is inconsistent. Investors should prioritize jurisdictions with clearer dispute resolution mechanisms, such as those aligned with the International Chamber of Commerce (ICC), even if domestic courts remain unreliable.

3. Monitor Geopolitical Shifts: The GNU's 2025 declaration is a positive signal, but its impact hinges on follow-through. Investors should track developments in Libya's political transition, including the stalled 2023 election plans, to gauge long-term stability.

4. Diversify Exposure: Given Libya's volatility, diversifying across North African markets—such as Egypt or Morocco—can balance the risks of overexposure to a single conflict-affected region.

The Path Forward: Justice vs. Stability

The ICC's work in Libya underscores a broader truth: international justice mechanisms can enhance a country's global standing but rarely resolve domestic instability. For Libya, the 2025 declaration is a step toward accountability, but without concrete cooperation with the Court or reforms to address corruption and militia control, its impact on investor confidence will remain limited.

Investors must ask: Is the ICC's presence a sign of progress, or a reminder of how far Libya has to go? The answer lies in balancing the symbolic value of international engagement with the harsh realities of on-the-ground governance. In the end, capital flows to Libya—and other conflict-affected regions—will depend not just on legal declarations, but on the ability of local institutions to translate them into action.

For now, Libya remains a high-risk, high-reward proposition. Those willing to navigate its complexities may find opportunities in its vast oil reserves and reconstruction needs—but only if they're prepared to bet on a future that is far from certain.