The International Criminal Court on Friday rejected Tripoli's bid to halt its prosecution of slain leader Moamer Kadhafi's son Seif al-Islam for crimes against humanity committed while trying to put down Libya's bloody revolt in 2011.
"The chamber concluded that it has not been sufficiently demonstrated that (Libya's) domestic investigation (covers) the same case that is before the court," the Hague-based ICC said in a statement on the long-awaited decision.
The ICC, which was mandated by the UN Security Council to investigate the Libyan conflict, issued an arrest warrant for Seif al-Islam, 40, his strongman father Moamer Kadhafi, now deceased, and his spy chief Abdullah Senussi in June 2011.
The court however has clashed with Tripoli over where he should be tried after he was captured by anti-Kadhafi fighters near the western town of Zintan in November 2011, where he is currently still being held.
Libya challenged the ICC's bid in May last year, saying the North African country had the means at its disposal to put him in the dock in a local court.
The ICC then also postponed its request for Libya to surrender Seif al-Islam until judges ruled on the challenge.
Tripoli has made progress in its own investigations into Seif al-Islam's role during Libya's revolt, sparked in mid-February 2011, including the mobilisation of militias, military forces and equipment and the arrests of journalists and activists, the judges said on Friday.
But after looking at Libya's challenge, they concluded that "taken as a whole... evidence did not allow the chamber to discern the actual contours of the national case against Mr Kadhafi such that Libya could said to have substantiated."
Tripoli said it would give careful consideration to the tribunal's decision.
"We need time to examine the ICC's decision," Justice Minister Salah al-Marghani told AFP. "Our response will be technical and not political."
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Libya has been plagued by a security breakdown since the uprising, with abductions and other crimes taking place frequently, and the new government is still unable to control the former rebels who overthrew Kadhafi.
The judges said "serious concerns" remained whether Libya was in fact able "genuinely to carry out the investigation or prosecution against Mr Kadhafi."
They acknowledged that Tripoli "deployed significant efforts to rebuild institutions and restore the rule of law" and improve security after the conflict, but said it "continued to face substantial difficulties in exercising its judicial powers fully across the entire territory."
This included the fact that Tripoli has not been able to secure Seif al-Islam's transfer from Zintan into state custody. Judges found "no concrete progress... had been shown since the date of his apprehension on November 19, 2011."
They were "not persuaded that the problem would be resolved in the near future," the judges added.
The court also pointed out that Libya lacked the capacity to get relevant testimony and was unable to provide adequate witness protection and that there were serious stumbling blocks in securing a lawyer for Seif.
Earlier this month, the ICC's chief prosecutor Fatou Bensouda told the UN Security Council that Libya's handling of the late dictator's family and followers could become a "Nuremberg moment" in legal history.
Bensouda at the time said the court's ruling would have a major impact on how it dealt with similar cases in the future.
Seif al-Islam Kadhafi is accused together with his father of orchestrating a plan to put down the Libyan revolt by "any means necessary".
This included the murder of hundreds of pro-freedom Libyan protesters and the injuring hundreds of others when security forces shot at crowds using live ammunition, as well as widespread arrest and torture.
Rights groups on Friday called on Libya to hand Seif al-Islam over to the ICC.
"Libya should abide by the ICC's decision and turn over Seif al-Islam to the court," Human Rights Watch said in a statement.