Libya's national assembly voted today to make sharia, Islamic law, the basis of all legislation and for state institutions in a decision that may impact banking, criminal and financial laws.

Two years after the NATO-backed uprising that ousted Muammar Gaddafi, Libya is still in messy transition with no new constitution and its temporary assembly caught in deadlock between an Islamist party and political rivals.

As in Tunisia and Egypt where autocratic leaders were ousted in the Arab Spring revolts, Libya has seen fierce debate over the role of Islam in its new democracy with the rise of hardline Islamists long oppressed by Gaddafi

The immediate scope of the General National Congress's decision was not clear, but a special committee would review all existing laws to guarantee they comply with Islamic law.

"Islamic law is the source of legislation in Libya," the GNC said in a statement after the vote. "All state institutions need to comply with this."

The Muslim Brotherhood's Justice and Construction party is one of the most well-organised forces in Libya and promotes Islamic law. But the secular-leaning National Front Alliance formed after the revolt calls for a more liberal position.

The GNC's decision came shortly before a vote to form a 60-member committee that will draft the new constitution.

Unlike codified Western law, sharia is more loosely defined moral and legal guidelines based on the Koran, the sayings of Prophet Mohammad and Muslim traditions.

One reform may be a shift to more Islamic finance regulation, based on religious principles which avoid interest and pure speculation, which has grown with many sharia-compliant investment funds in the Gulf.