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* Parties say law excludes large sections of society
* Critics say law will encourage voting on tribal lines
By Taha Zargoun and Oliver Holmes
TRIPOLI, Jan 15 (Reuters) - Twelve moderate Islamist parties in Libya have rejected a proposed election law because it encourages voting along tribal lines and gives undue influence to the wealthy, they said late on Saturday.
The draft law, published by the National Transitional Council (NTC) on Jan. 2, will set the rules of a vote for the national assembly in June. The body will be charged with writing a constitution and forming a second caretaker government.
"The proposed electoral system does not lead to true representation of all sectors of society, instead it would produce a representation overwhelmed by tribal consideration and the influence of the rich," the Forum of National Parties said in the joint statement.
Wasila al-Ashiq, head of one of the parties, al-Umma, told Reuters on Sunday the draft law would force candidates to run as independents because Libya has no law regulating political parties. That would mean candidates would rely on tribal power and affiliation to win seats, she said.
"We should not be voting for x or y, but candidates should join a party with clear political objectives," she said. "Otherwise, the larger tribes will gain all the seats and minorities such as the Berbers will be ignored."
It is not clear how much support the 12 parties will muster among Libyans, for whom multiparty democracy is a new concept after 42 years of rule by Muammar Gaddafi.
The proposals have been widely criticised for reserving only 20 seats for women in the 200-member national assembly and not tackling the contentious issue of dividing Libya into constituencies.
The NTC has asked people to comment on the proposals, expected to be finalised within a month, and to put forward their own ideas as part of a plan to engage the population in the democratic process and to move away from militancy.
The NTC is trying to disband dozens of rival militias with regional allegiances, more than four months after rebels captured and killed Gaddafi.
The Forum of National Parties says it will announce a final report on the election law on Monday. (Writing by Oliver Holmes; Editing by Ben Harding)