Contributed By Alem & Associates
The current Lebanese Arbitration Law has been codified in Lebanon since 1983 with the enactment of the new Civil Procedure Code (NCPC), Articles 762 to 821 of which govern domestic and international arbitration.
The section in the NCPC pertaining to arbitration is largely inspired by the 1981 French arbitration law, which preceded the current French legislation issued in 2011, and which was deemed favourable to arbitration. It follows that the NCPC ensures that arbitral proceedings progress in a flexible and timely manner and that arbitral awards are recognised and enforced promptly.
Further, as early as 1995, the Beirut Chamber of Commerce and Industry established the Lebanese Arbitration and Mediation Center (LAMC), which acts as an arbitral institution in charge of providing administration and monitoring services for arbitral proceedings in Lebanon. In addition to the LAMC, arbitrations that are initiated in Lebanon are often referred to international and regional arbitral institutions such as the International Chamber of Commerce (ICC) and the Dubai International Arbitration Centre (DIAC), the rules of which Lebanese courts are familiar with.
For all these reasons, Lebanon has been regarded as one of the most arbitration-friendly venues in the Middle East and as a jurisdiction where arbitration is perceived as a standard method of settling disputes.
A number of developments have confirmed the liberal approach that has been adopted in recent years by Lebanese courts in relation to arbitration.
The first issue that has received some attention lately pertains to the arbitrability of disputes arising from commercial representation agreements. By way of background, Decree-Law 34/67 (DL 34/67), dated 5 August 1967, regulates commercial representation in Lebanon. Article 5 of DL 34/67 grants jurisdiction to Lebanese courts for the settlement of disputes arising from commercial representation agreements. Considering that DL 34/67 was originally promulgated to protect the interests of Lebanese agents/commercial representatives against those of their foreign principals, the Lebanese courts’ jurisdiction to hear disputes arising from commercial representation agreements was traditionally viewed as exclusive. Accordingly, disputes arising from commercial representation agreements were historically considered non-arbitrable.
In a subsequent interim solution, Lebanese courts drew a distinction between arbitration clauses that are signed prior to the occurrence of a dispute and arbitration submissions (compromis d’arbitrage) that are signed after the occurrence of disputes. Only in the latter case did Lebanese courts accept that disputes arising from commercial representation agreements be settled by way of arbitration. The rationale behind this distinction is that, if parties agree to arbitration after the occurrence of a dispute, they are deemed to have knowingly and freely waived their right to the protective measures set out in DL 34/67, including the jurisdiction of Lebanese courts to hear their dispute. Certain Lebanese courts still apply this distinction when addressing the validity of arbitration clauses contained in commercial representation agreements.
More recently, in a decision rendered by the Court of First Instance of Beirut, the court concluded that Article 5 of DL 34/67 granted exclusive jurisdiction to Lebanese courts at the expense of other state judicial bodies, as opposed to non-state bodies such as arbitral tribunals (Court of First Instance of Beirut, 14 July 2015, Decision 376/74/2013). According to the Court of First Instance of Beirut, the provisions of Article 5 of DL 34/67 would therefore aim at preventing parties from settling disputes arising from commercial representation agreements before foreign state courts only, but not before arbitral tribunals. Such exclusion acquires real meaning in the context of anti-suit injunctions. It follows from the foregoing that the jurisdiction granted by Article 5 of DL 34/67 to Lebanese courts would not have the effect of rendering disputes arising from commercial representation agreements non-arbitrable.
This being said, in another recent decision, the Court of First Instance of Beirut considered that, in order to be enforceable, arbitral awards issued in relation to disputes arising from commercial representation agreements ought to apply the substantive provisions of DL 34/67 (Court of First Instance of Beirut, 2 November 2016, Decision 48/93). While this decision confirms the public policy nature of the substantive provisions of DL 34/67, it does not appear to challenge the arbitrability of disputes arising from commercial representation agreements.
Another interesting development in the sphere of Lebanese arbitration law revolves around Lebanese courts’ increasingly liberal interpretation of arbitration agreements and the validity thereof.
One telling example is a decision rendered by the Court of First Instance of Beirut, which considered that an invalid term contained in an arbitration agreement does not have the effect of annulling the entire arbitration agreement (Court of First Instance of Beirut, 5 June 2013, Decision 24/63).
Likewise, the same Court of First Instance of Beirut ruled that insolvency proceedings do not result in the invalidation of arbitration agreements concluded by the insolvent debtor and that the liquidator is bound to execute arbitration agreements in the same way as they would with any other acts of disposition or agreements entered into by the debtor prior to the declaration of his or her bankruptcy (Court of First Instance of Beirut, 13 February 2013, Decision 9/51).
In the same decision mentioned above, the Court of First Instance of Beirut declared that the lack of explicit reference to the number of arbitrators does not lead to the nullity of the arbitration agreement.
Further, contrary to a number of other jurisdictions in the Middle East, Lebanese case law qualifies the agreement to arbitrate as an administrative act that falls within the ambit of the day-to-day management of a company, and which therefore does not require a prior special authorisation from the company’s board of directors. This well-established jurisprudential trend in Lebanon was recently reconfirmed by the Beirut Court of Appeal (Court of Appeal of Beirut, 28 October 2009).
Lastly, with respect to the extension of arbitration agreements to non-signatories, the Court of First Instance of Beirut recently reiterated that a non-signatory is bound by an arbitration agreement provided he or she took part in the negotiations and/or implementation of the underlying agreement so as to confirm his or her intention to be bound by the same (Court of First Instance of Beirut, 14 January 2013, Decision 2/44).
The industry sectors where arbitration is the prevailing dispute resolution method are construction, banking and finance, real estate, telecommunication, and franchising. It is to be noted, however, that arbitration is nonetheless used to resolve disputes across different sectors and industries.
Moreover, following the approval by the Lebanese Cabinet in early 2017 of a model exploration and production agreement, petroleum activities are expected to be commenced in Lebanon within the next few years. Seeing as the aforementioned model agreement contains an ICC arbitration clause, it is reasonable to expect that arbitration would be used as the prevalent method for dispute resolution in the newly formed oil and gas industry.
The LAMC (see above, 1.1 Prevalence of Arbitration) is the main institution that administers domestic arbitration in Lebanon. The Rules of Conciliation and Arbitration of the LAMC are heavily inspired by the 1988 version of the ICC Rules of Arbitration.
Moreover, the Beirut Bar Association established in 2014 the Lebanese and International Arbitration Center of the Beirut Bar Association (LIAC-BBA) to administer domestic and international arbitrations. The LIAC-BBA has issued its own arbitration rules, but the centre has yet to publish the number of currently registered cases.
Aside from the LAMC, the ICC is frequently used for the administration of domestic arbitration proceedings in Lebanon. The ICC is also the leading institution for the administration of international arbitration proceedings in Lebanon.
In addition to the above, other regional arbitral institutions are active in Lebanon with a particular focus on disputes between parties from Middle Eastern countries. These institutions include, inter alia, the DIAC, the Cairo Regional Center for International Commercial Arbitration (CRCICA), the Abu Dhabi International Arbitration Centre (ADIAC) and, to a lesser extent, the DIFC-LCIA Arbitration Centre and the Bahrain Chamber for Dispute Resolution (BCDR-AAA).
As mentioned above (1.1 Prevalence of Arbitration), the Lebanese Arbitration Law is found in Articles 762 to 821 of the NCPC. The Lebanese Arbitration Law is not based on the UNCITRAL Model Law. Instead, the Lebanese Arbitration Law is largely based on the previous French Arbitration Law of 1981, with the difference between the two laws pertaining essentially to domestic arbitration.
The Lebanese Arbitration Law distinguishes between domestic arbitration, governed by Articles 762 to 808 of the NCPC, and international arbitration, governed by Articles 809 to 821 of the NCPC. As per Article 809 of the NCPC, arbitration is of an international nature when it pertains to international commercial interests. In light of the definition set out under Article 809 of the NCPC, Lebanese case law considers that the criteria determining the character of an arbitration is economic (Court of Appeal of Beirut, 21 March 2001, Decision 492/2001), and that arbitration is of an international nature when the underlying dispute involves the flow of goods or funds across borders (Lebanese Court of Cassation, 27 April 2006, Decision 98/2006).
Compared to domestic arbitration, international arbitration is more flexible and liberal insofar as parties have the liberty to choose procedural rules different from those included in the NCPC (Article 811 of the NCPC). This being said, where Lebanese Law is applicable to an international arbitration, Articles 762 to 792 of the NCPC governing domestic arbitration are applicable unless the parties expressly agree otherwise (Article 812 of the NCPC).
There has been no recent major reform of the Lebanese Arbitration Law. However, since its promulgation in 1983, the current Lebanese Arbitration Law has witnessed a couple of amendments.
In June 1996, paragraph 2 of Article 804 of the NCPC (applicable to international arbitration by reference to Article 821 of the NCPC) was amended in such manner as to permit the challenge in front of the court of cassation of decisions rendered by the court of appeal in annulment matters.
In July 2002, additional amendments were introduced to the Lebanese Arbitration Law mainly with regard to the state involvement in arbitral proceedings. The 2002 amendments clarified administrative disputes that are arbitrable and those which fall within the exclusive jurisdiction of Lebanese administrative courts. It was further specified that arbitration clauses and arbitration submissions (compromise d’arbitrage) entered into by the state, by state organs, and/or by legal persons under public law are now subject to a prior authorisation for administrative contracts.
While the NCPC provisions regulating domestic arbitration subject the validity of arbitration agreements to the formal conditions that said agreements be in writing and that they include the appointment of arbitrators or a method for such appointment (Article 763 NCPC), no specific or formal requirements for the validity of arbitration agreements are found in the NCPC section governing international arbitration. Moreover, as indicated above (see above, 2.1 Governing Law), according to Article 812 of the NCPC, parties may agree to exclude from international arbitration the application of the NCPC provisions governing domestic arbitration, and in particular Articles 762 to 792 of the NCPC.
The foregoing – coupled with the liberty that parties have in international arbitration to choose any procedural rules they wish to govern the arbitral proceedings – means that the Lebanese Arbitration Law has in theory adopted a very liberal approach with respect to the requirements for the validity of arbitration agreements in the context of international arbitration.
This being said, it is not uncommon for Lebanese courts to apply in international arbitration NCPC provisions governing domestic arbitration. This is particularly so when no agreement is reached by the parties to expressly exclude Articles 762 to 792 of the NCPC from an international arbitration governed by Lebanese law, as is required under Article 812 of the NCPC.
Thus, Lebanese courts have previously requested that conditions of validity of arbitration agreements generally required in domestic arbitration be also applied in international arbitration.
More recently, the Court of First Instance of Beirut held that validity requirements applicable to domestic arbitration should be excluded in international arbitration (Court of First Instance of Beirut, 28 April 2010, Decision 12/42). This approach appears to have become well settled in Lebanese case law (Court of First Instance of Beirut, 30 December 2014).
The NCPC section governing international arbitration does not contain any provision defining the arbitrability ratione materiae of disputes. Neither has there been, to date, any court decision shedding light on which criteria to use in identifying subject matters that may not be referred to arbitration.
In domestic arbitration, Articles 762 and 765 of the NCPC exclude arbitration in matters which may not be subject to transaction.
Article 1037 of the Lebanese Civil Code, also known as the Code of Obligations and Contracts (COC), defines matters which may not be subject to transaction as follows: (i) matters of personal status, which cover, inter alia, marriage, divorce, child custody, and inheritance; (ii) public policy issues; and (iii) personal rights which are not in trade. Excluded from the foregoing definition are pecuniary interests arising from matters of personal status or offences.
With regard to public policy issues, Lebanese Courts generally refrain from excluding the arbitrability of matters just because a public policy question is under consideration (Court of Appeal of Beirut, 19 December 2000, Decision 1417/2000; Court of First Instance of Mount Lebanon, 25 June 2001, Decision 25/2001).
Other subject matters which may not be referred to arbitration in Lebanon are matters falling under the exclusive or mandatory jurisdiction of state courts.
Such is the case for commercial representation agreements. However, as indicated above (1.1 Prevalence of Arbitration), Lebanese case law has accepted in certain cases the arbitrability of disputes arising from commercial representation agreements.
Likewise, maritime contracts are matters that potentially fall under the exclusive or mandatory jurisdiction of state courts. As per Article 212-1 of the Lebanese Code of Maritime Commerce, any clause intended to derogate directly or indirectly from the jurisdiction of Lebanese courts for bill of lading matters is null and void.
In labour disputes, Article 79 of the Lebanese Code of Labour subjects all disputes regarding employment and social security to the exclusive jurisdiction of Labour Arbitration Boards, which are state courts comprised of a presiding judge, one representative of employers, and one representative of employees. Lebanese courts have interpreted the jurisdiction of Labour Arbitration Boards to be an issue of public policy, thereby ruling in favour of the exclusivity of said jurisdiction at the expense of the parties’ agreement to arbitrate (Lebanese Court of Cassation, 26 April 2012, Decision 79/2012). It is to be noted that the non-arbitrability of labour disputes does not apply to collective labour contracts.
In relation to bankruptcy matters, as per Articles 490 of the Lebanese Code of Commerce and Article 108 of the NCPC, courts of first instance of the jurisdiction where the bankrupt business/merchant is located are exclusively competent to declare the bankruptcy and hear the disputes arising therefrom. This being said, as mentioned above (see 1.2 Trends), the liquidator is bound to executing arbitration agreements that were concluded prior to the bankruptcy and regarding disputes that are not related thereto.
Regarding the arbitrability ratione personae of disputes, prior to the 2002 amendment of the NCPC (see above, 2.2 Changes to National Law), the principle of arbitrability of state contracts in general, and administrative contracts in particular, was not commonly adhered to. With the 2002 amendment, Article 762(2) of the NCPC expressly recognised the arbitrability of domestic state contracts. Article 762(3) of the NCPC further required that arbitration agreements contained in administrative contracts be authorised by the council of ministers. As for international contracts, the principle of the arbitrability of international state contracts was enshrined in Article 809 of the NCPC as amended in 2002.
The NCPC does not contain any provision, whether in domestic or international arbitration, requiring state courts to decline their jurisdiction when a party invokes an arbitration agreement.
This being said, it is a well-established principle in Lebanese case law that state courts refer parties to arbitration whenever one of them invokes their lack of jurisdiction (Court of First Instance of Mount Lebanon, 31 July 2003, Decision 20/2003; Court of First Instance of North Lebanon, 15 January 2004, Decision 28/2004; Court of First Instance of Beirut, 16 October 2008, Decision 10221/2007.) This position is in line with the provisions of Article II(3) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).
The principle of separability of arbitration agreements is not expressly set forth in the NCPC. Lebanese courts have nevertheless consistently considered that “in arbitration, the arbitration agreement is independent from the underlying contract that contains it” (Court of Appeal of Beirut, 3 April 2003, Decision 464/2003). As a result, the annulment of a main contract does not entail the invalidity of the arbitration agreement contained therein (Court of Appeal of Beirut, 20 May 2008, Decision 767/2008).
Article 810 of the NCPC provides for a clear and unrestricted right to appoint arbitrators or to agree on the method of their appointment directly or by reference to specific arbitration rules. In this respect, Lebanese Courts have consistently confirmed that parties may bring their disputes to the knowledge of a legal entity (Court of Appeal of Beirut, Decision 464/2003; Court of First Instance of Beirut, 25 January 1999, Decision 43/1999; Court of First Instance of Beirut, 5 March 2007). Under all circumstances, arbitrators will always be natural persons even if they sometimes settle disputes in the name of the institution that administers and monitors the arbitral proceedings.
Further, the NCPC requires no special qualification of the arbitrator and, as such, parties have complete freedom to choose whomever they wish. There is general acceptance in Lebanese case law that members of the judiciary may act as arbitrators without any restriction (Lebanese Court of Cassation, 9 November 2004, Decision 150/2004).
With regard to the number of arbitrators, while the NCPC provisions governing domestic arbitration require that arbitral tribunals be composed of an uneven number of arbitrators (Article 771 of the NCPC), such is not the case in international arbitration insofar as Article 810 of the NCPC allows the appointment of arbitrators by reference to specific arbitration rules, which, in turn, may provide for the formation of an arbitral tribunal composed of an even number of arbitrators. This was confirmed by Lebanese Courts who have repeatedly granted exequatur to international arbitral awards rendered by tribunals composed of an even number of arbitrators (Court of First Instance of Beirut, 17 July 1991, Decision 197/3; Court of Appeal of Beirut, 16 May 2012, Decision 832/2012).
Pursuant to Articles 810 and 774 of the NCPC, whenever parties fail to appoint arbitrators and the arbitral institution administering the arbitration fails to step in to appoint the arbitrator(s), or there is no such institution and no alternative appointing authority (as is the case in ad hoc arbitrations), the President of the Court of First Instance acting in support of the arbitration can intervene and appoint the arbitrator(s). The decision of the President of the Court of First Instance must be issued in a timely manner and cannot be challenged. Only where the President of the Court of first Instance refuses to appoint the arbitrator(s) on account of the nullity of the arbitration agreement or the inadequacy thereof to make the appointment may the parties lodge an appeal against said decision.
State courts only intervene in the selection of the arbitrator(s) (i) where the parties’ chosen method for the appointment of the tribunal fails (see above, 4.2 Default Procedures), or (ii) in the event that arbitrator(s) are challenged and removed in ad hoc arbitrations (see below, 4.4 Challenge and Removal of Arbitrators).
Where an arbitrator is challenged in the context of an institutional arbitration, parties must follow the procedure set out in the institutional rules.
As for ad hoc arbitration, the NCPC section governing international arbitration does not lay down any specific procedure for the challenge and removal of arbitrators. This has led Lebanese Courts to follow the procedural rules set out in the NCPC provisions governing domestic arbitration in matters of challenge against arbitrators (Court of Appeal of Beirut, 10 December 2001, Decision 1778/2001).
Article 770 of the NCPC provides for the procedural rules governing the challenge and removal of arbitrators. Pursuant to the aforementioned article, arbitrators may only be removed upon the unanimous consent of the parties. It has yet to be seen whether Lebanese Courts will apply the same solution in the context of international arbitration.
As for challenges against the arbitrator(s), they must be based on grounds which have come to the knowledge of the parties after the appointment of the arbitrator(s). It is to be noted that, as per Article 769(2) of the NCPC, upon their appointment, arbitrators have the obligation to disclose to the parties possible causes that would lead to their recusal. It follows that the grounds for challenge may stem from facts preceding the appointment of the arbitrators.
According to Article 770(2) of the NCPC, the grounds to challenge arbitrators are the same as those to recuse judges. These grounds, which are set out under Articles 120 and 130 of the NCPC, must be interpreted restrictively and pertain essentially to the personal ties of the arbitrator(s) including, inter alia:
As per Article 770(3) of the NCPC, parties can bring a challenge against the arbitrator(s) before the competent court of first instance within 15 days following the discovery of the ground for challenge. However, as per Article 787(2) of the NCPC, parties cannot challenge the arbitrator(s) after the closing of the proceedings. Additionally, if a party has grounds to challenge an arbitrator and fails to do so during the timeframe provided by the arbitral institution for institutional arbitration or by the NCPC for ad hoc arbitration, the party is then deemed to have waived its right to challenge the arbitrator at a later stage in the proceedings, including in the annulment proceedings (Court of Appeal of Beirut, 21 February 1994).
In the event that the competent court of first instance decides to recuse the challenged arbitrator(s), it is well established in Lebanese case law that such decision does not lead to the annulment of the arbitration agreement (Lebanese Court of Cassation, 28 February 2002, Decision 29/2002). Such decision to recuse the arbitrator(s) would nonetheless have the effect of retroactively repealing the arbitrator(s)’ mandate and to annul any award that was rendered by the challenged arbitrator(s) in the related case (Lebanese Court of Cassation, 1 April 2004, Decision 60/2004).
Lastly, as per Article 770(3) of the NCPC, no remedies (whether by way of appeal or otherwise) are available against the decision of the competent court of first instance regarding the challenge of arbitrators.
Arbitrators must be impartial and independent, failing which they may be challenged and recused (Court of Appeal of Beirut, 27 December 1993, Decision 766/93). As explained above (4.4 Challenge and Removal of Arbitrators), the standards developed by Lebanese case law to evaluate the independence and impartiality of an arbitrator are similar to those admitted for the challenge of judges and are enacted on an exhaustive basis with no possibility of extending them (Court of First Instance of Beirut, 5 April 2006, Decision 12/48).
It is in light of these standards that Article 769(2) of the NCPC compels arbitrators to disclose any information that might lead a party to doubt the tribunal’s impartiality or independence.
As a matter of principle, disputes are generally arbitrable in Lebanon. However, certain subject matters are considered non-arbitrable and subject to the exclusive jurisdiction of state courts pursuant to the NCPC provisions governing domestic arbitration (see above, 3.2 Arbitrability). Given that the criteria establishing the non-arbitrability of certain subject-matters are found the Lebanese civil code (Article 1037 of the COC), these provisions would apply to international arbitration in the event that the parties subject the arbitral proceedings to Lebanese law.
Article 785 of the NCPC expressly recognises the principle of "competence-competence". Even though the aforementioned provision only governs domestic arbitration, the principle of competence-competence is generally extended in Lebanon to international arbitration. This has been increasingly confirmed by Lebanese courts (Lebanese Court of cassation, 25 January 2014, Decision 14/2014). It follows that arbitral tribunals are exclusively competent to hear challenges to their jurisdiction.
As mentioned above (see 5.2 Challenges to Jurisdiction), the Lebanese Arbitration Law recognises the principle of competence-competence. However, the NCPC does not specify the scope of competence-competence. Nor does the NCPC contain any provisions regarding state courts addressing issues of jurisdiction before arbitral tribunals.
With regard to domestic arbitration, Article 764 of the NCPC limits the review of arbitration-related matters by state courts to the assessment of arbitration agreements that are manifestly null and void or incapable of permitting the appointment of the arbitrator(s).
In matters of international arbitration, Lebanese courts almost always rule on the validity of arbitration agreements regardless of any prior jurisdiction given to arbitrators or limitations of the scope of state courts’ review (Court of Appeal of Beirut, 2 February 1999; Court of First Instance of Beirut, 27 March 1997, Decision 117/97).
In light of the shortcomings of the Lebanese Arbitration Law particularly in relation to international arbitration, it was suggested that Lebanese courts refer to Article II(3) of the New York Convention (ratified by Lebanon in 1998), pursuant to which state courts seized of matters governed by an arbitration agreement must decline their jurisdiction unless they find that the arbitration agreement is null and void, inoperative or incapable of being performed.
As a result, Lebanese courts are recently inclined to apply Article II(3) of the New York Convention in order to extend the application of Article 764 of the NCPC to international arbitration, thereby limiting state courts’ review to the verification of the sole manifest nullity of arbitration agreements (Court of First Instance of Beirut, 26 February 2014, Decision 194/2014).
When reviewing the admissibility of recourses against arbitrators’ decision on their jurisdiction, the Lebanese court of cassation ruled that the provisions of Article 615 of the NCPC, setting out the decisions that are subject to appeal during the course of proceedings, must be transposed to arbitration. This is due to the fact that Article 804 of the NCPC subjects the appeal and annulment applications against arbitral awards to the procedural rules governing recourses before the court of appeal. Further, seeing as Article 615 of the NCPC does not list the recourse against arbitrators’ decision on their jurisdiction as part of the decisions that are subject to appeal during the course of proceedings, the Lebanese Court of Cassation is of the view that said recourse is inadmissible before the issuance of the arbitral award (Lebanese Court of Cassation, Decision 13/2007). This approach is followed by lower courts (Court of Appeal of Mount Lebanon, 4 March 2010, Decision 28/2010).
Considering that Article 804 of the NCPC is also applicable to international arbitration by reference to Article 821 of the NCPC, the recourse against arbitrators’ decisions on their jurisdiction in international arbitration is also not admissible prior to the issuance of the arbitral award.
It follows from the above that parties have the right to challenge the jurisdiction of an arbitral tribunal before state courts only after an award has been rendered, at the enforcement or annulment stage (Articles 817 and 819 of the NCPC). It is to be noted that Lebanese case law remains silent with respect to recourses against partial arbitral awards.
Jurisdictional issues at the annulment or enforcement stage are assessed by the court of appeal de novo.
However, parties that fail to raise jurisdictional objections during the course of arbitral proceedings on grounds of which they were aware at the time are deemed to have waived their right to challenge the award on those grounds (Lebanese Court of Cassation, Decision 142/2001).
As for questions of admissibility, as indicated above (see 5.3 Circumstances for Court Intervention), Lebanese courts rule almost always on the validity of arbitration agreements regardless of any prior jurisdiction given to arbitrators or limitations of the scope of state courts’ review. Only recently did Lebanese courts start moving towards a mere prima facie control of the validity of arbitration agreements.
As indicated above at 3.3 National Courts' Approach, while the Lebanese Arbitration Law remains silent with respect to the principle by virtue of which state courts are required to decline their jurisdiction when a party invokes an arbitration agreement, this principle is well-established in Lebanese case law.
Neither the NCPC nor the case law allow state courts to raise their lack of jurisdiction ex officio given that a party’s right to object to the court’s jurisdiction is not a matter of public policy (Lebanese Court of Cassation, 22 March 2006, Decision 61/2006).
Instead, Lebanese courts require that the arbitration agreement be invoked in limine litis (Court of First Instance of Beirut, 18 February 2004), failing which the parties are deemed to have waived their right to bring the dispute before an arbitral tribunal (Court of Appeal of North Lebanon, 19 January 2006, Decision 24/2006).
The Lebanese Arbitration Law does not preclude the application of the principle of extension ratione personae of the scope of an arbitration agreement to persons (natural or legal) who have not signed it.
Thus, notwithstanding the requirement that arbitration agreements be made in writing (Articles 766 and 763 of the NCPC), the Lebanese Court of Cassation considered that a non-signatory company was bound by an arbitration agreement as a result of the economic unity that existed between said company and the signatories of the arbitration agreement. In this aforementioned decision, the Lebanese Supreme Court did not require a participation of the non-signatory in the drafting of the agreement or in the execution of the contract, or even the knowledge of the nonsignatory of the existence of the arbitration agreement (Lebanese Court of Cassation, 25 January 2014, Decision 14/2014).
In a similar vein, the President of the Court of First Instance of Beirut adhered to a request for the appointment of an arbitrator on behalf of recalcitrant sellers who had not signed the agreement for the sale of a property subject matter of arbitral proceedings. The judge reasoned that the arbitration agreement signed by some of the sellers could extend to other sellers if they were involved in the conclusion and execution of the sale contract, which would result in an economic unity between all the sellers (Court of First Instance of Beirut, 27 June 2011).
In another case, the President of the Court of First Instance of Beirut ruled that the participation of a non-signatory in the negotiation or execution of a contract constituted sufficient evidence to consider that the non-signatory wished to be a party to said contract with the effect of being bound by the arbitration agreement included therein (Court of First Instance of Beirut, 19 June 2013, Decision 34/272).
Following the 2002 amendment of the NCPC (see above, 2.1 Governing Law), Article 789 expressly granted the arbitrator the same powers as a trial judge to issue interim or conservative measures. These measures include, inter alia, sealing, inventory of assets, sequestration, forced sale of perishable goods, and status description (Article 589 NCPC).
In practice, interim or conservative measures cannot be sought from arbitral tribunals ex parte, without giving the opposing party an opportunity to be heard.
While the case law does not appear to be constant on the role played by state courts in preliminary or interim relief, Lebanese courts generally tend to consider that the arbitrator’s power to issue such measures is concurrent with the jurisdiction of the judge of expedited matters (Judge of expedited matters of Beirut, 7 September 1984, Decision 777/84).
With regard to interim payment, however, the concurrent jurisdiction of the judge of expedited matters has been often rejected given that interim payment decisions presuppose an examination of the substance of the dispute and could even concern the whole claim, which, if transferred to state courts, would be tantamount to depriving the arbitration of its substance (Court of Appeal of Beirut, 30 July 2009, Decision 1100/2009; Judge of expedited matters of Beirut, 12 February 2002, Decision 554/2002).
Further, it is established in Lebanese case law that, where arbitral tribunals are yet to be formed, state courts are competent to order preliminary or interim relief despite the existence of an arbitration agreement and provided that the parties did not agree otherwise (Lebanese Court of Cassation, 19 January 1996, Decision 8/2006; Court of Appeal of Beirut, 30 July 2009, Decision 1100/2009).
In addition to the above, state courts also act in support of the enforcement of measures ordered by arbitral tribunals, particularly since the latter lack coercive powers.
The Lebanese Arbitration Law does not contain any provisions governing arbitral tribunals’ power to order security for costs. Nevertheless, as a matter of practice, arbitral tribunals make such orders.
As for state courts, Article 866 of the NCPC stipulates that enforcement judges have the power to order protective measures with the purpose of seizing debtors’ funds as security for the debt. It may be argued that such measures comprise orders of security for costs.
As per Article 811 of the NCPC, the choice of procedural rules is left to the parties’ agreement or, in the absence thereof, to the arbitral tribunal.
The parties can choose their own procedural rules – either directly or by reference to the rules of an arbitral institution – while noting that, as per Article 812 of the NCPC, Articles 762 to 792 of the NCPC governing domestic arbitration are applicable to international arbitration unless the parties expressly agree otherwise.
As per Article 813 of the NCPC, in the event that the arbitration agreement is silent on the procedural rules governing the arbitration, the arbitral tribunal has discretion to choose or design the rules it deems appropriate while taking into account under all circumstances business practices and customs.
The Lebanese Arbitration Law does not provide for any mandatory procedural steps for arbitration proceedings.
As indicated above (see 5.2 Challenges to Jurisdiction, 6.1 Types of Relief and 7.1 Governing Rules), arbitrators have extensive powers under Lebanese law with regard to matters pertaining to their jurisdiction, the applicable procedural matters, and the provisional measures and remedies that can be granted.
With respect to their duties, arbitrators must remain at all times impartial and independent, failing which they may be challenged and recused (see above, 4.5 Arbitrator Requirements). As a consequence, arbitrators have the obligation to disclose to the parties any information that might cast doubt on their impartiality (see above, 4.4Challenge and Removal of Arbitrators and 4.5).
Additionally, arbitrators are required to comply with provisions of international public policy as well as fundamental principles of civil procedure, particularly those related to due process, the reasoning of a judgment, and the applicable arbitral institution rules (Article 777 of the NCPC). Arbitrators are also expected to conduct proceedings to completion, unless there is a legitimate reason not to do so (Article 769(3) of the NCPC). They are also under the obligation to render a final award within the allocated timeframe and within the terms of their mandate (Article 817 of the NCPC).
Lastly, given the contractual nature of the relationship between the arbitrators and the parties, arbitrators may be held liable to pay damages on account of non-performance or improper performance in application of the conditions of common law set out in the civil code.
As per Article 378 of the NCPC, each party must be represented by a lawyer in cases where the value of the dispute exceeds the amount of LBP1 million, or in cases where there is no quantification of damages, or in all other cases where the law requires the assistance of a lawyer. Parties cannot waive their obligation to be represented by a lawyer.
While certain commentators are of the view that the above provisions apply to domestic and international arbitration alike, a distinction ought to be made between the two categories of arbitration. As explained above (see 7.1 Governing Rules), contrary to domestic arbitration, which is always governed by the provisions of the NCPC, the choice of procedural rules in international arbitration is left to the parties’ agreement. Accordingly, parties in international arbitration often do move away from the NCPC and, thus, from the obligation to be represented by a lawyer. It follows that no particular qualification would be required for legal representatives appearing in international arbitration in Lebanon.
As is generally the case in civil law countries, Lebanon is based on an inquisitorial system whereby the court has the task of making inquiry as opposed to delegating the control of the adversarial process to the parties.
The NCPC provides for a broad range of evidence that may be relied upon, such as document production, use of witness testimonies (whether oral or in writing), and use of experts. In commercial disputes, evidence can be brought by any means.
This being said, Lebanese procedural rules are governed by the principle pursuant to which no one can create proof for himself or herself. It follows that documentary evidence outweighs witness testimonies, which, in any event, are often authored by third parties unconnected with the party that had collected them. Moreover, due to the inquisitorial nature of the Lebanese system, witnesses are typically questioned by the judge only and very rarely by the lawyers.
Further, discovery processes are not allowed under Lebanese law insofar as parties’ request for disclosure must be specific and subject to restrictive conditions, whereas the judge has wide discretion to grant or deny the request.
In the context of international arbitration, arbitration practitioners have generally embraced the balance between procedural rules of civil law tradition and those of common law systems. Therefore, it is not uncommon for parties in international arbitration to refer in the terms of reference to the IBA Guidelines on the Taking of Evidence in International Arbitration.
Arbitrators benefit from a broad range of actions to collect evidence in arbitral proceedings seated in Lebanon.
Arbitrators may thus order the parties to disclose any evidence in their possession (Article 780 NCPC). Similarly, arbitrators have the power to hear witnesses without, however, putting them under oath (Article 779(2) of the NCPC). Arbitrators also have the power to rule on allegations of the inauthenticity of signed (or handwritten) documents (Article 783(1) of the NCPC). More generally, arbitrators are expected to investigate the case (Article 779(1) of the NCPC), which would entail taking all necessary steps, including the appointment of experts unless their mandate does not allow for it.
Arbitrators do not have coercive powers in Lebanon and, as such, have very limited powers of compulsion.
The NCPC is silent on the arbitrators’ power to compel parties to produce documents. While Article 780 of the NCPC refers to the arbitrators’ power to order the production of documents, no mention is made with respect to the actions available to the arbitrators in case of nonproduction of the requested evidence. This, however, does not mean that arbitrators cannot draw negative inference from a party’s refusal to submit the requested evidence.
As for the attendance of witnesses, while arbitrators do not have powers to order a witness to attend a hearing, arbitrators may rely on state courts’ assistance to impose penalties upon recalcitrant witnesses (Article 779(3) of the NCPC). Likewise, arbitrators may apply to the competent state courts to order a letter rogatory to hear the case (Article 779(3) of the NCPC).
The Lebanese Arbitration Law has not expressly affirmed the obligation of confidentiality in arbitral proceedings.
It is, however, well-established in Lebanese case law that Article 553 of the NCPC governing the issuance of awards does not require that arbitral awards be rendered publicly, as is the case for state courts’ judgments given the private nature and the intrinsically confidential aspect of arbitration (Court of Appeal of Beirut, 9 October 2003, Decision 1404/2003).
Further, as per Article 788 of the NCPC, deliberations between arbitrators must remain secret. No equivalent provision is found in the NCPC section governing international arbitration.
Article 790 of the NCPC lists the formal requirements with which an arbitral award must comply. These include:
According to Article 791 of the NCPC, the arbitral award must be signed by the arbitrator(s) or by the majority of arbitrators who have issued the award.
While non-compliance with most of the above requirements may constitute grounds to challenge an award in domestic arbitration (Article 800(5) of the NCPC), such is not necessarily the case in international arbitration. Nonetheless, it is advisable to follow these minimum formal requirements to ensure that the award is not vulnerable to annulment on other grounds, such as international public policy.
The Lebanese Arbitration Law does not restrict the powers granted to an arbitral tribunal in awarding remedies. Further, it is widely accepted in Lebanese case law that, in settling contractual disputes, arbitral tribunals have the power to issue any decision regarding the specific performance of the underlying agreement or pertaining to the consequences resulting from contractual non-performance (Lebanese Court of Cassation, Decision 132/2002). This means that arbitral tribunals have complete discretion in awarding any of the remedies available under Lebanese law. These generally include orders to pay damages, injunctive or declaratory reliefs, award of interest (see below, 10.3 Recovering Interest and Legal Costs), and award of moral damages.
The only type of remedies that arbitral tribunals may not award are punitive damages given that such remedies are not provided for under Lebanese law.
Lebanon does not prohibit the application of interest (Article 767 of the COC). Further, and considering that Lebanese law has not set any limit for the calculation of interest in commercial matters, Lebanese courts are of the view that the award of interest by arbitral tribunals cannot be subject to review in the context of annulment proceedings (Court of Appeal of Beirut, 29 November 2011, Decision 1725/2001). The Lebanese Court of Cassation also confirmed that interest awarded by arbitral tribunals may exceed the value of legal interest determined by Lebanese law (Lebanese Court of Cassation, 27 April 2006, Decision 98/2006).
As regards legal costs, the general rule set out in the NCPC is that the losing party must bear the legal costs incurred by both parties (Article 541(2) of the NCPC). In certain circumstances, the winning party may be ordered to pay some or all of the parties’ legal costs, particularly when his or her procedural conduct has caused harm to the opposing party (Article 542 of the NCPC).
In the context of international arbitration, arbitral tribunals tend to mainly refer to the applicable rules of the arbitral institution, most of which provide guidance with regard to the apportionment of costs.
International arbitral awards rendered in Lebanon may be challenged by way of an application for annulment (Article 819 of the NCPC), but, contrary to awards rendered in domestic arbitrations, they cannot be appealed (Lebanese Court of Cassation, Decision 163/2001).
On the other hand, enforcement orders for international arbitral awards rendered outside Lebanon may be appealed (Article 817 of the NCPC).
The challenge of an international arbitral award rendered in Lebanon and the appeal of an enforcement order for an international arbitral award rendered outside Lebanon can be made on the same following five grounds:
The application for annulment should be brought before the Court of Appeal of the place where the arbitral award was rendered (Article 819(3) of the NCPC). The application for annulment may be filed as of the issuance of the award but in any event no later than 30 days from the notification of the order recognising the award or granting it exequatur (Article 819(4) of the NCPC). Annulment proceedings generally lead to the suspension of the enforcement unless the challenged award contains summary judgments (Article 820 of the NCPC).
As indicated above (see 11.1 Grounds for Appeal), international arbitral awards cannot be appealed in Lebanon. Instead, such awards may only be challenged by way of an application for annulment on the basis of the limited grounds mentioned in the previous section. Parties cannot alter or exclude some of these grounds, nor can they add new grounds.
It is for this reason that the Lebanese Court of Cassation ruled that parties cannot seek the annulment of an arbitral award for violation of public policy as a result of an alleged misinterpretation of the applicable law (Lebanese Court of Cassation, 31 October 2002, Decision 136/2002). The Lebanese Supreme Court also refused to annul an arbitral award where one of the parties claimed that adduced evidence and arguments had been incorrectly evaluated in the challenged award, or the principle of equality had been violated, but without such violation amounting to a breach of due process (Lebanese Court of Cassation, Decision 141/2001).
It is well established in Lebanese case law that actions for setting aside arbitral awards must not be confused with an appeal for the review of the legality of the challenged award (Lebanese Court of Cassation, 18 December 2007, Decision 159/2007).
It is settled case law that Lebanese courts must refrain from reviewing the merits of international arbitral awards (Court of Appeal of Beirut, 21 December 2011, Decision 1786/2011).
In a similar vein, it is widely accepted that the review of an action for setting aside an arbitral award must not entail any control of the reasons on the basis of which the challenged award was made or of the compliance of said award with the applicable law (Court of Appeal of Beirut, 18 June 2014, Decision 890/2014; Court of Appeal of Beirut, 26 March 2009, Decision 454/2009).
Nevertheless, on a few occasions, certain Lebanese courts failed to comply with the aforementioned principle. For instance, the Court of Appeal of Beirut examined the application made by an arbitrator of the law agreed upon by the parties on the basis of the court’s authority to review the arbitrator’s compliance with the terms of his or her mandate (Court of Appeal of Beirut, 3 March 2011, Decision 308/2011). However, such decisions remain the exception.
Lebanon ratified the New York Convention on 11 August 1998. At the time, Lebanon declared that it would apply the New York Convention, on the basis of reciprocity, to the recognition and enforcement of awards made only in the territory of another contracting state.
In line with Article VII(1) of the New York Convention, Lebanese courts are of the view that the New York Convention is only applicable if its provisions are more beneficial than national laws (Lebanese Court of Cassation, 29 November 2001, Decision 146/2001). Accordingly, Lebanese courts tend to consider that the NCPC provides a more favourable regime than the New York Convention regarding the recognition and enforcement of awards. Specifically, Article 814 of the NCPC excludes the recognition and enforcement of awards manifestly violating international public policy, whereas Article V(2)(b) of the New York Convention precludes awards violating public policy of that country where recognition and enforcement is sought, which is much broader than international public policy.
The enforcement of international arbitral awards is subject to the same rules governing the enforcement of domestic arbitral awards following the express reference found in Article 815 of the NCPC to Articles 793 to 797 of the NCPC.
As per Article 795 of the NCPC, as clarified by Lebanese courts, it is for the President of the Court of First Instance of Beirut to issue the order granting exequatur to international arbitral awards. Where the dispute is of an administrative nature, the enforcement order must be granted by the President of the Lebanese State Council (Article 795(2) of the NCPC).
The party requesting an enforcement order has the sole obligation of demonstrating the existence of the arbitral award for which the order is requested (Article 814 of the NCPC). To do so, the party must produce originals or authenticated copies of the award and the arbitration agreement. No other formal requirements are needed.
Enforcement orders are granted by Lebanese judges unless the arbitral award for which the order is sought has manifestly violated international public policy (Article 814(1) of the NCPC).
In addition, seeing as Article 796(2) expressly refers to Article 800 of the NCPC, it may be argued that, in order to be granted exequatur, the arbitral award for which the order is sought must not be in breach of one of the annulment grounds mentioned at 11.1 Grounds for Appeal, and that it contains all mandatory mentions including the parties’ claims and supporting causes and means, the name(s) of the arbitrator(s), the reasoning and operative part, the date, and signature of the arbitrator(s). The reference to Article 800 of the NCPC may also justify that the arbitral award for which the order is sought must comply with public policy rules. The foregoing may, however, be in contradiction with the aforementioned Article 814(1) of the NCPC which only refers to a manifest violation of international public policy as the sole test to granting or denying exequatur for an international arbitral award. As detailed below (see 12.3 Approach of the Courts), the Lebanese case law has mitigated the incongruity resulting from the provisions of Article 796(2) of the NCPC.
Once the enforcement order has been granted for international arbitral awards rendered outside Lebanon, the award debtor may appeal the order before the Court of Appeal. As for international arbitral awards, they are only subject to annulment proceedings (see above, 11.1 Grounds of Appeal).
Where the enforcement order has been denied, the applicant may in any event seek to appeal the order before the Court of Appeal (Article 816 of the NCPC).
As indicated above (see 12.2Enforcement Procedure), the reference made in Article 796(2) of the NCPC to Article 800 of the NCPC has the effect of making it possible to verify all the grounds which may be raised against a domestic award when assessing the request for exequatur for an international arbitral award.
Fortunately, Lebanese courts have operated a rectification of the inadequacy found in Article 796(2) of the NCPC.
Thus, the Court of First Instance of Beirut ruled that the exequatur judge must not, in fact, review the merits of the arbitral award (Court of First Instance of Beirut, 16 July 1991, Decision 197/3). Likewise, the Beirut Court of Appeal found that the review of the exequatur judge should be confined to verifying solely the manifest conformity with international public policy (Court of Appeal of Beirut, 21 December 2011, Decision 1786/2011). A decision from the Court of First Instance of Mount Lebanon was of the view that the exequatur is a purely administrative act that requires a simple summary review (Court of First Instance of Mount Lebanon, 12 October 1995, Decision 123/95).
In light of the above, international arbitral awards (rendered locally or abroad) are normally granted recognition and exequatur in Lebanon, whereas very few cases of dismissal of exequatur exist in Lebanese case law.