There are a number of public registers by means of which to identify the opposing party’s assets for enforcement purposes. These include the Real Estate Register for the identification of immovable property, the Commercial Register for the identification of shares owned in commercial companies, and the Motor Vehicle Register for the identification of vehicles owned by the opposing party.
The concept of “freezing orders” is not explicitly recognised under Lebanese law. However, the Lebanese Code of Civil Procedure (LCCP) provides for the possibility of issuing provisional seizure orders.
Asset disclosure orders are not explicitly regulated by Lebanese law. To our knowledge, there have been no decisions requiring a debtor to disclose assets, as no specific obligations exist in this regard.
There are multiple types of domestic judgments that may be rendered by Lebanese courts. These include:
Default Judgments
In accordance with Article 468 of the LCCP, a judge may render a default judgment when a defendant, despite being duly notified, fails to participate in the proceedings.
Interim Judgments, Summary Judgments and Injunctive Reliefs
Trial judges or judges of summary proceedings can, upon request, order provisional and conservatory measures. These include but are not limited to:
In addition, trial judges and judges of summary proceedings may issue any type of injunctive reliefs to protect litigants’ rights and prevent any potential harms. Interim reliefs can be obtained on an ex parte basis pursuant to Article 593 of the LCCP and subsequent provisions.
Final Judgments
Final judgments in civil cases are issued by trial judges. These judgments may involve granting a successful litigant a specific performance order, awarding damages to compensate for losses incurred, awarding damages in lieu of execution, or issuing declaratory relief orders.
The procedure for enforcement of a domestic judgment involves filing an application to this end before the Execution Judge (Enforcement Bureau). Pursuant to Article 828 of the LCCP, the Execution Judge is the judicial authority competent to enforce a domestic judgment.
The request for enforcement should be submitted at the clerk’s office of the Enforcement Bureau and should include all relevant details (ie, the name of the person requesting enforcement, the name of the opponent, their place of residence, titles (or nicknames), capacity and elected domicile) along with the judgment for which execution is sought, the requested amount, the assets to be sequestered where relevant, etc (Article 837 of the LCCP).
The enforcement process is subject to certain conditions. For instance, a domestic judgment cannot be enforced unless it has the force of res judicata (Article 836 of the LCCP) or is an interim measure or an ex parte decision (which is enforceable de jure).
For enforcement purposes, certain measures such as charging orders, seizure of earnings and third-party debt orders may be ordered.
Additionally, Article 569 of the LCCP provides for the courts’ power to order a penalty to ensure the enforcement of the judgments in case of partial execution, non-execution or delay in execution of the judgment.
As for insolvency proceedings, they may be initiated against the defaulting party if the defaulting party is a trader in a cessation of payments situation. Cessation of payments occurs when it is established that the debtor is in a desperate financial situation and has failed to pay any outstanding debt that is: (i) commercial in nature; and (ii) certain (typically, a final court judgment would fulfil this condition).
Timeframes and costs for enforcement vary on a case-by-case basis. The enforcement of a domestic judgment could take from six months up to three years depending on the parties, the objections raised, the number and places of assets subject to enforcement, etc.
Costs required for enforcing a judgment can include:
It is important to note that there is a single standard procedure for enforcement: filing an application with the Execution Judge. All judgments are treated equally and are subject to the same enforcement process. Therefore, there are no alternative options to consider.
For enforcement against real estate assets, an identification report can be requested from the Ministry of Finance, the General Directorate of Real Estate Affairs, in order to identify the real estate assets owned by the defendant.
In addition, the winning party may seek to enforce the judgment against other movable assets of the debtor. To this end, it can request an identification report from the Motor Vehicle Register or a corporate report from the Commercial Register.
A defendant may challenge the enforcement before the Execution Judge. Pursuant to Article 829 of the LCCP, the Execution Judge has jurisdiction to rule on any ‘enforcement dispute’, typically pertaining to procedural aspects of the enforcement process (eg, improper notification, lack of jurisdiction, errors in the form) which may affect the enforcement of a domestic judgment. In this respect, it is common for enforcement proceedings to be delayed as a result of procedural impediments, such as issues with the notification forms, the appointment of an expert, challenges of the expert’s reports, etc.
A defendant may also challenge the enforcement of a domestic judgment by filing an appeal before the Court of Appeal or cassation appeal before the Court of Cassation. While a decision issued on an expeditious basis by the court of first instance is generally directly enforceable, the filing of an appeal can lead to a stay of enforcement if the Court of Appeal grants a stay order. Similarly, a decision issued by the Court of Appeal is generally directly enforceable, but the Court of Cassation may order a stay of enforcement if a stay is requested through a cassation appeal.
Article 835 of the LCCP provides that enforcement can only proceed with a copy ‘good for execution’. Therefore, for a judgment to be enforceable, it must qualify as an ‘executable deed’.
According to Article 836 of the LCCP, a judgment would qualify as an executive deed when it becomes final, meaning it is no longer subject to appeal by ordinary means of recourse, unless it is rendered under expedited procedures. Therefore, any decision that is not final cannot in principle be enforced.
As an exception, decisions rendered by the Lebanese courts of first instance are not enforceable (as they are not final) unless they are rendered in an expeditious manner.
Subject to these conditions, all types of domestic judgments are, in principle, enforceable.
There is no register of judgments, except in criminal matters where culpability of individuals, established by criminal judgments, is recorded in the registry for criminal records.
Foreign judgments are recognised in Lebanon via an ‘exequatur’ request, which is an ex parte procedure. Article 1014 of the LCCP provides that exequatur (ie, prerequisite for enforcement) shall be granted to a foreign judgment that satisfies the following conditions.
As an exception, foreign judgments relating to personal status and capacity, as well as those issued ex parte, automatically produce their effects in Lebanon without the need for an exequatur, provided they are not rendered through ‘contentious’ proceedings (Article 1012 of the LCCP).
In addition, Lebanon has concluded multiple bilateral treaties which facilitate the enforcement of judgments between Lebanon and the respective countries. For instance, we note the following treaties:
Generally, all foreign judgments must be granted exequatur as a prerequisite for their enforcement in Lebanon.
With regard to the applicable conditions, all foreign judgments must qualify as executable documents under Articles 835 and 836 of the LCCP and meet the conditions outlined in 3.1 Legal Issues Concerning Enforcement of Foreign Judgments.
As outlined in 3.1 Legal Issues Concerning Enforcement of Foreign Judgments, the enforcement of judgments relating to personal status and capacity, as well as those issued ex parte, differs from standard foreign judgments. These judgments automatically produce their effects in Lebanon without requiring an enforcement order (exequatur), provided they were not rendered through ‘contentious’ proceedings.
As provided in 3.1 Legal Issues Concerning Enforcement of Foreign Judgments, a foreign judgment will not be granted exequatur in Lebanon if the criteria outlined in Article 1014 of the LCCP are not fulfilled. These include the judgment being rendered by competent judges according to the laws of the issuing country, having acquired res judicata effect abroad, wherein the parties’ rights of defence have been observed, originating from a country that reciprocally enforces Lebanese judgments, and not violating Lebanese public policy. Failure to meet any of these conditions will prevent the recognition and enforcement of the foreign judgment through an exequatur procedure in Lebanon.
Notwithstanding the above, even if a foreign judgment meets the above-mentioned criteria, exequatur can still be denied under Article 1016 of the LCCP, in the following instances:
Unless otherwise provided by virtue of an international convention signed between Lebanon and a foreign state, the request for exequatur is made through ex parte proceedings and is filed to the President of the Court of Appeal – Civil Section, having within its jurisdiction:
If none of the above-mentioned scenarios applies, the request shall be submitted to the President of the Beirut Court of Appeal (whose jurisdiction would, in this case, be established by default), pursuant to Article 1013 of the LCCP.
With regard to the required documentation, we note, pursuant to Article 1017 of the LCCP, that the party requesting the enforcement of a foreign judgment must submit, with the request, the following documents:
With regard to the conditions, we refer to Article 1014, outlined in 3.1 Legal Issues Concerning Enforcement of Foreign Judgments.
If the exequatur is granted by the President of the Court of Appeal, the unsuccessful party has the right to challenge the decision before the Court of Appeal within 30 days from the notification date of the decision or any enforcement proceeding. The challenge before the Court of Appeal stays the enforcement provided that the judgment is not enforceable on an expedited basis. In the event that the exequatur is denied, the petitioner has the right to object to that decision before the Court of Appeal within 15 days from the notification date of this decision.
As an exception, foreign decisions relating to personal status and capacity, as well as those issued ex parte, automatically produce their effects in Lebanon without the need for an exequatur, provided they are not rendered through ‘contentious’ proceedings abroad (Article 1012 of the LCCP).
Once the exequatur is granted, the foreign judgment becomes enforceable in Lebanon. The competent Enforcement Bureau will then proceed with its execution, in accordance with the provisions of the LCCP governing enforcement. This involves pursuing the judgment debtor’s movable and immovable assets.
Applicable Fees
An application for exequatur is subject to a fixed fee in the amount of LBP250,000. Execution against assets in Lebanon is subject to a proportional fee of 2.5% of the amount claimed.
Timeline
The time needed is assessed on a case-by-case basis depending on the circumstances of each case and the nature of the foreign judgment (eg, issued in summary or regular proceedings, ex parte proceedings, etc). Several factors should also be considered when assessing the time needed, notably:
Bearing in mind that the time estimates are always speculative (especially in the current context), we note from our experience in this field that the time needed to complete enforcement procedures would be as follows:
Please refer to 3.1 Legal Issues Concerning Enforcement of Foreign Judgments.
In short, exequatur is granted to a foreign judgment if all the conditions set out in Article 1014 of the LCCP are met.
Furthermore, pursuant to Article 1016 of the LCCP, Lebanese courts should refuse the exequatur of the foreign judgment if:
Any exequatur order granted in violation of these requirements will be subject to appeal before the Court of Appeal. The aggrieved party may challenge the exequatur order before the Court of Appeal within 30 days from notification (i) of this order or (ii) of one of the procedures relating to the enforcement of this order. It is worth noting that appeal could stay the enforcement only if the foreign judgment was not issued with accelerated enforcement.
The judgment rendered by the Court of Appeal could also be subject to appeal before the Court of Cassation.
The LCCP devotes its second chapter to arbitration.
As a preliminary note, the LCCP makes a distinction between domestic and international arbitration, the latter being governed by more liberal/arbitration-friendly rules. The main difference between domestic and international arbitration pertains to the validity of arbitration clauses, which are subject to stringent formalities in domestic arbitration. Other differences include the available means of recourse to challenge or set aside arbitral awards, which is broader in domestic arbitration than in international arbitration, as will be outlined below.
Domestic Awards
The enforcement of domestic awards is governed by Articles 793 to 808 of the LCCP.
Pursuant to Article 795 of the LCCP, arbitral awards can only be enforced by virtue of an exequatur order issued by the President of the court of first instance in whose jurisdiction the award was issued, upon request of the parties concerned, and after the examination of the award and the underlying arbitration agreement. The same article specifies that if the subject matter of the dispute involves administrative law, exequatur requests should be filed before the President of the Lebanese Council of State.
The court of first instance may either accept or refuse to grant exequatur. A decision to grant exequatur is not subject to appeal (Article 805 of the LCCP). However, a decision refusing to grant exequatur is subject to appeal before the Court of Appeal within 30 days from its notification (Article 806 of the LCCP).
Domestic awards can be challenged as follows:
The effects of the appeal and setting aside of domestic awards (Articles 801 and 803 of the LCCP), and the process of such recourses (Articles 802, 804, 806 and 807 of the LCCP), are further addressed in the sections below.
International Awards
International arbitration in Lebanon is regulated by Articles 809 to 826 of the LCCP.
As is the case for domestic awards, the enforcement of international awards requires exequatur. In this respect, we note that arbitration awards rendered in international arbitration are governed by Article 815 of the LCCP, which refers to Articles 793 to 797 relating to domestic arbitration (ie, international arbitral awards can only be enforced through an exequatur order granted by the President of the court of first instance in whose jurisdiction the award was rendered).
In addition, there are specific conditions for granting exequatur to international awards. These are as follows:
Decisions denying exequatur are subject to appeal before the Court of Appeal. The appeal has to be initiated within 30 days from the notification of the decision refusing exequatur. The Court of Appeal’s decision rendered in this respect is subject to cassation before the Court of Cassation. However, the review before the Court of Cassation is limited to legal grounds only, as the merits of the case cannot be reviewed.
In contrast, decisions granting exequatur are not subject to appeal pursuant to Article 819 of the LCCP.
With regard to challenges against international awards rendered in Lebanon, the means of recourse available differ from domestic awards as international awards are only subject to set-aside proceedings in the circumstances set out in Article 817 of the LCCP. The grounds for annulling awards in international arbitration are as follows:
Foreign Awards
The enforcement of foreign awards is mainly regulated by the New York Convention of 1958 on Recognition and Enforcement of Foreign Awards (NY Convention), which Lebanon ratified on 9 November 1998. However, Lebanon has made a reciprocity reservation under the NY Convention, declaring that it will apply the NY Convention on a reciprocal basis (ie, if recognition and enforcement of awards issued in Lebanon is possible in the territory of the contracting state where the foreign award that is subject to recognition and enforcement in Lebanon was issued).
Furthermore, the Lebanese courts have been adopting an arbitration-friendly approach, constantly applying the provisions of the LCCP that are more favourable/less restrictive to enforcement than those of the NY Convention, in application of Article 3 of the NY Convention.
In addition to the NY Convention and the provisions of the LCCP, Lebanon is a party to some international conventions, which are also applicable to the recognition and enforcement of foreign arbitral awards, which include:
As is the case for domestic and international awards, foreign awards also require exequatur in order to be enforced in Lebanon. In this vein, the exequatur is sought before the Beirut Court of First Instance, under the same conditions applicable to international awards (Article 814 of the LCCP, as outlined above).
The means of recourse available against foreign awards are the following:
Appeal against a decision refusing to grant exequatur to a foreign judgment
Pursuant to Article 816 of the LCCP, an appeal request has to be submitted within 30 days from the notification of the decision refusing exequatur. The Court of Appeal’s decision is subject to cassation before the Court of Cassation. The Court of Cassation’s review will be limited to legal grounds only.
Pursuant to Article 820 of the LCCP, unless the award is ‘enforceable on an expedited basis’, the enforcement of the arbitral award is stayed until expiration of the time limit set to file the appeal. The enforcement is also stayed upon the submission of an appeal.
Appeal against a decision granting exequatur
This appeal is only available in specific circumstances set out in Article 817 of the LCCP, as outlined above.
See 4.1 Legal Issues Concerning Enforcement of Arbitral Awards and 4.3 Categories of Arbitral Awards Not Enforced.
In short, there are no specific categories of awards that cannot be enforced. There are, however, specific circumstances in which the enforcement of arbitral awards may be refused. These circumstances differ between domestic and international awards.
Domestic Awards
The enforcement of domestic awards in Lebanon is subject to exequatur. The courts may deny exequatur if any of the following circumstances provided under Article 800 of the LCCP. are present:
International and Foreign Awards Rendered in Lebanon
As outlined in 4.1 Legal Issues Concerning Enforcement of Arbitral Awards, international awards rendered in Lebanon and foreign awards are enforceable provided that (i) their existence has been established according to Article 814 of the LCCP, and (ii) their recognition is not manifestly contrary to international public policy.
Upon further scrutiny, an international award will not be enforceable in Lebanon under any of the following circumstances, as provided by Article 817 of the LCCP:
Specific Conditions
In addition to the above, particular attention should be given to the following:
For domestic, international or foreign awards, the recognition and enforcement of an award in Lebanon is made through an ex parte exequatur proceeding.
As mentioned above, the competent court to grant exequatur depends on the nature of the dispute. In civil and commercial matters, exequatur requests are filed before the President of the court of first instance, either at the place where the award was rendered, if a domestic award was rendered in Lebanon, or in Beirut if the award was rendered outside Lebanon. In administrative matters, exequatur requests should be filed before the President of the Council of State (Articles 793, 795 and 815 of the LCCP).
For domestic, international or foreign awards, the exequatur application must be accompanied by the following documentation: (i) the arbitral award and (ii) the arbitration agreement, or a certified copy of these documents (Articles 793, 814 and 815 of the LCCP). If the award and/or arbitration agreement are in a foreign language, an Arabic translation certified or prepared by a sworn translator is required.
For international or foreign awards, the award should be translated into Arabic, and judges will verify (i) the existence of the award and (ii) that recognition of the award does not manifestly violate Lebanese international public policy (Articles 814 and 815 of the LCCP).
Pursuant to Article 796 of the LCCP, exequatur formula is placed on the award deposited. Any decision rejecting the exequatur must provide specific reasons for doing so.
Once the exequatur is granted, the procedure to be followed is typically the same as that applicable for enforcing court decisions: the competent Enforcement Bureau will proceed with the execution of the award, in accordance with the provisions of the LCCP governing enforcement. This involves pursuing the award debtor’s movable and immovable assets.
With regard to the means of recourse, please refer to 4.1 Legal Issues Concerning Enforcement of Arbitral Awards and 4.3 Categories of Arbitral Awards Not Enforced.
It is important to distinguish between the exequatur procedure (a prerequisite for enforcement) and the execution procedure against assets.
Timeline
The duration of the overall enforcement process typically varies based on the measures sought, the objections filed by the losing party and the efforts deployed to seek compulsory compliance with the award.
Exequatur: In normal circumstances, exequatur can be obtained within a month from the request.
Execution: As for execution against assets in Lebanon, the process may be initiated following the expiry of the 30-day period for (i) filing an appeal against the exequatur order, and/or (ii) commencing set-aside proceedings (for awards rendered in Lebanon). Bearing in mind that the time estimates are always speculative, the overall time required to execute arbitration awards can vary significantly, ranging from six months to three years, depending on various factors such as the parties involved, the objections raised, and the number and places of assets subject to enforcement.
Applicable Fees
Exequatur: An application for exequatur is subject to a fixed fee in the amount of LBP250,000.
Execution: Execution against assets in Lebanon is subject to a proportional fee of 2.5% of the amount claimed. In addition, a fee amounting to around 1% of the amount claimed is to be paid for the judiciary mutual fund stamp duty, the Bar Association stamp duty and the fiscal stamp duty. These fees do not include the translation fees, the lawyers’ fees or the legalisation fees.
Please refer to 4.1 Legal Issues Concerning Enforcement of Arbitral Awards, 4.3 Categories of Arbitral Awards Not Enforced and 4.4 Process of Enforcing Arbitral Awards for the options available to challenge enforcement.
Regarding public policy reasons, the Lebanese judiciary has identified several key areas that are considered rules of public policy, including:
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info@obeidpartners.com www.obeidpartners.comIntroduction
Over the past few years, Lebanon has faced several challenges, primarily stemming from a prolonged political deadlock and a severe financial crisis. Lebanon is still experiencing the lingering consequences of this crisis, which has deeply impacted the judicial system. Numerous judges opted to go on strike due to their deteriorating working conditions. This strike has, in turn, paralysed the judicial system, resulting in a backlog of thousands of unresolved cases. This prolonged political deadlock has gripped the country over the past year, which explains the notable shortage of recent legal developments.
Of particular importance, the October 2019 events have triggered a major depreciation of the local currency, the inaccessibility of foreign currency deposits in local bank accounts, and the imposition of restrictions on international transfers or cash withdrawals. In effect, existing US dollar balances in accounts at Lebanese banks are stranded. Dollars on deposit under these circumstances are known as “Lollars”, a contraction of “Lebanese dollars”. Lollars cannot be converted into actual cash, either as cash dollars in Lebanon or by USD transfer outside the country, and they are currently worth only a fraction of the face value.
This has given rise to several developments regarding the enforcement of foreign judgments involving monetary claims, as outlined below, which have emerged amidst the deepening economic crisis, particularly in view of the fluctuating exchange rate of the local currency.
Enforcement in Light of the Depreciation of the Currency of Payment
The unprecedented financial crisis resulted in a major depreciation of the local currency, with different exchange rates coexisting at the same time (ie, Lollar exchange rate, parallel market exchange rate, old official exchange rate).
This discrepancy has impacted the enforcement in Lebanon of domestic and foreign judgments and arbitral awards. Execution Judges have been faced with the following issues:
Payment as per the old official exchange rate has been categorically rejected as a means of discharge of debts. Regarding the question of whether a banker’s cheque in Lollars (or local transfer of funds) constitutes an adequate discharge of debts, the position of the Lebanese courts has been increasingly consistent. Several courts have issued decisions, including those referenced below:
Cases Against Lebanese Banks
Faced with the inability to access their deposits, depositors and creditors of Lebanese banks have initiated various actions against those banks before Lebanese courts, inside and outside Lebanon, over the past three to four years, relying on varying legal grounds.
Before Lebanese courts, depositors have been filing, and continue to file, lawsuits against Lebanese banks, particularly before judges of summary proceedings, seeking expedited relief to receive payments in foreign currency or to order the transfer of owed amounts abroad. However, while summary judges initially ruled against local banks, recent decisions rendered by the Courts of Appeal and the Court of Cassation appear to take an opposing view, considering that summary judges do not have jurisdiction to rule over these cases.
Additionally, creditors and depositors have sought to sue Lebanese banks in foreign jurisdictions, seeking a more decisive and expedient approach. Noteworthy cases include Manoukian v Bank Audi S.A.L. and Société Générale de Banque Au Liban S.A.L. (22 March 2022) in which the English High Court of Justice ordered the Lebanese banks to execute an international transfer of funds, as requested by the claimant. Also, in Bitar v Bank of Beirut S.A.L. (15 August 2022), the English High Court issued its judgment ordering the Lebanese bank to release the depositor’s funds. Similarly, there is a pending proceeding in a case involving Lebanese bank Saradar, but to the best of our knowledge, no decision has been issued yet. In a similar context, ongoing litigation before French courts involving BSL BANK has resulted in depositors successfully obtaining a provisional seizure of the bank’s assets in Europe.
Recently, in April 2024, Lebanese citizens filed a class action in the USA against Banque du Liban (BDL), its former governor, other Lebanese banks, and international auditing firms responsible for auditing those banks’ accounts. The argumentation revolved around the participation of the defendants in an alleged fraud scheme, which misled the depositors by misrepresenting the financial health of the Lebanese banking system and deceiving them into believing that they would be able to access their deposits by soliciting them to maintain deposits of US dollars in the banks.
The majority of these foreign judgments have been rendered in favour of the depositors. It is yet to be determined whether the depositors will attempt to enforce these foreign judgments in Lebanon, and particularly whether Lebanese courts will enforce and recognise such decisions. Some legal scholars in Lebanon argue that enforcing these foreign judgments could potentially lead to a domino effect, causing Lebanese banks to face insolvency due to liquidity shortages, thereby impacting Lebanese financial public policy.
At this stage, the chances of success in enforcing such judgments are debatable.
On another note, a number of depositors have taken a different route (ie, other than before the judge of summary proceedings) and initiated actions before the Insolvency Court in an effort to declare certain Lebanese banks insolvent. The main argument used by depositors is that, by failing to pay requested deposits in cash or effect international bank transfers, the defaulting banks are in a state of ‘cessation of payments’, which would trigger insolvency proceedings against them and, subsequently, liquidation.
In this respect, it is worth mentioning that the court of first instance’s ruling on insolvency matters (the Insolvency Court) adopted a firm judicial stance, and it has consistently refused to declare Lebanese banks as being in a cessation of payments situation. Although several banks are currently defending against insolvency petitions at time of writing, we have only been able to access four publicly available decisions that were recently issued. In these decisions, the Insolvency Court rejected every petition to declare the cessation of payments of a Lebanese bank during the crisis. The Insolvency Court has held that, in the context of Lebanon’s current financial crisis, the insolvency of any Lebanese bank could trigger a series of insolvencies among other banks, further destabilising and causing harm to the national economy. It has concluded that the provisions of Law No. 2 of 1967 dated 16 January 1967, and its implementing decree No. 7739 dated 3 July 1967 on bankruptcy (Law No. 2/67), are not adapted for the type of crisis that Lebanon is undergoing, reasoning as follows:
Thus, the Insolvency Court reasoned that the legislation was not intended to apply in a system-wide financial crisis and that rendering a declaration of insolvency against one bank could start a chain reaction with severe effects on the banking system, the economy and the state. The Insolvency Court’s approach appears to be consistent with the BDL’s policy during the crisis, and the BDL has been reluctant to initiate insolvency proceedings against banks, even though the BDL is aware that Lebanese banks (with BDL’s encouragement) are not permitting depositors to withdraw or transfer funds from their hard-currency accounts.
Nonetheless, the possibility of banks’ insolvency cannot be ruled out. Circumstances may evolve at the time when depositors/creditors of Lebanese banks will have final enforceable judgments in their favour. In fact, the aforementioned Insolvency Court decisions are subject to appeal, and it is therefore possible they could be overturned by the Court of Cassation. Also, changes may also occur at the BDL’s policy level, prompting a change in approach.
Anticipated Capital Controls Laws
It is commonly known in Lebanon that a number of draft laws aiming to address the Lebanese financial crisis are being discussed in both the government and the Lebanese parliament, including the draft law on capital controls. As of the time of writing, these draft laws have not been adopted by the Lebanese parliament. This in turn is preventing Lebanon from accessing the billions of dollars promised by the International Monetary Fund.
In the event that a capital control law is adopted, questions would arise as to the fate of all prior filed cases, in either local or foreign courts, against Lebanese banks, as the issuance of a formal capital controls law might close all depositors’ judicial attempts to retrieve their deposits.
Investment Arbitration Proceedings Filed Against the Lebanese State
Foreign investors in Lebanon may consider challenging the “de facto” capital control situation generated by the Lebanese crisis (which severely impacted investors’ businesses in Lebanon) through recourse to investor-state arbitration, on the basis of bilateral investment treaties signed between Lebanon and other foreign states. In that context, potential claims could be raised under bilateral investment treaties for the violation of free transfer of funds, fair and equitable treatment, and full protection and security provisions. It remains to be seen whether foreign investors will resort to investor-state arbitration to challenge Lebanon’s unofficial capital controls, and if so, how the awards would rendered be enforced in Lebanon. In this context, we are aware of an investment arbitration notice recently served by Al Habtoor Group against the Lebanese Republic in connection with Lebanon’s breaches of the bilateral investment treaty between the United Arab Emirates and Lebanon.
Arbitration in the Lebanese Oil and Gas Legislation
Following the discovery of prospects of abundant gas reserves in the Eastern Mediterranean basin, Lebanon was able to launch its first licensing round for offshore petroleum development, which culminated in early 2018 in the award of two exploration and production agreements (EPAs) based on the model EPA issued by virtue of Decree No. 43 of 19 January 2017. Both EPAs were awarded to the same consortium composed of three international companies for the offshore blocks 1 and 9 (out of a total of ten offshore blocks). In the beginning of April 2019, the Lebanese Minister of Energy and Water announced the launch of the second licensing round for offshore petroleum development in blocks 1, 2, 5, 8 and 10. However, the second licensing round was postponed several times, particularly due to the COVID-19 pandemic, and the bids were eventually closed at the end of June 2023. In a recent update, the Lebanese Petroleum Administration launched in December 2023 its third oil and gas licensing round, pertaining to the remaining nine blocks, with the bid deadline extended until 17 March 2025, pursuant to the Minister of Energy, Decision no. 15 dated 24 June 2024.
The model EPA includes an entire article on arbitration, Article 38. This article was reflected in the awarded EPAs.
As the concept of state immunity from execution is a well-recognised principle under Lebanese law, assets of the Lebanese state and public legal entities cannot be seized. Consequently, arguments regarding state immunity may arise during the enforcement stage against the Lebanese state. Article 38 came to alter this principle by explicitly waiving sovereign immunity from both jurisdiction and enforcement, as follows:
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