Lebanon

In summary

Lebanon is an arbitration-friendly jurisdiction. Its arbitration legislation is modern and embraces well-established principles of international arbitration. The main advantages of arbitration in Lebanon are similar to those prevalent in other arbitration-friendly jurisdictions. Investors and business actors in Lebanon increasingly include arbitration clauses in their agreements to benefit from the ability to choose their arbitrators, the speed and flexibility that is offered by arbitration and the confidential nature of arbitral proceedings.

Discussion points

• Overview of the arbitration legal framework
• Recognition and enforcement of awards in Lebanon
• International and national legal framework for investments in Lebanon
• Recent developments in international arbitration

Referenced in this article

• Beirut Court of Appeal, Third Chamber, 10 Dec 2001
• Beirut Court of Appeal, Decision No. 767/2008 of 20 May 2008
• Beirut Court of Appeal, Decision No. 832/2012 of 16 May 2012
• Beirut Court of First Instance Decision of 18 Aug 2016
• Lebanese Code of Civil Procedure [with its amendments by Decree No. 13909, 12 September 2024]
• Lebanese Code of Obligations and Contracts
• Lebanese Code of Commerce
• Lebanese Court of Cassation, Decision No. 14/2014 of 25 January 2014
• Lebanese Investment Law
• State Council, Decision No. 23781/2019 of 5 Nov 2020
• Zeina Obeid and Ziad Obeid, ‘Arbitration in commercial representation disputes: walking the line between tradition and modernism’, Lexology (19 July 2018).

Arbitration law

The provisions of the Lebanese Arbitration Law are based on the old French arbitration law (Decrees Nos. 80-354 of 14 May 1980 and 81-500 of 12 May 1981).

The Lebanese Code of Civil Procedure (LCCP) enacted by Decree Law No. 90/83, with amendments from Law No. 440 of 29 July 2002, devotes its second chapter to arbitration. The LCCP makes a distinction between domestic arbitration^[1] and international arbitration,^[2] the latter being governed by more liberal rules. The main differences between domestic and international arbitration concern the criteria for the validity of arbitration clauses, which are subject to stricter formal requirements in domestic arbitration. Other differences include the availability of recourses to challenging or setting aside an award, which is broader in domestic arbitration than in international arbitration.

Under article 809 of the LCCP, an arbitration is deemed international ‘when it involves the interests of international trade’. These interests are defined as involving movements of goods or funds beyond borders: if the operation that is the subject matter of the dispute is linked to more than one country, the arbitration is international.^[3]

Factors that are not determinative when assessing whether an arbitration is international include the nationality of the parties or arbitrators, the place of the arbitration, the residence of the parties or the place where the contract was concluded. The application of a foreign law or procedure also has no effect on whether an arbitration is defined as international.

Regarding international arbitrations seated in Lebanon, if an international arbitration is governed by Lebanese law, provisions relating to domestic arbitration apply unless the parties have agreed otherwise.^[4]

Lebanon is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), with a reservation, on the basis of reciprocity, that the government of Lebanon will apply the Convention to the recognition and enforcement of awards made only in the territory of another contracting state. Lebanon also ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention) on 26 March 2003.

Arbitration institutions based in Lebanon

The relevant arbitral institution based in Lebanon is the Lebanese Arbitration and Mediation Centre of the Chamber of Commerce and Industry and Agriculture of Beirut and Mount Lebanon,^[5] which was founded in 1995. The Centre has its own Arbitration Rules and its own Mediation Rules. It is an independent arbitration institution that administers domestic and international arbitration and also offers the possibility of resolving disputes through optional conciliation.

The Lebanese National Committee of the International Chamber of Commerce of Paris (ICC), although not involved in the administration of arbitration cases, is often invited by the ICC Secretariat to propose candidates for appointment as arbitrators.

The Lebanon branch of the Chartered Institute of Arbitrators^[6] principally serves as a forum for education and training in alternative dispute resolution (ADR) and may sometimes act as an appointing authority.

The Beirut Bar Association has established a centre for arbitration: the Lebanese and International Arbitration Centre. The Centre aims to provide services for domestic and international arbitration and has adopted its own arbitration rules; however, to the best of our knowledge, the Centre is not very active.

Overview of the arbitration legal framework in Lebanon

Arbitration agreements

Formal requirements for an enforceable agreement

Unlike in domestic arbitrations, where the written form of the arbitration agreement is required as a condition of validity,^[7] there is no particular requirement for an international arbitration agreement to be valid other than the parties’ consent. Article 814(2) of the LCCP, however, provides that an agreement in writing is required for awards rendered in international disputes to be enforced. Although not mandatory, it is advisable to specify the number of arbitrators and their method of designation, the seat and the language of the arbitration.

Insofar as administrative contracts are concerned, one important formal requirement concerns contracts made with the Lebanese state or with other state entities. In domestic administrative contracts, a state or state entity can enter into an arbitration agreement subject to prior authorisation by the Council of Ministers upon a recommendation of either the relevant minister or the relevant regulatory authority.^[8] In international administrative contracts, while the law is silent on the necessity of obtaining prior authorisation from the Council of Ministers, it is recommended to systematically obtain such authorisation in respect to arbitration clauses inserted in such agreements.

Separability of the arbitration agreement

The principle of separability of the arbitration agreement from the main contract is well-established in Lebanon and is recognised by Lebanese courts.^[9]

Arbitrability of disputes

Under Lebanese law, the following types of disputes are not arbitrable and are subject to the exclusive jurisdiction of the Lebanese national courts:

• Questions of personal status (nationality, age, adoption), questions of social status (divorce and marriage), and questions of capacity; however, article 1037 of the Code of Obligations and Contracts allows for an exception regarding financial compensation resulting from personal status disputes. In this case, arbitration is confined to the compensation sought.
• Non-negotiable personal rights, such as the right to physical integrity, human dignity, privacy and food. Similar to the questions of personal status, however, any dispute relating to monetary compensation associated with those personal rights is arbitrable.
• Rights of succession. Arbitration over acquired hereditary rights is possible where the value of those rights is determined.
• Questions of public policy, including all matters considered by law as guaranteeing social, economic or political interest.^[10]
• Questions of insolvency. As provided by article 490 of the Code of Commerce, state courts have exclusive jurisdiction in insolvency matters; however, if an insolvent party has concluded an agreement to arbitrate with his associates in a limited partnership company, such agreement is valid.
• Questions of employment contracts and social security. These issues fall under the exclusive competence of the local Labour Arbitral Council.
• Contracts for commercial representation. Article 5 of Decree-Law No. 34 of 5 August 1967 provides for the exclusive jurisdiction of Lebanese courts in respect of disputes arising out of commercial representation agreements; however, in recent years the Lebanese courts have adopted a more permissible stance towards the arbitrability of such disputes in specific circumstances.^[11]

Arbitrators: appointment and challenges

Appointment of arbitrators

Lebanese law does not place any limitation on the choice of the arbitrator, but an arbitrator must be a natural person, have full capacity to exercise his or her civil rights and must not be insolvent.^[12] There is similarly no limitation on the nationality of the persons who can act as arbitrators where the seat of arbitration is in Lebanon or where hearings are held in Lebanon. In domestic arbitration, the arbitration clause should include the name or characteristics of the appointed arbitrators or the appointment mechanism.^[13]

Parties are free to agree on the number of arbitrators. In this regard, in domestic arbitration, article 771 of the LCCP provides that in all cases there should be an odd number of arbitrators; otherwise the arbitration will be considered as invalid. This is not the case in international arbitration, as article 810 of the LCCP 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. Lebanese courts confirmed this by granting exequatur to international arbitral awards rendered by tribunals composed of an even number of arbitrators.^[14]

Therefore, in international arbitration, the parties may designate arbitrators in their arbitration agreement or provide for a mechanism for their designation directly or by reference to arbitration rules. In the absence of agreement between the parties, the most diligent party may petition the president of the competent court of first instance to make the appointment.^[15]

Challenge of arbitrators

Arbitrators must act independently and impartially, failing which they may be subject to challenge under article 770 of the LCCP.

Arbitrators may be challenged on the same grounds as judges for reasons that arise or become known after their appointment and that are exclusively listed in article 120 of the LCCP.^[16] Such grounds include if:

the arbitrator was a legal representative or an agent of one of the parties or one of the parties appointed him or her as an arbitrator in a previous case;^[17]

the arbitrator previously provided a legal opinion with respect to the same case even if this occurred before being appointed as an arbitrator;^[18] and

there is sympathy or animosity between an arbitrator and one of the parties that could prevent the arbitrator from ruling impartially.^[19]

Moreover, an arbitrator may be liable for his or her gross fault as is the case for local judges.^[20]

In domestic arbitration, unless provided otherwise by the arbitration rules in institutional arbitration, challenges against arbitrators should be brought before the court of first instance where the agreed place of arbitration is located. Failing this, the challenge can be brought before the Beirut court of first instance within 15 days of the date the challenging party became aware of the arbitrator’s appointment or within 15 days of the date that the reason for the challenge became apparent following the appointment of the arbitrator.^[21] The court’s decision on the challenge is final.

In international arbitration there are no express provisions regarding the challenge of arbitrators, which in most instances will be subject to the arbitration rules of the arbitral institution agreed on by the parties.

Parties’ representatives

In domestic arbitration, where the Lebanese rules of procedure apply, parties must be represented by counsel for claims exceeding 50 million Lebanese pounds or for which the amount is not determined, as well as in cases where the law requires representation by counsel.^[22]

In international arbitration, there are no express provisions for mandatory legal representation. Consequently, unless provided otherwise, the parties are free to decide whether they wish to be represented by legal counsel with no condition of nationality.

Intervention of domestic courts

Domestic courts’ support to the arbitral procedure

The president of the court of first instance may act as the judge in support of arbitration if required. Such support includes the appointment of arbitrators where the parties have failed to designate an arbitrator or where designation of an arbitrator is not carried out by the relevant arbitral institution. The Lebanese legislation further provides for the assistance of courts in the absence of an agreed set of institutional rules containing a default mechanism for the constitution of an arbitral tribunal or a mechanism provided for in the arbitration clause itself.^[23]

Intervention of domestic courts in cases of forgery allegations

Domestic courts are competent to rule on allegations of forgery. Where a party alleges forgery of one or more documents in the course of a domestic arbitration, the arbitrator shall suspend the proceedings pending the competent court’s decision on the issue of forgery.^[24] This principle also applies in international arbitration unless there is an agreement to the contrary.^[25]

Domestic courts and provisional relief

The Lebanese courts can grant provisional relief in support of arbitration when the arbitral tribunal is not yet constituted. In this case, an application for interim measures should be filed before the competent judge of summary proceedings, which can be done on an ex parte basis.^[26]

After the constitution of the arbitral tribunal, subsequent requests for interim measures must generally be submitted directly to the arbitral tribunal, which has the power to order any interim and conservatory relief deemed appropriate in accordance with articles 789 and 589 of the LCCP. The arbitrators may also request the local judge to sanction witnesses who fail to appear at a hearing or those who refuse to testify.^[27]

Finally, a party may seek an interim attachment order from the competent court to freeze the assets of the losing party pending the enforcement of an arbitral award.

Recognition and enforcement of awards

Recognition and enforcement procedure

The recognition and enforcement of an award in Lebanon is made through ex parte proceedings, and a legitimate interest is required for a court to accept jurisdiction over the recognition and enforcement of foreign awards.^[28]

The court that is competent to grant exequatur depends on the nature of 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 made, 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.^[29]

The exequatur application must contain the original arbitral award and the arbitration agreement or a certified copy of these documents, irrespective of whether the award is domestic or foreign. International or foreign awards must be translated into Arabic when seeking its enforcement.^[30] Further, for such awards, the judge will verify the existence of the award and that recognition of the award will not manifestly violate Lebanese international public policy.^[31]

Recourse against a decision on exequatur

A court decision granting recognition or enforcement of a domestic or international award rendered in Lebanon is not subject to any recourse (as these are subject to annulment);^[32] however, a court decision denying recognition or enforcement of a domestic, foreign or international award rendered in Lebanon is subject to appeal.^[33]

Challenge of arbitral awards

In domestic arbitration, unless agreed otherwise by the parties, an arbitral award can be subject to appeal.^[34] When an arbitration is conducted ex aequo et bono, the arbitral award cannot be appealed before the Court of Cassation unless the Court of Appeal annulled the arbitral award. In this case, the grounds for appeal before the Court of Cassation are limited to the annulment grounds set out in article 800 of the LCCP. The arbitral award can also be subject to a setting-aside action.^[35]

Arbitral awards can be challenged by filing a third-party opposition application before the court that would have had jurisdiction had the parties not referred their dispute to arbitration as per article 798 of the LCCP, as well as by filing retrial proceedings before the Court of Appeal under article 808 of the LCCP within the specific conditions applicable to the procedure.

However, in international arbitration, appeal is not an available recourse, and the arbitral award can only be subject to a setting-aside action.^[36] In both domestic and international arbitration, setting-aside actions are considered public policy and cannot be excluded by the parties’ agreement.

For awards rendered in foreign jurisdictions, the means of recourse available are the appeal against the decision refusing to grant exequatur (as per article 816 of the LCCP), and the appeal against the decision granting exequatur (in the specific circumstances set out in article 817 of the LCCP).

An award granted in domestic arbitration can be annulled if:

• it was rendered without an arbitration agreement or on the basis of an agreement that is null or void due to the expiry of the relevant time limit for rendering the award;
• it was rendered by arbitrators not appointed in accordance with the law;
• the arbitrators ruled without complying with the mission conferred upon them;
• it was issued without due respect of rights of defence;
• it does not contain the mandatory requirements related to the relief sought by the parties, along with the grounds and means substantiating the relief, the name of the arbitrators, the ratio decidendi of the award, the date of the award and the signature of the arbitrators; and
• it violates a rule of public policy.^[37]

An award granted in international arbitration can be annulled if

• it was rendered without an arbitration agreement or on the basis of an agreement that is null or void due to the expiry of the relevant time limit for rendering the award;
• it was rendered by arbitrators not appointed in accordance with the law;
• the arbitrators ruled without complying with the mission conferred upon them;
• it was issued without due respect to rights of defence; and
• it violates a rule of international public policy.^[38]

International and national legal framework for investments

International investment agreements and other relevant treaties

Private actors investing in Lebanon benefit from the protection of a number of international investment agreements and from other treaties with investment provisions, which provide for recourse to arbitration in case of dispute. These include 52 bilateral investment treaties (BITs) signed by Lebanon, one of which has been terminated and 43 of which are in force.

In addition to being a signatory to the ICSID Convention^[39] and the New York Convention, Lebanon has also signed other significant treaties, including:

• the Unified Agreement for the Investment of Arab Capital in the Arab States;^[40]
• the Agreement on Promotion, Protection and Guarantee of Investments among the Member States of the Organization of the Islamic Conference;^[41]
• the Euro–Mediterranean Interim Association Agreement;^[42]
• the free trade agreement between the European Free Trade Association and Lebanon;^[43] and
• the Trade and Investment Framework Agreement between the United States and Lebanon.^[44]

Lebanon has also ratified various regional and multilateral agreements (eg, intergovernmental agreements, guidelines and principles), namely:

• the Islamic Corporation for the Insurance of Investment and Export Credit 1992;^[45]
• the Inter-Arab Investment Guarantee Corporation 1971;
• the UN Code of Conduct on Transnational Corporations 1983;
• the World Bank Investment Guidelines 1992;
• the ILO Tripartite Declaration on Multinational Enterprises 2006; and
• the UN Guiding Principles on Business and Human Rights 2011.

Further, Lebanon is a party to the convention establishing the Multilateral Investment Guarantee Agency (MIGA). Under the treaty, Lebanese investors may acquire political risk insurance from MIGA in respect of investments made in certain developing states; however, this does not apply to all investments, as certain thresholds must be met (eg, investments must be medium- to long-term in nature).

Lebanese Investment Law

Lebanon has also enacted a national investment law^[46] aiming at promoting and encouraging investments in the country. The Lebanese Investment Law, enacted in 2001, covers investments in the agriculture, agri-food, tourism, information technology, telecommunication, technology and media sectors.^[47] It applies to investors willing to benefit from its provisions.^[48]

Lebanon’s pro-investment arbitration position can also be inferred from several factors. In addition to the Lebanese courts being generally supportive and respectful of arbitration proceedings, all Lebanese BITs contain arbitration clauses. The Lebanese government is also open to arbitration in general as government entities tend to include arbitration clauses in the contracts they sign with investors.

The Lebanese Investment Law further establishes a public authority named the Investment Development Authority of Lebanon (IDAL), a legal entity enjoying administrative and financial autonomy, administered by a board of directors and reporting to the prime minister.

In the case of a dispute between the IDAL and a foreign or national investor,^[49] the parties shall first attempt to resolve their dispute amicably. In the absence of amicable resolution of the dispute, the parties to the dispute shall turn to arbitration.^[50] Under the Lebanese Investment Law, a number of features pertaining to arbitration must be agreed on in advance.

Lebanon has been the subject of a few investor-state investment disputes;^[51] however, as the country is currently facing an unprecedented economic and financial crisis, this will likely lead to a significant increase in investment-related disputes.

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.

Lebanon’s ongoing economic and security crisis led the Emirati Al Habtoor Group to issue a notice of dispute under the 1998 UAE-Lebanon bilateral investment treaty against the Lebanese Republic. The foreign investor filed this notice over alleging that (i) Lebanon and its Central Bank have imposed restrictions preventing Al Habtoor Group from freely transferring its funds amounting to over US$44 million from the Lebanese banks, and that (ii) Lebanon has also failed to secure a safe and sound environment for Al Habtoor Group’s businesses and investments.

Recent developments in international arbitration in Lebanon

With regard to mediation, judicial mediation was introduced by Law No. 82, published in the Official Gazette on 18 October 2018, and Parliament enacted Law No. 286 in April 2022 specifically addressing conventional mediation.

Law No. 286 was intended to complement the legal framework of mediation in Lebanon. While judicial mediation handles disputes referred by the courts, conventional mediation focuses on disputes that parties choose to resolve without involving the courts.

Despite these recent initiatives, professionals in the legal sector remain cautious about utilising mediation. This caution is primarily because of the absence of implementing regulations issued by the Ministry of Justice.

With regard to arbitration, The Lebanese Arbitration and Mediation Centre (LAMC) recently amended its arbitration rules. The new rules entered into force on 1 July 2024 (Rules). The Rules aim to provide fast and effective procedures for settling disputes, and enhance transparency for arbitral proceedings conducted under the auspices of the LAMC.

These Rules introduced new features, including but not limited to: (i) multiple contracts whereby parties can make claims related to more than one contract in a single arbitration; (ii) expedited arbitration proceedings and emergency proceedings; (iii) consolidation; (iv) possibility for arbitral tribunals to grant interim measures; (v) tribunal's power to determine the relevance, materiality and admissibility of evidence; and (vi) interpretation and correction of awards and additional awards.

In addition to the aforementioned features, the Rules introduced new provisions aimed at promoting and enhancing the use of technology in arbitration proceedings (eg. possibility to hold remote hearing; possibility to communicate electronically with the arbitral tribunal; etc.)

This recent amendment demonstrates Lebanon's efforts to position itself as an arbitration-friendly jurisdiction.

Conclusion

The legislative landscape in Lebanon is evolving positively towards encouraging recourse to arbitration and other ADR mechanisms in cases where disputes arise. By ensuring better protection of investors and business actors in Lebanon and encouraging recourse to ADR, the Lebanese authorities are creating an increasingly friendly environment for large projects and investments in the country.

Endnotes