Introduction

On 17 October 2019 Lebanon experienced civil upheaval followed by an unjustified two-week closure of the banking sector, which had a direct effect on the country's economy due to the surge in deposit withdrawals. This has led to an ongoing severe financial, economic and social crisis, which has been further exasperated by the COVID-19 pandemic and the 4 August 2020 Beirut Port explosion which destroyed the port and part of the city.

This situation may give rise to arbitration claims which are subject to Lebanese law or seated in Beirut. As such, this article provides a brief overview of the legislative framework for arbitration in Lebanon.

For those considering this dispute resolution mechanism, the legislative framework in Lebanon is appealing and the relevant legislation is arbitration friendly. Investors and business actors in Lebanon increasingly include arbitration clauses in their agreements in order 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.

In addition, the recent legislative developments regulating public-private partnerships and oil and gas investments further promote the use of arbitration as a primary mechanism for dispute resolution against the Lebanese state.

National versus international arbitration law

Lebanese arbitration law is based on the old French arbitration law (Decrees 80-354 of 14 May 1980 and 81-500 of 12 May 1981).

The Code of Civil Procedure (LCCP), enacted by Decree Law 90/83 – with amendments resulting from Law 440 dated 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, with domestic arbitration subject to stricter formal requirements. Other differences include the availability of recourses to challenging or setting aside an award, which is broader in domestic arbitration.

Pursuant to 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. In other words, 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.

Further, the application of a foreign law or procedure will have no effect on the definition of an arbitration as international.(4)

Regarding international arbitrations seated in Lebanon, Article 812 of the LCCP provides that where an international arbitration is governed by Lebanese law, unless agreed otherwise, provisions relating to domestic arbitration apply.(5)

Lebanon is a signatory to the New York Convention with a reservation that the Lebanese government will apply the convention, on a reciprocal basis, to the recognition and enforcement of awards made only in another contracting state. Lebanon also ratified, among others, the Washington Convention on 26 March 2003.

Arbitral institutions based in Lebanon

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

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

The Chartered Institute of Arbitrators Lebanon Branch principally serves as a forum for education and training in alternative dispute resolution and may sometimes act as an appointing authority.

Arbitration legal framework

Arbitration agreements

Formal requirements for enforceable agreement

Unlike in domestic arbitration, where the written form of an arbitration agreement is required as a condition of validity (Article 763 of the LCCP), there is no particular requirement for an international arbitration agreement to be valid other than the parties' having consented to it. However, Article 814(2) of the LCCP provides that an agreement in writing is required to enforce an award rendered in an international dispute.

Insofar as administrative contracts are concerned, one important formal requirement pertains to contracts made with the Lebanese state or 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. In international administrative contracts, while the law is silent on the necessity of obtaining a prior authorisation from the Council of Ministers, it is recommended to systematically obtain such authorisation in respect of arbitration clauses inserted in such agreements.

Separability of arbitration agreement

The principle of separability of an arbitration agreement from the main contract is a well-established principle in Lebanon and is recognised by the Lebanese courts.(6)

Arbitrability of disputes

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

  • questions of personal status (eg, nationality, age and adoption) and questions of social status (divorce and marriage). 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, including the right to:
    • physical integrity;
    • human dignity;
    • privacy; and
    • food.

However, similar to questions of personal status, any dispute relating to monetary compensation associated with these personal rights is arbitrable;

  • rights of succession. Arbitration over acquired hereditary rights is possible where the value of such rights is determined;
  • questions of public policy, including all matters considered by law as guaranteeing social, economic or political interest;
  • questions of insolvency. As provided by Article 490 of the Code of Commerce, state courts have exclusive jurisdiction in insolvency matters;
  • questions of employment contracts and social security. These issues fall under the exclusive competence of the local labour arbitration court; and
  • contracts for commercial representation. Article 5 of Decree Law 34, dated 5 August 1967, provides for the exclusive jurisdiction of the 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 (for further details please see "Arbitration in commercial representation disputes: walking the line between tradition and modernism").

Arbitrators: appointment and challenges

Appointment of arbitrators

Lebanese law does not place any limitation on the choice of arbitrator. However, an arbitrator must:

  • be a natural person;
  • have full capacity to exercise their civil rights; and
  • not be insolvent.(7)

Similarly, there is 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.(8)

Parties can agree on the number of arbitrators and may designate arbitrators in their arbitration agreement or provide for a mechanism for their designation directly or by reference to the arbitration rules. The law requires arbitration tribunals to comprise an odd number. In the absence of agreement between the parties, the most diligent party may petition the president of the competent first-instance court to make such an appointment.(9)

Challenge of arbitrators

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

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 which are exclusively listed in Article 120 of the LCCP. Such grounds include if:

  • an arbitrator was a legal representative or an agent of one of the parties or one of the parties appointed them as an arbitrator in a previous case;(10)
  • an arbitrator previously provided a legal opinion with respect to the same case, even if this occurred before they were appointed as an arbitrator;(11) or
  • there is sympathy or animosity between an arbitrator and one of the parties which could prevent the arbitrator from ruling impartially.(12)

Moreover, an arbitrator might be liable for their gross fault, as is the case for local judges, pursuant to Article 741 of the LCCP.

In domestic arbitration, unless provided otherwise by the arbitration rules in institutional arbitration, challenges against arbitrators should be brought before the first-instance court where the agreed place of arbitration is located. Failing this, the challenge can be brought before the Beirut First-Instance Court within 15 days of the date on which the challenging party becomes aware of the arbitrator's appointment or within 15 days of the date on which the reason for the challenge becomes apparent following the appointment of the arbitrator.(13) 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 by the parties.

Parties' representatives

In domestic arbitration, where the Lebanese rules of procedure apply, parties must be represented by counsel for claims exceeding L£1 million or for which the amount is not determined, as well as in cases where the law requires representation by counsel.(14)

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

Intervention of domestic courts

How domestic courts support arbitral procedure

The president of the first-instance court 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 legislation further provides for the courts' assistance 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.(15)

Domestic courts' intervention in forgery allegation cases

The 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 will suspend the proceedings pending the competent court's decision on the forgery issue.(16) According to the law, this principle also applies in international arbitration, unless there is an agreement to the contrary.(17)

Domestic courts and provisional relief

Under Articles 589 to 593 of the LCCP, the Lebanese courts can grant provisional relief in support of arbitration before the arbitral tribunal is 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.

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 859 of the LCCP. The arbitrators may also request that the local judge penalise witnesses who fail to appear at a hearing or refuse to testify.(18)

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

Recognition and enforcement of domestic, international and foreign 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 foreign awards' recognition and enforcement.(19)

The court that is competent to grant exequatur depends on the nature of the dispute. In civil and commercial matters, exequatur requests are filed before the president of the first-instance court, 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.(20)

The exequatur application must contain the arbitral award and the arbitration agreement, or a certified copy of these documents, irrespective of whether the award is domestic or foreign. For international or foreign awards, the judge will principally verify the award's existence and that recognition of the award does not manifestly violate Lebanese international public policy.(21)

Recourse against 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.(22)

However, a court decision denying recognition or enforcement of a domestic, foreign or international award rendered in Lebanon is subject to appeal.(23)

Challenge of arbitral awards

In domestic arbitration, unless agreed otherwise by the parties, an arbitral award can be subject to appeal(24) or set aside.(25) When an arbitration is conducted ex aequo et bono, an 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 as set out below.

However, in international arbitration, an appeal is not an available recourse and the arbitral award can be subject only to a setting-aside action.(26) In both domestic and international arbitration, a setting-aside action is of public order and cannot be excluded by the parties' agreement.

The grounds for annulling awards in domestic arbitration are set out under Article 800 of the LCCP as follows:

  • where the award has been rendered without an arbitration agreement or based on an agreement that is null or void due to the expiry of the relevant time limit for rendering the award;
  • where the award has been rendered by arbitrators not appointed in accordance with the law;
  • where the arbitrators ruled without complying with the mission conferred upon them;
  • where the award has been delivered without due respect of rights of defence;
  • where the award does not contain the mandatory requirements relating to the relief sought by the parties, along with:
    • the grounds and means substantiating such relief;
    • the name of the arbitrators;
    • the ratio decidendi of the award;
    • the date of the award; and
    • the signature of the arbitrators; and
  • where the award has violated a rule of public policy.

The grounds for annulling awards in international arbitration are set out under Article 819 of the LCCP as follows:

  • where the award has been rendered without an arbitration agreement or based on an agreement that is null or void due to the expiry of the relevant time limit for rendering the award;
  • where the award has been rendered by arbitrators not appointed in accordance with the law;
  • where the arbitrators ruled without complying with the mission conferred upon them;
  • where the award has been delivered without due respect of rights of defence; and
  • where the award has violated a rule of international public policy.

International and national legal framework for investments in Lebanon

International investment agreements and other treaties with investment provisions

Private actors investing in Lebanon benefit from the protection of numerous international investment agreements and from other treaties with investment provisions, which provide for recourse to arbitration in case of dispute. These treaties include:

  • 52 bilateral investment treaties signed by Lebanon, of which 43 are in force;
  • the free trade agreement between the European Free Trade Association states and Lebanon;
  • the Organisation of Islamic Cooperation Agreement 1981; and
  • the Arab Investment Agreement 1980.

In addition, Lebanon is a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States.(27)

Lebanese Investment Law

Lebanon has enacted a national investment law aimed at promoting and encouraging investments in the country.(28) The Lebanese Investment Law, enacted in 2001, covers investments in sectors such as:

  • agriculture;
  • agro-food;
  • tourism;
  • information technology;
  • telecoms;
  • technology; and
  • media.(29)

The law also applies to investors willing to benefit from its provisions.(30)

Further, the law establishes the Investment Development Authority of Lebanon (IDAL), a public authority and legal entity that has administrative and financial autonomy. The IDAL is administered by a board of directors and reports to the prime minister.

In case of a dispute between the IDAL and a foreign or national investor,(31) the parties should first attempt to resolve their dispute amicably. Failing that, the parties should recourse to arbitration.(32) Under the law, numerous features pertaining to arbitration must be agreed in advance.

This article first appeared in The Middle Eastern and African Arbitration Review 2020. To read the rest of the review or explore similar publications, click here.

Endnotes

(1) Articles 762 to 808 of the LCCP.

(2) Articles 809 to 821 of the LCCP.

(3) Beirut Court of Appeal, Third Chamber, 10 December 2001; Beirut Court of Cassation, Decision 14/2014, 25 January 2014.

(4) Abdul Hamid El Ahdab and Jalal El- Ahdab, 'Arbitration in Lebanon', Arbitration with Arab Countries (Kluwer Law International: 2011), pp 337–449.

(5) Article 812 of the LCCP: "the provisions of articles 762 to 792 (relating to domestic arbitration) shall only apply in default of specific agreements and subject to the provisions of Articles 810 and 811 (relating to international arbitration)" (translated into English).

(6) For instance, Beirut Court of Appeal Decision 767/2008, dated 20 May 2008 and Lebanese Court of Cassation Decision 14/2014, dated 25 January 2014.

(7) Article 768 of the LCCP.

(8) Article 763 of the LCCP.

(9) Article 810 of the LCCP.

(10) Article 120(4) of the LCCP.

(11) Article 120(6) of the LCCP.

(12) Article 770 of the LCCP.

(13) Ibid.

(14) Article 378 of the LCCP.

(15) Article 810 of the LCCP.

(16) Article 783 of the LCCP.

(17) Article 812 of the LCCP.

(18) Article 779 of the LCCP.

(19) Article 795 of the LCCP.

(20) Articles 770, 775, 793, 795 and 810 of the LCCP.

(21) Articles 814 and 815 of the LCCP.

(22) Articles 805 and 819 of the LCCP.

(23) Articles 806 and 816 of the LCCP.

(24) Article 799 of the LCCP.

(25) Article 800 of the LCCP.

(26) Article 819 of the LCCP.

(27) This was signed by Lebanon on 26 March 2003 and entered into force in Lebanon on 25 April 2003.

(28) Law 360 of 16 August 2001.

(29) Article 2 of the Investment Law. The law also applies to other sectors, as specified by a decree issued by the Council of Ministers based on a proposal by its president.

(30) Ibid.

(31) Under the law, an 'investor' is defined as a "natural person or legal entity, whether Lebanese, Arab or foreign, investing in Lebanon in accordance with the provisions of this law".

(32) Article 18 of the Investment Law.