14 Dec 2023
Perspectives on Lebanon's private dispute resolution landscape by Dr. Zeina Obeid FCIArb and Ziad Obeid FCIArb.
Lebanon's legal landscape has undergone significant challenges in the past two years, primarily stemming from a prolonged political deadlock and a severe financial crisis. The vacancy in the presidential office since 31 October 2022 has raised concerns regarding the legitimacy of the Parliament’s legislative powers during the constitutional period for electing a new president. The resulting inaction by parliamentarians has led to a shortage of new legislation in the past year. Additionally, the economic crisis has profoundly impacted the judicial system, with numerous judges opting to go on strike due to working conditions. This strike has, in turn, paralysed the judiciary, resulting in a backlog of hundreds of unresolved cases.
Despite these challenges, private or alternative dispute resolution (ADR) methods, particularly arbitration, are widely embraced in Lebanon. Arbitration, recognised as the most popular method of private dispute resolution, is governed by the Lebanese Code of Civil Procedure (LCCP), which dedicates a specific chapter to domestic and international arbitration. The Lebanese arbitration provisions are rooted in the old French arbitration laws rather than the UNCITRAL Model Law.
Judicial mediation has also gained in popularity in recent years through the enactment of Law 82, which entered into force on 18 October 2018. It is also worth mentioning that the LCCP stipulates that conciliation between the parties is inherent in the judge’s duties (Article 375 LCCP). However, such conciliation made by the judge during the court proceedings is not mandatory, and there are no sanctions for refusing to engage in mediation.
Furthermore, Lebanon is considered an arbitration-friendly jurisdiction with modern legislation aligning with established principles of international arbitration. The judiciary demonstrates familiarity with and support for international arbitration practices. Recent legislative developments, such as Law No. 48 regulating public–private partnerships and exploration and production agreements, explicitly allow recourse to arbitration in disputes involving state entities.
Amid these difficulties Lebanon maintains a pro-investment arbitration stance, evident in the inclusion of arbitration clauses in its Bilateral Investment Treaties (BITs). All 52 signed BITs, with 43 in force, include arbitration clauses, reflecting the Government's commitment to arbitration in investor agreements. Lebanon's adherence to the 1965 ICSID Convention, the 1958 New York Convention, and other regional and multilateral agreements further underscores its commitment to facilitating arbitration. Additionally, Lebanese courts consistently demonstrate support and respect for arbitration proceedings.
Looking ahead to the next 12 months in Lebanon
While no new Acts or pieces of legislation on or involving dispute resolution are expected in the forthcoming year, it is worth noting that there are discussions surrounding reform of the arbitration law. However, reforms have not yet materialised as Lebanon grapples with a period of legislative scarcity, owing to to the ongoing political and financial crisis.
In the financial and banking sector, multiple reports, plans, and draft laws were prepared in 2022 to address the Lebanese financial crisis. Notably, draft laws, known as capital control draft laws, were circulated to implement temporary controls on banking operations. In March 2022, a draft received approval from the Council of Ministers and was forwarded to Parliament. Despite its supposed revision by Parliamentary committees and subsequent referral for final approval, discussions were deferred until the Government solidifies an economic reform plan. On 16 January 2023, joint Parliamentary committees approved a revised version titled “Draft Framework Law for Restoring Financial Regularity in Lebanon”, which resembles the initial capital controls draft law. Parliament is yet to finalise the adoption of these draft laws and their accompanying regulations.
In a separate development, the Administration and Justice Committee approved a draft law on 25 October 2022, aiming to amend rules governing procedural defences in criminal proceedings. This initiative seeks to strike a balance between preserving crucial procedural defences, which are essential for upholding defence rights and preventing the “abusive” misuse of these defences that could impede justice processes.
In addition, the same Committee in the Lebanese Parliament is on the verge of concluding its closed-door discussions on a new draft media law. If approved by the General Assembly, this law could significantly restrict freedom of expression and freedom of the press in Lebanon. The anticipated legislation is expected to replace the Publications Law of 1962 and the Audiovisual Law of 1994, following reconsideration prompted by comments from the United Nations Educational, Scientific, and Cultural Organization (UNESCO) in partnership with the Ministry of Information in 2023. The Committee is expected to deliberate on the remaining articles of the draft law in the upcoming weeks, including amendments proposed by UNESCO[1], before taking a final vote.
Dispute resolution and the court system in Lebanon
Lebanese courts frequently encounter challenges in expeditiously resolving disputes, often stemming from judges' limited expertise in technical matters. Additionally, the ongoing strikes exacerbate these challenges, contributing to delays in the timely rendering of judgments.
In contrast, private dispute resolution methods, namely arbitration and mediation, may provide for a more efficient approach by virtue of the principle of autonomy, which allows the parties to appoint arbitrators and mediators who are knowledgeable in the field/sector of the dispute.
Certain sectors are expected to play a key role in fostering the growth of arbitration in Lebanon. Notably, the oil and gas sector is anticipated to experience a surge in arbitration cases, driven by the need to address contractual suspensions and terminations arising from rapidly changing market conditions and political developments in the region.
Another crucial sector for dispute resolution through arbitration is Islamic Finance, where national courts may lack the requisite specialisation for handling disputes in accordance with Sha ria principles. Arbitration, with its ability to appoint experts in Sha ria, ensures the explicit application of these principles in the resolution process.
Given the manifold advantages private dispute resolution mechanisms offer, such as the ability to select arbitrators, pragmatism, flexibility, and confidentiality, investors and business entities in Lebanon are increasingly incorporating arbitration clauses into their agreements. This strategic adoption enables them to harness the benefits of private dispute resolution and navigate disputes with heightened efficiency.
About the authors:
Ziad Obeid FCIArb is Chair of Ciarb Lebanon Branch. He is a managing partner at Obeid & Partners and a dual-qualified lawyer with extensive cross-border experience gained through legal practice in Europe and the Middle East. His experience covers cases brought under bilateral investment treaties, international legal instruments and contractual provisions across the real estate, reinsurance, banking, construction, oil and gas, nuclear, power generation and telecoms sectors. Ziad has been involved in matters related to the recognition and enforcement of awards and judgments in Lebanon, the enforcement of asset preservation orders, worldwide freezing injunctions and cross-border asset-tracing issues and related litigation, investigations and fraudulent actions.
Dr. Zeina Obeid FCIArb is a partner at Obeid & Partners and has extensive experience in litigation and international arbitration matters. Zeina has acted as counsel in major international arbitration cases across the Middle East and North Africa region. She also acts as arbitrator and administrative secretary in several domestic and international arbitrations, both ad hoc and under international institutional arbitral rules, including those of the International Chamber of Commerce (ICC), Dubai International Arbitration Centre (DIAC), the London Court of International Arbitration (LCIA), The Cairo Regional Centre for International Commercial Arbitration (CRCICA), and Bahrain Chamber for Dispute Resolution (BCDR). Zeina is a member of the ICC Commission on Arbitration & ADR and co-vice chair of the IBA Young Lawyer’s Committee. She is an accredited Ciarb tutor and committee member of Ciarb’s UAE Branch.
Further Ciarb resources:
Ciarb Lebanon Branch serves as a forum of education and training in private dispute resolution in the jurisdiction.
The State of Play of Arbitration in the MENA Region - November 2023
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