Attitude toward Foreign Direct Investment
Traditionally, Lebanon has remained open to foreign direct investment (FDI). The Investment Development Authority of Lebanon (IDAL) is the national entity responsible for promoting investment in Lebanon and possesses the authority to award licenses and permits for new investment in specific sectors. IDAL also has the authority to grant special incentives, exemptions, and facilities to large and SME projects regardless of whether implemented by local or foreign investors (Investment Law No. 360). IDAL also facilitates strategic international and local partnerships through joint ventures, equity participation, acquisition, and other mechanisms. It provides legal and administrative advice as well as sectorial studies to support potential investors. Updated information on IDAL and its incentives can be found on its website: http://www.investinlebanon.gov.lb.
The government is committed to improving the business environment and encouraging domestic and foreign investment and public-private partnerships (PPP). Nevertheless legislative efforts have stalled. For example, a draft PPP law and the Ministry of Economy and Trade’s (MoET) amendments to the Lebanese Commercial Code, which would streamline business and intellectual property legislation, await consensus and are still pending in parliament.
Other Investment Policy Reviews
Lebanon is not a member of either the Organization for Economic Co-operation and Development (OECD) or the World Trade Organization (WTO). The United Nations Conference on Trade and Development (UNCTAD) last performed an investment policy review in 2003. IDAL publishes reports on key sectors, which are available online at http://investinlebanon.gov.lb/en/sectors_in_focus
Laws/Regulations on Foreign Direct Investment
A foreigner may establish a business under the same conditions as a Lebanese national, provided that the business is registered in the Commercial Registry. Foreign investors who do not manage their business from Lebanon do not need to apply for a work permit. However, foreign investors who own and manage their business within Lebanon must apply for an employer work permit and a residency permit. Employer work permits stipulate that a foreign investor's capital contribution cannot be less than USD 67,000 and that the investor must also hire three Lebanese and register them at the National Social Security Fund (NSSF) within the first six months of employment.
Companies established in Lebanon must abide by the Lebanese Commercial Code and are required to retain the services of a lawyer to serve as a corporate agent. Local courts are responsible for enforcing contracts. There are no sector-specific laws on acquisitions, mergers, or takeovers, with exception of bank mergers.
Lebanese law does not differentiate between local and foreign investors, except in land acquisition (see “Real Property” section). Foreign investors can generally establish a Lebanese company, participate in a joint venture, or establish a local branch or subsidiary of their company without difficulty. Specific requirements apply for holding and offshore companies, real estate, insurance, media (television and newspapers), and banking.
Under Lebanese law, the establishment of joint-stock corporations, limited liability, and offshore and holding companies are allowed. However, offshore and holding companies must be joint-stock corporations (Société Anonyme Libanaise - SAL). These are governed in separate chapters under the Lebanese Commercial Code.
As a one-stop-shop for investors, IDAL has a website (http://investinlebanon.gov.lb/) that provides updated information on investment legislation, regulations and starting a business. IDAL’s proposed changes to laws and regulations on foreign direct investment, including amending requirements for IT companies to benefit from IDAL incentives, are still pending government approval.
The Ministry of Justice publishes all required procedures, documents and payments needed to conclude the registration of any Lebanese company on its website at http://www.justice.gov.lb/CP/viewpage.aspx?id=589&language=2. According to the Ministry of Economy and Trade (MoET), the registration process takes approximately one day and a notary public is required. There is no other way to register businesses. Foreign companies are required to register electronically – a list of documents and procedures are published on the Ministry of Economy and Trade’s website http://portal.economy.gov.lb/. IDAL also provides a user-friendly portal for doing businesses in Lebanon and outlines all necessary requirements at http://investinlebanon.gov.lb/en/doing_business.
MoET established a small and medium-sized (SMEs) enterprise unit in 2005 to provide services to SMEs located and operating in Lebanon. The unit focuses on policy and governance, improving Lebanon’s business environment, offering linkages within the business community, and advice on financing. MoET defines enterprises with less than 10 employees as micro-enterprises, those with less than 50 employees as small enterprises, and those with less than 100 employees as medium enterprises. In 2014, the unit launched Lebanon’s SME Strategy: A Roadmap to 2020, but the Ministry has yet to implement its proposals.
IDAL currently focuses on promoting investments in the following sectors: agriculture, agro-industry, industry, information technology, media, technology, telecommunications, and tourism. Information on sectors and incentives provided are available on IDAL’s website and through conferences and meetings with stakeholders, including an annual meeting with the Association of Industrialists.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign private entities may establish, acquire, and dispose of interests in business enterprises, and may engage in all kinds of remunerative activities.
Limitations related to foreign participation include a general limitation on management participation (Article 144 stipulates that the majority of the board of directors should be Lebanese); indirect limitation with regard to acquisition of capital shares (Article 147); limitation on capital shares with regard to public utilities (Article 78); and limitation on capital shares and management with regard to exclusive commercial representation (Legislative Decree No. 34/67, dated August 5, 1967). In the financial sector, most establishments, including those in banking and insurance, must take the form of a joint-stock company.
A limited liability company (Société à Responsabilité Limitée - SARL) is governed by Legislative Decree No. 35, dated August 5, 1967. It may be 100 percent owned and managed by a non-Lebanese.
Holding and offshore companies follow the legal form of a joint-stock corporation and are governed by Legislative Decree No. 45 (on holdings) and Legislative Decree No. 46 (on offshore companies), both dated June 24, 1983, and amended by Law No. 19, dated September 5, 2008. A foreign non-resident chairman/general manager of a holding or an offshore company is exempt from the obligation of holding work and residency permits. Law No. 772, dated November 2006, exempts holding companies from the obligation of having two Lebanese persons or legal entities on their board of directors. All offshore companies must register with the Beirut Commercial Registry. Offshore banking, trust, and insurance companies are not permitted in Lebanon.
Law No. 296, dated April 3, 2001, amended the 1969 Law No. 11614 and governs foreign acquisition of property. The 2001 law eased legal limits on foreign ownership of property to encourage investment in Lebanon, especially in industry and tourism, abolished discrimination for property ownership between Arab and non-Arab nationals, and lowered real estate registration fees from six percent for Lebanese and 16 percent for foreigners to five percent for both Lebanese and foreign investors. The law permits foreigners to acquire up to 3,000 square meters (around 32,000 square feet) of real estate without a permit but requires cabinet approval for acquisitions exceeding this threshold. Cumulative real estate acquisition by foreigners may not exceed three percent of total land in each district. Cumulative real estate acquisition by foreigners in the Beirut region may not exceed ten percent of the total land area. The law prohibits individuals not holding an internationally recognized nationality from acquiring property. This restriction is widely believed to be primarily aimed at preventing Palestinian refugees residing in Lebanon from permanently settling in the country.
Lebanon’s laws for the privatization of the telecommunications sector (Law 431) and the power industry (Law 462) were drafted in 2002. However, political dysfunction stalled their implementation.
Parliament passed a two-year law authorizing the cabinet to issue Independent Power Producers (IPP) licenses to investors in April 2014. It later amended the law to extend its application through April 2018. Little has been done to date, but the Ministry of Energy and Water, the Ministry of Finance, and the Higher Council for Privatization (HCP) are collaborating with the IFC and the World Bank to explore next steps.
According to the HCP, there is currently considerable support by the political, business, banking and academic communities for the passage of Public-Private Partnership (PPP) legislation. The Sub-Committee of the Budget and Finance Parliamentary Committee has resumed discussions of a revised PPP Law. In anticipation of the passage of the PPP bill, the HCP issued and published guidelines for PPP in February 2014 on its website: http://www.hcp.gov.lb. Ratification of PPP legislation would open new opportunities for local and international private sector investment in Lebanon.
The Capital Markets Law calls for the corporatization and subsequent privatization of the Beirut Stock Exchange (BSE) within a two-year period from the date that the Capital Markets Authority (CMA) is appointed. The cabinet appointed the CMA in June 2012 but has yet to undertake serious action to corporatize the BSE.
Screening of FDI
There are no mechanisms in place to screen FDI in Lebanon.
Lebanon has not enacted a law that governs competition. Local courts review transactions for competition-related claims.