Transparency of the Regulatory System
Private firms should exercise caution when bidding on public projects. Lebanese Government agencies often awards contracts by mutual agreement, without a formal tendering process. Public institutions regularly evade the Procurement Law and full and open competition by splitting contract requirements into smaller solicitations whose values do not exceed government agency procurement limits. A modern Procurement Law awaits Parliamentary approval. The Central Inspection Office oversees government administrative processes and the Court of Audit has oversight over public expenditures.
The procedures for business entry, operation, and exit are not streamlined and are plagued by excessive regulation. However, the process does not discriminate against foreign investors. International companies face an unpredictable and opaque operating environment and often encounter unanticipated obstacles or costs late in the process. Despite this, the World Bank’s 2018 Doing Business report (http://www.doingbusiness.org) notes that it takes entrepreneurs 15 days to start a business in Lebanon, compared to the average of 18.6 days in the MENA region.
Trademark registration, economic and trade indicators, and market surveillance reports, are available online at: http://www.economy.gov.lb. However, some procedures, including those related to protecting intellectual property rights, still require the right-holder to visit the ministry in person to finalize and pay required dues.
The government does not publish proposed draft laws and regulations for public comment, but a parliamentary commission may invite private sector stakeholders to comment on legislation. Telecom Law No. 431 requires the Telecommunication Regulatory Authority (TRA) to issue regulations in draft for public consultation to promote transparency and enable the general public to shape future regulations. The TRA has not introduced new regulations since the term of its executive board expired in February 2012. All legislation, decrees, decisions, and official announcements are published in the Official Gazette. In general, legal, regulatory, and accounting systems are consistent with international norms. Publicly listed companies adhere to international accounting standards.
Lebanon passed the Access to Information Law in January 2017 to promote transparency in the public sector. The law permits anyone, including foreigners, to request information from government agencies. Public institutions are in the process of automating the process and appointing points of contact for these requests. A whistleblower protection law, however, has lagged in Parliament since 2010. Lebanon also joined the Extractive Industries Transparency Initiatives (EITI), a global standard to promote transparency of the extractive sector, but has not yet formed the required multi-stakeholder committee. The EITI standard requires annual data on licenses, contracts, beneficial ownership, payments, revenues and production. In addition, there is draft legislation promoting transparency in the oil and gas sector that awaits Parliament’s approval.
International Regulatory Considerations
Lebanon is not part of any regional economic block. It adopts a variety of standards based on type of product and product destination. Lebanon is not a member of the WTO, but has held observer status since 1999. Lebanon does, however, have a WTO/TBT Enquiry Point that handles enquiries from WTO Member States and other interested parties.
Legal System and Judicial Independence
Lebanon has a civil (Roman and Codified Law) legal system inspired by the French civil procedure code (three degrees of jurisdictions: First Instance, Appeal, and Supreme Court). Ownership of property is enforced by registering the deed in the Property Registry. Lebanon has a written commercial law and contractual law. Lebanon has commercial, civil and penal courts, but no specialized courts to hear intellectual property (IP) claims. Civil and/or penal courts adjudicate IP claims. Lebanon has an administrative court, the State Council, which handles all disputes involving the state. Lebanon has a labor court in seven out of its nine governorates to hear claims of unfair labor practices. The current judicial process is generally competent and reliable on a procedural basis. However, compensation sometimes is perceived as unfair.
Local courts accept investment agreements drafted subject to foreign jurisdictions if they do not contravene Lebanese law. Judgments of foreign courts are enforced subject to the Exequatur obtained. Cases in Lebanese courts are not settled rapidly due to a shortage of judges, inadequate support structures, and administrative delays in the handling of cases. The Lebanese Constitution guarantees the judicial system's independence. However, the politicians and powerful lobbying groups sometimes interfere in the court system.
Laws and Regulations on Foreign Direct Investment
A foreigner may establish a business under the same conditions as a Lebanese national but must register the business 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 businesses 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. The investor must also hire three Lebanese employees and register them in 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 the 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.
Lebanese law allows the establishment of joint-stock corporations, limited liability, and offshore and holding companies. 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.
IDAL’s website (http://investinlebanon.gov.lb/) is a one-stop-shop for investors and provides information on investment legislation, regulations, and starting a business. IDAL’s proposed changes to foreign direct investment laws and regulations, including amending requirements for IT companies to benefit from IDAL incentives, are pending government approval.
Competition and Anti-Trust Laws
Lebanon has not enacted a law that governs competition. Local courts review transactions for competition-related claims.
Expropriation and Compensation
Land expropriation in Lebanon is relatively rare. The Law on Expropriation (Law No. 58, dated May 29, 1991, Article 1) and Article 15 of the Constitution specify that expropriation must be for a public purpose and calls for fair and adequate compensation. Compensation is paid at the time of expropriation, but is often perceived as below fair market value. The government does not discriminate against foreign investors, companies, or their representatives on expropriations.
The government established three real estate companies in the mid-1990’s to encourage reconstruction and development in Greater Beirut following the Lebanese Civil War: 1) private corporation Solidere for Beirut’s downtown commercial center, 2) private corporation Linord, for northern Beirut, 3) and public institution Elyssar for the southwest suburbs of Beirut. However, Linord has been dormant for years, and Elyssar’s projects have stalled since 2007. The government granted these three companies the authority to expropriate certain lands for development under the Law on Expropriation. They have, however, faced serious legal challenges from landowners and squatters.
Lebanon is a member of the International Center for the Settlement of Investment Disputes (ICSID Convention). Lebanon ratified the 1958 Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) in 2007. Lebanese law conforms to both conventions.
The government accepts international arbitration related to investment disputes. In cases involving concessions or public projects, the government does not accept binding international arbitration unless the contract includes an arbitration clause that was obtained through prior approval by Cabinet decree. However, there is an exception for investors from countries that have a signed and ratified investment protection agreement with Lebanon that stipulates international arbitration in case of disputes. In the past, the government has faced challenges related to previously awarded contracts and resorted to international arbitration for resolution. To post's knowledge, there are no known new cases. In 2010, the government settled a dispute with a Chinese contracting company working to expand the northern port of Tripoli.
International arbitration is accepted as a means to settle investment disputes between private parties. The Lebanese Centre for Arbitration was created in 1995 by local economic organizations, including the Lebanese chambers of commerce, industry, and agriculture. The Centre resolves domestic and international conflicts related to trade and investment. Its statutes are similar to those of the International Chamber of Commerce (ICC) in Paris, and its conciliation and arbitration rules are modeled on those of the Paris ICC. Judgments of foreign courts are enforced subject to the exequatur obtained.
Lebanon does not have a Bankruptcy Law. However, the Commercial Code (Book No. 5, Articles 459-668) and the Penal Code govern insolvency and bankruptcy. By law, a secured creditor has the right to a share of the assets of a bankrupt party. Verdicts involving monetary values in contract cases are made according to the currency of the contract or its equivalent in Lebanese Pounds (LBP or Lebanese Lira) at the official conversion rate on the day of the payment. Workers can resort to the Labor Court and the National Social Security Fund to recover pay and benefits from local and foreign firms in bankruptcy. Fraudulent bankruptcy is criminalized.