2017 Investment Climate Statements: Lebanon

Policies Towards Foreign Direct Investment

Lebanon is 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 grants special incentives, exemptions, and facilities to large as well as small and medium-sized enterprise (SME) projects implemented by both local and 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 for potential investors. Information on IDAL and its incentives can be found on their website at 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.

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.

A joint-stock corporation (Societe Anonyme Libanaise – SAL) is governed by Legislative Decree No. 304, dated January 24, 1942, under the Commercial Code. 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 November 2016, the Parliament passed Law 75 forbidding joint stock corporations from issuing bearer shares and compelling them to replace their existing bearer shares with nominal shares. 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.

There are no mechanisms in place to screen FDI in Lebanon.

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. UNCTAD and IDAL plan to conduct an investor perception survey and Investment Policy Review in mid-2017, and are expected to publish its results by the end of the year. IDAL publishes reports on key sector online at http://investinlebanon.gov.lb/en/sectors_in_focus 

Business Facilitation

Lebanon’s Ministry of Justice publishes all required procedures, documents and payments needed to conclude the registration of any company on their online website at https://www.justice.gov.lb/ . According to the MoET, the registration process takes approximately one day and requires a notary public. 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 at https://portal.economy.gov.lb/ . IDAL also provides a user-friendly portal for doing businesses in Lebanon and outlines all requirements at http://investinlebanon.gov.lb/en/doing_business .

MoET established a SME unit in 2005 to provide services to related enterprises 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.

Outward Investment

Lebanon neither promotes nor incentivizes outward investment, nor does it restrict domestic investors from investing abroad.

Lebanon does not have a bilateral investment treaty with the United States. However, the United States and the MoET signed a Trade and Investment Framework Agreement (TIFA) in 2006, which pledged both countries to foster an environment conducive to mutual trade and investment. The TIFA requires both parties to set up a United States-Lebanon Council on Trade and Investment that would meet twice a year or more to consult on trade and investment impediments and other issues of concern. The council, which has not yet been set up, will seek and consider the views of private sector representatives in both countries. Under the TIFA, the United States and Lebanon agreed to a consultation mechanism that may be activated by either party within 60 days in the event of a dispute or other development affecting trade relations.

Lebanon signed the Euro-Mediterranean Partnership (ENP) agreement in 2002, the interim agreement for which came into force in March 2003. The final agreement came into force in April 2006 and Lebanon began reducing tariffs on imported products from the European Union (EU) in 2008. The EU and Lebanon finalized a review of the ENP in November 2015. Lebanon signed the Convention on Pan-Euro-Mediterranean Preferential Rules of Origin in October 2014, which parliament ratified in February 2017.

Lebanon and the European Free Trade Association (EFTA) signed a Free Trade Agreement (FTA) in 2004. In November 2010, Lebanon and Turkey signed an association agreement to establish a free trade area and reduce barriers to the free movement of goods, services, capital, and people between the two countries over the subsequent ten years. The agreement is not yet ratified. Lebanon also signed the Greater Arab Free Trade Agreement, which gradually replaced the bilateral FTAs signed with Arab countries including Tunisia, Morocco, Egypt, Iraq, Jordan, Syria, Sudan and the Gulf Cooperation Council states. A regional Economic and Trade Association Council between Lebanon, Syria, Jordan, and Turkey was announced in July 2010. Lebanon launched free trade agreement negotiations with MERCOSUR countries in 2016.

Lebanon has signed bilateral investment agreements with the following (in alphabetical order, as of January 2012): Armenia, Austria, Azerbaijan, Bahrain, Belarus, Belgium/Luxemburg, Benin, Bulgaria, Canada, Chad, Chile, China, Cuba, Cyprus, Czech Republic, Egypt, Finland, France, Gabon, Germany, Greece, Guinea, Hungary, Iceland, Iran, Italy, Jordan, Korea (South), Kuwait, Malaysia, Mauritania, Morocco, Netherlands, OPEC Fund, Pakistan, Qatar, Romania, Russia, Slovak Republic, Spain, Sudan, Sultanate of Oman, Sweden, Switzerland, Syria, Tunisia, Turkey, United Arab Emirates, Ukraine, United Kingdom, and Yemen. For more information, please visit the Ministry of Finance’s website on: http://www.finance.gov.lb/en-us 

Lebanon does not have a bilateral taxation treaty with the United States. A full list of all the countries with which Lebanon has signed taxation agreements can be found on the Ministry of Finance’s website at http://www.finance.gov.lb/en-us . The government is in the process of levying new taxes. The cabined also passed a new Petroleum Taxation Law, which now sits with parliament for approval.

Transparency of the Regulatory System

Local and foreign private companies should be wary when bidding for public projects, given the lack of transparency, clear regulations, and fair consideration of bids. Lebanon has a Procurement Law that regulates public procurement; however, public institutions have separate procurement regulations under the Law’s guidelines. The GoL often awards contracts by mutual agreement, without a tender, and does not always establish clear procedures for the process.

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 2017 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 20.2 days in the MENA region.

IPR trademark registration, economic and trade indicators, and market surveillance reports, are available online at: http://www.economy.gov.lb . However, some procedures, including IPR-related, still require a rightholder 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. There have been no new regulations since the TRA 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 private and public sectors, but failed to enact the whistleblower protection law, which has been pending since 2010. Lebanon also joined the Extractive Industries Transparency Initiatives (EITI), a global standard to promote transparency of the extractive sector. The standard requires annual data on licenses, contracts, beneficial ownership, payments, revenues and production. Several ministries have undertaken transparency initiatives since 2015, according to Transparency International’s Lebanon chapter and the Lebanese Transparency Association (LTA). The Ministry of Finance (MoF) continued to organize workshops, raise awareness, and build capacity of civil servants on access to information and whistleblower protection.

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 each of its eight 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. By constitution, the judicial system is independent of the executive branch; however, the latter still has power or influence over judicial matters. 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 it 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 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: private corporation Solidere, for Beirut’s downtown commercial center; private corporation Linord, for northern Beirut; 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 as per the Law on Expropriation. They have, however, faced serious legal challenges from landowners and squatters. Several court cases are still pending against Solidere after over 20 years of litigation.

Dispute Settlement

ICSID Convention and New York Convention

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.

Investor-State Dispute Settlement

The government accepts international arbitration related to investment disputes. In cases involving concessions or State 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 a dispute. 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 Commercial Arbitration and Foreign Courts

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.

Bankruptcy Regulations

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.

Investment Incentives

Lebanon’s Investment Law encourages investment in information technology, telecommunications, media, tourism, industry, agriculture, and agro-industry. The law divides the country into three investment zones, with different incentives in each zone. These include facilitating permits for foreign labor and tax benefits, which range from a five-year 50 percent reduction on income and dividend distribution taxes to a total exemption of these taxes for 10 years starting from the date of operation (tied to the issuance of the first invoice). Companies that list 40 percent of their shares on the Beirut Stock Exchange (BSE) are exempt from income tax for two years. The Law also introduces tailored incentives through package deals for large investment projects, regardless of the project’s location. These may include tax exemptions for up to 10 years, reductions on construction and work permit fees, and a total exemption on land registration fees. IDAL may exempt joint-stock companies that benefit from package deal incentives from the obligation to have a majority of a board of directors be Lebanese (Law No. 771, dated November 2006). Investors who seek to benefit from work permit incentives under “package deals” must hire two Lebanese for every foreigner and register them with the NSSF. Several amendments to the Investment Law are currently awaiting parliamentary approval and would expand incentives and increase the pool of ICT start-up companies. IDAL’s amendments to decrees related to investment incentives are pending cabinet approval and, if approved, will increase the number of benefitting companies.

Other laws and legislative decrees provide tax incentives and exemptions depending on the type of investment and its geographical location. Industrial investments in rural areas benefit from tax exemptions of six or 10 years, depending on specific criteria (Law No. 27, dated July 19, 1980, Law No. 282, dated December 30, 1993, and Decree No. 127, dated September 16, 1983). Exemptions are also available for investments in South Lebanon, Nabatiyeh, and the Bekaa Valley (Decree No. 3361, dated July, 2, 2000). For example, new industrial establishments manufacturing new products benefit from a 10-year income tax exemption. Factories currently based on the coast that relocate to rural areas or areas in South Lebanon, Nabatiyeh, or the Bekaa Valley benefit from a six-year income tax exemption. Parliament enacted a law in April 2014 to reduce income tax on industrial exports by 50 percent. More information can be found on IDAL’s website at http://investinlebanon.gov.lb/en/doing_business/investment_incentives 

The government reduces the dividend tax to five percent for companies that are listed on the BSE and that open up 20 percent of their capital to Arab companies listed on their country’s stock exchange. It also does so for foreign companies listed on the stock exchange of OECD countries and for companies that issue Global Depository Receipts (GDRs) amounting to a minimum value of 20 percent of their shares listed on the BSE.

Domestic and foreign investors may benefit from a 4.5 percent subsidy on interest for new loans granted after 1/1/2012 for amounts up to USD 10 million per project (with a ceiling of USD 40 million) provided by banks, financial institutions, and leasing companies to industrial, agricultural, tourism, and information technology establishments. The subsidy extends for a maximum of seven years, with a grace period of two years. This program has been extended until the end of 2017. Investors can also benefit from loan guarantees from Kafalat, a semi-private financial institution that helps SMEs to access subsidized commercial bank loans for projects in Lebanon, with a grace period of two years.

Domestic and foreign investors may also benefit from Central Bank (the Banque du Liban – BDL) initiatives to stimulate economic activity. Since 2013, the BdL has undertaken several stimulus packages worth approximately USD six billion to help commercial banks increase lending to the private sector at lower costs. Subsidized loans cover housing, investment in productive sectors, energy efficiency and renewable energy, and financing projects. In February 2017, the BdL authorized banks to increase their direct investment in technology start-ups up to four percent of equity, by providing banks with interest-free facilities over a maximum period of seven years. The Central Bank continues, in cooperation with the EU, to subsidize loans of USD five million or less to finance environmentally-friendly energy projects.

The government grants customs exemptions to industrial warehouses for export purposes. Companies located in the Beirut Port or the Tripoli Port Free Zone benefit from customs exemptions and are exempt from the value-added tax (VAT) for export purposes. They are also not required to register their employees with the NSSF if they provide equal or better benefits.

IDAL provides investment incentives in a number of industrial sectors, including IT. IDAL is developing a draft program to facilitate IT programs abroad, an initiative yet to be approved by the cabinet. IDAL also supports the Agro Food sector and likewise has drafted an export program for Agro Food goods, which also requires cabinet approval.

Foreign Trade Zones/Free Ports/Trade Facilitation

Foreign-owned firms have the same investment opportunities as Lebanese firms. Lebanon has two duty-free zones, the Beirut Port and the Tripoli Port. The WTO-compatible Customs Law issued by Decree No. 4461 fosters the development of free zones. The GoL also passed Law No. 18, dated September 5, 2008, to set up a Special Economic Zone (SEZ) in Tripoli to attract investment in trade, industry, services, storage, and other services and granted investors tax exemptions and other privileges. USAID provided technical assistance to the GoL to prepare a feasibility study for Tripoli SEZ (TSEZ) in 2011. On April 9, 2015, the cabinet appointed the TSEZ Authority, and efforts are actively underway to build and develop the zone. The Authority is working with the International Finance Corporation (IFC) to develop the regulatory framework. It has launched a bid for the preparation of a Master Plan, expected to be completed by the end of the year, and is mobilizing funding to build the infrastructure. The Authority expects the TSEZ to become operational within two years.

Performance and Data Localization Requirements

The government mandates local employment and the Ministry of Labor issues an annual list of jobs restricted to Lebanese. Foreign and local participation in the board of directors is specified in the status of the companies, according to Lebanese commercial law. Foreign investors enjoy the same incentives as local investors.

Foreigners doing business in Lebanon through a company, factory, or office must hold work and residency permits. There are no discriminatory or excessively onerous visas, residence, or works permit requirements. Registration with a chamber of commerce is required to import and handle a limited number of products that are subject to control requirements for safety reasons, but products with special import requirements constitute less than one percent of total tradable goods. Registration with a chamber of commerce is required to ensure that established facilities meet safety, handling, and storage requirements.

Lebanon does not follow any “forced localization” policy, nor require foreign IT providers to turn over source code or provide access to surveillance. Lebanon’s Central Bank requires all banks to keep data backups in Lebanon, while service providers are required to do the same.

Real Property

The right to private ownership is respected in Lebanon. The concept of a mortgage exists and secured interests in property, both movable and real, are recognized and enforced. Such security interests must be recorded in the Commercial Registry and the Real Estate Registry. The Real Estate Law governs acquisition and disposition of all property rights by Lebanese nationals, while Law No. 296, dated April 3, 2001, governs real estate acquisition by non-Lebanese. Over ten percent of land, mostly in rural and remote areas, does not have clear title. The government is undertaking efforts to identify property owners and register land titles.

Intellectual Property Rights

Lebanon is still not a member of the WTO though its intellectual property rights (IPR) legislation is generally compliant with Trade-Related Intellectual Property Rights (TRIPS). However, IPR enforcement is weak. The MoET’s Intellectual Property Protection Office (IPPO) has led efforts to improve the IPR regime but suffers from limited financial and human resources, and insufficient political will within the GoL. Lebanon’s Internal Security Forces (ISF) and Customs also play a role in enforcement. The understanding of IPR within the Lebanese judiciary has improved somewhat in recent years but gaps remain in awareness of the economic repercussions of IPR violations, judicial prosecution of IPR cases, and strong court decisions with punishments prohibitive enough to deter future infringements. The MoET’s new draft laws and amendments to existing laws to improve the IPR environment are pending parliamentary approval.

Existing IPR laws cover copyright, patent, trademarks, and geographical elements. Lebanon’s 1999 Copyright Law largely complies with WTO regulations and needs only minor amendments to become fully compatible. However, amendments to the current law have been stalled in parliament since 2007. Registration of copyrights in Lebanon is not mandatory, and copyright protection is granted without the need for registration. Lebanon’s parliament ratified the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty (WPPT) in February 2010. Ratification documents have not yet been deposited with WIPO, however, since this would also require amendments to the copyright law.

Drafts of new industrial design, trademark, and geographical indications laws have also been pending in parliament since 2007. The MoET is willing to push for all pending legislation to pass in parliament. The MoET launched an online registration service in January 2013 for copyrights and trademarks on https://portal.economy.gov.lb/ . This service simplified the registration process and over 80% of registrations of trademarks and copyrights now take place online. Due to the complexity of copyrights and patents, registration is still accepted in person at the Ministry and payment must also take place in person. The switch from a deposit system to an objection system for trademarks also remains stalled due to the need for parliamentary approval. However, the MoET noted that it implements the objection system in practice.

A modern TRIPS-compatible Patent Law, approved in 2000, provides general protection for semiconductor chip layout designs and plant varieties. Data protection and undisclosed information fall under Article 47 of the Patent Law, but current provisions for pharmaceutical registration are subject to interpretation. Generic manufacturers in Lebanon are not prohibited from using original data (e.g., data published on the U.S. Food and Drug Administration website) to register competing products that are identical to original products. Decree No. 571 on the conditions of registering, importing, marketing, and classifying pharmaceuticals, which should have improved the process of drug registration and reduced the number of copycat drugs being registered, still leaves some room for interpretation. There are no current plans to amend the Patent Law to reduce counterfeit drugs, even though such counterfeits are said to have decreased in the local market. The Lebanese legal regime does not require examination, prior to registration, of patents for novelty, utility, and innovation. Simple patent deposit is required at the MoET, where the application is examined only for conformity with general laws and ethics.

The ISF’s Special Criminal Investigation Division leads enforcement of IPR, while the Cybercrime and IP Unit also follow up on IP-related cases. Lebanese Customs also plays a direct role in IPR enforcement by seizing counterfeits and an indirect role as part of its efforts to combat smuggling. The U.S. Trade Representative’s Special 301 annual review of intellectual property protection worldwide has kept Lebanon on its watch list since 2008. Given insecurity, political instability, and spillover from the Syrian conflict, the GoL underscored its significant difficulties in enforcing IPR, but noted that, under such circumstances, the situation was relatively stable.

The IPPO acts upon the requests of rights holders or in an ex officio capacity. The ISF cannot act in an ex officio capacity and still requires a criminal complaint to be filed with the prosecutor’s office in order for it to take action. The sale and distribution of pirated, counterfeit, and copycat products continued across Lebanon, in commercial establishments and through street vendors. This included leather goods, apparel and luxury items, fast-moving consumer goods (FMCGs), software, optical media, and pharmaceuticals. Some companies and individuals whose goods were counterfeited in the local market were reluctant to pursue legal action due to weak enforcement. However, other right holders have highlighted the effectiveness of local enforcement when they do submit a complaint.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

There are no restrictions on portfolio investment and foreign investors can invest in Lebanese equities and fixed income paper. Lebanon does not restrict the movement of capital into or out of the country for investment or other purposes. The government permits the free exchange of currencies, precious metals, and monetary instruments, both domestically and internationally. There are no restrictions on payments and transfers for current international transactions.

Credit is allocated on market terms and foreign investors can obtain credit facilities on the local market. The private sector can access overdrafts and discounted treasury bills in addition to a variety of credit instruments, such as housing, consumer, or personal loans, as well as corporate and loans to SMEs.

Government legislation allows the listing of tradable stocks or papers on the Beirut Stock Exchange (BSE). By regulation, an investor should inform the BSE when her/his portfolio of shares in any listed company reaches ten percent. Currently, the BSE lists six commercial banks, 18 sovereign Eurobond issues (16 in U.S. dollars, one in euros, and one in Lebanese Pounds), and four companies, including Solidere, one of the largest publicly held companies in the region. However, the BSE suffers from a lack of liquidity and low trading volumes in the absence of significant institutional and foreign investors, and had an annual trading volume of only 8 percent of market capitalization in 2016. Weak market turnover discourages investors from committing funds to the market and discourages issuers from seeking listings on the BSE. Traditional businesses held by commercially powerful families dominate most sectors. The government is trying to improve the transparency of such firms to help solidify an emerging capital market for company shares. To stimulate market activity, the Capital Markets Authority (CMA) in Lebanon, analogous to the U.S. Securities and Exchange Commission, issued several regulations to regulate disclosure policy of joint stocks and mutual funds as well as to encourage investment in start-up companies. More information can be found on: www.cma.gov.lb/. Lebanon hosts the headquarters of the Arab Stock Exchange Union.

Money and Banking System

The Lebanese banking sector covers the entire country with 1,056 operating branches as of December 2016. There are 4,353 residents per branch in Lebanon, which compares favorably to regional and emerging markets. According to World Bank Development indicators, there are 652 depositors with commercial banks per 1,000 adults, 243 borrowers from commercial banks per 1,000 adults, and 38 ATMs per 100,000 adults.

The banking system enjoys high financial standing and boasts a capital adequacy ratio of 14.6 percent as of June 2016 (higher than Basel III requirements), sound liquidity, and a foreign currency prime liquidity ratio exceeding 57 percent of foreign currency deposits. The total domestic assets of Lebanon’s five largest commercial banks reached approximately USD 112 billion as of the end of 2016 (or about 52.1 percent of total banking assets), according to BdL data. About 3.7 percent of total loans were estimated as non-performing by December 2016. Banks maintained approximately 66.2 percent of provisions against non-performing loans as of December 2016. The remaining 33.8 percent were covered by adequate collateral.

Lebanon’s Central Bank imposes strict compliance with regulations on banks and financial institutions. Foreign banks and branches need Central Bank’s approval to establish operations in Lebanon. Moreover, any shareholder with more than five percent of a bank’s share capital must obtain prior approval from the Central Bank to acquire additional shares in that bank, and must inform the Central Bank when selling shares. There are no restrictions in Lebanon on a foreigner or non-resident’s ability to open a bank account in local currency or foreign currencies. However, banks have stringent inquiry mechanisms to ensure compliance with international and domestic regulations. They implement Lebanon’s anti-money laundering and combating terrorism financing laws. Banks also uphold Know-Your–Customer requirements and other regulations to combat tax evasion, inquire about the purpose of opening a new account, about the source of funds to be placed into an account, and to discover other relevant information. Lebanese banks are compliant with the Foreign Account Tax Compliance Act (FATCA).

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions on the movement of capital, capital gains, remittances, dividends, or the inflow and outflow of funds. The conversion of foreign currencies or precious metals is unfettered. Foreign currencies are widely available and can be purchased from commercial banks or money dealers at market rates. Lebanon’s Central Bank, the Banque du Liban (BdL), posts a daily local currency-exchange rate on its website: http://www.bdl.gov.lb/ . On average, the local currency has been pegged to the USD at LBP 1,507.5 per USD 1 since 1988. However, the dollar continues to trade on the local economy at LBP 1,500. BdL is committed to maintaining a stable currency. Lebanon has one of the most heavily dollarized economies in the world and businesses commonly accept payment (and return change) in a combination of LBP and USD.

Remittance Policies

There are no delays in remitting investment returns except for the normal time required by the banks to carry out transactions.

Sovereign Wealth Funds

Lebanon does not have any sovereign wealth funds. Lebanon’s Hydrocarbon Law states that proceeds generated from oil and gas exploration would be deposited in a Sovereign Wealth Fund. Creating the fund requires a separate law, which the government has yet to draft. Lebanon currently receives no proceeds from natural resources that could flow into a sovereign wealth fund.

The GoL maintains monopolies in the utility sector (Ogero for telecom landlines and two mobile companies, Electricité du Liban (EdL) for electricity production and transmission, and four water authorities), a casino (Casino du Liban, a mixed public-private enterprise), tobacco procurement, manufacturing, and sales (La Régie des Tabacs et Tombacs), as well as the national airline (Middle East Airlines), whose monopoly is scheduled to end in 2024. Other major state-owned enterprises or public institutions include the Beirut, Tripoli, Sidon, and Tyre ports, the Rashid Karami International Fair (in northern Lebanon), the Sport City Center, and real estate development institution Elyssar. The GoL also owns shares in Intra Investment Co., a mixed public-private investment company, which owns 96.62 percent of Finance Bank – a Lebanese commercial bank.

There is no uniform definition of State-Owned Enterprises (SOEs) and each has separate internal by-laws. Decree 4517 (dated 1972) establishes two types of public institutions, one administrative category that involves public enterprises like the Lebanese University, and a second that holds commercial aspects like EdL and La Régie. The Ministry of Finance maintains an unpublished list of SOEs and public institutions. SOEs and public institutions may purchase or supply goods or services from the private sector or foreign firms. Procurement is governed by separate regulations but under the same terms and conditions as public procurement. SOEs and public institutions benefit from certain tax exemptions.

Law restricts electricity production to EdL but numerous private investors operate unregulated generators across the country and sell electricity to citizens at significantly higher rates during the country’s frequent power cuts. EdL awarded several concessions to privately-owned companies for power distribution in specific regions, and these companies are interested in meeting customer demand. In April 2014, parliament granted the cabinet the authority through 2018 to license private companies to generate electricity. Since 2012, EDL contracted three private companies to manage bill collection, maintenance, and power distribution. Two private operators also hold government contracts to manage the country’s two cellular companies.

Lebanon’s SOEs report to shareholders whereas public institutions are subject to oversight by the concerned ministries as well as by the Ministry of Finance. Public institutions require the approval of concerned ministries for major business decisions. SOEs may independently prepare their budgets, which must be approved only by their board of directors. The SOEs and public institutions are required by law to publish an annual report, and to submit their books for independent audits as well as to send their books to the Court of Audit.

The GoL currently has no plans to privatize SOEs or public institutions. Middle East Airlines, which is 99.5 percent owned by the Central Bank, has postponed plans to list 25 percent of its shares on the BSE as a first step toward privatization. It is reportedly awaiting improvement in investor confidence to ensure that its shares will not be undervalued when traded on the BSE.

SOEs and public institutions have independent boards staffed primarily by politically-affiliated individuals, appointed by the cabinet for public institutions, and by shareholders for SOEs. These boards always include a cabinet-appointed Government Commissioner who reports to the concerned ministries. SOEs do not currently adhere to the Organization for Economic and Cooperative Development (OECD) Corporate Governance Guidelines.

Privatization Program

Lebanon’s laws for the privatization of the telecommunications sector (Law 431) and the electricity sector (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; however, the government has lagged in implementation. The Ministry of Energy and Water launched tenders in March 2017 for solar power plants under the IPP law.

According to the Higher Council for Privatization (HCP), Lebanon’s political, business, banking and academic communities strongly support the passage of Public-Private Partnership (PPP) legislation, which remains pending in parliament. In anticipation of its eventual passage, the HCP issued and published related guidelines in February 2014 on its website at 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.

Lebanese firms are increasingly aware of corporate social responsibility (CSR) and responsible business conduct (RBC), including on environmental, social, and governance issues. This is true for the banking sector as well as companies in telecom, real estate, and industry, which are slowly creating sustainable supply chains or pursuing social initiatives to appeal to consumers. The government also encourages corporate to solve national economic, social, and environmental problems. However, laws related to human and labor rights, consumer protection, and environment protections are unevenly enforced. The Lebanese Standards Institution (LIBNOR), part of the Ministry of Industry, works with the Swedish International Development Cooperation Agency (SIDA) to lead efforts an expansion of the use of the ISO 26000 standard on Social Responsibility (SR) in Lebanon, one of the eight pilot countries in the Middle East.

The Central Bank of Lebanon works closely with banks to direct their financial resources towards projects that improve society and the environment. This includes issuing circulars to create favorable environmental and educational loans, encourage entrepreneurship through private equity investments, and facilitating improved governance through customer protection. In 2015, the banking sector started to implement Central Bank Circular No. 134, requiring banks to apply measures to ensure transparent and fair dealings with their customers, a reflection of the CSR principles of corporate governance and consumer protection. It also established the Institute for Finance and Governance (IFG). The IFG cooperates with the Central Bank to organize conferences on topics such as good governance in the banking sector, economic and monetary policy, and banking regulations.

Several business ethics and corporate governance codes exist, including the business association ‘Rassemblement de Dirigeants et Chefs d’Entreprises Libanais’ (RDCL, or the Group of Lebanese Business Owners) “Code of Business Ethics,” and the Lebanese Code of Corporate Governance (CG), written under the auspices of the Lebanese Transparency Association (LTA). However, these codes are strictly voluntary and the government provides no incentives or enforcement for their adoption. In October 2016, the Lebanese League for Women in Business (LLWB) launched the “Women on Board” initiative, aiming to have 30% women on the board of banks and private sector by 2025. The RDCL, Chamber of Commerce, Industry and Agriculture of Beirut (Lebanon), and 21 other private companies signed this pledge.

LTA reports that more companies are approaching it for corporate governance assessments and its corporate governance guidelines and toolkits for family-owned enterprises and listed companies. CSR Lebanon, a Beirut-based company established in 2010, raises awareness and provides tools to promote CSR in Lebanon and the Middle East.

Lebanon seeks implementation of a number of international codes and standards to increase transparency and governance in government and the private sector. The Association of Banks in Lebanon adopted the Corporate Governance Guidelines for Banks Operating in Lebanon in January 2011. CSR Lebanon advocates for the principles of the United Nations Global Compact and was the first to introduce them to the private sector.

In 2013, Beirut-based business development advisory Capital Concept launched its Governance and Integrity Rating and becoming the first such firm recognized by Lebanon’s Central Bank to review and rate the banking sector in Lebanon and the MENA region. In 2015, it also launched Shareholder-Rights, a registered online platform and publication initiative to rate and review companies’ commitment to corporate governance and investor rights.

Lebanon has but does not effectively enforce laws and regulations to combat corruption such as the Illicit Wealth Law and the Penal Code. The Illicit Wealth Law applies to all state employees, government and senior officials, and municipality members and extends to family members. However, it does not extend to political parties. The laws have articles to counter conflict-of interest in awarding contracts and government procurement, but they are not enforced. The government does not require or encourage private companies to establish internal codes of conduct that prohibit bribery of public officials. Several companies have adopted a Code of Ethics. In December 2016, the Lebanese government established for the first time a State Ministry to Fight Corruption.

Transparency International’s (TI) Corruption Perception Index (CPI) ranked Lebanon 136 out of 176 countries worldwide in 2016, making Lebanon among the 50 most corrupt countries in the world. Corruption is reportedly more pervasive in government contracts (primarily in procurement and public works), taxation, and real estate registration, than in private sector deals. The law provides criminal penalties for official corruption but is not implemented effectively. Government security officials, agencies, and police were subject to laws against corruption, bribery and extortion. U.S. firms have identified corruption as an obstacle to FDI, including in government procurement, award of contracts, dispute settlement, customs and taxation.

Several ministries, including the Ministries of Public Health (MoPH), Economy and Trade, and of Finance as well as Customs, continued an anti-corruption campaign that began in 2014. Although generally satisfied, many people have adopted a wait-and-see attitude to see the extent of the campaign, including suspending operations and bringing those responsible to justice. The MoPH also released a mobile application and a hotline (1214) allowing citizens to report fraudulent actions to the ministry. In 2017, the MoPH also launched a new One-Stop Shop service aiming at improving service delivery, and limiting corruption by promoting e-government. The new service is expected to facilitate the process of submitting and tracking applications electronically. The MoET launched the “Consumer Protection Lebanon” mobile application in 2014, adding to the already established consumer protection hotline (1739). The application enhances communication between the ministry and local consumers. It allows users to send and follow complaints and provide them with prompt notifications about ministry decisions and other MoET news. The MoF continued fighting corruption in the customs and real estate departments. It investigated several civil servants for illegal appropriation of public property and embezzlement in the real estate sector as well as intensified port and airport inspections. The ministry also launched a hotline for citizens’ complaints on misconduct by ministry employees.

The Lebanese Transparency Association (LTA) established the Lebanon Anti-Bribery Network (LABN) in 2008 in partnership with the Center for International Private Enterprise (CIPE). It re-launched LABN in 2013, for the specific purpose of combating bribery in the country. The LTA also established the Lebanese Advocacy and Legal Advice Center (LALAC) to inform citizens of their rights and to encourage victims and witnesses to take action against cases of corruption. LALAC operates a hotline for victims and witnesses to report cases of corruption and receive free legal advice and assistance with their case. The program is currently funded by the European Union, the Lebanese Renaissance Foundation, and the CIPE.

Local NGO Sakker el Dekkene was established in 2013 to raise awareness against corruption though its innovative and interactive advertisement campaigns. It also encourages citizens to report and talk about their own experiences with corruption. Additional information can be found at https://www.sakkera.com . In 2015 and 2016, the MoET signed a Memorandum of Understanding with Sakker el Dekene and LTA to promote transparency and reduce the impact of corruption when it occurs.

Since 2015, Grassroots movements and campaigns, including “You Stink” and “We Want Accountability,” have regularly taken to the streets to protest corruption through collective action. In 2017, civil society rallied against the levy of new planned taxes.

Lebanon ratified the UN Anticorruption Convention in April 2009. Lebanon is not a signatory to the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

State Minister for the Fight against Corruption; Grand Serail – Beirut Downtown

Lebanese Transparency Association
Sami El Solh Avenue, Kalot Bldg. 3rd Floor
Badaro, Beirut
P.O. Box 50-552, Lebanon
Tel/Fax: +961-1-388113/4/5
Email: info@transparency-lebanon.org

Political violence declined in 2016 with only one major incident involving eight suicide bombers that attacked the predominantly Christian village of Qaa near the Syrian border, killing five and wounding at least 28 others. In the last quarter of 2016, Lebanon’s constitutional institutions began functioning normally, following the election President Michel Aoun on October 31 and the formation of a new cabinet. Saad Hariri was designated as Prime Minister and formed his cabinet on December 18. Nine of the Lebanese Armed Forces (LAF) hostages that were kidnapped by ISIL in 2014 remained in captivity and their whereabouts is still unknown. During 2016, the LAF and Internal Security Forces (ISF) remained vigilant and continued their crackdown on terrorism and extremists groups affiliated with ISIL.

Hizballah continued to accelerate its engagement in Syria fighting on behalf of the Syrian regime, while some Lebanese Sunni individuals reportedly have supported the Syrian opposition. Hizballah and the Sunni-dominated Future Movement continued the “political dialogue” that they started in 2014 in an attempt to try to alleviate tensions between the Sunni and Shia communities. By the end of 2016, there were 1,011,366 Syrian refugees in Lebanon officially registered with the UN High Commissioner for Refugees. These refugees, and a large number of additional unregistered refugees, are severely straining local resources and services. Lebanon is believed to host more refugees per capita than any other country in the world.

The U.S. government considers the potential threat to American Embassy personnel assigned to Beirut sufficiently serious to require all Chief of Mission personnel to live and work under security restrictions. These limitations occasionally prevent the movement of American Embassy officials and the provision of consular services in certain areas of the country. U.S. citizen visitors are encouraged to contact the Embassy’s Consular Section for the most recent safety and security information concerning travel to Lebanon.

The 1946 Labor Law provides for written and oral contracts and specifies a maximum workweek of 48 hours (with several exceptions, notably agricultural and domestic workers, whom are not covered under the Labor Law). The legal minimum wage was raised in 2012 to 675,000 LBP (USD 450) per month. Lebanon is a member of the International Labor Organization (ILO) and signatory to all of its fundamental conventions except on the Freedom of Association and Protection of the Right to Organize. The government mandates local employment and the Ministry of Labor issues an annual list of jobs restricted to Lebanese. Local unskilled labor is in short supply. Arab (mainly Syrians, Egyptians, and Palestinian), Asian, Indian, and African laborers are hired to work in construction, agriculture, industry, and households.

The law provides for the right of private sector workers to form and join trade unions, strike, and bargain collectively, although the law places a number of restrictions on these rights. It provides protection against anti-union discrimination but enforcement is weak and anecdotal evidence suggests anti-union discrimination was widespread. Lebanon has a government-recognized General Labor Confederation (CGTL), whose membership is limited exclusively to Lebanese workers. The CGTL’s activities are mainly limited to demanding cost-of-living increases and other social benefits for workers. The general labor-management relationship remains difficult and the Labor Law is not always properly enforced. Given its own strong political bias, the CGTL is sometimes accused of working for its own political interests and of ineffectiveness in fighting for workers’ rights. In recent years, other labor groups, including the Union Coordination Committees, have overshadowed it. Strikes and demonstrations are not uncommon, and are usually aimed at pressuring the government for better employment conditions. However, this has never posed a major risk to investment. The law requires businesses to adhere to safety standards, but it is poorly enforced.

Lebanon’s working population (aged 15 and above) totals 1.2 million, including foreign residents but excluding the seasonal work force, according to the Central Administration of Statistics’ 2011 Labor Market in Lebanon report. The IMF estimates the population at 4.64 million in 2017. The World Bank estimates Lebanese unemployment will have doubled to 20 percent between 2012 and 2014, in large part due to the Syria crisis. The Minister of Economy and Trade publicly noted that there was competition between Lebanese and Syrian labor for low to high skilled jobs and also at the level of micro to small enterprises, estimating unemployment at more than 25 percent in general and 35 percent among youth. There was widespread anecdotal evidence of arbitrary dismissals of Lebanese, being replaced by non-Lebanese, across economic and productive sectors. This has mainly been in the form of Syrian refugees allegedly replacing Lebanese in some sectors. However, there were no official statistics to quantify the scale of these dismissals.

In 1981, Lebanon and the United States signed an Overseas Private Investment Corporation (OPIC) agreement, which become operational in 1996. OPIC is currently active in Lebanon in insurance, financing, and investment. Since 2007, OPIC has worked with Citibank on a program that offers loans to the private sector (SMEs, retail, and housing) through selected Lebanese commercial banks. To date, OPIC has provided USD 300 million in credit line guarantees.

The Lebanese government’s National Investments Guarantee Corporation (NIGC) continues to insure new investments against political risks, riots, losses due to non-convertibility of currencies, and transfer of profits. Lebanon has been a member of the Multilateral Investment Guarantee Agency (MIGA), part of the World Bank, since 1994.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

*The Lebanese Central Administration of Statistics (CAS)

**The Banque du Liban (BdL) statistics on FDI only cover banking and financial sector, insurance and real estate investment; it doesn’t include investment in other sectors. Accordingly, the inward/outward FDI positions from/to the U.S. are considered as partial figures.
Table 3: Sources and Destination of FDI

U.S. Embassy in Lebanon
Economic Section
Aoukar, P.O. Box 70-840, Antelias, Lebanon
Tel: +961- 4-542600
Email: Beirutembassyinvestment@state.gov