The International Arbitration Review: Lebanon
Over the past three years, Lebanon has faced several challenges and endured multiple crises. In October 2019, anti-corruption street protests spread across the country calling for political and economic reforms. Banks in Lebanon have been withholding depositors' funds, and imposing severe capital control measures, albeit non-codified, including severe restrictions on withdrawals and transfer of funds. Lebanese currency has lost about 90 per cent of its value, and liquidity in foreign currency became scarce. This has led to overlapping severe economic, financial and social crises. The covid-19 pandemic and the massive Beirut Port explosion of 4 August 2020 added a strain on the country's unprecedented frail economy, worsening the crises.
As a result, traditional court litigation has been paralysed, giving rise to arbitration claims that are subject to Lebanese law or seated in Beirut. The legal framework with respect to arbitration is quite appealing as it is supportive of the laws and modern practices of international arbitration. Even though Lebanon is an arbitration-friendly jurisdiction, arbitration has not yet become a stronger alternative to court proceedings.
International arbitration is based on the provisions of domestic laws, on international conventions, and on the regulations of international institutions.2 Arbitration is governed by the Lebanese code of civil procedure (LCCP),3 enacted by Decree-law No. 90 dated 16 September 1983.4 LCCP dedicates a complete chapter to arbitration, divided between domestic arbitration5 and international arbitration.6 In 1996, Law No. 529 of 20 June 1996 entered slight modifications to LCCP,7 enabling the challenge of the decisions rendered by the court of appeal with respect to international arbitration. Another partial amendment of LCCP took place in 2002 by virtue of Law No. 440 of 29 July 2002 (Law No. 440),8 which mainly recognised the right of the state and public entities to enter into arbitration, regardless of the nature of the contract (subject to an authorisation). Moreover, Law No. 440 determined administrative disputes that fall under the competence of local courts, and those that may be referred to arbitration.9
The provisions on arbitration in LCCP derive from the French arbitration law of 1980–1981 (French Decrees No. 80/354 of 14 May 1980 and No. 81/500 of 12 May 1981), rather than the model law on international commercial arbitration of the United Nations Commission on International Trade Law (UNCITRAL Model Law). Replicating the French arbitration law was largely criticised given that, in France, the solutions regarding international arbitration usually derive from case law, whereas, in Lebanon, case law is not elaborate, in the same respect. Consequently, some provisions are considered concise, insufficient and incomplete, which eventually becomes problematic.10
With respect to international conventions, Lebanon ratified the New York convention on the recognition and enforcement of foreign arbitration awards (the New York Convention).11 Lebanon has made a reciprocity reservation12, declaring that the Lebanese government would only apply the New York Convention on the basis of reciprocity to the recognition and enforcement of awards made in the territory of another contracting state.
Furthermore, Lebanon ratified a number of arbitration conventions,13 including the Washington convention on the settlement of investment disputes between states and nationals of other states (the ICSID Convention),14 and the Arab convention on commercial arbitration.15
On a separate note, Lebanese laws and case law are familiar with institutional arbitration. In fact, LCCP grants parties the right to agree on institution arbitration.16 The main arbitration institution operating in Lebanon is the Lebanese Arbitration and Mediation Centre of the chamber of commerce and industry and agriculture of Beirut and Mount Lebanon, which allows the settlement of domestic and international disputes through arbitration or conciliation. The centre has its own set of rules of conciliation and arbitration, inspired by the 1998 ICC Rules.17
There are also a number of relevant arbitration institutions based in Lebanon such as the Lebanese and international arbitration centre established by the Beirut Bar Association.18
The arbitration legislation in Lebanon allows recourse to local courts in specific circumstances.19 For instance, the president of the first instance court has jurisdiction with respect to the appointment of an arbitrator20 or the challenge of same,21 or the extension of the time limit for the award issuance22.
Pursuant to Article 810 LCCP, the arbitration agreement may appoint, directly or with reference to arbitration rules, the arbitrator or arbitrators or the mechanism of their appointment. In the absence of such appointment in the arbitration agreement, the president of the competent first instance court is, in principle, allowed to proceed with the appointment at the request of the most diligent party.
Decisions granting recognition and exequatur to arbitration awards issued outside Lebanon and awards issued in the context of international disputes in Lebanon may be heard by the court of appeal.23 In addition, arbitration awards issued in the context of international disputes in Lebanon may be challenged by way of annulment before the court of appeal.24
The year in review
i Developments affecting international arbitration
We will set out below an outline of the legislative developments and court rules with respect to arbitration, giving particular attention to the main differences between domestic and international arbitration.
International arbitration and arbitrability of disputes
Under Lebanese law, arbitration is deemed international 'when it involves the interests of international trade'.25 Following the example of French courts, Lebanese courts adopt an extensive approach to interpret what falls under the category of 'international trade interests'. Courts focus on the nature of the economic operation, giving rise to the dispute to assess whether arbitration is domestic or international. Thus, the criterion adopted is strictly economic as it relies on the operation subject matter of the dispute rather than the parties' nationalities, the place of conclusion of the contract, the seat of arbitration, or the applicable law or procedure.26 In this respect, the Court of Cassation held that arbitration is considered international if the given economic operation involves a transnational flow of goods or funds (i.e., if the operation subject matter of the dispute economically occurs in more than one country).27 Provisions relating to domestic arbitration do not apply to international arbitration that is governed by Lebanese law, unless agreed otherwise by the parties.28
As to the arbitrability of disputes in Lebanon, almost all disputes may be submitted to arbitration in Lebanon, whether through the insertion of an arbitration clause29 or through the arbitration agreement.30 Lebanese laws do not clearly identify matters that can be submitted to arbitration. However, there are provisions in various laws and regulations that preclude settlement of certain disputes by arbitration. Also, some disputes are subject to the exclusive jurisdiction of Lebanese courts, and thus, are not arbitrable. Article 1037 of the Lebanese code of obligations and contracts of 1932 (COC) provides for disputes that may not be settled by agreement between the parties, and hence, may not be subject to arbitration, including personal status,31 public policy matters32 and non-negotiable rights.33 However, the settlement of pecuniary interests arising out of personal status matters34 or crimes35 is authorised, and thus, arbitrable.
Moreover, the right to alimony is not arbitrable, save for disputes relating to monetary compensation in connection thereof.36 Rights of succession are not arbitrable either,37 save for acquired hereditary rights where it is possible to determine the value of such right.38
On the other hand, bankruptcy disputes are in principle precluded from the scope of arbitration given that bankruptcy rules are of public policy and of mandatory application, and the bankruptcy court retains exclusive jurisdiction in Lebanon to adjudicate all disputes arising out of bankruptcy.39 Conversely, the first instance court of Beirut held that if a debtor concluded an agreement including an arbitration clause prior to the initiation of insolvency proceedings, disputes arising out of situations that are not in connection with the bankruptcy situation can be submitted to arbitration.40
Furthermore, disputes arising from employment contracts, labour accidents and social security between employers and employees fall in principle within the exclusive jurisdiction of the Lebanese labour conciliation board41 and may not be heard in arbitration. Nevertheless, Lebanese case law is not consistent in the matter of arbitrability of disputes in this respect. While most courts refute arbitration in employment matters, and consider the arbitration clause as null and void, given that the competence of the Labour conciliation board relates to public policy42 or that the object of the arbitration is a public policy matter,43 some courts do accept the validity of arbitration clauses inserted in employment agreements on the basis of the principle of autonomy of will.44 By way of illustration, the first instance court of Beirut considered valid the arbitration agreement entered between the central bank and one of its employees following the occurrence of a dispute, with respect to the termination of the latter's employment.45
Disputes relating to commercial representation have been subject to conflicting rulings and opinions as will be detailed below. No consistent jurisprudence has been reached as to whether or not parties to a commercial representation agreement can resort to arbitration to resolve their disputes.
Difference between domestic and international arbitration
The main difference between domestic and international arbitration resides in the conditions of validity of arbitration clauses.46 The validity of an international arbitration agreement is not subject to any specific formal requirements. The sole requisite for the validity of an arbitration agreement is the parties' mutual consent. The agreement may be proven by any means. Nevertheless, writings are required for the enforcement of awards rendered in international disputes.47 In practice, Lebanese courts are not strictly applying this requirement, seeing that they have granted exequatur to an award on the basis of an exchange of correspondence referring to a contract containing an arbitration clause.48 In addition, although it is not mandatory, it is recommended to appoint, in the arbitration clause or agreement, the arbitrator or arbitrators or determine the mechanism of their appointment.49
In contrast, a domestic arbitration agreement must be made in writing to be valid (ad validitatem) and must designate the arbitrator or arbitrators in person, their quality or the method of their designation, in the absence of which the arbitration agreement would be considered null and void.50 Moreover, in arbitration agreements entered into after the occurrence of a dispute, the written form is required as a condition of proof (ad probationem).51 However, and similarly to international awards, as noted above, a domestic arbitration clause could be established by way of an exchange of correspondence.52
Another distinction between domestic and international arbitration is identified in contracts concluded with the Lebanese state or public legal entities. Before the 2002 amendment of LCCP, the state or public legal entities were restricted from resorting to domestic arbitration for the settlement of their disputes but were allowed to enter into international arbitration agreements.53 Notwithstanding the above, the State Council54 held that it had exclusive competence to hear disputes against state entities and declared arbitration clauses null and void in both domestic and international contracts.55
Following the 2002 amendment of LCCP, the state and public legal entities were allowed to submit domestic disputes as well to arbitration.56 However, when the underlying contract is of an administrative nature, a prior authorisation from the council of ministers is required for the validity of the arbitration clause.57 In international administrative contracts, on the other hand, there is no such requirement in law but some authors recommend that a prior authorisation from the council of ministers is also secured to ensure the validity of the arbitration clause.58
Another interesting distinction between domestic and international arbitration relates to the availability of recourses against awards, which are narrower in international arbitration. Domestic arbitration awards are deemed to have acquired res judicata as of date of issuance.59
Arbitration awards issued abroad or arbitration awards issued in the context of international disputes in Lebanon shall be recognised and granted exequatur, based on an application made on an ex parte basis, if the party seeking recognition proves the existence of the award that must not clearly conflict with international public order.60 In domestic arbitration, awards can be subject to appeal61 or annulment62 unless the parties have expressly waived their right to do so. Conversely, arbitration awards issued abroad or awards issued in Lebanon in the context of international disputes cannot be subject of an appeal per se before Lebanese courts.63 Arbitration awards issued in the context of international disputes in Lebanon may be challenged by way of annulment.64 The challenge of foreign arbitration awards (issued outside Lebanon) takes the form of an appeal and must be directed against the order granting recognition or exequatur of said foreign awards.65 The grounds for appeal of the order granting recognition or exequatur to foreign arbitration awards (or to awards issued in the context of international disputes in Lebanon) are the same as those for annulment of arbitration awards issued in the context of international disputes in Lebanon. As a result, the Court of Cassation refused the challenge by way of annulment of an arbitration award when the court of appeal had previously granted exequatur to said arbitration award, on the basis that the court of appeal's decision is considered to have acquired res judicata.66
In this respect, it is worth mentioning that the New York Convention provides that national laws prevail when they are deemed more beneficial than the provisions of said convention. Henceforth, an award challenged abroad may be enforced by the national courts based on the provisions of Lebanese laws that are more advantageous than those of the New York Convention.67
ii Arbitration developments in local courts
Recent case law reveals that the local courts are adopting a more flexible approach with respect to the interpretation and enforcement of arbitration clauses and agreements, further promoting the country as an arbitration-friendly environment. The arbitrability of disputes has also been broadened by local courts to encompass disputes arising out of commercial representation agreements for example, but only subject to certain criteria, which would not have been possible as of the enactment of Decree Law No. 34 dated 5 August 1967 regulating commercial representation.
Moreover, recent years were witness to a new trend in the interpretation of the doctrine of 'privity of contracts' by local courts, namely the extension of the arbitration clause or agreement to non-signatories, which could be motivated by various concepts. Such concepts can be deduced from the nature of the relationship between the parties, inter alia, the group of companies, solidarity between contracting parties, express or implied acknowledgment of the arbitration clause, participation in the execution of the contract, the parties' autonomy of will, and the economic unity.68 Justice Sami Mansour69 held that the extension actually involves two different types of non-signatories: those who are considered, by virtue of the law, parties to the arbitration, and those who are considered, because of the nature of their relationship with signatories, parties to the arbitration.70 The former type of non-signatories includes procuration (agency), universal or singular succession, subrogation, merger, assignment, third-party beneficiary contract (stipulation pour autrui) and novation of contract.71
Article 225 COC establishes the principle of relativity of contracts and the arbitration clause or agreement is a consensual agreement similar to any other reached agreement; therefore, it is subject to the above principle. Yet, scholars and local courts have been considering, in recent years, that, in application of the above principle, an agreement does not necessarily require the party's presence or signature thereon upon its conclusion.72
Nevertheless, the extension of the arbitration clause to non-signatories, based on the principle of economic unity, does not imply per se that the arbitration may occur without the summoning and inclusion of those non-signatories in the proceedings. In fact, in Al Boulboul v. Al Kossaifi, the Court of Cassation held, in a decision dated 16 November 2012, that 'even if the principle of economic unity, that was established by the court of appeal, does apply in matters of domestic arbitration, the application of this principle leads to the expansion of the scope of the arbitration clause or its extension to others, and this does not indicate at all the possibility of issuing a judgment against those others without including them in the arbitration proceedings'.73
The chain of contracts is also relied on by the local courts in the extension of the arbitration clause to non-signatories. The Court of Cassation has rendered a decision, on 25 January 2014, in Al Dana Cinema Management & Film Distribution WLL v. Italia Film and Empire International, whereby it considered that 'any party entering into a chain of contracts, one of which contains a clause deferring disputes arising therefrom to arbitration, shall be subject to the rules of arbitration, regardless of whether or not said party was signatory of the contract in question, based on the concept of economic unity and the objectives that the chain of contracts aims to achieve, as well as on the existence of a common will between the contracting parties to extend the arbitration clause in one of the contracts to other contracts within the chain'. The court's confirmation of the extension of the arbitration clause was further cemented seeing that there were no agreements to the contrary between the parties.74
The intention of the parties and the contractual relationship between the signatories and the non-signatories on the arbitration clause or agreement also come to the spotlight in the extension of said clause or agreement to those non-signatories. Notwithstanding the above, in a decision dated 10 September 2015, the president of the First Instance Court of Beirut, Justice Fadi Elias, and while acknowledging that the non-signatories who negotiated or executed the agreement containing the arbitration clause are equally considered bound by the latter, has held, however, that the examination of those contractual relationships remains outside the scope of jurisdiction of the local court, but rather within that of the arbitrator. In fact, the decision stated as follows: 'According to the general legal principles of obligations and contracts, it is legally established that contracts bind the contracting parties (Article 221 COC). Besides, the contract does not produce its effects, in principle, with regard to a third party, which means that this party cannot acquire rights or become indebted, as the contract has a relative effect that is limited to the contracting parties (Article 225 COC). However, jurisprudence considers that the interference of a non-signatory to the agreement in the negotiations or implementation thereof would constitute a presumption that the contracting parties' real intention is to consider that non-signatory as an actual party to the agreement, and thus bound by its terms.'75 The same reasoning was adopted few days later by the Court of Appeal of Beirut in Akram Hilal v. Lebanon & Emirates General Trading Co SAL.76
Justice Ghaleb Ghanem77 praised the above decision, mostly in its interpretation of Article 785 LCCP78. He considered that said article is very explicit in precising, not only the principle of jurisdiction, but also the extent thereof. It is the term 'extent of jurisdiction' from which stems the theory of the extension of the arbitration clause to non-signatory third parties. LCCP entrusted upon the judge the mission of appointing the arbitrator (upon meeting the conditions of Article 764 thereof) and entrusted upon the arbitrator the mission to determine the scope of his jurisdiction (according to Article 785 thereof). Therefore, there is no room for any intertwining of jurisdiction; otherwise, the judge would be stripping the arbitrator from an exclusive jurisdiction entrusted upon the latter by law (the Kompetenz-Kompetenz principle).79
Another interesting development in the local courts is the admission of arbitrability of certain commercial representation agreements, changing, by that, the all-time classical interpretation of Decree Law No. 34 of 1967 regulating commercial representation, in alignment with the current business requirements.
In hindsight, Article 5 of the Decree Law stipulates that: 'Notwithstanding any agreement to the contrary, the courts of the place where the commercial representative exercises his activities shall be considered as competent for the determination of disputes arising from the commercial representation agreement'. By application of the above Article 5, any provision inserted in the commercial representation agreement conferring jurisdiction to determine disputes arising from the agreement to a foreign court or to arbitration would not prevent the commercial representative from seeking enforcement of his or her rights under the Decree Law before the Lebanese courts. Those rights include mostly compensation for termination of the commercial representation agreement, without fault on the part of the commercial representative or without a legitimate cause.80 Compensation would also be granted in a case of non-renewal of a commercial representation agreement, if the representative's performance resulted in the promotion of the mark, brand, name or product with obvious success, or in the increase of the products' market share.81 The Lebanese legislator enacted the Decree Law for the protection of the Lebanese representative in his or her relationship with the principal, usually international entities, hence Article 5.82
In an interesting interpretation of the above Article 5, the Court of Cassation held, in Compagnie Libanaise pour l'Importation des Produits Alimentaires v. Jacobs Suchard Tobler SA, known as Arrêt Suchard, that 'subjecting the agreement to imperative rules does not in itself necessarily exclude arbitral jurisdiction, at least in the international domain where the principle of the independence of the arbitration clause prevails, and which validity, i.e. the ability of the dispute to be arbitrated, is not affected by a specific law'. The Court of Cassation further held that the arbitrator would be responsible, in light of this opinion, to apply these imperative rules even if the parties exclude them by agreement.83 Some consider that following Arrêt Suchard, local courts are more encouraged to adopt the above interpretation of Article 5.84
Furthermore, the Court of Cassation has been acknowledging lately, up to a certain extent, that Article 5, and the regime of protection afforded for Lebanese representatives, were economically oriented,85 and must now be interpreted in light of the modern realities, without prejudice, nonetheless, to the Lebanese commercial representatives' rights.86 For instance, in Obegi Consumer Products SAL v. Taanayel Seasons SAL, the Court of Cassation held that the purpose of the mandatory jurisdiction of the Lebanese courts by virtue of Article 5 is to grant the Lebanese commercial representative a margin of liberty to choose whether or not to waive the rights provided to him or her by law, rather than to set forth a rigid procedural rule related to public policy, in such a way that if the representative resorts to arbitration post-dispute, it is still considered acceptable.87
In this respect, local courts have distinguished between arbitration clauses inserted in underlying contracts and arbitration agreements entered into between the parties following the occurrence of the dispute, to decide whether or not the Lebanese representative has renounced the protection granted to him or her by law.
It has been largely accepted that, in the event the Lebanese representative participates in the arbitration proceedings, he or she is deemed to have acknowledged the arbitrability of the dispute in question and to have waived the right of protection. In Dell Emerging Markets (EMEA) Ltd v. Systems Equipment Telecommunications Services SAL, the Lebanese representative was prevented from pursuing the proceedings initiated before local courts against the principal, following an anti-suit injunction issued by EWHC (Comm). The court considered that the fact that such agreement, subject to the exclusive jurisdiction of the High Courts of England, is considered unlawful in the place of performance (i.e., Lebanon) does not render the clause unenforceable under English law.88
The same analysis was followed in Perkins Engines Company Ltd v. Ghaddar Machinery Co SAL, whereby the principal obtained an anti-suit injunction preventing the Lebanese representative, appointed exclusively, from resuming the proceedings initiated before the local courts, in a claim for compensation arising from the termination of the distribution agreement between the parties.89
After all, jurisprudential currents witnessed at local courts remain bi-directional. Mostly, jurisprudence at the Court of Cassation level has not been consistent, whether with regard to the extension of the arbitration clause or the arbitrability of disputes arising out of agreements that fall within the jurisdiction of the local courts.90
iii Investor–state disputes
The following section will be twofold. We will lay down an overview of the investment sector in Lebanon and arbitration under investment agreements. We will then list some recent investor–state disputes, whether involving the state as a party or investors with other states.
Investment and arbitration
On 16 August 2001, Lebanon enacted Law No. 360, regulating investment, which provides for a dispute settlement mechanism in case of dispute between IDAL91 and the investor (Lebanese or foreigner), whereby the parties need to attempt amicable settlement at first, failing of which, they can resort to arbitration, domestically or internationally.
Lebanon is a signatory to 54 bilateral agreements for the development and protection of investments. Lebanon is party to the Arab investment agreement and the organisation of Islamic cooperation treaty.92 In almost all of the bilateral agreements of Lebanon, the dispute settlement clause inserted therein grants the right to the investor to bring his or her dispute against the state before an arbitral tribunal,93 except for the Syria–Lebanon bilateral investment agreement of 1997, whereby the investor is allowed to resort to arbitration only in the event the state agrees to it.94
Another interesting development for local and foreign investors concerns disputes involving state entities in procurement projects. Law No. 48 'regulating public private partnerships' (PPP Law)95 explicitly allows recourse to arbitration in disputes with state entities. Pursuant to PPP Law, the partnership agreement to be entered into between the private and public entity must contain mandatory provisions that can include international arbitration.96
While some consider that PPP Law provides further protection for investors in Lebanon as it assures effective recourse to arbitration in a dispute with a state entity97 without the need for any prior authorisation,98 others still recommend investors to ensure that the arbitration clause included in the partnership agreement is pre-approved by the competent authority.99 In any case, investors should negotiate the dispute resolution clause, and its terms, as it won't be automatically inserted in the partnership agreement.
The protection provided for under PPP Law for investors does not prevent them from benefiting of the protection granted by Law No. 360.100
By the same token, there have been recent developments with respect to the legal framework of the oil and gas sector in Lebanon, which expanded the use of arbitration in settling disputes against the Lebanese state. The government issued Decree No. 43 on 19 January 2017 that comprises a model exploration and production agreement for petroleum activities (the model EPA).101 The model EPA provides a specific dispute resolution mechanism whereby disputes between a representative of the state and right holders102 must be resolved by negotiations103. In the event that negotiations fail, disputes arising out of or in relation with the model EPA must be determined either through a sole expert mechanism or settled by arbitration in accordance with the arbitration rules of the International Chamber of Commerce.104 In this respect, some commentators believe that a number of provisions stipulated for under Decree No. 43 should be redrafted as they may be falsely interpreted.105
It is recognised that Lebanon has always been an attractive environment for foreign direct investments (FDI). Nevertheless, factors such as the straining financial crises in the last three decades, political instability, and certain infrastructure challenges impact the flourishing of FDIs in the country.106
In recent years, investor–state arbitration was accentuated, driven mainly by the ongoing Lebanese financial crisis that erupted towards the end of 2019, which was compunded by the unfortunate Port of Beirut explosion on 4 August 2020. It is believed that investor–state arbitration is now the 'avenue of relief' that foreign investors could rely on to access funds and receive full protection and security (FPS) from the state in light of the current banking crisis, with so far non-codified capital restrictions and measures.107 For instance, almost all Lebanon investment treaties include a 'free transfer' clause granting foreign investors the liberty to transfer their funds inward and outward; taking a dispute arising out of the restriction of funds transfer to arbitration would guarantee the foreign investor the applicability of the free transfer clause.108
The Beirut Port explosion also triggered the potential of arbitration proceedings for investor–state disputes. FPS clauses cause Lebanon to guarantee full protection and security to foreign investors, and their properties, which Lebanon failed to do as far as the explosion was concerned. FPS guarantees could be waived if Lebanon was able to demonstrate that it took all reasonable measures to protect the foreign investment. Foreign investors would have a valid claim under international arbitration against the state under an FPS clause.109
In all cases, however, it is thought that potential arbitration proceedings in investor–state disputes against Lebanon in light of the above-mentioned circumstances create an opportunity of compensation for foreign investors as a result of the state's actions, rather than direct recovery of trapped funds.110
Investment disputes involving the state and local investors
Starting off with the most recently awarded claims, in Abed El Jaouni and Imperial Holding SAL v. Lebanese Republic, involving the Germany–Lebanon bilateral investment treaty (BIT) of 1997, an ICSID tribunal ordered Lebanon, on 14 January 2021, to pay damages to a major shareholder in a Lebanese company operating private jets.111 El Jaouni is a shareholder in ImperialJet, a Lebanese operator of private jets that had its air operator certificates revoked in 2010 by the Lebanese civil aviation authority. As a result thereof, a claim was brought in 2014 before the State Council, which held that the revocation was indeed unlawful. Nevertheless, the state did not honour the judgment, which caused El Jaouni to bring a claim before the ICSID in 2015.112 El Jaouni claimed US$1.3 billion in damages.113 The ICSID tribunal ascertained that Lebanon breached the fair and equitable treatment standard of the BIT, but rejected EL Jaouni's other claims, inter alia, denial of justice and moral damages. The ICSID tribunal later confirmed the defendant's assessment of El Jaouni's damages, and awarded the latter the amount of US$218,205. The tribunal, however, granted Lebanon the amount of US$479,000 to be paid jointly by the co-claimants, and US$125,861 to be paid by El Jaouni, to cover Lebanon's costs of arbitration.114
An anticipated case, brought under the Greece–Lebanon BIT of 1997, is now pending before an ICSID tribunal. J&P-AVAX SA, a Greek construction engineering company has brought a claim against the Lebanese state (represented by the ministry of energy and water and ministry of justice) over an electric power generation project.115
In Toto Costruzioni Generali SpA v. Lebanese Republic, brought under the Italy–Lebanon BIT of 1997, and decided in favour of the state, the claimant, an Italian construction company entered into an agreement with the Lebanese state for the construction of a section of a highway linking Damascus to Beirut.116 Toto claimed that the Lebanese government interfered in the project and caused unnecessary hurdles, causing material damage to the highway, and subjecting Toto's rights, investments and reputation in Lebanon to jeopardy.117 The Lebanese state argued that the Italian firm was not an investor within the meaning of the BIT, and disputes arose before the entry into force of the BIT, which precludes the claimant from bringing a claim under this BIT. Eventually, the tribunal found that the claimant lacked evidence as to the state's alleged breaches, and 'irrespective of the lack of evidence . . . the Tribunal does not find that Lebanon has breached its Treaty obligations towards Toto, and as a result, no compensation is due to Toto'.
With regard to disputes engaging Lebanese investors with other states, the case of Iskandar Safa and Akram Safa v. Hellenic Republic, brought under the Greece–Lebanon BIT of 1997, currently pending before the ICSID tribunal, comes to mind.118 Safa is co-owner of the Privinvest Group, specialised in naval shipbuilding, which took control over Hellenic Shipyards SA. Both companies allege that the Hellenic Republic committed several unlawful actions, including lodging a claim for €300 million through a public entity, prohibiting the claimants to work for foreign navies, and freezing payments due under their contracts.119
Outlook and conclusions
Recent years have been quite interesting as to the turn arbitration has taken in Lebanon and the evolving jurisprudence witnessed in local courts has kept the momentum going. What was previously regarded as a rigid and imperative rule is now interpreted in favour of arbitration. The arbitrability of certain disputes arising out of commercial representation agreements, and the extension of the arbitration clause to non-signatories, albeit according to the principle of privity of contracts noted in COC, are a case in point. The recent laws introducing arbitration as a mechanism of resolution of disputes in specific sectors such as oil and gas, together with public–private partnerships, further encourage foreign investment in Lebanon. Nevertheless, and in light of the latest circumstances, financial and political, surrounding Lebanon, more efforts are needed to improve the quality of the legal framework and create a more favourable environment for investments and international arbitration.
1 Jean Baroudi is the managing partner, and Nadine Allam and Nour Mary Barakat are associate lawyers at Baroudi & Associates.
2 Fadi Nammour, Droit et pratique de l'arbitrage interne et international (4th edn, Point Delta - LGDJ 2014) 409.
3 ibid: 'The provisions of LCCP relating to arbitration replaced those of the old code of civil procedure and of law no. 73 of 19 December 1967'
4 Entered into force on 1 January 1985.
5 Articles 762 to 808 LCCP.
6 Articles 809 to 821 LCCP.
7 Article 804 para. 2 LCCP.
8 Law No. 440 amended Article 77, 762, 770, 789, 795, 804 and 821 LCCP.
9 In this respect, Article 77 LCCP refers disputes relating to state concessions to the competence of Lebanese courts while taking into account the provisions of Article 762(3) and Article 802(2) (relating to arbitration in international administration agreements).
10 Nathalie Najjar, Arbitrage dans les pays arabes et commerce international (LGDJ 2016) 73.
11 Lebanon ratified the New York Convention on 11 August 1998 by virtue of Law No. 629 dated 23 April 1997, entered into force on 9 November 1998.
12 Article 1(3) the New York Convention.
13 Such as the Arab league convention, the convention establishing the inter-Arab investment guarantee corporation, the Riyadh convention on judicial cooperation between states of the Arab league.
14 Lebanon ratified the Washington convention on 26 March 2003, entered into force on 25 April 2003 by virtue of Law No. 403 dated 5 June 2002.
15 Lebanon ratified the Arab convention on commercial arbitration on 23 September 1988.
16 Articles 772 and 810 LCCP.
17 Claudine Helou, 'The Middle Eastern and African Arbitration Review 2017' (Global Arbitration Review, 19 April 2017), https://globalarbitrationreview.com/review/the-middle-eastern-and-african-arbitration-review/2017/article/lebanon, accessed 4 May 2021.
18 ICC also operates in Lebanon through a national committee.
19 As such, the arbitral tribunal may request the competent judge or court president to impose sanctions on witnesses who refuse to appear before said arbitral tribunal or refuse to cooperate (Article 779(3) LCCP).
20 Article 771 LCCP (relating to domestic arbitration) requires an odd number of arbitrators. If the number is even, another arbitrator shall be appointed as per the parties' agreement or by mutual consent of the appointed arbitrators. Upon failure to do so, the president of the first instance court shall carry out the task.
21 Article 770(3) LCCP provides that the challenge application should be submitted to the first instance court in the agreed place of arbitration otherwise to the first instance court in Beirut, within 15 days of the date the challenging party acknowledges the arbitrator's appointment or from the date the reason giving rise to such challenge becomes apparent.
22 Pursuant to Article 773(2) LCCP, the extension of the time limit for the issuance of the award shall be made by an agreement of the parties or by a decision of the president of the first instance court.
23 Article 817 LCCP notes: the order which grants recognition or exequatur to the arbitration award (issued abroad or in an international arbitration) cannot be appealed, save in following instances:
– The issuance of the award in the absence of an arbitration agreement or based on an arbitration agreement that is void or lapsed
– The issuance of the award by arbitrators that were not appointed according to the law
– The award exceeds the scope of the mission entrusted upon the arbitrators
– The issuance of the award without due respect of the rights of defence of the parties
– The award has violated a rule related to international public policy
24 Article 819 LCCP reads: 'International arbitration awards issued in Lebanon may be challenged by way of annulment in the instances referred to under article 817 LCCP'.
25 Article 809 LCCP (paralleled by Article 1504 of the French code of civil procedure).
26 Abdul Hamid El Ahdab and Jalal El Ahdab: 'The application of a foreign law or procedure will have no effect on the definition of an arbitration as international' in 'Arbitration in Lebanon' (Kluwer Law International 2011) 337.
27 Al Dana Cinema Management & Film Distribution WLL v. Italia Film and Empire International  Court of Cassation 5th Chamber,  Baz 1040.
28 Article 812 LCCP stipulates the following: 'where international arbitration is subject to Lebanese law, the provisions of Articles 762 to 792 [relating to the rules of arbitration pertaining to domestic arbitration] shall not be applicable thereto, unless there are no specific agreements [as to the rules of arbitration], taking into consideration the provisions of Articles 810 and 811 [relating to international arbitration]'.
29 Article 762(1) LCCP: 'contracting parties may insert in commercial and civil agreements entered into between them a clause providing that all disputes which may be subject to settlement arising out of the validity, interpretation or execution of the contract shall be settled by way of arbitration'.
30 Article 765 LCCP: 'an arbitration agreement is an agreement whereby the parties agree to resolve a dispute which has arisen between them and that may be subject to settlement through the arbitration of one or more persons'.
31 Personal status matters pertaining to marriage, divorce, nationality, capacity of individuals, etc.
32 Al Zein & Maalouf v. General Company for Construction and Development  Court of Cassation 5th Chamber,  Baz 566: 'Public policy is defined as a set of mandatory rules relating to the best interests of society'.
33 Non-negotiable personal rights such as the right of individual freedom, the right to human dignity, the right to physical integrity, the right to privacy, etc.
34 Monetary compensation resulting from divorce can be settled by arbitration according to a prevailing case law.
35 Disputes on damages resulting from patent infringement can be arbitrable. It has also been established that the offender and the victim may resort to arbitration to evaluate the amount of damages in accordance with Article 1037 COC.
36 Article 1039 COC.
37 Article 188 COC.
38 Nammour (n 2) 66.
39 Article 490(4) Lebanese code of commerce of 24 December 1942 (as amended) and Article 108 LCCP.
40  Court of First Instance of Beirut 1st chamber.
41 Article 79 of the Lebanese labour code dated 23 September 1946 (as amended).
42 Fushu v. Conserves modernes chtaura SAL  Court of Cassation, 8th Chamber  Baz 846.
43 Nasr v. Nahr Al Founoun SARL  Court of Cassation, 8th Chamber,  Baz 839.
44 Charles Moubarak v. George Azar  Labour Conciliation Board, [vol 1, 1971] Al Adel 202.
45 Tasso v. Central Bank of Lebanon  First Instance Court of Beirut, 1st chamber,  Revue juridique Libanaise 971.
46 Obeid Law Firm, 'Arbitration in Lebanon: overview', (Lexology, 1 October 2020), www.lexology.com/library/detail.aspx?g=14f86c4d-e2a0-4169-bb82-a952b4f02e04, accessed 10 May 2021.
47 Article 814(2) LCCP.
48 Helou (n 17): 'President of Beirut First Instance Court, Decision No. 48/83 dated 9/12/2015, JIA, (2016), Vol. 30, 379: In order to grant exequatur to the award, the decision was based on article II (2) of NY Convention rather than the provisions of LCCP'.
49 Article 810(1) LCCP reads: 'The arbitration agreement may appoint, directly or with reference to arbitration rules, the arbitrator(s) or the mechanism of their appointment'.
50 Article 763 LCCP reads: 'The arbitration clause shall only be valid if made in writing in the main contract or in a document that refers to such contract'.
51 Article 766 LCCP.
52  Beirut Court of Appeal, 3rd chamber.
53 The state or public legal entities have always been authorised to resort to international arbitration without any restriction in this respect pursuant to art 809(2) LCCP.
54 This is the Lebanese administrative court of highest degree.
55 Memorandum from Jalal El Ahdab, GMPV, Paris, France / IBA Mediation Committee, CoChair; Myriam Eid, Ahdab law firm dated 19 June 2016, Comparative Study of Arbitrability under the New York Convention Chapter: The Lebanese State v. Libancell  State Council and The Lebanese State v. F.T.M.L.  State council.
56 Article 762(2) and (3) LCCP (which were added following the 2002 amendment of LCCP) provide as follows: 'The State and public legal entities may resort to arbitration irrespectively of the nature of the contract . . . In administrative contracts, an arbitration clause or arbitration agreement will only become effective after its authorisation by virtue of a decree issued by the council of ministers following the proposal of the competent minister (with regards to the State) or the proposal of the supervising regulatory authority (with regards to public legal entities)'.
58 Nayla Comair-Obeid, 'The Middle Eastern and African Arbitration Review 2020', (Global Arbitration Review, 20 April 2020), https://globalarbitrationreview.com/review/the-middle-eastern-and-african-arbitration-review/2020/article/lebanon, accessed 3 May 2021.
59 Article 794 LCCP.
60 Article 814 LCCP. Under same article: 'the existence of the arbitration award shall be established through submission of each of the original award and the arbitration agreement or true copies thereof duly certified by the arbitrators or any competent authority. If these documents are issued in a foreign language, they shall be translated by a sworn translator'.
61 Article 799 LCCP.
62 Article 800 LCCP.
63 Edward Eid, Encyclopedia of procedure, evidence and execution (vol 21, 1999) 91.
64 (n 24).
65 (n 23).
66 Soufan v. Al Arja  Court of Cassation, 5th chamber  Baz 759.
67 Helou (n 17).
68 Nammour (n 2) 121.
69 Former President of the Court of Cassation, 8th Chamber.
70 Sami Badih Mansour, 'Does the arbitration agreement bind non-signatories?' (vol 47, 2008) The Lebanese Review of Arab and International Arbitration, 20.
72 Ghaleb Sobhi Mahmassani, 'The effect of the extension of the arbitration clause to non-signatories' (vol 47, 2008), The Lebanese Review of Arab and International Arbitration, 16.
73 Al Boulboul v. Al Kossaifi  Court of Cassation 5th Chamber,  Baz 554.
74 Al Dana Cinema Management & Film Distribution WLL v. Italia Film and Empire International (n 27).
75 Court of First Instance of Beirut  Journal of International Arbitration (vol 33, 2017) 458.
76 Decision No. 1142 dated 21 September 2015, Journal of International Arbitration (vol 29, 2016) 483.
77 Former Honorary First President of the Court of Cassation, and former President of the High Judicial Council.
78 Article 785 LCCP: 'If one of the litigants disputes before the arbitrator the principle or extent of his jurisdiction to consider the case before him, the arbitrator would have to decide upon such issue'.
79 Journal of International Arbitration (vol 33, 2017) 464.
80 Article 4 DL 34, 1967.
82 Maher S. Mahmassani, La représentation commerciale en droit positif libanais (Librairie du Liban 1972) 239.
83 Compagnie Libanaise pour l'Importation des Produits Alimentaires v Jacobs Suchard Tobler SA.  Court of Cassation 5th Chamber,  Adel 610.
84 Rayanne B Assaf, 'Arbitrage et représentation commerciale en droit libanais' (2004) Commentary of Arrêt Suchard, Adel 613: 'Nowadays, arbitration may not be excluded for the simple fact that the dispute engages imperative rules, or rules relating to public policy'.
85 'This decree-law is part of an economic orientation, which surrounded the regulation of the commercial representation. This has occurred during a period of economic crisis linked to the collapse of Bank Intra in 1966 . . . It was in this context that the Lebanese legislator enacted various laws, inter alia decree-law No. 34, whose primary objective was to manage the crisis and protect Lebanese agents.' Najib Hage-Chahine, 'L'agence commerciale dans le droit international privé des pays arabes' (2016) Proche-Orient, Études Juridiques 2014/2016 No.73, 38.
86 Hadi Slim (2017) Commentary of Judgment No. 166 dated 26 May 2016, Journal of International Arbitration (vol 35 & 36, 2017) 651.
87 Obegi Consumer Products SAL v. Taanayel Seasons SAL  Court of Cassation 5th Chamber,  Baz 878.
88  EWHC 702 (Comm).
89  EWHC 1500 (Comm).
90 See Court of Cassation 5th Chamber, Decision No. 92 dated 28 December 2017,  Cassandre, 1664; Court of Cassation 4th Chamber, Decision No. 3 dated 14 April 2005,  Cassandre; Court of Cassation 4th Chamber, Decision No. 50 dated 4 December 2008,  Cassandre; and Court of Appeal 14th Chamber, Decision dated 10 May 2018 Maha Assaf v First National Bank SAL et al. (vol 81 & 82, 2019), The Lebanese Review of Arab and International Arbitration.
91 A public authority for investment development, with an administrative and financial autonomy (Investment Development Authority of Lebanon, IDAL).
92 Lebanon is a signatory to the ICSID Convention.
93 Dany Khayat, 'Les accords internationaux relatives aux investissements négociés par le Liban', Journal of International Arbitration (vol 47, 2008) 12.
95 PPP Law was enacted in Lebanon by virtue of Law No. 48 dated 7 September 2017.
96 Article 10 PPP Law reads: 'The Partnership Agreement shall comprise the following: . . . 15- The dispute resolution mechanism, which can include mediation and domestic or international arbitration'.
97 Michel Nassar, 'Arbitration under the Lebanese Public Private Partnership Law' (Kluwer Arbitration Blog, 23 June 2018), http://arbitrationblog.kluwerarbitration.com/2018/06/23/arbitration-lebanese-public-private-partnership-law/, accessed 5 May 2021.
98 (n 56).
99 Article 762 LCCP
100 Article 16 PPP Law provides that: 'The provisions of this law shall not prevent the Private Partner and the Project Company from benefiting from the provisions of Law No. 360 dated August 16, 2001 relating to the development of investments in Lebanon and from the provisions of Law No. 705 dated December 9, 2005 relating to the securitization of assets'.
101 The model EPA reflects a production-sharing contract whereby the Lebanese state owns exclusively the right of natural petroleum resources and grants the investors (such as oil companies) a share of the production.
102 Right holders are defined by the offshore petroleum resources law of 2010 as follows: 'any joint stock company which is participating in petroleum activities pursuant to this law through an exploration and production agreement or a petroleum licence that permits it to work in the petroleum sector'.
103 According to Article 37 of the model EPA, '[a] dispute shall be resolved, if possible, by negotiation between the Parties'.
104 In the event negotiations fail, 'either Party shall have the right to have such dispute determined by arbitration or a sole expert as provided for in this model EPA' (Article 38 of the model EPA); also 'save for any matter to be referred to a sole expert pursuant to the provisions of this model EPA, the Parties shall submit any dispute, controversy or claim arising out of or relating to the model EPA to binding arbitration', also 'arbitration and sole expert determination as aforesaid shall be the exclusive method of determining a dispute pursuant to this model EPA'. Mohamed Alem and Mazen Ghosn, Lebanon: 'Dispute Resolution Mechanism Under The Lebanese Model Exploration And Production Agreement' (Mondaq, 28 June 2018), www.mondaq.com/arbitration-dispute-resolution/704768/dispute-resolution-mechanism-under-the-lebanese-model-exploration-and-production-agreement, accessed 3 May 2021.
106 United Nations Conference of Trade and Development UNCTAD, 'Investment Policy Review, Lebanon' (2018) https://unctad.org/system/files/official-document/diaepcb2017d11_en.pdf, accessed 7 May 2021.
107 Michael Farchakh, 'The ongoing Lebanese financial crisis: is there potential for investor-state arbitration?' Kluwer Arbitration Blog (2020), http://arbitrationblog.kluwerarbitration.com/2020/03/08/the-ongoing-lebanese-financial-crisis-is-there-potential-for-investor-state-arbitration/, accessed 6 May 2021.
109 Amr Jomaa, 'Potential arbitration proceedings for investor-state disputes arising in the aftermath of the Beirut port explosion' (The American Review of International Arbitration, 15 February 2021), http://blogs2.law.columbia.edu/aria/potential-arbitration-proceedings-for-investor-state-disputes-arising-in-the-aftermath-of-the-beirut-port-explosion/, accessed 5 May 2021.
110 Kiran Nasir Gore, Charles H Camp, 'Do International Investment Agreements Provide Remedies for Foreign Investors Harmed by the Lebanese Financial Crisis?' (ABA, 6 July 2020), www.americanbar.org/groups/business_law/publications/blt/2020/07/lebanese-crisis/, accessed 6 May 2021.
111 ICSID Case No. ARB/15/3.
112 In his capacity as shareholder of 49 per cent of Imperial Holding (co-claimant).
113 For loss of enterprise value, loss of profits, loss of opportunity, and moral damages under the Germany–Lebanon BIT.
114 Tom Jones, 'Net loss for airline investor in Lebanon claim' (Global Arbitration Review, 19 January 2021).
115 ICSID Case No. ARB/16/29.
116 ICSID Case No. ARB/07/12.
117 The breaches included, as alleged by Toto, amendments to the regulatory framework, failure of site delivery, and the provision of incorrect instructions.
118 ICSID Case No. ARB/16/20.
119 'Iskandar Safa Submits Claim Against the Hellenic Republic with ICSID' (PR Newswire, 2016), www.prnewswire.co.uk/news-releases/iskandar-safa-submits-claim-against-the-hellenic-republic- with-icsid-583906371.html, accessed 7 May 2021.