This note focuses upon the final stage of arbitration proceedings, which involves the recognition and enforcement of an arbitration award, either domestic, international or foreign, in Lebanon. Arbitration in Lebanon is regulated by the Lebanese Arbitration Law, which has been codified into the Lebanese Code of Civil Procedure (“CCP”) through the enactment of Legislative Decree 90/83[1] along with some subsequent amendments. In its second chapter, the CCP regulates both domestic and international arbitration in Lebanon, which differ in a number of provisions such as those regarding the validity of the arbitration agreement. As is common, domestic arbitration requirements are stricter than those of international arbitration. Another main difference between domestic and international arbitration in Lebanon is the options given for setting aside a final award.
Domestic arbitration in Lebanon is regulated by Article 765 to Article 808 of the CCP. However, international arbitration in Lebanon is regulated by Article 809 to Article 826 of the CCP. An international arbitration results in an international award, which according to Article 809 of the CCP occurs “if the operation that is the subject matter of the dispute is linked to more than one country”.[2] It is therefore irrelevant whether the place of arbitration is chosen to be Lebanon or not. What matters is whether there is any sort of international commerce involved in the dispute.
As for foreign awards, which are awards with a place of arbitration different than Lebanon, the main source of applicable law will be the New York Convention of 1958 (“NY Convention”), which Lebanon ratified on 9 November 1998.[3]
Enforcement and Recognition of Awards in Lebanon
| Domestic Awards | International Awards | Foreign Awards | |
| Legal basis | Articles 762 to 808 CCP[4] | Articles 809 to 821 CCP[5] | NY Convention[6] Articles 792 to 795, and Articles 809 to 815 of the CCP[7] |
| Limitation periods | 10 years from the date of the award.[8] | ||
| Competent authority for recognition and enforcement[9] | First instance court in the region of the agreed seat of arbitration. In case the parties had not chosen the place of the seat, then in the first instance court in Beirut.[10] | President of the first instance court in the place where the award was rendered.[11] | President of the first instance court in Beirut in civil and commercial matters. In administrative matters, in the Council of State in Beirut.[12] |
| Legitimate Interest | The party should manifest legitimate interest. [13] | ||
| Initiation of proceedings | The interested party must submit to the competent court a request for enforcement with the original award (or a certified copy of the original award) with an original copy of the arbitration agreement (or a certified copy of the original agreement).[14] | ||
| Court Fees | According to Article 13 of the Lebanese Judicial Legal Fees Law, a fee varying between 25,000 Lebanese Pounds (“LBP”) and 50,000 LBP. [15] In the case in which assets against which the award is executed are in Lebanon, the Treasury is entitled to receive 2.5% of the sum awarded. Additionally, the judiciary mutual fund stamp, the Bar Association and the Fiscal stamp duties amount to a fee of approximately 1% of the amount paid.[16] | ||
| Type of proceedings | Ex Parte.[17] | ||
| Party Representation | Parties should be represented by lawyers whenever the value of the dispute exceeds 1 million LBP.[18] | ||
| Grounds for Annulment | a) The award is rendered without an arbitration agreement or with an agreement which is null or void due to the expiration of the time limit to render the award; b) The award is rendered by arbitrators who were not appointed in accordance with the law; c) The award rendered has exceeded the mandate conferred on the arbitrators; d) The award was rendered in violation of the parties’ due process rights; e) The award does not contain the mandatory elements of an award, which are: (i) the relief sought by the parties, along with the grounds and means of substantiating such relief; (ii) the names of the arbitrators; (iii) the legal reasoning; (iv) the relief granted; (v) the date of the award; and (vi) the signatures of the arbitrators; f) The award violated a public policy rule.[19] | a) The award is rendered without an arbitration agreement or with an agreement which is null or void due to the expiration of the time limit to render the award; b) The award is rendered by arbitrators who were not appointed in accordance with the law; c) The award rendered has exceeded the mandate conferred on the arbitrators; d) The award was rendered in violation of the parties’ due process rights; e) The award violated an international public policy rule.[20]
| N/A |
| Remedies against the decision of recognition or enforcement | There are no remedies available against the decision of granting recognition or enforcement.[21] The only remedy would be an application to the Court of Appeal to set aside the award involving the reversal of the decision of exequatur.
| There are no remedies available against the decision of granting recognition or enforcement.[22] The only remedy would be an application to the Court of Appeal to set aside the award involving the reversal of the decision of exequatur.
| Appeal against the decision granting recognition or enforcement is only possible in the following cases: (i) where the award has been delivered without an arbitration agreement or on the basis of an agreement which is null or void due to the expiry of the relevant time limit for rendering the award; (ii) where the award has been delivered by arbitrators not appointed according to law; (iii) where the award has exceeded the mission for which the arbitrator or arbitrators were appointed; (iv) where the award has been delivered without due respect for rights of defence; (v) where the award has violated a rule of international public policy.[23] |
| Remedies against the decision of denying recognition | The court decision is subject to appeal within 30 days following the notification date.[24] | ||
| Remedies against the decision of the court of appeal | The Court of Appeal’s decision is subject to appeal before the Court of Cassation. However, the review will be limited to legal grounds only, as opposed to factual grounds.[25] | ||
| Enforcing an award that has been set aside at the place of the seat | Annulment proceedings suspend the award’s enforcement.[26] | The CCP does not prohibit it. Local courts can therefore independently assess whether the award must have been annulled or not to determine its recognition or enforcement. The limits of international public policy must be kept in mind. [27] | |
| Execution against assets | The enforceability of the recognition of the award occurs 30 days after notifying the opposing party, during which the counterparty can commence legal proceedings to set aside the award.[28] | 30 days, in which the counterparty can file for an appeal against the exequatur.[29] | |
| Suspension of Execution | Arbitration is suspended if the appeal is submitted within the time limit.[30] | ||
Arbitration in Lebanon in the Context of Economic Crisis and Currency Devaluation
For approximately 22 years, the Lebanese pound (LBP) was maintained stable and pegged to the US dollar, at an exchange rate of 1,507 LBP for every 1 USD.[31] However, the declining economic situation destabilized the system, devaluing the value of the LBP until hitting an exchange rate of approximately 35,600 LBP per 1 USD on the black market.[32] The official exchange rate, however, has not incorporated such a currency devaluation. Accordingly, the Lebanese Central Bank maintains the exchange rate of 1,507 LBP for every 1 USD, while some private banks have modified the rate to approximate it to the de facto rate, the one in the black market. Moreover, despite the existence of numerous exchange rates, it is that of the black market which predominates in private transactions.
In this context, numerous issues may be encountered at the moment in which an award creditor moves to enforce an arbitration award in Lebanon. First, award creditors will attempt to receive their payment in US dollars. However, the question remains of whether this economic situation entitles the award creditor to receive its payment in a foreign currency, or rather it entitles the award debtor to make the payment in Lebanese currency, regardless of the currency agreed upon in the agreement. Once this issue is solved, the second issue is figuring out which one of the numerous exchange rates should apply to the payment.
The Mandatory Currency in Lebanon
As to the first issue, tribunals and Lebanese courts will first search for public policy provisions that will apply in an arbitration in Lebanon. Particularly, the Lebanese Code of Obligations and Contracts does make a brief mention of the currency in which debts must be paid.[33] Specifically, and with the aim of maintaining economic public order and protecting its national currency, the regulation provides that the currency of the country (LBP), is the default currency whenever debt consists of a sum of money.[34] Given its nature as public policy, this law must be respected in the context of an arbitration in Lebanon as well as when enforcing awards in Lebanon.
This understanding has been adopted by Lebanese judges. Particularly, Judge Mariana Anani, Head of the Beirut Execution Department, enacted a judicial decision on 15 December 2020 concluding that creditors may not refuse the payment of debt in the national currency, regardless of whether the agreement was based on a foreign currency. [35]
Accordingly, despite the lack of public decisions in this regard in the context of the enforcement of an arbitration award, the award creditor can expect local judges to apply such a provision. Regardless of the currency foreseen in the contract, if enforcement is sought against Lebanese assets, the creditor will only be entitled to Lebanese currency.
The Applicable Exchange Rate
That said, what remains unknown is the exchange rate at which debt must be paid. One might conclude that the only applicable exchange rate is that of 1,507 LBP per 1 USD, which is the official rate set by the Lebanese Central Bank. This is set out in the Code of Money and Credit, which determines the Lebanese legislature as the body entitled to determine the value of the LBP.[36] Accordingly, the Lebanese Parliament has not only maintained the official exchange rate but has passed several laws reinforcing it.
Lebanese case law also shows a tendency to apply the official rate of exchange, despite the existence of some recent rulings applying a rate of exchange which can be far more beneficial for creditors.
Conclusion
Upcoming cases will therefore be essential to determine the tendency of the application of these public policy laws. While award debtors can currently benefit from this situation, creditors will have to wait until there is either a change of legislation or until the Lebanese courts decide to adapt to the de facto value of the Lebanese currency amid Lebanon’s unprecedented financial crisis.
[1] Decree Law No. 90/83, Lebanese Code of Civil Procedure.
[2] Lebanon in The Middle Eastern and African Arbitration Review, Nayla Comair-Obeid, April 2022.
[3] The New York Convention, 1958.
[4] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Arts. 762 – 808.
[5] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Arts. 809 – 821.
[6] The New York Convention, 1958.
[7] ICC country answers. ICC Digital Library. (n.d.). Retrieved August 24, 2022.
[8] Lebanese Code of Obligations and Contracts, Arts. 344 and 349.
[9] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Arts. 793, 795 and 810.
[10] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Arts. 770, 775.
[11] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Arts. 810.
[12] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Arts. 793, 795 and 810.
[13] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Art. 795.
[14] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Arts. 793 – 797 and Art. 815.
[15] Judicial Fees Law, 10 Oct. 1950 as amended by law no. 710, Art. 13.
[16] Judicial Fees Law, 10 Oct. 1950 as amended by law no. 710, Arts. 67 – 71.
[17] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Art. 795, Arts. 814 – 816 and Art. 819.
[18] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Art. 378.
[19] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Art. 800.
[20] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Art. 817 and Art. 819.
[21] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Art. 805.
[22] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Art. 819.
[23]Decree Law No. 90/83, Lebanese Code of Civil Procedure, Art. 817.
[24] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Art. 806 and Art. 816.
[25] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Art. 804.
[26] Guide to arbitration places, Lebanon. Obeid Law Firm. Delos Dispute Resolution 2022. Retrieved August 24, 2022, https://delosdr.org/wp-content/uploads/2018/06/Delos-GAP-2nd-edn-Lebanon.pdf .
[27] Guide to arbitration places, Lebanon. Obeid Law Firm. Delos Dispute Resolution 2022. Retrieved August 24, 2022, https://delosdr.org/wp-content/uploads/2018/06/Delos-GAP-2nd-edn-Lebanon.pdf .
[28] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Arts. 820 and 866, 867 and 869.
[29] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Arts. 820 and 866, 867 and 869.
[30] Decree Law No. 90/83, Lebanese Code of Civil Procedure, Art. 820.
[31] Deutsche Welle, Lebanon: Dollars shield some from hyperinflation crisis: DW: 13.08.2021. Retrieved August 24, 2022, from https://www.dw.com/en/lebanon-dollars-shield-some-from-hyperinflation-crisis/a-58843383.
[32] Chehayeb, K. (2022, May 26). Value of Lebanese pound drops to all-time low. Al Jazeera. Retrieved August 24, 2022, from https://www.aljazeera.com/news/2022/5/26/lebanese-pound-value-drops-to-lowest-level.
[33] Lebanese Code of Obligations and Contract, 1932.
[34] Zein, K., Heavilon, S., Jeong, H., Lee, Y., & Scherer, M. (2021, December 16). Waiting for godot: The enforcement of arbitral awards in Lebanon amid the unprecedented fall of the Lebanese currency. Kluwer Arbitration Blog. Retrieved August 24, 2022, from http://arbitrationblog.kluwerarbitration.com/2021/12/20/waiting-for-godot-the-enforcement-of-arbitral-awards-in-lebanon-amid-the-unprecedented-fall-of-the-lebanese-currency/.
[35] Admin. (2020, December 21). قرار للقاضي مريانا عناني: تعاميم حاكم مصرف لبنان ليست ملزمة للمحاكم/علي الموسوي Retrieved August 24, 2022.
[36] The Code of Money and Credit promulgated by decree n°13513 of 8/1/1963.
