Full Contents List

• Introduction
  1. Preface
  2. Foreword
  3. Introduction
• Regional Overviews
  1. Recent Developments in Investment Treaty Arbitration
  2. Challenges to Arbitrators
  3. State of Necessity in Investment Arbitration
  4. Arbitration of Intellectual Property Disputes
  5. Provisional Application of the Energy Charter Treaty
• Country Overviews
  1. Austria
  2. Czech Republic
  3. Denmark
  4. Finland
  5. France
  6. Greece
  7. Ireland
  8. Netherlands
  9. Poland
  10. Portugal
  11. Spain
  12. Ukraine
  13. United Kingdom
  14. Middle East Overview
  15. Lebanon

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Arbitration is not a new concept in Lebanon, having been recognised by the legal system since the first Code of Civil Procedure of 1933. But it was with the enactment of the New Code of Civil Procedure (NCCP) in January 1985 that arbitration became more commonplace. This legisation was for the most part inspired by France’s Code of Civil Procedure of 1981 and does not follow the UNCITRAL Model Law. This new vision of arbitration by the legislature (see NCCP, book 2, chapter 1, articles 762 to 821), considered to be “one of the most liberal in the Arab countries”,¹ has led practitioners in the post-war period² and particularly since the mid-1990s to use arbitration more frequently as a method of dispute resolution. It has also led to a proliferation of arbitration centres and a burgeoning academic interest in the subject, through university programmes, professional workshops, seminars and conferences.
The attitude of the Lebanese courts towards arbitration has also changed from one of suspicion³ to acceptance. This transition was difficult, and there are still some areas where a resistance to the arbitrability of disputes remains.
The Lebanese government has taken various measures to ensure arbitration in Lebanon meets the needs of the international business community, including signing up to various international conventions (Amman Convention of 1987; New York Convention of 1958, in 1997; ICSID Convention of 1965, in 2002). In July 2002 they also adopted Law No 440 (amending NCCP, articles 77, 762, 770, 789 and 821), intended to further promote arbitration.
This chapter will discuss (i) the most important characteristics of the legislation; (ii) the arbitrability of disputes; and (iii) the arbitration centres in Lebanon.
The NCCP distinguishes between domestic and international arbitrations but is very favourable towards both, featuring rules intended to save them from failure and derailing tactics. These concern the arbitration agreement, the nomination of arbitrators, the arbitration proceedings and interim measures, the arbitral award, its enforcement and the recourses. The rules are more flexible in international arbitrations then in domestic ones. According to Lebanese law, arbitration is international if it “concerns the interests of international trade”,⁴ following only economic criteria and setting aside all the other elements conferring an international scope.⁵
The arbitration agreement shall be written into the contract itself subject to dispute (the arbitration clause) or in a separate document (the arbitration agreement). This clause shall designate the arbitrators by name or quality, or designate the process by which they shall be nominated. A special text concerning international arbitrations⁶ adds that arbitrators can be nominated by reference, in the arbitration clause, to an arbitration rule (in international arbitrations it is not mandatory to include in the arbitration agreement anything regarding the arbitrators’ nomination). In domestic arbitrations, arbitration agreements (compromise) shall include the subject of dispute or they will be considered null and void.
Regarding the instatement of the arbitral tribunal, arbitrators shall be natural persons and, if an entity is designated, this entity is considered designated to manage the arbitration process. Arbitrators shall be in odd rather than even numbers (mandatory in domestic arbitration) and shall be independent and impartial. Arbitrators can resign and are revocable by the will of all parties to arbitration or challengeable by one of the parties, by application to the tribunal of first instance (TFI) of the seat of arbitration (in domestic arbitrations).
In international arbitrations, this procedure of challenge can be made by application to the court if no other way is agreed, especially by reference to an arbitration rule that stipulates a special procedure of challenge by a special entity (eg, the ICC arbitration rules). If a party fails to nominate an arbitrator, the president of the TFI of the seat, or the president of the Beirut TFI, can be asked to fulfil this task.
In matter of arbitral proceedings, the arbitrator shall give his award within the term defined in the agreement of the parties, and in the absence of such an agreement Lebanese law determines a legal term of six month, starting with the acceptance of the arbitrator (in case of a sole arbitrator) or the last arbitrator (in case of an arbitral tribunal) of his mission. This term can be prorogated by agreement of the parties or by court decision by application of one of the parties or one of the arbitrators.
The arbitrator(s) in a domestic arbitration shall conduct the arbitration procedure according to the ordinary rules of civil procedure, from which shall be excluded those incompatible with the arbitration such as the terms stipulated for ordinary litigation, the obligation to hold at least one audience, the written submissions, etc. On the other hand, this flexible regime shall always be in accordance with the rules of public policy and due process (such as the rules regarding evidence and defence rights).
In international arbitration, NCCP, article 811 gives the parties the right to set the procedure to be followed by the arbitrators⁷ by a special agreement, by reference to an arbitration rule or a national law of civil procedure. If the parties fail to do so, then arbitrators shall fix the procedure either directly or by reference to a national law or to an arbitration rule.⁸ Regarding the applicable substantive law, if arbitrators shall, as a principle, apply the substantive Lebanese law in domestic arbitrations (even if the parties have the right to determine another national substantive law that is not against Lebanese rules of public policy), in international arbitration the parties have the right to choose “the rules of law” that shall govern the dispute. These rules can be a national law and even transnational standards such as the ‘general principles of law’ or lex mercatoria. If they fail to do so, the arbitrator, having a wide margin of discretion, will determine the rule he or she deems appropriate.⁹
In domestic and international arbitrations, parties may give to the arbitrator(s) the right to settle the dispute regarding the rules of justice and fairness, as amiable compositeur. This shall be expressly and clearly stipulated in the arbitration agreement. Arbitrators acting as amiable compositeurs can waive all procedural rules (except those related to due process and motivation of the final award).
The NCCP sets specific rules for arbitral proceedings for domestic arbitrations (applicable to international arbitrations if the parties have not chosen specific rules or law), such as the obligation to see the case collectively, the right of third parties to intervene in the arbitral proceedings by consent of the parties, the right of the arbitrators to hear witnesses not under oath, (the right to apply to the court having jurisdiction in the absence of arbitration to oblige parties to comply), the right of the arbitrators to order parties to produce elements of evidence in their possession, the right to ask national court to order rogatory commissions, etc.
Lebanese law also gives the arbitrator the right (after the arbitral tribunal has been constituted) to order interim measures such as those intended to preserve evidence (eg, expertise or witness statements) or prevent irreparable harm (eg, sale of perishable goods) or security for costs or provisional payments. Until July 2002, these rules were set by the jurisprudence of the national courts,¹⁰ but then Law No. 440 added to article 789 of the NCCP the following: “The arbitrator may order interim measures and may decide partially about the claims before giving the final award”. The only limit to the arbitrator’s powers concerns orders to freeze assets, which remain exclusively in the jurisdiction of the enforcement circuits of national courts.
Regarding the arbitration award, the only binding rule in international arbitrations is the obligation of motivation. In domestic arbitrations (applicable to international arbitrations if parties choose the Lebanese law of procedure), article 790 of the NCCP obliges arbitrators to include in their award the following:
• names of arbitrators;
• place and date of the award;
• names and salutation of parties and their councils;
• summary of the facts, claims and evidences alleged by parties; and
• motivation and orders of the award.¹¹

In general, the awards in domestic arbitrations can be subject to appeal (unless parties have expressly agreed to waive this right or if, in amiable composition, the parties reserved this right in their agreement). The appeal halts enforcement of the award (unless the award is given by provision and if the court of appeal grants the exequatur). When appeal is not possible, the parties can always file recourse for annulment (setting aside), the only recourse available against international arbitration awards rendered in Lebanon, exclusively on the following grounds:
• where the award has been rendered without an arbitration agreement or on the basis of an arbitration agreement that is null and void or terminated because of expiration of the time limit;
• where the award has been rendered by an arbitrator whose nomination was not in accordance with law;
• if the arbitrators exceeded their mission as determined by the parties;
• where the award has been rendered in disrespect for the rights of defence (due process);
• where mandatory stipulations of the award have not been met (domestic arbitrations only); or
• where the award violates a rule of public policy (international public policy if an international arbitration).

Arbitration awards, even if they have authority, are not enforceable unless they get the exequatur from the president of the court of first instance of the seat of arbitration (and, if the seat is in a foreign country, by the president of the Beirut TFI). In international arbitration, awards are granted the exequatur only if their existence is proved (in practice, the alleging party always submits an original or certified copy of the award) and it does not violate a rule of international public policy. These are the only grounds on which the judge who has jurisdiction to grant the exequatur can refuse it. In domestic arbitration, the judge can refuse to grant the exequatur for the same reasons stipulated in article 800 (see above).
Unlike the French system of arbitration, the NCCP gives a wide definition of arbitrable disputes. Article 762 of the NCCP gives parties to a ‘civil’ or commercial contract the right to settle disputes that can be transacted by arbitration: only disputes related to family law, public policy, inheritance, bankruptcy and free disposal of tenants are not arbitrable. National courts, however, were unconvinced and continued to look at arbitration sceptically, which led Lebanese policy makers to intervene successfully in some cases (regarding arbitration in the public sector), although not in others (for instance, disputes involving a commercial representation contract).
Article 762 of the NCCP goes on to stipulate that “the Lebanese State and other public entities can refer in their contracts to arbitration of any nature”. Moreover, article 77 reads that the mandatory jurisdiction of the Lebanese national courts shall be read taking into consideration the stipulations of article 762, paragraph 3 and article 809, paragraph 2. This give express permission to resort to arbitration in the case of domestic and international administrative contracts (even build-operate-transfer and concession contracts) and resolved the problem of granting exequaturs to domestic and international awards settling disputes arising from administrative contracts that include arbitration clauses.
However, this legislation makes the validity of the arbitration clause in administrative and state contracts subject to the condition of a decree made by the Council of Ministers at the proposion of an interested minister or supervising authority (in the case of a public entity).
This revolutionary amendment came after two critical decisions by the Lebanese Council of State on 17 July 2001, declaring that, both at domestic and international level, the state and public entities are forbidden from arbitration except in the case of an express law or an express statement of an international treaty. What was problematic about these decisions is that they claimed to have constitutional value, and that NCCP, article 809, paragraph 2 (which always gave the state and public entities the right to arbitrate) cannot be applied before the Council of State because it has only a supplementary value and will not be applicable when a rule of public policy is present.
This important legislative amendment was preceded by the adoption by Lebanon of the ICSID Convention on 5 June 2002. We are witnessing now the first arbitration proceedings against the Lebanese state under the Washington Convention (ICSID).
Legislative Decree No. 34 of 5 August 1967, amended by Decree No. 9,639 of 6 February 1975, introduced a new law on ‘commerical representation’ (including both commercial agency and sole distributorship contracts) for the purpose of protecting the Lebanese party to these contracts who is generally the representative (the weakest party). Article 4 of the Decree stipulated a non-waivable right to compensation in case of termination or non-renewal of the contract.¹² Article 5 futhermore states:
Notwithstanding any contrary agreement, the Courts of the Place where the commercial representative carries on his activity have jurisdiction over the disputes arising out of the commercial representation contract.

This raised the question of whether disputes arising out these contracts can be settled through arbitration. The Lebanese Court of Cassation, supported by a Lebanese doctrine, ruled in 1988 that such disputes should not be excluded from arbitration since Legislative Decree No. 34 does not contain an express provision preventing such disputes from being submitted to arbitration.
Opinion, however, has now changed and courts, among them the Court of Cassation, have decided that the jurisdiction of the Lebanese courts excludes these disputes from arbitration, in light of the aforementioned articles 4 and 5 as rules of public policy for the protection of the Lebanese representative.
Regarding commercial representation contracts, in 1998 the Court of Cassation annulled an arbitration clause, arguing that “the jurisdictional rule contained in the Legislative Decree is a matter of public policy... and the parties cannot agree otherwise”. This position was reaffirmed on 19 July 2001 by the Court of Cassation, 4th chamber, in its decision No. 34¹³ stating that arbitration clauses in commercial representation contracts shall be excluded but that arbitration should be acceptable in case of an arbitration agreement signed after the rights to compensation of the representative has arisen.
I shall conclude my review by signalling that, despite some hesitations, the Lebanese authorities and, among them, the judiciary, are becoming more open to arbitration, which has led to the proliferation of both ad hoc and institutional arbitrations. There are now many arbitration centres and rules, the most important being the Lebanese Arbitration Centre of the Chamber of Commerce, Industry and Agriculture of Beirut (BCCIA), with rules modeled on the 1988 ICC arbitration rules. Other small centres exist, such the arbitration centre of the CCIA in Tripoli, the legal centre of arbitration in northern Lebanon. In addition, there are numerous ad hoc arbitrations settling disputes arising out of engineering contracts that contain a mandatory arbitration clause.

Notes

1 Walid Kassir, ‘The potential of Lebanon as a neutral place for international arbitration’, in The Lebanese Review of Arab and International Arbitration, no. 34 (2005), p15.
2 The Lebanese war occurred between 1975 and 1990.
3 The Beirut Court of Appeal in its decision of 7 September 1984 said that “giving private parties the competence to deliver justice is against general legal principles”.
4 NCCP, article 809.
5 One of the main differences between the Lebanese legislation and the Model Law, which adopts a wider definition of international arbitration.
6 NCCP, article 810.
7 Nasri Diab, ‘L’arbitrage international en droit Libanais’, in Droit et Pratique du Commerce International, vol 20, no. 1 (1994), p181.
8 Marie Sfeir-Slim, ‘Le nouveau droit Libanais de l’arbitrage a dix ans’, in Revue de l’Arbitrage, No. 4 (1993), p543.
9 Charles Molineaux, ‘Reaching for the applicable law in arbitration: Rules imposed, chosen and the customs of commerce’ in Lebanese Review of Arab and International Arbitration, No. 16 (2000) p12.
10 Civil Court of Cassation, 5th Chamber, 29 January 2002; Cassandre, vol 1 (2002), p7.
11 NCCP, article 800 for domestic arbitration; articles 817 and 819 for international arbitration.
12 “...if his activity has promoted with manifest success the launching of the trademark represented or has increased the number of its costumers, while he was prevented from profiting from such success because of the refusal of his principal to renew the representation contract”.
13 Al Adl review (2003), p65.

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