The 9th chamber of the Paris Judicial Tribunal has decided to reimburse all of the sums deposited – equivalent to 2.5 million euros – by a Syrian national who has resided in France for 45 years by Banque Saradar. The judgment was rendered on November 19.
This decision, which could constitute a case law, was expected due to a bilateral investment protection treaty between France and Lebanon, therefore forcing Lebanese banks to resist funds to persons residing in France up to amounts equivalent to those precedents the establishment of an informal capital control in November 2019, by the association of banks in Lebanon.
According to a mission of the COMMITTEE ON FOREIGN AFFAIRS, DEFENSE AND ARMED FORCES – REPORT N ° 356 – 1997/1998
– The three principles of investment protection
The investors of the other party must first benefit, in the event of dispossession (nationalization, expropriation, etc.), from “prompt and adequate compensation”, the amount of which is assessed in relation to a “normal economic situation and prior to any threat of dispossession “(art. 4).
Second, in the event of damage and loss caused by exceptional circumstances such as armed conflict, revolution, state of emergency, foreign investors are entitled to treatment as favorable as that of national investors (art. 4-3).
The principle of freedom of transfers, essential for investors, is guaranteed in Article 5 of the agreement. It applies without reservation, in particular to income and proceeds from the liquidation of the investment (including capital gains). Its application appears, on the other hand, to be limited for transfers of income from nationals of one of the parties working in the territory of the other party to an “appropriate proportion of their remuneration” (art. 5).
Thus, several thousand depositors residing in France could benefit from this decision to the detriment of Lebanese banks already considered by many experts as already bankrupt, which their leaders and the Governor of the Banque du Liban refuse to admit.
Banks heavily impacted by the economic crisis
Lebanese banks, for their part, are heavily impacted by the economic crisis that Lebanon is going through. This crisis came to light with the famous foreign currency shortages in May 2019, first blamed on logistical problems by the Banque du Liban before finally recognizing that private institutions were facing major liquidity crises. . The ABL then implemented informal capital controls in November 2019.
So far, Lebanese banks generally refuse to allow depositors to freely dispose of their funds.
As early as 2019, many incidents had then broken out in bank branches, with depositors demanding to be able to withdraw their funds, which bank officials refused when the breakdown of losses in the banking sector, estimated at 69 billion dollars, should soon be detailed. according to the Mikati III government, 83 billion dollars according to the previous government, a figure close to that of the IMF and 103 billion dollars according to certain rating agencies.
In total, the top 14 Lebanese banks alone would require an injection of $ 65 billion, well beyond the possibilities of economic aid estimated at $ 26 billion. Also, haircuts on eurobonds or even on part of Lebanese bonds seem to become inevitable, despite the increase in equity on the decision of a circular from the Banque du Liban.