The ransacked hall of a banking establishment in Beirut. (Credit: Phillipe Hage Boutros)
Members of the Commission for the Protection of Depositors’ Rights who are part of the Beirut Bar Association are finalizing two appeals to be presented before the State Shura Council. The bar’s President Nader Gaspard may decide to submit them next week. This information was confirmed by a well-informed source within the bar who declined to be named.
These appeals seek to annul two controversial decisions adopted respectively by the caretaker cabinet of Najib Mikati and Banque du Liban (BDL) on April 18 and 19, which recognize and adjust the illegal restrictions that banks have imposed on depositors since the beginning of the crisis.
The first targets a cabinet decision allowing the BDL to cap withdrawals and transfers in commercial banks and ensuring that banks continue to guarantee the availability of “fresh funds.”
The second targets BDL’s Circular No. 165, which recognizes the distinction between old and new deposits. Nov. 17, 2019, was set as the pivotal date — the moment the Association of Banks in Lebanon (ABL) publicly acknowledged the banking restrictions that its members had begun to apply. The authorities, including BDL, continued to stay in power.. The new circular goes even further by setting up new clearing systems for fresh dollars and fresh lira, with dedicated accounts, checkbooks, Swift codes and bank cards.
FATF concerns
The combination of these two decisions is interpreted by many legal experts as an attempt by the state to forcibly legitimize the restrictions imposed by the banks through the implementation of formal capital controls that seal the fate of nearly $90 billion “old” dollar deposits. xperts also consider that these decisions will also allow banks to dodge being declared bankrupt for failing to meet their commitments, as provided for in the Code of Money and Credit and special banking laws (law no 2/67 and law no 110/91).
BDL’s circular has already been targeted by a first challenge seeking its annulment. Lawyers Pascal Fouad Daher and Charbel Chbeir had filed it in early May in their personal capacity.
The Bar’s potential challenge, which would target the cabinet decision, could be filed next week by Gaspard. As for the one targeting BDL’s Circular No 165, the Bar is waiting for BDL to provide an answer to its request for information.
“The interlocutors of the Bar at BDL plead that the circular does not legitimize the distinction between old and new deposits and that it tends to respond to the concerns of the Financial Action Task Force (FATF) about the development of the cash economy in the country, for lack of a viable banking sector,” said the source.
“The Bar [will decide whether] to act or not depending on the institution’s response, as part of its commitment to the defense of the rights of depositors, respect for the law and accountability,” the source said.
The deadline for filing a challenge for misuse of power is two months after the publication of the targeted decision in the Official Gazette. The institutions whose decision is challenged will then have two weeks to respond. After this period, or as soon as their response is transmitted to the State Shura Council, the latter has two weeks to suspend or pass the effects of the decision targeted by the challenge. This last phase is not subject to any strict time limit.
This article was originally published in French in L'Orient-Le Jour. Translation by Joelle El Khoury.
