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Lebanese Framework on Arbitration
I. General background
Lebanon is an arbitration-friendly jurisdiction. It is accepting arbitration as a dispute resolution more and more every day.
The Lebanese legislation on arbitration is modern, meaning that it recognizes all the established principles in international arbitration, and is familiar with the laws and practices of international arbitration.
Arbitration‘s advantages in Lebanon, like in many other countries, are that it is a rapid and flexible dispute solving method, as well as recognising the choice of the parties in determining their arbitrator and the applicable law. Most important is that arbitration proceedings are confidential.
However, some disadvantages are the restrictions imposed by the privity of the contracts, availability of appeal procedures in domestic arbitrations, and issues faced with multiparty disputes.
II. Definition of Arbitration
Arbitration is an Alternative Dispute Resolution that has a non-judicial process. A third independent party (an arbitrator) makes a binding decision. Arbitrations are less formal than ad hoc tribunals and arbitrators are often experts on specific rights. Article 768 of the Lebanese Code of Civil Procedure (LCCP) provides that an arbitrator must be a natural person, have full capacity to exercise his or her civil rights, and must not be insolvent.
III. Domestic vs International Arbitration:
The Lebanese arbitration law and regulations are based on old French arbitration law. The LCCP, which was enacted by Decree-Law 90/83, regulated in its second section arbitration. The law did differentiate between domestic and international arbitration. It stated in Articles 762 to 808 the rules monitoring domestic arbitration, and in Articles 809 to 821 it discusses the rules regulating international arbitration seating in Lebanon.
Article 809 provides that arbitration is considered international “when it involves the interests of international trade.”. Moreover, Lebanon joined the New York Convention on 9 November 1998, so in matters of international arbitration, the regulations of the latter are applied beside the Lebanese law. Concerning such arbitration, Lebanese law did not require a specific form for the arbitration agreement, other than the parties’ mutual consent. However, the Law did require that the domestic arbitration agreement must be in written forms to be considered valid ‘ad validitatem’ (article 763 LCCP). The arbitration agreement is directed by the privity of the contract and only binding to its parties. Nevertheless, Lebanese courts allow the binding of such agreement for non-parties under two circumstances. Firstly, in a chain of contracts, which have the same objectives and which form an economic unity. Secondly, in some cases involving “group of companies” issues. In some cases, the arbitration clause extends from the main contract to other contracts in the chain by reference to the economic unity of their operations. Also, institutional arbitration is more commonly used in international arbitration agreements, while ad hoc arbitration is more common in domestic arbitration agreements.
IV. Types of Arbitral Disputes
Almost all disputes can be resolved by resorting to arbitration. Article 762 of the LCCP provides that contracting parties may insert in their commercial and civil contracts a clause providing that all disputes that may arise from the validity, performance or the interpretation of their contracts will be settled by way of arbitration.
However, some disputes are not allowed to be resolved other than before local courts. These disputes include:
Questions of personal status (age, nationality)
Questions of insolvency
Questions of employment contracts and social security.
Non-negotiable personal rights such as the right to human dignity, the right to physical integrity, the right to privacy, the right to food.
V. Period of arbitral proceedings
Unless decided by the parties, arbitral proceedings must not take more than 6 months to complete, starting from the day the last arbitrator accepts his assignment. The period can be extended by the agreement of the parties or by the decision of the Chief Judge of the court based on the order of the parties (Article 773 LCCP).
VI. Why is arbitration better than local courts resolutions?
As stated in the background section, the arbitration process is fast and flexible, along with less costly and confidential.
Unlike Lebanese courts, where the minimum period of any civil case before the jurisdiction court takes between 10 to 15 years to be resolved and issue a statement. The arbitral process takes no more than 6 months and might exceed that limit based on certain circumstances. The late issuing of a statement about a dispute can cause the loss of evidence, forgetting a witness’ facts, death of witnesses potentially, higher legal fees, etc. However, arbitration costs less because there is no need for lawyers to represent the parties. Furthermore, payment of the fees is the responsibility of the convicted party. The arbitration process is rapid, where parties choose their arbitrator(s) and the applicable law, and where the arbitrator(s) settle the dispute by letting both parties agree on what satisfies their interests. Local courts do public hearings in general, however, arbitral proceedings are characterized by their confidentiality as they are conducted only in the presence of the parties. Since the use of rapid dispute resolving methods in arbitration, we notice that businessmen and contracting parties prefer resorting to this method rather than participating in ad hoc tribunals This is because they cost more and require much more time than arbitration.
VII. Institutional Arbitration centre in Lebanon
The Lebanese Arbitration and Mediation Center (LAMC) is an institution that provides administration and monitoring services for arbitration and mediation proceedings in Lebanon. Its provisions include the local and international business communities, private and public institutions, and the government. The Lebanese Arbitration Center was founded in 1995.
LAMC is based in The Chamber of Commerce and Industry and Agriculture of Beirut and Mount Lebanon. The centre is an independent institution that regulates and governs domestic and international arbitration.
Having a look at Lebanon's tribunal system it makes legalists sure every day that arbitration is a better option to resort to when solving disputes over civil issues. In this regard, it is advised to give more attention to arbitration and train the law students and legalists to be proper arbitrators.