Debt collection in Lebanon

Lebanon is a key market for Italian companies in the Middle East, supported by a strong commercial tradition and established trade relations. However, recovering a commercial debt from a debtor based in Lebanon presents significant challenges, linked to the complexity of the local legal system, the country’s economic and financial situation, and the length of legal proceedings. It is therefore essential to be aware of the tools available to protect your interests.

Commercial and economic context

The Lebanese economy is predominantly service-oriented and has historically played a central role as a financial and commercial hub in the Middle East. However, since the end of 2019, the country has been hit by a severe economic and financial crisis: the national currency, the Lebanese pound, has lost over 98% of its value, inflation has reached exceptional levels, and the banking sector has suffered huge losses. Banks have imposed informal controls on withdrawals, and Lebanon defaulted on its dollar-denominated debt in 2020. This economic situation has direct consequences on the solvency of debtors and the actual enforcement of judgments.

The legal system

The Lebanese legal system is based on a combination of French civil law and Islamic and Ottoman law. The fundamental rules governing commercial relations are the Code of Obligations and Contracts of 1932 and the Civil Code of Procedure. The system is divided into three levels of jurisdiction: courts of first instance, courts of appeal, and the Court of Cassation (Supreme Court), based in Beirut. In addition to the ordinary courts, there are specialized courts for commercial, labor, and land ownership cases. The official language is Arabic; French and English are widely used in commercial and legal contexts.

Actions for debt recovery in Lebanon

A creditor wishing to take action against a debtor based in Lebanon can rely on various instruments provided for by local law:

Out-of-court warning: before taking legal action, it is customary to send a formal letter of default through a local lawyer. This stage is particularly important in the Lebanese context, where the commercial culture values direct relationships and negotiations, and can facilitate an amicable agreement or the establishment of a payment plan. The out-of-court phase lasts on average up to 60 days.

Negotiation and agreement: if the debtor acknowledges the debt, it is possible to formalize a payment plan or explore alternative solutions, such as returning the goods or transferring the debt to a third party.

Legal action: if the out-of-court phase is unsuccessful, the creditor can file a claim with the competent court, presenting documentary evidence of the debt (contracts, invoices, correspondence). The court of first instance is composed of a single judge for cases of limited value, or a panel of three judges for more complex cases. Judgments of the courts of first instance may be appealed before the courts of appeal and, in the final instance, before the Court of Cassation.

Enforcement of the judgment: once a final judgment has been obtained, the creditor has 10 years to enforce it. Enforcement methods include seizure of funds in the debtor’s accounts, seizure and sale of movable and immovable property, and attachment of claims.

Limitation periods

The general limitation period for commercial claims in Lebanon is 10 years. For certain types of claims — including interest, dividends, rents, and all claims payable periodically — the period is reduced to 5 years. The limitation period is interrupted if the debtor acknowledges the creditor’s right. It is therefore essential, from the earliest stages of recovery, to take the necessary measures to suspend or interrupt the limitation period.

Recognition and enforcement of a foreign judgment in Lebanon

Foreign court judgments may be enforced in Lebanon subject to the granting of exequatur by the Lebanese courts. The main conditions include: the judgment must have been handed down by a court having jurisdiction under the law of the state of origin; it must be final; the defendant’s rights of defense must have been respected; the content of the judgment must not be contrary to Lebanese public policy; the state of origin must recognize, on the basis of the principle of reciprocity, the enforcement of Lebanese judgments on its own territory. In this regard, a bilateral agreement on judicial cooperation in civil and commercial matters and on the enforcement of judgments facilitate the exequatur process for foreign judgments.

Arbitration in Lebanon

Lebanon is considered a favorable jurisdiction for international arbitration. The country ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 1998 and is a party to the Arab Convention on Commercial Arbitration in Amman. The Lebanese Arbitration Center, founded in 1995, operates according to rules modeled on those of the International Chamber of Commerce in Paris and is a point of reference for the resolution of international commercial disputes. Foreign arbitral awards may be enforced in Lebanon after the Court of First Instance of Beirut has granted exequatur; the proceedings are conducted ex parte and the judge essentially verifies the existence of the award and its compatibility with Lebanese international public policy.

Critical issues and recommendations

Debt recovery in Lebanon requires in-depth knowledge of the local legal system and the current economic context. The main critical issues include the complexity of the judicial system, which is influenced by different legal traditions (French civil, Islamic, and Ottoman), the length of judicial proceedings, the situation of economic and financial instability that can affect the actual collectability of the debt, and the practical difficulties associated with the banking controls in force in the country. It is therefore essential, before taking any action, to conduct a preliminary assessment of the debtor’s solvency and the documentation available as proof of the debt. Relying on a lawyer specializing in international debt collection is essential in order to correctly prepare the initial warning letter, choose the most effective procedure based on the type of debt, and, if necessary, request the application of precautionary measures.