Lebanon: Project Finance

Last Updated: 21 September 2017
Article by Rima Abou Mrad and Mazen Fakih

1. What are the key differences in the legislation in this jurisdiction and other key international jurisdictions?

Lebanon is considered to be a civil law country. Indeed, the Lebanese legal system is based on/inspired mainly by the legal system in France, even though few Ottoman and Islamic legal principles apply on few matters. The Code of Obligations and Contracts (COC), which is the prevailing legislation, was promulgated in 1932, under the French mandate over Lebanon. The said code is the equivalent of the French Civil Code. However, the COC does not apply on personal status matters (such as marriage/divorce, inheritance etc) which are governed by the laws set by the 18 sects recognised in Lebanon. According to the COC, parties are free to structure contracts/projects as they see fit provided such contracts/projects do not violate or contradict mandatory legal provisions, public order, morality or core public policy.

2. Are there differences in the way project finance operates in freezones and secondary jurisdictions?

There are no free zones or secondary jurisdictions in Lebanon.

3. Do Islamic finance concepts impact the way the project finance is structured?

Islamic banks were introduced to Lebanon around nine years ago. However, despite the Central Bank's efforts to regulate the industry, Islamic finance has failed to impact the banking sector in Lebanon. Due to the way project finance is structured (including a competitive banking sector, a lack of marketing to create awareness about the various Islamic banking options and a lack of focus on equity-based contracts), the Lebanese fiscal laws consider Islamic financing as operational tools instead of financing tools that are not exempt from stamp duty, value-added tax and double taxation.

4. What types of collateral can be used?

Under Lebanese law, four types of collateral can be used:

  1. Guarantee over real estate which provides the creditor with a right over property in order to secure the repayment of a debt. Once registered, the guarantee follows the property and is redeemed only when the full amount of the loan is settled. The default of the debtor leads to seizure of the property and its sale to pay for any remaining debt.
  2. Mortgage over real estate which grants the creditor a retention right on the property of the debtor until settlement of the debt. In the event of default of debts, the property becomes a security that gives the creditor priority on collecting the debt he is owed.
  3. Pledge taken over movable property which grants the creditor the right to withhold a movable property (tangible or intangible) of the debtor until settlement of the debt.
  4. Assignment of insurance rights or payouts in order to ensure the creditor is paid first in case of default of the debtor.

5. How does a creditor assure themselves?

The creditor needs to execute an agreement with the debtor in order to perfect a security interest in anticipation of a collateral becoming extracted. Additional requirements apply for specific kinds of security interests. For example, pledges for shares of stock should be registered with the Commercial Register. Security interests over some movable property (e.g. boats, vehicles, etc.) must be registered with special registers specifically established for each type of good. Mortgages and guarantees over real estate must be registered with the Real Estate Register. It is important to note that any preexisting lien on movable or immovable property will provide its owner a priority over the lien of the creditor who will have a right of preference over any owner of a succeeding lien.

6. Outside bankruptcy/insolvency procedures how can project lender enforce their rights as a secured creditor?

Outside bankruptcy/insolvency procedures, the project lender will have to submit a petition before the execution department along with the instrument subject to execution requesting the notification of the debtor and seizure of the security (the good or property serving as a collateral) simultaneously. He will also have to pay an execution fee to the execution department.

The execution judge will either approve the request of the project lender, or decide to notify the debtor and give him a certain time period (usually ten days as of the date of notification) to settle his debt or submit an objection to the project lender's petition.

If the debtor submits an objection before the execution judge, the execution will be postponed until the execution judge issues his decision regarding the said objection. It should be noted here that the debtor could request to be granted an extra time period for the settlement of his debt provided that such time period does not exceed six months (such request will not affect the right of the creditor to take provisional measures in order to ensure the protection of his rights).

If the debtor fails to pay his debt or submit an objection to the execution department within the above mentioned time period, the execution judge will order the seizure of the security and its sale in a public auction.

If the debtor fails to settle his debt within the given time period, the execution department will seize the security and sell it at a public auction. The execution department will then give the project lender the amount due to him by the debtor.

7. Are there preference periods or clawback rights, creditor rights which can impact collateral?

Under Lebanese law, the transactions below shall be considered null towards the debtor's joint creditors if the debtor performed these transactions during the suspect period (which starts from the date of suspension of payment as determined by the court or within twenty days prior to this said date – such period shall not exceed 18 months as of the date of the declaration of bankruptcy by the court):

  • Gratuitous transactions or donations except the usual small gifts or the constitution of a wakf (mortmain property);
  • Any form of settlement of debts prior to their maturity date;
  • The settlement of due monetary debts by means other than cash, money orders, bill of exchange, or bank drafts;
  • The establishment of a conventional or judicial mortgage, pledge over movable property or pledge to benefit from the goods of the debtor in order to guarantee the payment of a former debt.

The debts of secured creditors should be satisfied prior to the debts of unsecured creditors, after settling the expenses and charges of the bankruptcy proceedings and the debts of preferential creditors.

8. What procedures other than court procedures can be used to seize project company assets?

Court procedures are the only procedures that can be used to seize project company assets.

9. Are there any relevant tax, fee or foreign currency restrictions which can impact project finance?

Lebanese companies are usually subject to taxes on corporate profits and to withholding taxes on dividends (few exceptions apply). Furthermore, services and goods are subject to a value added tax (VAT). However, Lebanese laws, in general, do not impose any foreign currency restrictions which can impact project finance. The Lebanese currency (Lebanese Pound – LBP) is currently pegged to, and readily tradable with, the US dollars..

10. What are the rules governing how project companies can maintain foreign currency accounts locally and outside the jurisdiction?

Project companies can freely maintain foreign currency accounts with banks in and outside Lebanon.

11. How does repatriation of foreign earnings work?

No restrictions apply, in Lebanon, on the repatriation of foreign earnings. However, a new law, dated 24 December 2015, stipulates that any money entering or exiting Lebanon, carried out by a person or shipped in a luggage or any other mean, which exceeds the amount of USD 15,000 or its equivalent in other currencies, should be declared to Lebanese customs.

Furthermore, Lebanese laws (e.g. the circular issued by the Bank of Lebanon number 7818/2001 issued on 18/5/2001, Lebanon Law No. 44/2015 etc) stipulate that banks and other financial institutions are obliged to report any operations they suspect to be related to money laundering operations or operations funding terrorism to a Special Investigation Committee at the Bank of Lebanon regardless of the amount of such operations.

12. Does any financing and project documentation need to be registered with authorities - if so who?

It is not usually required, under Lebanese laws, to notarise or register project documentation or financing documentation except for specific kinds of security interests (such as pledges for share of stock, security interests over some movable property, mortgages and guarantees over real estate etc) which usually need to be notarised and registered with the appropriate register for validity and/or to facilitate enforceability. In addition, pledges usually require the possession of the pledged asset. As for project documentation, it is not usually required to register them.

13. Are government or government agency approvals needed for project finance transactions?

There is no need to obtain approval from the government (i.e. Lebanese Ministries) or government agencies for project finance transactions (e.g. the financing structure or documents). Approvals are usually needed for the underlying project (and not for the project finance transaction per se) and should be granted by the Lebanese ministries having jurisdiction over the project involved. For example, the approval of the Ministry of Public Health and the Ministry of Environment is needed before initiating any project in relation to environmental concerns. A building permit is needed prior to beginning the construction of a new building etc.

14. Are any incentives provided to foreign investors?

There are many incentives provided to foreign investors in Lebanon. Among them:

  1. Investment Insurance Programs:

    There are many investment insurance programs encouraging new investments in Lebanon by insuring them against war, civil unrest, expropriation, confiscations and assisting them in entering the Lebanese market e.g. (i) The National Investment Guarantee Corporation (NIGC); (ii) The Multilateral Investment Guarantee Agency (MIGA) which protects investments against non-commercial risks; Overseas Private Investment Corporation (OPIC-US) which provides financial innovations that help U.S. businesses successfully enter the Lebanese market; (iii) COFACE (France); (iii) Export Credits Guarantee Department (ECGD- UK); (iv) Hermes Kreditversicherungs-AG (HERMES-Germany); (v) Istituto per i Servizi Assicurativi e il Credito all'Espotazione (SACE-Italy); (vi) Inter-Arab Investment Guarantee Corporation (IAIGC) etc.
  2. IDAL – Investment Law No. 360:

    Through Investment Law No. 360, Investment Development Authority of Lebanon (IDAL), offers investors various financial and non-financial incentives (e.g. tax exemptions, reductions, immediate issuance of work permits etc). There are two incentives schemes: (i) Investment Project by Zone Scheme which provides small and medium-sized projects in specific sectors such as information technology, media, tourism, agriculture, etc and pre-defined geographical zones in Lebanon with various benefits; and (ii) Package Deal Contract scheme for large-scale projects that have a high impact on employment.
  3. Investment Agreements:

    Bilateral Investment Agreements:

    The Lebanese government has signed bilateral agreements with various states (Canada, UAE, UK etc) by virtue of which the host contracting state grants investors and investments from the other contracting state the national treatment or the most favoured national treatment depending which one is more advantageous for the investor and its investment.

    Multilateral Agreements related to Investment:

    Lebanon has signed various regional and multilateral agreements related to investment such as:

    Agreements regarding the settlement of investment disputes and the enforcement of foreign arbitral awards (e.g. Convention on the Settlement of Investment Disputes between States and Nationals of other States of 18 March 1965 and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 - UNCITRAL);

    Agreements encouraging investment of regional capitals and their protections (e.g. the Unified Agreement for the Investment of Arab Capital in Arab countries of 26 November 1980 and Agreement on the Promotion and Protection of Investment and Transfer of Capital among Arab countries of 7 June 2000)
  4. Double Taxation Treaties:

    Lebanon has signed double taxation treaties with various countries (e.g. Cyprus, France, Italy, Russia, Turkey etc.) in order to relieve investors from the burden of double taxation.
  5. Banking Secrecy/Foreign Currency:

    Banking secrecy law in Lebanon still attracts foreign investments and deposits even though some laws were issued in Lebanon to combat money laundering and tax evasions. Furthermore, the fact that Lebanese laws do not usually impose any restrictions on foreign currency and foreign currency exchange, or the repatriation of foreign earnings encourages investors to invest in Lebanon.

15. Which jurisdiction's laws typically cover project agreements?

When it comes to project agreements, the parties usually typically agree that Lebanese laws are the laws having jurisdiction over their agreements. According to Lebanese law, the parties can freely agree on the form and content of their contractual arrangements as well as the applicable laws. However, such agreements should not violate public order or morals, and are subject to the Lebanese mandatory and imperative laws.

16. Which arbitration bodies are typically cited in project agreements?

The arbitration bodies typically cited in project agreements are the following:

  1. The Lebanese Arbitration Centre at the Chamber of Commerce, Industry and Agriculture of Beirut in Lebanon that was established in 1995. Arbitration of local and international dispute can be performed at this centre in accordance with the rules of arbitration of the Lebanese Arbitration Centre or any other rules agreed upon between the parties.
  2. ICC Lebanon which is a national committee for the International Chamber of Commerce of Paris (ICC).
  3. CIArb Lebanon which is the national branch of the Chartered Institute of Arbitrators (CIArb).

It should be noted that the Beirut Bar Association recently launched an arbitration centre.

17. What are the typical structures of project companies?

The typical structures of project companies in Lebanon are joint ventures, joint stock companies and limited liability companies.

  1. Joint Ventures:

    Joint ventures may take a number of forms in Lebanon. They could be a simple contractual arrangement between the parties without the establishment of any separate legal entity, or a business structure agreed upon between the parties such as joint stock companies, limited liability companies, holding companies etc. Joint ventures are not required, under Lebanese law, to have a specific percentage of Lebanese ownership unlike other countries in the region.
  2. Joint Stock Companies (Société Anonyme Libanaise – SAL):

    Lebanese joint stock companies are established with a minimum capital amounting to LBP 30,000,000 (USD 20,000). Under Lebanese law, the shareholders of a joint stock company do not have the status of commercial traders and their liability is limited to their contribution to the equity capital (except in the case of fraud). A SAL can take several forms in Lebanon. It could be a regular joint stock company which can carry out all kinds of business activities in Lebanon (certain activities might be subject to specific requirements). Regular joint stock companies are subject to 15% tax on corporate profits and 10% withholding tax on dividends.

    There are special kinds of joint stock companies: holding companies and offshore companies. Holding companies are exempt from income tax on profits and withholding tax. A proportionate tax of 6% of its capital and reserve fund apply (up to 5 million LBP). The activities of holding companies are limited to the acquisition of share in existing Lebanese or foreign companies, managing its subsidiaries, granting them loans and securing them against creditors, holding of Intellectual Property rights.

    Offshore companies are only subject to a flat annual tax of 1,000,000LBP (660USD); however their activities are limited to servicing customers outside of the Lebanese territory, except for banking, finance or insurance activities.
  3. Limited Liability Companies (Société à Responsabilité Limité – SARL):

    A SARL is established with a minimum capital of LBP 5,000,000 (USD 3,300). As is the case with joint stock companies, the liability of partners in a SARL is limited to their contribution to the equity capital (except in case of fraud). A SARL is subject to 15% tax on corporate profits and 10% withholding tax on dividends.

Originally published by LexisNexis.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions