Banks: The Ins and Outs of Litigation Linkage
Eleven Lebanese banks have initiated legal action by asking the Ministry of Finance to compel the government to repay its debts to the Central Bank (BDL). The purpose of this action is to enable the banks to fulfill their commitments to depositors.

One of the lawyers representing the group of eleven banks, barrister Elie Chamoun, explained the specifics of the lawsuit in an interview given to the TV channel MTV in the program "Sar el Wakt."

Initially, it should be understood that, in the administrative jurisdiction, it is necessary to take legal action against the state by submitting a complaint to the authorities in advance so that they can take a decision in response to it. It is the first step in the plaintiff's process to sue the government. This procedure is known in French law as "liaison du contentieux," a concept that does not exist in Anglo-Saxon law.

This "liaison du contentieux" refers to the rule of prior decision, whereby the administrative trial is a trial against an act, not against the administration. The response from the latter can be explicit, or if it remains silent for a period of two months, it is considered an implicit refusal.

In this context, lawyer Elie Chamoun highlighted that if the administration remains silent after February 5, 2024, the eleven banks will be compelled on that date to file a lawsuit against the state in front of the State Council.

He recalled that the banks had been requesting information from BDL since 2014, based on minutes of meetings, about the use of the funds they had provided. According to Chamoun, the Central Bank's response was that they were reinvesting abroad.

The legal expert also defended the banks' recourse to placing funds with the BDL.

Banks Forced to Resort to the BDL


Chamoun recalled that, in principle, Central Bank Circular 62 forces commercial banks to place funds with the BDL. It also requires ensuring that their placement with each correspondent bank does not exceed 25% of their own funds. "This encouraged them to prefer placements with the Central Bank, especially since the state, under Article 113 of the Money and Credit Code (MCC), guarantees any losses recorded on the balance sheet of the Central Bank," he noted.

Furthermore, within the same context, he highlighted that the BDL requires each bank to block with it the equivalent of any foreign exchange transaction it performs for its customer.

Consequently, the eleven banks are demanding the repayment of the state's debt to the BDL, totaling $16,617,199,858 billion, and the financing, as a first step, of the losses recorded on the balance sheet of the Central Bank for 2020, as reflected in the Alvarez & Marsal audit reports, totaling $51,302,155,887.

In a subsequent stage, following an audit of the BDL's balance sheets for the fiscal years 2021 and 2022, which would be conducted based on the criteria adopted by Alvarez & Marsal, the eleven banks demand that the state cover the negative balances of the Central Bank.

The "liaison du contentieux" procedure occurred in the aftermath of the inclusion on the agenda of the Council of Ministers of the bank restructuring project. The current version of the project absolves the government and, consequently, the Central Bank of responsibility in the context of the multidimensional crisis that Lebanon has been going through for the past four years. It transfers the losses to the banks and depositors.

This project is said to have been developed by the Deputy Prime Minister in the caretaker government, Saadeh Chami, with the approval of the IMF. However, Chami continues to plead not guilty, emphasizing that the author of the project is the Banking Control Commission in Lebanon, an entity under the jurisdiction of the BDL.

For reference, the eleven banks that initiated the dispute are, alphabetically: Bank Audi, Bank of Beirut SAL, Banque du Crédit libanais SAL, Banque Libano-française SAL, Banque Libano-suisse SAL, BBAC SAL, Blom Bank, Byblos Bank SAL, Fransabank SAL, MedBank SAL, and SGBL SAL,
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