Debt Collection in Lebanon

The process of debt collection in Lebanon begins with a legal and practical assessment of the debtor, the nature of the debt, the available evidence and the realistic recovery route. At this stage, the creditor should determine whether the debtor is an individual merchant, a Lebanese company, a foreign company operating in Lebanon, or a debtor with assets in Lebanon. The review normally covers solvency, business activity, available assets, documentary evidence of the debt, existing court cases and enforcement proceedings, previous payment conduct, and the likelihood that the claim will be disputed. For corporate debtors, information from the Lebanese Commercial Registry can help identify the company, its registered data and commercial status, but registry data should be assessed together with contracts, invoices, delivery documents, correspondence, bank details and other case materials because registration information is based on data submitted by the concerned party. This assessment determines whether the creditor should start with out-of-court recovery, prepare court proceedings, use provisional measures, enforce an existing judgment, seek recognition of a foreign judgment or arbitral award, or consider insolvency-related recovery.

If the debtor has no active insolvency risk, no blocking enforcement issues and remains engaged in commercial activity, the creditor may begin with out-of-court debt collection. This stage is useful when the debtor is still operating, has identifiable decision makers and there is a practical chance to obtain payment, a repayment schedule, return of goods, assignment of the debt, set-off, exchange of services or another settlement arrangement.

Out-of-court recovery normally starts with a written demand and direct communication with the debtor. The demand should identify the creditor, the debtor, the amount claimed, the legal basis of the debt, the supporting documents, the payment details and the consequences of non-payment. Communication may be conducted by mail, email, phone or instant messengers, especially where these channels were previously used by the parties in their business relationship.

For Lebanese court proceedings, informal communication with the debtor should be separated from formal service of judicial documents. Court documents and procedural notifications follow the rules of the Lebanese Code of Civil Procedure, and service is usually carried out through the competent procedural channels, including a bailiff, police, internal security forces or court clerk, depending on the case. Where the debtor or another party is located outside Lebanon, notification may involve registered mail with acknowledgement of receipt, Lebanese diplomatic or consular channels, or service in accordance with the law of the foreign state.

If out-of-court recovery does not produce payment or the initial assessment shows that negotiations are unlikely to protect the creditor’s position, the next stage is judicial debt collection. This may be necessary where the debtor ignores the claim, disputes the debt, delays payment without a credible proposal, transfers assets, has other creditor claims, or where a court judgment is needed for enforcement against bank accounts, movable assets, immovable property or receivables.

Before initiating court recovery, the creditor should check the limitation period applicable to the specific debt. In civil matters, the general limitation period in Lebanon is 10 years. Shorter limitation periods apply to certain specific categories of claims, including some recurring payments such as interest, dividends, rent and other claims payable annually or within a shorter period, where the claim falls within the relevant provisions of the Lebanese Code of Obligations and Contracts. The limitation period normally runs from the maturity date of the obligation and may be invoked before the court by a party to the proceedings.

The limitation period may be suspended or interrupted in circumstances provided by law. If the debtor acknowledges the creditor’s right, the limitation period may be interrupted, and after interruption the period begins to run again. For debt recovery purposes, this makes written acknowledgements of debt, partial payments, signed repayment schedules, settlement correspondence and other documents confirming the debtor’s obligation especially important.

Lebanese law provides for judicial debt collection primarily through ordinary civil proceedings, while a summary procedure may apply to certain lower-value claims that meet the statutory criteria.

Ordinary civil proceedings are commenced by filing an initial statement of claim before the clerk of the competent court. The statement of claim should identify the court, the parties and their representatives, the facts, legal grounds, evidence, relief sought, date, signature and enclosed exhibits. For legal entities, the claim should also identify the entity’s legal form, name, business address and legal representative. If a lawyer is appointed, the power of attorney should be attached. After payment of the court fee, the claim is registered, assigned a number, stamped and recorded in the court register.

If the value of the claim is more than one million Lebanese pounds, the parties are required to hire lawyers. Filing a claim in court without the participation of a lawyer in this case is not allowed.

After registration, the claim and appendices are served on the defendant. The defendant must file a statement of defence within fifteen days from receipt of the claim and attach the documents supporting the defence. The plaintiff may file a reply within ten days from receipt of the defence, and the defendant may file a further response within the same period. After these deadlines expire, further submissions are accepted only where there is a valid reason or where the court sets additional deadlines.

On the day following the expiration of the deadlines for submissions, the head of the registry or the secretary must refer the file to the president of the court, who appoints one of the judges to prepare the case for hearing. During preparation, the judge may order the parties to provide factual or legal explanations, submit documents relied upon, discuss new documents or materials, and may also hear the parties for the purpose of reconciliation and settlement. Upon completion of this stage, the file is returned to the registry.

If the parties fail to reach a settlement, the president sets a hearing date. In urgent cases, the court may shorten procedural time limits, provided that the time limit set is not less than twenty-four hours. Separately, claims relating to persons or to movable or immovable assets with a value not exceeding 30 times the minimum wage may fall within the summary procedure introduced into the Lebanese Code of Civil Procedure. In summary proceedings, there is one round of exchange of submissions with shortened time periods, and the judge must issue a decision within two weeks of the last submission.

The parties may also file a joint written statement confirming that they rely on the written explanations already submitted. If the court finds that oral argument or further investigation is unnecessary and the case is ready for decision, it may issue a judgment without setting a hearing date. In such a case, the court must issue its decision within 30 days of receiving the joint statement.

If the defendant fails to appear at the hearing without a valid excuse or fails to file a statement of defence, the court may issue a ruling against the defendant if it finds the plaintiff’s claims lawful, admissible and well founded. If the parties appear at the hearing, the court hears the case and, after the conclusion of pleadings, the presiding judge declares the trial closed and sets a date for the final decision within a period not exceeding six weeks. Each party may submit a written memorandum within one week after the trial concludes to clarify or elaborate on points raised in the pleadings.

If new circumstances arise or previously unknown facts appear after the conclusion of the pleadings but before the decision is rendered, the court may, on its own initiative or at the request of one of the parties, resume the proceedings and return the case to the pleadings schedule. Where there is a risk that the debtor may dissipate assets, provisional measures may also be considered. Lebanese courts may order provisional or conservatory measures to protect rights and prevent harm, including measures connected with the preservation or attachment of assets, where urgency and the risk to the creditor’s rights are shown.

A decision of the court of first instance may generally be appealed to the court of appeal within 30 days from notification of the decision. Decisions in disputes under LBP 150 million are generally not appealable, except on limited grounds provided by law. A shorter period of eight days applies to decisions issued by the judge of summary proceedings, the President of the Enforcement Bureau and decisions ordering interim measures.

A decision of the Court of Appeal may be challenged before the Court of Cassation within two months from notification of the decision, unless a special legal provision provides another time limit. Cassation is limited to grounds permitted by Lebanese procedural law and does not operate as a full rehearing of the factual dispute.

A challenge by way of cassation does not stay enforcement of the contested decision until it is set aside, unless the competent court orders a stay of enforcement, usually subject to appropriate security. The decision of the Court of Cassation is final and cannot be appealed further.

For international creditors, a separate stage may be the recognition and enforcement of foreign judgments in Lebanon. Unless an applicable international convention provides another route, a foreign judgment normally requires an exequatur order before it can be enforced in Lebanon. The application is filed to the President of the Court of Appeal, Civil Section, with jurisdiction based on the defendant’s domicile, residence or the location of the assets subject to execution. If none of these connecting factors applies, the application may be submitted to the President of the Beirut Court of Appeal.

For exequatur, Lebanese courts examine whether the foreign judgment was rendered by competent judges, whether it is enforceable and has acquired res judicata effect in the country of origin, whether the defendant was duly notified and given the right of defence, whether reciprocity exists for the enforcement of Lebanese judgments in the country of origin, and whether the judgment complies with Lebanese public policy. After exequatur is granted, the foreign judgment becomes enforceable in Lebanon and may be executed through the competent Enforcement Bureau.

Foreign and international arbitral awards may also require recognition and exequatur before enforcement in Lebanon. In practice, the creditor should be ready to provide the arbitral award, the arbitration agreement and the required translations where the documents are not in the procedural language accepted by the court. The court does not retry the commercial dispute on the merits; the review is focused on the existence of the award, the arbitration agreement and the absence of grounds preventing recognition or enforcement.

In cross-border recovery, payment channels, beneficial ownership, banking restrictions, sanctions and anti-money laundering issues should be reviewed before settlement or enforcement payments are arranged. This is particularly relevant where the debt, debtor’s assets or settlement funds are connected with Lebanese banks, foreign-currency accounts, pre-October 2019 deposits, international transfers or counterparties exposed to sanctions risks.

Once a Lebanese judgment, exequatur order or enforceable arbitral award can be executed, the creditor must initiate enforcement proceedings. A judgment may be brought for enforcement within 10 years. Within enforcement proceedings, the creditor’s claims may be satisfied by seizing and writing off funds from the debtor’s accounts, seizing movable and immovable property and selling it, seizing securities, and seizing receivables or other debts owed to the debtor.

An alternative or additional route for collecting a debt from a company or merchant is bankruptcy or another insolvency-related procedure. The general rules on insolvency of non-bank traders, including legal entities and entrepreneurs, are contained in Book V of the Lebanese Code of Commerce, as amended by Law No. 126/2019, which entered into force on 1 July 2019. Lebanese insolvency law includes preventive composition, reorganisation within main insolvency proceedings and liquidation.

A preventive composition procedure may be proposed by a debtor before cash-flow insolvency or within 10 days of suspension of payments. The debtor’s plan must foresee repayment of at least 50% of unsecured claims within one year, 75% of the debt within 18 months, or 100% within three years. The court calls a creditors’ meeting and appoints a trustee to supervise the debtor’s business. During this procedure, creditors may be restricted from initiating or continuing enforcement actions against the debtor’s property.

A reorganisation procedure may be used within main insolvency proceedings after the debtor is adjudicated insolvent. Main insolvency proceedings may be initiated by the debtor or by any creditor where the debtor is in a state of insolvency and may result in either reorganisation or liquidation. During main insolvency proceedings, a receiver may be appointed to manage the debtor’s assets and insolvency estate. Insolvent liquidation may follow where a reorganisation plan fails or where the debtor does not comply with an approved preventive composition or reorganisation plan.

According to the Lebanese Commercial Code, every merchant is considered bankrupt if he stops paying his commercial debts and maintains his financial reputation by clearly illegal means. At this stage, if the debtor’s assets are insufficient to fully satisfy the creditors’ claims, transactions made with intent to harm creditors may be challenged.

The following actions are recognized as invalid in relation to all creditors if the debtor made them after the date of cessation of payments established by the court, or within twenty days before this date: gratuitous transactions and transfers, except ordinary small gifts and the establishment of charitable foundations; payments of obligations before maturity, regardless of the form of payment; fulfilment of monetary obligations by means other than money, including bills of exchange, acceptances, transfers and other methods of satisfying obligations through the transfer of property; execution of a contractual or judicial mortgage, pledge of movable property or right to use the debtor’s property to secure a previously incurred debt; and any transaction concluded for value with a counterparty who knew about the debtor’s insolvency.

The limitation period for filing claims for annulment of the above actions is 18 months from the date of opening of bankruptcy. As a result of annulment, the value lost by the debtor through such transactions may be returned to the insolvency estate, increasing the assets available to satisfy creditors’ claims and cover the costs of the bankruptcy or liquidation procedure.

If you need support with debt collection in Lebanon or a wider international debt collection matter connected with Lebanese debtors, assets, judgments or payment channels, Grandliga can work on the case at each stage: debtor and Commercial Registry review, analysis of contracts and evidence, assessment of limitation periods, out-of-court recovery, court strategy, provisional measures, ordinary or summary proceedings, recognition and enforcement of foreign judgments or arbitral awards, enforcement proceedings, banking and cross-border payment issues, and insolvency-related recovery. The recovery route is selected according to the debtor’s status, available assets, evidence, currency issues, payment risks and the procedural stage of the claim.

# DEBT COLLECTION AGENCY LEBANON

28.10.2024

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