This statement first appeared in Arabic on Monday, 6 December 2021. After its publication, the bill was blocked in the joint committees.
Today, the joint committees will examine a bill to place restrictions and controls on deposits drafted by Prime Minister Najib Mikati’s team. Although both the Finance and Budget Committee and the Administration and Justice Committee had developed such a bill, Parliament Speaker Nabih Berri apparently had a mutual understanding with the government to pass its version. A legislative session was also announced for 7 December 2021 with the insinuation that this bill will be on its agenda if ready. Before the bill is adopted, we would like to make the following points:
Bogus Capital Control
The bill establishes bogus capital control. This is because, like the previous capital control bills, it has come too late and is divorced from any plan or vision for financial or economic reform that includes restoring equilibrium to the balance of payments, restructuring public debt and the banking sector, and restoring order to financial life in Lebanon.
Besides the bill’s lack of basis in fair and transparent rules and standards, it also spares the banks’ operations and investments from the restrictions imposed. Hence, it fails to stop further leakage of foreign currency out of the country. To the contrary, it will probably cause accelerated depletion of the remaining foreign currency, hyperinflation, and an inevitable and escalating deterioration of the national currency. Similarly, the bill does not address the issues of regulating import and payments to abroad and stimulating the economy and economic growth in a manner that takes into account the size of the available foreign currency reserve, on one hand, and fundamental socioeconomic needs, on the other.
To recall, the central bank’s foreign currency liquidity was reduced by USD10 billion in a matter of two years. The economy was during that period – and remains today – in dire need of optimal management of the remaining foreign currency resources.
Codifying the Banque du Liban and Other Banks’ Practices Such That the Depositors and General Population Shoulder the Losses
The bill codifies the current practices that restrict depositors’ rights without any legal justification or any financial and economic studies. In practice, these practices burden depositors with the brunt of the losses via veiled “haircuts” while freeing the banks from any responsibility. They thereby violate clear constitutional principles, most importantly social justice, equality, and proportionality and necessity in any restriction of the right to property.
The most important practices that the bill reestablishes include:
Ensuring That the Banque du Liban and Other Banks Escape Accountability
The bill’s main goal is to inoculate the governor of the Banque du Liban and the other banks against any judicial oversight domestically and abroad. This objective reflects apprehension about foreign justice and even domestic justice, which has produced several rulings in depositors’ favor. It undermines the principle of the separation of powers and strips depositors of the right to access an independent and impartial tribunal, in contravention of the Constitution and the international covenants that constitute an inseparable part of it. These changes to the judicial system are even more unconstitutional because of the failure to consult the Supreme Judicial Council, which constitutes a violation of a substantial formality bearing constitutional force according to Constitutional Council Decision no. 23 of 2019 concerning the 2019 budget law.
The aforementioned goal is achieved in three ways:
For these reasons and others that we reserve the right to reveal and discuss later;
And with full support for the Depositors Union, a member of the Independence of the Judiciary Coalition, in all its actions;
We reject this bill because it aims to protect sectional and private interests at the expense of public interest and violates several constitutional foundations and principles. The most important include social justice, equality before the law, and proportionality and necessity in any restriction of constitutionally guaranteed rights and freedoms, as well as the separation of powers and the independence of the judiciary and right of every individual to an impartial and independent tribunal. We call for the broadest possible social coalition to block the bill’s passage.