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:

 

• Stripping depositors of any acquired right to withdraw sums or make transfers to abroad from their “old” foreign currency bank accounts, as well as depriving those who have an account abroad or a “new” account of the ability to make a transfer. This deprives depositors of their balances in approved foreign currency (“lilarification”) without any guarantee that they can be exchanged at a rate reflecting their actual value or any safeguards unifying the exchange rate or limiting its deterioration.

 

• Allowing the Banque du Liban near-discretional authority over the limits and conditions for making withdrawals and transfers to abroad by including a non-exhaustive list of arbitrary exceptions without any transparency and accountability mechanisms, which will lead to unfairness and discrimination. Given the central bank’s current administration and its faltering governance that caused the current crisis and exacerbated the effects, the decision to free it from any oversight and grant it the broadest and most comprehensive powers to set these controls, adopt restrictions, and secure rulings is tantamount to handing the whip over to the torturer. Hence, the central bank and all its bodies should have been re-regulated, powers separated, and the conflict of interests addressed before this law’s adoption.

 

• Stripping the government of any power (except in extending or shortening the law’s term). To the contrary, the government should be able to define the exceptions from the restrictions on capital movements in accordance with national strategic interests based on a vision of the economic sectors and social groups that must be preserved.

 

• Ambiguity that leaves many key points, such as the withdrawal limit and exceptions, open to interpretation. The result will probably be increased outflows of foreign currency, accelerated inflation, and depreciation of the Lebanese lira.

 

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:

• The transfer of the power to examine claims of breaches by banks in the law’s application to the Higher Banking Commission, which is headed by the governor of the Banque du Liban.
• The establishment of exceptional courts (outside any judicial system) to examine depositors’ objections to refusals to execute transfers, courts whose decisions are not open to any appeal. There is legitimate fear that these courts may never actually arise or are at least guaranteed to be loyal to the political and banking class.
• The retroactive effect of the bill’s provisions pertaining to transfers that have not been executed or are in dispute before courts domestically or abroad. The pretext for this stipulation is that these provisions are “part of public order and override any text that conflict with them”. In effect, it establishes the exclusive jurisdiction of the exceptional courts, preempts the issuance of rulings in cases still pending before the regular courts, and nullifies the effects of the rulings already issued. Hence, it absolves banking officials and enables them to escape punishment. It is akin to a general financial amnesty that precludes any potential recovery of funds acquired illegitimately or arising from financial crimes and infractions punishable under the laws currently in force.

 

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.

 

This article is an edited translation from Arabic.