Stability has served Lebanon well and its economy has prospered in the years since its last conflict. Underlying political tensions between the pro-western coalition government and the Iran and Syria backed, Hizbollah-dominated opposition, however, began to simmer again in 2011....
[more]
Stability has served Lebanon well and its economy has prospered in the years since its last conflict. Underlying political tensions between the pro-western coalition government and the Iran and Syria backed, Hizbollah-dominated opposition, however, began to simmer again in 2011. The unity government formed in 2009 collapsed after Hezbollah cabinet members resigned amid rumours four of it's party would be indicted by a UN special tribunal set up to establish the murderer of the country's former president.
While a new government has been formed, the tribunal continues and the UN has pledged to station troops in the country for another year, in August 2011. These recent difficulties serve as a reminder of just how fragile the peace is that exists in the country. Lebanon's projected 5% growth rate is certain to be affected, although Moody's has left its rating as stable.
One area lawyers feel may benefit from the new government is projects for desperately needed infrastructure. "The unity government required that all the law, all the decrees, be passed by unanimity. So, lots of projects, including all PPP (public-private partnerships) projects and privatisation, were being held, were not being erected, no lawyers would be organising or dealing with these matters. But hopefully this will begin," says one partner. Others are certain the new government will create momentum in this area. "We foresee a lot of work coming in, in relation to PPPs and the necessity to inject certain funds in to the infrastructure system in Lebanon, which will also create lots of opportunities for banks and also lawyers to do certain kinds of work," says one lawyer.
Oil and gas projects are predicted to be another area of growth for the country in 2012 after discoveries were made in the Mediterranean basin. "We are foreseeing there will be a lot of finance work for oil and gas with a projected start at the end of 2011 for granting licences and concessions," remarks one lawyer.
Lebanon's notoriously stable banking system, which came through the crisis relatively unscathed, thanks to the regulators ban on derivatives, saw some upheaval in 2011. Lebanese Canadian Bank was accused of laundering $200 million a month for a drug smuggling organisation. According to lawyers however the issue was resolved almost immediately: "The bank has been subject to a very quick take over by another Lebanese bank and the matter was closed," says one, adding: "The banking sector is doing well, very healthy, quite solid."
Foreign investment continues to flood in unabated by any of the country's issues with investors assured by the safe and conservative banking system and attracted by the investment incentives. "They consider the banking secrecy law and tax benefits attractive" is one lawyer's explanation.
The country has become a popular choice for start-ups according to lawyers. With a dearth in finance throughout the majority of region, companies have been encouraged to set up in Lebanon. "After the crisis hit Dubai and most of the centres in the Arab world, a lot of firms have been coming to Lebanon," explains one. Cheap labour is another reason cited for the influx of new business.
In the M&A arena lawyers note an increase in outbound acquisitions: "We have seen more and more Lebanese clients wanting to acquire companies in Saudi, in the Emirates, in Kuwait," remarks one lawyer.
Financial services has continued to be a thriving sector with a number of foreign institutions seeking to gain a foothold in the Lebanese market, especially with the ban on investment banking lifted. EFG Hermes was the notable entrant acquiring a 65% interest in Lebanese bank Crédit Libanais for $542 million.
Activity in Lebanon's burgeoning real estate sector has dropped off with prices stabilising. "There has been a bit of a decline. It was on the rise but it is has slowed although there are still deals being done," explains one lawyer.
Amendments to restrictions on offshore companies has seen firms active for several Cayman-based funds acquiring stakes in Lebanese companies.
Reforms of the Beirut stock exchange's listing rules and companies law are "on the table" but nothing definite has been discussed.
[Read about law firms' performance in this practice area]
[hide]