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Law No. 214 of 08/04/2021 relating to the recovery of assets resulting from corruption crimes

The Law No. 214 of 08/04/2021 (here below), published in the Official Gazette No 15 dated 15/04/2021, concerns operations to recover assets resulting from corruption crimes (Ill-gotten assets), regardless of the nature of the asset, whether located on Lebanese territory or abroad, and whether they are still in the property of the perpetrator or transmitted to a third party. This law is applied in accordance with the United Nations Convention Against Corruption (UNCAC) to which Lebanon has adhered by virtue of the Law No 33/2008, as well as the Law No 44/2015 for Fighting Money Laundering and Terrorist Financing; in addition to the recent laws No. 189 dated 16/10/2020 relating to the declaration of assets and other interests and the repression of illicit enrichment and No. 175 of 08/05/2020 in connection with the Anti-Corruption in the public sector and the creation of a National Commission to combat corruption.

The function of the Fund Recovery Department of the National Commission to combat corruption is to coordinate with all relevant bodies, as well as with the Special Investigation Committee (SIC) regarding the related prosecutions. In addition, it organizes strategies to recover said funds. It pursues the recovery operations with the competent administrative and judicial bodies. It specifies the obstacles facing this recovery. If necessary, it can rely on any Lebanese or foreign expert, natural person or legal entity. The deliberations are secret and anyone who attends is bound by professional secrecy. The Department has the right to ask the administration for any information which it finds necessary. Every three months, a public hearing is held with the information providers. This department presents a detailed report each year, including its operations.

However, it should be underlined that this Law has provided three achievements. The first one is the creation of a National Fund to which the returned ill-gotten assets will be diverted rather than to the Public Treasury where it won’t be possible to assign them to a specific use in compliance with the golden rules of the Budget (unity, universality and non-allocation of resources); taking into consideration that the current worldwide trend is not to return ill-gotten assets and funds unless they are used to compensate victims of corruption or for sustainable development goals. The National Fund will be entrusted with the management and investment of funds being recovered or already recovered and has legal personality, as well as financial and administrative independence. Following the fund recovery stage, by virtue of specific mechanisms developed for this purpose, funds will be used to cover the expenses of the Department recovery of funds as well as of the National Commission to combat corruption and to compensate and protect whistleblowers or as donations to state projects aiming to fight poverty and achieving sustainable development. The Fund is vested with all the powers of signing contracts and taking the necessary measures to carry out the mission entrusted to it. It can also receive any donation from internal or foreign parties which constitutes other achievements since it may allow a quick entering into force of the law by finding quick and appropriate financing to trace and recover illegal financial flows, assists and funds. The Fund presents its annual report to the parliament. The third achievement pertains to the fact that the principle of Settlement and Plea Agreement whereby corrupted officials would voluntarily repatriate and return a substantial portion of the funds and would resign, in exchange in exchange for a reduced sanction.

Finally, the Ministry of Justice implements regulations allowing the reception and execution of requests for international legal assistance as quickly as possible, on the widest possible scale.

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Law No. 212 of 16/01/2021 relating to the extension of some deadlines.

The Law No. 212 of 16/01/2021 (here below), published in the Official Gazette No 3 dated 21/01/2021, has extended the deadlines for the presentation of declarations provided for in Law No. 189 dated 16/10/2020 (The law on the disclosure of financial information and interests and the suppression of illicit enrichment) until 31/03/2021. This law also provides for the automatic suspension of all legal, judicial and contractual deadlines granted to persons governed by public and private law.

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Law No. 199 of 29/12/2020 relating to the prorogation of the suspension of legal, judicial and contractual deadlines.

the Law No 199 dated 29th December 2020 (here below) published in the Official Gazette No 51 on the 31st December 2020 has further extended the suspension of the legal and tax obligations and deadlines set by Law No 160/2020 and prorogated by the Law No 185 by six (6) additional  months as of the publication date of the Law (i.e till the 30th of June 2021) or of the expiry date of the suspended delays by virtue of the aforesaid Law No 185/2020, as the case may be. This extension also covers the deadlines set in the Article 22 of the Budget Law 2020 that extended the deadlines of the articles 21, 22, 28, 29, 30 and 32 till 40 (tax and NSSF discounts in addition to the article 38 on the tax objection deadline), 49 (exceptional revaluation of fixed assets at the tax rate of 3%), 51, 58, 68 and 70 of the Budget Law 2019 for further 6 months as aforesaid. The Ministry of Finance should issue shortly an application decisions regarding the provisions of this Law.

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Law No. 182 dated 12/06/2020 amending the Law No. 83 dated 10/10/2018 relating to the protection of whistleblowers

The here below Law No. 182 dated 12/06/2020, published in the Official Gazette No. 25 dated 12/06/2020, added to article 9 of the Law No. 83 dated 10/10/2018 relating to the protection of whistleblowers, the following paragraph:

Whistleblowers benefit from all the provisions of this Law if they present their disclosure to the competent prosecutor’s office in addition to the Commission. Corruption detectors, witnesses, experts and victims also benefit from the guarantees provided for in the provisions of all paragraphs of chapter seven-bis (articles 370-2 to 370-6) of the Code of Criminal Procedures by virtue of the Law No. 164/2011 on the suppression of human trafficking.

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Law No. 194 dated 16/10/2020 relating to the protection of the damaged and affected areas and their reconstruction following the explosion of the port of Beirut.

The Law No.194 dated 16/10/2020 (here below), relating to the protection of the damaged and affected areas and their reconstruction following the explosion of the port of Beirut was published in the Official Gazette Journal No. 41 dated 22/10/2020.

In fact, it should be highlighted herein that the Draft Bill proposed by the Aldic (ref: Your Rights/Draft Bills) has been fully incorporated into article 6 of this Law which is related to exemptions from taxes and fees. This Draft Bill was presented in order to mitigate the serious consequences that could result if the provisions contained in the Decree-Law No. 146/1959 were applied, in particular articles 16 and 44 of this Decree-Law on aid and donations provided for the benefit of the victims of the explosion and thus prevent a return of the tax authorities a posteriori against the taxpayers benefiting from any aid in cash or kind (repair of windows, woodwork, renovation of facades …) which would exceed 1,600,000 LBP for natural persons and 100,000,000 LBP for charities. It should be noted in this regard that in accordance with aforesaid articles 16 and 44 of the Decree-Law No. 146/1959, are only exempted from taxation, donation not exceeding 1,600,000 LBP (the surplus being taxed) as well as donation granted to a charitable or sport or cultural or religious or artistic association, not exceeding 100,000,000 LBP (the surplus being taxable).

This being said, the main objective of this Law is to protect the affected areas, to encourage donations and aid, to avoid any intention aiming to profit from the damaged properties or to carry out a posteriori blackmail against the beneficiaries of this aid.

According to this Law, are subject to deduction from the taxable income, all aids and donations made by companies subject to the income tax on the basis of actual profit (article 7-9 of the Income Tax Law) as well as sums paid by these companies aiming to overcome the damages suffered by taxpayers and citizens owing to the explosion of the port of Beirut, as of 05/08/2020 and until 31/12/2021, whether the donations have been provided directly to the concerned persons or indirectly through institutions, organizations and associations and thus, up to an amount equivalent to their annual net profit during the year in which the aid was granted, provided that these aids are supported by supporting documents.

All the donations and local or foreign aids provided to public administrations and institutions, municipalities, the federation of municipalities and other persons of public law, by virtue of a letter issued by the High Relief Commission are exempt from taxes. In order to benefit from the exemption provided for by this Law, the names of local and foreign associations, religious organizations and communities, and persons of public law which contribute in any way to the reconstruction, restoration and repair of damaged areas, shall be registered before the High Relief Commission and/or before a committee chaired by the Lebanese Army.

In order to ensure that the assistance is distributed in full transparency and to help the greatest number of people affected by the explosion, the aforementioned associations are required to draw up a detailed list of aid and donations in cash and in kind before the High Relief Commission and/or a committee chaired by the Lebanese army.

Donations and foreign aid in cash and in kind as well as all the transactions aimed at their execution are exempt from:

· All fees, especially the fiscal stamp duty and customs fees, including the minimum customs, financial and port fees, and the fee imposed by virtue of Article 59 of Law No. 144 dated 31/07/2019 (General Budget Law and annexed Budgets for 2019)

· VAT (Value Added Tax) on import transactions and operations related to these donations and aids.

Besides, the said Law exempts, with the right to deduct, money delivery operations and services which are subject, by nature, to the value added tax, provided by natural or legal persons, to the benefit of these administrations, public institutions, municipalities, federations of municipalities and other persons of public law, associations, organizations and religious communities, in execution of these donations and aid.

Likewise, this Law also exempts, with the right to deduct, money delivery operations and services which are subject, by their nature, to value added tax, and which are supplied by individuals or legal entities, for the benefit of these administrations, public institutions, municipalities, federations of municipalities and other persons of public law, associations, organizations and religious communities, in execution of these donations and aid.

Those who lost their vehicles in the explosion will also be exempt from taxation in connection with the said vehicles.

Contrary to the provisions of articles 16 and 44 of Decree-Law No. 146 dated 06/12/1959 and its amendments (Law on inheritance tax), all aid and donations in cash and in kind provided to associations, organizations, religious communities, persons of public law and natural persons affected by the port explosion are exempt from inheritance tax, regardless of the extent of the damage suffered, thus escaping the application of the brackets and limits provided for by the aforementioned articles 16 and 44.

Likewise, and contrary to the provisions of article 15 of the Decree-Law No. 146/1959, the amounts provided for in life insurance policies are exempt from inheritance tax insofar as the beneficiaries of this life insurance are the legal heirs of a Lebanese person who died following the explosion of the port of Beirut.

 

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Law No. 189 dated 16/10/2020 relating to the declaration of assets and other interests and the repression of illicit enrichment

The Law No.189 dated 16/10/2020 (here below), published in the Official Gazette No 41 dated 22/10/2020, has amended, replaced made substantial changes to the Law No. 154 dated 27/12/1999 (Law on illicit enrichment) and its amendments in order to strengthen the means of combating corruption and to meet the principles enshrined in the United Nations Convention for the fight against corruption (UNCAC) to which Lebanon is a member since 2009 by virtue of the Law No. 33 dated 16/10/2008.

Indeed, illicit enrichment, which is henceforth elevated to the rank of a full-fledged offense and no longer a presumption, has been defined more precisely by this new Law (article 10) and represents a substantial and unjustified increase (both in Lebanon and abroad) in assets held by a person related to the public service in comparison with his declared actual resources. The concerned person, his spouse and minor children are considered as one person.

Several decisive elements have been introduced by this Law, starting with the definition of the offense, the broadening of the categories of persons concerned and the determination of the conditions under which a legal action can be justified. It should be noted in this regard that this new Law is not retroactive, but neither does it provide for prescription.

This Law innovates by targeting all the persons who manage public funds or related to public funds, directly or indirectly, such as public servants, military and judges, councilors, national or local elected officials as well as private persons dealing with the state’s institutions.

Despite the contrary opinion of a number of politicians concerned by this new Law, it appears that the Prime Minister and other members of the government could be judged by the ordinary courts, inasmuch as article 11 of the said Law stipulates that “the illicit enrichment is an ordinary crime relating to personal acts” and therefore could not be classified among acts falling within the exercise of the members of the government’s functions and therefore cannot be most likely judged before the High Court. This exceptional court established by the Constitution (article 70), is competent to judge presidents and ministers. The immunity granted to the parliament members can be lifted through a specific procedure. The President of the Republic shall be also liable to the provisions of this Law, but shall be judged by the High Court.

Anyone who commits the crime of illicit enrichment will be subject to three to seven years of prison and to a fine ranging from thirty to two hundred times the official minimum wage, in

addition to the obligation to return illicit assets to the concerned parties or failing that, to the public treasury. The judgment must be published in two local newspapers.

The judgment must be published in two local newspapers and the funds which were acquired by means of illicit enrichment must be returned to the concerned parties or confiscated for the benefit of the Treasury.

On the other hand, this new Law has broadened the circle of categories of persons providing a public service or working for the benefit of the latter and which are required to submit asset declarations and thus, in order to strengthen transparency and control. In fact, these declarations must be submitted once within two months of assuming the post. In the event that a person fails to submit the said declarations, he shall be automatically considered as resigning from his post and shall not receive any income related to his function. Any disbursement of public accountants in violation of the above, will engage the responsibility of the latter in accordance with the provisions of articles 93 and 173 of the Public Accounting Law. Once registered, the declarations must then be updated every three years, and finally, a last time two months following the person’s departure.

Regarding the submission of these declarations, they must be presented on paper or by any electronic means approved by the Law and must be detailed and include both the assets of the person in Lebanon and abroad (any income generated by the public service, movable and immovable assets, bank accounts, cash deposited in banks and/or in financial institutions, cash kept at home, jewelry and works of art according to determined limits, financial and property interests resulting from complex mechanisms and various structures (Trust, donations, etc.), powers of attorney on third-party accounts), as well as his debts and commitments, and other interests in Lebanon and abroad. However, only the first three categories of public servants shall comply with the said requirement (for now), except those in the administrations that are deemed to be sensitive (Ministry of Finance for example) in which the said requirement is extended to all the concerned employees.

Declarations shall be submitted before the same authorities until the National Anti-Corruption Commission is formed and active. This Commission, just like the public prosecutor, shall also be notified by whistleblowers. The Law also provides for the possibility for the latters to directly take legal actions to this effect.

Finally, this Law also innovates by introducing more flexible prior conditions for taking legal action. In the event that the whistleblower reports a notification to the National Commission, the procedure shall be free and without any deposit condition. However, if the whistleblower files an individual complaint before the competent courts, he shall deposit a bank guarantee amounting to three million Lebanese Pounds (and not 25 million Lebanese Pounds as provided

for by the previous law). The said amount shall be recovered unless there is evidence of abuse of rights. It should be noted in this regard that under the previous law, abusive procedures as well as those that could not succeed for lack of proof were subject to a fine equivalent to at least 200 million Lebanese Pounds and to a prison sentence ranging between three months and one year, as well as to damages and interests which could be claimed by the defendant.

The declarations shall be strictly confidential, and anyone who discloses their contents shall be punishable by detention of one year at most and by a fine which may be increased from five to ten times the official minimum wage or subject to either of these two penalties. Thus, criminal investigations and prosecutions can also be carried out against violators.

In addition, anyone who submits a false declaration shall be punishable by detention of six months to one year and liable to a fine ranging from 10 to 20 times the official minimum wage.

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Decree of the Minister of Justice No. 6940 dated 03/09/2020 relating to the implementing provisions of the Law No. 28 dated 10/03/2020 concerning the right to access information

The Ministry of Justice has issued the here below the Decree No. 6940 dated 03/09/2020 published in the Official Gazette No. 37 dated 24/09/2020, relating to the implementing provisions of the Law No. 28 dated 10/03/2020 concerning the right to access information.

 

According to this Decree, shall be considered as an abuse of the right, any request of a repetitive or systematic nature which is unjustified, and any unspecified or unclear request aimed at obtaining or accessing information for indefinite or long periods of time that would impede the work of the administration and the functioning of the public sector.

 

The failure of the requester of the information to provide the administration with the necessary requested explanations within the legal deadlines, or his refusal to pay the expenses which were due to him for previous requests, shall be also considered as an abuse of right.

 

Exercising the right of access to information in accordance with the provisions of Law No. 28/2017 does not prevent resorting to other methods and means provided for by laws and regulations in force to obtain information.

 

The confidentiality clauses included in the contracts executed by the administration do not preclude the right to access them.

 

The information that necessarily requires publication must be published in an accessible way.

The annual report of each department shall be published no later than January 31 of the following year. Two weeks before the deadline for publishing the annual report, the Ministry of Defense transmits a report of the military courts to the Supreme Judicial Council, which issues it according to the aforementioned annual report(s).

 

The request for information shall be submitted by the concerned person either personally or through an agent on his behalf, and may be submitted by electronic means according to a special mechanism determined by each administration. In addition, the administration is responsible for facilitating access to the documents requested. The value of the expenses due on each application and the method of their fulfillment are determined by virtue of a decision issued by the Minister of Finance.

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Decree No. 6850 dated 14/08/2020 related to the acceptance and exemption of foreign donations and aid that are provided to Lebanon to overcome the damages resulting from the Beirut Port explosion from taxes and value-added tax.

Decree No. 6850 of 14/08/ 2020 (hereinafter) exempted donations and foreign aid provided to public administrations and institutions, municipalities, the federation of municipalities and other persons of public law, associations, organizations and religious communities, by external organizations, by virtue of a letter issued by the High Relief Commission (الهيئة العليا للإغاثة), from:

  • All fees, especially the fiscal stamp duty and customs fees, including the minimum customs, financial and port fees, and the fee imposed by virtue of Article 59 of Law No. 144 dated 31/07/2019 (General Budget Law and annexed Budgets for 2019)
  • VAT ( Value AddedTax) on import transactions and operations related to these donations and aids.

Besides, the said Decree exempted, with the right to deduct, money delivery operations and services which are subject, by nature, to the value added tax, provided by natural or legal persons, to the benefit of these administrations, public institutions, municipalities, federations of municipalities and other persons of public law, associations, organizations and religious communities, in execution of these donations and aid.

This Decree shall be applied to the donations and aid that are granted as of 04/08/2020 until 03/08/2021, and the implementing provisions shall be determined, if necessary, by decision of the Minister of Finance.

 

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Law No. 185 of 19/08/2020 relating to the prorogation of the suspension of legal, judicial and contractual deadlines.

The Law No. 185 of 19/08/2020 (here below), published in the Official Gazette No 36 dated 27/08/2020, has extended the suspension of the legal and tax obligations and deadlines set by the Law#160/2020 till the 31th of December 2020. It suspended as well all other contractual delays, statute of limitation and deadlines, including those for the payment of loans and dues, as well as ongoing procedures, by 6 months as of the publication date of the Law (i.e. 27/08/2020) including deadlines granted by the administration or those provided by the latter and which fall within its discretion. This Law has also exempted the heirs of the persons who passed away in the terrible blast of the 4th August 2020 in Beirut from the inheritance tax and the damaged buildings from the built property tax and the municipality tax for the fiscal year 2020. The Ministry of Finance should issue shortly application decisions regarding the provisions of this Law.

 

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Law No. 163 dated 08/05/2020 organizing Private Investment Companies (PIC)

The Law No. 163 dated 08/05/2020 (hereinafter) organizing Private Investment Companies (PIC) was recently adopted and published in the Official Gazette No.20 dated 14thMay 2020. The main characteristics of this law are summarized in the following developments:

  1. 1-  Object of the Company:  

  2. 2-  Applicable rules:The provisions of the Code of Commerce relating to limited partnerships which are not in contradiction with this Law shall apply. Consequently, general partners are personally and jointly liable for the Company’s debts. However, the limited partners are liable to the extent of their contributions, provided that they do not interfere in the management of the PIC. Nevertheless, the Law No. 162/2020 provides the limited partners with the possibility to be appointed as managers of the PIC or of the portfolio management company of PIC, in which case their liability remains limited.

Invest in financial instruments issued by private companies and funds, non-

negotiable on regulated financial markets on the day of the investment.

Manage the aforementioned private companies and funds.

Grant loans to the aforementioned companies and funds in case they hold

participations in the said companies that are not less than 10%.

Acquire movable and immovable properties allocated to the exercise of its activities.

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  1. 3-  Incorporation Procedure
    •   Articles of Association: The articles of association may be notarized by a notary public or by private deed and must be registered near the trade register within 1 month + great flexibility as for the possible adjustments (choice regarding the determination of the fiscal year, voting rights allocated to the partners, majorities required for decision-making, etc.).
    •   Subscription: Any fund, legal person or physical person authorized by virtue of the articles of association may subscribe or acquire the parts of the general partners. However, the subscription to the limited partners’ parts is reserved: (i) the professional investor; (ii) the general partners; (iii) the company responsible for the assets’ management; (iv) investors whose value of shares amount to at least 150 million LBP (refer to article 7).
  2. 4-  Management of the PIC:The Articles of Association define the methods of appointment, dismissal and replacement of the manager. The manager does not require the Financial Markets Authority’s authorization.
  3. 5-  The management of the PIC portfolio:The management of the PIC investment portfolios may be entrusted to one or more companies authorized by the Financial Markets Authority for the assets’ management.
  4. 6-  The depositary:
    •   The depositary must have the authorization from the Financial Markets Authority.
    •   He/it must be independent from the manager and from the company responsible formanaging his investment portfolio.
    •   The financial instruments held by the company are registered in the name of thedepositary and constitute an independent body of its assets and liabilities (off-

      balance sheet) with all the resulting legal consequences.

    •   He/it executes the directives of the manager or of the investment portfoliomanagement company.
  5. 7-  The status of the PIC parts:
    •   The parts do not necessarily grant identical rights for all the partners (for instance the distribution of revenues may be done differently; the parts may be reserved for different investment sectors…).
    •   The Company is compelled to open a bank account in Lebanon. 4
  •   The parts of the limited partners are deemed to be negotiable financial instruments. However, these parts are not subject to the conditions applicable to financial instruments offered for public subscription as provided for by the Law on the financial markets.
  •   The parts of the general partners are non-negotiable instruments. It is even possible to provide in the articles of association for restrictions on their free transferability.

8- Tax Status of the PIC:

  •   Although the PIC has a legal personality, the profits are deemed to be made directly in the assets of each partner just like for the limited partnerships (article 35 of the Income Tax Law).
  •   The realized income of the general partners and limited partners are exempted from tax (chapters 1 and 3 of the Income Tax Law) as a result of the activity of SICAP or the transfer of shares as well as the tax provided for in article 77 of the Income Tax Law (for the proceeds of foreign shares and bonds).
  •   Are not exempt from the distribution tax: (i) the dividends paid by Lebanese capital companies in which PIC invests; (ii) the income earned in Lebanon listed in article 51 of the Law No. 497/2003 as amended by article 31 of the Law No. 144/2019; as well as (iii) on interests generated by loans granted by PIC to Lebanese companies in which it invests, whenever the loans are granted for less than 3 years.
  •   Income generated by the management of the companies in which SICAP invests shall be subject to a 5% tax.
  •   All the activities of the PIC are not liable to VAT. However, VAT shall nonetheless be applied to income generated by the management of the companies in which it invests. However, the VAT borne by the PIC due to services provided by third parties shall not be recoverable.
  •   Are exempted from the fiscal stamp duty: (i) the articles of association; (ii) the subscription to shares and any commitment relating thereto; (iii) the loans granted to PIC by its partners.

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