Category: Laws & Decrees

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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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 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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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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The Anti-Corruption Law in the public sector and the creation of a National Commission to combat corruption No. 175 of 08/05/2020 (hereinafter) has been published in the Official Gazette No.20 dated 14^th May 2020.

First, the said Law defined corruption as “the abuse of power or activity in connection with public money for the purpose of generating illicit personal profits or advantages for his benefit or for the benefit of third parties whether directly or indirectly.”

Besides, this Law listed comprehensively the acts of corruption referring on the one hand to the crimes of corruption provided for in the Penal Code such as bribery, gratuities, trading in influence, subtractions, embezzlement or other illicit uses of properties or funds, post abuse as well as illicit enrichment and all acts of corruption defined in international conventions to which Lebanon has acceded. This Law also assimilates corruption, offenses or influence peddling which illegally facilitated the obtaining of market concessions and public contracts or licenses or the delegation of public services or their improper performance by personal private interest.

Moreover, the abovementioned Law assimilated corruption to insider trading and the misuse of confidential or sensitive information resulting in an illegal profit or advantage.

The Law No. 175 provided for penalties ranging from three months to three years of prison in addition to a fine amounting to up to the double or triple the amount of the foreseeable or realized material profit.

Thus, criminal investigations and prosecutions can be carried out for crimes of corruption without the need to obtain any prior authorization, as long as such prosecutions are carried out by virtue of the National Commission’s request.

This Law provides also for the possibility to carry out criminal prosecutions for crimes of corruption even in the event of the resignation of the offender, dismissal, retirement or retirement.

The National Commission has a legal personality, and a financial and administrative independence. This Commission is formed of six members (two judges, one lawyer, one public accountant and two experts in the banking and public finance sector) one           appointed by decree issued by the Government for six (6) years that shall not be renewable. The National Commission is responsible for ensuring the fight against corruption and compliance with international conventions ratified by Lebanon.

This Commission must particularly:

• Fight against corruption, carry out the necessary prospecting and investigations and collect complaints relating thereto;
• Investigate complaints and refer suspects to the competent authorities while following the files;
• File a complaint against the suspects whenever it deems necessary and request the concerned judicial authorities to take the necessary preventive measures;
• Assess the situation of corruption and prepare reports and suggestions relating to this matter;
• Disseminate the principles of integrity and prevention as widely as possible;
• Receive asset and assets from officers and public agents;
• Receive complaints relating to the complaints related to the Access to information Law (Law No.28/2017);
• Protect and financially reward whistleblowers.

 

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The Law No. 160 of 08/05/2020 (hereinafter), published in the Official Gazette No.20 dated 14thMay 2020, has suspended all legal, judicial and contractual deadlines as from 28/10/2020 and until 30/07/2020 (inclusive)
The aforementioned suspension covers all deadlines relating to administrative, civil and commercial matters as well as legal deadlines provided for the meeting of public organizations of syndicates and cooperatives.
It should be noted that are excluded from the provisions of this Law, the following deadlines:

• Judicial deadlines which are left to the discretion of the judge;
• Deadlines granted by the administration or those provided by the latter and which fall within its discretion;
• Limitation periods and freed on bail deadlines in criminal matters provided that the deadlines relating to the exercise of personal rights shall be also suspended.
• All the legal deadlines relating to the meeting of public organizations of syndicates and cooperatives provided for before the promulgation of the said Law;
• Deadlines relating to familial matters, such as pension, guardianship, visit…
• Deadlines provided for by the Rental Law dated 05/09/2014 which was modified by the Law No. 2/2017.

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The Council of Ministers has adopted the Decree No.6327 dated 4th May 2020 (hereinafter) published in the Official Gazette #19 on 07/05/2020, ratifying the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (MCCA) which was signed in Paris on 12/05/2017 in accordance and implementation of the Law No 55 dated 27/10/2016 on the exchange of information for tax purposes (attached a scanned copy of the Agreement).

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Decree No.5159 dated 02/07/2019 (hereinafter), has defined the implementing provisions of article 16(8) of the Law No. 57 dated 05/10/2017 (the Law on the Offshore Petroleum Fiscal Regime) relating to the status of legal representative conferred to the companies holders of oil rights (as well as those licensed operating in this field) vis-a-vis non-residents co-contractors as regards to the VAT liability on transactions carried out with latters on the Lebanese territory or in the territorial waters as well as the related obligations.In fact, said companies holders of petroleum rights or operating in this field are considered by right as resident representatives jointly and severally liable with the non-resident taxpayers to the payment of the tax, fines and penalties incurred as well as to the execution of the obligations and formalities put at their charge, in respect of the value added tax (VAT) (articles 33 and 40 of the Law No. 379 dated 14/12/2001 and its amendments) regardless of the turnover achieved.  Therefore, this Decree specifies the procedures and practical measures aiming to the registration and acquisition of the Tax Identification Number (TIN) in this respect (for both representatives and non-residents), to the reporting of information, the presentation of declarations and filing tax returns, the exercise of the right of deduction and payment of taxes (VAT) instead of non-residents and on their behalf as well as to the resulting regularizations, restitutions, objections and appeals.

 

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Decree No. 5148 dated 05/07/2019 (hereinafter) recalled the scope of the permitted and prohibited activities of Lebanese offshore companies as exhaustively listed in articles 1 and 2 of the Decree-Law No. 46 dated 24/06/1983 amended by the Law No. 19 dated 05/09/2008. Indeed, the said Decree emphasizes on the fact that offshore companies cannot undertake banking operations or operations that financial institutions undertake as well as insurance operations of any kind whatsoever; activities prohibited by the provisions of article 2 of the Decree-law No. 46 dated 24/06/1983 amended by the Law No. 19 dated 05/09/2008.

It should be noted in this regard, that this Decree cannot be separated from two recent responses from the Direction of Revenues to questions submitted to the latter (MR No.476/ S2 dated 08/04/2019 and No.547/S2 dated 20/04/2019) – on the one hand, regarding the possibility for the offshore company to borrow from its shareholders and/or its Chairman-general director and, on the other hand, regarding the possibility for the company to invest its own funds in financial products, investment funds, future contracts and in other structured or derivative products; without regard to any transaction with or for the benefit of third parties in respect of such investments.However, the tax administration, supported by the Council of ministers by virtue of the aforementioned Decree, undertakes a restrictive interpretation of the law. As such, it is to be raised that “regardless of the fact that it concerns a factual situation, it is for the authority to correctly apply to that situation the rule of law which serves as the basis for its acts and to interpret it without subtracting or adding anything that would be contrary to the law. Consequently, are in particular tainted by error of law, decisions based on grounds not established by law, those which, more widely, demonstrate an incorrect interpretation of the rule and those that distort the powers conferred to the authority…Requiring a condition that is not provided by the Law and that is contrary to the applicable rule, whether to the law or to a regulation, is a frequent case of an error of Law”. (Administrative Jurisclass, fasc. 1152, n° 99 et 100). In other words, this means that offshore companies do not manage money and investments for the account and for the benefit of third parties.Thus, and in the perspective of the application to the letter of the two ministerial responses mentioned here above -which are likely to create a great legal instability at the level of investments and which mark a limit to the field of activities of the offshore companies listed in the first article of the Decree-law No. 46 dated 24/06/1983 amended by Law No. 19 dated 05/09/2008-, it follows that offshore companies will no longer be able to invest their own funds and assets, which does not seem to be the real intention of the legislator at the beginning or even during the modification of the Law in 2008 and the extension of the field of activities. It should be noted that these two aforementioned responses are only a reflection of an administrative practice and do not constitute, in no case, administrative regulations that are binding, mandatory or enforceable for taxpayers who, in the event of recovery, will still be able to claim the right of appeal and opposition conferred by the laws in force.

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