On 15 August 2022 the English High Court made a ruling in the latest case tried in London arising out of restrictions on withdrawals imposed by Lebanese banks (Bitar v Bank of Beirut S.A.L [2022] EWHC 2163 (QB) (“Bitar”)), in circumstances where Lebanon is in the midst of a severe economic and financial crisis.
In Bitar the Court ordered specific performance in the sum of US$7,790,624 plus interest at 9% per annum, accruing from the date of the Bank’s obligation to make an international transfer to payment.
Following a prior decision of the High Court in February 2022 (Manoukian v Banque au Liban SAL and another [2022] EWHC 669 (QB) (“Manoukian”)), Mr Justice Freedman held that Mr Bitar was entitled to an international transfer applying Lebanese law, notwithstanding that his accounts were purportedly closed by the Bank and the debt purportedly discharged by means of a Banqu du Liban (“BdL”) cheque under Article 822 of the Lebanese Code of Civil Procedure (a Lebanese “tender and deposit” procedure whereby a debtor can seek to discharge a debt by payment via a notary). The Court held, citing Picken J in Manoukian, that where there was an accrued obligation to make an international transfer (as here), that obligation cannot be discharged by way of a BdL cheque.
Freedman J held that:
- the Bank had a contractual obligation to make international transfers as sought by the Claimant and which it failed or refused to make;
- the contractual obligation is established from the combination of the words used and the intention of the parties having regard to the context of the agreement of the parties. The relevant time to determine the intention of the parties is the time of the contract and not at the time of the request for an international transfer. If it were the case that the custom thereafter changed, then that does not affect the construction of the contract. If it were the case that it was the intention of the parties that they were agreed that something in the contract would yield to a subsequent change in custom, that might then affect the obligations of the parties (paragraph 95 of the Judgment);
- It is not necessary to consider custom as part of that context, and so the construction would be arrived at without reference to custom;
- it therefore follows that it is not necessary to consider whether there would have been an international transfer obligation if the matter had depended entirely on custom;
- The transfer obligation is not absolute, but it is not so loose as to incorporate what was described as an acceptable reason beyond inadequate funds and established reasons such as not assisting fraud, money laundering or illegality. A desire to avoid a run on the banks is not a reason not to make an international transfer pursuant to a contractual obligation. Nor is any other characterisation of the desire of the Bank to refuse to make an international transfer in response to the current banking crisis.
Notwithstanding the above, at paragraphs 135-146 of the Judgment Freedman J went on to consider whether there had in fact been a change of custom, finding that the Bank had failed to establish that there had been such a change. A circular of the Association of Lebanese bankers (issued in November 2019, advising all member banks to impose uniform capital controls) was not sufficient to end a custom or to create a new custom. Freedman J found that there was no evidence of constant practice or sufficient acceptance of that practice from customers of Lebanese banks or outside the banking community in Lebanon (paragraph 144 of the Judgment).
Branch Austin McCormick is experienced in bringing claims against Lebanese banks arising from the financial crisis. Joseph McCormick brought the first claim to establish jurisdiction against a Lebanese bank before the English courts, as well as other claims since, and has a wealth of experience advising clients in relation to the financial crisis in Lebanon.
For further information on the issues raised, please contact contact Joseph McCormick or Tatyana Talyanskaya at:
Branch Austin McCormick LLP
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