A $2.8 million payout Lebanon’s capital controls couldn’t stop

File photo : Outraged over the collapse of the Lebanese currency Lebanese protesters set the Central Bank on fire, June 20, 2020
File photo : Outraged over the collapse of the Lebanese currency Lebanese protesters set the Central Bank on fire, June 20, 2020
  • Paris ruling could trigger more capital flight from Lebanon
  • Lebanon facing major financial crises as currency plunged

By Gaspard Sebag and Dana Khraiche

A woman seeking to recover money from her bank accounts in Lebanon secured a $2.8 million payout from a French court in a ruling which could spark a bigger cash exodus from the crisis-hit country, where de-facto capital controls have been imposed. 

Saradar Bank must pay the woman the cash she sought, the Paris court ruled last month, saying that “the bank had not fulfilled its restitution duties” by offering to deposit the sums with a Beirut notary. The judges said they were competent to rule on the dispute as the account documentation was signed in Paris and bank representatives regularly came to France.

The woman’s lawyer, Jacques-Alexandre Genet, said it was the first ruling outside of Lebanon ordering a Lebanese bank to effectively pay a depositor. This may not be an isolated win as further decisions in similar disputes are due to be handed down by other courts in Europe and in the U.K., he says. 

An attorney for Saradar didn’t immediately respond to a request for comment but the bank told French magazine Challenges, which first reported on the case, that it was planning to appeal the ruling.

Since late 2019, Lebanon has been facing one of the most severe financial crises in modern history. After protests erupted nationwide as dollar inflows began to dry up, the country’s banks imposed de-facto capital controls. The pound lost more than 90% of its value on the black market, decimating savings and pushing three-quarters of the population below the poverty line.

 Legacy of Political Turmoil Complicates Lebanon’s Debt Crisis

The successful plaintiff says she had asked Saradar to transfer the funds she requested to a French bank. Instead, Saradar closed her accounts and wrote two cheques — one for $2.73 million and another for slightly more than 50,000 euros ($56,000) — to a notary it chose. 

Those cheques could only be cashed in Lebanon, she said, and so she refused the cheques because of the plunging Lebanese pound. The Paris court ruled that the woman was entitled to refuse the cheques, which “can’t be considered as a pure and simple reimbursement of the amounts that were due.”