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Overview
Political strife has affected both the legislative timetable and the legal market in Lebanon, although several laws were ratified by the parliament in 2008, including a much needed competition law, which aims to go some way towards ensuring consumer welfare and economic efficiency. Elections are due to take place in spring 2009 and international observers will be watching closely as these will be potentially destabilising to the country.
The economy has been in a relatively poor state for some time, but the country’s economic activity in the first nine months of 2008 was buoyant. The global economic situation is not expected to have too much of an impact on the economy, partly as no domestic banks made substantial investments in US sub-prime mortgages but only time will tell. The government announced in November that the country is expected to join the WTO by the end of 2009.
But the downturn is already having a clear impact on the Lebanese legal market with law firm work decreased and the business environment poor. One high-profile lawyer said there is ‘panic’ as work starts to dry up in the more risky sectors, while another says that the legal market is ‘difficult for those with their eggs in the Lebanon legal basket’, but for international law firms it is good.
Lebanon is not attractive to external investors during a global recession and the outlook at the end of 2008 was precarious. The proposed sale of two state-owned Lebanese mobile phone firms is likely to be held up because of the global financial crisis and economic downturn with the government admitting that the financial markets and stock markets are not in a fit state to proceed yet.
On the construction front (one of Lebanon’s most active sectors), the major $1.2bn Beirut Gate development project has also been delayed, the first phase is not due to complete until at least 2009 after being put on hold a year or so ago.
But the manufacturing sector is doing well with substantial demand from abroad. The country’s industrial sector includes plastic and textiles, cement, paper and wood. However, the industry faces major challenges in the current economic climate, particularly as the sector is important to Lebanon as a major source of employment.
The property market is also healthy in the face of the global crisis, after a year of stagnation, with increasing demand in the Lebanese property market both at home and abroad.
Lebanon is a financial hub for the Levant region and its importance is growing. The Lebanese banking sector is performing robustly in the face of global financial problems and 2008 was, in fact, its best year ever with a major increase in banks’ lending portfoilios. This is partly down to significant lending by local banks to assist the local economy.
The financial sector as a whole, including capital markets, equities and bonds, is performing exceptionally well – a reflection of strong confidence in the country’s banking sector. The fact that Lebanese banks are well regulated by international standards will help soften any blow from the global financial crisis. The Islamic banking and finance sector is expected to flourish in the years to come.
In terms of the quality of its lawyers, Lebanon’s legal market suffers from ‘drainage’ of its best lawyers as they are increasingly leaving the country to work for international law firms where the remuneration is much greater. Many skilled lawyers, particularly young newly-qualifieds, have left the country to practice in the GCC countries but more experienced lawyers tend to stay put. That said, their language capabilities are in high demand in the region and those that remain, enjoy successful careers.
International firms such as Clifford Chance, Linklaters LLP and Norton Rose LLP tend to undertake transactional work in Lebanon without having a permanent base in the country.