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Lebanese banks under more pressure after landmark UK ruling

Sep 14

Lebanese banks under more pressure after landmark UK ruling

Lebanese living in EU can now sue domestic banks to demand they return their money If they do not return claimants’ assets, banks may have European operations curtailed, owners’ European assets frozen

LONDON: An English High Court has ruled that Lebanese citizens living in the EU do not have to be in Lebanon to sue their banks.

The case could have widespread ramifications for Lebanese banks that were already under extreme financial pressure.

A judge ruled that UK resident Bilal Khalifeh could have his case demanding Blom Bank return his $1.4 million in savings heard in Britain.

As Lebanon’s financial situation has spiraled out of control, citizens at home and abroad face restrictions in terms of withdrawing their money from Lebanese banks.

This ruling, however, means that those living outside Lebanon now have legal recourse in order to recover their money.

“The ruling has widespread implications because this part of consumer law has Europe-wide application,” said Khalifeh’s lawyer Joseph McCormick, a partner at law firm Rosenblatt.

“My sense is that Lebanese banks are firefighting and obviously have a lot of other problems. But I suspect this is now much higher up on their list of problems.”

The ruling means that the roughly 400,000 Lebanese living in France, the UK, Germany and Scandinavia who have been barred from accessing their money can now take Lebanese banks to court in their countries of residence.

It remains unclear whether any European court can compel banks to transfer depositors’ funds outside Lebanon.

But if they do not return claimants’ assets, they may have their European operations curtailed or their owners’ European assets frozen for not complying.

In response to the ruling on Khalifeh’s case, Blom Bank said it was not obliged to make an international transfer to him, and instead offered to repay him with a cheque that could only be cashed in Lebanon.

But due to the freefalling exchange rates, Khalifeh’s money would lose roughly 65 percent of its value if he chose to take this path.

While the ruling does little to help those Lebanese in the country who are unable to access their money, McCormick said the ruling may put further pressure on the banks to find a way out of the crisis.

“I expect we’ll see some kind of collective, group cases being brought judging by the sheer number of enquiries we’ve had since bringing this case,” he added. “People are desperate. They’re looking for a ray of hope.”