The Al Habtoor Group, a major UAE-based conglomerate, has threatened legal action against the Lebanese government over a lingering $44 million investment dispute.
In a major escalation of the long-running saga, the UAE-based company served an official notice to various state authorities, warning that it intends to pursue international arbitration proceedings if the matter remains unresolved after a six-month consultation period.
The dispute stems from restrictions imposed by Lebanon’s embattled central bank preventing Al Habtoor Group from transferring its trapped funds out of the country’s banks.
The Emirati giant has invested close to $1 billion in Lebanon’s real estate and hospitality sectors over the years. Its assets there include luxury Hilton-branded hotels, a large Beirut shopping mall, and an entertainment destination in the capital.
However, with Lebanon plunged into its worst financial crisis in modern history, the group says it has incurred significant losses due to being unable to freely access over $44 million of its money.
Represented legally by White & Case, Al Habtoor Group argues these restrictions amount to a breach of protections afforded to UAE investors under the bilateral investment treaty between the two countries. The agreement guarantees Emirati-owned businesses fair treatment and the right to repatriate funds without restrictions. It also allows for international arbitration in disputes involving investment protections.
The formal dispute notice kicks off a period of consultation mandated under the treaty before arbitration proceedings can commence.
“If the dispute is not resolved within six months and the Al Habtoor Group claims are not settled, it will be open to Al Habtoor Group to commence appropriate local and international legal proceedings against the Lebanese Republic in accordance with the Treaty,” the statement, released on Wednesday, said.
The threat of a lawsuit further strains already difficult UAE-Lebanese economic ties and could add turmoil as Lebanon tries to bring its banking crisis under control. It also represents the biggest investment treaty dispute Lebanon faces so far due to its financial collapse.
This comes one month after the UAE conglomerate issued an open letter to Lebanon’s caretaker Prime Minister Najib Mikati on December 7 which detailed the long-running saga.
Al Habtoor Group issues open letter to Lebanese PM
“Despite the promises, encouragement, and facilitations pledged to us by successive Lebanese governments to protect and support our investments in Lebanon, as Al Habtoor Group in particular, and Gulf investments in general, we, without hesitation, contributed substantial funds and investments to the Lebanese economy, believing in this beloved country and supporting its good people,” the open letter stated.
“Unfortunately, we have consistently observed with great concern and regret explicit hints about the potential threat to Gulf investments in Lebanon. This has caused considerable frustration and concern for us and all investors from the Gulf Cooperation Council countries, not to mention the “detention” of our group’s funds and Gulf and foreign investment funds illegally in Lebanese banks. This has been done with the cover of the Lebanese government and the Central Bank of Lebanon.”
The group added that the massive losses incurred were a direct result of the “instability int he political, economic, financial, and social situation” in the country which was further exacerbated by “the control of certain militias over the state’s resources, security, and economy.”
“These armed militias have involved the Lebanese state in pointless wars, worsening the economic situation further and leading to the current dire state,” the December 7 letter stated.
It urgently asked the Lebanese government to curb the influence of armed militias, guarantee and protect investments and ensure compensation in case of “external aggression,” and respect international agreements.
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