LEBANON Law and Practice Contributed by: Nayla Comair-Obeid, Ziad Obeid and Zeina Obeid, Obeid & Partners
that by failing to meet their obligations to pay demand deposits in cash or process international transfers, the banks are in a state of cessation of payment, justifying the application of insolvency laws, specifically Law No 2 of 1967, dated 16 January 1967, and its implement- ing Decree No 7739 dated 3 July 1967 on Bankruptcy (Law No 2/67). Despite these claims, recent court decisions have consistently rejected insolvency declarations against Lebanese banks stating that declaring a Lebanese bank insolvent during the financial crisis could trig- ger a series of insolvencies across the banking sector, undermining public credit and further destabilising the national economy. The courts reasoned that the provi- sions of Law No 2/67 were not intended to apply in the context of a system-wide financial collapse, but were designed for isolated cases of insolvency. Nonetheless, the possibility of bank insolvency can- not be ruled out, and many claims are being brought in this regard.
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