Lebanon Corruption Report

The courts present businesses with high corruption risks. Petty corruption is widespread in the institution; bribes and irregular payments are often exchanged to obtain favorable judicial decisions (BTI 2016, GCR 2015-2016). The courts are subject to political interference and their performance and independence are challenged (BTI 2016). Recruitment of key prosecutors and investigating magistrates is also subject to political intervention (BTI 2016). Companies find the ability of the courts to settle disputes and challenge government regulations to be weak (GCR 2015-2016). The courts contend with huge backlogs and judicial procedures suffer from long delays (HRR 2015). Enforcing contracts in Lebanon is more time-consuming compared to regional averages, taking 721 days (DB 2016).

Lebanon is a member of the International Centre for Settlement of Investment Disputes (ICSID) and is a signatory to the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Businesses may contend with high corruption risks when dealing with the police. Despite that authorities maintained control over the institution, police officials acted with impunity due to the lack of public information on the outcome of cases of abuse (HRR 2015). Furthermore, there are no mechanisms in place to investigate and punish corruption within the police (HRR 2015). Reportedly, private security firms are also on the rise in Lebanon; these are usually affiliated with powerful political figures and act with impunity (Al-Jazeera, Nov. 2015). Businesses do not find the police to be reliable in protecting them from crime and in enforcing law and order (GCR 2015-2016). A third of companies identify crime and theft in Lebanon as a major constraint (ES 2013).

The public services sector carries a high corruption risk for businesses. Bribes and irregular payments are often exchanged when applying for public utilities in Lebanon (GCR 2015-2016). While a little more than two in every ten companies expect to give gifts to officials ‘to get things done’ (ES 2013). The use of connections is also a common way to navigate the public administration (BTI 2016). In the same vein, municipalities are sometimes unable to enforce regulations as a result of undue political interference (BTI 2016). Three-quarters of Lebanese perceive the public administration’s efforts to crack down on graft as rather inefficient and almost a third report to have paid a bribe to public services in 2015 (TI 2016). Bureaucratic delays are another important obstacle for investors as is the burden of government regulations (BTI 2016). Starting a business is less time consuming than regional average; taking 15 days and requiring six procedures (DB 2016).

One case of corruption and patronage affecting public services is the trash crisis in Lebanon in 2015, as in July 2015 garbage collection services stopped in some parts of the capital Beirut leading to vast piles of refuse and deteriorations on health and environment (TI 2016). Reportedly, corruption and behind-the-scenes bargains have caused the crisis, which was not solved until February 2016. The case triggered the “You Stink” campaign voicing public dissatisfaction and protesting government corruption (TI 2016).

The land administration carries high corruption risks for businesses, furthermore, property rights are poorly protected (GCR 2015-2016). Almost half of companies expect to give gifts to officials in order to obtain a construction license (ES 2013). Bribes are also commonly exchanged when obtaining building permits (HRR 2015). Reportedly, several civil servants have been investigated for embezzlement in the real estate sector and for the illegal appropriation of public property (ICS 2016).

Registering property is more time-consuming in Lebanon compared to averages in neighboring countries; taking 34 days and requiring 8 procedures (DB 2016).

The tax administration carries a high risk for businesses. Bribes and irregular payments are often exchanged when meeting with tax officials (GCR 2015-2016). Moreover, almost two in every ten companies expect to offer gifts when meeting with tax officials (ES 2013).

The Ministry of Finance launched in 2013 an electronic payment system allowing citizens and companies to file and pay their taxes online (ICS 2015). Indeed, the time required to pay taxes in Lebanon is lower than the regional average; taking 183 hours per year (DB 2016).

Businesses contend with high corruption risks when dealing with the customs administration. Transparency at the border is ranked as low and irregular payments are bribes when importing and exporting are widely exchanged (GETR 2014). Corruption is reported to be more associated with importing than with exporting (GETR 2014).

The government introduced remote filing of manifests and declarations to the customs administration in an effort increase transparency (ICS 2015). Yet, the introduction of physical inspections on all incoming shipments – with the aim of fighting customs evasion and fraud and counterfeit goods – has led businesses to complain over long and expensive delays (ICS 2015). These, in turn, could constitute an incentive for bribery and corruption.

Corruption is rampant in public procurement presenting businesses with very high risks (ICS 2016). Companies report that bribes are often offered to obtain a government contract or license (GCR 2015-2016). Favoritism towards well-connected companies and individual is also widespread among procurement officials (GCR 2015-2016). Thus, businesses often offer bribes and cultivate relations with politicians to secure public procurement contracts (FitW 2015). Likewise, companies perceive the diversion of public funds due to corruption as common (GCR 2015-2016).

Lebanon lacks a law regulating all aspects of the public procurement processes (ICS 2016). Public contracts are often awarded by mutual agreement between government administrations and companies, without calling for a tender and with no clear procedures for the process (ICS 2016).