Lebanese banks under more pressure after landmark UK ruling

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. (File: Reuters)
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Updated 13 September 2020

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.”

OPEC faces a critical moment in its 60-year history

Updated 28 September 2020

OPEC faces a critical moment in its 60-year history

  • Pronouncements of the Vienna-based institution can still spark major price swings

LONDON: OPEC faces a critical moment in its 60-year history with the coronavirus crushing crude demand and prices, discord among its members, and threats from a world seeking cleaner fuels.

Founded on Sept. 14, 1960, OPEC currently comprises 13 members including nations from Africa and Latin America.

The 60th anniversary “comes at a critical moment in its history,” UniCredit analyst Edoardo Campanella said in reference to the Organization of the Petroleum Exporting Countries.

“Its ability to steer the oil market in its favor has never been put in question to the extent it is now,” he noted. The Vienna-based institution convenes for regular meetings to assess the state of supply and demand in the marketplace, and its pronouncements can still spark major price swings.

That ability has dimmed in recent years however, prompting it to join forces with ten non-OPEC producers including Russia to curb their collective output.

OPEC+ essentially wanted to counter surging energy supplies from shale rock in the United States and help clear a stubborn supply glut on world markets.

Today, OPEC pumps about one-third of global oil — but OPEC+ accounts for almost 50 percent, giving it greater clout.

Carlo Alberto de Casa, trader at Activtrades, insisted that the cartel retains a “relevant” function in the market, dismissing talk the organization was a “has-been.”

“They are slightly less influential compared to the past, also due to production of non-OPEC countries and new extraction techniques. But I still see a role for OPEC,” he told AFP.

The price war, in tandem with the worsening Covid-19 pandemic, sent oil prices off a cliff — and even caused New York’s light sweet crude contract to briefly turn negative in April — meaning producers paid buyers to take the oil off their hands.

After the unprecedented market crash, OPEC+ in May slashed up to a fifth of its output — a move that triggered a sharp rebound in crude prices to current levels around $40 per barrel.

Added to the supply backdrop, the United States, now the world’s biggest oil producer, curbed the pace of costly shale extraction.

Rystad Energy analyst Paola Rodriguez-Masiu, while noting that OPEC has lost market share in recent years, said the cartel still has an important role to play because it possesses the largest amount of accessible crude. This meant that extracting its oil resulted in fewer carbon emissions, she said.

“I would argue that OPEC would become more and more important” in the future, she concluded.