The decision of the Choura Council on bank deposits does not only close a dispute between the Association of Banks, the State and the Bank of Lebanon. It opens a broader, more sensitive and explosive question for applicants: can it serve as a basis for jurisprudence against « lollars » and against the haircut imposed since 2019? The answer must be cautious. The stop does not directly determine the fate of each bank withdrawal at a rate below the nominal value of the dollar. It does not alone condemn all the circulars of the Bank of Lebanon. It does not automatically convert old deposits into claims immediately payable into fresh dollars. But it lays down a principle that can feed new remedies: a bank claim is a protected property right, and its reduction cannot be organised by a simple administrative decision.
This point changes the field of litigation. Since the beginning of the crisis, Lebanon has lived with two categories of dollars. The fresh dollar circulates, transfers and withdraws normally. The « lollar » refers to the dollar blocked in the banking system, entered in the accounts but payable with restrictions, ceilings and sometimes a massive discount. This duality was never created by a clear law. It was imposed by the practice of banks, by the circulars of the Bank of Lebanon and by the absence of parliamentary control. The decision of the Choura Council puts this construction under pressure. It recalls that the financial emergency is not enough to suspend the legality.
Possible case law, not yet acquired
The word jurisprudence must be used with precision. A court decision can open a direction without settling all future cases. The Choura Council found a government act on the financial recovery strategy. He censored the idea of an administrative cancellation of a significant part of the Bank of Lebanon’s foreign currency liabilities to commercial banks. The judge did not rule on an individual complaint by an applicant refusing forced conversion or withdrawal into Lebanese pounds at an unfavourable rate. Therefore, the direct range of the stop remains framed.
But its indirect scope is considerable. By recognizing the protection of claims and by recalling that property infringements must be governed by law, the judgment provides an argument to applicants. It can be used against any measure that turns a fee into a devalued payment, without sufficient legislative basis. Lollars thus become more difficult to treat as a purely banking reality. They become what they are legally: disputed claims, not new currencies created by use.
Case law could be built by accumulation. An applicant contests a discount. Another attack a conversion. A third person refuses a circular settlement. An association raises the incompetence of the Bank of Lebanon or the executive. Each case will require the judge to answer a simple question: which authority can reduce the actual value of a deposit, according to which procedure, with which guarantees and what compensation? If the courts follow the logic of the Choura Council, they could limit the ability of banks and the BDL to impose legal losses.
This development does not mean that depositors will recover all their assets tomorrow. A case law protects a right, but it does not create the missing dollars. The banking system continues to face deep insolvency. The Bank of Lebanon does not have sufficient reserves to meet all former foreign currency liabilities. The State does not have a budgetary margin for rapid repayment. The judge can therefore prevent unlawful confiscation. He cannot finance the restitution.
The Lollar, a fiction born of the absence of a law
The lollar summarizes the Lebanese anomaly. It does not exist in the Currency and Credit Code. It is not an official currency. It is not based on stable legal parity. A collapse occurred: banks continued to display dollar balances, while limiting access to these balances. The contract then awarded these frozen receivables a lower value than the fresh dollar. Depositors understood that a dollar in a Lebanese bank was no longer worth a freely transferable dollar.
This fiction took a concrete form with the capped withdrawals. For several years, circulars allowed depositors to withdraw part of their assets at administered rates, often below market rates. Banks have thus gradually reduced their commitments. The depositors recovered cash, but at the cost of a real loss. Many accepted these withdrawals because they had no alternative. However, economic acceptance does not always mean legal consent.
This is where the decision of the Choura Council can weigh. If a deposit in foreign currency is a protected receivable, then its forced conversion into haircut payment constitutes a potential damage to the depositor’s assets. This may be justified by public interest, financial stability or the need to avoid a complete collapse. But it must then be provided for by law. It must also respect criteria of proportionality, equality and transparency. A central bank circular cannot become the equivalent of a bank resolution law.
The banks will respond that the lollar corresponds to a factual situation. They will say that they themselves have debts blocked with the Bank of Lebanon. They will argue that liquidity in fresh dollars has disappeared and that immediate full repayment is impossible. These arguments are not negligible. They describe a real constraint. But they are not enough to create a legal basis. The impossibility to pay does not automatically give the right to impose a discount.
Imputed haircut or forced transaction
The future litigation will probably focus on the boundary between transaction and constraint. Has a depositor who voluntarily withdraws funds through a circular accepted the discount? Can he then claim the difference? Can the bank consider that the payment partially extinguished its debt? The answer will depend on the signed documents, the degree of information, the existence of alternatives and the context of necessity in which the client found himself.
In a normal banking system, a transaction requires free consent. In Lebanon after 2019, this consent is questionable. The depositor often had only one limited choice: to leave his money blocked, to sell his bank check with a discount on the secondary market or to accept a partial withdrawal on conditions imposed. This situation creates a strong economic constraint. It may weaken the argument of consent.
Case law could therefore distinguish several cases. Withdrawals without clear release signatures may remain questionable. Explicit transactional agreements would be more difficult to challenge unless there was a lack of consent or clear abuse. The conversions imposed unilaterally by the bank would be the most vulnerable. BDL circular arrangements would be in an intermediate area, as they are based on a public authority but not necessarily on sufficient law.
The concept of discount must also be defined. It is not just about the exchange rate. It includes time limits, ceilings, transfer restrictions, eligibility conditions and the distinction between old and fresh deposits. A depositor paid over ten years with limited monthly amounts suffers a loss of value, even if the nominal amount is preserved. The law will therefore have to deal with the time value of money, not just the capital displayed.
Bank of Lebanon faced with litigation risk
The Bank of Lebanon occupies a delicate position. Its circulars have prevented a complete rupture of the system. They provided minimal access to certain deposits. They have also reduced foreign currency liabilities at lower cost to banks. This dual nature feeds litigation. What can be presented as a survival mechanism can also be described as an organized discount without a sufficient legislative mandate.
Under Karim Suaid, BDL must avoid aggravating this vulnerability. Any new circular on old deposits should be articulated with the Loss Act. Otherwise, it could be attacked as a new administrative measure infringing property rights. The central bank may organise the technical arrangements for a repayment. It can set procedures, monitor banks and verify liquidity. It should no longer define only the loss borne by applicants.
The decision of the Choura Council therefore pushes the BDL towards a more strictly prudential role. It must provide figures, monitor balance sheets, impose provisions, prepare the resolution of weak banks and preserve monetary stability. It cannot serve as a substitute legislator. This clarification also protects the central bank. The more she assumes sole responsibility for the distribution of losses, the more she becomes the target of appeals. The more the law defines the framework, the more its responsibility is limited to enforcement.
The BDL will also have to address the problem of numbers. The lollars remain included in the balance sheets. Fresh deposits are separated. Old deposits are reduced by withdrawals, conversions, secondary market sales or circular regulations. Without full transparency, the future law may be based on disputed data. However, case law on the discount will first arise from contradictions between the amounts displayed and the amounts actually recovered.
Commercial banks on the front line
Commercial banks will be the primary target for depositors. The deposit contract binds the customer to his bank, not directly to the Bank of Lebanon. Although institutions have placed a large portion of their currencies with the BDL, they remain the debtors of their clients. This legal reality explains why banks have been seeking the recognition of State and central bank responsibility since the beginning of the crisis. They want to move the debt centre to the public sector.
The decision of the Choura Council partially helps them. It confirms that banks’ claims on the BDL cannot be erased by simple government decision. But this victory can turn against them. If their claims are protected as property, their clients’ claims are protected as property. Banks cannot invoke the protection of their assets while challenging the protection of deposits. Legal logic is valid in both directions.
This is where case law on lollars could become formidable. It could require banks to prove the legal basis of each discount applied. It could also reinforce the requirement of equality between applicants. Some clients transferred their funds abroad after the crisis began. Others obtained preferential settlements. Many have been severely restricted. This difference in treatment can fuel liability actions.
Bank restructuring should therefore precede or accompany legal clarification. Without the resolution of insolvent banks, trials may lead to impracticable decisions. A judgment in favour of a depositor is valid only if the bank has seizable assets. If each applicant acts alone, only the fastest or best advised could gain an advantage. A well-designed law must avoid this disorderly race, while respecting individual rights.
The risk of fragmented case law
The danger lies in fragmentation. If Parliament delays, the courts will have to respond on a case-by-case basis. Some judges could strictly protect applicants. Others could consider the systemic crisis and validate temporary restrictions. Foreign courts could make decisions different from those of Lebanese courts. Banks may be exposed to seizures abroad, while local depositors would remain subject to internal ceilings.
Dispersed jurisprudence would have significant economic effects. It would increase uncertainty. It would push the banks to provide more. It could speed up unorganized bankruptcies. It would also create inequality between applicants capable of prosecuting abroad and those who have only domestic remedies. The protection of property rights can therefore have a paradoxical effect if it is not accompanied by a comprehensive law.
The role of the legislator thus becomes central. A good law must not seek to neutralize judges. It must reduce the need for litigation by laying down clear rules. It must recognize the value of old deposits, define losses, order shareholder contributions, process preferred transfers, protect small depositors and regulate repayment instruments. It must also provide for effective remedies. Otherwise, jurisprudence will replace reform.
The issue of equality will be decisive. A uniform discount may seem simple, but it ignores abusive behaviour, excessive interest, recent deposits, privileged transfers and social situations. A differentiated discount may be fairer, but it requires specific criteria. If these criteria are unclear, they will be challenged. The judge will then have to arbitrate between financial fairness and legal certainty.
The precedent that forces the law to be stronger
The decision of the Choura Council does not condemn any haircut in principle. In particular, it condemned the method of removing rights by administrative decision. A law could therefore provide for a contribution from large deposits, a spread of repayments or long-term instruments. But it will have to comply with strict conditions. It will have to demonstrate the general interest, protect vulnerable categories, establish a coherent hierarchy of losses and avoid having depositors bear the full cost.
The future loss law will therefore be subject to legal control. If it erases claims too widely without credible compensation, it will be attacked. If it protects banks too much to the detriment of depositors, it will be attacked. If it promises a refund without real funding, it will produce a new fiction. The Choura Council’s precedent obliges writers to write a more solid, precise and transparent text.
This also applies to circulars already applied. The question of their contentious retroactivity remains open. Applicants will be able to argue that past discounts have reduced their ownership without a legal basis. Banks will respond that withdrawals were accepted, circulars were in force and the crisis justified exceptional measures. The courts will have to say whether the urgency can validate a lasting infringement after the fact.
The most likely principle is gradual control. Judges could be more severe against unilateral operations and obvious discrimination. They could be more cautious about general arrangements that allowed partial payments. They could also wait until Parliament passes legislation and then assess its compliance. The case law will therefore not be based on a single judgment, but on a series of decisions on ownership, consent, equality and jurisdiction.
Lollars: the end of comfortable ambiguity
The force of the lollar was its ambiguity. For banks, it kept deposits on the balance sheet while limiting outflows. For applicants, he maintained the hope of a future return. For the State, it avoided immediate recognition of the magnitude of the losses. For the Bank of Lebanon, he gave time. This ambiguity has stabilized the system in appearance. It also destroyed trust.
The decision of the Choura Council makes this ambiguity more difficult to defend. It obliges us to return to the language of law. A deposit is a receivable. A claim can be restructured, but not retracted. A loss may be imposed, but not without a legal basis. A bank may be insolvent, but not continue indefinitely as if its liabilities were intact. A central bank can regulate, but not legislate.
The litigation of the lollars could therefore become a mirror of the Lebanese crisis. He will ask a simple question: does Lebanon want to emerge from the crisis by a law assumed or by a diffuse haircut, applied month after month, without a clear vote? The first path requires painful political choices. The second prolongs injustice and multiplies remedies. Since the Choura Council’s decision, the second path has become legally more fragile.
For applicants, the judgment does not guarantee full reimbursement. He gives them an argument. For banks, it protects their claims against the state, but further exposes their treatment of customers. For the Bank of Lebanon, it reduces the space for circulars creating losses. For the government, it confirms that bank reform cannot be an administrative operation. The lollar crisis thus enters a more judicial phase, where each haircut must be linked to a clearly identified law, justification and responsibility.
The next test will be the texts in preparation and subsequent appeals. If the Loss Act recognizes rights, prioritizes sacrifices and gives real value to repayment instruments, it can channel jurisprudence. If it organises a discount without guarantees, it will instead offer depositors a new ground of attack, with the Choura Council as a point of support.
