Al Habtoor legal threat clouds Lebanon’s Gulf outreach

UAE-based conglomerate Al Habtoor Group said on Monday it will pursue legal action against Lebanese authorities to recover about $1.7bn in investments it says were lost during the country’s banking crisis, a move that risks complicating Beirut’s efforts to rebuild confidence among Gulf investors.

The group said the losses stem from funds trapped in the Lebanese banking system after the financial meltdown that began in 2019, when lenders imposed sweeping restrictions on withdrawals and transfers. Those measures, applied without a formal capital controls law, left corporate depositors alongside households unable to access savings, effectively freezing balances for years.

Legal action threatens Lebanon’s Gulf investment hopes, the company said, adding that it has exhausted avenues for resolution through engagement with banks and officials. It plans to seek remedies through international arbitration and other legal forums, arguing that the failure to protect deposits and ensure equal treatment of investors violated basic safeguards expected by foreign capital.

Lebanon’s crisis wiped out the credibility of its once-vaunted banking sector. The local currency collapsed, public debt spiralled, and the state defaulted on Eurobonds in 2020. Banks responded by rationing cash and converting dollar deposits into local currency at below-market rates, a practice depositors and rights groups have challenged as arbitrary and discriminatory. Successive governments have pledged reforms, including capital controls legislation and bank restructuring, but progress has stalled amid political paralysis.

Al Habtoor Group said its exposure built up over years of operations and investments, reflecting what it described as longstanding confidence in Lebanon’s services economy. The company maintains interests across hospitality, real estate and other sectors in the region and said the scale of its claimed losses underscores the impact of the crisis on large employers as well as individuals.

The legal threat lands at a delicate moment for Beirut. Officials have repeatedly signalled that renewed Gulf engagement is essential to revive growth, stabilise the currency and attract hard currency inflows. Several Gulf states have conditioned deeper economic ties on governance reforms, financial transparency and the protection of investors’ rights. Any high-profile dispute with a prominent UAE group could harden perceptions of risk.

Industry analysts say the case illustrates a broader trend of foreign investors seeking recourse outside Lebanon’s courts, reflecting doubts about enforcement and the pace of reform. While some depositors have secured limited relief through foreign judgments against Lebanese banks with overseas assets, outcomes have been uneven and time-consuming.

For the government, the dispute raises questions about how to balance negotiations with banks, depositor protections and the need to reassure external partners. Without a comprehensive capital controls framework and a credible bank resolution plan, Lebanon has struggled to present a coherent path forward. The absence of a formal law in 2019 allowed banks to act unilaterally, creating a patchwork of restrictions that varied by institution and client.

Officials have argued that losses should be shared among the state, banks and large depositors, a stance that has fuelled opposition from those who say it amounts to expropriation. The International Monetary Fund has made bank restructuring and fiscal reforms central to any programme, but a full agreement has remained elusive.

Gulf investors have historically played an outsized role in Lebanon’s economy, particularly in tourism, property and services. Their pullback since the crisis has deepened the downturn. Business leaders say restoring confidence requires more than diplomatic outreach; it demands enforceable rules, transparent accounting of losses and equal treatment under the law.