On April 20, 2020, the Lebanese Parliament passed a law authorizing the cultivation, trade, research and use of medical cannabis. The adoption of the law by Lebanon creates an opportunity for leading medical cannabis companies around the world to enter the Lebanese market. There are six categories of license applicants, including foreign companies licensed in their home jurisdiction. Other opportunities that foreign investors are exploring are partnerships and associations with farmers and businesses in Lebanon. In this article, we detail information regarding foreign investment in Lebanon which is a consideration for foreign investors interested in the medical cannabis industry in Lebanon.
Lebanon is renowned for its liberal economy and strategic location and has always attracted significant inflows of foreign direct investment (“FDI”). In recent years, FDI flows into the country have shown resilience, despite several investment challenges at the global and regional levels. The performance of FDI has remained superior to that of similar countries, including the Middle East and North Africa (“MENA”) region as a whole. Indeed, Lebanon’s FDI stock reached $ 68 billion in 2019, an increase of more than $ 20 billion in more than ten years.
The majority of investors come from France, United Arab Emirates, United States, Germany, United Kingdom, Netherlands, Jordan and Egypt. FDI in Lebanon is mainly oriented towards trade, real estate, services, tourism and agriculture. Many other opportunities exist in healthcare, energy, oil and gas exploration, information and communication technology, and franchising, to name a few.
Lebanese government incentives
In order to facilitate investor establishment and administrative formalities, Law No.360 of 2001 introduced tailor-made incentives through package deals for large investment projects, including tax exemptions of up to ten. years, reductions in construction costs and work permits, and a total exemption on land. Registration fees. The law also created a government agency called the Lebanon Investment Development Authority (commonly referred to as “IDAL”) with the aim of providing domestic and foreign investors with comprehensive sets of services through their various stages of operations in Lebanon in the following sectors: Agriculture, agro-industry, industry, tourism, information technology, telecommunications and media.
The development of a solid legal and institutional framework
In addition, the Lebanese government, which generally maintains a hands-off position, has recently embarked on a reform campaign aimed at improving the legal and institutional framework for investments. A series of new laws have been adopted and nearly 70 bills are currently under consideration. In several regulatory areas, such as commercial arbitration or environmental assessment, Lebanon is seen as a model for other countries to follow.
More specifically, Law 81 of 2018 on electronic transactions and personal data; Offshore Companies and Single Member Offshore Companies Act 85 of 2019; and Law 126 of 2019, which amended the Commercial Code Law of 1946, were passed to create a new ecosystem where businesses and startups can thrive and grow. Their main objective is to make the country more attractive for foreign investment and to expose the Lebanese markets to international standards and scale.
The Lebanese legal framework for foreign investors
Lebanese business law is, in principle, very open to all traditional forms of investment. Foreign private entities can establish, acquire and dispose of interests in business enterprises and can engage in all types of activities. Lebanese law does not distinguish between local and foreign investors, nor does it dictate who can set up a Lebanese company, participate in a joint venture and authorize the establishment of a local branch or subsidiary of a company. without difficulty. Foreigners doing business in Lebanon through a company, factory or office must have work and residence permits. Yet there are no discriminatory or excessively onerous visa, residency or work permit requirements.
Additional guarantees for foreign investors are contained in bilateral investment treaties (“BITs”). Lebanon has concluded 50 BITs with traditional investment protection provisions and is a party to seven treaties with investment provisions (“TIP”). Once established, investors are offered high standards of treatment and protection even if these are not enshrined in law. In addition, expropriation is strictly regulated and is rare in the country.
In the event of a commercial dispute, domestic and foreign investors have access to local courts and commercial arbitration. The BITs signed by Lebanon all give access to investor-state arbitration. The country has ratified the 1965 Convention on the Settlement of Investment Disputes between States and Investors (“ICSID Convention”) and the 1958 Convention on the Recognition of Foreign Arbitral Awards (“New York Convention”). A comprehensive arbitration framework is in place, and although arbitration awards must be made enforceable by judicial exequatur, overall Lebanese courts are in favor of arbitration.
The tax system
The country has adopted a corporate tax regime based on low corporate taxes and a multiplicity of exemptions and exceptions and constantly strives to increase transparency. Law 43 of 2015 allows the exchange of information for tax purposes with countries which have concluded a Double Taxation Avoidance Agreement (“DTAA”) with Lebanon and which contains related provisions. Industrial investments in rural areas benefit from tax exemptions of six or ten years, depending on specific criteria. The Lebanese Parliament enacted a law in April 2014 to reduce the income tax on industrial exports by 50%. The government grants customs exemptions to industrial warehouses for export.
Foreign ownership of Lebanese property
Law No. 296 of 2001 deals with issues of acquisition of foreign property. The law relaxed some legal constraints on foreign ownership of property, ended discrimination between Arab and foreign nationals, and reduced property registration fees to the same amount for both. A foreigner can also obtain up to 3,000 square meters of real estate without an authorized permit; however, a special decree issued by the Cabinet must guarantee any overrun. The law also allows foreigners to acquire an area not exceeding 3% of the area of Lebanon, regardless of the geographical location, provided that the total ownership does not exceed 10% of the Beirut region.
Protection of intellectual property rights
Lebanese legislation on intellectual property rights (“IPR”) complies with regulations on trade-related intellectual property rights (“TRIPS”) and the World Trade Organization (“WTO”). IPR laws govern copyright, patents, trademarks and geographic features. Lebanese law provides patent protection for inventions and plant varieties and unique protection for layout designs of integrated circuits. In addition, the law protects undisclosed information. With regard to trademarks, they benefit from protection via the accession of Lebanon to the Paris Convention for the Protection of Industrial Property (“Paris Convention”). In addition, geographical indications are protected under the provisions of the new Customs Law, the Anti-Fraud Law and the Criminal Law. In addition, the law provides strict penalties for copyright infringements and adequate compensation for those whose rights have been violated. New bills and amendments to existing laws aimed at improving the IPR environment, especially for industrial designs, trademarks, geographical indications, as well as amendments to the copyright law, are being introduced. in preparation for.
Prevention of corruption
Corruption is seen as a deterrent for businesses in Lebanon. However, in April 2018, the government launched a national anti-corruption strategy and a strong movement is underway to tackle corrupt practices. In fact, many laws have been passed in this process: the Access to Information Law, the Anti-Corruption Law, the Whistleblower Protection Law, the Anti-Money Laundering Law and the law on illegitimate enrichment. In addition, a modern law on the independence of the judiciary is in progress. Public and civil society actors are more than ever actively engaged in new tools and initiatives to fight corruption.
Lebanese tariffs and booming sectors
Lebanon has great potential to become a regional leader in pharmaceutical production and sales. With its developed STEM education program, the country is able to provide a highly specialized labor pool for the pharmaceutical industries. In addition, it has direct access to the MENA pharmaceutical market, which has one of the highest growth rates – surpassing that of US pharmaceutical manufacturing companies – while other industries are eligible for a 50% exemption from export customs duties. Machinery, equipment, spare parts and construction materials imported for the creation of new industrial enterprises are only subject to a customs duty of 2%. Customs duty exemptions are applied to raw materials and semi-finished products. The Lebanese cosmetics industry ranks among the top 5 Lebanese exports, which indicates its solid position and growth potential to meet regional and global demand.
Finally, the Lebanese workforce is cheap, maintains a highly entrepreneurial culture and background, and is known to have a high level of education and strong language skills.
Considering all of the above, Lebanon will undoubtedly be, and always, a promising destination for investment opportunities, regardless.