Judiciary’s clash with banks threatens Lebanon’s elections

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An escalating confrontation between Lebanon’s judiciary and the battered banking sector appears to have overshadowed ongoing preparations to hold parliamentary elections on time, raising fears that judicial rulings against some leading banks might eventually lead to scuttling the vote altogether.

President Michel Aoun and the Free Patriotic Movement (FPM), the main Christian political party founded by Aoun and now headed by his son-in-law, MP Gebran Bassil, have been accused by their political opponents of standing behind the judicial campaign against Lebanese banks to delay or even derail the elections deemed “crucial” by the international community and most of the Lebanese people.

The Lebanese, reeling from the worst economic meltdown in the country’s history, are hoping that the polls, scheduled on May 15, will be an opportunity to bring about an overdue political change. It’s hoped this will steer Lebanon out of the crisis, described by the World Bank as one of the world’s worst since the 1850s, posing the gravest threat to its stability since the 1975-90 Civil War.

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The financial downturn, caused by decades of mismanagement, incompetence, and corruption by the country’s ruling political elite, has propelled more than 70 percent of Lebanon’s 6 million population into poverty. A crashing Lebanese pound has lost more than 90 percent of its value against the US dollar since late 2019, sending prices of food, supplies, and basic commodities skyrocketing.

“The ongoing crisis between the judiciary and the banking sector has put the government at bay while it struggles to cope with multiple crises, including an unprecedented economic meltdown that is hitting the Lebanese hard and threatening them with poverty,” a political source told Al Arabiya English.

So far, there are no signs of an imminent solution to the crisis despite a cabinet decision on March 23 to form a committee made up of judges and bankers to settle the conflict between the judiciary and banks. The latest crisis began earlier in March when Mount Lebanon Public Prosecutor Judge Ghada Aoun issued judicial orders freezing the assets of six banks while she investigated transactions they made with the country’s Central Bank.

The World Bank has described Lebanon’s economic crisis as one of the world's worst since the 1850s, posing the gravest threat to the country’s stability since the 1975-90 Civil War. (File photo: AFP)
The World Bank has described Lebanon’s economic crisis as one of the world's worst since the 1850s, posing the gravest threat to the country’s stability since the 1975-90 Civil War. (File photo: AFP)

The judge is currently at the center of a heated controversy after she had been accused by Aoun’s opponents of bias and acting in line with the political agenda of the president, who reportedly wants Central Bank Governor Riad Salameh removed from his post. She has denied this, saying that she is implementing the law.

The asset freeze applies to properties, vehicles, and shares in companies owned by the banks or the members of their boards. Judge Aoun has also issued travel bans against the heads of the boards of the banks as a precautionary measure while she carried out her probe. But she has not charged any of the parties mentioned with any crime. A seventh bank, Fransabank, had its assets frozen by another judge who ruled in favor of a man who had brought a case demanding the bank reopen his account and payout his deposit in cash.

Protesting the rulings, Lebanon’s banks staged a two-day “warning” strike on March 21-22, paralyzing businesses in a country mired in a suffocating economic crisis. Lebanon’s banks’ association has dismissed the rulings as “arbitrary” and “illegal.” the measures would further destabilize the country’s banking system, already crippled by a financial downturn that has seen depositors locked out of their hard currency accounts.

Raya Hassan, chairman of the board of Bankmed, one of the banks targeted by the judicial measures, warned that if such measures persisted against banks, the Association of Banks in Lebanon (ABL) would resort to escalating actions.

In an interview with the Lebanese channel MTV on March 24, she said one of these measures is to go on an open-ended strike by banks and file a lawsuit against the Lebanese state for allegedly wasting the money [the people’s deposits] from the Central Bank.

Hassan, a former interior minister, affiliated with the Future Movement headed by former Prime Minister Saad Hariri, blamed the collapse of the banking sector squarely on the Lebanese state, saying the state should compensate for the losses in this sector, estimated at more than $70 billion.

Experts said more than $100 billion had been trapped in a banking system paralyzed since 2019 when Lebanon descended into a devastating financial crisis.

“A prolonged bank closure risked chaos, and social unrest as public and private sector employees will not be able to withdraw their salaries,” a banking source told Al Arabiya English.

Interior Minister Bassam Mawlawi criticized the judicial rulings against banks, warning that the crisis between the two sides might lead to a “social implosion” in the crises-ridden country. “It is unacceptable for some judiciary members to take illegal, incorrect, and unwise decisions and for these decisions to be without constraints,” Mawlawi said in an interview published in the Kuwaiti newspaper Al-Rai on March 27. His ministry is supervising the upcoming elections.

“It is unacceptable for [judicial] decisions emanating from political and revengeful motives. A judge must be impartial,” he argued. “What we are seeing today is a judge’s bias toward one of the two parties and hatred for one of them. What is happening is very dangerous and might lead to a social implosion,” Mawlawi added.

Prime Minister Najib Mikati has denied interfering in the judiciary. (File photo: Reuters)
Prime Minister Najib Mikati has denied interfering in the judiciary. (File photo: Reuters)

Commenting on the judicial-banking crisis, Prime Minister Najib Mikati denied interfering in the judiciary in a statement on March 18 but said there were “shortcomings” in its work.

In what appeared to be an implicit criticism of Ghada Aoun’s rulings, Mikati said actions taken by some judges were stoking tensions in Lebanon, and he had asked the public prosecutor to “take appropriate measures.” He warned against attempts to exploit the judicial measures for election purposes. “It’s clear that the course of action taken by some judges is pushing toward ominous tensions, and there are attempts to use this tension in election campaigns,” Mikati said, referring to the May 15 polls. “This is a dangerous matter.”

Asked to comment on fears that the tensions arising from the judicial measures were aimed at scuttling the elections, Mikati, after chairing a special Cabinet session on March 19 to discuss the rulings against banks, said: “We in the government insist on holding the parliamentary elections on May 15, 2022.”

In its news bulletin on March 25, the Lebanese channel MTV, quoting what it called “informed sources” familiar with the matter, described the ongoing judicial-banking dispute as “a war with double win” launched by Aoun and Bassil “either to scuttle the elections or to devise an electoral slogan that would secure an election victory for the team of the president and the Free Patriotic Movement.”

However, sources close to Aoun rejected this accusation. Instead, they accused the president’s opponents, namely Parliament Speaker Nabih Berri, Hariri, and Druze leader Walid Joumblatt of seeking to torpedo the elections. “It’s neither the president’s team nor the FPM’s team that wants to foil the elections. Rather, the Berri-Hariri-Joumblatt team is seeking to scupper the elections,” MTV quoted the sources as saying.

At the presidential palace in Baabda, east of Beirut, a source also dismissed the opposition’s accusation that President Aoun stood behind the judicial campaign against banks intending to disrupt the polls. “The president has nothing to do with this issue [judicial measures]. He does not interfere in the judiciary’s work. Judge Aoun has files that she is pursuing. Probably she takes measures with some exaggeration,” the Baabda source told Al Arabia English.

Raya Hassan, chairman of the board of Bankmed, blamed the collapse of the banking sector squarely on the Lebanese state, saying the state should compensate for the losses in this sector, estimated at more than $70 billion. (Stock image)
Raya Hassan, chairman of the board of Bankmed, blamed the collapse of the banking sector squarely on the Lebanese state, saying the state should compensate for the losses in this sector, estimated at more than $70 billion. (Stock image)

“Concerning financial wrongdoings, the president is concerned with a forensic audit [of the Central Bank’s accounts]. The issue of judicial files remains in the hands of the judiciary. Therefore, the president does not interfere in order not to influence the judiciary’s work,” the source added.

Samir Geagea, head of the Lebanese Forces party, criticized the “selective” judicial measures taken against some banks. He warned that the crisis might eventually lead to scuttling the elections.

“We fear that these measures aim to push banks to close, something that will prevent elections being held on time because it will be difficult [for candidates] to open [bank] accounts and use them during the [election] campaign. It is a political-judicial play whose outward appearance is to serve right and the law, but inwardly it is to derail the elections,” Geagea said on March 19.

Geagea and other Hezbollah adversaries hope to overturn the majority won by the Iranian-backed Shia group and its allies, including the Free Patriotic Movement and the Amal Movement led by Berri, in 2018 elections. Analysts said the Lebanese Forces party, which has the second-largest Christian bloc in Parliament after the FPM’s bloc, is widely expected to make gains in the elections.

In contrast, its main Christian rival, the FPM, allied with Hezbollah, is expected to lose seats. MP Mohammad Hajjar, whose parliamentary Future Movement bloc headed by Hariri has been at loggerheads with President Aoun and the Free Patriotic Movement, linked the judicial measures against banks to attempts to disrupt the elections.

“Like many of the Lebanese, we have felt that the judicial measures are tied to the parliamentary elections, especially since these measures came after a demand by the president and his political movement, the Free Patriotic Movement, to amend the electoral law to allow Lebanese expatriates to elect only six MPs representing them instead of voting to elect the 128 members was not fulfilled,” Hajjar told Al Arabiya English.

Citing another demand by Aoun and the FPM to set up “mega voting centers” that was rejected by the government, Hajjar said: “The judicial measures came as if someone wants to play with this issue and probably derail the parliamentary elections… There is an impression held by the overwhelming majority of the Lebanese and observers that there is someone who wants to derail the elections by triggering these judicial rulings.”

The proposed “mega centers” would allow citizens to cast their ballots in areas of their residence instead of having to go to their hometowns to do so. The head of Lebanon’s influential Maronite Catholic Church also warned against attempts to use judicial measures against banks to thwart the elections, reiterating his stance that the polls should be held on time. “In the face of the sad and dangerous situation of the judiciary, we ask: Where are the honorable judges, and where are judicial authorities that do not do their duty to protect the judicial body?”

A view shows the exterior of the Justice Palace building where Raja Salameh, brother of Central Bank governor Riad Salameh is believed to have been arrested in Baabda. (Reuters)
A view shows the exterior of the Justice Palace building where Raja Salameh, brother of Central Bank governor Riad Salameh is believed to have been arrested in Baabda. (Reuters)

Maronite Patriarch Beshara Boutros al-Rai said in a sermon on March 27 after chairing Sunday’s Mass at his seat in Bkirki, northeast of Beirut. “Is the goal of some shocking [judicial] measures is to create a situation that will lead to undoing the parliamentary elections on time and holding the party that wants the elections to be conducted responsible for this national crime?” Rai asked.

He stressed that the polls should be held on time and followed by the election of a new president two months before the current president’s term expiry, as stated in Article 73 of the Constitution. Keeping up the heat on the banking sector, Judge Aoun, on March 21, charged Central Bank Governor Riad Salameh with illicit enrichment, days after she charged his brother Raja in the same case and ordered him arrested.

The first charge was brought against Riad Salameh, the veteran governor whose wealth is also being probed by authorities in at least five European countries. Judge Aoun told Reuters the case related to the purchase and rental of Paris apartments, including some to the Central Bank.

She imposed a travel ban on Riad Salameh in January. Salameh, 71, governor for nearly three decades, has denied the charge, saying he had ordered an audit that showed public funds were not a source of his wealth. He has described the accusations against him as politically motivated.

Raja Salameh’s lawyer has said allegations of illicit enrichment and money laundering against his client were unfounded. Unruffled by mounting criticism of her actions, Judge Aoun vowed to press on with her measures against banks. “Being a believer means to continue the jihad [struggle] of our message even though we don’t see fruits for now,” she wrote on her Twitter account on March 27.

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