The Binding Force of the Arbitration Clause vis-à-vis Contracting Parties under Lebanese Law: A Law and Economics Perspective

Abstract

Background: The paper's narrower focus is the (partially) binding character of arbitration agreements vis-à-vis contracting parties under Lebanese law, backed-up by comparative elements: comparative lessons from French civil and procedural law (indeed non-mutatis mutandis) and a Law & Economics approach. The paper assesses the (concept of) arbitration clause, as an independent procedural agreement following Article 221 of the Code of Obligations and Contracts (pacta sunt servanda), in terms of its legal requirements for proper functioning, faithful compliance, and legal reasons for termination.
Methods:The study adopts a doctrinal and comparative methodology, which entails a review of legislative provisions (Arts. 762–821 of the Code of Civil Procedure), supported by an extensive body of legal literature and leading case law from Lebanese and French courts. The analysis also incorporates a Law & Economics approach to examine the legal and economic implications of enforcing arbitration agreements.
Results :The study demonstrates that rigorous judicial enforcement of arbitration clauses lowers transaction costs and discourages opportunistic lawsuits, thus incentivizing trust in commercial market transactions. It further argues that loyalty to procedure, or good faith, does not permit parties simply to unilaterally relinquish arbitral jurisdiction. The analysis also identifies the statutory circumstances that may remove the binding effect of an arbitration agreement, including mutual consent, challenge or removal of an arbitrator, death, and expiry.
Conclusion: The work clearly delineates boundaries for practitioners and businesses in crafting robust arbitration clauses that balance the difficulties of sustaining long-term contractual commitments with economic efficiency. It emphasizes that the binding character of arbitration agreements under Lebanese law is subject to legally recognized grounds for termination and cannot ordinarily be unilaterally relinquished by the contracting parties.