The 1967 Capital Control Law

Once upon a time in Lebanon (2)

With the onset of the financial-economic crisis in late 2019, calls have escalated to adopt the Capital Control Law that restricts the transfer of funds abroad and regulates the relationship between banks and their customers. But as this law has not yet been passed, the wastage has increased and the crisis has persisted. This lack of responsibility has prompted us to recall the past where there were “real” men working for the country and its population and protecting their rights and interests.

The Israeli attack on the Egyptian airports on Monday June 5, 1967 at 8:45 a.m., followed by the raids on other Arab countries, led to the outbreak of a war between the Arab countries and Israel known as the Six-Day War. The Lebanese officials sensed the danger early on, notably the then President Charles Helou, the then Prime Minister Rachid Karami, the then Speaker of Parliament Sabri Hamadeh and all the ministers and MPs. Consequently, the Council of Ministers held an emergency session on the same day at 11:00 a.m. and passed the draft law referred to by Decree No. 7510, requesting legislative powers in the financial and economic sphere in order to address the situation and its repercussions. The Parliament did not delay in meeting the Council of Ministers but held a session headed by Sabri Hamadeh at 4:30 p.m. and approved at 5:00 p.m., i.e. in less than half an hour, the government’s request. Law No. 45/67 was promulgated on June 5, 1967 “giving the government the right to legislate on economic, financial, public safety and internal and public security issues for a period of two months by decrees taken in the Council of Ministers, as well as the right to amend other provisions. With regard to public safety issues, the government is entitled to coordinate the military operations between the Lebanese armed forces and the Arab forces, to bring Arab forces into the Lebanese territory and to secure the funds needed for the war effort”.

The Council of Ministers met three days later, on June 8, 1967, and issued legislative Decree No. 1 “regulating the relationship between banks and their customers until June 29, 1967”. 

The said legislative decree stipulates the following:

• Each holder of credit account in Lebanese pound or any other currency is entitled to withdraw from one bank a cash amount of no more than LBP 1,000 during the period from June 5 to June 29.
• Each holder of a commercial credit account is entitled to exclusively use his account balance for the needs of his ordinary profession through the various payment methods, excluding banknotes.
• Banks are entitled to use the accounts of employers and pay in cash the salaries of employees that are due before June 29 based on detailed schedules and under their own responsibility, provided that the amount paid to the employee or worker does not exceed LBP 500. 

This was done at a record speed. The decision was taken in hours and simple procedures were adopted to restrict the transfer of deposits abroad, reduce the liquidity in Lebanese pounds in order to avoid speculation on the currency and force the banks to apply the same procedures to all customers.

Thanks to this awareness and responsibility, it was possible to overcome the crisis without leaving any impact on the financial and banking conditions (namely the transfer of deposits abroad).