George Gabriel Bitar v Bank of Beirut S.A.L

A Lebanese-law banking contract may require a bank to execute international transfers where its wording, the parties’ common intention, the contractual context and established banking practice show that obligation. The relevant custom is ordinarily the custom existing when the contract was made, not a later practice arising during a banking crisis. A bank cannot rely on a broad or elastic acceptable-reason exception to refuse transfers merely to avoid a run on banks, protect liquidity or distribute funds between customers. A later custom cannot replace a contractual obligation without the parties’ assent. Specific performance is available for breach, and a tender or deposit in Lebanon does not discharge an accrued obligation to make an international transfer.

The claimant held substantial US dollar deposits with the defendant, a Lebanese bank, under two account agreements. He instructed the bank between September 2020 and October 2021 to transfer the balances to his UK bank account. The bank refused, relying on the Lebanese banking crisis, Association of Banks in Lebanon guidance, an alleged change in banking custom, an acceptable-reason exception, agency principles and a Lebanese tender-and-deposit procedure.

The court considered whether the account agreements required international transfers, the relevance and timing of Lebanese banking custom, whether the bank had an acceptable reason to refuse, whether a new custom had arisen, whether the tender procedure discharged the debt, and the claimant’s remedies.

1. Contractual obligation. The account agreements, read with the parties’ common intention and the factual context, required the bank to execute international transfers on the claimant’s instructions. The relevant clauses concerning withdrawals by transfer orders, payment orders, transfer delays, electronic instructions and joint-account operation were contractual provisions for an international transfer service, not merely a menu of services which the bank could choose to provide. It made no commercial sense for the bank to substitute a cheque for an international transfer requested by the customer.
2. Custom and timing. Lebanese law required the contract to be construed in accordance with the custom existing when the agreements were made. A later change in custom did not alter the contractual obligation unless the parties had agreed that the contract would yield to subsequent custom. The admitted pre-crisis custom reinforced the contractual construction but was not necessary to establish it.
3. Limits on refusal. The transfer obligation was not absolute. Refusal remained possible for established matters such as insufficient funds, inadequate information, fraud, money laundering, sanctions, illegality or other recognised compliance impediments. There was no broad acceptable-reason exception permitting refusal because of a risk of a run on banks, a desire to preserve liquidity, insolvency concerns, an ABL circular or a wish to distribute funds between depositors. The alleged circumstances did not amount to force majeure.
4. No new custom. Any new custom required repetitio and opinio necessitatis. The bank failed to establish a longstanding, constant practice or general acceptance of the restrictions. An ABL circular lacked sufficient legal effect to terminate the existing custom or create a new one.
5. Agency and discharge. The bank’s role as agent did not permit unilateral refusal or selective termination of the transfer service while retaining the deposit. The prior banking contract obliged the bank to consent to and perform properly given, lawful transfer instructions supported by sufficient funds. A tender and deposit in Lebanon could not discharge an accrued obligation to make an international transfer.
6. Remedy and disposal. Specific performance was available and was ordered for USD7,790,624. If damages had been required, they would have been assessed at the full amount of the transfers without deduction for the Lebanese cheque. Interest was payable at 9 per cent per annum from the date each transfer ought to have been made, with the final interest order left for consequential determination.