Lebanon's new Public Procurement Law; A missed opportunity?!

Mohammad Ali Almoghabat

Senior Legal Consultant – Lebanese Transparency Association – No Corruption

Considering the loss of confidence in the Lebanese government and its agencies by the Lebanese society and the global community, and in light of the economic and financial crisis that Lebanon is experiencing,  news on the Parliament’s work on several anti-corruption legislation and on promoting good governance in the management of public affairs is often seen on a daily basis, which could help the Lebanese Government restore this loss of confidence, and hopefully, restore what is left of the Government.

Perhaps one of the most important laws recently adopted by the Lebanese Parliament is the Public Procurement Law. After nearly five decades without amending the procurement regime and public accountancy, a Public Procurement reform campaign was launched in Lebanon with the support of the global community calling for radical and credible reforms to provide financial support. Public Procurement is the procedural tool used by the government and its agencies to secure their needs, together with other services needed for the maintaining of life in any society, which constitutes a breeding ground for corruption, trading in influence, and conflict of interest. 

The Institut des Finances Basil Fuleihan, mandated by the Minister of Finance and supported by several international organizations such as the World Bank (WB) and the Agence française de développement (AFD), was able to prepare a modern and unified draft law for Public Procurement that was subsequently introduced as a Bill within the Parliament, which was adopted on June 30, 2021.

A copy of the Bill was published in February 2020, allowing many concerned parties to access and comment on this Bill, although no public consultation involving Civil Society Organizations (CSOs) was formally held, which had a negative impact on the ability of CSOs to efficiently support formal efforts.   

In general, the Law advances the procurement regime from the 1960s to the modern-day, as its provisions rely on various international standards and best practices, particularly in terms of establishing a Public Procurement Register and accessing specific information, and the creation of a centralized website dedicated to the dissemination of other specific information on e-procurement, along with new provisions on the integrity of employees engaged in procurement operations.

Mainly, as part of our work in the Lebanese Transparency Association – No Corruption, Transparency International’s National Chapter, and after reviewing the provisions of the draft Law that was published in February 2020 on the Institut des Finances Basil Fuleihan’s website, we reached three substantive observations about three topics: Transparency, Beneficial Owners of Government-contracted companies and its agencies, and the Role of Civil Society Organizations in Monitoring Public Procurement Procedures. 

Transparency:

There is no question that the provisions of the new Public Procurement Law are better in terms of transparency since it provides many documents related to procurement procedures to the public that are not available under the current tendering process and the Public Accountancy Law. However, some of the provisions exclude documents related to national security and general security, which could lead to the exploitation of such provisions in an attempt to block a large part of the information.

The fundamental problem is not the exceptions provided for in the aforementioned provisions, since there is no doubt that some documents if made available, could be detrimental to national security and general security and therefore harm the public interest. Rather, the problem is that there are no safeguards or criteria for withholding this type of documents, which gives this type of document absolute secrecy. The same problem applies to a number of other laws, such as the Parliament's By-laws and Decree regulating the Council of Ministers Procedures,. This demonstrates the culture of absolute secrecy in the Lebanese legal system (in clear violation of the general principles of the Lebanese Constitution and the international obligations of the Lebanese Government), which continues to rely on old legal theories without taking into account how jurisprudence developed these theories in line with International Human Rights Law. 

Going back to the Public Procurement Law, Articles Six and Nine prevent access to documents that are considered secret and allow only the courts to decide whether a document is confidential or not. Perhaps this direction in Public Procurement, which is not only limited to Lebanon but to many countries, is caused by the approach to Transparency from a procedural and not from a fundamental rights perspective. In International Human Rights Law, there is the “Right to Access Information”, this implies that making information accessible to the public is not a grant from the government to its citizens, but rather a fundamental human right to view and access the information held by the government, and the latter must ensure that the public experience this right.

The Preamble and Article Thirteen of the Lebanese Constitution guarantee the Right to Access  Information, in addition to Article Nineteen of the Universal Declaration of Human Rights (UDHR) signed by the Lebanese Government, which the late Charles Malik was a member of the  Committee that drafted it; bearing in mind that paragraph B of the Constitution’s Preamble requires the Lebanese government to be committed to this Declaration, which grants it some constitutional value. In addition, to Article Nineteen of the International Covenant on Civil and Political Rights (ICCPR), also guarantees the Right to Access Information, which makes the scope of the exceptions limited only to the access to personal information and to national security and public security.

The difference between the exception in the Lebanese legal system and the exception stipulated in the ICCPR, is that the exception in the latter is not absolute in contrast with the Lebanese legal system, which can consider a document as secret through a decision issued by the relevant authority, without specifying any criterion for doing so, which in turn limits the ability of the Lebanese Courts to develop jurisprudence in this regard, since the legal text is imperative in terms of giving a specific type of information the secret status.  

At the international stage, the United Nations Special Rapporteur on Freedom of Opinion and Expression detailed in his report to the United Nations Economic and Social Council in the year 2000 that there is a “Harm” vs. “Public Interest” Test. It is a test that requires that three conditions be fulfilled concerning any information that an individual is requesting to be withheld and be given a secret status.

These conditions are as follows:

- The information must relate to a legitimate aim specified in the law (e.g. National Security);

- The disclosure of the information must threaten to cause substantial harm to that protected aim;

- The substantial harm must be greater than the public interest achieved by disclosing the information.

Those who developed this test rely on Article Nineteen of the (ICCPR) in addition to several jurisprudence and best practices, yet, the text of Articles Six and Nine of the Public Procurement Law does not allow the administration to apply this the test.

Despite the foregoing, this test finds its way into the Lebanese legal system through Article Two of the Lebanese Civil Procedure Law, which establishes the rule of precedence;  when there is a conflict between the provisions of international law and national law, courts must rule that the provisions of the former shall take precedence over the latter... It would be preferable in this regard that the national law be harmonized with the international obligations of the Lebanese government, specifically Article Nineteen of the (ICCPR), to avoid such conflict and not allow the opportunity for those lurking the Public Administration to violate a fundamental human right, namely, the Right to Access Information... aside from violating the international obligations of the Lebanese government. 

Also, the Public Procurement Law in its entirety does not reference the Right to Access Information Law, a pillar of transparency in Lebanon. Knowing that this right is constitutional right and regulated by law and may not be compromised by other laws, in accordance with the principles adopted by the United Nations Special Rapporteur in their abovementioned report. It would be more effective to directly refer to the Right to Access Information Law by the Public Procurement Law so that we do not fall into the same problem that the legislator is trying to resolve through a new unified Public Procurement Law rather than the dispersal of procurement provisions in different laws, legislative decrees, decrees and decisions; if this path of legislation is continued, we may find in Ten years that the provisions governing the Right to Access Information are scattered over a large number of laws and decrees, leading to undermining this right, just as it happened to the Public Procurement regime over five decades.

Beneficial Owners of Companies Contracted by the Government and its Agencies:

Articles Four and Five of the Law on Anti-money Laundering and Terrorism Financing regulate how to determine the identity of the Beneficial Owners of companies and individuals, who are the actual owners receiving profits from companies despite the fact that the legal owner whose name is registered in the Commercial Register or in a bank may be different.

However, Beneficial Ownership in Lebanon is not very effective, as a result of the legal provisions’ weakness, as there are many legal loopholes and legal fragmentation, in addition to poor implementation of the available provisions.

The importance of an effective Beneficial Ownership regime is that it helps in combatting money laundering resulting from illicit activities such as corruption, as well as exposing conflicts of interest and promoting competition, in addition to providing a vast amount of information that helps public bodies in planning and policymaking.

Some countries include provisions in their Public Procurement laws relating to the Beneficial Owners of the companies contracted with the government. In Slovakia, to name a few, the parliament adopted a law prohibiting the government from contracting with companies that did not disclose their Beneficial Owners; which led five companies to end their contracts rather than declaring their Beneficial Owners information, which shows that there was, at the very least, a conflict of interest. 

In the United Kingdom, for example, the information available in the Beneficial Ownership Register for companies is used to plan and develop competition policies and to ensure that if a company defaults, it will not negatively affect any particular sector. 

In  Lebanon, the new Public Procurement Law does not in any way mention the Beneficial Owners of government-contracting companies. This may have a negative impact in the future on corruption, conflicts of interest, and trading in influence, in addition to weakening planning and policymaking.

Hence, the LTA believes that it is necessary to include in the current Law provisions that require government-contracting companies to disclose their Beneficial Owners, knowing that this is not new to Lebanon, since the Law on Enhancing Transparency in the Petroleum Sector obliges contractors in the petroleum sector to do so as well. The Lebanese Petroleum Administration published on its website a register of Beneficial Owners for the contracting companies, which shows the ability of Lebanese administrations to adopt such a model that helps in strengthening Public Procurement governance in Lebanon.

The Role of Civil Society Organizations in Monitoring the Implementation of Public Procurement Procedures:

Going back to the loss of confidence in the Lebanese Government and its agencies, it must be stressed that this confidence in the Government cannot be restored without transparency, which is based on the Right to Access Information, as well as built on the adoption of a participatory policy.

We already presented the Right to Access Information, as for the participatory policy, the simple dissemination of information is not enough to achieve it, stakeholders must be actively involved in decision and policy making to achieve the participatory approach.

The Mexican Republic is a prime example of governments adopting a participatory policy in this regard. The Public Procurement Law in Mexico establishes a system known as the “Social Witness” system, which requires the presence of approved Social Witnesses representing Civil Society Organizations, whether representatives of industrial groups or non-governmental organizations, during the procurement procedures from the moment a tender is announced to the opening of bids before the tender committees, until the moment of signing and implementing the contract. These Social Witnesses prepare reports on the procedures they have monitored and the outcome of this monitoring, including any observations and/or suggestions. A study by the Organization for Economic Cooperation and Development (OECD) and the World Bank (WB) concluded that the participation of the Social Witness in the procurement procedures of the Federal Electricity Commission (Comisión Federal de Electricidad) generated savings of approximately 26 million US dollars and increased the proportion of bidders by more than 50%.

On the other hand, the Philippines adopts a similar system whereby their Procurement Law compels the Bids and Awards Committee to call upon at least two approved observers to attend the procurement procedures before it, with the procedure rendered as invalid if the convocation is not made and the observers are not present.

The importance of involving civil society organizations in the procurement procedures lies in ensuring that such procedures are not manipulated for the benefit of one of the bidders, especially since the official monitoring bodies usually take a lot of time to rule on a specific matter, even if this official body specializes in procurement procedures, as it is insufficient to ensure that the procurement process is not tampered with; particularly in a country like Lebanon, which ranks 149/180 on the Corruption Perceptions Index issued by Transparency International with a score of 25/100.

Based on the above, the Parliament must adopt these observations to ensure an efficient Public Procurement process and to strengthen legal safeguards against interfering with procurement procedures, in addition to the necessity of these proposals to restore the confidence of the Lebanese society and international community in the Lebanese government and its agencies, and to strengthen the concept of governance in public administrations and not to waste another opportunity…