Buying a Franchise in Lebanon: Getting Dispute Resolution Clauses Right

You may choose a suitable brand and a promising location, only to discover at the first disagreement that enforcing your rights requires proceedings outside Lebanon and costs you have not budgeted for. Joining a franchise network calls for cooperation, but it also requires a workable route for resolving disputes. Do not treat the final clauses of the agreement as mere formalities: they determine where you can enforce your rights, how and at what cost.

Understand the Lebanese framework before accepting foreign law

Lebanon has no comprehensive law specifically governing franchise agreements, nor a statutory franchise disclosure regime comparable to those in some other countries. Depending on its subject matter, the relationship falls under the Code of Obligations and Contracts and the Commercial Code. Consumer protection, intellectual property and competition laws also come into play, alongside the relevant procedural rules.

Particular attention should be paid to Legislative Decree No. 34 of 1967 on commercial representation, taking account of its amendments and relevant subsequent legislation. The legal classification of the relationship does not depend simply on calling the document a ‘franchise agreement’. The substance of some distribution or representation arrangements may raise questions about the application of mandatory rules that differ from those the parties expected.

Beirut Court of Appeal Decision No. 1106/2009, issued on 30 July 2009, distinguished a franchise agreement from commercial representation. However, that does not automatically settle the position for every agreement bearing the same label. Ask a Lebanese lawyer to examine the nature of the obligations and how their legal classification may affect the chosen law, the competent court and the availability of arbitration.

The code of ethics adopted by the Lebanese Franchise Association is a professional reference that includes obligations for members, not a law binding on every franchisor. Check whether the franchisor is a member and whether the code is incorporated into the agreement. Do not assume that the code alone gives you a special legal route to enforce your rights.

Distinguish between governing law, courts and arbitration

These are three separate choices. Governing law determines the rules for interpreting the agreement and its obligations. A jurisdiction clause identifies the court that will hear a dispute. An arbitration clause refers the dispute to an arbitral tribunal under the parties’ agreement and the applicable rules, within the limits permitted by law.

If the franchisor proposes foreign law and a foreign court, ask about the practical implications. Will you need a lawyer there? Will documents need translating? Where are the assets of the party from whom you might seek compensation? Obtaining a judgment does not automatically mean you can recover the money in Lebanon or elsewhere; a separate process for recognising and enforcing the judgment may be needed.

For arbitration, ask for the following points to be clearly specified:

• The legal seat of arbitration, not just the venue for meetings.
• The institution administering the proceedings and its rules, or how an ad hoc arbitration will be managed.
• The number of arbitrators, how they will be appointed and the language of the proceedings.
• How fees and advance payments will be paid, and how costs will be allocated in the final award.
• Whether interim or urgent measures can be sought from the competent court or tribunal.

Do not accept claims that arbitration is always faster or cheaper. Compare its likely cost with the value of potential disputes and the size of your investment. Discuss whether a sole arbitrator or streamlined procedures would be appropriate and available.

Set out a written process for addressing disagreements early

The best dispute resolution clause is not one that sends you straight to court, but one that allows problems to be addressed without obstructing the enforcement of your rights. Negotiate a requirement for written notice describing the breach, the supporting documents and the action requested, followed by escalation to a named representative of each party within an agreed period.

Direct negotiation or mediation can be added before binding proceedings, but specify when each stage begins and ends. A statement that ‘the parties will seek an amicable resolution’ is not enough if either side can prolong discussions indefinitely. Ask your lawyer to explain how these stages affect legal deadlines; do not assume that negotiations automatically suspend limitation periods.

Also define how contractual notices must be delivered: the approved addresses, the email address designated for notices, proof of receipt and the procedure for updating contact details. Distinguish these notices from the service of court documents, which is subject to its own rules.

To protect operations during a dispute, discuss continued performance of undisputed obligations, a process for handling disputed amounts and safeguards against blocking access to data without a contractual or legal basis. Do not assume that a dispute allows you to stop paying or disregard brand standards. Doing so may create a further breach and weaken your position.

Test the clause before signing

Put two realistic scenarios to your lawyer: a modest financial claim and a sudden action that threatens the continued operation of the outlet. Ask them to explain the steps, the competent court or tribunal, the documents required and the types of cost involved in each case. If the resolution process is disproportionate to a small claim, negotiate changes before committing.

Also check that the dispute resolution clause in the franchise agreement is consistent with its schedules, any personal guarantee and any related agreement. Different courts or procedural languages may split a single dispute across several proceedings. Check who is bound by the clause: the operating company, the owner personally, or the guarantor as well?

From the outset, maintain an organised file containing the agreement, its versions and amendments, notices, invoices, meeting minutes and approvals. After important calls, send a written summary and ask for confirmation, while respecting confidentiality and data retention rules. Clear evidence can help achieve a settlement before it becomes necessary in formal proceedings.

The practical takeaway: Do not sign until you can answer four questions: Which law applies? Where will I resolve a dispute? How do I bring a claim? Can I afford the process and enforce the outcome? A clear, workable clause protects your investment and supports a balanced relationship within the franchise network.