Seizure of state property

House of law Center for research and development

Seizure of state property

Article 268 of the Code of Obligations and Contracts stipulates that: “A creditor has a public right of mortgage on the debtor’s property as a whole, not on parts thereof.”
Based on this stipulation, it appears that the law grants the creditor whose right was not fulfilled by his debtor, the power to take action of forcible execution against the latter’s property so that he would recover his rights from him.
Considering that such provisions are applied to creditors and debtors belonging to the category of persons under the private law, one might wonder about the possibility of applying such provisions to the state or to persons under the public law. Is it permissible for a creditor to take executive action against the property of such persons?
In response to this question,

On the domestic Level,

We shall make reference to article 860 of the Code of Civil Procedure which provides that:
“There may be no seizure of the funds that the law forbids to be seized and of the following funds:
1- Funds of the state and other legal persons under the public law.
2- Funds of foreign states with the exception of those involved in a transaction subject to the rules of the private law.”

Given the provisions of this article, we may indicate that they seek to prevent creditors of the state and creditors of all persons under the public law from seizing funds belonging thereto and take executive action against them. This is justified by the fact that such funds are considered as part of the financial assets belonging to the state, to the public institution or to the person subject to the public law. Such funds are therefore intended for public utility, and seizing them may lead to cessation of services or activities thereat. Of course, this applies to all funds, whether these funds are public, such as government premises owned by such people, or private, such as property owned by the state when there is no legatee to a deceased person.

On the external and international level,

State property abroad also benefits from this principle, which stipulates that there may be no seizure of such funds and no executive action shall be taken against them abroad. Such funds consist of the official headquarters of the diplomatic and consular missions that represent Lebanon abroad, as well as the residences of Lebanese representatives around the world.
This prohibition is stipulated in two international treaties that regulate relations between countries.
– The first treaty is the Vienna Convention on Diplomatic Relations of 1961 which stipulates, in article 22, that “the diplomatic mission’s premises, furnishings, property, or any means of transport shall not be subject to appropriation, inspection, or seizure as part of any executive action.”
– The second treaty is the Vienna Convention on Consular Relations of 1963 which provides, in paragraph 3 & 4 of article 31, that “the receiving State is under a special duty to take all appropriate steps to protect the consular premises against any intrusion or damage and to prevent any disturbance of the peace of the consular post or impairment of its dignity. The consular premises, their furnishings, the property of the consular post and its means of transport shall be immune from any form of requisition for purposes of national defense or public utility.”
Based on such provisions, we may say that if execution is prohibited for public utility, then of course it will be also prohibited for private utility, i.e., for the benefit of creditors. This prohibition is justified by the fact that the state’s sovereignty, independence and the confidence which was granted to it shall not be compromised. Otherwise, diplomatic relations between countries would be destabilized by taking executive action against the foreign state’s properties.
The prohibition to seize and to take executive action against state funds inside and outside the country constitutes a general principle.
However, some exceptions may violate such principle; the most important exception may be the one being applied on the international level and which differentiates between state properties intended for public interest and properties intended for an economic or commercial activity being practiced in accordance with the rules of the private law. Such funds would be subject to seizure and executive action may be taken against them.
In this context, it was established that state properties are covered by immunity from executive action. Nonetheless, such immunity may be excluded exceptionally (decision by French Court of Cassation, chamber 1, dated March 14th, 1984 – published in the journal of civil decisions of the first chamber, 1984, No. 98). The jurisprudence also establishes that the immunity from executive action shall not be applied to the foreign state by the mere fact that it is a debtor state, but the state’s activity should be also practiced under the public law.
In case such activity is one of the activities to which the private law is applied, funds may be seized by the creditors of such person subject to the public law (decision by French Civil Court of Cassation, chamber 1, dated 01/10/1985 – published in the journal of civil decisions, 1985, No. 236, page 211).
One of the applications of this exception is a case where the Lebanese state had purchased a building in France, for example, from the Lebanese embassy’s excess funds and leased it. Hence, such building shall not be subject to the public law and shall not be considered as part of the diplomatic mission’s premises as it practices a commercial activity like the ones practiced by persons under the private law. We may also say that not only the building will be subject to seizure but also the cash funds deriving from such activity.
Consequently, all premises and properties owned by countries abroad and which are not intended for diplomatic activity fall within the framework of property managed by the state under the private law, and therefore, it is permissible to seize them and take executive action against them.