Beirut's controversial $122m airport terminal deal cancelled after just three days

Just three days after the deal was announced, Lebanon's government on Thursday agreed to cancel a $122 million contract to build a new airport terminal following public outcry.

“Although the project of constructing the new terminal for travellers is of great importance, in the wake of the legal controversy taking place in the country … I announce courageously that we terminate the contract and that we consider it not to be in effect,” the caretaker Minister of Public Works and Transport, Ali Hamie, said.

He said his decision followed a request from Hezbollah, the powerful Iran-backed political party which he represents in the government.

Mr Hamie's decision also came after meetings on Thursday with the Parliamentary Committee on Public Works, representatives of the Court of Audit, and the director of the Public Procurement Authority to discuss the deal.

“This confirms that if members of parliament hold ministers accountable, we can improve governance. In this case, we were able to protect the current laws on public procurement, which provide a transparent framework to award such projects,” said Mark Daou, one of the 13 opposition MPs in parliament.

On Monday, Mr Hamie announced that the government had awarded a contract to build and operate a new terminal at Beirut's Rafik Hariri International Airport for 25 years through a mutual agreement with Lebanese Air Transport (LAT) and Irish airport company daa International.

Daa is a state-owned company that owns and operates the Dublin and Cork airports. Its subsidiary, Aer Rianta International, has been operating Beirut duty free since 1996 with Phoenicia Trading, owned by the Lebanese businessman Mohamed Zeidan.

LAT is the ground handling company for Beirut's airport, with the Saudi Prince Turki bin Muqrin Al Saud among its key shareholders, according to the Lebanese trade register.

However, the absence of a competitive bidding process for a contract valued at more than $100 million triggered a significant amount of public criticism and opposition from civil society groups and some MPs.

Critics said the agreement could violate the law on public procurement passed in 2021 to enhance transparency and curb cronyism in awarding public contracts.

The international community praised the 2021 law as a positive step towards adhering to international standards and made its implementation a prerequisite for providing crucial financial assistance to Lebanon.

Mr Hamie, daa and the press office of the Irish Ministry of Transport did not respond to requests for comment.

'Important step' towards transparency

Karim Daher, an international lawyer and board member of Aldic, the Lebanese association for taxpayer rights, lauded the cancellation of the contract as an “important step”.

Aldic, along with nine other civil society groups, issued a petition denouncing the contract's non-compliance with the law.

“Civil society organisations campaigned for the passage of the new law and will continue to do so to ensure its full implementation. It is one of our many ongoing battles for greater integrity, transparency, and accountability in Lebanon,” Mr Daher said.

He also questioned why Mr Hamie submitted the new terminal contract for review to the Court of Audit and the PPA after the deal was signed.

“This should have been done before,” he said.

The cancelled contract was on a build-operate-transfer (BOT) basis, a common arrangement in which the state grants a concession to private companies to finance, build and operate a large infrastructure project that it cannot fund on its own.

It granted the consortium the rights to operate the airport terminal and to collect revenue from fees and taxes, including from airlines, retail activity, duty-free sales and parking fees for a period of 25 years.

After this time, control of the airport terminal would return to the state.

“These contracts are highly lucrative for private companies,” Mr Daher said. “As they entail a long-term commitment from the state, it is crucial to conduct thorough due diligence and ensure complete transparency.”

Wronged companies?

Mr Hamie said he would take part in a meeting of the Parliamentary Committee of Public Works next week to “review the details of the new terminal project”, including the reasons for the project, its objectives, its legal framework, financing, and the expected benefit to the Treasury.

The companies could potentially challenge the decision and appeal to the Council of State for compensation if they believe they have suffered damages, as the contract had already been signed. Alternatively, they may choose to accept the decision in order to maintain a positive relationship for future tender opportunities.

Beirut airport's sole terminal was built in 1998 and has not undergone expansion in more than 20 years, leading to overcrowding and delays.

Lebanon's infrastructure has been reeling from three years of an unprecedented economic crisis, following decades of reckless spending of public funds by the state. This often involved profitable infrastructure contracts being awarded to companies with political connections.