The Association of Banks in Lebanon (ABL) is preparing to take legal action against the Lebanese state over unpaid interest on Eurobonds, debt instruments held by its member banks, local media reported. 

According to a circular issued on February 13, the unpaid interest, which is estimated to total around $10 billion, has led the ABL’s board of directors to pursue a lawsuit.

The Lebanese government has yet to engage in any negotiations with bondholders regarding debt restructuring since defaulting on its debt in March 2020. The situation has left bondholders, including local banks, in a prolonged state of uncertainty.

The threat of legal action remains a looming concern, especially as the statute of limitations for legal claims related to debt payments, including both principal and interest, begins to run out. Bondholders generally have a ten-year statute of limitations to claim principal payments, but interest claims are subject to a shorter, five-year time frame. In this case, the initial deadline for interest claims was set for March 9, 2025.

Earlier this year, the Lebanese government extended the statute of limitations for interest claims by three years, pushing the deadline to March 9, 2028. However, questions remain about whether this extension, enacted by a caretaker government, will stand up to potential court challenges.

The uncertainty surrounding these legal timelines and the absence of meaningful negotiations with bondholders raises concerns for Lebanon’s financial stability and its relationship with both domestic and international creditors. The risk of foreign creditors taking legal action against the state remains uncertain, but the looming deadlines for legal claims add another layer of complexity to the country's financial crisis.