You need to quickly determine a couple of things:
What backing does this project have from upper management?
Why was this development team previously thrown to the wolves?
What is the status of the project? Was it doomed to failure from the start (either due to impossible requirements or an impossible timeline)?
Why did the previous PM throw in the towel (although it doesn't sound hard to guess)? Can you contact and talk to him about his experience?
What does this team lead hold over the heads of management that ties their hands?
From your research, you need to determine if this project is doable (without taking personalities involved into account) given the requirements and timeline? If it is doable, what roadblocks stand in the way of successful completion (although it sounds like the answer is obvious)?
Obviously, the first option would be try and gain this team lead's confidence and respect. This may or may not be possible. If you can't get through to thisguy that you aren't the enemy, it will be impossible.
I find it hard to believe that the labor laws of any country would prevent the management of a company from disciplining (or otherwise firing) ANY employee who is not meeting expectations or fulfilling his job responsibilities.
Obviously, there is history here between this team lead (and the rest of his team??) and upper management. What is the morale of the rest of the team like? Are there other team members that actually WANT to see this project succeed? Using these other team members (with managements backing of course), you may be forced to essentially make this team lead a non-player in the project in order to see its completion.
Or you may determine that this project isn;t worth the triple ulcer it's likely to give you and throw in the towel yourself. Some projects just aren't salvagable!
Good luck!