Legal Briefing- April 2019

Diplomacy

  • President Bashar Al-Assad accepted the credentials of the Brazilian and Indian ambassadors to Syria. With these recent appointments, officially all member states of the BRICS countries now have ambassadors in Syria.
  • The Baghdad Summit brought Syrian parliamentary officials in direct contact with their Saudi and Turkish counterparts for the first time in years.

Property

  • The Chairman of United Contracting and Engineering Company confirmed that construction works would resume on the Garden City project near Damascus International Airport during this year after renovation works were carried out to repair sections that were damaged during the war. The project was halted in mid-2012 as the security situation around Damascus gradually started to deteriorate. The location of the Garden City project meant that it was caught up in clashes that took place in the Ghouta region. The Garden City project will be comprised of villas, apartments, a branded hotel, hotel apartments, a mall, a gym, a physiotherapy center and water parks. Currently, there are a couple factors affecting project delays in general, including the lack of financing facilities and some legal complications. The government is encouraging developers to resume work on their projects in areas where the security situation has improved.
  • Al-Toun Real Estate Development and Investment Co. plans to undertake a project in Rural Damascus that will lead to the construction of 80,000 residential units on land measuring more than 500,000 m2 in size. It will include a mall, hotel, hospital and other facilities. The company is preparing the plans in order to obtain the relevant licenses. It never ceased operations but rather carried out around 80% of construction works on a project in another part of the province which includes 1,500 residential units, some of which are inhabited. Like others, the company suffers from problems associated with the Real Estate Investment Law which provides that the General Commission for Real Estate Development and Investment (GCREDI) shall license and supervise projects on land measuring at least 250,000 square meters. The government is now planning a range of amendments to the Real Estate Investment Law, especially after a number of developers lodged complaints with Prime Minister Imad Khamis regarding shortcomings in the current legislative framework. The number of real estate development companies licensed by GCREDI stands at 57 while the number of registered projects for execution throughout Syria stands at 25 with others being currently proposed in the pipeline.
  • A touristic real estate project to be developed in the province of Rural Damascus in accordance with international standards at an estimated cost of SYP 130 billion is reportedly moving forward in terms of preparation plans.
  • The Governorate of Rural Damascus announced that there are offers from Emirati, Jordanian and Syrian companies to carry out real estate development projects in the province at their expense and to provide free alternative housing arrangements for residents whose homes were damaged.
  • The industrial district of Qaboun in Damascus is expected to be converted into a residential and commercial zone with buildings comprised of more than 12 floors according to a new zoning plan that has been prepared by the Governorate of Damascus. The new zoning plan for the Damascus district of Qaboun was presented to the Executive Bureau of the Governorate of Damascus to be approved before it was submitted to the Provincial Council to be voted upon at its subsequent session.
  • The Souria Towers project in the Damascus district of Baramkeh has apparently been renamed Damascus Towers after the land on which it is to be built was withdrawn from Souria Holding by the government and is expected to be handed over to a new company soon.
  • A European company announced its intention to enter the Syrian market and work on integrated housing projects.

Energy

  • Fuel shortages in Syria caused by the imposition of US sanctions were prevalent during the month of April but the government appeared to get the situation under control to an extent after its reserves started to run low. The conclusion of a credit line from Iran coupled with the threat of US sanctions contained in an OFAC advisory notice in both November 2018 and March 2019 against any person or entity involved in the shipment of oil products to Syria led to a shortage of fuel products, most notably petrol for automobiles as well as diesel. Moreover, US secondary sanctions against Iran also meant that its oil tankers could not reach Syria as they were blocked from travelling through the Suez Canal. The fuel shortage at one point led the Director of the Competition and Anti-Monopoly Commission to become the first public official to park his car and instead use a bicycle.
  • The government coped with the fuel shortages in a number of ways as their stockpiles were in decline. The Ministry of Petroleum and Mineral Resources had already introduced a smart card system for the allocation of petrol to buyers whose purchases are all recorded electronically. As such, Syrians require a smart card to fill up their cars. In in the initial days of the crisis, each car was ensured 200 liters of octane grade 80 petrol a month with up to 40 liters per day and this restriction was built into the smart card system. A liter of petrol was sold at the subsidized price of SYP 225. There was at that point no extra fuel available for anyone willing to pay more. The Ministry then rationed petrol further by halving the quota to 20 liters every 48 hours before it became 20 liters every five days with a maximum allocation of 120 liters per month. Allowances for extra petrol were made if drivers had to travel between provinces. Subsequently, more petrol especially octane grade 95 was delivered to the markets and the Ministry introduced the parallel market rate in addition to the subsidized fixed-allocation rate of 20 liters every five days. The unsubsidized octane grade 95 petrol was priced at SYP 600 per liter and purchasers were permitted to buy as much as they wanted with no need to use their smart card. Eventually, the final decision made was that every car with a smart card is to be allocated 100 liters of octane grade 80 petrol every month at the subsidized rate of SYP 225 per liter with refueling limited to 40 liters every five days. Moreover, any person with a smart card could additionally purchase 200 liters of octane grade 80 petrol every month at the subsidized rate of SYP 375 per liter. Public transport drivers with a smart card can purchase 350 liters every month for SYP 225 per liter. Motorcycles with a smart card are allocated 25 liters every month at a rate of SYP 225 per liter. The octane grade 95 is still available for buyers to purchase as much as they want without a smart card for SYP 600 per liter.
  • A private company belonging to a rising business personality in Aleppo announced that it will ensure the delivery of diesel to commercial and industrial businesses at official government-sanctioned rates after it obtained approval to do so in accordance with Ministry of Economy and Foreign Trade Resolution 276/2019. The Resolution was introduced to permit certain private sector businessmen to import fuel products into Syria after the government struggled to do so due to a halt to the Iranian credit line and the imposition of sanctions.
  • Initial rumors that the government was studying plans to lift subsidies on petrol and allow prices to increase to international rates appeared to be behind a sudden surge in congestion around petrol stations where petrol can only be purchased via the pre-allocated smart card system. The Minister of Petroleum and Mineral Resources subsequently denied that there were are any such plans to lift subsidies on the petroleum sector. The whole episode surrounding rumors of the lifting of petrol subsidies being published by media outlets coupled with denials from the Ministry led the Prime Minister to meet with journalists to discuss honest reporting standards to avoid the spread of fake news.
  • New fuel shipments which will require more time to reach Syria because of sanctions, the liberation of more gas fields and a revised petrol allocation schedule for motor vehicles is forecasted to help improve the provision of supplies in Syria.
  • According to a Russian expert, while Russia can technically export oil to Syria, the infrastructure between the two countries such as pipelines and transport services respectively does not really exist and would in any case be expensive by 20 to 30 times compared to the average price.
  • By subjecting fuel supplies to a smart card system where all purchases are automated and recorded, the risks of smuggling subsidized products overseas to be sold at market rates are curtailed. Fuel subsidized in Syria used to be smuggled into Lebanon regularly and sold at a premium.

Transport

  • The government has agreed a public-private partnership (PPP) agreement with the Russian company Stroytransgaz to invest in Tartous Port by managing, operating and expanding the facility for a period of 49 years and making it competitive with regional ports. The port will still remain in the ownership of the Syrian state and no sovereignty rights are affected. A main objective of this project is for Syria to develop international trade and transport ties via Russia and specifically Crimea to help offset the effects of US and EU sanctions. According to the Syrian Minister of Transport, Russia will invest more than $500 million (US) into Tartous Port, upgrade and increase its capacity, and guarantee job security for its current employees. According to the investment agreement signed between both parties, any disputes that may arise will be subject to arbitration overseen by the Council of State, which functions as the Syrian administrative court. According to the investment agreement, Syria will receive 25% of revenues regardless of the costs with its percentage increasing to 35% gradually until the expansion is completed. The Minister elaborated by stating that under the current circumstances, the port can generate a maximum revenue of $24 million (US) annually but that as a result of this investment agreement, Syria’s annual revenues will amount to $84 million (US) annually. In addition to its investment in Tartous Port, Stroytransgaz has signed similar PPP agreements with the government to invest in the gas, phosphate and fertilizer sectors. On a similar note, Lattakia Port will be managed by an Iranian company starting in October after the Syrian authorities decided against renewing their contract with the port operator consortium comprised of Souria Holding and CMA CGM.
  • Syrian businessmen regard the lack of close transport links as a main obstacle to facilitating better trade relations between Syria and Russia. In this respect, there are plans to establish a commercial sea line between Syria and Crimea to solve this problem. To this effect, a joint trade house was registered in Crimea to facilitate commercial exchanges between Syria and Crimea and the next step is to set up a shared maritime shipping company for transporting goods between the ports of Syria and Crimea.
  • Several bilateral meetings took place coupled with plans in the works to improve transport links between Syria, Iraq and Iran through roads and rail networks which could also complement China’s Belt and Road Initiative concerning the linking of the Middle East with Europe.
  • The Ministry of Internal Trade and Consumer Protection ratified the articles of association of Naya Airlines Co., the latest airline company established in Syria. The company was incorporated in Damascus with a share capital of SYP 500 million.
  • The Ministry of Transport in Damascus approved a request from the Civil Aviation Authority in Qatar to permit its national carrier Qatar Airways to transit through Syrian airspace on route to its destinations. The Minister of Transport stated that the decision to grant permission for Qatar Airways to transit through Syrian airspace will generate sufficient revenues in hard currency for the Public Treasury, cut travel time for passengers and is in line with the principle of reciprocity.
  • The Ministry of Transport revoked any previous transit fee exemptions granted to loaded or unloaded Saudi vehicles entering or exiting Syria in accordance with the principle of reciprocity.

Corporate

  • The Board of Directors of Syrian-Kuwaiti Insurance Co. proposed to distribute cash dividends amounting to 3.5% of its capital, or SYP 37,187,500, to its shareholders. The motion was voted upon at the ordinary shareholders meeting on April 29th. In 2018, Syrian-Kuwaiti Insurance Co. accumulated profits of around SYP 49.7 million, down by 62% from the 2017 highs of SYP 190.3 million. As for its assets, they fell by one percent in 2018 compared to 2017 from SYP 5.8 billion to SYP 5.7 billion. In 2018, the company obtained the approval of the Syrian Insurance Supervisory Commission to increase its capital by SYP 212.50 million to 1,062,500,000 by utilizing some of its accumulated profits. Syrian-Kuwaiti Insurance Co. was incorporated with a total share capital of SYP 850 million in accordance with Resolution 13/2006 and obtained its license to practice insurance activities by virtue of Resolution 44/100 issued by the Syrian Insurance Supervisory Commission.
  • Following the decision to authorize cash dividends for shareholders of Al-Baraka Bank – Syria, share trading on the Damascus Securities Exchange was temporarily suspended until after the shareholders’ meeting and its share price was reduced to accommodate the payout of dividends. A reduction of share prices on the Damascus Securities Exchange following a payout of cash dividends was authorized by Article 10 of the Resolution passed by the Board of Directors of the Damascus Securities Exchange on April 1, 2009. The bank’s shareholders subsequently approved a total payout of dividends amounting to SYP 5.25 billion, which is equivalent to five percent of the bank’s subscribed capital.
  • The Board of Directors of Banque Bemo Saudi Fransi is proposing to raise the capital of the bank by SYP 1.5 billion which will be conditioned on approval from the shareholders. The capital increase will be financed from the bank’s available profits for distribution as well as the issuance of new shares to be subscribed for by the shareholders. If the relevant approvals are obtained, including from the Central Bank and the Syrian Commission on Financial Markets and Securities, the capital markets regulator, the bank’s share capital will become SYP 8 billion. Banque Bemo Saudi Fransi was the first private bank to be established in Syria in 2004 after the government ended its monopoly on the banking sector and by the end of 2018, it had 1,150 shareholders.
  • The Syria International Islamic Bank increased its share capital slightly to SYP 15 billion by utilizing a portion of its retained earnings and distributing the extra shares to its current shareholders.
  • The Board of Directors of insurance company Arope Syria recommended to its shareholders to approve a share capital increase by SYP 110 million to SYP 1.21 billion.
  • Syriatel has been added to the DLX stock index that samples the share values of the leading companies on the Damascus Securities Exchange.

Finance

  • Questions were being asked as to whether Syria International Islamic Bank lent out SYP 135 billion to several companies associated with the same owner, who is also a shareholder, when the bank’s capital was close to SYP 15 billion and its assets in 2018 amounted to SYP 365 billion. Such practices could potentially conflict with Central Bank Resolution 395/2008.
  • Lebanese-based BLOM Bank stated that is unlikely to re-associate with its former affiliate BSO in Syria unless the international sanctions regime imposed on Syria is lifted.
  • The Central Bank clarified that its Resolution 13/2019 allows individuals entering Syrian territory via the border crossings to make use of banking services and deposit their funds upon entering the country. Accordingly, Syrians can make deposits at bank branches located at the border and can then transfer these funds to whichever accounts they choose regardless of whether the account is with the same bank or another one. By passing this measure, the Central Bank intends to facilitate banking and financial transactions for investors and expatriates without restrictions. Moreover, it eases the burden on expatriates who face difficulties in transferring their funds from overseas as a result of the international sanctions regime imposed against Syria. In addition, individuals may undertake foreign exchange transactions at the same branches at whatever time they arrive at the border. Resolution 13/2019 also permits individuals to bring in higher sums of foreign currency than the limit set in 2012 as well as to take it out upon exiting Syria in the same manner while taking into consideration legislation combating money laundering and terrorism financing.
  • A conference was held in which the Governor of the Central Bank encouraged the establishment of more microfinance institutions to plug the gap in demand for their services by small and medium-sized enterprises.

Commerce

  • The Economic Committee linked to the Council of Ministers has apparently recommended the importation of second-hand goods into Syria. The move may be an attempt to lure back Syrian industrialists overseas, such as those in Egypt, to return to Syria with their equipment.
  • The Chairman of the Bulgarian-Syrian Chamber of Commerce called for the establishment of a joint Syrian-Bulgarian business council to enhance cooperation between companies from both countries, promote trade and investment, exchange ideas and facilitate the visits of businesspersons from both countries.
  • Jordanian authorities prepared to ban the importation of 194 items from Syria including certain foodstuffs and clothing with the restrictions coming into effect in May. There are two possible reasons given for this decision including reciprocal measures by Jordan in response to Syrian import controls and to protect Jordanian producers from cheaper Syrian goods. Jordanian authorities subsequently stated that they would reverse their decision if Syria lessens import controls to facilitate the importation of Jordanian goods into Syrian markets.

Telecommunications

  • The Syrian Telecommunications Regulatory Authority has raised customs duties on all mobile phones entering Syria for whatever purpose. Four categories of duties are imposed on different types of mobile phones and include SYP 15,000, SYP 30,000, SYP 60,000 and SYP 75,000. The decision surprised citizens who criticized the move since it took effect on April 1st without any warnings ahead of time. The measure was unexpected and no prior consultations were reported to have been held as has been the case all too often. The resolution was issued by the Ministry of Communications and Technology.

Tourism

  • Syria’s Ministry of Tourism participated in the Arabian Travel Market exhibition held in Dubai.
  • A group of Spanish tourists recently traveled to Lattakia province and visited a number of archaeological and touristic sites.
  • Aman Holding incorporated a tourism company with a share capital of SYP 50 million which will be involved in establishing various projects, undertaking investments, and owning, operating and managing touristic complexes and hotels.

Agriculture

  • President Bashar Al-Assad ratified Law 11/2019 with respect to setting up the General Establishment for Grain Trading, Storing and Manufacturing. The entity shall enjoy financial and administrative independence and will be headquartered in the city of Hassakeh. The decision to headquarter the establishment in the city of Hassakeh as opposed to Damascus, which is usually the norm in such cases, may be a move to appease the Kurdish community in Hassakeh.

Employment

  • The new Employment Bill applicable to private sector employees is being drafted in a way to provide alternative arrangements for how termination and compensation provisions are treated when compared with the current legislation in place. According to Article 64 of the Employment Law presently in force, there are specified instances when an employer can terminate an employee’s contract whether fixed-term or indefinite-term without notice and without the payment of a salary or an end-of-service gratuity. However, it has been deemed contrary to the spirit of the Constitution to punish an employee with multiple penalties for a single act. Hence, the new amendment to Article 64 would see an employee in this case only forfeiting his or her end-of-service gratuity upon dismissal under these specified instances. Amendments are also being considered that could grant employees a periodic nine-percent salary increase every two years. New definitions will also be introduced for the types of remuneration provided to employees. The concept of maternity leave will also be expanded. The rationale for the proposed changes is part of an effort to achieve a more balanced approach between the relevant parties, close loopholes discovered during the conflict and harmonize domestic legislation in accordance with international conventions that Syria has ratified.
  • As a consequence of the public-private partnership agreement signed between the state-owned General Establishment for Chemical Industries and the Russian company Stroytransgaz to invest in three fertilizer plants in Homs, the employees of the plants will retain their status and be treated according to the provisions contained in the Public Sector Employment Law. They will benefit from this Law as well as the Employment Law governing private sector employees with respect to food allowances.
  • The new Chambers of Commerce Bill will include the most recent practice of requiring members registered with a chamber of commerce to recruit at least one employee regardless of whether they require his or her services. The employee must then be registered with the General Establishment for Social Security, which is the basis for granting a chamber of commerce membership card to the business owner. The measure was introduced after numerous persons sought to obtain the membership card only to be able to travel to Lebanon without visa restrictions but not to undertake any trading activities. In fact, the requirement to register employees was the reason behind the postponement of elections for the chambers of commerce as membership numbers began to dwindle.

Health

  • In accordance with Law 7/2019, members of the medical profession have been granted an additional year to settle their status and comply with the applicable requirements provided for in Article 3 of Legislative Decree 9/2015.

Lawyers

  • The President of the Bar Association criticized some practices by lawyers whereby they sought to exploit their clients’ ignorance by charging them exorbitant fees and also in US Dollars which is illegal under Syrian law.

Judiciary

  • The new Administrative Law Bill would seek to confer an independent status on the Council of State separate from the Council of Ministers. The Council of State is the administrative court in Syria that hears disputes involving state entities and the public sector in general. It also provides advisory notices to governmental bodies. It is currently attached to the Council of Ministers but that could soon change. According to the bill, the Council of State will also hear challenges to administrative decisions and could strike them down if necessary. The bill also provides for the establishment of a department that would be involved in the drafting of legislative instruments for the various public entities. As such, the Legislation Department in the Ministry of Justice would consequently be dismantled. In addition, public sector employment tribunals would be abolished and the Council of State would absorb their functions directly with respect to disputes emanating from employment contracts.
  • The Syria branch of the International Chamber of Commerce held a conference at the Four Seasons Hotel in Damascus in the presence of the Minister of Justice to discuss building the appropriate legal environment in Syria in anticipation of reconstruction. Emphasis was placed on the need to make use of the facilities offered by international arbitration in resolving disputes so as to instill confidence in investors.
  • The Minister of Justice reopened the judicial courts complex in Douma one year after rebel groups were expelled from the Damascus suburb. The rehabilitation of the courts in Douma follows the reopening of the Magistrate’s Court in the neighboring suburb of Harasta.

Criminal Law

  • President Bashar Al-Assad ratified Law 8/2019, which amends provisions of the Criminal Code to strengthen penalties surrounding unjustified forms of begging, a phenomenon that has grown in size during the conflict.
  • The government is working on preparing a new bill to combat corruption and increase transparency in anticipation of its post-conflict program. Corruption in both the public and private sectors has reached unprecedented levels since the outbreak of the conflict and requires urgent attention. Initiatives to fight corruption include establishing e-government portals and encouraging further use of automation to limit interactions between individuals susceptible to corrupt behavior.

International

  • The EU formally rejected US President Donald Trump’s proclamation that the Syrian Golan Heights are to be recognized as falling under Israeli sovereignty.
  • At the 17th World Economic Forum on the Middle East and North Africa held in Jordan, the country’s Prime Minister said that Jordan hopes to revive flagging economic growth by participating in reconstruction work in neighboring countries including Syria and building an oil pipeline with Iraq.
  • An emerging view slowly taking hold is that Jordan will emerge as the primary foreign logistical hub for the transport of goods to Syria during the reconstruction process. Lebanon was such a candidate but political and economic stagnation could mean Lebanon misses out in this case.
  • Lebanese developer Bodon Group has relaunched North Gate Akkar, a commercial project that targets companies interested in participating in the reconstruction of Syria. Akkar’s proximity to the cities of Homs and Tripoli makes it attractive for Chinese companies looking at Syria.
  • The Lebanese government opened a second licensing round for offshore oil and gas concessions in Blocks 1, 2, 5, 8 and 10. The demarcation of Blocks 1 and 2 will require negotiations with the Syrian government as there are around 400 square kilometers of disputed waters.
  • According to a US official, US relations with Syria could improve and public communications reopen if Damascus helped with the release of the American journalist Austin Tice. Allegedly, if Syria were to do so, it would be a step towards building bridges with the Trump Administration.
  • Standard Chartered was fined by US and UK regulators for breaching sanctions against countries including Syria in violation of the ban to provide services by US persons to persons and entities in Syria.