Legal Briefing- August 2019

Commerce

  • Russian Prime Minister Dmitry Medvedev approved a proposal by the Crimean authorities to formalize economic relations with Syria in order to facilitate cross-border trade between Russia and Syria given the shorter maritime distance between Syria’s coastal ports and Crimea. A joint trade house, shipping line and air route are being set up between Crimea and Syria to facilitate imports and exports between Russia and Syria. Most trade will be transacted in Russian Rubles. Furthermore, an economic and commercial cooperation agreement was signed between Crimea and Syria at the Damascus International Fair.
  • Around 400 foreign businesspersons participated in the 61st edition of the Damascus International Fair this summer alongside 38 countries.
  • The US government attempted to deter foreign businesses from participating in the Damascus International Fair by threatening sanctions. The Chinese Ambassador to Syria criticized the US measure and stated that Chinese companies would nevertheless ignore threats of US sanctions and participate in the Damascus International Fair. Russia likewise slammed the US move.
  • Large business delegations from the UAE and Oman travelled to Syria to take part in the Damascus International Fair. They included approximately 40 Emirati and 50 Omani business personalities.
  • A European parliamentary delegation visited Syria and participated in the opening ceremony of the Damascus International Fair.
  • It appears that obstacles to opening businesses or maintaining operations include visits by officials from the Ministry of Internal Trade and Consumer Protection or the Customs Directorate who allegedly find violations and impose fees and fines, which add to financial pressures.

Corporate

  • Syrian and Chinese investors incorporated a company to grow Chinese vegetables in Syria.
  • Two lawsuits were filed by Syria Gulf Bank with the Commercial Court of First Instance in Rural Damascus seeking the nullification of the sale of 24,112,533 shares on the Damascus Securities Exchange that were the subject of a share capital increase undertaken by the bank back in July. The lawsuits alleged non-compliance with transparency and disclosure regulations with respect to the sale of shares, though such assertions have been denied by the Damascus Securities Exchange. Syria Gulf Bank is demanding that the shares be re-registered in its name. The Director of the Damascus Securities Exchange stated that all procedures were complied with and that brokers were informed of the sale. He added that the shares have been on sale since 2015 and the pre-emptive period when existing shareholders can purchase them had expired. The Syrian Commission on Financial Markets and Securities (SCFMS) subsequently revealed the results of a report published by the special committee formed pursuant to Resolution 95/2019 to review the complaints addressed to the SCFMS pertaining to the sale of shares in Syria Gulf Bank. The report found that there were no legal violations of any sort in the trading process and consequently, the sale of shares was deemed valid and will not be revoked.
  • Damascus Cham Holding realized a profit of approximately SYP 2.86 billion in 2018.

Investment

  • The Council of Ministers completed its final review of the new Investment Bill, which is expected to consolidate most economic sectors into one law with a particular emphasis on setting up special economic zones to encourage investments in the reconstruction process. According to Minister of Economy and Foreign Trade Samer Al-Khalil, the new Investment Bill will overcome obstacles that were regularly encountered in the execution of investment projects, including most importantly reducing the bureaucratic process for obtaining licenses. Like previous investment legislation, the new Bill will introduce tax and customs duties exemptions, streamline the importation of machinery and equipment to undertake investment projects, and encourage the provision of financial facilities to investors. Other features of the Bill which mirror provisions of previous laws include a one-stop shop where all licenses and permits can be obtained and a center for the settlement of investment disputes.
  • The new Investment Bill places a lot of emphasis on generous tax exemptions for potential investors in Syria’s reconstruction. However, some economists fear that such circumstances could lead to fiscal deficits compensated for by tax increases elsewhere.

Finance

  • The government has approved a new electronic payment mechanism proposed to it by the Central Bank to facilitate payments for utility services by citizens.
  • The government has set the conditions for the incorporation of electronic payments companies, which can take the form of limited liability or joint stock companies. The minimum share capital should be SYP 250 million and the term of the company shall not be less than 15 years. Applications for incorporation shall be submitted to the Central Bank and preliminary approval or rejection shall be notified within 60 days. Applicants have six months to commence operations if approved. E-payment companies cannot provide cash deposit or withdrawal services. Successful applicants can conclude agreements with banks, financial institutions and vendors in order to provide payment gateway services. There are restrictions on the ability of founding shareholders to transfer their shares. Firstly, they can only do so after three profitable fiscal years and only to Syrian nationals with the approval of the Central Bank. The resolution authorizing the establishment of e-payment companies is based on the decisions of the Monetary and Credit Council and the Central Bank. Such companies will have to take note of other legislation in their operations including but not limited to the Banking Secrecy Law, the Countering Money Laundering and Terrorism Financing Law, the Electronic Commerce Law, the Digital Signature Law and so forth.
  • The state-owned Real Estate Bank is concerned that granting interest on deposits by housing cooperatives linked to the General Housing Establishment poses a financial risk to the bank which it cannot afford. Rather, the funds should be used to finance housing projects.
  • The Central Bank reportedly agreed to raise the ceilings on housing loans to SYP 15 million from SYP 5 million.

Insurance

  • The new Insurance Bill is expected to be submitted to the Council of Ministers for review shortly and it is anticipated to increase the minimum share capital requirements of insurance and reinsurance companies and limit them to taking the form of public joint stock companies.

Industry

  • There are approximately 1,000 factories operating in the Adra Industrial Park outside Damascus with a total investment value of roughly SYP 560 billion since operations commenced in 2004. Moreover, 80 industrial facilities set up only this year so far.
  • The Aleppo Chamber of Industry submitted a memorandum to the Ministry of Industry to assist in the recovery of the industrial sector by lobbying for increased tariffs on some imports, tariff reductions on raw materials and equipment, tax exemptions, rescheduling of loans and so forth.

Agriculture

  • The United Nations Food and Agriculture Organization (FAO) announced that Kuwait will offer a grant amounting to $3 million (US) to support 20,000 farmers in Syria to boost food security.
  • Farmers are calling for an extension to the provisions of Law 46/2018, which grant borrowers from the Agricultural Cooperative Bank exemptions from interest and penalty payments and the ability to schedule repayments over a 10-year period in equal annual instalments.
  • Prime Minister Imad Khamis agreed to provide a loan worth SYP 11 billion to the Syrian Grain Establishment to import 100,000 tons of wheat for bread.

Real Estate

  • The Director of Zoning in the Governorate of Damascus revealed that an agreement had been reached with the Higher Institute for Regional Planning linked to the University of Damascus to study and prepare zoning regulations for the Damascus district of Jobar. The Governorate of Damascus also agreed with the General Corporation for Engineering Studies to prepare for the implementation of the new zoning regulations for the Damascus district of Qaboun, which were issued in July and include a small portion of the nearby suburb of Harasta.
  • Minister of Public Works and Housing Souheil Abdel-Latif discussed during a meeting of the General Corporation for Engineering Studies the proposed new zoning scheme for Yarmouk Camp, which sits on 220 hectares. On May 22, 2019, President Bashar Al-Assad ratified Law 12/2019 merging the General Corporation for Technical Studies and Consultations with the General Corporation for Water Studies to incorporate the General Corporation for Engineering Studies with a share capital of SYP 1.45 billion.
  • Governor of Damascus Adel Olabi signed an agreement with the General Manager of the General Corporation for Engineering Studies to undertake a technical evaluation to assess the infrastructure for the launch of Basilia City in southern Damascus, the sister development of Marota City.
  • The First National Conference for Housing hosted in early August focused on a number of major issues including the legislative environment governing the housing sector and its proposed reform and most importantly, the means by which to attract financing to undertake such projects.

Energy

  • The Ministry of Electricity is undertaking foundational works on a site in Lattakia which will host a power plant before handing it over to the Iranian Mapna Group for construction.
  • The first wind turbine to generate electricity in Syria has been built and installed in the western region of the province of Homs. The wind turbine was wholly manufactured in Syria and is part of plans to diversify away from hydrocarbon energy towards renewables.
  • A US court issued a warrant for the seizure of the Iranian tanker Grace 1 on the grounds that it was allegedly shipping oil to Syria in violation of US secondary sanctions imposed against Syria’s petroleum sector. A Gibraltar court had already cleared the stranded ship for departure. However, Gibraltar rejected the US warrant to seize the Iranian tanker on the grounds that it was unable to comply because it was bound by EU law, thereby refusing to apply US secondary sanctions against Syria’s petroleum sector.

Transport

  • Minister of Transport Ali Hammoud issued a resolution imposing fees on foreign-owned trucks entering Syria, including those transiting their cargo through Syria to other countries. Syrian merchants were not happy with this decision because they export their goods in foreign trucks. Foreign trucks can easily travel to other countries without restrictions but Syrian trucks cannot. Syrian trucks can only enter Lebanon and Jordan due to bilateral agreements between the governments but no other country unless the driver has a visa to enter a specific country. Syrian trucks carrying cargo to Gulf countries for example can only travel as far as the Jordanian-Saudi border before being re-loaded into Jordanian trucks. Apart from the new fees recently imposed, Syria has no restrictions on the entry of foreign trucks onto its territory.
  • Lebanon continues to lobby Syria to reduce the high transit and cargo fees imposed recently on foreign trucks shipping goods via Syria, which are hindering Lebanese exports to the Gulf countries. Though there was talk of progress in the negotiations, nothing has yet materialized.
  • The Economic Committee linked to the Council of Ministers agreed to permit the importation of automobile parts for assembly purposes and the shipment of their components from the Syrian ports to the free zones.
  • Government sources revealed the formation of a special committee comprised of representatives from the Ministry of Economy and Foreign Trade and the Customs Directorate to evaluate the possibility of permitting the importation of automobiles starting in February 2020. Car imports were halted in 2011 in a bid to reduce demand for foreign exchange so as to support the value of the Syrian Pound, which began to depreciate with the onset of conflict during that year.

Tourism

  • Tourists from Britain, Australia, New Zealand, Canada, Germany, Switzerland and Norway travelled to the archaeological city of Palmyra in central Syria where they documented the destruction visited upon the historical monuments by ISIS terrorists back in 2015.
  • Minister of Tourism Mohammed Rami Martini stated that it is likely that the Supreme Tourism Council dating back decades will be dismantled and its tasks absorbed by the Supreme Investment Council, which will continue to implement the decisions of the Supreme Tourism Council. Dismantling the Supreme Tourism Council also derives from the fact that the new Investment Bill will encompass the tourism sector which has hitherto been regulated by stand-alone legislation. Hence, it follows that the Supreme Investment Council will be the competent authority.

Health

  • The President of the Syrian Medical Association revealed that the government and particularly the Ministry of Health have been asked to review the classification of doctors and private hospitals and to standardize medical fees to avoid unjustified expenses.
  • German prosecutors announced that there was no legal basis to investigate Brenntag, the world’s largest chemicals distributor, over the sale of ingredients by a Swiss subsidiary to a Syrian pharmaceutical company to produce a painkiller in line with relevant laws and regulations. Swiss drug maker Novartis had earlier licensed the Syrian pharmaceutical company the rights to manufacture and distribute the pain relief skin gel Voltaren for which it required the ingredients. The sale by Brenntag’s Swiss subsidiary to the Syrian pharmaceutical company was not found to have breached “dual-use” provisions in the EU sanctions regime imposed against Syria.
  • President Bashar Al-Assad issued Legislative Decree 18/2019 amending pension legislation pertaining to the provision of health benefits to personnel in the Syrian Arab Army and the Internal Security Forces.

Education

  • President Bashar Al-Assad issued Legislative Decree 17/2019 granting academics who were dispatched abroad in accordance with the Scientific Missions Law a period of one year to convert their degrees in Syria provided they obtained their qualifications after March 15, 2011.

Local Councils

  • Governor of Damascus Adel Olabi issued a resolution entrusting members of the Executive Committee of the Governorate of Damascus with supervisory tasks over service departments within the capital in order to raise the level of services and submit progress reports every 15 days.

Public Sector

  • The Council of Ministers decided to form a higher committee to oversee public sector reform, which will be chaired by Prime Minister Imad Khamis.

Judiciary

  • Minister of Justice Hisham Al-Shaar called on judges adjudicating cases in the Terrorism Court to speed up litigation proceedings, particularly as a number of pending lawsuits have remained on the docket for some time now.
  • New courts have been added to the judiciary in Daraa while old ones have been rehabilitated.
  • An official source in the Damascus judiciary revealed a rise in the number of special powers of attorney issued by Syrians overseas to their relatives in Syria to pay their military service exemption fees and passport fees after security clearances for these two cases were revoked.

Syndicates

  • Customs agents are demanding a syndicate of their own and not to be affiliated any further with the Craftsmen’s Union.
  • Some manufacturers and traders are discussing the prospects of establishing a joint chamber to represent their common interests to help them overcome their conflicting ones that center around the notion that traders support a policy of imports while manufacturers discourage them.

International

  • The German Interior Minister has proposed withdrawing the refugee status of every Syrian national who visits Syria or intends to do so.