Legal Briefing- December 2020

Energy

The Central Financial Supervisory Agency (CFSA) reportedly detected fraudulent activity concerning a contract between the Syrian Gas Company and a private oil services company to undertake works on gas fields north of Damascus and to link them up with the power station in Jandar. The CFSA pointed out that the gas pipeline north of Damascus is currently operating at high risk due to the alleged failure to supply the required materials and consequently, the private contractor should be charged with deceiving the state under the Economic Criminal Code.

Syria’s state-owned company for the storage and distribution of fuel products known locally as Mahroukat once again raised the price of a ton of fuel used for medium-sized and heavy industries by around 13% from SYP 290,000 to SYP 333,000, which was SYP 217,000 last December.

The Ministry of Electricity granted two licenses to investors to generate 100 kilowatts and 300 kilowatts of solar energy in Hama, which would be linked up to the national grid. Both projects were licensed pursuant to the Electricity Law 32/2010 for a period of 25 years.

A Lebanese MP expressed Lebanon’s hesitancy to renew its electricity procurement contract with Syria, which expired in April 2020, out of fear of US Caesar Act secondary sanctions. Syria reportedly provided the Lebanese state with up to four percent of electricity it generated. Syria sold electricity to Lebanon in order to purchase fuel to feed its own power stations. The US State Department has not responded to Lebanon’s request to purchase electricity, the payment of transit fees for its cargo trucks and trade in agricultural products with Syria.

Health

A local businessman announced that work on a factory for baby formula in cooperation with a French company had commenced after approvals from the Ministry of Health and other authorities had been obtained. The Central Bank currently subsidizes the importation of baby formula.

Finance

The People’s Assembly approved the national budget for 2021 valued at approximately SYP 8.5 trillion (~$3 billion [US]). President Bashar Al-Assad subsequently ratified the national budget through the passage of Law 23/2020.

The Ministry of Internal Trade and Consumer Protection ratified the incorporation of another e-payment company, adding to the list of entities formed pursuant to the regulations issued in August 2019. They are entitled to cooperate with banks to process payments and service ATMs.

The Board of Directors of Banque Bemo Saudi Fransi reportedly disclosed their negotiations to purchase 49% of the share capital of Bank Audi – Syria and indicated that it had obtained initial approval from the Central Bank. Bank Audi – Lebanon owns 47% of its Syrian subsidiary.

The recent formal designation of the Central Bank of Syria by the Office of Foreign Assets Control (OFAC) serves to highlight its sanctioned status since it was already indirectly blocked pursuant to Executive Order 13582 for acting as the fiscal agent of the Syrian government. OFAC clarified that despite listing the Central Bank of Syria as a Specially Designated National, US and non-US persons may continue to engage with it in connection with humanitarian assistance and other trade authorized in accordance with general and specific licenses.

Corporate

The volume of trading on the Damascus Securities Exchange in 2020 reached 29 million shares worth SYP 22 billion, with an average trading volume of 137,000 shares worth SYP 104 million split over 211 sessions. The market value of the 27 listed companies reached SYP 1.4 trillion.

International Trade

Jordanian authorities are reportedly not allowing a number of Syrian trucks to cross Jordanian territory on route to the Gulf while Iraq is apparently not granting visas to Syrian drivers. Transit fees through Jordan are much higher than Iraq but crossing through Iraq is longer.

The Minister of Transport stressed that the state spends $2 billion (US) a year on energy imports and $500 million annually to import wheat products. Furthermore, agreements have been signed with Russia and Iran to supply such imports.

Commerce

Price controls on basic goods are being continuously undermined down along the supply chains as wholesalers charge retailers in excess of legal limits while falsely invoicing them up to the permissible caps, thereby obliging the latter to sell at even higher prices to consumers.

Industry

The net investment revenues of the three industrial parks, which provide 5,352 job opportunities, reached SYP 12.743 billion during 2020, of which SYP 5.3 billion were derived from Adra, SYP 2.191 billion from Hassia and SYP 5.252 billion from Sheikh Najjar. The volume of investments in the three industrial parks reached SYP 144 billion in 2020, of which SYP 117 billion were in Adra, SYP 7.257 billion were in Hassia and SYP 19.773 billion were in Sheikh Najjar. The three parks were established in 2004, of which Adra is the largest.

Agriculture

According to the Minister of Agriculture and Agrarian Reform, Syria requires 2 million tons of wheat a year to secure bread demands and 360 thousand tons of seeds. The strategic national stockpile of wheat declined during the war, forcing the state to resort to imports.

State-owned corporations, including the Syrian Grains Establishment, purchased 700,000 tons of local wheat and imported 675,000 tons of Russian wheat during the 2020 season. Syrian wheat is used to produce pastries and pasta while imported wheat is used to bake bread. Syrians consume 2.5 million tons of wheat annually, some of which are secured locally while the rest are imported. Before the war, Syria was self-sufficient as it produced 4 million tons annually, which meant 1.5 million tons of wheat were available for exports each year.

Chairing a governmental delegation visiting Deir Ez-Zor, Prime Minister Hussein Arnous launched operations at the fifth sector irrigation project, which irrigates more than 3,500 hectares in the eastern rural region of the province following rehabilitation works. Prime Minister Arnous also launched a project to rehabilitate 3,000 hectares in the southern plains of Aleppo to irrigate strategic crops at a cost of SYP 1.2 billion.

President Bashar Al-Assad issued Legislative Decree 36/2020 to exempt the importation of raw materials utilized in the manufacture of veterinary medicinal products from customs duties and all other taxes and fees for a period of one year. While there are 72 veterinary drug factories in Syria, the 54 which operate will benefit from 8-11% cost reductions on the import of raw materials and they cover 75-80% of local market demand. Exports of veterinary medicine in 2019 amounted to approximately $2.1 million (US).

Real Estate

According to the Minister of Housing, the Real Estate Investment Bill will redress deficiencies discovered in Law 15/2008, such as the treatment of informal settlements and delays in the licensing of projects due to overlapping authorities between local councils and regulators.

The Governorate of Damascus is allocating SYP 2.9 billion to 5,516 former settlers of Marota City to cover their annual rent. Since 2015, SYP 13.2 billon has been earmarked. The General Housing Establishment plans to develop alternative housing for these settlers in Marota City.

According to a real estate expert, rising property rises exclude those on limited incomes from property ownership while 2.5 million homes were destroyed in Syria during the war. Rents in Damascus can reach $300 (US) per month while sales in popular areas reach $1,500 per square meter.

A combination of a severe fluctuating unofficial foreign exchange rate, rising construction costs, asset hedging and market speculation have caused property prices to triple in Aleppo during 2020. Prices marked at SYP 170 million at the start of the year shot up to SYP 500 million. The US Dollar at the beginning of the year cost SYP 1,000 whereas it is now near SYP 3,000. Irrespective of the recent decline in demand for real estate in the high-end neighborhoods of the city, their prices have maintained their value due to a parallel decrease in supply.

Construction

The Chairman of the Construction and Wood Workers Syndicate revealed that increasing prices of building materials, such as steel and cement, forced private sector contractors to cease operations, leaving 50% of workers unemployed due to the ongoing economic recession.

The price of a ton of steel reached more than SYP 2 million while a cubic meter of concrete now costs around SYP 105,000, leading to an increase in real estate prices by 25% compared to six months ago and forcing developers to pause construction pending market stability.

The Ministry of Internal Trade and Consumer Protection capped prices on Portland cement products sold by the listed private sector company Al-Badia Cement Co., which range from SYP 124,000 per ton to SYP 163,500 per ton, following an increase in prices by public sector companies.

After raising its prices locally, the government announced a tender through its General Foreign Trade Organisation to export 20,000 tons of Portland cement produced by the state-owned General Cement Corporation. Final bid bonds amount to 10% of the total contractual value.

According to the Chairman of the Construction Contractors Association, cement constitutes two percent of the construction costs and raising its price has had a limited impact on real estate prices.

Transport

The Council of Ministers approved measures to restart operations at Aleppo International Airport, Lattakia Bassel Al-Assad International Airport and Qamishli International Airport as of December 21st.

Education

Duolingo, the American language-learning platform, obtained a specific license from OFAC in the US to provide language learning services in Syria, which would otherwise have not been legally permissible under US sanctions that restrict the exportation of services to Syria.

Employment

President Bashar Al-Assad issued Legislative Decree 34/2020 mandating the disbursement of a one-time tax-free grant of SYP 50,000 to public sector employees both in the civilian and military sectors as well a provision of SYP 40,000 to pensioners.

Judiciary

The Ministry of Finance imposed a provisional attachment order against the movable and immovable assets of the former Governor of Rural Damascus, who was discharged from office by President Bashar Al-Assad recently on 02-12-2020. The measure also covers his wife and children.

The Minister of Justice directed attorneys-general in the provinces and the Legal Affairs Department to protect officials of the Ministry of Internal Trade and Consumer Protection who possess judicial authorities from malicious litigations pursued against them by business owners.

The Bar Association intends to raise the price of a power of attorney from SYP 100 to SYP 2,000. Meanwhile, a number of lawyers have been disbarred and arrested on charges of forging powers of attorney, prompting the Bar Association to consider standard non-negotiable documents.

The Second Customs Court of First Instance in Damascus imposed fines amounting to SYP 15.25 billion in 2020. 263 customs lawsuits out of 454 before the First and Second Customs Courts were settled in 2021. They concerned mainly import smuggling charges, mostly unfit foodstuffs. The Customs Law 38/2006 mandates fines that can range from six to eight times the value of smuggled goods.

Public Administration

President Bashar Al-Assad toured an e-service center in Damascus where Civil Registry documents are filed online without the need for citizens or residents to visit in person. The e-government initiative will be further complemented with the passage of the new Civil Status Bill.

International

The Syrian-Russian Joint Committee held an expanded session of talks in Moscow to discuss implementation of the agreements recently signed between the two countries and to plan for an enhancement of trade and economic cooperation during the meetings in Damascus in December.

OFAC settled with the National Commercial Bank (NCB) based in Saudi Arabia after NCB agreed to remit $653,347 (US) to settle its potential civil liability for apparent violations of Syria and Sudan sanctions processed through the US financial system between 07-11-2011 and 28-08-2014.