Legal Briefing- February 2019

Reconstruction

  • The British Syrian Society held a two-day conference in Damascus entitled What Comes Next After the War? involving citizens, Prime Minister Imad Khamis, government ministers, public officials and experts to discuss post-war reconstruction, legal and administrative reform, raising awareness of the National Administrative Reform Program (NARP) launched in June 2017 in order to enhance contributions by citizens, socio-economic development and so forth. According to the Prime Minister, the government has been intensely formulating a strategic four-phase reconstruction program for the past 18 months called Syria 2030 to rehabilitate infrastructure across the country and address socio-economic development. Participants also heard that the public sector is being reformed to meet the needs of reconstruction and the economic public sector establishments are undergoing an administrative reform process in line with NARP. Corporatization whereby such public sector entities are converted into independent commercial companies owned by the state as was the case with Syrian Arab Airlines is an option to reform the public sector. Such a measure would instill new governance structures and rules and free these establishments from restrictive regulations governing the public sector. The Prime Minister affirmed that the government has been working on making public sector entities financially independent in order to secure their own revenues. Developing new governance mechanisms as well as integrating e-government and automation systems within the public sector would be expected to aid in the fight against corruption. Another specific objective of NARP would be to promote the independence of the judiciary free from outside influences by ensuring job and financial security for judges. The Vice-President of the Council of State, the administrative court tasked with adjudicating disputes involving the state, confirmed that the government instructed the Ministry of Justice to carry out a full legislative review of laws currently in force that relate to NARP’s objectives. 190 laws are deemed to be in need of immediate amendment even though 68% of the laws currently in place are considered recent. The Minister of Administrative Development also focused on the delivery of adequate human resources and electronic integration to help make NARP a success. On energy security, the Minister of Petroleum and Mineral Resources stated that Syria is looking to meet its pre-war oil production levels in the next decade. The Minister of Transport claimed successful results as his ministry delivered road rehabilitation projects and a train service to transport visitors to the Damascus International Fair in record speed relatively speaking within a period of one year. He also held that the Belt and Road Initiative is of strategic importance to Syria and the country must be part of the transport and logistical links that connect China with Europe. The US Caesar Bill that would in effect impose US secondary sanctions on Syria to an extent kept getting mentioned intermittently at the conference. The Minister of Local Administration and the Environment called on participants to distinguish between government projects and investments relating to the real estate assets of local councils like Marota City. The latter reportedly save money for the Public Treasury by financing their own development without contributions from the state’s funds. His assistant minister meanwhile highlighted the government’s desire to protect private property, which is a legal right guaranteed by the Constitution, the Civil Code and the Land Registry Law. According to the Director of the Syrian Family Affairs and Population Commission, more than half of the Syrian population is located in the three provinces of Damascus, Rural Damascus and Aleppo. The huge demographic changes that took place in Syria during the war means that the little heard-of Syrian Family Affairs and Population Commission will be playing a key role in steering the post-war societal reconstruction. The Minister of Higher Education explained that his ministry is attempting to cooperate with foreign universities abroad and Syrian expatriate university professors to help improve and develop internal standards with a desire to resume sending Syrian students overseas to learn from practices abroad. An interesting point was that the University of Damascus moved up in global rankings from 10,300 to 3,600. A delegate informed the Minister of Higher Education that it is not just the risk of military service that keeps Syria’s bright youth overseas but the administrative burdens of paperwork and converting their degrees to meet local standards as well. Another delegate lamented how Syria is producing high caliber doctors and engineers who graduate from Syria but emigrate to the West like the United States to serve the American economy. The United States is therefore benefiting from Syrian-produced talent. One of the responses of the government should therefore be to lessen the bureaucracy to facilitate healthcare investment in Syria. On women, the Ministry of Social Affairs and Labour is working on several initiatives to improve their conditions including in the Personal Status Law and the Employment Law as they have taken on more responsibilities during the war. Legislative reform is anticipated to reflect this fact. As for the new Governor of the Central Bank, he is pursuing a new strategy that needs to be built on trust and which includes a review of previous decisions and resolutions issued by the Monetary and Credit Council with the objective of protecting the value of the Syrian Pound. Deputy Foreign Minister Faisal Meqdad spoke about the unfair consequences of the US and Western sanctions and the international embargo imposed on Syrian citizens. Syria’s diplomatic missions are sharing this message with other countries in order to help improve the economic situation in Syria. The Minister of Economy and Foreign Trade commented on the Public-Private Partnership Law issued in 2016 to open up sectors of the economy that were previously within the exclusive domain of the state to private investors on a partnership basis. Such projects are usually related to infrastructure works. He also mentioned the new Investment Bill that will be an all-encompassing piece of legislation covering all sectors of the economy, which will be open to private investment without limitations. It will also fill in the gaps discovered by investors during the war that were previously untested under the current investment legislative framework. A commercial law professor reminded the government that imposing travel bans on businessmen who cannot meet their debt obligations to banks is not a way to build a friendly investment environment that would encourage Syrian investors to return home. Rather, the Syrian government should adopt policies that would entice them like Egypt does for Syrian businessmen. A lawyer made clear that Syria needs proper large joint stock companies that can live for decades and ensure the security of long-term investments. However, the country lacks a substantial number of joint stock companies because converting to such a corporate structure may incur tax liabilities. For a year now, the Ministry of Finance has been preparing legislation that would reform the tax system to achieve a more equitable formula according to the Minister of Finance. The conference concluded with the Governor of Damascus outlining his plan for Damascus to make better use of transport services, reduce pollution and institute new urban development plans while discussions on unregulated, informal settlements gained traction. One major theme of the conference was that a lot of the current problems that exist today in the country were already there before the war so to what extent should the war be an excuse for government inaction? Key features of these British Syrian Society conferences include the grilling of ministers by citizens and experts which has hitherto not been the norm and some semblance of developing modes of accountability in the citizen-state relationship that could potentially shape a new social contract in the post-conflict reconstruction phase.
  • In his speech to members of local councils, President Bashar Al-Assad held that the conflict is not over but rather Syria is fighting four different wars – the military war which is being won by the Syrian Arab Army, the economic war brought on by international sanctions, the internet war and the war against corruption. The main message President Al-Assad got through in his speech is the rejection of any notion that would lead to a comprehensive decentralization of the state’s authority as such a scenario would be seized upon by foreign powers to undermine the central government in Damascus.

Finance

  • There are number of theories regarding the recent depreciation of the Syrian Pound in foreign exchange markets. One is that since the rebel groups were routed outside Damascus in May 2018, the flow of Dollars to them ceased and thus informal currency trading with government areas stopped. The second theory is that since the Office of Foreign Assets Control (OFAC) linked to the Department of the Treasury in the US warned against the shipping of petroleum products to Syria and coupled with the US secondary sanctions imposed on Iran, it became very difficult and expensive to import Iranian gas into Syria since key international shipping routes were either curbed or blocked. The government thus had to exchange more Syrian Pounds for Dollars to pay the extra costs to import the gas at premium prices. Other contributing factors include currency traders taking advantage of the situation to turn a quick profit and thus dragging down the Syrian Pound. In any case, authorities in Syria began cracking down on illegal foreign exchange businesses whose unlicensed activities place undue pressure on the value of the Syrian Pound. Furthermore, the importation of materials for reconstruction means more US Dollars are needed to make purchases. Finally, there has been a general global improvement in the status of the US Dollar vis-à-vis other currencies including the Syrian Pound.
  • As part of its new monetary policy, the Central Bank issued a circular to banks requesting them to take the necessary measures to facilitate citizens’ banking transactions, particularly their freedom to deposit and withdraw foreign currencies.
  • The Central Bank announced that it is permitting the issuance of certificates of deposit denominated in Syrian Pounds for a nominal value of SYP 100 million for the first time in its history with an interest rate set at 4.5%. The Central Bank accumulated approximately SYP 131 billion from subscriptions by banks to certificates of deposit. Moreover, the Central Bank is preparing a resolution that would permit certificates of deposit that are Sharia-compliant to be issued by banks.
  • The Ministry of Local Administration and the Environment and the Syria Trust for Development are supporting a program together that is providing microfinance loans worth more than SYP 3.6 billion to small projects in Syrian villages spread across 646 funds and 10 provinces.

Taxation

  • The People’s Assembly was expected to approve the new Customs Bill before it was withdrawn for further consultations the following month. It was intended to transform the Customs Directorate from a unit within the Ministry of Finance into an independent body with a board of directors that takes decisions jointly.
  • The Customs Directorate has imposed fines worth SYP 22 billion on smuggled goods since the beginning of 2019.
  • Lebanese exporters have written to the Syrian Exporters Union to help them lobby for a reduction in customs duties, which they regard as quite high.
  • Jewelers in Damascus continue their dispute with the Directorate of Finance in the capital over their income tax liabilities and how to categorize them accordingly.

Corporate

  • The Ministry of Internal Trade and Consumer Protection ratified the articles of association of Ramak Human Development Holding, a private joint stock holding company with a share capital of SYP 1.03 billion owned by a leading pre-war Syrian businessman.
  • Syriatel’s shares stopped trading on the Damascus Securities Exchange (DSE) for one day on February 5th as its General Assembly held an ordinary shareholders meeting to distribute profits amounting to SYP 280 per share. Any person registered as a shareholder on February 4th was entitled to receive a dividend. Any shareholder who sold his shares before the meeting would have forfeited his profits. If shares were sold to a new shareholder before the meeting of the General Assembly to determine the distribution of the company’s profits, that new shareholder would have been entitled to the dividends, not the previous one who sold the shares. As per the DSE’s bylaws, Syriatel could not return to trading on the stock market until a certified copy of the General Assembly’s resolution was submitted to the DSE. Following the meeting, Syriatel’s shares resumed trading on the stock market but its share price was reduced from SYP 8,116 to SYP 7,836. Syriatel began trading its shares on the DSE on January 10th this year at a price of SYP 8,000 per share. The Board of Directors of the DSE rejected the proposed share price MTN Syria desired to initially list with on the stock market as it was deemed unreasonable.
  • Family members of a leading industrialist incorporated Mourjano Motors Ltd., a company that manufactures automobiles in Lattakia.
  • The Ministry of Internal Trade and Consumer Protection ratified the dissolution of MAG Real Estate Development LLC, a company owned by the UAE-based Syrian businessman Moafaq Al-Gaddah. It does not however signal an intention to exit the Syrian market and could potentially be part of a corporate restructuring though this has not yet been confirmed.

International Trade

  • It was reported that the UAE plans to take part in the Damascus International Fair this coming summer.
  • An exhibition to promote Jordanian products in Damascus is planned for April.
  • Egyptian exports to Syria continue to surge as economic relations began improving since 2015 when the period of commercial stagnation between the two countries came to an end.
  • According to a Reuters article, Syria purchased 200,000 tons of wheat from the Black Sea region.

Industry

  • Syrian industry was on full display at the Gulfood Exhibition in Dubai. Syrian Olive Oil Co., a private joint stock company that maintained production throughout the war while sourcing its olives from northern Syria, was one of numerous Syrian manufacturers who displayed its products at the exhibition.
  • Prime Minister Imad Khamis approved Syria’s latest import substitution program that will seek to provide incentives and facilities to investors to manufacture a range of goods locally to avoid the need for imports and thus prevent further depreciation of the Syrian Pound.
  • The passage of the new Investment Bill, more efforts to combat the smuggling of goods into Syria and a package of incentives to encourage businessmen to set up factories are just some of the proposals on the table to help kick start the industrial sector in Syria.
  • Prime Minister Imad Khamis has agreed to stop licensing new steel factories in order to support the operations of currently active plants.
  • Egypt’s Chemical Industries Holding Co. is expected to visit Syria to explore reconstruction opportunities

Transport

  • Emirates Airlines may take a decision to resume flights to Damascus after a report is received from a technical team assessing facilities at the airport in the Syrian capital.

Energy

  • The People’s Assembly ratified a contract signed between the General Establishment for Chemical Industries and the Russian company Stroytransgaz for the latter to invest in the three plants belonging to the General Fertilizer Corporation in Homs for a period of 40 years. The value of the contract is not less than $200 million (US). The General Establishment for Chemical Industries has the right to terminate the contract and claim compensation if Stroytransgaz does not comply with the contractual terms within two years. Stroytransgaz will develop and modernize the plants during the contractual period and will revert ownership back to the General Establishment for Chemical Industries at the end of the 40-year period. Stroytransgaz signed a similar public-private partnership contract last year to invest in phosphate mines.
  • Syrians are becoming accustomed to using government-issued smart cards which allocate prescribed amounts of diesel and petrol to citizens at regulated prices. Diesel smart cards are issued to every family while petrol smart cards are issued for every automobile.

Property

  • Aman Dimashq has begun the first stage of construction works for its real estate development project in Marota City.
  • UAE real estate developer Majid Al-Futtaim announced that it had obtained permits to carry out necessary infrastructure works at its Khams Shamat project in Sabboura just outside Damascus.
  • The Vice-President of the Contractors Syndicate in Tehran announced that a memorandum of understanding has been signed between Iran and Syria for the former to undertake a massive real estate development project in Damascus that would lead to the construction of 200,000 residential units. A $2 billion (US) line of credit from Iran to finance the project is a possibility.
  • The state-owned General Housing Establishment announced the construction of 12,200 residential units spread across eight provinces and has invited interested buyers to subscribe to the properties. The Minister of Public Works and Housing recently announced a new housing initiative.

Tourism

  • The Ministry of Tourism is reviewing the status of private investment projects on the Syrian coast. The Ministry wants the tourist developments to move forward but it has been advised to be cautious with its pronouncements so as not to make investors nervous.
  • A French tourism company is organizing a trip for 20 tourists who will reportedly visit Syria for a period of 10 days this coming April. The move is a sign of reassurance that the conflict is winding down and stability is returning to Syria.

Education

  • The University of Damascus has apparently been ranked as seventh in the world and first in the Arab world as the largest producer of graduate doctors who then practice overseas.
  • President Bashar Al-Assad issued Decree 69/2019 granting special courses and an additional academic year for students whether serving in the Armed Forces or not who have exhausted all levels of their university studies.
  • The Ministry of Higher Education abolished leave without pay for doctoral students.

Health

  • According to the Director of Hospitals at the Ministry of Health, the Ministry is studying a bill that would regulate the work of health facilities including beauty centers as well as nutritionists and dieticians.

Social Affairs

  • A bill made its way to the Ministry of Justice and onto the Council of Ministers and the People’s Assembly which amended the Personal Status Law and grants women a priority status when dealing with matters concerning the family and children. The People’s Assembly subsequently approved an amendment to the Personal Status Law mandating the minimum age of marriage for both men and women at 18 years. Another amendment to the Personal Status Law allows a wife-to-be to stipulate her right to work in the marital contract. President Bashar Al-Assad subsequently ratified Law 4/2019, which contains these amendments thereby improving the legal position of women.
  • The First Sharia Judge in Damascus confirmed that a young man accepted to pay a dowry of SYP 300 million to his bride even though the Judge tried to convince him to reduce it by warning him of possible prison time if the marriage breaks down and he has not paid the full dowry.

Military Affairs

  • The General Command of the Army and the Armed Forces issued an administrative order excluding individuals called up for reservist duty but have failed to enlist in the Armed Forces from legal charges if they were born in 1981 or before.
  • The Council of Ministers approved an allowance of SYP 35,000 per month for individuals who served for a period of five years or more in compulsory military service or as reservists or who were discharged from the military due to injuries. The entitlement will be valid for a period of one year.

International

  • A diplomatic source in Brussels announced that Lebanon, Algeria, Iraq, Tunisia, Egypt, Sudan, the UAE and Bahrain all support Syria’s return to the Arab League after its membership was suspended in November 2011.
  • President Bashar Al-Assad travelled to Iran and met with Ayatollah Ali Khamenei. The visit was the latest to a foreign country after two previous trips to Russia by President Al-Assad since the war began and coincided with the 40th anniversary of the Iranian Islamic Revolution.
  • A US judge ruled that the Syrian government is liable for at least $302.5 million (US) in damages for the death of American journalist Marie Colvin in the city of Homs during combat operations in 2012. The judge ruled that additional damages against the Syrian government will be determined at a later date. The civil claim found that Syrian government forces unlawfully caused the death of the American journalist despite the fact that she illegally entered Syria without a visa and without prior authorization while embedding herself with armed groups battling Syrian Arab Army forces. The Syrian government was not involved in any of the court proceedings as it deems the case politicized with US foreign policy objectives in mind. Colvin’s family, who obtained the ruling, are expected to find it challenging to enforce the judgment and collect damages.