Legal Briefing- January 2020

Industry

  • The number of private industrial facilities licensed according to the Industry Law 21/1958 reached 1,441 in 2019 while four were licensed in accordance with the Investment Law. The total capital of the licensed companies amounts to SYP 35.6 billion. One of the main reasons investors are resorting to the outdated Industry Law 21/1958 to execute their projects appears to be due to the delays in enacting the new Investment Bill into law. The Bill has been promised for years but industrialists no longer want to wait for it. The new Investment Bill will address the gaps in the current Law that were hindering investment projects in Syria, present a wider range of incentives, shorten the time period for procedures and give more guarantees to local and foreign investors.
  • Russian companies are studying the prospects of investing in industrial projects in Syria in 2020, especially in the cement field.
  • Criticism is being directed at the fact that 33 factories have been licensed with a capacity to produce 50 million tons of cement annually but none of them have started operating yet.
  • The Homs branch of the General Establishment for Geology and Mineral Resources revealed that negotiations with a Chinese company to establish a factory to manufacture silicon at a cost of $67 million (US) for one year are almost complete.
  • There are plans to enact legislative provisions to exempt imports into the free zones from customs duties to encourage factories to start up industrial production once again. A number of factories that used to export their products from the free zones shut down during the war.
  • Factories in the province of Rural Damascus are continuing to come back online after years of production suspension during the war.
  • The Governor of the Central Bank agreed with industrialists to finance the importation of 44 items of raw materials for production purposes at the preferential foreign exchange rate of SYP 700 per US Dollar in order to lower manufacturing costs, reduce prices for consumers and stimulate exports. In addition, the importation of 10 basic essential items will continue to be financed at the official foreign exchange rate of SYP 435 per US Dollar.

Agriculture

  • The reopening of the Aleppo-Hassakeh Highway has revived hopes for merchandising agricultural crops from Hassakeh.
  • The government is planning to revitalize the agricultural sector through financial and taxation incentives along with an emphasis on promoting local produce.
  • The Council of Ministers is assessing a bill that exempts loans granted to livestock breeders from the Animal Feed Fund from interest and delay payments in order to reduce burdens on them to pay their financial obligations.
  • The Ministry of Agriculture and Agrarian Reform is directing the export of locally produced veterinary pharmaceutical products to African markets.

Commerce

  • The Council of Ministers agreed to distribute basic goods such as sugar, rice and tea in specified quantities at subsidized prices to citizens via the Smart Card Program, which originally included only fuel allowances.
  • President Bashar Al-Assad issued Legislative Decree 6/2020 setting up the Syrian Establishment for Bakeries with a capital of SYP 5 billion to replace the General Corporation for Bakeries and the Reserve Bakery Committee. It will possess financial and administrative independence.
  • With a fluctuating exchange rate, the government continues to emphasize monitoring of local markets to ensure prices do not rise considerably. However, it is inevitable that imported products are facing price hikes and the government’s intervention will have its limitations.
  • The Ministry of Internal Trade and Consumer Protection is sending out patrols to monitor whether vendors are labeling their goods with prices as required by law. Some merchants are avoiding doing so in anticipation of foreign exchange rate fluctuations.
  • In light of the economic situation, a new initiative was launched on social media platforms to encourage merchants to sell their products either for SYP 1 or at reduced prices. Many commercial establishments participated in this initiative for a set period of time.
  • The Ministry of Justice is reviewing amendments to the Consumer Protection Law to increase penalties on merchants for illegal practices. It will then send the bill to the Ministry of Internal Trade and Consumer Protection, which will then forward it to the People’s Assembly.

International Trade

  • It has been reported that trade exchanges between Syria and Iraq increased by 35% following the exemption of Iraqi trucks from fees when crossing Syrian territory and the granting of Iraqi visas to Syrian truck drivers.
  • The first shipment of Syrian citrus fruits is heading to Crimea following a range of agreements and arrangements to facilitate Syrian exports to the Russian markets given the proximity between the Syrian coastal ports and Crimea.

Finance

  • There is speculation that deposits of Syrians in Lebanese banks range between $40 billion and $50 billion (US) amounting to approximately a quarter of all bank deposits in Lebanon.
  • The Loan Guarantee Corporation, which was legislated for back in 2016, is expected to be launched very soon.
  • The Central Bank is planning to initiate its second phase of issuing certificates of deposit to entice depositors to freeze their funds for a specified length of time in exchange for a favorable interest rate. The first phase was carried out last year. The second phase of the issuance of certificates of deposit will also be denominated in Syrian Pounds, which is expected to help appreciate the value of the local currency.
  • The government released its calendar for the issuance of treasury bonds for 2020 and plans to raise SYP 300 billion accordingly.
  • Following the shutting down of an unlicensed business on the premise that its commercial activities were prohibited by law, there is speculation that it could potentially have been a small time Ponzi scheme. Reports now suggest that the owner of the illegal business was arrested and will be charged with violating the Fundraising Law 8/1994. Victims who deposited money with him are being urged to file lawsuits against him in his personal capacity since his business was not licensed.
  • The government is mandating the use of bank transfers to evidence real estate and motor vehicle sales in an attempt to ease reliance on cash transactions and help prepare the groundwork for electronic payments.

Monetary

  • The Minister of Economy and Foreign Trade issued Resolution 2/2019 authorizing the General Establishment for Free Zones to charge fees in Syrian Pounds according to the official foreign exchange rate bulletin issued by the Central Bank. The aim of this decision is to create more demand for Syrian Pounds and help to appreciate the value of the Syrian Pound against the US Dollar.
  • The unofficial rate of the Syrian Pound against the US Dollar crossed the SYP 1,000 per US Dollar mark for the first time in its history.
  • The Central Bank stated that it is willing to purchase foreign exchange from citizens without documentary requirements and at the preferential foreign exchange rate of SYP 700 per US Dollar.
  • The Ministry of Interior is spearheading a clampdown on persons caught transacting in currencies other than the Syrian Pound. In this respect, it announced that it is moving against currency manipulators in the foreign exchange markets and against any vendors who contravene the provisions of Legislative Decree 54/2013, which prohibits transactions in any currencies other than the Syrian Pound. The announcement followed the depreciation of the unofficial rate of the Syrian Pound to SYP 1,200 per US Dollar.
  • President Bashar Al-Assad issued Legislative Decree 3/2020, which amends Article 2 of Legislative Decree 54/2013. Accordingly, the penalty for transacting in any currency other than the Syrian Pound has been increased to a minimum of seven years’ imprisonment with hard labor. A fine shall be imposed on violators equal to twice the amount that is the subject of the transaction in addition to confiscatory measures.
  • President Bashar Al-Assad issued Legislative Decree 4/2020, which amends Article 309 of the Criminal Code provided for in Legislative Decree 148/1949. Accordingly, the penalty for broadcasting or publishing fabrications or false allegations that cause the Syrian Pound to depreciate or to become unstable is tightened.
  • The Central Bank is continuing its campaign to withdraw licenses and shut down foreign exchange businesses due to the failure of the latter to abide by their legal obligations.
  • The Council of Ministers deliberated on potential amendments to the Foreign Exchange Law 24/2006 to address gaps that have been revealed since 2011. From 2007 up until late 2019, 90 out of 133 bureaus and companies had their licenses revoked for unauthorized transactions.
  • Syrian state media reported a protest in President’s Square in the city of Suwaida in government-controlled southern Syria where demonstrators voiced criticism against deteriorating living standards, which have been affected to an extent by the depreciation of the local currency.

Taxation

  • Ideas for tax reform include building a database to identify tax evaders, reducing tax obligations on individuals with limited income, adopting uniform taxation legislation, combating the informal economy to increase tax revenues and implementing billing systems.
  • Complaints are being directed at the Ministry of Finance that while it aims to live up to its pledge not to impose new taxes, it is rather raising fees.
  • Prime Minister Imad Khamis agreed to exempt Iranian goods stored in Syrian free zones and those imported directly to them from taxes for all of 2020.
  • The Ministry of Finance is studying options to raise the value of the minimum salary that is exempt from income tax.

Corporate

  • The Chief Executive Officer of the Damascus Securities Exchange confirmed that the performance of the stock market in terms of trading values and volumes during 2019 was the most optimal since its opening in 2009.
  • The Board of Directors of the Syrian Commission on Financial Markets and Securities granted a license to a financial brokerage company to commence operations in the Damascus Securities Exchange, bringing the number of licensed brokerage firms to eight.
  • According to the Syrian Investment Authority, foreign nationals established nine projects in 2019 in accordance with the Investment Law that amounted to SYP 34 billion.
  • 497 companies were incorporated in Syria in 2019 after they were licensed by the Ministry of Internal Trade and Consumer Protection.

Real Estate

  • The Governorate of Damascus granted the fourth building permit in Marota City to the owners of Plot TC111.
  • The Governorate of Damascus awarded the fifth building permit in Marota City to the owners of Plot SA178.
  • The Governorate of Damascus laid blame on plot owners for delays in developing Marota City for their alleged procrastination in moving forward with building permits.
  • There are complaints within the Governorate of Damascus over the large amounts of rents being paid on behalf of former settlers of what is now Marota City due to the delays in building alternative housing facilities for them within the grounds of Marota City.
  • The Urban Renewal Law 10/2018 is set to be applied to the former industrial district of Qaboun and its surrounding areas in Damascus.
  • The Governor of Damascus proposed the construction of modern towers in the area between the Damascus districts of Qaboun and Barzeh.
  • An Egyptian real estate development company is considering an investment in Rural Damascus while other potential investors are awaiting the issuance of the new Real Estate Investment Bill that will further empower developers.
  • Real estate prices are reportedly rising in Syria due to increases in the cost of construction materials brought about by a weakening Syrian Pound and anticipation that the new Real Estate Sales Bill will be enacted soon, which will raise taxes on sellers of properties.
  • The Ministry of Public Works and Housing revealed plans to amend the Escrow Account Law 25/2011 to harmonize it with proposed changes to the Real Estate Investment Law 15/2018, including text to permit real estate developers to obtain bank loans guaranteed against their projects. The Escrow Account Law, whose executive regulations were issued in 2014, regulates contractual relations between real estate developers and buyers and between the real estate developers and escrow account keepers at the banks. The real estate developer opens an escrow account at the bank and all funds are deposited in it accordingly whether they be from sales or loan facilities. If the real estate developer goes bankrupt, the escrow account is protected and cannot be touched. Proposed amendments focus on facilitating loans by banks to prospective property buyers in exchange for the real estate unit as collateral and loans to real estate developers in exchange for the project as collateral with the funds deposited into an escrow account. Other amendments include allowing developers to start selling units once infrastructure works are completed where the real estate development zone is owned by the state or once contracts are signed and guarantees provided where the developer owns the real estate development zone.
  • Sources in the Ministry of Public Works and Housing revealed that there is a possibility that an Indian company will complete the Youth Housing Plan instead of the General Housing Establishment.

Construction

  • The managers of public sector construction companies are calling for the activation of provisions in the Construction Law provided for in Legislative Decree 84/2005 that encourage joint projects between the public and private sectors in order to overcome economic difficulties.

Telecommunications

  • According to the Minister of Communications and Technology, the infrastructure for electronic payments is ready to be utilized for public services.

Transport

  • The Minister of Transport granted Libyan Airlines permission to cross through Syrian airspace following a request submitted by the Libyan Civil Aviation Authority to the Syrian Civil Aviation Authority. By granting such permission, Libyan Airlines benefits from less fuel and time by crossing Syrian airspace and avoiding detours while the Public Treasury in Syria receives fees in return. The Civil Aviation Authority expects monthly revenues of $20,000 (US) from Libyan Airlines.
  • There was speculation whether the People’s Assembly may in an unprecedented move withhold confidence in the Minister of Transport over two matters involving an airline purchase contract and royalty payments due to Syrian Arab Airlines from Cham Wings pertaining to air routes.
  • According to the Minister of Petroleum and Mineral Resources, GPS devices will be installed in government-owned vehicles this year to measure fuel consumption and distances traveled.
  • An Indian company expressed an interest in investing in a suburban train project that would link Damascus with suburbs in Rural Damascus and Damascus International Airport.

Tourism

  • The Ministry of Tourism revealed that the number of Arab and foreign persons traveling to Syria during 2019 reached approximately 2.4 million arrivals, which amounted to an increase of 31% compared to the previous year.
  • The Minister of Tourism presided over a meeting to discuss structural amendments to the Law governing the Federation of Syrian Chambers of Tourism as well as incentive measures for the industry as a whole with an eye towards the post-war period.
  • The Supreme Tourism Council issued Resolution 451/2020, which increases the net percentage of commercial premises within touristic establishments and complexes both inside and outside zoned regions to 30% of the total licensed floor areas.
  • The Supreme Tourism Council issued Resolution 452/2020 to amend Resolution 198/1987, which regulates the establishment and urban development concerning touristic projects, complexes and facilities located on the coastal areas and inland though outside zoned regions. Resolution 452/2020 permits an increase in licensed areas in order to meet the economic feasibility of the project, which would be commensurate with construction costs while mandating flexibility in the design and architectural concepts of the touristic facilities.

Energy

  • The People’s Assembly recently approved bills for the establishment of two new oil refineries to be built according to a public-private partnership model. The bills approved on December 8th by the People’s Assembly were subsequently ratified by President Bashar Al-Assad on December 12th through Laws 28/2019, 29/2019 and 30/2019 leading to the incorporation of the Rusafa Refinery Company and the Al-Sahel Refinery Company. The incorporation of the companies also follows the ratification of an oil services contract between the public and private sectors.
  • Prime Minister Imad Khamis confirmed that the financial facility provided by the Iranian oil credit line ceased in 2019 and that the state was now using its own funds to secure fuel products.
  • The Ministry of Petroleum and Mineral Resources apologized to the Ministry of Transport for its inability to provide fuel from its refineries in line with the International Maritime Organization’s sulfur cap obligations for 2020. Accordingly, both Syrian and foreign vessels that dock in Syrian ports will have to be provided with fuel from outside of Syria in order to meet the sulfur cap.

Employment

  • The Council of Ministers agreed that public sector employees who were engaged in combat operations and wounded or killed in action during the war benefit from the provisions of the Social Security Law.
  • The Economic Committee affiliated to the Council of Ministers is planning to incorporate a joint stock company to invest the funds of the General Establishment for Social Security, which will be named the National Corporation for the Investment of Social Security Funds.
  • The General Federation of Trade Unions called for an amendment to the executive regulations of Legislative Decree 23/2019 to ensure the minimum wage obligation is applied to all workers, including contractors with the public sector and those not classified according to the Law.

Media

  • A rising Syrian businessman with interests in private security and telecommunications has started a new business in billboard advertising.

Lawyers

  • According to the President of the Bar Association, Syrian lawyers residing outside of Syria have two months to declare their current status and the reasons for their absence.
  • The Bar Association is concluding contracts with the mobile telephone network operators Syriatel and MTN Syria to provide almost free services to lawyers communicating with each other since their discussions can last for hours and drive up their bills.
  • The Bar Association is exempting the sons and daughters of martyrs killed during the war from membership fees, which will be covered internally. Lawyers undertaking their military service will also receive similar treatment with respect to financial dues owed by them.
  • Foreign lawyers whose mother is Syrian will be allowed to register in the Syrian Bar Association. The previous position was that only Arab lawyers could register and have rights of audience before the Syrian courts if their country granted Syrian lawyers reciprocal rights.

Judiciary

  • The Supreme Judicial Council, which oversees the courts and disciplines the judiciary, dismissed a number of judges following disciplinary proceedings. The judges in question were held to have committed grave errors in their judgments and violated standards of judicial conduct.

Arbitration

  • Syria hosts approximately 60 arbitration centers, most of which lack any cases to adjudicate and are therefore facing closure. The high number of arbitration centers in a low-activity economy compared with a small number of centers in booming economies is unprecedented. The reason for their spread is the soft conditions and virtually no fees imposed on any party thinking of opening an arbitration center. There is now talk of amending the Arbitration Law 4/2008 to include stricter regulations to deter the presence of numerous arbitration centers. The Ministry of Justice, which licenses arbitration centers, approves their rules of procedure, and supervises their operations overall, may start to encourage them to merge and consolidate since there is no market appetite for approximately 60 centers at the present time.
  • One of the key features of the new Council of State Administrative Law 32/2019 with respect to administrative arbitration involving a government entity is that it adopts the same legal principles as the Arbitration Law 4/2008 concerning the appeal of arbitral awards. The Arbitration Law is applicable to disputes involving the private sector and adopts the UNCITRAL model provisions on permitting the appeal of arbitral awards on procedural grounds only. The same position has now been applied in administrative arbitration. Previously, an arbitral award involving a government entity could be appealed before the Council of State Administrative Court and the Supreme Administrative Court on substantial grounds, meaning the case was effectively retried again without consideration to the arbitrators. Following the ratification of Law 32/2019, arbitral awards can only be appealed in the Council of State solely on the grounds of procedural irregularities. The merits of the case cannot be considered any further after an award has been issued by the arbitrators.

Non-Governmental Organizations

  • The Syria Trust for Development provided SYP 368 million for an ongoing project in Suwaida to support the local population.

Public Administration

  • Several vocal MPs in the People’s Assembly are calling for a different minister to replace the Minister of Finance as the head of the government’s economic team.
  • President Bashar Al-Assad chaired a meeting of government officials on the implementation of the National Administrative Reform Program. The final version of the Financial Disclosure Bill, which requires prospective government appointees to disclose their assets, was reviewed.

Constitutional Reform

  • Following a poll conducted by the Syrian Law Journal, 89% of respondents think that Syria should consider an amendment to Article 97 of its Constitution in order to grant the People’s Assembly, the national Parliament, a say in the formation of the Council of Ministers. The poll was carried out in light of a similar constitutional proposal in Russia that was recently announced.

Military

  • The Syrian Arab Army declared victory in the Battle of Ma’aret Al-Naaman in January, which took place in Idlib and which extended government control over the M5 Highway, thereby clearing the path for the reopening of Aleppo International Airport. In February, the Army completed combat operations and won back full control of the M5 Highway.

International

  • The arrival of Russian President Vladimir Putin in Damascus coincided with celebrations of Orthodox Christmas. Alongside President Bashar Al-Assad and the Greek Orthodox Patriarch of Antioch and all the East Yuhanna X, he visited the Mariamieh Cathedral in the Patriarchate.
  • President Bashar Al-Assad offered condolences on behalf of the Syrian people to the new Sultan of Oman Haitham bin Tarek bin Taimour Al-Said following the death of Sultan Qaboos bin Said Al-Said.
  • A tripartite Syrian-Russian-Turkish summit was held in Moscow where Syria’s security chief called for his country’s national sovereignty to be respected while affirming that his government was committed to the liberation of Idlib.
  • According to a poll conducted by the Syrian Law Journal in January, 63% of respondents think that Turkey no longer objects to the Syrian Arab Army extending government control to northwestern Syria. The indications were due to (1) the recent Syrian-Turkish meeting in Moscow, (2) the transport of Syrian anti-government fighters to Libya, and (3) the advances by the Syrian Arab Army in Idlib and Rural Aleppo. However, other views held that Turkey will only agree to implement its part of the Sochi Agreement of 2018 – the Idlib Backstop – to allow the Syrian Arab Army to extend its control over the main highways. The poll was conducted before military engagements took place between the Syrian and Turkish armies in February.
  • In a poll conducted by the Syrian Law Journal, 60% of respondents think that a potential US Army withdrawal from Iraq means that US soldiers will also leave Syria because the US Army presence in Syria is supplied and maintained via the American military bases in Iraq.
  • There are reports that Syria’s UN Ambassador Bashar Al-Jaafari attended a private party hosted by Saudi Arabia’s UN Ambassador in New York, which would mark the first meeting between the two figures in an official capacity after a long disruption.