Legal Briefing- June 2019

Corporate

  • A special committee has been formed to rewrite provisions of the Companies Law to encourage local and foreign investments in the reconstruction phase. The Syrian Companies Law is already one of the most liberal in the Arab world since 2008, including its most recent amendments in 2011.
  • Since the beginning of this year up until June, 222 companies had been incorporated in Syria with licensed activities in a variety of sectors, 35 of which were registered in the month of May alone.
  • The Board of Directors of the Rural Damascus Chamber of Commerce has expressed its readiness to support traders in the incorporation of new companies and in existing companies, especially with respect to assisting where possible with access to bank financing.
  • The Vice-Chairman of Banque Bemo Saudi Fransi incorporated a company in Syria with a share capital of SYP 70 million to participate in the establishment of development projects.

Commerce

  • Over the course of June, the Syrian government reportedly spent approximately $440 million (US) on petroleum and wheat imports.
  • The Council of Ministers issued a resolution requiring 25% of items imported into Syria by the private sector through financing supported by the Central Bank at its official rate to be sold by the state-owned Syrian Trade Establishment at its subsidized prices.
  • The Ministry of Internal Trade and Consumer Protection approved the dissolution of the Syrian Export Company, a single-person limited liability company owned by the Syrian Exporters Federation, with the latter fulfilling all of the company’s legal obligations towards third parties. The People’s Assembly deliberated on a bill to also dissolve the Syrian Exporters Federation, which was formed pursuant to Law 27/2009, on the pretext that it is no longer fit for purpose and due to the absence of a similar body in other jurisdictions. President Bashar Al-Assad formally liquidated the Syrian Exporters Federation when he ratified Law 19/2019.
  • The Board of Directors of the Damascus Chamber of Industry met and plans to develop an export strategy following deliberations by the People’s Assembly to dismantle the Syrian Exporters Federation as lawmakers regarded the body as not fit for purpose.
  • Amendments to the Consumer Protection Law are expected to include harsher penalties for non-compliance by merchants.
  • An election took place to vote in the new Board of Directors of the Syrian-Chinese Business Council with visits between traders of both countries topping the agenda of the incoming administration.
  • A German company along with agents for French, Italian and Chinese companies have recently been participating in exhibitions taking place in Syria.
  • Jordan banned the importation of Syrian fruits and vegetables into its territory in a bid to protect its farmers against competition.
  • A Russian trade delegation visited Syria and businesspersons from both countries exchanged ideas on enhancing commercial relations.

Industry

  • The Damascus Chamber of Industry is considering incorporating a joint stock company to manufacture alternative energy products.
  • A leading industrialist established a metal smelting company in Homs.
  • A Russian company presented an offer to the Ministry of Industry to invest on a public-private partnership basis in a batteries manufacturer in Aleppo, which is affiliated with the General Establishment for Engineering Industries. The proposed share of the Russian investor would account for 20% of production output in exchange for responsibility over infrastructure works and salaries.
  • China is planning to establish a permanent trade center for its companies in the Adra Industrial Park measuring around 7,000 square meters.

Finance

  • The Damascus Chamber of Industry has expressed reservations about a potential government decision to require manufacturers to sell their exports earnings denominated in foreign currencies to the Central Bank at the official foreign exchange rates. In this case, manufacturers would prefer that the Central Bank purchase their export earnings denominated in foreign currencies at the more expensive parallel foreign exchange rates they are accustomed to using when obtaining import financing for their raw materials. Obliging manufacturers to sell their export earnings to the Central Bank at the official rate means that they will lose out on the difference between the official and parallel rates, which in turn will increase their production costs and lessen the volume of exports in general. The government resorts to these measures and similar ones from time to time especially since 2013 to build up the Central Bank’s reserves of foreign currencies to finance imports and other costs. In some cases, they amount to limited-term regulations.
  • Al-Baraka Bank – Syria raised its share capital to SYP 10 billion from SYP 5 billion.
  • The People’s Assembly approved a bill to increase the minimum capital requirements for internal money transfer companies. The requirements are SYP 100 million for internal money transfer companies and SYP 400 million for internal money transfer companies that provide any additional services provided for in the bill.
  • It should be noted that throughout the entire Syrian War, no bank, financial institution or insurance company in Syria collapsed. They did however close some of their branches.
  • The Economic Committee linked to the Council of Ministers gave approval to the Ministry of Finance to issue treasury bills to cover part of the public expenditure and investment allotments for 2019. The government first began borrowing right before the war pursuant to a 2007 law.
  • Syrian Foreign Minister Walid Mouallem undertook an official visit to China at the invitation of his counterpart in Beijing as part of efforts to further strengthen Sino-Syrian relations. The Foreign Minister met with the Chairwoman of the Exim Bank of China and discussed means by which to support and facilitate funding for Chinese companies interested in Syria’s reconstruction.

Taxation

  • To encourage import and export channels within Syria, the Ministry of Transport confirmed that any trucks transiting cargo from seaports to land borders and vice versa will be subjected to a two percent fee based on their weight instead of the 10% fee imposed on land-to-land transit.
  • Agricultural traders in Jordan are calling for transit fees to be imposed on Syrian produce crossing their territory in line with a similar measure in force in Syria or for the authorities in Damascus to revoke transit fees on products from Jordan crossing Syrian territory.

Property

  • The Governorate of Damascus granted the first building permit for a residential plot in Marota City, with construction works commencing on the 12-floor building immediately. Up until now, only designs have been approved by the relevant technical committee linked to the Governorate.
  • The Damascus Provincial Council agreed to announce the zoning plan for the former Damascus industrial district of Qaboun, which will be developed in accordance with the Urban Renewal Law 10/2018. Qaboun will be converted to a residential, commercial and services district instead. After the zoning plan for Qaboun was approved by the Provincial Council, it was then submitted to the Council’s Executive Committee for ratification before being forwarded to the Ministry of Local Administration and the Environment for final approval. An opportunity for objections to be lodged was presented. The new Qaboun development will be allocated accordingly: 80% of the total land area will be distributed to the current owners and tenants and 20% to the Governorate of Damascus in exchange for providing the underlying infrastructure works.
  • Palmyra’s Mayor disclosed plans to redevelop an informal area in the western part of the city in accordance with the Urban Renewal Law while providing alternative housing for residents. The proposal will be presented to the Regional Committee of the Governorate of Homs for approval.
  • A former Housing Minister incorporated a real estate development company in Hama with a share capital of SYP 50 million.
  • The Governorate of Damascus approved a proposal to activate the provisions of the Landlord and Tenant Law 20/2015 and apply them to the commercial premises it owns throughout the capital. At present, a number of these premises are leased out to tenants based on undervalued rates determined according to the previous Landlord and Tenant Law issued back in the 1950s. Such tenants take advantage of this position and sublease the premises to third parties at current market rates while paying a fee to the ultimate landlord, which in this case is the Governorate of Damascus. The Governorate is proposing to benefit from the provisions in the current Landlord and Tenant Law, which present it with the opportunity to increase the fees it charges the tenant to 10% of the value of subleasing the commercial premises.

Intellectual Property

  • President Bashar Al-Assad ratified Law 17/2019, which authorizes the Patent Office in Syria to provide inventors who have not paid their patent fees since the beginning of 2011 a grace period of three months in which to settle them, starting from June 17, 2019. With respect to inventors who did not utilize their patents within the three-year mandatory period following their issuance as stated in the Patent Law, the Patent Office is providing a grace period of one year from June 17, 2019 to do so. Although the inventor does not have to personally utilize his or her patent, they can license the right to do so to another party within the three-year mandatory period or submit a nominal working, which evidences that they have at least advertised the right of use of the patent.

Hospitality

  • The Four Seasons operator terminated its management agreement with its branded hotel in Damascus following the imposition of US sanctions against the latter. Although the license to use the Four Seasons trademarks is to be revoked, it is unclear if the Four Seasons Hotel in Damascus will rebrand under a new name. Built by a local private contractor, the launch of the Four Seasons Hotel in Damascus as well as its presidential opening in 2006 symbolized the beginning of Syria’s economic liberalization program. The hotel was deemed the ‘jewel in the crown’ of the Four Seasons family. The Four Seasons Hotel became a landmark in Damascus and a national icon for Syria. Even during the war, it brought in significant revenues from the UN personnel and staff stationed in Damascus. Saudi Prince Al-Walid Bin Talal sold his stake in the hotel last year.
  • By imposing sanctions on the Four Seasons Hotel in Damascus, it appears that the US government through its Office of Foreign Assets Control, which is linked to the Department of the Treasury, may have for the first time in general but also in Syria sanctioned a building – i.e. a piece of real estate. The move is unconventional in the sense that it did not target a legal person – i.e. a natural person, a company or a government entity – but rather a property which is only identifiable by reference to a title deed. The measure is a new development for sanctions regimes in general.
  • Chinese and Lebanese investors incorporated a company to manage hotels and provide other touristic operating services.
  • The People’s Assembly is considering a bill that would regulate the hotel training industry.

Health

  • Two women have incorporated a limited liability company equally owned between them to establish a pharmaceutical factory in Adra, just outside Damascus, which will deal in medical supplies, cosmetics, hospital and laboratory equipment, milk powder and so forth.

Energy

  • With its current gas reserves and optimism for offshore exploration, Syria is expected to join the world’s top club for gas producers. The current conflict has inhibited Syria’s ability to fully exploit its gas potential for the time being.
  • The US sanctioned a leading private sector supplier of fuel products to Syria. The company provided 80% of the diesel requirements for Syrian manufacturers. The US has been attempting to cut off and deter fuel supplies to Syria as part of its sanctions regime against the country.
  • The government permitted industrialists to continue importing diesel for a further three months.

Transport

  • The public-private partnership (PPP) agreement signed between the Ministry of Transport and the Russian company Stroytransgaz has been ratified by the People’s Assembly. The PPP agreement provides for 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 Council of Ministers is reviewing a bill to revoke Legislative Decree 14/2014, which imposed a fine on car owners who took their automobiles outside of Syria and did not undertake the annual status renewal procedures at the relevant Syrian consulates. Failure to do so was a breach of the Law. Legislative Decree 14/2014 was issued at the time to prevent Syrians from taking their cars outside of Syria simply for the purpose of selling them in markets with higher demand and greater returns without complying with the relevant Syrian legal procedures. Ever since the conflict broke out in Syria in 2011, car imports have been restricted in a bid to avoid heavy demand for foreign currencies which would depreciate the Syrian Pound further. Thus, the automobile market in Syria became reliant on second-hand vehicles. Any attempts to take these second-hand vehicles illegally outside of Syria without undertaking the relevant paperwork and simply for the purpose of selling them would cause an imbalance in the supply and demand, thereby unduly raising prices in the markets due to a lack of cars.
  • Car dealerships are being relocated to a different area outside Damascus after their previous sales centers were destroyed during the conflict. Car dealers have been invited to subscribe for plots in the new area.
  • The Ministry of Internal Trade and Consumer Protection approved the liquidation of the joint stock company Damascus Village Shipping Co. The company, incorporated pursuant to Council of Ministers Resolution 1189/2001, constituted a joint venture between the Civil Aviation Authority and various shareholders to manage exports through Damascus International Airport.

Technology

  • India is eyeing a leading role in Syria’s IT infrastructure during the reconstruction process. Given widespread technological interest and expertise among the Indian population, ideas are being floated that Indian IT businesses could help Syria develop the concept of smart cities.

Education

  • The Minister of Higher Education revealed that there are ongoing discussions in the Council of Ministers on a bill to address the qualification status of students who went abroad to study and did not return back to Syria or who changed their university overseas.

Judiciary

  • The People’s Assembly began deliberations on the long-awaited Council of State Administrative Bill. The Council of State is the administrative court that adjudicates disputes whenever one of the parties is a public sector entity. Current legislation governing this body dates back to the late 1950s. While the Council of State is presently associated with the Council of Ministers, this bill seeks to grant it independence as a judicial organ on its own. As part of the legislative process, Syrian MPs must vote on each article of the proposed legislation before it becomes law.

Public Sector

  • The Ministry of Administrative Development is preparing a bill that will require the wealth of candidates for public sector appointments to be disclosed beforehand so as to ensure that they do not unjustly enrich themselves once in office. The move is part of the National Administrative Reform Program launched in June 2017 by President Bashar Al-Assad.

International

  • Brazilian Ambassador to Syria Fabio Vaz Pitaluga affirmed that Brazil is standing by Syria while shedding light on the deep friendly relations and cooperation between the two countries and Brazil’s keenness on invigorating them in various spheres.
  • At the Project Lebanon exhibition in Beirut, there were suggestions that Turkish companies that cannot supply the Syrian market during the reconstruction process for political reasons will use Lebanon as a re-export hub to access Syrian customers.
  • British Labour MP in the House of Commons Chris Williamson raised a question during a parliamentary session to Foreign Secretary Jeremy Hunt with reference to investigations suggesting that reports of the use of chemical weapons by the Syrian government in the Damascus suburb of Douma in April 2018 were staged and that expert advice was redacted from the final report issued by the Organisation for the Prohibition of Chemical Weapons.
  • Trump Heights, a renamed development dedicated to US President Donald Trump, was inaugurated on the Israeli-occupied Syrian Golan Heights. The move follows President Trump’s decision to recognize Israeli sovereignty over the Syrian Golan Heights, which is a violation of international law.