Legal Briefing- November 2020

Government

The Prime Minister’s Office and the Ministry of Foreign and Expatriate Affairs announced the passing of veteran diplomat and Foreign Minister Walid Mouallem (1941-2020). He had served earlier as Syrian Ambassador to the US (1990-1999) and participated in the Madrid peace process. A high ranking official in the Foreign Ministry, Walid Mouallem was appointed as Deputy Foreign Minister in 2005 before officially becoming Foreign Minister in 2006 and serving in his post until his death. Since 2012, he also held the additional position of Deputy Prime Minister.

President Bashar Al-Assad issued decrees appointing Faisal Meqdad as the new Foreign Minister, Bashar Al-Jaafari as Deputy Foreign Minister, and Bassam Sabbagh as Syrian Ambassador to the UN. The new appointments follow the recent passing of Foreign Minister Walid Mouallem.

Economy

President Bashar Al-Assad argued that the primary cause of the economic crisis in Syria, which accelerated in 2020 and accounts for oil and wheat supply chain disruptions, is the Syrian deposits stranded in Lebanese banks, amounting to between $20 billion (US) and $42 billion. Despite the gravity of the US-led international embargo, it predates the present economic crisis while the Caesar Act came in the midst of it. While not discounting the international sanctions and state mismanagement, he holds that the stranded deposits had the largest effect.

A local newspaper reported that the Syrian economy regressed in 2019 and 2020 by 10 times compared with the period from 2012 to 2018. Furthermore, the price of a gram of gold increased by SYP 131,000 from 2018 to 2020 compared with an increase of SYP 12,000 from 2012 to 2018. As for the national budget, its value decreased from $16.5 billion (US) in 2010 to $6.3 billion in 2018, and is valued at $3.7 billion for 2021. The Lebanese financial crisis, international sanctions and the suspension of the Iranian credit line are contributing factors to the decline.

Finance

The Central Bank announced the third round of issuances of certificates of deposit denominated in Syrian Pounds this year, which were held on November 15th. The certificates of deposit were offered to banks at a nominal value of SYP 100 million per certificate. The Public Debt and Securities Directorate at the Central Bank subsequently revealed the results of the subscriptions. Eight out of 17 banks subscribed for 1,016 certificates of deposit worth a total of SYP 101.6 billion (~$38 million [US]). The term of the certificates of deposit is set for a period of six months and they shall mature on May 17, 2021. Interest payable on each certificate of deposit is set at an annual limit of 6.5%.

The Ministry of Finance confirmed that it plans to reduce reliance on the Central Bank to finance the budget deficit and rather issue treasury bonds as well as fight tax evasion to increase revenues. The budget deficit for 2021 is estimated to be SYP 2.5 trillion (~$940 million [US]).

According to the Central Bank, the volume of deposits in Syrian banks grew in June 2020 by SYP 1.5 trillion (~$570 million [US]) to reach SYP 6.77 trillion (~$2.5 billion [US]) while credit facilities increased to SYP 3.4 trillion (~$1.3 billion [US]) by the end of May 2020. The six public and 14 private banks suffer from excess liquidity.

Taxation

The Ministry of Finance plans to apply the AML/CTF Law on tax evaders and those who aid them, including chartered accounts, some of whom have already had their licenses revoked following allegations that they knowingly audited and certified falsified accounts for taxpayers.

Insurance

The Insurance Supervisory Commission reportedly intends to activate compulsory fire insurance in the public and private sectors. The measure will be in line with Prime Ministerial Resolution 49/2009, which also mandates compulsory insurance for civil liabilities and earthquakes.

Corporate

The Ministry of Internal Trade and Consumer Protection issued a resolution permitting traders and commercial companies to submit their social security declarations to their respective chamber of commerce, from whom they can obtain their commercial registration certificates.

Industry

The Board of Commissioners of the Sheikh Najjar Industrial Park and the Governor of Aleppo agreed to ease the procedures for investors based overseas to transfer their equipment and machinery to plots in the industrial park. Such approval was granted to two investors based in Egypt.

Agriculture

The Syrian Grains Establishment announced a tender of 150,000 tons of wheat from the Black Sea region. Offers denominated in Syrian Pounds were supposed to be submitted by November 9th. Wheat imports have been restricted due to sanctions and the pandemic causing supply chain disruptions.

The state-owned General Foreign Trade Organisation (GFTO) relaunched a tender to secure 39,400 tons of white Chinese rice for a second time on the condition that bids were received by November 23rd and accounted for a minimum of 20,000 tons. Foreign suppliers were permitted to bid in Euros but they must have delivered the stock to the Syrian ports, while local suppliers were permitted to bid in Syrian Pounds or Euros but they must have delivered the stock to the relevant warehouses and accepted payment in Syrian Pounds exclusively. The GFTO subsequently announced a tender for 25,000 tons of white Chinese rice with a bid submission date of December 2nd. Bids must be for a minimum of 12,500 tons.

The Council of Ministers set the procurement prices for wheat crops purchased from farmers for the next season at SYP 450 (~$0.17 [US]) per kilogram with a bonus of SYP 100 (~$0.04 [US]) per kilogram to those who market their wheat to the Syrian Grains Establishment, and the price of barley at SYP 200 (~$0.08 [US]) per kilogram.

According to the Minister of Agriculture and Agrarian Reform, 60% of the Syrian lands cultivated to grow wheat are under control of the so-called Syrian Democratic Forces while the remaining 40% are under state control, 80% of which depends on rainfall and not irrigation.

The Minister of Economy and Foreign Trade froze exports of potatoes to reduce local prices starting from the date of the Economic Committee’s recommendation on November 16, 2020 until the end of March 2021, thereby affecting 1,450 tons of daily exports to Iraq and the Gulf.

The Tartous Chamber of Commerce and Industry signed agreements with a Russian trade delegation to export 700 containers of citrus fruits and vegetables from Syria to southern Russia and to establish a facility for sorting and packaging fruits and vegetables in Tartous.

International Trade

The Jordanian authorities are reportedly permitting only 30 refrigerators and trucks out of a total of 415 already present to pass through the Syrian-Jordanian border at the Nassib-Jaber crossing and continue on towards Saudi Arabia and other Gulf countries.

The Saudi Customs Authority reportedly confirmed that Syrian exports, which include fruits, vegetables and other products, flow steadily to the Saudi markets without any special procedures adopted towards Syrian trucks, whose drivers were recently granted Saudi visas.

Traders anticipate that the opening of the Arar crossing on the Saudi-Iraqi border will lead to savings of $1,500 (US) per truck in transit fees compared to the Nassib crossing on the Syrian-Jordanian border where Jordanian authorities charge $2,000 per truck heading to the Gulf.

Following the directive to limit import licenses to six months, traders are complaining that they are not being allowed to clear their pre-existing orders through customs even though their licenses are valid for one year. The traders are now looking to re-export their goods.

The Ministry of Economy and Foreign Trade stated that 75% of imports comprise raw materials and production requirements for the industrial and agricultural sectors. Syria’s imports last year reportedly cost €5.6 billion, down 16.4% from 2018. The number of imported items reached 3,731 and are comprised of industrial and agricultural goods and foodstuffs not produced locally while 2,672 luxury items are barred from importation according to the Economic Committee. The Ministry apparently only grants new import licenses to importers for the same goods if they submit a customs declaration proving their importation of the previous batch.

Transport

The Minister of Transport confirmed agreements with Russia on a new credit loan and procurement of new Russian passenger airplanes. Maintenance works are seeking to bring three aircrafts into service to increase the fleet to six while Aleppo International Airport nears operation.

Seven automobile manufacturers employing 3,000 workers and producing 65,100 cars annually called for resuming imports of already purchased raw materials to avoid losses of $60 million (US) and price rises of secondhand cars by 300% but the Economic Committee has not yet responded.

The Chairman of the Freight Companies Federation explained that only 60% of the freight vehicles in Syria are in service while 40% were destroyed or stolen during the war, and high customs duties of 200% and 300% deter their importation. Although 20,000 trucks are operational, 500 are stranded in Egypt because Jordanian authorities are not allowing them to cross via the Nassib border into Syria. 50,000 trucks are expected to satisfy the demands for reconstruction.

Energy

Work is ongoing on the rehabilitation of five plants utilized in the concentration, washing and drying of phosphate, which have a production capacity of 3.7 million tons annually.

A contract has reportedly been signed with BS Oil Services Co. worth $23 million (US) for the supply of maintenance parts to the Homs Refinery given the significant wear and tear while Ebla Co. signed a maintenance contract with the Banias Refinery worth around $4.5 million.

Russia announced the allocation of $1 billion (US) for the reconstruction of electricity networks in Syria along with plans to sign eight memorandums of understanding between both countries in various fields, including energy, customs and education.

The Federation of Syrian Chambers of Industry complained to Prime Minister Hussein Arnous about electricity rationing experienced by industrial parks, which disrupted production at factories, especially in Aleppo where it is limited to 80 megawatts, thereby limiting exports.

The Ministry of Economy and Foreign Trade licensed branches of the Russian companies Mercury and Velada in Damascus to undertake oil exploration and production activities. Two other Russian companies Stroytransgaz and STG Technology previously opened branches.

The Ministry of Electricity licensed a solar power project pursuant to the Electricity Law 32/2010 in the province of Rural Damascus with a nominal capacity of 100 kilowatts for a period of 25 years. The electricity generated will be linked to the national power grid.

Tourism

The Ministry of Tourism granted a license to an Aleppo-based company formed in 2018 for the development of the Marina project in Tartous on land that belongs to the City Council with the right to build a five-star hotel and other mixed use facilities within a period of 47 months. The granting of the license is pursuant to an investment agreement ratified by Tartous City Council last July, in which royalty payments to the latter were set at 14% of the total annual revenues with a minimum of SYP 612 million (~$230,000 [US]), and a five percent increase every five years.

A directive was issued to the investor of the Hijaz project in Damascus to start works, which includes a five-star hotel and a commercial complex on Plot No. 748. The investment agreement stipulates for more than SYP 103 billion (~$39 million [US]) in royalty payments to the applicable state entity.

Health

The Kuwait Fund for Arab Economic Development provided a grant worth approximately $4 million (US) to the United Nations International Children’s Emergency Fund (UNICEF) to support the organization’s plan to confront the ramifications of the COVID-19 pandemic in Syria.

The Director of the General Foreign Trade Organisation (GFTO) revealed that the annual medicine bill for Syria is approximately €120 million, of which the GFTO has secured 60%, and that international sanctions affect the pharmaceutical sector by hindering financial transactions.

Judiciary

The Director of the Legal Affairs Department in the Ministry of Justice, which represents the state in civil lawsuits, revealed that the Department has won judgments worth approximately SYP 531 billon (~$200 million [US]) over the last three years and managed to collect part of these sums. The Department will aim to coordinate with the General Commission for Taxes and Fees and the Customs Directorate to execute judgments within the statute of limitations to seek recourse to assets. However, some parties are seeking to dissolve the Department in its entirety.

The Minister of Justice revealed that the Supreme Judicial Council is hearing cases of judges accused of committing gross professional errors in ordering transfers of property ownership based on forged powers of attorney. The maximum penalty beyond dismissal is being pursued. The investigative committee in the Court of Cassation will review the judgments issued by the Court’s chambers to determine whether such gross professional errors were committed and whether to recommend referral to the Supreme Judicial Council for disciplinary action.

Military

President Bashar Al-Assad issued Legislative Decree 31/2020 amending key provisions of the Military Service Law provided for in Legislative Decree 30/2007, which affect the status of resident and expatriate Syrians and their potential exemption from military service obligations. In general, Syrian males serve in the military upon attaining 18 years of age for a period of two years but can defer compulsory service until completing their university studies. Expatriates were exempted if they lived overseas for at least four years and paid $8,000 (US). Following the amendments, expatriates who spend one year, two years, three years or four years abroad can pay $10,000, $9,000, $8,000 or $7,000 respectively to obtain exemptions. Resident Syrians who serve in fixed positions in the military can now pay $3,000 for an exemption.

Immigration

A two-day international conference on the return of 5.6 million Syrian refugees took place in Damascus and was addressed by President Bashar Al-Assad. 27 countries participated, including Russia, Iran, China, Lebanon and Iraq. The latter two host large numbers of refugees.

Minister of Interior Mohammed Rahmoun informed MPs in the People’s Assembly that more than $21.5 million (US) were collected this year in fees from the issuance of passports to Syrian expatriates through the Syrian consulates overseas.

International Sanctions

The US sanctioned seven individuals and 10 entities, its fifth round since the Caesar Act came into effect, targeting Syria’s petroleum industry, MPs, and military officials and establishments pursuant to the Caesar Act and Executive Orders 13572, 13573, 13852, 13582 and 13894. The sanctions targeted the Ministry of Petroleum and Mineral Resources and two private companies involved in joint ventures to establish two new oil refineries.

A Danish company is being charged by prosecutors in Denmark with violating EU sanctions on Syria by delivering large quantities of fuel to Russian warplanes based in Syria between 2015 and 2017 on 33 occasions worth approximately $102 million (US).