Syria’s Liberal Foreign Ownership Rules
Even in the midst of conflict, foreign investment is on the rise in Syria. Nationals of neighbouring Arab countries are leading the charge while others are taking initiative as well. The reason is twofold – the investors are anticipating a surge in demand for their goods and services once the reconstruction phase kicks in while at the same time taking advantage of Syria’s relatively liberal foreign ownership rules. While the Foreign Ownership Law 11/2011 relating to real estate purchases is restrictive to an extent, its obstacles can be easily overcome by recourse to the Companies Law and the Investment Law, which are the source of these liberal rules.
The Companies Law provided for in Legislative Decree 29/2011 permits the establishment of certain business entities, the most important of which are joint stock companies, limited liability companies and partnerships. It is essential to point out that there are no foreign ownership restrictions to incorporating any one of them. They can be 100% owned by foreign nationals. Companies formed in Syria possess Syrian nationality and can own as much real estate as they desire in the country regardless of the nationalities of their shareholders.
The Investment Law provided for in Legislative Decree 8/2007 moreover sets no limits on foreign ownership or the disposal of revenue. It lists a range of areas as potential targets for investors: agriculture; industry; transport; information technology; environment; services; and electricity, oil and mineral wealth. The body in charge of licensing proposed investment projects under this Law is the Supreme Investment Council (SIC), which may also approve enterprises in other sectors. It should be noted that the SIC does not have jurisdiction over the tourism, real estate development and financial services sectors as they benefit from similar incentives more or less under separate legislation.
In pursuance of a project licensed by the SIC, investors are entitled to purchase and rent as much land as necessary even if it exceeds the maximum amount defined in other legislation. However, it must only be utilized for the purposes of the licensed investment. If the project is halted, any extra land would have to be disposed of by sale to Syrian nationals, or with special approval from the SIC to other foreign investors intending to execute a project.
Therefore, it is essential to keep in mind that regardless of the limitations contained in the Foreign Ownership Law, these restrictions may be bypassed through the Companies Law, and projects undertaken in accordance with the Investment Law and the other sector-specific laws. The fact that companies incorporated in Syria possess Syrian nationality even if a majority or all of their shareholders are foreign nationals means that foreign parties may own property through their companies without regard to the provisions of the Foreign Ownership Law. In the event the corporation is wound up, other factors would need to be considered when disposing of the property in order to comply with the Law.
According to the Foreign Ownership Law, a property may be sold to a foreign purchaser under certain conditions. After obtaining authorization from the Minister of Interior, a family from abroad may purchase a residence measuring a minimum size of 140 square meters. International organizations such as diplomatic and consular missions and cultural centers may purchase a property after having received approval from the Prime Minister based on a proposal by the Minister of Foreign and Expatriate Affairs and according to the principle of reciprocity whereby the country in which the organization is based grants the same rights to its Syrian counterparts. Still, in both cases the Prime Minister has discretion to grant exemptions from these conditions based on a proposal by the respective ministers. In addition, there is a two-year waiting period before a foreign owner may sell their property but an exception to this rule may be sanctioned by the Minister of Interior.
In the event the foreign owner dies and the property is transferred through inheritance or according to a will, the successors will lose the right to the property if they are nationals of a country that does not grant reciprocal rights to Syrian citizens. If this situation arises, the new owner would have to transfer the property to a Syrian national within two years from acquiring it, or else the property will be automatically transferred to the State Property Administration in return for compensation. As in previous cases, the Prime Minister has discretion in these matters as well.
Bearing in mind all these factors, it is quite understandable why investors from abroad are taking advantage of the liberal provisions regulating foreign ownership found in the Companies Law and the Investment Law. By doing so, they are avoiding the restrictions contained in the Foreign Ownership Law. Since they foresee significant potential during the reconstruction period, they are taking advantage of the current legislative environment to pour capital into Syria. In a region where foreign ownership has been tightly regulated, Syria has adopted liberal attitudes towards it, which will come in handy during the reconstruction phase.