Legal Briefing – March 2018

Property

• Damascus Cham Holding announced the incorporation of a new private joint stock company called Rawafid Damascus with a share capital of SYP 25.9 billion in partnership with four other companies, one of which is owned by a leading and prominent pre-war businessman. Rawafid Damascus will invest in three residential plots in Marota City, the development sanctioned by Legislative Decree 66/2012 and to be built in the Al-Razi area of southern Damascus adjacent to the Mezzeh Highway. The company will also focus on investments in other sectors as well. Damascus Cham Holding will contribute 49% of the share capital in-kind by providing the land valued at SYP 12.7 billion while the other four partners will own the remaining 51% valued at SYP 13.2 billion. 40% of the capital will be paid up on incorporation while the balance will be settled within three years.
• The Governorate of Damascus has advised developers in Marota City that they need to start applying for building permits and commence construction or face penalties contained in the Land-Use Planning Law, which include fines and ultimately expropriation.
• The Governorate of Damascus has approved the zoning of a new development in Damascus to be named Basilia City with an area of 9 million square meters. Basilia City is the second development to be sanctioned under Legislative Decree 66/2012 following Marota City.

Tourism

• Saudi Prince Al-Walid Bin Talal closed a deal to sell his stake in the Four Seasons Hotel in Damascus to a leading Syrian businessman. The sale of the Four Seasons Hotel, which symbolized the start of Syria’s economic opening in the 2000s, by the Saudi Prince marks the conclusion of his venture into the Syrian market beginning in 2001 and ending in 2018. The Four Seasons Hotel was built by the largest and only Syrian contractor qualified at the time to execute the project due to its lengthy experience in Syria dating back to the 1960s, which saw it undertake massive infrastructure and multi-sector construction projects throughout the country. Amendments to the Trademark Law accompanied the opening of the Four Seasons Hotel to ensure its well-known and internationally recognizable logo was legally protected in Syria following attempts by a local individual to register it for his small business.
• The Ministry of Tourism signed an investment agreement with Mourouj Al-Cham, owned by an up and coming businessman, to redevelop the Al-Jalaa Hotel located in a popular district of Damascus on a build-operate-transfer contract for a period of 45 years. The owner of Mourouj Al-Cham made the largest investment to operate a mall in Syria – the Qassioun Mall – to date. He is also targeting other investments in the tourism sector. The project, which includes the demolition of the current Al-Jalaa Hotel and the construction of a new five-star hotel, must be executed within four years from the date the building permit is granted in accordance with the Land-Use Planning Law. In 2017, the Ministry of Tourism offered the Al-Jalaa Hotel for investment purposes and it drew much interest from the business community because of its prime location in the Mezzeh district of Damascus.
• The Ministry of Tourism has offered the three-star coastal Golden Rose Hotel in Lattakia to Lattakia City Council as a 45-year investment undertaken on a build-operate-transfer model. The implementation period is set at 36 months from the date the building permits are issued.
• The Ministry of Tourism has seized the initiative to offer a number of assets particularly buildings belonging to the Regional Command of the Baath Party in Damascus to private investors on a build-operate-transfer basis. The move follows the state’s policy of adopting public-private partnership models as a means to transfer management of public assets to the private sector in a bid to stimulate capital investments in the country.
• The Civil Enforcement Department in Aleppo seized the Coral Martini Hotel and sold it in a public auction to settle a debt owed by its owner to the state-owned Real Estate Bank. Its owner was a leading businessman in the tourism sector and is currently the Deputy Minister of Tourism.

Investments

• The new Investment Bill caused sharp differences among governmental entities regarding the objectives of the proposed legislative framework during the first meeting of the members of the Supreme Investment Council. Prime Minister Imad Khamis noted that the new Bill in its current form does not live up to the expectations of potential local and foreign investors whom it targets. In addition to the Supreme Investment Council, the Syrian Investment Authority and the Economic Committee linked to the Council of Ministers have all provided their input regarding the provisions of the Bill. There was nevertheless mixed reactions to the Bill among ministers. The most significant demands made by ministries and concerned parties included subjecting insurance companies to the provisions of the Bill. In addition, a request was made by the Central Bank to include investments in the financial sector such as banking, foreign exchange and remittance activities in the Bill. The goals of the draft law include attracting capital investments into Syria for the reconstruction phase and combating unemployment. Syria has witnessed the enactment of several investment laws in its modern history, including Law 103/1952, the famous Law 10/1991 that sought to attract foreign investment following the end of the Cold War and the most recent one Legislative Decree 8/2007. The current Investment Law provided for in Legislative Decree 8/2007 was enacted as part of the government’s reform program at the time to establish a social market economy in Syria beginning in 2005. The real test for any investment law will only be appreciated once political stability is restored in Syria and the reconstruction program begins to move forward.

Industry

• Syrian and Lebanese investors incorporated a company with a capital of SYP 6 million. They plan to establish a lead smelting plant in Adra Industrial City to extract metal from batteries and other items through heating and melting and to manufacture different types of batteries.
• More than 10,000 industrial facilities are currently operating in Aleppo as a surge in license applications was witnessed over the course of the previous year.
• According to the Damascus Chamber of Industry, there are more than 1,000 factories in the Eastern Ghouta region registered with it, 800 of which are located in the suburb of Harasta.
• The Chairman of the Damascus Chamber of Industry announced that industrial and handicraft facilities in the Qadam suburb outside Damascus will be handed back to their owners once security is restored to the area and infrastructure rehabilitation is expected to follow.
• Industrialists who will have to rehabilitate their factories in order to restart production are demanding that they be provided with loan facilities to carry on business and tax exemptions in order to attain a reasonable degree of profitability.
• Industrialists whose title deeds to their factories were lost, damaged or destroyed in the conflict will have to reconstruct what they can from whatever documents they have in their possession to prove their ownership in accordance with Law 33/2017.

Commerce

• As the Eastern Ghouta region just outside Damascus comes back under government control for the first time in six years, it will eventually take up its previous position of supplying the capital with its agricultural produce, which will reduce prices given the short transport routes. With supplies from Eastern Ghouta greatly affected over the last six years, agricultural produce had to be transported from other regions of Syria including the coastal provinces. The longer distance travelled meant agricultural produce cost more when it reached Damascus. With the eventual resupply of fruits and vegetables from Eastern Ghouta, inflation in Damascus should ease as prices start to drop given the shorter distances and thus lower costs associated with transporting the products. It is not yet clear what the status of wood-based products will be as it is expected that trees throughout the Eastern Ghouta region were cut down to be used as firewood as was the case in the Zabadani Valley where hardly any trees are standing compared to their pre-war level. Some optimism has remained as back in 2016, manufacturers of the famous backgammon tables in Damascus expressed to the Syrian Law Journal that they can resume work and produce more tables once wood starts to flow into the capital from the Ghouta.
• From a strictly commercial perspective, the return of the Ghouta region to government control after six years is expected to encourage Syrian expatriates to return to Damascus and seek business opportunities where the cost of living is cheaper than most other cities. The pressures on the capital Damascus are also expected to ease as agricultural produce from the Ghouta drive prices down and give Damascenes greater purchasing power while freeing up more capital to pursue work opportunities. Foreign investors looking to participate in the reconstruction phase are also expected to gain more confidence to visit Damascus and explore potential business opportunities. The fact that the Syrian capital will be stabilized and is the seat of government where administrative matters are attended to will have a significant impact on the economy. The return of the Ghouta will have major ramifications for the whole country. The fact that Damascus is also secured will send a message to all areas not under the control of the government that continued fighting is futile and a stabilization process is preferable.
• The border crossing between Abou Kamal on the Syrian side and Al-Qaim on the Iraqi side is set to reopen soon and will help boost trade ties between the two countries.
• The Jordanian Minister of Finance has expressed his country’s keen interest to see stability return to Syria, which would allow Jordan to resume exporting its goods to Europe and Turkey via Syria. Jordan’s ability to trade internationally has been greatly affected especially due to the fact that its two land border crossings with Syria are closed.
• The Ministry of Internal Trade and Consumer Protection has completed drafting amendments to the Consumer Protection Law that will fill in gaps and toughen up penalties for non-compliance with its provisions. The bill will be referred to the Council of Ministers and then the People’s Assembly. A lack of strenuous oversight by government authorities due to more pressing matters at hand has led to an increase in violations by merchants and producers in the markets, which is the target of the latest amendments.
• The Ministry of Internal Trade and Consumer Protection sent in its agents to the top malls in Damascus to seize smuggled goods from supermarkets, which are some of the rarest places to find high-quality imported goods.
• An investigation is ongoing regarding whether the Ministry of Internal Trade and Consumer Protection contracted with a supplier subject to an attachment order due to charges of smuggling. The supplier is responsible for procuring Lebanese bananas for the Ministry. Under Article 11 of the Public Procurement Law, no public entity may contract with any party whose movable or immovable properties are subjected to an attachment order issued in favour of the state.

Corporate

• A prominent Syrian businessman in the pharmaceutical sector incorporated Platinum Holding, a private joint stock company with a capital of SYP 500 million. Platinum Holding will be active in a variety of sectors and carry out projects in accordance with investment legislation.
• Leading Syrian world class football player Omar Al-Somah, who almost took his home country to the World Cup in Russia, has incorporated a single-member limited liability construction company and a sports company in the run-up to reconstruction.

Finance

• The Economic Committee linked to the Council of Ministers approved a proposal by the Central Bank to resume the provision of loans by public banks while giving priority to production and industrial loans in accordance with Resolution 52 issued by the Monetary and Credit Council. Resolution 52 sets controls on the provision of loans.
• The Council of Ministers approved the reconstruction plan for the current year and allocated sums worth SYP 42.425 billion to execute projects in a variety of sectors.

Telecommunications

• Law 5/2018 extends the provisions of Legislative Decree 17/2017 for another year. Accordingly, debtors to the Syrian Telecommunications Company are exempted from interest and other payments if they settle their debts. The Law applies to debtors who have subscribed to landline, telex, wireless devices and so forth. Subscribers whose subscriptions were cancelled due to unpaid debts can restore them if they pay half their debts at least.

Transport

• President Bashar Al-Assad issued Decree 114/2018 to increase customs duties on the importation of automobile components from five percent to 30%. There had previously been reports of importers bypassing high customs duties on cars by importing car parts and reassembling them in Syria. The Decree retains the five percent customs duties on automobile components when there is a three-part process to redesign the car parts before they are assembled together unlike a pure dismantling and reassembling on Syrian territory, which incurs 30% customs duties. As for automobiles that would be imported fully assembled and immediately ready for sale, they are subject to customs duties of 40% but no import licenses are being granted at the present time.
• The Ministry of Economy and Foreign Trade is considering permitting the importation of cars once again into Syria but it first needs to assess what effects such imports will have on demand for foreign currencies and consequently what that will do to the value of the Syrian Pound. If the proposal moves forward and cars are allowed to be imported into Syria, this will help to reduce the prices of second-hand cars that jumped ten times since 2011 following the import restrictions which limited supply. The restrictions were imposed in 2011 as a means to protect the value of the Syrian Pound, which was subjected to harsh pressures at the time, by limiting demand for foreign currencies to import the cars.
• The Governorate of Damascus has entrusted the management and investment of car parks in the city to the Board of Directors of Damascus Cham Holding, a company wholly owned by the Governorate. Damascus Cham Holding was established in accordance with Legislative Decree 19/2015 to manage and invest the assets belonging to the Governorate of Damascus. The company is subject to the provisions of the Commercial Code and is not treated as a public sector entity.

Energy

• The Ministry of Petroleum and Mineral Resources approved Contract No. 66 concluded between the state-owned General Establishment of Geology and the Russian company Stroytransgaz for a period of 50 years to extract phosphate ores in Palmyra. An annual production of 2.2 million tons out of a reserve of 105 million tons is expected. The contract stipulates for a production sharing agreement between the two parties with the public entity attending to the administrative requirements to ensure execution of the project. The terms of the contract must be ratified by law in accordance with Article 75(6) of the Syrian Constitution as it grants special privileges to a foreign company. The People’s Assembly subsequently ratified the contract as constitutionally mandated. Stroytransgaz has built a gas processing plant in Syria and is currently constructing a second one in the country.
• Syria is currently in talks with Russia and China to potentially implement wind energy and photovoltaic projects to produce power.

Health

• A new healthcare law could soon be issued that would regulate the licensing of medical facilities, including hospitals, clinics and medical centres. Legislation in this respect is quite urgent given an increase in the spread of unlicensed clinics.

Agriculture

• Law 8/2018 sets down provisions to govern the agricultural engineering profession including the relevant syndicate responsible for regulating these types of engineers.

Media

• Popular Syrian news page ‘Damascus Now’ was reportedly taken down by Facebook despite having 2 million followers. No explanation was given by Facebook.

Lawyers

• The new Legal Profession Bill being reviewed in the Ministry of Justice by a committee made up of judges and three lawyers seeks to resolve the gaps in the current Law that were revealed during the conflict and aims to guarantee lawyers the freedom to do their job as they see fit. The Bill makes provision to ease the transition back into the legal profession for lawyers who have been undertaking compulsory military service over the course of the last few years by subjecting them to an examination. The provisions of the Bill once enacted will conform to the relevant articles in the Constitution of 2012. The Bill also seeks to protect lawyers against malicious accusations against them so that they can work freely. The issue here is also related to the fact that there have been tensions between judges and lawyers not least stemming from the fact that judges are not as well paid as the latter.

Judiciary

• President Bashar Al-Assad ratified Law 9/2018, which establishes specialized courts to try cybercrime cases.
• Cybercrime is becoming a hot topic in Syria as the Minister of Justice joined judges in a session devoted to the subject. A special unit in the judiciary to tackle cybercrime cases is currently being set up following the issuance of Law 9/2018.
• The Supreme Judicial Council appointed a new attorney general for Damascus to head up the judicial structure in the capital and a new president for the Economic Criminal Court.
• By virtue of his position as President of the Supreme Judicial Council, the body charged with overseeing the judiciary, President Bashar Al-Assad issued Decree 121/2018, which included the promotions of numerous judges.
• The Ministry of Justice held a seminar to stress the importance of the newly established insurance courts and the means by which to improve access to justice and a speedy discharge of judicial proceedings. Stakeholders had their say on what aspects of the insurance courts required improvements and attention. The courts were deemed a necessity as the number of claims by policyholders against insurance companies increased significantly during the war due to unforeseen circumstances that arose since 2011. Insurance courts were established by virtue of Law 5/2017.
• The Attorney General in Damascus approved the establishment of a service center in the Palace of Justice where civil registration documents can be obtained for use in personal status lawsuits. The move seeks to facilitate easier access to such documents to citizens and lawyers.
• The Attorney General of Rural Damascus confirmed that judicial documents have been preserved in some suburbs of Eastern Ghouta while others are missing or destroyed in other areas but that the authorities are carrying out a search where possible. In the suburb of Harasta, the Attorney General confirmed that all the judicial documents were found since they were kept safe in a warehouse until the gunmen left the area. The Attorney General pointed out that the courts in Eastern Ghouta did not stop working but some were rather moved to safer areas where judges could attend to cases. It is not yet clear when these courts can be relocated back to their respective suburbs as some were damaged heavily. Nevertheless, he affirmed that the court system in Eastern Ghouta is operational and can process requests and lawsuits by citizens whether relating to civil, criminal or family law matters.

Public Administration

• The Council of Ministers announced that it set out a reconstruction plan for Eastern Ghouta focused on restoring services, renovating buildings, investing in the region and organizing the return of displaced persons to their cities and villages and government employees back to their jobs.
• A prominent Syrian businessman has discussed the prospects of merging the towns of Deir Attiyeh, Nabek, Qara and potentially Yabroud, which are located in the province of Rural Damascus, into a new province to be created and named Qalamoun after the name of the relevant region. The establishment of a 15th province from parts of the current Governorate of Rural Damascus, which will be located on the border with Lebanon, would help draw more attention and potential investment to the area as well as develop commercial ties with Lebanese towns nearby across the border.

Criminal Law

• Law 4/2018 amends Article 15(d) of the Economic Criminal Code provided for in Law 3/2013, which aims to revoke the option for corrupt officials to avoid prosecution if they confess to their crimes before the case is referred to the courts. Previously, corrupt officials had the opportunity to take their chances and abuse the system while hanging on to the possibility of immunity if they were caught as long as it was before they appeared in court. Following the passage of the Economic Criminal Code, economic criminal courts were established in a move to strengthen a judicial specialization in this area of the law.
• Law 6/2018 imposes strict penalties on anyone found to have deliberately started wildfires. The new Law seeks enhanced protections for the forested regions in Syria.

International

• Syrian Foreign Minister Walid Mouallem paid a visit to Oman to strengthen bilateral ties and inaugurate the new Syrian embassy in Muscat alongside his Omani counterpart Youssef bin Alawi. Oman is expected to play a big role in Syria’s reconstruction phase especially since it is planning investments in its oil and gas sector in which agreements are being drafted.
• A German parliamentary delegation visited Syria to assess conditions on the ground.
• The Foreign Minister of the Czech Republic announced that his government has approved the implementation of six humanitarian projects in Syria worth approximately €1.137 million.
• China’s National Development and Reform Commission (NDRC) issued the Administrative Measures for Enterprise Outbound Investment provided for in Regulation 11, which came into force on March 1, 2018. Regulation 11 contains a section on outbound Chinese investments in ‘sensitive countries and regions’, in which investors will be required to consult with the NDRC for verification purposes through a procedure stated in Article 15 of Regulation 11. ‘Sensitive countries and regions’ include those without diplomatic relations with China; experiencing war or internal strife; or where investment by an enterprise is restricted by international treaties, or agreements China concluded or acceded to. Despite the friendly relations enjoyed between Syria and China, it remains to be confirmed whether verification procedures will have to be undertaken by Chinese investors intending to participate in the reconstruction phase in Syria.
• Two asylum seekers lost her claim to overturn a decision by the Japanese government to deny them refugee status, in the first such lawsuit filed by Syrian citizens in Japan. The Tokyo District Court upheld the government’s decision that the pair’s bid for asylum was inadmissible under international refugee law. Japan accepted only 20 Syrian refugees last year and the number of people applying for asylum was 19,628.
• The European Union sanctioned four additional persons employed by the Scientific Studies and Research Centre, which has itself been subjected to EU restrictive measures since December 1, 2011. The total number of Syrian nationals targeted by a travel ban and an asset freeze by the EU has reached 261 while 67 entities are subjected to an asset freeze. EU sanctions against Syria currently in place include an oil embargo, restrictions on certain investments in the country, a freeze of the assets of the Syrian Central Bank held in the EU, and certain export restrictions on equipment and technology to Syria. The EU sanctions were last extended on May 29, 2017 and will remain active for the time being until June 1, 2018 when they are up for renewal.