Legal Briefing – January 2018

Property

• Kuwait-Syria Holding Company announced that it purchased along with some Syrian investors a plot of land measuring more than 100,000 square meters in the Yaafour district of Rural Damascus for $12.2 million (US). Kuwait-Syria Holding’s share in the land amounts to 45% valued at $5.5 million. The land will be merged with an adjacent plot that the company owns so the total size of the anticipated development will be 180,000 square meters. After obtaining the required licenses from the competent authorities, the development will be comprised of mixed-use facilities including residential and commercial projects. In the coming period, the joint venture will be run by a company incorporated in Syria and owned by both Kuwait-Syria Holding and its subsidiaries, which will have a 70.5% shareholding, and the Syrian investors whose ownership will comprise 29.5%. Before the war, Kuwait-Syria Holding had made investments in Syria, including the Al-Nasser Gardens near Yaafour and the Kiwan development in Damascus which anticipated the construction of the InterContinental Hotel. While these projects are on hold, they could be restarted soon. The Kuwait-Syria Holding Company is a Kuwaiti joint stock company incorporated in July 2002 and it is mainly involved in real estate development. It listed on the stock market in Kuwait in 2008. One of its main shareholders is Kuwaiti businessman Marzouq Nasser Al-Kharafi.
• Damascus Cham Holding is ready to sell five plots in the Marota City development in Damascus to a Kuwait-based Syrian businessman for $70 million (US) only recently after agreeing a contract with him for developing a mall and six buildings worth $250 million also in Marota City. As for the mall, a company will be formed to develop it and 75% of the value of the investment will be paid immediately upon incorporation in order to accelerate the execution of the project. It is expected that it will attract international companies specialized in mall management. The strategic partnership between Damascus Cham Holding and this investor is expected to be among the most significant in Marota City, which will become the commercial center of Damascus and house homes, shops, hotels, restaurants, businesses, financial institutions and so forth. On August 27, 2017, Damascus Cham Holding signed a contract with another Syrian investor for SYP 150 billion to build and invest in three towers and five residential plots in Marota City. In 2016, the Governorate of Damascus launched Damascus Cham Holding with a capital of SYP 60 billion with the aim of implementing the provisions of Legislative Decree 66/2012. It lays down zoning requirements for the Al-Razi area in southern Damascus, which became Marota City. The passage of Legislative Decree 66/2012 in September 2012 followed intense fighting in certain suburbs of Damascus that came to an end in the summer of 2012.
• Damascus Cham Holding signed a joint venture agreement with a Syrian company to incorporate a company together to invest in four plots in Marota City worth SYP 23 billion. The company which is the subject of the joint venture will develop residential and commercial properties in a prime area of Marota City. The total area of the site will be 60,000 square meters. Investments in the project will target the commercial, services, tourism and technology sectors. Damascus Cham Holding will contribute 75% of the share capital of the joint venture through in-kind contributions worth SYP 17.3 billion. The Syrian company will contribute 25% of the share capital through a cash investment of SYP 5.7 billion, 40% of which will be paid on incorporation and the balance within a period of three years. The joint venture was agreed by the Chairman of Damascus Cham Holding and the Governor of Damascus Bisher Al-Sabban and the Chairman of the Syrian company. The investment in Marota City follows similar ones recently undertaken by a Syrian businessman based in Kuwait and another local investor.
• The Ministry of Local Administration and the Environment referred a proposed amendment to the People’s Assembly concerning Legislative Decree 66/2012, which made provision for the rezoning of the Al-Razi development in southern Damascus. According to the proposal, the provisions of Legislative Decree 66/2012 should be applied to other areas in the various provinces throughout Syria so that developments similar to Marota City in Al-Razi can be replicated if it indeed proves to be a successful model. That Law as it stood at the time specifically dealt with Al-Razi and other nearby areas. The measure to apply it throughout Syria was subsequently adopted by the People’s Assembly after MPs debated the bill.
• The Ministry of Public Works and Housing announced that a public joint stock company with a capital of SYP 50 billion would be incorporated by the state-owned General Housing Establishment, the state-owned Commercial Bank of Syria and a private Syrian company owned by top businessmen. The joint venture will operate as a public-private partnership and undertake real estate development. The new public joint stock company will build two residential towers in the Damascus district of Dummar.

Construction

• Egypt is the latest country to express an interest in participating in the reconstruction phase in Syria, particularly in the construction sector. Egypt has already reserved 6,000 square meters of space at the next Damascus International Fair currently slated for this coming September. Other countries that are similarly interested in the reconstruction phase include Russia, China, Iran, India, Lebanon, Iraq, Oman, Brazil, Belarus, Armenia and others. Investors from all these countries and more are looking at Syria with increased interest.
• The Ministry of Public Works and Housing signed a memorandum of understanding with the Russian Stroy Expert Company to cooperate on public construction and housing projects.
• As a government delegation visited Aleppo, the first item on the agenda was considering new zoning requirements to rebuild affected areas of the city and ensure a proper resumption of all public services.
• A new building to be constructed in the Kafer Sousseh district of Damascus is expected to house the People’s Assembly.

Finance

• The Central Bank raised the remittance limit from $500 to $5,000 by virtue of Resolution 7/2018 issued on January 3rd. Any funds being transferred to Syria from overseas that are equivalent to $5,000 or less shall be exchanged into Syrian Pounds. Any funds in excess of $5,000 can additionally be disbursed in foreign currencies. Resolution 7/2018 formally puts an end to previous regulations that froze financial transfers above $500 in the form of deposits for a period of three months.
• According to the Central Bank, financial transfers may soon start taking hours to complete as opposed to days. The new system launched by the Central Bank is expected to effect financial transfers rapidly between Syrian banks in less than one hour as opposed to several days.
• The Central Bank called on banks to postpone the provision of loans for automobile purchases as the priority currently is on housing loans. Housing loans were permitted recently as fears that borrowers would take the money and transfer it overseas started to recede.
• The Damascus Securities Exchange is technically ready to issue certificates of deposit but waiting for approval from the Central Bank according to its Director.

Taxation

• Committees set up by the Ministry of Finance have been determining real estate valuations based on actual market prices throughout Syria as the government prepares to introduce new legislation regulating real estate sales taxes. The current Law 41/2005 imposes taxes using outdated valuations that are nowhere near market rates and are therefore costing the Public Treasury large sums of revenue. Incoming legislation will mandate a one percent tax on real estate sales based on current market rates.
• The General Commission for Taxes and Fees signed a contract to automate its taxpayer database starting with income and real estate taxes.

Commerce

• The government is studying a proposal to establish business parks similar to industrial cities to cater to investors in the reconstruction phase.
• As Syria enters the transitional post-conflict reconstruction phase, demand for raw materials and goods from overseas for the rebuilding, which will be payable in foreign currencies, will mean added pressure on the Syrian Pound.

Corporate

• In the 2017, the Ministry of Internal Trade and Consumer Protection ratified the articles of association of 536 companies. Of those incorporated, 460 were limited liability companies, 43 were single-shareholder limited liability companies and 33 were private joint stock companies. There are more than 5,000 companies currently registered in Syria. The surge in incorporations compared to previous years is indicative of greater confidence as Syria transitions towards the reconstruction phase.
• The Ministry of Internal Trade and Consumer Protection ratified the articles of association of Soraya Holding, a private joint stock company with a capital of SYP 1 billion. The incorporation of this company is noteworthy because the presence of holding companies in Syria is rather limited given the high minimum capital requirements mandated by law.
• A number of Gulf and other Arab investors have incorporated companies in Syria alongside Syrian partners as they prepare for the reconstruction phase. At the moment, investments in Syria are being led mainly by local Syrian investors.

Industry

• According to industrialists, 90 factories out of a pre-war total of 135 have resumed operations in the Fadloun area of Rural Damascus. Some of the difficulties faced by factory owners have included access to sites, services and financial facilities.
• In Egypt, a leading Syrian industrialist from Aleppo opened Africa’s largest textile factory in the presence of Egyptian President Abdel-Fatah Al-Sisi. 30,000 Syrians have made investments in Egypt especially after the war erupted in 2011. Syrian investors in Egypt are contributing heavily to the Egyptian economy. The emigration of some of Syria’s biggest businessmen to Egypt has led calls in Syria for the government to issue laws that would help build a welcoming investment environment to entice expatriates to return.

Energy

• The Syrian Electricity Minister discussed with the Russian Deputy Energy Minister the means by which to implement agreements signed between Syria and Russia in the electric power sector. Such projects include those related to the rehabilitation of power plants in Syria.

Transport

• Two private airline companies were established in Syria in the space of one week by the end of 2017 worth an estimated $82 million. They are ‘National Airlines’, which is owned by a Syrian businessman based in Kuwait and ‘East West Airlines’, which is owned by an Iraqi businessman. The articles of association of both companies were ratified by the Ministry of Internal Trade and Consumer Protection. Both companies are however in the process of fulfilling the remainder of their licensing requirements before commencing operations. There are two other Syrian private airline companies operating in the market – Cham Wings and Fly Damas. Syria has one state-owned carrier Syrian Air, which is undergoing a corporatization process that will see it converted from a public entity to a corporation.
• The Syrian Investment Authority licensed a bus transport project worth SYP 337 million in accordance with the Investment Law. The Authority licensed 66 projects worth SYP 1.066 trillion during 2017.

Tourism

• The Ministers of Tourism, Finance, and Internal Trade and Consumer Protection discussed with the Board of Directors of the Sheraton Hotel in Aleppo the current status of the hotel, ways to rehabilitate it and finding quick solutions to its legal and financial problems, especially its SYP 2 billion debt.
• Homs City Council signed a contract with the Syrian Arab Company for Hotels and Tourism to invest in the Al-Safir Hotel in Homs an annual sum of SYP 400 million for a two-year period with a total investment of SYP 800 million.
• The Ministry of Tourism announced plans to offer major projects on the Syrian coast to interested investors. In this respect, the Supreme Tourism Council granted licenses to a prominent businessman and others to implement touristic projects including hotels and cable cars in the coastal region and providing them with certain incentives and exemptions as provided for under investment legislation.

Health

• The Syrian Investment Authority has agreed to license a project by the company Pure Pharma for the production of medicines in accordance with the Investment Law. The project will be set up in Adra Industrial City and will provide job opportunities for 150 employees.

Water Resources

• President Bashar Al-Assad ratified Law 1/2018, which lays down the groundwork for rehabilitating the area around the Ain Al-Fijeh Spring in Rural Damascus. It is the main source of water for the capital and faced substantial damage during the war. It requires rehabilitation work worth SYP 5.5 billion.

Education

• It was revealed that the University of Damascus ranked seventh place with respect to international medical schools with the largest number of graduates actively licensed in the United States in 2016.

Employment

• Syrian youth with deferred military service obligations are finding it difficult to seek employment as employers are nervous to take on recruits who may be called up for military service in the near future. Deferment of military service obligations is only possible as long as the individual is in educational placement.
• Legislative Decree 1/2018 extends the mandate of the Temporary Employees Law provided for in Legislative Decree 4/2017 for one additional year. Accordingly, a minister may provide permanent job positions to temporary employees on an annual contractual basis. The Law applies to the families of martyrs, including their sons and daughters, and to those on youth contracts. When Legislative Decree 4/2017 was issued last year, 40,000 temporary employees were expected to benefit from permanent employment under that Law.
• According to the Minister of Finance, the amendments to the Public Sector Employment Law will have to be postponed until the government is convinced of the proposed changes. Once the amendments are approved, a new law regulating public sector employment will be issued to replace the current Law 50/2004.

Local Councils

• Prime Minister Imad Khamis called on governors throughout Syria to draw up strategies within their provinces that would see local councils investing in their assets to generate sufficient revenues. Property investments and a clampdown on building violations were on the agenda. According to the Prime Minister, local councils that fail to perform could be dissolved. The emphasis appears to be on creating the conditions for sufficient decentralization that would promote a culture of local investments with potential private sector contribution.

Lawyers

• The President of the Bar Association issued a circular requiring lawyers who represent clients to validate their powers of attorney by including the lawyer’s full name and presenting the lawyer’s Bar Association identity card. The latest measure is an attempt to curb forgeries.
• The President of the Bar Association also explained that trainee lawyers cannot represent clients in any court with the exception of the Conciliation Court, which is equivalent more or less to a magistrate’s court. He went on to acknowledge that some judges have a problem in understanding the fundamental role of lawyers in the litigation process and this requires the Ministry of Justice and the judiciary to take measures to remedy this situation. In a subsequent meeting between the Minister of Justice, the President of the Bar Association and the other officers of the Bar Association, much emphasis was placed on continuing to develop the relationship between judges and lawyers to improve the quality of judicial proceedings.
• The Legal Profession Bill, which regulates lawyers, is currently in the Ministry of Justice awaiting the formation of a committee to deliberate on its provisions. The number of lawyers in Syria is expected to rise to 30,000 by the end of the year. A number of lawyers have returned to Syria and registered with the Bar Association. As long as they did not violate the provisions of the current Legal Profession Law, they were registered accordingly.
• Amendments to the Pension Law are being considered that are expected to benefit lawyers.

Judiciary

• President Bashar Al-Assad issued Decree 2/2018 granting judges a 100% increase in their monthly salaries in an effort to further encourage the activities of the judiciary.
• A judicial source revealed that the proportion of mistakes committed by judges dropped in the last period from 50% to 15%. The errors were caused by the speed of the decision-making process as opposed to intentional wrongdoing by judges though such accusations have been made. Administrative procedures set out by the Ministry of Justice helped to lessen the chances for mistakes. In such situations for example, if a party to a dispute is unhappy with the ruling of the Court of Cassation – the highest court in the land – it can resort to filing a complaint against the specific judge for intentional wrongdoing before the General Assembly of the Court of Cassation. The General Assembly brings together a group of judges either to validate a complaint against a judge and refer the case back to the court system or to dismiss it. The Judicial Inspectorate on the other hand only hears complaints against judges and carries out a formal evaluation but does not have the authority to refer a case back to the courts or overturn any rulings issued by judges. The Judicial Inspectorate instead punishes a judge found to have been guilty of wrongdoing.
• The Ministry of Justice carried out a rotation of lawsuits dating from 2017 to 2018 to ensure that there is no interruption in proceedings while the Supreme Judicial Council sees strides in automating cases so that respective parties can monitor their progress electronically.

Administration

• The British Syrian Society hosted a conference in Damascus focused on the National Administrative Reform Program (NARP) launched by President Bashar Al-Assad last summer. Speakers included the Prime Minister, several ministers and other officials. The Ministry of Administrative Development is spearheading NARP as it attempts an overhaul of the public sector and the relationship between citizens and the state. The Syrian Law Journal was in attendance at the conference.
• One speaker at the British Syrian Society conference in Damascus presented a very interesting insight into potential judicial reform. She recounted how the executive branch of government in Syria is represented by the Prime Minister, the legislative branch by the Speaker of the People’s Assembly and the judicial branch by the Supreme Judicial Council (SJC). The SJC is officially headed by the President of the Republic and deputized on his behalf by the Minister of Justice who runs its day-to-day affairs. There is therefore a fusion between some of the branches to a certain extent under the framework of the Syrian Constitution. There was discussion at the conference as to why the Minister of Justice, an officer of the executive branch, should be at the forefront in leading the judicial branch. Potential constitutional reform could instead see the President of the Court of Cassation – the highest court in the land – as head of the judicial branch. Another option is for the President of the Supreme Constitutional Court to head the judicial branch. The speaker put forward the proposal that a vice president for judicial affairs serving under the President of the Republic could be appointed to head up the judicial branch. Once participant in the conference even argued that the President of the Republic actually heads up the executive branch, not the Prime Minister. Thus, the judicial branch needs its own head – possibly an officer of the courts. Such issues are a matter for constitutional lawyers, legislators and policymakers to debate. The entire discussion took place within the context of NARP.
• The Council of Ministers approved an amendment to Law 19/2013 to raise the ceiling for concerned ministers to ratify public contracts to SYP 400 million for investments from SYP 200 million and SYP 150 million for expenditures from SYP 100 million. The amendments come in light of fluctuations in the prices of materials and the exchange rate of the Syrian Pound.
• A bill is being considered that would regulate the appointment of deputy ministers. Possible conditions for their appointment mean that they would have to be aged between 35 and 58 years, possess foreign language proficiency and sufficient experience. Deputy ministers have quite considerable authority in managing the daily affairs of ministries. Unlike ministers, they tend to last longer in their positions and attend to technical matters. Contractors generally prefer to interact with deputy ministers for these reasons. The bill comes in light of NARP.

Military

• According to the Prime Minister, the government cannot permit males aged less than 42 years to remain in the country and pay an exemption fee to avoid military service as this would be unfair to soldiers currently fighting on battlefields across the country. Under the Military Service Law, males aged less than 42 years who reside outside of Syria for four years are entitled to pay a fee of $8,000 (US) in lieu of performing compulsory military service. Under the current circumstances, many young men are feeling forced to emigrate overseas to avoid military conscription. There is much concern as these young people are supposed to shape the future of Syria but are instead emigrating abroad without any concrete plans to return. At a time when the government provides free or subsidized education, the result is that all these young men are obtaining a degree at the state’s expense to an extent and are instead contributing to the economy of a foreign country whenever they decide to leave Syria. The Syrian government is in reality contributing to the economic growth in other countries when young Syrians emigrate overseas because they are highly prized for their talents and skills. It is these young people who are needed during the reconstruction period. During the British Syrian Society conference recently held in Damascus, one speaker noted that out of 400 graduates, 200 of them are planning on leaving Syria. The issue of military service and its effect on contributing to a brain drain in Syria need to be evaluated.
• The Chairman of the National Security Committee in the People’s Assembly confirmed that it sent a memorandum to the Ministry of Defence containing a proposed amendment to Article 10 of the Military Service Law. The proposal calls for sole breadwinners in families to have their military service obligations suspended for the time being due to their familial commitments.

Government

• As the New Year began, President Bashar Al-Assad issued an executive order which reshuffled some top portfolios in the Council of Ministers. Through Decree 1/2018, General Ali Abdullah Ayoub was appointed Minister of Defence, Muhammad Mazen Ali Youssef was appointed as Minister of Industry and Imad Abdullah Sara was named as Minister of Information. The appointment of the new Minister of Industry will have interesting ramifications on the reconstruction phase as this Ministry is at the forefront of post-conflict planning. The new Ministers were sworn into office in the presence of President Bashar Al-Assad and Prime Minister Imad Khamis.
• The former Minister of Defence Fahd Jassem Freij took over his post in exceptional circumstances right after his predecessor General Dawoud Rajha was killed in the Damascus bombing on July 18, 2012. Freij oversaw the most difficult phases of the war starting with the low points of 2012 and the government-led counter-offensive launched on April 7, 2013 that witnessed the Syrian Arab Army reclaiming territory lost to foreign-sponsored militants in 2011 and 2012. The Army gradually gained the upper hand through 2013, 2014 and 2015. In 2015, Saudi Arabia, Qatar and Turkey agreed to boost support to militants to an unprecedented level leading Russia to formally intervene on the side of the Syrian Arab Army. From 2015 to 2016, the Army pushed forward culminating in its victory in the city of Aleppo. In 2017, as US President Donald Trump dumped support for the rebels and Syrian-Russian cooperation intensified, the Army under Freij’s direction continued its forward trajectory throughout the western part of the country. It also battled ISIS in eastern Syria and reclaimed more than a third of the country’s territory as evidenced by its victory in Deir Ez-Zor. Even though Freij was replaced on the first day of 2018 by the Army Chief of Staff General Ali Abdullah Ayoub, who also played a leading role in the war, there is no doubt that his tenure at the Ministry of Defence helped shape the course of the war from 2012 to 2017.

International

• The Ministry of Justice has prepared three draft judicial agreements related to civil and commercial matters, personal status, extradition and criminal matters to be signed between Syria and Lebanon.
• The Sochi Congress in Russia brought together around 1,300 Syrian participants out of 1,600 invited guests who were welcomed by Russian Foreign Minister Sergei Lavrov. The Congress established a committee to discuss the current Constitution but not to draft any new provisions.
• A Brazilian parliamentary delegation visited Syria to assess the possibilities for reconstruction.