Legal Briefing – December 2018

International

• The United Arab Emirates reopened its embassy in Damascus after a hiatus of six years in an effort to develop bilateral diplomatic and economic relations with Syria. The reopening of the embassy was followed by plans to invite a delegation of Syrian businessmen to Abu Dhabi to further cultivate UAE-Syrian economic ties. Furthermore, UAE carriers are expected to resume flights to Syria in the near future.
• US President Donald Trump announced that American forces will withdraw from Syrian territories. Their presence in Syria is illegal under both Syrian domestic and international law since they were never invited into Syria by the Syrian government unlike Russian and Iranian forces who were invited. According to a source, outgoing US Defence Secretary James Mattis already signed the order to withdraw American troops from Syria.
• As the US planned to withdraw from Syria, the Syrian Arab Army began extending its authority over territories controlled by Kurdish forces following an agreement reached to this effect between the central government in Damascus and the local Kurdish authorities on the ground.
• Sudanese President Omar Al-Bashir’s visit to Damascus, the first for an Arab leader since the beginning of the Syrian War, could signal that a resumption of overall Syria-Gulf diplomatic ties may be imminent. President Al-Bashir’s ties to the Gulf states suggest a message was carried to Damascus.
• President Bashar Al-Assad greeted a governmental delegation from Russia and discussed various subjects including agreements to be signed through the mechanisms of the Russian-Syrian Joint Commission for Trade, Economic, Scientific and Technical Cooperation. Russian companies agreed to implement 30 projects in Syria in a variety of sectors following the Russian governmental delegation’s visit to Damascus.
• The Syrian Embassy in EU member state Romania held a conference in Bucharest highlighting the opportunities that await local and foreign investors in the reconstruction phase while emphasizing the new features of the Syrian economy that facilitate public-private partnerships.
• Jordan has sent several delegations to Syria in the past couple of months to express its appreciation to Damascus for reopening the Nassib border crossing. It appears to be only a matter of time before Syria and Jordan normalize their bilateral relations after years of hostility.
• Syria and Iran signed more economic cooperation agreements to further facilitate transactions between the two countries.
• Syrians across the world rallied against the international sanctions imposed against Syria. The irony is that the embargo was put in place in 2011 on the pretext to “support” the Syrian people when in fact it was to pressure the same people to rise up against the Syrian state.

National Administrative Reform Program (NARP)

• The National Administrative Reform Program launched by President Bashar Al-Assad last year has set the goal of streamlining bureaucratic procedures to facilitate administrative tasks for citizens and investors, such as for example with respect to investment legislation. The new Investment Bill differs from the current one in its attempt to streamline legal procedures.
• The Council of Ministers discussed means by which all ministries throughout Syria could adopt measures to simplify and facilitate procedures for citizens to fulfil their bureaucratic requirements without the need to go through a paper-heavy and time-consuming process.
• Two ways to challenge corruption in Syria’s public sector include automating bureaucratic procedures through an e-government program, which limits interactions between public sector employees and citizens. The second and tricky one is raising public sector salaries. The problem is that the government’s public finances are under strain and a fiscal policy that aims to increase or create new taxes is counterproductive as citizens are already overburdened. An alternative is to attract Syrian expatriate and foreign investments into the country. However, foreign investments require a reliable judicial system and public sector that shun corruption. Herein lies the complicated task of navigating this vicious cycle to combat corruption, which is at the heart of the National Administrative Reform Program.
• Following the cabinet reshuffle in Damascus, President Bashar Al-Assad instructed every minister to set up an electronic complaints system that can be utilized by dissatisfied citizens. The theme of public accountability falls within the National Administrative Reform Program.
• A joint ministerial-gubernatorial meeting was held under the direction of Prime Minister Imad Khamis that brought together various ministers and provincial governors to discuss enhancing the powers of governors to better deal with the daily issues facing citizens.
• At a meeting held in the Ministry of Justice, Prime Minister Imad Khamis announced that all laws and legislation that permit discretionary exemptions to be granted according to their provisions will be repealed as they contribute to corruption in the public administration.
• The new Minister of Internal Trade and Consumer Protection Atef Naddaf confirmed that there will be no special treatment offered to anyone by his Ministry as it will abide by the government’s decision not to grant exemptions.
• Following statements by Prime Minister Imad Khamis with respect to the government’s latest anti-corruption initiative, the former Secretary of the Baath Party branch in Rural Damascus said he planned to go public on his experiences in office where he came across dishonest behavior.
• The Minister of Administrative Development has been coming under criticism from MPs in the People’s Assembly as they grill her on the new powers her Ministry is exercising. The Minister who is the youngest in the cabinet is overseeing the National Administrative Reform Program. The Ministry of Administrative Development is becoming a powerful ministry in Syria as it is obtaining oversight powers over other ministries and is at the heart of the National Administrative Reform Program, which will reform the entire public sector and restructure the relationship between citizens and the state. It should not come as a surprise that the Minister of Administrative Development would be subjected to criticism as a number of public officials have their eyes set on this Ministry given the powers it has at its disposal.
• The new Interior Minister Major General Mohammed Rahmoun visited a Damascus prison to monitor the treatment of inmates while calling on prison guards to adhere to laws and regulations while on duty at the correctional facility.
• The Interior Minister issued a circular ordering the full implementation of Article 53 of the Constitution of 2012, which mandates that any suspect who is arrested must be accorded all of their legal rights and due process of law.
• The Ministry of Interior is pushing through a new system that will link prison databases with the Criminal Security Department and the Information Branch so that information and procedures become more accessible. The first to be linked will be Damascus Central Prison.

Judiciary

• Judges and lawyers are facing a major problem in that certain laws and regulations are being amended far too quickly that they are sometimes drafting legal opinions on the status of a law or regulation without realizing that it has been amended.
• The People’s Assembly deliberated on the means to pursue judicial reform such as by improving the economic situation of judges and enhancing their investigative powers through new legislation while creating specialized courtrooms to adjudicate disputes pertaining to the digital age.
• The Supreme Judicial Council ordered the dishonorable discharge of two judges in Damascus after the Judicial Inspectorate revealed that they had taken bribes. In one case, the judge was involved in a lawsuit where the amount in dispute was hundreds of millions of Syrian Pounds.
• A Syrian MP revealed in Parliament in the presence of the Justice Minister that love letters existed between a judge and one of the parties in a lawsuit, leading the Judicial Inspectorate to investigate the allegation and the reasons for the judge not recusing himself from the case.
• The judiciary in Aleppo has registered a lawsuit brought against the former Minister of Internal Trade and Consumer Protection for failing to execute a court order while in office. Since it is a lawsuit pertaining to a former minister acting in his official capacity at the time, an application was made to the Ministry of Justice to seek consent from the President of the Republic to move the case forward.

Finance

• Syria’s banks are facing complex issues such as enhanced and stricter lending rules, and the constant threat of borrowers defaulting on their debts are forcing them to restrict loan provisions, which limit revenues from interest payments. The long-term consequences of such a situation could prove tricky at a time when depositors are increasing and banks have to pay interest rates on deposits while revenues from interest payments on loans are decreasing, thus limiting their ability to cover those deposit rates. Even when banks do lend funds to customers, there is the fear of default and further losses. At the same time, potential borrowers are being put off by high interest rates and the possibility of travel bans if they fail to repay their loans. It is in this context that Hazem Qarfoul, the new Governor of the Central Bank, finds himself steering Syria’s monetary policy. Concurrently, the Syrian Pound finds itself facing an appreciating US Dollar globally and increased demand for imports to accommodate reconstruction.
• The Central Bank appears to have reversed course on a decision to require bank customers seeking a loan to maintain a sufficient balance in their accounts as this would have restricted the ability of banks to profit from loans and to pay out interest rates on customer deposits.
• In 2012, the Central Bank offered merchants a preferential rate to purchase more than US$10,000 in order to finance their imports. However, a number of them allegedly took advantage of the preferential rate by selling the foreign exchange at market rates to turn a profit. In 2018, the Central Bank sought accountability by requiring purchasers of the preferential rate of 2012 to prove that they spent the US Dollars on imports or otherwise pay the difference according to the Syrian Pound’s rate in 2018. In 2012, merchants purchased US Dollars at a rate of SYP 70 per Dollar. In 2018, the rate was around SYP 440 so the Central Bank required violators to repay SYP 370 for every Dollar they could not prove went to fund imports. After protests by merchants, they are now required to pay SYP 31 per Dollar.
• MPs rejected some articles in a bill that sought to reschedule loan repayments by debtors to the state-owned Agricultural Cooperative Bank as well as a cancellation of fines and interest payments for failing to adhere to deadlines. In the end, the bill was passed by the People’s Assembly and ratified by President Bashar Al-Assad in Law 46/2018 in an effort to assist farmers with their financial situations.
• According to a source in the Ministry of Finance, the new Customs Bill, which is comprised of 270 articles, is currently being discussed by three parliamentary committees and will soon be ready for adoption. In December 2017, the cabinet approved the text of the new Customs Bill. The Bill calls for transforming the Customs Directorate from a Ministry of Finance department into an independent public authority with much greater powers. The Bill also focuses on import policies and provisions relating to import controls. The new Customs Bill proposes merging the current Customs Law 38/2006 with the Customs Control Law 37/2006 into one Law.
• The People’s Assembly approved the 2019 national budget worth SYP 3.9 trillion with 70% going towards public expenditure and 30% to cover investments. The budget was eventually ratified by President Bashar Al-Assad in Law 44/2018.
• Syria’s private banks generated total profits of approximately SYP 9.7 billion during the first nine months of 2018, with the share of Islamic banks amounting to SYP 5.57 billion. The top three banks with the most profits include Al-Baraka Bank – Syria, Banque Bemo Saudi Fransi and the Syria International Islamic Bank.

Taxation

• A new law governing the taxation system could also be in the works for 2019 that would encourage automated and electronic mechanisms whose aim would be to curb tax evasion practices. The current system has its origins in an outdated 1949 law that has been amended over the decades.
• The Real Estate Sales Tax Bill has been published and should see light by 2019. Real estate sales will be taxed at one percent of the actual market value of the sold property rather than outdated registered rates which no longer bear any resemblance to reality.

Corporate

• The Damascus Securities Exchange recorded its largest daily trades since the stock market was launched in 2009. Two major deals involving 95 transactions covering 8 million shares worth SYP 7.4 billion or $15 million (US) exchanged hands, the bulk of which was attributed to the Syria International Islamic Bank. It was apparently Aman Holding which purchased the $15 million (US) worth of shares in the Syria International Islamic Bank, the largest transaction to date on the Damascus Securities Exchange. Following the purchase, Aman Holding owned 6.53% of the Syria International Islamic Bank.
• Aman Holding also purchased 592,250 shares in Al-Baraka Bank – Syria for an estimated value of SYP 841 million on the Damascus Securities Exchange. Consequently, Aman Holding was listed as owning 1.18% of the bank’s total shares.
• The two companies on the Damascus Securities Exchange that dominate share trades on an almost daily basis are the Syria International Islamic Bank and Al-Baraka Bank – Syria. The Damascus Securities Exchange opens Sunday to Thursday and on each day, stocks can only increase in value up to a maximum of five percent from the previous day and can only decrease in value down to a maximum of two percent from the previous day.
• Damascus Cham Holding sent a farewell message to its founding Chairman Bisher Sabban, the former Governor of Damascus. Following the appointment of Adel Anwar Al-Olabi as the new Governor, he will also assume the role of Chairman of Damascus Cham Holding. The Governor of Damascus and the provincial authorities comprised of the Executive Office and the Provincial Council of Damascus Governorate oversee Marota City as a whole while the province-owned Damascus Cham Holding undertakes some investments within Marota City.
• Prime Minister Imad Khamis issued a resolution appointing a new board of directors for the Damascus Securities Exchange, marking the first time since it was launched in 2009 that a member of the Federation of Syrian Chambers of Commerce is absent as they usually chair the board. Those appointed to the Board include three experts, a representative of the Syrian Commission on Financial Markets and Securities, and a representative of the Central Bank of Syria. Four directors were elected by the General Assembly of the Damascus Securities Exchange. The four elected directors represent financial services and brokerage companies, and public joint stock companies. The resolution provided that the directors choose among themselves the Chairman and Deputy Chairman of the Board. The nine directors shall serve for a one-time renewable three-year term with the exception of the representatives of the Syrian Commission on Financial Markets and the Central Bank of Syria who are not bound by term limits. The resolution stipulates that the Chairman and the remaining directors shall be entitled to remuneration of SYP 10,000 for every board meeting held, with such compensation not exceeding SYP 30,000 in a one-month period. Since 2006 when the Board of Directors of the Damascus Securities Exchange was established, the President of the Federation of Syrian Chambers of Commerce always chaired it but this will not be the case this time. Previous Chairmen include Rateb Al-Shallah and Ghassan Al-Qalaa.
• The Ministry of Internal Trade and Consumer Protection ratified the decision of the General Assembly of the Syrian Tourism Development Co. LLC, which is 98.3% owned by the Kuwaiti food company Americana, to sell its assets and raise its share capital.
• The Damascus Securities Exchange announced the listing of an additional 2,125,000 shares of the Syrian-Kuwaiti Insurance Company worth SYP 212.5 million to be traded on the stock market. The increase in shares was registered with the Syrian Commission on Financial Markets. The share increase was also sanctioned by the insurance regulator the Syrian Insurance Supervisory Commission. The total number of shares of the Syrian-Kuwaiti Insurance Company now amount to 10,625,000 worth SYP 1,062,500,000. The profits of the Syrian-Kuwaiti Insurance Company at the end of last September stood at around SYP 30.2 million, which represents a decrease of about 65% compared with the same period in 2017 when profits stood at SYP 87.6 million. The Syrian-Kuwaiti Insurance Company was established with a capital of SYP 850 million. It was incorporated in accordance with Decree 13/2006 and it received its license to practice insurance activities by virtue of Resolution 44/100 issued by the Syrian Insurance Supervisory Commission.
• A new law is being prepared that will facilitate the conversion of family businesses into public joint stock companies that can list on Syria’s stock market, the Damascus Securities Exchange.

Real Estate

• UAE real estate development company DAMAC Properties is studying potential opportunities to invest in Syria and an initial meeting was held at the Four Seasons Hotel in Damascus between corporate representatives.
• The Ministry of Tourism confirmed that Souria Holding has commenced preparatory works on the Syria Towers project in the Baramkeh district of Damascus.
• A delegation from one of China’s largest companies visited Marota City in Damascus to explore potential investment opportunities.
• Chinese, Lebanese and Jordanian investors all visited Marota City during the month of December to consider investment opportunities in the real estate development sector.
• Damascus Cham Holding will partner up with a local company to invest in a park in the Damascus district of Mezzeh.
• The General Commission for Real Estate Development and Investment licensed new companies to execute real estate projects in accordance with the Real Estate Investment Law as reconstructions gets underway.
• Developing a housing strategy for Syria is proving challenging for experts as the middle classes have diminished. Those most in need of new homes cannot afford them and any major real estate development projects can only be targeted at the local wealthy classes and expatriates.

International Trade

• Reports that Al-Qaeda took control of the Aleppo-Lattakia Highway located in Idlib province following clashes with Turkish-backed rebels threatened the viability of the Idlib Backstop agreement. Under the deal, cross-border trade on the highway between Syria and Turkey should have resumed in December.
• Jordan banned citrus imports from Syria after cheaper Syrian products sold off the shelf in record time while Jordanian merchants were left vulnerable as their goods remained unsold.
• The Ministry of Economy and Foreign Trade extended the ban on the exportation of Syrian wood and coal for another year after initially introducing the prohibition in 2016 to protect existing forests at the request of the Ministry of Agriculture and Agrarian Reform.
• While the recent appreciation of the US Dollar in relation to the Syrian Pound can be attributed somewhat to the general strength of the US Dollar globally, there are suggestions that the main cause is the government’s decision to relax import controls for reconstruction. When imports into Syria increase, there is more demand for foreign currencies like US Dollars to pay for those foreign priced imports and this has an effect on Syrian Pounds because they are exchanged for US Dollars, thus the value of the Syrian Pound depreciates in relation to the US Dollar.
• In an attempt to curb smuggling and lower demand for imports, which affect the value of the Syrian Pound because they increase demand for foreign currencies, the government is trying to push import substitution measures to produce goods locally in Syria rather than import them.

Commerce

• The government is launching a new initiative to combat the manipulation and smuggling of subsidized goods such as fuel and flour. Consequently, the Consumer Protection Law will be amended to increase penalties for violators and barcodes will be introduced to monitor flour sales.
• Merchants have been complaining to the chambers of commerce about the treatment they have been receiving during visits by officials from the Customs Directorate, citing some of the procedures they are using as improper methods.

Construction

• The Syrian Engineers Syndicate signed an agreement with its Jordanian counterpart to grant preferences to Syrian engineers in Jordan and Jordanian engineers in Syria especially with respect to the reconstruction stage in Syria.

Energy

• According to the Minister of Electricity, Syria’s electricity production in 2023 will match its pre-war levels.
• A Syrian businessman plans to launch the largest power plant project in Syria using solar energy at a cost of SYP 5 billion and which will be located in Tartous province.
• Minister of Petroleum and Mineral Resources Ali Ghanem revealed that his Ministry is aiming to produce 29 million cubic meters of gas daily by 2023 while stating that daily imports of gas improved from 6 million cubic meters to 16 million cubic meters from 2017 to 2018.
• A gas shortage crisis during winter caused considerable hardships. The crisis was exacerbated by the difficulties of importing Iranian gas following the re-imposition of US secondary sanctions against Iran.

Transport

• Jordan agreed to reactivate the Land Transport Treaty signed with Syria in 1999 and permit Syrian private motor vehicles to enter its territory without restrictions on the basis of the principle of reciprocity since Syria already permits the same for Jordanian automobiles.
• The Jordanian Ministry of Transport approved a request by the Syrian Ministry of Transport to permit approximately 500 Syrian trucks located in Egypt and Sudan to return to Syria via Jordanian territory.
• Despite calls from Lebanon and Jordan to reduce transit fees at the border crossings, the Minister of Transport confirmed that Syria will not do so.

Tourism

• A new emerging business personality who recently invested in the upscale Massa Mall, the Qassioun Mall and the Al-Jalaa Hotel has reportedly invested in the stalled Yalbagha Complex, which is owned by the Ministry of Religious Endowments, and plans to turn it into a tourist and commercial center with a hotel, restaurants, lounges and so forth.
• The Ministry of Tourism announced plans and investment opportunities for sites in Damascus and several provinces.

Cultural Property

• Syrian authorities are leveraging their new diplomatic advantages to pressure countries like Jordan and Lebanon to return stolen cultural antiquities while successfully insisting that European auction houses not sell off artefacts looted from Syria.

Public Procurement

• A new public procurement law could see light in 2019. The current Law 51/2004 has been criticized for having too many gaps that can be filled by suspicious deals agreed between public authorities and private sector contractors.

Government

• The former Tourism Minister Bisher Yazigi has been appointed as an adviser to the Syrian Presidency.

Armed Forces

• The General Command of the Army and the Armed Forces issued an order discharging the soldiers of army units listed under Session 248 and the previous sessions who served in the military for five years up until January 1, 2019. Session 249 was also demobilized. Army demobilizations are underway as the conflict winds down.
• President Bashar Al-Assad issued Legislative Decree 20/2018 raising the salaries of pilots employed by the Armed Forces as well as the allowances extended to military personnel.
• President Bashar Al-Assad ratified Law 45/2018 granting injured military personnel the right to procure one locally-manufactured automobile, which will be exempted from all taxes and fees, through loan facilities extended by the Commercial Bank of Syria.
• The Interior Minister issued a circular granting the provincial police chiefs and heads of police units broader authorities to investigate individuals who are avoiding military service or who have deserted their posts in the Armed Forces.