Syrian Law Journal

Legal Briefing – December 2015

by · 04/01/2016

Welcome to our latest legal briefing covering the news of the past month- here is a taste of what is in store: The government has approved a bill amending the Capital Gains Tax Law, which will use actual real estate market valuations to assess tax liabilities as opposed to the current position that utilizes out-of-date property valuations. Import licenses will be granted to traders based on three categories with different deposit requirements including 0%, 50% and 100% of the value of the imports. The Draft Public-Private Partnership Law dating back from 2010 has finally been passed by the People’s Assembly. The adoption of UNSC Resolution 2254 may very well lead to constitutional and electoral reform as the government and opposition get ready to initiate talks on a political transition under the auspices of the United Nations. US President Barack Obama has signed into law new rules that impose visa restrictions on Syrians and visitors to Syria.

Taxation

  • The government has approved a bill amending the Capital Gains Tax Law, which will use actual real estate market valuations to assess tax liabilities as opposed to the current position that utilizes out-of-date property valuations. Since the passage of the Capital Gains Tax Law in 2005, these tax liabilities have technically become fees paid as a percentage of outdated real estate valuations in conveyances as opposed to a capital gains tax resulting from real property sales in the traditional sense. A proposal that would have updated the real property valuations to reach market rates in order to calculate these fees was rejected in 2010. However, it might be more forthcoming today as a result of the increases in real estate prices in safe areas of the country.
  • New tariffs for the ports in Lattakia and Tartous that are less than the amounts charged in neighbouring countries are expected to be introduced soon in an effort to increase Syria’s commercial competitiveness.
  • The Ministry of Tourism is taxing restaurants based on the number of diners they are able to accommodate and a new 10% tax has been imposed on ‘shawarma’ sandwiches.
  • The Customs Directorate has undertaken not to enter the factories and business premises of industrialists except in the cases of offences and forgeries.

Finance

  • Commissions can now be charged by the Central Bank and banks in general on financial transfers following two regulations issued by the Monetary and Credit Council, the body that governs the Central Bank.
  • The Minister of Finance has stated that a law to set up a body to guarantee loans by banks in an effort to stimulate investments is not far off from being enacted following deliberations by the government. In fact, the government has approved the draft law that would see the incorporation of a private joint stock company that would guarantee the loans to small and medium-sized enterprises (SMEs). While on this subject, the People’s Assembly has passed a bill concerned with the establishment of a body to support SMEs.
  • There are discussions that the Syrian Commission on Financial Markets and Securities (SCFMS), the capital markets authority, may face changes such as to its structure, public control over its finances as opposed to retaining the services of an auditor, and the possibility of granting the Ministry of Internal Trade and Consumer Protection (MITCP) some influence over the body. The MITCP did not exist at the time the SCFMS was created.
  • The SCFMS has revealed that 14 publicly-traded companies do not have corporate social responsibility policies in place compared to 22 companies but in reality, only a small number apply them.
  • The SCFMS is preparing to encourage the listing of new companies on the Damascus Securities Exchange (DSE) in 2016 as it seeks to discover why some have not yet been included on the bourse.
  • Consultations between the SCFMS and the Central Bank in their joint committee continue regarding the inclusion of foreign exchange companies on the DSE. Not long ago, the SCFMS admitted that the current rule, which requires foreign exchange companies to seek the approval of the Central Bank whenever their shares are traded, is hindering the listing of these types of companies on the DSE. In this regard, a number of foreign exchange companies are incorporating themselves as private joint stock companies and avoiding going public on the DSE. One proposal that was being discussed that would facilitate the listing of foreign exchange companies on the DSE would be to give these companies the right to trade up to five percent of their shares without the need to obtain the consent of the Central Bank.
  • In disputes involving the DSE, new strategies are being considered with the goal of promoting arbitration instead of litigation.
  • Syrians continue to await the government’s response to a proposal that calls for the creation of a bond market as interested parties continue to provide their input on the idea. Months ago, the SCFMS announced that work was underway to launch a bond market by the end of 2015 following the creation of a special committee to realize this objective.
  • Law 26/2015 sets the conditions and deadlines for settling debts owed to publicly-owned banks. The Law lays out how debtors can apply to benefit from its provisions and also provides for the establishment of relevant committees to assess and approve applications. It also deals with exemptions, circumstances when debts can be waived partially or totally, options when settlements are voidable, grace periods and much more. In this respect, this Law replaces the preceding Legislative Decree 213/2006, which used to govern loan repayments to public banks.
  • The Central Bank agreed with the public banks to transfer the latter’s non-performing loan cases against defaulting borrowers to the Financial Public Prosecutor. However, the Minister of Justice has clarified that lawsuits pertaining to defaulting loans cannot be transferred to the Financial Public Prosecutor. He has argued that these cases are subject to the jurisdiction of the Court of First Instance for examination since they are to an extent classified as misdemeanors.
  • Public banks are facing a number of problems stemming from non-performing loans, which also include the loss of loan documents in conflict areas.
  • The Minister of Justice has proposed in a draft regulation to reduce the fees charged by lawyers who are contracted to advise banks.

Commerce

  • In line with Regulation 703/2015, which was recently passed by the Ministry of Economy and Foreign Trade (MEFT) and its executive regulations issued by the Central Bank, import licenses will be granted to traders based on three categories. In accordance with these categories, different deposit requirements apply and they include 0%, 50% and 100% of the value of the imports. Therefore, depending on the importance of the goods in question, importers will have to deposit the relevant amounts in Syrian Pounds with the Central Bank after they receive preliminary approval from the MEFT to import the goods and before the issuance of the actual license. The latest measures for granting import licenses aim to reduce the current pressures on the Syrian Pound, which has depreciated significantly during the ongoing conflict. The MEFT has spent time working alongside the Central Bank in order to develop new policies concerning the issuance of import and export licenses.
  • The People’s Assembly has passed a bill prepared by the MEFT that contains amendments to Legislative Decree 6/2009, which establishes the Export Development and Promotion Agency (EDPA), and Legislative Decree 19/2009, which launches the Export Development Fund. The bill creates a body to replace the EDPA. The new body will support the domestic production of goods and look to improve their quality in order to assist Syrian companies to meet local demand. It will also encourage them to export their products overseas even under the strenuous conditions facing the country. In strengthening its competitiveness in international markets, domestic production will be supported at all stages leading up to the exportation of the goods.
  • The Damascus Chamber of Industry has encouraged exports to Russia in line with bilateral agreements, which are expected to be realized with customs duty exemptions and sea transport facilities. There has recently been a significant push towards boosting Syrian-Russian trade relations with a number of Syrian businessmen looking to satisfy the Russian markets with food exports.
  • Iran will begin to reduce customs duties to four percent on Syrian exports in line with the Free Trade Agreement of 2012 signed between both countries.
  • The Federation of Syrian Chambers of Industry is seeking accountability for all companies and businesses that deal in Turkish goods. It recently called for the establishment of a Turkey Boycott Office, which would be similar in nature to the Israel Boycott Office to prevent trading in Turkish goods.
  • There are calls on the government to pursue corruption claims involving price and currency manipulations, imports of goods, monopolies over industries, and the unethical involvement of public officials in certain transactions.
  • The Prime Minister has decreed the establishment of the Syrian Metals and Steel Council (SMSC) to be headed by businessman and MP Muhammad Hamsho. The SMSC is mandated to oversee and promote this sector and is expected to pursue a significant role during the reconstruction period.
  • The price of one tonne of fuel has been reduced from SYP 112,000 to SYP 105,000 in an effort to increase activity in the industrial sector.
  • The Pharmacists Syndicate is bringing a lawsuit against the government over its decision to reduce medicine prices by five percent, which is affecting the profit margins of pharmacists.
  • As part of its powers, the local council in Damascus has raised prices on food items, beverages and ‘shisha’ sold by certain vendors in the province.

Public Procurement

  • The Draft Public-Private Partnership (PPP) Law dating back from 2010 has finally been passed by the People’s Assembly after it was reviewed by its Constitutional and Legislative Affairs Committee. It awaits presidential assent before it becomes law. When the bill was brought to the floor of the People’s Assembly for deliberations, it was met with skepticism by some MPs who feared it would benefit private and foreign businesses at the expense of the public sector. One of the main reservations about this bill is that it may lead to eventual privatization, which is a sensitive issue in a country that has based its economic policies on socialist principles for more than half a century. An article on the Draft PPP Law that might be of interest featured in the Syrian Law Journal last month.
  • The government is backing private sector investment in the electricity sector, particularly in renewable energy in line with the Electricity Law. The Law invites local and foreign investors to participate in the electricity sector either on their own or in partnership with the public sector. Private investors are allowed to generate and distribute electricity to consumers. One key feature of this Law is that it promotes investments in renewable resources.
  • The government appears to be pursuing policies that aim to grant public sector companies priority in bids for construction projects tendered out by the state, particularly in the industrial sector.

Judiciary

  • The new Draft Civil Procedure Code that governs how cases will be managed throughout the civil court system from now on has been approved by the People’s Assembly following deliberations by MPs. It awaits presidential assent before it becomes law. The draft is an updated version of the Code provided for in Legislative Decree 84/1953 and dating back to the era of Adib Shishakli, which has proven to be outdated and in need of change. It seeks to simplify and enhance the litigation process and the procedures for enforcing judgments.
  • The Aleppo branch of the Ministry of Justice has called for legal reforms pertaining to judicial investigators, investigating judges, search warrants and so on. Other reforms in mind include automobile and currency crimes, an anti-corruption law, criminal procedures, the restoration of property and judicial records, judicial fees and personal status matters. There are also calls to repeal the Fundraising Law 8/1994 since it is no longer effective. The final proposal is to increase the number of staff to handle judicial functions and to coordinate between the concerned entities.
  • The Attorney-General of Aleppo has proposed to the Ministry of Justice that it sanction the use of WhatsApp for the purpose of legalizing official documents for residents of conflict areas.

Local Councils

  • A holding company in the form of a private joint stock company (JSC) has been established for the province of Damascus in accordance with the Local Council Private Companies Law. According to this law, the private JSC is permitted to manage and invest the assets belonging to the local authority in Damascus. The shares of the company are owned by the local authority. The company is also expected to abide by the Companies Law, the Commercial Code and the Employment Law.

Property

  • The new Urban Planning Law 23/2015 deals with the concept of planning and the division and organization of land. It has a particular focus on zoning provisions. The Law also helps to curb the number of illegal housing settlements and to develop urban expansion. In this respect, it repeals Law 9/1974 and Law 60/1979, which previously governed these matters.
  • The government has approved a bill regulating real estate fees to link them to actual property market valuations. The current Law 429/1948 that deals with this subject is quite outdated.

Employment

  • The Ministry of Labour has reminded private businesses affected by vandalism to submit requests to cease operations to the Ministry so as to avoid social security liabilities.
  • The People’s Assembly has passed a bill that exempts businessmen and employers registered with the General Establishment for Social Security from making penalty and interest payments if they pay their dues within a year.
  • The government has approved amendments to Regulation 22/2015, which permits Syrians working abroad to obtain social security protection.
  • The Ministry of Justice has established an employment tribunal in the province of Suwaida in accordance with Legislative Decree 64/2013.
  • According to the Minister of Labour, the amendments to the Public Employment Law are expected to be forwarded to the People’s Assembly by the government in the coming period.
  • Public sector salaries are facing a review, which is also considering the maximum amount that should be payable to employees.
  • The Prime Minister has issued a measure with the aim of preventing huge numbers of public employees from migrating abroad in an effort to retain a sufficient degree of talent and expertise in Syria.
  • The Ministry of Labour is working on amendments to Legislative Decree 65/2013, which regulates the recruitment of foreign domestic servants.

Tourism

  • The Ministry of Tourism has closed 48 touristic businesses and has come across more than 850 violations this year.

Transport

  • A new air transport bill is being prepared that will encourage more private companies to be licensed and at the same time safeguard the status of the national carrier Syrian Arab Airlines. Moreover, the government is requesting the Ministry of Transport to cease licensing private airline companies pending the passage of the bill. Before this request was made, the fourth private airline company was in the process of obtaining its license.
  • Syria and Iraq have signed an agreement to develop land transport cooperation between the two countries.
  • Syria has reciprocated and cancelled the Mutual Visa Waiver Agreement of 2009 with Turkey after the latter made a similar move. As a result, Turkish nationals will require visas to enter Syria. The Agreement dated back to a time of warm relations between both governments.

Telecommunications

  • The government has doubled monthly telephone subscription prices.

Health

  • Syria and Cuba have signed an agreement to promote cooperation in the healthcare sector.

Personal Status

  • Law 24/2015 facilitates the registration of birth and death certificates. In this respect, it amends Article 20 of the Civil Status Law provided for in Legislative Decree 26/2007.
  • The Ministry of Justice is being urged to permit the use of the golden ‘lira’ (Syrian Pound) for dowry payments in marriage contracts due to the depreciation of the national currency.

Criminal Law

  • On average, there are around four lawsuits in Damascus per day relating to the illegal sale and smuggling of petroleum products, most of them bound for Lebanon.
  • The Ministry of Justice has released 270 suspects held by the Terrorism Court.
  • Proposals have been put forward to establish a terrorism court in Aleppo that would be similar in nature to the one in Damascus in order to adjudicate crimes in northern Syria.
  • The Attorney-General of Aleppo has reported that a judicial committee will be formed to look into the cases of prisoners at the main prison there to assess their status. The number of prisoners in Aleppo is estimated to have already dropped from 8,000 to 2,700 inmates.

International

  • The United Nations Security Council (UNSC) has unanimously adopted Resolution 2254 setting out a roadmap that would ideally lead to the end of the conflict in Syria. The Resolution itself touches on matters of importance relating to Syrian constitutional law if it is implemented. According to its terms, the Syrian government and opposition elements are expected to initiate talks on a political transition this month. A nationwide ceasefire monitored by the United Nations is envisioned as soon as the government and opposition take the initial steps towards a transition. The main items of interest in the Resolution are a transition towards a new government composed of new ministers within six months and elections to be held within 18 months of the start of the peace talks.
  • Following the adoption of UNSC Resolution 2254, the Syrian Foreign Minister responded that he hopes a dialogue among Syrians will lead to the formation of a national unity government. In addition, he announced that in line with the latest peace plan, a committee will be set up to draft a new constitution and a new electoral law to govern the elections expected to be held within 18 months of the start of the peace talks. Consequently, this will result in the Constitution of 2012 and the current Electoral Law being replaced.
  • US President Barack Obama recently signed into law the Visa Waiver Program Improvement and Terrorist Travel Prevention Act of 2015, which will have wide ramifications for the ability of certain Syrians who are dual nationals to travel to the United States. The law also restricts the ability of certain foreign nationals who have visited Syria since March 1, 2011 to travel to the United States. The Visa Waiver Program (VWP) allows citizens of 38 countries, including much of Europe, to visit the United States without a visa. According to the law, if a Syrian national holds any one of the 38 nationalities of the VWP as well, they will no longer be entitled to visa-free travel to the United States and will have to obtain a visa to do so. As for the nationals of any of those 38 countries, they will also have to obtain a visa to travel to the United States if they have visited Syria since March 1, 2011. As a result of these changes, the European Union might reciprocate and implement similar rules itself. It could decide to do so as early as April 2016. An article on the US visa restrictions that might be of interest featured in the Syrian Law Journal last month.