Syrian Law Journal

Legal Briefing – March 2016

by · 04/04/2016

Welcome to our latest legal briefing covering the news of the past month- here is a taste of what is in store: Following comments made by the United Nations Special Envoy Staffan de Mistura, Foreign Minister Walid Mouallem replied that discussing presidential elections is the exclusive right of the Syrian people and that constitutional change will be addressed by a national unity government, with both points being reiterated by President Bashar Al-Assad. The Ministry of Tourism is preparing a new investment law for its respective sector and pushing for smart taxes to be imposed on tourism projects in order to encourage investments and deter unfair tax practices. While the Ministry of Economy and Foreign Trade continues to grant import licenses depending on the goods in question, merchants have been complaining that the government issues import regulations without warning and right after their goods have arrived at the ports, which leaves them in a precarious position. The Ministry of Industry has offered 27 of its companies for private sector investment in accordance with the Public-Private Partnership Law. A law setting up the Loan Guarantee Establishment has been passed and this new body’s main objective will be to guarantee loans by banks and other financial institutions to small and medium-sized enterprises.

Government/ Parliament

  • The United Nations Special Envoy for Syria Staffan de Mistura has stated that the objectives to resolve the conflict in Syria include creating a new government, preparing a new constitution, and holding parliamentary and presidential elections within the UN-mandated 18-month period. The Special Envoy hoped that the Geneva peace talks between the Syrian government and opposition groups that took place in March would firstly focus on establishing a new government as part of the transition process envisioned in United Nations Security Council Resolution 2254. However, such discussions appear to have been postponed until the next round of talks scheduled for this month.
  • Foreign Minister Walid Mouallem responded to de Mistura by stating that the latter has no right to discuss presidential elections in Syria, which is the exclusive right of the Syrian people. During an interview with the Russian-based RIA Novosti and Sputnik news agencies, President Bashar Al-Assad clarified that early presidential elections are a separate issue from parliamentary elections and are subject to the popular will in Syria. Therefore, if there is support for early presidential elections by the people, then they will be held. Moreover, the President emphasized that it would be better for the people and not Parliament to elect a president directly. He argued that a direct election by the people will free the president from the influence of different political forces. The President also affirmed that the wider the participation of Syrians both inside and outside the country in electing their president, the better it would be. In any event, the idea of Syrians abroad voting in presidential elections is a procedural matter and is not viewed as a political principle.
  • Responding to de Mistura, Foreign Minister Walid Mouallem also maintained that a national unity government formed in the future will appoint a committee to draft a new constitution or amend the current one before submitting it to a national referendum. Until then, the existing Constitution will remain in place. He explained that the Syrian government understood the concept of political transition to mean moving towards a new constitution or amended one and a new government that involves other parties. As for the upcoming parliamentary elections, he confirmed that they will be held in accordance with the current Constitution.
  • President Bashar Al-Assad touched more on constitutional change during his interview with the Russian-based RIA Novosti and Sputnik news agencies. Like Foreign Minister Walid Mouallem, he repeated that Syria interprets the concept of political transition to mean moving from one constitution to another. The transitional period would continue under the current Constitution before moving to the next one after a popular referendum is held to confirm its legitimacy. During the transitional period, a national unity government would be formed and could be comprised of current members of the government, opposition elements, independents and others. The President regarded the main objective of this government during the transitional period to be drafting a new constitution and submitting it to a referendum. As far as the concept of a transitional governing body, the President held that this idea did not comply with the provisions of the current Constitution and therefore, the solution lies in forming a national unity government. For the Syrian government, the objective of the upcoming talks in Geneva this month is a Syrian-Syrian dialogue to agree on the composition of the next government.
  • On a timescale for the drafting of a new constitution, President Bashar Al-Assad explained that it could be prepared in a matter of weeks but what takes time are the discussions. The United States and Russia had examined the possibility of setting August as a target for the Syrian government and opposition elements to establish the framework for a political transition in Syria and the preparation of a draft constitution. In any event, President Al-Assad said that aiming for August allows a sufficient amount of time to draft a new constitution.
  • According to President Bashar Al-Assad, the current proposals on the table point towards holding parliamentary elections after a new constitution takes effect. Moreover, any government formed after those elections will reflect the shares of the political forces in the Parliament.
  • On the issue of federalism, President Bashar Al-Assad told his interviewers that geographically speaking, Syria is too small to become a federal state. Socially speaking, he expressed that a federation presupposes the existence of social constituencies that cannot live with each other. He emphasized that this has not been the case throughout Syrian history. While he conceded that the question of federalism is linked to constitutional debate, he stated that there are no natural factors that might give rise to it. In any case, he clarified that if the issue of federalism was determined in a referendum, he did not believe that it would be endorsed by the Syrian people. In an earlier press conference, Foreign Minister Walid Mouallem similarly held that it would be doubtful that Syrians would support federalism as they would prefer to maintain their country’s unity.
  • A total of 11,341 candidates registered for the upcoming parliamentary elections scheduled for April 13th. However, a number of them have dropped out of the race. A final list of candidates whose applications met the legal requirements was compiled. Candidates were not allowed to begin campaigning until they were notified that their nominations were confirmed. While 262 objections were received by the Supreme Judicial Committee for Elections (SJCE) concerning candidates’ nominations, 221 were accepted.
  • The SJCE has announced that polling stations for the parliamentary elections will be organized in safe areas. As a result, the polling stations for electoral constituencies in conflict zones will be moved to safe areas. The electoral constituencies are comprised of the 14 provinces in Syria in addition to the electoral district of Rural Aleppo. Voters from Idlib province will have the options of casting their ballots in the provinces of Damascus, Aleppo, Hama, Lattakia and Tartous. Voters from Raqqa will be able to vote in the provinces of Damascus, Hama, Lattakia, Tartous and Hassakeh. Voters in Aleppo will have the opportunity to vote in Aleppo if it is possible to do so but otherwise, they can cast their ballots in Damascus, Lattakia or Tartous. The polling stations for the electoral constituency of Deir Ez-Zor will be set up in the safe areas of Deir Ez-Zor as well as in Damascus and Hassakeh. Finally, voters in Daraa will have the option of voting in their home province or in the provinces of Damascus, Rural Damascus or Suwaida. Moreover, voting will only take place in Syria and no polling stations will be set up overseas.
  • The Council of Ministers has approved a bill restructuring the Ministry of Culture.

Tourism

  • The Ministry of Tourism is preparing a new investment law for its respective sector, which will be part of the general investment legislation in Syria. The new law is expected to replace the Tourism Investment Rules.
  • The government is reconsidering the tax exemptions provided for in the Tourism Investment Rules. Plans are currently underway to impose smart taxes on tourism projects in order to encourage investments in this sector and deter unfair tax practices. The Ministry of Tourism is arguing that smart taxes will benefit the tourism sector and the Ministry of Finance by increasing revenues to the Public Treasury.
  • The Ministry of Tourism is working on establishing free zones to provide facilities for touristic investments. There are currently plans for four such touristic free zones, including one in Tartous province and three in Lattakia province.
  • Proposals are also being put forward by interested parties to amend the Chambers of Tourism Law 65/2002 in order to encourage growth in the touristic industry.

Commerce

  • The Ministry of Economy and Foreign Trade is facilitating the issuance of import licenses for the industrial and agricultural sectors.
  • The Minister of Finance has told MPs in the People’s Assembly that import licenses for basic goods and food items are being granted in line with the priorities to meet the basic needs of Syrians.
  • Much imported cargo was recently stopped at the seaports in Syria because merchants did not obtain the required import licenses beforehand. The merchants complained that the government issues import regulations without warning and right after their goods have arrived at the ports, which leaves them in a precarious position. Nevertheless, the Ministry of Economy and Foreign Trade soon thereafter began granting import licenses to merchants using Lattakia Port while stressing the need for legal compliance with import regulations.
  • Importers have been calling for more transparency on the government’s side when granting import licenses as some merchants only wait two days to receive approval after filing their applications while for others, it takes much longer.
  • The Ministry of Economy and Foreign Trade has also been complaining that merchants are taking advantage of import licenses to bring in unauthorized goods into Syria.
  • The Ministry of Economy and Foreign Trade has reiterated that importing goods through intermediaries is prohibited and must be done by the business entity itself.
  • The Customs Court has explained that most violations related to imports are settled in the Customs Directorate without the need to resort to the judiciary.
  • After the issuance of a number of import finance regulations, the President of the Federation of Syrian Chambers of Commerce has called for an independent advisory council to help the government get out of the current economic crisis.
  • The Economic Committee, which is linked to the Council of Ministers, is studying a new pricing mechanism put forward by the Ministry of Internal Trade and Consumer Protection to reflect the prices of imports after the issuance of the recent import regulations. While on this subject, the Ministry is seeking a new compulsory pricing strategy for food and other important consumer items.
  • The Ministry of Agriculture has issued a regulation laying down conditions for the importation of cows into Syria.
  • News reports suggest that merchants have been feeling the pinch of commercial legislation starting with the new Consumer Protection Law, the recent import regulations that are quite restrictive, the latest customs decisions and so forth. Merchants wishing to import goods must now pay deposits beforehand and must also not be benefitting from any credit facilities. New controls also limit what goods can be sent to the free zones in Syria.
  • A committee has been formed to amend the new Consumer Protection Law barely eight months since it was enacted in order to fill in the gaps that have already emerged in its application.
  • Reports suggest that approximately 75 merchants break the law everyday in the province of Rural Damascus. Meanwhile, 620 merchants in Rural Damascus remedied the breaches they committed under the Consumer Protection Law since the beginning of this year.
  • The Ministry of Internal Trade and Consumer Protection has discovered 5,000 irregularities in the markets committed by merchants over the past month. Consequently, 210 businesses have been shut down and 35 merchants have been referred to the judiciary.
  • The Competition Protection and Anti-Monopoly Commission has listed a number of obstacles impeding fair competition within the Syrian economy such as market abuse, complicity and so forth.

Public Procurement

  • The Ministry of Industry has offered 27 of its companies for private sector investment in accordance with the Public-Private Partnership (PPP) Law. The Ministry also reiterated that PPP projects do not constitute privatization or abandonment of the public sector.
  • The Deputy Minister of Public Works has advised contractors to consider the PPP Law, which is envisioned to have a beneficial impact on the construction sector and attract players from abroad to set up in Syria. He called on contractors to cooperate with each other, or create companies or partner up with the public sector. He predicted that the size of the state’s projects in the next phase will be on a grand scale and beyond the capacity of individuals. As a result, Syria will require strong and competitive companies in the future.
  • The Deputy Minister of Public Works has sought to address the persistent increases in foreign exchange rates affecting contractors who undertake projects tendered out by the state. He stated that it was important to refer to the recently-issued Regulation 26/2016, which allows bids to be submitted in foreign currencies as opposed to being denominated in Syrian Pounds. He also explained that the contractual dues shall be paid as per the prevailing foreign exchange rate at the beginning of the project.
  • Contractors are still seeking the issuance of the law that would terminate public contracts and the subsequent reimbursement of stamp duties in an attempt to limit damage to their interests. The President of the Rural Damascus Contractors Syndicate has explained that the government hesitated at the beginning to issue a law to terminate public contracts. The government appeared concerned about the estimated enormous costs that it interpreted as being associated with the process. However, the Syndicate held that the costs involved would not have a material effect on the Public Treasury’s finances as they would merely include refunding bond and retention payments to contractors. It was also revealed that there are around 10,000 contracts or projects that meet the requirements for contractual termination.
  • Private sector contractors have rejected any decisions by the Council of Ministers to exclude them from undertaking projects tendered out by the state. The President of the Rural Damascus Contractors Syndicate confirmed that contractors have requested the Prime Minister to reverse the government’s decision to award public contracts solely to public sector companies. The Deputy Minister of Public Works has reiterated that private contractors are one of the main pillars of the construction sector in Syria and any attempt to exclude them is rejected.
  • The President of the Rural Damascus Contractors Syndicate has complained that the Ministry of Finance continues to impose a four-percent tax on compensatory payments awarded to contractors. The payments are intended to make up for price differences caused by significant inflation in the markets. It has been argued that the tax is contrary to laws that exempt such compensation from taxes and duties.
  • The Governor of Rural Damascus has promised to address problems faced by contractors, which have mainly stemmed from factors such as foreign exchange fluctuations and inflation.
  • The Deputy Minister of Public Works has stated that potential amendments to the Public Procurement Law are currently under review.
  • The government has laid down procedures for public sector entities to follow when contracting with experts and consultants.

Finance

  • Law 12/2016 sets up the Loan Guarantee Establishment (LGE). Headquartered in Damascus with a capital of SYP 5 billion, the LGE is to take the form of a private joint stock company that does not offer its shares to the public. The Central Bank and certain financial institutions can contribute to its capital but foreign shareholders are limited to a 49% shareholding. The LGE’s main objective will be to guarantee loans by banks and other financial institutions to small and medium-sized enterprises (SMEs). By guaranteeing loans to SMEs, the LGE will seek to bolster their position in the economy. Furthermore, it is expected to give banks and other financial institutions a certain degree of confidence to lend money to SMEs. The LGE is permitted to invest its surplus funds at a value of no more than 25% of its capital in low-risk financial investments. The Economic Committee, which is linked to the Council of Ministers, welcomed the People’s Assembly’s passage of this Law.
  • The Customs Directorate has reported that the Customs Bill, which is expected to replace the current Law, will be passed soon but the President of the Federation of Syrian Chambers of Commerce has confirmed claims by merchants that they have not seen the final draft yet.
  • The Minister of Finance has told MPs in the People’s Assembly that a main factor causing the depreciation of the Syrian Pound recently is the smuggling of goods into Syria. In this respect, the Minister called on the Customs Directorate to do more to protect the country’s borders from such illicit activities.
  • The Ministry of Interior has ordered the arrest of offenders accused of currency manipulation in the provinces of Damascus, Aleppo, Hama, Lattakia and Suwaida. They were suspected of exploiting the Syrian Pound through their illegal foreign exchange activities and causing it to depreciate in value. In total, 63 crimes were discovered and 104 offenders were arrested as of the beginning of 2016.
  • Banks have informed the government that it is illegal to prevent them from enforcing the charges they possess on industrial facilities.
  • The Central Bank has requested feedback from public banks on a proposal to exempt the loans of fallen soldiers and fighters from interest and penalty payments for a period of five years.
  • The Council of Ministers has approved a bill amending the Local Councils Finance Law, which seeks to unify the financial laws related to revenues collected by local councils throughout Syria. The bill will seek to ensure that the councils are supplied with new resources to help them improve their financial positions, which will enable them to carry out their projects and provide better services to Syrians.

Taxation

  • The Minister of Finance has answered questions from MPs in the People’s Assembly relating to tax reform. During the parliamentary session, he stated that his Ministry is continuing with efforts to deter tax evasion. In doing so, he believes that the Billing Bill and a bill regulating real estate sales will help increase revenues to the Public Treasury.
  • The Council of Ministers initially approved the draft law pertaining to the billing system, which will have consequences for the tax system. The Draft Billing Law was submitted to the government for approval after amendments by the Ministry of Finance were included. The Ministry of Finance held discussions about the provisions of the Draft Law after receiving feedback from the Damascus Chamber of Commerce and other interested parties. Despite its initial approval, the Ministry of Finance has confirmed that the Draft Law was returned to it by the Council of Ministers so that it could work alongside the Ministry of Justice to develop the executive regulations, which will accompany the bill upon enactment. Once completed, the Draft Law will be sent back to the Council of Ministers for approval once again. If enacted, this piece of legislation will introduce the billing system into Syria, which is anticipated to have a positive effect on the economy and the operation of the tax system. It is also envisioned that the billing system will help curb any fraudulent activity and increase transparency especially when it concerns customs documents. There are hopes it will have an effect on limiting transactions in the informal economy. Additionally, the Ministry of Finance has stated that the Draft Billing Law will complement the provisions of the recently-enacted Consumer Protection Law.
  • There is a general consensus that tax reform without the passage of the Billing Bill is not going to be productive or forthcoming. At the same time, there is mounting frustration that work on this piece of legislation has been ongoing for the past eight years.
  • A bill regulating real estate sales was submitted to the government for consideration following its earlier approval of a bill amending the Capital Gains Tax Law.
  • Iran plans to reduce customs duties on goods imported from Syria to four percent starting this month.
  • The Ministry of Economy and Foreign Trade has stressed that Syrian merchants wishing to export goods to Russia can obtain a reduction in customs duties by 25% on certain designated goods.
  • The Ministry of Finance is seeking fairer tax exemptions that would stimulate economic activity, particularly in the industrial and touristic sectors.

Transport

  • With an eye towards reconstruction, the Ministry of Transport is looking at new laws to regulate the transport of goods and persons, and intermodal transport.
  • The Ministry of Transport is studying the possibilities of separating the ownership and management of assets under its jurisdiction in order to encourage private sector investments and promote public-private partnership projects.
  • The Ministry of Transport has licensed 16 shipping agencies in accordance with the Maritime Law since the beginning of 2016.

Arbitration

  • The Minister of Justice has affirmed that amendments to the Arbitration Law will take into account global legislative standards on the one hand and international practices in the operation of arbitration centers on the other. He acknowledged that Syria is seeking a modern law that incorporates high standards in an attempt to meet the needs of reconstruction.

Property

  • President Bashar Al-Assad laid the foundation stone for the Al-Razi development project, which was sanctioned by Legislative Decree 66/2012. The law aims to carry out an urban redevelopment project in informal parts of southern Damascus that were the scenes of intense fighting during the current unrest.
  • The General Housing Establishment, which concerns itself with social housing schemes, has determined the conditions to be met for the disposal of properties under its jurisdiction as provided for in contractual agreements.

Social Affairs

  • The People’s Assembly has begun discussing the Civil Society Bill while consulting with the Syrian Bar Association regarding its provisions. Last summer, the Constitutional Committee in the People’s Assembly approved the draft law, which is expected to replace the current Law 93/1958 dating back from the era of the United Arab Republic. If passed, the new law is expected to regulate the increasing number of non-governmental organizations that have sprung up around the country in recent years in response to the ongoing conflict.
  • The Ministry of Justice has formed a committee to prepare a bill that would combat the illegal smuggling of migrants and protect them from attacks abroad.

Employment

  • The Minister of Labour has confirmed that the Public Employment Bill is in the final stage of drafting before being submitted to the government for final approval. It was delayed because of the issue of public sector salaries, which required a redrafting of the bill.
  • Following proposals, the Public Employment Bill will include conditions for offering temporary workers permanent job security in the public sector. The Minister of Labour has confirmed that this issue will be addressed in the bill.
  • The government has laid down procedures for granting public sector employees leave as the process has hitherto been restrictive.

Education

  • Law 9/2016 establishes a pension fund for teachers.
  • Law 11/2016 establishes the Scientific Excellence and Creativity Agency, which will be linked to the Minister of Higher Education.
  • The Council of Ministers has discussed a draft decree to establish a private university in the city of Banias in Tartous province.

Immigration

  • The Ministry of Interior has raised the validity period for passports belonging to Syrian expatriates to six years after it was previously two years.

Judiciary

  • According to the Minister of Justice, the Criminal Procedure Bill requires six months of consultations with interested parties before it can be submitted to the government for approval. If enacted, the bill would replace the current Criminal Procedure Code that regulates the criminal court system and which dates back to 1950.
  • The Minister of Justice hopes that one day Syria will reestablish the Court of Audit similar to the one in France to audit public institutions. While the Court of Audit did previously operate in Syria, it became the Central Financial Supervision Agency. While it is currently attached to the executive branch, the Minister would like to see a judicial body emerge in its place.
  • Decree 81/2016 establishes more courts and judicial bodies in the province of Tartous.
  • Decree 99/2016 creates depositories throughout Syria for storing documents and articles related to criminal cases.

Environment

  • The Minister of State for Environmental Affairs has stated that new environmental legislation will be needed to meet the requirements of reconstruction.

Syndicates

  • The Council of Ministers has approved a bill amending the law that regulates the Plastic Artists Union.