Legal Briefing – August 2018

Property

• A prominent UAE businessman arrived in Damascus and met with officials from Damascus Cham Holding – both the Governor of Damascus in his capacity as the Chairman of the Company, and the CEO – to discuss potential real estate investments and a possible joint venture in Marota City.
• The Director of the General Commission for Real Estate Development and Investment announced the upcoming launch of a development project located in an informal area of Aleppo.
• New legislation governing real estate development is expected to be issued soon which will regulate off-plan sales and the role played by banks as intermediaries between property developers and buyers in guaranteeing payments. The new law will add to existing legislation, which provides incentives and exemptions to investors such as easier means to import necessary materials and machinery to construct real estate developments. The current Law 15/2008 already provides taxation benefits as well as provisions for the repatriation of profits.

Reconstruction

• More than 300 businesspersons representing around 20 countries will descend on Damascus next month to participate in a forum that will discuss the reconstruction stage and related investment opportunities.
• The government is planning to launch an initiative to encourage Syrian expatriates to return, invest and participate in the reconstruction process. Syrians overseas possess high levels of capital which would be instrumental in helping their country to rebuild.
• Chinese Special Envoy for Syria Xie Xiaoyan expressed hope that the international community will accord special interest to the issue of post-war reconstruction in Syria and will participate, noting the need to secure basic security conditions in parallel with the rebuilding.
• Russia is to provide Syria with an electronic system that will facilitate urban planning in the framework of the reconstruction process.
• The relevant authorities have completed a number of projects in the province of Deir Ez-Zor to restore public services after it was returned to governmental control last year. The work undertaken includes those relating to the Civil Registry and the telecommunications infrastructure.
• Prime Minister Imad Khamis has led a governmental delegation to Daraa to consider the needs required to rehabilitate public services.
• Thousands of Syrians began returning to the Damascus suburb of Daraya, two years after the government restored control.
• Talks between the government in Damascus and Kurdish leaders are progressing. The government is reportedly proposing converting the Kurdish autonomous region in northeastern Syria into local administrative units governed in accordance with the Local Administration Law. The proposal is to cancel the de facto autonomous status of the Kurdish-led regions and govern them according to local council structures laid down in the Law. The Law, which dates back to 2011, was hardly applied to those regions since government control there was ceded in the summer of 2012. The presumption is that just as the Law applies to Damascus and other districts it would also apply to the northeastern region. Whether there will be special distinctions on some issues remain to be seen.

Corporate

• According to the Damascus Securities Exchange, a bill that would see family businesses being converted into joint stock companies is being reviewed by the Ministry of Finance before it is submitted to the Council of Ministers.

Investments

• The Syrian government is preparing a list of 200 investment projects it will make available to the private sector on a public-private partnership (PPP) basis during the reconstruction stage. Syria issued its PPP Law in January 2016.

Finance

• The Minister of Finance announced that the Central Bank will issue certificates of deposit denominated in US Dollars which will yield an interest rate of 4.25%. The measure is aimed at encouraging Syrians to repatriate their funds and deposit them in Syrian banks.
• In addition to certificates of deposit, the Central Bank allowed the banks operating in Syria to accept direct deposits in either US Dollars or Euros provided that the deposits meet the minimum requirement of $1 million or €1 million.
• The Central Bank has amended its interest rates regime concerning how much banks will have to pay customers for their deposits. Syrian banks will now have to pay interest rates of seven percent on one-month deposits and 10% on investment certificates. Depositors can also now open multiple savings accounts of up to SYP 5 million, which is up from only one savings account of SYP 1 million.
• Deposits in Syria’s private banks during the first quarter of 2018 exceeded SYP 930 billion.
• A Bahraini company granted Syria Gulf Bank, a local private bank, a $2.5 million loan without interest and payable over a period of 10 years.
• There has been talk recently of reforming the public banking sector. A number of ideas have been floated such as the merger of some banks, the corporatization of public banks by converting them into state-owned joint stock companies and so forth. A bill is also being drafted that will adopt a modernized approach as to how public banks should be managed. Furthermore, the Minister of Finance clarified that there is no intention to return authority over the six publicly-owned banks to the Ministry of Economy and Foreign Trade as they will continue to be subordinate to the Ministry of Finance. As far as technical supervision is concerned, this responsibility lies with the Central Bank and its governing body the Monetary and Credit Council.
• The former Minister of Economy and Trade proposed the issuance of a Syrian cryptocurrency to be utilized during the reconstruction stage.
• The depreciation of the Turkish Lira contrasted with the value of the Syrian Pound, which has pretty much remained stable for some time now, will have interesting economic effects in northern Syria where there is a Turkish occupation. Turkey pays its proxies in Turkish Liras. Armed groups who once held sway in southern Syria and moved up north following their defeat have taken with them Syrian Pounds, which has helped to challenge the status of the Turkish Lira in northern Syria. The depreciation of the Turkish currency, capital inflows of Syrian Pounds from southern to northern Syria and the pending offensive by the Syrian Army to retake Idlib undoubtedly will all weigh heavily on the eventual decline of the Turkish Lira in northern Syria. In areas of Idlib and Rural Aleppo that are under Turkish occupation, the illegal circulation and use of the unstable and volatile Turkish Lira is causing inflation and panic in the markets.

International Trade

• News reports suggest that Greece has resumed phosphate imports from Syria. From 2009 to 2011, Syria supplied almost a fifth of EU imports of phosphate but those sales collapsed during the war.
• The Jordanian Chamber of Commerce confirmed that it is sending a delegation of 100 businessmen to Syria to participate in the 60th Damascus International Fair in an attempt to help normalize economic relations between Syria and Jordan. The visit will also be aimed at hastening the reopening of the Nassib border crossing. Opened in 1997, the Nassib crossing on the Syrian-Jordanian border serves as a major transit route facilitating trade relations between European, Levantine and Gulf countries with substantial benefits for both Jordan and Lebanon. The crossing aids exports of Syrian and Lebanese goods particularly to the Gulf countries by land routes. Syria also earns a great deal from transit fees. The Nassib crossing was taken over by armed groups in 2015 thus cutting out a transit point for trade. More recently, the Syrian Ministry of Transport confirmed that the border crossing is now ready to resume operations after the Syrian government retook control earlier this year.
• Syria and Russia are in talks to establish a major trade area between the two countries on the Crimean peninsula. Crimea could serve as a transit point for Syrian goods to other markets as well as for those destined to the Russian markets.
• In order to support exports, the Ministry of Economy and Foreign Trade stated that the shipment of goods under export contracts signed at the Damascus International Fair will be 100% free of charges. Syrian products are now reaching more than 100 countries despite the international sanctions imposed on Syria. A Syrian merchant involved in the production of foodstuffs has revealed that the number of countries importing Syrian goods stands at around 110.
• The total value of import licenses granted by the Ministry of Economy and Foreign Trade during the first half of 2018 amounted to €2.85 billion.

Commerce

• A new businessman emerging on the local scene has been granted the right to operate the Massa Plaza mall, which is located in the upscale Damascus district of Malki. The Governorate of Damascus had signed off on a build-operate-transfer contract with the previous investor many years back before the conflict whereby the provincial authority would provide the land and the investor would build and operate the mall. The Governorate was entitled to a share in the profits along with rent payable by the investor. Nevertheless, the government established a committee to review lease contracts to account for the significant inflation that has plagued Syria since the war erupted in 2011. In the end, the Governorate terminated its earlier agreement with the initial investor and instead concluded a deal with the new businessman who offered to pay a higher rental price. The new businessman is known for his investments in the retail and hospitality sectors, such as the Qassioun Mall and the Al-Jalaa Hotel.
• The Minister of Internal Trade and Consumer Protection continued his campaign to shut down any establishment, particularly those involved in the sale of foodstuffs, which did not abide by health and safety standards.

Industry

• President Bashar Al-Assad greeted workers from the Rastan Cement Factory who lived under siege for seven years at the plant while protecting its facilities. Their presence prevented the factory from being looted and as a result, it can now resume production.
• The Chairman of the Damascus Chamber of Commerce has warned that relocating industrialists from the Damascus district of Qaboun will have severe negative repercussions on their profession. The government is looking to convert the industrial zone in Qaboun into a residential one and wants to lure factory owners to other industrial areas such as the one in Adra just outside of Damascus. There is added frustration as industrialists had already begun renovating their factories in Qaboun months ago at the request of the government.
• The Investment Directorate at the Ministry of Industry asserted that 376 facilities and investment projects started production in the first half of 2018 with a capital of more than SYP 10 billion. Moreover, they provided 1,712 job opportunities.

Energy

• The Aleppo MP and businessman who was elected in 2016 and recently formed an oil services company has incorporated a private joint stock company with a share capital of SYP 1 billion to be known as Aleppo Holding, which will undertake investments in various sectors.

Transport

• Reports suggest that a Syrian cargo ship flying the Syrian flag was spotted crossing the Bosporus Strait in Turkey. The Syrian General Establishment for Maritime Transport owns three cargo ships whose routes are focused on the Mediterranean Sea and the Black Sea. The sighting is significant because it is the first time a Syrian ship has crossed into Turkish waters since diplomatic relations were severed between Damascus and Ankara following Turkish support for armed groups seeking to topple the Syrian state.
• The Council of Ministers gave the green light to the national carrier Syrian Air to purchase several new airplanes for its fleet.
• Several European and Arab airline companies have expressed a desire to resume flights to Syria according to the Ministry of Transport.
• Iraqi-based Fly Baghdad became the first Arab airline to begin flights to Syria after it obtained the necessary permits from the Ministry of Transport in Damascus. The days when only Syrian airliners could be spotted at Damascus International Airport are therefore officially over. The first foreign-based airliner made its first trip to Syria from Iraq and touched down in the capital.
• According to Royal Jordanian Airlines CEO Stefan Pichler, the company’s core market is in the Levant, including Iraq and Iran. He confirmed that some destinations such as Damascus are suspended temporarily but that he hoped would reopen soon.

Tourism

• The Ministry of Tourism granted a license to the Russian company Stroytransgaz to develop a five star hotel and chalets at the Manara site in Tartous. The investment is expected to cost more than SYP 18 billion.

Health

• A leading Syrian businessman is expected to open a pharmaceutical plant that will produce 42 types of cancer treatment drugs early next year. Once built, the factory will be the first of its kind in the Middle East.
• A UAE company has contributed 50% of the share capital in a company incorporated in Syria that will provide medical equipment.

Education

• The first Russian school in the Middle East is expected to open soon in Damascus.
• Hundreds of local residents in the northern city of Qamishli protested against the de facto Kurdish authorities imposing a curriculum on schools which differs from the official curriculum issued by the Ministry of Education.
• President Bashar Al-Assad issued Decree 273/2018 establishing the Faculty of Health Sciences at the University of Damascus.

Employment

• The issue of salary and wage increases for public sector employees continues to remain on the government’s agenda though it is not clear when the measure will be implemented.
• A number of public sector employees holding management positions in publicly-owned companies have been replaced recently, in what is being interpreted as a clampdown on misuses of office.
• Saudi Arabia’s Saudization policy of getting more Saudi nationals into employment has led to expatriate employees such as Syrians being made redundant. As for those Syrians who are not being made redundant, they may leave Saudi Arabia rather because of the hefty taxes also being levied on expatriates. While some of these expatriate Syrians are deciding to return home to Syria to seek opportunities as the conflict winds down, a good number of them with substantial savings earned in Saudi Arabia are opting to invest in Turkey and obtain residency permits.

Immigration

• The Council of Ministers approved a bill aimed at preventing the smuggling of persons and the protection of migrants.
• A new ministerial body will coordinate the return of Syrian refugees to Syria from overseas.
• The Polish government dispatched its Deputy Foreign Minister to Damascus where he announced that Poland will help build accommodation to house Syrian refugees returning from Lebanon.

Local Councils

• Nominations for local council elections have closed. A total of 49,096 candidates have registered their intentions to stand in the nationwide poll to be held on September 16th, the first of its kind since December 12, 2011.
• The local council elections planned for September 16th may be the most significant in modern times. Following passage of the Urban Renewal Law, local councils are given the authority to oversee real estate development projects like Marota City, which are envisioned to be part of the reconstruction process.

Arbitration

• A graduation ceremony was held for the first batch of arbitrators accredited to the Damascus Regional Centre for International Arbitration. During the ceremony, the Minister of Justice emphasized the importance of developing the culture of arbitration in Syria further to resolve commercial disputes.

Judiciary

• Unconfirmed reports suggest that a Damascus court issued attachment orders freezing the assets of 58 public opposition figures based overseas for conspiring against the Syrian state.
• The Ministry of Justice is rehabilitating the courts in Eastern Ghouta outside Damascus in order to resume operations in the foreseeable future.
• As part of its judicial reform program, the Ministry of Justice is carrying out a process to amend relevant legislative provisions in pursuance of its anti-corruption drive.
• The Chairman of the Damascus Chamber of Industry has called for the abolition of banking courts. He cited their draconian use of travel bans and asset freezes which he deemed unacceptable and counterproductive to the goal of getting industrialists to repay outstanding business loans.

Criminal

• The Anti-Money Laundering and Terrorism Financing Commission investigated 288 suspicious cases in 2017.

International

• Syria and Iran signed a military cooperation and reconstruction agreement following the visit of the Iranian Minister of Defence and his accompanying delegation to Damascus. Iran’s military attaché to Damascus said that the country’s military advisers would remain in Syria under the recently inked agreement.
• Canadian authorities are pursuing their first sanctions case against a Syrian businessman for allegedly breaching the Canadian sanctions regime against Syria put in place in 2011 by engaging in unauthorized investments and payments in the country.