Syrian Law Journal

Legal Briefing – February 2020

by · 02/03/2020

Finance

  • The Council of Ministers tasked the Ministry of Interior, the Ministry of Justice and the Central Bank with formulating executive regulations for the implementation of Legislative Decrees 3/2020 and 4/2020 forbidding transactions in currencies other than the Syrian Pound.
  • The Ministry of Interior clarified that undated documents or invoices issued by businesses in currencies other than the Syrian Pound will be presumed to be evidencing transactions that occurred after January 19, 2020, thereby implicating their owners under Legislative Decree 3/2020.
  • The Governor of the Central Bank agreed to support fruit and vegetable exporters by granting them an additional 15% on the preferential foreign exchange rate so that they obtain SYP 805 for every US Dollar. Moreover, the Central Bank announced that it is willing to buy foreign exchange generated from Syrian exports from the respective exporters at the preferential rate of SYP 805 per US Dollar while offering them priority in financing their imports.
  • The Central Bank issued a new bulletin to set the foreign exchange rate at approximately SYP 700 per US Dollar for the purposes of determining customs duties and pricing airplane tickets in foreign currencies. The rate was previously around SYP 435 per US Dollar. The measure is expected to raise the amounts of customs duties payable by importers by around 60%, which would in theory lead to an increase in prices in the markets. However, the government is planning to mitigate the effect on consumers by reducing other administrative fees.
  • The Central Bank issued a resolution permitting beneficiaries of remittances from overseas which are processed by international money transfer companies to receive them in Syrian Pounds at the preferential rate of SYP 700 per US Dollar.
  • The Central Bank approved the executive regulations to Resolution 5/2020 issued by the Council of Ministers requiring all real estate and automobile sale transactions to be conducted through bank transfers in a declared bid to increase transparency and reduce dependency on cash payments. Nevertheless, the Resolution is being labeled as unconstitutional. The argument is that since the right to contract in cash or otherwise is a private right guaranteed to individuals in the Civil Code, then only the People’s Assembly can amend the Civil Code to make such rules. Resolution 5/2020 will not apply to the assignment of subleases authorized under old rental legislation or mortgage contracts. In addition to spreading the banking culture among citizens with this new Resolution, which will require them to open bank accounts to complete such transactions, another aim is to help prepare the groundwork for the processing of electronic payments.
  • After a long pause, the government issued its first treasury bill referred to as TB060222 and worth SYP 148.5 billion. Its coupon rate was set at 6.70% and its maturity period was fixed at two years. Seven banks subscribed to the treasury bill during the auction.
  • The Central Bank confirmed that it fulfilled its financial obligations towards the subscribers of its first issuance of certificates of deposit, being 16 state-owned and private banks, which were due on February 21, 2020.
  • The Central Bank finally approved a proposal to raise the ceilings of housing loans granted by the state-owned Real Estate Bank. The loan amounts for purchases will be increased to SYP 15 million from SYP 5 million and SYP 4 million from SYP 2 million for renovations.
  • The Commercial Bank of Syria obtained approval to offer loans for the purchase of commercial premises and residences with a ceiling of SYP 100 million.
  • The Director of Foreign Relations at the Central Bank revealed the details of the new regulations issued by the Monetary and Credit Council pertaining to the amounts of foreign currency travelers arriving to or departing from Syria are entitled to possess. Persons arriving in Syria regardless of their nationality can carry a maximum amount of $100,000 (US). Any amount in excess of $5,000 must however be declared to the Customs Department, which will then grant a permit to the traveler to carry the money into Syria. The funds can then be deposited in any bank located at the border and the money can be collected from any branch within the country without any limitations. There will be facilities to open such bank accounts. For Syrian nationals departing Syria, they can carry with them a maximum amount of $10,000 and must declare any funds over $1,000 to the Customs Department. Foreigners departing Syria can carry with them a maximum amount of $5,000 or the amount they declared on entry into Syria.
  • The Central Bank confirmed that citizens have the right to withdraw $5,000 (US) from their banks on a daily basis.

Insurance

  • The Insurance Supervisory Commission licensed two insurance brokerage firms with a capital of SYP 50 million each.

International Trade

  • The Council of Ministers agreed to grant merchants exemptions from certain fees on imports and exports to ease pressures currently facing the local markets while mandating the Ministry of Finance to find alternative means to cover the resulting deficit.
  • The government made plans to exempt the importation of basic goods from the full force of the import deposit rules, which require 40% of the value of the imports to be paid upfront before issuance of the import license. The Ministry of Economy and Foreign Trade subsequently exempted 11 basic goods from 25% of the import deposit requirement.
  • Prime Minister Imad Khamis agreed to exempt manufacturers who contract with public sector entities from the import deposit rules in an effort to facilitate the importation of the necessary raw materials and to support local production in general.
  • The Syrian Minister of Transport is preparing to meet his Jordanian counterpart soon as part of plans to facilitate the movement of Syrian trucks into Jordan in order to support exports of Syrian goods. In this respect, Syria is willing to reduce transit fees on trucks crossing its territory from 17% to 10% as a gesture of goodwill. The Minister of Transport even hinted that the government is flexible on the remaining 10% and could potentiality waive it.
  • Jordanian authorities reduced the fees imposed on Syrian trucks entering its territory, which will help increase exports of Syrian goods to the Arab countries. The measure reciprocates a similar move by Syria abolishing additional fees imposed on Jordanian trucks entering Syria.
  • Trade exchange between Syria and Iraq at the Abou Kamal border is limited with appropriately 20 Syrian trucks crossing per day. 80% of Syrian exports to Iraq include citrus fruits, in addition to various kinds of foodstuffs, metals, plastics and clothes.

Commerce

  • Subsidized quantities of sugar, rice and tea are now being offered on the smart card program in addition to allowances for fuel products.
  • Prime Minister Imad Khamis affirmed that the state-owned Syrian Trade Establishment will meet the demands of consumers so as to foil monopolistic practices in the markets that may otherwise arise due to a decline in the number of traders following increased import restrictions.
  • Despite the controversy surrounding the Chambers of Commerce Bill over the last few months, it appears to be progressing through the People’s Assembly with limited objections at times, such as during the session to vote on the articles regulating the election of the boards of directors. There was however much debate and disagreement among MPs within the People’s Assembly about whether they should refer Article 47 of the Chambers of Commerce Bill back to its respective committee for review as it touches on the powers of the boards. Controversy over the Chambers of Commerce Bill continued in the People’s Assembly as MPs voiced positions on its procedural aspects and its merits in general, even including exchanges involving the Speaker of the People’s Assembly. Some articles, though amended, were approved.

Industry

  • The Ministry of Economy and Foreign Trade is pushing forward with its import substitution program and is targeting 67 items that it wants local manufacturers to produce so as to avoid their importation. The objective is to reduce demand for foreign exchange to pay for imports. Some proposals to facilitate the program include reducing customs duties on raw materials needed for production while increasing customs duties on manufactured goods from overseas to make local products more competitive in the markets. Further import controls may also be imposed. There are also ideas to allocate lands in industrial parks for the construction of factories on attractive terms while the provision of financial facilities to manufacturers is also being considered. Meanwhile, some merchants are warning that certain goods may disappear from the markets in the coming months due to difficulties associated with financing their purchase and the granting of import licenses.
  • Syrian businessmen in Egypt are calling for a revision to legislation hindering their return to Syria to rehabilitate their factories, including travel bans ordered in response to unpaid loans and the issuance of tax exemptions to encourage local industries.
  • The Arab Swiss Engineering Company, also known as ASEC Cement, is considering resuming the operations of its Syria-based subsidiary ASEC Syria Cement Company, which was incorporated in 2007 and ceased work during the war.
  • The Minister of Economy and Foreign Trade emphasized that the new Investment Bill will grant incentives to investors who produce goods for export, utilize local materials in production and create job opportunities for Syrian workers. The Bill, which is comprised of 52 articles, is currently under deliberation in the Economic Affairs Committee of the People’s Assembly before it is submitted to MPs for a vote.

Real Estate

  • The EU imposed a new round of sanctions targeting eight businessmen and two corporations in Syria, including newly emerged business personalities, the Governor of Damascus and Damascus Cham Holding, the latter two linked to the development of the Marota City real estate project.
  • Business owners with interests in the Damascus district of Qaboun are threatening legal action against the Governorate of Damascus in the Council of State, the body entrusted with adjudicating disputes where government entities are a party, and the Supreme Constitutional Court if the Urban Renewal Law is applied to the district in question in the absence of formal legislation.
  • A real estate development company submitted a request to the General Commission for Real Estate Development and Investment to obtain a license to create a large real estate development zone in the province of Aleppo which would include more than 4,000 apartments.
  • An MP revealed that the Real Estate Sales Bill, which would utilize actual market valuations as opposed to outdated figures in determining tax liability on property sales, has been suspended for the time being.

Intellectual Property

  • There may be plans to abolish the commercial registration requirement as a precondition for registering trademark ownerships when applied for by certain professionals including lawyers, doctors, engineers and so forth.

Energy

  • Prominent businessman Rami Makhlouf stated that he paid more than was required to lift the provisional attachment order against his assets but to no avail. He argued that the procedures are time consuming and denied any link to Abar Petroleum, which also had its assets frozen. He further complained that the relevant authorities did not correctly apply the legal procedures to verify the ownership of Abar Petroleum, which is registered in Lebanon, and rather relied on informal customs records that bore his name. On December 23, 2019, the Customs Department imposed a provisional attachment order against Makhlouf’s assets, including his wife’s, and those of Abar Petroleum citing allegations of customs violations including smuggling. To avoid disruptions to his businesses, Makhlouf confirmed that he signed a settlement agreement with the Customs Department on December 29, 2019 and paid SYP 7 billion of his own money, an amount that exceeds the demanded sum from Abar Petroleum despite denying any links to it. Makhlouf added that imports of gas and diesel, such as from companies like Abar Petroleum, are facilitated without the need to provide customs declarations or pay duties since they are for the benefit of the Syrian state. Thus, he held that such acts did not constitute smuggling.
  • The Ministry of Petroleum and Mineral Resources announced that the contracted supplies of oil derivatives to Syria since June 2019 amounted to 237,000 tons but the actual amounts supplied to date did not exceed 89,000 tons, or approximately 38% of the contracted supplies.
  • The Ministry of Electricity concluded a contract with an Iranian company worth SYP 60 billion to rehabilitate a power turbine in Aleppo.

Transport

  • The Civil Aviation Authority revealed that Venezuelan Airlines will resume flights to Damascus in March. The Public Treasury is earning approximately $2 million per month in fees from airplanes crossing Syrian airspace with nearly half of revenues coming from Qatar Airways.
  • The Director of the Civil Aviation Authority revealed that three local companies are in the process of receiving their aviation licenses in accordance with Resolution 17/2020 while there are more than 20 companies that applied for such a license. The Minister of Transport issued Resolution 17/2020 requiring aviation companies to register accordingly in the Commercial Registry and to possess a share capital of at least SYP 500 million, not including the value of their airplanes, before applying for their aviation license.
  • Transport networks in Aleppo are to resume operations with the reopening of the M5 Damascus-Aleppo Highway and Aleppo International Airport where flights have already been scheduled. Regular flights are set to be launched between Aleppo and Damascus and Aleppo and Cairo following the reopening of Aleppo International Airport.
  • Following disputes between the workers in Tartous Port and their union on the one hand and the new operator, the Russian company Stroytransgaz, an agreement is being worked out between both sides that preserves the former’s legal rights in accordance with employment legislation.
  • The Ministry of Economy and Foreign Trade issued a license to an Emirati road contracting company to incorporate a branch in Syria. At its official meeting held in Dubai, the company appointed its general manager in Syria.
  • During the Middle East Rail exhibition in Dubai, the Syrian Ministry of Transport presented the suburban train project where some European consulting companies expressed an interest in addition to identifying a potential investor on a public-private partnership basis.

Telecommunications

  • The Ministry of Finance lifted the provisional attachment orders issued against the assets of MTN Syria and members of its Board of Directors. Since MTN Syria is a publicly traded company on the Damascus Securities Exchange, it has to report any legal action against it.

Tourism

  • The Minister of Tourism approved an investment agreement with Old Aleppo Rehabilitation LLC to reconstruct and restore the destroyed five-star Carlton Hotel next to the historic Citadel of Aleppo with 80 rooms and the capacity to serve 800 customers in four restaurants. The build-operate-transfer (BOT) investment agreement has a duration period of 40 years with four years dedicated to construction. The Ministry of Tourism will be entitled to an annual investment allowance of 16% of the revenue with an average minimum of SYP 558 million.

Health

  • The marginalization of Syria from the global economy might help limit its exposure to the Coronavirus but nevertheless, the Economic Committee affiliated to the Council of Ministers took the decision to prevent exports of face masks in order to avoid shortages in stockpiles.

Public Administration

  • The Ministry of Communications and Technology launched the electronic government portal along with a mobile application within the e-government project.
  • The Council of Ministers reviewed the provisions of the Financial Disclosure Bill, which requires prospective government appointees to disclose their assets, and called on all ministries to submit their observations to the Ministry of Administrative Development. The People’s Assembly referred the Financial Disclosure Bill to its Constitutional and Legislative Affairs Committee to assess its constitutionality.
  • The Council of Ministers approved a SYP 145 billion integrated economic, services and construction plan for the province of Aleppo.

Politics

  • For the first time since the war began, the Baath Party held primaries to choose its representatives and leaderships at the provincial level. The last party elections were held in 2011 in preparation for the conference of the Regional Command of the Baath Party. Assistant Secretary-General Hilal Hilal, who is deputy to the party leader President Bashar Al-Assad, cautioned delegates against choosing the so-called “grey men” who disappeared from duty during the war but suddenly came back during the primaries.
  • The People’s Assembly unanimously approved a resolution condemning the Armenian genocide committed by Ottoman rulers at the beginning of the 20th century.

Military

  • The Syrian Arab Army formally secured the entire approximately 450-kilometer M5 international highway after taking control of both sides of the Aleppo-Idlib section of the highway. Control over the strategic M5 has been disputed by the Army and armed groups since 2012. The significance of the M5 lies in the fact that it connects the political capital Damascus with the once economic hub Aleppo. Moreover, it runs further down towards Hama, Homs, Daraa and the Syrian-Jordanian border at Nassib, which opens up Syrian trade links to the Gulf region. In the last Idlib town of Saraqib, the M5 intersects with the M4 and links up Damascus and Aleppo with the coastal ports in Lattakia and Tartous. Most of the conflict in western Syria was played out along the M5 and its surrounding cities, towns and villages. The Army began its offensive in Idlib and Rural Aleppo to secure control of the M5 following Turkey’s failure to implement the Sochi Agreement – i.e. the Idlib Backstop – where it was meant to clear the M5 and M4 of its allies to facilitate its use by civilians. The latest phase of the war to recapture the final stretch of the M5 included battles and victories by the Army in Khan Sheikhoun, Ma’aret Al-Naaman and Saraqib, which hosts the key intersection onto the M4 towards the coastal region. The M5 is the main road in Syria’s transport network and complete control over it by the government now means that the movement of persons and goods between Syria’s commercial hubs and further into Jordan, the Gulf region and vice versa will be better facilitated.
  • As of February 16, 2020, combat operations on the outskirts of Aleppo ended with the Syrian Arab Army securing the rural areas and preventing the firing of rockets into the city. The occasion bore a resemblance to May 21, 2018 when combat operations ended around Damascus.

International

  • Russia supports an initiative by Jordan which would involve some reconstruction projects in southern Syria.
  • According to a poll conducted by the Syrian Law Journal concerning Turkish President Recep Tayyip Erdogan’s main preoccupation with Idlib, 47% of respondents think that he is worried that an inflow of refugees could destabilize his domestic electoral prospects, 33% think that he wants to maintain a base of Syrian loyalists to use against Kurdish forces, and approximately 20% believe that he wants to use Idlib as leverage to win concessions from Russia in Libya. Though not asked, there exists the threat of annexation to increase the size of Turkish territory as evidenced by the spread of Turkish educational institutions in northwestern Syria, and the use of the Turkish language and Lira.