Syrian Law Journal

Legal Briefing – January 2016

by · 04/02/2016

Welcome to our latest legal briefing covering the news of the past month- here is a taste of what is in store: The Public-Private Partnership Law has been enacted with a view to preparing the ground for reconstruction and the rehabilitation of infrastructure in coordination with the private sector. New rules issued by the Central Bank require importers to prove that they are not benefitting from any credit facilities to finance their imports. Two laws that came into effect in January seek to promote small and medium-sized enterprises, local products and exports in an effort to stimulate an economy struggling under wartime conditions. According to the Prime Minister, the new Draft Investment Law, which plans to adapt to the new realities on the ground and looks towards reconstruction, is expected to be endorsed by the government very soon. Recent legislation 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.

Public Procurement

  • The Public-Private Partnership (PPP) Law 5/2016 has been enacted with a view to preparing the ground for reconstruction and the rehabilitation of infrastructure in coordination with the private sector. PPPs can be defined as long-term contractual arrangements entered into by governmental entities and private sector parties with the aim of delivering services to the general public. When delivering public services under these business models, the private partner bears most of the risk and management responsibility associated with running the public facility in return for a profit. An article on the PPP Law that might be of interest featured in the Syrian Law Journal last December.
  • The PPP Law provides for the establishment of the PPP Council that makes important decisions to push PPP projects forward, which include approving PPP contracts. The PPP Council, which is chaired by the Prime Minister, supervises PPP projects and regulates agreements entered into by public and private sector partners. The PPP Bureau is expected to be the institutional focal point for implementing the PPP program such as by identifying potential projects and actively participating in the project procurement lifecycle. In terms of procurement procedures, the Tender Evaluation Committee will be tasked with evaluating bids and selecting preferred bidders. The Law provides for investment incentives for private sector partners to become shareholders in special purpose vehicles, which include the right of financial repatriation by foreign investors.
  • The PPP Law was originally prepared back in 2010 after two years of preparation and drafting but was put on hold when the conflict broke out a few months later in March 2011. The passage of the Law is perceived by the government to be necessary given that the Public Procurement Law does not provide appropriate mechanisms to execute PPP projects. Moreover, it is regarded as an essential piece of legislation that will facilitate the rehabilitation of infrastructure through private investment. The participation of the private sector along with its financial capabilities and expertise in delivering certain public services is recognized as a crucial component of the reconstruction process.
  • When the PPP Law 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 the Law 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.
  • The Minister of Industry has argued that the PPP Law in no way represents an attempt to pursue privatization and that the wellbeing of public sector companies is a red line that will not be crossed. He also announced that projects will soon be pursued on the basis of PPPs with the private sector in accordance with the new Law.
  • Following the passage of the PPP Law, the Minister of Tourism is proposing to the Central Bank to use the PPP model to get the private sector to invest in state-backed touristic projects that are defaulting on their loans.
  • Experts have warned that the PPP Law must be implemented in a way to meet the objectives of reconstruction without pursuing corrupt practices and furthermore that the Law should not serve as a means to launder private sector capital through investments in PPP projects.
  • With the enactment of the PPP Law, the post of Deputy Prime Minister for Economic Affairs may be filled once again after it was last vacated in late 2013.
  • Five licenses have been awarded to private sector operators to generate electric power, including from renewable energy, in accordance with the Electricity Law.
  • The Prime Minister has requested public bodies to apply the correct classification requirements for contractors when concluding new contracts with them. Last year, the Ministry of Public Works issued Regulation 1296/2015 to make adjustments to the system for classifying contractors deemed suitable for executing projects for the state. The Prime Minister has also amended some provisions of a 2007 regulation related to the classification of contractors for the purposes of drilling wells.
  • The Competition Protection and Anti-Monopoly Commission has admitted that the public procurement process as it currently stands is a fertile ground for corruption.
  • The Prime Minister has issued a decision calling on all public entities and public sector companies to cut expenses. The government is seeking a 30% reduction in public expenditures.

Commerce

  • New rules issued by the Central Bank require importers to prove that they are not benefitting from any credit facilities to finance their imports.
  • The Central Bank has clarified that following the issuance of Regulation 703/2015 by the Ministry of Economy and Foreign Trade, there has been a reduction in demand by importers for foreign exchange. In line with Regulation 703/2015 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.
  • Reports suggest importers are evading deposit payments to the Central Bank, which are mandated by Regulation 703/2015.
  • Law 2/2006 establishes the Small and Medium-Sized Enterprises (SME) Development Agency to replace the General Employment and Project Development Agency. The SME Development Agency is affiliated with the Ministry of Economy and Foreign Trade and covers a variety of sectors. Its tasks include coordinating and making plans to develop SMEs, creating policies, undertaking studies, facilitating the financing of projects, monitoring their progress, and so on. In accordance with this Law, the Minister of Economy and Foreign Trade has set up a committee to lay the foundations for the SME Development Agency to pursue its mandate.
  • The Federation of the Syrian Chambers of Agriculture was surprised that it was apparently left out of the proposals for the creation of the SME Development Agency. However, the Ministry of Economy and Foreign Trade rushed to affirm that the Chambers of Agriculture are a key partner in the SME Development Agency. While on this subject, there have been simultaneous calls to hasten reform of the law regulating the Chambers of Agriculture, which has not been amended since 1958 during the era of President Gamal Abdel-Nasser, in an effort to modernize and update it.
  • Law 3/2016 creates a body called the Agency for Supporting and Developing Local Products and Exports (ASDLPE) to replace the Export Development and Promotion Agency (EDPA). Consequently, it revokes Legislative Decree 6/2009, which established the EDPA, and Legislative Decree 19/2009, which launched the Export Development Fund. 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. Following the enactment of Law 3/2016, the Ministry of Economy and Foreign Trade is preparing to activate the ASDLPE.
  • The official in charge of the new exports authority the ASDLPE has proposed excluding the US Dollar in import and export transactions in order to support the Syrian Pound.
  • Syria and Russia have discussed an agreement to authorize customs exemptions in order to promote trade ties between the two countries. Russia is considering exempting Syrian goods from customs duties. The talks also focused on facilitating shipping on a regular basis. The Damascus Chamber of Industry has recently encouraged exports to Russia in line with bilateral agreements through 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.
  • According to the Federation of the Syrian Chambers of Commerce, the ban on the import of Turkish goods applies only to ready-made goods and not raw materials.
  • According to the General Establishment for Free Zones, European goods that enter Syria via Turkey are not subject to the 30% fee stipulated for in Legislative Decree 18/2015.
  • The Customs Directorate has imposed new controls on the movement of imported goods from port and border free zones to internal free zones. Accordingly, import licenses for these goods granted by the Ministry of Economy and Foreign Trade must be presented to the internal free zone authorities before they can be accepted. As a result, these free zone authorities are protesting the passage of this measure as it is expected to affect commercial activity in their premises.
  • In addition to the controls above, further restrictions on the entry of goods into the free zones will be included. As a result, prior approvals will have to be obtained before certain goods can be transported into the free zones while others will be prohibited.
  • The Prime Minister has appointed Fawaz Assaad to head up the Customs Directorate. He succeeds the previous Director-General Mejdi Hikmieh. The Customs Law and particularly the broad powers it grants to the Director-General are coming under the spotlight following the management reshuffle.
  • There are reports that more than 100 merchants break the law every day in the markets throughout Syria. The passage of the new Consumer Protection Law was intended to alleviate the pressures on consumers caused by this problem.
  • The cases of 4,000 traders from the province of Rural Damascus were sent to the judiciary in 2015 following allegations of market violations.
  • There were more than 528,000 registrations in the Commercial Registry throughout Syria in the last quarter of 2015. The Commercial Registry is maintained at the Ministry of Internal Trade and Consumer Protection.
  • In light of the challenging energy situation in the country, the Ministry of Electricity has increased electricity prices once again. As a consequence, households and businesses face electricity price hikes amounting to more than twice as much as the previous tariffs. The last time the Ministry increased prices was back in August last year.
  • The Ministry of Internal Trade and Consumer Protection has reduced the price of a tonne of fuel by SYP 5,000 from SYP 105,000 to SYP 100,000 in order to support the industrial sector.

Companies

  • Reforms to the Damascus Securities Exchange (DSE) include simplifying requirements for companies to list on the stock market and reconsidering legally-restricted price fluctuations on shares.
  • A committee has been set up by the Syrian Commission on Financial Markets and Securities (SCFMS), the capital markets authority, to study mechanisms for including more companies on the DSE.
  • The SCFMS has called on listed companies on the DSE to distribute dividends to their shareholders.
  • The Companies Directorate in the Ministry of Internal Trade and Consumer Protection licensed more than 20,000 companies in 2015 in accordance with the Companies Law.

Investment Law

  • According to the Prime Minister, the new Draft Investment Law, which plans to adapt to the new realities on the ground, is expected to be endorsed by the government very soon. The bill, which will revamp the current Law, is being drafted to correspond to the new emerging priorities involving reconstruction brought about by the ongoing conflict. Recommendations to the bill were already proposed by the Federation of the Syrian Chambers of Industry.

Employment

  • Law 4/2016 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. Additionally, the Ministry of Labour has issued the executive regulations to implement this Law.
  • The Prime Minister has issued Regulation 49/2016 amending Regulation 22/2015 and replacing the US Dollar with the Syrian Pound for the purposes of registering Syrians working abroad with the General Establishment for Social Security. Regulation 22/2015 originally permits Syrians working overseas to obtain social security protection.
  • According to the Minister of Labour, the Draft Public Employment Law that contains various amendments to the current Law, which regulates the employment of public sector employees, is in its final stages and will solve a number of problems dating back to 2004. They are expected to be forwarded to the People’s Assembly by the government in the coming period. The changes to the Law are expected to address salary ceilings and re-examine the procedures for recruiting public sector employees, which are usually done by conducting competitions among candidates. According to the Ministry of Labour, the legal revisions covering public sector employees are intended to further guarantee their rights and increase their salaries. They will also touch on the matter of temporary workers employed in the public sector and ways to provide them with permanent job security.
  • The government has passed a regulation to amend existing rules so as to ease leave without pay and travel restrictions for public sector employees who have hitherto found it difficult to travel abroad.
  • The Ministry of Justice has established an employment tribunal in the province of Aleppo in accordance with Legislative Decree 64/2013.

Taxation

  • The Ministry of Finance is completing work on the Draft Customs Law that will replace the present Law. The new law is expected to incorporate the current Smuggling Laws provided for in Legislative Decree 13/1974 and Legislative Decree 42/2008. It also envisions granting the customs courts criminal jurisdiction. Previously, the administrators of the customs courts were studying a proposal that would grant them the power to hear smuggling claims after they had been adjudicated by the criminal courts in accordance with the Smuggling Law provided for in Legislative Decree 13/1974. In that instance, the customs courts would only have the authority to grant compensation while the criminal courts would apply penal sanctions.
  • The Ministry of Finance is warning businesses that pay a fixed lump-sum income tax that they face closure if they do not settle their outstanding liabilities. According to the Income Tax Law, small businesses are entitled to pay a fixed lump-sum amount as opposed to complying with the relevant tax brackets.
  • Work is ongoing on the Draft Billing Law and its executive regulations. The draft should be under consideration by the government. The Ministry of Finance has already stated that the Draft Billing Law will complement the provisions of the new Consumer Protection Law. If enacted, the Draft Billing Law 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.
  • Port tariffs have been reduced by 25% for this year.
  • The Ministry of Finance is considering raising the tax on gold.

Finance

  • The Ministry of Finance has issued Regulation 212/2016, which contains the executive regulations of the Public Banks Loan Repayments Law. The Law sets the conditions and deadlines for settling debts owed to publicly-owned banks. It 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 has rejected a request by public banks to involve the latter’s employees in debt collections to help settle the problem of non-performing loans. The public banks made this proposal during a meeting with the Central Bank and a delegate from the Ministry of Justice and argued that their employees rather than lawyers are in a better position to encourage clients to settle their debts due to their personal relationships with them.
  • The Minister of Internal Trade and Consumer Protection has announced that a plan to prevent further depreciation of the Syrian Pound against the US Dollar will take effect soon. The Central Bank is currently seeking to keep the exchange rate of the US Dollar below SYP 400.
  • Amendments to currency swap policies contained in Regulation 756/2011 have been pursued by the Central Bank.
  • There have been concerns over the lack of reciprocity where Syrian accountants are not granted similar rights to work abroad as foreign accountants are in Syria in accordance with the Accounting and Auditing Profession Law. Moreover, there is unease over the conduct of international accounting firms in Syria involving possible breaches of confidentiality.

Insurance

  • Work continues on a comprehensive insurance law and on a proposal for establishing insurance courts. The Insurance Law is expected to face significant revisions. The Ministry of Finance has recently initiated deliberations on a new law for the insurance sector that would consolidate all legislation in this field into one comprehensive document. Once enacted, it is expected to facilitate the entry and exit of insurance companies in and out of the market respectively. Another law targeting this sector may mandate the creation of insurance courts to try insurance-related cases, which would resemble the set-up of banking courts. There have been calls from interested parties in the insurance industry for the establishment of these types of courts for some time now.

Property

  • A bill imposing fees on the subleasing of properties by old rent tenants is the subject of deliberations by the government following its earlier approval of a bill amending the Capital Gains Tax Law. Old lease contracts refer to those concluded under Legislative Decree 111/1952, which remain in force despite the passage of subsequent legislation.
  • A bill regulating real estate sales has been submitted to the government for consideration.
  • It has been observed that there is a significant decrease in real estate litigation. Related to this issue is the fact that the basic Real Estate Law dating back to 1923 is severely outdated and requires an urgent review. In this respect, the Ministry of Justice has formed a committee to come up with urgent changes to the Law.
  • The Ministry of Justice has acknowledged a dangerous rise in the number of title deed forgeries as the conflict in Syria continues.
  • The Former Minister of Industry has called for expediting the implementation of the new Urban Planning Law, which is expected to help lower property rental prices.
  • The Ministry of Housing and Urban Development has issued the executive regulations of the Urban Planning Law.
  • The government has taken measures to approve the draft law regulating the housing cooperative sector. The Housing Bill, which is being debated in the People’s Assembly, aims to resolve problems related to the provision of land and the finance of construction works. If enacted, it will replace Legislative Decree 99/2011.
  • The government has approved a bill that would exempt citizens benefitting from social housing from paying fines for failing to make fee payments on time to the state-owned General Housing Establishment.

Intellectual Property

  • There are calls to establish an advisory council to protect intellectual property rights.

Tourism

  • The Minister of Tourism has issued a decision setting up a special center concerned with serving the interests of investors.

Health

  • Following complaints, the Ministry of Health has vowed action against doctors and others who do not comply with official pricing regulations.
  • An initiative is underway to strengthen medical labeling to stamp out counterfeit drugs.
  • Syria and Iran have discussed means to implement health and medical agreements, which include the registration of medicines to facilitate imports.

Water

  • Changes to legislation regulating water use seek to curb violations and to properly organize the management of water resources.

Parliament

  • A date for the 2016 parliamentary elections to the People’s Assembly will be fixed in a decree, which is expected to be issued next month.

Local Councils

  • The government has discussed a bill to postpone local council elections held in accordance with the Electoral Law. Elections are usually held every four years but the last local council elections took place on December 12, 2011 where 42,889 candidates competed for 17,588 seats.
  • President Bashar Al-Assad has dismissed the Head of Hama City Council over allegations of corruption.

Judiciary/ Lawyers

  • The new Civil Procedure Code provided for in Law 1/2006 has been enacted after seven years of preparation and drafting. The Law is an updated version of the Code provided for in Legislative Decree 84/1953, which dates back to the era of Adib Shishakli. It governs how cases will be managed throughout the civil court system from now on and applies to the resolution of commercial and personal status disputes. The new Code seeks to simplify and enhance the litigation process and the procedures for enforcing judgments.
  • The Ministry of Justice has published on its website a draft law that governs the body entrusted with managing the state’s legal cases. After an earlier proposal to dissolve this body, the Prime Minister has decided to retain it. There are currently 350,000 public sector cases that are managed by the state’s competent legal department. Dissolving it would mean referring cases to private sector lawyers who charge higher fees than the state’s lawyers, which would be a drain on the Public Treasury. Despite the drawbacks inherent in this legal department, the draft law aims to safeguard the state’s funds. Moreover, it envisions broader powers for this body in handling cases and giving its approval for lawsuits to proceed.
  • According to the President of the Syrian Bar Association, decisions are being taken by the government to facilitate the return of refugees to Syria, even those who left illegally.
  • The Ministry of Justice has announced that 11,057 persons, including rebels, have had their legal status settled in 2015 after they turned themselves in to the authorities.
  • Reports suggest that Syrian citizens have filed up to 5,000 lawsuits against the Ministries of Finance, Agriculture, Health, and Electricity.
  • It has been announced that 1,109 cases came before the Customs Courts of First Instance in 2015.
  • President Bashar Al-Assad has appointed Judge Hisham Al-Shaar as the new President of the Council of State. Al-Shaar succeeds the previous incumbent Muhammad Hussein. The role of the Council of State is to pass judgments in administrative cases involving the state and to serve as an advisory body to public entities. It consists of both the Judicial Division and the Advisory Division.
  • The Ministry of Justice has established new courts in the provinces of Homs and Tartous.
  • Three years after it was sanctioned, lawyers remain unfamiliar with electronic notifications to parties in lawsuits and they hold judges partly responsible for this state of affairs.

Family Law

  • A proposal has been put forward to raise the value of dowries for brides in marital contracts following depreciations in the local currency.

International

  • US President Barack Obama recently signed into law the Visa Waiver Program Improvement and Terrorist Travel Prevention Act of 2015, which took effect on January 21st. It has 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 are no longer entitled to visa-free travel to the United States and must obtain a visa to do so. As for the nationals of any of those 38 countries, they 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 December.
  • Following an agreement between the European Union and Turkey, all Syrians entering Turkey have been required to obtain a visa to do so as of January 8th. Syria had earlier reciprocated and cancelled the Mutual Visa Waiver Agreement of 2009 with Turkey after the latter made clear its intention. As a result, Turkish nationals will require visas to enter Syria. The Agreement dated back to a time of warm relations between both governments.
  • The Prime Minister has called on public entities to cooperate with the Ministry of Justice to recover their assets, which were seized and frozen as a result of international sanctions imposed on Syria.