Syrian Law Journal

Legal Briefing – June 2016

by · 04/07/2016

Welcome to our latest legal briefing covering the news of the past month- here is a taste of what is in store: As he is constitutionally obliged to do so following the recent parliamentary elections, President Bashar Al-Assad has designated Minister of Electricity Imad Khamis as the new Prime Minister of Syria to replace the incumbent Wael Halqi. The People’s Assembly has elected Deir Ez-Zor MP Hadiyeh Abbas as the first woman Speaker since 1919 during the term of the post-Ottoman Syrian National Congress. The major oil company Gulfsands Petroleum has found itself in the middle of legal battles in Damascus and London following a court-ordered freeze over its assets. The Ministry of Internal Trade and Consumer Protection has pushed through fuel price hikes leading to a quizzing of the government’s economic team by the newly-elected MPs. Public and private sector employees have their salaries topped up by an additional SYP 7,500 per month. The Import Deposit Rules have been amended so as to reduce deposit requirements on certain goods to 25%. Syria prepares to respond to the decision taken by the Lebanese Minister of Agriculture to ban the import of Syrian fruits and vegetables. The outgoing government recently issued a number of expropriation decisions targeting owners of land who exceed the ownership ceilings defined in the Land Reform Law.

Government/ Parliament

  • As he is constitutionally obliged to do so following the recent parliamentary elections, President Bashar Al-Assad has designated Minister of Electricity Imad Khamis as the new Prime Minister of Syria to replace the incumbent Wael Halqi. Wael Halqi will leave his post after almost four years as Prime Minister. Imad Khamis will be tasked with forming the next government in accordance with Decree 187/2016. He has already begun consultations to form his government.
  • The decision to select a new prime minister took comparatively longer than last time around in 2012. At one point, Syria was forced to deny media rumors that a new government had been formed. Suggestions were even being made early on in the media that leading Aleppo businessman and newly-elected MP Fares Chehabi could be Syria’s first non-Baathist Prime Minister since 1963.
  • The newly-elected People’s Assembly convened on June 6th for its first legislative session. With the swearing-in of the new MPs in the People’s Assembly, the government of Prime Minister Wael Halqi began functioning in a caretaker capacity.
  • The People’s Assembly has elected Deir Ez-Zor MP Hadiyeh Abbas as the first woman Speaker since 1919 during the term of the post-Ottoman Syrian National Congress. Abbas won the position uncontested following her nomination by the Baath Party-led bloc. She replaces Damascus MP Jihad Laham who served as Speaker for the past four years. Abbas was first elected as an MP for the province of Deir Ez-Zor back in 2003. In the 1973 parliamentary elections, women won five out of the 186 seats while in the 2012 elections, they gained 31 out of the 250 seats available. Abbas joins incumbent Vice-President Najah Al-Attar as another woman to reach high political office. It is worth mentioning that women’s suffrage in Syria dates back to the middle of the 20th century.
  • The famous director Najdat Anzour who only won his seat for Aleppo in this last election was elected Deputy Speaker.
  • During one of its sessions, the newly-elected MPs in the People’s Assembly touched on developing the work of the Parliament and amending some provisions in its Rules of Procedure. They stressed the need to amend the procedures for passing bills, revising some laws, appointing a spokesperson for the People’s Assembly and improving the work of its parliamentary committees.
  • On June 7th, President Bashar Al-Assad addressed the new Parliament. He stated that Syria proposed a set of principles to govern the Geneva 3 negotiations between the government and opposition groups. He reiterated that after an agreement is reached on the principles, then it would be possible to discuss the formation of a national unity government, a new constitution and elections. According to the President, the proposed principles include Syria’s sovereignty and unity, rejection of foreign interference, rejection of terrorism, supporting reconciliations, preserving institutions, lifting the siege imposed on Syria, reconstruction and controlling the borders. He emphasized that the principles include points in the current Constitution and other ones, which make provision for cultural diversity, citizens’ liberties, independence of the judiciary and so forth.
  • According to the United Nations Special Envoy for Syria Staffan de Mistura, there will be no further Syrian peace talks until all the parties agree on the parameters for a political transition, which has been set a 1st of August deadline. Towards the end of June, de Mistura acknowledged that there was not yet enough agreement by the parties to resume peace talks ahead of the 1st of August deadline to start a political transition.

Energy

  • Gulfsands Petroleum Plc tells investors it is determined to protect its rights in Syria following a court judgment against it in Damascus. A major shareholder, Al-Mashrek Global Investment Ltd, claims it was not properly notified of a new share issuance and therefore lost its right to subscribe to the new shares. As a result, its shareholding was diluted. Apparently, sanctions imposed by the United Kingdom prevented the share subscription by Al-Mashrek, which took its case to the courts in Damascus. Finding in favour of Al-Mashrek, the Court of Appeal in Damascus issued a provisional attachment order over the movable and immovable assets of the defendant’s subsidiary Gulfsands Petroleum Levant Limited. The assets include Gulfsands’ stake in the Block 26 oilfield in Syria. The claim by Al-Mashrek amounts to the equivalent of $2 million (US). In response, Gulfsands Chairman Alastair Beardsall said that his company will vigorously defend its action in the appropriate courts to protect its interest in Block 26.
  • The Ministry of Internal Trade and Consumer Protection has raised the price of a liter of diesel from SYP 135 to SYP 180, a liter of gasoline from SYP 160 to SYP 225 and the price of a gas cylinder from SYP 1,800 to SYP 2,500.
  • The fuel price hikes found critics among MPs as they convened in the People’s Assembly to quiz the government’s economic team. MPs criticized the move to raise fuel prices saying that they would have a detrimental effect on the livelihoods of Syrians. The Minister of Petroleum and Mineral Resources claimed that an increase in foreign exchange rates and international oil prices led to the price hikes. Likewise, the Minister of Economy and Foreign Trade asserted that raising fuel prices is unavoidable because of the rising prices of oil on international markets. The Minister of Finance explained that international sanctions imposed on Syria have affected the finances of public and private banks. He reminded MPs that oil revenues in Syria used to make up 38% of the Public Treasury’s turnover before the crisis gripped the country in 2011. He further clarified that fuel products are now imported at a higher cost than international prices due to the sanctions leveled against Syria. According to him, the Public Treasury now depends on the fees, taxes and resources of some successful public companies as its only source of income and the recent foreign exchange measures adopted by the government are an important attempt to stabilize the market in Syria. In any case, he claimed that the recent increases in employment salaries are greater than what will be generated by raising fuel prices. Despite the price rises, the Minister of Internal Trade and Consumer Protection affirmed that he is increasing the provision of basic food items in the markets.
  • Reports indicate that the government will hold off on licensing more private petrol stations until the end of this year.
  • The latest renewable energy tariffs have been issued by the Ministry of Electricity in Regulation 1763/2016, which amends Regulation 16202/2011. In order to encourage investment, the latest Regulation amends the tariffs set for independent producers who generate electricity using renewable energy. The prices that the Ministry of Electricity will purchase electricity from producers had to be amended due to significant changes since 2011. The tariffs will be determined by reference to the Euro exchange rate and payment will be made in Syrian Pounds. The Ministry of Electricity subsequently held a meeting to identify mechanisms to implement the new tariffs. While encouraging private investment in this sector, the state will continue to own the underlying public assets so there is no hint of privatization. Nine licenses have already been granted to investors to execute wind and solar power projects in Syria. The Electricity Law invites private investment in this sector through public-private partnerships, including in renewable energy projects.

Employment

  • Legislative Decree 13/2016 adds an additional SYP 7,500 per month to the salaries of public sector employees, both civilian and military personnel, workers in the private and joint public-private sectors, and families of retired employees. The SYP 7,500 per month is in addition to the SYP 4,000 monthly increase provided for in Legislative Decree 7/2015 and its executive regulations contained in Regulation 394/2015. The executive regulations to Legislative Decree 13/2016 were issued by the Minister of Labour in Regulation 950/2016.
  • The Ministry of Labour has revised the Foreign Employees Rules, which govern the employment of foreign nationals in Syria, through the issuance of Regulation 888/2016. As is normally the case, foreign nationals must not compete with Syrian workers and their work experience and competence must be taken into consideration. They have to obtain a work permit and residence permit for employment purposes. The number of foreign nationals employed by one employer cannot exceed 10% of the total employed workforce. The salaries for foreign employees cannot exceed 30% of the total salaries paid by that employer. There are however additional restrictions imposed on the number of foreign nationals employed by banks, insurance companies, financial services companies and brokerages. The number of foreign nationals at these companies cannot exceed nine percent of the total employed workforce during the first two years of operations. They must gradually decrease to three percent of the total employed workforce after five years. If there is a lack of Syrians capable of doing jobs at these companies, the Ministry of Labour can raise these quotas. The restrictions contained in this Regulation do not apply to foreign nationals resident in Syria for more than 15 years prior to the submission of their work permit application. They also do not apply if the potential worker has a Syrian mother or is married to a Syrian national. The revised Rules replace the previous ones contained in Regulation 23/2010.
  • As the current conflict grinds on, more than 7,000 public sector employees have been laid off and a good number of them were unfairly dismissed. As a result, the government is now requiring prior notification from the concerned public bodies before an employee is dismissed.

Commerce

  • The Ministry of Economy and Foreign Trade has amended the Import Deposit Rules through the issuance of Regulation 481/2016 to facilitate the flow of imports into Syria. A few items were exempted from the Rules while changes were made to the list that comprises ‘Category A’ imports. The deposit rules for ‘Category B’ imports were reduced from 100% to 25% and this new deposit requirement includes goods that are subject to customs duties of 20% and 30%. In addition to this recent Regulation, some essential medical items were granted an import validity period of six months by the Ministry as opposed to the original three months from the date the license is granted.
  • The Ministry of Economy and Foreign Trade has issued its 2016-2017 Import Guidelines to reflect the new regulations it has implemented. An executive committee was formed by the Minister of Economy and Foreign Trade to evaluate daily import requests and to approve them in line with the Import Guidelines. In addition, the Prime Minister has formed a steering committee under the chairmanship of the Minister of Economy and Foreign Trade to develop rules and policies for the granting of import licenses.
  • The government has exempted Iranian imports from all administrative and procedural restrictions.
  • Lebanon’s Minister of Agriculture issued a decision to prevent trucks carrying Syrian fruits and vegetables from entering Lebanon until next February allegedly to protect Lebanese farm revenues. Since the Syrian-Jordanian border was shut last year, Lebanon has been unable to export to the Gulf market, which has led to a surplus of agricultural produce. In Damascus, the Minister of Economy and Foreign Trade decried the Lebanese decision as surprising and regrettable while pointing out that its timing is unfortunate as it will harm Syrian crops. He also criticized it for being put into effect without giving Syria sufficient notice ahead of time while predicting that it will affect Lebanese trade activities. He lamented that the Lebanese decision will incur unjustifiable financial burdens on both countries and cause great harm to the trade interests between them. The Minister further assured Syrian farmers and exporters that agreements were signed last year with friendly countries to import Syrian products. He also pointed out that new mechanisms will be studied to control the trade balance with Lebanon and friendly countries to maintain a positive growth rate for Syrian exports. To mitigate the damage as best he could, the Lebanese Minister of Industry suggested that the crisis caused by his colleague’s decision will be resolved soon. Meanwhile, the Syrian Exporters Union is expecting Syria to respond soon to the measure taken by the Lebanese Ministry of Agriculture.
  • The Syrian Exporters Union has announced the signing of a memorandum of association with Iraq to open a new land route to export goods from Syria to Iraq.
  • The Minister of Economy and Foreign Trade has formed a committee to regulate exports.
  • The Ministry of Internal Trade and Consumer Protection has issued Regulation 1282/2016 to seize the goods of importers, producers and traders found to be in breach of the Consumer Protection Law. The decision follows allegations that they were pursuing monopolistic practices or refusing to sell goods to customers. Any merchant found to be doing so will apparently have their goods seized by the authorities. Soon after issuing this Regulation, the Ministry began preparing mechanisms to enforce it. The Ministry has warned that this Regulation will be implemented with a view to deter violators with penalties. As a consequence, a number of Damascene merchants began to face off with the Ministry over this Regulation on the issue of a lack of invoices.
  • The Competition Protection and Anti-Monopoly Commission (CPAMC) is seeking to reduce the merger notification thresholds triggered in the Competition Law from a market share exceeding 30% to that exceeding 25%. At present, mergers and acquisitions that result in a market share of more than 30% must be notified to the CPAMC.

Industry

  • In August 2015, the Ministry of Justice tasked a special committee comprised of representatives from its own Ministry, the Ministry of Industry, the Aleppo Chamber of Industry and the Aleppo Chamber of Commerce with looking into cases of looted factories to prepare for possible prosecutions. Recently, the committee announced its findings and held Turkey responsible for the damages estimated so far at $5.3 billion (US) that were sustained by the businesses and called on it to compensate their owners. The committee further reported that the industrial facilities were illegally transferred to Turkey. Following the findings, the Ministry of Justice announced that a lawsuit has been filed against Turkish President Recep Tayyip Erdogan in Damascus by the country’s Legal Affairs Department on behalf of the Syrian state. The lawsuit is filed against him in his personal capacity and in his official capacity as the President of Turkey. The Turkish President has been charged with the looting of the Syrian factories and their illegal transfer to Turkey.
  • The Aleppo Chamber of Industry is planning to pursue a lawsuit against the looters of the industrial facilities based in the industrial city at Sheikh Najjar.
  • The Prime Minister has issued a circular requesting that the assets of an Italian company be handed over to the General Establishment of Textile Industries (GETI). The circular asks all public bodies to inform the GETI of any property belonging to the Italian company. The company was found to be in breach of its contractual obligations, which date back to a 1976 agreement to build a spinning mill in Hassakeh. The value of the dispute, which was decided by the Supreme Administrative Court in the Council of State, is $2.367 million (US). It was the Supreme Administrative Court’s judgment against the Italian company that led to the Prime Minister’s circular to seize its assets.

Property

  • The government recently issued a number of expropriation decisions targeting owners of land who exceed the ownership ceilings defined in the Land Reform Law. They were originally allowed to exceed the legal limits following a 2008 law that permitted them to do so as long as they undertook investments on the extra land within a two-year period. With the country now plunged into conflict, it is highly unlikely that any investments would be carried out and therefore, the government was faced with two choices. They could either extend the time period for the potential investments, which expired a while back, or they could expropriate the extra lands in accordance with the Land Reform Law. The government decided to expropriate the extra lands. The move had a socialist underpinning reminiscent of the socialist transformation in Syria that took place in the 1950s and the 1960s.
  • Since the start of 2016, the Ministry of Agriculture has issued around 52 decisions allocating state-owned land to public bodies to implement projects.
  • It has been revealed that a lawyer in Daraa sold two properties on behalf of an owner only to be informed later on that he did not have the authority to do so. The basis of the misunderstanding may have been related to a false identification card, fraud or mistakes when executing the power of attorney.

Intellectual Property

  • The Minister of Internal Trade and Consumer Protection has issued Regulation 1171/2016, which provides for an increase in the official fees of trademarks and designs.

Finance

  • During his speech to the People’s Assembly, President Bashar Al-Assad advised that what is needed to support the Syrian Pound and the economy is for investors to carry out projects irrespective of their sizes. He also placed importance on the government looking into laws and legislation to strengthen the economy. He added that after five years, Syrians now have experience in how to deal with the current situation and do not have to start from the beginning.
  • In a surprise turnaround, the Central Bank started permitting exporters to retain their foreign currency earnings in order to encourage exports and increase liquidity in the foreign exchange markets. Exporters will now be allowed to keep their foreign exchange earnings for transactions carried out until the 1st of September. Before this exemption came into effect, exporters were required to sell 100% of their foreign currency earnings to any of the authorized banks in Syria. The subsequent exemption, which was originally provided for in the Central Bank’s Regulation 679/2016, won a vote of confidence from the Syrian Exporters Union. According to it, the recent exemption has given exporters more confidence to trade. As a result, the Syrian Exporters Union has called for a permanent settlement whereby exporters will be allowed to retain their earnings indefinitely.
  • The Central Bank has permitted banks to sell foreign exchange to Syrians to finance their commercial and non-commercial transactions without restrictions.
  • The Central Bank is also allowing foreign exchange businesses to sell US Dollars to Syrians out of their own reserves or from the amounts they purchased from the Central Bank. Foreign exchange offices and companies are obliged to buy $100,000 and $1 million respectively from the Central Bank to sell directly to customers. All these measures come in light of the Central Bank’s decision to issue regulations to counter the depreciation of the Syrian Pound. In fact, a number of foreign exchange offices and companies were shut for a month for failing to abide by foreign exchange purchase and sale regulations issued by the Central Bank.
  • According to the Chairman of the Damascus Chamber of Industry, the Central Bank’s measures to withdraw Syrian Pounds from the market to improve the foreign exchange rate are not a solution. He also emphasized that a new law on loan repayments is needed to take into account damages sustained by industrialists. He clarified that the Public Banks Loan Repayment Law did not take into account the interests of industrialists. He further held that the industrial sector should benefit from tax and fee exemptions if their operations have ceased.
  • The Federation of Syrian Chambers of Commerce has called for fairness in setting schedules for investment loan repayments to better protect businesses.
  • The Central Bank has circulated a document, which was drafted by a Ministry of Justice committee, to all the banks specifying the legal requirements incumbent upon them when following up on defaulting debtors.
  • Banks are facing a number of legal problems trying to recover debts owed to them because assets may be located in conflict areas. The banks are also unsure where a number of their clients may be at the moment and therefore cannot reach them. Other problems they are facing include the transfers of asset ownership without their knowledge, electronic accounts and demands by the Ministry of Finance that they have to consider.
  • The Council of Ministers has settled a dispute between the Central Financial Supervisory Agency (CFSA) and the Central Bank in favour of the former. The dispute centered on the appointment of external auditors to audit public banks. The Central Bank wanted the public banks to select external auditors from its own accredited list. In response, the public banks referred to the CFSA as the body responsible for auditing them. Consequently, the Council of Ministers found in favour of the CFSA and held it as the body entrusted with conducting the audits.

Taxation

  • The committee reviewing tax exemptions for the agricultural, industrial and touristic sectors is seeking an agreeable formula. According to the Deputy Minister of Finance, the tax exemptions are expected to be commensurate with the current conditions in the country while looking towards the next phase in Syria. He also added that important modifications are being made to the Billing Bill and the Real Estate Sales Bill before their submission to the Council of Ministers for consideration.
  • A local newspaper has reported one of the largest tax evasion cases involving a well-known five-star touristic establishment in Damascus, 70% of which is owned by a businessman from the Gulf. The five-star facility is accused of not paying consumption taxes since 2012.

Tourism

  • The Council of Ministers is studying a request from the Ministry of Tourism to form a committee of representatives from several ministries to prepare the final version of a bill on the powers and functions of the Ministry of Tourism.
  • Consideration is being given to a possible law exempting touristic investors from delay penalties and a reduction in consumption taxes while maintaining oversight over prices. The potential law could give a break to touristic investors in terms of penalty exemptions for delays and repayments of financial obligations.
  • The Ministry of Tourism is considering a new pricing strategy for restaurants following the recent fuel price hikes.
  • The Minister of Tourism has issued new standards and conditions for the establishment of rest areas along the roads.

Transport

  • The Ministry of Internal Trade and Consumer Protection has warned against attempts to violate new transport tariffs, which were increased in light of the recent fuel price hikes. Public transport prices began taking center stage and dominating the media following the increase in fuel prices. Both the Prime Minister and the Ministry of Internal Trade and Consumer Protection warned against violations of the new transport tariffs.
  • The Ministry of Transport has licensed around 35 shipping agencies in accordance with the Maritime Law during the first half of 2016. The number stood at 16 shipping agencies around three months ago.
  • The Ministry of Transport has denied any increase or amendment to the new port tariffs.
  • The Prime Minister has frozen the assets of a group of businessmen acting in contravention of the laws and regulations in their dealings with the state-owned Tartous Port Company.

Telecommunications

  • The Telecommunications Regulatory Authority has issued Regulation 30/2016 setting conditions to limit the unauthorized entry of mobile phones into Syria.

Health

  • The Pharmacists Syndicate has noticed a decrease in the number of pharmacists illegally assigning their licenses to other parties to open pharmacies.
  • The Minister of Health has issued a regulation setting up a health inspection force to counter violations of the Pharmaceutical Trade Law.

Local Councils

  • The Council of Ministers has approved a bill amending Article 116 of the Local Administration Law, which provides for the discharge of local council chiefs by the Prime Minister based on a proposal by the Minister of Local Administration.

Judiciary

  • There were earlier reports that the Council of Ministers approved a bill extending the provisions of Legislative Decree 28/2013 for a fourth year upon the expiration of the recent extension provided for in Legislative Decree 24/2015. Legislative Decree 28/2013 permits the Supreme Judicial Council to transfer lawsuit proceedings from one court to another in exceptional circumstances after a formal request has been made by the Minister of Justice. The Law was originally passed to ease the transfer of cases from conflict to safe areas and to extend the time period for processing claims that were lost, burnt or destroyed during the war. The People’s Assembly has now submitted the bill extending the provisions of the original Law for a fourth year to its competent committee to study.
  • The Ministry of Justice has formed a committee to scrutinize problems relating to commercial lawsuits and the liquidation of companies.
  • The Ministry of Justice has launched projects for issuing powers of attorney electronically and automating court decisions for easier access. The initiatives seek to simplify procedures and curb instances of counterfeiting.

Family Law

  • A Sharia judge in Damascus has highlighted cases of fraudulent death claims in Syria because the conflict is making it more difficult to prove otherwise. There have been unfortunate circumstances where people try to profit from fraudulent death claims during the war in order to benefit from the inheritance process. As a result, the area of family law in Syria is seeing a surge in activity, not least because in some cases false death claims are leading widows to remarry only to discover later on that their husbands are still alive. Such problems and others are prevalent in conflict areas throughout Syria.
  • The Sharia judge has also noticed a decline in the number of travel requests by minors by half.

Criminal Law

  • Reports indicate a woman was assaulted and robbed inside the Palace of Justice in Damascus.
  • Since the beginning of 2016, the Drug Enforcement Department at the Ministry of Interior has registered around 2,075 drug-related cases and consequently, 2,294 persons were arrested.
  • The Council of Ministers has approved an amendment to the Military Criminal Code.