Legal Briefing – May 2015

Welcome to our latest legal briefing covering the news of the past month- here is a taste of what is in store: private companies may now be incorporated to manage and invest the assets of local councils in Syria. The Competition Council has been busy working on new amendments to the Competition Law, one of which focuses on merger notification thresholds. A new law has been passed to regulate the public housing sector while new legislation is being considered to govern free zones and to introduce the billing system into Syria. The financial markets remain the subject of policy initiatives to attract new investments. Moreover, lawsuits around the country continue to be transferred to courts in safe areas while international arbitration centers may soon be set up to facilitate speedy hearings for Syrian investors based abroad. With regards to international trade, the government’s current priority is to limit imports where goods can be produced in Syria in an effort to promote local industries and the value of the Syrian Pound while chasing down price manipulators. In this respect, it is also seeking to push through the new Consumer Protection Law.

• A new law affecting local councils has been promulgated. Legislative Decree 19/2015 permits the establishment of private joint stock companies on the basis of social, economic and regulatory studies with the objective of managing and investing the assets belonging to the various local councils within Syria. However, approval must first be sought from the Minister of Local Administration based on a proposal from the relevant provincial council. These companies will consist of a chairman and members of local councils and their resolutions will have to be ratified by the governor of the province where the local council is located.

• The Competition Council is drafting some new amendments to the Competition Law 7/2008. These include filling in gaps in the Law that have surfaced seven years after it was originally enacted and enforcing strict penalties that aim to deter anti-competitive behaviour. The provision regulating merger notification thresholds is expected to change. At present, mergers and acquisitions that result in a market share of more than 30% must be notified to the main body- the Competition Commission. If amended, this threshold is expected to be reduced to 25%.

• A new law has been passed to reassess the activities of the General Housing Establishment (GHE) to meet the needs of the population in light of the current conflict, particularly through social housing. The GHE is mainly tasked with satisfying the housing and construction requirements in the country and setting five-year plans to meet these targets. The recent law Legislative Decree 26/2015 replaces the previous one contained in Legislative Decree 76/2011.

• A new law governing free zones in Syria is presently under review and will take into consideration the economic effects that the conflict has had on them. The General Establishment for Free Zones has recently passed on the final draft of the law to the Ministry of Economy and Foreign Trade and is awaiting its response. This new piece of legislation is expected to replace the current law provided for in Legislative Decree 18/1971.

• The Ministry of Economy and Foreign Trade has stated that the land and sea free zones in Lattakia will be converted into two areas specialized in the textile, chemical and pharmaceutical industries.

• A draft billing law is under consideration with the aim of formally introducing 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.

• Work is ongoing on a draft health insurance law and the prospective establishment of the Supreme Health Insurance Council, which seek to extend coverage to interested parties.

• The Syrian Commission on Financial Markets and Securities (SCFMS) is calling for the activation of the relevant provisions of the Companies Law (provided for in Legislative Decree 29/2011) that deal with the issuance of corporate bonds by joint stock companies. It is doing so in order to increase liquidity in the market. The SCFMS is also studying the prospects of promoting investment funds.

• The SCFMS has issued rules relating to the freezing, suspension and revocation of licenses issued to financial services and brokerage companies that fall under its authority.

• The Damascus Securities Exchange is seeking to relax restrictions in order to encourage new investors to list their shares on the stock market and is also considering making new financial instruments available to interested subscribers. As well as amending certain laws and regulations, it also wants to make use of arbitral proceedings to settle potential disputes that may arise.

• The number of companies registered with the Directorate of Internal Trade and Consumer Protection in Damascus until the end of March was 102,112 while the number of companies that have been struck off the Registry has reached 20,000.

• The Ministry of Justice and the Syrian Investment Agency are studying plans for the establishment of international arbitration centers to consider the claims of Syrian investors who are based abroad.

• An official at one of Syria’s banks has acknowledged that while the Banking Courts have had a positive effect in speeding up litigation, there were still major shortcomings that needed to be addressed, particularly the complexity of appointing expert witnesses.

• Legislative Decree 24/2015 extends the provisions of Legislative Decree 28/2013 for a third year after the original extension provided for by Legislative Decree 17/2014 expired. 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. This law was originally passed to ease the transfer of cases from conflict to safe areas.

• The General Federation of Trade Unions is apparently working with the competent authorities to review legislation to improve the economic situation in the country and has announced that the revival of the economic security courts may be an important prerequisite in doing so since the current crisis has led to the rise of new forms of corruption.

• The Ministry of Justice has created employment tribunals in the provinces of Rural Damascus, Daraa and Homs in accordance with Article 205 of the Employment Law 17/2010, which was specifically amended by Legislative Decree 64/2013.

• The ongoing amendments to employment legislation will also touch on the matter of temporary workers employed in the public sector (see the Public Employment Law 50/2004) and ways to provide them with permanent job security.

• The Council of Ministers has approved a decision to allow Syrian workers who live abroad to subscribe to the General Establishment for Social Security to safeguard their interests in the event of old age, disability and death.

• A number of complaints have been made regarding the inadequate application of Legislative Decree 7/2015, which grants an additional SYP 4,000 in monthly salaries to public and private sector employees, by a number of individuals who have yet to receive their compensation.

• With regards to international trade, the government’s current priority is to limit imports where goods can be produced in Syria in an effort to strengthen local industries and the value of the Syrian Pound. In this respect, the Ministry of Industry announced that the government’s efforts are also focused on reducing customs duties on raw materials used to produce goods domestically.

• As part of their bilateral relations, Syria and Iran are looking to promote free trade relations and eventually remove customs barriers between both countries by decreasing duties to zero percent.

• The Ministry of Economy and Foreign Trade will impose a one percent fine on manufacturers who import products in violation of the law. The fine amounts to one percent of the total value of the imported goods.

• The Economic Committee has recommended that owners of industrial establishments be granted the right to import coal, which should be used exclusively for their businesses.

• The Customs authorities have begun paying visits to a number of trading establishments to view documents and merchandise officially for the purposes of legal compliance. However, a number of merchants have voiced concerns that the law is not being applied appropriately and have in a number of cases closed their shops for days to avoid the visits.

• The Aleppo Chamber of Industry is calling for legislation to exempt manufacturers who have been affected by the ongoing conflict from paying taxes and other fees.

• Industrialists are criticizing the fact that the new Consumption Tax Law provided for in Legislative Decree 11/2015 imposes taxes on imported food items necessary for the food industry and on final products, which results to a degree in double taxation.

• The Ministry of Internal Trade and Consumer Protection has disclaimed any liability for the delay in enacting the new Consumer Protection Law especially as the crisis afflicting the country is having wide repercussions on the economic and living conditions in Syria. Moreover, following the creation of the Ministry in 2012 after it was previously part of the Ministry of Economy and Trade, it has had to conduct a further review of all laws that touch on consumer protection. After discussing the draft law with interested parties, the Ministry passed it on to the Council of Ministers and the People’s Assembly whose responsibility it currently is to enact it.

• The Ministry of Justice has reaffirmed that the judiciary will not tolerate practices that manipulate the prices of basic foodstuffs and reminded traders that linking the prices of goods to the US Dollar is a criminal offense. The Ministry of Justice also announced that it will work alongside the Ministry of Internal Trade and Consumer Protection by offering training courses to its staff to ensure that the law is implemented accordingly in this respect.

• A source in the Ministry of Internal Trade and Consumer Protection has denied any intentions by the Ministry to liberalize prices or revoke pricing decisions affecting commodities and food products produced locally or those imported from abroad.

• The Ministry of Tourism is considering proposals to support legislation to freeze the imposition of penalties and any accrued interest on non-performing loans granted to touristic projects while the crisis in Syria is ongoing.

• A new tougher law that sanctions harsher penalties on individuals who illegally obtain electrical power is currently being prepared. Previous laws that address electricity theft have been enacted in the past as this issue is becoming more prominent as a result of electrical shortages in the country.

• The need to undertake the Agrégation, which is a civil service competitive examination that enables individuals to become university lecturers, no longer applies to graduates who come first in their respective degree following the passage of Legislative Decree 25/2015.

• The former Minister of Economy and Trade Lamia Assi is calling for amendments to the Nationality Law provided for in Legislative Decree 276/1969 so as to enable women to pass on their Syrian nationality to their children. She argues that the current law, which denies women the right to do so, violates the provisions of the Constitution.