Syrian Law Journal

Legal Briefing – February 2016

by · 04/03/2016

Welcome to our latest legal briefing covering the news of the past month- here is a taste of what is in store: The Prime Minister has announced that his government will push through a new national economic strategy called the National Partnership, which will replace the social market economic model adopted back in 2005 by the Baath Party as a compromise between socialism and capitalism. President Bashar Al-Assad told the Syrian Bar Association that the country required a national unity government as opposed to a transitional governing body that would merely serve to create new political groupings within Syria that rely on foreign support and paralyze the institutions of state. A presidential decree has set Wednesday, April 13th as the date for parliamentary elections to the People’s Assembly to be held. The Ministry of Economy and Foreign Trade has issued a regulation that limits the entry of goods into the free zones in an effort to prevent smuggling and stimulate production. The Council of Ministers has approved a draft law to set up insurance courts in each province at the levels of first instance courts and courts of appeal.

Government/ Parliament

  • The Prime Minister has announced that his government will push through a new national economic strategy called the National Partnership, which will replace the social market economic model adopted back in 2005 by the Baath Party as a compromise between socialism and capitalism. The adoption of this new strategy is in no doubt related to the passage of the Public-Private Partnership (PPP) Law earlier this year. The National Partnership appears to allude to partnerships between the public and private sectors. The social market economy was more about promoting the private sector alongside the public sector in Syria. Therefore, PPPs are set to take center stage now.
  • Historically, Syria had a free market economy when independence was achieved in 1946 but socialism began creeping in shortly thereafter. The original force for socialism in Syria was President Gamal Abdel-Nasser who served as leader of the United Arab Republic comprising both Syria and Egypt from 1958 to 1961. However, socialism was entrenched as state policy by the Baath Party when it came to power in 1963 after a two-year gap when a market economy was restored. President Hafez Al-Assad continued socialism as an economic policy objective when he came to power in the early 1970s but gave the commercial classes some room to operate in the economy. President Bashar Al-Assad pushed through market reforms in Syria when he took office in 2000 and his government formally adopted the social market economic model five years later. The Baath Party pushed for this type of economic system as a means for Syria to move away from a socialist command economy towards a more market-based approach. The policy shift was fuelled by declining oil reserves and challenges to public finances, which meant that investments from the private sector would be welcome. However, the social market economy stalled in 2011 with the onset of conflict and instead, a war economy has developed since then.
  • President Bashar Al-Assad met with lawyers from the Syrian Bar Association in Damascus. He described the notion of a transitional governing body as a threat to the political structures of the state, which will encourage sectarianism. The existence of such a body would in effect be an attempt to create a sectarian constitution that pits sects against each other. What the body would actually represent is a means to create new political groupings within Syria that are reliant on foreign support. While the President did not actually state it, the concept of a transitional governing body as he described it would in reality turn the Syrian governing system into one resembling that of neighbouring Lebanon’s where state paralysis is the norm. Instead, official Syrian policy leans more towards the establishment of a national unity government formed in Damascus as opposed to a transitional government created with foreign support and conditions. According to the President, Syria will look towards national dialogue and a referendum to decide on major issues of constitutional importance. In addition, he held that any transitional process that takes place in Syria must be in line with the current Constitution.
  • Days later, President Bashar Al-Assad told the Spanish newspaper El País that the objectives for ending the conflict in Syria should include the following: firstly, the formation of a national unity government in line with the provisions of the current Constitution; secondly, the preparation of a new constitution; and finally, early parliamentary elections.
  • President Bashar Al-Assad has issued Decree 63/2016 setting Wednesday, April 13th as the date for parliamentary elections to the People’s Assembly to be held. The elections are carried out in accordance with the Electoral Law and held at the provincial level with each province being allocated a fixed number of seats. While there are 14 provinces, there are 15 electoral districts since Rural Aleppo counts as one. There are 250 seats in the People’s Assembly that are allocated as follows: Damascus has 29 seats; Rural Damascus has 19 seats; Aleppo has 20 seats; Rural Aleppo has 32 seats; Homs has 23 seats; Hama has 22 seats; Idlib has 18 seats; Lattakia has 17 seats; Deir Ez-Zor has 14 seats; Hassakeh has 14 seats; Tartous has 13 seats; Daraa has 10 seats; Raqqa has eight seats; Suwaida has six seats; and Quneitra has five seats. 125 seats (or 50%) are allocated to workers and members of the peasantry. The last parliamentary elections took place in May 2012 and the elections this April will be the second ones held under the current Constitution. The elections will be supervised by the Supreme Judicial Commission for Elections (SJCE). Candidates standing for the People’s Assembly had until March 1st to submit their candidacy papers to the subcommittees of the SJCE located throughout the provinces. Candidates from conflict areas were permitted to file their candidacy papers in nearby provinces that were considered safe. By the end of February, around 5,600 candidates registered to stand in the elections. According to the Interior Minister, the parliamentary elections will only take place in areas under the authority of the state.
  • Law 8/2016 amends some provisions of the Electoral Law to take into account certain logistical issues in order to hold the upcoming parliamentary elections in April. The People’s Assembly moved quickly in passing this Law after it was briefly reviewed by its Constitutional and Legislative Affairs Committee.
  • Following the questioning of the Minister of Internal Trade and Consumer Protection by MPs, the Speaker of the People’s Assembly has warned that no minister is exempt from legislative scrutiny. Referring to the Constitution, the Speaker further asserted that MPs can resort to a vote of no confidence in ministers if they feel that they have failed to perform their duties appropriately. Given the sensitive issues surrounding consumer protection and market abuse that have become prevalent in the economy as a result of the ongoing conflict, the Minister of Internal Trade and Consumer Protection faced heated questioning by MPs.
  • The Minister of Culture has informed the People’s Assembly that the new law restructuring his Ministry has been drafted and takes into consideration the changes that have taken place in Syria.

Commerce

  • The Ministry of Economy and Foreign Trade has issued Regulation 145/2016 to limit smuggling and stimulate the production of goods in the free zones. The Regulation stops the shipment of goods with 20% and 30% customs duties into the free zones whether for the purposes of re-exportation, domestic consumption, storage, etc. Goods subject to a 10% customs duty require prior approval from the General Establishment for Free Zones (GEFZ) before being shipped to the free zones. Goods subject to one-percent and five-percent customs duties can be shipped to free zones as is normally the case already. Goods that are exempt from the Regulation but require prior approval before they can be shipped to the free zones consist of cars, trucks and other heavy equipment including those used for public works. Goods shipped to the free zones for the benefit of the public sector are also exempt from this Regulation but they require prior approval. Moreover, goods located at the ports of entry or shipped before the issuance of this Regulation are exempt and can be shipped to the free zones after obtaining the consent of the GEFZ. Regulation 145/2016 continues in effect until the end of 2016 and its provisions will be assessed throughout the year. By imposing controls on the entry of goods into free zones, Regulation 145/2016 seeks to promote the local production of goods as opposed to relying on imports. Additionally, it looks to increase the national income and lower demand for foreign exchange so as to protect the Syrian Pound.
  • In January, the Customs Directorate 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, the free zone authorities are protesting the passage of this measure as it is expected to affect commercial activity in their premises.
  • The Draft Free Zones Law aims to make the Syrian free zones more attractive and more competitive with their counterparts in neighbouring countries. There is no doubt that this can only be accomplished if the conflict first comes to an end.
  • Since Regulation 703/2015 came into force earlier this year, the Ministry of Economy and Foreign Trade has issued 61 import licenses for essential items. In line with Regulation 703/2015, which was recently passed by the Ministry of Economy and Foreign Trade (MEFT) 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.
  • According to the Ministry of Economy and Foreign Trade, it granted 19,000 import licenses in 2015 and the Central Bank financed 6,000 of them.
  • Reports suggest that there has been a significant reduction in importers violating import regulations during the second half of 2015. In fact, compliance with import regulations increased by 90% in the second half of 2015 compared with the beginning of that year. The reason for this decrease appears to be the issuance of Regulation 623/2015 by the Ministry of Economy and Foreign Trade, which imposes penalties on the circumvention of import rules. According to this Regulation, a first-time violation of import rules leads to a one-percent fine on the value of the imported goods, a five-percent fine for a second violation, and fines amounting to 10% for further breaches. Before the passage of Regulation 623/2015, importers used to ship their goods to Syria and then apply for an import license.
  • The Central Bank is requiring importers to be registered with the Chambers of Commerce for at least five years before they can receive financing. New rules issued by the Central Bank also require importers to prove that they are not benefitting from any credit facilities to finance their imports.
  • Confectioners in the Damascus Chamber of Industry have called for pricing confectionary exports in foreign currencies and liberalizing prices for locally-sold goods so they are free of controls.
  • The Ministry of Economy and Foreign Trade has issued Regulation 142/2016 extending the ban on water bottle imports into Syria in accordance with Regulation 104/2015 until the end of the year.
  • The Ministry of Economy and Foreign Trade has denied that it permitted the importation of secondhand cars into Syria.
  • According to the Agency for Supporting and Developing Local Products and Exports, recent import bans and trade measures are not permanent but rather they are meant to address the current economic situation in the country.
  • Environmental marks are expected to be issued by the Ministry of State for Environmental Affairs to be placed on local and imported goods to encourage environmentally-friendly production processes.
  • According to the Director-General of the Competition Council, 15 merchants are monopolizing imports into Syria and unfairly controlling the markets.
  • A Syrian MP in the People’s Assembly had questioned why the Ministry of Internal Trade and Consumer Protection had not up to that point issued the executive regulations to the Consumer Protection Law. It seemed at first that the Ministry held the opinion that the Law was clear enough in its provisions and that it was not in need of the regulations. However, very soon after that session, the Ministry issued them.
  • Reports pointed to a significant rise in commercial registrations in Tartous province in 2015.

Tourism

  • The Minister of Tourism has issued Regulation 700/2016, which contains the licensing requirements for management companies concerned with touristic facilities.

Insurance

  • The Council of Ministers has approved a draft law to set up insurance courts in each province at the levels of first instance courts and courts of appeal. The creation of these courts to try insurance-related cases will 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.
  • While the Syrian Insurance Supervisory Commission hopes to have the new Insurance Bill prepared this year, concern looms over its drafting as not all the players agree on the priorities to be pursued in this piece of legislation. The Insurance Law is expected to face significant revisions that will address shortcomings experienced in the past decade. The Ministry of Finance had 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. The Minister of Finance had earlier defended his handling of the drafting of the new Insurance Bill, particularly the composition of the committee charged with overseeing the process. There have been concerns as to whether the committee sufficiently represents all the interested parties in this sector.
  • The Board of Directors of the state-owned Syrian Insurance Company is considering converting it into a public joint stock company in order to list it on the Damascus Securities Exchange.

Property

  • The Court of Cassation is hearing cases where debtors are having their properties repossessed after they take out loans from banks in Syrian Pounds and convert them into foreign currencies in order to profit against the depreciation of the Syrian Pound. When they fail to pay back their loans since they are waiting to profit on the drop in the value of the Syrian Pound, the banks are foreclosing on their immovable properties and selling them off through public auctions conducted by the state in order to settle their debts. Legally, public auctions can only be conducted if the property is free of any charges. Case 147/2016, which was recently heard by the Court of Cassation, involved a debtor filing a lawsuit and arguing that the bank did not follow the correct procedures for the purposes of holding the auction. In this particular case, the claimant was trying to recover his property from the third party purchaser who bought the property from the person who initially bid for it at the auction. The fundamental question for the Court here was whether the state could go back on a property sale after a public auction had been conducted? If the state could go back on such a sale, who would compensate the third party purchaser? The Court held that in accordance with the Land Registry Law that dates back to 1926, if a property has been transferred to a third party purchaser acting in good faith and the conveyance has already been registered in the Land Registry, the sale cannot be voided.
  • Amendments to the Property Investment Law are being discussed with developers, investors and other interested parties both inside and outside Syria. The proposed changes are also taking into consideration the reconstruction period. In the real estate development sector, there are currently 45 licensed companies and 23 areas designated for investments.
  • There is controversy over lawsuits related to the state-backed southern Damascus development being carried out in line with Legislative Decree 66/2012. The judiciary is seeking advice from the provincial authorities in Damascus as to whether the supposed sales of shares in the holding company that is spearheading the development are valid. The holding company is owned by the provincial authority in Damascus, which is supposed to grant shares to owners with proprietary interests in the development. Whether the provincial authority has actually transferred the shares to their rightful owners to date remains in question. Legislative Decree 66/2012 aims to carry out an urban redevelopment project in informal parts of southern Damascus that were the scenes of intense fighting during the current unrest. To meet this objective, the government has recently allocated SYP 20 billion to cover infrastructure costs and compensation payments to residents.
  • The Council of Ministers has approved a bill suspending the registration of properties in land registries that were closed due to unstable security conditions.
  • Bills relating to real estate sales and fees on old rent-related tenancies are still on the government’s table for discussions 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.
  • The Council of Ministers has approved a decision to transfer certain properties located in areas subject to planning in Tartous province to local councils for the purposes of promoting small and medium-sized industrial projects.
  • Legislative Decree 7/2016 exempts citizens benefiting from social housing provided by the General Housing Establishment from paying fines for failing to make fee payments on time.

Taxation

  • The Council of Ministers initially approved the draft law pertaining to the billing system, which will have consequences for the tax system. The Draft Billing Law was submitted to the government for approval after amendments by the Ministry of Finance were included. The Ministry of Finance held discussions about the provisions of the Draft Law after receiving feedback from the Damascus Chamber of Commerce and other interested parties. Despite its initial approval, the Ministry of Finance has confirmed that the Draft Law was returned to it by the Council of Ministers so that it could work alongside the Ministry of Justice to develop the executive regulations, which will accompany the bill upon enactment. Once completed, the Draft Law will be sent back to the Council of Ministers for approval once again. If enacted, this piece of legislation 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. There are hopes it will have an effect on limiting transactions in the informal economy. Additionally, the Ministry of Finance has stated that the Draft Billing Law will complement the provisions of the recently-enacted Consumer Protection Law.
  • Syrian exports to Russia are benefiting from reductions in customs duties of up to 80%.
  • The Ministry of Finance has confirmed that there is no present intention at the moment to amend the Consumption Tax Law that was passed last year.
  • A committee set up by the Ministry of Finance is considering changes to the Income Tax Law to ensure touristic businesses declare their actual earnings to the General Commission for Taxes and Fees (GCTF). Taxation problems relating to touristic businesses stem from the fact that some two-star establishments charge prices that are applicable by their four-star counterparts.
  • A committee has been formed in the Ministry of Finance to review laws and regulations to improve the capabilities of the GCTF.

Finance

  • Following the passage of the Public Banks Loan Repayments Law in December last year, small borrowers are paying back their debts in the first six months of this year to benefit from penalty exemptions. 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 Monetary and Credit Council, the body that governs the Central Bank, has pushed through a decision that stops banks in Syria from offering new banking products to customers unless they obtain prior approval from the Central Bank.
  • A committee is studying proposals to amend laws in order to facilitate banking transactions in Syria.
  • The Federation of Syrian Chambers of Industry has referred a draft law to establish the National Fund for Social Development (NFSD) to the Prime Minister’s Office after previously doing so in 2013. The NFSD plans to finance the rebuilding of Syria’s infrastructure without recourse to borrowing. The draft provides incentives for various parties to contribute funds for reconstruction projects including entitlements to profits. Players from all parts of the economy will be invited to contribute with the NFSD. The government and the private sector will equally contribute 50% of the budget of the NFSD.

Public Procurement

  • Contractors are describing certain decisions by the government as unfair, especially its preference of using public sector companies to undertake work on state-owned projects.
  • The Construction Contractors Syndicate in Rural Damascus has called for the value of public contracts to be set at the equivalent value of gold. Such a call follows complaints by contractors that they are not being compensated by the state for price increases in materials as directed by the government.
  • The Central Financial Supervision Agency has discovered a number of violations of the Public Procurement Law that relate to purchases made by the public sector.
  • The Director-General of the Industrial Cities has called for setting up electricity companies in accordance with the PPP Law. However, this can already be done in line with the Electricity Law. The Law invites local and foreign investors to participate in the electricity sector either on their own or in partnership with the public sector. Private investors are allowed to generate and distribute electricity to consumers. One key feature of this Law is that it promotes investments in renewable resources.
  • The Ministry of Industry is compiling a list of all its companies deemed suitable for private sector investment under the PPP Law.
  • Proposals are being considered that could see new malls being built in accordance with the PPP Law.

Employment

  • According to the Minister of Labour, there are no obstacles to the passage of the Draft Public Employment Law as the only issue holding it up at the moment relates to salaries, which will be resolved soon. He confirmed that the bill would have gone to the People’s Assembly sooner but for the delay caused by the matter of public sector salaries. While it is unclear at this point, there appears to be a strong drive to incorporate the system for paying public sector salaries into the bill. On previous occasions, the Minister has stated that the draft, which regulates the employment of public sector employees, is in its final stages and will solve a number of problems dating back to 2004. In addition, the Minister has hinted that the bill will tackle problems brought on by the crisis in Syria that the current Law does not address. As well as filling in these gaps, it will comply with the relevant provisions of the Constitution of 2012, which came into force after the original Law. The draft is expected to be forwarded to the People’s Assembly by the government in the coming period after it completes its review.
  • In fact, the Ministry of Labour came out publically to discuss the proposed amendments to the Public Employment Law in more detail. The reasons for amending the Law include improving the living conditions for public sector employees as well as ensuring that they are recruited for the positions that match their qualifications. The changes will specifically cover recruitment, job allocations depending on the qualifications of employees, promotions, salaries and salary ceilings, family allowances and so forth. According to the Ministry of Labour, the legal revisions covering public sector employees are intended to further guarantee their rights and increase their salaries. The bill will re-examine the procedures for recruiting public sector employees, which are usually done by conducting competitions among candidates. The bill lays down four categories as opposed to the current five for the purposes of recruiting employees through competitions. They will also touch on the matter of temporary workers employed in the public sector and ways to provide them with permanent job security. One of the changes expected to be ushered in is the raising of the age of retirement to 65 years instead of 60 years. The bill will also address the conditions of employees who have been kidnapped throughout the conflict in Syria. Furthermore, it is expected to increase the percentage of public sector employees with disabilities to six percent.
  • Bearing in mind the possibility of further changes, the draft law regulating public sector salaries could be passed soon. Moreover, the Minister of Administrative Development has confirmed that the concerned authorities are reviewing the latest public sector salaries proposal. What is noteworthy is that the Minister supports merging this draft law with the comprehensive Public Employment Law. In general, the Ministry of Administrative Development is seeking to amend legislation to improve and enhance the efficiency of the public administration.
  • The government has pushed through procedures to facilitate the right of public sector employees to seek leave without pay, travel abroad and resign. Public sector employees have hitherto found it difficult to travel abroad.
  • MPs in the People’s Assembly have called for public sector employees who are proven innocent of charges leveled against them to be reinstated in their jobs.
  • The Central Financial Supervision Agency has discovered misappropriations of salaries that should have been paid to public sector employees in Raqqa province. The case has been sent to the Attorney-General in Damascus.
  • Private sector construction workers are seeking better employment and social security protections through legislative reforms.

Judiciary

  • The Ministry of Justice has adopted new procedures for promoting judges and state attorneys.

Civil Society

  • The Minister of Social Affairs has informed the People’s Assembly that her Ministry is continuing work on the Draft Civil Society Law. Last summer, the Constitutional Committee in the People’s Assembly approved the Draft Civil Society Law, which is expected to replace the current Law 93/1958 dating back from the era of the United Arab Republic. If passed, the new law is expected to regulate the increasing number of non-governmental organizations that have sprung up around the country in recent years in response to the ongoing conflict.

Transport

  • MPs in the People’s Assembly have called for amendments to be made to the Road Traffic Law and for replacing imprisonment for certain traffic offences with fines.

Education

  • The Ministry of Labour has set minimum wages for the different categories of teachers and other employees in private schools, which were licensed in accordance with the Private Education Law.
  • The People’s Assembly has begun deliberations on a bill that establishes a pension fund for teachers.
  • The Council of Ministers has approved a bill establishing the Scientific Excellence and Creativity Agency, which will be linked to the Minister of Higher Education.

Health

  • MPs in the People’s Assembly are seeking a review of the law regulating full-time work for doctors as part of efforts to improve the health sector.
  • Syria and Russia have signed a number of cooperation agreements in Moscow relating to health and medical education.
  • The Central Financial Supervision Agency (CFSA) has investigated 10 irregularities at the Ministry of Health in 2014 worth around SYP 27 million. The CFSA has been analyzing the accounts of various government departments looking for discrepancies.

Water

  • The Ministry of Water Resources has discussed the Draft Water Law, which addresses issues such as illegal wells and the prevention of wastage. Changes to legislation regulating water use seek to curb violations and to properly organize the management of water resources.

Military

  • Legislative Decree 8/2016 grants amnesty to soldiers both inside and outside Syria who deserted their posts. It also grants amnesty for crimes included in the Military Service Law that were committed before February 17, 2016.
  • Law 6/2016 amends Article 5 of Legislative Decree 75/1973, which created the Order of the Hero of the Republic. The Order was originally awarded to civilians in Syria who contribute towards achieving military victories and to soldiers in Arab armies that fight alongside Syrian forces. According to the Law, the Order can now be awarded to fighters from other allied countries fighting alongside Syrian forces.

Criminal Law

  • The Ministry of Justice has formed a committee to recommend tight controls on pre-trial detentions for suspects, which should be proposed within two months.
  • Syria and Russia have signed an agreement to share information related to combating money laundering and terrorism financing.

International Sanctions

  • US sanctions are now affecting internet users inside Syria. The Syrian Law Journal along with other websites suddenly became inaccessible to Syrians after the American internet hosting service cut access to its websites for internet users inside Syria. What is interesting is that the Syrian Law Journal along with other websites is non-profit and not commercial in nature.