Syrian Law Journal

Legal Briefing – September 2015

by · 04/10/2015

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 called for compensation to be granted to private contractors after their government contracts were terminated last month. In addition to property transfers, security clearances are now required for certain corporate and commercial transactions as well. The Ministry of Finance is considering compelling limited liability companies and joint stock companies to withhold and pay the payroll taxes of their managers, even if none are appointed. Moreover, the Ministry of Finance has listed the areas in Syria affected by conflict where taxpayers can settle their tax obligations over a five-year period. As for the monthly minimum wage for employees in the private sector, the cooperative sector and the mixed public-private sectors, it has been increased to SYP 16,175.

Public Procurement

  • The Prime Minister has called for compensation to be granted to private contractors after their government contracts were terminated last month. The move comes in response to requests by contractors who sustained financial losses as a result of significant inflation since the current crisis erupted. During the annual general meeting of the Damascus branch of the Construction Contractors Syndicate earlier this year, participants called for the termination of contracts they concluded with public bodies for projects they are unable to complete due to the unrest affecting the country.
  • The Ministry of Public Works plans to implement a pricing review targeting loss-making projects while new legislation, which is being drafted, intends to safeguard the rights of contractors.
  • The Council of Ministers has approved a draft law to continue exempting all Iranian imports supplied to the public sector from customs duties and other fees.
  • The government has implemented a boycott of Turkish goods, which will be applied to the public and mixed public-private sectors.

Commerce

  • The Prime Minister has clarified to ministries and public bodies that the following transactions require the prior approval of the security services: powers of attorney concluded in Syria or abroad for the transfer of property ownership; powers of attorney concluded in Syria or abroad for the incorporation of companies and for becoming or ceasing to be a shareholder; powers of attorney for the establishment of branches of foreign companies in Syria; and commercial agencies that require attestation. All these obligations are in addition to the requirement to obtain security clearances for all powers of attorney concluded abroad for the purposes of transactions in Syria.
  • The Consumer Protection Association in Damascus has complained that it was never given the opportunity to have its say on the drafting of the new Consumer Protection Law. Rather, it has claimed that the Law was put before the People’s Assembly without taking into consideration the opinions of specialists in this field.
  • The Council of Ministers is preparing to push through a draft law that will regulate the transport of goods.
  • The Ministry of Economy and Foreign Trade has set the minimum prices for imports of goods that are produced locally in Syria.
  • The Economic Committee is discussing a proposal that would permit the temporary export of machinery for the purposes of maintenance services by both the public and private sector before it is returned to Syria. In light of the decision taken by a number of industrial businesses to ship their equipment abroad as a result of the challenging economic situation in the country, the government banned the export of machinery. At the same time, importing spare parts to maintain these machines has proven arduous under the international sanctions regime imposed on Syria.
  • Following a recommendation from the Economic Committee, the Prime Minister has prohibited the export of aluminum pellets.
  • Since exports of sheep and goats were permitted by the Ministry of Economy and Foreign Trade, 26,000 of them have been exported so far.
  • The Economic Committee has also recommended banning the import of cement with a view to protecting local production.
  • From January until July of this year, it is estimated that more than 22,000 commercial registration certificates have been issued by the Commercial Registry for the purposes of establishing sole proprietorships, partnerships and companies.
  • Licenses to operate fuel stations are coming under scrutiny following allegations of corruption in this sector.

Industry

  • The Ministry of Industry has barred the Damascus Chamber of Industry from certifying certificates of origin and invoices submitted by companies registered in Aleppo province. Accordingly, Aleppo-based companies must first refer to the Federation of Syrian Chambers of Industry or the Aleppo Chamber of Industry before submitting their documents for certification in Damascus. The move by the Ministry of Industry comes following reports of forgeries in this respect.
  • The Ministry of Local Administration is seeking to set up a public body that would bring together the management boards of the various industrial cities in Syria in order to increase cooperation between them.

Finance

  • According to the Damascus Securities Exchange (DSE), the law does not permit trading in gold, silver and other similar commodities on the stock market. Instead, a separate bourse would have to be established to cater for them.
  • The Syrian Commission on Financial Markets and Securities (SCFMS), the capital markets authority, is considering changes to the DSE Listing Rules, which are presently provided for in DSE Regulation 505/2010.
  • The SCFMS has held that local banks are not speculating in foreign exchange markets outside Syria.
  • Public banks have proposed referring defaulting debtors who acted in bad faith to the Financial Public Prosecutor. Meanwhile, the Central Bank is coordinating with the Ministry of Justice to facilitate the repayment of loans owed to public banks by defaulting debtors.
  • The Central Bank has reached an agreement with public banks regarding the conditions the latter are required to abide by when contracting the services of lawyers. The conditions include certain thresholds pertaining to how many years the lawyer has been practising his or her profession for and the fees they are entitled to charge for their services.
  • The Central Bank has written to the Prime Minister requesting that the competent authorities honour the banking secrecy provisions provided for in Legislative Decree 30/2010. Meanwhile, the Ministry of Finance and the Ministry of Justice have been discussing instances where banking secrecy provisions can be waived and whether amendments to the law are necessary under the current circumstances.
  • The Central Bank has called for an audit of bank accounts belonging to civil society organizations, which are incorporated in accordance with the Civil Society Law, to be carried out to ensure legal compliance. The process of opening a bank account by these organizations is quite regulated and a certain level of oversight is exercised by the Ministry of Social Affairs in this respect.
  • The Central Bank is pursuing 428 suspects accused of violating foreign exchange regulations.
  • The Ministry of Economy and Foreign Trade has issued special instructions with regards to the financing of small projects.
  • The Ministry of Finance has issued a regulation supposedly getting tougher on corruption and at the same time improving the level of services it offers citizens through its various directorates in the country.

Insurance

  • Insurance policies are becoming the subject of litigation as insurers and policyholders argue over the wording of clauses that touch on conflict-related issues.

Taxation

  • The Ministry of Finance may consider the possibility of compelling limited liability companies and joint stock companies to withhold and pay the payroll taxes of their managers whose names are registered in the Commercial Registry to the General Commission for Taxes and Fees (GCTF). For those managers whose names are not recorded in the Commercial Registry and are therefore not legally appointed, it is being proposed that their tax liability be estimated in light of what a manager in their position would earn.
  • The Damascus Chamber of Commerce has been studying the Draft Billing Law. 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.
  • The Ministry of Finance has listed the areas in Syria affected by conflict where taxpayers can settle their tax obligations over a five-year period.
  • The minimum amount exempt from the payroll tax, which applies to salaries and wages earned by employees, has been increased to SYP 15,000 from SYP 10,000 in accordance with Legislative Decree 46/2015. The provisions governing the payroll tax are found in the Income Tax Law.
  • The Economic Committee has made recommendations relating to the fixed lump-sum income tax that would increase public revenues. In this respect, this tax may be imposed on restaurants, cafes, hotels and private hospitals located in the cities. 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.
  • The Ministry of Finance has granted tax benefits to industrial businesses in order to encourage them to produce Syrian goods.
  • The Large Taxpayers Office in the GCTF has collected up to SYP 10 billion from large taxpayers so far this year.
  • The Ministry of Tourism and the Ministry of Finance have agreed to work together to jointly determine the tax liabilities of touristic businesses located in safe areas across Syria following numerous reports of tax evasion.
  • The Ministry of Tourism has started implementing consumption taxes on services offered by touristic establishments.
  • Port tariffs are currently under review to make the ports in Lattakia and Tartous more competitive with those of neighbouring countries.

Employment

  • Public sector employees, both civilian and military personnel, are to be granted a monthly increase of SYP 2,500 in their salaries in accordance with Legislative Decree 41/2015. The pay raise will also apply to employees of mixed public-private sector companies, in which the state owns at least a 75% share. It also covers other forms of contractual employment, including on a part-time basis. In addition, this law also increases the monthly minimum wage to SYP 16,175 for employees in the private sector, the cooperative sector, and the mixed public-private sectors not subject to the provisions of the Public Employment Law.
  • Legislative Decree 42/2015 grants retired public sector employees, both civilian and military personnel, an increase of SYP 2,500 in their pension payments. Furthermore, this law also covers pensions received by the families of deceased pensioners.
  • The Council of State has clarified that according to the law, public sector employees are entitled to return to their jobs and has denied rumors that they are deemed to have resigned. In recent years, a number of employees have been unable to reach their workplaces as a result of the war.
  • Legislative Decree 38/2015 amends Article 74 of the Military Service Law provided for in Legislative Decree 30/2007. It grants all public sector employees leave with pay while fulfilling their military service obligations and also guarantees them their right to return to their jobs.

Tourism

  • The Ministry of Tourism has stressed that it will shut down any tourist operator that does not posses a valid license. Domestic tourism and even religious tourism remain a source of income despite the ongoing conflict in the country. One reason the Ministry of Tourism appears to be going after tourist operators is because some of them are profiting substantially from migrants by facilitating their trips abroad.
  • It has been reported that the Ministry of Tourism is in the process of implementing new pricing structures for restaurants.

Health

  • The government intends to establish the Health Insurance Council, a body headed by the Minister of Finance whose aim will be to meet the medical needs of Syrians.

Education

  • The Council of Ministers is preparing to push through legislation that would put an end to military training obligations for students at public universities and institutions.
  • The Supreme Higher Education Council has agreed to license a private university in Homs.

Administrative Law

  • The Draft Law that is expected to replace the current Council of State Administrative Law dating back to 1959 requires further consideration according to the President of the Council of State. The procedural aspects of the Draft Law are receiving much attention as the objective is to modernize and develop the functions of the Council of State. What is interesting is that after the Draft Law was presented to the People’s Assembly last year, lawmakers sent it back to the Council of State with instructions to reconsider a number of its provisions.

Government/ Parliament

  • A Russian newspaper has claimed that a new government in Syria is expected to be appointed shortly. However, it is unclear yet if any of the ministers will be selected from among opposition groups. There is apparently a Syrian-Russian understanding that envisions the formation of a coalition government that includes members of the opposition and the holding of early parliamentary elections. As it currently stands, the next elections are due to be held in 2016.
  • Decree 244/2015 ratifies the results of the recent parliamentary by-elections held on September 19th to fill the vacant seats of the 10 MPs expelled from the People’s Assembly in late July.

Criminal Law

  • Seven cases alleging abuses by ministers, their aides and other senior officials are to be heard before the Court of First Instance.
  • There have been almost 19,000 reported incidents of individuals illegally acquiring electricity since the beginning of this year. Legislative Decree 35/2015, which recently came into effect, sanctions tougher penalties on individuals who illegally obtain electrical power. 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.
  • 20,000 crimes have been recorded so far this year in Syria for the purposes of prosecution. The majority of these crimes concern forgery and theft.
  • The Ministry of Justice has issued a circular requiring all kidnapping cases linked to terrorism to be prosecuted in the Terrorism Court.

Miscellaneous

  • Water prices are expected to rise following a decision by the government.
  • A proposal is being put forward to permit the construction of suburban cooperatives outside of areas subject to planning.