Legal Briefing- October 2017

Companies

  • The Ministry of Internal Trade and Consumer Protection raised the minimum capital requirements for commercial companies in Syria. Regulation 2128/2017 increased the minimum capital requirements for general partnerships, limited partnerships, limited liability companies, joint stock companies and so forth. For general partnerships, limited partnerships and limited liability companies, the minimum requirement is set at SYP 5 million, while it was previously SYP 1 million. For single-shareholder limited liability companies, it was raised to SYP 10 million from SYP 2 million. The minimum capital requirement for private joint stock companies was raised to SYP 15 million while for public joint stock companies, the limit was raised to SYP 100 million. For holding companies that take the form of joint stock companies, it was set at SYP 1 billion.
  • Regulation 2128/2017 also raised the fees the Ministry of Internal Trade and Consumer Protection charges to ratify the articles of association of companies. For limited liability companies, it was raised to SYP 100,000 from SYP 10,000. For private joint stock companies, it was raised to SYP 150,000 from SYP 25,000. For public joint stock companies, the fee was set at SYP 300,000 and for holding companies, the price is SYP 500,000. To obtain a certified copy of the articles of association, the fee is SYP 500,000.
  • The Ministry of Internal Trade and Consumer Protection issued Regulation 2191/2017 containing the Executive Regulations for Offshore Companies. Offshore Companies are provided for under the Companies Law. An offshore company is a limited liability company that carries out its activities outside of Syria. It shall be limited to concluding contracts and executing projects outside of Syria, with the exception of Israel, and it is not entitled to undertake any activities inside Syria. An offshore company must not own any immovable property in Syria other than its headquarters. An offshore company shall be deemed to be a commercial company and therefore subject to the provisions of the Companies Law. The name of an offshore company must be followed by ‘Offshore LLC’. It is prohibited from carrying out any insurance, banking, financial transfers or financial savings activities. The founding shareholders may be natural or legal persons. They may be of Syrian or foreign nationalities. There must be a minimum of two shareholders. In the event there are less than two shareholders, the offshore company shall be wound up in accordance with the Companies Law. The minimum capital of an offshore company is SYP 5 million. The fee for ratifying its articles of association is SYP 350,000. The fee for obtaining a certified copy of the articles of association is SYP 50,000. The fee for granting a copy of the amendments to an offshore company is SYP 25,000. The fee for obtaining a certified copy of the Commercial Registry Certificate is SYP 50,000. In order to incorporate an offshore company, its articles of association must be ratified by the Minister of Internal Trade and Consumer Protection. If an offshore company wishes to undertake activities inside Syria, it must convert its offshore status by passing a shareholders resolution to this effect and have its new onshore status ratified by the Ministry of Internal Trade and Consumer Protection. The provisions applicable to limited liability companies under the Companies Law shall also be applied to offshore companies. The Companies Directorate in the Ministry of Internal Trade and Consumer Protection shall maintain a special register for offshore companies.
  • The Minister of Internal Trade and Consumer Protection issued Regulation 2190/2017 allowing the establishment of companies that provide flexible serviced offices. The flexible offices can serve as the registered addresses of several companies and come in light of the lack of available commercial space.
  • More company incorporations in Syria were observed during the month of October as investor sentiment picks up on optimism that the conflict in the country is drawing down. Lebanese and Iraqi investors lead the way in company incorporations as their Russian, Iranian, Chinese and Brazilian counterparts are set to follow. In addition, investors from Oman, Armenia and Belarus are studying the prospects of reconstruction in Syria. Hardly a day goes by when a company is not incorporated in Syria. The winding down of the conflict has investors preparing for reconstruction.
  • The Minister of Internal Trade and Consumer Protection issued a circular with new instructions for all departments of the Commercial Registry. The Commercial Registry has been instructed not to provide sole traders, partnerships or companies with copies of Commercial Registration Certificates unless those businesses provide a copy of their Certificate of Membership in their respective Chamber of Commerce for that same year. Article 15 of the Chambers of Commerce Law 131/1959 sets out the conditions for membership in the Syrian Chambers of Commerce.

Investments

  • A study is being commissioned to consider the possibility of transforming the coastal city of Tartous into a free zone.
  • Estimates suggest that expatriate Syrians have a combined total of between $80 billion (US) to $140 billion overseas that could be invested in Syria’s reconstruction.
  • The Syrian and Omani governments are set to incorporate a company in Syria to provide services to operators of oil and gas fields and for the rehabilitation and reconstruction of damaged oil facilities. The agreement to form the company was officially concluded between the Syrian Minister of Petroleum and Mineral Resources and the Omani Minister of Oil and Gas. The decision follows the signing of a memorandum of association in Muscat on expanding the prospects of mutual cooperation between the two countries in the oil and gas fields. The new Syrian-Omani company will serve as a springboard towards establishing other investment projects between the two countries. The Omani Minister affirmed his country’s readiness to continue to contribute to oil investment activity in Syria to provide full support in oil exploration and refining. Oman is the latest country to prepare for participation in the reconstruction of Syria.
  • A summit in Sochi saw the Syrian and Russian governments sign various protocols paving the way for Russian investments in Syria’s reconstruction.

Commerce

  • The Ministry of Internal Trade and Consumer Protection completed draft amendments to the Consumer Protection Law that strengthen penalties on merchants for violations.
  • The Ministry of Economy and Foreign Trade is considering adding new goods to its list of permissible imports, including household items. The Ministry already permitted the importation of 33 new items. It further added 23 new goods.
  • The Minister of Economy and Foreign Trade issued a decision allowing merchants to export all types of wool without any restrictions.

Industry

  • The government permitted the importation of used machinery for industrial purposes. However, the decision issued by the Prime Minister does not apply to projects licensed under the Investments Laws of 1991 and 2007.

Energy

  • There was speculation that German giant Siemens was expected to carry out works on the expansion of the Al-Nasserieh Power Plant in Rural Damascus. The Al-Nasserieh Power Plant was the subject of special legislation before the conflict to attract foreign investment for a public-private partnership to execute the project. With respect to EU sanctions, they prohibit European companies from participating in the construction of new power plants for electricity production, not maintaining current ones. Therefore, as the project in Al-Nasserieh is an expansion of a current power plant and not a new one, the EU sanctions would not technically be breached if Siemens executed the project.

Finance

  • The Ministry of Finance moved forward with preparations for the 2018 national budget, which amounts to projected spending of SYP 3.187 trillion, which is equivalent to approximately $6.6 billion (US), and marks an increase of SYP 527 billion compared to the 2017 budget. SYP 2.362 trillion ($4.92 billion) is allocated for running expenditures while SYP 825 billion ($1.72 billion) has been budgeted for investment expenditures. SYP 657 billion ($1.37 billion) was earmarked for social support, including for the Agricultural Production Fund, the National Fund for Social Aid, subsidies and so forth. SYP 700 billion ($1.46 billion) was allocated for electric power. SYP 600 million ($1.25 million) of local revenues are to support the independent budget of Suwaida Province with the aim of implementing service projects. The Council of Ministers subsequently approved the draft national budget.
  • The Central Bank issued a series of regulations concerning foreign exchange activities. It initially imposed restrictions on the exchange of any amount above $1,000 (US). The decision required purchasers of foreign exchange amounting to more than $1,000 to deposit an equivalent amount in an account for a period of one month. The move was part of the Central Bank’s policies to shore up the exchange rate of the Syrian Pound and prevent manipulations in the market. There was consequently a significant decline in purchases of foreign exchange by the state-owned Commercial Bank following the issuance of this decision. Many vendors of foreign exchange split their sales and sold to a number of customers as opposed to one significant sale to one buyer following this decision. The aim of the purchasers was to avoid freezing an equivalent amount as a deposit for up to one month.
  • The Central Bank then issued regulations capping foreign exchange purchases at once per month and up to a ceiling of $500 (US) for transfers after it was previously $1,000. Any remittances of more than $500 or its equivalent are to be exchanged into Syrian Pounds and deposited in the account of the beneficiary for not less than three months. Central Bank regulations require banks dealing in foreign exchange to transfer remittances from abroad to the accounts of beneficiaries in Syrian Pounds. The withdrawal of the deposit from the account before the three-month period incurs a fee of 10%, of which a one percent commission goes to the relevant bank and the remaining nine percent to the Central Bank. The regulations limited financial transfers to once per month per individual. According to the Governor of the Central Bank, these regulations apply only to individuals and not to commercial companies. The passage of these measures appears aimed at narrowing the gap between the Central Bank foreign exchange rate and the black market rate to deter speculative profiteering. The new regulations began causing problems for visitors to Syria who instead resort to the black market because of the foreign exchange limit in the banks. They are also causing problems for hotels which accept payments for bookings from foreign guests in US Dollars and Euros and have to exchange them. The Central Bank clarified that hotels are exempt from this requirement in respect of revenue generated from foreign currencies. It also exempted United Nations agencies, the Aga Khan Development Network and others from these rules. The Governor of the Central Bank has hinted that these regulations may be revoked in the coming months.
  • The Central Bank set five conditions for banks and foreign exchange businesses to abide by before accepting foreign currencies. The five conditions relate to the quality of the banknotes.
  • The government is deliberating on a bill criminalizing the publication of black market rates of the Syrian Pound that are contrary to the Central Bank rates. Penalties are to include a SYP 5 million fine and a minimum term of five years in prison for anyone caught publishing black market rates of the Syrian Pound.

Taxation

  • According to an Aleppo MP, there are some government incentives for industrialists like tax deductions and reduced customs duties for industrial imports but these are not enough. He went on to explain that the government should treat Aleppo like a devastated area and provide specific incentives tailored to its industrial sector.

Property

  • The General Commission for Real Estate Development and Investment has recently licensed a total of 45 real estate development companies in Syria.
  • In light of legislative reforms in anticipation of reconstruction, the People’s Assembly approved a bill giving legal effect to the status of real estate documents that were lost, stolen, or partially or totally damaged during the war. The bill became Law 33/2017 and it regulates the process of re-issuing the respective real estate documents. It also provides for imprisonment for any person who steals or damages real estate documents. The current Land Registry Law and its Executive Regulations do not address such circumstances where real estate documents are affected in this way. In keeping with the provisions of the Constitution guaranteeing property rights to owners, the People’s Assembly passed this bill. According to a judge in the Real Estate Court, 70% of property documents were lost, stolen or destroyed during the conflict. The Law is expected to resolve 80% of problems associated with missing real estate documents, which will be reconstructed and given legal effect.
  • There is an abundance of real estate lawsuits being heard by the courts in Damascus and Rural Damascus. There is much demand in these two provinces for real estate because of their attractive safe zone status. The lawsuits are mainly related to disputes over lease contracts between landlords and tenants. The problem is that there are not enough real estate judges to rule on disputes as there are lawyers and lawsuits involving property matters. Judges are more attracted towards the criminal legal system because it is perceived to be easier and considered more prestigious socially than adjudicating in the civil courts. Despite this misconception, criminal law judges have been busier than their civil law counterparts due to the effects of the current crisis.
  • There are 31,000 real estate fraud cases in Damascus and 1,000 title deeds lost in Daraya suburb.
  • The Prime Minister revoked a requirement for private banks to obtain security clearances before offering foreclosed properties to bidders at public auctions.

Health

  • A new pharmaceutical factory is to be established in the Adra Industrial City in Rural Damascus after being granted a license from the Ministry of Health. The factory will supply the local market with more pharmaceutical products and export to foreign markets. Most of the pharmaceutical factories affected by terrorism have been put back into service partially or totally. There are 69 factories currently in operation while four new plants are being licensed. The pharmaceutical industry in Syria before the war covered 93% of local market needs and exported medicinal products to 56 countries. Following the war, coverage dropped to 80% with special medicines such as those for the treatment of cancer and chronic diseases being imported.
  • A bill is being drafted that will criminalize prescriptions of medicines by doctors to patients who are not suffering from the relevant underlying symptoms that would be treated by such medicines. The bill aims to reduce instances where doctors prescribe medicines for patients who do not actually require them.
  • The People’s Assembly deliberated on a bill regulating the veterinary profession.

Education

  • The Council of Ministers discussed a bill amending Articles 116 and 176 of the Universities Law to allocate seats to the victims of war and to the families of the security forces.

Transport

  • Registration fees for automobiles in Syria along with insurance premiums are expected to rise soon to complement an increase in car prices.
  • Despite a lack of import licenses for automobiles, there is frustration that this policy does not apply to the wealthier classes. The complaints stem from the fact that there are numerous modern cars that can be seen on the streets of Syria despite there being import restrictions since the beginning of the crisis in the country. The Ministry of Economy and Foreign Trade has imposed import restrictions on cars in an effort to preserve the foreign exchange rate of the Syrian Pound.
  • The People’s Assembly approved a bill on maritime certificates for seafarers, which will replace Law 57/2001 as it is no longer compatible with the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers 1978. Syria acceded to the Convention in 2000. The new bill, which became Law 34/2017 following its ratification, will seek to ensure more optimal compliance with the amendments to the Convention. The Minister of Transport foresees greater amounts of revenues as a result of this new Law.

Government

  • The Council of Ministers approved a bill on administrative training.
  • The Competition Protection and Anti-Monopoly Commission, which is linked to the Council of Ministers, is set to be restructured reportedly to make it more rewarding for employees and to give them incentives.

Parliament

  • The Complaints Committee in the People’s Assembly received 150 complaints a month at the rate of five per day about decisions taken by ministers. The complaints concerning missing persons are down to 60% after they constituted the bulk of inquiries. The Complaints Committee is in charge of overseeing operations at the Central Financial Supervisory Agency and the Central Supervisory and Inspection Agency after it was assigned these tasks in accordance with the new Rules of Procedure of the People’s Assembly. The two agencies are linked to the Council of Ministers but are being treated as if they are ministries. In this respect, the Complaints Committee is calling its officials for questioning to discuss matters related to corruption.

Judiciary

  • Law 32/2017 extends the provisions of Legislative Decree 28/2013 for another year. Legislative Decree 28/2013 permits the Supreme Judicial Council to transfer lawsuit proceedings from one court to another. The transfer of lawsuits is permitted in exceptional circumstances after a formal request has been made by the Minister of Justice. According to Article 1, the Supreme Judicial Council may, upon a request from the Minister of Justice, transfer cases from one court to another within the same province or between provinces. The Law was originally passed to ease the transfer of cases from conflict zones to safe areas and to extend the time period for processing claims that were lost, burnt or destroyed during the war.
  • The number of lawsuits concerning cases of smuggling dropped by 240 in 2016 to 48 compared to 288 in 2015 while only eight cases were registered in 2017. The eight ongoing lawsuits have been distributed between the courts in Damascus and Lattakia. Of the 48 lawsuits in 2016, 42 resulted in convictions while six cases were cleared. In 2015, there were 207 convictions and 81 acquittals.
  • The Minister of Justice issued a decision to reshuffle the judicial circuits in Damascus and Rural Damascus.
  • The Minister of Justice lamented defects in the Public Prosecution and stated that they cannot be accepted by the judiciary. He went on to explain that the Public Prosecutor’s Office represents the public’s rights and therefore must serve as the refuge of victims. He said that arbitrary arrests are not acceptable but that the judge must have the wisdom and conviction in light of the relevant investigations to make decisions. Meanwhile, the Chief Justice of the Criminal Court in Damascus said that public opinion in Syria yearns for comprehensive judicial reform to establish an independent judiciary.
  • Evidence contained in documents points to the Directorate of Finance in Damascus failing to implement peremptory judgments of the courts. Refusing to execute court judgments is punishable by Article 138 of the Constitution and Article 361 of the Criminal Code.
  • The Supreme Council for Economic and Social Planning discussed the Ministry of Justice’s plan for 2018, which includes a focus on rebuilding the Palaces of Justice damaged by terrorism while completing the one in Lattakia.

Military

  • The People’s Assembly discussed potential amendments to the Military Service Law in relation to job security for conscripts and reservists in the Armed Forces.

Family Law

  • According to a prominent Sharia judge, 70% of women have the right to initiate a divorce under a special provision contained in Article 87 of the Personal Status Law.
  • According to a judicial source, fathers are registering the names of their daughters with the Sharia courts to prevent them from unlawfully getting married.
  • The People’s Assembly referred a bill on unknown parentage to the Women’s Rights, Families and Children Committee for further deliberations. The referral was made in accordance with Article 145 of the Rules of Procedure whereby amendments proposed by MPs affecting the text of a bill are sent back to committees.

Criminal Law

  • A gang of forgers, described as the most dangerous of their kind, was busted in Damascus for falsifying documents in official transactions. Forged powers of attorney became dominant in marital relations, for example where women were divorced by fake attorneys without their knowledge. The Ministry of Justice, the Bar Association and the Criminal Security Department are all investigating cases of forged powers of attorney.
  • The Central Financial Supervisory Agency requested the Attorney-General in Lattakia to pursue four contractors on suspicion of forgery and embezzlement of public funds.
  • The Ministry of Justice and the Ministry of Interior are leading a committee towards amending the Narcotics Law to better combat trafficking and the smuggling of drugs. The current conflict has created bigger narcotics problems in the country that there is now a policy to admit drug abusers to rehabilitation clinics.

International

  • The People’s Assembly approved a bill that ratifies Syria’s accession to the Paris Agreement on Climate Change. Law 31/2017 ratified by President Bashar Al-Assad formally cleared the way for Syria’s accession. A Syrian delegation was dispatched to the 23rd session of the Conference of the Parties (COP 23) to the UN Convention on Climate Change in Bonn, Germany to confirm Syria’s participation in the Paris Agreement. While Syria is preparing to join the Paris Agreement, only one country refuses to be a signatory – the United States.
  • Brazil is preparing to take a decision to reopen its Damascus embassy officially very soon as part of plans to participate in the reconstruction of Syria. International sanctions continue to pose a potential obstacle as Western banks remain hesitant to engage in Syria but alternative arrangements for financing are planned. Brazil is expected to face stiff competition from Russia, China and Iran as Syria gets ready to transition to reconstruction.
  • Reports suggest that Firas Tlass, the son of the late Minister of Defence General Mustafa Tlass, was arrested in the United Arab Emirates after allegations were apparently made that he worked as a broker between ISIS and Lafarge Holcim to maintain the latter’s cement factory in Syria. Firas Tlass announced his opposition to the Syrian government and left the country in 2012.
  • Three Miami residents pleaded guilty to conspiracy to illegally export prohibited articles to Syria in violation of US export control laws. They allegedly exported aviation parts and equipment to Syria in violation of the International Emergency Economic Powers Act. The exports were sent to Syrian Arab Airlines (Syrian Air), which was sanctioned by the Office of Foreign Assets Control (OFAC), which falls under the authority of the US Department of the Treasury. US persons and entities are prohibited from doing business with Syrian Air unless they obtain a license from OFAC. The defendants were indicted for conspiracy to export dual-use – civilian and military – goods to Syrian Air without a license from OFAC. They could face a statutory maximum sentence of up to five years in prison, three years of supervised release and a $250,000 (US) fine.
  • Syrians sanctioned by the Swiss government continue to press ahead with lawsuits in Swiss courts to unfreeze their assets. In some cases, their cases are proving successful but not in others.
  • A federal court in Hawaii ruled that President Donald Trump’s latest September ban on the entry of Syrian and other nationals illegally discriminates based on nationality. As a result, the court issued a nationwide temporary restraining order blocking the ban. The judge held that Trump’s actions require him to make “sufficient findings” that the entry of people would be “detrimental” to US interests. One of the questions raised in the hearing involved the Immigration and Nationality Act’s prohibition on “nationality-based” discrimination. A federal court in Maryland also issued a nationwide preliminary injunction prohibiting the enforcement of the entry restrictions on the same nationals. However, Syrians lacking a credible claim of a bona fide relationship with a person or entity in the US are still banned. The judge in Maryland addressed the question of the constitutionality of the ban and the possible violation of the Establishment Clause. While these court orders are in effect, Syrians not affected by restrictions can still travel to the US as they did before. To recap, the courts’ orders prohibit the US government from enforcing or implementing entry restrictions on Syrian and other nationals. The US Supreme Court dismissed the appeal concerning the previous Trump ban in light of the September 24th expiration of that travel ban.
  • The Trump Administration is to allow refugee admissions to the US to resume as the 120-day ban expired while announcing stricter rules for vetting applicants. The US Supreme Court dismissed the second travel ban case as the refugee ban expired. Under the new executive order issued by President Donald Trump, refugee applicants from Syria will be subjected to a 90-day security and intelligence review, which will include more in-depth checks relating to the applicant’s social media presence, personal information, phone numbers, e-mails and addresses dating back 10 years.
  • Law 30/2017 ratifies a memorandum of understanding signed between Syria and Iraq on the mutual exemption of entry visas for holders of diplomatic, service, private and official passports.
  • The International Monetary Fund (IMF) is slowly starting to look at Syria through a post-conflict lens with an eye towards potential reconstruction. At the IMF’s Regional Economic Outlook Conference in Dubai, Syria was mentioned more times than in previous years. Jihad Azour, the Director of the Middle East and Central Asia Department of the IMF and the former Minister of Finance in Lebanon, said that geopolitical risk in the region is down and post-conflict reconstruction could be a game changer but needs more time to develop. John Defterios of CNN and the host of the panel at the Conference explained that while it is too early to talk about the rebuilding of Syria because the conflict is not finished yet, it is the time to think about it.

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