Syria: Legal Analysis, Business Structures & Forms
According to the Constitution of 1973, the Syrian Arab Republic is a democratic, popular, socialist and sovereign state with a republican system of government. The Constitution establishes Islamic jurisprudence as a main source of legislation.
Two judicial systems operate in Syria: the Courts of General Jurisdiction and the Administrative Courts. Transcendent authority over all courts of law rests with the Supreme Constitutional Court, which deals almost exclusively in matters of constitutional law and other internal affairs of state.
Courts of General Jurisdiction
The Courts of General Jurisdiction are separated into six branches, all of which are further categorized by Civil and Penal Chambers (with the exception of the Personal Status Courts). These branches are: (1) The Court of Cassation; (2) Courts of Appeal; (3) Tribunals of First Instance; (4) Tribunals of Peace; (5) Personal Status Courts; and (6) Courts for Minor Offendors.
The Court of Cassation, the highest court, hears appeals from the lower courts and can overturn judgments rendered by Courts of Appeal in criminal and civil cases.
The Courts of Appeal preside over a separate governorate (Mouhafazat) each and are divided into Civil and Penal Chambers. Each Court of Appeal hears appeals of decisions in cases previously tried before the Tribunals of First
Instance and the Tribunals of Peace.
There are several Tribunals of First Instance located in each governorate. Each Tribunal is divided into several divisions according to nature of the cases presented.
The Tribunals of Peace preside over minor civil and criminal matters and are abundant in each governorate. The Personal Status Courts deal mostly in personal status and family matters and vary according to the religion and ethnic origin of the litigants. The jurisdiction of the Courts for Minor Offendors applies accordingly to matters relating to minors. The Administrative Courts adjudicate matters involving the state and its agencies.
Recognition of Foreign Judgments
Foreign judgments can only be executed in Syria if they relate to civil or to commercial disputes upon the approval of the Court of First Instance in the governorate where the judgment is to be executed. If there is no bilateral treaty on mutual recognition with the country concerned, the Syrian court will re-examine the case and scrutinize the foreign court's opinion. If a bilateral treaty exists, the Court will limit its scrutiny to violations of Syrian public policy.
Generally, both domestic and international disputes are arbitrable, unless otherwise specified in statutory provisions. Public or government institutions cannot agree to submit to arbitration unless provided for by statute. The state can only agree to arbitrate if it is bound by treaty. International arbitration held in Syria is subject to Syrian law and is generally covered by the same rules governing domestic arbitration. The enforcement of international arbitration awards generally follows the same rules as the enforcement of foreign court decisions.
Furthermore, Syria is a contracting party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Few investment disputes have actually occurred during the past few several years. Such disputes are usually settled (often after long delays) through negotiations or by enforcement of a contractual arbitration clause.
Business Structures and Forms
According to Syrian commercial law contained in Legislative Decree No. 149 of 1949, there are several forms in which entities may be registered in Syria and through which business may be conducted. These are: (1) capital company (either a shareholding or a limited liability company); (2) general partnership; (3) limited partnership; (4) joint venture; and (5) branch of a foreign company. All of these forms enjoy an independent legal personality except for the joint venture.
Foreign enterprises wishing to establish a branch or to carry out work in Syria must register with the Foreign Companies Department of the Ministry of Foreign Trade. The participation of foreign entities may not exceed 49 percent of invested capital. As a limiting measure, foreign companies and individuals of non-Arab origin may not own real property, but may only rent facilities in order to meet their commercial and residential needs, unless the government issues a decree permitting a particular foreign company to own real property.
A non-Syrian company may establish a shareholding company in Syria provided that: (1) the majority of shareholders are Syrian nationals; (2) the Ministry of Economy and Foreign Trade authorizes the venture; and (3) there is a minimum capital investment of SP 50,000.
Shareholding companies must set aside 10 percent of their net profits annually, as a legal reserve that can be discontinued when its total reserves equal at least 50 percent of the share capital of the company. The legal reserves set aside may not exceed 25 percent of the company's net profits per year. Foreign nationals who are members of the board may not exceed the proportion of their relative shareholding participation in the company's capital. In addition, a majority of the members of the board must be Syrian nationals.
In public shareholding companies, at least two members of the board of directors are required to be representatives of the employees. Members of the board of directors are individually liable for any violation of laws, regulations or the terms of the company's articles of association. The board must convene once a month, in Syria, and at least one member more than half of the total number of board members must be present. Voting by proxy or by writing is not permitted. The board of directors must have full authority to deal with all matters pertaining to the company's normal conduct. A general assembly of shareholders is required to convene at least once a year.
Limited Liability Company
In order to form a limited liability company, a copy of the company's constitution must be deposited at the Primary Civil Court within a month of establishment. Capital investment of not less than SP 25,000 is required. An application to register a limited liability company should also be submitted to the Ministry of Supply and Interior Trade (along with a copy of the Constitution) which, if it shall approve the application, shall issue a certificate of registration.
Foreign individuals or corporate bodies are permitted to enter into a general or limited partnership provided a written agreement is signed by all partners, an application is submitted to the Ministry of Supply and Interior Trade and provided that the foreign entity is not a bank, insurance company, law or accounting firm.
In a general partnership all partners are jointly liable to the full extent of their personal fortunes. A minimum of two partners is necessary to found a general partnership. At least one of the general partners’ names must be included in the title of the company along with a description signifying it is a partnership.
A limited partnership includes limited partners, who are liable only to the extent of their capital investment, in addition to a general partner or partners, who have unlimited liability. A foreign company or individual can be a partner in either type of partnership.
There are few joint ventures between Syria and foreign firms. The largest are in the oil sector.
Due to special privileges and exemptions, which include tax and customs duty exemptions, relaxation of foreign currency controls and the easing of some bureaucratic restraints, joint ventures are considered to be very practical. In order to establish a joint venture, a law or legislative decree must be issued to approve the proposal. In order for a foreign business to set up a joint venture, it must first establish its presence in Syria in some other manner.
Companies wishing to establish a branch in Syria are required to submit a request to the Foreign Companies Department of the Ministry of Economy and Foreign Trade. Following authorization, registration of the company must be published in the Official Gazette. The general manager of a branch must be a Syrian national.
There are no special requirements for the financing of the branch, but the transfer of capital from the branch is restricted. Any amounts transferred must receive prior authorization from the Ministry of Economy.
Generally, Syrian law does not require a foreign firm that wishes to do business in Syria to have an agent or a local distributor. Syrian businesses may order directly from abroad without seeking to establish an agent/distributor relationship.
Legislative Decree 151 of 1952 governs the licensing and registration of agents acting for foreign companies. The agent must apply for a license to the Ministry of Economy and Foreign Trade. In addition to providing the agents particulars as required in the application, a notarized, Arabic translation of the agency agreement between the agent and the foreign company must accompany the application. Agents may only be Syrian nationals or a company registered in Syria whose partners or shareholders are Syrian nationals.
© 2000 Mena Report (www.menareport.com)