Syria Jacques el-Hakim 1 COMMERCIAL LAW 1.1 Banking law 1.1.1 Licensing af private banks In 1961, following the union with Egypt, banks were nationalized in Syria and, except for the Central Bank of Syria, remained private companies subject to commercial law and responsible for their previous debts up to the limits of their assets. In fact they never paid a consistent part of their debts (particularly the agricultural ones) and their previous shareholders were never compensated, as was provided for in the law. After the partition of the two countries, only the "Arab" banks (i.e. banks with mainly Arab shareholders) were denational- ized, but after the socialist revolution of 8 March 1963, they were national- ized again by Legislative Decree No. 27 on 2 May 1963, and merged in a sin- gle bank, the Commercial Bank of Syria (CBS) by Decree of the Minister of Economy and Foreign Trade (the Minister) No. 813 of 29 October 1966. That bank had the monopoly of short-term deposits and credit, together with the Popular Credit Bank, the Agricultural Cooperative Bank, the Industrial Bank and the Real Estate bank; these were all state owned and each had the mo- nopoly of banking in its own field. After the liberalization trend that was initiated in Syria in 2000, a decree of the Minister authorized the opening of private banks in the Free Zones (in Damascus, Aleppo, Tartous and Latakia, governed by Legislative Decree No. 84 of 1972). The regulations applicable to those banks were issued by a Decree of the Minister No. 793 of 24 May 2000. Up to now, six foreign banks have operated * Professor of Law, Damascus University, Attorney at Law. in the Free Zones in addition to the CBS, and can only deal with clients hav- ing a business in a Free Zone. But it was only on 16 April 2001 that Law No. 28 authorized the opening of private banks on Syrian territory. Under Article 28 of that law, the Minister has to issue instructions governing the operations of those banks, and although the existing laws (particularly Legislative De- cree No. 87 which established the Central Bank of Syria in 1953 and laid down the basic rules of the Syrian currency) and the private regulations of the banks involved were quite sufficient to operate them before nationalization, the in- structions have not up to now been issued, which has delayed the opening of those banks which the country badly needs in order to replace, even partially, operations conducted with foreign banks abroad. Under the new law, the banks must be incorporated as joint stock compa- nies (in French, sociétés anonymes) with the approval of the Council of Minis- ters. They can be completely private or with a 25 per cent participation of the public sector (state-owned banks, the Syrian Insurance Organization, which has the monopoly of insurance in Syria or other entities authorized to receive deposits). They operate under the control of the Central Bank (Article 1). Except for public sector shares, all shares must be nominative and negotiable (this is in any case required by the Commercial Code of all joint stock com- panies) and held by Syrian individuals or corporate bodies (Article 2). How- ever, the Council of Ministers may authorize foreign individuals or corporate bodies to own up to 49 per cent of the shares, provided their shares are paid for in foreign currency at the actual exchange rate (Articles 3 and 9). The ap- plication for the licence is submitted to the Central Bank, which must take into consideration the bank's reputation and ability and the needs of the banking sector. The Central Bank's report and recommendation is transmitted to the Minister who submits them with his advice to the Council of Ministers for a final and reasoned decision. The latter must be issued within three months from the registration of the application at the Central Bank, otherwise the applica- tion is deemed to have been rejected. In that case, the bank can submit a new application to the Central Bank after the lapse of three months. When the li- cence has been published in the Official Gazette, the Government Commis- sioner must then register the bank in the Banks Registry, and only then can the bank start its activity. If it does not do so within one year from that regis- tration, its licence is cancelled. The bank's licence cannot be transferred to third parties, in whole or part. Upon the proposal of the Council of Money and Credit, provided for by Legislative Decree No. 87 for 1953, the Minister lays down the regulations governing the application, the enquiry, the registration and the fees to be paid by applicants (Article 4). It is up to the bank to estab- lish its main office in any county town (Mouhafazat centre) of its choice. It may also, with the approval of the Central Bank, open branches in Syria or abroad (Article 5). The bank's licence must mention: (a) its capital, which should not be less than SPI,500 million (now about US$ 30 million); (b) the public sector's share of the capital, if any; (c) the number of shares and their unit value, which should not be less than SP500 (US$10). This is the maximum share value according to the Com- mercial Code. .