New Decision Excludes Non-compliant Contractors from Engaging with Public Authorities

On March 14, the Syrian Prime Minister issued Decision No. 11 outlining the mechanism for issuing exclusion decisions against any investor or contractor found to have violated the terms of contracts made with public authorities. Exclusion means preventing the investor or contractor from obtaining contracts to execute projects with public authorities for the duration of the exclusion period.

Decision No. 11 of 2024 does not explicitly mention construction contractors, but they are implicitly included under the category of contractors. A contractor is someone who enters into a contract with a public authority to meet its needs in various fields, while a construction contractor is a specialist in construction works registered with the Construction Contractors Syndicate.

According to the decision, the exclusion measure is applied if a final judicial ruling, an oversight report, or a final arbitration decision establishes a violation of contract terms. Subsequently, the relevant ministry submits a request for exclusion to the Prime Minister’s Office. The exclusion decision is then issued solely by the Prime Minister’s Office, stating the reasons and duration of the exclusion. Before Decision No. 11 of 2024, ministers had the authority to issue exclusion decisions for contractors who violated contract terms with their ministries, under Law No. 51 of 2004 concerning the public contract system and its executive instructions.

The contractual relationships between contractors, construction contractors, and investors with public authorities are governed by Law No. 51 of 2004 concerning the public contract system, its amendments, and its executive instructions. There are six methods of contracting between the parties: direct purchase, tender, request for proposals, competition, negotiated contract, and execution of works on trust.

Law No. 51 of 2004 did not expand on the penalties resulting from breaches of contracts, instead designating the administrative judiciary as the competent authority to resolve disputes related to contracts with public authorities. The law also allowed for arbitration in disputes, following the procedures used in administrative judiciary. It permitted the selection of a specific arbitration body for foreign contracts.

Law No. 51 did not regulate the contractual relationship between contractors and the private sector. Therefore, it is notable that Prime Ministerial Decision No. 11 of2024 also stipulates the exclusion of contractors who violate the terms of contracts with private sector establishments, institutions, or companies. However, the text of Decision No. 11 does not clarify the mechanism for excluding contractors in this case or the legal basis for it.

Additionally, under Decision No. 11 of 2024, exclusion decisions must be published in the Official Gazette and through the National System for Precautionary Seizure Orders (NSPSO), an electronic system that covers all precautionary measures, such as precautionary seizure, compulsory insurance, and other measures that restrict property transactions. These measures are issued by competent authorities as precautionary steps to protect public funds. After the issuance of final judicial rulings that are not subject to appeal and include the confiscation of the convicted parties’ assets, the Ministry of Justice circulates these rulings through the NSPSO, enabling their conversion from precautionary to executive seizure. The aim of using the NSPSO is to replace paper circulars with electronic ones, facilitating their accessibility to relevant authorities.

According to Decision No. 11 of 2024, the seizure of the contractor’s or investor’s property through the NSPSO will be automatic upon the issuance of the exclusion decision by the Prime Minister. However, the relationship between precautionary seizure and exclusion decisions, even if based on a final judicial ruling, oversight report, or final arbitration ruling proving contract violations, is unclear. A breach of contract terms does not automatically warrant precautionary seizure. Therefore, there is no direct connection between exclusion decisions and precautionary seizure.

There are two types of precautionary seizure: judicial and administrative. Judicial precautionary seizure is issued by ordinary courts based on personal lawsuits or official entities with a financial basis or results in financial consequences, such as cases of debt and tax evasion. Administrative precautionary seizure can be imposed by certain ministries under Decree No. 12 of 1953. This includes the precautionary seizure of the property of municipal employees, officials overseeing municipal affairs, and employees in all state departments and public institutions, to secure compensation for losses and damages caused to public funds. The property of employees’ spouses can also be seized.

Under Legislative Decree No. 177 of 1969, administrative precautionary seizure can be imposed on the property of non-employees and their spouses. In 2022, the Minister of Public Works and Housing, following a proposal from the Construction Contractors Syndicate, requested the Ministry of Finance (in letter No. 2968, referencing the Syndicate’s letter No. 264) to exempt the monthly financial statements due to contractors even if the contractor is subject to precautionary seizure. These monthly statements are the payments due to the contractor from public authorities for completed stages of work. This exemption ensures that contractors can continue to fulfill their contracts with public authorities, even if their property is under precautionary seizure, whether due to issues related to the same contract or previous contracts. Failure to pay these statements would halt the contractor’s work, preventing public authorities from suing them since they would be responsible for the non-performance.

Additionally, the Construction Contractors Syndicate‘s Regulation No. 9 of 2014 outlined five reasons for excluding a contractor from the syndicate, four of which are related to conduct: breaching professional ethics, undermining the dignity of a syndicate member, failing to perform syndicate duties, and not informing the syndicate of ongoing work. The fifth reason is wasting public funds, which was not clearly defined in Law No. 9 of 2014. Exclusion from the syndicate prevents a contractor from working in both the public and private sectors, as they lose the official status required to practice the profession.

The Construction Contractors Syndicate can issue exclusion decisions through its Disciplinary Council, composed of the branch head, a judge appointed by the Minister of Justice, and a syndicate member. The council can revoke a contractor’s membership. In both cases, exclusion and revocation, the contractor cannot enter into contracts with public authorities until the exclusion period ends or they regain their syndicate membership.