Contracting with the Syrian State Post-Sanctions

The lifting of major international sanctions on Syria has reopened opportunities for direct investment and contracting with Syrian ministries, public authorities, state-owned enterprises, public-private partnerships and other government-linked counterparties. For many international investors, transactions that were effectively impracticable for several years can now be considered again.

The removal of these restrictions does not, by itself, simplify the legal analysis of a state-facing transaction. Where the Syrian State or a government-linked entity is involved, questions of legal personality, public authority, procurement, governmental approvals, dispute resolution, sovereign immunity, payment security and enforcement need to be considered alongside the sanctions, banking and regulatory requirements applicable to any cross-border investment.

The practical issue for an investor is therefore whether the particular transaction can be structured so that the public counterparty is properly authorised, the payment and performance arrangements are workable, the contractual protections are effective and there is a credible route to recovery or repatriation of capital.

These considerations are likely to become increasingly relevant as Syria moves further into reconstruction and economic reintegration.

The post-sanctions compliance position

The international sanctions environment has changed materially.

In the United States, Executive Order 14312 terminated the comprehensive Syria sanctions programme effective 1 July 2025. OFAC now states that the United States no longer maintains comprehensive sanctions against Syria or blocking sanctions against the Government of Syria. Targeted sanctions nevertheless remain against Bashar al-Assad and his associates, human-rights abusers, Captagon traffickers, persons associated with Syria's past proliferation activities and other designated actors. Separate terrorism- and Iran-related sanctions authorities may also remain relevant depending on the parties and circumstances of the transaction.

The European Union similarly lifted its economic sanctions on Syria in May 2025, except for measures maintained on security grounds. Those residual restrictions include measures concerning arms and certain technologies capable of being used for internal repression. The Council subsequently restored full application of the EU-Syria Cooperation Agreement in May 2026, while targeted measures concerning individuals and entities linked to the former Assad regime were renewed until 1 June 2027.

For investors, the practical effect is that compliance now turns much more heavily on the parties to a transaction, ownership and control, the payment route, the goods or technology involved and the jurisdictions through which the transaction will be performed. Counterparties, intermediaries, banks, end users and other material participants should therefore continue to be screened against the sanctions and export-control regimes applicable to the transaction.

AML/CFT considerations remain relevant as well. As of June 2026, Syria remains among the jurisdictions under FATF increased monitoring. FATF records that Syria substantially addressed its technical action plan, although an on-site assessment has not yet been possible because of the security situation.

This has practical consequences for banking. A transaction may be permissible under the applicable sanctions regimes and still encounter enhanced due diligence or internal risk restrictions at an international financial institution. Investors should test the proposed banking arrangements early rather than assume that legal permissibility will necessarily translate into an available payment channel.

Identifying the public counterparty

The expression “government-linked entity” covers a wide range of possible counterparties. It is commercially convenient, but it does not describe a single legal category.

A ministry, public authority, state-owned enterprise, municipality, project company and privately incorporated entity supported by a governmental or sovereign guarantee may each have different legal characteristics. State ownership alone does not determine whether an entity has separate legal personality, whether it may sue and be sued in its own name, which rules govern its contracts, whether it has authority to agree to arbitration or whether any of its assets may benefit from sovereign-immunity protection.

This is an area where due diligence should precede substantive contractual negotiation. For a significant state-facing transaction, counsel should review the counterparty's constitutive legislation or instrument, its legal personality and contractual capacity, the authority of the proposed signatory, the approvals required for the particular project and any public-contracting or sector-specific legislation that applies.

In practice, the signature itself is only part of the inquiry. It is equally important to establish the legal basis on which the entity and the individual signatory are authorised to assume the particular obligations contained in the agreement.

This becomes especially relevant where the proposed contract contains an arbitration agreement, governmental guarantee, security arrangement, waiver or long-term concession right. Authority to conduct the entity's ordinary commercial affairs should not automatically be treated as authority to undertake every one of those commitments. The position should be verified against the legislation and regulatory framework applicable to the particular entity and transaction.

The changing Syrian investment framework

Syria's domestic investment framework has developed alongside international sanctions relief.

Decree No. 114 of 2025 amended Investment Law No. 18 of 2021 and reorganised important aspects of investment governance. The amendments strengthened a number of statutory investment protections and revised the framework applicable to investment disputes.

The amended dispute-resolution provisions expressly contemplate arbitration in accordance with applicable laws and relevant international agreements and permit the establishment of a specialised investment arbitration centre. The significance of the amendment lies in the refinement of the investment-arbitration framework rather than in the creation of arbitration as an entirely new remedy.

These developments are important for foreign investors, but the investment legislation cannot be considered in isolation from the legal regime governing the particular public contract.

In a state-facing transaction, counsel should separately confirm that arbitration is available under the relevant investment framework, that the particular public or government-linked entity has authority to enter into the proposed arbitration agreement, and that the individual executing the contract is authorised to bind that entity to the clause. Where governmental or other approvals are required, the evidence of those approvals should form part of the transaction documentation.

Arbitration and choice of seat

Syria has been a party to the New York Convention since 1959, providing a long-standing treaty framework for the recognition and enforcement of foreign and non-domestic arbitral awards.

Treaty membership is nevertheless only one part of the dispute-resolution analysis in a state-facing transaction. The arbitration agreement must first be valid and binding on the relevant entity. Once that has been established, the institutional rules, governing law, composition of the tribunal, language, interim-relief arrangements and arbitral seat can be considered in light of the particular project.

Choice of seat deserves careful attention because it determines the supervisory court and may affect challenges to the award and the availability of judicial assistance during the arbitration. There is no reason, however, to approach that question on the basis that arbitration should automatically be seated either inside or outside Syria.

For a cross-border transaction, the appropriate seat will depend on the parties, the nature and location of the project, applicable mandatory rules, the supervisory courts, the availability of interim measures and the jurisdictions in which recognition or enforcement may eventually be required. These considerations should be examined before the agreement is signed so that the dispute-resolution mechanism corresponds to the commercial and enforcement geography of the transaction.

This is also consistent with the continuing development of Syrian arbitration practice. The objective should be to select the dispute-resolution framework that best serves the particular investment rather than to adopt a predetermined preference based solely on geography.

For certain investments, the analysis should extend beyond the commercial contract. An applicable bilateral or multilateral investment treaty may provide substantive protections or dispute-resolution rights of its own. The investor's nationality and corporate structure may therefore have consequences for treaty protection and should be considered before the investment is made.

Sovereign immunity and enforcement

Sovereign immunity requires particular care in transactions involving the State or public entities.

It should not be assumed that every state-owned or government-linked enterprise enjoys the same immunity as the Syrian State. The opposite assumption—that participation in commercial activity necessarily removes any possible immunity—is equally unsafe. Much will depend on the entity's legal personality and functions, the nature of the relevant act and the immunity rules applied by the court before which proceedings or enforcement are eventually pursued.

There is also an important distinction between immunity from jurisdiction and immunity from execution. An agreement to arbitrate, or an effective waiver relating to jurisdiction, does not necessarily make every state or public asset available for attachment.

Enforcement courts may protect particular categories of sovereign property notwithstanding broad contractual language. Public-purpose assets, diplomatic property, central-bank assets and other protected categories can be subject to special rules, depending on the jurisdiction concerned.

For that reason, the drafting of an immunity waiver should follow, rather than replace, the enforcement analysis. Counsel should consider whether the counterparty has legal capacity to provide the contemplated waiver, what governmental or statutory approvals may be required, whether jurisdiction and execution have been dealt with separately, where potentially relevant commercial assets are located and how the law of the anticipated enforcement jurisdictions treats state and state-enterprise property.

This work is best undertaken while the transaction is being structured. Securing a favourable arbitral award is one part of the process; determining where and against what assets it could realistically be enforced is another.

Payment security and banking arrangements

In practice, one of the more immediate concerns in a government-facing project may be payment rather than dispute resolution.

Large reconstruction projects can depend on budget allocations, administrative approvals, project revenues, external financing and banking arrangements that are still in the process of normalisation. The easing of sanctions removes important legal barriers, but it does not automatically restore correspondent banking relationships or alter the internal risk policies of international financial institutions.

Payment security should therefore be considered at the outset. Depending on the project and the credit profile of the parties, this may involve advance payments, escrow arrangements, documentary or standby letters of credit, governmental or sovereign guarantees where legally available, dedicated project-revenue accounts, milestone-based payments or other forms of security.

There is no single mechanism suitable for every transaction. Its effectiveness will depend on the governing law, the identity and creditworthiness of the issuing bank or guarantor, applicable perfection requirements and public-law restrictions, sanctions and AML considerations, and the jurisdictions in which the instrument could ultimately need to be enforced.

The banking arrangements should also be tested in practice. A Syrian bank may be willing and legally able to issue an instrument without an international correspondent or confirming bank necessarily being prepared to accept it. For significant transactions, discussions with the relevant financial institutions should therefore proceed alongside the legal structuring rather than after the contractual documents have been finalised.

Ongoing compliance during the life of the transaction

Compliance should be treated as an ongoing part of the transaction rather than an exercise completed at signing.

Sanctions designations may change. Ownership and control of counterparties can change. New subcontractors or intermediaries may be introduced. Payment banks and correspondent routes may be replaced. The export-control treatment of particular goods or technology may also depend on their destination, end user and actual use.

The contractual framework should be capable of accommodating those developments. Depending on the transaction, this may require compliance representations, continuing information undertakings, notification requirements and contractual mechanisms addressing designated persons, prohibited performance or material changes in applicable sanctions, banking or export-control requirements.

Banking difficulties require particular discipline. If an otherwise lawful transaction falls outside the risk appetite of a particular institution, attempts to disguise the parties, payment purpose or destination are likely to create substantially greater compliance problems. The preferable course is to identify a transparent and properly documented alternative route that the participating financial institutions are prepared to accept.

As Syria's international financial relationships continue to normalise, the ability to explain the transaction clearly—to banks, regulators, investment committees and compliance functions—will remain an important part of its bankability.

A practical pre-investment review

Before significant capital is committed, or a binding term sheet is signed with a Syrian public or government-linked counterparty, several matters deserve particular attention.

The first is the counterparty itself: its legal status, contractual capacity, required approvals and the authority of the person who will sign on its behalf.

The second is the project or underlying asset. Title, concessions, licences, encumbrances and regulatory status should be independently verified where relevant rather than assumed from the contractual documentation alone.

The third concerns payment and banking. The investor should understand where the funds will originate, through which institutions they will move and what legally effective security is available if payment is delayed or disputed.

The fourth is dispute resolution and enforcement. The validity of the chosen dispute mechanism should be confirmed for the particular counterparty, together with a realistic assessment of the jurisdictions in which an eventual award or judgment could be recognised and enforced.

Finally, the investor should consider compliance and exit. Sanctions, AML/CFT requirements, export controls, taxation, foreign-exchange arrangements and regulatory approvals may affect not only entry and performance but also profit repatriation, divestment and eventual exit.

These matters inevitably overlap. The value of an arbitration agreement depends in part on the authority of the entity that entered into it. The commercial value of an award depends on the prospects for enforcement. Likewise, a transaction that is legally capable of proceeding may still encounter difficulty if the banking arrangements or exit mechanics have not been tested in advance.

Addressing those issues before capital is deployed generally leaves the investor with considerably more options than attempting to resolve them after the project is underway.

Conclusion

Syria's reconstruction and economic reopening present genuine opportunities for international investors and contractors in infrastructure, energy, industrial development, healthcare, telecommunications, tourism, real estate and other strategic sectors.

In many of those sectors, the Syrian State and public entities will remain important participants, whether as regulators, contracting counterparties, project sponsors, guarantors or, in some cases, in several of those capacities at the same time.

The international legal environment is materially different from that which investors faced only a short time ago. Comprehensive U.S. sanctions have ended, EU economic sanctions have largely been removed, Syria's investment framework has been amended, and international investment and arbitration mechanisms are again becoming commercially relevant.

The risks that remain are increasingly the familiar risks of complex foreign direct investment: establishing legal capacity and public authority, securing the necessary approvals, putting workable payment arrangements in place, maintaining sanctions and AML compliance, protecting the investment, and ensuring that contractual and arbitral remedies have a realistic route to enforcement.

For investors considering Syria, the opportunity is increasingly real. The quality of the legal structuring will often determine whether that opportunity can be translated into a transaction that is workable in practice, acceptable to banks and capable of enforcement if difficulties arise.

Disclaimer: This article is provided for general informational and professional discussion purposes only and does not constitute legal advice. Syrian legislation, international sanctions, export-control rules, AML/CFT requirements, banking arrangements and regulatory practice remain subject to change. Specific investments and transactions should be assessed on the basis of the parties, sector, transaction structure and applicable law in force at the relevant time.