Is Syria Open for Business? | Protecting Investments in Syria – The Importance of Investment Protection Treaties

With the gradual lifting of international sanctions and initial rebuilding efforts, Syria is on the cusp of re-opening to the outside world. Foreign direct investment into Syria’s economy will be critical to the success of Syria’s revival. Recent announcements of substantial commitments by both state and non-state investors from Saudi Arabia, Turkey, and Qatar are likely just the beginning of the significant capital inflows required to rebuild vital infrastructure in Syria. 

International investors into Syria will undoubtedly be aware of the inherent risks of investing into Syria and the broader risks of regional instability. This blog examines how those risks can be mitigated through early planning and structuring of investments, specifically to benefit from international law protections available under bilateral investment treaties (BITs) and other similar instruments.

What are BITs?

BITs provide substantive protections to investors of one contracting state in respect of their investments in the territory in another contracting state (in this case, Syria) on the basis that the investor meets the jurisdictional requirements set out in a BIT. Typically, the key jurisdictional thresholds that must be met to benefit from a BIT are a covered ‘investor’ and a covered ‘investment’.

Most BITs contain a broad definition of ‘investment’ that encompasses a range of tangible and intangible rights such as shareholdings in companies, concessions to extract natural resources, licencing (e.g. telecoms licences), IP rights, contractual rights, and more.

If there is a breach of the applicable substantive protections, an investor can then initiate legal proceedings against the state, as per the dispute resolution mechanisms provided for in the BIT. Many BITs offer access to either institutional arbitration (for example under the auspices of the International Centre for the Settlement of Investment Disputes (ICSID)), or ad hoc arbitration under the UNICTRAL rules. This allows investors to have their disputes decided by a tribunal of independent arbitrators, rather than the courts of the host state (which may not be neutral, competent or efficient), leading to an arbitral award that is internationally enforceable in any of the 172 states that are parties to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention).

The existence of robust BIT protections can also be a strong negotiating tool in an investor’s favour when engaging in negotiations with the state following interference with an investor’s investment. It can also be a pre-requisite to (or at least materially reduce the cost of) political risk insurance coverage.

Syria’s Investment Treaty Landscape

Syria signed its first BIT (with Senegal) in 1975 and its latest BIT (with Saudi Arabia) in 2025. Syria has signed a total of 45 BITs, of which 33 are in force.[1]  Eight BITs have been signed but not ratified (and thus are not in effect),[2] and four have been terminated (either replaced by a newer BIT, such as with Switzerland, or left terminated without alternative, like the BIT with Italy).[3] It should be noted that even if a BIT has been terminated, it can contain a ‘sunset’ provision which typically means that its protections are still valid for pre-existing investments for a specified duration.

Syria is also party to multilateral investment treaties (MITs), which operate similarly to BITs in that they offer investors substantive protections under international law, but as implied in the name, said treaties apply between multiple states. On 4 January 2010, Syria ratified the Organisation of the Islamic Conference Investment Agreement 1981 (OIC Investment Agreement). Syria is also a member of the Unified Agreement for the Investment of Arab Capital in the Arab States 1980 (Arab Investment Agreement), which entered into force on 7 September 1981 (albeit Syria did not ratify the 2013 Amendment to the Arab Investment Agreement, which applies only between ratifying states).[4] These MITs include certain idiosyncrasies and ambiguities which means they should only be relied on as a measure of last resort.

Syria ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 (ICSID Convention or Washington Convention), which entered into force for Syria on 24 February 2006 and it was also one of the first Arab countries to accede to the New York Convention. Syria’s membership of the Washington Convention and the New York Convention streamlines the enforcement of arbitral awards, including those resulting from investment disputes.

Substantive Protections for Investors

Each BIT Syria has entered into will include its own set of substantive protections, upon which investors can rely on. The language used in each BIT needs to be considered very carefully because nuanced differences in language can materially impact the scope of available protection. Typical substantive protections found in many BITs that investors should be looking for include:

• A guarantee of fair and equitable treatment, which is one of the cornerstones of international investment law and one of the most relied upon in disputes;
• Full protection and security, that guarantees the physical (and sometimes legal) protection of an investment;
• Protection against expropriation (be it direct or indirect) without prompt, adequate, and effective compensation;
• Free transfer of funds, to guarantee the remittance of profits and dividends;
• A most-favoured-nation clause, which ensures that investors are treated no differently than investors from other states that have BITs in force with Syria, which in practice allows investors to ‘import’ more favourable substantive protections from other BITs; and
• An umbrella clause, which can be used to elevate a contractual obligation of a host state to an international obligation and may result in the failure by the host state to respect its contractual obligations being treated as violation of the BIT.

Structuring Investments to Obtain Protection

Not all BITs provide the same protections to investors. For example, some BITs contain limitations on who can be an ‘investor’ or which ‘investments’ are covered. Some BITs also include so-called ‘denial of benefits’ clauses, which preclude an investor from benefitting from protections if there is no ‘substantial business activity’ conducted in the host state, or if the investor is controlled or owned by persons having the nationality of neither contracting state to the BIT.[5] An essential security provision in a BIT can be relied upon by states to try to justify their acts (or omissions), in times of national security or emergency – which Syria has faced for over a decade.[6] Finally, some BITs contain sub-optimal dispute resolution provisions. For example, some BITs require the exhaustion of local remedies (before the courts of the host state) before having recourse to international arbitration. Others provide less advantage choices of fora for international arbitration.

Investors can address limitations by structuring investments in such a way as to obtain the benefit of a particular treaty. This exercise is similar to tax planning, where investors structure their investments to take advantage of favourable double tax treaties. For example, an investor from Italy (which no longer has a BIT with Syria), can incorporate a legal entity in another country which does have a BIT with Syria in order to benefit from that BIT. However, this requires careful planning and consideration of the precise language of the BIT. If the Italian investor in our example incorporated a special purpose vehicle in Switzerland to benefit from the Switzerland - Syria BIT, this could be problematic as the definition of ‘investor’ in that BIT requires “real economic activities in the territory of the same Contracting Party”.[7]

It is also important to consider the timing of a corporate restructuring to benefit from investment treaty protections. Arbitral tribunals often reject claims by parties that have engaged in ‘treaty shopping’ if the restructuring was carried out after a dispute has arisen or was contemplated. It is therefore advisable to structure an investment correctly at the outset or, with respect to existing investments, to restructure as soon as possible.

Future Ahead

For the first time in decades, foreign investors are seriously contemplating injecting capital in Syria. The sums needed to rebuild are likely to be in the hundreds of billions of dollars. Nevertheless, with a nascent institutional framework and wider regional instability, investing in Syria remains a risky proposition. Structuring investments to benefit from the strongest available BIT protections is a cost-effective and necessary exercise for any foreign investor to mitigate risks in the event of state interference in the future.

[1] BITs in force: Germany - Syria BIT (1977); France - Syria BIT (1977); Libya - Syria BIT (1993); Pakistan - Syria BIT (1996); Yemen - Syria BIT (1996); China - Syria BIT (1996); Egypt - Syria BIT (1997); Indonesia - Syria BIT (1997); United Arab Emirates - Syria BIT (1997); Iran - Syria BIT (1998); Belarus - Syria BIT (1998); Sudan - Syria BIT (2000); Bulgaria - Syria BIT (2000); Bahrain - Syria BIT (2000); Tunisia - Syria BIT (2001); Kuwait - Syria BIT (2001); Jordan - Syria BIT (2001); Morocco - Syria BIT (2001); Ukraine - Syria BIT (2002); Greece - Syria BIT (2003); Spain - Syria BIT (2003); Turkey - Syria BIT (2004); Russia - Syria BIT (2005); Switzerland - Syria BIT (2007); Cyprus - Syria BIT (2007); Romania - Syria BIT (2008); Czech Republic - Syria BIT (2008); Malaysia - Syria BIT (2009); Slovakia - Syria BIT (2009); Armenia - Syria BIT (2009); Azerbaijan - Syria BIT (2009); Philippines - Syria BIT (2009); and the Lebanon - Syria BIT (2010), respectively.

[2] BITs not in force: Senegal - Syria BIT (1975); Algeria - Syria BIT (1997); Qatar - Syria BIT (2003); Oman - Syria BIT (2005); North Korea - Syria BIT (2006); Tajikistan - Syria BIT (2007); France - Syria BIT (2009); and the Saudi Arabia - Syria BIT (2025), respectively. To note, in relation to the 2009 BIT with France that is signed but not ratified, the France - Syria (1977) is in effect instead.

[3] Terminated BITs: Switzerland - Syria BIT (1977), replaced by the 2007 BIT; Lebanon - Syria BIT (1997), replaced by the 2010 BIT; Italy - Syria BIT (2002); and the India - Syria BIT (2008), respectively.

[4] The Arab Investment Agreement provides for the creation of an Arab Investment Court. Some of Syria’s BIT provide an option for investors to refer disputes to the Arab Investment Court. See Article 5(2)(b), Tunisia - Syria BIT (2001) and Article 6, Jordan - Syria BIT (2001).

[5] See Article 11, Azerbaijan - Syria BIT (2009).

[6] See Article 12, Cyprus - Syria BIT (2007).

[7] Article 1(2)(b), Switzerland - Syria BIT (2007).