Iraq is a country whose economy is heavily dependent on its dealing with foreign investors, especially in the oil & gas field. Many of these foreign investors prefer arbitration as an alternative dispute resolution method due to the advantages it provides, such as a less rigid structure to litigation and the ability to choose a governing law they are more familiar with. Iraqi law has expressly endorsed the use of arbitration by investors (see Article 27 of Federal Investment Law Number 13 of 2006), as well as the use of arbitration in relation to government contracts (see Article 11 of Regulations Number 1 of 2008 for Implementing Government Contracts).

Arbitration in Iraq is not codified in one separate law. Instead, relevant legal provisions could be found in many laws, such as Federal Law Number 30 of 1928 in respect of Enforcement of Foreign Judicial Awards and the Riyadh Convention on Judicial Cooperation of 1983 (the “Riyadh Convention”). This differs somewhat from the United Nations Commission on International Trade (UNCITRAL) Model Law on International Commercial Arbitration, which is adopted by many other countries. Recently the Iraqi government has taken a giant leap in respect of arbitration by signing the New York Convention for Arbitration (the “New York Convention”). The New York Convention’s principal aim is that foreign and non-domestic arbitral awards will not be discriminated against and it obliges disputing parties to ensure international awards are recognized and generally capable of enforcement in their jurisdictions in the same way as domestic awards.

What is the current legal position in Iraq?

For the New York Convention to become applicable, it must first be signed and then ratified by the Iraqi government (see Federal Law Number 35 of 2015 for Conducting Treaties). Iraq previously endorsed ratification of the New York Convention on 6 February 2018. However, for the New York Convention to be enforceable by the national courts, an additional step was needed: the enactment of a formal ratification law by the Iraqi Parliament in respect of the New York Convention (the “Law”). The Parliament completed the first reading of the Law on 3 March 2021 and it will come into force upon publication in the Official Gazette, which is yet to take place.

Here are a few points regarding the New York Convention worth mentioning:

• The New York Convention will not have a retrospective effect. This means that it will apply only to foreign arbitral awards made after the publication date of the Law.
• The New York Convention deals only with commercial awards, so in other cases, such as a probate award, for example, existing arbitration laws apply.

The New York Convention will facilitate the enforcement of foreign arbitral awards in Iraq. Currently, the enforcement of a foreign arbitral award is mostly dependent on the Riyadh Convention. The Riyadh Convention demands conditions that often delay the enforcement process, such as the requirement for a statement from the local judicial authority certifying that the award is final. Under the New York Convention, no separate certification is required, and enforcement may be sought against state entities.

Through its accession to the New York Convention, Iraq can assure potential foreign investors that, if a dispute arises, they will have access to a neutral venue with a highly enforceable award mechanism system. It is hoped that this will make Iraq more appealing to future investors.

Article written by :

Mustafa Muayad
m.ridha@saltandassociates.com

Senior Managing Associate
Salt & Associates
Baghdad Office