Iraq

Since the fall of Saddam Hussain`s regime Iraqi laws have been in constant changes. More than 100 laws and regulations were issued by US Civil Administrator within one year changing and repealing long established civil and commercial laws.
The following are few examples of the new legislation:
The Iraqi Company Law no. 21 of 1997 has been amended to grant foreign companies and persons the right to establish Iraqi companies and hold shares and equities.
New Banking and Insurance laws have been enacted to permit foreign investment and participation in the Iraqi banking and insurance market.
The Investment Law No (13) of 2006 as amended with Law No.2 of 2010 and the Law No. 50 of 2015 is another major legislation, which aims to encourage foreign investment in Iraq. Under Article 10 of this law, foreign entities and persons investing in Iraq enjoy the same right and privileges as those granted to Iraqi entities. They have the right to invest, own shares, and trade in the Iraqi market. The law also provides guarantees against confiscation, and it guarantees free movement of foreign capitals. Furthermore, foreign investors may enjoy additional rights and privileges subject to any international and bilateral agreement as stated in Article 22 of the Law.
Disputes between physical persons under the Investment law are subject to Iraqi law and jurisdiction according to Article 27. But, foreign parties are free to choose any other law and jurisdiction including international arbitration. Article 27.1 states that “disputes arising from applying this law shall be subjected to Iraqi Law, the mandate of Iraqi Judiciary, and may agree with the investor to resort to Commercial Arbitration (National, or International) in accordance to an agreement concluded between the two parties determines Arbitration procedures, its authority, and law applicable.”
Notwithstanding the new legislation, the main Iraqi Civil Code No. 40 of 1951 and the Code of Civil Procedures No. 83 of 1969, which constitute the backbone of the Iraqi legal system, have remained unchanged and in force. The conduct of arbitration law is governed by the Code of Civil Procedures ("CCP"). Articles 251 to 276 of this Code deal with the arbitration and arbitration procedures. Regarding arbitration agreements, Article 251 of the CCP provides that an agreement on arbitration may be made in relation to a specific or existing dispute as well as in relation to future disputes which may arise from a contract. An agreement on arbitration may be made as a clause in the contract or as a separate contract, except in insurance policies where an arbitration agreement must be in a form of a separate contract.
An arbitration clause or contract must be in writing containing the elements of a valid agreement. Only disputes or differences of a nature capable of a compromise may be referred to arbitration. Article 704 of the Iraqi Civil Code of 1951 describes matters which are capable of being compromised as those, which are capable of being disposed of for valuable consideration, and they must be defined or known. Matters related to public policy or criminal acts may not be subject to arbitration in case of a dispute. But, financial consequences or damages arising from criminal acts or from personal matters may be subject to arbitration. Article 704.1 of the Iraqi Civil Code clarifies that “the subject matter of the composition must be something against which a consideration may be taken and must be defined if it is something which needs to be received and delivered.” And Article 704.2 of the Iraqi Civil Code explains that “no composition may be concluded in respect of matters related to the public order or morality; but composition is allowable in respect of financial interests which result from the personal status or which arise from the commission of an offence.”
In terms of separability and independence of the arbitration clause, whether an arbitration clause remains valid and effective if the main contract is not valid, there is no clear provision in the Iraqi law on this issue. But, it can be assumed that the arbitration clause is independent from the main contract, and the invalidity of the main contract does not necessarily invalidate the arbitration clause. This assumption is based on Article 139 of the Civil Code, which states that in case of an invalidity of a provision of a contract, such invalidity does not affect the rest of the contract, unless the invalid provision was the basis of the agreement. Article 139 states that “where a part of the contract is void that part only will be void and the remaining part of the contract will remain valid and be considered as an independent (separate) contract unless it is revealed that the contract would not have been concluded without the part which has been voided.”
The number of the arbitrators and the method of their appointment are subject to the agreement of the parties, but the number of arbitrators must be an uneven number. If a party fails to appoint his arbitrator, the other party may refer the matter to the court to appoint one or more arbitrators. The decision of the court to appoint an arbitrator is final and not subject to appeal. But before the same court a party may challenge the appointment of an arbitrator on the grounds of certain disqualifying reasons and request the court to disqualify an arbitrator, which the court had appointed before. These disqualifying grounds are the same as those applicable to judges.
In this connection, Article 93 of the CCP provides that an arbitrator can be disqualified by the court for reasons such as existence of an employment relationship, or if there is a friendship or enmity between the arbitrator/judge and the party concerned, or if the arbitrator/judge has already rendered an opinion on the case, or has accepted presents or payment.
It is also notable that article 91 of the CCP has laid down other reasons for disqualification of a judge or arbitrator, such as blood or marriage relationship. The arbitrator must also have no interest in the dispute, and he should not be an agent of either party. The decision of the court to disqualify an arbitrator is subject to an appeal as stated in article 261 of the CCP. Furthermore, the presence of such reasons (of disqualification) can be held as a reason for repealing any arbitral decision taken by such disqualified arbitrator or arbitrators. According to article 260 of the CCP, an arbitrator may not resign, unless he has justified reasons, and cannot be dismissed unilaterally by one party.
It is pertinent to note that Iraq is a signatory party to a number of Arab League Conventions on judicial cooperation, and to the Geneva Protocol on Arbitration Clauses of 1923.
According to Article 265 of the CCP, arbitration, which takes place in Iraq, should apply the rules of procedure laid down in the CCP, unless otherwise agreed by the parties. In other words, the parties to an arbitration agreement are free to choose other sets of procedural rules, such as the UNCITRAL Arbitration Rules. The parties may also agree to exclude the procedural rules of CCP, which are not of a compulsory nature, and apply other rules as long as such rules are not contrary to public order and morals.
As to the substantive law, the arbitrator must apply the applicable law to the contract in question. In an Iraqi contract between two Iraqi parties, or in a contract subject to the Government Standard General Conditions, the Iraqi law will apply to the dispute. But, the question arises as to whether it is possible to apply a foreign law to an arbitration which takes place in Iraq. The answer to this question can be derived from the provisions of article 25 of the Civil Code, which states that:
“1) The contractual obligations shall be governed by the law of the state wherein lies the domicile of the contracting parties if they have a common domicile; where they have different domiciles the law of the state within which the contract was concluded will be applied unless the contracting parties have agreed otherwise or where it would be revealed from the circumstances that another law was intended to be applied.”
From the above, it is understood that in a contract, where the domicile of one party at least is outside Iraq, the parties may choose a law other than Iraqi law, provided, however, that the application of such a foreign law is not contrary to public order or morals. 
According to Article 262 of CCP arbitration tribunal must render its decision within a period, if such period is specified in the arbitration agreement. In the absence of a stipulated period, the arbitrators must issue the award within 6 months from the date of their acceptance to act as arbitrators.
Pursuant to Articles 268 and 269 CCP arbitrators have no power to order interim measures, and have no jurisdiction in matters of criminal nature such as forgery and other offences, nor have they jurisdiction to order an action against witnesses who fail to appear before them.
In terms of enforcement of the arbitral award, the parties rarely enforce the award voluntarily as often one party is not satisfied with the award or wishes to gain time. The arbitral award is not res judicata and cannot be enforced without a decision of the competent Iraqi court, according to Article 272 of the CCP. The court would normally subject the award to a thorough and detailed examination from the point of view of form and law.
Basically, confirmation of the competent court of the arbitral award is required in order to enforce the award. If the award is confirmed by the court, it becomes final and enforceable, acquiring res judicata effect. Pursuant to Article 270 CCP, the arbitral award must be rendered by either majority or unanimous vote in case of more than one arbitrator, and it must be in writing and in the form of a court judgment including a reference to the arbitration agreement, statement of the parties, documentary evidence, the place and date of the award together with the reasons and basis of the arbitral award
The court, in accordance with the provisions of Article 274 of the CCP, may either approve the arbitration award or reject it in whole or in part. In the latter case, the court may refer the matter back to the arbitrator to rectify the rejected part of the award or issue a new decision. The court may also decide to adjudicate the case itself. The aforementioned decision of the court confirming or rejecting the arbitration award is subject to appeal to a higher court in accordance with the CCP rules of appeal. Obviously, this is another reason for delay and would frustrate the intended purpose of arbitration.
Article 273 of the CCP has laid down a number of grounds upon which the parties may request the court for annulment or according to which the court may by itself set aside the award:
The reasons for annulment are extensive, and are summarised as follows:
Invalidity of the arbitration agreement.
The arbitrators have acted beyond the scope of their jurisdiction.
Lack of certain documentary evidence.
The award is contrary to Public Order or public morality. (There is no comprehensive definition of Public Order, but Article 130.2 of the Iraqi Civil Code refers to certain matters by way of example as matters of public orders. Also, Iraqi Law does not distinguish between national and international public order).
If there is an essential error in the award or in the proceedings which effects the validity of the award.
If the arbitrators did not observe certain compulsory rules of CCP procedures.
If there is any reason to justify re-hearing of the case, such as the presence of forged evidence, and
if there is a reason for one of the parties to challenge the competence of the arbitrators such as lack of impartiality, as stated before.
In developed jurisdictions the international public order is interpreted narrowly. In Iraq the competent court has an extensive power to intervene in the arbitration procedures. The arbitration is not final unless approved by the court. There are extensive reasons for the court to set aside the arbitration award and even to adjudicate itself the case and enter the merit of the dispute. That is undoubtedly unnecessary interference of the courts in the arbitration proceedings. As a brief summary, it could be stated that the purpose of arbitration as an efficient and relatively fast track of dispute settlement is frustrated in this jurisdiction and international arbitration is not supported in the country. There is no specific legislation concerning international arbitration, nor is there any law in Iraq prohibiting international arbitration. Judiciary in Iraq generally is familiar with the international commercial arbitration but not supportive of the law and practice of international arbitration.
The official attitude in Iraq during 1970 to 1980 was to resist acceptance of international arbitration clauses in contracts for government projects and supplies on the ground that it is a violation of the general domain and jurisdiction of Iraqi courts, and contrary to the principle of sovereignty. Gradually, with the economic development in Iraq the international arbitration was resorted to more frequently and inserted in many contracts concluded between foreign companies and Iraqi government entities.
In this respect, it is pertinent to note that both Iraqi government standard conditions of contracts, namely the General Conditions for Contracts of Civil Engineering Works and the General Conditions of Contracts for Electrical and Mechanical Process have laid down special provisions for dispute resolution, according to which disputes between the parties are referred to national arbitration subject to the provisions of the CCP.
According to clause 69 of the General Conditions for Contracts of Civil Engineering Works “the Committee of Arbitration shall have full power to open up review and revise any decision opinion direction certificate or valuation of the Engineer. The award of the Arbitration Committee shall be binding unless one of the parties postulate its avoidance in accordance with the provisions provided in the Code of Civil Procedures.”
Iraq is not a party to the New York Convention of 1958, but is has ratified the Arab League Riyadth Convention for judicial cooperation, which includes recognition and enforcement of arbitral awards issued in Member States.
Finally, a new and updated Arbitration Law covering international arbitration and enforcement of foreign awards is required in Iraq. Meanwhile, as mentioned before, foreign investors are entitled by the new Investment Law No. 13 of 2006, to choose international arbitration or any foreign jurisdiction for the settlement of disputes.