February 26 2007
The National Assembly has passed a new investment law, which will enter into force upon publication in the Official Gazette. The new law repeals Coalition Provisional Authority Order 39/2004, which established the basis on which foreign investment in Iraq was to be conducted following the fall of Saddam Hussein's regime. The passing of the law follows the enactment in Kurdistan of the Kurdish Investment Law (4/2006) (for further details please see "Kurdistan Assembly Continues Investment Reform") and seeks to establish the framework for the conduct of foreign and domestic investment in Iraq and that framework's interaction with regional legislation.
The law provides for the establishment of the National Commission for Investment, which will be responsible for setting national investment policies, regulations and instructions and monitoring their implementation. The commission's mandate will be strategic investment projects of an exclusively federal nature. In this regard, the commission shall receive information regarding economic development needs and investment opportunities from Iraqi regions and governorates, and shall prepare lists of investment opportunities in strategic and federal investment projects for interested investors.
The law permits the regions and governorates to form investment commissions to regulate regional investment in coordination with the commission. The law restricts such regional commissions from implementing policies or regulations that are not in line with the national plan established by the commission.
The law provides for a number of privileges and guarantees to be granted to investors, including:
The law does not apply to investment in the oil and gas extraction and production sectors and the banking and insurance sectors, which will be governed by industry-specific investment laws.
Investors looking to invest on a national basis will need to ensure compliance with both regional investment laws and the new federal law. The Kurdistan Investment Law, which pre-dates the federal law and builds on the ongoing Kurdish initiative to open the Kurdistan region up to foreign investment, will be a particular concern. In the past, the Kurdistan regional government has indicated that it will not wait for federal approval or guidance in pursuing the economic development of the region. As a result, there is potential for investors to find themselves dealing with contradictory laws and regulations. In the context of the broader constitutional issues emerging in Iraq, it remains to be seen how these issues will be resolved.
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Mohamed H El-Roubi