April 30 2007
With the publication of the new Investment Law (13/2006) in the Official Gazette on January 17 2007, the Iraqi government has begun to re-implement the company laws and regulations that existed under Saddam Hussein's regime, replacing many of the changes introduced by the Coalition Provisional Authority (CPA). The law repeals CPA Order 39/2004, which established the basis on which foreign investment in Iraq was conducted following the fall of the former regime, and puts in place new instructions for the registration of branch offices of foreign companies. The instructions reintroduce restrictions that existed before the fall of the former regime.
Under CPA Instruction 149/2004 concerning the establishment of branch and representative offices of foreign companies, the requirement that a branch have a contract with the government of Iraq was removed. The new instructions bring back the requirement for a government contract. The company must further present a confirmation letter from the government agency with which it holds a contract, setting out:
The instructions make this requirement applicable to companies that are investing in the governorates and the regions under the law. This is a clear attempt to impose the instructions on the Kurdistan region, which has so far tried to chart its own course in such matters, independently of the federal government.
The instructions also reintroduce the requirement for the individual who will undertake registration of the branch in Iraq to hold a valid legalized power of attorney. This requirement was removed in Instruction 149/2004 and replaced with an informal appointment made under penalty of perjury. The reintroduction of the power of attorney will add time and expense to the registration process, as it must be legalized by the Iraqi embassy in the home country of the parent company.
It is not yet clear how existing branches of foreign companies that do not have government contracts (including the large number of private security companies operating in Iraq) will be treated under the instructions or whether they will be grandfathered. It is also unclear what changes will be made to the procedures for the registration of local subsidiaries (Iraqi companies). Further instructions are expected to be issued by the registrar of companies shortly. So far, however, application of the new law has done little to improve the investment climate and may in fact provide the impetus to introduce further restrictions on foreign investment.
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Mohamed H El-Roubi