On its road to recovery, Iraq has witnessed an avid influx of foreign investment in its economy. With the ongoing developments in Iraq's legal infrastructure, it is anticipated that further regulations concerning international dispute resolution and judicial cooperation will be enacted in order to create a legal environment suitable for the country's attractive investment opportunities.
In light of the current humanitarian crisis and the large number of refugees that have entered the Kurdistan Region of Iraq, the presence of non-governmental organisations (NGOs) is vital in order to assist affected local communities and refugees. As the call for aid increased, the number of registered NGOs in the Kurdistan Region has surged. In this respect, NGOs must comply with applicable laws and regulations in order to secure a legal presence in the region.
Twenty-eight years after the enactment of the Labour Law (71/1987), Parliament voted on the new Labour Law (37/2015). Considering the fundamental differences between the governance system and business environment surrounding the promulgation of both laws, they naturally differ on several points. Understanding these differences is essential for the organisation of companies' relationships with their employees and the adjustment of underlying employment agreements.
While shareholders in a limited liability company can transfer ownership of their shares to another shareholder or outsiders, they should bear in mind certain considerations, such as the notification requirements when selling shares, the procedure for selling shares to non-shareholders and the contractual requirements therein.
Contracts can be a valuable tool to help foreign businesspeople deal with issues in Iraqi law, such as the inability of foreigners to own real estate in Iraq and the inability of non-Arab foreigners to own interests in Iraqi companies. However, there are some important differences between Iraqi and common law legal systems, including in regards to legislative and judicial restrictions on interest, remedies for breach of contract and the statute of limitations.
Investment Law 13/2006 is the main text governing investment in Iraq. It encourages foreign investments by granting facilities in order to develop certain sectors in Iraq, create job opportunities and transmit know-how to the Iraqi population. Not only has the law created numerous advantages for investors, it has also made the administrative process for obtaining investment licences much easier.
The liquidation of a limited liability company (LLC) is undoubtedly a complicated and lengthy process, but nonetheless includes many safeguards to guarantee the rights and obligations of the company with regard to third-party debtors and creditors. The process for liquidating an LLC includes appointing a liquidator, submitting the reasons for liquidation, fulfilling any obligations under the liquidation process and settling the company's debts.
While Iraq places no constraints on foreigners selling products, foreign companies seeking to enter the market must first consider their options. A foreign principal that wishes to export its merchandise and sell it in Iraq can enter into an agreement with an agent, distributor or representative, or even start trading itself. However, the trend is towards establishing distribution agreements or commercial agencies and, although similar, the two regimes are not the same.
After the recent economic slowdown mainly caused by ISIS-related security concerns and the reduction in oil prices, the Kurdistan regional government has taken several measures to ensure that all taxes are being collected. These measures include a recent public notice announcing that all companies that fail to file their audited financial statements and pay their taxes before June 30 2016 will be taken to court.
The production sharing contracts signed between the Kurdistan regional government and international oil companies regulate almost all aspects of the companies' operations in Kurdistan. The Ministry of Natural Resources has, in practice, managed to unify the procurement procedures for all of the oil companies to a large extent, including setting unified thresholds, vendor requirements and tender approval procedures.
Directive 17094/2013 – issued by the Ministry of Natural Resources – states that the social security exemption regime applies to foreign employees of oil companies and provides relaxed exemption conditions for foreign employees of oil companies. However, despite the ministry's clear and flexible directive, exemptions are still granted on a discretionary basis, a fact which often proves to be a final hurdle when seeking exemptions.
Foreign oil services companies in the Iraqi Kurdistan Region are subject to special directives and requirements. The details and practical application of these conditions must be fully understood when planning a prospective presence in the region – in particular, the different requirements for registration of a branch of a foreign oil services company and incorporation of a local entity.
Many international commentators have recently argued that the Iraqi upstream petroleum sector has stalled in a post-conflict setting, besieged by competing political factions, corruption and turmoil. While these commentators are not altogether incorrect, Iraq has successfully implemented four generally successful petroleum licensing rounds with the aim of replacing the former state monopoly on oil and gas with private development.
An international non-governmental organisation (NGO) must register to carry on its conceived activities in Iraq. The authority for registering and regulating NGOs has changed a number of times over the years. Although the requirements for registration have not changed significantly, there have been differing interpretations of the requirements and a general desire by the regulatory authority to seek more information.
Following the final exit of the US armed forces from Iraq, US contractors - having previously been granted immunity from Iraqi laws - were forced to comply immediately with federal immigration and residency requirements. To meet this challenge, the government has promulgated a new set of immigration procedures to allow certain approved defence contractors to seek exemption from the normal immigration rules.
The Iraqi Stock Exchange (ISX) is preparing for the initial public offering (IPO) of several large domestic telecommunications companies, pursuant to the previously negotiated operating licences. While the challenges of such IPOs are clear, the legal foundations and domestic capabilities of the ISX itself provide a platform that can accommodate their large-scale roll-out.
It is increasingly important to determine whether foreign, non-Iraqi employees are subject to Iraqi tax and social security provisions. The payment of social security contributions on behalf of foreign workers is not currently accepted by the Iraqi government, but nevertheless is often required for compliance reasons by other agencies, leading to uncertainty for foreign companies and possible non-compliance fines.
Iraq and the Kurdistan Region's investment laws provide significant benefits for investors in qualified projects, principally tax and customs fees and duty exemptions. Amendments to this law are before the region's Parliament. While these laws continue to be developed, the roles played by the investment agencies are rapidly becoming more prominent.
Several recent events have prompted a return to the debate over the legality of production sharing contracts entered into between the semi-autonomous Kurdistan Regional Government (KRG) and private international companies over the past few years. The KRG is adamant that the signing and negotiation of contracts for any 'new' petroleum developments remains its sole responsibility.
Iraq may tax the business profits of companies that are located outside Iraq, but which provide goods and services into the country. The Iraqi authorities apply a tax to the value of the supply contract on entry into the country, as a kind of guarantee deposit. This is released once the non-Iraqi supplier has submitted a tax clearance letter confirming settlement of its tax liability on the supply contract in question.