Following the US invasion of Iraq in 2003, Iraq has attracted huge international investment, particularly in light of the reconstruction of Iraq's key infrastructure such as roads, ports, electricity, water supply and medical facilities.
In parallel with this economic activity, the political and legal changes underway inevitably present risks and opportunities to both investors and state parties to international contracts.
A key decision, therefore, when drafting/entering into a contract in Iraq is whether to opt for arbitration or litigation as the dispute resolution mechanism. Set out below is an overview of the dispute resolution methods available to foreign investors in Iraq.
Litigation
The judicial system in Iraq comprises of the Civil Courts, Courts of Personal Status and Criminal Courts. Civil Courts have jurisdiction over all cases involving civil and commercial matters, Matters relating to the personal status of new Muslim Courts of personal status have jurisdiction over matters relating to the personal status of Muslim, including matters of family and inheritance.
There are three tiers to the Iraqi judicial system- the Courts of First Instance, Courts of Appeal and the Court of Cassation. Pursuant to the Iraqi Civil Procedure Code, any person, whether Iraqi or foreign, may file a suit of action and may hire Iraqi legal counsel.
Legal action is commenced upon filing a statement of claim with the supporting documentation/evidence. Notwithstanding the political climate, the courts in Iraq have now resumed work under the supervision of the Coalition Provisional Authority controlled Ministry of Justice.
Enforcement of a foreign judgement, however, can be problematic as there are a small number of bilateral or international agreements of which Iraq is a signatory. During the period of the UNsanctions, foreign parties were prevented from enforcing any foreign judgement, however, since the lifting of the sanctions, the Court system has become more predictable and efficient.
Arbitration
At present, there is no independent arbitration law in Iraq and the Iraq Civil Procedure Code of 1969 governs arbitration proceedings. A foreign investor may, in any agreement, elect to utilize the arbitration mechanisms outlined in this law. However, the mechanism provided under the Iraq Civil Procedure Code is considered unsatisfactory and does not address enforcement of foreign awards.
Further, parties wishing to have a foreign arbitral award enforced in Iraq may first need to get a judgment from a domestic court and then go through the process of enforcing that court decision through the Iraqi procedures for enforcement of domestic judicial awards. It is important to note that Iraq has not signed or acceded to any of the international conventions on the recognition and enforcement of foreign arbitral awards, such as the Geneva Convention of 1927, the New York Convention of 1958, or the Washington Convention of 1965 and as a result enforcement of foreign arbitral awards in Iraq can be extremely difficult.
In view of the above, Arbitration under the Iraqi Civil Procedure Code may not appear encouraging. However, there are ways to tailor the arbitration to suit the specific requirements of the parties:
- Judicial Arbitration- This approach will ensure the appointment of the arbitrators and the arbitration proceedings are conducted under the court's auspices and direction.
- Application of international rules - Iraq belongs to the United Nations and other International Committees and parties can agree on the UNCITRAL Arbitration Rules instead of the Iraqi ones. The Civil Procedure Code expressly provides for the possible application of non-Iraq rules in the arbitration.
- Foreign Arbitrators - The parties can appoint foreign arbitrators to their arbitration, this is particularly significant if the parties are unsure of the specializations of the arbitrators in Iraq and want to choose an arbitral panel well suited to adjudicate the dispute.
- Rules of Arbitration of the International Chamber of Commerce (ICC)- This can be used as an alternative to ad hoc Iraqi arbitration.
Conclusion
Arbitration's main advantage over litigation is its greater flexibility of procedure. This perceived advantage can be applicable in Iraq if the above steps are taken into consideration, making arbitration proceedings in Iraq more acceptable. Nevertheless, dispute resolution in Iraq is a debatable issue and the development of the Iraqi legislation and economy will certainly change the face of dispute resolution in Iraq.
Zane Anani & Jason Majid
© Al Tamimi & Company 2005
