our practice to provide periodical updates on the economic and legal situation
in Iraq to appraise visitors of this website of important legal, administrative
and economic developments that might have an impact or effect the international
1.1. The persisting
unstable security situation in Iraq remains the main obstacle to the return to
normality and progress being attempted in the economy. In the six months that
past since the change of regime there have been improvements in electricity supply,
water purification, the start of the new academic year in improving schools, medical
care and there seems to be general optimism that the economy will gradually improve
particularly when oil production and exports can be resumed at an increased pace.
1.2. Recently there has also been marked activity in the legislative
process with important laws issued as Coalition Provisional Authority (CPA) orders,
which will be briefly referred to below. We believe these laws will have a dramatic
impact enhancing the liberal trend for the privatization of the economy. The Orders
were in spite of arguments that the occupying powers should only manage the administrative
affairs of the country but not issue laws amending existing laws changing the
overall legal and economic environment.
1.3. Practical difficulties could
arise in the implementation of the Orders referred to above particularly since
the were made effective from the date of their signature and publication in the
Iraqi Official Gazette, the first edition of which was published in mid June 2003,
as was the practice of previous governments in Iraq. It is also believed that
specific directives/regulations will be required to implement some of these Orders.
2.1. The Iraqi Provisional Governing
Council (GC) has appointed 25 Ministers with portfolios to mange the affairs of
Iraqi Ministries which remain generally the same as before except the portfolios
of Defence and Information whose staff has demobilized and dismissed. Consequently
Ministries are now functioning and gradually going back to normal work.
Economy and Finance
3.1. The important steps made to normalize
the economic and financial situation which we previously reported are being confirmed
such as the appointment of a Governor of the Iraqi Central Bank (ICB) and the
expected introduction of new currency will which will be in circulation on 15.10.03.
The CPA has also declared that it has established “the Iraqi Trade Bank” to improve
and expand the import and export business activities. Foreign banks were requested
to provide operational and management suggestions. It was further reported that
JP Morgan and the National Bank of Kuwait in consortium with 13 other banks were
chosen to manage the Iraqi Trade Bank.
3.3. The award of three contracts
for the Iraq mobile phone network was also recently announced. Contracts were
awarded to companies for areas of the north, middle and south of Iraq. Installation
of the network expected to use some of the existing facilities will reportedly
be achieved within weeks of the signature of the contracts. The installation of
the network will alleviate the prevailing major communications difficulties.
4.1. The CPA has issued on 19 September 2003
Order Number 39 on Foreign Investment in Iraq (“the Order”). It is believed that
this Order will have far reaching legal and economic ramifications aimed at facilitating
foreign investment and dealing with the Iraqi legal framework regulating commercial
activity in Iraq. The provisions of this Order practically amend provisions of
the Companies Law No. (21) of 1997 by allowing the unrestricted registration of
companies and unlimited foreign investment in many areas except for banks and
insurance companies. The Order also imposes restriction on retail sales.
5.1. The CPA reconfirmed the suspension of customs duties
and tariffs until the end of 2003. The CPA on 19 September 2003 further issued
Order Number 38 decreed the imposition, as from 1 January 2004, of the Reconstruction
Levy at a rate of 5% of the taxable value of goods unless exempted. The Order
exempted listed goods such as food, medicines and other goods issued and further
provided that it the levy will not be imposed on the CPA, its forces and other
6. Income Tax
6.1. The CPA in its Order
Number 37 also issued on 19 September 2003 also decreed that income and property
tax shall be suspended until the end of the calendar year 2003. This order further
provided that the highest rate of individual and corporate income tax for 2004
and subsequent years shall not exceed 15 percent.
The above is not a legal
opinion or advice. Contact Gulf-Law for any further
detailed advice required on specific aspects of developments in Iraq.
Update: December 2010
Update: December 2008
Update: August 2004
Update: October 2003
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Update: July 2003
Update on Agency Law: March 2001Iraq Law latest update from