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Iraq Update

 

August 2004

We are delighted to announce that while on a recent trip to Baghdad, Sabah M. Ali Mahmoud renewed his membership with the Iraqi Lawyers Association to re-activate his Baghdad practice. The Baghdad Office communications details will be shortly announced.

We also resume our practice of providing periodical updates on the situation in Iraq to appraise visitors of this site of important legal, administrative and economic developments that have an impact and an effect on the business environment in Iraq.  

1.      General

1.1.    In spite of the transfer of formal sovereignty to a new Interim Iraqi Government at the end of June 2004 and other major developments, that will be briefly referred to blow, the lack of essential security and local instability remains predominant factor in Iraq. It is expected that the escalation of violence will persist until substantial Iraqi security and armed forces can be reorganized and become effective in imposing law and order. To achieve the restructuring of the armed forces the new Interim Government recently announced that it will rescind the order to dissolve the Iraqi army.

1.2.    The above mentioned prevailing lack of security remains the main obstacle to achieving the stability which is essential for economic progress in the different sectors including oil production and exports, production of refined products, electricity supply, water purification, medical care and other essential services.             

1.3.    One of the first steps taken by the Interim Government was the issue of the Law for the Defence of National Security (Emergency Law) allowing for the declaration of emergency measures for specific periods and in specific areas as and when is deemed necessary.

2.   Transfer of Sovereignty

2.1.    Prior to the transfer of sovereignty important measures were taken. The issue in March 2004 of the Transitional Administrative Law (TAL) (colloquially referred to as the interim Constitution) by the Governing Council is considered as one of the major developments on the ground in Iraq. The TAL will be the supreme law in Iraq during the transitional period and provides the detailed mechanism for the selection, election and running the country until a permanent constitution is adopted and a Government is accordingly formed.

2.2.    The formation of the Interim Government, referred to above, on 1st June 2004, was a major new development in the process for the transfer of sovereignty. This was the culmination of a lengthy joint process involving the UN representative, the CPA and the Governing Council for the transfer of sovereignty to an Iraqi Government. The Governing Council, which until then had assisted in running the country, declared that it was dissolved.

2.3.    On 8th June 2004, the UN Security Council unanimously adopted Resolution 1546 welcoming the termination of the Coalition’s formal occupation of Iraq and the transfer of sovereignty to the Interim Government that will take place on 30th June 2004. While the termination of the occupation will lead to the dissolution of the CPA, the new interim Iraqi Government is expected to agree the new status for the US led multinational forces presently in Iraq.

2.4.    The above mentioned UN Resolution 1546 provided the details and timetable for the political transition to a democratic government in Iraq.

3.       The Interim Government

3.1.    On 28th June 2004 sovereignty was formally transferred to new Iraqi Government referred to in 2.2 above which included the President, two Vice Presidents, the Prime Minister, two Deputy Prime Ministers and thirty Ministers.

3.2.   Consequently, from that date, the CPA ceased to exist in accordance with the provisions of UN Security Council Resolution 1546 referred to in 2.4 above.

4.    Economy and Finance

4.1.    The trend for economic liberalization and free market approach adopted by the CPA is expected to be continued by the Interim Government. Important Orders (laws), some of which are referred to below, were issued by the CPA prior to its dissolution. These Orders in accordance with Paragraph (C) of Article 26 of TAL will remain valid until changed or amended by new laws.

5.   Banking

5.1.    In addition to the important step of issuing the new Central Bank of Iraq (CBI) Law, on 6 March 2004 which we had referred to in a previous update, further steps were taken for the liberalization of the previously strictly controlled banking sector. Initially a Bank Law was issued on 19 September 2003 which rescinded and replace by a new Banking Law on 07 June 2004. The Bank Law primarily aims to maintain public confidence in the banking system, promoting better understanding and information and more importantly providing an appropriate degree of depositors protection.

5.2.    Foreign banks that were reportedly given licenses to operate branches in Iraq will probably be able to establish and expand such branches when the security situation improves.

6.       Investments & Company Law

6.1.    In a previous update we reported on the Order issued by the CPA to encourage foreign investment in Iraq, Order (39), and anticipated that even though this Order will have major ramifications on the business environment in Iraq, to be effectively applied the relevant laws had to be accordingly amended. One of the important laws that had to be amended was the Company Law. Consequently, Order 64 was issued on 05 March 2004 providing the requisite extensive amendments to the Company Law No. (21) of 1997.

6.2.    To implement the provision in the above Order provides that foreign investors may, to implement foreign investment using freely convertible currencies and Iraqi legal tender, establish a wholly foreign-owned business entity in Iraq including a subsidiary, the Company Law now allows the incorporation of Iraqi companies by foreign individuals and corporate entities. The Department of the Companies Registrar of the Ministry of Trade has issued the requisite forms for the registration of these companies.

7.   Intellectual Property

7.1.    Very important Orders were issued by the CPA amending the protection of intellectual property laws to make them compatible with current internationally-recognized standards of protection of such property, extend the scope of geographical protection and to demonstrate the current Iraqi interest to become a full member in the international trading system, known as the World Trade Organization. While Order (80) was issued amending the Trademarks and Descriptions Law No. 21 of 1957, Order 81 was issued amending the Patent, Industrial Design, Undisclosed Information, Integrated Circuits and Plant Variety Law No. 65 of 1970 and Order 83 was issued to amend the Copyright Law No. 3 of 1971.

8.       Labor

8.1.    Another important Order Number 89 was issued to amend the provisions of the Labor Code Law No. (71) of 1987 to improve conditions of work, technical skills, improve work opportunities and fight unemployment.

CAVEAT

The above update is a guideline not intended to be considered as a legal opinion or advice. For such opinion and/or advice on specific legal aspects, matters or developments in Iraq, kindly contact Gulf Lawfor detailed advice required. 

Other Updates:

Iraq Update: December 2010

Iraq Update: December 2008

Iraq Update: August 2004

Iraq Update: October 2003

Iraq Update: Agency Law

Iraq Update: July 2003

Iraq Update: April 2003

Iraq Update on Agency Law: March 2001

Iraq Law latest update from Gulf Law August 2004

 

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