On March 4, 2021, the Parliament of Iraq passed the “Law on the Accession of the Republic of Iraq to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards,” which, upon being published in the Official Gazette, will formally ratify the country’s anticipated accession to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”).
This step is just the latest in Iraq’s ongoing plans for economic recovery, which includes an increasing willingness to adhere to international dispute resolution norms. The objectives of Iraq’s reconstruction programme are described in detail in its 2018 Framework Paper.
The New York Convention will apply in Iraq with respect to: (i) recognition and enforcement of awards made in the territory of another contracting state (the so-called “reciprocity reservation”); (ii) awards arising out of disputed contracts which were of a commercial nature, as defined by Iraqi law (such as commercial transactions and practices stated in Articles 4, 5, 6 and 7 of the 1970 Commercial Code (the so-called “commercial reservation”); and (iii) arbitration agreements concluded, or arbitral awards rendered, after the date of accession (the “non-retroactivity exception”).
In the past, foreign arbitral awards were only enforceable in Iraq if they were issued in a country that is a signatory to the 1983 Riyadh-Arab Agreement for Judicial Co-operation (the “Riyadh Convention”), or a country that has a specific treaty on judicial cooperation with Iraq, such as Egypt and Jordan. Although there are 18 signatory states to the Riyadh Convention across the Middle East and Africa, the convention was of limited use for investors, principally because it does not permit enforcement proceedings against Iraqi government entities. Moreover, the requirements for enforcement under the Riyadh Convention could delay the enforcement process by, for example, requiring a certificate from the originating judicial authority certifying that the award was final.
By comparison, the New York Convention now has 167 signatories around the world, does not require awards to be certified by the originating judicial authority, and permits enforcement against state entities.
In recent years, Iraq has seen its civil law system change significantly in an effort to attract foreign investment. Notably, Iraq endorsed the use of arbitration by investors (such as Article 27 of the Iraqi Investment Law 2006), as well as arbitration of disputes concerning government contracts (Article 11 of Regulation No. 1 of 2008 “Regulations for Implementing Government Contracts”). In November 2015, Iraq ratified the ICSID Convention.
Iraq’s decision to accede to the New York Convention was originally announced in the Iraqi Council of Ministers Decree of 2018, shortly before the International Conference for Reconstruction of Iraq, which was co-headed by the World Bank and the European Union in February 2018.
Iraq’s accession to the New York Convention could be an indication of adhesion to more neutral dispute resolution mechanisms and greater enforceability, with only limited grounds for non-enforcement of awards. It is hoped that this, in turn, will likely facilitate continued investment in Iraq and further development of its economy as it continues its reconstruction.
For more information, please contact Amal Bouchenaki, Partner, Anna Wren, Senior Associate, Rob Dawes, Senior Associate, or your usual Herbert Smith Freehills contact.