Doing business in Iraq continues to present a combination of real commercial opportunities and legal challenges.

Iraq remains one of the most important markets in the Middle East for oil and gas, power, infrastructure, logistics, construction, telecommunications, healthcare, pharmaceuticals, banking, digital services and consumer goods. The country has a large population, a young labor force, significant hydrocarbon reserves, and a strategic location linking the Gulf, Turkey and wider regional trade routes.

At the same time, Iraq is not a simple market to enter. Foreign companies still need to deal with detailed requirements relating to company formation in Iraq, branch registration, tax registration, social security registration, employment compliance, foreign worker approvals, banking, customs, licensing, commercial agencies, public procurement and dispute resolution. In practice, the legal and regulatory position may also differ between Federal Iraq and the Kurdistan Region of Iraq, especially in matters relating to tax, labor administration, public authorities, land, oil and gas, and local licensing.

BUSINESS ENVIRONMENT

Iraq’s economy remains heavily linked to oil revenues, but the market is gradually moving toward a wider investment model. Oil continues to represent a major share of public revenue and exports, and this makes the Iraqi economy sensitive to global oil prices, production limits and regional geopolitical developments. According to the International Monetary Fund’s 2026 country outlook for Iraq, inflation is expected to remain relatively contained at approximately 3.0 percent, which supports a more stable operating environment for businesses and investors. While the IMF projects pressure on real GDP growth in 2026, mainly due to Iraq’s exposure to oil market volatility and regional conditions, the country continues to benefit from significant natural resources, large infrastructure needs, a young population and ongoing reform efforts in banking, digital payments, tax administration and public services. For international companies and investors, this outlook confirms that Iraq remains an important long term market, provided that market entry, tax compliance, banking arrangements, contract structuring and regulatory risk are properly managed from the outset. Despite these challenges, Iraq is not a stagnant market. There is visible activity in infrastructure, power generation, housing, logistics, banking reform, electronic payments, digital platforms and energy transition projects. The country is also moving from a purely reconstruction driven market to a wider investment market, where international companies are considering long term opportunities in transport corridors, electricity, solar power, gas processing, private healthcare, pharmaceuticals, education, agribusiness, financial services, technology and professional services.

One of the most important business developments is the continued progress of Iraq’s transport and logistics agenda. In June 2025, the World Bank approved a USD 930 million project to support the Iraq Railways Extension and Modernization Project. The project will upgrade railway infrastructure and services between Umm Qasr Port in southern Iraq and Mosul in northern Iraq. It is expected to improve railway performance, increase freight volumes, support domestic trade and create opportunities for dry ports and logistics hubs. This is highly relevant for investors in transport, ports, construction, engineering, warehousing, supply chain, customs brokerage and project finance.

The Development Road project and Al Faw Grand Port are also important for Iraq’s investment story. These projects aim to improve Iraq’s role as a regional transport hub linking the Gulf to Turkey and Europe. For foreign investors, this creates opportunities not only in construction and transport, but also in logistics, industrial zones, storage facilities, customs services, technology systems, financing, and operation and maintenance contracts.

In the energy sector, Iraq has also continued to attract major international and regional energy investment. In 2026, Iraq entered into exclusive negotiations with Chevron in relation to West Qurna 2, one of the world’s largest oil fields and a field that represents nearly 10 percent of Iraq’s production, with a structure involving Basra Oil Company and the potential transfer of operations to Chevron after final approvals. This was supported by Iraq’s wider objective to increase oil and gas output and maintain strategic upstream assets through cooperation with major international oil companies. Iraq’s energy momentum is also reflected in the TPAO and BP Memorandum of Understanding, which identified Iraq as a priority area for cooperation in oil and natural gas fields, export capacity and gas transport infrastructure. In the power sector, Iraq announced agreements with international companies to build new power plants with a total capacity of 48,000 MW, while in the Kurdistan Region, Dana Gas and Crescent Petroleum announced long term gas sales agreements to supply up to 142 MMscf per day from the Chemchemal field to industrial consumers. These developments, together with the ongoing Gas Growth Integrated Project led by TotalEnergies with Basra Oil Company and QatarEnergy, which covers gas recovery, oil, solar energy and seawater treatment, confirm that Iraq remains a key market for oil and gas, power generation, energy infrastructure, industrial projects and long-term foreign investment.

Banking and payment systems are also changing. Iraq remains a cash heavy economy, but this is gradually being challenged by electronic payment regulations, digital payment services, financial inclusion initiatives and banking sector reforms. The Central Bank of Iraq launched the National Financial Inclusion Strategy for 2025 to 2029, which aims to improve access to financial services, support digital payments and create a better regulatory and operating framework for financial inclusion.

The Central Bank of Iraq has also introduced a banking sector reform programme. The programme requires private banks to comply with stricter standards relating to governance, financial soundness and risk management, with regulatory pathways described as Stay, Merge or Exit. This is a major development for companies operating in Iraq, because access to reliable banking, international transfers, trade finance, compliance documentation and foreign currency procedures remains one of the key practical concerns for foreign investors.

Digital transformation is another area of change. Iraq has adopted Digital Payment Regulation No. 2 of 2024, and UNDP has described this as part of Iraq’s move away from an over reliance on cash toward greater financial inclusion and transparency. UNDP also confirmed in April 2025 that Iraq adopted a new regulatory framework for e commerce, prepared through a committee established by the Iraqi Council of Ministers with input from the Central Bank of Iraq, government departments, UNDP and the private sector.

For foreign companies, this means that Iraq is moving toward a more regulated digital economy. Companies involved in e commerce, online platforms, payment services, fintech, digital content, advertising, delivery services, online marketplaces and technology services should expect more licensing, registration, data, payment and consumer protection issues in the coming years.

LEGAL SYSTEM

The Iraqi legal system is civil law-based. Their Civil Code was based on the Egyptian Civil Code and has some Sharia Law features. However, Sharia Law only has a minor impact on Iraqi law. This includes crucial aspects of business, such as Islamic banking, which aren’t impacted in Iraq. They are governed under a federal system. Kurdistan, however, is the sole semi-autonomous territory. Many of Kurdistan’s laws are shared with the remainder of Iraq.

Even if certain products are allowed to be imported and supplied, companies will have to comply with regulatory regulations that may appear strange. Almost every industry is extensively regulated, meaning investors will need to secure licenses and then sub-licenses from a slew of government agencies.

For example, they will need a license from the Ministry of Trade to work in the security industry, but they won’t be registered as a firm until they have the green light from the Ministry of Interior. A license for firearms, a license from the telecoms regulating body for radio frequencies, and a license for vehicular GPS trackers are all required before you are allowed to operate.

All of the licenses must be obtained at different times, putting huge administrative strain on the investor because they’ll have to keep track of which ones are about to expire and which ones are still valid.

RECENT DEVELOPMENTS

Iraq’s Market Overview and Business Ready Assessment

The legal and business environment in Iraq should be assessed in a practical way. The former World Bank Doing Business report has been discontinued, and the new B READY framework evaluates the wider business and investment climate, including regulatory framework, public services and operational efficiency. For Iraq, this is important because many challenges faced by companies are not only found in written laws. They appear in implementation, authority practice, documentary requirements, timing, tax assessment practice, banking procedures and regional differences between Federal Iraq and the Kurdistan Region.

For this reason, international companies doing business in Iraq should not rely only on general market reports. They should conduct legal due diligence, tax due diligence and regulatory mapping before signing contracts, hiring employees, appointing agents, opening a branch, establishing an Iraqi limited liability company, or entering into public procurement arrangements.

Company Registration and Digital Government Services

Iraq has taken steps to simplify company registration and reduce paper-based procedures. In March 2025, the Iraqi Prime Minister’s financial and economic adviser described the unified electronic company registration system as an important step to support commercial activity and investment. The stated objective is to reduce registration time from weeks or months to hours or minutes, reduce administrative costs, limit paper-based transactions and improve transparency.

This development is significant for foreign companies considering company formation in Iraq, branch registration in Iraq or the establishment of a subsidiary. However, in practice, foreign shareholders should still expect documentation requirements, legalization of corporate documents, Arabic translation, tax registration, social security registration, bank account procedures and sector specific approvals where applicable.

Employment, Social Security and the Social Security E-Platform

Employment compliance in Iraq has become more important for both Iraqi and foreign employers. Iraqi Labor Law applies to employees working in Iraq, and employers must consider written employment contracts, working hours, leave entitlements, termination rules, foreign worker approvals, payroll tax, social security registration and end of service obligations.

Iraqi Labor Law No. 37 of 2015 extends to all employees in Iraq regardless of their nationality and does not extend beyond the borders of Iraq. Irrespective of the legislation choice in their work contracts, Iraqi labor law applies to all foreign and domestic employees who work in Iraq. Iraqi courts have sole authority over all labor laws.

Furthermore, contracts of employment are required to have any minimum terms. Unless extra rights are provided under contract, all minimal rights under Labor Law No. 37 of 2015 are assumed into contractual arrangements by default.

Iraqi Labor Law No. 37 of 2015 prohibits the termination of employment contracts by imposing restrictions on the manner in which a business relationship can be ended. In some limited circumstances, the employer has the right to terminate the contract. This is conditional on the employee receiving at least 30 days of written notice prior to the date of termination.  

Unfair dismissal is defined as any termination that does not strictly follow the statute’s reasons for termination. In such cases, the worker is eligible to double the standard severance pay and can also request reinstatement to their previous post.

In Iraq, under Worker Retirement and Social Security Law No. 18 of 2023, all workers must register with the Ministry of Social Security. The proportion of monthly social security contribution is 5% of the worker’s gross salary to be deducted from the worker and 12% of the basic salary to be paid by the employer, which forms a combined monthly payment of 17%. The highest gross salary base for these percentages is set at IQD1,750,00. The oil and gas sector has its own social security payment rates, which vary based on the type of activity performed by the employer.

A major practical development is the launch of the Social Security digital platform by Iraq’s Department of Retirement and Social Security for Workers. The platform is designed to provide social security services for employers, facilitate the process of social security contribution payment, business owners and private sector workers covered by the Labor Retirement and Social Security Law.

This development increases the importance of proper employee registration, monthly contribution compliance, Iraqi and foreign employee data management, deregistration procedures, and accurate reporting of employment status. Companies with large workforces, project-based employees, expatriates, seconded personnel or subcontractor structures should review their employment and social security compliance carefully.

Banking Reform, Financial Inclusion and Digital Payments

Banking remains one of the most sensitive areas for doing business in Iraq. International companies often face practical issues relating to account opening, foreign currency payments, correspondent banking, compliance requests, documentary support, inward and outward transfers and payment timing.

The Central Bank of Iraq’s National Financial Inclusion Strategy for 2025 to 2029 is intended to improve access to financial services and build a stronger framework for digital payments. The Central Bank has also launched a banking sector reform programme that requires private banks to comply with stronger governance, financial soundness and risk management standards.

Iraq’s banking sector is also undergoing a notable reform process led by the Central Bank of Iraq in cooperation with Oliver Wyman. The reform programme is designed to strengthen governance, financial soundness, risk management, compliance and transparency across private banks, with regulatory pathways for banks to remain, merge or exit the market. The Central Bank has described the programme as part of a broader effort to build a safer and more credible banking sector, improve financial inclusion, modernize banking infrastructure and support the gradual reintegration of compliant Iraqi banks with the international financial system. For foreign investors, this is an important development because stronger banking supervision, better compliance standards and improved correspondent banking access can support trade finance, cross border payments, foreign currency transactions and long term investment activity in Iraq.

For investors, these reforms may improve the banking environment over time, but they may also increase compliance requirements in the short term. Companies entering Iraq should ensure that their contracts, invoices, tax position, bank documentation and payment flows are consistent and properly supported.

E-Commerce, Digital Platforms and Technology Regulation

The Communications and Media Commission has issued a framework for digital platforms and services. The framework aims to create a legal framework for digital platforms, align Iraq’s regulatory position with international best practice, support an investment friendly digital environment, and ensure transparency, security and accountability for digital service providers.

This is relevant for regional and international companies operating online platforms, digital marketplaces, fintech products, media services, streaming services, telecom related applications, online advertising businesses, delivery applications, cloud-based services and other digital services offered to users in Iraq. These companies should assess whether they need local licensing, registration, notification, tax registration, local contracts, data safeguards, consumer protection measures or other regulatory compliance steps.

Iraq has also taken an important step in regulating the digital economy through the issuance of E Commerce Regulation No. 4 of 2025. The regulation introduces a licensing framework for e commerce merchants and online business activities in Iraq, with the Ministry of Trade acting as the licensing authority through an electronic platform. In practice, the requirements are linked to the Registrar of Companies Department, including the need to provide the registered name appearing in the certificate of incorporation or branch registration certificate, together with other documents and undertakings required for the electronic merchant license. This development is important for foreign companies, online platforms, retailers, fintech operators and digital service providers, as e commerce in Iraq is moving from an informal market into a regulated business activity requiring licensing, consumer protection compliance, proper disclosure, data protection measures and coordination with tax and customs authorities.

TAXATION IN IRAQ

Iraq’s current tax law is set out in Law No. 113 of 1982 (as amended) (the Income Tax Law). Under the GCT’s current interpretation and application of tax laws and instructions in Iraq, the factors that would create a taxable presence for a non-resident in Iraq can be summarized as follows, whereby meeting any one of the below factors causes a non-resident company to be ‘doing business in Iraq’ and, therefore, taxable in Iraq; whereas, avoiding all four factors means that a company is ‘doing business with Iraq’ and should, therefore, avoid taxation in Iraq:

The place of signing the contract by the party executing work under the contract (vendor or service provider) is in Iraq;

There are three different type of taxes applicable in Iraq:

Corporate Income Tax

In Iraq, corporate income tax (CIT) is imposed on taxable profits from all sources arising, or deemed to arise, at a flat rate of 15% (a 35% CIT rate is applicable only in Iraq for oil and gas companies).

Any revenues and expenses related to any services rendered in Iraq should be booked and reported locally by the Iraqi entity. The Iraqi entity would need to prepare local financial statements (prepared in Arabic under the Iraqi Unified Accounting System (local Iraqi GAAP) (IUAS) and CIT return, and file them with the GCT on an annual basis.

The net income reported in the locally prepared financial statements and CIT return would then become the basis for the GCT in assessing the due CIT on the Iraqi entity. It should be noted that the GCT reserves the right to reject a company’s reported net profits and instead impute a deemed profit if the actual profit, as reflected in the IUAS financial statements, is less than the deemed profit percentage as communicated in the GCT’s indicators. If the actual profit as reflected in the financial statements is more than the deemed profit percentage, the tax will most likely be based on actual profit.

Withholding Tax

To the extent that the Iraqi entity is a customer under a contract for ‘doing business in Iraq’ (a taxable contract), the Iraqi entity would be required to act as a withholding agent and retain tax from payments made to its vendors/service providers who are undertaking work and generating income in Iraq and then remit the retentions to the GCT.

The retention rates vary and are dependent on the nature of activities carried out under each contract (which typically range from 1.8% to 10%, as per the GCT’s income tax law and indicators).

Recently, Iraq issued new regulations to include SOMO oil contracts under the withholding tax regulations. Therefore, oil companies dealing with SOMO or Ministry of Oil have to comply with withholding tax regulations and complete necessary procedures at the General Commission of Taxes in Iraq.

Employee Income Tax

Employee income tax in Iraq must be withheld by the Employer at rates that graduate from 3%-15%. The Iraqi entity must then remit the withheld amounts to the GCT’s Direct Deductions Department (DDD) by the 15th day of each month which follows the month of deduction.

An annual employee income tax filing is also required by 31 March of each year. After the annual employee income tax filing is made, the DDD would undertake an audit of the filing and assess the employer’s compliance with its employee income tax obligations and may impose an additional employee income tax liability if the DDD concludes that the employee income tax paid is less than the required minimum tax obligation.

In addition, the Iraqi entity would be obligated by law to operate payroll and maintain records of salaries, allowances, and wages for all of its employees (Iraqis and non-Iraqis) who are working in Iraq. By law, employees of the Iraqi entity must have local employment contracts that include details of basic salary and allowances. Salaries of foreign employees seconded to Iraq by a non-resident party are subject to income and social security taxes in Iraq in the same manner as Iraqi employees.

Iraq’s tax system remains one of the most important areas of legal risk for foreign companies. The General Commission for Taxes continues to have wide practical authority in assessing tax liabilities, including corporate income tax, withholding tax, employee income tax and deemed profit assessments. Foreign companies should carefully consider whether their activities are treated as doing business in Iraq or doing business with Iraq, as this distinction remains central to Iraqi tax exposure.

Recent reforms indicate a clear move toward stronger tax administration and revenue collection. Iraq launched a Domestic Revenue Mobilisation Strategic Reform Plan in 2025 with support from the European Union and Germany. The strategy aims to reduce reliance on oil, diversify revenues, modernize financial systems and improve investment in public services.

In addition, recent tax reform commentary notes the formation of the Supreme Committee for Tax Reform, digital tax inquiry through the Ur electronic services platform, work toward an integrated tax administration system, expansion of the tax base, and efforts to reduce inconsistency in tax assessment practice. These reforms are important for investors because tax compliance in Iraq is no longer only a year end filing matter. It is becoming a continuing compliance issue linked to digital records, taxpayer profile, authority screening and proper documentary support for expenses.

Corporate tax compliance in Iraq remains a key issue for foreign companies, branches and local subsidiaries operating in the market. As a general position, income derived from Iraq is subject to Iraqi tax regardless of the residence of the recipient. The corporate income tax rate is generally 15%, but it may reach 35% depending on the activity of the company, particularly where the activity falls within oil and gas or related petroleum activities. In practice, the three main tax compliance requirements that companies should manage are corporate income tax, personal income tax on employees and withholding tax on relevant payments. Companies registered with the General Commission for Taxes are required to file corporate income tax returns, while employers must also comply with payroll tax obligations in respect of their employees. In addition, certain payments made to contractors, service providers or non-resident parties may require withholding tax review depending on the nature of the payment, the contract structure and the applicable Iraqi tax position. Iraqi tax law has traditionally required taxpayers to maintain books and records in accordance with the local unified accounting system, commonly referred to as Iraqi GAAP, which remains relevant for tax assessment purposes. However, Iraq is now moving toward stronger alignment with international accounting and financial reporting standards.

In 2026, the Federal Board of Supreme Audit issued the guide for the unified accounting system in accordance with international accounting and financial reporting standards, while IFRS Standards are already required for Iraqi banks and permitted for other companies under the position published by the IFRS Foundation.

This development is positive for foreign investors, as wider IFRS alignment can improve transparency, comparability of financial statements, audit quality and confidence in Iraqi financial reporting. In practice, companies should still ensure that IFRS based accounts, Iraqi tax books, audited financial statements, contract records, invoices, payroll records and expense support are properly reconciled and maintained, especially during tax audits and tax clearance procedures before the General Commission for Taxes.

FRANCHISES & Commercial Agencies in Iraq

Franchise, distribution and commercial agency arrangements in Iraq are mainly regulated under the Law for the Regulation of Commercial Agency No. 79 of 2017. The law was published in the Iraqi Official Gazette No. 4469 on 13 November 2017 and defines commercial agency broadly to include arrangements where an Iraqi natural or legal person sells or distributes goods or products, or provides services inside Iraq, as an agent, distributor or franchisee for a foreign principal, in return for profit or commission, including after sale services, maintenance and spare parts. This broad definition is important for international brands, manufacturers, franchisors and service providers, because many distribution and franchise structures may fall within the Iraqi commercial agency regime. In practice, the Iraqi agent must obtain a commercial agency license and register the agency arrangement with the Registrar of Companies at the Ministry of Trade, while further implementation rules were issued under Instructions No. 1 of 2020 to facilitate the application of the law. For foreign companies entering Iraq through local agents, distributors or franchise partners, careful drafting of exclusivity, territory, term, termination, renewal, registration, compliance, public sector sales and dispute resolution clauses is essential, as unregistered or poorly structured agency arrangements may create enforceability and regulatory risks before Iraqi authorities.

Furthermore, while the government of Iraq has huge purchasing power and attractive tenders, it has recognized that the nation needs to diversify its sources of finance and reduce its dependence on oil. With a surge in new franchisees coming into the country, there are already hints of change.

There is huge potential for franchise business operators. While some may be skeptical of establishing a potential franchise in Iraq, there is great scope for the possibility. Although retail is declining in most places around the world, Baghdad has seven malls with a remarkable number of visitors. Everyone wants to go out after times of hardship.

The responsibility to register a commercial agency is on the agent, not the principal, and any penalties to be imposed for failing to register a commercial agency fall on the agent. For a commercial agent/distributor to register agencies under its name, a commercial agent/distributor is generally required to submit a duly notarized and certified copy of the commercial agency/distribution agreement to the Registrar of Companies\Commercial Agencies Department.

Technology

In terms of media and telecommunications, Order No. 65 established the Iraqi Communication and Media Commission (the CMC). According to the Iraqi constitution and Order No. 65, the CMC is an independent entity and non-profit administrative institution, and it has the sole authority to regulate and issue licenses for telecommunications, broadcasting, information services, and other media in Iraq, and shall be committed to the principles of objectivity, transparency, non-discrimination, proportionality and due process in carrying out its duties.

In contrast to the financial status under the previous regime, which was virtually nonexistent, and employment prospects were restricted to those made available by the Iraqi Telecommunication and Post Company (ITPC) – the only organization entrusted with managing and regulating the country’s communications infrastructure – Order No. 65 will place the communications industry as the growth driver of the Iraqi economy. It is hoped that this segment will be among the country’s growing employment prospects in Iraq.

The CMC and the Ministry of Communications (MoC) are the two governmental bodies with the authority to oversee telecommunications licenses in Iraq. The State Company for Internet Services (SCIS) and the ITPC are two state-owned businesses that are run by the MoC. While the SCIS manages internet subscribers and digital communication in Iraq by offering wireless connectivity for government agencies, DSL and Dial-up VOIP services, and internet protocol (IP) address registration, the ITPC is in charge of the fiber-optic network, the microwave backbone, and the limited Fixed Wireless Local Loop (WLL) CDMA network.

The official policy of spectrum management made by CMC in line with the national frequencies distribution table in Iraq, as well as ITU rulings and recommendations, governs all frequency allocations, service distribution, frequency bands applications, license granting for communications services and telecom systems, and quality approval certifications.

All government organizations, private and public sector businesses, and private individuals who would like to use spectrum, operate a communications system, or engage in the sale and purchase of telecommunications equipment used in the spectrum procedure must obtain the necessary fundamental authorization and licensing for their Iraqi operations.

The main licenses granted by the CMC are as follows:

In 2025, the Communications and Media Commission (CMC) in Iraq introduced a new regulatory category known as the "Usage License for Telecommunication and GPS Devices." And “GPS License”. This license is now required for companies and individuals operating or utilizing telecommunication equipment and GPS-based technologies within Iraq, including but not limited to tracking systems, fleet management solutions, and satellite communication tools. The aim of this regulatory development is to enhance oversight, ensure national security compliance, and regulate the importation, installation, and use of such devices across the country.

HEALTH & PHARMACUETICAL SECTOR

Iraq’s Ministry of Health is in charge of policing medical procedures. The Iraqi Pharmacist Syndicate and the State Company for Marketing Drugs and Medical Appliances (KIMADIA) are the two main organizations to work with when it comes to the commercial side of the pharmaceutical industry in Iraq.

Depending on the Federal Iraqi buyer, pharmaceutical products may adhere to several business models. The buyer may either be KIMADIA or a customer from Iraq’s private market to name two options. In terms of government procurement, KIMADIA is the sole institution permitted to acquire pharmaceutical products for Iraq’s federal government.

Pharmaceutical goods must only be imported into Iraq via Iraqi registered third parties, or ‘scientific bureaus,’ under Pharmaceutical Law (Federal Law No. 40 of 1970) and associated instructions (Instructions No. 4 of 1998), which govern scientific bureaus engaged in the business of promoting pharmaceutical products.

The only exception to this is if KIMADIA determines that direct product importation is necessary. KIMADIA prefers to operate through Iraqi authorized scientific offices wherever possible even though it can deal with non-Iraqi suppliers or marketers directly (as agents for the exporting companies). The only option to market pharmaceutical items while working with the private sector in Iraq is by engaging with a scientific bureau.

The rules and legislation governing the pharmaceutical industry in Iraq apply to the exchange of drugs and medical supplies as well as the importation of those products into Iraq through the private market. The following entities are permitted to do such business, within the bounds set for each firm by the applicable laws and regulations:

The Licensed Entities

Licensed Entities’ business practice is limited to Iraqi pharmacists who have been granted licenses by the Syndicate of Iraqi Pharmacists. Additionally, according to Iraqi legislation, a corporation cannot be granted a license to establish a pharmacy until all of its stakeholders are Iraqi pharmacists and the firm’s shares are intended to be sold solely to pharmacists.

Any arrangement of a different sort, such as the possession of a pharmacy’s stock, capital, or assets by a person who is not a pharmacist, shall be regarded as void. Even while all requirements are satisfied, no company has received a license to conduct the same as of yet.

A manufacturer or drug store may be granted a license under Article 9 (2) of the Practicing Pharmacy Profession Law No. 40 of 1970 (the Law), provided that Iraqis control at least 51% of the relevant organization’s shares. The permit is valid for as long as the aforementioned criterion is met (and vice versa). However, the incorporation of such firms has not been approved by the Registrar of Companies. Noting that passing on the license of the scientific bureau to another party is against the Law.

Comprehensive Guide to Company Formation in Iraq:

PROCEDURES FOR STARTING BUSINESS:

Iraq has indeed become one of the top choices of global investors and companies to invest in and launch their business ventures. One such reason is the country’s improving economic growth and standing. If you are planning to register an LLC in Iraq or a branch, we’d say it’s a great idea. However, as a law firm in Iraq with decades of experience, we’d advise you to read this guide first before you begin. We say this because the laws for registering and launching a business in modern-day Iraq witnessed many changes in the past few years.

The Changing Dynamics

Published in Gazette 4554, the Iraqi Companies Law No 21 of 1997 was amended with Iraqi Law 17 of 2019. It came into effect on 9th September 2019. Various changes were made in the Iraqi Companies Law. These include the following:

LLC Registration: Understanding the Essential Steps

Under Iraqi law, an LLC (Limited Liability Company) can be established between two and twenty-five shareholders. However, under the Companies Law, there is an exception to the Iraqi general rule. It allows a single person, judicial or natural, to form a Limited Liability Company. Furthermore, when registering an LLC in Iraq, foreign investors must have Memorandum of Association (“MoA”). This works as a foundation document between the shareholders. However, if one founder creates the LLC, you must prepare a statement with the same requirements as the Memorandum of Association as per Commercial law. Foreign natural individual could acquire membership in a capacity as the founder or a shareholder of a limited company or joint-stock only if the contribution percentage of the Iraqi person is equal to or more than 51% (fifty-one percent) of the invested capital.

As per the Companies Law, the items to be included in the MoA are:

The Companies Law sets forth the minimum share capital requirement. This requirement must be paid in full and nominal values of one Iraqi dinar, and it can be withdrawn upon completion of company registration. Furthermore, when registering your LLC in Iraq, you must:

In a situation where the founder of the new business entity in Iraq is a company, the application should include the following information:

It is important to note that in some situations, steps may vary depending on legal complexities or business structure. But don’t worry, our lawyers are here to help. We can provide you with quality assistance unique to your situation, ensuring that registering an LLC in Iraq for you is simple, smooth, and stress-free.

Branch of a Foreign Company

The governmental entity responsible for regulating and establishing foreign branches and granting the certificates of regulation is the Ministry of Trade/Registrar of Companies Department. A new law, Regulation No. 2 of 2017 was issued to regulate the registration of foreign companies in Iraq.

According to the law:

If the foreign companies that intend to set up a branch in Iraq have established their operations for at least two years in the country of their origin, they will be permitted to conduct business in Iraq if they obtain any of the following:

It is important to note that you shall not be granted a license to carry out commercial activities in Iraq, even if you have a certificate of registration. At times, the sector-related license requirement is pronounced by the RoC after the registration certificate issuance. It is subject to the activities that are listed in the AoA (Article of Association) if the RoC declares the license acquisition necessary.

Litigation In Iraq

Litigation in Iraq is primarily governed by the Civil Procedure Law (83/1969), which outlines the rules for civil and commercial disputes. For criminal cases, the Penal Code (111/1969) and the Criminal Procedure Law (23/1971) apply. Additionally, the Evidence Law (107/1979) governs how evidence is presented in court.

Pursuant to Article 14 of the Civil Code (40/1951), the Iraqi courts have jurisdiction over cases where one of the parties is an Iraqi national, even if the obligations were entered into outside Iraq. With respect to foreigners, the Iraqi courts exercise jurisdiction if:

Iraq is bound by various bilateral and multilateral agreements that significantly influence litigation within its jurisdiction. These instruments pertain to areas such as judicial cooperation, criminal law, human rights and international trade.

These agreements reinforce Iraq’s commitment to international legal norms, ensuring cooperation in litigation matters across borders and supporting the enforcement of international standards in both civil and criminal cases.

Arbitration and Foreign Judgment Enforcement

A foreign judgment is a decision made by a court that is not located in Iraq. Foreign verdicts were not upheld or acknowledged in Iraq before 1928 because, at the time, it was believed that doing so would violate their sovereign rights.

The maintenance of rights protected by international judgments and the significance of protecting people’s business interests became more crucial as opinions started to shift. Many nations, including Iraq, started to respond to this by allowing the incorporation and execution of foreign judgments rendered by non-national authorities either through statute or through numerous multinational treaties.

Enforcing Foreign Judgments in Iraq

Foreign judgments rendered by international courts cannot be enforced in Iraq unless otherwise determined by a particular law, according to Article 16 of the 1951 Iraqi Civil Code. We must thus examine the Foreign Enforcement Law, which is the primary law addressing the subject, to comprehend the execution of foreign judgments in Iraq.

Anyone seeking to have a foreign judgment enforced in Iraq needs to make a request to the Court of First Instance in line with Article 3 of the Foreign Enforcement Law. The appropriate court must be chosen based on its proximity to either the accused’s dwelling or the property subject to claim, whichever is closer.

A ruling enforcing an international judgment may be made by the Court of First Instance. If the accused can show that the decision was obtained unfairly or that the international court did not follow justice, then the court may also decline to execute the foreign judgment.

Foreign Arbitration

Iraq is a country whose economy is heavily dependent on its dealing with foreign investors, especially in the oil & gas field. Many of these foreign investors prefer arbitration as an alternative dispute resolution method due to the advantages it provides, such as a less rigid structure to litigation and the ability to choose a governing law they are more familiar with. Iraqi law has expressly endorsed the use of arbitration by investors (see Article 27 of Federal Investment Law Number 13 of 2006), as well as the use of arbitration in relation to government contracts (see Article 11 of Regulations Number 1 of 2008 for Implementing Government Contracts).

Arbitration in Iraq is not codified in one separate law. Instead, relevant legal provisions could be found in many laws, such as Federal Law Number 30 of 1928 in respect of Enforcement of Foreign Judicial Awards and the Riyadh Convention on Judicial Cooperation of 1983 (the “Riyadh Convention”). This differs somewhat from the United Nations Commission on International Trade (UNCITRAL) Model Law on International Commercial Arbitration, which is adopted by many other countries. Recently the Iraqi government has taken a giant leap in respect of arbitration by signing the New York Convention for Arbitration (the “New York Convention”). The New York Convention’s principal aim is that foreign and non-domestic arbitral awards will not be discriminated against, and it obliges disputing parties to ensure international awards are recognized and generally capable of enforcement in their jurisdictions in the same way as domestic awards.

What is the current legal position in Iraq?

Iraq's accession to the New York Convention On 31 May 2021. Iraq's recent ratification of the law of accession to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards marks a pivotal shift in its legal framework towards international arbitration. This momentous step underscores Iraq's commitment to fostering a pro-business environment and aligning its arbitration laws with global standards. By joining the New York Convention, Iraq has opened new avenues for international businesses operating within its borders, offering a more reliable and efficient mechanism for the enforcement of arbitral awards. This development is particularly significant for foreign investors and companies, as it provides a heightened sense of legal security and predictability in dispute resolution. The accession to the convention signals Iraq's readiness to integrate into the international business community, enhancing its attractiveness as an investment destination. It ensures that arbitration awards made in other member states can be recognized and enforced in Iraq, thus strengthening the country's position as a viable and competitive market for global business operations.

Here are a few points regarding the New York Convention worth mentioning:

The New York Convention will facilitate the enforcement of foreign arbitral awards in Iraq. Currently, the enforcement of a foreign arbitral award is mostly dependent on the Riyadh Convention. The Riyadh Convention demands conditions that often delay the enforcement process, such as the requirement for a statement from the local judicial authority certifying that the award is final. Under the New York Convention, no separate certification is required, and enforcement may be sought against state entities.

Through its accession to the New York Convention, Iraq can assure potential foreign investors that, if a dispute arises, they will have access to a neutral venue with a highly enforceable award mechanism system. It is hoped that this will make Iraq more appealing to future investors.

For more information in relation to litigation legal framework in Iraq, check out our litigation guide: Iraq Litigation Guide

CONCLUSION

Iraq remains a complex but important market for international and regional companies. The main opportunity lies in the size of the market, the need for infrastructure, the role of oil and gas, the demand for power, the growing digital economy, the banking reform agenda, the move toward electronic payments, and the government’s continuing focus on investment.

Muayad & Associates LLC

Author: Mustafa Muayad

Managing Partner

E: [email protected]

T: +964 780 5010 222

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