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 GLS
for detailed advice required.
Other Updates:
Iraq
Update: August 2004
Iraq
Update: October 2003
Iraq
Update: Agency Law
Iraq
Update: July 2003
Iraq
Update on Agency Law: March 2001
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