Iraq

Although the Civil Code (No. 40 of 1951, by the Egyptian jurist Sanhuri) of clear French inspiration is in force in the Republic of Iraq, one cannot overlook how the codified sources of law must be supplemented by the sources of Islamic Law.

Sharia, in the contractual sphere, assumes particular relevance at the stage of contract negotiation. A cardinal principle of Islamic Law è that law is nothing but the will of God, that is, the rule given by God to the People whom he has chosen, and according to which he will one day judge them. The law è therefore, is the direct word of God, and refers to the acts of those who are bound to observe its precepts. Obedience to the law è thus, at the same time, a social duty and a precept of faith; whoever violates it, breaks not only a legal norm, but also commits a sin, from a religious point of view. At the contractual negotiation stage, this highly ethical – moral perspective of law translates into a’focus on protecting the fairness and reciprocity of the various contractual benefits, with the clear objective of avoiding unjustified or undue enrichment. In Muslim law, the obligation on the parties to a negotiation to behave according to good faith - and thus in a fair manner and with the utmost loyalty - both during negotiations and during the formation stage of a contract, is of crucial importance, as is the foundational rule that covenants must be respected. The principle of good faith must also be respected at all stages of the contractual relationship, including after the conclusion of the agreement.

Having clarified, therefore, the influence of Sharia in the contractual sphere, it is necessary to specify that the Republic of Iraq è is currently divided into two distinct jurisdictions: the Federal Parliamentary Republic of Iraq and the Iraqi Kurdistan Region. While the principles of Sharia must be considered applicable throughout Iraqi territory, the civil law rules governing agency and distribution contracts – whose discipline è has been amended several times in recent decades – are different in the two regions.

In the Kurdish part, the old legislation on agency contract is still applied, specifically, the Law on Agents No. 51 of 2000 (L. No. 51/2000) together with some rules of the Iraqi Civil Code (which will be indicated in detail below), as the Kurdish Parliament has not yet ratified the 2017 law, which was adopted instead in the rest of the territory. Both disciplines will be examined below.

The AGENCY CONTRACT IN THE KURDA REGION

The substantive law of agency contracts è therefore, is regulated by the Law on Agents No. 51 of 2000 and for what is not expressly regulated, reference is made to the provisions of the Iraqi Civil Code (henceforth “c.c.i.”). In the mind of’Article 3 paragraph 1 of Law No. 51/2000, an agent è a natural person or legal entity carrying on a commercial activity in Iraq as a representative of another foreign natural person or legal entity, whether his activity is more attributable to that of an agent in the strict sense, or whether he performs the function of a commission agent, as regulated by commercial, corporate or transport law.

The second paragraph of Art. 3 of the already mentioned law stipulates that the title of agent can be held by both natural persons and legal persons possessing Iraqi citizenship or nationality, or having their seat or residence in Iraq. It should be pointed out that natural persons è are required to meet additional requirements, including full legal capacity, attaining at least 25 years of age, not having been convicted of crimes or violations of morality, and being registered with a Chamber of Commerce business office. Finally, è it is stipulated that the agent cannot carry out activities in the employ of the state. Moreover, pursuant to Art. 4 paragraph 3 of Law No. 51/2000, è companies are also allowed to take on the status of agent, provided that all shares in them are owned by Iraqi-registered entities.

Regulation No. 4/1998 of the Iraqi Ministry of Health regarding Scientific Offices of Pharmaceutical Publicity” makes some specific provisions for the pharmaceutical sector (see “Instructions No. 4/1998 of the Ministry of Health related to Scientific Offices of the Pharmaceutical Publicity”).

CLAUSES AND OBLIGATIONS

Under Law 51/2000, it is not necessary for an exclusivity clause to be included in the agency contract, any negotiation of which is left to the’autonomy of the parties. The rule under consideration places a limit on the maximum number of principals the agent can represent: there cannot be more than three. It follows quite clearly from the brief examination carried out that the agent’s obligation to comply with the requirements of the law and in case of violations could incur penalties.

It should be emphasized that there are no regulatory provisions listing the agent’s duties to the principal, therefore, it is necessary for the contract to contain clear and precise clauses to this effect (e.g. duties of fidelity and diligence, prohibition of competition, preservation of the principal’s trade secrets, obligation to keep records on the business procured and to transmit to the principal all relevant information in the context of the agency business).

Equally, no precise obligations of the principal towards the agent are codified, so the same general rules of contracts contained in the I.C.C. in Articles 71-179 and in Articles 927-952 regarding specific rules on representation apply. Specifically, Art. 940 of the I.C.C. establishes the right to compensation of the representative (agent), while Art. 941 establishes the right to reimbursement of expenses. Art. 940 I.C.C. does not introduce any parameter for quantifying the commission, so it must be expressly defined by the parties and, in the absence of explicit agreement, the customary commission will apply. Likewise, the legislator fails to determine the cases in which the commission is due. It follows, therefore, that even the choice between different types of commissions including, commission on brokerage, commission on conclusion or area commission, è is left to the’contractual autonomy of the parties.

Article 946 of the I.C.C. stipulates that the contract is terminated by the death or incapacity to act of one of the contracting parties, by the attainment of the purpose of the contract or by the expiration of the stipulated term. In this regard, it is pointed out that the contractors may enter into the agency contract for a fixed or indefinite term.

In the absence of legal provisions, è parties are given the option to withdraw at any time from both the fixed-term and open-ended contracts. Generally, the prerequisites for termination are: the expiration of the term, termination upon reasonable notice, achievement of the purpose of the contract, bankruptcy or change of partners, serious breach of contract, breach of a non-competition clause, breach of the obligation of confidentiality.

The parties are entitled to terminate the contract at any time.

The Iraqi regulations do not provide for any compensation in favor of the agent in the case of termination of the contract, which is why in the case of unlawful termination there will arise, rather, the right to claim damages. Under Article 939 of the Civil Code, the appointment of an auxiliary by the agent (agent) may take place with the express consent of the principal (principal). Once an auxiliary is appointed, with the consent of the principal, he becomes the principal’s direct representative, and his contractual relationship è autonomous and independent from that which binds the agent to the principal. For example, the auxiliary continues to represent the principal in spite of the agent’s withdrawal or termination of the contract due to the latter’s death (art. 939 second sentence of the I.C.C.). In the case of unauthorized auxiliaries, the principal’s liability is excluded (art. 942-944 of the i.c.c.).

In certain cases, the agent's liability may also be established for the act of the auxiliary or culpa in eligendo (e.g., where there are specific agreements to this effect or where the agent has made a wrong choice of the person of the auxiliary). In the Iraqi legal system, the rules relating to the figure of the agent, as well as those contained in the aforementioned Law No. 51/2000 and the Implementing Regulation No. 1 of the Iraqi Minister of Commerce of 2000, which regulates the obligations of the agent towards the State, can be considered mandatory.

Federal Republic of Iraq: The Agency Contract, the Distribution Contract and the Franchise Contract The new Law on Agency Contract, approved by the Parliament of the Federal Republic of Iraq on November 13, 2017 (Law No. 79 of 2017), and applied throughout the Federal Republic of Iraq outside the Kurdish Region, is also deemed applicable to distribution and franchise contracts. In fact, the definition of agency contract provided by the above legislation è as follows: “A contractual arrangement in which a natural or legal person è entrusted with the sale or distribution of goods or products or the provision of services within Iraq as an agent, distributor or franchisee for the principal, for a fee or commission, in addition to the provision of after-sales services, maintenance support and procurement of spare parts for the products and goods marketed by the said agent/distributor/franchisee."

One of the main innovations introduced by this legislative act is to regulate not only agency relationships, but also distribution and franchise relationships. With the general aim of boosting trade, the Iraqi government has given the agent/distributor/franchisee a one-year deadline to comply with the legal requirements regulating them. Unlike the previous legislation, the novation allows commercial agents to negotiate directly with government procurement entities and contract directly with the government.

The requirement to register with the Chamber of Commerce, which must issue a proper license if the applicant demonstrates that he or she meets the following requirements, remains in place: being an Iraqi citizen; having full legal capacity; not having been convicted of crimes against public morals; having a business office in Iraq for the operation of its business; being registered with a chamber of commerce in Iraq and having a business name; not being a civil servant or public employee; and having at least one commercial agency contract duly notarized in accordance with the law.

In addition, pursuant to the aforementioned law, in order to verify that the agent carries out his or her activities directly to the Principal, and thus does not act as an intermediary in a wider chain of operators, è it is provided that: “Agency agreements submitted by a commercial agent must be submitted on behalf of a company that produces or manufactures goods or provides services directly, or may be submitted by the original company owned by another company that produces goods or provides services directly, and formally authorized to have branches in Iraq. In addition, registration requirements for commercial agency contracts are determined through instructions issued by the Ministry”. The obligation to register these contracts is binding in nature: failure to register renders the contract unenforceable.

A number of limits have also been introduced to the possibility of terminating the agency/distribution/franchise agreement, not found in the previous regulations: “The Principal cannot withdraw from or renew the agency agreement except for just cause. However, an agency agreement mayò be terminated by mutual agreement between the agent and principal or in accordance with the terms of a contract concluded between the parties that contains either an arbitration clause or a clause assigning jurisdiction or applicable law."

In the field of labeling, there are different provisions depending on the products to be labeled. In general, è country of origin labeling is mandatory for products subject to conformity control, as well as on food and pharmaceutical products. Specifically, the regulations stipulate that food and pharmaceutical products must have mandatory Arabic language labeling.

At this point, è special attention should be paid to the Iraqi regulations applied to food products. The specific requirements for pre-packaged and canned foods are described by the technical standard IQS/230/1989. This is a provision drafted in 1973 and updated in 1978 by COSQC (Central Organization for Standardization and Quality Control;) based on a careful study by the Technical Commission for Standardization of Dairy Products and Canned Foods.

The labeling requirements for imported food products are as follows: name of the food, list of ingredients, net content and drained weight (metric system), name and address of the manufacturer/packer/distributor/importer/exporter/seller, country of origin, lot identification, production date and storage instruction, and instructions for use (relating to the preparation and consumption of the food). On the other hand, nutrition declarations of ingredients and the indication of expiration dates through the use of stickers (labels) are not allowed. The production and expiration dates must be indicated in a specific order, namely: day, month and year.