The selection of suppliers for supply chain operations in Iraq is a process governed by both legal obligations and prudential considerations. The legal obligations arise principally under the Iraqi Civil Code (Law No. 40 of 1951), the Commercial Code (Law No. 30 of 1984), the Anti-Money Laundering and Counter-Terrorism Financing Law (Law No. 39 of 2015), the Anti-Corruption Commission of Integrity Law (Law No. 30 of 2011), and the Penal Code (Law No. 111 of 1969). The prudential considerations engage commercial standing, technical capacity, and risk allocation, each of which warrants documented evaluation at the selection stage.
Commercial Registration Verification
The Iraqi Companies Registrar maintains the public register of companies registered under the Companies Law. The verification of a supplier’s commercial registration should include:
- Confirmation of the supplier’s registered name, registration number, and registered address
- Confirmation of the supplier’s corporate form and the date of registration
- Confirmation of the names and powers of the supplier’s authorised representatives
- Confirmation of the supplier’s registered capital and shareholders
- Confirmation that the supplier’s registration is in good standing and has not been cancelled or suspended
- Where the supplier is engaged in import activity, confirmation of registration as a commercial agent under the Commercial Agency Law No. 79 of 2017
The verification record should be preserved as part of the supplier file.
AML and KYC Obligations
The Anti-Money Laundering and Counter-Terrorism Financing Law No. 39 of 2015 imposes customer due diligence obligations on persons engaged in designated non-financial businesses and professions. While the most prescriptive obligations apply to financial institutions, the principles of customer due diligence have become market practice for substantial commercial counterparties. Customer due diligence should include identification of the counterparty, identification of the beneficial owners holding a controlling interest, understanding of the nature of the counterparty’s business, and assessment of the risk profile. The records of customer due diligence are to be retained in accordance with the periods specified in Law No. 39 of 2015 and its implementing regulations.
Sanctions Screening
Sanctions screening engages the international sanctions regimes that bind the operator by virtue of its corporate group composition, its currency of payment, or its broader commercial exposure. The principal regimes relevant to supply chain operations in Iraq are the United Nations Security Council sanctions, which are directly applicable in Iraq following Council of Ministers implementing instruments; the United States Office of Foreign Assets Control (OFAC) sanctions, which engage operators with a United States nexus or USD-denominated transactions; the European Union sanctions, which engage operators with an EU nexus or EUR-denominated transactions; and the United Kingdom sanctions, which engage operators with a UK nexus. Screening should be conducted against the relevant sanctions lists at the supplier onboarding stage and on a periodic basis thereafter.
Anti-Bribery and Integrity Screening
The Iraqi Penal Code No. 111 of 1969 criminalises both active and passive bribery in Articles 307 to 314, and the Anti-Corruption Commission of Integrity Law No. 30 of 2011 establishes the framework for the investigation and prosecution of corruption offences. Operators with a foreign group nexus are additionally subject to extraterritorial anti-bribery legislation, including the United States Foreign Corrupt Practices Act of 1977 and the United Kingdom Bribery Act 2010. Supplier due diligence should accordingly include screening for adverse media, prior enforcement actions, and links to public officials, particularly where the supplier interfaces with the operator’s public-sector customer relationships.
Technical and Quality Capacity
Where the supplied goods are subject to mandatory standards, the supplier’s compliance with the Standards and Quality Control Law No. 54 of 1979 and the standards issued by COSQC should be verified. Verification may include review of the supplier’s COSQC certifications, third-party quality assurance certifications, factory audits where commercially feasible, and sampling and testing of representative production. The verification record should be preserved and referenced in the supply contract’s quality provisions.
Financial Standing
The supplier’s financial standing affects both the supplier’s capacity to perform and the operator’s recovery prospects in the event of breach. Verification may include review of audited financial statements, bank references, trade references from existing customers, and credit reports where available. For substantial supply relationships, the supplier may be required to procure performance guarantees, advance payment guarantees, or bank guarantees in the operator’s favour. The form and content of such guarantees are governed by the Commercial Code and the practice of Iraqi banks under Central Bank of Iraq supervision.
Documentation of the Selection Process
Documentation of the supplier selection process supports both internal governance and subsequent dispute analysis. The documentation should include the selection criteria, the candidates evaluated, the due diligence performed on each candidate, the basis for the selection of the successful candidate, and the authorisation of the selection by the competent internal authority. Where the operator is a public entity or operates under public procurement obligations, additional procedural requirements apply under the Public Contracts Implementation Instructions and related instruments.
How We Can Help
Etihad Law Firm advises on supplier selection in Iraq, including the conduct of legal due diligence, verification of commercial registration and capacity, AML and KYC compliance under Law No. 39 of 2015, sanctions screening, integrity and anti-bribery screening, review of supplier-side guarantees and security packages, and the documentation of the selection process for subsequent governance and dispute purposes.