This article examines how German exporters should review commission flows through Iraqi reseller networks where payments pass through several intermediary layers. Multiple layers do not prove misconduct, but they can obscure who is ultimately paid and for what, especially where the end customer is a public body or a public official can influence the purchase.
The framework includes the Penal Code No. 111 of 1969, which criminalises bribery of public employees and related offences, including offering, promising and mediating a bribe; the Federal Integrity Commission Law No. 30 of 2011, as amended, which established the Commission responsible for investigating corruption; the Anti-Money Laundering and Combating the Financing of Terrorism Law No. 39 of 2015; the Law on Regulating Commercial Agency No. 79 of 2017; and the Iraqi Civil Code No. 40 of 1951, under which a contract with an unlawful object or cause is void.
Mapping the legal role of each intermediary
The review should begin with what each participant actually does. Buying and reselling goods, representing the exporter, introducing opportunities and advising on tenders are different activities with different legal consequences. Arrangements may fall under the Commercial Agency Law, with its registration requirements, even where the contract uses a different title. The exporter should confirm who is authorised to make representations or collect money on its behalf.
Ownership and control of intermediary entities should be established through reliable records and contractual disclosure, including whether another person ultimately benefits from a commission. The review should remain evidence-based: family links or a public-sector background may warrant closer examination, but they are not proof that a payment is unlawful.
Linking each payment to a lawful service
The Penal Code treats as bribery any benefit given or promised to a public employee to perform, omit or breach a duty, and it extends liability to intermediaries and those who offer. Describing a payment as consultancy or marketing does not make it lawful merely because an invoice exists. Its purpose, recipient and connection to official action are what matter, and a contract cannot make an unlawful payment enforceable by calling it an ordinary business expense.
For each commission, the exporter should be able to show:
- The services actually provided and the deliverables supporting payment.
- The person or entity entitled to receive the amount.
- The commercial reason for the rate and any unusual increase.
- Whether sub-agents may be appointed and how their role is disclosed.
Requests to pay an unrelated account, to split invoices or to settle in cash should trigger enquiry before any release. An intermediary’s assurance that such practices are customary does not answer the Iraqi legal question. The explanation obtained, the supporting documents and the decision of the authorised reviewer should all be recorded.
Controls that reach beyond the first contract
The reseller agreement should state whether sub-agents may be engaged and what information must be provided about them. Controls can include approval rights, service records, proportionate audit access and a duty to report suspicious requests. These protections only work if they are used and if the evidence they generate is reviewed.
An indemnity does not remove criminal or regulatory exposure. Nor should exporters borrow reporting obligations designed for banks and impose them on every counterparty. Obligations under the AML/CFT Law apply to defined categories of reporting entities and should be assessed for the relevant person and activity, while German obligations, including those under the German Criminal Code concerning foreign bribery, must be considered separately.
Public tenders and the Integrity Commission
Public procurement in Iraq is closely watched by the Federal Integrity Commission and the Federal Board of Supreme Audit, and tender documents frequently require bidders to declare commissions and confirm that no improper payments have been made. False declarations can lead to exclusion, contract cancellation and criminal referral. Exporters whose products are bid by resellers into government tenders should know what declarations are being made in their name and ensure that commission arrangements are consistent with them.
Investigating concerns without damaging the record
If a questionable payment comes to light, contracts, invoices and communications should be preserved, and further payments suspended where legally and contractually justified. Authorised decision-makers should be identified, and legal advice obtained before making admissions, allegations or disclosures. Reviewing employee communications should itself rest on an appropriate legal and contractual basis.
The investigation should distinguish poor documentation, contractual breach and evidence of an unlawful payment, as each calls for a different response. Termination and recovery clauses should be applied according to their terms, while any mandatory legal obligations are handled separately from the commercial dispute with the reseller.
Making commissions explainable
A defensible arrangement lets the exporter explain who was paid, for which service and under what authority, at every level of the network. Periodic refresh of due diligence, rather than a one-off check at appointment, keeps that picture current as resellers change their own partners.
Contractual consequences of improper payments
Under the Civil Code, an agreement whose object or cause is unlawful is void, which means an intermediary cannot enforce a commission tied to a bribe, and an exporter may face difficulties recovering sums paid for such a purpose. Public contracts tainted by corruption can be cancelled, with the contracting entity seeking compensation and excluding the supplier from future tenders. Exporters should therefore include clear rights to suspend payments, terminate and recover sums where a breach of anti-bribery undertakings is established, while recognising that these clauses support, but do not replace, effective oversight of the network.
Conclusion & how Etihad Law Firm can help
Commission structures in Iraq can be legitimate and commercially necessary, provided the exporter can see through each layer. As Iraq anti bribery compliance lawyers for German companies, Etihad Law Firm reviews intermediary structures and commission terms, advises on agency registration and tender declarations, and supports internal investigations, helping exporters keep their reseller networks aligned with lawful representation and documented commercial activity.