This article considers how US software suppliers working in Iraq through an Iraqi main contractor can protect customer continuity if that contractor defaults. In a typical structure, the US supplier licenses technology to the contractor, while a ministry, bank or private company actually uses the system. If the contractor stops paying the supplier or abandons the project, the end customer may lose support even though it has paid its own invoices in full. Continuity therefore needs to be designed into the contractual chain before the system becomes essential to the customer’s operations.
Iraq has no specific statute on software licensing. The framework is drawn from the Copyright Protection Law No. 3 of 1971, as amended in 2004, which expressly protects computer programs; the Iraqi Civil Code No. 40 of 1951, which governs contracts, assignment, assumption of debt and agency; the Electronic Signature and Electronic Transactions Law No. 78 of 2012; and, for public customers, the Public Contracts Implementation Instructions No. 1 of 2025. Where the contractor acts as the supplier’s representative, the Law on Regulating Commercial Agency No. 79 of 2017 may also apply.
Identifying the customer’s existing legal entitlement
The first question is whether the Iraqi customer holds a direct licence from the US supplier, a valid sublicence from the contractor, or only a contractual promise from the contractor to provide access. The Copyright Law protects software as a literary work, and owning an installed copy does not by itself give a right to use, copy or modify the program. What matters is the grant, its scope and its conditions, and whether the contractor had the right to pass those rights on.
The licence should be read together with the main contract and the subcontract. A review of intellectual property rights in Iraq should establish who can grant continued use, maintenance access and updates if the contractor drops out. The supplier cannot promise rights in third-party or open-source components beyond those it holds, and the contractor cannot create broader permissions simply by including them in its proposal to the customer.
Separating contractor default from customer default
The licence chain should state clearly whether the contractor’s non-payment can terminate the end customer’s rights where the customer has met its own obligations. Without clear drafting, a general termination clause in the supplier-contractor agreement may cut off a customer that has done nothing wrong, producing a commercially and reputationally damaging result without any workable path to transition.
A continuity arrangement should address:
- Notice to the customer before specified rights are suspended or terminated.
- Evidence of payments already made through the contractual chain.
- A defined opportunity to obtain a direct licence or replacement support.
- Treatment of accrued contractor debts and future subscription fees.
- Permissions needed for an authorised replacement service provider.
The customer should not be required to pay the same charge twice without an agreed legal basis. Any direct payment arrangement should explain how it affects the contractor’s receivable and the supplier’s outstanding claim against the contractor.
Obtaining the approvals needed for direct continuity
Under the Civil Code, a new agreement between supplier and customer does not automatically transfer every obligation from the original contractor. Assignment of rights, assumption of debts and release of the original party are separate legal steps, and transfer of a debt generally requires the creditor’s acceptance. The parties whose consent is needed should be identified, together with any provision in the original contract restricting replacement or direct dealings.
For public projects, the authorised procurement and approval process also matters. A technical administrator may be able to keep the system running but lack authority to change the government’s payment obligations or accept a new contracting party. A review of government projects in Iraq should distinguish practical operational cooperation from a valid contractual commitment by the public customer, which may require approval at a senior level.
Preserving access without surrendering the supplier’s rights
Continuity may require configuration files, administrator credentials, documentation and exports of customer data. The material to be delivered and the permitted use should be specified. Source-code escrow is one option, but the deposit, verification, release triggers and the licence that applies after release must all be defined; the word escrow alone does not establish the customer’s rights.
Confidential information belonging to other customers should be protected, and access limited to the system concerned. Remote suspension or deactivation should be assessed against the contract, Iraqi law and its foreseeable consequences, particularly where the system supports public services. A dispute with the contractor does not authorise the supplier to interfere with the customer’s infrastructure.
Local presence and agency questions
Where the main contractor has been acting as the supplier’s local representative, its default may also raise questions under the Commercial Agency Law, including registration and termination of the agency. If the supplier intends to deal directly with customers after the contractor exits, it should consider whether it needs a local branch, a new registered representative or a different contracting structure to provide ongoing support lawfully.
Documenting the transition and preserving claims
The transition should record the effective date, the continuing rights and the allocation of support obligations. The supplier should preserve evidence needed for its separate debt or damages claim against the defaulting contractor, including invoices, notices and correspondence, and should make sure that any direct agreement with the customer does not inadvertently release the contractor.
Conclusion & how Etihad Law Firm can help
Customer continuity in Iraq is far easier to secure when it is built into the licence chain at the outset rather than negotiated after a contractor fails. Clear direct rights, payment mechanics and transition obligations protect both the supplier’s intellectual property and the customer’s operations.
As Iraq intellectual property lawyers for American companies, Etihad Law Firm reviews software licence chains, drafts continuity and escrow arrangements, advises on public-sector approvals and agency issues, and pursues claims against defaulting contractors, helping US suppliers keep customers operational when a main contractor fails.