This article considers how UK companies with Iraqi branches should document the local manager’s authority when the branch takes on contracts outside the original project scope. A branch set up to support one project often receives further opportunities, and the manager may already hold signing powers. That does not answer every question about a new contract: the company’s internal delegation, the branch’s registered position and the permissions required for the new activity all need examination.
The principal framework is the Foreign Company Branches Regulation No. 2 of 2017, as amended, which governs registration of branches and offices of foreign companies with the Companies Registration Directorate, together with the Civil Code No. 40 of 1951 on agency and representation and the Notaries Public Law No. 33 of 1998 for powers of attorney. Sector licensing, the Income Tax Law No. 113 of 1982 and the Labour Law No. 37 of 2015 also apply as operations expand. The position differs from that of an Iraqi subsidiary.
The branch and the foreign company
An Iraqi branch is an extension of the foreign company rather than a separate legal person. Contracts signed through the branch therefore create obligations for the UK company itself, subject to authority and contract terms. Using the branch name should not obscure the identity of the contracting party, and counterparties may pursue the UK company’s assets abroad as well as in Iraq.
The registration file should be checked whenever new work is considered. Foreign branch compliance in Iraq includes assessing whether changes to the registered activities, manager or other recorded information require notification or amendment. Existing registration should not be assumed to cover a regulated activity outside its recorded scope, and some activities require separate licences regardless of registration.
The scope of the manager’s mandate
The manager’s authority usually derives from a board resolution and a power of attorney drafted for the original project. A mandate to administer that project may not cover borrowing, guarantees, asset disposals or contracts in a different business line. Monetary limits and requirements for UK board approval are equally important.
Where the new contract exceeds the mandate, authority should be established before signature through an amended power of attorney identifying the acts contemplated, including variations and dispute resolution. Under the Civil Code, the principal may ratify an agent’s unauthorised act, but ratification raises its own questions and cannot cure a missing regulatory permission.
Registration and operational requirements
The review should consider how the activity will actually be performed. A consultancy branch that begins installing equipment, importing goods or employing a larger workforce faces different obligations from one providing advice. Tax registration, contract tax retentions, employment contracts, social security and work permits should all reflect the expanded operations.
The documents to compare commonly include:
- The current branch registration and manager appointment.
- The power of attorney and internal approval limits.
- The proposed contract and a description of actual activities.
- Existing licences and their conditions.
These records should be consistent. A contractual description chosen for commercial convenience will not determine how the authority classifies the activity.
Contracting while approvals are pending
If further approval is needed, the parties should consider signing subject to a genuine condition precedent, allocating responsibility for obtaining the approval and the consequences of refusal or delay. A promise to obtain permission does not authorise performance in the meantime.
Review of commercial contract terms in Iraq should also cover the manager’s authority to accept variations, sign acceptance certificates and agree payment arrangements. Counterparties should be told of relevant limitations, and internal delegation records should match external communications, especially when several regional offices instruct the same branch. Bilingual authority documents should describe the same powers in Arabic and English.
Liability exposure of the UK company
Because the branch is not a separate entity, any liability arising from new contracts, including tax, employee claims and damages, falls on the UK company. Some groups decide that substantial new business lines are better conducted through an Iraqi subsidiary, which limits exposure to that entity’s assets. The choice between expanding the branch and incorporating a subsidiary should be made deliberately when the scope changes, not after obligations have been assumed.
Tax registration and retentions for new contracts
Each new contract may trigger contract tax retentions by the customer and require the branch to update its tax file. Customers often withhold final payments until a tax clearance covering the specific contract is produced. Before signing new work, the branch should confirm that its tax registration covers the activity and that it can obtain clearances, otherwise cash flow on the new contract may be delayed long after performance.
The branch’s accounts should also separate income and costs by contract, which simplifies both tax filings and any later audit of the expanded operations.
Conclusion & how Etihad Law Firm can help
New business should be assessed against both the branch’s legal position and the manager’s actual mandate before the UK company becomes bound.
Providing Iraq branch compliance support for British businesses, Etihad Law Firm reviews branch registrations and amendments, drafts powers of attorney and delegation frameworks, and advises on contract terms and structuring options, helping UK companies understand the obligations they will assume before their Iraqi representative commits to new work.