The Iraqi state owns a large share of the country’s land, buildings and equipment. Foreign companies often need these assets, whether a plot for a facility, a building for an office, or surplus equipment. Unlike private property, state property cannot simply be bought or leased by negotiation. A company that bypasses the procedure set by law risks a contract that is void and an asset it can lose.
Legal Framework
The State Property Sale and Lease Law No. 21 of 2013 governs the sale and lease of movable and immovable property owned by the state. It covers property belonging to ministries and entities not linked to a ministry. It replaced the earlier Law No. 32 of 1986 on the sale and lease of state property.
The law works alongside other legislation. Property subject to a special law, such as land allocated under the Investment Law, may follow different rules. Private property leases fall under the Real Estate Lease Law instead. Identifying which regime applies is therefore the first step in any transaction.
Key Points for Foreign Companies
Public Auction as the General Rule
The general rule is that state property is sold or leased by public auction. The aim is transparency and the best return for the state. Direct allocation without an auction is the exception and is allowed only where the law expressly permits it. A deal negotiated privately with an official, outside these exceptions, carries serious legal risk.
Committees Run the Process
Each owning entity forms committees to handle the transaction. Typically, one committee assesses the value of the property and another conducts the auction. The assessed value usually serves as the starting price. Decisions are generally subject to approval by the competent head of the owning entity.
Announcement and Participation
Auctions must be publicly announced, with the property, conditions and date stated in the announcement. Bidders must usually provide a deposit, set as a percentage of the assessed value. Foreign companies should prepare documents early, since proof of legal capacity and authority to bid will be required.
Lease Terms and Use
State property leased under the law is subject to a maximum term and conditions set by the law and the auction terms. The lessee must use the property for the declared purpose. Subletting, changes of use or construction generally require the owning entity’s approval. Breach can lead to termination and loss of deposits.
Payment and Delivery
The winning bidder must pay within the period set by the law and the auction conditions. Failure to pay can lead to cancellation of the award and forfeiture of the deposit. The property may then be re-auctioned at the defaulting bidder’s expense. Delivery of the property follows payment and completion of the required approvals.
Exceptions and Special Regimes
The law allows certain transactions outside the normal auction route, for example between state entities. Investment projects may obtain land through the investment authorities under the Investment Law. A foreign investor should confirm which route applies before starting, as procedures and protections differ.
Challenges and Disputes
Bidders and lessees may challenge decisions through the routes provided by law, including the courts. Grounds commonly arise from irregular announcements, valuation or award decisions. Keeping copies of all announcements, receipts and committee decisions is essential for any later dispute.
Practical Recommendations
- Confirm that the asset is state property and identify the entity that owns it before any discussion.
- Check whether the Investment Law or another special law offers a more suitable route.
- Prepare legalised corporate documents and powers of attorney well before the auction date.
- Read the auction conditions closely, especially use restrictions, payment periods and deposit forfeiture.
- Keep a complete file of announcements, bids, receipts and decisions throughout the process.
Conclusion
The State Property Sale and Lease Law gives foreign companies a clear, if formal, route to state assets. Following the auction procedure carefully protects both the investment and the company’s reputation. Early legal review helps identify the right route and avoid a void transaction.
This article provides general information only and does not constitute legal advice. For advice on acquiring or leasing state property in Iraq, contact Etihad Law team.