An Overview of Arbitration in Iraq
Due to the global economic and technological developments and the information and communications revolution of the third millennium, and its reflection on all local and global economies, its contractual relations, investments, and resulting disputes require resolution away from local justice and its long procedures, in short of time and effort.
The necessity for alternative dispute resolution is highly commanding after numerous companies entered the country with the purpose of investing due to the massive evolution in the economy. ADR consists of many methods including arbitration, mediation, and conciliation. Iraq lacks the advantages of these methods. However, vast progress occurred after Iraq ratified the New York convention.
One of the main struggles for any corporate that aspires to invest in Iraq is how to settle a dispute that may arise between parties. Despite the strong economy in Iraq, there are still obstacles facing the upcoming company and making them anxious about taking such a step. Luckily, the obstacle was removed after the New York convention entered into force in 2021 in which, Iraq becomes the 169th state party.
According to Gary Born, arbitration is – and only is – a process by which parties consensually submit a dispute to a non-governmental decision-maker, selected by or for the parties, to render a binding decision resolving a dispute in accordance with neutral, adjudicatory procedures allowing each party to present its case.
Arbitration is more favorable than courts for several reasons including:
- More efficient and flexible: the dispute will be resolved sooner than the courts.
- Less complicated.
- Neutrality: One of the central objectives of international arbitration agreements is to provide a neutral forum for dispute resolution.
- Commercial Competence and Expertise: Another essential objective of international arbitration is to provide a competent, expert dispute resolution process.
- Party autonomy: The parties’ ability to adopt the procedural and substantive law. Moreover, the ability to select the institution and the rules for the arbitration process.
- Confidentiality: unlike courts, arbitration has more privacy than courts. The information brought up in the dispute shall be kept confidential.
- Impartiality: unlike courts, the parties have the power to appoint arbitrators.
- Finality: there are limited opportunities for appeal. That gives finality to the arbitration that is not often available with a trial decision.
ARBITRATION UNDER IRAQI LAW
The law relating to arbitration does not exist as a free-standing law. It only exists in some provisions under the civil procedural code No.83 of 1969 and can be found precisely in articles 251-276.
Some of its key aspects under these articles are:
- According to article 252, the arbitration agreement must be in writing to fulfill the formal requirement.
- According to article 253, if the parties agreed to go to arbitration, the courts may not have the power the hear the case.
- There are no restrictions on the appointment of the arbitrators
- There are no restrictions on the nationality of the arbitrators
- There are no restrictions on who will represent a party
- The code has not referred to procedural details such as the timeline of the process.
- Article 262 states: unless otherwise agreed by the parties, the arbitral tribunal has six months from accepting its appointment to render its award.
- The code did not mention the difference between international and domestic arbitration. therefore, both types are subject to the provision of the civil procedural code.
Evidently, arbitration under Iraqi law is vulnerable and lacks substantial matters that deal with both procedural and substantive matters. However, a quantum leap occurred following the ratification of the New York convention. Given that, NYC deals with the recognition and enforcement of arbitral awards and with procedural matters related to arbitration and the formal requirement.
NYC covers the flaws of the Iraqi law related to arbitration because parties have become able to settle the dispute in another country with better procedural law and easily enforce the awards inside the country and the award will be final.
One of the advantages of arbitration is that parties do not have to select an arbitration center to assist with the arbitration process. The term “ad hoc” refers to the autonomy of parties to set their own rules and appoint the arbitrators by themselves and negotiate their fees. However, an arbitration institution is highly recommended due to the numerous services provided.
The Federation of the Chambers of Commerce Arbitration Centre and The International Commercial Arbitration Centre Najaf are the only centers in Iraq. Despite both centers having no cases yet but both centers are willing to manage any arbitration process. However, parties are allowed to select abroad institutions to settle their dispute such as ICC, LCIA, PCA, ICDR, and extra which provide many services including usage of their own rules to manage the process of arbitration and appointing the arbitrator and pay them as well and then parties are allowed to enforce the award rendered by any mentioned institution inside the country.
ENFORCING AN AWARD IN IRAQ
What makes arbitration equal to court, if not even better, is the finality of the awards. Previously, parties couldn’t settle their dispute either in Iraq, due to the flaws in the Iraqi law, or outside the country. Nevertheless, parties nowadays have the power to settle the dispute outside the country and enforce it inside as long as the seat of the arbitration, where the award will be made, and each party are a contracting state to the NYC. The convention is one of the key instruments in international arbitration and the most significant Convention Ever Created by Human Beings, with 170 Contracting States. The convention provides the power to parties to choose the procedural law that will apply to their arbitration clause to render an efficient award and then enforce it in Iraq.
It is well known that Iraq’s economy is developing and foreign corporates become more interested in investing inside the country. In return, corporates request protection in case any dispute may arise, and due to the flaws in the country code which represent the procedural law make it difficult to subject any dispute under the country code. However, arbitration evolved in Iraq after the ratification of the New York convention. Parties are no longer subject to the civil procedural code. Moreover, there are no reservations about the enforcement of the awards inside. Iraq encourages foreign and domestic corporates to invest and encourages arbitration as the most prestigious method to settle disputes as the second amendment of investment code no 13 of 2006 stated under article 27 to refer any dispute that may arise to arbitration.