For foreign companies planning a substantial project in Iraq, the Investment Law can change the economics of the venture. It offers access to land, exemptions and legal guarantees that ordinary companies do not receive. These benefits are not automatic. A project that starts without an investment licence, or breaches its licence conditions, can lose its privileges and face recovery of exempted amounts.
Legal Framework
The Investment Law No. 13 of 2006 governs investment projects in Iraq by Iraqi and foreign investors. It has been amended, notably by Law No. 2 of 2010 and Law No. 50 of 2015. The law aims to attract capital, technology and employment by granting incentives to licensed projects.
The law established the National Investment Commission, with investment commissions in the provinces. These bodies issue investment licences and coordinate with other authorities. The law works alongside the Companies Law, tax laws and sector legislation. Kurdistan has its own investment legislation.
Key Points for Foreign Companies
The Investment Licence
Benefits under the law depend on obtaining an investment licence. The investor applies to the competent commission with a project proposal, feasibility study and supporting documents. Larger or strategic projects are handled at national level, while others go to provincial commissions. The licence sets the project’s scope and the investor’s obligations.
Excluded Sectors
Not every activity qualifies. The law excludes investment in oil and gas extraction and production, as well as banks and insurance companies. These sectors are governed by their own legislation. Investors in related activities should check carefully where the line falls.
Tax and Customs Exemptions
Licensed projects can benefit from exemption from taxes and fees for a period set by the law, starting from commercial operation. Imports needed for the project may also be exempt from customs duties, subject to conditions. Exemptions can be extended in certain cases, such as projects in less developed areas or with high Iraqi participation.
Access to Land
Land is often the most valuable benefit of the law. Investment commissions can facilitate the allocation of land for licensed projects, usually by lease or usufruct. Ownership rules for foreign investors are restricted and depend on the type of project. Investors should confirm the land route before committing capital.
Guarantees for Investors
The law provides guarantees for foreign investors, including:
- the right to transfer capital and returns abroad, in line with the law;
- protection against nationalisation and expropriation, except for public benefit with fair compensation;
- the right to employ foreign staff where qualified Iraqis are not available.
Investor Obligations
Licensed investors must carry out the project within the timeframe and specifications in the licence. They must keep proper accounts, give priority to Iraqi workers, and comply with safety and environmental rules. Breaches can lead to warnings, suspension, licence withdrawal and recovery of benefits.
Dispute Resolution
Disputes involving foreign investors may be resolved by the Iraqi courts or by arbitration where agreed. Iraq acceded to the New York Convention on the recognition and enforcement of foreign arbitral awards in 2021. Investors should draft dispute clauses carefully in their project agreements.
Kurdistan
Kurdistan applies its own Investment Law No. 4 of 2006, administered by its own investment board. Projects located there are licensed under that regime. Incentives and procedures differ from the federal law.
Practical Recommendations
- Obtain the investment licence before committing significant capital or importing equipment.
- Confirm early that the planned activity falls outside the excluded sectors.
- Secure the land arrangements and their legal basis in writing as part of the licensing process.
- Track the licence timetable closely and document progress to protect exemptions.
- Include a clear dispute resolution clause in all project agreements.
Conclusion
The Investment Law offers foreign investors meaningful incentives and protections in Iraq. Those benefits depend on a properly obtained licence and continuing compliance with its terms. Early planning with the investment authorities helps secure both.
This article provides general information only and does not constitute legal advice. For advice on investment projects and licensing in Iraq, contact Etihad Law team.