This article examines how US buyers of Iraqi businesses should review historic payments to intermediaries before integrating the target. Due diligence may reveal years of commissions paid to consultants with limited supporting records. Missing documentation does not prove bribery, but it prevents the buyer from understanding what services were provided and who ultimately benefited, and integration should not begin by either treating every payment as legitimate or making unsupported allegations.
The Iraqi framework includes the Penal Code No. 111 of 1969, as amended, which criminalises bribery of public employees and the offering or mediation of bribes; the Federal Integrity Commission Law No. 30 of 2011, as amended; the Anti-Money Laundering and Combating the Financing of Terrorism Law No. 39 of 2015; the Law on Regulating Commercial Agency No. 79 of 2017; and the Companies Law No. 21 of 1997 and Civil Code No. 40 of 1951 for corporate and contractual consequences. US buyers must separately consider the Foreign Corrupt Practices Act and other US rules applicable to them.
Identifying the payment and its commercial context
The review should reconcile adviser contracts, invoices, internal approvals and bank records. It should establish who performed the work, what benefit the target received and whether funds passed on to another person. Success fees, expense reimbursements and ordinary distributor margins should be distinguished rather than grouped under a single assumption about intermediary payments.
The Penal Code treats any benefit given to a public employee in exchange for performing or omitting a duty as bribery, regardless of its label. A review of commercial arrangements in Iraq should examine the intermediary’s actual activities, registration and authority to represent the target. The buyer should also check whether an intermediary holds a power of attorney or customer-facing authority, since ending payments does not revoke a separate mandate.
Conducting a focused and lawful investigation
The buyer needs access to evidence, but confidentiality and privacy obligations still apply. An investigation protocol agreed with the seller and target should identify authorised access and document preservation, avoiding indiscriminate transfer of employee or customer records where a narrower review can establish the facts.
The review should determine:
- The service, payment trigger and supporting deliverables.
- The ultimate recipient and reasons for unusual payment routes.
- Any link to a public decision or procurement process.
- Who approved each payment and their authority.
- Whether similar arrangements remain active today.
Interview notes should separate first-hand knowledge from assumption. Original documents should be preserved, and historical descriptions must never be amended to make a payment appear better supported than it was.
Public contracts and the target’s revenue
Where the target earns significant revenue from Iraqi public contracts, the review should consider whether any contract could be challenged if improper payments are established. Contracts obtained through corruption may be cancelled, the entity excluded from future tenders and compensation claimed by the public body. These risks affect valuation directly and should be considered alongside the criminal exposure of individuals.
Assessing consequences under the transaction structure
A share purchase leaves the target as the same legal entity, carrying its obligations and exposures. An asset purchase requires analysis of what transfers and which claims remain with the seller. Neither structure removes every Iraqi legal consequence of historic conduct, particularly criminal liability of individuals and the validity of tainted contracts.
Due diligence on corporate acquisitions in Iraq should be assessed together with the investigation’s findings. Any US legal implications require separate analysis under the rules applicable to the buyer, and a US compliance conclusion does not substitute for an assessment of Iraqi criminal, regulatory or contractual issues.
Converting findings into transaction protections
Material unresolved issues may justify further diligence, a condition to completion, a price adjustment or a specific indemnity with escrow. The protected risk, notification process and recovery mechanism should be defined. A general warranty of legal compliance offers less practical protection than a tailored response to identified arrangements.
Contractual protections cannot bind authorities or remove criminal responsibility. Reporting and cooperation obligations should be assessed on their actual legal basis. Where concerns remain, current arrangements should be suspended or restructured only through lawful corporate and contractual steps, preserving the evidence needed for assessment.
Integrating the target without carrying forward the uncertainty
After completion, approval authorities, intermediary onboarding and payment documentation should be aligned with the findings. The buyer should retain responsibility for unresolved investigations and historical records, train local management on new controls and monitor intermediary payments closely during the first years of ownership.
Buyers should also consider the target’s relationships with public officials more broadly, including employees who previously worked in ministries and family links between owners and officials. These connections are common in Iraq and are not unlawful in themselves, but they should be disclosed, assessed and managed through clear conflict-of-interest rules after completion, so that legitimate relationships are not mistaken for improper influence.
Conclusion & how Etihad Law Firm can help
Historic intermediary payments are a common feature of Iraqi acquisitions, and the right response is evidence-based review, tailored protection and robust post-closing controls.
As Iraq anti bribery compliance lawyers for American companies, Etihad Law Firm conducts focused investigations, advises on Iraqi criminal and contractual exposure, drafts indemnity and completion protections, and designs post-closing intermediary controls, coordinating with the buyer’s US advisers.