Three Years on: the Recognition and Enforcement of Arbitral Awards in Iraq under the New York Convention

The New York Convention mandates that member states recognize and enforce foreign arbitral awards issued in the jurisdiction of other member states, thus promoting uniformity and predictability in international arbitration. Courts of member states are generally required to enforce awards without entering into the substantive aspects of the dispute, and an award can only be challenged on the basis of one of the seven limited grounds specified by Article V of the New York Convention.

Iraq's Ratification of the New York Convention

Prior to the New York Convention, the enforcement of foreign arbitral awards in Iraq was permitted on a limited basis under the Enforcement of Foreign Judgments Law (Law No. 30 of 1928) (the “Foreign Judgments Law”) and the Enforcement Law (Law No. 45 of 1980) (the “Enforcement Law”). Moreover, foreign awards were susceptible to being enforced through the Riyadh Convention on Judicial Cooperation (the “Riyadh Convention”) if the judgment or award was issued by one of the 18 state signatories to the Riyadh Convention.

On 4 March 2021, the Iraqi Parliament issued the “Law on the Accession of the Republic of Iraq to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards" (the “Law of Accession”). This instrument ratified Iraq’s accession to the New York Convention.

Notably, the Law of Accession made the following reservations:

• the law would not apply to arbitral awards issued prior to the its entry into force;

• the law would not apply in relation to the recognition and enforcement of awards issued in the territory of another contracting member state, unless it was subject to a condition of reciprocity; and

• the law would only apply to arbitral awards arising out of contractual disputes deemed “commercial” in nature under Iraqi law.  Under the Iraqi Commercial Code No. 30 of 1984, commercial activities include (but are not limited to) supply of goods and services, construction, and shipping.

Pursuant to the express terms of the Law of Accession, the New York Convention was to enter into force once it was published in the Iraqi Official Gazette, which took place on 31 May 2021.

Key considerations for parties seeking Enforcement in Iraq under the New York Convention

Timing for Applicability of the New York Convention

Article XII(2) of the New York Convention provides as follows: 

“For each State ratifying or acceding to this Convention after the deposit of the third instrument of ratification or accession, this Convention shall enter into force on the ninetieth day after deposit by such State of its instrument of ratification or accession.” (emphasis added)

Iraq deposited the “instrument of ratification or accession”, i.e. the Law of Accession, on 11 November 2021, meaning that entry into force under Article XII(2) would in theory have been on 9 February 2022.

The Law of Accession, on the other hand, provides that recognition and enforcement of arbitral awards under the New York Convention in Iraq is not possible prior to its publication in the Official Gazette.  As indicated above, this took place on 31 May 2021, i.e. 9 months earlier than the 9 February 2022 effective date based on Article XII(2) of the Convention.

In recent confidential proceedings before the Iraqi courts, the Baghdad Court of First Instance issued a decision determining that Article XII(2) of the New York Convention took precedence, and would therefore only apply to awards issued as from 9 February 2022. The Iraqi Court of Cassation subsequently affirmed the ruling of the lower court. 

Special considerations for awards implicating the Iraqi State or State Entities 

Article 62 of the Enforcement Law prohibits the seizure of Iraqi State assets to settle a debt owed by the State. This essentially means that the Iraqi State, and Iraqi State-owned entities, are immune from enforcement against their assets to satisfy an arbitral award or court judgement. This restriction is limited to assets of the State located within Iraq, however. 

The Iraqi Public Companies Law No. 22 of 1997 (the “Public Companies Law”) defines a "State Company" as a self-financed unit, fully owned by the State, with corporate status and financial and administrative independence. Under the Public Companies Law, once a State-owned company is incorporated and its certificate of incorporation has been issued, that company is considered to have a distinct legal personality.  Whether this would render its assets susceptible to enforcement remains to be tested.  

The risk that Iraqi courts may refuse to enforce an arbitral award against assets owned by State Entities, notwithstanding Iraq’s accession to the Convention, is therefore a crucial consideration for parties seeking to enforce arbitral awards against state-owned assets in Iraq.