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Iraq GAR know-how: Investment Treaty Arbitration

Investment Treaty Arbitration

Iraq
Authors
Firm

I OVERVIEW
1 What are the key features of the investment treaties to which this country is a party?

  Substantive protections Procedural rights

BIT Contracting Party Fair and Expropriation Protection Most- Umbrella Cooling-off Local courts Arbitration
or MIT equitable and security favoured- clause period
treatment nation (MFN)
(FET)
Armenia Yes Yes Yes Yes No 180 days Yes Yes
(not in force)
France Yes Yes No Yes No 180 days Yes Yes
(not in force)
Germany Not available
(not in force)
Japan Yes Yes Yes Yes Yes1 Three months Yes Yes
(not in force)
Kuwait Yes Yes Yes No No None No Yes2
(7 June 1966)
Morocco Not available
(not in force)
Syrian Arab Republic Not available
(not in force)
Unified Agreement for No Yes Yes Yes4 No None Yes Yes5
the Investment of Arab
Capital in the Arab
States3
Agreement on No Yes No Yes No None No No
Investment and Free
Movement of Arab
Capital Among Arab
Countries6
(29 August 1970)
Agreement on No Yes Yes Yes No None Yes Yes
promotion, protection,
and guarantee of
investments among
member states of the
Organisation of the
Islamic Conference

  Substantive protections Procedural rights

FTAs/EPAs Fair and Expropriation Protection Most- Umbrella Cooling-off Local courts Arbitration
equitable and security favoured- clause period
treatment nation (MFN)
(FET)
European Union - No No No Yes No No No No
Iraq Partnership and
Cooperation Agreement

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II QUALIFYING CRITERIA
2 Definition of investor
What are the distinguishing features of the definition of ‘investor’ in this country’s investment treaties?

Issue Distinguishing features in relation to the definition of ‘investor’

Nationality of individuals The treaties to which Iraq is a party generally require individual investors to have the nationality of the other contracting party
(or another contracting party if multilateral). In determining nationality, the treaty with Kuwait refers specifically to the Kuwaiti
Nationality Law, whereas the treaty with Japan refers to the ‘applicable laws and regulations’ of the home Contracting Party.
The Unified Agreement does not address the question of determining nationality, and IFMAC contains no definition of investor
but does use the term ‘Arab investor’ rather than ‘investor’.
Juridical persons The treaties with Armenia, Japan and Kuwait require qualifying juridical persons to be constituted under the laws of the host
state. The Kuwait treaty refers specifically in this regard to the Kuwaiti Commercial Companies Law, as well as ‘any legal
person or establishment or body set up under the laws in force in Kuwait.’
The France treaty requires a French investor to have its head office in France, but does not impose the same requirement on
Iraqi investors.
The Unified Agreement requires a qualifying juridical person to have the nationality of a State Party, but excludes a juridical
person if non-Arab citizens own (directly or indirectly) any part of the capital of that juridical person.
Denial of benefits The Japan treaty provides that the host state may deny the benefits of the treaty to a juridical person of the other contracting
party if that juridical person is owned or controlled by an investor of a non-contracting party with whom the host state does
not maintain diplomatic relations.

3 Definition of investment
What are the distinguishing features of the definition of ‘investment’ in this country’s investment treaties?

Issue Distinguishing features in relation to the concept of ‘investment’

Indirect investments There are no specific exclusions of indirect investments, and the Armenia and Japan treaties expressly extend protection to
cover indirect investments. The France treaty expressly includes indirect shareholdings.
Eligible assets The Kuwait treaty contains a limited definition of investment, whereas the treaties with Armenia, France and Japan contain
a very broad definition. The Unified Agreement refers to ‘Arab Capital’ as being, in the main, assets ‘comprising any material
and immaterial rights which have a cash valuation’. IFMAC merely refers to ‘Arab investments’, without further definition.
The Unified Agreement further requires that the Arab Capital be used in a field of economic development with a view to
obtaining a return in the territory of the host state.
Compliance with local Most Iraqi treaties refer, at some level, to an investor’s compliance with local laws and regulations. This is not, however,
laws expressed in the definition of protected investments.
Limits on investments IFMAC provides that each contracting party shall designate the procedures, terms and limits governing investment, and the
sectors for investment, and notify these to the General Secretariat of the Council of Arab Economic Unity.
Excluded investments No treaties specifically exclude certain types of assets from the definition of investment, although the Kuwait treaty does
provide a closed list of items in the definition of investment.
Changes in form The Armenia, France and Japan treaties expressly provide that changes in the form of an investment do not alter its status as
an investment.
Commencement of The Armenia, France and Japan treaties apply to all investments acquired prior to the entry into force of the treaty, but the
coverage Japan treaty does not cover claims arising out of events which occurred prior to its entry into force. The remaining treaties are
silent on the commencement of the protections afforded.
Sunset clauses The Armenia, France, Japan and Kuwait treaties provide that following termination of the treaty, the provisions of the treaties
shall still apply to investments made before termination of the treaty for a specific period of time. The periods vary from 5 to 20
years.

III SUBSTANTIVE PROTECTIONS

4 Fair and equitable treatment
What are the distinguishing features of the fair and equitable treatment standard in this country’s investment treaties?

Issue Distinguishing features of the fair and equitable treatment standard

FET standard Those Iraqi treaties which refer to fair and equitable treatment do so with no further elaboration and no reference to
customary international law save the France treaty which includes a non-closed list of potential impediments to the fair and
equitable treatment standard. The Japan treaty simply refers to according to investments of investors of the other contracting
party ‘fair and equitable treatment’.
The Kuwait treaty refers to ‘just and equitable’ treatment rather than fair and equitable.

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5 Expropriation
What are the distinguishing features of the protection against expropriation standard in this country’s investment
treaties?

Issue Distinguishing features of the ‘expropriation’ standard

Protection against All Iraqi treaties, save for the EU-Iraq Cooperation Agreement, provide protection against expropriation.
expropriation
Conditions for lawful Generally, expropriation is permitted if (i) in the public interest;7 and (ii) in return for compensation.8 The Unified Agreement
expropriation and the Armenia, France and Japan treaties further require that the expropriation be non-discriminatory, while also requiring
that the expropriation be in accordance with due process of law and, in respect of the Japan treaty, Article 5 of that treaty.9
The Unified Agreement permits the seizure of ‘property’ as distinct from ‘capital of the Arab investor’, which is the term used in
the provision prohibiting expropriatory acts.
Under IFMAC as amended the contracting parties pledge not to nationalize or confiscate Arab investments in sectors
which have been earmarked therefor. The unamended text had provided for lawful expropriation in the public interest, and
specified that the investor shall be entitled to compensation.
Indirect expropriation Only the France treaty makes express reference to indirect expropriation. However, the Armenia and Japan treaties refer to
measures equivalent to expropriation and the Unified Agreement refers to actions which infringe the right of ownership or
prejudice the intrinsic authority of the owner.
Compensation The Japan treaty provides for ‘prompt, adequate and effective compensation’ equivalent to the fair market value of the
investment. The Kuwait treaty refers to ‘just and immediate compensation’, equal to the value of the investment. The Unified
Agreement refers to ‘fair compensation’, and the unamended IFMAC referred to ‘fair and effective compensation’. The
Armenia and France treaties refer to ‘prompt and adequate’ compensation equivalent to the ‘real’ or ‘actual’ value of the
investment.
Time limits for The Kuwait treaty and the Unified Agreement both require that compensation be paid within a year. The Japan treaty requires
compensation it be paid ‘without delay’ and the unamended IFMAC required it be paid ‘within a reasonable period of time.’
Review by local courts The Japan treaty and the Unified Agreement both provide that the investor may challenge both the expropriation and the
amount of compensation in the courts of the host state.
Arbitration Those treaties providing for investor-state arbitration do not exclude expropriation from the scope of the dispute settlement
provisions.

6 National treatment/most-favoured-nation treatment

What are the distinguishing features of the national treatment/most favoured nation treatment standard in this country’s
investment treaties?
Issue Distinguishing features of the ‘national treatment’ and/or ‘most favoured nation’ standard
Scope of protection The Armenia, France and Japan treaties, the Unified Agreement, the EU-Iraq Cooperation Agreement and IFMAC all provide
for both national treatment and most-favoured-nation treatment.
The Japan treaty extends national treatment and MFN to both the investment and the investor, whereas the Armenia
treaty, the Unified Agreement and IFMAC only extend such treatment to the investment. The France treaty and the EU-Iraq
Cooperation Agreement extends national and MFN treatment only to the investor.
The Japan treaty expressly excludes from the scope of the MFN provision treatment accorded to investors of third states by
provisions concerning the settlement of disputes.
The MFN provision in the Unified Agreement extends only to treatment afforded to ‘a non-Arab investment in a similar field.’
The Unified Agreement exempts from the scope of the national treatment and MFN provisions ‘additional concessions
accorded to Arab investment’ (for national treatment) or ‘privileged treatment in respect of specific projects which are of
particular importance’ (for MFN).

7 Protection and security

What are the distinguishing features of the obligation to provide protection and security to qualifying investments in this
country’s investment treaties?

Issue Distinguishing features of the ‘protection and security’ standard

Scope The Armenia, Kuwait and Japan treaties, and the Unified Agreement, all guarantee some form of protection to investments
(and investors, in the case of the Unified Agreement).
The Kuwait treaty refers to ‘full protection’, the Armenia and Japan treaties use the ‘full protection and security’ formulation,
whilst in the Unified Agreement contracting parties undertake to ‘protect the investor, safeguard his investment and […]
ensure the stability of the pertinent legal provisions.’

8 Umbrella clause
What are the distinguishing features of the umbrella clauses contained within this country’s investment treaties?

Issue Distinguishing features of any ‘umbrella clause’

Scope Only the Japan treaty contains an umbrella clause, providing that ‘[e]ach Contracting Party shall observe any obligation it
may have entered into with regard to investments and investment activities of investors of the other Contracting Party.’
However, disputes arising under the umbrella clause are excluded from the Contracting Parties’ consent to arbitration in the
dispute resolution provision and the ‘necessary consent for the submission to the conciliation or arbitration will be given by the
disputing Party on a case-by-case basis.’

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9 Other substantive protections

What are the other most important substantive rights provided to qualifying investors in this country’s investment
treaties?

Issue Other substantive protections

Transfer of capital All of Iraq’s treaties (save the EU-Iraq Cooperation Agreement) contain provisions relating to the transfer of capital out of the
host state. Although the wording differs, they all include revenues or profits in the permitted transfers.
The Armenia and Japan treaties require that such transfers may be made without delay and in freely usable currencies. The
France treaty requires that they be made without delay. The other treaties are silent on timing but the Kuwait treaty permits
the transfer of funds in the same currency as that in which the capital was provided to make the investment.
The Armenia, France and Japan treaties and the Unified Agreement permit the host state to adopt restrictions on such
transfers in certain circumstances.
Arbitrary measures / The Japan treaty prohibits the impairment of the ‘investment activities’ of an investor by arbitrary measures.10 The Armenia
discrimination treaty prohibits ‘unreasonably harmful’ or discriminatory measures. IFMAC provides that investments shall be treated without
discrimination.
Armed conflict The Armenia, France and Japan treaties require the host state to afford investors treatment no less favourable than it accords
its own investors or investors of a third state in relation to loss or damage related to investments caused by armed conflict or
similar events.

IV PROCEDURAL RIGHTS
10 Are there any relevant issues related to procedural rights in this country’s investment treaties?
Issue Procedural Rights
Fork in the road The Unified Agreement and the Japan treaty both contain fork in the road provisions; Iraq’s other treaties are silent on the
question. In respect of the Japan treaty, an investor which has submitted an investment dispute to the local courts may still
seek arbitration under the treaty if the investor withdraws its domestic claim before a final decision is made.
Cooling-off period The Armenia, France and Japan treaties provide for a cooling-off period (three months for Japan, 180 days for Armenia and
France). The Unified Agreement provides that recourse to arbitration may be agreed if the disputing parties cannot agree to
conciliation or if the conciliator cannot render his/her decision within the time specified (three months being specified for that
decision).
Arbitration The France and Japan treaties provide for arbitration under any of: ICSID, ICSID Additional Facility, and UNCITRAL. The
Armenia treaty only provides for ICSID/ICSID Additional Facility arbitration or the host courts. The Japan treaty also provides for
‘any other rules agreed with the host state’ and the France treaty also provides for the jurisdiction of the host courts.
The Kuwait treaty provides for an ad-hoc arbitration committee, and sets out basic rules for the selection of the arbitrators. It is
not clear from the wording of the relevant article whether it provides only for arbitration between the two contracting parties,
or whether it provides for investor-state arbitration.
The Unified Agreement provides for arbitration but this must be separately agreed to by the disputing parties and there is no
standing consent to arbitration from the contracting parties to the treaty. In the absence of agreement on conciliation or
arbitration, the dispute shall be heard by the Arab Investment Court.
Applicable law The Kuwait treaty and Unified Agreement both contain provisions relating to the law applicable to the relevant agreements.
Whilst the Kuwait treaty provides that international law and ‘usage and commercial practice’ shall apply, the Unified
Agreement provides that interpretation shall be guided by ‘the principles on which it is based and the aims which inspired it,
followed by the rules and principles common to the respective legislation of the States members of the League of Arab States
and, finally, by the principles recognized in international law.’

11 What is the status of this country’s investment treaties?

It is not known whether any investment treaties are currently under negotiation. However the signing in 2012 of the treaty with Japan, the entry into force
of the US-Iraq Trade and Investment Framework Agreement in 2013, the passing of a law on accession by Iraq to theAgreement on promotion, protection,
and guarantee of investments among member states of the Organisation of the Islamic Conference in 2015,and the entry into force of the ICSID
Convention in December 2015 indicate that further investment treaties may be signed in the future.

V PRACTICALITIES (CLAIMS)
12 To which governmental entity should notice of a dispute against this country under an investment treaty be sent? Is
there a particular person or office to whom a dispute notice against this country should be addressed?
Government entity to Not known
which claim notices are
sent

13 Which government department or departments manage investment treaty arbitrations on behalf of this country?
Government department There have been no known investment arbitrations against Iraq.
which manages
investment treaty
arbitrations

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14 Are internal or external counsel used, or expected to be used, by the state in investment treaty arbitrations? If external
counsel are used, does the state normally go through a formal public procurement process when hiring them?
Internal/external counsel Not known

VI PRACTICALITIES (ENFORCEMENT)
15 Has the country signed and ratified the Washington Convention on the Settlement of Investment Disputes between
States and Nationals of Other States (1965)? Please identify any legislation implementing the Washington Convention.
Washington Convention Iraq signed and ratified the ICSID Convention in November 2015, and it came into force for Iraq on 17 December 2015.
implementing legislation

16 Has the country signed and ratified the United Nations Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (1958) (the New York Convention)? Please identify any legislation implementing the New York Convention.
New York Convention Iraq has not signed the New York Convention.
implementing legislation

17 Does the country have legislation governing non-ICSID investment arbitrations seated within its territory?
Legislation governing There is no specific legislation in Iraq governing non-ICSID investment arbitrations. All arbitrations seated in Iraq are governed
non-ICSID arbitrations by the provisions of articles 251 – 276 of the Code of Civil and Commercial Procedure 1969.

18 Does the state have a history of voluntary compliance with adverse investment treaty awards; or have additional
proceedings been necessary to enforce these against the state?
Compliance with No known instances
adverse awards

19 Describe the national government’s attitude towards investment treaty arbitration.

Attitude of government The entry into force of the ICSID Convention is an important step in indicating a favourable disposition towards investment
towards investment treaties and investment treaty arbitration. This is supported by the fact that the parliament passed laws in 2012 and 2014
treaty arbitration permitting the ratification of the France and Armenia treaties respectively and the passing of a law in 2015 on accession to
theAgreement on promotion, protection, and guarantee of investments among member states of the Organisation of the
Islamic Conference.

20 To what extent have local courts been supportive and respectful of investment treaty arbitration, including the
enforcement of awards?
Attitude of local courts Not known
towards investment
treaty arbitration

VII NATIONAL LEGISLATION PROTECTING INWARD INVESTMENT

21 Is there any national legislation that protects inward foreign investment enacted in this country? Describe the content.
National legislation Substantive protections Procedural rights
FET Expropriation Other Local courts Arbitration
Iraqi Constitution 2005 No Yes11 No No No
The Investment Law (No. No Yes12 Limited form of national Yes No
13 of 2006) treatment
Ability to transfer
capital
Kurdistan Regional No No National treatment No Yes
Investment Law (No. 4 Ability to transfer
of 2004) capital

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VIII NATIONAL LEGISLATION PROTECTING OUTGOING FOREIGN INVESTMENT

22 Does the country have an investment guarantee scheme or offer political risk insurance that protects local investors
when investing abroad? If so, what are the qualifying criteria, substantive protections provided and the means by which
an investor can invoke the protections?
Relevant guarantee Qualifying criteria, substantive protections provided and practical considerations
scheme
Multilateral Investment Under the terms of MIGA, Iraqi nationals may acquire political risk insurance in exchange for the payment of a premium. The
Guarantee Agency political risk insurance covers investments made in certain countries as long as certain conditions are met.
(MIGA)
Islamic Corporation Under the terms of ICIEC, investors may obtain insurance in relation to investments made in ICIEC member states, subject to
for the Insurance of the conditions imposed by the scheme, including that the investment is not prohibited by Shariah law.
Investment and Export
Credit (ICIEC)
Arab Investment and Under the terms of AIECGC, investors may obtain insurance in relation to investments made (by any investor) in member
Export Credit Guarantee states.
Corporation (AIECGC)

IX AWARDS
23 Please provide a list of any available arbitration awards or cases initiated involving this country’s investment treaties
Awards
No known awards
Pending proceedings
No known proceedings

24 Reading list
N/A

Notes
1 Under Article 17(5), disputes arising under the umbrella clause are
excluded from the Contracting Parties’ consent to arbitration and the
‘necessary consent for the submission to the conciliation or arbitration
[in relation to the umbrella clause] will be given by the disputing Party
on a case-by-case basis.’
2 It is unclear whether the relevant article provides only for arbitration
between the two contracting parties, or whether it provides for
investor-state arbitration.
3 In general, the provisions of the Unified Agreement depart from the
usual forms of wording used in BITs and do not, therefore, necessarily
neatly fit within the categories of protections and rights used in this
table. Careful reference should be made to the text of the treaty.
4 The ‘Unified Agreement’. The Unified Agreement guarantees national
treatment, but also entities a qualifying investor to opt for treatment
applicable to ‘a non-Arab investor in a similar field’.
5 The Unified Agreement provides for the possibility of arbitration
between an investor and the contracting parties, but does not
provide consent to arbitration by the contracting parties. The Arab
Investment Court enjoys a residual jurisdiction over cases in which
there has been no agreement to arbitrate.
6 ‘IFMAC’.
7 In the Kuwait treaty, ‘public purpose’ in the Japan treaty and
‘public benefit’ in the Armenia and France treaties and the Unified
Agreement.
8 Kuwait treaty, Armenia, France and Japan treaties and the Unified
Agreement.
9 Article 5 provides for: fair and equitable treatment, full protection and
security, a prohibition on arbitrary measures, an umbrella clause, and
a commitment to improve the investment environment and reduce
or eliminate restrictive measures.
10 The term investment activities means the operation, management,
maintenance, use, enjoyment and sale or other disposal of
investments.
11 Although it is more limited than other common formulations of
protection from expropriation.
12 The protection does not apply if there is a final judicial judgment
issued.

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Iraq GAR know-how: Investment Treaty Arbitration

Alexander Slade Robert Landicho

Vinson & Elkins
Alexander Slade is a senior associate in the
London office of Vinson & Elkins RLLP. He
has broad experience in both investment
arbitration and international commercial
arbitration, under a wide range of arbitral
seats and governing laws. Alexander is
familiar with all major institutional rules, and
has particular experience of arbitrations
under the ICSID, ICC, LCIA, SCC, PCA and UNCITRAL Rules. Alexander is
admitted in England as a Solicitor Advocate, and acts as advocate in
arbitrations at both procedural and merits hearings. Alexander’s practice
covers a wide variety of sectors, particularly energy, infrastructure,
construction, and telecommunications, and he regularly advises on dispute
resolution clauses, public international law, international investment law
and nationality planning, as well as issues arising out of EU sanctions. He has
also been involved in numerous claims in the English High Court. In 2011,
Alexander was seconded to the London Court of International Arbitration
where he administered arbitrations as part of the counsel team.
Vinson & Elkins
Robert Reyes Landicho is an associate of
Vinson & Elkins LLP, based in its Houston
office. His practice focuses on international
arbitration and litigation, including disputes
involving commercial, construction, energy,
and public international law. His experience
extends from federal and state court lawsuits
in the United States, to commercial and
investor-state arbitrations in the Middle East, Asia, and Europe. He has
advised on international arbitration matters, including ad hoc arbitrations
and arbitrations under the ICC, ICDR, UNCITRAL, and ICSID Arbitration
Rules, and also advises on investment-treaty planning. Mr. Landicho has
also contributed to articles and book chapters on arbitration and energy-
related disputes. Before joining Vinson & Elkins, Mr. Landicho researched
Middle Eastern political regimes as a Fulbright Scholar, and worked at the
Iraq Mission of the International Organization for Migration, a UN-affiliate
organization. Mr. Landicho has a working knowledge of Arabic.

Vinson & Elkins From litigation in the English courts to arbitration in Singapore or enforcement litigation in India, Vinson & Elkins
handles international arbitration and international litigation around the globe. With experienced practitioners
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Alexander Slade
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aslade@velaw.com
Our lawyers know the institutions, arbitrators, opposing lawyers, and the written and unwritten rules of
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Robert Landicho
speaks to their standing in the arbitration community, while giving greater insight into what it takes to be
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lawyers are experienced trial lawyers, skilled in written and oral advocacy and persuasive strategy.
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