Contractual Obligations Suspended Per Government of Iraq Orders
May 20, 2020
Throughout all instability and security issues in Iraq for the past 17 years, the Government of Iraq (GoI) and the judicial system never declared any event to be a force majeure, including when ISIS occupied one third of the country. However, on March 21st 2020, GoI announced that COVID-19 pandemic is a force majeure, subjecting all contracts and projects to article 211 of the Iraqi Civil Code No. 40 of 1951.
What does that mean for international businesses doing business in Iraq?
Without getting into deep legal analysis, the obligation and liabilities of contracts and projects are now subject a special legal system which allows the Iraqi courts discretionary powers to balance the commitment and rights of the parties in the contracts. What is important for international businesses applying common law principles in these contracts in Iraq is that force majeure under the Iraqi legal system is a statutory matter and not a contractual clause like common law. Accordingly, many of the common law force majeure clauses in Iraqi contracts are null and void. Only the provision of the civil code will apply because the force majeure in Iraq is a matter of public order and the parties cannot agree otherwise.
Important to note that the force majeure provisions will not apply automatically (ipso facto). Special legal procedures must take place by one or both parties.
GoI also announced that the force majeure statues would continue until the announcement of the end of COVID-19 pandemic by the Iraqi Ministry of Health.
For further information and questions about this and other legal matters in Iraq, please contact us as iraqlegalupdates@bhc.iq