This month we bring you a special focus on a continent that boasts the world’s largest free trade area, a diverse economic make-up and increasing political stability. The latest edition of Law Update focuses on Africa, a territory that continues to be an attractive business and investment destination.
Like the rest of the world, Africa is still re-building from the impact of COVID-19, however, there continues to be an optimistic view of the opportunities the continent presents. An example of the appetite for investment into Africa was captured in a report we commissioned, titled Legal Leaders in MENA. Our survey of legal leaders revealed a resounding desire to expand into new territories, with 81% naming Africa as their investment destination of choice.Read the full edition
A number of encouraging facts such as the young population, stable security situation, plentiful natural resources, investment opportunities, banking regulations, universities, and airports make the northern gateway to Iraq, the Kurdistan Region, one of the fastest growing economies in the world. From a legal and practical perspective, the Investment Law in the Kurdistan Region of Iraq No. 4 of 2006 (the “Investment Law”) is the key motive behind the rapid development in this area.
The aim of this article is to outline the main aspects of the Investment Law, with a particular emphasis on the attractive incentives offered to foreign investors.
Treatment of the Foreign Investor
Foreign investors and capital are treated on an equal footing with national investors and capital. As Iraqi law does not allow for foreigners to own land in Iraq, the Investment Law creates a significant privilege at Article 3 by granting total ownership of project lands for foreign investors, though they may not own land containing oil, gas or mineral resources.
Exemptions for Foreign Investors
The following is a list of exemptions granted to foreign investors under the Investment Law:
8. The Board may grant service investment projects that are established in accordance with the provisions of the Investment Law (according to their nature, especially hotels, hospitals, tourist cities, universities and schools) additional exemption of duties on their purchases of furniture, furnishings and other items for the purposes of modernization and renewal once every three years, provided they are imported into the region and used exclusively in the project within one year from the issuance of the approval of the list of purchases and their quantities by the Chairman of the Board.
Legal Guarantees for the Foreign Investors
The Investment Law provides the following legal guarantees for foreign investors:
Supremacy of Kurdistan Region Laws and Dispute Resolution
According to the Investment Law, investment disputes shall be settled in accordance with the contractual terms agreed to by the parties. If there is no clause in it for this purpose, the dispute will be settled cordially. In the event that cordial settlement is impossible, the two sides may resort to arbitration, the provisions of which are stated in existing laws in the region or in accordance with the provisions for the settlement of dispute that exist in any of the international or bilateral agreements to which Iraq is a signatory.
However, investors need to be aware that the laws of the Kurdistan Region have supremacy over the federal Iraqi laws and the international or bilateral agreements to which Iraq is a signatory, save for a limited number of matters detailed at Article 110 of the Iraqi Constitution (such as foreign policy and citizenship). Article 115 of the Federal Iraqi Constitution states that ‘All powers not stipulated in the exclusive powers of the federal government belong to the authorities of the regions and governorates that are not organized in a region. With regard to other powers shared between the federal government and the regional government, priority shall be given to the law of the regions and governorates not organized in a region in case of dispute’. Therefore the provision of the Investment Law in Kurdistan Region shall be applicable, and it is considered best practice to state that ‘Kurdistan Region Laws’ are the applicable laws rather than ‘Iraqi Laws’.
After decades of wars, economic sanctions, and devastation, Iraq, including the Kurdistan Region, needs a positive climate which supports this stage of the rebuilding process and which will benefit all aspects of Iraqi life. The Investment Law in the Kurdistan Region was issued with the view to creating such a climate, one that promotes investment, removes any legal obstacles and permits the investment of national and foreign capital collectively or individually in investment projects in a manner that contributes to the economic development process.