27 February 2012 | By Ruth Green
Iraq’s legal market is showing signs of stability following a decade of turmoil, and with energy featuring, highly international firms are beginning to take note
Security issues and political instability have dominated Iraq’s legal market in the past decade. While some believe its fortunes are changing, it is clear that there are still many challenges facing both local and international law firms operating in Iraq.
United Arab Emirates (UAE) firm Al Tamimi & Company’s trajectory in Iraq perhaps best exemplifies how the situation has improved. It opened an office in Baghdad in 2003, but was forced to close its doors from 2006 until 2009 due to security concerns. Today it has five Iraqi lawyers working on the ground and plans to open a second office in Basra in 2012.
“As the security situation improves we’re seeing more foreign investment, particularly from construction and financial companies, banks and those in oil and gas and related services,” says Khaled Saqqaf, head of the firm’s Jordan and Iraq offices.
Sanad Law Group (which operates in association with Eversheds) managing partner T Tabbaa acknowledges how much has changed. “The legal market used to be very unsophisticated, with few lawyers with English-language skills,” he recalls. “And there was no internet or email , so it was very cut off from the world.”
He notes that some international firms have already recognised Iraq’s potential, a prime example being when Eversheds approached his firm to set up an association agreement, which was formalised in May 2011.
“In the early part of the decade it was mostly US or UK lawyers who were creative enough to venture into Iraq and usually set up small offices in the ’green zone’,” says Tabbaa.
Thomas Donovan was one. After gaining experience of oil and gas deals in the Middle East during a stint at a US firm, he set up Iraq Law Alliance in 2004. With offices in Baghdad and Erbil, his is one of the few international firms to have a presence on the ground in Iraq. Aside from the security risks, he highlights that the cost of hiring security companies in Iraq has convinced many companies to run their businesses out of Amman or Dubai. For this and other reasons several firms such as DLA Piper have opted to do the same. Iraqi lawyer Salem Chalabi has been leading DLA Piper’s Iraq desk out of Dubai for almost three years.
In spite of ongoing security concerns and issues such as bureaucracy, Donovan highlights that the timing could not be better for international firms to enter Iraq. “There’s huge demand for international legal talent here,” he asserts. “Baghdad’s the second-largest city in the Arab world.”
And there has been interest. Clyde & Co established a cooperation agreement with Baghdad-based Numan Shakir Numan in 2003. Christopher Duffy and George Booth are Clydes’ key partners focused on Iraq. Duffy is chair of the London corporate group and has worked in Baghdad and Dubai, while Booth splits his time between Abu Dhabi, Dubai and London.
Clydes handles many transactions from Baghdad, particularly upstream projects, such as advising Russian oil giant Lukoil on developing the West Qurna II concession. Donovan says oil and gas have been both of major interest to foreign investors and an ongoing bone of contention in Iraq.
“Oil and gas took up a lot of oxygen in the room over the past few years and there’s been endless amounts of related legal issues,” he explains. Iraq’s first hydrocarbon draft law was agreed in 2007, but disagreement among different local political groups has delayed its approval.”
“There’s a constitutional debate over Kurdistan’s right to have autonomy over its own oil and gas sector,” says Duffy. This issue has got companies such as Hess Corporation and Exxon Mobil into hot water.
“Exxon Mobil being awarded a project in Kurdistan has created a conflicting message of what foreign companies can do,” adds Booth.
Meanwhile, the fourth round of tendering for oil concessions in Iraq has been pushed back to the end of May. It is hoped that it will help resolve discrepancies in Iraq’s oil
and gas laws and boost foreign investment in the sector.
Iraq has been witnessing an oil boom since 2005. This has proved to be a great attraction to foreign oil companies operating in the country.
Oil and gas: Kurdistan’s call for autonomy
Iraq has one of the largest crude oil proved reserves in the world.
In 2011 the Iraqi government amended the 2007 hydrocarbon draft to give Baghdad greater control over the country’s oil reserves and this provoked a conflict with the Kurdistan regional government.
Kurdistan, which is a semi-autonomous region in Iraq, believes it should be allowed to manage its own oil fields and award contracts to companies without the need for prior consultation from the Iraqi government.
In September 2011 Hess Corporation learnt the hard way when it was booted out of the fourth bidding round for oil concessions in Iraq after signing deals in Kurdistan.
Two months later Exxon Mobil signed six exploration deals in Kurdistan without approval from the Iraqi government. Exxon is already developing the West Qurna Field
in southern Iraq and has been told that this project may be terminated if it proceeds with its plans in Kurdistan.
The fourth round for oil concessions in Iraq has been postponed several times and has been pushed back until the end of May 2012 at the time of writing.