Settlement by agreement to arbitrate, and what follows

A supply contract between two companies contains a single line: “every dispute arising from this contract shall be referred to arbitration.” Two years later shipments slip and formal notices start to travel back and forth. That one line then comes into play. It opens a route other than an ordinary lawsuit, yet it does not take the courts out of the picture entirely. The office of lawyer Ali Barakat in Baghdad, al-Yarmouk, follows that route the way a file actually moves: from the written clause, to the award, to the Enforcement Directorate (مديرية التنفيذ).

Which instrument is in your hands?

The first task is to name the paper, because each kind is governed by a different statute:

Domestic arbitration is governed by Book Two of Civil Procedure Law No. 83 of 1969, published in the Official Gazette, issue 1766 of 10/11/1969.

First stop: is the clause valid?

• Writing is how the agreement is established. An agreement to arbitrate is established only in writing, and it may be made during a court hearing (art. 252).
• Scope. The parties may refer a particular dispute, or every dispute that arises from the performance of a particular contract (art. 251).
• Subject-matter. Arbitration is valid only in matters in which conciliation (صلح) is permitted, and only by a person who has capacity to dispose of his or her rights (art. 254). Arbitration between spouses follows the Personal Status Law and the rules of Islamic law, and is treated on the personal status page.

Anyone drafting a new contract will find the wording of the clause discussed in drafting an arbitration clause.

Second stop: the other side sued anyway

It is common for one party to ignore the clause and file an action. The starting rule is that an action on a dispute covered by the agreement may not be brought until the arbitration route has been exhausted. Silence has a cost: if the other party does not object at the first session, the court may hear the action and the clause is treated as cancelled. If that party does object, the court stays the action until the award is issued (art. 253). The court also stays the action once it finds that the agreement exists, or once it approves an agreement made during the hearing (art. 252). In practice, the objection is prepared before the first session, not after it.

Third stop: appointing the arbitrators

• A minor, a person under interdiction, a person deprived of civil rights, or an undischarged bankrupt may not sit as an arbitrator. A member of the judiciary may sit only with the permission of the Judicial Council (art. 255).
• Where there is more than one arbitrator, their number must be odd, except in arbitration between spouses (art. 257).
• The arbitrator’s acceptance must be in writing unless the court itself made the appointment (art. 259). After acceptance, the arbitrator may withdraw only for an acceptable excuse, and may be removed only by agreement of the parties (art. 260).
• An arbitrator may be recused on the same grounds as a judge, if those grounds appear after the appointment. The recusal request is made to the court that would originally hear the dispute (art. 261).
• If the panel cannot be formed. The parties have not agreed on the names, or an agreed arbitrator declines, withdraws, is removed, or is prevented from acting, and nothing in the agreement covers the gap. Any party may then apply by petition to the court that would originally hear the dispute, after the others have been served and heard. The decision appointing the arbitrator is final. A decision refusing the request is open to cassation under the procedure in article 216 (art. 256).

Fourth stop: time, procedure and the award itself

Procedure. The arbitrators follow the Civil Procedure Law unless the agreement expressly relieves them of those forms or draws a different procedure. If they have been authorised to conciliate, they are released from those forms and from the rules of law except what touches public order (art. 265), and their settlement is then treated as a settlement (art. 258).

Time. If the agreement fixes a period, the arbitration lapses when that period expires unless the parties extend it. If no period is fixed, the award must be issued within six months of the arbitrators’ acceptance. The period is extended by the duration of the obstacle if a party dies, an arbitrator is removed, or recusal is sought (art. 262). If the period runs out without a decision, or the arbitrators cannot deliver the award for a compelling reason, any party may ask the competent court for a further period, or for the court to decide the dispute, or for other arbitrators to be appointed, as the situation requires (art. 263).

Form of the award. It is issued unanimously or by a majority after the arbitrators have deliberated together, and it is written in the same manner as a court judgment. It includes a summary of the agreement, the parties’ statements and documents, the reasons and the operative part, the place and date of issue, and the arbitrators’ signatures (art. 270).

Deposit. Each party is given a copy. The award, together with the original arbitration agreement, is lodged with the court that would originally hear the dispute inside three days of issue, and the court clerk signs a receipt (art. 271).

Remuneration. The arbitrators’ remuneration is fixed by the parties’ agreement in the arbitration contract or afterwards; if they have not agreed, the competent court fixes it (art. 276).

Fifth stop: ratification or annulment at the original court

An award is not taken up in the enforcement departments, whether the arbitrators were chosen by the parties or appointed by a court, until the court that would originally hear the dispute has ratified it, on the application of one of the parties and after the statutory court charges have been settled (art. 272). The award binds only the parties who appointed the arbitrators, and only in the matter that was referred.

At this stage the award is examined. The parties may plead its nullity, and the court may set it aside of its own motion in the four situations article 273 lists:

1. There was no written evidence, or the agreement was void, or the award stepped outside what had been referred.
2. It clashes with public order or morals, or with an arbitration rule contained in the Law.
3. A ground for a retrial is made out.
4. A fundamental error appears in the award, or in a step of the procedure, and that error goes to validity.

The court may ratify the award, or set it aside entirely or only in part. If it sets the award aside, it may send the matter back to the arbitrators to repair the flaw, or it may decide the dispute itself where the case is ready (art. 274). The judgment the court gives under article 274 is not open to objection against a judgment in absentia, but it remains open to the other means of challenge provided in the Law (art. 275).

When the award or judgment came from abroad

An award issued outside Iraq. This is read in the light of the New York Convention of 1958, after Iraq’s accession by Law No. 14 of 2021, published in the Official Gazette, issue 4633 of 31/5/2021. Accession was made with three reservations, set out on a dedicated page: awards issued before the accession law entered into force are outside the Convention as against Iraq; recognition and enforcement of an award given in another Contracting State proceed only on reciprocity; and Iraq confines the Convention to contractual differences that Iraqi law treats as commercial. The detail is in Iraq’s reservations to the New York Convention.

A judgment of a court formed outside Iraq. That instrument is not an arbitral award. An “enforcement decision” (قرار التنفيذ) is sought by an action in the Court of First Instance, under Articles 2 and 3 of Law No. 30 of 1928: the action is brought where the judgment debtor lives, or, if that person has no settled address in Iraq, where the property to be attached is found. Article 6 sets the conditions that must all be present, including that the debtor was served with the foreign action by reasonable and sufficient means, that the foreign court had competence in the sense of Article 7, that the judgment is for a debt or a definite sum of money — or for civil compensation only, if it was given in a criminal case — that the underlying claim does not clash with public order under Iraqi law, and that the judgment can be enforced in the country where it was given. Judgments in absentia given by the Court of First Instance under this Law are open to cassation before the Federal Court of Cassation (محكمة التمييز الاتحادية), and are not open to appeal (art. 9). The path is explained in enforcing a judgment given by a court outside Iraq.

Once the instrument can be enforced

The file then moves under Enforcement Law No. 45 of 1980, as amended, published in the Official Gazette, issue 2762 of 17/3/1980. That Law applies to judgments and enforceable instruments, and to foreign judgments that are capable of enforcement in Iraq in accordance with the Law on the Enforcement of Foreign Judgments, having regard to the international agreements in force in Iraq (art. 3). A judgment given by a foreign court is not capable of enforcement in Iraq unless it is treated as such under that Law or under those agreements (art. 12). What follows by way of attachment and follow-up is set out in enforcement directorates in Baghdad.

How the office reads an arbitration file

The office begins with the clause itself: is it in writing, what is its scope, and does it fix the number of arbitrators and the time for the award? It then places the file at one of the five stops, because what is needed when a panel is being formed is quite different from what is needed at ratification. If the instrument came from abroad, the first distinction is whether it is an arbitral award or a court judgment, and only then is the governing statute read. The office does not impose a particular arbitration centre on a contract; that choice belongs to the parties. The office can be reached on +964 770 848 7526.

Legal basis and sources

1. Civil Procedure Law No. 83 of 1969, Book Two (arbitration) (Official Gazette, issue 1766 of 10/11/1969) — Articles 251–276
2. Law No. 14 of 2021, accession of the Republic of Iraq to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (Official Gazette, issue 4633 of 31/5/2021)
3. Law on the Enforcement of Foreign Court Judgments in Iraq No. 30 of 1928
4. Enforcement Law No. 45 of 1980, as amended (Official Gazette, issue 2762 of 17/3/1980)

Frequently asked questions

Topics in this area

• 01Iraq’s reservations to the Convention on the Recognition and Enforcement of Foreign Arbitral AwardsIraq’s accession Law 14/2021 to the 1958 New York Convention: reservations on earlier awards, reciprocity, and contractual commercial relationships.
• 02Enforcing a foreign court judgment under Law No. 30 of 1928Seeking a decision of enforcement of a foreign court judgment in Iraq under Law 30/1928: Court of First Instance, articles 6–7, cassation.

Always check the text in force and its amendments in the official source.

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