Distribution of goods under a commercial agency
A notarial power of attorney, given so that one person may sign for another in a single transaction, is not a commercial agency in the sense of Iraqi law. Nor is a contract of employment. Article 1 of Commercial Agency Organisation Law No. 79 of 2017 describes a commercial agency as an arrangement under which someone — a person, or a body with legal personality — is given the task of selling merchandise, placing it with buyers, or supplying services, inside Iraq, in the capacity of an agent, a distributor or a franchisee, for a principal situated abroad, against a profit or a commission, together with after-sales care, upkeep, and the provision of spare parts for what is placed on the market.
In this Law the commercial agent is an Iraqi — whether a private individual or a legal person — who carries out any of those acts. The principal is a foreign individual or a foreign legal person, situated abroad, for whose account the agent acts. The licence is the document the Registrar of Companies issues for that purpose. Where the Law speaks of the Minister, it means the Minister of Trade.
The Law Office of Ali Barakat, from Baghdad, follows questions of the licence and of the record of the contract, a grievance against a refusal or a cancellation, and what the Law requires when dealing with a foreign company that has no licensed agent. What follows is a reading of the text in force as it appears in the Iraqi Legislation Database.
The licence, and the record of a particular contract, are not the same step
Article 3 of the Law sets out three means of achieving its aims: obtaining a licence to carry on this kind of work; entering agencies in a dedicated register kept for that purpose; and supervising what agents do. The licence is a quality of the agent: the agent is authorised to carry on this kind of work. The record of the contract is a record of the relationship with a particular principal, after the contract has been authenticated as the Law requires. Neither step stands in for the other.
Article 5 of Instructions No. 1 of 2020 requires anyone who wishes to contract with a foreign principal through that principal's agent in Iraq to confirm that the agent is licensed, and that the agency has been recorded in the agent's name at the Companies Registration Department.
The aims of the Law, as article 2 states them, are to organise agency work, and to organise how State departments, and how the public, mixed and private sectors, deal with foreign persons, so as to prevent exploitation and unlawful intermediation and to secure the interest of the national economy. That framework explains the strictness of the licence and of the register.
A caution about article 4 in the legislation database
In the version retrieved from the Iraqi Legislation Database when this page was prepared, the text displayed for article 4 is the same as the text of article 3. At the same time, articles 5 and 7 refer to "the conditions set out in article 4" when a licence is sought and when it is cancelled. The conditions attributed to article 4 are read from the full wording published in the Official Gazette. It is enough to say, as article 5 does, that the licence application is accompanied by the documents that establish those conditions.
How a licence application is decided, and how a refusal is challenged
The applicant presents the request to the Registrar of Companies, that is, the registrar of the Companies Registration Department at the Ministry of Trade. The Registrar decides the request within ten working days from the date on which it is recorded as incoming in the Registrar's office. If that period expires and the request satisfies the conditions in the Law, it is treated as accepted. If the request is refused expressly, the refusal must be reasoned.
A decision refusing the request may be taken, as a grievance, to the Minister within thirty days, counted from the day following notification of the refusal to the applicant. The Minister decides the grievance within ten working days from the date on which it is recorded as incoming in the Minister's office. If that period expires, the grievance is treated as refused. The Minister's decision, whether an express refusal or a deemed refusal, may be taken to the Administrative Judiciary Court (محكمة القضاء الإداري).
When the conditions for a grant are met, the Registrar issues the licence on a prepared official form, after the charges the Law imposes have been paid.
The 2020 Instructions set out, in some detail, the documents that accompany an application by a natural person and an application by a company: proof of identity and nationality, or the adopted card; the trade name in the commercial register; a chamber-of-commerce identity if it indicates that the type of work is commercial agencies; title to the office or an authenticated lease; the agency contract with the foreign principal, authenticated; written undertakings the Instructions specify; and the tax identity. If the applicant is a company: its certificate of incorporation, its contract of incorporation, and the minutes appointing the managing director, authenticated in the ordinary way. The passage points to what the Instructions require. The text of the Instructions, and the document names in force at the time of filing, are checked when the file is presented, because everyday practice may refer to the Unified National Card or to later electronic systems.
Yearly renewal, and when the licence is cancelled
Every year, in the first sixty days of the calendar year, the agent is required to apply for renewal of the licence, without regard to the date on which it was first granted or last renewed. Missing that period is one of the grounds for cancellation in article 7.
The licence is also cancelled if any of the conditions to which the Law refers in article 4 is lost, or if the record of the only agency contract registered in the agent's name is cancelled for one of the reasons in article 8, and no new contract is presented within a period of six months (180 days), counted from that cancellation. A cancellation decision may be taken, as a grievance, to the Minister within thirty days, counted from the day following notification, and then challenged before the Administrative Judiciary Court, on the same time limits and by the same route as article 5 provides for a refused application.
Recording the agency contract, and when that record is cancelled
The agent files with the Registrar a request to record every commercial agency the agent holds for foreign persons, once authentication required by the Law has been completed. What is filed is the formal instrument between the parties, and the instrument relied on before government bodies and the courts, as article 16 provides. Article 14 requires that the contracts come from concerns that produce or make the goods and services, or come through the parent concern owned by the producer, maker or service provider and formally empowered to grant sub-agencies for Iraq. The conditions for recording the contract are set in instructions issued by the Minister.
The record of the contract is cancelled if it appears that it was built on incorrect data or documents; or if the agent or the principal asks for cancellation, provided the cancellation is not intended to harm the interest of either party; or if it appears that the foreign principal has failed in its obligations towards Iraq and has been listed as a barred company; or when ninety days have run from the Registrar's notice to the agent that the contract's term has ended; or when the agent's licence is cancelled and a fresh licence is not obtained within a period of six months (180 days) from that cancellation.
When the Registrar treats an activity as a commercial agency
Under article 9 the Registrar may conclude, on the legal evidence, that commercial activity a person carries on in Iraq amounts to a commercial agency falling under the Law, and may do so by a notice that appears once in a daily paper and also in the department's bulletin. Anyone with an interest may object to that conclusion within fifteen days, counted from the later announcement. The Registrar rules on the objection within ten days of its being recorded, and the ruling must be reasoned; if the period expires without a ruling, the objection is treated as refused. A decision refusing the objection may be taken to the Administrative Judiciary Court.
The four forms set out in the 2020 Instructions
Article 1 of Instructions No. 1 of 2020 describes a commercial agency as a contract between two parties, and includes four forms. The first is a commercial agency in which the principal abroad authorises the Iraqi agent to represent that principal and to act in that principal's name and for that principal's account in Iraq, for a profit, a commission or a fee, and for a fixed term. The second is a commission agency in which the agent acts in the agent's own name and for the principal's account, on the principal's terms, for a commission. The third is a distributor's agency in which the Iraqi distributor purchases the goods on the distributor's own account, title then passing to the distributor, who offers and sells them at a price the distributor fixes, for a profit, with after-sales care. The fourth is a franchisee's agency in which the franchisee is authorised to use one or more intellectual-property rights to produce the goods locally to specification and to market them under the original mark, in a geographical area and for a fixed period, with an obligation on the grantor to provide technical support. In each form, the products or services of the first party are stated in the contract, in an annex, or in an authenticated explanatory letter.
Article 2 of the Instructions requires the agent to affix the mark, the trade name, the agency number and the name of the producer on imported materials, and it allows contracts limited to maintenance, the supply of parts, or after-sales service on the principal's behalf to be recorded. Drafting a franchise contract, from the point of view of its clauses, is the subject of a separate page in the contracts area. The company structure when a foreign brand is franchised is on the companies page.
The agent's ledger, supervision, and the entry of goods
The agent keeps a dedicated ledger, free of what the ordinary rules of commercial book-keeping do not require, in which the amount of the profit or commission is entered, together with what of it was transferred to Iraq through the authorised bodies, its proportion to the amounts of the transactions, and the operations carried out for the principal's account. When the ledger is first opened it is shown to the Commercial Agencies Section at the Registrar's office, so that the number of pages may be fixed and each page stamped; at year-end the used pages are certified and the ledger is closed; it is then delivered to the General Commission of Taxes (الهيئة العامة للضرائب) after the financial year has ended.
Supervision and oversight of what the agent does rest with the Registrar, who may send a representative to audit the agent's books. The agent is forbidden to deal in materials and goods that the law prohibits.
As for the entry into Iraq of goods, merchandise or products of foreign companies, or the provision of their services, for the purpose of trade, article 13 forbids the Ministry of Trade — through the Iraqi State Company for Fairs and Commercial Services (الشركة العامة للمعارض والخدمات التجارية العراقية) — and the Ministry of Finance — through the General Commission of Customs (الهيئة العامة للكمارك) — to allow that entry except through that foreign company's licensed commercial agent, being the agent in whose name a recorded agency contract for the company exists, and only inside the territory of activity fixed for that agent in Iraq. The meaning of that territory is read in the contract and in the practice of those two bodies.
The 2020 Instructions add operational duties: informing the Companies Registration Department of every amendment or change to the agency contract, with an authenticated confirmation from the principal, within sixty days of its occurring; keeping ledgers of commissions with the particulars the Instructions list; and presenting the ledger, with a statement of commissions and bank attestations, to the Department as the Law requires.
Ending the contract, and what stands outside the Law
The principal may not bring the agency contract to an end, or refuse its renewal, unless a reason exists that justifies that step. The contract may be rescinded by mutual consent, or in accordance with an agreement the parties conclude that fixes the arbitration procedure, its seat and the law that is to apply. If arbitration is agreed, it is mentioned in general terms; the details of recognising foreign awards belong to a separate practice area.
Scientific offices for the advertising of medicines, licensed in accordance with the law, are excepted from the provisions of this Law, under article 21. The Law repealed the earlier Commercial Agency Organisation Law (No. 51 of 2000), while leaving instructions issued under that earlier law operative, so far as they did not clash with the new statute, until something replaced them. The 2020 Instructions then repealed the earlier instructions on organising commercial-agency work (No. 1 of 2014), and took effect on publication in Official Gazette issue 4604 of 16 November 2020. Law No. 79 of 2017 itself took effect on its publication in the Official Gazette. Article 19 required an agent already licensed when it was issued to adapt the agent's position within one year of that commencement, failing which the licence was treated as cancelled. That is a transitional rule whose period has expired. It is mentioned in order to understand the history of an old file, not as a time limit that is still running today.
The Law imposes sanctions on anyone who performs an act of a commercial agency without a licence, or without recording all of that person's agencies; on a breach of the ledger rules; and on a public official, or anyone entrusted with a public duty, who, with intent, carries on commercial-agency work. They are read in the official text.
What is read in the draft before the contract is authenticated?
The authentication that precedes the record — as article 10 requires — is a step in its own right. The draft is read before that step: does it identify the foreign principal and the Iraqi agent in a way that matches the definition in article 1; does it state the products or services as the Instructions require, in the contract, in an annex, or in an authenticated explanatory letter; does it state the area of activity if the entry of goods under article 13 is in issue; does it organise ending and renewal in the light of article 20; and does it distinguish representation in the principal's name, distribution in which title passes, or a franchise founded on an intellectual-property right, according to the forms in the Instructions?
If the agent is an Iraqi company, it is confirmed that the person who signs is the managing director, or holds a power of attorney that authorises the signature, and that the company's objects cover agency work. Registration of the company with the Registrar is a separate path, described in registering a company in Iraq, and it does not stand in for an agency licence. If the principal also opens a branch in Iraq beside the appointment of an agent, the branch path in registering a foreign-company branch is not to be confused with this Law.
Any arbitration clause, or any choice of the law that is to apply, is drafted within the limits of what article 20 allows and of what Iraqi law provides for the subject of the contract.
How the office approaches the file
The office follows a reading of the conditions of the licence and of the record of the contract, comments on a draft contract before it is presented for authentication, and a grievance before the Minister or a challenge before the Administrative Judiciary Court, within the limits of the text. The office is in Baghdad, al-Yarmouk, and following a file does not mean that there is a branch in another governorate.
If the activity is spread over more than one governorate, the territory fixed for the agent is read from the contract and from the practice of the Iraqi State Company for Fairs and Commercial Services and of the General Commission of Customs, not from an assumption that the licence alone makes the activity cover the whole of Iraq. Likewise, the record of a contract for one principal does not, by itself, allow the import of goods of another principal whose contract has not been recorded; article 10 requires all agencies to be recorded.
A commercial agency is also distinct from a civil power of attorney authenticated by a notary so that the attorney may sign for the principal in a dispute or a transaction. The second does not stand in for the licence, even if the principal is foreign, and the first does not, merely by being issued, give the agent authority to represent the principal before a court unless the recorded agency contract contains that authority, within its limits.
Before the file is presented, or before it is renewed, it is completed with a clear inventory of the marks and of the goods or services, so that what appears on the licence does not differ from what is offered in the market in the principal's name.
Legal basis and sources
- Commercial Agency Organisation Law No. 79 of 2017 (Official Gazette No. 4469 of 13/11/2017)
- Instructions No. 1 of 2020 facilitating the application of Commercial Agency Organisation Law No. 79 of 2017 (Official Gazette No. 4604 of 16/11/2020)
- Companies Registration Department / Commercial Agencies Section
Frequently asked questions
Is a power of attorney authenticated by a notary enough to practise a commercial agency?
No. A commercial agency in the sense of Law No. 79 of 2017 is a path before the Registrar of Companies: a licence, and then a record of the contract after it has been authenticated. A notarial power of attorney is a different authentication path, and it does not stand in for the licence.
To whom is a grievance against a refused licence application made?
To the Minister of Trade, within thirty days counted from the day after notification of the refusal, after which the Minister's decision may be challenged before the Administrative Judiciary Court, under article 5.
May the foreign company end the agency contract whenever it wishes?
Article 20 restricts ending the contract, or declining to renew it, to the existence of a reason that justifies that step, and it allows rescission by mutual consent or in accordance with the parties' agreement on arbitration, its seat and the law that is to apply.
Are scientific offices for the advertising of medicines covered by the licence?
Article 21 excepts from the provisions of this Law scientific offices for the advertising of medicines that are licensed in accordance with the law. The exception is read within the limits of that text, and it is not extended to agencies for other goods. Any office of that kind remains subject to the licence or the regulation that its own statute imposes, which is outside the scope of this page.