Drafting an arbitration clause in an Iraqi contract

In briefAn arbitration agreement can only be proved in writing. It may cover every dispute arising from the performance of a given contract, but is valid only for matters open to compromise and only when signed by someone able to dispose of the right. Clauses are most often weakened by a vague scope, an even number of arbitrators, silence on time, procedure and remuneration, and forgetting that the award cannot be enforced until the competent court ratifies it.

Plenty of contracts end with a single line saying that "any disagreement shall be resolved by arbitration". When a dispute actually arrives, the parties find that this line raises more questions than it answers. This page is about writing the clause itself, before signature. What happens once an award exists (ratification, enforcement, challenge) is covered on the arbitration and enforcement pages. The Law Office of Ali Barakat, in Baghdad, al-Yarmouk, works from Book Two of Civil Procedure Law No. 83 of 1969.

The foundation: writing, scope and capacity

Three rules sit underneath every clause:

Writing is the only proof. Article 252 will not accept an arbitration agreement proved any other way. A spoken understanding with a partner or contractor does not count, even if one side later admits it outside court.
Scope comes from the wording. Article 251 lets the parties refer one identified dispute, or everything that grows out of performing a particular contract. If you want the clause to reach interpretation, termination and damages as well, say so; a bare reference to "performance" can be read narrowly.
Only what can be compromised. Article 254 confines arbitration to matters in which settlement by compromise is allowed, and requires the person agreeing to it to have capacity to dispose of their rights. A clause on a public-order question achieves nothing, and so does one signed for a company by someone without authority over its assets.

Mistakes that keep coming back

1. An even number of arbitrators. Where there is more than one arbitrator, article 257 requires an odd number. A clause that says "each party appoints one arbitrator" and stops there produces a panel of two that the text does not allow. Name a third arbitrator and the way that person is chosen.

2. No appointment mechanism. If the parties have not agreed on arbitrators, or one refuses, withdraws or is unable to act, either side may apply to the court competent for the dispute to appoint them (article 256). That route exists, but it costs time. A good clause sets out how appointments are made, the deadline for each step, and who decides if the two party-appointed arbitrators cannot agree.

3. Choosing someone who cannot serve. Article 255 bars a minor, a person under interdiction, someone deprived of civil rights, or an undischarged bankrupt. A serving judge may act only with the permission of the judicial council.

4. Leaving out a time limit. If the agreement sets no period, the arbitrators must give their award within six months of accepting the appointment (article 262). If you want a shorter or longer period, write it in, and say whether the parties may extend it by agreement.

5. Leaving procedure open. By default arbitrators follow the procedural rules of the Civil Procedure Law, unless the agreement expressly releases them or lays down its own procedure (article 265). Arbitrators authorised to reach a compromise are freed from procedural rules and rules of law, except those of public order. That authority is a major choice and should never be added casually.

6. Forgetting remuneration. Under article 276 the parties fix the arbitrators' remuneration in the agreement or a later one; failing that, the court decides it. Stating the rule in advance, and who bears the cost, avoids a side quarrel.

7. No language or seat. In a contract with a foreign party, naming the language and place of the arbitration and the law that governs the substance is sensible; see governing law and language.

What if one side goes to court anyway?

Article 253 says a claim may not be brought in court until arbitration has been exhausted. But if one party files a claim and the other raises no objection at the first hearing, the court will hear it and the clause is treated as void. Anyone relying on the clause must raise it at the very first session; the court then stays the case until the award is given.

An award does not enforce itself

Whether the arbitrators were appointed by agreement or by the court, the enforcement directorates will not act on their award until the competent court ratifies it at the request of one party (article 272). The court may annul it in whole or in part, for example where it goes beyond the agreement or conflicts with public order (articles 273 and 274). A clearly bounded clause therefore protects the award later on.

If the arbitration will be held abroad and the award enforced in Iraq, bear in mind that Iraq joined the New York Convention by Law No. 14 of 2021 with reservations, including one limiting it to contractual disputes that Iraqi law treats as commercial.

Legal basis and sources

Frequently asked questions

Is "disputes go to arbitration" enough on its own?

It proves an agreement if written down, but it leaves the number of arbitrators, their appointment, the time limit and remuneration to be fought over or decided by the court.

Can we agree to arbitrate after a claim has been filed?

Yes. Article 252 allows agreement during the proceedings.

Does arbitration end if one party dies?

No, under article 259; the deadline for the award is extended for as long as the obstacle lasts, under article 262.

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

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Drafting an arbitration clause: recurring mistakes and how to avoid them