Iraqi Federal Supreme Court Issue a Decision of the Unconstitutionality of KRG Oil & Gas Law

Brief summary:

On 15^th of February 2022, the Federal Supreme Court of Iraq (“Supreme Court”) issued a judgment that it’s binding to all authorities in Iraq regarding (i) the constitutionality of the Kurdistan Region Oil and Gas Law 22 of 2007 and their oil operations activities thereunder; (ii) the ownership of oil & gas located in the Kurdistan Region of Iraq (“KRI”); (iii) the status of contracts entered into between the Kurdistan Regional Government (“KRG”) and oil and gas companies, traders and foreign States; and (iv) the calculation of the KRG’s financial share of oil revenue resulting from these contracts.

Federal Supreme Court announcement overview:

The KRG Oil and gas law number (22 of 2007) is unconstitutional and null and void; pursuant to Articles (110-111-112-115-121) of the 2005 Iraqi constitution.
The Supreme Court ordered KRG to hand over all petroleum production in the KRI and other regions from which the KRG extracted natural resources to the Federal Ministry of Oil;
iii. The Federal Ministry of Oil has the right “to monitor the termination of petroleum contracts entered into by the KRG with foreign parties (States and companies) relating to the exploration, production, export and sale of petroleum”;
The Supreme Court ordered and instructed the KRG to allow the Federal Ministry of Oil and the National Audit Bureau to review and audit all petroleum contracts for export and marketing signed by KRG, in order to determine the KRG’s related financial rights and its share of the public budget. ⁽¹⁾

Court announcement ramifications:

The most important point to highlight in this article is that the Federal Ministry of Oil has the right to monitor termination of petroleum contracts entered into by the KRG with foreign parties with respect to federal court announcement, as legal point of view such granted right to the Federal Ministry of Oil may result in many and complicated arguments and disputes before national courts and arbitral tribunals.
Contractual rights and obligations of the Parties who entered into Oil and Gas production or exploration agreement’s “petroleum contracts” with the KRG will need carefully to consider their obligations under both Iraqi and International laws by examining the governing law and dispute resolution clauses in their contracts.

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