Court case will shape Iraq's oil policy - and its politics

A challenge to the executive control of petroleum contracts will influence everything from how business is done to national elections.

Anyone who wonders if the rule of law can ever take hold in Iraq should pay attention to the case of Mosawi vs Nouri al Maliki, now being heard in Baghdad Federal Court. The question to be decided is this: which entity in the Iraqi political spectrum - the prime minister, the oil minister, the 275-member parliament, the local governorates, or the Kurdish Regional Government - has the legal authority to contract with international oil companies to develop the nation's vast oil wealth.

At stake is arguably the fiscal future of Iraq and its effect on the world's supply of oil for the next 50 years. The case centres around the applicability of laws from the Saddam Hussein/Baath Party regime, namely whether an old law which has not been repealed or altered (Law 97 of 1967) requires federal oil tenders to be ratified by parliament. Iraq granted several such tenders to international oil companies in the first and second bidding rounds in 2009, and the validity of each one hinges upon the Mosawi decision.

The plaintiff, Sheda al Mosawi, is an outgoing parliamentarian who is not running in Sunday's election. She has questioned the authority of Prime Minister al Maliki and his appointed oil minister, Hussain al Shahristani, to negotiate and contract these agreements unilaterally. Ms al Mosawi argues that the prime minister and oil minister had begun - without parliamentary approval - to decide the nation's petroleum policy and to permit international petroleum companies to extract, process and distribute Iraqi oil.

Her case also claims that their actions were contrary to the post-Saddam democratic constitution established in 2005. Oil policies, contracts and licences should now be approved in concert with other institutions, she contends, especially the parliament and the local governorates where the oil fields are located. In Ms al Mosawi's view, and in a strict and literal reading of Law 97 of 1967, all contracts between Iraq's ministry of oil and any third party must be subject to a separate vote of approval from parliament to become binding, legal and enforceable under Iraqi law.

Mssrs al Maliki and al Shahristani do not agree. They argue that, practically, such a cumbersome decision-making process would prevent timely action and efficient transactions. Also, they say they are not issuing "licences" (permits which allow separate partnerships between the international oil companies), but rather simple "service contracts" (which spell out specific activities and timetables for those activities).

They also argue that, legally, the 2005 constitution does not require their oil policy decisions to be ratified by parliament or local government, because such policy is vested in the executive branch of government. In practice, parliamentary ratification has never been required for agreements between the nation and foreign operators in the petroleum sector - not under the constitutions of the Saddam regime, or the regimes which preceded and followed him.

The case has attracted worldwide attention and dominates national headlines. The international petroleum industry and industry insiders are anxiously awaiting the outcome as the case makes a very tedious progression through the Iraqi judiciary system. How each hearing is litigated will likely affect national elections and the way business is conducted in the foreseeable future. Whichever way the court decides, the process itself is heartening for those who hope the nation can develop its democratic legal institutions. Prior to 2003, it would have been daring, if not futile, to sue the Iraqi leadership on such an issue as Ms al Mosawi has done. And the defendants in the case, rather than resorting to violence and retribution, have retained counsel and are responding through motions, briefs and counter-arguments - not through sectarian ambush.

A trained and competent judiciary has demonstrated a strict separation of powers from the immense political and economic pressures forced upon it. This case is arguably a larger test of the separation of powers and of judicial independence than the Saddam trial, because it deals with an interpretation of the democratic institutions that created Iraq, not the obvious crimes that were committed during the Saddam regime. The federal court in Baghdad accepted the case on the correct jurisdictional grounds and has begun to systematically hear arguments. The proceedings are public, open and transparent.

In such a country, where sectarian violence between ethnic groups, tribes and political parties still dominates the headlines, it is rare that grievances are handled professionally and through proper channels. Even if unsuccessful in her claim, Ms al Mosawi has shown that there have been tremendous victories in Iraq. It is just necessary to know where to look and how to measure them. The obvious accomplishment is that, for the first time in the recent political history of the Middle East, a female parliamentarian has stood and openly challenged a political policy with real and tangible consequences. Just that achievement shows tremendous advances in the role of civil society and tremendous maturity in the court system, when both are in their infancy in a newly independent country.

Thomas W Donovan is an attorney with the Iraq Law Alliance