The Commercial Agency Regulation Law No. 79 of 2017 defines a commercial agency as follows:

“A contract under which a natural or legal person is entrusted with the sale or distribution of goods or products, or the provision of services within Iraq, in the capacity of an agent, distributor, or franchisee on behalf of a principal located outside Iraq, in return for a profit or commission. The agent shall also provide after-sales services, maintenance services, and supply spare parts for the products and goods marketed.”

From this definition, it is understood that a commercial agency is based on two essential elements:

• The commercial nature of the contract.

• The legal relationship between an Iraqi agent and a foreign principal located outside Iraq.

In addition, the commercial agency is aimed at achieving a profit or commission and is subject to a special legal framework that distinguishes it from other forms of agency.

Second: Definition of a Civil Agency

Article (927) of the Iraqi Civil Code No. 40 of 1951 provides that:

“Agency is a contract whereby a person appoints another to act on their behalf in a known and lawful act.”

This provision indicates that a civil agency is based on the concept of legal representation in a specific act, without requiring a commercial character or the pursuit of profit. It is governed by the general rules of civil law.

Third: Distinction Between Commercial Agency and Civil Agency

Commercial agency differs from civil agency in several fundamental aspects. The most important differences can be summarized as follows:

1. Legal Nature of the Contract

• A commercial agency is considered a contract of exchange, as the agent undertakes to perform agency services in return for a profit, commission, or financial consideration.

• A civil agency, as a general rule, is considered a gratuitous contract, unless an agreed-upon fee exists. It is primarily based on personal trust and consideration.

2. Principal’s Authority to Dismiss or Restrict the Agent

• In a civil agency, the principal has the right to dismiss the agent or restrict the scope of the agency at any time by unilateral will. Any agreement to the contrary is invalid, pursuant to Article (947) of the Iraqi Civil Code.

• In contrast, in a commercial agency, the principal may not dismiss the agent, terminate the agency contract, or limit its scope unilaterally, except for a justified reason, in accordance with Article (20) of the Commercial Agency Regulation Law. This reflects special legal protection granted to the commercial agent.

3. Formal Requirements

• A civil agency is a consensual contract, concluded merely by the concurrence of offer and acceptance, without requiring a specific form.

• Conversely, a commercial agency is a formal contract, which does not come into existence nor produce legal effects unless the statutory formalities are fulfilled, particularly:

  • Written form

  • Registration

  • Official licensing in accordance with the law

This highlights a fundamental procedural distinction between the two types of agency.

4. Scope of Covered Activities

• A commercial agency does not cover all forms of representation. Instead, it is strictly limited to the activities explicitly specified in the instructions issued pursuant to the law, namely:

  • Commercial agency

  • Commission agency

  • Distributor agency (distribution contract)

  • Franchise agency

• A civil agency, however, extends to any “known and lawful act” without limitation to a specific category of activities.

5. Parties and Legal Status

• In a commercial agency, the law requires that:

  • The principal must be located outside Iraq, and

  • The agent must be Iraqi, according to the legal definition.

  This makes the legal status of the parties an integral element in classifying the contract and subjecting it to special legislation.

• In a civil agency, no such restriction applies, as it does not require one party to be foreign or the agent to be Iraqi.

6. Licensing and Administrative Oversight

• Practicing a commercial agency is contingent upon:

  • Obtaining a license from the Companies Registrar

  • Renewing the license annually

  • Compliance with administrative procedures for review, objection, and appeal within both administrative and judicial frameworks

• A civil agency, on the other hand, does not require licensing or renewal for its validity and remains governed solely by general legal principles.

Section Two: Conditions of the Commercial Agency Contract

The commercial agency contract, pursuant to the Commercial Agency Regulation Law No. 79 of 2017 and the instructions issued thereunder, is subject to a set of conditions upon which the existence, validity, and legal enforceability of the contract depend. These conditions can be outlined as follows:

First: The Requirement of Writing

The requirement of writing is implicitly derived from the legal definition of the commercial agency contract set forth in Paragraph Third of Article One of the Commercial Agency Regulation Law No. 79 of 2017, as it is practically inconceivable to authenticate or prove a commercial agency contract unless it is executed in written form.

This understanding is further reinforced by Article 77 of the Iraqi Evidence Law No. 107 of 1979, which requires written evidence to prove legal acts whose value exceeds fifty thousand Iraqi dinars, thereby excluding the possibility of proving a commercial agency contract through an oral agreement.

Second: The Requirement of Registration

The registration of the commercial agency contract is considered a fundamental condition for the conclusion and effectiveness of the contract. It represents one of the core objectives upon which the Commercial Agency Regulation Law No. 79 of 2017 was established, as the law aims to regulate the activities of commercial agents in Iraq and subject them to administrative oversight.

Accordingly, a commercial agency contract shall not be recognized unless it is registered with the competent authority in accordance with the provisions of the law.

Third: Lawfulness of the Subject Matter of the Commercial Agency Contract

The legislator has required that the subject matter of the commercial agency contract be lawful. Article 12 of the Commercial Agency Regulation Law expressly provides as follows:

“The commercial agent is prohibited from dealing in materials and goods that are legally prohibited.”

Accordingly, any agency contract that relates to goods or services prohibited by law is considered contrary to the law and produces no legal effect.

Fourth: The Contract’s Connection to a Foreign Principal Located Outside Iraq

One of the distinguishing conditions of the commercial agency contract under Iraqi law is that the principal must be a foreign person located outside Iraq.

This condition is derived from the definition of the principal set forth in Paragraph Fifth of Article One of the Commercial Agency Regulation Law, which defines the principal as:

“The foreign natural or legal person located outside Iraq for whose benefit the commercial agent operates.”

Accordingly, any relationship in which both parties are located within Iraq, or where the principal is Iraqi in nationality despite being located outside Iraq, falls outside the scope of application of the Commercial Agency Regulation Law and is subject to the general rules of the Civil Code.

Fifth: The Requirement that the Agent Be Iraqi

The legislator has required that the commercial agent be Iraqi. This condition is expressly stated in Paragraph Fourth of Article One of the Commercial Agency Regulation Law, which defines the commercial agent as:

“The Iraqi natural or legal person who performs any of the activities of a commercial agency.”

This condition will be examined in greater detail when addressing the requirements applicable to the commercial agent.

Sixth: Inclusion of Commercial Agency Activities in the Contract

The commercial agency contract must include one of the activities that fall within the scope of application of the Commercial Agency Regulation Law, as stipulated in the instructions issued pursuant to this law, which have limited commercial agency activities to four types:

1. Commercial agency.

2. Commission agency.

3. Distributor agency (distribution contract).

4. Franchise agency.

Accordingly, any contract that does not fall within these activities shall not be considered a commercial agency contract within the meaning of the Commercial Agency Regulation Law and shall not be subject to its provisions. These activities will be addressed in further detail in Section Four of this research.

Seventh: Issuance of the Agency Contract by a Producing or Legally Authorized Entity

The legislator stipulated in Article 14 of the Commercial Agency Regulation Law No. 79 of 2017 that commercial agency contracts submitted by the commercial agent must be issued by companies that produce or manufacture goods or provide services, or by the original company owned by the producing or manufacturing company or the service provider, provided that such company is officially authorized to grant sub-agencies within Iraq.

This condition aims to prevent the unjustified multiplication of intermediary layers and to ensure that the relationship of the commercial agent is directly connected to the producer or the original owning entity, thereby enhancing reliability and transparency in the practice of commercial agency activities.

For professional legal advice on commercial agency contracts, compliance, and regulatory matters in Iraq, contact Osama Tuma for Legal Services and Advisory today.
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