Paragraph (3) of Article (27) of Investment Law No. (13) of 2006, as amended, empowers the head of the relevant Investment Authority to take legal actions to liquidate the project in the event of a dispute between partners in the investment project or between the owner of the project and third parties, without addressing the method of liquidation.

The Distinction Between Project Liquidation and Company Liquidation in Iraq

The provisions for liquidation stipulated in Articles (158) to (179) of the Companies Law No. (21) of 1997 apply only to companies registered under the provisions of the aforementioned law.

The provisions of the Companies Law cannot be applied to the liquidation of a project unless the project is structured as a company established under its provisions. Instead, the stipulations in the partnership agreement and the general rules of law will apply to the liquidation of the project if it takes the form of a partnership or a sole proprietorship owned by one person.

It is not possible to liquidate the project according to the provisions outlined in the aforementioned articles of the Companies Law, as those texts pertain specifically to the liquidation of a company; the general assembly of the company is responsible for carrying out the liquidation.

Meanwhile, the text mentioned in paragraph (3) of Article (27) of the Investment Law pertains to the liquidation of the project and not the liquidation of the company executing the project.

The phrase, "the liquidation amount will be deposited in one of the banks after fulfilling the rights of the state," requires the Investment Authority to take necessary actions to sell the tangible assets related to the project, such as machinery, equipment, and other essentials for establishing the project, in accordance with the provisions of the Government Debt Collection Law No. (56) of 1977, based on the provisions of paragraph (10) of its first article.

Paragraph (3) of Article (27) of Investment Law No. (13) of 2006

Whereas paragraph (3) of Article (27) of Investment Law No. (13) of 2006 allows (in the event that a dispute between partners or between the owner of the project and third parties in a project subject to the provisions of this law results in a work stoppage for more than three months), the authority may revoke the license and request the project owners to resolve the matter within a period not exceeding three months.

If this period passes without resolving the matter between the partners or between the project owner and third parties, the authority may take legal actions to liquidate the project, notifying the project owner or one of the partners of this.

The liquidation amount will be deposited in one of the banks after fulfilling the rights of the state or any rights for third parties after a judicial ruling asserting their entitlement. (Whereas paragraphs (4) and (5) of Article (27) of the aforementioned Investment Law clarify the possibility of resolving disputes among the parties subject to the provisions of the mentioned law if the contract outlines a mechanism for doing so and resorting to arbitration.)

The Role of the National Investment Authority in Project Disputes: Legal Considerations

Whereas the National Investment Authority and the authorities in the governorates are considered direct and indirect parties in disputes occurring in projects subject to Investment Law No. (13) of 2006 and the regulations issued under it.

Moreover, the investment contract in question may lack provisions on how to liquidate the project when execution becomes impossible, and the authority has exhausted means of dispute resolution. Additionally, Articles (158) to (179) of Companies Law No. (21) of 1997 outline the procedures for liquidating a company, appointing a liquidator, and defining his powers.

Given that the nature of the legal system governing the company and its management differs from that governing the investment contract and the investment project, the mechanisms for dispute resolution within the company, as well as objections, grievances, and legal actions, are clearly defined by law and differ from the provisions in the aforementioned Investment Law.

Furthermore, it is possible to include in investment contracts the existing mechanisms for dispute resolution and liquidation as outlined in the aforementioned Companies Law for guidance.

Whereas the judiciary holds general jurisdiction, and there are various applications for judicial liquidation within procedures that ensure the rights and obligations of the parties involved. It is worth mentioning that the Council of State previously issued its decision No. (40/2013), stating that the liquidation of the investment project referred to in paragraph (3) of Article (27) of Investment Law No. (13) of 2006 refers to judicial liquidation.

Therefore, the liquidation of the project requires an urgent inspection of the site of the revoked project license conducted by experts specializing in construction and development, along with accounting for the amounts received from the investor in the form of installments from the beneficiaries of the Central Bank initiative as loans.

This includes collecting those amounts, along with any late payment penalties owed by the investor, and adding a clause within the requirements for announcing the transfer of rights and obligations related to the project, as per the liquidation decision, to the new investor.

This should be done while considering the provisions of Article (28) of the Investment Law, which allows third parties to claim compensation from the investor for damages caused by violations.

Our law firm in Iraq has extensive experience in the liquidation of investment projects. We will assist you in completing the process smoothly and with the highest levels of transparency. Get a free consultation today!