The conditions stipulated by the Commercial Agency Regulation Law No. 79 of 2017, whether those related to the commercial agency contract or to the commercial agent himself, are characterized by a mandatory and peremptory nature. It is not permissible to agree on violating or bypassing them, as they form part of public order. This is because the legislator did not establish these conditions merely to regulate the contractual relationship between the parties to the contract, but rather to achieve a regulatory objective connected to economic public order and the organization of commercial agency activity within Iraq.

The mandatory nature of these conditions is clearly manifested through the sanctions imposed by the law for breaching them, which range from administrative sanctions to criminal sanctions.

First: Administrative Effects Resulting from Breach of the Conditions of the Commercial Agent

Article (7) of the Commercial Agency Regulation Law stipulated the cases in which the license of the commercial agent shall be revoked, which constitutes one of the most serious legal effects resulting from breach of the conditions set forth in the law. It provides as follows:

1. The license of the commercial agent shall be revoked if any of the conditions stipulated in Article (4) of the law is lost, which confirms that the conditions of the commercial agent are continuing conditions and not temporary ones, and must be fulfilled throughout the entire period of practicing the activity.

2. The license shall be revoked if the registration of the only commercial agency contract registered in the name of the agent is cancelled for any of the reasons stipulated in Article (8), and the agent fails to submit a new commercial agency within a period of one hundred and eighty (180) days from the date of cancellation.

3. The license shall also be revoked if the commercial agent fails to renew his license after the lapse of the period stipulated in Article (6) of the law.

The legislator also granted the commercial agent the right to submit a grievance against the decision to revoke the license before the competent minister within a period of thirty (30) days from the day following the date of notification of the revocation decision. The minister shall decide on the grievance within ten (10) working days from the date it is registered as received in his office. The silence of the minister after the expiry of this period shall be deemed a rejection of the grievance by operation of law, and his decision shall be subject to appeal before the Administrative Judiciary Court.

Second: Effects Resulting from Breach of the Conditions of the Commercial Agency Contract

Article (8) of the Commercial Agency Regulation Law stipulated the cases in which the registration of the commercial agency contract shall be cancelled. This results in the removal of the legal effect of the contract before official authorities and prevents reliance on it in practicing commercial agency activities, in the following cases:

1. If it is established that the registration of the commercial agency contract was based on incorrect data or documents.

2. If the commercial agent or the principal requests the cancellation of the contract, provided that such cancellation is not intended to harm the interest of either party.

3. If it is established that the foreign principal company has breached its obligations towards Iraq and has been included on the blacklist.

4. The lapse of ninety (90) days from the date the registrar notifies the commercial agent of the expiry of the contract term without its renewal.

5. Revocation of the commercial agent’s license and failure to obtain a new license within one hundred and eighty (180) days from the date of revocation.

It is understood from these cases that the registration of the commercial agency contract is not a formal procedure, but rather an essential condition for the continuation of the legality of practicing the activity, and that any breach of the conditions upon which the registration is based results in its cancellation.

Third: Criminal Sanctions Resulting from Violation of the Provisions of the Law

The legislator did not confine himself to administrative sanctions, but also stipulated explicit criminal sanctions in Article (18) of the Commercial Agency Regulation Law, as confirmation of the peremptory nature of its provisions. It provides as follows:

1. A fine of fifteen million (15,000,000) Iraqi dinars shall be imposed on any person who carries out any commercial agency activity without obtaining a license or who fails to register all of his agencies.

2. A fine of five million (5,000,000) Iraqi dinars shall be imposed on any agent who violates the provisions of Article (11) of the law relating to the keeping of books and records.

3. Imprisonment for a period of not less than three years shall be imposed on any employee or person assigned to public service who intentionally carries out commercial agency activities.

These penalties reveal a clear legislative intent to criminalize the practice of commercial agency activities outside the legal framework, particularly in cases that affect the continuity of public facilities or lead to harm to the national economy.

Section Five: Scope of Activities Considered a Commercial Agency under Iraqi Law

The Instructions for Facilitating the Implementation of the Provisions of the Commercial Agency Regulation Law No. 79 of 2017 defined the scope of activities considered to constitute a commercial agency on an exclusive basis, as set forth in Article (1) thereof, in a manner that leaves no room for expansion or analogy beyond what is expressly stated in the text. Accordingly, the application of the provisions of the Commercial Agency Law to any legal relationship depends on its falling within one of the types specifically defined in the instructions.

First: Commercial Agency

A commercial agency is considered a contract by which a foreign principal, whether a natural or legal person, authorizes the Iraqi commercial agent to represent him and act in his name and for his account within Iraq, in return for a profit, commission, salary, lump-sum remuneration, or a percentage of the value of contracts concluded through the agent, for a specified period of time.

It is required that the agency contract, its annex, or a duly certified explanatory letter specify the type of products or services covered by the agency.

This type of agency is characterized by the agent’s direct representation of the principal, in the principal’s name and for his account, without the transfer of ownership of the goods to the agent.

Second: Commission Agency

A commission agency is regulated by a contract under which the Iraqi commercial agent is authorized to operate within Iraq in his own name but for the account of the foreign principal, and in accordance with the conditions determined by the latter. This includes carrying out distribution and marketing activities for the principal’s products and providing services on his behalf.

In this case, the consideration consists of a commission calculated as a percentage of sales or as remuneration for the services provided, for a specified period of time, provided that the products or services are specified in the contract, its annex, or a duly certified explanatory letter.

This type differs from the traditional commercial agency in that the agent operates in his own name rather than in the name of the principal, while the economic results remain for the account of the principal.

Third: Distributor Agency (Distribution Contract)

A distributor agency is realized when the foreign principal authorizes the Iraqi distributor to purchase the goods for his own account, whereby ownership of the goods is transferred to him, after which he offers and sells them at a price he determines, in return for profit, with an obligation to provide after-sales services.

It is also required that the products or services covered be specified in the contract, its annex, or a duly certified explanatory letter.

This type of contract is distinguished by the transfer of ownership of the goods to the distributor, unlike the commercial agency and the commission agency, while the relationship remains subject to the provisions of the Commercial Agency Law once its conditions are fulfilled.

Fourth: Franchise Agency

A franchise agency is regulated by a contract under which the foreign principal authorizes the Iraqi franchisee to use one or more intellectual property rights for the purpose of producing the goods locally in accordance with approved specifications, marketing them, and providing after-sales services, under the original trademark owned by the franchisor.

This is carried out in accordance with the instructions of the franchisor and under his supervision, on an exclusive basis within a specific geographical area and for a specified period of time, with the franchisor being obligated to provide support, assistance, and technical advice, in return for financial consideration or a share of the benefits or economic returns of the project.

It is also required that the products or services covered be specified in the contract, its annex, or a duly certified explanatory letter.

Fifth: Activities Outside the Scope of Commercial Agency

It is understood from the foregoing provisions that the scope of activities considered to constitute a commercial agency is defined on an exclusive basis. Accordingly, any activity that does not fall within the four types mentioned above is not considered a commercial agency and is not subject to the provisions of the Commercial Agency Regulation Law, even if it resembles it in certain aspects.

Examples of similar activities that do not constitute a commercial agency in the legal sense include:

1. Direct sale contracts between a foreign company and an Iraqi company without continuous representation or distribution.

2. Temporary or one-time supply contracts that do not establish a permanent agency or distribution relationship.

3. Consultancy or purely technical service contracts that do not involve marketing products or providing after-sales services on behalf of a foreign principal.

4. Employment or internal marketing representation contracts in which no foreign principal is a party.

5. Personal or non-commercial importation carried out outside the framework of an organized commercial activity.

Accordingly, the application of the provisions of the Commercial Agency Regulation Law to any legal relationship depends exclusively on its proper legal characterization and its inclusion within one of the types specified in the instructions of the law. Mere formal or economic similarity is insufficient to confer upon it the description of a commercial agency.

Section Six: Termination and Non-Renewal of the Commercial Agency Contract in Light of Article (20) of the Commercial Agency Regulation Law and Its Comparison with the Provisions of the Civil Code

Through the Commercial Agency Regulation Law No. 79 of 2017, the Iraqi legislator introduced a special regulation governing the termination and non-renewal of the commercial agency contract, as set forth in Article (20) of the law. This regulation departs from the general rules stipulated in the Civil Code and establishes a special legal regime aimed at protecting the commercial agent and ensuring the stability of the contractual relationship.

First: The Provision of Article (20) of the Commercial Agency Regulation Law

Article (20) of the Commercial Agency Regulation Law provides as follows:

“ The principal may not terminate the agency contract or refrain from renewing it unless there is a reason justifying its termination or non-renewal. The agency contract may be terminated by mutual consent between the agent and the principal, or in accordance with an agreement concluded between the parties specifying the arbitration procedures, the competent arbitration body, and the applicable law. ”

It is understood from this provision that the legislator restricted the authority of the principal to terminate the commercial agency contract or to refrain from renewing it. Termination or non-renewal is no longer left to the unilateral will of the principal, but rather requires the existence of a reason justifying such action. The provision also allows termination of the contract by mutual agreement of the parties, or by resorting to arbitration in accordance with the contractual agreement.

This regulation reveals a clear legislative tendency aimed at preventing arbitrary termination of commercial agency contracts, particularly in light of the efforts and investments made by the agent to build the market and the commercial reputation of the principal within Iraq.

Second: The Legislator’s Departure in Article (20) from the General Rules of the Theory of Rescission

Article (178) of the Iraqi Civil Code No. 40 of 1951 provides that the contracting parties may agree that the contract shall be deemed rescinded automatically upon failure to perform the obligations arising therefrom. This represents the general rule in the theory of rescission, which is based on the principle of freedom of will in regulating the grounds and mechanisms for terminating contracts.

However, the provision set forth in Article (20) of the Commercial Agency Regulation Law constitutes a special rule through which the legislator departed from these general principles. It restricted the possibility of agreeing on the termination of the commercial agency contract and prohibited the principal from terminating the contract or refraining from renewing it by unilateral will, even if such termination or non-renewal had been agreed upon in advance, unless there exists a reason justifying termination or non-renewal.

Accordingly, the legislator limited the principle of freedom of contract established in the Civil Code and established a special regime for commercial agency contracts that prioritizes considerations of protection and stability over the general rules governing rescission.

Third: The Practical Effect of This Restriction and the Imbalance of Legal Positions

The provision of Article (20) raises an important practical issue, represented by the legislator’s use of the phrase “a reason justifying termination or non-renewal,” which is a broad expression for which the law has not set a specific standard. This opens the door to divergent administrative and judicial interpretations in assessing the existence of such a reason.

It is also observed that the legislator restricted the principal’s right to terminate or not renew the contract, while the law does not contain a corresponding provision restricting the right of the commercial agent to terminate the agency contract. This practically results in placing the foreign principal in a weaker legal position compared to that of the commercial agent.

From this, it is understood that the legislator has expressly favored the protection of the commercial agent, as the local party contributing to the activation of the national economy, even if this comes at the expense of full balance between the parties to the contractual relationship.

Conclusion

It is evident from this study that the Commercial Agency Regulation Law No. 79 of 2017 has established a special legal framework for commercial agency contracts in Iraq, based on mandatory rules connected to economic public order.

The legislator has linked the conclusion of the commercial agency contract and the effectiveness of its legal effects to the fulfillment of specific formal requirements, particularly writing, registration, and obtaining a license. This renders the commercial agency contract a formal contract that does not come into existence and does not produce its legal effects unless these requirements are met.

The law has also subjected the commercial agent to clear regulatory obligations and has provided him with special protection by restricting the authority of the principal to terminate the contract or refrain from renewing it except for a justified reason. Accordingly, the proper application of this law requires strict adherence to its procedures and the drafting of commercial agency contracts in a manner consistent with its mandatory provisions, in order to ensure the legality of the contract and the stability of commercial dealings.

To ensure that commercial agency contracts comply with mandatory Iraqi legal requirements and avoid legal risks, professional legal guidance is essential. Contact Osama Tuma for Legal Services and Advisory and work with a trusted law firm in Iraq that delivers clear, reliable, and legally compliant solutions.