This article will discuss whether the present situation in Iraq presents new opportunities for U.S. oil companies to expand their business into Iraq, as well as the ethical and legal risks of attempting to do so. In addition, this discussion will identify the some of the governments and/or organizations with whom these companies should deal if they decide to embark on a business venture in Iraq.
Until recently, it was not possible for companies to enter into business in Iraq, due to U.S. law and U.N. Sanctions. The present situation in Iraq has changed that, because “Iraq is now a free and open market” (Tom Foley’s Remarks). Iraq is rich in natural resources. The US Energy Information Administration states that “Iraq holds more than 112 billion barrels of oil – the world’s second largest proven reserves” (Iraq: Oil and Economy). This is a tremendous opportunity for U.S. oil companies. According to Tom Foley, Director of Private Sector Development for the CPA in Baghdad, “Iraq presents an exceptionally attractive business opportunity for foreign investors
The current situation in Iraq is a volatile one. Accounts of bombings and shootings are reported almost daily. This becomes an ethical risk when an organization considers sending employees to Iraq to do business. Is it unethical for the company to put its employees at risk of physical harm? Tom Foley states that businesses “understand these security risks and accept them as just a cost of doing business”. Organizations may show ethical responsibility if they “know and use people in their organizations who accept, and sometimes actually prefer, the risk in these environments” (Tom Foley’s Remarks).
Another ethical risk involves consumer perception of these U.S. oil companies. It is important that these companies understand consumer opinion of Iraq, as well as consumer opinion of U.S. companies doing business in Iraq. Generally speaking, consumers do not wish to support what they believe to be unethical behavior. If consumers believe that these companies are behaving unethically in its business dealings in Iraq, their buying habits could change, which could ultimately hurt these companies.
There are several legal risks involved with U.S. companies doing business in Iraq. First is the issue of conflicts of law. Laws in Iraq will differ from the laws in the United States. “The rules on conflicts of law in international transactions are as follows: (1) If the parties choose which law applies, that law will apply, and (2) if no provision is made, the law of the country where the contract is performed will be used” (Jennings).
Another issue is criminal law protections. “All persons and businesses present within a country are subject to that nation’s regulatory scheme for business as well as to the constraints of the country’s criminal code” (Jennings). The regulatory scheme and criminal code in Iraq may differ significantly from those of the United States, so it is imperative that companies understand these provisions prior to conducting business in Iraq.
It is also important to understand that although international laws exist which may protect U.S. companies in international transactions, “there really is no way to enforce international laws” (Jennings). Tom Foley discusses the legal risks when he states that “your lawyer won’t be able to give the normal “all clear” signal about the legal environment in Iraq. But the legal uncertainties are diminishing and will continue to diminish, and there is a lot you can do to avoid legal risk. Particularly if your counsel is the type who focuses on finding ways to reduce risks rather than just cautioning you about them.
Governments and Organizations to Contact
If U.S. oil companies decide to embark on a business venture in Iraq, first and foremost they should deal with the United States government and the Iraq government. Other organizations they should deal with are the Iraq Investment and Reconstruction Task Force, the U.S. Department of Commerce, the Iraqi Ministry of Trade, and The Ministry of Oil. In addition, Iraqi business centers can help companies interested in private sector trade. These business centers are located in Baghdad, Basra, Kirkuk, Nineveh/Mosul, and Hillah.
“Iraq: Oil and Economy.” About website. URL: http://usgovinfo.about.com/library/weekly/aairaqioil.htm
Jennings, M. M. (2006). “Business: Its Legal, Ethical, and Global Environment.” (7th ed.). Mason, OH: Thompson West.
“Tom Foley’s Remarks Encouraging Trade and Investment in Iraq.” The Coalition Provisional Authority website. URL: http://www.cpa-iraq.org/economy/investment_remarks.pdf