Legal Protection of Foreign Investment from Non-Commercial Risks in Iraqi and Iranian Law (A Comparative Study(

Abstract

Non-commercial risks are among the most significant factors affecting the stability of foreign investment, given the potential consequences of state interventions and measures, as well as political, security, and legislative disturbances that may affect investors’ rights and economic interests. The most significant of these risks include nationalization, expropriation, and confiscation, in addition to restrictions that may be imposed on the transfer of capital, profits, and returns, and the resulting damages that may give rise to compensation claims. Therefore, effective legal protection is essential to ensure investment stability and mitigate the consequences arising from the occurrence of such risks.

This study examines the legal protection of foreign investment against non-commercial risks under Iraqi and Iranian law by analyzing and comparing the legal provisions governing investment in both countries. It focuses on the guarantees provided to investors against nationalization, confiscation, and expropriation; guarantees concerning the transfer of capital, profits, and returns; compensation provisions; mechanisms for dispute settlement; and the role of international agreements in strengthening the legal protection of investment. The study adopts an analytical comparative approach to identify the similarities and differences between the two legal systems and to assess the effectiveness of the guarantees provided therein.

The study finds that Iraqi law provides explicit protection for investment projects against confiscation and nationalization and subjects expropriation to the requirement of public benefit and the payment of fair compensation. It also guarantees investors the right to transfer the capital introduced into Iraq and its returns abroad, subject to the settlement of applicable obligations and debts. In contrast, Iranian law conditions protection against expropriation and nationalization upon the existence of a national interest, compliance with legal procedures, and the absence of discrimination, while providing for compensation based on the actual value of the investment immediately prior to expropriation or nationalization. The study also identifies differences between the two systems in regulating the transfer of capital and profits. Iraqi law guarantees the transfer of capital and returns in accordance with the applicable legislation and the instructions of the Central Bank of Iraq, whereas Iranian law regulates the transfer of the principal capital, interest, and profits abroad through specific procedures and approvals.

The study further reveals differences in the regulation of dispute settlement. Iraqi law permits the parties to agree to resort to national or international commercial arbitration in accordance with the agreed terms and applicable procedures. Iranian law, on the other hand, generally provides for the settlement of disputes between the government and foreign investors through domestic courts after attempts at settlement through negotiation have failed, unless another method of dispute settlement is agreed upon in accordance with the conditions prescribed by law. The study also demonstrates that international agreements constitute a complementary framework for investment protection, as Iraqi law grants foreign investors additional protections under bilateral and multilateral international agreements to which Iraq is a party, thereby strengthening the protection afforded under domestic legislation. Accordingly, the study concludes that the two legal systems share recognition of several fundamental investment guarantees, while differing in the conditions governing the exercise of these guarantees and the mechanisms for their implementation, particularly with regard to compensation, the transfer of capital and profits, and dispute settlement. This highlights the importance of developing legislative and procedural guarantees to enhance the stability and legal security of foreign investment.