On 15 February 2022 the Federal Supreme Court of Iraq issued its decision on the constitutionality of the Kurdistan Oil and Gas Law No. 22/2007 (KOGL) and the right of the Kurdistan RegionalGovernment (KRG) to explore, develop, extract and export oil and gas resources independently ofthe Federal Government.
The KOGL and Independent Oil Exports Declared Unconstitutional
In its decision, the Court held that the KOGL and the KRG’s actions had violated Articles 110, 111,112, 115 and 121(1) of the Iraqi Constitution of 2005 and were unconstitutional. The ruling also
provided for the KRG to hand over to the Federal Ministry of Oil all oil and gas extracted from fields in the Kurdistan Region and for the Federal Government to enforce its constitutional rights to explore, extract and export oil and gas from the Kurdistan Region.
Audit of the KRG’s Oil and Gas Sales and Export Contracts
The Court’s decision obliges the KRG to permit the Federal Ministry of Oil and the Federal Board of Supreme Audit to audit all contracts entered into by the KRG for the sale and export of oil and gas to determine the KRG’s financial obligations.
Effects on Production Sharing Contracts
The ruling does not directly address PSCs entered into by the KRG. However, it states that the Federal Ministry of Oil may seek the annulment of all petroleum contracts concluded by the KRG with foreign entities and states. This suggests that any annulment of such PSCs will necessitate separate legal proceedings.
No Appeal
The Court is competent to decide on the constitutionality of laws (Art. 4(1)) of the Federal SupremeCourt Law No. 30/2005 and Article 923(1) of the Constitution) and to resolve disputes between the Federal Government and Regional Governments (Art. 4(4) of the Federal Supreme Court Law and Article 93(4) of the Constitution).
The Federal Supreme Court is the highest court in Iraq and its decisions are final and binding on all parties and are not subject to further appeal (Art. 5(2) of the Federal Supreme Court Law and Art. 94 of the Constitution).
How will the decision be implemented?
The Federal Supreme Court Law does not address the enforcement of the Court’s decision. This means that the decision will – most likely – still require the Federal and Regional governments to reach an agreement on its implementation and any resulting repercussions.
Various scenarios are possible. The KRG may comply with the decision willingly subject to the enactment of a Federal Oil and Gas Law to regulate the issues and the allocation of a fair and equitable portion in the federal budget to the Kurdistan Region. If the KRG refuses, it may be difficult, if not impossible, to enforce the Federal Supreme Court’s decision against the KRG. It looks as if any alliance with the KRG parties on a federal level may now require an agreement on agreement on a Federal Oil and Gas Law as contemplated by the Constitution.
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DUBAI | AMERELLER | One by Omniyat, 14th Floor | Business Bay | P.O. Box 97706 | Dubai, United Arab Emirates | T +971 4 432 3671
ERBIL | MENA Associates in association with Amereller | Golan Street | World Trade Center | 10th Floor, No. 4 | Erbil | Kurdistan Region of Iraq | T +964 750 346 0444
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