Federal Oil and Gas Law: Viability, Coherence and Functioning Perspectives

7- Petroleum Revenues and Funds

The proposed law (article 11) obligates both the executive branch (CoM) and the legislative branch (Parliament) to enforce a “federal revenue law”, which creates and regulates “Oil Revenue Fund” and “The Future Fund”.

There are many serious problems with the said article and its provisions as summarized bellow:

From technical, procedural and constitutional way this law cannot be the legal source to promulgate another law, e.g., revenue sharing law, since the constitution is the legal source and reference for the latter law according to articles 106 and 112 of the constitution.

The parliament has not so far tabled for debate any draft for “federal revenue law” though a text of such a law have been circulating unofficially. However, the CoM has proposed in September 2011 a draft of new law for the “General Commission for Observing the Allocation of Federal Revenue”.

It appears that all these five laws are connected together, and they should be promulgated simultaneously. But this is the real problem! Each law is connected to the other four laws, thus creating a type of vicious circle.

It is therefore very advisable to remove article 11 completely from oil and gas law as there is no legal justification to address revenue sharing matters within this law in such un-substantive way.

8- Legalizing already concluded contracts

The proposed law should have clear and complete provisions to review, assess, recommend and finally legalize any of the contracts concluded before a specific cut-off date. The following is suggested for this legalization process:

1. A specific full-time Iraqi team comprising known Iraqi petroleum experts with proven track record should be formed to review and assess all concluded contracts within a specific time frame (for example, no more than six months).

2. The team should develop a unified approach consisted of objective criterion to review and assess all concluded contracts. Principles of transparency, competitiveness, openness, comparativeness, corruption-free, absence of any forms of financial irregularities, adherence to the usual contracting practices, participation of related stakeholders, are few examples that should be included in the assessment yardstick and process.

3. Both MoO and KRG are obliged to provide the Iraqi team with authentic copies of all signed contracts with one month from a specific date. No contract would be accepted after the month deadline, and the said contract would be considered null, void and illegal.

4. The review and assessment could require streamlining all these contracts to one form only. This could mean the conversion of all production sharing contracts into service contracts with terms and conditions similar to those concluded by MoO taking into considerations the comparative differences of the related fields.

5. The team would only recommend contracts if they were assessed to have been in compliance with and deliver the best interests/ highest benefits for the Iraqi people (as required by the Constitution). The recommended contracts would be reviewed by CoM, and when endorsed they would be send to the Parliament for consideration.

6. The Parliament considers the contracts case-by-case, and a law promulgated according to the due process would legalize the approved contract.