International Reconstruction and Investment

International efforts to rebuild postwar Iraq generated a breadth of legal issues. Following reconstruction investments were often managed by US-based entities, and most legal claims and disputes that arose involved American citizens. Many of the prominent reconstruction disputes arose from the awarding of US government service contracts to American firms. As early as December 2003, JURIST Guest Columnist Joost Pauwelyn challenged the legality of restricting reconstruction and relief contracts to "firms from the United States, Iraq, Coalition partners and force contributing nations." Pauwelyn argued that such practices were inconsistent with the World Trade Organization's (WTO) non-discrimination principle as applied to the Government Procurement Agreement.

No-bid contracts were commonplace throughout the Iraqi reconstruction process, generating multiple US Department of Justice (DOJ) inquiries. Oil conglomerate Halliburton was the focus of severall fraud investigations. Halliburton subsidiary Kellog, Brown and Root (KBR) faced accusations regarding a five-year contract for oil field repair in November 2005. KBR was forced to pay US$4 million to settle potential claims of fraud in August 2006. Additionally, an executive of Halliburton subsidiary Eagle Global Logistics (EGL) pleaded guilty to making false statements and violating the Anti-Kickback Act in connection with the company's Iraq shipping contracts.

Following these scandals, the US government began a comprehensive crackdown on war profiteering in post-invasion Iraq. In March 2007, the US Department of Defense (DOD) began to monitor contractors involved in Iraqi reconstruction with heightened scrutiny. A federal probe was also initiated in September 2007 to respond to numerous complaints of fraud and related offenses against US government personnel and contractors. However, a 2008 DOD audit revealed that the US military failed to ensure that over US$8 billion dollars in Iraqi reconstruction contracts, awarded between 2001 and 2006, complied with federal anti-fraud laws.

The DOJ has also prosecuted individuals for extreme abuses of the contract assignment process, as in the 2007 case of former Coalition Provisional Authority (CPA) comptroller Robert Stein, who later served a sentence for conspiracy, money laundering and bribery. Individuals were also prosecuted under the Foreign Corrupt Practices Act, as in the 2006 case of Faheem Mousa Salam who was a translation contractor working for Titan Corporation.

These drawbacks notwithstanding, Iraq's petroleum sector largely recovered following the invasion. In January 2007, Iraqi legislators proposed formal parameters on the development and distribution of the national oil reserves. No agreement was ever reached, but the Iraqi Ministry of Oil awarded service contracts to develop seven separate oil fields between June 2009 and February 2010.

Some US oil companies benefited from no-bid contracts during this time period, which was described by JURIST Contributing Editor Haider Ala Hamoudi as "unusual in the industry and particularly unusual given the global demand for oil." Hamoudi went on to identify Iraq's lack of independent and qualified counsel throughout the contract assignment process:

It seems inconceivable to me that a competent lawyer (in the government, on a USAID contract or otherwise) if handed an oil contract and told that it is a contract between Iraq and an unnamed oil company and then asked to comment thereon on behalf of the Iraqi government would provide any comment further than "hire a lawyer."
Iraq's finance, private security, and telecommunications sectors reached unprecedented heights owing to the post-invasion period. As the international community sent resources and aid devoted to Iraqi reconstruction, the law continued to define clear rules according to which such efforts would proceed.

 

About Features

Features provides comprehensive background on the issues that dominate the news. Inquiries and comments welcome at archives@jurist.org

Included from Forum level -->

© Copyright JURIST Legal News and Research Services, Inc., 2013.