Iraq: An Overview

Iraq continues to represent one of the most complex yet strategically important jurisdictions in the Middle East for foreign investment, corporate structuring and regulatory compliance. While hydrocarbons remain the backbone of public revenue and foreign currency inflows, the Iraqi market in 2025 is increasingly shaped by regulatory consolidation, institutional modernisation and business-friendly reforms targeting non-oil sectors, including banking and financial services, digital payments and fintech, telecommunications, logistics, renewable energy and light manufacturing.

From a macro-economic and legal perspective, the Iraqi economy and regulatory framework remain sensitive to global energy prices and regional geopolitical developments. Nevertheless, sustained oil revenues over recent years have enabled the government to maintain public spending, preserve relative currency stability and finance large-scale infrastructure and public-service programmes. In parallel, the business environment in Iraq is increasingly defined by stronger regulatory enforcement, corporate governance requirements and compliance obligations, particularly in sectors linked to financial integrity, tax and public-revenue protection, and labour and social security compliance.

For both local companies and multinational investors, the most significant developments in Iraq are no longer driven solely by economic indicators. Instead, they arise from the interaction between evolving Iraqi laws and regulations, regulatory practice by public authorities, and operational realities faced by companies doing business in Iraq. As a result, demand for legal advisory services in Iraq, regulatory advisory, corporate compliance and investment structuring continues to grow.

Current Economic Conditions Affecting Clients in Iraq

The prevailing economic environment continues to support market entry, corporate expansion and foreign direct investment in Iraq, particularly in construction and infrastructure, power and renewable energy projects, telecommunications, logistics, healthcare and consumer-driven sectors. Government-backed projects and public procurement remain a primary source of commercial activity, while the private sector is increasingly characterised by mergers, multi-client and multinational corporate restructurings, group reorganisations and cross-border holding structures involving Iraqi operating companies.

At the same time, access to banking services in Iraq, foreign currency transfers and cross-border payment flows remain a central concern for corporate clients. Regulatory supervision and enforcement led by the Central Bank of Iraq continue to intensify, particularly in relation to banking compliance, AML and transaction monitoring, financial reporting and licensing requirements for financial institutions and payment service providers.

For companies operating in sectors that depend on imports, international remittances, foreign shareholder funding or project finance, regulatory scrutiny over banking channels has become a decisive operational and legal risk factor. As a result, clients increasingly require banking and finance legal advice in Iraq, as well as regulatory support for dealing with Iraqi financial institutions and supervisory authorities.

Inflationary pressures and ongoing exchange rate management remain directly relevant to commercial contracts, EPC and infrastructure projects, long-term supply agreements and financing arrangements. Companies operating in Iraq increasingly seek legal support for contract structuring, currency-risk mitigation clauses, payment and settlement mechanisms, and renegotiation of commercial terms in order to preserve commercial balance and project viability under volatile market conditions.

Level of Activity, Trends and Developments in the Iraqi Legal and Advisory Market

The Iraqi legal and advisory market in 2025 is experiencing a clear structural shift away from purely transactional, filing-based and company-registration mandates toward complex regulatory advisory, compliance management and legal risk mitigation services in Iraq.

Demand is increasingly driven by corporate restructuring in Iraq, multinational group reorganisations, regulatory remediation projects and cross-border corporate advisory mandates, reflecting the growing sophistication of both foreign investors and domestic corporate groups.

In particular, multinational and regional groups with historical or legacy operations in Iraq are actively reassessing their operating and legal structures, including:

• conversion of foreign company branches in Iraq into locally incorporated subsidiaries;
• consolidation of multiple Iraqi entities into unified operating platforms;
• shareholding and ownership restructurings involving regional or offshore holding companies; and
• preparatory corporate restructuring for future capital markets access in Iraq.

This restructuring activity is reinforced by a growing focus on corporate governance, transparency and regulatory readiness. Although market depth remains limited, the Iraq Stock Exchange is gradually attracting renewed attention from local family-owned groups and regional investors considering future IPOs, second-market admissions and capital increases in Iraq.

As a result, legal work relating to pre-listing corporate clean-ups, governance reforms, shareholder reorganisation and regulatory alignment with Iraqi capital markets requirements is becoming increasingly prominent.

Another significant development is the rapid growth in demand for regulatory advisory services for the digital economy in Iraq. Telecommunications operators, payment service providers, fintech companies, digital platforms and technology-enabled service providers are actively seeking legal advice on:

• regulatory licensing and authorisations in Iraq;
• data protection and information security compliance;
• technology outsourcing and cloud arrangements; and
• cross-border digital and managed services delivery.

This trend reflects both commercial expansion and a steadily strengthening enforcement culture among Iraqi regulators.

Legislative and Regulatory Developments Affecting Clients in Iraq

The most impactful developments affecting businesses operating in Iraq are not driven by comprehensive legislative reform, but rather by regulatory instructions, evolving implementation practices and administrative enforcement by Iraqi authorities.

Companies doing business in Iraq are currently facing heightened scrutiny in relation to:

• corporate governance and disclosure obligations under Iraqi company law;
• licensing scope and regulatory perimeter compliance;
• employment registration, payroll reporting and workforce compliance; and
• sector-specific operational approvals and permits.

In employment and workforce matters, enforcement practices under the supervision of the Iraqi Ministry of Labor and Social Affairs and its affiliated social security authorities have become significantly more robust.

Companies are increasingly subject to:

• retrospective labour and social security inspections;
• payroll and headcount audits; and
• reconciliation exercises between financial statements, tax filings and social security submissions.

This enforcement trend has resulted in a sharp increase in employment compliance remediation projects in Iraq, historical regularisation mandates and negotiated settlement strategies with social security authorities.

In parallel, regulatory expectations imposed by the Companies Registrar of Iraq continue to evolve. Companies are facing:

• stricter document review standards;
• enhanced scrutiny over beneficial ownership and shareholder structures; and
• more detailed verification of capital, board composition and governance documentation.

These practices have a direct impact on corporate transactions in Iraq, capital increases, share transfers, corporate restructuring projects and group reorganisations.

In the banking, fintech and digital payments sectors, regulatory licensing, operational readiness assessments and ongoing supervisory reporting obligations in Iraq have become a central concern.

Payment institutions, digital wallet providers and financial service companies must now demonstrate not only compliance at the licensing stage, but also continuous operational alignment with regulatory requirements, including:

• internal control frameworks;
• governance and risk management structures; and
• ongoing regulatory and supervisory reporting.

Key Hurdles and Operational Difficulties Faced by Clients in Iraq

Despite the positive regulatory and institutional developments, Iraq remains a challenging jurisdiction from both a compliance and operational perspective. The most common hurdles faced by foreign and domestic investors include:

• Regulatory Uncertainty and Evolving Administrative Practice in Iraq: Even where Iraqi legislation is relatively clear, implementation may vary between authorities, departments and provinces. Clients frequently encounter differing interpretations of licensing scope, reporting obligations and procedural requirements.
• Legacy Compliance Exposure: Many multinational groups operating in Iraq inherited historical employment practices, payroll structures and corporate filings that no longer fully align with current enforcement standards. This exposes companies to retrospective penalties and administrative disputes.
• Banking and Cross-Border Transaction Constraints: Companies continue to be affected by enhanced compliance controls imposed on Iraqi financial institutions, leading to delays in payments, capital injections and operational funding.
• Complex Public Sector Interfaces: Engagement with multiple ministries, regulators and public bodies often results in extended timelines, overlapping approval processes and procedural duplication.
• Data and Documentation Inconsistencies: Discrepancies between accounting records, employment contracts, social security filings and regulatory submissions remain one of the most frequent triggers of administrative investigations and compliance disputes in Iraq.

How these hurdles can be effectively addressed

Successful market entry and sustainable operations in Iraq increasingly depend on a proactive legal compliance and regulatory strategy, rather than reactive problem-solving after inspections or enforcement actions.

Clients operating in Iraq are advised to adopt:

• structured internal compliance reviews and legal risk assessments prior to regulatory inspections;
• early engagement with Iraqi regulators on licensing scope and operating models;
• employment, payroll and social security legal audits to identify historical exposure before inspections are initiated; and
• careful contractual and corporate structuring of cross-border services, group arrangements and management functions involving Iraqi entities.

For corporate groups undertaking corporate restructuring in Iraq or market expansion projects, early legal alignment between foreign parent companies and Iraqi operating entities is essential to avoid misalignment in:

• shareholder rights;
• management authority and signatory powers; and
• statutory and regulatory filings.

In banking, fintech and telecommunications projects in Iraq, regulatory readiness assessments and phased licensing strategies have proven particularly effective in reducing approval timelines and mitigating post-licensing operational disruptions.

Outlook for the Iraqi Legal and Regulatory Environment

Looking ahead, Iraq’s legal and regulatory environment is expected to continue evolving primarily through administrative practice and regulatory enforcement, rather than through comprehensive legislative reform.

Enforcement intensity, particularly in (i) employment and social security compliance; (ii) financial supervision and fintech regulation; and (iii) corporate governance and disclosure obligations, is expected to increase further throughout 2026 and beyond.

For international investors and domestic corporate groups alike, Iraq remains a high-potential investment jurisdiction in which commercial opportunity is closely linked to regulatory resilience and legal compliance capability.

Firms that invest in structured compliance frameworks, regulatory engagement strategies and locally grounded legal support in Iraq are better positioned to manage regulatory risk, accelerate project execution and maintain long-term operational continuity.

In this context, legal advisory services in Iraq are becoming increasingly strategic. Clients no longer seek support solely for company registration or dispute resolution, but also for long-term regulatory planning, institutional risk management and the design of sustainable operating models within one of the Middle East’s most complex and commercially significant markets.