Law, Social Justice & Global Development
(An Electronic Law Journal)
The Legality of Reconstruction Contracts in Post-War Iraq
Sophie Kavanagh
LLM Student,
School of Law,
Kings College, London.
sophie.kavanagh@kcl.ac.uk
This is a refereed article published on: 28 February 2005
Citation: Kavanagh, S, ‘The Legality of Reconstruction Contracts in Post-War Iraq, 2004 (2) Law,
Social Justice & Global Development Journal (LGD).
<http://www.go.warwick.ac.uk/elj/lgd/2004_2/kavanagh>
Kavanagh, S
2
The Legality of Reconstruction Contracts in
Post-War Iraq
Abstract
This paper is an analysis of the legal issues that surround the contracts awarded to reconstruct Iraq after
the war in 2003. Initial consideration is given to the unilateral invasion of Iraq by the United States of
America and the United Kingdom, the support given by the United Nations Security Council
Resolutions, and the international conventions that govern the occupation of a country. Following this,
an in depth analysis explores the major role of the United States in managing the reconstruction
programmes, their justifications for not allowing certain countries to compete for these contracts, and
the compatibility of such behaviour under international obligations. Research into American law shows
that a number of contracts, awarded by the United States Government to American firms, have not
complied with the accountability and transparency requirements that are essential when spending
taxpayers’ money. It follows that such discrepancies are susceptible to the risk of corruption. A look at
international and domestic anti-corruption measures provides further arguments into the uncertain
legality of these contracts to reconstruct Iraq.
Keywords: Coalition Provisional Authority; US Government Agencies; Reconstruction
Contractors; Public Procurement; International Standards; WTO-GPA; UNCITRAL Model
Law; US FAR; Anti-Corruption Instruments
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
1.
3
The Legality of Reconstruction Contracts in
Post-War Iraq
Introduction
The crisis in Iraq following the invasion by the US and UK in spring 2003, has not only been subject to
controversial debate over the legality and justifications for the war. Concerns have also been voiced
about the methods adopted to reconstruct Iraq, now that the war has been declared ‘over’. Funding has
been acquired from countries across the globe to provide for the humanitarian, reconstruction and
economic reparation needs of Iraq1. However, the US decision to ban countries which opposed the war
in Iraq from bidding for the contracts has resulted in condemnation by prospective donors.
The UN Security Resolution 1483 of 22 May 2003 empowers the Authority2 to disburse funds directly
into the Development Fund for Iraq, so that such funds:
‘…shall be used in a transparent manner to meet the humanitarian needs of
the Iraqi people, for the economic reconstruction and repair of Iraq’s
infrastructure, for the continued disarmament of Iraq and for the costs of
Iraqi civilian administration, and for other purposes benefiting the people of
Iraq…’ (para.14)
This paper examines whether such transparent methods have been adopted by the US led Authority.
Where taxpayers’ money is being spent, taxpayers are privy to these contracts. Public interest must be
safeguarded. If the US government is not fully accountable to their own citizens, then there are
possibilities of revolt which could undermine the US administration, and leave the situation in Iraq
considerably worse off.
2.
Iraq, the International Situation
2.1.
The Invasion
The United States (US) and the United Kingdom (UK), in March 2003, took unprecedented unilateral
military action against Iraq. The correctness or legitimacy of the action taken against Iraq is extremely
important in terms of the future role of the UN and international law. However, the main purpose of
this analysis is the legality of the contracts to reconstruct Iraq. Now that the Saddam regime has been
overthrown, control over Iraq is shared between the US, UK and the new Iraqi interim government.
The US and UK do have rights under the 1907 Hague Conventions3 and the UN Security Council
Resolution 1483. However, without UN authority, they cannot impose a government, cannot make
major structural economic changes, nor exploit the occupied State’s natural resources 4.
The issues of legality of the initial invasion of Iraq must not obstruct the best way to reaffirm ‘the
sovereignty and territorial integrity’ of Iraq and ‘the vital role’ for the UN in Iraq. These two major
themes are central to the post-war UN Security Council Resolutions 1483 and 1511. They must be
upheld and respected by all Member States of the UN.
2.2.
The Role of the CPA-PMO
The US-run Iraq Coalition Provisional Authority (CPA) was comprised of 63 countries, encompassing
every major religion and ethnic group, each undertaking to assist in the financial, material, and military
needs in Iraq < >. The procurement component of the CPA was the Iraq Program Management Office
(PMO), run by the US Pentagon, responsible for all activities associated with the program, project,
asset, construction and financial management of the reconstruction in Iraq.
In July 2003, the CPA appointed an Iraq Governing Council. Both organisations were formally
recognised by the UN Security Council under Resolution 1500 (August 2003). Resolution 1511
(October 2003) reaffirmed this recognition emphasising the ‘temporary nature of the exercise by the
CPA of the specific responsibilities, authorities, and obligations under applicable international law …
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
4
The Legality of Reconstruction Contracts in
Post-War Iraq
which will cease when an internationally recognized, representative government established by the
people of Iraq is sworn in’ (para.1).
The CPA dissolved on 28 June 2004, at which point control was transferred to an interim Iraqi
government comprised largely of Iraq exiles led by the US-appointed Prime Minister Iyad Allawi
(Dinmore, G, 2004a) ‘White House getting used to idea of Shia Government’, Financial Times, 2
December 2004). The CPA awarded contracts funded by the Development Fund for Iraq (DFI), money
accumulated from oil and gas sales, the UN oil-for-food programme, frozen Iraqi assets and
contributions from the CPA countries and World Bank (Nichols, R, 2004, NA103-112). The US
continues to supervise the administration of contracts funded by the DFI and the contracts awarded
before the CPA’s dissolution. The DFI was originally worth USD 20.6 billion, but by the end of June
2004, its value had decreased to USD 2.9 billion5.
2.3.
The Legal Status of Foreign Contracts in Iraq
The legal position of Iraq and the issues surrounding any contracts made between foreign firms and
Iraq whether before, during or after the war, raises extremely important international law questions.
The main applicable law governing such questions is international humanitarian law (including the
1907 Hague Conventions), the 1949 Geneva Conventions, investment treaties, customary international
law concerning occupied territory, and UN law (particularly Resolution 1483). Precedent such as the
post-World War II occupations of Germany and Japan may also be relevant to the Iraq situation.
2.3.1. Legal Status of Contracts made Before the War
The overthrow of Saddam Hussein’s regime and any subsequent change of Iraqi government should not
affect the legal position of any contracts made between the Republic of Iraq and foreign parties before
the war. A State’s international obligations do not change merely because that State’s government has
changed. In the Tinoco Case (UK v Costa Rica) despite the lack of recognition by a number of states of
the regime under the former dictator of Costa Rica, Tinoco, the international arbitrator held that the
new government of Costa Rica was bound by the concessions and bank notes given by Tinoco to
British companies. It was irrelevant that Tinoco’s regime was a dictatorship. Unlike the Tinoco Case,
Iraq was a recognised State by many states.
It is uncertain whether the Security Council has the authority to declare any existing contracts made
with a former government of a UN member state, such as Iraq, null or void (Bekker, P, 2003a, p8).
Resolution 1483 has not declared any contract null or void. Resolution 687 (1991) did provide that the
force majeure defence was available to persons who complied with the economic sanctions against
Iraq, and that no claim could be made by the Iraqi government, person or body in Iraq in connection
with any contract affected by sanctions (para 29). Resolution 687 also provided that statements by the
Iraq government disclaiming its foreign debt were null and void.
Under Article 46 of the Hague Regulations made under the Hague Conventions of 1907, any contracts
made regarding ‘private property’, which include proprietary rights granted in a state contract, ‘must be
respected’. This provides that the old and the new Iraq governments will be bound by any contacts
made between Iraq and foreign private parties before the Iraq invasion, including any property rights.
Article 43 of the Regulations made under the Hague Conventions of 1907, provides that the Occupying
Power must respect the laws of the occupied territory6. This will include Iraq’s law on contracts,
provided that any such contract did not violate any UN sanctions. Therefore, the CPA, as the
Occupying Power, is prohibited from nullifying (possibly suspending) any Iraq state contract
concluded with foreign parties by amending the law of Iraq or by issuing legislation that could declare
any such contract void.
With regard to the post-World War II occupations of Germany and Japan, the US did respect pre-war
contacts, despite the major alteration in governmental authority and their ten-year occupation in the
defeated states. The US was not subject to The Hague Regulations’ restrictions for a number of
reasons, and the Geneva Conventions had not yet been established. Pre-war legal relationships made
between the defeated state and any foreign government or national of the allied states were kept valid
after the war had finished through various peace and reparation treaties, such as the Agreement on
Reparation from Germany, 14 Jan 1946 and the Treaty of Peace with Japan, 8 September 1951.
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
5
The Legality of Reconstruction Contracts in
Post-War Iraq
2.3.2. Legal Status of Contracts made During the War
Article 52 of the Hague Regulations stipulates that enemy private property within occupied territory
can not be taken or interfered with unless it is of use for local military purposes, for example, for the
occupational army but not for its general needs at home or abroad. However, private property of nonbelligerent bodies is protected from confiscation, but may be seized temporarily.
Article 43 of the Hague Regulations, provides that the Occupying Power must respect the laws of the
occupied territory, subject to an exception (Bekker, 2003b, p8), and Article 46 of the Hague
Regulations, provides that the ‘private property’ within the occupied territory ‘must be protected’ and
‘cannot be confiscated’ by the Occupying Power.
A foreign party’s right to compensation, under Iraqi law, may be initiated if the US or Iraq appropriate
the foreign party’s lawful property rights in the occupied territory, or the US or Iraq declare any such
rights worthless or void. This right to compensation is provided for under Article 3 of the Hague
Convention IV, which states that a ‘belligerent party which violates the provisions of the said
Regulations shall, if the case demands, be liable to pay compensation’. In Iran - US Claims Tribunal v
AS, it was established that the cancellation of contractual rights, e.g. long-term oil concession rights,
may constitute expropriation under international law. The status of contractual rights as property is
confirmed in the UN General Assembly Resolution (V) of 2 December 1950, which states:
‘No one shall be deprived of property, including contractual rights, without
due process of law and without payment of just and effective
compensation’ (UN GAR, 1950)
The oil-for-food programme was ended within 9 months from the initial invasion of Iraq. The UN
Secretary General, the CPA and the Iraqi interim administration examined the contracts concluded by
the Hussein regime under the programme. However, the provisions that authorised the SecretaryGeneral to interfere with these contracts did not clarify the position of whether or not this could be
done without the consent of the contractor (Griffiths, J, 2003, p68). Until 31 December 2007, oil and
gas exported from Iraq will be immune from legal proceedings (UN Security Council Resolution 1483,
para 22). All proceeds from oil and gas exports are expected to be paid into the Iraq development fund
until a suitable Iraqi government takes office. It follows from this, that if Iraq now breaches an export
contract, in the interests of promoting stability, it can avoid any liability.
If the US, UK or Iraq breach a rule of international law (for example under the Hague Conventions),
then either state may be internationally responsible for that particular breach to the injured party.
However, it is not clear who can be sued and where. Under the US Foreign Sovereign Immunities Act
(FSIA), jurisdiction over a foreign state is within the power of the US courts. This is likely in the case
of Iraq. Section 1605(a) of the FSIA states that:
‘A foreign state shall not be immune from the jurisdiction of courts of the
US or of the States in any case in which rights in property taken in violation
of international law are in issue …’
Only in the situation of breach of international law will the US assert this exception to immunity. It is
not clear how these matters will be dealt with in the UK or by European Union Legislation.
There is no binding international dispute instrument established by the Hague Regulations available for
private parties. If a foreign company is incorporated into a State and has a registered office in that
State’s territory, then a dispute may be settled by the laws of that State, for example Iraqi law.
2.3.3. Legal Status of Contracts Made After the War
Provided that no future UN Security Council Resolution is created that will affect the legal status of
contracts made between foreign parties and the authority of Iraq (old and new), either before or after
the war, then these contracts will remain valid.
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
6
The Legality of Reconstruction Contracts in
Post-War Iraq
There is legal uncertainty, however, with regard to contracts made between the Occupying Power (eg
by the CPA or the US Department of Defense) and non-Iraqi firms during the occupation. The CPA
had the authority to administer new Iraqi contracts, however, under The Hague Conventions and UN
law, only for the period of the occupation. The uncertainty lies in legal status of these contracts now
that the occupation is over, especially in relation to contracts for Iraq’s natural resources. The Preamble
of Resolution 1483 emphasises ‘the right of the Iraqi people freely to determine their own political
future and control their own natural resources’ (UN Resolution 1483).
International law is unlikely to bind the new Iraqi government to the contracts awarded by the CPA (or
other US state agencies) to foreign parties during its occupation. The new Iraqi government has the sole
discretion to uphold or reject these contracts, whether partially or in whole. It may also change or
repeal any legislation or measures made by the CPA during their occupation of Iraq (ASIL Sept/Oct
2003, p9).
3.
Public Procurement and International Standards
3.1.
Public Procurement
The damage caused in Iraq by the US and UK’s bombing has inevitably opened substantial building
opportunities to reconstruct its demolished infrastructure. The main area of work to be addressed is
public procurement, which involves obtaining goods or services for the use of the public sector.
Procurement in this sector is often formalised, and contracts for public works, supplies, or services,
which will be large in Iraq’s case, are normally advertised for formal tender. Public procurement has
been described as ‘big business’ (Arrowsmith and Hartley, 2002, p ix), involving government at
different levels purchasing goods and services from private firms.
Figures show that spending by governments on procurement is significant (Table 1), highlighting an
area of great economic, political and legal importance in most countries.
Government Procurement
Country/Organisation
% GDP spent in 2000
WTO
10 - 15
European Union
14
United Kingdom
10.84
United States
28.45
Iraq
0.04
Table 1: UN Procurement by Country
As an important policy tool, procurement spending must be seen to be efficient, legitimate and
effective. Through ‘fair’ and transparent competition procedures, better procurement services can be
obtained for less. Also, implementing procurement procedures to reduce bribery and corruption
practices is fundamental (Strombom, 1998a)
3.2.
The Nature of the Post-War Iraq Contracts
United States firms have been recorded to have obtained USD 900 million reconstruction contracts
from the United States Agency for International Development (USAID) before the war in Iraq had
started (Arnold and Booth, 2003, p1). These were the ‘major’ contracts involving work on
infrastructure, roads and seaport administration. A total of 8 contracts from this sum were awarded
solely to American firms (Nikkhah, 2003a) on the basis that strict US government procurement
guidelines maintain that only American firms can win prime contracts funded by the US government..
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
7
The Legality of Reconstruction Contracts in
Post-War Iraq
The US Defense Department, on 5 December 2003, issued a document listing 63 countries eligible to
compete for the second round of 26 Iraq contracts, funded by the USD 18.4 billion that US Congress
has allocated to rebuild Iraq. This decision excluded non-coalition countries, such as France, Germany
and the UN Security Council, to bid for any of the prime contracts (Pleming, 2003). A memorandum,
titled ‘Determination and Findings’ and signed by the Deputy Secretary of Defense Paul Wolfowitz,
states the reason for their decision to award the reconstruction contracts only to contractors from the 63
different countries:
‘..it is necessary for the protection of the essential security interests of the
US to limit competition…’ (Palmeter and Meagher, 2003a)
This second round of contracts, described as the ‘prime’ contracts, are open to tender for all coalition
countries and cover areas such as oil, power, communications, water, housing and public work
buildings (King, 2003a, p2). However, only one out of seven of these contracts (worth USD 13 billion)
worth USD 8,416,985 was awarded to a UK-based company to provide support to the Oil Sector
Programme, and only part of a contract worth USD 43,361,340 to provide support to the Electrical
Services Sector Programme was given to a UK-based company to share with an American firm. The
rest of the contracts were awarded to solely American firms (CPA-PMO Construction Contracts
Awarded as of 14 March, 2004 and CPA-PMO Programme Management Contracts Awarded as of 12
March, 2004).
The banned non-coalition countries have the potential to get business in Iraq through selling material
and equipment to the major and prime contractors (Pleming, 2003). However, the argument stands that
the US should not limit international competition to rebuild Iraq when its infrastructure has been
destroyed by decades of neglect, war and post-war looting and economic sanctions (Nikkhah, 2003b).
3.3.
International Standards and Regulations
There are a number of important policy documents on public procurement to guide government
purchasing in all countries. Each document has a different influence within the legal framework
governing international transactions and on the procurement processes for contracts similar to the Iraq
reconstruction contracts (Hors, 2003). .
Without a single body responsible for creating internationally binding law upon all states, nor an
appropriate judicial system to interpret and extend the law comprehensively, there are problems in
international law to determine whether a specific proposal amounts to a rule of law (Shaw, 2003, p 66).
Most of the policy documents on public procurement do not fall within any of the four source
categories provided by Article 38(1) of the Statute of the International Court of Justice. Instead, these
particular documents may form part of another category of international law termed as ‘soft law’,
which itself is arguably not law (Boyle, 1999, pp 901-913). Such documents have been known to
ultimately be converted into legally binding rules, so their influence cannot be underestimated 7.
Discriminatory procurement favouring domestic suppliers can constitute a barrier to trade and to
international competition. These procurement systems share numerous objectives to combat such
barriers (Arrowsmith, Linarelli and Wallis, 2002, p 103-10) including value for money, integrity,
accountability, fair treatment and social/industrial development, all to be implemented through a costefficient process. Most systems also attempt to prevent discrimination against foreign industry
(especially the WTO-GPA which actually establishes a procedural framework for making foreign
suppliers aware of opportunities and ensuring that entities cannot hide discrimination) and provide
procedures to ensure competition and transparency8.
An analysis of the most relevant international public procurement rules and provisions will help to
determine their applicability to the Iraq reconstruction contracts and identify any possible breach of
international law that may have occurred.
3.3.1. The WTO Rules
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
8
The Legality of Reconstruction Contracts in
Post-War Iraq
The WTO Agreements are largely made up of multilateral agreements that apply to all of the 140 WTO
Members equally. The decision of the US Department of Defense to disallow some WTO Members,
such as Germany, France, and Russia, to participate in the reconstruction effort in post-war Iraq
apparently contradicts the fundamental principles of the WTO (Palmeter and Meagher, 2003).
However, the issue is much more complex than this, and difficult questions would have to be answered
in order to successfully challenge the Department of Defense’s decision under WTO rules. A large
share of US government procurement is excluded from these rules and according to the US
government, it appears the same for the Iraq reconstruction contracts.
Firstly, there are two primary WTO rules both contained in the General Agreement on Tariffs and
Trade (GATT), which entered into force for signature countries in January 1996:
(i) the most favoured nation (MFN) principle, which provides for all
WTO Members to treat all other WTO Members equally; and
(ii) the national treatment principle, which provides for all WTO Members
to treat goods of other WTO Members no less favourably than domestic
goods.
Article III does provide an exception to the national treatment rule, stating;
‘…laws, regulations or requirements governing the procurement by
governmental agencies of products purchased for governmental purposes
and not with a view to commercial resale …’.
An issue to address would be whether any of the Iraq reconstruction contracts fall within this
exception. There is no express exception from the MFN principle for procurement, therefore, the US
Department of Defense policy to favour some WTO Members over others may be a cause for concern.
However, both of the primary WTO rules cover the import and distribution of goods, and it is unlikely
that they do cover the Iraq reconstruction contracts which mostly involve the purchasing of services.
Secondly, the Government Procurement Agreement (GPA) is undoubtedly the most relevant set of
WTO rules to the procurement of the Iraq reconstruction contracts. The GPA entered into force in 1996
and is a means used to regulate public tenders to guarantee the transparency of the procedures and to
ensure equal treatment of domestic and foreign suppliers. It is one of the four WTO plurilateral
agreements, therefore, in law is optional for WTO members to consent to, however, applicants are now
expected to consent to it as a condition of WTO membership (Arrowsmith, S, 2004, p21). WTO-GPA
signatories include the US, the European Community (including its Member States), Canada, Japan and
Korea. Russia is not a party, nor is Iraq (USInfo.State.Gov). In order to challenge the consistency of
another party’s actions with its obligations under the GPA, the challenging party must also be a
signatory to the GPA.
Only central government entities and contracts of value above the threshold of approximately USD
7.2m are subject to the GPA (Trionfetti, 2000, p 57). The majority of the Iraq contracts are valued
above the threshold requirement. Even so, parties are only bound by the extent that they have expressly
agreed to commit particular procurement processes and entities to be covered by the GPA. Each party
submits an Appendix I which contains annexes that identify all the public entities which that party
wishes to be subject to the GPA. One of the annexes identifies a positive and negative list of the types
of services to be covered by the party’s obligations (which includes the types of construction services).
Therefore, it is necessary to analyse the Iraq reconstruction contracts to determine whether the entity
involved is covered by the US’s GPA obligations, and whether the type of service involved is also
covered by those obligations.
Firstly, the public entities awarding the Iraq reconstruction contracts must be listed in the US Appendix
I of the WTO USAID is listed, however, it is also stated that this does not include procurement for ‘the
direct purpose of providing foreign assistance’. It is unlikely, therefore, that the first round of contracts
awarded by USAID for Iraq redevelopment to US firms will be covered by the GPA. The Department
of Defense is listed in Annex 1, therefore, any contracts awarded by them are also covered.
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
9
The Legality of Reconstruction Contracts in
Post-War Iraq
Problems emerge in determining whether the CPA is also covered by the GPA. The Department of
Defense has stated that the 26 prime contracts awarded by the ‘CPA and the Department of Defense, on
behalf of the CPA’ (US Department of Defense, 2003) are not covered by international trade
procurement obligations because the CPA is not an entity subject to these obligations (USTR, 2003).
Article I:3 of the GPA states that:
‘…where entities, in the context of procurement covered under this
Agreement, require enterprises not included in Appendix I to award
contracts in accordance with particular requirements, Article III shall apply
mutatis mutandis to such requirements …’
Although the CPA is not an entity specifically listed in the US’s Appendix I, it may still be covered by
the GPA. In the Korea - Government Procurement case9, the US challenged some of the procurement
practices adopted by Korea under the GPA. The issue in question was whether an entity not specified
on the Korean Appendix I was ‘essentially a part’ of an entity already on the list, and whether the two
entities were legally incorporated. The US had argued that it had ‘reasonably expected’ that it had
received Korea’s commitment to extend GPA-consistent treatment to US suppliers for the procurement
for an international airport. However, the Panel held that the specific entities responsible for the
procurement were not included in Korea’s commitments; therefore, Korea had not violated the GPA.
Analysis of the Korea - Government Procurement case, however, does not fully resolve the issue of the
relationship between the Department of Defense and the CPA as an incorporated entity under the US
Appendix I. There are at least three reasons why the legal personality of the CPA is unclear:
(i) the US have argued that the CPA is an international entity, and not a
party of the GPA;
(ii) the assertion of the US Department of Defense in their Determination
and Findings memorandum to control the activities of the CPA in awarding
the reconstruction contracts could be interpreted to be within the meaning
of Article I:3 of the GPA;
(iii) the independence of the CPA in awarding the contracts is not clear,
which could be a major factor in deciding whether or not it should be
treated as a US entity under GPA obligations (Palmeter and Meagher,
2003).
If it can be successfully argued that the CPA is an independent body from the US, and is not covered
by the WTO rules, then it is free to discriminate in awarding the contracts as it pleases (Busk and
Alden, 2003).
Secondly, it is important to determine whether the types of contracts awarded by any of the public
entities in Appendix I are covered by the US obligations under the GPA. The 26 contracts awarded by
the Department of Defense and CPA involve many different services, such as construction activities,
communication, management services in the health sector, equipping the new Iraqi Army, etc
(Determination and Findings Memo, Attachment 1).
Annex 4 of the US obligations to the GPA excludes ‘all services purchased in support of military forces
located overseas’. It is arguable that some of the contracts awarded to reconstruct Iraq are considered as
necessary to support the US military forces in Iraq, therefore, exclude them from any obligations under
the GPA. However, contracts to construct Iraq’s infrastructure is not likely to be within this exception.
The US has stated that ‘any form of government assistance, including cooperative agreements, grants,
loans, equity infusions, guarantees’ are also exempt from its obligations under the GPA. Therefore,
contracts of a type to reconstruct Iraq’s infrastructure (rather than purchase services to support the US
military abroad) may be excluded as well from the GPA. This will ultimately depend on the individual
details of each of the 26 contracts procured.
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
10
The Legality of Reconstruction Contracts in
Post-War Iraq
The GPA does not apply to ‘procurement indispensable for national security or for national defence
purposes’ (Busk and Alden, 2003). This security exception is provided for in Article XXIII:1 of the
GPA, and the Deputy Defense Secretary has said that it is for this reason that the US adopted the policy
to ban countries from the rebuilding contracts in Iraq. It is debatable whether such an argument by the
US is valid for the reconstruction of Iraq’s infrastructure (King, 2003, p2). There is a possibility that
such use of the exception could undermine important WTO obligations and encourage WTO Members
to evade them at their own discretion.
It is possible however, that the US has alternative justifications not to comply with WTO rules. The
GPA does contain an endnote which provides that certain types of development assistance (eg ‘tied
aid’) are not subject to the GPA rules, which indeed may cover the reconstruction contracts for Iraq.
3.3.2. The UNCITRAL Model Law on Procurement of Goods, Construction and
Services
The United Nations Commission on International Trade Law (UNCITRAL) adopted a Model Law in
1993, a non-binding instrument offering flexibility and guidance for States to form part of wider trade
regulations (Arrowsmith, 2004, p 17-46)10.
The UNCITRAL ‘model’ rules cover:
‘…all essential procedures and principles for conducting procurement
proceedings in the various types of circumstances likely to be encountered
by procuring entities…’ (Guide to Enactment, para 12)
Its main objectives are to avoid inefficiency, ineffectiveness and abuse in public procurement as a
result of an inadequate legislative national framework. It is more detailed and demanding than the
WTO-GPA, however, is unlikely to have as much an impact (Arrowsmith, 2004, pp 17, 25-26).
Articles 52-57 of the Model Law provide for a system of supplier review which includes a complaint
made by the challenging party to the procuring entity or authority supporting the challenged decision, a
review by a superior administrative authority, and judicial review. Any successful challenges against
the US government under this model law for non-compliance is unlikely, however, as its methods of
enforcement are not strict enough to interfere with recognised constitutional arrangements.
3.3.3. Procurement Guidelines Under World Bank Loans
The relevance of the World Bank in Iraq is its involvement in the International Reconstruction Fund
Facility for Iraq (the Facility). At the European Commission’s Conference in Madrid on the
Reconstruction in Iraq on the 24 October 2003, the World Bank’s involvement was discussed in
relation to the creation of a transparent and operational multilateral framework for reconstruction. The
World Bank and the UN were in the process of establishing a Multi-Donor Trust Fund for Iraq, through
which donors wishing to contribute to the reconstruction effort could channel their contributions
(European Commission, 2003).
It was agreed that the World Bank is to administer its Iraq Trust Fund (ITF) under the Facility 11 in
accordance with its ‘Guidelines for Procurement under IBRD Loans and IDA Credits’ (World Bank
2004, para 56). Eligibility criteria and the application of the guidelines apply, including strict
accordance with certain procurement procedures, that is the UNCITRAL Model Law. Failure to
comply may result in cancellation of financial lending (Report No P7615, paras1.5, 1.6-1.8, and 1.13).
There are no issues of illegality here, per se, for two main reasons:
(i) the procedures are internal and any concerns raised are subject to
review by the Facility’s Coordination Committee and the Donor
Committee;
(ii) the World Bank, as an international public organisation, is unlikely to
be subjected to international rules12.
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
11
The Legality of Reconstruction Contracts in
Post-War Iraq
4.
American Procurement Law and Corruption
4.1.
Federal Acquisitions Regulations
There are a number of different US Government agencies involved in the reconstruction effort in postwar Iraq (for example, the Department of Defense, United States Agency for International
Development (USAID)). The procurement of these contracts, therefore, occurs under different statutes
and rules but all contractors are obliged to comply with the Federal Acquisitions Regulations (FAR).
FAR is the primary regulation for use by all Federal Executive agencies in their acquisition of supplies
and services with the appropriations that the US Government has acquired from tax payers. It provides
for full and open competition (40 US Code 474), fair and transparent assessment of a contractor’s
ability to perform, simple and uniform procedures to conduct the pre-solicitation, selection and
negotiation processes, and provide notification to offerors in making an award. The FAR entered into
force on 1 April 1984.
Under the joint authorities of the General Services Administration, the Secretary of Defense, and the
Administrator for the National Aeronautics and Space Administration, the FAR was issued within other
applicable laws.
For example, USAID, the agency that has awarded $900m worth of contracts to US firms for the Iraq
reconstruction programme, is subject to the terms of the Foreign Assistance Act of 1961. Section
604(2)(g) of the FAA states that:
‘…none of the funds authorised to be appropriated or made available for
obligation or expenditure under this Act may be made available for the
procurement of construction or engineering services from advanced
developing countries …
….which have attained a competitive capability in international markets for
construction services or engineering services…’
Therefore, only US firms can be awarded the prime Iraq contracts by the US Government It was stated
that these firms must however understand the federal procurement rules, accounting standards,
standards of the (USAID) inspector general and the General Accounting Office (of Congress) and have
security clearance (Scherr, 2003).
4.1.1. USAID’s Compliance Record with the FAR
The Office of Inspector General (OIG) makes a review of each contract awarded by USAID to
determine compliance with Federal regulations. Table 2 represents some of the non-compliance issues
with the FAR from a random selection of the USAID awarded contracts.
It can be seen that out the five contracts selected, only one complied fully with the requirements of the
FAR. Through recommendations given by the OIG, USAID is given the opportunity to correct
themselves or implement measures to ensure non-compliance does not reoccur in future contracts.
In circumstances such as the crisis situation in Iraq, USAID can be authorised under statutory authority
by the Office of Inspector General ‘expedited acquisition’ and ‘assistance procedures for activities and
programmes’. This authorisation allows USAID to award such contracts using other than full and open
competition requirements (as specified under 40 USC 474). However, awarded contracts must be
supported by written justifications and approvals as described in the FAR. The statutory authority also
requires that agencies request offers from as many sources as is practicable under the circumstances.
A detailed examination of the memorandums issued by the OIG shows that even under the
authorisation of limited competition, USAID still did not comply fully with the requirements of the
FAR under expedited circumstances in a number of contracts. For example, the largest value contract,
for the Iraq Infrastructure Reconstruction (IIR), it is stated that under limited competition conditions,
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
12
The Legality of Reconstruction Contracts in
Post-War Iraq
the average procurement time to award a contract is seven months. In this case, the Iraq Infrastructure
Reconstruction contract was awarded within three months. Considering the nature, size and expense of
such a contract to be performed, it is fundamental that the procurement process is seen to be carefully
executed and value for money is achieved. This is always important in an area which concerns the
public interest and welfare of political society. There a number of indicators that can be used to help
identify corruption risk (discussed in 4.2), and the misuse of an expected time frame of a procurement
operation is one specific example. Therefore, concerns about corruption may arise.
Table 2: USAID’s Compliance Review with Federal Acquisitions Regulations (FAR) by the Office
of Inspector General (OIG)
Date of
Memo
Value of Name of
Contract Contract
Awarded
27.01.2004 $10.2m Iraq Airport
(18
Administration
months)
Plus two Contract
optional
years,
a
potential
total
cost of
$31.3 m
US Firm
Awarded
NonRecommendation(s) Response to
compliance
by the OIG
Recommendation(s)
issue(s) noted
SkyLink Air -There was no
and
documentation
in the contract
Logistic
files of market
Support
research
(USA), Inc performed to
support the
size and
complexity of
this
acquisition
Recommendation
No.1: Before
sponsoring SkyLink
USA for a facilities
clearance and
modifying the
airport
administration
contract to require
one, the Asia &
Near East Bureau
should determine if
-SkyLink
there is a need for
USA’s
SkyLink USA to
incorporation have a facilities
status had
clearance and take
lapsed before appropriate action
it was asked to when this decision
participate in is made
the bidding
process (nb:
this lapse was
corrected
several days
before the
final contract
was signed)
The Office of
Procurement and
the Asia & Near
East Bureau
determined that
there is not a
justifiable need for
SkyLink USA to
have a facilities
clearance.
Therefore, final
action has been
taken on
Recommendation
No.1
-USAID had
not reviewed
SkyLink
USA’s newly
implemented
cost
accounting
system and
provisional
indirect cost
rates
-USAID had
not
determined if
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
13
The Legality of Reconstruction Contracts in
Post-War Iraq
SkyLink USA
needed a
facilities
clearance*
27.01.2004 $4.8m
(one
year
with no
option
years)
Iraq Seaport
Assessment
and Operation
Contract
SSA Marine,
formerly
known as
Stevedoring
Services of
America
-USAID failed
to comply
with the need
to document
market
research
described in
the
negotiation
memorandum
14.01.2004 $36.9m
(one
year
plus 2
option
years)
Agriculture
Reconstruction
and
Development
Programme
for Iraq
Contract
Development
Alternatives,
Incorporated
(DAI)
USAID
n/a
complied with
applicable
federal
regulations in
making the
award
Date of
Memo
Value of
Contract
17.10.2003 $43.8 m
(cost-plusfixed-fee
completion
type
contract)
LGD 2004 Issue 2
Name of
Contract
Awarded
The Office of
Procurement has
not yet developed
specific procedures
requiring
contracting officers
to verify, in the
early stages of the
procurement
1) issue a policy
process, the
directive to provide facilities clearance
-USAID
guidance to
level of the bidding
changed the
procurement
contractor. USAID
facilities
officials on the
is still in the
clearance
requirements for
process of taking
requirements documenting
action on these
of the Request contractor facilities recommendations
for Proposals clearances during
(RFP) during the procurement
the
process,
procurement
& 2) ensure that
process
when facilities
clearance
requirements are
part of an RFP, the
decision to go
forward or delete
the requirement is
made prior to
selection
US Firm
Awarded
Health System Abt
Strengthening Associates
in PostConflict Iraq
Contract
Similar
recommendation to
the Airport
Administration
Contract. Also, 2
recommendations
made to the Office
of Procurement:
n/a
Noncompliance
issue(s)
noted
Recommendation(s) Response to
by the OIG
Recommendation(s)
-USAID did
not consult
the General
Councel for
a legal
opinion, as
required by
the FAR,
before
Recommendation
No.1: USAID
should use a
checklist of contract
procurement steps,
which among other
things, will ensure
that it requests and
obtains an opinion
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
USAID concurred
with the OIG that it
had not obtained
advise from the
General Counsel,
and would include a
step to refer conflict
of interest issues to
the Counsel to help
Refereed Article
Kavanagh, S
14
The Legality of Reconstruction Contracts in
Post-War Iraq
excluding a
firm (out of
two offerors)
from the
invitation to
bid on the
contract
23.07.2003 $679,833,259 Contract for
Bechtel
Iraq
National,
(cost-plusInfrastructure Inc
fixed-fee
Reconstruction
type
(IIR)
contract)
LGD 2004 Issue 2
from it's Office of
General Counsel on
conflict of interest
issues regarding
potential bidders.
Recommendation
No.2: the Office of
Procurement should
obtain an opinion
from USAID's
Office of General
Counsel, which
specifies whether
the firm providing
personnel support
services to USAID
in Iraq should have
been excluded from
the invitation to
compete for the
Health System
Strengthening in
Post-Conflict Iraq
Contract
-USAID did
not comply
with Federal
Regulations
in providing
notification
to offerors
who were
not selected
(FAR
15.503(b)(1))
Recommendation
made to USAID's
Office of
Procurement to
develop
administrative
procedures to
ensure that timely
award notification
and debriefings are
performed in
accordance with
-USAID did FAR requirements.
not comply
with Federal Second
Regulations Recommendation
in providing made to the Office
timely
of Procurement to
debriefings issue an Agencyto all
wide notice that
requesting
would ensure that
offerors
items discussed in
(FAR
pre-solicitation
15.506)
meetings with
potential offerors
-Preare documented.
solicitation
contacts with
offerors were
not
documented
(FAR
15.201), to
maintain
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
ensure compliance
with the FAR.
USAID
subsequently
obtained the
required opinion
from the General
Counsel, who
concluded that the
firm was
appropriately
excluded from
bidding on this
contract. Final
action has therefore
been taken on
Recommendation
No.2
-USAID, whilst
admitting that it
was late in
providing the nonselected contractors
with a debriefing,
stated that the delay
was a result of the
urgency of getting
the selected
contractor working
in Iraq.
-USAID felt that
documenting these
meetings would
place a burden on
USAID personnel.
The OIG maintain
that records of such
meetings would
provide additional
information to
officials in the
Office of
Procurement as the
award process
progresses, and
provide evidence of
USAID's
compliance with
FAR.
Refereed Article
Kavanagh, S
15
The Legality of Reconstruction Contracts in
Post-War Iraq
good
business
practice and
provide
further
evidence of
USAID's
compliance
with FAR
3.101-1
("Standards
of conduct General")
4.1.2. Department of Defense’s Compliance Record with the FAR
The results from an audit published by the Office of the Inspector General on the 18 March 2004,
discloses the following specific contracting rules that were evaded or liberally interpreted:

firm contract requirements were not established by the personnel
who generated the contract requirements (8 of 24 contracts);

of 24 contracts awarded, 18 were awarded using the General
Service Administration Federal Supply Schedules which the
contracting officers ‘misused’ (10 of 18 contracts);

personal services contracts were inappropriately awarded by the
contracting officers (10 of 24 contracts);

‘out-of-scope activity’ was permitted by the contracting officers (1
contract);

price reasonableness determinations were not supported by the
contracting officers (22 of 24 contracts);

little or no Government surveillance on awarded contracts was
performed by officials (13 of 24 contracts).
The reason given by the Department of Defense for the non-compliance of the contracting rules was
that they had to acquire supplies and services quickly because of the rapidly changing situation in Iraq
in early 2003.
Out of 24 contracts awarded by the Department of Defense, only two are considered to have followed
the FAR. As a result, the Department of Defense have been warned that they cannot be assured that the
best contracting solution was provided, that they received fair and reasonable prices for the goods and
services, or even that the contracts will perform the work that the contract required.
Recommendations to prevent future problems included an analysis of all the ongoing contracts,
determination of Government liability, and initiation of appropriate termination actions. Also,
compliance with the FAR when documenting the contract files, appointment of representatives for the
Iraqi contracts, provision of monthly status reports of the contracts, and ensure that contractors refund
any overpayments to the Government. It is reported that the majority of these recommendations have
been agreed upon.
The audit also notes that the OIG did not identify any actions taken by Government personnel which
‘were based on the desire for personal gain’ despite the various acquisition problems. Interestingly, the
proposal for a review and initiation of appropriate administrative action against the contracting officers
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
16
The Legality of Reconstruction Contracts in
Post-War Iraq
who failed to apply the FAR and misused the General Service Administration Federal Supply
Schedules was rejected by the commander. The commander stated that there was no evidence that any
contracting officials acted illegally or in bad faith, and that it was ‘unconscionable’ that action be taken
against contracting officials without holding any senior officials responsible for making the demands
accountable.
4.2.
Corruption in Public Procurement
Corruption is an offence relating to the improper influencing of people in certain positions of trust
(Oxford Dictionary of Law). It is an important consideration with regard to the reconstruction contracts
for post-war Iraq because these contracts involve large sums of tax payers’ money, the involvement of
a State government and private firms. Also, issues have been raised from this assessment that some
important procurement rules have not been complied with.
Public procurement usually accounts for the largest share of public expenditures at all levels of
government. The value of individual contracts is high and government salaries and social benefits are
relatively low. The risk of punishment for corruption is small. The opportunities and temptations for
bribes and other pay-offs are abundant. The result is that corruption is notorious in public procurement
(Strombom, 1998).
Corruption undermines the institutions and legitimacy of a State and affects the efficiency of public
action. The importance of combating corruption is to essentially protect the taxpayer, as it is clear that
it is the public who lose out in the end. A recent example of the consequences of a State’s citizens,
through non-compliance of regulations and poor quality construction, is the earthquake in Turkey
(2001) that killed 176 people (Hors, 2003).
Procedures that include the principles of fair competition, transparency and efficiency are thought to be
only part of the solution to corruption in public procurement. Efficient controls, the provision of
education to private and public actors and a strong political will are also required to circumvent
corruption (Hors, 2003).
4.2.1. Detecting Corruption
A method adopted by the Central Service for Corruption Prevention (SCPC) 13 is based on known
patterns of corrupt practices in public procurement and an identification of the tracks that these
practices are likely to leave.
Reliable records of companies should be easily compared to the following information for each
procurement operation;
1.
the expected time delay and the budget allocated initially;
2.
the actual duration and cost;
3.
the procurement method used;
4.
whether the procurement operation gave rise to litigation;
5.
the identity of the company who won the contract and
information of its activities and history
6.
the identity of the public officials involved in the definition
of the project, in the evaluation of the bids and in the
allocation of the contract (Hors, 2003)
If there is any variation from the above information, then a suspicion of corruption may arise which
will initiate an investigation line that will reveal either an illicit operation or inefficient implementation
of procurement procedures (Hors, 2003,).
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
17
The Legality of Reconstruction Contracts in
Post-War Iraq
4.2.2. International Anti-Corruption Instruments and the US
The first multilateral instrument specifically designed to combat corruption was signed by 21 Member
States of the Organisation of American States (OAS) in 1996. The Inter-American Convention Against
Corruption (ICAC) entered into force on the 6 March 1997, and has been the main influence for the
enactment of other international instruments (Baistrocchi, 2002).
Corrupt acts covered by the Convention include the direct or indirect solicitation or acceptance by a
government official of any benefit for his personal benefit, in exchange for any act or omission in the
performance of his public functions (Article VI). Corrupt acts must be established as a criminal offence
in the domestic law of a State Party (Article III). Measures are also prescribed to prevent corruption
that the Parties ‘agree to consider establishing’. The wording of the Convention does suggest that these
measures are more instructive than legally binding. States that do not punish these acts internally are
required to assist and cooperate within the framework of the Convention.
The ICAC broadly defines ‘Public Function’ to cover temporary or permanent, paid or voluntary
activity, performed by a natural person in the name of the State, the service of the State or its
institutions at any level of its hierarchy (Article I). The Convention also broadly defines a ‘Public
Officer’ to cover any civil servant at any level of its hierarchy. Interestingly, the US has made an
explicit reservation that no obligations may be imposed with respect to the conduct of officials other
than Federal officials (Baistrocchi, 2002).
In October 2000, the US passed the International Anti-Corruption and Good Governance Act.
S.203(a)(5) of this Act amends the Foreign Assistance Act 1961 by establishing ‘the promotion of good
governance through combating corruption and improving transparency and accountability’
(Baistrocchi, 2002). This new US policy authorises the US President to establish such programmes in
foreign countries where it has either a significant economic interest, provides it with significant foreign
assistance or where the practice of corruption is well known. 14 It is likely that the US will set up anticorruption programmes in Iraq to govern government procurement processes.
However, the accountability of the US government for the procurement of the Iraq reconstruction
contracts is already doubtful. Numerous demands have been made by members of the US Congress to
improve oversight and accountability over the reconstruction of Iraq which highlights the concerns
about corruption (Corporate Watch et al, 2003).
4.2.3. Improving the Accountability of the Iraq Reconstruction Contracts
In the House of Representatives, the following demands are recorded to have been made;
1.
to introduce the ‘Rebuild Iraq Contractor Responsibility Act’, which
would require that businesses seeking contracts in Iraq possess a
satisfactory record of integrity andbusiness ethics;
2.
to make an amendment to the House Resolution 1837 through the
‘Services Acquisition Reform Act of 2003’, so that government
agencies procuring Iraq reconstruction contracts are required to
publish full details of all non-competitive contracts. This was accepted
by the House Government Reform Committee on the 8th May 2003;
3.
to call upon the General Accounting Office (GAO) to investigate
contracts with private firms for work in Iraq;
4.
to call upon the GAO to investigate the US agencies, offices and
international organisations involved in reconstructing Iraq and their
roles in the procurement process.
In the US Senate, two amendment proposals were passed on the 22 May 2003 following strong
demands for legislative alteration. The first amendment was to the Defense Authorisation Bill (WarnerLGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
18
The Legality of Reconstruction Contracts in
Post-War Iraq
Boxer Amendment 826), requiring the Department of Defense to comply with standard competitive
bidding practices when awarding any contract for Iraq reconstruction. This was passed unanimously by
the Senate. The second amendment was to the Defense Authorization Bill (the ‘Sunshine in Iraqi
Reconstruction’ amendment) which requires that the Department of Defense to publish justification
documents for any Iraq contract awarded through a non-competitive bidding process.
These demands and alterations are the result of public pressure calling on the US Government to
account for the massive tax expenditure being invested into the reconstruction effort in Iraq, in which
corporate enterprises are set to profit. Contracts that have been examined in the previous chapter show
substantial cost differences between the initial budget allocated for purchasing a firm’s services and the
final sum awarded (USAID, 2003). Overspending is a prime example of a specific indicator of
corruption risk (Hors , 2003). The publication of justification documents and full investigations into the
procurement process adopted by State agencies, such as USAID, will inevitably help answer obvious
questions that arise such as how USAID could have made such a dramatic mistake in evaluating the
contract. Also, an investigation line may be initiated to discover corruptive practices that may bring the
firm into disrepute. Without a satisfactory record of integrity and business ethics, it is unlikely that such
a firm could have future business with the government. This will encourage other firms to bid, opening
up the procurement process to become accountable, transparent and non-discriminatory, satisfying
international rules and more importantly the taxpayer.
5.
Conclusion
It would seem that the home biased procurement activities of the US agencies and their noncompliance with the important GPA rules is justified. However, the analysis of compliance by the US
agencies with respect to US domestic law has revealed dubious justifications for their adoption of nontransparent, unaccountable and discriminatory practices.
The FAR are strict procurement rules and provide that the US Government is not allowed to award
firms, other than US firms, contracts that are to be procured with US appropriations. However, the US
Government agencies have had to justify why they themselves have not complied fully with these
‘strict procurement rules’. Firstly, the Office of Inspector General (OIG) granted USAID statutory
authority to award their contracts using ‘other than full and open competition requirements’. However,
it has been discovered that even under these conditions, the FAR provides that written justifications and
approvals must be submitted to support the contract award. This has not always been accomplished.
Secondly, the Department of Defense did not comply with the FAR for the expressed reason that the
need to acquire supplies and services quickly was a response to the rapidly deteriorating situation in
Iraq. Although no statutory authorisation was given by the OIG to use such methods for awarding these
contracts (to the knowledge of the author), it would appear that little more than ‘recommendations’
have been given to ensure compliance.
The discussion concerning corruption is particularly relevant, as without a transparent and accountable
government, public involvement and participation is restricted. Essentially, it is the US taxpayers’
money that is being spent by the US agencies. If the public are not satisfied with the integrity of their
national system, then a radical change of government aims should be engaged. As a consequence of
which, the Iraq contracts could be abandoned to channel the funds back into US society.
In relation to the 80 percent of the DFI awarded largely to US contractors by the CPA before 28 June
2004, it has been reported that most of this money was awarded without any competition or application
of US government procedures against fraud, waste and abuse. This appalling example seems to have
been continued by the Iraq interim government when awarding further contracts, as little, if not any,
information has been made publicly available since their empowerment (OSI Revenue Watch Report
No 7 Sept 2004).
While the lack of security in Iraq exists, US firms may find that they are physically unable to work
there. The elections scheduled in Iraq beginning of 2005 may result in an emergence of ‘a coalition
dominated by religious parties of the Shia majority’, (Dinmore, 2004). This could demolish the US’s
objective to create a democracy and stability in the region. The main concern resulting from a further
change in Iraqi government, for both US, UK and Iraq will be the length of time foreign troops will
remain in Iraq to fight against the persistent rebel forces.
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
19
The Legality of Reconstruction Contracts in
Post-War Iraq
The future of Iraq depends on making the country more secure and on its successful reconstruction, as
Brian Wilson, the former UK construction minister, stated in August 2003:
‘…nobody would underestimate the safety issue, but it also emphasises
why the reconstruction is so important. Rebuilding is needed so the region
can move forward…’ (cited in Broughton, 2003, p 11).
Endnotes
1
For example, the Development Assistance Committee (DAC) which includes the following members;
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland,
the UK, the US and the European Commission.
2
The Coalition Provisional Authority is comprised of 63 countries and led by the US Pentagon.
3
On 18 October 1907, the US signed and ratified the Hague Regulations. Iraq has only signed these
conventions, so is therefore, not a party.
4
See Regulations Respecting the Laws and Customs of War on Land, annexed to the Convention
Respecting Laws and Customs of War on Land (1907), and the Convention Relative to the Protection
of Civilian Persons in Time of War (1949)
5
Disorder, Negligence and Mismanagement: How the CPA Handled Iraq Reconstruction Funds OSI
Revenue Watch Report No 7 September 2004.
Article 43 does provide an exception which applies when the occupying power is ‘absolutely
prevented’ from respecting an occupied state’s law, e.g. if such pre-existing laws threaten safety and
supply of the occupying force, public order and civilian life of the occupied state. Ignoring or amending
such laws may also be justified by necessity in relation to the occupied population or the occupying
force.
6
7
For example, the IAEA Guidelines 1985 which were rapidly adopted in the 1986 Convention on Early
Notification of a Nuclear Accident after the Chernobyl catastrophe.
The two standard GPA procedures, included in the UNCITRAL Model Law, are ‘open tendering’ and
‘selective tendering’.
8
9
Korea - Measures Affecting Government Procurement, WT/DS163/R (June 2000) para7.59
<http://www.wto.org/english/tratop_e/gproc_e/disput_e.htm>
10
The World Bank has consistently and actively participated in the preparation of the Model Law,
therefore, it recommends that legislation be based on it before the World Bank finances procurement
reform. The significance of this could be that Iraq, after the occupation, may have to adopt the Model
Law in its legislation as a condition to obtain funding from the World Bank.
The Facility is composed of two trust funds, the World Bank’s ITF, and the UN Development Group
Iraq Trust Fund to be administered by the UN Development Programme (UNDP) and participating UN
organisations.
11
12
In Mendaro v World Bank [1983] 92 ILR, pp92, 97-99, the US Court of Appeal held that the
justification for granting immunity to international organisations was to enable them to pursue their
functions more effectively, in particular, to operate freely from unilateral control by a member state
over their activities within its territory.
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
20
The Legality of Reconstruction Contracts in
Post-War Iraq
13
The SCPC is a specialised unit for analysing corruption, providing education and training on
corruption, advising public authorities and assisting courts (Hors, 2003).
14
The Transparency Index of Transparency International lists the countries that are known to have
problems with corruption.
References
Arnold, D and Booth, R (2003) 'Call-up to rebuild Iraq', Building Design, 21 March 2003.
Arrowsmith, S (2004) 'Public Procurement: An Appraisal of the UNCITRAL Model Law as a Global
Standard' ICLQ 53, pp 17-46.
Arrowsmith, S and Davies, A (1999) Public Procurement: Global Revolution (London: Kluwer Law
International)
Arrowsmith, S and Hartley, K (2002) Public Procurement I & II (The International Library of Critical
Writings in Economics 144).
Bagheri, M (2000) International Contracts and National Economic Regulation - Dispute Resolution
Through International Commercial Arbitration (The Hague: Kluwer Law International).
Baistrocchi, P (2002) 'International Anti-Corruption Instruments: Recent Developments in the
Americas and the United States' Public Procurement Law Review 11, NA65.
BBC News (2004) 'No Flaw' in Iraq Contracts System', 31 Jan 2004.
Bekker, P (2003) 'The Legal Status of Foreign Economic Interests in Occupied Iraq' American Society
of International Law Newsletter of September/October 2003, p 8.
Boyle, A (1999) 'Some Reflections on the Relationship of Treaties and Soft Law', International and
Comparative Law Quarterly 48, pp 901-913
Broughton, T (2003) 'British Firms Win One Fifth of Iraq Sub-Contracts', Building Magazine, 29
August 2003.
Brownlie, I (1998) Principles of Public International Law (Oxford: Oxford University Press)
Brownlie, I (2002) Basic Documents in International Law (Oxford: Oxford University Press)
Busk, T and Alden, E (2003) 'International Economy: Trade Lawyers Pick Over Small Print in Treaty',
Financial Times, Dec 11, 2003.
The Coalition Provisional Authority Overview http://www.iraqcoalition.org/bremerbio.html
Corpwatch, Global Exchange and Public Citizen (2003) 'Bechtel: Profiting from Destruction - Why the
Corporate Invasion of Iraq Must Be Stopped'. Corpwatch et al
<http://www.occupationwatch.org/downloads/Bechtelreportfinal.pdf>
Dinmore, G (2004) 'White House getting used to idea of Shia government', Financial Times
Washington, 2 December 2004.
Dixon, M and McCorquodale, R (2003) Cases & Materials on International (Oxford: Oxford
University Press)
Griffiths, J (2003) 'After The Fall', Building Magazine, 25 July 2003.
Heilman Grier (2001) ‘Government Procurement’, September 2001.
http://www.osec.doc.gov/ogc/occic/gpa.htm
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
21
The Legality of Reconstruction Contracts in
Post-War Iraq
Hors, I (2003) 'Shedding Light on Corrupt Practices in Public Procurement', Public Procurement Law
Review 12, NA101.
Hunja (1999) 'The UNCITRAL Model Law on Procurement of Goods, Construction and Services and
its Impact on Procurement Reform' Public Procurement: Global Revolution (London: Kluwer Law
International).
Jennings, R (1957) 'Extra-Territorial Jurisdiction and the United States Antitrust' British Yearbook on
International Law 33, pp153-160.
King, D (2003) 'War Opponents Lose Out in Iraq Rebuild', Evening News (Edinburgh), 10 December
2003.
Lowe, V (2003) 'The Iraq Crisis: What Now?' International and Comparative Law Quarterly 52, p 865.
Madrid Conference (2003). ‘Communication From The Commission to the Council and the European
Parliament’, The Madrid Conference on Reconstruction in Iraq, 24 Oct 2003, COM (2003) 575.
New York Times (2003) 'US - British Draft Resolution Stating Position on Iraq', 25 February 2003.
Nichols, R (2004) 'Iraq Reconstruction: US Government Procurement Practices in a Coalition
Government' PPLR 4, NA103-112.
Nikkhah, R (2003) 'US to keep plum Iraq Contracts', Building Design, 28 March 2003.
Martin. Elizabeth A (ed) (1994) Oxford Dictionary of Law, 4th edition (Oxford: Oxford University
Press).
Palmeter, D and Meagher, N (2003) 'WTO Issues Relating to US Restrictions on Participation in Iraq
Reconstruction Contracts' ASIL Insights. http://www.asil.org/insights/insigh123.htm
Peterson, J (2004) 'Keynote Article: Europe, America, Iraq: Worst Ever, Ever Worsening?' Journal of
Common Market Studies 42, pp 9-26.
Pitschas, C (2004) 'World Trade Organisation/United States: Award of Prime Contracts for
Infrastructure Reconstruction in Iraq - An Assessment Under the WTO Agreement on Government
Procurement' Public Procurement Law Review 3, NA85-89.
Pleming, S (2003) 'US Shuts Out France, Germany for Iraq Work', Reuters Washington, 9 December
2003. http://www.casi.org.uk/discuss/2003/msg05054.html
Russell, A and Gedye, R (2003) 'Old Europe' Banned from Iraq Aid Contracts by Washington', The
Daily Telegraph, 11 December 2003.
Scheffer, D (2003) 'Beyond Occupation Law, AGORA (Continued): Future Implications of the Iraq
Conflict', American Journal of International Law 97, p856.
Scherr, E (2003) 'US Aid Effort for Iraq Largest Since Marshall Plan', Washington File Special
Correspondent, 27 March 2003. http://japan.usembassy.gov/e/p/tp-20030327b4.html
Shaw, M (2003) International Law (Cambridge: Cambridge University Press).
Slaughter, A (2003) 'A Fork in the Road' American Society of International Law Newsletter of
September/October 2003.
Strombom, D (1998) 'Corruption in Procurement' Electronic Journal 3 (5).
http://usinfo.state.gove/journals/ites/1198/ijee/strombom.htm
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
22
The Legality of Reconstruction Contracts in
Post-War Iraq
The Morning Star (2003) 'France Questions Iraq Ban Legality', 11 December 2003.
Trionfetti, F (2000) 'Discriminatory Public Procurement and International Trade' Public Procurement I
& II (The International Library of Critical Writings in Economics 144) p 57.
Villagier, M E (1985) Customary International Law and Treaties (Dordrecht: Nijoff).
The World Bank Iraq Trust Fund within the International Reconstruction Fund Facility for Iraq (2004)
‘Guidelines for Procurement under IBRD Loans and IDA Credits’, January 2004, Report No P7615,
para 56.
United Nations (2000) ‘2000 – Procurement Volume by Country’ United Nations Procurement Service
http://www.un.org/Depts/ptd/00goods.htm
USAID (2003). ‘Memorandum: USAID’s Compliance with Federal Regulations in Awarding the Iraq
Infrastructure Reconstruction Contract’, 23 July 2003 http://www.usaid.gov/oig/iraq_doc/memo_03003.pdf
US Department of Defens (2003) ‘Determination and Findings’ of the 5 December 2003 Regarding
Reconstructing Iraq http://www.washingtonpost.com/wpsrv/world/documents/iraqcontracts_dod20031205.pdf>
US Department of Defense Office of the Inspector General (2004) ‘Audit on Contracts Awarded for the
Coalition Provisional Authority’
http://www.globalsecurity.org/military/library/report/2004/04057sum.htm
USTR (2003). Statement from USTR Spokesman Richard Mills on Coalition Provisional Authority on
the 12 October 2003.
http://www.ustr.gov/Document_Library/Spokesperson_Statements/Statement_from_USTR_Spokesma
n_Richard_Mills_on_Coalition_Provisional_Authority.html
Cases
Harmon v House of Commons [2000] 72 Con LR 21.
Iran - US Claims Tribunal v AS [1984] 94 ILR 321.
Korea - Measures Affecting Government Procurement Case, WT/DS163/R (June 2000).
Mendaro v. World Bank [1983] 92 ILR 92.
Tinoco Case (UK v. Costa Rica) 18 AJIL 147 [1924].
International and UN Documents
Agreement on Reparation from Germany, 14 Jan 1946
Hague Convention (IV) respecting the Laws and Customs of War on Land 1907
Inter-American Convention Against Corruption (ICAC) 1997
Statute of the International Court of Justice 1945
Treaty of Peace with Japan, 8 September 1951
UN General Assembly Resolution (V) of 2 December 1950
UN Security Council Resolution 1500 of 14 August 2003
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article
Kavanagh, S
23
The Legality of Reconstruction Contracts in
Post-War Iraq
UN Security Council Resolution 1511 of 16 October 2003
UN Security Resolution 1483 of 22 May 2003
UNCITRAL Model Law on Procurement of Goods, Construction and Services 1994
WTO General Agreement on Tariffs and Trade (GATT) 1994 (to be read with GATT 1947)
WTO-GPA, 1 January 1996
WTO-GPA, Disputes 1994http://www.wto.org/english/tratop_e/gproc_e/disput_e.htm
WTO Government Procurement: Plurilateral Agreement: Loose-leaf appendices to the agreement on
government procurement APPENDIX I for all signatory countries
http://www.wto.org/english/tratop_e/gproc_e/apend_e.htm#us
LGD 2004 Issue 2
http://go.warwick.ac.uk/elj/lgd/2004-2/kavanagh
Refereed Article