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The Iraqi Oil Contracts and the Importance of Independent Counsel

JURIST Contributing Editor Haider Ala Hamoudi of the University of Pittsburgh School of Law says the Iraqi government needs to secure independent counsel over and above whatever guidance it has received from US government advisers before entering into key oil contracts with major US oil companies...

Much has been written recently of the oil contracts Iraq is near to signing with a series of large oil companies. One legal aspect of this story, however, has gone largely unreported in the larger media and deserves greater consideration, particularly among us lawyers who take the notion of legal representation and legal ethics fairly seriously.

To review, Iraq's Oil Ministry announced last week that Iraq was in final negotiations with a number of larger oil companies, among them Chevron, Total, BP, Exxon Mobil and Shell, on contracts to develop some of the larger oil fields in Iraq's south. This attracted media and Congressional attention mainly because the contracts were no-bid, meaning that there was no open bidding process to obtain them, unusual in the industry and particularly unusual given the global demand for oil presently. Suggestions soon arose that perhaps the United States had something to do with the manner in which the contracts were awarded, given that the largest beneficiaries were American oil companies. Calls arose in Congress to cancel or delay the contracts, and the Bush administration vehemently denied any involvement.

In this atmosphere, an article appeared in the New York Times indicating that U.S. government officials had advised the Iraqi government as to the contracts. Some advice was given through a program entitled Tatweer (Arabic for development) funded by the United States Agency for International Development (USAID) and organized by a consulting firm. In addition, it was reported that advisers from the Departments of State, Commerce, Energy and Interior regularly advise the Oil Ministry in Iraq.

Defending their activities as having nothing to do with the awarding of the contracts, Tatweer officials insisted that their advice was purely legal — offering contract templates, suggesting clauses to include, providing formatting changes. The State Department claimed to offer similar advice. In the words of one State Department official, what was told to the Ministry was along the lines of "these are the clauses you may want. You will need a clause on arbitration. You will need this clause to make this work.'' The reason for all of this advice, someone from Tatweer indicated, was that there was an exodus of qualified employees and lawyers able to draft contracts of these sorts.

This was supposedly meant in defense of this program, as a demonstration that the advice was not the surreptitious exertion of undue influence on the Iraqis to issue the no-bid contracts. Yet the defense is in many ways considerably worse than the initial accusation. As an attorney, it seems to me that if all of this is true, then the Tatweer officials and the government lawyers have been advising the government extremely poorly and the Iraqi Oil Ministry is doing a deep and fundamental disservice to its own people.

I realize these words are strong, but I do not think they are overstated. 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." There are plenty such lawyers, who have spent decades drafting precisely contracts of this sort and who are more than capable of providing excellent, first rate representation who could handle such matters. Certainly they are more capable of serving the needs of their clients than these U.S. government advisers, with other obligations and interests, would be. (In full disclosure, I have on occasion advised the Iraqi government on any number of topics, and repeatedly urge them to hire lawyers on anything of significance, arranging in some cases meetings with potential law firms and suggesting which one appeared to be the most qualified).

Moreover, Model Rule of Professional Responsibility 4.3 indicates that a lawyer cannot offer legal advice to an unrepresented person whose interests conflict with those of her client, other than to seek counsel. The lawyer should also not state or imply that the lawyer is disinterested. The U.S. government as a voracious oil consumer clearly has interests in oil that conflict with those of Iraq, an oil producer, though perhaps technically speaking the Iraqi government is being advised by its own domestic legal department and so is not "unrepresented." While perhaps sufficient to evade sanction, this hardly seems like a principled position for the U.S. government to take given that the severe shortcomings of that Iraqi legal department are precisely what led to the institution of the program to offer legal advice in the first place.

As for the Iraqis, giving the Ministry the benefit of every possible doubt, one must assume that their lawyers are simply not experienced enough to understand the importance of retaining independent counsel. As someone who has been intimately involved in Iraqi legal education and practice, I have great respect for Iraq's legal culture and the dedication of its legal professionals. However, thirty five years of isolation has taken its toll, particularly as regards matters of international commerce. Still, it is difficult to justify or explain the Iraqi decision to rely on their in-house legal department, and to ask U.S. government lawyers for assistance on occasion despite the obvious potential conflict. The large oil companies, with a far more experienced and deeper in-house staff, would never hesitate to hire top notch counsel when in need of assistance. Surely on a matter of this importance involving this much money, Iraq must do the same, and the U.S. government should be telling them as much.

Haider Ala Hamoudi is a professor at the University of Pittsburgh School of Law. The American-born son of Iraqi parents, he has lived and worked in Iraq and has been a legal advisor to the Iraqi government, experiences he describes in his new book, Howling in Mesopotamia (Beaufort Books). He has a blog on Islamic law at http://muslimlawprof.org.


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