The United States’ presence in transitional Iraq resulted in many opportunities for U.S. government contractors. Since the early 2000s, a significant number of U.S. government contractors have engaged individuals to perform work in Iraq, and sponsored visas for those individuals. In recent years, the legality of these arrangements largely was governed by an agreement between the United States and the Iraqi transitional government, called the “Status of Forces Agreement” (SOFA). Corresponding with the timing of the withdrawal of U.S. troops from Iraq, SOFA expired at midnight on December 31, 2011. With this expiration came significant rule changes. In particular, any foreign company wishing to sponsor visas or work permits for foreign nationals working in Iraq must establish an entity in Iraq with a physical presence in the country. The implications of noncompliance are significant. The Iraqi government has even detained individuals without proper visas upon attempting to exit the country.
The January 1, 2009 SOFA—concluded as a U.S. executive agreement and approved by the Iraqi Council of Ministers—allowed government contractors to enter and leave Iraq easily, without risk of violating immigration rules. Specifically, SOFA’s Article 14 enabled members of the Armed Forces and civilian employees working for the U.S. military to enter and leave Iraq through specified official entry/exit points merely by displaying identification cards and U.S.-issued travel orders. While not directly addressing immigration for government contractor employees, SOFA’s permissive treatment of Armed Forces members and employees led to similarly permissive application of the requirements for U.S. government contractor employees.
Almost immediately after the withdrawal of U.S. troops from Iraq and the corresponding expiration of SOFA, Iraqi authorities began detaining foreign contractors at various checkpoints and at the airport, citing improper paperwork such as invalid or expired visas, weapons permits, work permits, and route authorizations, many of which the government refused to renew. With little warning, the lax immigration requirements under SOFA were replaced by the more common requirement in the global arena that foreign nationals must have current work permits tied to a locally-registered business entity that is sponsoring the employees.
Sources estimate that hundreds of individuals have been detained for periods of 24 to 96 hours or more, sometimes including severe interrogation. Some contractors have been ordered to leave Iraq within 10 days due to new limitations on visas. Many government contractors were utterly unprepared for this sudden crackdown, as immigration requirements in a post-SOFA world were not clear at the time of SOFA’s expiration. Some commentators also have surmised that Iraqi government authorities felt compelled to assert their newfound sovereignty against mistrusted contractors, some of whom reportedly mistreated the Iraqi population during the occupation.
The result? U.S. government contractors are now on notice that Federal Iraq will strictly monitor the immigration status of their employees. The penalties for noncompliance include detention of employees working in and attempting to exit Iraq.
As a first step, all U.S. government contractors should promptly review their staff’s travel documentation to ensure that it has not expired or is otherwise invalid. To comply with the new state of the law, it is also recommended that U.S. government contractors that do not already have a subsidiary based in Iraq for the purpose of sponsoring employees for business permits take immediate steps to create one. Requirements for an LLC include, but are not limited to:
- A business name, which must be in Arabic and have an Arabic meaning;
- A designated managing director, and a copy of his or her passport (if foreign) or identification (if Iraqi);
- Initial capital of one million Iraqi Dinar (approximately $850) in an Iraqi bank;
- Lease agreement for the company’s location in Federal Iraq, which the authorities likely will inspect;
- A designated agent for service of process and filings with the Registrar of Companies; and
- A resolution of the Board of Directors of the parent company establishing the Iraqi subsidiary, which meets the requirements of the Registrar of Companies.
Additional requirements exist for commercial agents and retailers. The entire process takes approximately four months to complete. Once the Iraqi entity is established, it must comply with all relevant laws in securing work permits and visas, which may vary by region. An individual authorized to work in one region of Iraq may not be permitted to work in another region.
Issues and Developments
At present, the laws are in transition and a reliable workaround has yet to be discovered to the requirement that a business entity must be established. This means that, for now, U.S. government contractors must create an Iraqi entity with a physical presence in Iraq. The “physical presence” requirement—and the accompanying inspection by Iraqi authorities—raises some questions. Defense contractors, for example, frequently perform the majority of their work in Iraq on U.S. military bases, which U.S. agencies do not generally permit Iraqi authorities to inspect. In such circumstances, contractors frequently lease office space for a minimum of six months to start the company and undergo the inspection process, and they subsequently transfer the office location to the military base through a filing with the Ministry of Interior.