Court orders plaintiff to pay costs in Rumaila case

29 April 2010

Case challenges the legality of Iraq’s Rumaila oil contract

In a ruling which could end future legal challenges to Iraq’s oil field contract awards, the Federal Supreme Court has ordered the plaintiff in a case against the Rumaila contract to pay more than $250,000 in fees or drop the case.

Sheda Musawi, an outgoing parliamentarian who brought the case against the Oil Ministry in December 2009, claims that the contract, awarded to the UK’s BP and China National Petroleum Corporation (CNPC), is not legal under the country’s constitution.

According to sources close to the case, Musawi must pay for the court to hire a number of international consultants to study the technical issues of the case.

The court’s decision has been seen by some observers in Iraq seen as calculated to bring an end to the controversial case.

“While it is normally the plaintiff’s burden to prove her case, this is entirely uncalled for. It appears they pushed her into a corner and she can only buy her way out,” says one lawyer based in Baghdad.

“Let’s watch it closely over these next three months and we will see if she has a wealthy benefactor.”

This seems unlikely. According to some members of parliament, Musawi has “no substantive following to speak of” and “her proclivities and eccentricities were widely known in the parliament community”, which goes some way to explain why she did not run for her parliamentary seat in the 7 March elections.

The Rumaila deal was the first of 10 contracts awarded to international oil companies (IOCs) to develop the country’s oil and gas resources. An eleventh field at Missan near Iraq’s border with Iran has been initially awarded, but so far has not received confirmation from the government (MEED 3:11:09).

If upheld, the case would have serious implications for the other contracts signed by international oil companies in Iraq’s first and second oil field licensing rounds in June and December last year.

Musawi claims that the contract violates Iraq’s constitution as it does not have the approval of parliament and that the provincial government in Basra was not involved in the contract negotiation process.

That the case has even come to court is largely the result of the absence of an Iraqi hydrocarbons law, which would set the country’s parameters for negotiating contracts and lay out the responsibilities of the Oil Ministry, national oil companies and the role of international oil firms. The proposed law has been stalled in parliament for the past three years. The passage of the law will be among the priorities of the new Iraqi government.

A final decision on the case was scheduled for 30 March, but was postponed to the end of April, while the Oil Ministry presented its response to Musawi’s claims. Iraq’s Oil Ministry presented a response to a seven-point technical challenge presented by Musawi for the 30 March hearing. Musawi’s lawyers asked for more time to prepare their response, says the Oil Ministry source. 

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