COVID-19 Outbreak in Iraq and the Official Outbreak Response
- Over the past several weeks and up to the time of writing of this publication (31 March 2020), Iraq has registered a total of 694 cases of COVID-19, with 50 deaths (the "Outbreak"). The Outbreak has led the Iraqi government to take precautionary measures including the establishment of:
- Special national committee formed by virtue of Diwan Order 55/2020 to contain the proliferation of COVID-19 and to issue the necessary related recommendations and decisions (the "Special Committee"). The scope of action of the Special Committee was recently amended by a decision of the Council of Ministers ("CoM") issued on 26 March 2020, which created a higher committee for national health and safety for fighting the Outbreak (as detailed in paragraph (b) below). The CoM decision limited the Special Committee's prerogatives to: (i) the prevention, treatment and medical services in relation to COVID-19, and (ii) the issuance of the necessary related recommendations for the approval of the Prime Minister. The Special Committee is chaired by the Minister of Health and Environment and includes, among others, representatives of the Ministry of Defence, Ministry of Interior, Ministry of Finance, Ministry of Oil, Ministry of Foreign Affairs, Ministry of Transportation, the Civil Aviation Authority, the Iraqi Media Network, the Government of the Kurdistan Region and the Kurdish Ministry of Health.
- Higher committee for national health and safety responsible for fighting the Outbreak (the "Higher Committee") established by virtue of CoM Decision dated 26 March 2020 (the "New CoM Decision"). The Higher Committee is vested with the powers of the CoM; it has the duty to establish public strategies and plans, supervise their implementation, take the major related decisions, ensure complementarity between all executive authorities, and coordinate with legislative, judicial and international authorities involved in fighting the spread of COVID-19. The Higher Committee is chaired by the Prime Minister and includes, inter alia, the Ministers of Oil, Finance, Planning, Foreign Affairs, Interior, Higher Education and Scientific Research, Trade, Health, Agriculture, Labour and Social Affairs, Transportation, and Communication, the Governor of the Central Bank of Iraq, representative of the Kurdistan Regional Government, the President of the Advisory Committee within the Ministry of Health, the President of the Civil Aviation Authority, and the President of the Iraqi Media Network, among others.
- Some of the main actions/measures taken by the Special Committee (prior to the amendment of its scope of action by the New CoM Decision as detailed in paragraph 1(a) above) include ("Outbreak Response"):
- Applying national lockdown (which was subsequently confirmed and extended by the CoM and is scheduled to extend until 11 April 2020);
- Enforcing a travel ban from and to Iraq (which we understand may continue until 11 April 2020) and in any case restricting until further notice entries to Iraq of foreigners coming directly or indirectly from China, Iran, Thailand, South Korea, Japan, Italy, Singapore, Germany, France, Spain, Bahrain, Kuwait or Qatar (with the exception of diplomatic and official delegations);
- Declaring that the Outbreak is considered as force majeure ("FM") with respect to all projects and contracts, as of 20 February 2020 and until the Ministry of Health announces the elimination of COVID-19.
- The above measures taken by the Special Committee are intended to fight the proliferation of the Outbreak and to alleviate some of its economic consequences (e.g. suspension of municipality fees payments). Apart from these measures, no general measures were taken by the Iraqi government directly aiming at supporting the current challenges faced by employers and employees and preserving job security. The CoM only resolved on 3 March 2020 to grant a monthly bonus of five hundred thousand Iraqi dinars to workers who are in direct contact with persons infected with COVID-19, until the end of the crisis.
Enforceability of the Outbreak Response Implemented by the Special Committee
- It may be argued that the Special Committee was vested with sufficient legal power and authority to implement the Outbreak Response actions/measures at the time such actions/measures were issued (i.e. prior to the amendment of its scope of action by the New CoM Decision as described above) and that such measures may likely remain valid despite the change in the Special Committee's scope of work, particularly based on the following:
- Article 46 of the Iraqi Public Health Law grants competent authorities the power to take all the necessary measures to fight the spread of a disease declared as such by the Minister of Health. These measures may include (i) imposing a curfew and restrictions on entry to, and exit from infected regions, (ii) closure of public places that are subject to permitting/supervision by health authorities, and (iii) closure of educational institutions, factories, projects, state directorates and public, mixed and private sectors.
- CoM Decision 65/2020 endorsed the
mandatory status of the Special Committee's decisions (i.e.
decisions made prior to the New CoM Decision) by resolving,
inter alia, to:
i. Grant the Ministry of Health the power to shut down public and private institutions in case of non-compliance with the decisions of the Special Committee;
ii. Compel the ministries, non-ministerial parties, governorates, and public and private institutions to immediately comply with the decisions and recommendations of the Special Committee; and
iii. Grant the Special Committee the power to issue the necessary recommendations and decisions to control the proliferation of Covid-19 and manage the epidemic.
- Notwithstanding the foregoing, it may be argued that the scope of the measures taken by the Special Committee cannot automatically result in the application of FM to contractual relationships. In fact, we believe that an event of FM would not have an impact on a specific contract (including employment agreements) unless one or more of the contractual parties declare such FM event in compliance with applicable law and any relevant contractually agreed processes. On that basis, we believe that the decision of the Special Committee declaring FM (mentioned in paragraph 2(c) above) – i.e. declaring 'that the Outbreak is considered as force majeure with respect to all projects and contracts, as of 20 February 2020 until the Ministry of Health announces the elimination of COVID-19' – would not automatically alter contractual arrangements, and that FM must be declared by relevant contractual parties on a case-by-case basis if its conditions are met under each relevant contract.
FM as a Basis for Employment Termination or Suspension Under Iraqi Labour Law
- Employment relationships in the private sector in Federal Iraq are governed by Law No. 37 of 2015 (the "Labour Law"). The Labour Law explicitly states that an employment contract terminates in the case of FM.
- Nevertheless, the Labour Law does not define FM events nor the procedure/consequences of termination in case of FM. Cross-reference may be made to the FM provisions in the Iraqi Civil Code. Articles 168 and 425 of the Civil Code relieve a party from executing its contractual obligations when such execution is rendered impossible (either physically or legally) due to a reason that is not attributable to that party and that is beyond its reasonable control. Iraqi scholars define FM as being an event which is not attributable to the debtor, creditor or relevant third parties (i.e. not due to their act, fault or negligence) such as wars, earthquakes, fires, floods, storms, pandemics or the issuance of a new legislation or a foreign applicable order.
- Subject to relevant specific circumstances, there may be scope for employers to argue that the Outbreak and/or the actions/measures implemented as part of the Outbreak Response constitute FM events rendering the execution of obligations under an employment contract both physically and legally impossible and giving legal grounds for the employer to terminate unilaterally the employment contract.
- Alternatively, an employer may decide to suspend an employment contract during the FM period instead of resorting to termination. In such case, the Labour Law provides that the employer must pay the employee's wage for the duration of the work interruption up to 30 days. In order to compensate for the time paid by the employer but not worked by the employee, the employer may assign to the employee some form of part time work, if possible, up to two hours per day provided that such arrangement would not exceed 30 days per calendar year.
Redundancies as Part of Business Downsizing
- The Labour Law may allow for the possibility of mass redundancies in the case of business downsizing. Termination of employment contracts in such case is subject to the consent of the Minister of Labour and Social Affairs. The employer must serve the employee a 30 days' prior written termination notice. Given that ministerial approval is required and in order to avoid any potential unfair dismissal claim by the employee, it may be prudent for employers to secure the Minister's consent before serving the employee a termination notice.
- Terminated employees are entitled to an end of service indemnity equivalent to two weeks' pay for each year of service. Additionally, employers must pay employees for any unused annual leave.
Labour Litigation Risk and Processes
- Unilateral termination of employment agreements based on FM may expose the employer to litigation by the relevant employees. This would give the relevant judicial body the possibility to assess the correctness of the FM event relied upon by the employer and whether it reasonably constitutes a material obstacle to business continuity.
- It may be reasonable to believe that if the employer obtains the Minister of Labour and Social Affairs' approval on redundancies made as part of the downsizing of the business, such approval reduces considerably litigation risks including claims of abusive termination.
- Below is an overview of relevant statutory provisions governing labour claims initiated by terminated employees:
- Choice of competent authority: The employee may challenge the dismissal decision before either an End of Service Committee or the labour court (additional recourse venues may be available if the employment relationship is subject to a collective employment convention, which is not addressed in the present publication). The statute of limitation for the employee to file his/her claim is 30 days following the receipt of a termination notice. The choice of one of the two venues bars the employee from submitting another claim before the other venue. Decisions rendered by the End of Service Committee may be appealed before the labour court within 30 days of the employee's notification. Judgements of the labour court may be appealed before the Court of Cassation within 30 days of the employee's notification.
- Urgent proceedings: The Labour Law expressly confers an urgent nature to labour claims; however, it does not clearly determine the timeframe for the issuance of a decision/judgement.
- Burden of proof: The burden of proof rests with the employer in a claim filed by an employee to challenge the termination decision.
- Reinstatement/compensation: If the termination decision is overturned by the End of Service Committee or the labour court, an order would be made for the reinstatement of the employee to his/her position and the employer would pay to the employee the wages accrued for the duration of the interruption period. In case the reinstatement of the employee is impracticable, the employer must pay to the employee a compensation equivalent to two times the end of service indemnity mentioned in paragraph 11 above.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.