The Choice-of-Law Conundrum for Torts in Iraq

Last week the Fifth Circuit rendered a fascinating decision in McGee v. Arkel Int’l about choice-of-law rules as applied to torts in Iraq. I’ve never seen anything quite like the Iraqi law in question, so I thought it is worth sharing for the private international law aficionados among our readers.

The Iraqi law in question, passed by the Coalition Provisional Authority, tries to avoid the application of Iraqi tort and contract law to contractors working in Iraq for the U.S. Defense Department. With respect to contracts, Section 4 of CPA Order 17 provides that:

Contractors shall not be subject to Iraqi laws or regulations in matters relating to the terms and conditions of their Contracts….

Contractors shall be immune from Iraqi legal process with respect to acts performed by them pursuant to the terms and conditions of a Contract….

With respect to torts, Section 18 of CPA 17 provides that:

[T]hird-party claims including those … for personal injury, illness or death … arising from or attributed to acts or omissions of … Contractors or any persons employed by them for activities relating to performance of their Contracts, … shall be submitted and dealt with by the Sending State whose personnel … are alleged to have caused the claimed damage, in a manner consistent with the Sending State’s laws, regulations, and procedures.

So what substantive law governs when a National Guardsman is electrocuted in Iraq while cleaning a Humvee due to faulty wiring of an electric generator maintained by a Defense Department contractor? That was the question the Fifth Circuit had to decide in McGee.

Applying Louisiana choice-of-law principles, the Fifth Circuit concluded that Iraqi substantive law applied. The wrongful conduct and resulting injury occurred in Iraq, therefore Iraqi law should apply under Louisiana choice-of-law rules. As for CPA 17, the Fifth Circuit concluded that it required application of Louisiania law, which includes Louisiana choice-of-law.

Section 18 requires claims to be ‘submitted and dealt with … in a manner consistent with the Sending State’s laws, regulations and procedures.’ Included in that law is the state’s choice-of-law principles. Consequently, if the plaintiff’s claim is ‘submitted and dealt with … in a manner consistent’ with Louisiana law, that law uses Iraqi law for the standards of conduct and safety. Section 18 restates what the law of the forum state for the current suit, Louisiana, already required. It is superfluous here.

Judge Edith Jones dissented, finding that CPA 17 was trying to guarantee the application of the Sending State’s substantive law, not its choice-of-law rules.

In my view the whole point of Section 18 is to substitute the Sending State’s substantive laws for those of Iraq. Read in the majority’s fashion, the courts and ‘processes’ of Iraqi law are excluded from handling these cases under Iraqi law, but American courts are not…. This reading of Section 18 is unnecessary. To say that the tort claims shall be handled ‘consistent with the Sending State’s laws’ need not include the Sending State’s conflict of laws reference back to Iraq. Such an interpretation preserves the evident intent to apply the domestic law of Sending States to their contractors operating in Iraq.

Anyone familiar with choice-of-law rules knows the doctrine of renvoi. Thus, when drafting a governing law clause in a contract one must be very careful to draft it in such a way that choosing the law means choosing the internal law, not choice of law which may send you right back to another jurisdiction’s substantive law.

It would seem that the Coalition Provisional Authority did not anticipate this fairly standard problem when it adopted CPA 17, with the result that Iraqi substantive law will govern the merits of tort claims involving Contractors, even though Iraqi law stipulates that such torts will be dealt with in a manner consistent with the laws, regulations, and procedures of the Sending State.