Money Laundering Amidst Mortars: Legislative Process and State Authority in Post-Invasion Iraq

• Author: Haider Ala Hamoudi
• Position: Associate in Law, Columbia Law School
• Pages: 523-549

Associate in Law, Columbia Law School. The author served as a legal adviser to the Finance Committee of the Governing Council of Iraq from January 2004 until its dissolution on June 28, 2004. He also acted in a variety of capacities within Iraq from June 2003 until August 2005, primarily in the areas of improvement of Iraqi legal education and the educational methodologies employed in Iraqi law schools. Since leaving Iraq in August 2005, he has worked with and advised various Iraqi entities and individuals, including the Iraq Constitutional Committee, the Office of the Vice Presidency, and Jubilee Iraq. The author would like to thank Adil Abdul-Mahdi, Hussein Adhab, Justin Alexander, Judge Rizgar Amin, M. Cherif Bassiouni, Ahmed Chalabi, Salem Chalabi, Sheikh Humam Hamoudi, Feisal Isterabadi, Judge Latif Abdul-Rahman, Adnan Pachachi, and Fareed Yasseen for comments, suggestions, and help in providing information and opportunities critical to the development of this Article. Special thanks to Abdullahi An-Naim, Hoi Kong, and Clark Lombardi for their extensive thoughts and contributions. Any errors are those of the author. Unless otherwise noted, all translations are the author's.

Page 523

There is much truth to the common criticism that the Coalition Provisional Authority (CPA)-the U.S.-and U.K.-run entity responsible forPage 524 governing Iraq from May 2003 until June 28, 2004¹-was entirely removed from the concerns of ordinary Iraqis and was, therefore, ineffective in addressing the problems facing Iraq.² However, while the superficial deficiencies of CPA officials in this regard were entirely obvious, the role of these deficiencies in the development of legislation in Iraq has been exaggerated. The more serious structural problem that the CPA faced was a deep disparity between it and the Iraqi authoritative body representing the Iraqi body politic, the Governing Council of Iraq (GC).³ The disparity centered on fundamental ideological and ethical assumptions, presuppositions, and biases underlying political and economic forms of human association. This disparity made effective cooperative governance between the CPA and the GC entirely impossible in many instances.

The disparate biases and presuppositions in question specifically relate to the relationship of state authority and law to alternative religious and culturally based sources of authority within the social construct. The most important Iraqi assumption has been that central religious and cultural forms of authority-and in particular the extremely powerful Shi'i religious institution known as the marja'iyya-are not political. Therefore, any matters that are to be governed pursuant toPage 525 religious rules and norms are properly the province of the marja'iyya and should be largely removed from state control. Given this, any prescriptive ideas respecting legal change in Iraq, including those developed in this Article, require significant accommodation to Iraqi biases and presuppositions concerning the role of the state in ensuring social order.

By contrast, existing academic literature replicates many of the misconceptions of the CPA by disregarding the particular Iraqi biases toward state authority and the role of the marja'iyya in ensuring social order.⁴ Instead, the current literature gives undue attention to the ways in which religious and cultural norms might be manifested in legal texts and in expressions of political power.⁵ It thereby neglects the manner in which these same norms result in the creation of a landscape of social order wherein the relative authority of the legal texts, and the state organs and institutions responsible for enforcing them, would be less pronounced.⁶ The result has been misplaced analogies to nations with different cultural traditions⁷ and odd assumptions regarding the exercise of religious authority by state organs in a manner hardly contemplated by the Iraqi body politic.⁸ Prescriptive approaches in the literature are therefore necessarily reductive and incomplete.

This Article illustrates this thesis by using a CPA order concerning money laundering (Order 93), the terms of which I participated in negotiating, where Iraqi presuppositions and biases were reflected in GC objections to CPA proposals regarding preferred modalities of regulation and enforcement.⁹

This Article is divided into five parts. Part I provides a brief background of the formal legal authority of the CPA and the GC in Iraq following the fall of the Saddam Hussein regime and explains how the bodies were expected to work in principle. Part II highlights the significant disagreement between the GC and the CPA over financial andPage 526 economic regulation in the context of Order 93 and shows how this disagreement relates to fundamentally disparate religious, cultural, and ethical assumptions surrounding the exercise of regulatory authority and enforcement. Part II also discusses the aftermath of the passage of Order 93 and demonstrates that, while the CPA's formal legal authority may have resulted in its ability to impose its will, the long-term sustainability of the CPA's victories is under assault. Part III examines more deeply the nature and causes of Iraq's disparate biases and assumptions and shows how the academic literature misunderstands Iraq in much the same way that the CPA did. Part IV introduces ideas regarding the means by which Iraq's peculiar biases can, to some extent, be accommodated in the context of financial regulation in order to develop more salutary forms of regulatory control. Finally, Part V touches briefly upon how much of this debate is replicated to much more significant effect in the context of the proposed repeal of the Personal Status Law. There, the debate directly confronts the issue of the exercise of rulemaking authority normally reserved to the states by independent cultural and religious institutions unconstrained by state processes.

I General Principles of Legal Authority in Iraq: May 2003-June 28, 2004

On January 20, 2003, prior to the invasion of Iraq, President Bush signed National Security Presidential Directive 24, giving control over post-war Iraq to the Department of Defense and establishing the Office of Reconstruction and Humanitarian Assistance (ORHA), which was to be responsible for administering Iraq after the fall of the regime.¹⁰ ORHA, however, did not survive much longer than the Saddam Hussein regime itself, which fell in early April, 2003.¹¹ In May, 2003, when it became clear to the United States that significantly greater American involvement in Iraqi political rebuilding would be necessary than was originally conceived, President Bush announced that former diplomat L. Paul Bremer III would succeed the head of ORHA, Jay Garner.¹² In June of 2003, the Bush administration dissolved ORHA, created the CPA, gave the CPA supreme administrative authority over Iraq on behalf of the United States and the United Kingdom, and named Bremer the U.S. "Ambassador" to Iraq.¹³ Around the same time, on May 22, 2003, thePage 527 United Nations Security Council issued Resolution 1483, which called upon the United States and the United Kingdom, through the CPA (referred to in the Resolution as the "Authority"), to "promote the welfare of the Iraqi people through effective administration of the territory" in a manner "consistent with the Charter of the United Nations and other relevant international law."¹⁴ The subsequent paragraph required the CPA to comply with the Geneva Convention and Hague Regulations IV, both of which set forth duties and responsibilities of occupying states.¹⁵ For example, the Hague Regulations require an occupying state to respect the laws in force in the occupied state "unless absolutely prevented."¹⁶

Resolution 1483 also "supported" the efforts of the CPA and the people of Iraq to create an Iraqi "interim administration as a transitional administration run by Iraqis, until an internationally recognized, representative government is established by the people of Iraq and assumes the responsibilities of the Authority."¹⁷ To this end, in July of 2003, the CPA created the "Governing Council" of Iraq (the GC). The GC consisted of twenty-five Iraqis, including some former exiles, to act as the "principal body of the Iraqi interim administration"¹⁸ and to consult with the CPA "on all matters involving the temporary governance of Iraq."¹⁹ In August of 2003, U.N. Security Council Resolution 1500 formally recognized the GC, "welcom[ing]" its establishment, describing it as "broadly representative," and indicating that its formation was "an important step towards the formation by the people of Iraq of an internationally recognized, representative government that will exercise the sovereignty of Iraq."²⁰ Resolution 1511, passed later that month, acknowledged the GC as the principal body of the interim administration and indicated that the GC "embodie[d]" the sovereignty of Iraq "until an internationally recognized, representative government is established and assumes the responsibilities of the CPA."²¹Page 528

This patchwork of Security Council resolutions and CPA regulations has led to two primary areas of discussion in the academic literature. The first, irrelevant for the purposes of this Article, concerns the ability of the CPA to engage in activities normally referred to as "nation-building" in light of the fact that Resolution 1483 limited the powers of the CPA to those held by an occupier under the Hague...