The Iraq v. Turkey Arbitration: Summarising the Initial Arguments
Introduction
From May 2014 until February 2023, Iraq and Turkey engaged in a high-stakes arbitration using the International Chamber of Commerce (ICC). The crux of this dispute concerned the unilateral usage of the Kirkuk-Ceyhan Pipelines to export oil from the Kurdistan Region of Iraq (KRI), a semi-autonomous entity within the Republic of Iraq. The issues covered in this arbitration are profoundly interwoven with the Iraqi hydrocarbon industry, which generated 89 per cent of that country’s 2024 state budget, and Turkey’s geopolitical ambitions to become an energy transit hub between Europe and the Middle East. This explanatory note aims to provide a basic overview of the most crucial initial arguments of the Iraq v. Turkey arbitration and shall, in the interest of remaining as concise as possible, exclude discussion on any counter-claims. It shall accomplish this task by: (a) outlining the legal instrument under which the arbitration was initiated (the Iraq-Turkey Pipeline Agreements or ITPAs) and the dispute’s factual background; (b) explaining the overarching Iraqi and Turkish arguments in the dispute, and; (c) XYZ.
The Iraq-Turkey Pipeline Agreements & the Roots of the Dispute
Before addressing the specific arguments raised during the arbitration, it is necessary to recount the background of the dispute briefly. The stated purpose of the initial 1973 Iraq-Turkey Pipeline Agreement (ITPA) was to enable the transportation of “all kinds of crude oil”, including the shipment and loading of these crude oils for both Turkish and international consumption. Article 3 of the agreement would limit these objectives to Iraqi-origin crude oil. To accomplish this goal, the agreement provided for the construction of a 40-inch Pipeline from the Iraqi oil fields at Kirkuk to the port city of Ceyhan, situated on Turkey’s Mediterranean coastline (see Figure 1). Turkey was expected to store the crude oil at Ceyhan and await Iraq’s instructions on its sale and delivery. At the same time, Iraq would also pay a specified throughput fee on a barrel-by-barrel basis. A further Iraqi-Turkish agreement was negotiated in 1976 and added to the first ITPA, identifying the related undertakings of both parties concerning the earlier 1973 agreement. It created two essential obligations which would be the focus of the Iraq-Turkey arbitration. Firstly, Article 3 obligated Turkey to ensure that the crude oil's transit, pumping and loading were conducted per the instructions and requirements provided by the “Iraqi side.” Secondly, Article 7 further obliged Turkey to adhere to Iraqi instructions concerning the storage, disposal and loading of all crude oil originating from Iraq.
Figure 1 — A map of the Kirkuk-Ceyhan Pipelines (red) traversing through territories administered by the Federal Government of Iraq (beige) and the Kurdistan Regional Government (lime green).
In 1985, an additional agreement between the two countries provided for the construction of another 46-inch Pipeline that ran alongside the existing Kirkuk-Ceyhan Pipeline. It became operational in 1987. This was followed by an amendment being added to the original 1973 ITPA in 2010 (the ‘2010 Amendment’), which enacted the following provisions: (a) both governments guaranteed to “operate, maintain, manage and finance” the portion of the Kirkuk-Ceyhan Pipeline system located within their sovereign territories; (b) the Pipeline system and associated facilitates would be used exclusively for the transport and loading of “crude oil coming from Iraq” (unless otherwise agreed by the Iraqi Ministry of Oil), and ; (c) Iraq’s annual Minimum Throughput Obligation (i.e. the quantity of crude oil Iraq had committed to transporting via the Pipelines) was decreased, albeit it on the understanding that it would increase back to 1985-levels from 2013. Additionally, the 2010 Amendment clarified that any disputes arising from the ITPA’s would be resolved via an arbitration governed by French law and seated in Paris. Having briefly summarised the relevant and specific legal obligations binding Iraq and Turkey, this section can now outline the factual background of the dispute.
Three main events eventually culminated in Iraq initiating ICC arbitration proceedings against Turkey for allegedly breaching the ITPAs. Firstly, the Kurdistan Regional Government (KRG) completed the construction of a new oil pipeline to enable increased oil exports via Turkey. Crucially, this project involved a tie-in between the KRG pipeline and the existing 40-inch Pipeline at Faysh Khabur in northern Iraq, which allowed KRG oil to be transported to Ceyhan using the existing pipeline infrastructure. Secondly, Turkey permitted the flow of KRG oil via its section of the 40-inch Pipeline as well as its storage and export using facilities and tankers at Ceyhan. Thirdly, the State Organisation for Marketing of Oil (SOMO) (whose parent agency is the Iraqi Ministry of Oil) issued written protests directed at the Turkish Ministry of Energy and Natural Resources, calling for the export of KRG oil via the 40-inch Pipeline to cease and affirming that such exports could only occur following Iraqi instructions. SOMO further communicated that the Iraqi Ministry of Oil was the “sole sovereign authority” within Iraq capable of issuing such instructions. However, the loading and export of KRG oil via Turkey continued.
Having provided the legal and factual context underpinning the Iraq v. Turkey arbitration, this note can proceed to outline the specific claims brought by both countries once the ICC proceedings had begun.
Identifying the Overarching Iraqi and Turkish Arguments
What specific claims were submitted for the consideration of the ICC tribunal? Iraq argued that the agreements granted only itself and Turkey the right to transport, store, and load oil using the Kirkuk-Ceyhan pipeline infrastructure. Additionally, these activities could only occur under Iraqi instruction. Hence, given that the KRG was not a signatory to the ITPAs and that SOMO had previously called upon the Turkish Ministry of Energy and Natural Resources to prevent the KRG from using the pipelines, Turkey had breached its obligations under the ITPAs. The claimant then based its claim for relief on the foundation that “but for” Turkey’s actions in enabling the transport of KRG oil, those resources would have been sold at fair market price, and the proceeds would have been deposited in the Iraqi sovereign wealth fund.
Turkey disputed that its transport, storage and loading of KRG oil breached any obligations it owed to Baghdad. It based this claim on the following arguments: (a) Iraq did not have the authority to instruct the Respondent from ceasing the export of KRG oil; (b) SOMO’s instructions constituted an abuse of Iraq’s rights under the ITPAs and contravened the overarching purpose of these agreements; (c) even if these instructions did not contradict the overarching purpose of the agreements, they had been issued in bad faith; (d) the Federal Government of Iraq (FGI) knowingly allowed the KRG to use into the pipelines; and (e) Turkey would have violated its jus cogens obligations owed to the KRG (given the latter’s military efforts against the Islamic State terror-organisation) if it had followed SOMO’s demands to block Kurdish usage of the 40-inch Pipeline.
Given the above, this note can now proceed to explain the tribunal's response to each of these arguments, beginning with those submitted by Iraq.
Iraq’s Claims for Breach of the ITPAs
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