Law No. 11, which established Iraq National Oil Co., stipulated provisions defining the company’s rights and responsibilities:
1. In view of the importance of the oil reserves of which the rights of exploitation are expected to be granted to the National Oil Co., the law has stipulated that the company’s capital be purely governmental in keeping with the principle of sovereignty over mineral resources of the state that are natural monopolies.
This, however, shall not preclude the company’s acting within its statutory framework, from making use of other capital, domestic or foreign, through loans or through partnership of various forms of business cooperation with concerns or organizations concerned with oil development, should this be warranted by the magnitude of capital needed, marketing exigencies, or the technological requirement of construction.
2. Further, because it is necessary that the company enjoy financial and administrative independence for it to be able to perform most efficiently its diverse and steadily growing task so as to achieve the purposes for which it is established, the law has stressed the company’s independence in those spheres.
3. The decisions of the company’s board of directors shall be implemented immediately upon their issue, with the exception of such decisions as may involve matters regarded as pertaining to the country’s supreme oil policy. The law stipulates that the Council of Ministers shall deal with such matters.
4. The company’s objective shall be to engage, both inside and outside Iraq, in the oil industry in any or all of its phases, including exploration and prospecting for oil and natural hydrocarbons, the production, transportation, refining, storage, and distribution of said substances or of their products (petrochemicals), and the manufacture of relevant equipment. The company shall have the right to trade in all these substances.
5. The company, for the purpose of achieving its objectives, shall have the right to establish companies, singly or jointly with other parties, or participate in existing companies.
6. The company shall have the right to enter into contracts for cooperation in various forms with companies or organizations engaged in activities related to its objectives, also to purchase or affiliate such companies or organizations.
7. The company, within the scope of its objectives, shall have the right to establish, singly, companies with capital wholly owned by it in accordance with articles of association to be issued by the company.
8. INOC, however, shall not exercise the operation of refining and distribution of oil products for the purpose of local consumption within Iraq so long as there are other government organizations having legal monopolistic control over said operation.
9. The company shall have the right to perform the function prescribed above in all Iraqi territory with the exception of areas covered by Article 2 of Law No. 80 of 1961 defining the areas for exploitation by the oil companies (IPC and associated companies) and of such areas as the government may allocate to these companies under Article 3 of the said law.
10. The company shall select the areas wherein it may desire to carry out its operations. Such areas shall be allocated to the company by the Council of Ministers upon recommendation by the minister of oil. However, the hydrocarbon resources shall remain the inalienable property of the state.
11. INOC and its fully owned subsidiary companies are exempted from income tax laws for the first 5 years and have also the usual exemptions from all taxes and duties in respect to the performance of its functions.
12. INOC, however, shall pay to the government, as the government share, 50% of its annual net profit for income tax purposes, to be treated as part of the operating cost.
13. The company shall be administered by a board of directors, which shall be financially and administratively independent and composed of nine members [Six members, including the chairman, his deputy, and general manager, were full time officers of the company, and the remaining three directors were senior government officials].
14. The company shall adhere to the general oil policy of the state and shall be attached to the minister of oil in respect to the implementation thereof.
15. However, it is important to note that, in the event of difference over policy, such difference is brought before the Council of Ministers for a decision.