British and US troops will be granted immunity from prosecution in Iraq after the crucial June 30 handover, undermining claims that the new Iraqi government will have "full sovereignty" over the state.
Despite widespread ill-feeling about the abuse of prisoners by US forces and allegations of mistreatment by British troops, coalition forces will be protected from any legal action.
They will only be subject to the domestic law of their home countries. Military sources have said that the question of immunity was central to obtaining military agreement on a new UN resolution on Iraq that will be published by the middle of next month.
The new resolution will lift the arms embargo against Iraq, allowing the country to rearm its 80,000-strong army in readiness for taking over the nation's security once coalition forces finally leave.
"The legal situation in Iraq will be very difficult after 30 June, with some confusion over where jurisdiction lies," said one British official. "We wanted to ensure that British troops maintained the immunity they already have under Order 17."
Order 17 refers to an agreement signed by the Coalition Provisional Authority giving US and British troops protection.
That will now be extended to the new multi-national force made up of British and US forces that will remain in Iraq at the invitation of the interim government.
On Saturday night British members of parliament demanded that Iraqi citizens should have some form of legal redress, following allegations that people had died unnecessarily during gunfights with British forces.
"How is anyone in Iraq expected to bring a case in the British courts?" said Adam Price, the Plaid Cymru (Welsh Nationalist) MP for Carmarthen East, who has been credited with uncovering many of the claims made against British troops.
The first picture of how the new Iraq will look after the handover is now starting to emerge. Senior diplomatic sources said that the new UN resolution, which will give a legal basis to the Iraqi interim government, will be published in the middle of next month.
It is likely to say that this government should be able to give "strategic direction" to the multinational force although it will not take over full command, a move that has already been rejected by the US and British armies.
Iraq's new ministers will also take over control of the prisons, including the notorious Abu Ghraib jail, where Americans have been photographed and videotaped abusing prisoners.
It will also be allowed to equip its army and run a police force and all of the departments of state.
"We will give full sovereignty back," said one source closely involved in the negotiations. "There must be a partnership between the Iraqi government and the multinational force. There can't be subservience."
Iraq will be allowed to control its oil revenues, which will raise US$48 billion a year within the next three years, although it will have to pay tens of billions of dollars in reparations imposed following the Gulf War.
After the invasion and occupation of Kuwait by former president Saddam Hussein's forces in 1990 and the subsequent war, the UN oversaw a reparations program, mostly payable to the Kuwaiti government. Iraq has so far paid US$18 billion funded from its oil reserves.
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