Capacity building fees provisions of the Kurdistan region production sharing contracts as a mandatory corporate social responsibility tool

Abstract

Abstract Due to corporate social responsibility (CSR), oil companies operate in socially responsible ways and engage more with local communities to ensure environmental protection and community welfare. In the past few years, the Kurdistan Region paid great attention to CSR. The main aim of this study is to provide a critical analysis of the CSR legal framework of the Kurdistan Region and survey the impact of CSR implementation on economic growth in Kurdistan, with a view to ascertain legal complications and underlining the weaknesses. The study clarifies that CSR is not limited to purely voluntary undertakings by companies but extends to mandatory government regulation and contractual commitments. In the Kurdistan Region, there is no legislation to make CSR mandatory or regulate CSR, and there is no penalty for non-complying companies. However, most of Kurdistan’s available production sharing contracts (PSCs) oblige contractors to pay capacity building bonuses and payments but due to the lack of legal regulation, their adopted amounts and types vary, and a number of PSCs require no capacity building bonus. Finally, the study suggests that CSR should be enforced by issuing a specific law and also propounds numerous recommendations for the Kurdistan Region to minimize legal contentions and problems relating to CSR.