Reported deal by US state department investigators could prevent prosecutions.
Erik Prince, the founder of the firm, which employs 1,000 people in Iraq to protect US diplomats and other officials, told a US congressional hearing that his men had come under small-arms fire and “returned fire at threatening targets”.
“The actions of these contractors will ultimately reflect on coalition forces in general”
Kyle, Fremont, US
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Media reports on Tuesday said that prosecuting guards involved in the September 16 incident in Baghdad could be complicated by a grant of limited immunity offered by state department investigators.
Speaking after a cabinet meeting, Ali al-Dabbagh, an Iraqi government spokesman, said: “The cabinet has approved a law that will put non-Iraqi firms and those they employ under Iraqi law.
“Also, all immunity given to them under Order 17 is cancelled.”
Order 17 was a decree issued by Paul Bremer, who ran the US occupation government until June 2004, in the days before power was handed over to an interim Iraqi government.
The measure gave foreign contractors immunity from prosecution in Iraq.
The draft law proposes tightening controls on foreign security firms by making them register and apply for a licence to work in Iraq, and for all guards to have weapons permits. That process has begun but has been mired in bureaucracy.
Contractors who enter Iraq with a US department of defence identity card would in future have to apply for entry visas.