Nov. 20 (Bloomberg) -- U.S. government contractors in Iraq are balking at a new agreement that eliminates their immunity from local laws, saying thousands of Americans would be subject to a legal system that still fails international standards.

``This agreement throws the DoD contractors under the bus,'' said Doug Brooks, president of the International Peace Operations Association, a trade group that represents 57 firms that provide services including security, development and military support. Pretrial detention and incarceration in Iraq are ``way below'' global standards, he said.

The Defense Department and State Department briefed their private contractors today on a provision of the so-called status- of-forces accord that eliminates contractors' immunity from prosecution under Iraqi law. While the agreement applies to U.S. military operations, the State Department told its contractors today that Iraq will make them subject to the same rules.

The provision is part of an agreement that would govern U.S. military operations in Iraq after a United Nations Security Council resolution expires on Dec. 31. About 28,000 of the 163,500 people employed as Pentagon contractors in Iraq are U.S. citizens. Others are Iraqis or citizens of other countries, according to Defense Department data. About 4,500 of the State Department's 5,500 contractors in Iraq are U.S. citizens.

`Green Zone'

The accord calls for U.S. combat forces to withdraw from cities and villages by June 30, 2009, and from the entire country by the end of 2011. It also returns the heavily fortified ``Green Zone'' that houses the U.S. Embassy in central Baghdad to Iraqi control.

Military surveillance over the country's airspace also will return to Iraqi authority under the agreement. Iraq can ask the U.S. to provide temporary support for surveillance and air traffic control. The U.S. also must coordinate military activities through a new joint coordinating board.

U.S. Ambassador Ryan Crocker and Iraqi Foreign Minister Hoshyar Zebari signed the agreement earlier this week after approval by Iraq's Cabinet. It must be approved by Iraq's parliament, which dissolved into shouting yesterday during debate over the accord, according to the New York Times. A parliamentary vote is scheduled for Nov. 24.

``This is going to create costs for contractors because every contractor will need additional insurance coverage'' to protect against the risk of prosecutions, said Tara Lee, a lawyer at DLA Piper LLP in Reston, Virginia, who has represented private security contractors in Iraq. ``There's an increased likelihood of civil litigation costs for companies in the U.S. every time an investigation is opened in Iraq.''

KBR, DynCorp, Fluor

The agreement says Iraq ``shall have the primary right to exercise jurisdiction'' over U.S. contractors and their employees. Some Americans already are subject to Iraqi law because their companies contract directly with Iraq's government.

KBR Inc. of Houston, DynCorp International Inc. of Falls Church, Virginia, and Fluor Corp. of Irving, Texas, provide food, fuel and supply services for the U.S. Army in Iraq in a contract worth about $5 billion.

Blackwater Worldwide of Moyock, North Carolina, and Triple Canopy Inc. of Herndon, Virginia, are among the firms that provide security for U.S. officials under contracts with the State Department.

``I would imagine that no matter what the legal protections are for contractors operating'' in Iraq, the country ``will remain a profitable enough business that you will still see a number of contractors willing to do this,'' Pentagon spokesman Geoff Morrell said at a news briefing yesterday.

Blackwater

Concerns about the role of private security contractors escalated after a Sept. 16 incident last year, in which 17 Iraqi civilians died, involving a Blackwater Worldwide team guarding a State Department convoy. The Baghdad incident remains under investigation.

Blackwater employees have been involved in at least 195 shooting incidents since 2005, firing the first shot more than 80 percent of the time, according to a report prepared last year by the House Oversight and Government Reform Committee. Twenty-three Blackwater employees had died in Iraq since 2003, according to U.S. Labor Department statistics.

Blackwater spokeswoman Anne Tyrrell and Fluor Corp. spokesman Keith Stephens didn't return calls seeking comment. KBR spokeswoman Heather Browne said the company couldn't comment because it has ``not fully reviewed the agreement.'' Doug Ebner, spokesman for DynCorp, declined to comment.

To contact the reporters on this story: Gopal Ratnam in Washington at gratnam1@bloomberg.net; Viola Gienger in Washington at vgienger@bloomberg.net.

Last Updated: November 20, 2008 18:04 EST