Their helicopters buzz through the Baghdad sky, their patrols bristle with the latest weaponry and their armored vehicles carry the latest hi-tech gadgets.

It's not the U.S. military but another lethal fighting force in Iraq -- private security contractors.

Iraq has vowed to review all local and foreign security contractors, described by critics as mercenaries who act with impunity, after a shooting incident involving U.S. firm Blackwater on Sunday in which 11 people were killed.

It said it will revoke the license of the high-profile Blackwater and prosecute those involved in the incident.

But the government might find it difficult to prosecute the case, and even harder to revoke Blackwater's license because it most probably does not have a current one.

Blackwater said its employees reacted "lawfully and appropriately" to a hostile attack. The Iraqi Interior Ministry says 11 people were killed when Blackwater contractors fired randomly after mortar rounds landed near their convoy.

Security sources in Baghdad say they operate in a murky world of little regulation where few companies hold up-to-date licenses and many bribe their way into work.

The workings of security contractors in Iraq are so unclear that the State Department, whom Blackwater protects in Iraq, was still unable to say more than 48 hours after Sunday's incident whether the company holds a legitimate license.

The U.S. embassy also could not answer questions about the legal status of security contractors, and whether any possible proceedings would be prosecuted under Iraqi or U.S. law.


Based in North Carolina, Blackwater was founded in 1997 by former U.S. Navy SEAL Erik Prince and says it works in two main areas: training and protection.

It says on its Web site ( that its vision is to "support security, peace, freedom, and democracy everywhere".

It employs about 1,000 people in Iraq and has an immediately visible presence, its small helicopters buzzing in circles as they provide "top cover" whenever U.S. embassy officials travel around the capital.

Estimates of the number of security contractors employed by mainly U.S. and European firms range between 25,000 and 48,000 in what can appear like multinational militias.

Peruvians man checkpoints around Baghdad's heavily fortified Green Zone. Fijians in blue helmets guard the U.N. compound.

Australian, English and New Zealand accents abound, many of them former special forces soldiers who learned their martial skills for a fraction of their current wages.

Some security companies try to keep low profiles, but Iraqis have long complained about the heavy-handed approach of others whose convoys of armored vehicles muscle their way through traffic and shoot at cars which come too close.

Private security industry representatives in Britain said the Blackwater episode highlighted ambiguities in the status of security contractors and a need to update laws governing them.

Security firms still operate under memorandum 17 of the Coalition Provisional Authority, written in 2004, which makes foreign security contractors immune from Iraqi law.

"Circumstances in Iraq have changed drastically since then," said Andy Bearpark, head of the British Association of Private Security Companies.

"We would still wish certain elements of immunity to be maintained. The Iraqi (legal) system is simply not robust enough at the moment to allow for them to be removed," he said.

One Baghdad security source said: "They're operating under Iraqi law but there are so many loopholes in it."


Other security sources, who asked not to be named, said few foreign security companies hold current licenses, most simply not bothering to renew their one-year permit after landmark 2005 elections because the new government's policy was unclear.

Companies wanting to work in Iraq must register with the ministries of trade and the interior, lodging documentation for personnel, vehicles, weapons, training, fire and safety and first aid, and pay a bond of between $20,000 and $55,000.

David Claridge, managing director of London-based Janusian Security Risk Management which employs about 1,000 mostly Iraqi staff, said the rules on licensing private security companies (PSCs) had not been consistently applied.

"You have to apply those rules evenly. Otherwise it does introduce a level of uncertainty ... and create a sense that some people are totally immune and can behave as they wish and others not," he told Reuters in London.

Claridge and several Baghdad security sources said it was widely known Blackwater was operating without a license because they worked under the protection of the U.S. embassy.

"From our perspective, it's unwanted attention and unwanted bad publicity for our industry as a whole but we don't consider ourselves to be in the same group as Blackwater," Claridge said.

But many believe Blackwater will survive the incident relatively unscathed, mainly because of its close ties to the State Department.

"Smart money says that Blackwater is in Iraq for the duration," said security author and blogger R J Hillhouse (

(Additional reporting by Mark Trevelyan in London)