During the past two years, and even before, Kurdistan has been in a critical spot, which resulted in tensions both politically and legally. It is crucial to understand the current relationship in the region between the political institutions, the citizens and the rule of law.The question that must be asked is: does rule of law govern the Kurdistan region, or it is being governed by arbitrary decisions of individual government officials? This question is difficult to answer, both in the legislative as well as the political arena, however, a member of parliament in the Kurdistan region stated that 70 percent of the legislation issued by the parliament is not being enforced by the executive branch.Moreover, the ongoing term issue of the Kurdistan region presidency led to the freezing of the legislative branch and the closing down of the Kurdish parliament, and created a severe tension between the political parties surrounding different interpretations of the law, and also the issue of whether given the political status of the region along with the war against Islamic State this is a suitable time for change in the presidency. This legal-political obstacle that the Kurdistan region is facing is a critical moment in which to determine whether Kurdistan as an entity abides by rule of law or whether it is essentially a dictatorship.In addition to the current internal disputes, the Kurdistan region as part of Iraq is located in the bottom percentile of Worldwide Governance Indicators.Currently Europe, too is facing a related crisis, having to decide the question of whether security or civil liberties and respect the rule of law will win the day in the face of the terrorist threat Europe is facing.Rule of law is a key foundation of any civilized society, and its significance is not limited to civil liberties and politics but also economic development and integrity. Kurdistan is facing as serious test right now, and the world is watching to see if, as a nation, it will pass.The author is an academic and businessman. He holds a doctorate in Business Administration from the Paris School of Business and other academic degrees from the Harvard Business School, London Business School and the American University of Iraq – Sulai.