BBC:
The coalition in Iraq wants its troops to remain immune from prosecution by Iraqis after the handover of power, it is reported.
Creating a sovereign Iraq should mean forces become subject to Iraqi laws.
But BBC Correspondent Jonathan Beale says UK and US forces want to remain under their own jurisdictions.
The Foreign Office said negotiations on gaining a new UN security council resolution on the handover are at an "extremely important stage".
Agreement on the resolution governing the return of Iraqi sovereignty, set for 30 June, needs to be reached in the next few weeks.
Jonathan Beale says one of the biggest sticking points is the issue of whose laws the remaining foreign troops will be subject to - their own or Iraqi laws.
Giving them immunity is likely to be controversial after allegations of abuse by troops of Iraqis.
"It seems to be that the British and American governments want to get guarantees that soldiers remain under their own laws not Iraqi laws," he says.
"This is going to be controversial if you are going to make American and British troops immune from Iraqi laws because the wrongs that have been done seem to have been against the Iraqi people themselves," he adds.
Currently under an order signed by the Coalition Provisional Authority, known as Order 17, coalition forces have immunity from prosecution.
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