By Ahmed Rasheed

BAGHDAD (Reuters) - The Iraqi parliament has passed an amnesty law that could lead to the release of thousands of prisoners, including Iraqis convicted of attacks on U.S. soldiers and people who fought for Islamic State, lawmakers said on Thursday.

A copy of the law seen by Reuters shows that those found guilty of terrorism leading to murder or disability, manslaughter, vandalising government institutions, and recruiting for or joining terrorist organisations can request a retrial if they allege a confession was extracted under duress.

Judicial sources and lawmakers confirmed that those convicted of attacks against American forces in Iraq could benefit from the law.

Sunni blocs in the Iraqi parliament have been pushing for the law as many of those in prison on such charges are Sunni Muslims, with most convicted of membership of Al Qaeda and Islamic State and carrying out attacks against Iraqi forces and civilians, mostly between 2004 and 2018.

Sunni lawmakers estimate that at least 30,000 Sunni prisoners will have the chance for a retrial.

Judicial sources say around 700 members of Shi'ite militias are also in prison convicted of terrorism, having been arrested by U.S. forces between 2004 and 2008, for attacks on U.S. soldiers.

Abul Karim al-Mohammedawi, the Shi'ite head of parliament's security and defence committee, said the top priority of the law should be releasing detainees who fought American forces in Iraq because "they are heroes and should be rewarded for their sacrifices, not left behind bars for the crime of defending their country".

Sunni lawmaker Raad al-Dahlaki said: "This law will not lead to the immediate release of prisoners. We, the Sunni bloc in parliament, demanded the retrial and review of all the prisoners’ investigations, and the courts will decide their fate."

The law applies to all convicted Iraqis and those accused of crimes still under investigation or on trial. It also allows for the review of death sentences.

Government officials and judicial sources say the new law will alleviate pressure on overcrowded prisons, which currently house around 67,000 prisoners, far exceeding their capacity of 25,000.

Tuesday’s session also passed an amendment to the Iraqi personal status law, which was submitted by the majority Shi'ite blocs in parliament, that would allow Iraqi Muslims to choose either Sunni or Shi’ite sharia laws for personal status matters, instead of one standard regardless of sect or religion.

Critics say amendments that allow sect-based jurisprudence to govern personal matters, such as marriage, divorce, and inheritance, could institutionalise legal divisions between Sunni and Shi'ite Iraqis, further entrenching sectarian divides.

“This amendment could change the social fabric of the country at a time when sectarian tensions run high and stability remains precarious”, said Sarah Sanbar, Iraq researcher at Human Rights Watch.

The parliament also approved a law, which was pressed by the Kurds, allowing the return of farmlands confiscated before 2003 to their original owners, mainly Kurds.

(Reporting by Ahmed Rasheed; Additional reporting by Muayad Hameed; Editing by Timour Azhari and Alison Williams)