WASHINGTON  The thousands of American contractors in Iraq who have been above Iraqi law since the war began are suddenly facing a new era in which their United States passports will no longer protect them from arrest and imprisonment.

When the Iraqi government ratified an agreement last week setting new terms for a continued American presence in Iraq, private contractors working for the Pentagon faced the inevitability that they would be stripped of their immunity from Iraqi law. That immunity had been granted by the Coalition Provisional Authority before a postwar Iraqi government was established.

Now that the contractors’ legal protection is to lapse, officials in the defense contracting industry are trying to come to grips with how their operations will change in Iraq, how many of their American employees will be sent home, and whether the weak and often corrupt Iraqi judicial system will become an impediment to recruiting Western workers. If it is approved by Iraq’s Presidency Council, as expected, the agreement will go into effect on Jan. 1.

So far, no major company working in Iraq has announced plans to withdraw from the country. Some industry experts said that while the corporations would stay, they would be forced to rely much more on Iraqi employees, rather than on Americans and other foreigners who might fear working without legal protection.