Baghdad said Tuesday it has authorised the justice minister to sign a prisoner swap deal with Britain that could see a British security guard convicted of murder in Iraq head home to serve the rest of his life sentence.

Justice Minister Hassan al-Shammari and British officials have been discussing the deal, which would allow the transfer of convicts between the two countries, since at least January.

A key beneficiary would be Danny Fitzsimons, who became the first Western contractor to be convicted of a crime by an Iraqi court when he was sentenced to life in prison in February 2011 for killing a Briton and an Australian in Baghdad's heavily-fortified Green Zone in August 2009.

An Iraqi cabinet statement on Tuesday said ministers had given Shammari "the power to negotiate and sign a draft agreement for transferring convicted prisoners between Iraq and Britain".

It did not say when such an agreement would be signed, or give any details about its provisions.

Fitzsimons, a former British soldier who suffered from post-traumatic stress disorder, had insisted throughout his trial that he had acted in self-defence during an alcohol-fuelled brawl.

He told the court in west Baghdad that fellow Briton Paul McGuigan and Australian Darren Hoare had burst into his room and pinned him down before pointing an M4 rifle at his face, prompting him to use his pistol to kill them. He also wounded an Iraqi guard before being detained.

Foreign security contractors had not been subject to Iraqi law until the beginning of 2009, when a security agreement between the United States and Iraq lifted their immunity.