An Iraqi woman who suffered head injuries after she was shot by Australian soldiers in Baghdad has launched a landmark lawsuit against the Australian government.

Lamyaa al-Saadi and her family, including husband Nezar, their three children and a teenage nephew, were travelling down a Baghdad street in 2005 when Australian soldiers opened fire on their red Volkswagen.

The Australian Defence Force at the time claimed the vehicle was "suspicious" and said the driver, Mr al-Saadi, did not respond to repeated requests to stop.

However, in a civil action launched on behalf of the family in Queensland's Supreme Court on Tuesday - the third anniversary of the shooting - the family allege the soldiers acted negligently.

"What we are saying is that the rules of engagement are such that they ought not to have fired on unarmed civilians and in doing so they have done the wrong thing," the family's lawyer Rod Hodgson said.

The action is the first of its kind in Australia.

The family claim the four ADF personnel flanking the road, which was only streets away from the Australian embassy, made no gesture towards them and did not signal to stop the vehicle.

Mr al-Saadi stopped the vehicle because of the presence of the soldiers, but an ADF member who was kneeling on the side of the road opened fire, the statement of claim says.

'Horrific injuries'

Mr Hodgson said Ms al-Saadi suffered "horrific" injuries.

"She's had effectively the left-hand side of her face severely damaged and she required neurosurgery in Baghdad on her brain," he said.

"Her left eye has been obliterated, she's lost the sight in that eye, many of the bones on the left-hand side of her face have been smashed and required reconstructive surgery, and she's lost the sense of smell."

The couple's son Ahmed, then aged eight, was blinded in his right eye after being hit with glass or shrapnel.

The rest of the family escaped with lacerations but suffered serious psychological trauma, Mr Hodgson said.

"All members of the family have been psychologically traumatised," he said.

"All of them have, in addition to the physical injuries, an understandable psychological response to the trauma."

They were treated at local hospitals before being taken to a US combat support hospital.

A month after the shooting, the family claim soldiers delivered two envelopes to their home, one bearing Ms al-Saadi's name and the other with Ahmed's name written on it.

One contained $US4,700 ($A4,993) and the second contained $US3,000 ($A3,187), the family claim.

Mr Hodgson said the family was offered a one-year medical visa by the Australian government last September so Ms al-Saadi could receive ongoing treatment at an Australian hospital.

A family representative who lives in the Brisbane suburb of Greenslopes contacted Mr Hodgson's firm last week to say they wanted to commence legal proceedings. None of the al-Saadi family speaks English.

The action started on Tuesday, putting it narrowly within Queensland's three-year limit for personal injury claims.

Mr Hodgson did not believe the family's temporary visa status would affect the lawsuit.

"There may well be an argument about what we call jurisdiction in this case - that is, the power of the court to deal with the matter - and also the standing of the plaintiffs to advance the claim," he said.

He said that government lawyers had not raised concerns on Tuesday.

Mr Hodgson said the final amount of the damages claim was yet to be determined, but he did not believe it would stretch into the millions of dollars.

"We would need to see a wealth of further medical evidence and commission our own independent medical evidence before we had any clear idea about those," he said.

'Little chance of succeeding'

Dr Michael McKinley, a lecturer in international relations at the Australian National University, said he believed the suit had little chance of succeeding.

"Buckley's, really," he told Sky News.

"The problem will be that even if the claims made by the family were totally true, they would be corroborating evidence, and I am sure that there would be counter evidence offered.

"Clearly the Australian Defence Forces are saying that instructions were given (for the car to stop).

"It would be very difficult to somehow put it beyond a reasonable doubt that `this is what happened'."

The key problems in the case would lie with disputed evidence and the way in which civilian injuries and deaths in war were understood, Dr McKinley said.

"It would be said that this is a war in which the battle lines are murky at best, or even totally non-existent, and something like this is going to happen from time to time, even if the greatest of care is taken," he said.

"For that reason, this is a discouragement for anyone bringing the case, because it's likely to fail."

There had been cases in which the families of British soldiers had taken action against US authorities for their deaths, but Dr McKinley was not aware of any instances of a civilian casualty taking such a step.