Buy-back agreement is considered as a service purchase contract. Buy-back agreement is usually known as long-term contracts. Under the Buy-back Agreement, a foreign investor as the supplier, assumes responsibility for provision of the needed equipment and funds for a project in another country. Thus the foreign investor fulfills its contractual obligations by transferring knowledge, technology and other required infrastructures in order to initiate, develop, complete or renovate a project in cooperation with another party to the agreement.
The Foreign Investment Promotion and Protection Act makes explicit reference to buy back agreements as a widely used method for foreign investment. Although buy-back agreements are usually used in oil and gas fields, the possibility to enter into such agreements beyond oil and gas, is also possible. A buy-back agreement entails that the supplier, wholly or partially, places the goods and services required for the establishment, expansion, reconstruction, improvement or continued production of manufacturing enterprises of the country at the disposal of the producer.
Therefore, buy-back agreement brings, among others, two important advantages for the host-country:
Since under the bay-back agreement, the foreign investor is responsible for financing the project and providing the needed equipment, by way of reciprocity, the other party commit to pay back the costs undertaken by the investor and the interest that the parties have agreed through the sale of the products and profits arising from the project operation after the project is completed and operationalized.
Advantages of Buy-back Agreement
Bayan Emrooz Law Firm renders services to foreign and Iranian natural and legal entities in the field of contract law, including consulting, for setting up a Buy-back Agreement. Having an experienced and specialized legal staff, Bayan Emrooz is ready to provide the needed legal services in respect to investment and JVs, sale and purchase in accordance with Incoterms, exclusive and non-exclusive agency, distributorship, technology transfer, license, franchise, turn-key, buy-back, finance, consultancy services, service contracts, EPC, transportation and logistics, insurance, MOUs, LOIs and etc. in Iran.
Bayan Emrooz Law Firm was founded in 2008 under the registration No. 23211 in Tehran, and renders legal consultation and attorneyship services to foreign or domestic legal and natural persons. Our approach and main purpose is to expand the culture of utilizing legal consultation in civil and commercial matters in order to prevent high personal or social costs spent on resolution of disputes before judicial and non judicial authorities.