Arbitration in the Iranian Legal Regime
Intro:
Arbitration in Iran has a relatively long history. Numerous regulations have considered it. Articles 454 to 501 of the Civil Procedure Code is assigned to arbitration. According to Art.454, each person with the capacity to sue claims can refer their disputes to one arbitrator or board of arbitrators at any stage of proceedings if pursued in court or outside the courts by mutual Agreement.
In Civil Procedure Code:
According to the Arts. 466, 470, persons prohibited from arbitration are:
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- Persons with no legal capacity.
- Persons prohibited from arbitration by the judgment of the court
- All judges and administrative staff working in the judiciary.
According to art.469 of the Civil Procedure Code, following are persons who can be assigned to arbitration only by mutual consent:
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- Persons under the age of 25;
- Those who are beneficiary in a lawsuit or dispute;
- Persons who have affinity by blood or marriage with parties to the dispute according to laws of Iran;
- Those who themselves or their spouses are the heirs of one of the parties;
- Persons who are guardian, procurator, lawyer or steward of parties or one of the parties is steward of their personal affairs;
- Persons who have had criminal proceedings in the past or present with one or both parties or with persons who have affinity by blood or marriage with parties to the dispute;
- Persons who themselves, their spouses or their blood or marriage relatives have had a civil suit with one of the parties, spouse or one of the blood or marriage relatives to the dispute;
- Government employees in their area of mission.
In Other Regulations:
Other regulations that refer to arbitration are the General Terms and Conditions Agreement (1999) which has three parts, Agreement, General and private Conditions of Contract, and explain the key issues and requirements of contracting and has clarified concepts used in these contracts. According to Art.54 (3) whenever there is a disagreement between parties to the dispute, either party can request to refer the dispute subject to arbitration to the chief of program and budget organization. Family Protection Act (2013) has also referred to arbitration. According to art. 27 of the Family Protection Act, in each case of divorce except uncontested divorce, the court should refer the case to arbitration for settlement and reconciliation. According to Art. 28, after the issuance of the arbitral writ, each couple should introduce one married relative familiar with religious, family, and social issues as an arbitrator within a week. In family law one arbitrator is accepted
According to Art.36 of the Stock Market Act (1966), professional career discrepancies between Brokers, Marketers, Traders, Investment Advisors, Publishers, Investors, and related persons, if not settled, will be resolved by the Arbitration board. The Arbitration board should consist of three members.
International Commercial Arbitration in Iran:
In Addition to national arbitration, there is an entity named International Commercial Arbitration. According to Art.1 (b) of the International Commercial Arbitration Act, disputes of international commercial relations including sales of goods and services, transportation, insurance, finance, consulting services, investment, technical cooperation, agency, factor age, contractor, and related activities are settled through arbitration.
According to Art.1 (c), an arbitration agreement is an agreement between the parties, under which any or all of the differences that may arise in relation to one or more contractual or non-contractual legal matters, will be referred to arbitration. The arbitration agreement can be in the form of an arbitration clause in the contract or in the form of an independent agreement.
According to Art.7, the arbitration agreement shall be signed by both parties by way of signature of a document or through an exchange letter, telex, telegram, or alike evidencing acceptance of arbitration by both parties. Furthermore, it shall be possible that one party claims the existence of an agreement concerning arbitration through an application or notice and the other party practically accept it. An arbitration clause in a contract providing for arbitration shall be considered an independent arbitration agreement.
Referral to document in a written agreement containing an arbitration clause is an autonomous arbitration agreement. According to Art.36, arbitration of international trade disputes is excluded from civil procedure arbitration laws and other regulations. Arbitration to international commercial disputes mentioned in this law, shall be excluded from the arbitration rules mentioned in the Civil Procedure Code and other rules and regulations.
Unresolvable Disputes by Arbitration in Iran:
According to the laws of Iran following claims can`t be resolved through arbitration:
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- Bankruptcy which persons other than the litigants will also be affected by the arbitral award;
- Matrimony, annulment, divorce and affinity claims which are entwined with public order and expediencies of collective life and have more extensive consequences than the parties of the dispute;
- Civil cases entwined with criminal cases inseparable from each other;
- Arbitration dispute which one of the parties raise forgery claims should be investigated by the prosecutor;
- The dispute in respect of arbitration agreement and the transaction on itself should be referred and proceed by the court.
The sanction for referring the above claims to arbitration includes the following:
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- Annulment of the arbitration agreement by the court;
- Annulment of the arbitration clause by the court;
- Annulment of an arbitral award by the court;
- The unenforceability of arbitral awards.
In this regard, Art.34 of the International Commercial Arbitration Act has asserted that if the subject matter can’t be resolved through arbitration and referred to arbitration, the arbitral award will be unenforceable and in case of issuance of the award, annulment of the arbitral award will be announced by the court.
Execution of Arbitral Award in Iran:
Execution of arbitral awards in Iran must be enforced by the Civil Procedure Code, International Commercial Arbitration Act, and the New York Convention which are basic laws and regulations in this field.
It should be noted that the arbitral award is enforceable if:
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- it`s of legal validity and
- it`s not confronted with the annulment request of the other party. Principles and conditions of arbitral award annulment are mentioned in the Arts. 33, 34 of the International Commercial Arbitration Act. Art.33 expresses the possibility of arbitral award annulment with the request of the beneficiary by the court.
The above mentioned are a bit similar to Art.498 of the Civil Procedure Code. Art.34 of the International Commercial Arbitration Act asserts what makes arbitral award annulled and unenforceable.
One of the main differences between the International Commercial Arbitration Act and Civil Procedure Code arbitration is that with the request of arbitral award annulment and payment of incidental damages, execution operations suspend. International conventions and treaties are superior to national laws with respect to the execution of foreign arbitral awards. Before Iran joined the New York Convention, there was no particular convention to execute the foreign arbitral award. The only available international tool to use as the execution of arbitral award is the bilateral treaties of Iran and member states of the Convention but this does not render the same facility of the New York Convention. According to New York Convention Art.2 (1), (2) requests for recognition of foreign arbitral award can be rejected by national courts if the subject matter is not referable to arbitration according to laws of the country or execution of the award is in contrast with public order of the country.
For example, according to Art.496 of the Civil Procedure Code, bankruptcy claims, matrimony, annulment, divorce, and affinity claims can`t be referred to arbitration. According to the Constitutional law of the Islamic Republic of Iran, referring the disputes of public and government properties to arbitration, should be signed by The Council of Ministers and should be informed to parliament. If the party to the dispute is a foreigner, parliament should ratify it too. Therefore, in prohibited subject matters or matters subject to restriction, the arbitral award will be inapplicable if it fails to comply with the conditions.
The arbitration department of Bayan Emrooz Law Firm renders services to foreign and Iranian natural and legal entities in the field of arbitration in Iran, including arbitration in possible disputes of commercial companies, startup companies in various subjects. Having experienced and specialized attorneys, arbitrators, and legal staff, Bayan Emrooz is ready to provide the needed legal services, regarding the arbitration in Iran.
