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GUIDE TO IRANIAN MARKET

Arbitrating the national and international differences which may arise between businesspersons, is a function legally delegated to the Iran Chamber Arbitration Center. The Center has been active in resolving differences on the basis of domestic arbitration regulations. However, since September 1997, when the Law of International Commercial Arbitration (LICA) was approved, an amicable settlement of disputes involving Iranian and foreign businesspersons can be reached through a more comprehensive and updated legal instrument. The Law is based primarily on the principles enshrined in the Model Arbitration Rules of the United Nations Commission on International Trade Law, known as UNCITRAL.

What is the acceptable form of an arbitration agreement according to the Law of International Commercial Arbitration (LICA)?
When is arbitration considered international?
Who is entitled to ask for arbitration?
In which areas of commercial activities can arbitration be applied, according to the LICA?
What about the number and manner of the designation of arbitrators?
Should the arbitrator or arbitrators have Iranian nationality?
To What extent is the arbitrator empowered to act?
Which national law shall take precedence and be applied in the arbitration proceeding?
What is the basis for the judgment of the arbitrator?
How is the procedure and place of arbitration determined?
In the arbitration proceeding, which language is used?
If the disputing parties settle their difference through conciliation, what decisions shall be taken about the arbitration proceeding?
Are all awards made according to the rules of LICA enforceable?
When is an arbitral award null and void and unenforceable perse?
What about the arbitration costs?
Are foreign awards enforceable in the Islamic Republic of Iran?
Should an arbitration clause be included in contracts which refer future disputes of the transacting parties to the arbitration of the Iran Chamber of Commerce, Industries and Mines?
What is the status of the LICA in relation to other Iranian arbitration regulations?

What is the acceptable form of an arbitration agreement according to the Law of International Commercial Arbitration (LICA)?

   The form is varied. An arbitration agreement can be conceived by a document signed by the parties, or through a letter, telex, telegram and the like, indicating the creation of an agreement. If one of the parties in his application for arbitration or in his defense, proclaims the existence of an agreement and the other party accepts it in practice, it is considered that there is an arbitration agreement.

When is arbitration considered international?

   In the event that one of the parties is not considered an Iranian national, as stipulated by Iranian law, at the time of the conclusion of the arbitration agreement, then the proceeding is defined as being international.

Who is entitled to ask for arbitration?

   All persons who are competent to litigate, may ask for settlement of their disputes through arbitration, in line with the rules set out in the LICA. Even pending lawsuits already in the courts, can be put to arbitration. However, based on the stipulation of principle 139 of the Iranian Constitutional Law, putting governmental and public assets to arbitration needs special permission.

In which areas of commercial activities can arbitration be applied, according to the LICA?

   Recourse can be had to arbitration for resolving disputes emerging from international commercial relations such as the sale and purchase of goods and services, transport, insurance, financial affairs, consulting services, investment, technical cooperation, representation, commission agency, commission, contracting and similar activities.

What about the number and manner of the designation of arbitrators?

   The designation of arbitrators lies with the disputing parties. If not designated, a panel of three arbitrators shall be appointed to resolve the difference.

Should the arbitrator or arbitrators have Iranian nationality?

   They can be foreign persons, too. However, as long as a dispute is not arisen, the Iranian side can not bind itself in the transaction contract, by stipulating that in the event of the development of a difference, it would be arbitrated by one or more persons who have the same nationality as that of the other party.

To What extent is the arbitrator empowered to act?

   In addition to issuing arbitral awards, the arbitrator can decide concerning both his own competence, and the existence and/or validity of the arbitration agreement. At the request of either party, the arbitrator can take any interim measures he deems necessary in respect of the subject-matter of the dispute. He may seek the opinion of experts, if required.

Which national law shall take precedence and be applied in the arbitration proceeding?

   The arbitrator shall decide on the merits of the dispute in accordance with the laws of any country which the parties have agreed upon. If the parties fail to designate an applicable law, the arbitrator shall apply the law determined by the rules of conflict of laws which he considers applicable.

What is the basis for the judgment of the arbitrator?

   In all cases, the arbitrator shall decide in accordance with the terms of the contract and shall take into account the usage of the trade applicable to the transaction.
   The arbitrator can decide as amiable compositeur or ex aequo et bono, only if the parties have expressly authorized him to do so. The arbitrator is obliged to treat both parties to the dispute fairly and give each of them full opportunity for making claims, mounting a defense and submitting evidence.

How is the procedure and place of arbitration determined?

   The parties are free to agree on the procedure to be followed by the arbitrator in conducting the proceeding. Failing any agreement in this regard, the arbitrator may subject the proceeding to the rules of conduct considered appropriate by the LICA.
   The parties may agree on the place that arbitration is to be held. In the absence of such agreement, the arbitrator shall conduct arbitration at any place he deems appropriate, with due regard being paid to the circumstances of the case and the accessibility of the place to both parties.

In the arbitration proceeding, which language is used?

   The parties may agree upon the language or languages to be used in the arbitration proceeding. Otherwise, the arbitrator shall decide about the adoption of the appropriate language.

If the disputing parties settle their difference through conciliation, what decisions shall be taken about the arbitration proceeding?

   In the event that the parties end their differences by conciliation and compromise in the course of the arbitration proceeding, the arbitrator shall issue a writ of disposal of the arbitration petition and close the file. However, on the request of one of the parties and provided that the other party does not object, the compromise agreement can be issued in the form of an arbitral award.

Are all awards made according to the rules of LICA enforceable?

   Generally yes. An arbitral award, shall be recognized as definite and binding under the rules of LICA, so long as it is not in violation of the basics of the arbitration agreement, mandatory laws of Iran, and the public order.
In the event that one party demands the court to recognize the award, and the opposing party asks for annulment, the court may order that the latter deposit an appropriate security.

When is an arbitral award null and void and unenforceable perse?

   There are three instances. Firstly, if the subject of difference referred to arbitration can not be put to arbitration according to Iranian law. Secondly, if the content of the arbitral award contravenes public order or good morals and/or mandatory rules of the LICA. Thirdly, if the award is issued on immovable properties situated in Iran and is contrary to the mandatory laws of the Islamic Republic of Iran and/or the purport of official deeds, it is invalid; unless the arbitrator has been empowered with the specific right of making compromise in the realm of the latter subject.
   Even in the case an award is not invalid per se, each of the parties may apply to the court for its cancellation on the grounds of the instances set out in Article 33 of the LICA.

What about the arbitration costs?

   The LICA is silent on this matter. Therefore, it can be concluded that the costs may be fixed by the mutual agreement of the arbitrating authority and the disputing parties. The Iran Chamber Arbitration Center determines the costs by taking into account the amount of the relief sought, the complexity of the subject matter, the time which may be spent by the arbitrator and any other circumstances relevant to the case. 

Are foreign awards enforceable in the Islamic Republic of Iran?

   Iran to date has not joined the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. There are conditional possibilities for enforcement of a foreign award, in the framework of the Iranian Civil Code and the Execution of Civil Judgments Act of 1977. However, in many cases, litigation based on the award as a documented evidence, should be brought before the Iranian courts which tend to examine the merits of the case according to the national law. The judgment of the court confirming the foreign award can be enforced by a writ of execution. 

Should an arbitration clause be included in contracts which refer future disputes of the transacting parties to the arbitration of the Iran Chamber of Commerce, Industries and Mines?

  There is no uniform clause. Any wording which indicates the parties will and consent to bring their differences to the arbitration of the Chamber, shall be acceptable. However, it is recommended to include the following text in the contract:

   "All disputes which may arise between the parties regarding the construction, interpretation or application of this agreement, shall be settled by the Iran Chamber of Commerce, Industries and Mines Arbitration Center which shall appoint a sole arbitrator or a panel of three arbitrators, as the case may be, to arbitrate the dispute according to the rules of the Law of International Commercial Arbitration. The parties shall bind themselves to the award made by the arbitrating authority."

What is the status of the LICA in relation to other Iranian arbitration regulations?

   Article 36 of the LICA stipulates that arbitration of international commercial disputes subjected to the provisions of this law, is excluded from the arbitration rules set out in the Civil Procedure Code and other related laws and regulations. The LICA shall have no effect on the other laws of the Islamic Republic of Iran, wherein certain disputes - such as bankruptcy - can not be put to arbitration.
   The LICA shall have no effects on different conditions and arrangements made with respect to commercial arbitration in the treaties and agreements between the Islamic Republic of Iran and other governments.

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