Introduction
Enforcing an international arbitration award in Iran may seem challenging at first. However, despite the known issues (such as sanctions), there are no specific obstacles preventing a person from enforcing an arbitration award in Iran. Karimi & Associates Law Firm, with an experienced and innovative team in international arbitration, provides related services. It is worth noting that there is an outdated view regarding Iran’s legal system, which suggests that alternative dispute resolution methods do not work and that all disputes end up in court. However, in reality, this view is not accurate.
Joining the New York Convention on October 15th, 2001 was a game-changer for Iran. Nowadays, Alternative Dispute Resolutions are no longer considered alternatives but the main solutions.
Most international cases, including those involving Iranian parties, are typically resolved through arbitration. The duration of the process varies depending on the specific issues of the case, the lawyers representing the parties, and the judge presiding over the case.
As mentioned earlier, joining the New York Convention proved to be a significant move for Iran’s legal system. However, the fact that this happened only in 2001 implies that the Alternative Dispute Resolution (ADR) process has only existed for the past two decades. This is why several lawyers and also judges, are not familiar with the arbitration process.
Arbitration Centers in Iran
Iran has two leading arbitration centers, each with its own history and reputation.
ACIC
The Arbitration Center of Iran, which falls under the Chamber of Commerce, Industries, Mines and Agriculture, was established in adherence to the Iran Chamber of Commerce, Industries, and Mines Act, specifically Article 5 (h), which was passed on March 15, 1991. This act was later amended on December 06, 1994, and the Statute of Arbitration Center of Iran Chamber was passed on February 03, 2002. The arbitration center operates under the concept of institutional arbitration and has been integrated into the Iranian legal system.
The Arbitration Center provides a means of resolving domestic and international commercial disputes through institutional arbitration. The process is governed by several laws and bylaws, including the Act on the Statute of the Arbitration Centre, the Bylaw on Manner of Provision of the Arbitration Center Services (also known as the Domestic and International Arbitration Code of Procedure), and the Arbitration Costs Bylaw of the Arbitration Center. The Center is conveniently located on the premises of the Chamber of Commerce, Industries, Mines, and Agriculture of Iran, and it operates under the guidance of three organs: the Board of Directors, the Secretary-General, and the arbitrators.
TRAC
The Tehran Regional Arbitration Centre (TRAC) is an independent international organization operating under the auspices of the Asian-African Legal Consultative Organization (AALCO). It was established in accordance with the agreement signed on May 3, 1997, between the Islamic Republic of Iran and AALCO. The Iranian legislative bodies ratified the agreement in July 2004, and TRAC started its operations a year later, in July 2005, when it published its Arbitration Rules.
The TRAC Rules of Arbitration is primarily based on the UNCITRAL Rules of Arbitration. These Rules allow the parties involved in the arbitration to have maximum freedom in determining the number of arbitrators, choosing their preferred arbitrator, and defining the procedure for their appointment. The parties are also free to select the place of arbitration, the procedural rules, and the substantive law that the arbitrators may apply. The TRAC’s interventions are kept to a minimum and are only done when necessary to help the arbitration proceed smoothly.
The Rules
When enforcing arbitration awards in Iran, it is crucial to consider the rules that govern the process. There are three main rules that apply: the Enforcement of Civil Judgments Act, the International Commercial Arbitration Act, and the New York Convention. These rules help to ensure that the enforcement procedure is carried out effectively and fairly.
To put it briefly, the New York Convention is the most crucial rule when it comes to arbitration. Iran became a member of this convention in 2001, and ever since, the legal system for enforcement has undergone a complete transformation. As per Article 1 of the New York Convention, an arbitration award can be considered international if it meets two criteria:
- The request for recognition and enforcement of arbitration awards must be made in a country other than the country where the arbitration took place or where the award was issued.
- In the country where the request for recognition and enforcement is made in its territory, the arbitration award should not be considered domestic according to that country’s legal system.
However, according to Iran’s International Commercial Arbitration Act, an award can be considered international if the arbitration agreement has a foreign party.
According to the Civil Judgments Act, an award can be enforced if it meets one of the following criteria:
- The judgment can be enforced in a country with laws, covenants, or contracts stating that the judgments issued by Iran’s courts are enforceable. Additionally, a reciprocal transaction regarding the execution of the judgments can also make the judgment enforceable in that country.
- The verdict’s provisions must not violate public order or morals.
- The execution of the ruling shall not be contrary to the international covenants signed by the government of Iran or to special laws.
- The judgment is enforceable and final where issued and not invalidated.
- Iranian courts have not issued a ruling against the foreign court.
- The subject matter of the lawsuit is not exclusive to Iran’s court under Iranian law.
- The verdict is not about immovable property located in Iran and the rights belonging to it.
- The competent authorities of the country issuing the sentence have ordered its execution.
Now it’s time to get familiar with the process.
Before we dive in, let’s identify any obstacles in the enforcement process.
Obstacles
- Lack of eligibility
In case the parties involved in an arbitration agreement (as mentioned in the second article of the convention) are deemed ineligible for any reason under their respective laws or if the agreement is governed by a law agreed upon by the parties, or if there is no indication of the parties’ agreement regarding the governing law, then, according to the law of the country where the arbitration award was issued, if it is found to be invalid, the issue of lack of eligibility can be raised.
- Failure to notify
One common objection in arbitration is when the party against whom the verdict was invoked was not properly informed about the arbitrator’s appointment or the arbitration proceedings. This can also happen when the party was unable to present its opinions and positions during the arbitration process.
To avoid this issue, it is recommended that both parties specify an address for all notices related to the arbitration process. This address can be the same or different from the main address of the parties, which is usually mentioned at the beginning of the contract. By doing so, both parties can ensure that they receive all the necessary information and can participate fully in the arbitration process.
- Nullification of the arbitration award
Suppose the arbitration award has not yet been legally enforced or has been annulled or suspended by the relevant authority in the country where the award was issued. In that case, it will not be recognized or enforced.
It is important to note that if you want to challenge an arbitration award, you must wait until it is in the enforcement process. Before that point, you cannot file a lawsuit to nullify it. Additionally, you can only file a nullification lawsuit against the other party in the country where the arbitration award was issued.
- The non-arbitrability of the matter
It is important to note that specific issues cannot be resolved through arbitration in some countries. For instance, in Iran, bankruptcy and family rights disputes cannot be settled through arbitration. As a result, any arbitration decisions made on these matters cannot be recognized or enforced in Iran.
The Process
The first step to initiate the enforcement of an arbitration award involves submitting a request titled “petition for enforcement of an arbitration award.” Along with this request, you must attach the official translation of the award, as well as the arbitration agreement (if it is separate from the contract) and the contract (if it contains the arbitration agreement).
At this stage, the competent court will examine your request in formal section. It is important to note that your request should provide a brief and comprehensive background of the arbitration process between the parties. However, it is crucial to understand that the court is only authorized to enforce the award and not to examine it substantively.
It is important to note that although the court is permitted to review an arbitration award, it must ensure that it complies with all relevant laws and regulations. One area of particular importance is the scope of the arbitration agreement, which is usually the first thing a judge will consider during a review.
To avoid issues related to scope, legal experts are advised to draft the arbitration agreement in a way that is broad enough to cover any disputes related to the contract between the parties. Using the exact language of the arbitration agreement from the chosen arbitration center is also recommended.
Once the judge has completed their review and found no issues, an enforcement order may be issued. At this stage, Karimi & Associates Law Firm can provide professional assistance from a team of experienced lawyers who specialize in international arbitration.
Overall, it is now feasible to enforce an international arbitration award in Iran if the necessary evidence is available and an Iranian party is involved due to recent improvements in the legal system.