Arbitration in Iran has become more relevant following the lifting of international sanctions against Iran in January 2016, which has had a positive impact on foreign direct investments in a country largely isolated from the world for a number of years.
Many international commercial agreements including arbitration as a preferred dispute settlement mechanism as compared to local courts have been or will be signed with Iranian parties while international sanctions remain relatively relaxed, some of which call for arbitration to take place in Iran in the event of a dispute.
There should be little concern in drafting an agreement calling for arbitration in Iran in the event of a dispute.
Iran has a modern arbitration regime and advanced domestic legislation already in place concerning arbitration. Articles 454 to 501 of the Iranian Code of Civil Procedure has provided for arbitration as one dispute settlement method since as early as 1939.
The Iranian Law for International and Commercial Arbitration (“LICA”), which entered into force in 1997, is a modern arbitration regulation based on the UNCITRAL Model Law. Some important aspects of LICA are for example that the arbitrator does not have to be of Iranian nationality, that the parties are given the freedom to agree on the procedure to be adopted with regard to proceedings, on the seat of the arbitration, and on the language of the arbitration.
Iran itself has two arbitration centres, the Teheran Regional Arbitration Centre (TRAC) and the Arbitration Centre of the Iran Chamber (ACIC). The Teheran Regional Arbitration Centre was set up in 1997 with TRAC Rules being based on the UNCITRAL arbitration rules. The ACIC was established a bit later, in 2002, and its arbitration rules are largely based on the LICA rules. Nevertheless, traditionally ICC and the LCIA remain a preferred venue for the resolution of disputes with Iranian parties and the actual caseload of the TRAC and the ACIC is unreported.
Iran is a party to the New York Convention with one reservation, which concerns the case where one of the parties is of non-Iranian nationality. In such circumstances, the submission of arbitration disputes concerning public and governmental properties requires the approval of the Council of Ministers and of the Consultative Assembly. Hence, there are no reservations with respect to the New York Convention concerning disputes between private parties.
With respect to investment arbitrations, Iran has ratified 52 BIT’s to date, and 14 ratifications remain pending. While Iran also has a national law on foreign investments, the Foreign Investment Promotion and Protection Act (FIPPA) which provides important substantive protections for investors, the only dispute settlement mechanism provided for by the FIPPA is before Iranian courts rather than before arbitral tribunals. In 2014, Iran won its first investor-State arbitration, which concerned an UNCITRAL arbitration brought by the Turkish mobile phone company Turkcell concerning the attribution of GSM licenses.
Iran has seen positive changes and developments in the field of international arbitration both before and after the lifting of the sanctions, and one would hope that arbitration in Iran will continue to grow over the coming decades.