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Recognition and Enforcement of International Arbitral Awards in Iran
If an arbitration procedure or a litigation results in a monetary award or some other form of affirmative relief, the prevailing party will likely attempt to enforce the decision. Methods of enforcement of an arbitration award or judgment are different and a foreign investor should consider them before start an arbitration or file a case in an Iranian court. In this section, we will discuss enforcement of arbitral awards in Iran.
2. Using New York Convention in Iran
Islamic Republic of Iran jointed to the Convention on Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention) by ratifying it on 18/04/2001. Accession of Iran to NYC 1958 was a great step for promotion of arbitration and enforcement of arbitral awards.
Contracting States of this convention are allowed to make two reservations as to the scope of applicability of the Convention.
The first limitation is reciprocity: A Contracting State can provide that it will only apply the Convention to awards that are issued in the territory of another Contracting State. This reservation has been adopted by more than half of Contracting States.
The second permitted reservation is that a Contracting State may “declare that it will apply the Convention only to disputes arising out of legal relationships, whether contractual or not, which are considered as commercial”.
Islamic Republic of Iran use both of the reservation rights in accordance with article 1(3) Of New York Convention.
According to “Act of Accession of Islamic Republic of Iran to the Convention on Recognition and Enforcement of Arbitral Awards in New York”:
1. Iran will apply this convention only to the commercial disputes whether contractual or non-contractual.
2. Iran will apply this convention only to the awards that are issued in another contracting state.
Therefore, an arbitration award that is issued in any of 147 members of NYC can be enforced in Iran and an arbitral award that is issued in Iran can also be enforced in any of Contracting State subject to compatibility with conditions of NYC.
3. International Arbitral Awards outside of New York Convention
Chapter 8 of International Commercial Arbitration Act, is about enforcement of the awards: Article 35: Enforcement:
1. Excluding the cases mentioned in Articles (33) and (34), the arbitration award issued in accordance with the regulations of this Law shall be final and binding after notification. In case of “written application” from the court mentioned in Article (6), the arrangements for enforcement of court verdicts shall be executed.
2. In case one of the parties demands the cancellation of the award from the court mentioned in Article (6) of this Law and the other party demands its recognition or enforcement, the court shall prescribe that the party demanding nullification to deposit an appropriate guarantee provided that the party demanding recognition or enforcement of the judgment requests so.”
3. A difficulty arises when an international arbitral award is neither enforceable under provisions of New York Convention nor ICAA. For example, when an award is issued in a non-contracting states and it’s also not enforceable based on ICAA. In such cases, there are three theories that can be used by a competent court:
4. Analogize a foreign arbitral award to a foreign court decision.
5. Analogize a foreign arbitral award to a foreign enforceable documents.
6. Analogize a foreign arbitral award to a domestic arbitral award whether a national award (according to Civil Procedure Code of Iran) or an international award (according to ICAA)
4. Required Procedures for Enforcement
The only specific requirement imposed by the Convention is that the party applying for recognition and enforcement must provide the court with authenticated original award or a certified copy, and original arbitration agreement or a certified copy.
In addition, if the award or the agreement is not in the same language used in the enforcing jurisdiction, the party must provide a certified translation of the documents.
5. Defenses to Enforcement (Ground for Non-Enforcement)
Grounds of challenging an international award in Iran are the same as grounds stated in Article 5 of the Convention. Reasons of challenging an arbitration award based on Article 5(1) are as follows:
1. Incapacity and invalidity.
2. Lack of notice of the appointment of the arbitrator and of the arbitral proceedings or fairness.
3. Arbitrator acted in excess of his/her authority.
4. The tribunal or procedure was not in accord with the parties’ agreement.
5. The award is not yet binding or has been set aside.
6. Above-mentioned grounds will be applied when the losing party protests against the award.
In brief, Article 5(2) defenses include:
1. Lack of arbitraility.
2. Violation of public policy.
These two additional defenses can be raised by the court itself.
Another restriction that exists in Iran legal system is article 139 of Constitutional Code of Iran. According to “act of Islamic Republic of Iran’s Accession to the New York Convention on Recognition and Enforcement of Arbitral Awards “This convention will be applied without prejudice to article 139 of Constitutional Code of Iran.”
Article 139 states: “the settlement, of claims relating to public and state property or the referral thereof to arbitration is in every case dependent on the approval of the Council of Ministers, and the Assembly must be informed of these matters. In cases where one party to the dispute is a foreigner, as well as in important cases that are purely domestic, the approval of the Assembly must also be obtained. Law will specify the important cases intended here.”
This article states one of the controversial principles in the Constitution of Iran. Some scholars believe that this principle does not apply to States Companies so bringing a case before an arbitral tribunal by such companies is not in contract with that provision.
There are different kinds of international arbitral awards. Some of them are enforceable under New York Convention, and since Islamic Republic of Iran has ratified the Convention, they can be enforced in Iran provided that they have been granted in a contracting state and in relation to commercial disputes.
Some other awards are enforceable under “Iran’s International Commercial Arbitration Act”.
Other international arbitral awards that are not covered by NYC or ICAA can also be recognized and enforced by courts according to theories presented by well-known scholars.
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