Iran arbitration regime is basically governed by two different Acts:
- Section 7 of the Civil Procedure Act which governs “Domestic Arbitrations”; and
- Law on International Commercial Arbitration (LICA) which governs “International Arbitrations”.
It is easy to distinct between domestic and international arbitration under Iran arbitration system: when both parties to arbitration agreement, at the time of concluding the agreement, are nationals of Iran, then the arbitration is considered as Domestic. Otherwise, it should be considered as international. Therefore and with such definition, when Iranian companies are into arbitration, even if their shareholders are all non-Iranian nationals, since the company is Iranian, the arbitration should be considered as domestic and therefore, Domestic Arbitration Law of Iran (Section 7 of the Civil Procedure Act) shall apply to the proceeding.
In Iran arbitration system, domestic arbitration is not very consistent with recent developments of arbitration in modern commercial area. Also, the arbitrator’s scope of authority is sometimes limited and some innovative features of arbitration, i.e. Separablity, are not fully permitted therein. In addition, the grounds for setting aside of domestic arbitration awards are quite wide. More information on annulment and setting aside of arbitration awards in Iran is available here.
On the other hand, the Law on International Commercial Arbitration (LICA) which regulates the international arbitrations is very inspired by UNCITRAL Model Law on International Arbitration and therefore, adopts most known features of modern arbitration. Enacted in 1997, LICA requires below conditions in order to be applicable to an arbitration:
- First, at least one of the parties is not Iranian national, at the time of conclusion of the arbitration Agreement; and
- Second, the dispute is related to commercial matters (as defined in the Article 2 of the same Act).
Law on International Commercial Arbitration (LICA) encompasses internationally accepted arbitration principles contained in the Model Law such as autonomy of the parties to decide on the procedural aspects of the arbitral proceedings and in choosing the applicable law governing their disputes. Separability of the arbitration clause from the underlying agreement, competence of the arbitral tribunal to rule on its jurisdiction (Competence-Competence), and power of the arbitral tribunal to order interim measures are other internationally accepted principles which are incorporated in this Act. In addition, institutional arbitration is accepted under LICA and therefore, some important powers of courts (i.e. decision on challenge of arbitrator) are delegated to arbitration institutions.
There are two arbitration institutions in Iran: Tehran Regional Arbitration Centre (TRAC) and Arbitration Center of Iran Chamber (ACIC). They are both independent from government and are established by virtue of law. Also, they have both published arbitration rules and are actively promoting arbitration in Iran and in the region.
Iran legislative bodies are currently working on a new Arbitration Law which, once enacted, will merge both above laws in one Act and will establish a uniform arbitration law for domestic and international arbitrations in Iran.