Court intervention in Iran arbitrations

>>Court intervention in Iran arbitrations

Court intervention in Iran arbitrations

2019-02-12T12:01:25+03:30June 18th, 2018|Categories: Iran Arbitration|0 Comments

Iran has two arbitration regimes: Domestic Arbitration which is governed by section 7 of Iran Civil Procedure Code and International Arbitration which is governed by Law on International Commercial Arbitration (LICA). In order to find out more about these acts and the differences between them, click here.

Court intervention in International Arbitration might occur in three stages, as below:

Court intervention before arbitration proceeding:

Before initiation of the arbitration, court might intervene in three occasions: first, appointment of arbitrator(s), second, challenge of arbitrator(s) and third, interim measure.

Article 11.2(a) of Iran Law on International Commercial Arbitration (LICA) provides that if one of the parties fails to appoint his arbitrator within thirty days of the commencement of arbitral proceedings, or if the appointed arbitrators fail to agree on the presiding arbitrator within thirty days of their appointment, an arbitrator for the failing party or the presiding arbitrator as the case may be, shall be appointed by court atthe request of the other party.

Also, section (b) of the same article provides that in arbitration with a sole arbitrator, if the parties are unable to agree on the arbitrator, the latter shall be appointed, on the request of a party, by court.

According to article 13.3 of Iran Law on International Commercial Arbitration (LICA), if a challenge of arbitrator(s) under the procedure of this law is not successful, the challenging party may request, within thirty days after receiving the notice of the decision dismissing the challenge, the court to examine and decide the challenge.

It should be noted that according to article 6 of Iran Law on International Commercial Arbitration (LICA), in institutional arbitration, the arbitral institution shall perform the functions regarding the appointment and challenge of arbitrator(s).

As to the matter of interim measure before commencement of arbitration, article 9 of Iran Law on International Commercial Arbitration (LICA) allows each party to request the court to issue a writ of attachment or order interim measures of protection, before or during arbitral proceedings.

In addition to all above, it is important that,according to article 8 of Iran Law on International Commercial Arbitration (LICA), if a court is requested to decide on a case which is the subject of an arbitration agreement, it shall, upon the request of each party and not later the first session of the court, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or impossible to be performed.

Court intervention during arbitration proceeding:

  • Court intervention/assistance during the arbitration proceeding might occur in one of following occasions:Interim measure: Although arbitral tribunal has the required power to order interim measures (article 17 of Iran Law on International Commercial Arbitration), many parties prefer to recourse to court for obtaining interim measure even after the arbitration is initiated and the tribunal is constituted. To this aim, article 9 of LICA allows each party to request the court to issue a writ of attachment or order interim measures of protection, either before or during arbitral proceedings.
  • Challenge of arbitrator or deciding on the competence of the tribunal: According to Article 13.3 of Iran Law on International Commercial Arbitration (LICA), if the parties do not agree on the challenge of arbitrator or the arbitratordoes not accept the challenge, the requesting party may, within 30 days from the date of rejection of request from tribunal, requestfrom the competent court to decide upon this request. The process does not affect the arbitration process and issuance of award; however, if the court accepts the challenge, the award might be later set aside (Article 33 of LICA). Same procedure applies to the matter of competence of the tribunal (Article 16.3of LICA).
  • Failure or impossibility of arbitrator to act: Article 14.1 of Iran Law on International Commercial Arbitration (LICA) provides that if an arbitrator becomes de jure or de facto unable to perform his functions or, for other reasons, fails to act without undue delay, and the controversy remains concerning any of these grounds, any party may request the court to rule on the termination of the mandate of the arbitrator in question. In addition, Article 15 of LICA provides that

When the mandate of an arbitrator terminates as a result of challenge or failure or impossibility to perform function or because of his withdrawal from office, or because of the revocation of his mandate by agreement of the parties or for any other reason and in any other case, a substitute arbitrator shall be appointed by the court.

Court interventionafter making the award:

After the award is rendered by the arbitrator(s), the court may intervene either for enforcement of the award OR for annulment or setting aside the award. In order to read the enforcement of arbitral award please click here and to see the enforcement of foreign arbitral awards in accordance to the
“Act of Islamic Republic of Iran’s Accession to the Convention on Recognition and Enforcement of Arbitral Awards (New York Convention, 1958)” please click here.Annulment of arbitral award and setting aside of awards under Iran arbitration regime are explained here.

It is noteworthy that, according to article 6.2 of Iran Law on International Commercial Arbitration (LICA), the court’s authority in regards to below matters is delegated to arbitration institution:

  • Appointment of arbitrator(s) in case of lake of agreement between the parties;
  • Deciding on the challenge of arbitrator; and
  • Failure or impossibility of arbitrator to act and appointment of the substitute arbitrator.

Also, in institutional arbitration, the method and authority for service of documents and noticesshall be in accordance with the rules of the institution.

In domestic arbitration, which is under section 7 of Iran Civil Procedure Code, courts have wider hands in intervening in the proceeding. By way of example, article 461 of Civil Procedure Code, regulates the situation in which the validity of the main contract or the validity of arbitration agreement is under dispute. In this case, the court –and not the arbitral tribunal- shall decide upon the existence of contract or the validity of arbitration agreement. It means that the principle of Separability is not accepted under Iran domestic arbitration regime. Moreover, unlike LICA provisions, in case of challenge of an arbitrator, domestic arbitration grants the authority to the court to decide upon.

Court’s wider hands is also evident in the matter of setting aside of arbitral awards. According to paragraph 1 of article 489, one of the grounds of request for setting aside of arbitral award is “inconsistency of the award with the laws creating rights”, which somehow, allows the courts to enter into the substance of the award, instead of a mere procedural review, as it is in international arbitration.