Time limitation in Iran arbitration

>>Time limitation in Iran arbitration

Time limitation in Iran arbitration

2020-07-02T20:35:23+04:30June 4th, 2019|Categories: Recent Experiences|0 Comments

Time limit for rendering arbitration award under Iran law is a controversial matter, particularly when it comes to domestic ad-hoc arbitration.

The common practice in Iran arbitration suggests that the default duration for rendering the award is three months. This understanding comes from Note of Article 484 of Civil Procedure Code (CPC) of Iran which provides that:

“In circumstances where the parties to the transaction have undertaken the obligation to accept the arbitration of certain person(s), if a dispute between them, in the absence of specific terms, arbitration duration shall be three months, commencing from the date the matter is communicated to the arbitrator(s). The said duration may be extended by the parties’ agreement.”

Although the provision of this Article is limited to the cases that parties have agreed on arbitration by a specific person, Iranian courts (and lawyers as well) are tempted to interpret the Note so that the limitation is extended to all sorts of arbitrations. That is, the time limit of every and all Iran domestic arbitrations are assumed to be three months from the date of transmitting the case to the arbitrator unless the parties would agree otherwise or extend this time. Although the reasoning behind this provision is clearly to increase the speed of arbitration and forcing the arbitral tribunals to conduct the proceeding in an efficient way, at the same time, it has many dangerous downsides. The most important problem with this provision is that in case a reluctant party uses delaying tactics in arbitration, it can simply place the proceeding in a situation that the time expires. It is correct that the arbitrators can always extend the time-limit by agreement of parties or acquire the power to extend in Terms of Reference, but I have the experience of participating in arbitrations that the arbitral tribunal even did not succeed to conclude and sign the Terms of Reference with the parties before the 3 months expire.

The time limit for rendering arbitration award under Iran law is indeed a crucial matter, because a large number of arbitration cases that are referred to Iranian courts for annulment, pursuant to Article 489 of the CPC, are based on the fact that the award is not rendered in due time, that is the statutory three months. Article 489 of the CPC, among other grounds for setting aside an award, provides that:

“Where the arbitration award was issued and submitted after the expiration of the arbitration duration.”

Therefore, every arbitrator in Iran domestic arbitration should be mindful of this limitation.

When it comes to international arbitration, the situation is much better. That is, Iran Law on International Commercial Arbitration (LICA) which governs the international arbitrations, does not impose any time limitation on arbitrations. This approach is consistent with UNCITRAL Model Law, which LICA is completely inspired of. Therefore, unlike domestic arbitrations, Iran international arbitration cases are not limited to a specific period.

In institutional arbitrations, namely arbitrations under TRAC or ACIC Rules, the Rules require that the Arbitral Tribunal should draft a time schedule for conduct of the proceeding. This schedule is mostly inserted in the Terms of Reference or is issued in the form of a separate procedural order. While this schedule is mostly to regulate the time-limits of different steps of the proceeding (i.e. the date of parties’ submissions, hearing session, etc.) it might also set the time-limit of arbitrator for rendering the final award, which is also the deadline for arbitration. In addition, in the Terms of Reference, the parties can agree on the deadline of arbitration, as well on the arbitral tribunal’s power to extend the deadline.