Litigation and Court Procedure in Iran

Table of Contents

Dispute Settlement Councils

The civil courts in Iran shall be divided into four different levels, the Dispute Settlement Councils which are established to hear the minor issues merely between private individuals (and not the governmental entities). The Dispute Settlement Councils are competent for the claims not over IRR 200.000.000.

The following items are the most common issues which have been studied by the Dispute Settlement Council in Iran:

  • In family law, applying for grant of probate and inheritance declaration.
  • In connection to the residential lease agreement, the settlement of disputes between landlords and tenants.
  • In general, all civil claims not exceeding IRR 200.000.000.
  • In some special circumstances, even the claims exceeding the above-mentioned amount have been studied and reviewed by the Dispute Settlement Councils prior to be referred to the civil court of first instance. In such an event, the role of the council is alike an arbitrator trying to find a mutual settlement not to refer the case to the higher court.

The final decision of the councils could be reviewed by the courts of first instance.

The Courts of First Instance in Iran

In general, any civil claims exceeding the threshold of the Dispute Settlement Councils should be heard by the civil courts of first instance in Iran.

Considering the fact that the special commercial court doesn’t exist in the current civil procedure law of Iran, all the commercial disputes should also be reviewed by the courts of first instance.

The court fee at this stage is equal to 3.5% of the demand.

The Courts of Appeal in Iran

The vast majority of the decisions issued by the courts of first instance could be appealed before the courts of appeal.

In financial claims, the decision with the demand exceeding IRR 3.000.000 could be appealed and in non-financial claims, all of the decisions issued by the courts of first instance could be appealed in Iran.

The Supreme Court of Iran

The Supreme Court of Iran comprising the most knowledgeable and experienced judges of Iranshall be considered as the highest judicial authority in Iran.

The main duty of Iran’s Supreme Court is to control the correct fulfillment of Iranian laws and regulationsThe Supreme Court is authorized to establish judicial precedents which have to be followed by the inferior courts.

Execution of Civil Judgments in Iran

  • Legal Framework for Execution of Civil Judgments in Iran
  • Start your Journey by an Order of Execution
  • Preconditions for Executing a Civil Judgment
  • Interim Orders
  • Requests and Notices
  • Executability of the Judgment
  • Competent Court for Starting Execution Process
  • Mid Process Quarrels
  • Bankruptcy Take Over
  • Third Party Claims
  • Obligations of Losing Party in the Civil Execution Process
  • Insolvency of Losing Party
  • Insolvency and Installments
  • Seizure of the Properties
  • Immune Properties from Distraint

Methods of execution of the civil judgments in Iran are based on the Law on the Execution of the Civil Judgments. There are also other rules and regulations which address the execution matters with an admirable accuracy.

Legal Framework for Execution of Civil Judgments in Iran

Legal Framework for Execution of Civil Judgments in Iran is based on the “Law on the Execution of the Civil Judgments” and the “Law on the Manners of Execution of the Financial Convictions”. These two laws constitute a general legal framework for executing civil judgments and have to be read together.

There are some other relevant acts which deal with relating issues like the Act of Prohibition on the Confiscation of the Municipal Property and the Act of Manners of the Payment of the Government Financial Convictions. There are also a range of indications for special paradigms, like some of the rules in the regulation of the execution of the enforceable official documents. Here we just approach the matter generally, based on the two main laws mentioned earlier.

Start your Journey by an Order of Execution

The execution process begins with the judicial “order of execution”, which the prevailing party has to seek in the competent court for execution matters. Soon we address this question in the paragraphs below. Then, the supposition is that the parties will come up with an agreed plan as to execute the judgment (article 40 of the Law on the Execution of the Civil Judgments).

has the losing party failed to go with the plan, then the execution officers are called to cross swords with him/her, according to a step-by-step course of actions prescribed by the law (article 41). For example, execution officers are not supposed to sally forth alongside police forces, but only in the case of emergency, they can use them (article 14).

Preconditions for Executing a Civil Judgment

The first condition is that the judgment must have been finalized (article 1). That doesn’t mean the judgment must have been irreversible, for a judgment might be finalized whereas it would be still possible to go through retrial process (article 39).

Interim Orders

Here, we are talking about judgments, but it’s noteworthy that interim orders are also executable by the same law (article 1).

Requests and Notices

The second condition is that the losing party must have been served and be noticed of the judgment. (Article 2). The same article states that the execution process only may get started upon the request of the winning party.

The reason behind this rule is that the execution process is supposed to be carried out by the voluntary steps and common understanding between parties, and there is a number of articles throughout the law reflecting this policy (Articles 40, 46, 73, 74, 76, 78, 79, 112). As you can see, even after the beginning of the process, parties’ agreements remain relevant.

Executability of the Judgment

The fourth condition is that the judgment must be executable. It means there are some qualities without them the execution is meaningless. For example, some judgments are just declaring a legal status like annulment of a document (article 4). How can one imagine an execution process for that? Some other court decisions pronounce a right attributed to the plaintiff but the subject of the right is not specified (article 3). The same problem again would resurface then.

Competent Court for Starting Execution Process

First of all, you should know appellate courts have no office to this purpose and one has to go back to the court of first instance. (Article 5). Not to mention, the execution office of the court that issued the first judgment on the matter has the jurisdiction (Article 19). Whenever part of the subject of execution were sited at another jurisdiction, the execution office of that district should continue the process (Article 20).

Mid-Process Quarrels

If in the middle of process some disagreements appear, the court under aegis of which the execution process is going on, has the jurisdiction. (Articles 25 and 26). Bearing in mind of what was said in the previous paragraph, this court is not necessarily the court that had issued the first judgment on the case. But if the disagreement is about or is originated from the judgment per se, then the court that issued the judgment has the say-so, be it the court of first instance or appellate court (27).

Bankruptcy Take-Over

In the case of bankruptcy, which only happens for businessmen or merchants, the execution process shall be stopped in view of liquidation process and the execution officers will send the last status of the bankrupt merchant to the liquidator (article 33).

Third Party Claims

If the subject of execution be found in the hand of a third party and he/she claims a right thereof and present evidence, the execution office shall give him/her one week to refer the case to the court. The third party has to solicit an order from the court addressing the execution office to stop the process. Otherwise, the execution process will continue (article 44). The third party is liable for his/her claim if he or she couldn’t prove his/her claim later on in the court and the prevailing party may seek relief (Article 61).

Obligations of Losing Party in the Civil Execution Process

According to the article 34, the losing party must satisfy what is wanted from him in the judgment within a period of 10 days after receiving the execution notice. He can also declare his or her inability as to execute the judgment. In that case, he or she must prepare a list of his properties and hand it over to the execution officers. The later part of the article provides that if losing party thereby misrepresents the truth and the truth transpires within the span of following three years, he or she shall be incarcerated from 61 days to six months.

Insolvency of Losing Party

In the case of inability, the detailed rules are embedded in the Law on the Manners of Execution of the Financial Convictions. Accordingly, the losing party shall either prove his or her insolvency or go to the jail for an indefinite time until he or she pay the bill. (Article 3). However, the burden of proof is inversed, had the winning party failed to prove the earlier status of solvency of his/her counterpart. (Article 7).

The jail here is a special prison separated from those of criminals. In these special prisons, they could avail themselves of the opportunity to continue their business and make money to pay the debts (Article 5). The insolvency claims are to be brought before the court of first instance which issued the first judgment on the case or the court which issued the order of execution (Article 13).

Insolvency and Installments

In the case of insolvency, the insolvent party has to pay his or her debts by installments, according to a plan devised by the court (Article 11).

Seizure of the Properties

Let us get back to the Law on the Execution of the Civil Judgments. Article 49 of the law states that if the losing party refuse to execute the judgment and end up remiss under his or her duties under the order of execution, the prevailing party may request to seize his or her properties.

Immune Properties from Distraint

Some properties are considered to be necessary livelihood assets. It’s obvious the law will never seize your food or attire. An average house and workshop tools are always respected and execution office will never put hands on them. But detailed rules and the technical nuance differ dependent on the type of your claim, because under current legal system in Iran, there are four separate laws governing on the matter.

Article 523 of the Code of Civil Procedure, article 65 of the Law on the Execution of the Civil Judgments, article 24 of the Law on the manners of execution of the Financial Convictions and the article 61 of the regulation of the execution of the enforceable official documents, each provides a similar yet slightly different chart concerning the immunity status.

Arbitration

In 1997, the Law concerning International Commercial Arbitration in Iran has been ratified by the Iranian Parliament in order to regulate a domestic law for international commercial arbitration in Iran in accordance to the International Trade Law (UNCITRAL) Model Law and New York Convention on recognition and enforcement of foreign arbitral awards.

The applicability of international arbitration clause under Iranian law

How International Arbitration Clause Could be Applied under Iranian Law

Are you a company willing to sign an agreement with an Iranians? This article is for you if the disputes raised from agreement shall be referred to the international arbitration.

 Iran adopted in 1997, the “Law concerning International Commercial Arbitration” (LICA) which provides a modern arbitration framework. LICA follows the United Nations Commission on International Trade Law (UNCITRAL) Model Law (Model Law). However, the LICA is not applicable to arbitration taking place outside Iran.

Iran acceded to the United Nations Convention in the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) with two reservations through the adoption of a specific law for this purpose, the single article Act in 2001(Ratifying Law).

The two reservations are as follows:

Firstly, Iran declared that “in accordance with article 1(3) of the Convention, Iran will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under national law of Iran “.

Secondly “in accordance with article1(3) of the Convention, the Islamic Republic of Iran will apply the Convention, on the basis of reciprocity, to the recognition and enforcement of only those awards made in territory of another contracting state party to the Convention”.

The other piece of legislation which provides for term and conditions under which international arbitration could be used by foreign investors is the Foreign Investment’s Promotions and Protection Act (FIPPA).

The applicability of international arbitration clause in the contracts between international companies and Iranian governmental organizations shall be analyzed through referring to the above acts as well as the Iran’s Constitution.

Enforceability of Foreign Arbitration Awards in Iran

Since the assistance of Iran to New York Convention, awards rendered outside Iran shall be enforceable in Iran under the terms and condition provided for in the Ratifying Law.

The New York Convention aims at establishing common legal grounds for the recognition of arbitration clause and recognition and enforcement by state courts of foreign and non-domestic awards.

The Convention deals only with the recognition and enforcement of foreign and non-domestic arbitral awards. The Convention does not define clearly if it applies to domestic and/ or foreign arbitration agreements. However, some Iranian courts reason that the Convention applies if the arbitration agreement is international in nature.

The internationality of the agreement results either from the nationality or domicile of the parties or from the underlying transaction and also when determining whether an arbitration agreement falls within the scope of the Convention.

Under the Ratifying Law of the New York Convention, the following conditions shall be met for the foreign award to be enforceable:

  • The legal contractual relationship of the parties should be considered commercial under the law of Iran;

  • The provision of the New York Convention shall be implemented on the basis of reciprocal relationship (i.e. the state where the award was made should be a party to the Convention), and

  • Article 139 of the Islamic Republic of Iran constitution related to arbitration in the event of government disputes shall be complied with.

After assessing and making sure the award meets the above requirements the Iranian courts will issue an enforcement order and the arbitration award will be enforced under the same rules of procedure required for enforcement of domestic awards rendered in Iran.

The position of the Iranian state owned entities regarding the international arbitration

The LICA provides that an arbitration agreement shall have no impact on other regulations of Iran on the basis of which certain dispute cannot be referred to arbitration. LICA emphasizes that an award shall be annulled if “the subject matter of the dispute is not capable of settlement by arbitration under Iranian Law” (Article 33(1) of the LICA).

Articles 77 and 139 of the Iranian Constitution are the main provisions which shall be taken into consideration in this regard.

Article77: “international treaties, protocols, contracts and agreement must be approved by the Iranian Parliament.”

Article 139 provides that the settlement of claim relating to public and state properties or the referral thereof to arbitration is in every case dependent on the approval of the Council of Ministers (Cabinet), and the Iran Parliament 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 Iran Parliament must also be obtained.

Accordingly, should the dispute or claim rated to public and state property, referral of the dispute to arbitration can be done only upon observance of relevant legal formalities by the Iranian (government) party.

At the enforcement stage in Iran, the default of consent by the Iran Parliament to international arbitration disputes may affect the decision of the Iranian courts to recognize and enforce of the award due to the condition set under the Ratifying Law of the New York Convention.

It is best advised that the arbitration agreement confirms that state entity has the authority to refer the dispute relating to public and state property, to arbitration, in compliance with article 139 of the Constitution.

Applicability of International Arbitration Clause in Accordance to FIPPA

Article 19 FIPPA provides that “disputes arising between the government and foreign investors with regard to their respective mutual obligations within the context of investments under this Act, if not settled through negotiations, shall be referred to domestic courts, unless the law ratifying the Bilateral Investment Agreement with the respective Government of the Foreign Investors provides for another method for settlement of disputes”.

You may read about relevant laws in below.

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