Arbitration clause in foreign contracts makes compensation of losses for Iranians easier: TRAC director 

October 14, 2018 - 10:9

TEHRAN - Oveis Rezvanian, director of the Tehran Regional Arbitration Centre (TRAC), says in all international contracts the parties shall agree that their dispute be settled by arbitration. 

Unfortunately, Rezvanian says, in some contracts parties fail to put arbitration clause in their contracts or this clause has not been drafted in an effective way.

Rezvanian tells the Tehran Times that reliable arbitration institutions can help the Iranian parties for indemnification of the damages after unilateral termination of the contracts by foreign countries after the U.S withdrew from the JCPOA, the official name for the 2015 nuclear agreement.

Rezvanian says after the re-imposition of U.S. sanctions against Iran, some companies unilaterally terminated their commercial relationship with private sector in Iran and consequently the private sector suffered losses.

He suggests that inclusion of a proper arbitration clause simplifies the process for Iranians to obtain their rights.

The TRAC director says despite of the nature of the right to be compensated and the right of termination, one should note that the dispute resolution method in the contract shall be scrutinized. 

In the contracts concluded between Iranian parties and foreign companies, inserting a proper arbitration clause is very essential because it simplifies and accelerates the compensation, he insists.

In the absence of arbitration clause, parties shall refer their dispute to the foreign courts, he suggested, adding by inserting an arbitration clause in the agreements, it will be more convenient for the parties to compensate the damages.

Local arbitration institutions clause

Rezvanian, also a member of the arbitration board of ACIC (the Arbitration Center of Iran Chamber of Commerce), says in recent years some foreign arbitration centers caused some difficulties for Iranian companies, lawyers and business users. “For example there were some difficulties in payment receipt of arbitration costs and the prolongation of the arbitration proceedings. Therefore, I strongly suggest to the business users to insert the local arbitration institutions clause such as TRAC model clause.”

Rezvanian says, “By the local arbitration institutions, I mean the arbitration institutions located in Iran. TRAC and ACIC are Iran's two arbitration institutions which were established by the code passed by the legislative body and are active in the arbitrations, whether in private sector or the public sector.”

Pointing to some other arbitration institutions in Africa and Asia, he emphasized that these two arbitration centers (TRAC and ACIC) have some advantages including the convenient method of payment of the arbitration costs and without the problems for following the proceeding. 

“Moreover, referring to these local institutions are considered as supporting the local services.”

Rezvanian suggested that parties in their contracts agree on these two local institutions which are specialized in arbitration and are independent.  “These two institutions have no affiliations with the government.”

The award rendered in local and foreign institutions are enforceable, he stated.

He went on to say that the awards rendered in local or foreign institutions can be enforced in more than 150 countries. 

“According to the New York Convention on Recognition and enforcement of Foreign Arbitral Award (which Iran is a member), an arbitral award rendered in any member state shall be enforced in other member states. Court judgments, on the other hand, are not enforceable easily in other states.”

The legal expert insists that the only way for the Iranian companies to obtain their right and oblige the other party to compensate damages is proceeding with the arbitration clause stipulated in the parties’ agreement. 

“When parties insert an arbitration clause, no one can derogate from such clause.”

Rezvanian says he believes that even when the foreign party does not agree on a local institution, putting a reliable institution for arbitration is still necessary. 

“Parties should not omit the arbitration clause at all.”

Rezvanian says in some agreements parties agreed on unilateral right for termination of the contract and on a broad force majeure clause. “In each cases, it should be examined that whether the termination was lawful or not.”

Lots of business users did not conduct a comprehensive legal analysis for such situations, he pointed out.  “On the other hand, in some cases there are some possibilities to request for the compensation of the damages.”

Rezvanian insists that it is very essential to get legal consultation regarding the leaving of these companies from Iran, before the conclusion of the contract.

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