Our brief report on the matter of “Governing Law of a Contract” already prepared and uploaded here https://www.tavcolleagues.com/en/Publications/page/14, aimed to give a general idea of how the Iranian legal system deals with the choice of law.
In this review, we aim to give a general understanding of the position of the laws of Iran with regard to the choice of jurisdiction focusing on the question of “should the Iranian legal system grant liberty to the contracting parties to determine in their contract that the courts of which jurisdiction would be competent to review and settle the disputes arising therefrom?”.
In the absence of any specific reference in the corpus of the laws, the matter needs to be reviewed and analysed on the basis of general rules and principles taking into consideration the provisions stipulated in the laws. This means that any answer to the question, should be treated as an opinion rather a conclusive interpretation of the law.
The matter of “competence”, itself, is among the sovereignty issues. Iranian Code of Civil Procedure provides a long list of grounds for the Iranian courts to exert jurisdiction over a case brought before them. Meanwhile, the Iranian Civil Code explicitly determines that the matter of “competence” shall be governed by the laws of the same country before whose courts the case has been brought. This obviously indicates that where a foreign court has found itself competent to hear and determine a suit under a ground provided in the laws of its own jurisdiction, that shall be respected by the Iranian courts. The exceptions will ordinarily be the same provided in the Enforcement of Civil Judgement Act as the hinders of recognition and enforcement of foreign civil judgements in Iran that we have already prepared and uploaded a brief in that respect here https://www.tavcolleagues.com/en/Publications/page/9.
On the other hand, The Code of Civil Procedure grants a wide scope of liberty to the contracting parties to agree on “arbitration” for final settlement of their disputes instead of referral to the court. According to the said provisions, such agreement shall oblige the court to refrain from review of a relevant claim brough before it by one of the contracting parties. This shall equally apply in the situations that the arbitration tribunal is located outside Iran (there are of course number of exceptions as well as certain limitations and formalities). So, it seems fair rational to conclude that where the contracting parties are entitled to choose a foreign arbitration tribunal for final settlement of a dispute; there is no reason for not being entitled to agree on the jurisdiction of the courts of a foreign country at least within the same scope and in compliance with the same requirements that apply for “arbitration” (see our brief in respect of Arbitration as treated under the laws of Iran here https://www.tavcolleagues.com/en/Publications/page/8). Emphasizing that there is no explicit provision preventing the Choice of Jurisdiction, the above conclusion will strengthen by the provisions of Article 10 of the Iranian Civil Code that allows the contracting parties to freely determine the terms and conditions of their contracts to the extent that those terms and conditions are not “contrary to the explicit provisions of law”.
The above explains the position that under the Iranian legal system, contracting parties can agree to submit their claims to the courts of a foreign country in the parallel of the competence granted by the Iranian law to the courts of Iran to review the same claim. A more complicated aspect of the question, however, is that “can the contracting parties agree on “exclusive jurisdiction” of the courts of a foreign country?”. In other words, if the parties of a contract deprive the courts of Iran to hear a claim while the said courts are basically competent to hear such claim according to the applicable laws, how an Iranian court would treat with such agreement. What makes the situation problematic is not only the fact that the court is competent to review the claim under the provisions of the Code of Civil Procedure but also the fact that Principle 34 of the Constitution provides that (i) seeking justice is indisputable right of any person, (ii) any person can refer to the competent court to seek justice, (iii) all people have the right of access to the competent court and (iv) no one can be banned from a court to which they are legally entitled to refer. We believe that there are still grounds to argue in favour of validity of such agreement.
For more information and advice, please contact us in Tavakoli & Colleagues law firm.
