Arbitration of investment disputes under Iranian investment treaties
| Date | 10 May 2011 |
| Pages | 130-157 |
| DOI | https://doi.org/10.1108/13685201111127795 |
| Published date | 10 May 2011 |
| Author | Ardeshir Atai |
| Subject Matter | Accounting & finance |
Arbitration of investment
disputes under Iranian
investment treaties
Ardeshir Atai
Atai & Associates Law Firm, Tehran, Iran
Abstract
Purpose – The purpose of this paper is to examine the remedies available under Iranian investment
treaties for settlement of investment disputes. This includes the obligation of the Iranian Government to
provide foreign investors access to international arbitration. The sensitivity of the controversial Iranian
nuclear program and the imposition of economic and financial sanctions on Iran will lead to the
termination of many contracts between companies from Europe and the West and Iran, therefore, a
viable solution must exist to address the rights and remedies of foreign investors. This article aims to
provide an insight into Iranian treaties.
Design/methodology/approach – Themain method wasa survey of different treatiessigned by Iran.
Findings – The discussion revealed that there are currently more than 50 treaties signed and ratified
by Iran which provide arbitration as a dispute resolution forum. There are many treaties between the
member countries of the European Union which make it important for the research. Iranian treaties
guarantee international law remedies to foreign companies with investment in Iran by allowing them
to seek redress in an international forum.
Practical implications – Iran has not signed the ICS1D Convention, meaning that the arbitration
proceedings will be subject to ad hoc arbitration rules of UNCITRAL. Furthermore, ICSID rules on
enforcement of the award do not apply. Therefore, the winning party must go through the Iranian courts
to enforce its awards.
Originality/value – The value of the paper is to government organization, international institutions
and multinational companies with substantial economic interest in Iranian energy and natural
resources. For the first time, the topic has been covered in a research paper. There are no articles in
Iranian bilateral investment treaties (BITs) addressing dispute resolution through arbitration. This is
the first piece of work that actually conducted a thorough analysis of Iranian BITs.
Keywords Arbitration,International investments, Iran
Paper type Research paper
Introduction
The imposition of economic sanctions by the United Nations[1], the USA[2] and European
Union[3] on Iran for pursuing nuclear programme has prevented international oil companies
active in the Iranian energy sector to complete their projects. The restrictions on the US,
European and Asian companies to perform their obligations under the investment contracts
may give rise to disputes with the Iranian counterparty. Iran is party to more than
50 bilateral investment treaties (BITs) concluded with capital exporting countries and
developing countries to attract foreign investment. This article highlights the remedies that
are available to foreign investors under the provisions of the BITs to defend their rights
against the host state of investment. Iranian BITs offer foreign investors the optionto refer
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1368-5201.htm
This article is based on a chapter of the PhD thesis in international investment law submitted by
the author to the Institute of Advanced Legal Studies, University of London in 2010.
JMLC
14,2
130
Journal of Money Laundering Control
Vol. 14 No. 2, 2011
pp. 130-157
qEmerald Group Publishing Limited
1368-5201
DOI 10.1108/13685201111127795
their disputes with the Iranian Government to international arbitration. The purpose of this
research is to provide foreign investors involved in disputes with state entities with the
solution to protect their interest in Iran under international law.
Investor-state arbitration
BITs offer ICSID arbitration as an option for settlement of disputes between the foreign
investor and the host government, provided that both the home state of investor and the
host state of investment have ratified the ICSID Convention and consented to arbitration
of disputes under the ICSID arbitration rules[4]. Iran has not acceded to the ICSID
Convention therefore arbitration of investment disputes between foreign investors and
the Iranian Government/state entities are subject to the dispute resolution clause
contained in the bilateral investment protection treaties ratified by Iran[5].
Notwithstanding, the non-adoption of ICSID Convention by Iran, some treaties
signed by Iran provide ICSID arbitration as an option for resolution of investment
disputes, subject to ratification of the Convention by both contracting state pa rties.
In case, Iran accedes to the Washington Convention, investors should meet the
jurisdictional requirements (personal and subject matter) in both the ICSID Conven tion
and provisions of an investment treaty. Iran adopted its first model BIT in 2001
(UNCTAD, 2001, p. 479). The Iranian model BIT set forth the substantive investment
protection standards including the rules and procedures for resolution of inv estment
disputes. Article 12 is titled “Settlement of disputes between a contracting party and
investor(s) of the other contracting party”[6]. Iranian BITs gua rantee various
methods/procedures for the settlement of investment disputes including international
arbitration (institutional and ad hoc) and municipal courts. The first two provisions set
forth the procedure and conditions for parties to prosecute their claim. The next sec tions
will analyse the content of dispute resolution provision in Iranian BITs.
Scope of application
The substantive investment protection standards including access to international
arbitration contained in investment treaties are offered to investments that are covered
under the treaty provisions. Once a dispute arises out of an investment between a foreign
investor and the Iranian Government, the first step for the investor is identifying an
investment treaty in force between its home government and Iran containing the rights
and obligations of the parties to the dispute[7].
In the context of Iranian BITs, the foreign investors must meet the criteria for
approval and registration of the investment by the Organisation for Investment,
Economic and Technical Assistance of Iran (OIETAI) in order to enjoy the benefit of BIT
protection[8]. Scope of agreement provision in the Iranian Model BIT stipulates tha t:
[...] this Agreement shall apply to investments approved by competent authority of the host
Contracting Party. The competent authority in the Islamic Republic of Iran is “Organisation
for Investment, Economic and Technical Assistance of Iran (O.I.E.T.A.I)” or any other
authority which will succeed it[9].
The Foreign Investment Promotion and Protection Act (FIPPA) 2002 and its
Implementing Regulations lay down the conditions and procedure for admission and
approval of foreign investments in Iran (Atai, 2005-2006, p. 115, 2009). Therefore, in order
to qualify for protection under an applicable investment treaty, foreign investors must
Iranian
investment
treaties
131
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