Iran

This web site aims to provide some useful legal information for those persons who are willing to enter into any kind of relationship with the Islamic Republic of Iran – by focusing on some aspects related to international law and to domestic commercial law.
Therefore, this web site is not intended to exhaustively describe international law or domestic commercial law, but simply to focus the attention on the most interesting and practical aspects for those persons who are willing to enter into business relationships with the Country.
This web site has no political content: it is free and open to all persons who intend to give a contribution in the field of civil, commercial and administrative law. For every information, clarification or advice, please contact us at: mail@decapoa.com

Iran

Commercial relationships and legislation

All persons who are willing to enter into a commercial or any other kind of relationship with an Iranian partner must be aware of the existence of very strict rules provided for by the United Nations Organization and by the European Union.
These rules aim at avoiding any kind of activity which is related to the production, the trade, the import and the export of chemical and biological weapons as well as any kind of nuclear weapons in Iran.
Therefore, foreign dealers, before enter into any kind of relationship with Iranian partners and/or with partners established in the Iranian territory, are required to carefully examine and assess if the international restrictions are applicable.
The scope of these rules is very huge.
First of all, international restrictions do not apply only to those foreign persons who are willing to export a product to Iran or to provide a service in Iran, but also to those persons who are directly or indirectly involved with the activities banned by international restrictions as well as all those persons who are, directly or indirectly, informed by any relevant element concerning the correct application of the international restrictions.
Secondly, international restrictions apply to a very huge range of products, materials, technology, know-how and services. The lists of the products and/or services banned are periodically updated and they include both items which are exclusively used in military activities. It is important to point out that not only the final product can be considered “listed” but also its components.
Therefore, the foreign dealer is required to carefully check if the product in question or its components do fall within the list of the item and/or the materials which cannot be exported to Iran or within the list of the items and/or the materials for which a preliminary authorization is needed.
Thirdly, international restrictions provide also for a list of physical and juridical persons with whom it is absolutely forbidden to enter into any kind of relationship. This list is periodically updated and includes all those physical and/or juridical persons which are directly or indirectly involved in activities related to the production, trade, import, export of chemical and biological weapons as well as any kind of nuclear weapons.
Therefore, foreign dealers must fully comply with the international rules in order to avoid any administrative or criminal sanction.
Indeed, very severe sanctions are provided for all those persons who do not respect, both directly and indirectly, the restrictions established in the international legislative texts as implemented by the national law.

Depending on the national law, the sanctions can consist in administrative bans and/or restrictions as well as the payment of high sums of money and/or the detention for people deemed to be considered responsible of the violation.
In order to avoid the application of these sanctions, foreign dealers must adopt a very careful and prudent approach and to cooperate as far as possible with the national competent Authorities. Indeed, the foreign dealers are required to assume any possible information about the operation they are going to carry out in Iran. Indeed, the compliance of the operation with the international restrictions depends on various factors: for instance, depending on the features of the specific product exported or the specific service provided, the operation can be considered consistent or not with the international bans.
Moreover, the final destination of the product exported to Iran and/or its end user can be crucial for the legal assessment of the operation. Undeniably, if the end user is somehow involved with the above banned activities that can definitely have relevance on the legal assessment of the operation according to the international restrictions. If the foreign dealer does not adopt this kind of approach, it is highly possible that the goods to be exported could be banned by the national competent Authorities. For this purpose, it must be remembered that the national Authorities have a high power of discretion in order to assess if the operation is lawful or not. In particularly, national Authorities can decide to block the export of goods which are not “listed”, in virtue of the so called “catch more” and “catch all” clauses.
Moreover, it must be remembered that in case of bans by the national Authorities, foreign dealers can be also considered responsible for violation of contractual obligations with their Iranian partner.
Indeed, the application of the bans prevents foreign dealer to carry out the operation (i.e. the export of goods) and, therefore, to comply with the contractual obligations. In these cases, foreign dealers cannot invoke “the force majeure” as justification for not having executed the contract, in so far as the foreign dealer is aware of the existence of these bans and of the high discretion power of the national Authorities.
Therefore, it is highly recommendable to inform the Iranian partner about the risk of bans by the national Authorities and to expressly rule the effects of this circumstance in the contractual documents.

Certification of products

The Iranian law provides for very strict rules concerning the export of goods to Iran.
The technical rules for trade of goods in Iran are established by the Institute for Standards for Iran (ISIRI).
Therefore, the foreign dealer is supposed to know and to correctly apply the technical rules concerning the quality and the features of the goods to be traded into the Iranian territory and must assess, together with the importer, the steps to adopt in order to comply with these technical rules. Indeed, if the rules provided for by the ISIRI are not respected, the product cannot be traded into the Iran territory.

Very severe sanctions can be applied in case of violation of the above mentioned rules. In order to correctly assess and face this problem, it can be recommendable that the exporter/importer applies for a certification by a competent body of the quality of the product to be traded into the Iranian (“The Inspection Certificate”). The certification of a product is a document which attests the quality and the features of a foreign made product and its compliance with the national and/or international technical rules. This certification is issued by the Certification Bodies which are located in the territory of Iran.
The certification can be also issued by foreign bodies, located in the territory of the exporter, which have been expressly authorized to issue these certifications. The certifications issued by the foreign competent bodies must be also authenticated by the local Chamber of Commerce. The importer and the exporter must closely cooperate in order to inform the Certification Body about all the features of the product to be traded into Iran as well as the kind of commercial operation to be carried out.
For instance, the Certification Body shall be informed about:

  • the quality of the product;
  • the quantity of the product to be exported;
  • the package of the goods;
  • the scheduled time for the carriage;
In some cases, the certification is a necessary requirement in order to trade a product in Iran, for reasons of health, protection of the consumers and of the environment.. This means that the export of some goods must be accompanied by a certification of compliance issued by a competent body (“The Certificate of Inspection”): otherwise, the export of that product will be not allowed by the national Customs Authorities.

The list of these goods is indicated at the link legislative materials. At the moment, almost 200 kinds of products are subject to the special procedure in order for them to be traded in Iran.
They are divided into 10 categories: Mechanic and metallurgy, Electric and electronic, Weight and scale, Valuable metals assays and hallmarking, Auto motive and dynamic force, Construction and mineral, Chemical, Food industry and agricultural, Textile and leather, Packaging and cellulosic materials. The Certification of compliance of a product to be traded into Iran plays also a fundamental role as concerns the negotiation of a letter of credit. Indeed, the Iranian Central Bank (Bank Markazi) requires this certification in order to issue a letter of credit for the importer.
Therefore, the latter shall choose a Certification Body (which must be approved by the exporter) among the bodies included in the “vendor list” provided for by the Bank Markazi. In case that the importer does not indicate any body, the Bank Markazi will autonomously indicate the competent body to deal with the specific operation.

LEGISLATIVE MATERIALS

List of the products subject to the mandatory requirements of the ISIRI, taken from the website http://www.isiri.org/

LINKS
  • Central Bank of the Islamic Republic of Iran: www.cbi.ir/
  • Italian-Iranian Chamber of Commerce: http://www.ccii.it/
  • Constitution of the Islamic Republic of Iran: www.iranonline.com/iran/iran- info/Government/constitution.html
  • Embassy of the Islamic Republic of Iran in Italy ‎Via Nomentana, 363, 00162 Roma 06 86215287‎ – 06 8621 4478‎ – 06 86214480‎
  • Embassy of The Italian Republic in Iran: http://www.ambteheran.esteri.it/ambasciata_teheran
  • Iran Chamber of Commerce, Industries and Mines: http://en.iccim.ir/index.php

Legislative Materials

  • Council Regulation (EU) no. 2017/964 of 8th June 2017, amending EU Regulation no. 267/2012 concerning restrictive measures against Iran.
  • Implementing Commission Regulation (EU) no. 2016/1375 of 29th July 2016, amending Council Regulation (EU) no. 267/2012 concerning restrictive measures against Iran.
  • Council Resolution (PESC) 2016/37 of 16th January 2016 concerning the date of implementation of the Resolution (PESC) 2015/1863 amending Resolution 2010/413/PESC concerning restrictive measures against Iran.
  • Council Regulation (EU) 2015/1861 of 18th October 2015, amending Regulation (EU) no. 267/2012 concerning restrictive measures against Iran.
  • Implementing Council Regulation (EU) 2015/1862 of 18th October 2015 implementing Regulation (EU) no. 267/2012, concerning restrictive measures against Iran.
  • Council Resolution (PESC) 2015/1863 of 18th October 2015, amending PESC Resolution 2010/413, concerning restrictive measures against Iran.
  • Council Resolution (PESC) 2015/1148 of 14th July 2015, amending PESC Resolution 2010/413, concerning restrictive measures against Iran.
  • Implementing Council Regulation (EU) 2015/230 of 12th February 2015 implementing Regulation (EU) no. 267/2012, concerning restrictive measures against Iran.
  • Council Regulation (EU) 2015/229 of 12th February amending Regulation (EU) no. 267/2012, concerning restrictive measures against Iran.
  • Council Resolution 2015/236/PESC of 12th February 2015 amending Resolution 2010/413/PESC concerning restrictive measures against Iran.
  • Council Resolution 2014/829/PESC of 25th November 2014 amending Resolution 2010/413/PESC concerning restrictive measures against Iran.
Importing to Iran through a local agent
Second only to the Saudi Arabian one, the Iranian economy represents one of the driving forces of the Middle East.
Despite the political and economic sanctions imposed on the country by the international community, currently eased thanks to the negotiations of January 2014 in Ginevra, Iran is the 17th economic world power: industries are expanding so steadily that they now represent 45% of the national economy and Iran ranks fifth among producing countries for extraction of crude oil. The Iranian market can therefore represent a fertile space for the expansion of international operators.
The Iranian regulations on imports distinguish the following three categories of goods:
  • freely marketable products, the import of which does not require any authorization;
  • products whose marketability is dependent on obtaining authorization;
  • products which are unmarketable because they are forbidden by the Shari’a (the Islamic tenet) or national legislation;
In any case, the importer must obtain the import license, which is issued by the Chamber of Commerce, Industry and Mines with the approval of the Minister for Trade.
Industries wishing to invest or export to Iran can expand their commercial network through a local agent.
Art.656 of the Civil Code of the Islamic Republic defines the Agency Agreement as the one under which one of the parties entrusts the other to behave in a certain way as his representative.
It is important to note that Iranian legislation safeguards the Principal more than the Agent and this must be taken into consideration, seeing that, for instance, EU and other countries instead favor and protect the Agent more than the Principal.
This is particularly with regard to period of notice, instances of termination, the obligation to pay out severance compensation.
Surely, at present, Iranian legislation does not contemplate such rights for the Agent, therefore each time the parties should weigh up whether to subject the Agency Agreement to Iranian law, to the law of the Principal’s country of origin or to the one of a third country.
One other fundamental aspect to consider is the determination of the tribunal in charge, where it is inserted in the Agency Agreement. In fact, in the Islamic Republic of Iran, not many conventions with other countries in terms of judicial cooperation and assistance are in force, which can create issues as to the recognition of judicial decisions adopted by foreign judicial authorities (however, in practice, there is a tendency to accept foreign judgements, as long as they are not in conflict with domestic norms of public order). It is therefore preferable to subject any controversy that could arise between the Principal and the Agent to the judgment of an Arbiter, as Iran ratified the New York Convention of 1958 on the recognition of arbitral awards given abroad. It is hence necessary to determine where the Arbitration will take place, which may be the country of origin of the Principal or a third country. The types of Agent recognized by Iranian legislation are three: the broker, that is the one acting as mediator between the parties in a transaction; the Commission Agent, namely the one who acts under his own name on behalf of the Principal and, lastly, the Commercial Agent. The regulations do not provide for any specific prerequisites of the Agent, however it is important to note that the import licence is issued only to legal or natural persons having Iranian nationality.
There are four different types of Agency Agreement:
  • special, when the Agent has the duty to act only to accomplish a specific task;
  • general, when the Agent can act within the limits determined by the agreement;
  • universal , when the Agent’s powers are unlimited;
  • ‘del credere’, when the Agent is responsible towards the Principal for the regular compliance to the agreement by third parties
No specific formal requisites are required to conclude an agreement, which can therefore be made orally or through the completion of written documents. The Agent’s duties, regulated by art.666 ss., mainly derive from the agreement between the parties. The Agent must always comply with his obligations in the interest of the Principal, and he is considered liable for any economic losses when they are the consequences of his behavior. Anyhow, the Agent is liable in respect of the obligations undertaken with a third party, outside his mandate. Moreover, under art.668 ss., the Agent is under the obligation to inform the Principal. The duration and termination of the Agency Agreement may be determined freely according to the contractual will of the parties. Withdrawal from the Agency Agreement by the parties is possible at any point without reason, unless the agreement provides otherwise. The termination of the agreement due to death or incapacity to act of one of the parties is also allowed (Art.668 c.c.). According to art.672, sub-agency is not allowed, unless explicitly or implicitly provided for by the parties.
Any agreement which an industry is about to conclude should state explicitly:
  • The value of the Agent’s commission, which otherwise is determined according to local practice;
  • The obligation for the Agent to conclude an insurance, as he is not obliged to guarantee the goods which he markets;
  • The exclusive rights of the Agent.
Moreover, it is advisable to specify the duration of the agreement in the agreement itself, taking into consideration the difference between the Western and the Persian calendar.
  • Council Regulation (EU) no. 2017/964 of 8th June 2017, amending EU Regulation no. 267/2012 concerning restrictive measures against Iran.
  • Implementing Commission Regulation (EU) no. 2016/1375 of 29th July 2016, amending Council Regulation (EU) no. 267/2012 concerning restrictive measures against Iran.
  • Council Resolution (PESC) 2016/37 of 16th January 2016 concerning the date of implementation of the Resolution (PESC) 2015/1863 amending Resolution 2010/413/PESC concerning restrictive measures against Iran.
  • Council Regulation (EU) 2015/1861 of 18th October 2015, amending Regulation (EU) no. 267/2012 concerning restrictive measures against Iran.
  • Implementing Council Regulation (EU) 2015/1862 of 18th October 2015 implementing Regulation (EU) no. 267/2012, concerning restrictive measures against Iran.
  • Council Resolution (PESC) 2015/1863 of 18th October 2015, amending PESC Resolution 2010/413, concerning restrictive measures against Iran.
  • Council Resolution (PESC) 2015/1148 of 14th July 2015, amending PESC Resolution 2010/413, concerning restrictive measures against Iran.
  • Implementing Council Regulation (EU) 2015/230 of 12th February 2015 implementing Regulation (EU) no. 267/2012, concerning restrictive measures against Iran.
  • Council Regulation (EU) 2015/229 of 12th February amending Regulation (EU) no. 267/2012, concerning restrictive measures against Iran.
  • Council Resolution 2015/236/PESC of 12th February 2015 amending Resolution 2010/413/PESC concerning restrictive measures against Iran.
  • Council Resolution 2014/829/PESC of 25th November 2014 amending Resolution 2010/413/PESC concerning restrictive measures against Iran.
Importing to Iran through a local agent Second only to the Saudi Arabian one, the Iranian economy represents one of the driving forces of the Middle East.
Despite the political and economic sanctions imposed on the country by the international community, currently eased thanks to the negotiations of January 2014 in Ginevra, Iran is the 17th economic world power: industries are expanding so steadily that they now represent 45% of the national economy and Iran ranks fifth among producing countries for extraction of crude oil. The Iranian market can therefore represent a fertile space for the expansion of international operators.
The Iranian regulations on imports distinguish the following three categories of goods:
  • freely marketable products, the import of which does not require any authorization;
  • products whose marketability is dependent on obtaining authorization;
  • products which are unmarketable because they are forbidden by the Shari’a (the Islamic tenet) or national legislation;
In any case, the importer must obtain the import license, which is issued by the Chamber of Commerce, Industry and Mines with the approval of the Minister for Trade.
Industries wishing to invest or export to Iran can expand their commercial network through a local agent.
Art.656 of the Civil Code of the Islamic Republic defines the Agency Agreement as the one under which one of the parties entrusts the other to behave in a certain way as his representative.
It is important to note that Iranian legislation safeguards the Principal more than the Agent and this must be taken into consideration, seeing that, for instance, EU and other countries instead favor and protect the Agent more than the Principal.
This is particularly with regard to period of notice, instances of termination, the obligation to pay out severance compensation.
Surely, at present, Iranian legislation does not contemplate such rights for the Agent, therefore each time the parties should weigh up whether to subject the Agency Agreement to Iranian law, to the law of the Principal’s country of origin or to the one of a third country.
One other fundamental aspect to consider is the determination of the tribunal in charge, where it is inserted in the Agency Agreement. In fact, in the Islamic Republic of Iran, not many conventions with other countries in terms of judicial cooperation and assistance are in force, which can create issues as to the recognition of judicial decisions adopted by foreign judicial authorities (however, in practice, there is a tendency to accept foreign judgements, as long as they are not in conflict with domestic norms of public order). It is therefore preferable to subject any controversy that could arise between the Principal and the Agent to the judgment of an Arbiter, as Iran ratified the New York Convention of 1958 on the recognition of arbitral awards given abroad. It is hence necessary to determine where the Arbitration will take place, which may be the country of origin of the Principal or a third country. The types of Agent recognized by Iranian legislation are three: the broker, that is the one acting as mediator between the parties in a transaction; the Commission Agent, namely the one who acts under his own name on behalf of the Principal and, lastly, the Commercial Agent. The regulations do not provide for any specific prerequisites of the Agent, however it is important to note that the import licence is issued only to legal or natural persons having Iranian nationality.
There are four different types of Agency Agreement:
  • special, when the Agent has the duty to act only to accomplish a specific task;
  • general, when the Agent can act within the limits determined by the agreement;
  • universal , when the Agent’s powers are unlimited;
  • ‘del credere’, when the Agent is responsible towards the Principal for the regular compliance to the agreement by third parties.
No specific formal requisites are required to conclude an agreement, which can therefore be made orally or through the completion of written documents. The Agent’s duties, regulated by art.666 ss., mainly derive from the agreement between the parties. The Agent must always comply with his obligations in the interest of the Principal, and he is considered liable for any economic losses when they are the consequences of his behavior. Anyhow, the Agent is liable in respect of the obligations undertaken with a third party, outside his mandate. Moreover, under art.668 ss., the Agent is under the obligation to inform the Principal. The duration and termination of the Agency Agreement may be determined freely according to the contractual will of the parties. Withdrawal from the Agency Agreement by the parties is possible at any point without reason, unless the agreement provides otherwise. The termination of the agreement due to death or incapacity to act of one of the parties is also allowed (Art.668 c.c.). According to art.672, sub-agency is not allowed, unless explicitly or implicitly provided for by the parties.
Any agreement which an industry is about to conclude should state explicitly:
  • The value of the Agent’s commission, which otherwise is determined according to local practice;
  • The obligation for the Agent to conclude an insurance, as he is not obliged to guarantee the goods which he markets;
  • The exclusive rights of the Agent.
Moreover, it is advisable to specify the duration of the agreement in the agreement itself, taking into consideration the difference between the Western and the Persian calendar.

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