Online Arbitration: How Iranian Courts React?

Oveis Rezvanian, Kamyar S. Oladi

Dispute resolution methods are now facing with some unprecedented times in the Covid-19 pandemic period. Since the trade cannot stop, Alternative Dispute Resolution (ADR) methods, including arbitration, are now being more and more conducted in online ways. Accordingly, more online hearings are being held and, the arbitral tribunals shall deal with and answer to more sophisticated questions and documents i.e. the online arbitration agreements and the online arbitral awards. In this review, we will concentrate on Iran law’s perspective as to the electronic arbitration agreement, electronic arbitral award and online conduct of arbitration hearing sessions.

 

Online Arbitration Agreement

While technology brings new facilities to arbitration proceedings, i.e. paperlessness, cost-efficiency and speed, at the same time, some conventional and key legal instruments, such as arbitration agreements and arbitral awards, would inevitably be subject to rethinking.

Written requirement of arbitration agreement (whether as a separate agreement or as a clause in the contract), in Iran Arbitration Laws has different approaches. In domestic arbitration which is regulated in the Civil Procedure Act of Iran, there is no written requirement for an arbitration agreement. Therefore, according to the general principle of Iranian contract law (which is envisaged in Iran Civil Code), there is no requirement for concluding contract unless otherwise stipulated in the law. In contrast, article 7 of Iran Law on International Commercial Arbitration (LICA) provides that the arbitration agreement shall be contained in a document signed by the parties. LICA also allows that exchange of letters, telex, telegrams or other means of telecommunication (which provides a record of the agreement) is considered as a valid arbitration agreement. In addition, there are situations in which parties’ conduct can constitute an arbitration agreement, even if there is no written document. By way of example, an exchange of statements of claim and defense in which the existence of an agreement is alleged by one party and accepted by the practice of the other party can validly establish an arbitration agreement.

The wide range of means of communication envisaged in the Law on Electronic Commerce results in acceptance of the arbitration agreement to be through online means of communications including, but not limited to, e-mail, telex, telegrams, etc.

 

Online Arbitral Award

Generally, in a tribunal of three members, after finalizing the contents of award, it would be circulated among the members for being signed and, in institutional arbitration, be transmitted to the institution. Eventually, the institution or the president of arbitral tribunal forwards copies of the award to the parties. This procedure could efficiently be reduced if an arbitral award was rendered digitally, which may particularly be of interest in light of the ongoing efforts to shorten arbitral proceedings.

The requirements for issuance of online award is neither stipulated in Iran Domestic Arbitration act, nor in the Iran International Arbitration regime. Therefore, the possibility of issuance of an online award, as well as their enforceability, will be examined in awards with Iranian nationality (either domestic or international) by considering the Iran arbitration laws. Also, such a possibility would be examined in foreign arbitral awards by considering the Iran Law of Adhesion to New York Convention.

 

• Iranian Online Awards

Before discussing the online awards, it worth mentioning that in Iran Arbitration Law, there are two types of awards, based on the seat of arbitration. First, national awards which are issued under the provisions of either section 7 of the civil Procedure Code (CPC) or the Law on International Commercial Arbitration (LICA). On the other side, the foreign awards are the awards issued outside of the territory of Iran (i.e. the LICA or CPC are not applicable).

Iran Arbitration Laws (i.e. section 7 of CPC and the LICA), do not have any specific provision as to the possibility of issuance of online award. Article 30 of LICA, however, determines that after signing of the award, the “copy” of the award shall be submitted to the parties.

The “authenticity” is, perhaps, the first and foremost feature of an arbitral award. Therefore, the first step is to examine whether an electronic signature or sending the award by email or other means can serve as an original award, and accordingly, be acceptable under Iran arbitration Laws or not.

To answer this question, one should note that the arbitration-related laws in Iran do not deal with this interrogation at all. However, the Law on Electronic Commerce (LEC), enacted on January 7, 2004, specifies some provisions in this regard. Since this Law was enacted after both LICA and CPC, it shows the latest intention of the legislator and would prevail. According to article 6 of the LEC, whenever the existence of a written document is required, the Data Message is deemed to be sufficient to this purpose. The Data Message is also defined as the information generated, sent, received, stored or processed by electronic, optical or similar modern means. Therefore, when an award is being transmitted via email, the first requirement for an original award is fulfilled, that is the award could be considered as original.

This, however, is not the only requirement. According to the LICA and Section 7 of CPC, the award shall encompass a signature. This question is also dealt with in LES. Article 7 of LEC specifies that whenever the law requires the existence of a signature, the Electronic Signature would suffice. According to article 2 (definition) of LES, the Electronic Signature is any mark that is affixed to or logically associated with a data message, which may be used to identify the signatory of data message.

Consequently, the arbitrator may sing its award electronically and then submit the award through the “electronic, optical or similar modern” means of communication as required by the LES.

This theoretical approach, however and when it comes to the courts for enforcement or other reasons, might face with some difficulties. When the parties have expressly agreed on the online award and the online notification of such award, the courts are obligated to recognize this procedure as required by article 485 of CPC. This article states that if the parties do not specify the method of communication of the award, the arbitrator(s) shall submit the award to the competent court. According to the general interpretation rules in Iran Law, the opposite meaning of the said article is also reliable which means that should the parties have any agreement as to the communication of the award, the court would have nothing to do with award. This is, in such situation, the typical means of communication of the award would not be applicable.

All in all, although there is no specific reaction form Iranian Courts as to the validity or enforceability of online awards, according to the provisions of LEC and considering the recent approach of the Iran Judiciary system in accepting the electronic means of communication such as the Electronic Registration System of Judiciary (is known in Iran as SANA) for filing the dispute/motion, communications and summoning the accused person, etc. (article 175 of the Criminal Civil Procedure Code enacted in 2013), and the recent approach toward the possibility and option of the parties and counsels to attend in the court sessions remotely, the permission of issuing online award should be considered as granted. In other words, Iranian courts, facing with the current circumstances and the general tendency towards online proceedings or –what is called as- “electronification”, have allowed the possibility of issuance of online awards.

 

• Foreign Online Awards

Islamic Republic of Iran jointed the Convention on Recognition and Enforcement of Foreign Arbitral Awards (New York Convention, 1958) by ratifying it on 2001. Accordingly, the arbitral awards issued in a contracting state other than Iran shall be enforceable in Iran in accord with New York Convention.

Similar to the Iranian arbitration laws, the New York Convention does not expressly set out any specific formal requirements for the arbitral awards either. However, in some circumstances, the form of an arbitral award could be a factor that bars the arbitral award from becoming binding on the parties. In other words, in that cases a lack of form constitutes a ground for denying the recognition and enforcement under the NYC.

As a way of example, Article IV(1)(a) NYC requires that “[t]he duly authenticated original award or a duly certified copy thereof” shall be supplied to the competent court. Article IV(1)(b) NYC also requires “[t]he original agreement referred to in article II or a duly certified copy thereof”. Again, the “authenticity” of the award is the most important factor. The Convention, however, does not have any specific provision as to the authentication. Authentication and originality is rather governed by national laws (either the lex arbitri or the lex fori or a combination of both).

The term “authenticated original” in Article IV(1)(a) and (b) NYC is to be interpreted along with the provisions of article 2, 6, 7 and 8 of the LEC and would result in the same conclusion as to the awards issued under the Iranian law (i.e. the national awards).

According to article 8 of LEC, where the law requires that the information be presented or retained in its original form, it is also possible to retain it as “Data Message” if the following requirements are met:

• The information contained therein is accessible so as to be usable for subsequent reference.
• “Data message” is retained in the same format it was generated, sent or received or in a format which can exactly represent the information generated, sent or received.
• The information, if any, enabling the identification of the origin and destination of a “data message” and the date and time when it was sent or received is also retained.
• Other provisions that an institution, organization, and governmental agency or ministry has laid down within the scope of their functions are retained.

Based on above, if the award is sent through the data message, provided the above conditions are met, it is deemed to be authentic and original. Therefore, the arbitrator, may issue, sign and submit its award to the parties through the electronic, optical or any other similar modern means. Therefore, such an award, according to the Iranian laws, shall be deemed authenticated and original.

In addition to all above, the Convention is likewise silent on the delivery and communication of the award to the parties. A lack of proper delivery under the lex arbitri (which may be any country other than Iran) may result in refusal of recognition and enforcement. Therefore, any glitch or negligence may constitute a ground for denying recognition and enforcement of the award under Article V(1)(e) NYC. Once the delivery of an electronic award complies with the lex arbitri, the recognition and enforcement of the award cannot be denied under Article V(1)(e) NYC.

 

Online Hearing

It has been always a discussion among the practitioners that whether face to face hearing sessions, despite all its advantages would worth the costs it imposes on the parties or not. Such a question becomes more important in small and medium size disputes, and particularly when the parties are not confident about their positions and the result of arbitration.  Now, and by increasing concerns arising out of the COVID-19 pandemic, the question should be seriously attended and answered. Nonetheless, there is growing interest in development of online dispute resolution systems. Particularly, in small disputes and the disputes in which the parties are seeking speedy resolutions based on evaluative determinations, the Online Arbitration holds special advantages.

It is disputed at all that online arbitration should in any way, take good care of the basic requirements of a fair arbitration, i.e. due process and equal treatment. That is, regardless of the technical method that is used for conducting the online proceeding, such basic elements should be protected. Of course, it will not be easy to establish what is ‘fair’ in the eyes of all parties.

According to article 23 of LICA, “[t]he arbitrator has the authority to decide whether to hold hearing for the presentation of evidence and oral arguments. However, unless the parties have agreed otherwise, the arbitrator shall hold hearing if a party so requests in an appropriate stage of the proceedings.” It can be construed from this article that when the parties are allowed to agree on having or not having the hearing session, they should be obviously and undoubtedly allowed to decide on the way of conducting such session. That is, if the parties are in agreement to hold the hearing session online, and if the arbitral tribunal deems such agreements of the parties appropriate, nothing should prevent the parties in effecting their agreement, provided that due process and fairness standards are all complied with.

The problem, however, might arise when the parties are not in agreement to hold the online sessions. The question here is whether the tribunal has the power to oblige the parties to do so or not. As stated earlier, the most important matter is to protect the parties’ basic rights in the arbitration. That is, if there is a risk that the online hearing might affect in any way the due process or and fairness of the proceeding, there is a risk that it might later fall within the scope of article 33(1)(d) of LICA for setting aside of the arbitration award. This article reads that “[t]he requesting party could not proffer his evidence and documents due to reasons beyond his control”. Therefore, as long as the arbitrator assures that such basic rights of the parties are not violated, it should have the required power to decide about the way of conducting the hearing session (i.e. in person, online, telephone conference, etc.)

 

Conclusion

Due to the recent circumstances established by COVID-19, the needs for conducting online arbitrations have remarkably increased. Iranian law, likewise other legislations, does not particularly deal with the online arbitration. However, as far as parties’ agreement is involved, the Iranian law will consider the parties’ agreement as valid. Consequently, the online arbitration agreement, arbitration awards and arbitration hearing are valid under Iranian law, provided that they encompass the parties’ agreement.

The only problem lies in the online arbitration is the circumstances where the parties are silent or there is no agreement therein. As elaborated earlier, thanks to the provisions of article 2, 6, 7 and 8 of the Law on Electronic Commerce, the possibility of recognition of the online arbitration agreement and online arbitration award is defendable. However, since this issue is not dealt with in any court decision so far, the exact reaction of the court is not predictable so far.

The possibility of having online arbitration hearing in case of lack of parties’ agreement is also critical because it deals with the due process and fairness standards requirements. As discussed above, the tribunal has the power to order the parties to participate in an online hearing session provided that it meet the abovementioned standards and requirements and a party does not provide any valid reason that the hearing shall be face to face. In any case, if a party provides reasons showing that an online hearing would cause damages to the ability of that party to present its case, then the tribunal shall definitely consider this request and decide about that.