Annulment, setting aside and refusal of enforcement of arbitral awards in Iran
Iranian courts are well educated that they can only set aside or annul a national award (that is arbitration with Iran as the seat) and therefore, no request for annulment or setting aside a foreign arbitral award would be admissible. Iranian courts, however, might refuse to enforce a foreign arbitral award, as will be explained.
Setting aside of Iran National Awards
Iran national arbitral awards are either domestic, that is between the nationals of Iran and conducted under Section 7 of the Civil Procedure Act, or they are international, that is with at least one non-Iranian party and conducted under Law on International Commercial Arbitration (LICA). The procedure and grounds for setting aside national awards are different for domestic and international arbitral awards.
Setting aside or annulment of National Awards in Domestic Arbitrations
Although the domestic arbitral awards are considered as final and binding, in case of an application for setting aside, courts have limited discretion for entering into the merits of the award and therefore, they have a wider hand.
Grounds for setting aside of a domestic arbitration award are stipulated in Article 489 of the Iran Civil Procedure Act. These grounds(except one) are to a great extent similar to what exists in other legal systems, and therefore, they cannot be interpreted widely. According to this article, an arbitral award is null and unenforceable if:
- Where the award has been in conflict with laws establishing rights;
- Where the arbitrator has issued an award in relation to a matter other than the subject-matter of arbitration;
- Where the arbitrator has issued an award beyond the scope of powers granted to him; in such a case, only the part of the award which is issued beyond the arbitrator’s scope of power shall be nullified;
- Where the arbitration award was issued and submitted after the expiration of the arbitration duration;
- Where the arbitration award is in conflict with what has been recorded in real Property Register, or with what the parties to the dispute consented to and registered in notary public and which still is regarded as valid
- Where the award has been issued by arbitrators who were not authorized to act; and
- Where the arbitration agreement had not been valid
Setting aside of National Awards in International Arbitrations
According to Articles 33 of Iran Law on International Commercial Arbitration (LICA), the arbitral award may be set aside by the court, at the request of a party, if one of the following grounds exist:
a) One of the parties was under incapacity;
b) The arbitration agreement is not valid under the law designated by the parties, or, in the case of the silence of the applicable law, the agreement conflicts with explicit provisions of the Iranian laws;
c) The provisions of this Law have not been complied with in regard to the service of notices concerning the appointment of the arbitrator or the application for arbitration;
d) The requesting party could not proffer his evidence and documents due to reasons beyond his control;
e) The arbitrator has made an award beyond the scope of his authority, the matters submitted to arbitration can be separated, only that part of the award which has been beyond the scope of the arbitrator’s authority may be set aside;
f) The composition of the arbitral panel or the arbitral procedure was not in accordance with the arbitration agreement or, in case of the silence of the agreement or failing such agreement, was in conflict with the provisions of this Law;
g) The arbitral award has received the concurrent and casting vote by an arbitrator whose challenge had been accepted by the authority specified in Article 6;
h) The arbitral award is based on evidence proved, by a final judgment, to be a forgery;
i) After the issuance of the award, the evidence is found proving the entitlement of the objecting party, provided it is established that the other party had concealed, or caused to be concealed, such evidence,
Annulment of National Awards in International Arbitrations
In addition to the grounds provided for setting aside of an arbitral award, articles 34 ofIran Law on International Commercial Arbitration (LICA) provides that an arbitral award is inherently unenforceable, null and void, when:
a) The subject matter of the dispute is not capable of settlement by arbitration under the laws of Iran;
b) The award is against the public policy or good moral respected in the country, or against any mandatory provisions of this Law.
c) The award with respect to immovable property located in Iran is incompatible with the mandatory provisions of the laws of the Islamic Republic of Iran, or with the official deeds unless, in the latter case, the arbitrator has been given the authority to make a compromise.
In such cases, there is no need for any request from the parties, but the court itself can declare the award as unenforceable, null and void.
Refusal to enforce foreign arbitral awards
New York Convention, under certain circumstances, allows that a contracting state refuses to enforce a foreign arbitral award. Article V of the Act of Islamic Republic of Iran’s Accession to the New York Convention provides that:
1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains deci- sions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
b) The recognition or enforcement of the award would be contrary to the public policy of that country.
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