Iran has actively expanded and strengthened its economic and political ties with East Asia over the last decade. A March 2021 Reuters report noted for example that the National Iranian Oil Company started actively contacting its Asia based customers when an end to the ongoing economic sanctions seemed within reach. Even regardless of economic sanctions, China has continued to be a major trading partner with Iran. Refinitiv Oil Research calculated that 17.8 million tonnes of crude was exported to China in the past 14 months with volumes reportedly reaching record levels in January and February 2021.

China’s position that Iran would be an important player in the Belt and Road Initiative further suggests that trade between Iran and East Asia will continue to thrive. This is evidenced most recently by the twenty-five year Strategic Cooperation Agreement between Iran and China that is reportedly worth up to US$450 billion. With Iran potentially re-joining the Joint Comprehensive Plan of Action (JCPOA), there is also a distinct possibility that further trade between Iran and its current major trade partners in Asia – which include India, North Korea and Japan – will continue to rise further.

An increase in commercial activities however naturally leads to a corresponding increase in misunderstandings, bad-faith conduct and breaches of contract. Parties will require a neutral and efficient mechanism to resolve their commercial disputes, and amongst the options available, international arbitration in Singapore is ideally suited for both Iranian businesses and their East Asian counterparts.

 

A convenient, international option

Singapore’s obvious benefits include its strategic location between Iran and East Asia and its more politically neutral stance than Western Europe and North America where other popular arbitral seats are located. Its other lesser appreciated benefits however are equally if not more important.

Singapore is home to the market leading Singapore International Arbitration Centre (“SIAC”) as well as many other leading arbitral institutions. The International Chamber of Commerce (“ICC”) has a representative office in the city state, while the Beihai Arbitration Commission established its international arm in Singapore through the Beihai Asia International Arbitration Centre (“BAIAC”). Other Chinese legal institutions have conducted Memorandums of Understanding with the SIAC, including the China International Economic and Trade Arbitration Commission (“CIETAC”), Fudan University Law School and the Hainan International Arbitration Court.

The familiarity of Singapore’s legal profession with international arbitration has also created a sophisticated, pro-arbitration eco system. Chief Justice Sundaresh Menon of Singapore’s Court of Appeal was formerly Patron of the Chartered Institute of Arbitrators and is widely recognised for his contributions to international arbitration. His 2014 judgment in the Astro v. Lippo case is regularly cited as a key authority on the technical question of joining third parties to ongoing arbitrations.

As a result, Singapore seated international arbitrations are supported by a legal infrastructure that can help to maintain the integrity of arbitral awards and ensure the finality of proceedings.

 

International enforceability of Singapore arbitral awards

Singapore, Iran and many East Asian jurisdictions are parties to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Awards issued by Singapore seated arbitral tribunals are therefore binding in Iran and can be enforced pursuant to Chapter 8 of Iran’s Law on International Commercial Arbitration.

The strong reputation of Singapore arbitration further helps to increase the likelihood that Singapore awards will actually be enforceable as a matter of practice. Singapore related awards have in any case recently been enforced in China, India and Indonesia – three major jurisdictions from which a large proportion of users originate from.

 

Transferability of funds for legal services

Two major issues faced by Iranian companies operating abroad are the risk of international financial transactions being stopped and the risk of assets being frozen.

Whilst these issues persist in many situations, one useful exception that Iranian entities should know of is that the Monetary Authority of Singapore’s 2016 Regulations generally allow Iranian commercial entities to use funds in Singapore for “reasonable professional fees and reimbursements in connection with the provision of legal services”. In other words, Iranian entities are generally speaking allowed to engage Singapore based lawyers to represent them in international arbitrations, regardless of whether such arbitrations are seated in Singapore, Iran or elsewhere. This exception gives Iranian clients access to a pool of arbitration practitioners whom they might not otherwise have thought to engage, especially since arbitration lawyers in certain other jurisdictions are not allowed to represent Iranian entities due to sanctions related restrictions.

This exception also gives Singapore based arbitral institutions greater freedom to receive funds that originate from Iranian sources. By contrast, the authors have seen anecdotal evidence which suggests that popular European based arbitral institutions sometimes face problems accepting money from Iranian sources due to ongoing sanctions.

 

Economic and practical competitiveness

For Iranian lawyers, Singapore arbitration should feel quite familiar. The Singapore International Arbitration Act (Cap. 143A) and the Iranian Law on International Commercial Arbitration are both based on the UNCITRAL Model Law. Both contain the same basic principles on party autonomy, competence-competence and limited judicial recourse against arbitral awards.

Singapore is also more practically accessible to Iranian parties than other major arbitral seats regarding ease of travel. Whilst Iranian nationals often face cumbersome immigration procedures in jurisdictions such as France, England and the United Arab Emirates, they can apply for entry into Singapore through a simplified online portal called SAVE. The ancillary costs of arbitration in Singapore are also likely to be lower for Iranian parties than arbitrations in London, Paris or Geneva – some of the most popular alternatives.

 

A new option

As Iranian parties become more involved with international trade, they may not always have the necessary leverage in negotiations to insist on dispute resolution provisions that provide for the Iranian courts, arbitration seated in Iran or an Iranian arbitration institution. When forced to look further afield, Singapore arbitrations present a viable and effect alternative. Singapore arbitration is widely accepted by international commercial parties and is an option which Iranian parties can potentially benefit from.

 

 

Authors: Kamyar Oladi and Anthony Cheah NICHOLLS