International Commercial Arbitration
One of the most important classifications of arbitration is the distinction between domestic and international arbitration. In certain countries, including Iran, two different legal regimes govern domestic and international arbitrations. In Iran, where an arbitration is considered domestic, it is subject to Articles 454 to 501 of the Iranian Code of Civil Procedure. However, where an arbitration is international, it is governed by the International Commercial Arbitration Law enacted in 1997. This article addresses the advantages of arbitration compared with court litigation, the applicable law in international arbitration, various forms of arbitration agreements, service of arbitral awards, and review of arbitral awards.
The Concept and Necessity of International Commercial Arbitration
Advantages of Arbitration Compared with Litigation
The advantages of arbitration over court proceedings have led to its broad acceptance in international trade. Since there is no standing international court dedicated to resolving international commercial disputes through which traders and merchants may settle their claims, parties are generally compelled to bring proceedings before a national court. National courts may decline jurisdiction over an international dispute where the parties reside in different countries. In addition, one party may be a state, in which case, under a widely recognized principle of international law, states enjoy jurisdictional immunity, and no national court may issue a judgment against another sovereign state. Arbitration, by contrast, is not rooted in a single national legal order and may adjudicate international commercial disputes regardless of whether one party is a state or a private person.
Applicable Law in International Arbitration
For international commercial arbitration, familiarity with two key legal instruments is essential:
- Iran’s International Commercial Arbitration Law (1997).
- The New York Convention (1958), namely the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Under Iranian law, the criterion for characterizing an arbitration as “foreign” is neither the subject matter of the transaction nor the place of performance. Rather, the existence of a foreign element is the determining factor.
Different Forms of Arbitration Agreements
Common forms of arbitration agreements include:
- A separate arbitration agreement.
- An arbitration clause.
- An arbitration clause is incorporated through a reference to law.
In international commercial arbitration, where both parties are foreign, the arbitrator’s nationality is generally not decisive. However, where one party is Iranian and the other party is foreign, the arbitrator should not be a foreign national if the arbitrator is appointed before a dispute arises. In both domestic and international arbitration, it is advisable to avoid appointing an individual arbitrator due to practical risks that may arise with natural persons as compared to legal entities. In international arbitration, parties more commonly rely on established arbitral institutions. Examples include the Singapore International Arbitration Centre, the International Chamber of Commerce, the American Arbitration Association, and proceedings associated with the Washington Convention.
Frequently Asked Questions about International Commercial Arbitration
International commercial arbitration is a process for resolving cross-border commercial disputes without resorting to national courts. In Iran, domestic arbitration is governed by Articles 454 to 501 of the Code of Civil Procedure, while international arbitration is governed by the International Commercial Arbitration Law enacted in 1997.
Arbitration offers greater flexibility and a practical mechanism for resolving cross-border disputes, including cases involving parties in different jurisdictions or states benefiting from jurisdictional immunity. It can provide a more efficient and effective forum for resolving international commercial disputes.
Two principal instruments are particularly important in Iran: the International Commercial Arbitration Law of 1997 and the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Arbitration agreements may take the form of an independent arbitration contract, an arbitration clause within a main contract, or an arbitration clause incorporated by reference through legal provisions.
As a matter of risk management, it is often preferable to use reputable institutional arbitration bodies rather than appointing individual arbitrators to reduce practical challenges and ensure procedural reliability. What is international commercial arbitration, and how does it differ from domestic arbitration?
What are the advantages of arbitration compared with court litigation?
Which laws govern international commercial arbitration?
What types of arbitration agreements exist?
What is the best approach to selecting an arbitrator in international arbitration?
