Persons Disqualified and Prohibited from Appointment as Arbitrators

Persons Disqualified and Prohibited from Appointment as Arbitrators

Numerous definitions of arbitration have been provided, all conveying essentially the same meaning with minor variations. A comprehensive definition may be stated as follows.

Arbitration is an agreement by which the parties, either by mutual consent or by operation of law in cases of compulsory arbitration, submit an existing or potential dispute to private individuals, rather than to judicial authorities. These arbitrators examine the dispute without observing formal judicial procedures and within a specified period, and issue an appropriate decision.

Occupational and Legal Prohibitions on the Appointment of Arbitrators

Advantages of Arbitration

Arbitration offers several benefits, including the following:

• Saving time.
• Reducing costs.
• Allowing the parties to select an arbitrator whom they trust.
• Minimizing hostility between the parties after issuance of the award.

Note: If the parties do not exercise sufficient care in selecting an arbitrator, the resulting harm may exceed that of a court judgment.

• First, an arbitrator may lack adequate judicial expertise and is not strictly bound by procedural rules, increasing the risk of error.
• Second, while court judgments may be appealed for legal or substantive errors, arbitral awards are generally not appealable.

Persons Disqualified and Prohibited from Appointment as Arbitrators

Such persons are divided into three categories. These include individuals who absolutely lack legal capacity, individuals with relative incapacity, and officials who are legally prohibited from appointment as arbitrators.

Persons lacking legal capacity may not be appointed as arbitrators because appointment to arbitration is considered a social right. An individual deprived of social rights by operation of law cannot be appointed to this position. Lack of capacity may be either absolute or relative.

Absolute Incapacity

Absolute incapacity applies to individuals who may not be appointed as arbitrators under any circumstances, even with the consent of the parties, because their incapacity relates to public order. These individuals include the following:

• Persons lacking legal capacity.
• Persons who have been deprived of arbitration by a final court judgment or as a consequence thereof.
• In disputes involving an Iranian party and a foreign party, the Iranian party may not, prior to the emergence of a dispute, agree to the appointment of an arbitrator holding the nationality of the foreign party, even with mutual consent.
• All judges and administrative employees currently serving in judicial courts.

Relative Incapacity

Relative incapacity applies to individuals whom the court may not appoint as arbitrators unless both parties expressly consent. These individuals include the following:

• Persons under the age of twenty-five.
• Persons having a direct interest in the dispute.
• Persons related by blood or marriage to either party up to the second degree of the third class.
• Persons who are guardians, guarantors, attorneys, or agents of one of the parties, or whose affairs are managed by one of the parties.
• Persons who themselves or whose spouses are heirs of one of the parties.
• Persons who have had criminal proceedings, whether past or ongoing, with one of the parties or with close relatives of the parties up to the second degree of the third class.
• Persons who themselves, their spouses, or their close relatives up to the second degree of the third class are involved in civil proceedings with one of the parties or their relatives.
• Government employees within the scope of their official duties.

Officials Prohibited from Appointment as Arbitrators

Pursuant to Article One of the Law on the Prohibition of Intervention of Ministers, Members of Parliament, Government Employees, and State Officials, enacted on January 11, 1999, the following persons are prohibited from appointment as arbitrators:

• The Prime Minister, ministers, deputies, and members of parliament.
• Ambassadors, provincial governors, county governors, mayors, and members of city councils.
• Civil and military officials and employees of the state, municipalities, and affiliated institutions.
• Employees and managers of any organization, enterprise, company, bank, or branch in which the majority of shares, interests, management, administration, or supervision belongs to the state, municipalities, or affiliated entities.
• Persons who receive continuous salaries, stipends, fees, or remuneration from the state treasury, parliament, or the institutions mentioned above.
• Managers and employees of charitable organizations that receive assistance from the state or municipalities.
• Companies or institutions in which five percent or more of the shares, capital, or interests belong to any of the aforementioned persons, or in which management, administration, supervision, or inspection is conducted by such persons, except for companies with one hundred fifty or more shareholders, provided that none of the prohibited persons holds more than five percent of the shares or exercises managerial or supervisory authority.
• Companies in which the majority of shares, capital, or interests belong to companies described above may not participate in transactions or arbitration involving disputes with the state, parliament, municipalities, affiliated institutions, or the entities mentioned herein, regardless of whether such disputes have been formally submitted to legal authorities.

In addition, the parents, siblings, spouses, children, sons in law, and daughters in law of the persons listed above, as well as companies and institutions in which such relatives hold interests or positions as described, may not enter into arbitration agreements with ministries, banks, municipalities, organizations, or institutions in which those persons hold ministerial, deputy, or managerial positions.

Frequently Asked Questions About Disqualified and Prohibited Arbitrators