Approaching the UNIDROIT Principles with Antagonism: The Case of Iranian Courts
Farshad Rahimi Dizgovin*
On 28 October 2015, Tehran’s Public Court, Branch 12, invoked the
UNIDROI Principles of International Commercial Contracts (PICC) to ‘supplement’Iranian
domestic laws. This was the ﬁrst time that an Iranian court had cited the PICC.
However, the Appellate Court approached this with antagonism and implied that
invocation of the PICC constituted one of the grounds for appeal under Article
348 of the Iranian Civil Procedure Code. In the Appellate Court’s view, the
reference to the PICC ran contrary to the Sharia principles and Iranian
statutes. This note examines the Appellate Court’s decision. However, before
turning to the Appellate Court’s decision, this note will provide a brief
description of the Iranian judicial system.
There are three levels of judiciary, and the authority to establish
courts and determine their territorial jurisdiction and the number of branches
has been vested in the head of Iranian judiciary.
At the lowest level are public
courts, also known as ﬁrst instance courts or courts of general jurisdiction.
The public courts have general jurisdiction to hear all civil and criminal
disputes unless the issue falls within the jurisdiction of the special courts,
such as revolutionary and clerical courts. Public courts are set up in
districts, counties, and speciﬁc areas of large cities.
The Courts of Appeal, or appellate courts, are the second instance
courts com-petent to review cases decided by public courts. Appellate courts
are set up in the central county of each province. The number of appellate
courts is determined based on county need, and they have the jurisdiction to
hear appeals from deci- sions of the public courts located in that province. If
the number of branches exceeds one, they will be divided into civil and criminal
branches. However, not all cases may be appealed; rather, cases qualiﬁed for
appeal must involve certain types of disputes and certain amounts in
The Supreme Court of Iran is the highest judicial authority in the
country. It is primarily charged with overseeing the proper enforcement of the
laws and regu- lations by the lower courts and securing uniformity of
jurisprudence. The Supreme Court may have as many branches as needed; some
branches handle criminal cases and some other legal issues. The branches are
mainly located in Tehran, the capital city; however, they might also be set up
in other provinces should the head of the judiciary consider it necessary and
appropriate. When a branch of the Supreme Court issues a uniform decision, it
is binding, subject to conformity with Sharia principles, on all branches of
the Supreme Court and all other lower courts. In the following sections, I will
elaborate on the decision of Tehran’s Public Court.
A representative (the claimant) and a client (the defendant) concluded
an en- gagement agreement (the agreement) that required the claimant to take
the ne- cessary legal actions regarding some dishonoured cheques. Under the
Iranian legal system, issuance of a dishonoured cheque subjects the issuer to
both civil and criminal liability. The claimant ﬁled a criminal suit before the
relevant court, which resulted in the issuer’s accusation and an order for his
arrest. By doing so, the claimant argued that she had lived up to her
obligations and, therefore, was entitled to receive outstanding attorney fees.
In contrast, the defendant argued that the claimant was not entitled to
receive the outstanding fees because the agreement required him to ﬁle both
civil and criminal lawsuits. The agreement contained a clause that required the
repre- sentative to ‘bring any action, regardless of the nature of the claim
and its value, before any relevant civil and criminal courts’. When the
defendant refused to pay the outstanding fees, the claimant brought an action
before Tehran’s Public Court, Branch 12, claiming payment of fees and
associated legal costs among others.
primary legal issue was whether the claimant had complied with her obliga- tions
under the agreement. The court had to interpret the agreement to deter- mine
the scope of the claimant’s obligations.
Tehran’s Public Court’s arguments
Tehran’s Public Court, Branch 12, commenced its analysis by invoking
Article 667 of the Iranian Civil Code, which clariﬁes the nature of a
representative’s obligations. Article 667 provides a general rule under which a
representative, in performing his or her obligations, is required to take a
client’s interests into account. To determine the client’s interests, the
representative must consider the client’s explicit authorizations or consult
with the relevant circumstances, usages, and customs. In light of these general
rules, the Public Court concluded that the representative must have ﬁled both
criminal and civil lawsuits. The Public Court then turned its focus on
construing the disputed contractual clause.
Regarding the interpretation of the contractual clause, the Public Court
alluded to one of the general principles of contract interpretation under which
any am- biguity in a clause must be resolved against the party who drafted the
clause. To support its reasoning, the Public Court invoked Articles 4–6 of the
PICC and concluded that the contra preferentem rule is one of the interpretation
rules of both domestic and international contracts. According to the Public
Court, under the Iranian legal system, asl-e-adam and asl-e-baraet speak to the
same concept envisaged by the contra preferentem rule.
Nevertheless, the Public Court’s decision left some issues untouched.
First, the Public Court did not clarify how exactly Sharia principles
correspond to the contra preferentem rule. Although the literature largely
agrees that the named Sharia principles and contra preferentem rule come into
play only when other rules of interpretation do not provide sufﬁcient answer to
the problem at hand, it is not clear whether their scope of application are
identical.Second, it is not evident what role, if any, Sharia principles played
in the Public Court’s decision, especially taking into account that the case
did not discuss who supplied the disputed clause and who wished to invoke an
interpretation against the other party.
In any case, the Public Court, by invoking the named principles,
concluded that the contractual clause required the representative to bring both
criminal and civil lawsuits. By failing to do so, the representative had failed
to meet her contractual obligations. Therefore, the Public Court ruled against
the claimant. The claim- ant appealed the decision before Tehran’s Appellate
The Court of Appeal’s arguments
The Appellate Court’s decision was very concise. Finding the claimant’s
claim in congruency with paragraphs (c) and (e) of Article 348 of the Iranian
Civil Procedure Code, the Appellate Court set aside the Public Court’s decision
and remanded it to the Public Court for substantive determination. Article 348
sets out grounds for appeal. If a court failed to accord due regard to the
submitted evidence, or rendered a judgment in violation of Sharia principles or
statutory provisions, a losing party may appeal from the decision of Public
Courts. Therefore, the Appellate Court appears to have taken the position that
citation to the PICC violates Sharia principles.
The case is remanded to the Public
After the case was remanded to the Public Court, Branch 12, the Court
avoided invoking the PICC and decided the case merely in accordance with the
domestic laws, though the outcome of the judgment was the same as the one
originally decided by the Public Court. The Public Court primarily cited
Article 661 of the Iranian Civil Code and concluded that when a subject matter
of an engagement agreement is unqualiﬁed, limiting the agreement’s scope
requires the claimant to provide contrary evidence. Because the claimant had
failed to do so, the Public Court ruled against the claimant.
Evaluation of the decisions
To begin with, it is self-explanatory that the Public Court, Branch 12,
did not use the PICC as a main source of rights and obligations. Instead, the
Public Court reached the same conclusion based only on domestic law—namely,
Article 667 of Iranian Civil Code—which already required the representative to
bring both civil and criminal lawsuits. The ﬁrst time that the Public Court
heard the case—that is, the pre-remand—it apparently invoked the PICC to
‘supplement’ and ‘interpret’ Iranian statutes. Then the question becomes
whether there was any need to cite the PICC in the ﬁrst place and whether
Iranian statutes permit the invocation of sources other than Iranian statutes.
The PICC’s preamble anticipates that the PICC may contribute to the
inter- pretation and supplementation of domestic law. The PICC’s Ofﬁcial Commentary
provides that, ‘[i]n applying a particular domestic law, courts and arbitral
tribunals may be faced with doubts as to the proper solution to be adopted
under that law, either because different alternatives are available or be- cause
there seem to be no speciﬁc solutions at all’.
It appears that none of these situations are at stake in the case before
Tehran’s Public Court. Articles of the Iranian Civil Code and Sharia principles
like asl-e- adam and asl-e-baraet clearly provided a solution for the dispute
at hand. A question of different alternatives was also not at play. The
question therefore becomes why the Public Court invoked the PICC and why the
Appellate Court approached the reference to the PICC with antagonism?
Regarding the Public Court’s citation to the PICC, it appears that
psychological factors were among the most important factors that inﬂuenced the
Public Court’s decision. We live in a legal environment where Iranian judges’
familiarity with international law, international soft law instruments, and
foreign languages are very limited. Judges have been criticized for not
welcoming the invocation of unfamiliar sources of law in statements of claim. Iranian
judges have also been criticized for not keeping up with the developments in
the legal scholarship. In light of these, the Public Court’s reference to the
PICC was likely a response to these kinds of critiques. It also is equally
possible that the Public Court cited the PICC only for persuasive purposes
without being aware of these criticisms. In this regard, it seems that Iranian
statutes do not bar citation to the PICC for persua- sion purposes.
Principle 167 of the Iranian
A judge shall strive to decide a case in accordance with statutory
provisions. If he cannot ﬁnd the solution in the statutes, he must decide the
case relying on valid Islamic sources or religious rulings (fatawas). A judge
cannot refrain from deciding the case and rendering a judgment under the
pretext of silence, deﬁciency, brevity, or inconsistency in the statutes.
In the same vein, Article 3 of the Iranian Civil Procedure Code
obligates courts to decide cases in accordance with statutory provisions.
However, it sets forth that, ‘[i]n cases where statutory provisions are
unclear, incomplete, or inconsistent or where there is no statute regarding the
relevant issue at all, judges must decide cases in accordance with valid
Islamic sources or religious ruling (fatawas) and legal principles that are
consistent with Islamic rules’. These provisions do not rule out the
possibility of citation to the PICC, because as long as the PICC’s provisions
are in accord with Sharia principles, they might be used as general legal principles;
at least, for clarity and persuasion purposes.
Therefore, invocation of the PICC did not, in and of itself, violate
Sharia prin- ciples. Consequently, it would have been better for the Appellate
Court to deeply engage in a discussion of how the PICC ran contrary to Sharia
principles and whether there are situations where a reference to the PICC does
not conﬂict with Sharia principles. Nevertheless, this is a common problem with
the Iranian judicial system in which judges usually limit their written
opinions to brief evalu- ations of whether a claim is valid under the text of a
One likely explanation for the Appellate Court’s antagonist approach
appears to be its concerns about the institutionalization of citation to the
PICC. The Appellate Court seems to be considering the invocation of the PICC as
a threat to the government of Sharia rules in the long run. Should a citation
to the PICC be institutionalized within the Iranian judicial system, courts
might consider themselves needless of invoking Sharia principles when they run
into problem in terms of ﬁnding a proper solution, and, instead, they may be
tempted to cite the PICC. This may be particularly the case regarding the
settlement of disputes through arbitration. Due to arbitrators’ wide discretion
regarding the application of proper law of a dispute, they may easily give way
to the application of the PICC simply because there are various alternatives
available for the problem at bar. This will be the case regarding the
compensability of loss of proﬁts, which is one of the most controversial issues
under the Iranian legal system. Nonetheless, because Tehran’s Appellate Court’s
judgment is not binding on other courts, the true place and role of the PICC
remains to be seen.