Approaching the UNIDROIT Principles with Antagonism: The Case of Iranian Courts

Approaching the UNIDROIT Principles  with Antagonism: The Case of  Iranian Courts

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 controversy.


  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.




  The 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 Court, Branch.


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 Court


   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 Constitution states:


  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 statutory provision.


   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.

Dec 18, 2018 19:44
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