The specialized commercial courts in iran : a step toward modernization

The Specialized Commercial Courts in Iran: A Step Towards Modernization Iran’s commercial landscape has evolved rapidly, with increased complexity in trade and business activities demanding a more tailored approach to dispute resolution. In response, the Iranian judiciary has made strides to modernize its framework, exemplified by establishing the Judicial Complex for Handling Commercial Claims in Tehran in 2021. However, Iran’s commercial dispute resolution system still faces significant challenges that hinder its efficiency and global competitiveness. This article explores the state of commercial dispute resolution in Iran, emphasizing the critical need for specialized commercial courts and procedural reforms. Current Framework for Commercial Dispute Resolution in Iran Commercial litigation procedures in Iran are governed primarily by the Civil Procedure Code, which applies to most litigation processes. While these laws provide a basic framework, they fail to address the unique complexities of modern commercial disputes. However, international commercial disputes are addressed under the International Commercial Arbitration Act (1997) in arbitration. A notable milestone in the country’s legal landscape was the establishment of the Judicial Complex in Tehran, which exclusively handles commercial matters. However, outside Tehran, commercial disputes remain under the jurisdiction of general courts, which often lack the expertise and procedural efficiency needed for such cases. This disparity underscores the need for uniformity and specialization in commercial dispute resolution across Iran. The most revolutionary change in Iranian litigation of commercial disputes emerged through the draft of the commercial procedure code in 2011. This draft has been circulating since 2011 but has not been ratified. It was proposed by the Judiciary and approved during the Council of Ministers’ meeting on November 6, 2011. The draft was formally received by parliament and was forwarded for review by the relevant committees in December 2011. However, since it was not approved during that parliamentary term, it was reintroduced to parliament on July 2, 2016, where it is currently under review. This draft includes 133 articles divided into nine chapters. Some of the most interesting features of this draft are:

• Nationwide expansion of specialized courts
• Mandating the attendance of experts in commercial courts
• Creation of E-litigation in commercial disputes
• Mandating the parties of the dispute to have lawyers.

    Specialized Commercial Courts: A Step Forward The Judicial Complex for Handling Commercial Claims represents a significant advancement in Iran’s legal infrastructure. Governed by a directive issued in 2020, this complex has jurisdiction over specific types of disputes, including:

1. Disputes arising from purchasing and selling goods in traditional or electronic commerce between commercial companies.
2. Disputes related to commercial companies’ formation, merger, dissolution, and bankruptcy.
3. Arbitration-related matters include appointing arbitrators, annulment, and enforcement of arbitral awards, provided the underlying dispute falls within the court’s jurisdiction.

By limiting its jurisdiction to specialized commercial cases, the Judicial Complex ensures that judges and personnel adjudicate disputes with a thorough understanding of commercial laws. This approach enhances judicial efficiency, reduces delays, and better aligns with contemporary business practices. Another attractive feature of these courts is the incorporation of arbitration and alternative dispute resolution (ADR) mechanisms, which can be particularly appealing to international corporations. Furthermore, the court actively engages in educational initiatives focusing on commercial law disputes and conducts research to identify legal challenges and improve administrative procedures in this area. Challenges and Shortcomings Despite the progress made, Iran’s commercial dispute resolution system faces significant challenges:

1. Limited Geographical Reach: Specialized commercial courts operate only in Tehran, leaving businesses in other cities dependent on general courts that may lack the requisite expertise.
2. Outdated Substantive Laws: Iran’s current commercial law dates back to 1921, with its last update in 1958. While amendments are under review, the outdated framework fails to address modern issues like distribution contracts, shareholder disputes, and mergers and acquisitions.
3. Absence of a Pre-Trial Discovery Mechanism: Unlike many jurisdictions, Iran does not have a formal pre-trial discovery process. This absence makes it difficult for parties to access critical evidence, disadvantaging those with fewer resources.
4. Underutilization of Expert Witnesses: Although judges can consult industry experts, these experts do not appear in court hearings, leading to inefficiencies and delays. The lack of direct expert input can result in misinformed judgments.
5. Narrow Jurisdiction of Specialized Courts: The directive governing the Judicial Complex excludes certain critical areas, such as disputes involving natural persons engaged in large-scale commercial transactions. Expanding the jurisdiction of these courts to include all commercial activities could enhance their utility and effectiveness.

  The Path Forward: Recommendations for Reform To enhance its commercial dispute resolution framework, Iran should address the following areas:

1. Nationwide Expansion of Specialized Courts: Establishing specialized commercial courts across all major cities would ensure uniformity and accessibility for businesses nationwide.
2. Ratification of the Commercial Procedure Code: Pending since 2011, the draft Commercial Procedure Code includes 133 articles tailored to address the intricacies of commercial disputes. Its ratification would mark a significant step toward procedural modernization.
3. Updating Substantive Commercial Laws: Comprehensive amendments to the Commercial Code should address current economic realities, including shareholder rights, M&A regulations, and electronic commerce.
4. Introducing Pre-Trial Discovery Mechanisms: A formal pre-trial discovery process would facilitate greater transparency and evidence-sharing, leveling the playing field for all litigants.
5. Mandatory Presence of Expert Witnesses: Requiring industry experts to testify during hearings would improve judicial decision-making and enhance the credibility of verdicts.

Conclusion Iran’s commercial dispute resolution system is at a crossroads. Establishing specialized courts in Tehran is a promising step, but significant gaps remain in its legal and procedural frameworks. Iran can strengthen its position as a competitive jurisdiction for resolving commercial disputes by expanding specialisation, updating substantive laws, and embracing modern judicial practices. These reforms are not merely administrative but essential to fostering a business environment conducive to growth, innovation, and global integration.