The most significant developments within the Iranian legal provisions with respect to promotion of commerce
As Iran has paved a lot in order for the foreign investment to be eased, as well as the whole trade ambiance to be motivated, we would like to surrender an outline, as an instance, of such endeavors within the legal sphere:
Foreign Investment Promotion and Protection Act “FIPPA” (ratified on March 04, 2002):
- Methods of foreign investment under FIPPA:
- Foreign investors enjoy all of the facilities and exemptions as same as the national investors. [Article 8]
- Foreign investor shall not be deprived of its ownership unless in case of Public benefits based on a lawful procedure. According to FIPPA the application for indemnification of damage incurred must be submitted to the Board after the act of deprivation of ownership or nationalization. Any disputes in this regard should be settled according to the clause of settlement of disputes. Moreover, the facility of transfer of capital is prepared. [Articles 9 & 10]
– Foreign Direct Investment (FDI): all areas are open to private sector.
– Contractual Arrangements → Build, Operate and Transfer (BOT) Schemes: all areas are open to private and governmental sector.
Contractual Arrangements → Buy-Back / Civil Partnership: all areas are open to private and governmental sector.
Act on Management of State Services (ratified on October 10, 2007):
In order to promote the privatization, the Act on Management of State Services as well as the Act of Execution of the General Policies re Principle 44 of Iranian Constitution allowed the private companies to take part and invest in many economic sections as mentioned in Principle 44 of Constitution.
Incorporation of the governmental entities are solely likely through the Parliament’s enactment. Moreover, the companies in which the shares owned by the governmental companies are less than 50% cannot be transformed, via increase in capital, to governmental companies. [Article 4, Note 1]
Act of Execution of General Policies re Principle 44 of Iranian Constitution (ratified on June 14, 2008 at the Expediency Discernment Council, and further amended on June 22, 2014 by Parliament):
Competition rules under Iranian laws and regulations are so poor. However, the lately ratified “Act of Execution of General Policies re Principle 44 of Iranian Constitution” provide for regulations as to competition, inter alia, as follows:
- Public non-governmental entities/institutions and their affiliates/subsidiaries are authorized for taking over, whether directly or indirectly, of up to 40% of the market share of any goods or services. [Article 6, para 2]
- Any kind of conspiracy between the contracting parties in order to apportion the relevant market among two or more persons/entities, is forbidden. [Article 44, Note 6]
- Misuse of prevailing financial circumstances, via making hurdles for the competitors to inter into a specific activity or to omit the competitors from which, is forbidden. [Article 45, Para T, Note 4]
Aggregated ownership, for each public non-governmental entity/institution, of the shares or management seats (taking part within the board of directors) in any economic institute, whether directly or indirectly, cannot exceed 40%. [Article 6, para 3]
The companies/institutes owned by the following entities are obliged, as the case may be, to arrange for their complete fiscal information to be submitted to Securities & Exchange Organization (“SEO”), and the SEO should deliver the same information, per case, to the “Competition Council”:
– Public non-governmental entities/institutions;
– Military and police related entities;
– Charity organizations/entities;
– Vaghfi organizations/institutions and holy shrines;
– All the retirement funds;
– Revolutionary institutions.
[Article 6, para 5]
The relevant anti-competitive practice being established before the “Competition Council”, the said Counsel may rule for cease of which [Article 61, Note 2 & 3] and the winning party (who incurred losses as result) may file an action before Public Civil Courts (within a year as of issuance the final decision by the Competition Counsel) and claim for damages. [Article 66]
Act on Removal of Competitive Production’s Bars and Improvement of Financial System (ratified on April 21, 2015):
Due to “Act on Removal of Competitive Production’s Bars and Improvement of Financial System” several provisions within the associated Acts (inter alia, Direct Taxation Act, Labour Act & Mines Act) were modified/added in order (as well as a number of decrees for Governmental Bodies) to facilitate and promote the matter of local industrial productions.
Act on Constant Improvement of Trade Ambiance (ratified on April 05, 2011):
- The national indicators of trade ambiance in Iran shall be prepared and declared through the Chambers (i.e. Chambers of Commerce and the Chambers of Cooperatives), annually or for each season, depending to any province, any section and/or any economic activity. [Article 4]
- The national economic establishments shall be listed through the Chambers (i.e. Chambers of Commerce and the Chambers of Cooperatives). [Article 5]
- The information regarding the statistics as required by the economic activists and investors in Iran shall be constantly declared and updated through the Statistical Center of Iran. [Article 6]
- The process of foreign trade (including importation and exportation of goods and services, issuance of relevant documents e.g. certificate of origin, certificate of standard, certificate of health, letter of credits, customs permits, insurances, etc.) shall be accomplished via electronic routes without any personal references. [Article 8]
- Ministry of Foreign Affairs was required to facilitate the matter of transit and residence of foreign investors (to be eased and accelerated in as much as possible) through removal of trade visas and/or long-term arrangements for issuance of multiple visas. [Article 10]
Act on Maximum Use of Production and Services Content for Supply of the Country’s Necessities and Enhancing them for the Matter of Exportation (ratified on July 22, 2012):
- The Act on “Maximum Use of Technical Power …” (ratified on 02 March 1997) had provided that all the relevant works and services shall only be assigned to the local companies and where, for acceptable reasons, such an assignment is not possible, it is permissible to deliver the projects (re up-stream development of the Iranian oil and gas resources) to a partnership with an Iranian company having 51% of the shares. In either way, 51% of the project costs (at least) shall be in form of inland work. [Article 3]
- By the way and pursuant to ratification of the Act on “Maximum Use of Production Power …” (22 July 2012), in case of the Iranian companies not being competent to do so, the projects may be consecutively assigned to a domestic-foreign partnership and a full foreign venture (still 51% of the project costs shall be in form of inland work). [Articles 5 & 6]
Anti-Corruption Legislation in Iran
- Iran has ratified the United Nations Convention against Corruption on October 11, 2008 with the exception of Clause 2 of Article 66.
- Apart from the foregoing, a number of general laws and regulations have been enacted as to prevention of corruption in connection with the administrative and governmental bodies, inter alia as follows:
- Moreover, Bribery is a crime under Criminal Code of Iran (by virtue of the Articles 588 to 594 of the said Code, adopted on 22 May 1996) and also under the “Act of Increase in Punishment for the Crimes of Bribery, Embezzlement and Fraud” in which the punishments for the persons offering and receiving, as well as whomever facilitating the commitment of the bribe, have been set forthed.
- Anyhow, receipt of bribe by the staff of private sector have not been improvised within the above. Some of jurists and judges attempted to define such an affair as a crime of “Acquisition of Wealth through Illegitimate Means” (based on Act of Increase in Punishment for the Crimes of Bribery, Embezzlement and Fraud, Article 2) which has not been well-hailed by the courts.
– Promotion of Wellbeing of Administrative System and Combating Corruption Act (ratified on October 29, 2011). The said law is mainly dealing with the obligations of governmental bodies in prevention of corruption. However, some parts being vague, have led to different construes, concerning the non-governmental entities to be subject to the law as well;
– Prohibition of Receiving Commission in Foreign Transactions Act (ratified on July 18, 1993).
Coordinated by Dr. Mahnaz Mehrinfar & Mr.Ali Shahabi
 Article 5 of the Public Accountancy Act (ratified on August 23, 1987): “Public non-governmental entities/institutions are distinct organizational units which, under the sanction of Law, are created/to be created for the matter of conducting the tasks and services which are of the public nature”.
Article 3 of the Act on Management of State Services (ratified on October 10, 2007): “Public non-governmental entities/institutions are distinct organizational units which, having the legal independence, (i) are created/to be created through the Parliament’s enactment, (ii) more than 50% of their annual budget comes from the non-governmental sources; and (iii) are conducting the tasks and services which are of the public nature”.