Introduction

International commercial arbitration depends on predictable enforcement of awards across borders. The 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) provides the principal multilateral mechanism for that predictability. Iran joined the New York convention in 2001, and its domestic statutes governing international arbitration are largely built on UNCITRAL Model Law principles, signaling formal commitment to the international arbitration regime.  Despite these formal commitments, enforcement of foreign arbitral awards in Iran remains fraught [1].

Two interlocking doctrinal features account for much of the friction: (1) the constitutional protection of “public and state property” (article 139 of the Constitution), which conditions arbitration or settlement involving such property on executive and, in important cases involving foreigners, parliamentary approvals; and (2) the broad and protean “public policy” grounds available to Iranian courts when considering enforcement under both domestic law and the New York convention reservation. These features intersect with procedural, institutional, and geopolitical realities including sanctions and sovereign immunity doctrines producing uncertainty for award creditors and debtors alike [2].

This article maps the legal framework, explores jurisprudential trends (including recent supreme court interpretation), and assesses practical and doctrinal challenges. It then proposes recalibrations statutory, judicial, and administrative that could preserve legitimate sovereignty concerns while improving enforceability and investor confidence.

Literature Review

The enforcement of foreign arbitral awards stands at the heart of international commercial arbitration. Without reliable enforcement mechanisms, arbitration would lose its practical value as an alternative to litigation. The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereafter “the New York Convention”) is the primary multilateral instrument that obliges member states to recognize and enforce foreign awards with limited exceptions. Iran’s accession to the convention in 2001 represented a significant milestone in its integration into the international arbitration regime. Nonetheless, the interaction between Iran’s constitutional law particularly article 139 of the Iranian constitution and international obligations has created a persistent tension between the enforcement of foreign awards and the protection of public order (ordre public) and national sovereignty [].

Scholars of international arbitration law (Born, 2021; Redfern & Hunter,2015) generally agree that the predictability of enforcement is the lifeblood of arbitration. Under article V of the New York Convention, recognition may be refused only on limited grounds, such as lack of due process, non-arbitrability, or contravention of public policy. However, the convention allows each signatory state to define public policy according to its domestic legal principles, creating variance in interpretation [4].

Iran’s domestic legal framework comprises the law on International commercial arbitration (LICA) of 1997, which closely follows the UNCITRAL Model law, and the civil procedure code, which governs enforcement procedures. While LICA incorporates international standards of party autonomy and limited court intervention, the Iranian constitution imposes certain structural constraints that cannot be overridden by statute. Article 139 prohibits the arbitration or settlement of disputes involving “public or state property” without the approval of the council of ministers, and, when foreigners are parties, parliamentary notification or approval is also required. This dual requirement often complicates or delays the enforcement of arbitral awards involving state entities or public assets [5].

The public policy exception under article V(2)(b) of the New York convention has generated extensive academic debate. In most jurisdictions, courts interpret “public policy” narrowly, limiting it to violations of fundamental moral, legal, or constitutional norms. For example, French and Swiss courts apply an “international public policy” standard that minimizes state intervention in enforcement. By contrast, some states, including Iran, India, and certain Arab jurisdictions, adopt a broader view encompassing socio-economic considerations, Islamic law principles, and political interests [6].

In the Iranian context, public policy often overlaps with Islamic principles and national interests as defined by constitutional and statutory provisions. Courts have invoked public order to refuse enforcement of awards deemed contrary to “Islamic morals,” to public property protection, or to sanctions regimes. The elasticity of public policy has thus become a tool for reconciling international obligations with domestic ideological and sovereign imperatives.

Academic studies highlight article 139 as the most distinctive feature of Iran’s arbitration regime [7]. It embodies a constitutional safeguard ensuring that state assets are not arbitrated or alienated without governmental oversight. While this serves the legitimate purpose of protecting national property and sovereignty, its ambiguous language especially the undefined scope of “public property” and “important cases” creates unpredictability.

Several scholars argue that article 139 functions as both a jurisdictional limitation (restricting the validity of arbitration agreements) and an enforcement filter (allowing courts to deny recognition of awards not duly authorized). In practice, Iranian courts have applied the provision inconsistently. In some cases, the courts have treated lack of prior approval as a jurisdictional defect voiding the arbitration clause ab initio; in others, they have allowed post-hoc ratification [8].

Recent supreme court interpretations, such as the 2024 ruling discussed by Viamediationcentre.org and the ASA Bulletin (2024), suggest a gradual shift toward a functional reading: approvals may be deemed curative if obtained before enforcement. However, no uniform administrative procedure yet exists to secure such approvals, leaving enforcement outcomes uncertain.

Empirical studies and case analyses indicate that Iranian courts approach foreign arbitral awards cautiously. The judiciary’s relative unfamiliarity with international arbitration principles and the political sensitivity of cross-border disputes reinforce conservative interpretations. Several recurring challenges emerge from Iranian jurisprudence:

ü  Procedural formalities: Strict requirements for certified Persian translations, notarized documents, and diplomatic authentication often delay enforcement.

ü  Substantive review: Courts sometimes engage in de facto merits review under the guise of public policy, contrary to Article V’s limited scope (Fazeli,2023).

ü  Sovereign immunity: State-owned enterprises often invoke immunity to resist enforcement, even when they have contractually agreed to arbitration.

ü  Sanctions and international relations: Enforcement may be hindered by sanctions-related restrictions, as courts and banks avoid transactions with sanctioned entities, citing national interest [9].

Collectively, these factors foster uncertainty and discourage foreign investors from relying on arbitration in Iranian-related transactions.

Iranian scholars and practitioners have debated how to reconcile article 139 with Iran’s treaty obligations. One camp advocates a restrictive interpretation, confining the approval requirement to disputes directly involving state property in the public domain. This view aligns with the principle of good faith in treaty performance under the Vienna convention on the law of Treaties. Another camp argues for legislative clarification, suggesting that Parliament or the council of ministers should issue implementing regulations defining “public property,” “important cases,” and procedural steps for obtaining approval.

Comparative studies recommend that Iran emulate systems such as Egypt or Turkey, which have adopted pragmatic mechanisms allowing state entities to arbitrate without separate legislative authorization, provided that relevant ministries approve contracts ex ante. Judicial training and specialization have also been proposed to harmonize interpretations and limit excessive judicial review.

Furthermore, reformers suggest distinguishing between domestic public policy and international public policy a concept used in many jurisdictions to narrow the scope of review when enforcing foreign awards. By adopting an international public policy test, Iranian courts could preserve core constitutional values while honoring the pro-enforcement spirit of the New York convention [10].

Recent jurisprudential trends show cautious progress. The 2024 supreme court decision clarifying article 139 signaled a willingness to interpret the approval requirement more flexibly. Academic commentary interprets the decision as an attempt to balance sovereignty with arbitration efficiency. The government has also expressed interest in drafting implementing regulations, though as of late 2025, no finalized directive has been enacted.

At the academic level, Iranian law faculties increasingly incorporate international arbitration into curricula, and professional bodies such as the Tehran regional Arbitration Centre (TRAC) are promoting alignment with UNCITRAL standards. These developments, though incremental, indicate an ongoing evolution toward compatibility with international enforcement norms.

The reviewed literature reveals a vibrant but fragmented body of scholarship. Most authors agree that the combination of article 139 and a broad public policy exception remains the principal barrier to effective enforcement of foreign arbitral awards in Iran. While international instruments and the LICA provide a formal framework consistent with global standards, domestic constitutional and procedural obstacles persist.

However, there remains a significant research gap concerning (a) the empirical impact of article 139 on enforcement statistics, (b) the precise boundaries of Iran’s public policy doctrine, and (c) practical mechanisms for harmonizing constitutional sovereignty with treaty commitments. Few studies systematically integrate legal doctrine, case law, and institutional practice. The present research aims to fill this gap by offering a comprehensive analysis of the doctrinal, procedural, and constitutional dimensions of enforcing foreign arbitral awards in Iran, with an emphasis on reconciling public order and national sovereignty.

Legal and institutional framework

The New York convention and Iran’s accession: The New York convention requires contracting States to recognize arbitral awards made in other contracting States and to enforce them subject to limited exceptions. Iran deposited its instrument of accession in 2001; the convention entered into force for Iran in January 2002. Iran’s accession law and implementing practice make the convention applicable domestically, but the convention’s article V defenses (including non-arbitrability and public policy) leave significant interpretative space for national courts.

Domestic arbitration law: LICA and the model law influence: Iran’s Law on International Commercial Arbitration (LICA), adopted in the late 1990s, draws on the UNCITRAL model law and provides a regime for arbitration in international commercial relationships (where at least one party is non-Iranian). LICA sets rules on jurisdiction, arbitrability, seat and enforcement procedures, and recognizes party autonomy in choice of law and procedure. Nonetheless, LICA operates alongside constitutional provisions (notably article 139) and ordinary procedural law that shape courts’ treatment of foreign awards.

Article 139: constitutional overlay on arbitrability and settlement: Article 139 of the constitution conditions conciliation or arbitration of claims relating to public and state property upon the approval of the Council of Ministers, and in cases involving foreigners (or “important” cases) also upon parliamentary approval or notification. This constitutional rule aims to insulate public property and sovereign prerogatives from private dispute resolution without political oversight; however, its breadth and linkage to “public property” create legal uncertainty about which cases must observe the approval mechanism and when a court may refuse enforcement on that ground [11]. In table (1), Comparative Table of Previous Studies and Analyses was illustrated.

Table 1. Comparative Table of Previous Studies and Analyses

Key Insights from Comparative Studies

ü  Consensus: Most scholars agree that Article 139 of the Constitution and a broad conception of public policy constitute the two main legal-institutional hurdles to enforcement of foreign arbitral awards in Iran.

ü  Tension: There is a persistent tension between Iran’s treaty obligations under the New York Convention and constitutional sovereignty safeguards.

ü  Judicial Uncertainty: Courts differ on whether failure to obtain government or parliamentary approval (under Article 139) nullifies arbitration clauses or merely delays enforcement.

ü  Institutional Weakness: The absence of clear administrative regulations for obtaining approvals or defining “public property” undermines predictability.

ü  Emerging Reform Trend: The 2024 Supreme Court interpretation marks a gradual shift toward balancing sovereignty with enforcement efficiency.

ü  Practical Barriers: Sanctions, procedural formalities (translations, notarizations), and state immunity still create substantial non-legal enforcement barriers [12].

The public policy doctrine in enforcement practice

ü  Normative role of public policy in the New York Convention: Article V(2)(b) of the New York Convention permits refusal of recognition or enforcement of an award if enforcement would be contrary to the public policy of the country in which enforcement is sought. National courts therefore retain a residual safeguard to protect core values, but international jurisprudence cautions against expansive uses of “public policy” to revisit merits. Iranian courts face the same tension: balancing deference to arbitration with constitutional and public-interest considerations.

ü  Iranian courts’ approach: breadth and unpredictability: In practice Iranian courts have sometimes construed public policy narrowly limited to core constitutional principles and prohibitions and at other times broadly extending to economic policy, public interest, or matters touching state prerogatives. The jurisprudence has been uneven partly because domestic courts must reconcile LICA and the Convention with article 139 and because guidance on the scope of “public” vs. “private” disputes is fragmented. Recent academic analyses and notes document the oscillation and call for more doctrinal clarity.

National sovereignty and Article 139: practical problems at enforcement

Identifying “public and state property”: A recurring problem is the definitional ambiguity of “public and state property.” Contracts using state guarantees, concessions, or involving state enterprises may implicate public property protections even when the dispute concerns private law obligations. That ambiguity means an award-creditor may face petitions to suspend or refuse enforcement on article 139 grounds, even when parties believed their contract to be purely commercial. The question of whether approval had to be obtained before arbitration, or whether post-hoc ratification can cure arbitral jurisdictional defects, is contested.

 Administrative approvals: timing, scope and political risk: The procedural requirement of Council of Ministers (and sometimes Parliamentary) approval creates practical obstacles: (a) approvals are discretionary and politically inflected; (b) the process lacks standardized timelines; (c) sensitive cross-border disputes may be delayed for political reasons; and (d) ambiguity exists about whether a failure to obtain prior approval vitiates arbitral jurisdiction or only impacts enforcement. The lack of a clear, accessible administrative pathway for obtaining approval undermines predictability. Recent Supreme Court commentary has begun to refine interpretation but has not fully systematized practical procedures.

Sovereign immunity and enforcement against state property: When award debtors assert sovereign immunity or invoke protections for state assets, enforcement may be practically impossible. Iranian law and practice provide limited avenues for piercing immunity where a state has waived it, but proving a valid waiver and locating seizable assets within Iran or abroad is difficult. Moreover, when awards touch contracted public services or privatization projects, competing claims about public interest further complicate execution [13]. Table (2), shows the National Sovereignty and article 139 Practical Problems in Enforcement of Foreign Arbitral Awards in Iran.

Table 2: National Sovereignty and article 139 Practical Problems in Enforcement of Foreign Arbitral Awards in Iran