Review of Article 968 of the Civil Code and Article 27 of the International Commercial Arbitration of Iran

Review of Article 968 of the Civil Code and Article 27 of the International Commercial Arbitration of Iran Hedyeh Sarhani *, Dr. Abdolkazem Jabar Matouri ** * Department of Private Law, Persian Gulf International Branch, Islamic Azad university, Khorramshahr, Iran ** Faculty member, University of Marine Science and Technology Khorramshahr Abstract Arbitration as a way to settle disputes out of court is one of the most important tools in the field of resolving disputes. The use of arbitration in settling commercial disputes, particularly at the international level is very wide. In court proceedings is a costly and lengthy process that is incompatible with the nature of trade. Acceptance of optional theory of 968 according to the current needs of international trade law is a matter of that reference, because it has greater coordination with global trends based on acceptance of the principle of autonomy. According to Article 27 of the Law on International Commercial Arbitration in Iran, respect freedom of will between the parties in the governing substantive law is quite explicit material that can be deduced from the provisions. But the answer is wherever by virtue of the provisions of paragraph 1 of Article 27 of the law of international commercial arbitration, the parties have chosen the law governing the contract with the assumption that the rule is law of Iran, they have chosen the Iranian legal system, so that Article 27 the is an independent part of the system of international commercial arbitration and does not have conflict with Article 968, but it is only for the provisions of article 968 of the International Commercial Arbitration. Keywords: contract, governing law, autonomy, Article 968 of the Civil Code, Article 27 of the International Arbitration. http://www.ijhcs.com/index.php/ijhcs/index Page 2664

Introduction Arbitration as non-judicial procedures for resolving disputes historically has a very long history. In the past this method was considered in respect of claims related to family relationships and worker-management relations and specifically in the field of public international and in relations between states. The reasons for the popularity of this method can be its optionality, the lack of formal proceedings, speed and efficiency and low cost of it. But in addition to these factors, what fundamentally distinguishes Arbitration from the court proceedings is that the parties are better off waiting for the arbitration of justice. The importance and necessity of research On the importance of law governing the nature of the dispute that was listed in International Law, the law is not silent and in Article 27, expressly accepted the principle of sovereignty and granted the parties complete discretion in the choice of law governing the nature of the claim. On the other hand, Article 968 Civil Code as the only rule of conflict resolution related to contractual obligations have been discussed in terms of interpretation by lawyers. Some consider the article as optional that involves the granting of independence and freedom to the parties. Others know the article Imperative and that it grants independence and freedom only if both parties are foreign nationals. The literature review of relevant records Akhlaghi, Behruz, business documents in the field of international trade law, Journal of Law, No. 112. Saljuqi, Mahmoud, Private International Law, Volume II, conflict of laws, publishing of Justice, 1998. Katouzian, Nasser, introduction of law and the legal system in Iran, twelfth edition, 1990, published by Modares Almasi, Nejadali, Conflict of Laws, University Center, Third Edition, 1994. Nasiri, Morteza, international trade law, Paykan Printing, 1973. Nikbakht, Hamid Reza, how to determine the law governing contractual obligations, Journal of Legal Studies, Issue 22-21, 1997. Research hypotheses 1. The provisions of Article 27 of the new rule is useful in the determination of governing law in international Arbitration agreements. 2. The provisions of Article 968 of the Civil Code is not in conflict with Article 27 of the Commercial Arbitration Act. In order to prove this hypothesis we explore ideas of scholars on Article 968 as well as the interpretation of Article 27 of the Commercial Arbitration Act. 3. Exploring the legal origins of Article 27 of the Law on Commercial Arbitration in Iran of The UNCITRAL Model Law which is the source and pattern of writing commercial arbitration law in Iran. Review of theories on Article 968 of the Civil Code in Iran Article 968 of the Civil Code stipulates that: "obligations arising from Law contracts are subject to law of the location of contract, unless the parties are Foreign Nationals and are subject to another law." Ambiguous and vague appearance of the article and the struggle between the old theory of contract law and contract theory of autonomy rule of law (law of http://www.ijhcs.com/index.php/ijhcs/index Page 2665

the parties) is still kept alive in Iranian law, is a battle that in important major legal systems is terminated in favor of the latter theory. Review of Article 27 of the Law of International Commercial Arbitration in Iran International Commercial Arbitration Act was passed by Parliament in 1997. This law was adapted from UNCITRAL Arbitration Model Law in 1985 and has nine chapters and 36 articles. Article 27 of the law as the law governing conflict resolution is related to nature of the contract dispute. This article is comprehensive for all matters relating to conflict of laws relating to the contract that will be submitted to arbitration. Lack of Abrogation of Article 968 of the Civil Code in Iran If you consider abrogation of the law as a discredit of the law by legislators and consider abrogation of the law that may be expressed or implied and that the abrogating and the abrogated laws must be of a kind or general and specific to each other, Article 27 of the Law on International Commercial Arbitration Act 1998, could not be Abrogated by Article 968 of the Civil Code 1934.Article 968 Civil Law Rule is related to conflict resolution procedures (proceedings), judicial or court, Article 27 of the Arbitration Act or Arbitration tribunals. The first rule is in accordance with nature of the courts that are public authorities and the second rule is proportionate to the nature of the tribunal that is private bodies and is elected or is the product of the will of the parties. Article 27 of the Law on International Commercial Arbitration in Iran International Commercial Arbitration by Council of Ministers and relied on UNCITRAL model law which is one of the most prestigious international instruments in the field of Arbitration was prepared and approved by the Parliament on 1997 and became law. This law has 9 chapters and 36 articles; Article 27 of this law under the (Governing Law) is the subject of this section that its provisions are as follows: Article 27 of the law 1. "Arbitrator" will make decisions according to the rules of law chosen by the parties about the nature of the dispute. 2. In case of lack determining the applicable law by the parties, the "arbitrator" will act based on law about the nature of the dispute in accordance with appropriate conflict rules. 3. "Arbitrator" if the parties have expressly authorized, can decide on the fairness or paternalistic. 4. "Arbitrator" shall in all cases decision based on contract terms and consider business practices related to its topic. Review of Article 968 of the Civil Code and Article 27 of the International Arbitration Act Regarding Article 27 of the Law on International Commercial Arbitration also priority and respect for the free will of the parties in legislative elections in paragraph 1 of this article is translated word for word from paragraph 1 of Article 28 of the Model Law. In this paragraph in addition to the explicit recognition of the principle of autonomy, initiative drafters of the regulations by the use of the (rules) rather than the (law) granted maximum possible freedom to the parties of the arbitration agreement. In the manner used in this article from the Article 27 of The UNCITRAL Model Law also there have been many discussions between opponents and proponents, Opponents of the method believed that the method taken in this paragraph is contrary to paragraph 1 of Article http://www.ijhcs.com/index.php/ijhcs/index Page 2666

that unlimited freedom is granted to the parties, and makes the referee was obliged and limited to refer to rules of conflict resolution and the (law). As a result, the referee through the enforcement of Conflict resolution of a certain government will find the appropriate law. This result is in contrast to recent trends to denationalize the arbitration and coordination with paragraph 1 of Article. But advocates of this approach believe that the obligation to refer to conflict rules to determine the law governing the contract requires the referee to provide argues. Since selecting a special law against other laws requires reason. This method also provides predictability and greater certainty for both parties. Conclusion the existence of Article 968 of the Civil Code and Article 27 of the Law on International Commercial Arbitration in our law has causes the emergence of two different conflict resolution rules (obligations) of contracts in Iran's legal system. According to one (Article 968 Civil Code) Iranians who are parties in international conventions have no power to declare the law governing the contract and based on other article (Article 27 of the International Commercial Arbitration Act) has been granted the option in the wide range. Regarding independence or freedom of Iranians in international agreements, in Article 968 of the Civil Code, if we accept that the legislator at the time of adoption of this matter in 1934, it was about signed contracts in Iran and it had the idea to deprive Iranians from the law governing the contract. First, the totality of the article does not say this and secondly, it does not seem legislators really want to separate international treaties (signed in Iran and abroad) and thirdly, if we assume that about the signed contracts in Iran article 968 Civil Code is applied, and in the case of outside signed contracts is applied under Article 10 of the Civil Code Act. A) Article 968 causes less Iranian contract to be signed in Iran and the parties to govern the law will try to sign the contract outside the country or bother to include rules of foreign law in the contract (incorporation). B) The legislative purpose of separate contracts will be meaningless or ambiguous. In addition to this article, there are other issues that need clear answers such as: What are the issues related to obligations arising from contracts; what is implied selection? Can a clear choice by the parties include any law (including law of a country with no relation to contract). Is the referral prohibited? In this case, Article 968 of the Civil Code rule is incomplete and inconsistent with the needs of today's legal and business community of Iran. On the other hand by approval of International Commercial Arbitration Act passed in 1997 by Parliament, in Article 27 of that law, although it has shortcomings and ambiguities in written form, (Of course, with the implementation of the original, namely the UNCITRAL Arbitration Model Law, it can be fixed) you could say the questions and ambiguities in Article 968 of the Civil Code, are not raised. Legislator acts according to the new and updated rules in order to trade and economic development and in fact, has been incorporated with the development of trade and international economics. In such a situation, it seems inappropriate that in the legal systems two heterogeneous rules conflict resolution exist in a conflicted practice with each other. http://www.ijhcs.com/index.php/ijhcs/index Page 2667

References 1. Akhlaghi, Behruz., "commercial documents in the field of international trade law", Journal of Law Office Legal Services International, Issue 12, Spring and Summer 1990. 2. Aryanpour, F., "a glimpse of the principle of party autonomy in terms of choice of law governing the obligations arising from trade agreements", Journal of Law and Political Science, Number 55, Spring 2002 3. Asadi race, Mohammed, arbitration in Iran and its and comparison with the UNCITRAL Model Law, Master Thesis 4. Skini, Rabya, Conflict of Laws in International Arbitration Law Journal 11, 1989 5. Amiri, Ghaem Maghami Abdul Majid, rights and obligations, published in 1990, First Edition, Volume II 6. Iranpour, F., "identified or deny of the principle of parties autonomy in private international law of Iran", Faculty of Law and Political Science, Issue 58, Winter 2002, 7. Irani, Nasser, the principle of party autonomy in determining the applicable law on commercial contracts, private law master's thesis, Tehran University, 1999 8. Bahrami, Shahriar and Nader Mardani, "the law of international trade and economic agreements," Justice Magazine, Number 4, Summer 1992 9. Jafari Langroodi, MJ, will impact on civil rights, thesis, Faculty of Law and Political Science, 1961 10. Jafarian, M, Reflections on International Commercial Arbitration Act, Parliament and Research, No. 15, Persian date Ordibehesht 1995. http://www.ijhcs.com/index.php/ijhcs/index Page 2668