farhad emam Farhad Emam
Publish Date : 11/27/2015

The Legal System of Iran v the International Sanctions

EXECUTIVE SUMMARY

Key terms

Resistance economy, Article 44 of the Constitution, Ministry of Petroleum, court decisions.

Summary

The legal system of Iran, especially its international trade law, has been affected by sanctions imposed on Iran either internationally, or by the USA and the EU. These sanctions have forced or encouraged the legislator, the courts, and the legal doctrine of Iran to adopt specific measures to devise a system of legal concepts and rules that could help the economic system of the country to deal with these sanctions ‘swiftly’.

To understand the mechanisms devised or used by the Iranian legal system to cope with the international sanctions, in this Legal Report we will discuss the following issues:

a) Policies concerning “resistance economy” of Iran;

b) Laws implementing the “resistance economy” policies; and

c) Court decisions debasing the sanctions temporarily.

More detailed study of the above three issues will be included in our booklet on the “Resistance Economy” of Iran in the Post-Sanctions Era.

I. Policies concerning “resistance economy” of Iran

According to a decree of the Supreme Leader of Iran issued on February 19, 2014, the policies concerning the resistance economy sets out the following objectives for the petroleum-related activities, as reported by almonitor.com on February 24, 2014:

1. Reduce vulnerability of oil and gas exports through the selection of strategic buyers and involving the private sector in diversifying sales channels;

 2. Increase oil and gas value-added exports;

 3. Increase oil and gas strategic reserves and production to have an impact on international markets …; and

4. Increase the share of the National Development Fund from oil and gas export revenues.

The Ministry of Petroleum of Iran (“the MoP”) has devised the following plans and projects to meet the above objectives:

a. Plan for increasing the capacity of producing oil and liquefied gas with an emphasis on using joint oil fields;

b. Projects for increasing production of oil from the joint oil fields of west of Karun to the amount of at least 700 thousand barrels per day;

c. Improving the structure of the oil contracts of Iran with the objective of attracting technology and enhancing management of national technology especially for successful execution of projects to increase the percentage of recovery of oil.

Objective: Increase of production of oil and liquefied gas to 7.5 million barrels per day till March 21, 2017.

Under another plan prepared by the MoP in accordance with the Resistance Economy Policies, the Ministry shall undertake the following actions or shall put into action the following programs:

a)      The Second Leap Program to Increase production and export of petrochemical products;

b)     Timely execution of the projects concerning provision of raw materials for new petrochemical plants (including the project of production and retrieval of natural gas liquids (NGL));

c)      Marketing and exportation of petrochemical products for new markets;

d)     Providing support for development of downstream petrochemical units including through development of technical chemistry-cities; and

e)      Using new technologies for development of petrochemical industry.

II. Laws implementing the “resistance economy” policies

2.1. Constitution of Iran

The cornerstone of the “resistance economy” is Article 44 of the Constitution of Iran. To understand the practical scope of this Article, it is indispensable to analyze and understand the ambit of “The General Policies Pertaining to Principle 44 of the Constitution of the Islamic Republic of Iran”. The main objectives of the Iranian economy under the General Policies are:

·         To increase the pace of national economic growth;

·         To expand ownership to the general public in order to provide for social justice;

·         To enhance efficiency of economic entities and to utilize monetary, human, and technological resources;

·         To increase the share of the private and cooperative sectors in the national economy;

·         To decrease the financial and managerial responsibilities of the government in managing economic activity;

·         To increase the public employment rate; and

·         To encourage savings and investment by the public and to enhance family income.

2.2. Bylaw on Importation, Exportation and Transactions of Gold, Platinum and Silver (2001)

Article 4 of the Bylaw on Importation, Exportation and Transactions of Gold, Platinum and Silver (2001) states that importation of gold, platinum and silver in bullion to Iran by natural or legal persons in order to be used for commercial needs and transactions is permissible without any limits.

Therefore, persons who own gold workshops as well as merchants are allowed to import, free from any limits, bullion of gold, platinum and silver into Iran. It is evident that this importation shall be subject to payment of customs fees and duties under the laws of Iran. The paid amounts shall be added to the price of gold, platinum and silver in Iran and shall eventually imposed on end-users. 

Article one of the same Bylaw authorizes the Central Bank of Iran (CBI) to import or export gold, silver and platinum either directly or through other Iranian banks in order to regulate the market. The CBI shall be kept informed about all the gold, platinum and silver that enter the country by the Customs Office of Iran.

III. Court decisions debasing the sanctions temporarily

Iranian banks have experienced a certain degree of success in handling their legal cases in foreign courts:

1) It is reported on the website of law360.com on October 1, 2015:

The high court on Thursday elected to hear Bank Markazi's appeal of a Second Circuit ruling that allowed the family members of the 1983 marine barracks bombing in Beirut to collect $1.75 billion because Iran funded the militants that committed the attack. The U.S. government had urged the Supreme Court to reject Bank Markazi's petition for review.

2) According to reuters.com on January 22, 2015:

The European Union's second highest court on Thursday annulled EU sanctions on an Iranian bank and 40 shipping companies hit with asset freezes as part of pressure on Tehran over its nuclear programme.

3) The website of ft.com reported on September 18, 2014:

The EU’s initial freeze on the assets of Iran’s central bank has been struck out in court, calling into question the bloc’s use of confidential sources to support its international sanctions.

What are the impacts of these decisions on the sanctions imposed on the banking system of Iran? How will they interact with the sanctions that will remain in force for the foreseeable future? Would these cases be influenced by the political changes that are directed towards easing of sanctions on Iran?

The above issues and many more are analyzed by our Law in Iran Booklet No. 8: The “Resistance Economy” of Iran in the Post-Sanctions Era, Friday, November 27, 2015.



GOOD TO KNOW

To learn more about the issues mentioned in this Legal Report, you may read the following texts. If after reading this Legal Report and the following texts, you still have questions that call for detailed responses, you may send them to us by clicking on “Our Services” button and following the procedure explained there.

RELEVANT LEGAL NEWS:

1. Law in Iran Legal News: Impacts of Ending Sanctions on Iran’s Economy, Wednesday, August 12, 2015.

2. Law in Iran Legal News: Lifting of Iran Sanctions and Iran-UAE Trade, Thursday, August 6, 2015.

3. Law in Iran Legal News: Iran Sanctions Agreement – SWIFT Update, Tuesday, October 27, 2015.

RELEVANT BOOKLET:

Law in Iran Booklet No. 8: The “Resistance Economy” of Iran in the Post-Sanctions Era, Friday, November 27, 2015.


 

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