Post-Sanction Era in Iran, Legal Challenges and Economic Opportunities

Post-Sanction Era in Iran, Legal Challenges and Economic Opportunities

(Dr. Behrooz Akhlaghi – Farhad Emam)

Executive summary

The negotiations between Iran and P5+1 is getting closer to its final stage. If the parties get into a win-win deal, the first international action would be to lift the sanctions. This would ease the pressure on the Iranian economy and would boost the efforts to normalize the current staggering conditions. The other side of this coin is the plan of action of the Iranian government to renovate and internationalize the economic system of Iran. The final direction of the efforts on both sides of the table is to establish a free market economy in Iran.

In this brief report, we will look at the actions to be taken internationally and locally in order to show how they can invigorate each other if in devising each plan of action, the needs and requirements of the other one could be kept in mind.

A. International Plan of Action

1. Lifting and easing of sanctions

According to the Guidance Relating to the April 2, 2015 Announcement of Parameters for a Joint Comprehensive Plan of Action Regarding the Islamic Republic of Iran’s Nuclear Program:

“The parameters announced on April 2, 2015 for a Joint Comprehensive Plan of Action (JCPOA) by the P5+1 and Iran do not immediately relieve, suspend or terminate any sanctions on Iran. The only sanctions relief in force is the relief provided pursuant to the Joint Plan of Action (JPOA) reached on November 24, 2013 and extended through June 30, 2015.”[1]

After June 30, 2015, some of the sanctions imposed on Iran shall be lifted, depending on the terms of the agreement expected to be concluded between Iran and the P5+1. For the sake of facilitating our analysis, we presume that the parties will agree on all of their issues of common interest. In that case, according to the US Fact Sheet[2] the main consequences of the agreement shall be:

• “U.S. and E.U. nuclear-related sanctions will be suspended after the IAEA has verified that Iran has taken all of its key nuclear-related steps. If at any time Iran fails to fulfill its commitments, these sanctions will snap back into place.
• The architecture of U.S. nuclear-related sanctions on Iran will be retained for much of the duration of the deal and allow for snap-back of sanctions in the event of significant non-performance.
• All past UN Security Council resolutions on the Iran nuclear issue will be lifted simultaneous with the completion, by Iran, of nuclear-related actions addressing all key concerns (enrichment, Fordow, Arak, PMD, and transparency).
• However, core provisions in the UN Security Council resolutions – those that deal with transfers of sensitive technologies and activities – will be re-established by a new UN Security Council resolution that will endorse the JCPOA and urge its full implementation. It will also create the procurement channel mentioned above, which will serve as a key transparency measure. Important restrictions on conventional arms and ballistic missiles, as well as provisions that allow for related cargo inspections and asset freezes, will also be incorporated by this new resolution.”

2. Allowing Iran to join the international club

Iran has been treated as a pariah state for more than 35 years. Now time is ripe to open the doors to allow the Iranian State to become a full member of the following entities:

1. WTO: The accession status of Iran, as explained on the website of WTO, is as follows:

“The General Council established a Working Party to examine the application of the Islamic Republic of Iran on 26 May 2005. The Islamic Republic of Iran submitted its Memorandum on the Foreign Trade Regime in November 2009. The Working Party has not yet met.”[3]

The main reason for the current stand-still is political, according to the Iranian government. For this reason, Iran has taken few political steps to remove the existing barriers as reported by Tass, Russian News Agency, on November 30, 2014[4]:

“Iran asks Russia to help it join the World Trade Organization (WTO), according to a memorandum on cooperation between Russia’s ministry of economic development and Iran’s ministry of industry, mining and trade signed on Sunday.”

Almost five months have passed since then and Iran’s membership status has not budged a bit. This means that it would be impossible for Iran to join the WTO as long as its disagreements with the P5+1 lingers. But even after signing the agreement with the P5+1, there will be an expectation to see to it that Iran respects and abides by the international rules before allowing this country to become a full member of the WTO.

1. Others: Becoming a member of an international organization is just the first step in direction of joining the international club. To become an active member, Iran needs to enter into the game of give and take. This means that Iran has to take the following steps:

1) International policy of Iran, as far as its membership in international organizations is concerned, must be defined in clear and concise terms;

2) Based on that policy, Iran needs to define its strategies in order to meet its objectives;

3) Then a plan of action must be devised comprising the ways and means of initiating and maintaining an international cooperation while taking into account the capacities and capabilities of Iran; and

4) Finally, Iran needs to look into the steps to be taken in order to put its plan of action into execution.

3. Conclusion of new bilateral and multilateral agreements with Iran

Iran has concluded many bilateral and multilateral international agreements with its economic partners. In practice, however, these agreements are often of no practical contribution to the Iranian economy. For example, the following list shows that Iran has entered into Bilateral Investment Treaties (BITs) with the following 46 countries:

Countries	Date of signature	Date of entry into force
1. Afghanistan	28 May 2006	2 February 2008
2. Algeria	19 October 2003	5 December 2005
3. Armenia	6 May 1995	26 February 1997
4. Austria	15 February 2001	11 July 2004
5. Azerbaijan	28 October 1996	20 June 2002
6. Bahrain	19 October 2002	12 October 2004
7. Bangladesh	29 April 2001	5 December 2002
8. Belarus	14 July 1995	23 June 2000
9. Bosnia &Herzegovina	27 July 1996	25 August 2002
10. Bulgaria	13 November 1998	24 August 2003
11. China	22 July 2000	1 July 2005
12. Croatia	17 May 2000	2 August 2003
13. Finland	4 November 2002	25 June 2004
14. France	12 May 2003	12 November 2004
15. Georgia	27 September 1995	22 June 2005
16. Germany	17 August 2002	23 June 2005
17. Indonesia	28 March 2009
18. Italy	10 March 1999	27 July 2005
19. Kazakhstan	16 January 1996	3 April 1999
20. Kyrgyzstan	31 July 1996	27 June 2005
21. Lebanon	28 October 1997	14 May 2000
22. Macedonia	12 July 2000	19 August 2005
23. Malaysia	22 July 2002	4 August 2006
24. Morocco	21 January 2001	31 March 2003
25. North Korea	30 September 2002	24 April 2005
26. Oman	2 December 2001	8 April 2003
27. Pakistan	8 November 1995	27 June 1998
28. Poland	2 October 1998	26 October 2001
29. Qatar	20 May 1999	5 November 2001
30. Romania	26 January 2002	12 January 2005
31. Serbia & Montenegro	5 December 2003	7 July 2006
32. South Africa	3 November 1997	5 March 2002
33. South Korea	31 October 1998	31 QQQ

 

Some of the above BITs have been left inactive and useless for decades. It is now an appropriate time to look into each of them to see whether they are of any practical value and if so, to reactivate them after discussing the ways of reviving these treaties with the States whose economic partnership is of interest to Iran.

B. Domestic Plan of Action

1. Internationalization of the domestic laws

The economic laws of Iran are old and outdated. The government of Iran need to establish a working group to carry out a comparative study of these laws in order to adapt them to the current needs of potential international partners of Iran. The main laws that need to be reviewed are in the following fields:

1. Competition (and restriction of competition);
2. Public- Private Partnership (PPP);
3. Concessions (based on Article 81 of the Constitution of Iran);
4. Public markets;
5. Oil and gas;
6. Public property and public domain;
7. Privatization; and
8. Mining activities.
9. Establishing “connecting entities”

Foreign companies and firms need to learn about the applicable rules of the Iranian market. They also need to establish joint ventures with their Iranian partners. Furthermore, it is indispensable for them to keep themselves aware of the changes and developments in the Iranian market place. In handling all of these challenges, normally they have to rely on international law offices and their representatives in Iran. There is a dire need to have companies that are expert in gathering economic information on both public and private sectors of the economy of Iran and to carry out due diligence studies for foreign companies, if and when needed. Lack of ‘connecting entities’ could delay the process of internationalization of the Iranian economy.

3. Modern courts and arbitration centers

It is trite to say that Iranian courts fall short of the expectations of the foreign companies that are in need of reliable judicial services. The Arbitration Center of the Iran Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA) has taken serious steps in order to meet the international standards of commercial arbitration but despite all of the invaluable efforts of its managers, the Arbitration Center of the ICCIMA needs to take serious measures to meet the international expectations. In taking these measures, the Arbitration Center needs to avail itself of services of renowned experts of international commercial arbitration.

CONCLUSION

The agreement to be concluded between Iran and the P5+1 ushers in a new era in economic development of the country. The role of this agreement, however, must not be overemphasized. Iran needs to take other steps, both at international and at domestic level, to pave the way for implementing its new economic development plan. In this brief report, we tried to put emphasise on the main parts of this plan. A detailed version of this plan will be prepared as soon as Iran and P5+1 ink their final agreement.

[1] http://www.treasury.gov/resource-center/sanctions/Programs/pages/iran.aspx

[2] http://www.state.gov/e/eb/tfs/spi/iran/fs/240539.htm

[3] https://www.wto.org/english/thewto_e/acc_e/a1_iran_e.htm

[4] http://in.rbth.com/news/2014/12/01/iran_asks_russia_to_help_it_join_wto_40023.html