Before you get behind the wheel of the law firm, you should think about whether you need to actually do it. After all, you can obtain the status of the head manager and full independence through partnership, managerial position or individual practice. In addition, prior to becoming Managing Partner, it is preferably to acquire the relevant experience. This will provide an understanding of youself and your aspirations. This will help to feel your own style of management and building relationships. It won’t let you forget how the company and profession is perceived at the different stages of career.

I got behind the wheel of AGA Partners in 2005, having experience of a law firm Intern, Paralegal in classical law offices, Senior Associate at one of the best and most well-known law firms at the time, self-employed lawyer – free hunter, and Department Director of a large national company. In addition, I had a chance to work as in-house lawyer for about a month, but after realizing that this is not really my thing I left before the end of the probationary period. Overall, my professional experience comprised 9 years. In 28 years, I established my own company.

The first thing to understand is that the company is exactly what you need. You need to understand that you are ready. This should be your lifework, your mission. And from that moment the firm becomes a part of your life. Everything that happens here (your relations with the staff, partners and customers), defines you as well as behavior with family and friends determines you. The responsibility that you take of the firm, should satisfy and shouldn’t not cause any doubts. It's like having a child – no matter how difficult it can be, dropping it is not an option. Without this all the way forward is just impossible. By the way, I believe that there is no difference, whether you establish a company or accept it. It all depends on you when the wheel is in your hands. After all, you are the only person responsible for everything.

The second thing that I suppose Managing Partner should always remember is a formula of " first people, then business." This is my personal approach to work. For me it is important with whom I work, how we do this, for whom we work. And I cannot imagine our company without healthy, friendly, warm atmosphere in the office. Honesty and transparency in relationships are very important. We have developed horizontal communication where everyone can freely communicate with anyone, there is no military hierarchy. Another point is that we will never work with a client who misbehave with any of our people.

The third thing is – learn, Managing Partner, learn! There is plenty of information on business management, but not only this. You can use literature, consultants, trainings, any new knowledge, even art! You should be open to the world, feel it’s pulse. There will be no ideas, innovations, and breakthroughs without this. You should let these information flows pass through youself and rethink them. It is highly unlikely that someone will give you a magic recipe that will help immediately develop a company or just teach you everything and solve problems. However, if you reside in the information field, the brain becomes much faster and more inventive.

The fourth is that you should decide where and how you go. Choose the aims, strategy and tactics. Interestingly, it may all diametrically change over time. Life experience, Partners’ and lawyers’ willingness impose some imprint on the process. However, it should be fully controlled and extremely balanced. It is Managing Partner’s responsibility, because the wheel is in your hands and it’s you who turn it.

The fifth is that you should honestly answer the question of who you want to be (manager or leader). Who is a leader? That’s a good question. Leader is a jaded word that has become a banal cliche, but there is no more aptly word than that.

The leader’s philosophy differs from the philosophy of the head. The first difference is that the leadership must be proven. It is worth fighting for, and you can lose it by distancing yourself from those you work with, surrounding yourself with retinue, losing visual acuity. I can not tell which system is better – head or leader. But I can state that loss of movers and shakers is inevitable in “the head” system. However, such system is the part of our social and legal traditions. We know a lot of successful companies with this structure.

Overall, I can say by paraphrasing Lev Tolstoy that every happy company is happy in its own way. I saw completely different management models whereby legal business makes a profit, if we put profit a criterion of success, because another universal criterion is hard to reconcile. One thing that remains unchanged is the responsibility for everything.

If we have already used an analogy with the wheel, so it's like driving a car. You can both know the rules and don’t know. You can abide by the rules, and you can be easy-going about such a trifle. You can race and cut off everybody collecting sincere and not very good wishes or epithets from other drivers. At a certain distance such a driver can be ahead of others, but he risks both his license and vehicle. You can also ask godfather to give you flashers and loudspeaker, and demand to be given way. Most will do it, as all know who the godfather is. However, godfathers change. And the trouble is that they change suddenly. It is also possible to drive without regaining consciousness for years, and if the police catch you and take away the license you can just buy it again.

There are plenty of options. The main thing is to realize that you are not alone in your car. If everybody agrees, then drive the way you want. That's what is a team of associates.

Trade war between Ukraine and Russia has started not yesterday and it directly affects foreign trade relations. Major producers from both countries that have been accustomed to free access to market outlet for their goods, are now suffering multi-billion losses as a result of the dozens of official restrictions.

Sometimes the probability of the ban can be foreseen, as in the cases with the adoption of mirroring sanctions. However, such events have the tendency to occur suddenly, especially in view of the ongoing armed conflict and the current political situation.

The sphere of commodity trading is particularly at risk, as it is characterized by a forward nature of performance. Many contracts are concluded before harvesting. Accordingly, there is a real likelihood that circumstances preventing contract execution will appear during a significant period of time between the conclusion and execution of the contract.

What is to be done in this case? For example, goods were sold in April and should be delivered in September, and the official authorities of the buyer’s country impose a ban on imports. Is the buyer's refusal to accept the goods due to force majeure circumstances reasonable in this case? This issue is mostly buyer's concern, who in fact has no legal possibility to import this type of product.

The answer is not so clear and depends on many factors. We will try to determine the possible outcome of such a situation using the example of our recent case concerning Russia's ban on imports of products from Ukraine. And here we want to share with readers the nuances of this case and arbitration award.

So, not so long ago, the Federation of Oils, Seeds and Fats Associations (London, UK) (hereinafter - FOSFA) issued an important decision that provides insight into whether the ban on import of agricultural products in the country of destination should be considered as force majeure, releasing the buyer from the contract, in terms of the applicable English law.

Contract

In March 2014 our client, a large Ukrainian agri-holding (hereinafter – Seller), concluded a deal with Russian agri-industrial company (hereinafter – Buyer) for the delivery in October-November of a large batch of Ukrainian soybean for import and further processing on the territory of the Russian Federation. According to the contract, the goods should have been delivered from Ukraine to Russia on the DAF terms (Incoterms 2000).

The place of delivery was the border between Ukraine and Belarus. Like in most similar transactions, the contract was subordinated to English law, and all disputes between the companies were subject to consideration in FOSFA arbitration.

The contract had a force majeure clause that ambiguously interpreted the consequences of imposing import restrictions and the buyer's responsibility for not obtaining an import license and other official permits necessary for the import of goods into the territory of the Russian Federation.

Import ban

In early August, the Buyer reported about the introduction of Russian restrictions on imports of soybean of Ukrainian origin and referred to the force majeure clause, announcing the cancellation of the contract due to force majeure circumstances making the execution of the contract impossible.

Indeed, on August 1, 2014 Rosselkhoznadzor, Russia's state veterinary and phytosanitary service, introduced an unlimited ban on the import of several crops from Ukraine: sunflower, oil meal and soybeans, which made it impossible to import goods to Russia.

Despite official prohibition, the Seller did not accept the Buyer's notification of force majeure and proceeded to fulfill his obligations. So, during the next several months, the Seller repeatedly notified the Buyer about the readiness for goods delivery and asked the latter to provide documentary instructions, without which further execution of the contract by rail was impossible. The buyer pressed his point by stating that he cannot accept the goods, justifying his position by the onset of force majeure circumstances.

Default

We should also take into account the price factor. The thing is that by the time of delivery, the price of soybean has significantly decreased, making the contract extremely unfavorable for execution by the Buyer. By the end of the delivery period stipulated by the contract, the Buyer has terminated the contract, referring to force majeure circumstances.

In response, the Seller declared the Buyer in default[1]. As the price for the goods decreased, the Seller demanded compensation for the difference between the contract price and the market price that is the classic calculation of the general losses in English law and in FOSFA / GAFTA contracts.

The buyer stated his objections to the demand for compensation for price difference, arguing in favour of the force majeure circumstances and referring to the frustration doctrine in English law providing for exemption from liability. Eventually, the case was submitted to the FOSFA arbitration at the request of the Buyer.

The parties’ arguments in FOSFA arbitration

The Seller's position, in fact, consisted of two key arguments. Firstly, according to DAF terms, the obligation to obtain a license to import goods to the territory of Russia rests with the Buyer, while the Seller's duty was limited to the delivery of the goods to the borders of Ukraine and Belarus and did not imply importation into the territory of Russia.

Secondly, any restrictions on the import of goods into the territory of Russia are not force majeure circumstances neither within the framework of the contract concluded and the DAF terms, nor in accordance with English law.

In particular, restrictions on import of goods do not fall under the frustration[2] doctrine referred to by the Buyer, as this circumstance did not prevent the Buyer from lawfully executing its contractual obligations, namely, accepting the goods in the contract place of delivery. And it also did not "destroyed" the overall purpose of the contract, because it did not contradict the parties’ agreement.

The Seller also cited a number of well-known precedents in support of his position, such as Congimex v. Tradax[3] and Bangladesh Export Import Co Ltd v. Sucden Kerry S.A[4], where the court came, in fact, to the same conclusion that the ban on the import of goods did not fall under the doctrine of frustration and did not release the buyer from the contract, and the duty to import the goods, in one way or another, was assigned to the buyer.

The position of the Buyer was largely based on the doctrine of frustration: the import of goods and its further processing in Russia was the main purpose of the contract, its commercial essence, without which the contract can not exist. In other words, the import and processing of goods in Russia is what the goods were bought for, and if this is not possible, the transaction is deprived of its main purpose and must be canceled on the basis of English law and precedents such as Czarnikow[5], Attorney General of Belize v Belize Telecom Ltd[6] и Bunge SA v Nidera BV[7].

The Tribunal’s judgement

The Tribunal agreed that there was a ban on soybean imports to Russia, which in fact did not allow the Buyer to import goods. But this prohibition had no effect on the fulfillment of contractual obligations by either the Seller or the Buyer – the Seller could deliver the goods, and the Buyer could accept them at the border of Ukraine and Belarus. At the same time, the import of goods to Russia was not the responsibility of the Seller, who was responsible only for export, while the Buyer had the right to import the goods to any country.

Consequently, the ban on imports was not a force majeure circumstance either in understanding of the contract or under English law, in particular, frustration doctrine.

Thus, the Tribunal decided that in this case the Buyer could not refer to the ban on the import of goods and refuse to fulfill his contractual obligations. Having terminated the contract, the Buyer himself infringed the contract and therefore must compensate the Seller for the losses incurred as a result of the Buyer's non-fulfillment of the contract.

Conclusion

The ban on imports is possibly a loss in the battle, but not in a war that may be continued in London arbitrations and courts and, as we can see, it does not necessarily end in favor of the party that considers itself exempted from obligations due to import restrictions imposed by the authorities.

Therefore, before canceling the contract, buyers, referring to such circumstances, should determine the nature and extent of their obligations under the contract, and also understand how the law applicable to the contract interprets this or that circumstance.

Sellers, in turn, should receive lawyers’ consultation to determine the full scope of rights and obligations of the parties under the contract before agreeing with the arguments of the buyer regarding the onset of force majeure circumstances.

Ivan Kasynyuk, Partner, AGA Partners 

Dmitry Koval, Associate, AGA Partners 

[1] Default is a specific term in delivery contracts according to GAFTA and FOSFA rules, implying a significant breach of contract with automatic termination.

[2] A doctrine in English law that exempts a party from liability in the event when an unforeseen circumstance (i) makes it absolutely impossible (illegal) to fulfill the party’s contractual obligations, or (ii) radically changes the basic purpose for which the party has originally entered into the contract.

[3] Congimex Companhia Geral de Commercio Importadora & Exportadora S.A.R.L. v. Tradax Export S.A [1983] 1 Lloyd’s Rep. 250

[4] Bangladesh Export Import Co Ltd v. Sucden Kerry S.A. [1995] 2 Lloyd's Rep. 1

[5] Czarnikow (C) Ltd vCentrala HandluZagranicznego Rolimpex [1979] AC 351

[6] Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10

[7] Bunge SA v Nidera BV [2015] UKSC 43

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Ukraine seems to be quite friendly jurisdiction for entering and exercising marriage contracts. However, there are plenty of issues to be taken into account before you can be assured that after entering marriage contract with your spouse all pecuniary interests are protected.

This article addresses the main tips that will help you to choose the most efficient way to share the spouses’ property and prevent long-lasting property disputes.

What is marriage contract under the Ukrainian law?

Ukrainian legislation and practice supports intention of spouses to govern their own relations. At the same time this right is not absolute.

Pre-nuptial agreement under foreign law vs marriage contract under Ukrainian law?

Ukrainian law provides the option for the couples who are already married or are going to marry in the nearest future to govern their property relations during the marriage at their own discretion. However, Ukrainian law recognizes the notion of marriage contracts, unlike pre-nuptial agreements (“prenups”).

In contrast to prenups, establishing the property and financial rights of each spouse in case of divorce [1], marriage contracts regulate property relations of the couple from the date of marriage. In particular, pre-nuptial agreement governs relations only if the couple divorces. If the marriage is not terminated, prenup does not come into effect. On the other hand, marriage contract is one of the sources for governing spouses property relations in both cases: during their marriage or in the case of divorce.

It is worth saying that Ukrainian legislation recognizes marriage contracts concluded abroad. Such contracts are enforceable in Ukraine unless they do not contravene the mandatory rules of Ukrainian legislation.

In addition to it, marriage contracts in Ukraine have other peculiarities.

Who and when may enter into marriage contract?

Only married couples or couples that have applied to the Civil Registry Office for registration of marriage may conclude a marriage contract. In other words, it is possible to enter such agreement at any time after you have officially become a bride and a groom. However, under Ukrainian law the contract will become valid only after the official registration of marriage.

The Parties may choose Ukrainian law as the law governing their marriage contract if Ukraine is:

• lex personalis of one of the spouses;
• the state where one of the spouses has a place of habitual residence;
• the state where the immovable property is situated (the contract may cover respective immovable property).

What is the procedure of entering marriage contracts in Ukraine?

It is not too complicated to enter marriage contract in Ukraine. Both parties have to appear before a Ukrainian notary public official and sign the contract in front of him.

What issues may be and may not be addressed in the marriage contract?

1. The couple may govern only property relations.

Marriage contract deals only with property relationships and specifies the property rights and duties of the couple as the spouses or the parents. It is possible to prescribe arrangements for:

• the legal status of joint property;
• the order of property division in case of marriage dissolution;
• the legal status of separate personal property;
• the use of personal or joint residential property etc.;
• determination of the date of beginning of the co-residence period without marriage registration [2].

It is prohibited to govern nonpecuniary relations of the parties and each provision that intends to govern such relation is deemed to be invalid.

2. There is no exhaustive list of issues that may be addressed in the marriage contract.

There is a general rule for governing private legal relations, including family relations: the person may do everything that is not prohibited by the law. Enforcing this principle, the Supreme Court of Ukraine held that the parties do not have the right to govern their relations at their own discretion only in limited cases when:

• there is an expressed prohibition in civil legislative act;
• the prohibition is implied by a legislative act;
• such agreement contradicts the substance of the parties’ relations.

For instance, the marriage contract may not narrow the scope of the child’s rights established by the Family Code and it may not put one of the spouses in extremely unfavorable material situation.

In other words, the marriage contract is valid if it does not contradict the mandatory rules of the law and basic moral rules of the society [3].

3. Any property may be subject to marriage contract.

Existing or future property

The couple may agree on the fortune of the property that is already possessed by the couple or will be acquired in the future. It is not prohibited to prescribe the fortune of the house that had not been built yet.

Personal or joint property

The couple may prescribe rules for joint or personal property as well as the regime of ownership: parties may change the ownership for particular item from joint to personal and vice versa. At the same time, it is prohibited to pass ownership rights for property that must be registered, in particular immovable property. This rule leads us to the next important peculiarity.

4. The couple does not have the right to change title for registered property, but may determine legal regime of such property.

It is crucial that marriage contract under the Ukrainian law may not include provisions on changing the title for the property that is to be registered, inter alia immovable property.

For instance, you may not prescribe that “after entering this contract the car owned by John becomes the property of Maria”. On the other hand, provision “The car registered to John`s name is his personal property, but may be used by Maria” will be enforceable.

The general formula of Ukrainian legislation looks like “each spouse has equal rights for all matrimonial property without determination of precise rights for each item”. However, it is possible to agree that precise item is subject to personal ownership of one of the spouses or the spouses joint property and define the shares of each spouse in such item.  Even if in the future such person changes his mind and claims such agreement as invalid, Ukrainian courts tend to dismiss such a claim since “other decision will be in contravention to the contract”[4].

Thus, the parties may agree that precise property is the personal property of one of them despite it was bought during marriage. But it is crucial that such property must be registered at the name of the person that owns the property.

5. The marriage contract may cover the fortune of the property acquired during co-residence period prior to the marriage, if the couple has been married later.

This conclusion appears from the Ruling of the Supreme Court of Ukraine [5]. In that case the Plaintiff tried among other issues to challenge the provisions of the marriage contract about the fortune of the flat purchased during co-residence period before official marriage registration. The Supreme Court of Ukraine held that “the parties have a right to determine legal regime of property acquired during their co-residence prior to registration of marriage”.

6. The marriage contract may state the date of the beginning of co-residence period before the marriage.

The parties have the right to agree on the date that is to be considered as the start point of the co-residence. From this point all property is a joint property of the parties unless otherwise is prescribed by the marriage contract.

The Supreme Court of Ukraine held, that there are no reasons to prohibit parties to agree on the date of the beginning of their co-residence period in the contract since it does not contravene the mandatory rules of law [6].

7. The marriage contract may not place one spouse in an «extremely unfavorable material position».

«Extremely unfavorable material position» means that the question for the court is whether the spouse has been placed by a marriage contract in a position significantly less favorable than the position he or she would have enjoyed under the general rules of Ukrainian legislation. According to these rules all property obtained during the marriage is going to be divided between the spouses in equal shares 50/50.

Therefore, it is vital that provisions of a marriage contract comply with the principle that «each party eats what he/she kills», meaning that each spouse owns property acquired himself or herself during the marriage. For instance, everybody gets consideration individually from the contract which he or she is party to; assets acquired during the marriage that are subject to mandatory registration (houses, land plots, cars) are owned by the spouse on whose name these assets (movable or immovable) have been registered.

The burden of proving the extremely unfavorable material position rests on the party that claims to be in the mentioned position. The Supreme Court of Ukraine stated that this term is evaluative and must be proved by the Party that invokes it [7].

Is the marriage contract an ideal solution for governing matrimonial relations?

We outlined the main issues related to entering marriage contracts in Ukraine. This information may help you in drafting enforceable contract in the course of recent court practice. However, it is worth saying that marriage contracts are still not too widespread in Ukraine. Despite significant professional focus on marriage contracts, the last are not the best option for governing property relations between spouses. There are many reasons for it:

• moral ill-preparedness of couples to regulate pecuniary relations since it may string up relations;
• there is always a risk that the other party will file a claim with the court demanding to held marriage contract as invalid as it places this party in extremely unfavorable material position. Even if the claimant fails to prove his allegations the court proceedings may last for years.
• The notary or other authority may get information on the existence of marriage contract only after voluntary disclosure by one party.
• The marriage contract is not a document that evidences title for goods, unlike certificate of ownership or agreement on division of spouses` property;
• The marriage contract may determine spouses shares in joint property. However, for real division of property the couple needs to get court decision or enter agreement on transfer of the property from one spouse to another, that is called the agreement on property division.

We would like to consider the agreement on property division as one of the optimal solutions to govern legal relations of the spouses.

The agreement on division of spouses` property.

In the contrast to marriage contract, the agreement on division of spouses` property is a document on transferring of title. This means, that if somebody contests or disclaims your property right to some estate you may present the abovementioned agreement as the proof of your ownership. Moreover, unlike marriage contracts, it is possible to transfer the property rights for immovables under the agreement on division of spouses` property.

Why is it so? With the best will in the world notary does not have any possibility to check whether a particular person has been a party to marriage contract. The reason is that marriage contract is not registered, as well as any information from such agreement is not included into any official State Registries.

Thus, the notary may take into account the terms of the marriage contract only if the parties voluntarily inform about it. Meanwhile, the agreement on division of spouses` property as well as other agreements on transferring property title do not have any chances to be hidden from the notary and the public. All transfers of property under such agreements are reflected in the State Registries, while the agreement itself is the property title document. However, the agreement on property division could deal only with existing, but not the future property.

Thus, if you want to divide the property formally and univocally, to be sure that the property cannot be claimed by the other spouse or his successors, it is better to choose the agreement on division of spouses` property rather than marriage contract. The spouses may also opt for entering marriage contract and after that conclude the agreement on division of property.

Conclusion

Marriage contracts are recognized and enforceable under Ukrainian law. Recent court practice supports spouse’s decision for governing their relations in the way, different from the common rules. This article addressed some tips for making decision to enter marriage contract more acknowledged. On the other hand, we suggest that agreement on division of spouses` property is one of the most effective alternative ways to determine spouse’s pecuniary relations if the parties are looking for some ultimate decision.

Notes:

1. Prenuptial Agreements, available at: http://family.findlaw.com/marriage/prenuptial-agreements.html
2. The Supreme Court of Ukraine, the Ruling dated 28 January 2015, No. 6-230цс14за, Verdictum database
3. The Ruling, supra note 2.
4. The Appeal Court of Kyiv, the Order dated 04 March 2015, No. 22-ц/796/3320/2015, Verdictum database (upheld by the Ruling of High Court for Civil and Criminal issues dated 18 May 2015)
5. The Ruling, supra note 2.
6. The Ruling, supra note 2.
7. The Ruling, supra note 2.

Irina Moroz, Partner at AGA Partners,
Olga Kuchmiienko, Associate at AGA Partners

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Phantom Arbitral Institution: Lessons from Iran

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Iran. The country with enormous trade potential and a juicy market for many foreign companies around the globe. Following partial lifting of sanctions in Iran, it is expected that more and more businesses from different industries will enter the Iranian market. Needless to say, along with the development of international trade in Iran more disputes and arbitrations involving Iranian companies will emerge.

In the meantime, the author of this post has already faced the case where the arbitration clause with Iran-based company provided for arbitration at the non-existent Iranian arbitral institution. This case is a good illustration of what problems and dilemmas arise when the parties agree on such a pathological clause.

Arbitrating or litigating?

Imagine you are instructed to bring a claim. You look at the relevant arbitration clause in the contract, but you realize that it refers to a non-existent Iranian arbitral institution. What are your first thoughts? – One of the first questions that crosses the lawyer’s mind is whether this clause is enforceable. In simpler terms, the question is whether to arbitrate or litigate.

The positions of Iranian lawyers in this respect differ significantly. Some lawyers think that such an arbitration clause is unenforceable in Iran. According to them, provided the parties do not agree on another arbitral institution, they are left with no other choice than to litigate. On the other extreme, there are practitioners who believe that the parties should arbitrate in existent Iranian arbitral institutions. There are also Iranian lawyers who do not conclude whether the clause is valid or not, but who, nevertheless, advice to resort to litigation.

It can be said that the practice in many countries points towards arbitration since there are plenty of cases where arbitration clauses that refer to non-existent arbitral institutions were enforced. For instance, in the case HKL Group Co Ltd v Rizq International Holdings Pte Ltd [2013] SGHCR 5 the arbitration clause referred to the non-existent “Arbitration Committee at Singapore under the rules of The International Chamber of Commerce” (paras. 1-2). Despite the absence of this arbitral institution, Singapore High Court stayed court proceedings in favour of arbitration on

“[…] the condition that parties obtain the agreement of the SIAC or any other arbitral institution in Singapore to conduct a hybrid arbitration applying the ICC rules, with liberty to apply should they fail to secure any such agreement.” (para. 37).

Judge Jordan Tan AR has explained the enforceability of the arbitration clause by referring to the following reasons (para. 27):

“[f]irst, it clearly evinces the intention of the parties to resolve any dispute by arbitration. Second, it provides for mandatory consequences in that if a dispute arises, the matter has to be referred to arbitration. Third, it states the place of the arbitration, namely, Singapore. Fourth, it provides that the arbitration is to be governed by a particular set of rules, namely, the ICC rules.”

In contrast with the Singapore case, the arbitration clause in the case at hand does not specify seat of arbitration. The fact that the parties agreed on a non-existent Iranian arbitral institution does not mean that they have selected Iran as the place of arbitration. This is because the choice of the arbitral institution cannot be regarded as the choice of the seat. However, the arbitration clause is enforceable because it clearly records parties’ intention to arbitrate. This intention is not prejudiced by the mere fact that the selected arbitral institution does not actually exist. This is the main argument in favour of commencing arbitral rather than court proceedings. Undoubtedly, enforceability of such arbitration clauses is in full conformity with the pro-arbitration spirit of the New York Convention.

Even though the pro-arbitration practice with regard to such arbitration clause is far more evident, you are still exposed to the certain risks. On the one hand, if you choose arbitrating, there is always a risk that you will fail in your attempt to commence arbitral proceedings. On the other hand, you definitely run a risk that the court will stay proceedings in case you decide to litigate. This situation plainly causes much uncertainty. Is that a threat to the claimant’s right to a fair trial? – It is not the question of who to blame for such an uncertainty, but rather the issue (along with the main question of the enforceability of the arbitration clause) for the arbitrator’s or for the judge’s (as the case may be) attention.

Which arbitral institution?

Reference to a non-existent arbitral institution creates not only a dilemma whether to initiate court or arbitral proceedings. The next important issue is the arbitral institution which shall substitute the non-existent one. Of course, there will be no problem if the parties select the existent arbitral institution by mutual agreement. But obviously, that is highly unlikely scenario after the dispute has arisen.

One may suggest that the parties’ intentions were to arbitrate at the Iranian arbitral institution. Therefore, it should be the existent Iranian arbitral institution: either the Arbitration Center of the Iran Chamber of Commerce or the Tehran Regional Arbitration Centre. However, given the absence of the choice of the seat of arbitration, it may also be argued that possible options are not restricted only to Iranian arbitral institutions. But what shall the claimant do in such a situation? File a claim in any arbitral institution in any country of the world hoping that it will hear the case?

Ideally, the claimant should select the arbitral institution which will most likely accept its jurisdiction. The problem is how to identify this arbitral institution. First of all, the potential claimant should look for the arbitral institution(s) that is the most closely connected with the case or the arbitration agreement. Once the claimant has identified such an arbitral institution, he should then conduct a proper investigation in order to find out (through relevant practice and the case law) whether it has previously accepted jurisdiction to hear the dispute under similar circumstances and whether it has pro-arbitration approach. Indeed, in Iran the advice should be sought from local lawyers who should assess the prospects of commencement of arbitration there.

First step: court or the arbitral tribunal?

Even if you decide to go to arbitration in Iran and determine the particular arbitral institution, you still have the issue of whether to go to the Iranian court for the appointment of the tribunal or directly submit the dispute to arbitration. In practical terms going to the national court would be an unreasonable waste of time with unpredictable result. For this reason, it is better to have recourse to arbitration directly. Especially, given that arbitral tribunal has a power to rule on its own jurisdiction. But this issue is something that Iranian lawyers also do not have a common opinion on.

Conclusion

Arbitration agreement that refers to a non-existent arbitral institution is always a headache for potential claimants and a room for maneuvers for potential respondent. It creates a number of dilemmas that need to be resolved prior to bringing the case. Iran – is not an exceptional jurisdiction when it comes to solving those dilemmas there, especially given controversial views regarding such arbitration agreements among local lawyers. However, you cannot have a 100% correct recipe for dealing with the issues such arbitration clauses cause. It is very much a matter of the strength of your arguments that the parties’ intention to arbitrate is maintained despite the absence of contractually agreed forum and the pro-arbitration views of the court seized or of the arbitral tribunal (as the case may be). The story in Iran is not over yet. It remains to be seen how it will develop…

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