Legal Challenges of Russian Investors in Iran
In this article, we will discuss the legal challenges of Russian investors in Iran. Despite the international sanctions and political pressure, Iranian and Russian companies have a significant connection chiefly in the areas of energy, defense, technology, and transportation. However, it is mentioned that the bond between the two countries has not been without some challenges over diverse matters, such as oil prices, but both countries try to hold on to this connection. Iran and Russia have cooperated in various projects, including the energy sector. Zarubezhneft, Gazprom Neft, and Rosneft are some of the Russian companies working in Iran’s energy sector. These companies have been working in Iran through the exploration and production of oil, development of gas fields, and also buying crude oil from Iran.
Russian companies are also active in defense sectors, involved in selling military equipment to Iran. A company named Rostec is the developer, producer, and exporter of high-tech military use products, which has provided Iran with several military equipment.
Differences between Iranian and Russian commercial law
The legal systems of Iran and Russia are different. While Iran’s legal system is based on Islamic law and civil law, Russia’s legal system is based on civil law, which includes codified laws and general rules that must be consistent with the codes.
Iranian commercial law
Iran’s commercial law consists of commercial law, industrial property law, copyright law, and advertising law. The commercial law of Iran is founded on the principles of the civil law system. It regulates all aspects of commercial transactions, encompassing contracts, sales, negotiable instruments, agency, partnership, bankruptcy, and arbitration. The Iranian Commercial Code serves as the principal legal authority for commercial law in Iran.
The Industrial Property Law of Iran offers safeguards for intellectual property rights, including patents, trademarks, industrial designs, and trade secrets.The Iranian Patent Office holds the responsibility of granting patents and trademarks within the territory of Iran.
Iran’s Copyright Law provides legal protection for various forms of intellectual property, including literary, artistic, and scientific works. This protection is granted to the creators of such works and enables them to control and benefit from their creations.
The Advertising Law of Iran governs all aspects of advertising, encompassing advertisement content, the utilization of trademarks and logos in advertisements, and advertisement placement.
Russian commercial law
In Russia, commercial law includes laws on industrial property, copyright protection, and competition law. In Russia, the legal framework for industrial property covers various aspects such as patents, trademarks, industrial designs, and geographical indications.
The Patent Law of the Russian Federation is responsible for regulating the issuance, utilization, and safeguarding of patents.
The Trademark Law of the Russian Federation governs the registration and protection of trademarks. Additionally, the Law on Industrial Designs provides protection to designers and inventors of industrial designs. The regulation of copyright protection in Russia is governed by the Civil Code of the Russian Federation and other relevant laws.
The Copyright Law of the Russian Federation explicitly outlines that copyright applies to literary, artistic, and scientific works, computer programs, and databases. Additionally, the law defines the rights of authors and their heirs, as well as the duration of protection. Competition law in the Russian Federation has the objective of promoting fair competition and preventing monopolistic practices.
The Federal Law on Protection of Competition sets forth regulations for market participants to ensure fair competition. The enforcement of competition law in Russia is the responsibility of the Federal Antimonopoly Service (FAS).
Similarities between Iranian and Russian commercial law
Both Iran and Russia have a comparable trade law in place, which regulates commercial activities and provides businesses with guidelines to follow. The Commercial Code is the term used for trade law in Iran, while in Russia, it is referred to as the Trade Law. The similarity between the two countries lies in their adoption of similar legal frameworks for trade regulation. Contract formation based on commercial law in Iran and Russia requires an offer and acceptance in a clear and unambiguous way. Contracts can be concluded either in writing or orally but certain types of contracts must be concluded in writing. It is essential that both parties have the legal capacity to enter into a contract, and the object of the contract must be lawful and possible. These contracts are considered legally binding and enforceable in court.
Iran and Russia share a similarity in their utilization of international agreements to safeguard intellectual property rights. As an illustration, both countries are affiliated with the World Intellectual Property Organization (WIPO) and have entered into international treaties such as the Paris Convention for the Protection of Industrial Property and the Berne Convention for the Protection of Literary and Artistic Works.
Both countries’ legal systems prioritize local businesses over foreign ones. This is recognizable in some foreign investment cases that they have to provide certain licenses for doing business in these countries.
Legal Challenges for Russian businessmen entering Iran’s Market
Russian businessmen face several legal challenges entering Iran’s market due to the differences between Russia’s and Iran’s legal system, which is partly based on Islamic law and has severe regulations on foreign investment and business activities. Also, the lack of transparency in related legal regulations and incompetence of judicial procedures have caused troubles in attracting foreign investments.
The US sanctions regime is another significant problem that restricts investment and trade with Iranian companies. The risk of secondary sanctions, which target non-US persons or companies that do business with Iran is one of the issues faced by Russian investors. Due to the sanctions, financial services are interrupted and many banks are reluctant to do business with Iran and taking the risk of US sanctions. Also, the sanctions imposed on Iran, target various sectors, including banking, oil, and gas. Consequently, finding profitable investment opportunities is difficult.
Special concessions for Russian Investors in Iran
Iran has taken several steps to support Russian Investors in the country. The Foreign Investment Promotion and Protection Act (FIPPA) stands out as a significant measure for foreign investors looking to invest in Iran, which establishes a framework providing foreign investors with provisions for the protection of their investments, guarantees against nationalization or expropriation, and established mechanisms for dispute resolution.
The government has implemented various policies and regulations to attract foreign investors, comprising of tax exemptions, waivers on customs duty, simplified procedures for obtaining business licenses, respecting national treatment and equality of foreign investors with Iranian investors, and providing protective coverage to all foreign investment methods. Iran has implemented a significant initiative to promote foreign investments, which involves the creation of Special Economic Zones (SEZ). These zones provide various benefits such as tax exemptions, duty-free imports and streamlined regulatory process to attract foreign investment. Iran has established free trade zones (FTE) that offer similar advantages to foreign investors, besides the Special Economic Zones.
Special concessions for Russian investors in Iran
Iran and Russia have attempted to enhance their economic cooperation by signing multiple agreements, which cover a diverse range of sectors. One example of such an agreement is the “Green Corridor” agreement signed in 2015. The purpose of this agreement is to facilitate the transit of goods between the two countries by minimizing customs formalities and simplifying procedures. Another agreement signed in 2017 is the “North-South” transport corridor, which seeks to establish a transportation network of railways, roads, and ports connecting Russia, Iran, and India.
Also, the two countries have signed an agreement on encouragement and mutual support of investment between the Government of the Islamic Republic of Iran and the Government of the Russian Federation. This bilateral agreement governs the investment activities between the two countries, however, it mostly does not provide a special privilege for these nations’ investors.
How the judicial agreement between Iran and Russia could help investors
The judicial agreement between Iran and Russia can ease commercial activities by providing a legal framework for businesses to operate within. The agreement, signed in 2015, aims to increase cooperation between the two countries in various fields, including trade and commerce.
One of the key benefits of the agreement is that it provides a mechanism for resolving disputes between Iranian and Russian businesses. This is particularly important given the complex legal landscape in both countries. By establishing a clear set of rules for resolving disputes, the agreement can help to reduce uncertainty and encourage investment.
Another way in which the agreement can ease commercial activities is by providing a framework for the recognition and enforcement of judgments. Under the agreement, judgments made in one country will be recognized and enforced in the other. This can help to ensure that businesses are able to recover debts and enforce contracts across borders.
In addition to these benefits, the agreement also includes provisions aimed at promoting investment and protecting intellectual property rights. For example, the agreement provides for the mutual protection of trademarks, patents, and copyrights.
Overall, the judicial agreement between Iran and Russia has the potential to significantly ease commercial activities between the two countries by providing a clear legal framework for businesses to operate within. By reducing uncertainty and promoting investment, the agreement can help to strengthen economic ties between Iran and Russia.
Please do not hesitate to contact Iran Best Lawyer if you have any legal inquiries concerning business activities between Iran and Russia.
