Investment Arbitration and Constitutional Law Constraints in Iran: An Examination of the Impact of Articles 139, 77, 125, and 81 on the Design of Arbitration Clauses and Protective Enforcement Mechanisms

Abstract

International investment arbitration is regarded as one of the most important mechanisms for protecting foreign investors and ensuring legal certainty for investment in international economic relations. However, within the Iranian legal system, the acceptance and enforcement of obligations arising from investment arbitration are subject to constitutional limitations and considerations. Articles 139, 77, 125, and 81 of the Constitution are among the most significant provisions that may affect the conclusion of investment agreements, the drafting of arbitration clauses, and the implementation of the State’s international obligations. In this context, ambiguity concerning the scope of Article 139 with respect to the referral to arbitration of disputes involving public and state property, the requirement for parliamentary approval of certain international agreements under Articles 77 and 125, and the restrictions arising from Article 81 concerning the granting of concessions to foreign nationals constitute some of the most significant legal challenges facing Iran’s foreign investment protection regime. The present study aims to examine the impact of these constitutional provisions on investment arbitration and the related protective enforcement mechanisms. It seeks to answer the question of the extent to which the obstacles and limitations arising from Iranian constitutional law affect the validity, design, and enforcement of investment arbitration clauses and how a balance may be established between constitutional requirements and the imperatives of attracting foreign investment. This research employs a descriptive-analytical method and draws upon library-based sources, domestic legislation, judicial decisions, interpretative opinions, and relevant international instruments. The findings indicate that although the Constitution of the Islamic Republic of Iran does not impose an absolute prohibition on the acceptance of investment arbitration, interpretative ambiguities and divergent understandings of the aforementioned constitutional provisions reduce legal predictability and increase investment risk. The findings further demonstrate that the precise drafting of arbitration clauses, the distinction between the stage of concluding an agreement and the stage of referring a dispute to arbitration, and the enactment of clear legislation governing the implementation of constitutional provisions can play an effective role in strengthening foreign investment protection and mitigating existing legal challenges.