Article 139 of the Constitution of the I.R. of Iran in light of International Arbitral Decisions and Iran’s Reservations to Investment Treaties

The idea of protecting the public interest by incorporating specific provisions in private contracts or in international treaties has been accepted in some legal systems. The provision of Article 139 of the Constitution of the I.R. of Iran concerning settlement or arbitration of public or state property is one such requirement. The international arbitration practice of the last forty years indicates, that except in cases where observance of article 139 is stipulated in the contract, arbitral tribunals have been reluctant to apply its limitations. Explicit or implicit references to the necessity of observing article 139 of the Constitution in the documents of ratification of bilateral investment treaties are a form of unilateral reservation by one party to the treaty. In the absence of stipulation as to the need for obtaining the authorization of article 139 in the text of the treaty, the principle of respect for the integrity of the bilateral treaty is applicable. Accordingly, it is feared that the unsuccessful experience of invocation by Iranian public law entities of the objections based on Article 139 in previous international commercial arbitration cases would be repeated in the field of investment arbitration in the future.