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Most of the time, international commercial contracts involve
two or more national laws (depending on contracting parties,
place of enforcement, etc), which may conflict each other and
cause many problems. Therefore, in order to avoid such
problems, contracting parties, agree on determination of a
substantive law (governing their contractual rights and
obligations), which may be a national law or an International
one (e.g. “Principles of International Commercial Contracts”
codified by UNIDROIT); The same stands for dispute resolution
system. In other words, since contracting parties do not know
(and perhaps do not trust) the national courts of the other
party, and they are reluctant to go to foreign courts, they
agree on arbitration in order to avoid overlapping
jurisdictions and also costs associated to court proceedings.
However such an agreement/clause may be against an imperative
rule of the national law of either party, in which case many
difficulties may arise in enforcement of the contract,
particularly if the contract or an arbitral award has to be
enforced in their respective country.
Therefore, international contracts should be drafted with a
view to the relevant law of the country of both contracting
party, in order to avoid difficulties that may raise as a
result of inconsistency between determination of applicable
law by the parties as well as dispute resolution clause, and
the national law of either party, in which case the failing
party may bar an enforcement action against them.
If you are going to sign an international contract with an
Iranian party, consult us in order to make sure that your
contract is compatible with relevant Iranian laws and
regulations; we review your contracts and give you our
professional views
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