Iran's commercial code reform invites turmoil
The Iranian parliament's rush job on approving hundreds of articles of a bill designed to reform the commercial code will lead to unconsidered consequences.
After years of delay, Iran’s parliament suddenly approved 331 articles of the first book of a massive trade reform bill in just one week in mid-September. This came as a surprise to many economic and legal analysts and raised concerns about the fate of the remaining four commercial code books awaiting lawmakers' final verdict.
To highlight some major disadvantages of the bill, it is fairly argued that it's fraught with myriad ambiguous terms that are open to misinterpretation and prone to conflict with the country's business procedures. Among these ambiguities is the bill's introduction and application of common law, which often uses references to precedents rather than strictly statutes. That hasn't been the case in the current commercial code of Iran.
Implementation of common law requires specific mechanisms and conditions that ought to be defined in plain words for judges who might otherwise not be well-versed in business terminology and procedure. Additionally, critics say the bill's complexity and ambiguity could increase the judiciary's authority. Since judges are not fully aware of all the mechanisms related to corporate law, applying common law concepts in settling conflicts would most probably complicate the legal procedures.
At a panel discussion regarding ratification of the trade bill in parliament, Gholam Hossein Davani, a member of Iran's Supreme Council of Chartered Accountants, reiterated the judiciary's inadequacy in reviewing business-related cases. He noted that he had witnessed tribunals on business crimes where the judges weren't aware of the meaning of even basic financial terms such as annual general meetings or consolidated financial statements.
