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Debt Collection in Iran

2021/06/22 15:56 (GMT)

1. Source of Monetary Liabilities in Iran

Dividing liabilities to Contractual and Non-Contractual is one of the well-known and classic liability classifications. This classification is based on the liability source which can be a contract or a tort.

Contracts: contract is usually defined as an agreement between public or private parties creating mutual obligations enforceable by law. Contract is one of the specified legal actions in Iranian Law which can be a source of monetary liability. If a contract includes monetary obligations and one or both of the parties do not respect their obligations regarding payment of their debts in due time, debt collection should be considered. Commercial contracts almost always result in monetary liability, therefore, debt collection procedure under the title of dispute resolution clause is usually determined by such contracts.

Civil Liability (Tort): Tort is a liability that arises from an act or omission that gives rise to injury or harm to another and amounts to a civil wrong for which courts impose liability. The primary aims of tort law are to provide relief to injured parties for harms caused by others, to impose liability on parties responsible for the harm, and to deter others from committing harmful acts. Torts can shift the burden of loss from the injured party to the party who is at fault or better suited to bear the burden of the loss. Typically, a party seeking redress through tort law will ask for damages in the form of monetary compensation. Less common remedies include injunction and restitution.

2. Measures You Can Take to Collect a Debt in Iran

According to what has been said in the previous section, Debts can be rooted in a contract or a tort. Depending on its source, one or more debt collection measures can be taken which range from ADR methods to litigation.

A. Debts that raised from a contractual relationship:

Negotiation: One of the very first ADR methods that can be used to settle a debt is negotiation. Using this method can be agreed upon during a contract conclusion or after that. In this method, parties try to reach a common solution through interactive dialogue and reciprocal accreditation. This is the most cost-effective solution and sometimes with a little discount, you can collect your money and also maintain your future business relationship with your clients.

Arbitration: Arbitration is a non-judicial process for the settlement of disputes where an independent third party - an arbitrator - makes a decision that is binding. The role of an arbitrator is similar to that of a judge, though the procedures can be less formal and an arbitrator is usually an expert in the referred dispute. Using arbitration becoming increasingly popular in contracts concluded in Iran.

Litigation: Litigation is the last resort for collecting your debts in Iran and there is no need to specify it in a contract as it is recognized public right in Iran to refer a claim to public court. Based on the "Iranian Civil Act", every foreign national enjoys the rights that an Iranian has unless it is exempted by law. Since every Iranian has the right of litigation, every foreign national whose government is recognized by Iran's government has the right of litigation as well.

B. Debts that raised from a tort (civil liability):

Since there is no contractual relationship between the parties in a tort, using ADR methods is subject to agreement of both parties which is difficult to reach. However, it is recommended to request for negotiation or arbitration to collect such debts as they save your time and money. Based on articles 454,455 and 496 of the Iranian Civil Procedures Act, arbitrators can decide if there is a civil liability and also make a decision about debt collection (if he/she is permitted to do so according to the arbitration agreement).On the other hand, the most common measure that is often taken by a creditor in a tort base debt collection procedure is litigation. This is mainly because there is no contract between the parties and the public court is the only tribunal that can force the debtor to pay his/her debts.

3, Can I Use Emails and other Electronic Communications to Prove a Debt?

If the structure of electronic communication is compatible with "Electronic Commerce Act of Iran", it will certainly considered as an evidence and can be used in a debt collection procedure.

Article 14 of "Electronic Commerce Act of Iran" states that: “All “data messages” which have been generated and stored via secure method are deemed to be valid and reliable documents by judicial or legal authorities in terms of what they contain as well as included signature therein, obligations of both parties or the party who covenants and all persons who act legally on their behalf, and effecting the terms and conditions contained therein”.

Article 16 of the Act also says: “Any “data message” recorded and retained by a third party in accordance with the provisions of … this Law, is deemed valid”

It can be concluded from the above-mentioned rules and common practice that emails are usually considered as valid evidence for proving a debt. Communications in other messengers such as WhatsApp and Telegram can also be used as evidence and in case of doubt in validity of electronic data, and expert determination will be used.

4.How Can a Lawyer Help you in Debt Collection?

You might have already tried your best to collect your money by keep calling or sending emails to the debtor, but still there is no sign of success. You may also wonder what else a lawyer can do for you to collect your money. Below are the main reasons for engaging a lawyer to help you during this process:

(I) A lawyer can help come up with strategies to get back money that you’ve loaned out. This is also a fact that when a lawyer calls a debtor, the debtor will take the issue more seriously and it would be easier to negotiate or convince the debtor to pay your money.

(ii) Since lawyers are aware of the legal steps and the consequences of nonpayment of a debt, they are better negotiators. In an appropriate time, lawyers would be able to threaten the debtor by elaborating the consequences of nonpayment of the debt and make a breakthrough in the collection of the debt.

(iii)When the time comes and file a case in a court is required to collect a debt, lawyers can present you in a competent court and also take care of all paperwork. An official warning notice can also be sent to the debtor by a lawyer before starting litigation.

Written by: ESK Law Firm Team