J. Nouraei & M. Mostafavi Law Offices – 5 May 2025-Tehran-The “Law on Referring Disputes between the Central Bank of the Islamic Republic of Iran and the Government of South Korea,” which was published in the Official Gazette on 17/1/1404 (30 April 2025) and will enter into force after fifteen days, appears to be Iran’s long-awaited formal contractual solution to release and receive its frozen claims, plus damages, from its trading partner, South Korea. The funds generated from selling oil and petrochemical products in the past to South Korea were blocked under International sanctions.
The Iranian government submitted this law to the Islamic Consultative Assembly (Parliament) in the form of a bill nearly two years ago. According to Article 139 of the “Constitution of the Islamic Republic of Iran,” “The settlement of claims regarding public and state property or its referral to arbitration in any case shall be subject to the approval of the Council of Ministers and shall be notified to the Parliament. In cases where the party to the claim is foreign, and in important domestic cases, it shall also be subject to the approval of the Parliament. Important matters shall be determined by law.”
The text of the approved law is as follows:
Single Article – The Central Bank of the Islamic Republic of Iran is authorized to implement Article (12) of the Agreement on Promotion and Protection of Investment between the Government of the Islamic Republic of Iran and the Government of the Republic of Korea, approved on 13/7/2003( ) in cooperation with the Legal Deputy of the President, and proceed with the arbitration process by the aforementioned Agreement regarding the pursuit and claim of legal claims and damages from the government and banks of the said country.
When the Iranian former President submitted the bill to the Parliament for approval, Mehdi Darabi, Director of the Monetary and Banking Group of the Parliament’s Researches Center, wrote: “In recent years and after the intensification of sanctions, the use of foreign exchange resources obtained from oil exports by banks of various countries has faced restrictions, of which the restriction on the use of foreign exchange resources available in South Korea is one of its examples. According to the Governor of the Central Bank report, approximately $7 billion of the country’s foreign exchange resources were seized in the late 1390s ( )in the form of South Korean Won in the banks of that country. On the one hand, no interest was accrued on the deposits of the Central Bank, and on the other hand, due to the depreciation of the South Korean national currency in recent years, nearly $1 billion from the dollar value of these foreign exchange resources has been deducted. During negotiations held in the first half of this year, these foreign exchange resources were deposited into Qatari bank accounts for the import of non-sanctioned goods such as basic items, medicines, and medical equipment. With the cooperation of European banks, these resources were converted from South Korean Won to euros, and finally, the equivalent of 5 billion 573 million 492 thousand euros was made available to the Central Bank. Although the aforementioned foreign exchange resources have been made available, the loss due to the depreciation of the South Korean Won has been significant”.
(Copyrighted. Re-publication and usage wholly or partially allowed upon naming the source J. Nouraei & M. Mostafavi Law Offices).
