Jurisdiction - Australia
Australia – Iran’s Markets Opening Up For State.

14 May, 2015


Bishop’s Tehran Visit A Sign Of Things To Come


Julie Bishop’s recent visit to Iran – the first by an Australian foreign minister in over a decade – marks an important step in the development of relations between the two countries.

Coming just a few weeks after the signing of the nuclear framework agreement between Iran and the P5+1, Bishop’s Tehran trip suggests there is mutual interest in expanding cooperation in different areas, with Iranian officials also invited to visit Australia as soon as possible.


Australia currently imposes a range of sanctions on Iran to implement United Nations Security Council and Australian autonomous sanctions. Of particular relevance to businesses, there are:


  • sanctions restricting certain types of exports, imports, services and commercial transactions involving Iran – targeted sectors include equipment and technology for the oil and gas industry and the petrochemical industry;
  • targeted financial sanctions against designated persons and entities listed for Iran – these sanctions prohibit doing business with a designated person or entity (including indirectly providing a benefit to a designated person or entity, so adequate supply chain screening is important); and
  • financial countermeasures under anti money-laundering laws (AML) – the financial countermeasures prohibit a reporting entity under the AML (for example, a bank handing funds from a sale transaction) being a party to a transaction for AUD 20k or more with a party located or incorporated in Iran.


The sanctioned conduct can be undertaken if a permit is obtained from the Department of Foreign Affairs and Trade. Whether a permit is viable differs between the types of sanctions. If looking to do business with Iran, a business should give itself sufficient time to work through the potential application of Australian sanctions to all parties involved in the transaction and, if applicable, obtaining a permit. Depending on the parties involved, the potential application of other sanctions regimes may also need to be assessed as well as Iranian government requirements.

Opportunities For Investment

At just USD 330m a year, trade between Iran and Australia has been limited to date, but with the gradual lifting of economic sanctions likely to follow a final nuclear deal in June, experts now believe that the market for Australian companies in Iran is wide open. If Bishop’s visit is anything to go by, Australia has recognised the need to get in early and is acting swiftly. This is likely to expand trade ties between the two countries beyond carpets and wheat.

Iran, home to the second largest natural gas reserves and the fourth largest oil reserves, represents an enormous investment opportunity for Australia. Experts believe that there could be a burgeoning Australian-Iranian investment relationship in respect of energy and resources in hydrocarbons, mineral extraction and agriculture, as well as in IP and IT, particularly in nanotechnology. For example, reports suggest that Iran has already listed patents in chemical free technologies for food crops to assist Australian farmers.
Other ideas for investment that have been touted include Australian-Iranian cooperation in gas markets to increase energy efficiency through regional pricing benchmarks which could help develop new Asian markets in gas swaps.


Renewable Energy Markets

One particular area which has significant potential is Iran’s renewable energy market. Experts believe it is an “area of truly untapped potential and value” for both Australia and Iran’s economies, with clear opportunities in solar, wind and hydro technologies. Like Australia, Iran has a unique geographical position as the only country bordering both the Persian Gulf and the Caspian Sea. Iran has strong solar energy potential throughout the country, vast amounts of wind and hydro capabilities and a significant interest in becoming a major geothermal energy producer.

With Iran announcing plans to expand its renewable infrastructure, including 5,000MW of wind and solar power capacity by 2018, there are clear opportunities for cooperation between Australia and Iran in the area of renewable energy.

Legal Framework For Foreign Investment In Iran

With sanctions against Iran potentially being reduced, attention will turn to Iran’s legal system, particularly in respect of foreign investment.

Iran: An Overview

Iran’s legal system is a blend of a civil and Islamic law components. The local currency is the Iranian Rial.

The Iranian Commercial Code deals with commercial activities, trading, instruments for investment, contracts and bankruptcy.

Foreign Investment – Regulations And Government Policy

Foreign investment in Iran is encouraged through their Foreign Investment Promotion and Protection Act 2002 (FIPPA) and its implementing regulations. Iran’s Foreign Investment Board of the Organization for Investment, Economic and Technical Assistance of Iran (OIETAI) is responsible for approval of foreign investment in Iran.

Rather than limit foreign capital, FIPPA offers foreign investors certain privileges and incentives to invest in Iran.

Some key features of FIPPA include the following:


  • Foreign investment is generally permissible in all sectors of the economy with little restrictions on the scope of activities (provided that they comply with FIPPA and municipal laws);
  • Foreign investors are defined as Iranian (including expatriates) and Non-Iranian (natural and legal) persons utilising foreign capital (with the necessary investment licenses from OIETAI);
  • Subject to certain conditions, there are generally no restrictions on the percentage of foreign shareholding under FIPPA (compared with a 49% foreign capital limitation for Iranian companies);
  • two major types of investments (foreign direct investment and non-equity based contractual arrangements) are permissible, with equity and debt investments (including build-operate-transfer schemes) available for both;
  • Repatriation of all gains permitted and protected in foreign currencies; and
  • Limitations on how long OIETAI can take to assess foreign investment applications.


Forms Of Business Organisation

The Iranian Commercial Code specifies the different legal entities that can be used by foreign investors to invest in Iran.

Private Joint Stock Companies, which are defined under the Iranian Commercial Code as companies whose capital is divided into shares and the liability of whose shareholders is limited to the par value of the shares respectively held by them, are generally recommended for foreign investors in Iran. They have specific requirements, such as the need for at least three members, and at least one million Iranian Rials at the time of formation in share capital.


Foreign investors in Iran are subject to the same privileges and protections offered to Iranian nationals. However, some additional exemptions are offered for certain sectors of foreign investment.


Free Trade And Special Economic Zones

Since the 1970s, Iran has set up various free trade and special economic zones to offer incentives for foreign investment. Some of the advantages of these zones include:


  • no limitations in foreign ownership;
  • no entry visa requirements for foreign nationals;
  • a recently extended 20 years’ tax exemption for foreign entities within Free Trade Zones; and
  • employment and labour regulation advantages for businesses.



In the event of disputes, FIPPA provides various dispute resolution mechanisms for foreign investors.

Iran is a signatory to international standards of arbitration through the New York Arbitration Convention, and provides for resolution of disputes through arbitral institutions such as the Tehran Regional Arbitration Centre.


Baker McKenzie


For further information, please contact:


Christopher Saxon, Partner, Baker & McKenzie

[email protected]


Sean Duffy, Partner, Baker & McKenzie

[email protected]


Anne Petterd, Partner, Baker & McKenzie

[email protected]


Jahan Navidi,  Partner, Baker & McKenzie

[email protected]


Baker & McKenzie International Trade Practice Profile in Australia


Homegrown International Trade Law Firms in Australia


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