Dual Citizenship Legal Risks in Iran
Agency Contract in Iran foreign companies looking to expand into Iran often seek local partners to represent their goods or services. One of the most common legal tools for this purpose is the agency contract. But what is an agency contract in Iran, and how can you make sure it serves your interests under local laws?
This guide explains the key legal framework, risks, and steps involved in establishing an agency relationship in Iran, offering clear insight for international businesses looking to navigate the Iranian market..in mjklawfirm
What Is an Agency Contract in Iran?
Agency Contract in Iran under Iranian law, an agency contract is a legal arrangement where one party (the principal) authorizes another party (the agent) to act on their behalf in performing certain tasks — often commercial — within specified limits.
Legal Basis
The concept of agency is governed primarily by:
- Iranian Civil Code: General principles of agency
- Commercial Code (esp. Articles on commercial representation and brokers)
- Specific Laws and Sectoral Regulations (e.g., for pharmaceuticals, insurance, or foreign trade)
While there is no distinct “Agency Law” in Iran, these combined sources define the scope and limitations of agency relationships.
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Types of Agency Relationships
1. General Agency vs. Special Agency
- General Agency allows the agent to perform various tasks on behalf of the principal.
- Special Agency restricts the agent to specific actions, such as signing contracts or receiving payments.
2. Disclosed vs. Undisclosed Agency
- In disclosed agencies, third parties know the agent represents the principal.
In undisclosed relationships, the agent acts in their own name, which creates different liabilities under Iranian law.
Why You Need a Written Contract
A well-written agency contract provides essential clarity and legal protection for both parties.
A well-drafted contract should include:
- Scope of representation
- Territory and exclusivity
- Term and termination clauses
- Compensation and commission structure
- Compliance with Iranian law and export-import regulations
- Dispute resolution method (e.g., Iranian courts or arbitration, etc.)
❗ Note: In Iran, exclusive agency contracts may require registration with the Ministry of Industry, Mine and Trade, or relevant chambers, especially in regulated industries.
Due Diligence: Choosing the Right Iranian Agent
Selecting a reputable and competent agent is critical. Foreign companies should conduct thorough due diligence by:
- Reviewing the agent’s commercial registration
- Checking prior contracts with other foreign principals
- Evaluating experience in your industry
- Confirming there are no conflicts of interest
An Iranian lawyer for international companies can assist in agent background checks and drafting proper legal documentation.
Common Mistakes Foreign Companies Make
Relying on informal agreements
Without a clear written contract, disputes over commissions, territories, or duration become difficult to resolve.
Ignoring local regulations
Certain industries (like pharma, telecom, or oil & gas) require agents to hold specific licenses or approvals.
Improper dispute resolution clauses
Clauses requiring foreign arbitration may not always be enforceable in Iran. An international lawyer can advise on practical enforcement.
Tax and customs oversight
Iranian tax authorities may scrutinize commissions and cross-border payments even if the agent is not an employee.
Regulatory and Legal Requirements
Registration and Licensing
Depending on the type of goods or services, your Iranian agent may need:
- A valid business license
- Commercial ID and tax number
- Import license (if handling imported goods)
Foreign Principal Obligations
- Declare and register the agency (if required)
- Report commissions and payments for transparency
- Ensure compliance with US/EU sanctions to avoid secondary liability
Agency vs. Distribution Contracts in Iran
An agency contract is often confused with a distribution contract. The main differences:
| Feature | Agency Contract | Distribution Contract |
| Legal Role | Agent represents principal | Distributor buys and resells |
| Ownership of Goods | Principal retains ownership until sold | Distributor owns goods upon delivery |
| Liability | Principal often liable for agent’s acts | Distributor assumes independent liability |
| Regulatory Exposure | Higher for principals in agency relationships | Lower regulatory oversight for distributors |
Choosing the right structure depends on your business strategy, regulatory burden, and risk appetite.
Dispute Resolution and Termination
Termination Rights
Agency contracts in Iran can be terminated:
- By mutual agreement
- By expiration of the contract
- For breach or misconduct
- By unilateral termination, if permitted in the contract or law
Post-Termination Obligations
- Payment of pending commissions
- Return of goods or confidential information
- Non-compete clauses (if enforceable)
Dispute Forums
International arbitration (only enforceable if conditions of the New York Convention, to which Iran is a party, are met)
Iranian Courts (default jurisdiction)
Arbitration (must be expressly stated in the contract)
How MJK Law Firm Can Help
MJK Law Firm advises international companies entering into agency contracts in Iran across diverse sectors — from technology and consumer goods to pharmaceuticals and machinery.
Our services include:
- Drafting and reviewing agency contracts
- Conducting due diligence on local partners
- Advising on tax and regulatory compliance
- Negotiating dispute resolution mechanisms
- Handling disputes or terminations under Iranian law
We combine local legal knowledge with a deep understanding of cross-border business transactions to help protect your commercial interests in Iran.
Frequently Asked Questions (FAQs)
1. Can a foreign company directly appoint an agent in Iran?
Yes, but the agency contract must comply with Iranian commercial and regulatory laws. Registration or local presence may be required in some sectors.
2. Are commissions subject to tax in Iran?
Yes. Agents in Iran must report commissions as taxable income. Depending on the structure, the foreign principal may also need to address withholding tax issues.
3. Can a foreign company terminate an Iranian agent easily?
It depends on the contract terms. Some exclusive agents may demand compensation, especially if termination is abrupt or unjustified.
4. Is arbitration enforceable in Iran?
Yes, if properly drafted and compliant with Iranian laws and international treaties like the New York Convention.
5. How long does it take to finalize a legally compliant agency contract in Iran?
With proper legal assistance, drafting and finalizing may take 2–4 weeks, depending on the complexity and sectoral requirements.
Contact an International Lawyer in Iran
If you’re planning to work with an Iranian company through an agency contract, don’t leave it to chance. The right legal guidance can mean the difference between a profitable relationship and a legal headache.
👉 Contact an international lawyer in Iran today at MJK Law Firm for tailored legal advice, compliant contracts, and trusted representation across borders.