All questions

Franchise law

i Legislation

The concept of a franchise is not explicitly provided for by Iranian law, including the Iranian Civil and Commercial Codes. Therefore, there are no specific commercial agency or franchise laws in Iran granting special rights to franchisees and agents. In addition, franchise and agency relationships are not regulated under Iranian legislation.

This distinguishes Iran from most other Middle Eastern countries, where there are regulations in place protecting local franchisees, distributors and agents and, in particular, commercial agency laws that provide the local party with enhanced rights on the termination of the relationship.

Given the lack of specific legislation addressing this matter in Iran, franchise agreements will be governed and regulated by ordinary contract principles. As such, the parties to a franchise agreement have the freedom to determine the different aspects of their relations such as the terms of the contract, notices, early termination, payment of damages, etc.

ii Pre-contractual disclosure

In general, no particular duty of good faith or recognition of the doctrine of culpa in contrahendo can be identified in Iranian contract law provisions. There is a school of thought that believes that a fraudulent disclosure of facts in a pre-contractual disclosure can result in liability based on the general civil liability provisions of Iranian law. However, this approach is not widely accepted in Iranian jurisprudence.

iii Registration

A factor that is quite distinct from the general freedom of parties to enter into a franchise agreement is that mandatory registrations must be made with certain authorities, namely the MIMT and the MOH for import and distribution of foreign products. These registrations are the responsibility of the franchisee and not the franchisor.

In particular, in line with the provisions of the Consumer Protection Law 2009 (CPL) all providers of capital and durable goods must register themselves with affiliates of the MIMT, as without this registration the import of products into Iran is not possible. To implement the CPL requirements, the MIMT has issued instructions relating to the registration of distributors and agents, namely the 2018 Instructions, which are currently in force.

From a legal perspective, registration with MIMT is not for the purpose of granting or triggering commercial agency protection of registered franchisees in Iran, as there are no legal provisions regarding such protection under Iranian law. Rather, the registration is intended to ensure continuity of supply, aftersales and similar requirements.

The same applies to the import and distribution of health-related products, where approval must be obtained from the MOH pursuant to Article 16 of the Law on Foodstuffs, Beverages, Cosmetics and Hygiene 1967. Numerous implementing regulations have been issued to implement the above in all different sorts of areas including pharmaceutical drugs, medical devices, foodstuffs, beverages, cosmetics, etc. by the Iranian Food and Drug Administration.

iv Mandatory clauses

There are no mandatory clauses required in franchise agreements under Iranian law.

v Guarantees and protection

No particular legislation addresses this matter. To the extent that a franchise agreement contains provisions relating to a personal guarantee and guarantees from entities to the franchisor, those guarantees are in principle valid and enforceable (subject to compliance with general mandatory provisions).