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Article 139 of the Constitution of the Islamic Republic of Iran, which restricts and binds the referral of litigation regarding public and State property to arbitration, for obtaining an approval from the government and the parliament, has led to different views and legal opinions. In general, they can be categorized into “literalist” and “realist” theory”. The result of literalist theory is that article 139 applies to any dispute that on the one hand, there is the State, and it has been agreed upon by arbitration and thus if any dispute exists, it will be resolved by arbitration in which, it should obtain an approval from the government and the parliament, otherwise, the arbitration will not be valid. According to this view, article 139, in general, is not economically beneficial for the State and therefore it must be thought upon. In contrast, there is the realist theory which can be a response to the literalist theory and holds that, with a rational and principled interpretation, the principle can be freed from the problems which are arisen by former theory and also the dynamics of principle 139 is useful for the State in terms of national interest

Abstract: Concluding of the arbitration agreement is based on the principle of party autonomy but this principle is restricted by public order. In other words, although the arbitration agreement is mainly based on the private agreement of both parties, it is not correct that the common will of both parties have an absolute authority to refer any disputes to arbitration. Sometimes the law forbid or restrict the reference of some disputes to arbitration, and the reason for these are based on the basic concept of public order and interest; thus, the settlement of some disputes are merely on the authority of the courts and if the arbitrators proceed to issue an award about such disputes, that award will not be applicable. This article will outline the opinions of Iranian scholars with regard to the effect of public policy on the arbitration agreements as it could help to understand the floating essence of public policy. In addition, this article set forth to analyses the most important cases in relation to arbitrability which are the Art. 139 of the constitution, bankruptcy claims, family disputes, intellectual property claims, securities claims and also labor and employment contracts.

Over the past years, "arbitration" as a means of settling international disputes has gained popularity, but compared to international tax disputes, the possibility of applying the arbitration clause is disputed. After the successful use of arbitration to resolve tax disputes in EU arbitration convention, The Organization for Economic Cooperation and Development (OECD) in 2008 and the United Nations (UN) in 2011 were convinced to insert an arbitration clause in their model treaties. Skepticism to Arbitrability of international tax disputes due to its link to the sovereignty rights of states, resulted in utilizing such clauses by few countries in their tax treaties. Shortcomings in current methods of dealing with disputes between Contracting states (bilateral agreement procedure) on avoidance of double taxation agreements and lack of a binding mechanism for resolving disputes through direct negotiations between the two countries, has justified the need for an arbitration clause in these treaties. Regarding the nature of possible disputes arising from double taxation treaties, seems there’s no obstacle to use arbitration clause in Iran’s bilateral tax treaties and in order to draft a proper clause, it is recommended to use one of the model clauses of UN or OECD.