Legal and Jurisprudential Challenges to the Recognition and Acceptance of Contractual Petroleum Joint Ventures and Petroleum Joint Operating Agreements in Iran

Nowadays, it would be against good-practice for a company to go-about conducting upstream oil-and-gas operations without finding a suitable partner. This association may come-into being under the form of either an equity or a contractual joint-venture, while the latter does not lead to the creation of a separate legal-personality. As-far-as recognition-and-acceptance are concerned, equity joint-ventures are expressly provided-for in Iranian-law; and such joint-ventures may come-under “legally-existing companies” (as per article 20 of the Commercial-Code). However, the more common practice-and-trend in upstream oil-and-gas operations is not to establish a new-company and enter-into contractual joint-ventures, in which the horizontal-relationship between partners would be governed by a joint-operating-agreement. It is true to say that it is challenging to accept contractual joint-ventures and joint-operating-agreements in Iran, due to the lack of express-provisions of law and major disparities in the opinions expressed in Islamic-jurisprudence (which forms the basis of the current legal-system). This article will attempt to analyze such joint-ventures in the context of recognized contracts and in light of social-necessities. For this purpose, de-facto corporations and civil-partnerships are first discussed in order to subsequently determine whether contractual joint-ventures and joint-operating-agreements qualify as such; and if yes, whether they are legitimate-and-valid. In spite of the many similarities between such joint-ventures and de-facto corporations, the conclusion is drawn that this comparison is not very solid. Such joint-ventures may, however, legitimately come under the broad definition of civil-partnership, that is to say, despite most Islamic-(Shiite)-jurists being of the opinion that all civil-partnerships (save from joint-ownership) are invalid-and-void.