Challenging a Bank Enforcement Order in Iran: When and How

Many companies and guarantors first engage with a bank recovery when an enforcement order has already been issued and their assets or accounts are about to be attached. At that point, choosing the right route of objection and acting quickly matter a great deal.

Why banks can enforce without a court

Under Article 15 of Iran’s Usury-Free Banking Law, bank facility agreements have the status of directly enforceable official documents. A bank can therefore apply to the registry’s enforcement office for an enforcement order without bringing a lawsuit. The order is issued against the borrower and any joint guarantors; once served, a payment period runs, after which assets can be attached.

Routes of objection

• Complaint about enforcement operations at the registry: where the issue is how enforcement is carried out, such as defective service, attachment of exempt assets, incorrect valuation or calculation errors, a complaint goes to the head of the local registry office and then to the Supervisory Board, under the regulations on enforcing official documents.
• Action to annul the enforcement order in court: where the issue is the debt itself or its amount, for example partial payment, interest and penalties above permitted limits, or a fundamental defect in the contract, an annulment action is filed with the civil court.
• Application to stay enforcement: filing an annulment action does not by itself stop enforcement. To prevent the sale of collateral while the case is pending, a separate stay application is needed, usually with security.

Common issues in bank cases

• Interest and late-payment penalties calculated above Central Bank rates and rules
• Instalments already paid or earlier settlements not credited
• A guarantor’s liability extended beyond what the contract provides
• Facilities extended or rescheduled without the guarantor’s consent
• Service to an incorrect address, causing deadlines to be missed

Negotiation alongside legal action

In many cases a well-founded legal objection creates room to negotiate instalments, rescheduling or settlement on better terms. The goal is usually to keep the business running and protect key collateral, not simply to delay.

Read more about our banking and capital markets litigation practice.

This note is general information and is not legal advice on any particular matter. To discuss your situation, request a consultation.