Are EPC Contracts in Iran’s Oil Industry Considered “Fixed Contracts”?

The question arises as to whether standardized contracts in the oil industry, particularly Engineering, Procurement, and Construction (EPC) contracts, possess a clear legal basis in Iranian law — and whether one can regard them as a new and emerging fixed contract under the Iranian legal system.

EPC contracts are widely used in large-scale infrastructure projects. Despite their extensive application in engineering practice, Iran’s legal community has not yet sufficiently analyzed or elaborated upon the legal nature of these contracts.
This is partly because the early versions of EPC contracts were drafted mainly by technical professionals involved in project execution rather than legal experts. Moreover, in the event of disputes between the parties, Iranian judicial and arbitral authorities typically interpret and resolve such matters based on Article 10 of the Civil Code.

However, numerous legal texts explicitly or implicitly recognize EPC contracts, and in some instances, their legal effects and implications have also been identified. Some of these effects are of a statutory nature, while others are contractual.

In Iran’s legal framework, the legal foundations of EPC contracts are multiple but scattered across various legislative instruments.
In general, under Principles 44 and 45 of the Iranian Constitution, investment and contracting in the oil and gas sector are permitted. According to the Law on the Implementation of the General Policies of Principle 44, the government may undertake exploration and production activities in oil and gas fields through EPC contracts. Furthermore, financial and investment mechanisms, including EPC arrangements, have been envisaged in several annual budget laws.

The Petroleum Acts of 1974 and 1987 (1353 and 1366 A.H.) explicitly mention and recognize the legal basis of EPC contracts and their implications. Therefore, one may argue that EPC contracts in Iran possess the characteristics of a fixed contract (ʿaqd-e moʿayyan*).Additionally, pursuant to the *Executive By-Law of the Petroleum Industry Project Management System, the oil-specific EPC contracts are legally recognized as being similar to the standard EPC form for industrial works (Publication No. 5490), and both may be used for industrial projects — whether in the oil and gas sector or otherwise.