In Esfand 1402 (March 2024), the City Council of Tehran approved a proposal allowing the municipality to import electric buses from China for the amount of 2 billion euros to equip the public transportation fleet of Tehran.
This contract, with such a significant amount, has evidently been rushed into the hands of the Tehran municipality without following proper procedures, as indicated by the published negotiations of the City Council. Now, an examination of the documents we have received shows that, as anticipated, numerous violations have occurred in this contract.
It is evident that when such a large sum is granted to an organization in a rushed manner and without formalities, we should expect to see such violations. However, what has transpired in this contract goes beyond some common infractions or negligence that could be overlooked.
This contract reached its conclusion with the direct intervention of Alireza Zakani, the involvement of Mahdi Chamran, and the participation of the financial arm of the municipality, namely Bank Shahr. It is a vague contract that raises many questions about the Chinese contractor. For instance, how does a construction company become an importer of Chinese vehicles to Iran?
Haste and Bypassing Procedures
One of the most important issues in this contract is the insistence on bypassing formalities and the rush to sign the contract with the Chinese party. This issue is explicitly mentioned in the official negotiations of the City Council.
For example, Nasser Amani states in the session approving the purchase of vehicles that issuing such a permit is not within the authority of the City Council, and the cabinet must address it. However, it is repeatedly emphasised that the conditions offered by the Chinese company are exceptional and that we should not miss the opportunity.
For instance, Lotfollah Forouzandeh, the financial and economic deputy of Tehran municipality, praises the Chinese company and its conditions, stating: “For us, even one hour is an hour. We request that this bill be approved so we can take advantage of the golden opportunity of currency, place orders, and receive support from government agencies.”
Mehdi Ahmadi, the CEO of” Shahr Bank ”, is another figure who strongly insists during this meeting that the contract be concluded quickly. He mentions, “The purchase price of euros in the NIMA system is 42,700 tomans, and in the currency market, it is 67,000 tomans. It is likely that next year the NIMA currency will reach 50,000 tomans, and if it is not allocated within these 15 days, we will witness a 10 to 15 percent increase in the NIMA currency, which will effectively cause losses to the municipality.”
Regardless, with the insistence put forth, permission was granted for a contract worth 2 billion euros to be concluded without following the proper procedures. Naturally, this raises the question for all of us: what kind of supervisory mechanisms exist in this country that allows a contract of this magnitude to be quickly awarded to an organization without following the necessary formalities?
Is it even legally possible to conclude a 2 billion euro contract in Iran while bypassing procedures?
Perhaps the biggest ambiguity in the 2 billion euro contract between Alireza Zakani and the Tehran municipality with the Chinese party is the choice of the contracting company.
May the Mayor of Tehran explain to us why a construction company was selected for the contract to purchase electric buses and vehicles?
According to legal investigations conducted, Poly Overseas Engineering Co., Ltd, the contracting party with the municipality, was registered in 2010 and has the following scope of services:
- Training
- Business scope including engineering with foreign contracts
- Wholesale of electrical equipment
- Import and export of technology
- Business management consulting services
- Trade consulting services
- Wholesale of hardware products
- Railways, roads, tunnel and bridge engineering construction
- Public municipal construction
- Building materials
- Wholesale of decorative materials
- Import and export (excluding licensed products)
- Operation of medical devices without a licence
- Trade in licensed medical equipment.
It is worth noting that in October 2019, the company contracted by the Tehran municipality signed a memorandum of understanding with Ukraine, in which it committed to constructing the outer ring road of Kyiv and assisting in improving Ukraine’s road infrastructure!
Additionally, there is another contract with the Army of Ghana from March 2019, which also pertains to military housing as well as their equipment and technology. Compared to the current contract with the municipality, it naturally involves several observers and significant legal safeguards.
However, the noteworthy point here is that the name of the company contracted by the municipality does not match the registration number mentioned in the contract!
Ultimately, after extensive searches, we found that the contracting company is one of the 15 subsidiaries of a larger holding company, which is registered in this contract under the name Poly Chengda Engineering Co., Ltd.
However, the description of this company states:
“This company has a professional team composed of road and bridge experts, senior engineers, and various technical management personnel. It has a national company technology center and a national laboratory, as well as advanced 3200-ton crane ships and a 100-metre frame pile driving rig.
The ships, 8000-horsepower multipurpose tugboats, and other modern land and water construction equipment are used for constructing highways, river-sea bridges, offshore wind power facilities, port channels, submerged pipelines, and urban engineering construction.
In the process of reform and development, investment and design of engineering projects, a maintenance and industrial structure has been established for the coordinated development of ports, shipping, urban management, and rail transit construction.”
As we can see, this company has no expertise in electric vehicles and clean transportation. Now, 2 billion euros from the public treasury of the people of Iran is to be entrusted to them to provide electric vehicles, hoping to bring a bit of clean air and reduce traffic in Tehran.
Contract Ambiguities
A look at the translated text of this contract reveals several ambiguities beyond the questions mentioned above. These ambiguities suggest that this contract has created economic benefits for some unknown companies outside Iran without receiving the necessary documents and specific guarantees, which has no justification.
Below are a few of these ambiguities:
In clause two of this contract, a vague and general reference is made to a company in Dubai, which is introduced as the purchasing agent.
The text of this clause is as follows:
“For each category of supply, the buyer must engage a qualified company based in Dubai that meets the relevant commercial expertise criteria, including possessing business licences related to the subject of the contract and a reasonable turnover that supports the financial capability of the agent company. The appointed entity will act as the authorized and approved representative of Bank Shahr.”
How can it be that, in a contract of this financial magnitude, the conditions for the sales agent company are so vague? For example, it is stated that the company must have “reasonable turnover,” but how is reasonable turnover calculated in an official international contract?
On the other hand, no explanation is provided about how and by what method these companies are selected. Are they chosen in the same manner as the contract, by bypassing procedures, or is there a standard for their selection?
The only thing we see in this contract is that with this ambiguous condition, a company named GOLDEN ADDRESS GENERAL TRADING L.L.C., Dubai, is introduced as the representative of Bank Shahr in this contract in Dubai. This company has neither a header in this contract nor a letter for confirmation, nor any documents showing that it has reasonable turnover.
Our investigations reveal that the total purchases of this company since its establishment have amounted to 2 million euros, yet it has been suddenly chosen as the purchasing agent for a 2 billion euro contract without any explanation.
Interestingly, the company GOLDEN ADDRESS in Dubai stated in a letter that it has chosen City IMD Group as the purchasing agent. However, there is no information in the contract about this selection, its legal processes, or even its official letters. There is only one letter from the company located in Dubai to the Tehran municipality that suddenly introduces City IMD Group as the buyer of the vehicles.
Clauses “J” and “D” of section 6 of the contract are other ambiguous issues.
This section addresses the seller’s commitments, but the text is entirely irresponsible and unprofessional. For instance, none of the alternative solutions for the lack of approval of the guarantees by the Ministry of Commerce of China are addressed. It is crucial to note that the Chinese company involved in the contract is actually a subsidiary of the government and the Communist Party of China, and it should have been able to obtain the guarantee approvals in advance.
Another ambiguity in this contract is the determination of dispute resolution conditions.
Although international contracts, even with the friendliest countries, must adhere to specific protocols to protect the interests of the people of Iran, we see strange phrases in this contract.
The subject of clause 15 of the contract is one of the most critical sections of a legal contract, namely dispute resolution.
In a contract at the level of two countries and with a transaction volume of 2 billion euros, the use of friendly negotiations for dispute resolution demonstrates a profound disregard for legal principles, a violation of international trade rights, and ultimately a neglect of the rights of public funds. This implies that in the event of a dispute, the Tehran municipality will never be able to secure its rights, and there will be no recourse.
At the end of this section, the Iran Chamber of Commerce is designated as the dispute resolution authority, which is highly unprofessional and unconventional, as this organization does not have the legal and executive authority to resolve disputes in such contracts. Such contracts cannot be resolved through informal mediation.
In such agreements, the competent authority is determined by the International Court of Justice in The Hague, and there is no reference to resolving disputes through negotiation.
The urban management of Tehran during Zakani’s mayorship has faced numerous criticisms, and various groups are dissatisfied with the city’s management. In this regard, various campaigns have been formed to remove Zakani, but so far, he has continued on his usual path, ignoring the criticisms. This path seems to be defined solely for the benefit of a specific group, disregarding public opinion and the common good in Tehran.