Challenges of State Civil Liability Arising from Manipulation and Intervention in the Stock Market and Securities in Iranian Law

Abstract

The capital market, as one of the key pillars of the economy, is profoundly influenced by the actions of the state, which acts as the most powerful player and regulator. Macroeconomic decisions, interventionist policies, and public statements by government officials can lead to extensive losses for investors. The central question of this study is: considering the existing challenges, what are the legal grounds and mechanisms for establishing the state’s civil liability in relation to its harmful interventions in the stock market? Using a descriptive–analytical method, this study demonstrates that despite strong theoretical foundations in Islamic jurisprudence and law—such as the principles of la ḍarar (no harm), causation (tasbib), and deception (ghurur)—for holding the state liable, the practical realization of such liability faces three major obstacles: substantive, evidentiary, and structural. The most significant substantive obstacle lies in the government’s invocation of the “shield of sovereign immunity” (aʿmal-e ḥākemiyyat) to justify its economic actions. This challenge is compounded by the evidentiary difficulty of proving a “causal relationship” within a multifactorial market, as well as the “legislative silence” of the Securities Market Act, which leaves investors trapped in a vicious cycle of “judicial confusion” between the Administrative Justice Court and the general courts. Findings indicate that overcoming this deadlock requires an integrated reform package: Legislative reforms to explicitly establish the government’s liability and introduce a “presumption of causation”; Structural reforms to ensure the independence of the supervisory authority through revising the composition of the High Council of the Stock Exchange; and Judicial reforms through the creation of a specialized capital market court and protection of investors’ legitimate expectations. Establishing such a system of accountability is a prerequisite for public trust and the sustainable development of the capital market.