National Iranian Oil Company v Sapphire
| Jurisdiction | Iran |
| Date | 01 December 1963 |
| Court | Court of First Instance (Iran) |
Disputes Arbitration The award Scope and binding force of award Arbitration between State-owned company and foreign private company Arbitration provisions in oil concession agreement Law governing such agreement Assignment of contractual rights and obligations Proper party to initiate arbitration Validity of appointment of sole arbitrator Validity of his award The law of Iran.
Summary.This was a petition to the Court of First Instance of Teheran by N.I.O.C. seeking a declaration from the Court that the arbitral award given on 15 March 19631 by Judge Pierre Cavin of Lausanne, in favour of Sapphire International Petroleums Ltd., was null and void. N.I.O.C. also claimed damages and costs from the defendant, Sapphire International Petroleums Ltd. It was submitted by N.I.O.C that the award was a nullity because the arbitration proceedings had begun only on 2 December 1960, when Sapphire International wrote its first letter in the matter of N.I.O.C. N.I.O.C. had nominated their arbitrator within the period of two months from this date, as required by the concession agreement. Any events and procedural steps taken by Sapphire Petroleums Ltd., the original party to the concession which had assigned all its rights and obligations thereunder to Sapphire International in August 1958, were of no legal relevance. Consequently, it was submitted, the purported appointment by the President of the Swiss Federal Tribunal of M. Cavin as sole arbitrator in the dispute between N.I.O.C. and Sapphire International was of no effect. M. Cavin had no jurisdiction and his award was therefore a nullity.
The Court of First Instance of Teheran accepted these submissions and declared the award to be null and void. In addition, the Court determined that the concession agreement was subject to the law of Iran, and not to the principles of law common to civilized nations, which M. Cavin had held to be the governing law.
The following is the text of the judgment:2
On the 10th of Azar 1342 file number 138/42 was referred to Branch One of the Court of First Instance of Teheran for investigation.
Presiding Judge: |
Mohammed Karyabi |
Plaintiffs: |
The National Iranian Oil Company represented by Mr. Mohammed-Ali Movahed (Attorney-at-law) |
Defendants: |
Sapphire International Petroleums Ltd. of no known address |
Object of Claim: |
To have an arbitral award declared null and void, the defendant condemned to pay damages and the legal costs of the reversal of the decision. |
A petition comprising the above claim, with the defendants as party to the dispute, was presented to the Court of First Instance of Teheran on 28/2/1342. The brief attached in the petition states that on the 26th of Khordad 1337 an agreement was concluded in accordance with the provisions of the Petroleum Act of Mordad 1337 (Petroleum Act of July 1957) between the plaintiffs and the Canadian Company Sapphire Petroleums Ltd., in which the plaintiffs were the first party and Sapphire Petroleums Ltd. the second party. This agreement came into force after being ratified by Parliament (National Consultative Assembly and Senate) and receiving the Royal assent. According to Article 39 of the Agreement it was stipulated that:
1. If any dispute arises out of the execution or interpretation of this agreement, the parties may agree that the matter shall be referred to a Mixed Conciliation Committee composed of four members, two nominated by each party, whose duty shall be to seek a friendly solution.
2. If the parties do not agree upon the reference of a dispute to a Conciliation Committee, or if a dispute is referred to the said Committee but not settled, the sole method of determining it shall be by arbitration in accordance with Article 41.
According to Article 41:
1. If the parties do not agree that a dispute shall be referred to an expert or experts under Article 40 or if they do so agree but the appointments provided for are not made or a decision is not given within the time specified for the purpose, or if in the circumstances set out in Section 4 of Article 40 either of the parties seeks the determination of a question of law, each of the parties shall appoint an arbitrator and the two arbitrators before proceeding to arbitration shall appoint an umpire who shall be the president of the arbitration board. If the two arbitrators cannot within four months of the institution of proceedings agree on the person of the umpire, the latter shall, if the parties do not otherwise agree, be appointed, at the request of either party, by the President of the Swiss Federal Tribunal.
2. If one of the parties does not appoint its arbitrator or does not advise the other party of the appointment made by it within two months of the institution of proceedings, the other party shall have the right to apply to the President of the Swiss Federal Tribunal for the appointment of a sole arbitrator.
On 25 August 1958, Sapphire Petroleums Ltd. transferred all its rights and obligations under the agreement to Sapphire International Petroleums Ltd. (as envisaged in Article 36) and informed the plaintiffs of having effected the transference, which was registered in the Iranian Companies and Industrial Properties Registration Office. From then on, Sapphire International Petroleums Ltd., as the second party, established contact with the plaintiffs, and the parties, contributing equal capital, formed a company named Iran-Canada (IRCAN) which was to carry out the operations which were the object of the agreement in the manner envisaged by the text of the agreement.
On 28 September 1960, Sapphire Petroleums Ltd. sent a letter to the plaintiffs and, on the grounds that the matters in dispute between the two parties were not susceptible to settlement in an amicable way, stated that, since the plaintiff, on the one hand, by refusing to carry out its obligations had violated the agreement, and, on the other hand, had abstained from releasing the...
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