Originally from American Review of International Arbitration - ARIA

Preview Page

I. INTRODUCTION

In early November 1989, in a small town near Dusseldorf, a confidential settlement was reached between prominent international oil trader John Deuss and the head of the Soviet oil export monopoly, ending the twelve-year litigation of Sojuznefteexport v. JOC Oil Ltd.2 Besides the U.S. $200 million at stake, the case resolved interesting questions of the separability of the arbitration clause under Soviet law and of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.3 It was exhaustively litigated by two eminent teams of counsel and expert witnesses, and, but for the settlement, would ultimately have been decided on appeal to the British Privy Council. The case turned on the significance of the fact that a purported contract had been signed by one representative of SNE, instead of two. This article reviews the Bermudian decisions — which exceeded three hundred pages — on the enforcement of the Soviet arbitration award in SNE v. JOC.

II. FACTUAL SETTING
During the oil crisis of the mid-1970’s, a steady source of supply was crucial to petroleum trading companies such as JOC, a Bermudian corporation headed by John Deuss. The company had initiated in 1975 a highly prized relationship with SNE, the Soviet Foreign Trade Organization with exclusive authority over that nation’s crude and refined oil products export. In November 1976, in Paris, Deuss and SNE’s then president, V. Merkulov, drafted and signed, without resort to legal counsel, a purported agreement for the installment sale during 1977 of nearly four billion metric tons of crude and refined products. Payment was to have been by letter of credit issued by the First Curasao International Bank (FCIB or Bank). The agreement incorporated SNE’s standard arbitration clause, which provided: