Gatoil International v. National Iranian Oil Co.

In April 1982, Gatoil International (Gatoil) (plaintiff) and National Iranian Oil Co. (NIOC) (defendant) signed a contract for the purchase of oil between April and December 1982. Section 8 of the written contract provided that the parties would refer any disputes to arbitration in accordance with the laws of Iran. Section 8 also provided that the party that initiated the arbitration would nominate one arbitrator, while the other party would nominate a second arbitrator. The two arbitrators would then appoint a third arbitrator; the President of the Appeal Court in Iran would appoint the third arbitrator if the two arbitrators could not reach an agreement. Section 8 also provided the arbitration would occur in Tehran. In 1987, a dispute arose between the parties, and Gatoil initiated a suit in a British court. Although Gatoil refused to arbitrate in Iran, NIOC prepared to appoint an arbitrator in Tehran. NIOC then filed for a mandatory stay under § 1(1) of the Arbitration Act of 1975, the statute implementing the New York Convention. Gatoil countered that Section 8’s process of appointing the third arbitrator was invalidated by the fact that the position of the President of the Appeal Court in Iran no longer existed. Gatoil also claimed it was impossible for Gatoil to find a qualified arbitrator willing to go to Tehran.