National Iranian Oil Co. v. Ashland Oil, Inc.

817 F.2d 326 (1987)

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National Iranian Oil Co. v. Ashland Oil, Inc.

United States Court of Appeals for the Fifth Circuit
817 F.2d 326 (1987)

Facts

Prior to the Iranian Revolution of 1979, Ashland Oil, Inc. (defendant) entered an oil supply contract with the National Iranian Oil Co. (NIOC) (plaintiff). During the Iranian Revolution, NIOC repudiated the contract with Ashland, and the parties signed a new contract on April 11, 1979. After the takeover of the American Embassy in Tehran, President Carter banned importation of Iranian oil except for the oil in transit. At the time, NIOC had several cargoes of crude oil for refinement in transit to Ashland, and Ashland received and refined the oil. However, when Ashland’s subsidiaries refused to pay for the oil, NIOC sought to resolve the dispute through the arbitration clause in the April 1979 contract. Ashland refused to participate in the arbitration given the danger for Americans in Iran. NIOC subsequently brought a lawsuit in federal district court, seeking to compel arbitration in Mississippi. Ashland filed a counterclaim, and in response to the counterclaim, NIOC filed a motion seeking to compel arbitration and to stay litigation. Relying on Snyder v. Smith, the district court denied NIOC’s motion. The district court found it lacked the power under 9 U.S.C. § 4 to compel arbitration in Mississippi because the April 1979 agreement expressly provided for arbitration in Tehran. NIOC appealed the denial of the motion to the Fifth Circuit. Although conceding it could not compel arbitration in Tehran, NIOC argued that the New York Convention compelled enforcement of the arbitration clause in the United States.

Rule of Law

Issue

Holding and Reasoning (Goldberg, J.)

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