Sapphire International Petroleums Ltd. v. National Iranian Oil Company

Sapphire Petroleums Ltd. (Sapphire) and the National Iranian Oil Company (NIOC) (defendant) entered into a contract in 1958 containing an arbitration clause. Sapphire later assigned its rights and obligations under the contract to Sapphire International Petroleums Ltd. (Sapphire International) (plaintiff). The arbitration clause stated that if one party failed to appoint an arbitrator within a certain time frame, then the other party was entitled to seek appointment of a sole arbitrator from the president of the Swiss Federal Supreme Court (the president). In 1960 Sapphire initiated arbitration proceedings after a dispute arose with NIOC, appointed an arbitrator, and requested that NIOC select an arbitrator. NIOC refused, stating that only Sapphire International, and not Sapphire, could utilize the arbitration clause to resolve disputes. Sapphire International asked that the president appoint a sole arbitrator. The president issued a decision in January 1961 appointing a sole arbitrator, federal judge Pierre Cavin, and finding that the conditions set forth in the arbitration clause to justify the appointment of a sole arbitrator were satisfied. NIOC sought revocation of the January 1961 decision appointing Cavin. The president rejected NIOC’s request in March 1961 in a decision that also rejected NIOC’s arguments regarding its assertion that only Sapphire, and not Sapphire International, could initiate the arbitration process. The arbitration proceedings began, and NIOC repeatedly failed to participate. NIOC claimed that Cavin’s appointment was null and that the deadline for NIOC to appoint an arbitrator never applied because an improper party—Sapphire, instead of Sapphire International—initiated arbitration. Therefore, NIOC argued, it did not fail to appoint an arbitrator within the designated time frame, which would have justified the president in appointing a sole arbitrator. NIOC objected to Cavin’s jurisdiction over the dispute.