Sojuznefteexport (SNE) (USSR) v. Joc Oil, Ltd. (Bermuda)

In the Soviet Union (USSR), contracts entered into by foreign-trade organizations were subject to strict procedural rules. Under these rules, contracts executed outside Moscow had to be signed by two authorized individuals. Noncompliance with this rule resulted in the contract being found invalid. Sojuznefteexport (SNE) (plaintiff) was a USSR foreign-trade organization selling oil. V. E. Merkulov served as SNE’s chairman. Joc Oil, Ltd. (defendant) was a Bermudan company that purchased oil for resale. Johannes Duess was president of Joc Oil. SNE and Joc Oil executed an oil-sale contract in 1976 in Paris. Only Duess and Merkulov signed the contract. The contract contained an arbitration clause stating that disputes arising from the contract must be arbitrated by the Foreign Trade Arbitration Commission of the USSR Chamber of Commerce and Industry (FTAC) in Moscow. SNE made multiple shipments of oil to Joc Oil, and after a dispute arose about performance of the contract, Joc Oil lapsed on payments. SNE initiated arbitration proceedings at the FTAC. Joc Oil argued in part that the 1976 contract was invalid because it was not signed by two authorized people as required by USSR law, and therefore, there was no valid jurisdiction for an arbitral tribunal to issue an award. The FTAC, applying the FTAC rule that the FTAC may determine its own competence, found that it had jurisdiction to resolve the dispute. The FTAC ruled that the contract was invalid because only Merkulov had signed the contract on behalf of SNE. However, the FTAC found that the two-signature requirement did not apply to arbitration agreements and ultimately issued an award in favor of SNE. Joc Oil refused to pay, and SNE sued Joc Oil in Bermuda, seeking enforcement of the FTAC award. The Bermuda court declined to enforce the award, holding that SNE failed to prove that the doctrine of separability was recognized under USSR law. SNE appealed.