## Facts

- All-Union Export-Import Association Sojuznefteexport (SNE), a Soviet foreign trade organization, entered agreements to sell oil to JOC Oil Ltd. (JOC), a Bermuda company engaged in oil trading.
- The parties’ deal documents incorporated SNE’s standard conditions, including an arbitration clause providing that disputes arising out of or connected with the contract would be resolved by arbitration at the Foreign Trade Arbitration Commission (FTAC) of the USSR Chamber of Commerce and Industry in Moscow, without recourse to Soviet courts.
- The relevant sale contract was signed in Paris in November 1976 for deliveries during 1977.
- Under Soviet rules applicable to foreign trade organizations, contracts of this type required signatures from two duly authorized representatives of the Soviet organization.
- The contract documentation was signed on SNE’s side by only one authorized representative (its president), and on JOC’s side by its representative.
- SNE shipped oil to JOC. JOC took delivery of 33 shipments but did not pay for them.
- SNE commenced arbitration at the FTAC seeking payment.
- JOC objected to the FTAC’s jurisdiction, arguing that the underlying sale contract was void under Soviet law for failure to satisfy the two-signature requirement and that, because the contract was void, there was no valid arbitration agreement or contractual relationship on which arbitration could rest.
- SNE argued that even if the sale contract was void, the arbitration clause operated as a separate agreement and did not depend on the same signature formalities as the sale contract.

## Issues

1. Whether the FTAC could decide its own jurisdiction when the respondent claimed the underlying sale contract was void under Soviet signature requirements.
2. Whether the arbitration clause was legally independent from the main sale contract and remained valid even if the sale contract was void for lack of a second authorized signature.
3. Whether SNE could obtain monetary relief for oil delivered and received when the sale contract was found invalid.

## Decision

- The FTAC ruled that it had authority to decide the jurisdictional objection under its procedural rules.
- The FTAC found the main oil sale contract invalid under Soviet law because it lacked the required second signature on behalf of SNE.
- The FTAC held that the arbitration clause was a separate agreement from the sale contract and was not rendered invalid by the sale contract’s defect in form.
- Proceeding on that basis, the FTAC exercised jurisdiction and ordered JOC to pay for the oil shipments it had received, awarding relief despite the invalidity of the main contract.

## Legal Principles

- An arbitral tribunal may rule on objections to its own jurisdiction, including objections based on alleged invalidity of the underlying commercial contract.
- An arbitration agreement can be treated as separate from the main contract; the main contract’s invalidity does not automatically invalidate the agreement to arbitrate.
- Under the approach applied by the FTAC, an arbitration clause may be characterized as a procedural agreement distinct from the parties’ substantive sale obligations.
- Contract-execution formalities applicable to a Soviet foreign trade contract (such as a two-signature rule) do not necessarily govern the validity of the arbitration agreement.
- Even where the substantive contract is invalid, an arbitral tribunal may award payment based on the recipient’s retention of delivered goods and the absence of payment (a restitution-type basis rather than contractual enforcement).

## Conclusion

The FTAC concluded that the oil sale contract between SNE and JOC was invalid under Soviet law because it lacked the required second authorized signature, but it treated the arbitration clause as a separate procedural agreement that remained effective, allowing the FTAC to hear the dispute and order JOC to pay for 33 oil shipments it received without payment.


All-Union Export-Import Association Sojuznefteexport (Moscow) v. JOC Oil, Ltd, Moscow Arb. Case No. 109/1980 of 9 July 1984, XVIII Y.B. Comm. Arb. 92 (1993)