## Facts

- In 1966, National Iranian Oil Company (NIOC) concluded a petroleum exploration and production agreement in Iran (the “Sofiran Agreement”) with French interests, including ERAP and SOFIRAN, under which the contractor side financed exploration and early exploitation.
- The agreement provided that, if oil was discovered and “commercial production” began (defined in the contract by reference to regular exports reaching a specified threshold), NIOC would repay the advances made for the operations.
- The agreement also provided for sales of a stated percentage of crude oil to the contractor side at a preferential price.
- The contract permitted transfers of the contractor parties’ interests and obligations to controlled companies. Over time, ERAP’s position was assigned to Elf Iran and SOFIRAN/SNPA’s position was assigned to Aquitaine Iran.
- Elf Iran and Aquitaine Iran later merged into Elf Aquitaine Iran (ELF), which asserted it had succeeded to the contractual rights and obligations, including the arbitration clause.
- Two oil fields were discovered, and commercial exploitation began in December 1978. ELF alleged NIOC did not repay the advanced funds when the contractual trigger was met and did not perform the preferential crude-sale obligations.
- Following the 1979 Iranian Revolution, Iran adopted public-law measures affecting the petroleum sector. NIOC relied on these measures to argue the contract framework (and with it the arbitration agreement) had been extinguished or invalidated.
- Article 41 of the agreement contained a broad arbitration clause. It provided for party-appointed arbitrators and, if a party failed to appoint (or if the arbitrators could not agree on a chair), appointment by the President of the Supreme Court of Denmark, including appointment of a sole arbitrator in case of default.
- ELF commenced arbitration. NIOC did not appoint an arbitrator, and an appointment was made through the Danish appointing authority mechanism. The tribunal issued a Preliminary Award on 12 December 1984 addressing jurisdictional and foundational objections, leaving liability and quantum for later phases.

## Issues

1. Whether the arbitral tribunal had power to rule on its own jurisdiction when NIOC contended that post-revolution Iranian public-law measures had nullified the agreement.
2. Whether the arbitration clause in Article 41 remained effective even if NIOC alleged the underlying petroleum contract had been terminated, nationalized, or rendered void.
3. Whether ELF, as successor through assignments and merger (Elf Iran and Aquitaine Iran), had standing to invoke the arbitration clause against NIOC.
4. What legal standards governed these threshold questions, given the clause’s reference to decision-making on equitable grounds and generally recognized principles of law, with special reference to international law.
5. Whether Iranian nationalization-type measures and related public policy arguments could, by unilateral effect, deprive the tribunal of jurisdiction.

## Decision

- The tribunal affirmed that it could decide objections to its own jurisdiction and proceed to determine whether the arbitration agreement bound the parties.
- The tribunal upheld the effectiveness of the Article 41 arbitration agreement as a distinct dispute-resolution undertaking, not displaced merely because NIOC argued that Iranian public-law measures had affected the main contract.
- The tribunal found ELF had standing as a successor to the original contractor interests, relying on the contract’s express transfer provisions and treating the right to arbitrate as traveling with the transferred contractual position.
- The tribunal rejected the view that domestic public-law measures invoked by NIOC could, without more, extinguish the parties’ agreement to arbitrate in a neutral, international forum structured around an external appointing authority.
- The tribunal confirmed its jurisdiction in a preliminary award and reserved the merits (including liability and damages) for later proceedings.

## Legal Principles

- An international arbitral tribunal may determine its own jurisdiction, including objections framed as contract invalidity, termination, or supervening state measures.
- An arbitration clause may survive disputes about the continued existence or enforceability of the main contract, allowing the tribunal to decide threshold questions without accepting a party’s unilateral characterization.
- Where a contract authorizes assignment or transfer of interests and obligations to controlled entities, a successor may acquire the procedural right to arbitrate as part of the transferred contractual package.
- A state entity’s reliance on subsequent domestic measures affecting an economic sector does not automatically negate a prior agreement to submit disputes to international arbitration, particularly where the clause provides a neutral appointment mechanism outside the state’s own courts.
- References in the arbitration clause to equity and generally recognized principles of law, with special reference to international law, support use of transnational legal standards when assessing the effect of state measures on the arbitration agreement and accrued contractual claims.

## Conclusion

In its 12 December 1984 Preliminary Award, the ad hoc tribunal confirmed jurisdiction under Article 41 of the Sofiran Agreement, held that ELF could invoke the arbitration clause as a successor to the original contractor parties, and declined to treat post-revolution Iranian public-law measures as sufficient, by themselves, to eliminate the parties’ agreement to arbitrate; the tribunal therefore directed that the arbitration proceed to the merits and quantum in later phases.


*Elf Aquitaine Iran v. National Iranian Oil Co.*, Preliminary Award (Dec. 12, 1984), 11 Y.B. Com. Arb. 97 (1986)

Elf Aquitaine Iran v. National Iranian Oil Co., Preliminary Award (Dec. 12, 1984), 11 Y.B. Com. Arb. 97 (1986)