## Facts

- National Iranian Oil Company (NIOC), a state-owned Iranian entity, supplied Middle Eastern crude oil to Ashland Oil’s foreign subsidiaries under long-term contracts beginning in 1973.
- During 1978–79, amid political upheaval in Iran, NIOC allegedly repudiated and renegotiated the supply arrangements multiple times.
- On March 11, 1979, NIOC and Ashland Overseas Trading Limited (AOTL) executed a “Heads of Agreement” for delivery of 150,000 barrels per day; NIOC allegedly repudiated it on April 10, 1979.
- On April 11, 1979, NIOC and AOTL executed a new contract for 115,000 barrels per day through December 31, 1979, containing an arbitration clause requiring arbitration in Iran.
- After the November 1979 U.S. Embassy hostage seizure, the U.S. President banned importation of Iranian oil not already in transit.
- NIOC had shipped several cargoes to AOTL that were received and refined, with an asserted value near $283 million, but Ashland and its affiliates did not pay despite demands.
- NIOC initiated arbitration by appointing an arbitrator in Iran; Ashland refused to participate, citing safety risks to Americans in Iran.

## Issues

1. Whether a federal court may compel arbitration in the United States when the parties’ contract requires arbitration in Iran.
2. Whether the New York Convention and its implementing provisions in the Federal Arbitration Act authorize a U.S. court to compel arbitration when the chosen seat is in a non-Convention state and the United States has adopted the reciprocity reservation.
3. Whether the FAA’s domestic arbitration provisions permit a court to disregard the contract’s forum selection and compel arbitration in Mississippi due to danger or impracticability.

## Decision

- The Fifth Circuit affirmed the denial of NIOC’s motion to compel arbitration.
- The court held it lacked statutory authority under the New York Convention, given the U.S. reciprocity reservation and Iran’s non-signatory status, to compel arbitration in Iran under the Convention framework.
- The court held it could not compel arbitration in Mississippi (or elsewhere in the United States) because doing so would contradict the parties’ agreement specifying Iran as the arbitral forum.
- The court rejected reliance on the FAA’s general provisions to override the contract’s designated seat or to supply a substitute forum.

## Legal Principles

- Arbitration is a matter of contract; courts must enforce arbitration agreements according to their terms, including the parties’ agreed arbitral seat.
- Under the New York Convention as adopted by the United States with the Article I(3) reciprocity reservation, Convention-based enforcement is limited to awards made in the territory of another Contracting State.
- When the parties select a non-Convention state as the arbitral seat and no separate contractual basis authorizes another forum, a U.S. court may lack power to compel arbitration either at the chosen seat or in an alternative domestic location.
- Practical obstacles or safety concerns, without contractual authorization, do not permit a court to rewrite the forum term of an international arbitration clause.

## Conclusion

The Fifth Circuit held that the arbitration clause requiring arbitration in Iran could not be specifically enforced through an order compelling arbitration in Mississippi, and the New York Convention—limited by U.S. reciprocity—did not provide authority to compel arbitration tied to a non-signatory seat.


Nat'l Iranian Oil Co. v. Ashland Oil, Inc., 817 F.2d 326 (5th Cir. 1987)