Moscow Court Starts Hearings on Israel Complaint; Israel Wins Point

Representatives of two Israel oil corporations, receiving their first day in court in Moscow yesterday to argue a breach of contract claim, won from a three-man Soviet arbitration board an order directing the Soviet defendant to give a full reply to the claim.

The defendant, Soyuzneft-Export, the Soviet Union’s oil export corporation, stopped deliveries of oil to Israel and cancelled contracts on November 6, 1956, a week after Israel opened its Sinai campaign. The ostensible reason given by the export corporation was that it had lost its export license for Israel.

In seeking to establish its claim in principle, Israel filed suit for $2,396,440 in damages for the uncompleted contract of one of the companies for the first half of 1957. The sum makes this the largest claim brought before the foreign trade arbitration commission in its 25-year history.

The Israel claimants are Jordan Investments, Ltd., and the Delek Israel Fuel Corporation. David M.Schlosberg and Zeev Argaman are the Israel representatives appearing before the commission.

The case has attracted tremendous interest, particularly in Western countries, because it poses a challenge to Soviet Government contentions that Soviet export and import corporations are independent business enterprises, rather than instruments of Soviet policy.

The Soviet export corporation was expected to plead it could not fulfill its contracts with the Israel oil companies because of “force majeure,” an act beyond its control. This legal principle is used by western non-governmental enterprises, but the two Israel attorneys were planning to contend that in the Soviet Union all businesses are government monopolies and, therefore, subject to government control.

The two Israel firms had contracts for 1957 and 1958 for the purchase of 1,150,000 tons of fuel and crude oil at a cost of $18,000,000 representing about a third of Israel’s total fuel use annually.