M3030-C KUALA LUMPUR REGIONAL CENTER FOR ...lawasiamoot.org/pdf/competition2011/M3030-C.pdfPerwaja...
Transcript of M3030-C KUALA LUMPUR REGIONAL CENTER FOR ...lawasiamoot.org/pdf/competition2011/M3030-C.pdfPerwaja...
M3030-C
KUALA LUMPUR REGIONAL CENTER FOR ARBITRATION
KUALA LUMPUR
2011
ASTORIA PRODUCE COMPANY
(CLAIMANT)
v.
ROLGA FARMER‟S EXCHANGE
(RESPONDENT)
MEMORIAL FOR CLAIMANT
ii
TABLE OF CONTENTS
INDEX OF AUTHORITIES ………………………………………………………………….. vi
STATEMENT OF JURISDICTION ………………………………………………………… xv
QUESTIONS PRESENTED ………………………………………………………………… xvi
STATEMENT OF FACTS …………………………………………………………….…… xvii
SUMMARY OF PLEADINGS ………………………………………………………………. xx
PLEADINGS …………………………………………………………………………………… 1
I. KLRCA HAS THE AUTHORITY TO RESOLVE THIS DISPUTE …………..….…… 1
A. The arbitration agreement is valid ………………………………………………………. 1
1. The agreement satisfies the requirements of lex arbitri …………………….……….. 1
a. Substantive law of contract will apply to arbitration agreement ……………….. 1
i. Form requirements not necessary under Art.11 CISG …………….…...….. 2
ii. Acceptance of counter-offer ………………………………………………. 2
iii. Art.90 not applicable for domestic legal systems …………………………. 3
b. “Writing” requirements of Law of the Seat satisfied …………………….……… 3
2. The agreement is valid under The New York Convention ………………………….. 4
i. Requirements of Art.II(2) met …………………………………………….. 4
ii. Art.VII(1) allows relaxing requirements of Art.II(2) ……………………… 4
B. Award rendered pursuant to this agreement will be enforceable ………………………... 5
II. THE TRIBUNAL HAS BEEN PROPERLY CONSTITUTED ………………….…….. 6
A. Ms. Benti‟s appointment in accordance with the parties‟ agreement …………………... 6
1. RESPONDENT failed to appoint its arbitrator in time …………………………… 6
iii
2. No grounds for replacing Ms. Benti ………………………………………………. 6
B. The Presiding Arbitrator has been properly appointed ……………………………….. 7
1. 30 days time limit not applicable …………………………………………..……… 7
2. List procedure not compulsory ……………………………………………..……... 9
C. Any award passed by this Tribunal will be enforceable ……………………….............. 9
III. THE TRIBUNAL HAS THE AUTHORITY TO IMPOSE SANCTIONS ………..…. 10
A. Procedural discretion of the arbitrators ……………………………………………….. 10
B. Tribunal‟s duty to minimize delay ……………………………………………………. 11
C. Power to impose sanctions ……………………………………………………………. 11
IV. CISG SHOULD GOVERN THE CONTRACT ……………………………………….. 13
A. Applying CISG through Art.1(1)(b) …………………………………………………... 13
1. The Convention prevails over Private International Law ………………………... 13
2. Applicability of Art.1(1)(b) ……………………………………………………… 14
3. Rules of Private International Law leading to application of laws of Astoria. …... 14
a. Choice-of-Law Rules of the forum ……………………………………….….. 14
b. Application of Laws of Astoria …………………………………………….… 16
i. Place of business …………………………………………………………. 16
ii. Lex situs of tangible goods ………………………………………………. 16
iii. Place of characteristic performance ……………………………………… 17
B. UNIDROIT Principles cannot be applied …………………………………………….. 17
1. Requirements of Arbitration Act, 2005 ………………………………………….. 17
2. UNIDROIT Principles vis-à-vis CISG …………………………………………... 18
iv
V. RESPONDENT HAS BREACHED ITS OBLIGATIONS UNDER THE CONTRACT
……………………………………………………………………………………………... 20
A. RESPONDENT has breached its obligations under the contract ……………………... 20
1. RESPONDENT‟s duty under FOB contract to deliver goods in accordance with the
contract ………………………………………………………………………….... 20
a. Goods not adequately packed ………………………………………………... 20
b. Goods not insured by RESPONDENT ………………………………….…… 20
2. Clean bill of lading does not prove goods were properly packed ………………... 21
3. Bananas deteriorated due to inadequate packing and lack of instructions given to the
Pinafore‟s Captain ………………………………………………………………... 22
4. RESPONDENT liable for not dispatching the goods in suitable packages for the
long transit period ………………………………………………………………... 22
B. CLAIMANT can avoid the contract ……………………………………………….….. 23
1. Non-conformity occurred before passing of risk ………………………………… 23
2. Goods did not comply with specified quality and description ………………….... 23
a. CLAIMANT wanted “green bananas” ……………………………………….. 23
b. CLAIMANT only catered to retail grocery stores of Astoria ………………... 23
3. The breach is fundamental ……………………………………………………….. 24
a. Purpose cannot be fulfilled with ripened bananas …………………………… 24
b. Consignment has been rejected ………………………………………………. 25
C. Alternately, RESPONDENT committed material breach under UNIDROIT Principles
…………………………………………………………………………………………. 25
1. Quality of bananas not in accordance with the contract …………………………. 25
v
2. There is fundamental non-performance ………………………………………….. 26
3. Consignment has been rejected …………………………………………………... 26
VI. CLAIMANT DID NOT HAVE A LEGAL OBLIGATION TO ATTEMPT TO SELL
THE BANANAS …………………………………………………………………………. 27
A. CLAIMANT is under no obligation to sell the bananas under CISG ………………… 27
1. Duty to mitigate under Art.77 only when damages claimed ……………………… 27
2. CLAIMANT not obligated to sell the goods ……………………………………… 27
a. Lack of good faith from RESPONDENT ……………………………………... 27
b. CLAIMANT only required to take reasonable measures ……………………... 27
c. No inaction by CLAIMANT ………………………………………………….. 28
d. Non-applicability of Art.86 …………………………………………………… 28
B. Alternately, if UNIDROIT Principles apply, CLAIMANT had no duty to sell the
bananas ………………………………………………………………………………... 29
1. There cannot be obligation when there is no right to sell ………………………… 29
2. No fixed responsibility ………………………………………………………….… 29
PRAYER ………………………………………………………………………………………. 30
vi
INDEX OF AUTHORTIES
ACTS
Malaysian Arbitration Act 2005 ……………………………………………………….. 18
English Arbitration Act , 1996 …………………………………………………………. 18
German ZPO ……………………………………………………………………..…….. 17
Uniform Commercial Code …………………………………………………….. en passim
ARTICLES
Belden Premaraj, The Choices of Law – Better Safe Than Sorry,The Malaysian
Arbitration Perspective
http://www.beldenlex.com/pdf/The%20Choices%20of%20Law%20%20Better%20Safe%
20Than%20Sorry.pdf …………………………………………………………………... 16
Robert Koch, The CISG as the Law Applicable to Arbitration Agreements?, Sharing
International Commercial Law across National Boundaries , Wildy, Simmons & Hill
Publishing, 2008, p.273 …………………………………………………………………. 2
Carolina Saf, A Study of the Interplay between the Conventions Governing International
Contracts of Sale, http://www.cisg.law.pace.edu/cisg/text/saf96.html ........................... 13
Ricardo Quass Duarte, Anti-Suit Injunctions in the Context of International Commercial
Arbitration,www.trenchrossiewatanabe.com.br/_noticias/Antitruste%20texto_integral.pdf
…………………………………………………………………………………………... 12
BOOKS
Albert van den Berg, ICCA Yearbook Commercial Arbitration XXVIII 2003, Kluwer
Law International ………………………………………………………………………... 4
vii
Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan, 1987, p. 284-
289 …………………………………………………………………………………….... 23
Bonell & Liguori, The U.N. Convention on the International Sale of Goods: A Critical
Analysis of Current International Case Law
http://www.cisg.law.pace.edu/cisg/biblio/libo1.html…………………………………..…... 14
Dr. Peter Huber, Some Introductory Remarks on the CISG, (Sellier European Law
Publishers, Munich, 2006) ………………………………………………………….….. 19
Fouchard, Gaillard & Goldman, International Commercial Arbitration, (Kluwer Law
International, Hague, 1999) ……………………………………………………………. 11
G Petrochilos, Procedural Law in International Arbitration, (Oxford University Press,
London, 2005) …………………………………………………………………....… 10, 15
Gary B. Born, International Commercial Arbitration (Kluwer Law International, The
Hague, 3rd
ed., 2009) ……………………………………………………….7, 8, 10, 11, 15
Gary Born, International Commercial Arbitration, (Kluwer Law International, 2001, 2nd
edn.) ……………………………………………………………………………………... 1
Griffin Day & Griffin The Law of International Trade, 3rd Ed, 2003 ………………… 20
Grigera Naon, Choice-of-law Problems in International Commercial Arbitration, 289
Recueil des Cours 9, 285-86 (2001) …………………………………………………… 15
Halsbury's Laws of England , 3rd Edn., Vol. 2, at p. 218 …………………..…………. 21
Robert Merkin, Arbitration Law (Informa Legal Publishing, London 2004) ………….. 11
Michael G. Bridge, Sale of Goods, 2nd
ed. 1997. ……………………………………..... 27
North & Fawcett, Cheshire & North’s Private International Law, (LexisNexis
Butterworths, London, 13th
Edn.,1999) ……………………………………………. 16, 17
viii
Dicey & Morris, The Conflict of Laws, (Sweet & Maxwell, London, 2000, 13th
edn.)
pp.923-924 ………………………………………………………………………...…… 16
Holtzmann & Neuhaus, A Guide to the UNCITRAL Model Law on International
Commercial Arbitration: Legislative History and Commentary, (1989) ………………. 18
Nygh & Davies, Conflict of Laws in Australia, (Butterworths, Sydney, 2002, 7th
ed.)
………………………………………………………………………………..…………. 17
Pieter Sanders, The Work of UNCITRAL on Arbitration and Conciliation, (Kluwer Law
International, 2001) …………………………………………………………………….... 4
Preventing Delay or Disruption of Arbitration, ICCA Congress Series No. 5 (Kluwer,
1991) …………………………………………………………………………………..… 8
PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS, Study L – Doc.
98, Rome 2004, www.unidroit.org/english/documents/2004/study50/s-50-098-e.pdf .... 24
Redfern, Hunter, Blackaby & Partasides, Law and Practice of International Commercial
Arbitration, (Sweet & Maxwell, London, 4th
Edn., 2004) …………………...……….. 10
CASES
AUSTRALIA
Downs Investments Pvt Ltd v. Perwaja Steel SDN BHD [2000] QSC 421, 17 Nov. 2000
(Supreme Court of Queensland) ……………………………………………………….. 28
AUSTRIA
CLOUT case No. 107 [Oberlandesgericht Innsbruck, Austria, 1 July 1994] ………..… 25
CLOUT case No. 176 [Oberster Gerichtshof, Austria, 6 February 1996] ……………... 23
CANADA
ix
Canada Insurance Corpn. v. Canadian Commercial Bank (1994) 121 DLR (4th
) 360 ... 16
Re First National Bank (1975) 60 DLR (3d) 751 ……………………………………… 16
FINLAND
Crudex Chemicals v. Landmark Chemicals S.A, Finland 31 May 2004 Hovioikeus
[Appellate Court] Helsinki, http://cisgw3.law.pace.edu/cases/040531f5.html ................ 22
FRANCE
CLOUT case No. 150 [Cour de Cassation, France, 23 January 1996] ………………… 24
GERMANY
CLOUT case No. 79 [Oberlandesgericht Frankfurt , Germany, 18 January 1994]….......24
CLOUT case No. 82 [Oberlandesgericht Düsseldorf, Germany, 10 February 1994] ..… 28
CLOUT Case No 338, Appellate Court Hamburg Germany 23 June 1998,
http://cisgw3.law.pace.edu/cases/980623g1.html ...................................................... 20, 27
Landgericht Krefeld, Germany, 24 November 1992,
http://cisgw3.law.pace.edu/cases/921124g1.html ............................................................ 28
Printed Goods case, OLG Frankfurt am Main 26 June 2006 (Germany) ………………. 2
Doors Case, OS Germany 13/01/1993 ……………………………….………………….. 2
Shoes case, Germany 17 September 1991 Appellate Court Frankfurt,
http://cisgw3.law.pace.edu/cases/910917g1.html ............................................................ 26
ICC
Case No. 2103 in 1972, ICC International Court of Arbitration ………………….…… 29
Case No. 7110, 00.04.1998, http://www.unilex.info/case.cfm?id=650, ICC International
Court of Arbitration ………………………..………………………………………...… 29
Case No. 8786, January 1995, I.C.C. International Court of Arbitration …………..…. 28
x
Schiff Food Products Inc v. Naber Seed & Grain Co. Ltd., ICCA Yearbook Commercial
Arbitration XXVI (2001) …………………………………………………………….….. 5
INDIA
YK Fung Securities v. James Cape Ltd. (CA) [1997] 4 CLJ 300 ……………………… 16
Smita Conductors Ltd. v. Euro Alloys Ltd., (2001) 7 SCC 328 ………………………..... 4
ITALY
Rheinland Versicherungen v. Atlarex., Tribunale di Vigevano, Italy, 12 July 2000, No.
405 …………………………………………………………………………………….... 13
LLYOD‟S CASES
Carlos Federspiel & Co v Charles Twigg & Co Ltd [1957] 1 Lloyd's Rep 240 …….… 20
Credit Lyonnais v. New Insurance Co. [1997] 2 Lloyd‟s Rep 1 ……………………….. 17
Union of India v. McDonnell Douglas Corp. [1993] 2 Lloyd‟s Rep. 48 ………………. 15
MEXICO
Conservas La Costeña v. Lanín, Mexico 29 April 1996 Compromex Arbitration
proceeding , http://cisgw3.law.pace.edu/cases/960429m1.html ...................................... 22
30.11.2006, Centro de Arbitraje de México,
http://www.unilex.info/case.cfm?id=1149........................................................................26
NETHERLANDS
Société Nouvelle. v. Import - en Exportmaatschappis, Rb Alkmaar, Netherlands, 30
November 1989, 674/1989 …………………………………………………………… 14
Netherlands Arbitration Institute No. 2319 (15 October 2002).
http://cisgw3.law.pace.edu/cases/021015n1.html ............................................................ 24
xi
MISCELLANEOUS
Prosecutor v. Blaskic Appeals Chamber Judgement, Review, Trial Chamber II, 18 July
1997 ………………………………………………………………………………..…… 10
Re Ewin (1830) 1 Cr & J 151 …………………………………………………………... 16
N.V. Namur v. N.V. Wesco, Rechtbank van koophandel Kortrijk, ,16 December 1996,
A.R. 4328/93 ………………………………………………………………………..….. 14
T. SA v. Établissement, HG Zürich, 30 November 1998, HG 930634/O ………………. 13
Prosecutor v. Kanya ICTY Appeals Chamber Decision, 3 June 1999 ……………..…. 10
SPAIN
Case No. 35/201017.02.2010, Tribunal Supremo, Spain,
http://www.unilex.info/case.cfm?id=1524 …………………………………………….. 26
Case No. 383, 26.11.2007, Audiencia Provincial de Tarragona, Spain,
http://www.unilex.info/case.cfm?id=1359 …………………………………………….. 27
Case No. 812/2007, 09.07.2007, Tribunal Supremo, Spain,
http://www.unilex.info/case.cfm?id=1216 …………………………………………….. 26
UNITED KINGDOM
AIG Group Ltd. v. Ethinki [1998] 4 All ER 301 ………………………………………. 17
Pavia & Co SpA v Thurmann–Nielsen, [1952] 2 Q.B. 84 …………………………...… 21
Re Anziani [1930] 1 Ch 407 …………………………………………..……………...… 17
Silver v. Ocean Steamship Co. Ltd, L.R. [1906] 1 K.B. 237 ………………………...… 21
Sonatrach Petroleum Inc. v. Ferrell International, [2002] 1 All ER 627 ………………. 1
XL Ins. Ltd. v. Toyota Motor Sales USA Inc., Q.B. 14 July 1999 ………………………. 8
UNITED STATES
xii
08.02.2005, Administrative Determination; USA,
http://www.unilex.info/case.cfm?id=1125 …………………………………………….. 26
Al Haddad Bros. Enterprises, Inc. v. M/S Agapi, 635 F.Supp.205 (D.Del.1986), aff‟f
without op., 813 F.2d 396 (3d Cir. 1987) ……………………………………………….. 9
American Construction Machinery & Equipment Corp. v. Mechanized Construction of
Pakistan Ltd, 659 F. Supp. 426 (S.D.N.Y.), aff‟d, 828 F.2d 117 (2d Cir. 1987) ……….. 5
Ball v. Versar, 2006 WL 2568057 (S.D. Ind. 2006) …………………………………… 12
Beijing Metals v. American Business Center, 993 F.2d 1178 (5th Cir. 1993) ……….….. 1
Diemaco v. Colt’s Mfg. Co., 11 F.Supp.2d 228 (D.Conn.1998) ………………………… 8
Fahnestock v. Waltman, 935 F.2d 512, 519 (2d Cir. 1991) ………………………….... 12
In re Arbitration Between U.S. Turnkey Exploration 577 So.2d 1131 (La. App. 1991)
…………………………………………………………………………………………... 10
Kaiser Aluminum & Chemical Corp. v. Illinois Central Gulf R.R., 615 F.2d 470 (8th Cir.)
…………………………………………………………………………………………... 22
Mastrobuono v. Shearson Lehman Inc , 514 U.S. 52 (U.S. S.Ct., 1995) ……………… 11
Sphere Drake Insurance PLC v. Marine Towing INC, 16 F.3d 666 (5th Cir. 1994) ……. 4
CONVENTIONS
INCOTERMS, www.iccwbo.org/incoterms/preambles/pdf/FOB.pdf .................. en passim
UNCITRAL Model Law on International Commercial Arbitration………...….. en passim
UNIDROIT Principles on International Commercial Contracts ……………….. en passim
United Nations Convention on the Carriage of Goods by Sea, 1978
(Hamburg)……………………..……………………………..…………………. en passim
xiii
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral
Awards…………………………………………………….……………...……. en passim
DIGEST
2008 UNCITRAL Digest of Case Law, United Nations Convention on the International Sale of
Goods ……………………………………………………………………………………………. 2
HYPERLINKS
http://www.cisg.law.pace.edu/cisg/biblio/koch.html ....................................................... 24
http://www.cisg.law.pace.edu/cisg/text/flecht81,85,88.html …………………………... 29
JOURNALS
Abba Kolo, Witness Intimidation, Tampering & other Related Abuses of Process in
Investment Arbitration: Possible Remedies Available to the Arbitral Tribunal, 43
Arbitration International Vol.26, No.1 (2010) …………………………………….…… 11
Albert Jan van den Berg, New York Convention of 1958: Refusals of Enforcement, ICC
International Court of Arbitration Bulletin Vol. 18 No.2, 2007 …………………….... 5, 9
Bonell, The UNIDROIT Principles and Transnational Law, 5 Uniform Law Review 199
(2000) …………………………………………………………………………………... 18
Christofer Coakley, In The Growing Role of Customized Consent in International and
Commercial Arbitration, 29 GA. J. INT‟L & COMP. L. 127…………………………… 3
Friedland, Provisional Measures in ICSID Arbitration (1986) 2 Arb. Int‟l 335 ………. 13
Hirsch, The Place of Arbitration and the Lex Arbitri 34 Arb. J 43, 45 (1979) ………… 16
xiv
Janet Walker, Agreeing to Disagree: Can We Just Have Words? CISG Article 11 and the
Model Law Writing Requirement, (25) Journal of Law and Commerce 153 at 163 …..… 1
Mann, Lex Facit Arbitrum, 2 Arb Int‟l 241, 244-245, 248, (1986) ………………….... 15
Markiyan Kliuchkovskyi, Applicability of UNIDROIT Principles of International
Commercial Contracts in Courts and Arbitration Tribunals, International Arbitration &
L.P., Magisters …………………………………………………………………………. 18
Peter Kucherepa, Reviewing Trends And Proposals To recognize Oral Agreements To
Arbitrate In International Arbitration Law, (2005) 16 Am. Rev. Int‟l Arb. 409………... 3
Rubins, Allocation of Costs and Attorney’s Fees in Investor-State Arbitartion, 18 ICSID
Rev. FILJ 109 (2003) ………………………………………………………………...… 12
Sieg Eiselen, Adoption of the Vienna Convention for the International Sale of Goods (the
CISG) in South Africa, 116 South African LJ, Part II (1996), 323-370 ……………...… 18
REPORT
2004 WL 2075351, World Trade Organization, Report of the Panel, UNITED STATES -
SUBSIDIES ON UPLAND COTTON, September 8, 2004 …………………………… 20
RULES
Kuala Lumpur Regional Centre for Arbitration Rules ……………………….…………..7
UNCITRAL Arbitration Rules ……………………………………………..……… 10, 11
xv
STATEMENT OF JURISDICTION
Astoria Produce Company (The Claimant) has approached the Kuala Lumpur Regional Center
for Arbitration (KLRCA), Kuala Lumpur pursuant to the arbitration agreement between the
Claimant and Rolga Farmers‟ Exchange (The Respondent)and maintains that the claim is
admissible against the Respondent. The same has been argued further in the pleadings.
xvi
QUESTIONS PRESENTED
I. WHETHER THE KLRCA HAS THE AUTHORITY TO RESOLVE THE DISPUTE BETWEEN THE
PARTIES, AND SPECIFICALLY, WHETHER THERE WAS AN AGREEMENT BETWEEN THE
PARTIES TO SUBMIT THIS DISPUTE TO IT?
II. WHETHER THE THREE ARBITRATORS WERE PROPERLY APPOINTED, SPECIFICALLY,
WHETHER RESPONDENT WAS IMPROPERLY DENIED THE OPPORTUNITY TO SELECT ITS
„PARTY-APPOINTED ARBITRATOR‟ AND WHETHER THE PRESIDING ARBITRATOR WAS
IMPROPERLY APPOINTED?
III. WHETHER THE ARBITRATION PANEL HAS THE AUTHORITY TO IMPOSE SANCTIONS IN THE
FORM OF A FINE ON THE RESPONDENT FOR FAILING TO APPEAR AT THE INITIAL HEARING
AND/OR FOR NOT PROVIDING ADEQUATE NOTICE THAT IT WOULD NOT APPEAR AND,
ASSUMING IT DOES, WHAT SANCTION WOULD BE APPROPRIATE UNDER THE
CIRCUMSTANCES?
IV. WHAT LAW OR LEGAL PRINCIPLES APPLY TO THIS DISPUTE?
V. DID THE SHIPMENT OF BANANAS ARRIVE AT ITS DESTINATION IN AN UNSATISFACTORY
CONDITION DUE TO IMPROPER STORAGE DURING THE VOYAGE FROM ROLGA TO ASTORIA
AND, IF SO, DOES THIS CONSTITUTE A BREACH OF THE RESPONDENT‟S OBLIGATION UNDER
THE CONTRACT BETWEEN THE PARTIES?
VI. WHETHER EITHER PARTY HAD A LEGAL OBLIGATION TO ATTEMPT TO SELL OR STORE
THE BANANAS, OR A PORTION OF THEM, SOON AFTER THE PINAFORE DOCKED AT THE
PORT OF ASTORIA?
xvii
STATEMENT OF FACTS
The Parties
Rolga Farmer‟s Exchange (RFE) (hereinafter Respondent) is an agricultural cooperative Rolgan
law, which is a civil law jurisdiction.
Astoria Produce Company (AP) (hereinafter Claimant) is a major distributor of produce to retail
grocery stores throughout Astoria, which is a common law jurisdiction.
The Contract
On July 15, 2010, Mr. Vogel, the Claimant‟s Chief Purchasing Agent, contacted Ms Rocco, the
Respondent‟s General Sales Manager by telephone and ordered a large quantity of bananas. In
response, Ms. Rocco sent a confirming Bill of Sale (email attachment) to Mr. Vogel which
indicated that the shipment would be made “FOB Rolga City”, with a forum selection clause,
calling for settlement of disputes by a sole arbitrator, in Rolga City, with the rules of the Western
Pacific Regional Centre for Arbitration.
Mr. Vogel subsequently signed the Bill of Sale, after revising the original forum selection clause
changing the number of arbitrators to three, place to Kuala Lumpur and the Rules to the Kuala
Lumpur Regional Centre for Arbitration (KLRCA) Rules.
Loading of Shipment
The Respondent arranged for shipment on the M/S PINAFORE on which the loading of bananas
began on September 21, 2010. The captain of the Pinafore, signed a clean bill of lading prepared
by Respondent on September 23, 2010.
xviii
The Payment
On September 30, 2010; the Respondent was paid in full for the bananas, through a letter of
credit
Inspection of Shipment
The Pinafore departed from Rolga on October 1, 2010, and arrived in Astoria city on November
24, 2010. Before unloading, Dr. Bartolo, with an Astorian Department of Agriculture inspector,
inspected the shipment. Some of the bananas were found to be ripe or ripening. The degree of
ripening in the No.2 hold where the bananas had been packed in boxes was substantially greater
than ripening in the No.1 hold, where, the bananas had been stowed by the stem.
The next day, a professional Maritime Surveyor, inspected the bananas and reported that
approximately 30% of the bananas were ripe or ripening, when the normal percentage of ripe or
ripening is from 3-5 % and more than 10% is considered excessive. He attributed the ripened
state of the bananas to the high temperatures at which they had been transported.
Rejection of Shipment
Based on Dr. Bartolo‟s recommendation, Mr. Vogel sent an email to Ms Rocco on November 26,
2010, rejecting the entire shipment due to excessive ripening of the bananas. He also requested
Ms. Rocco to advise the Captain of M/S Pinafore as to how the bananas were to be disposed of.
Most importantly, Mr. Vogel also asked for a full refund of the purchase price within 30 days.
In response, Ms. Rocco contended that the Respondent‟s responsibility had ended when the
bananas were loaded onto the M/S Pinafore, and also conveyed that their non-intention of
paying for the damage to the bananas.
xix
Dumping of Shipment
As the Pinafore had other “ports of call,” the bananas were unloaded and stored in a nearby
warehouse. The following day, an inspector for the Astoria Department of Agriculture found that
54% of the bananas were over-ripe and the remainder ripe or ripening. The Respondent was
asked to pick up the bananas, but it refused to dispose of the bananas. Two days later, the
Department of Agriculture supervised the dumping of the entire shipment as waste.
The Arbitration
On June 1, 2011, the Claimant commenced arbitration with the KLRCA pursuant to Rule 3 of the
UNCITRAL Arbitration Rules (2010). It designated Bernard Bodd as its party appointed
arbitrator. KLRCA‟s Director notified RFE of the filing of the Request for Arbitration and
requested that RFE appoint its party appointed arbitrator within 30 days. After 45 days had
elapsed without RFE making an appointment, the Director appointed Riska Benti, as the second
arbitrator and Judge John Chong, as the presiding arbitrator.
Less than an hour before the initial hearing, scheduled on 15 August 2011, the Director received
an e‐ mail from Ms Rocco stating that the Respondent would not appear as it intends to
challenge the authority of the tribunal.
The Director then, arranged for another hearing to be scheduled on 10 October 2011. A
representative of RFE notified the Director that it would be represented by an attorney at the
hearing who should be appointed as its "party appointed arbitrator”. The Director refused the
replacement on the grounds that it was too late to substitute an attorney as a member of the
arbitration panel.
xx
SUMMARY OF PLEADINGS
I. KLRCA HAS THE AUTHORITY TO RESOLVE THIS DISPUTE
The arbitration agreement to submit disputes to the KLRCA is valid. It satisfies the
requirements of CISG, or in the alternative, is valid under S.9 of The Arbitration Act, 2005 of
Malaysia. Further it fulfils the requirements of Art.II(2) of The New York Convention, and
can further be validated under Art.VII(1). Any Award pursuant to this agreement will be
enforceable under Art.V(1)(a) of The Convention.
II. THE TRIBUNAL HAS BEEN PROPERLY CONSTITUTED
Ms. Benti‟s appointment by the Director as the second arbitrator is valid under the KLRCA
Rules. Further the appointment of the Presiding Arbitrator is also in accordance with the
Rules. Any Award rendered by this Tribunal will be enforceable under Art.V(1)(d) of The
New York Convention.
III. THE TRIBUNAL HAS THE AUTHORITY TO IMPOSE SANCTIONS
Unless a mode of conducting the proceedings has been prescribed by the parties, arbitrators
have a general discretion over the proceedings and are not bound by formal rules of
procedure. Whether or not the instruments of the tribunal explicitly or implicitly vest it with
such authority, it can always rely on its inherent powers as a basis of jurisdiction so as to
resolve the disputes effectively. Further, it may use its procedural discretion in the present
matter in order to fulfill its obligation of conducting the arbitration expeditiously.
xxi
IV. CISG SHOULD GOVERN THE CONTRACT
Art.1(1)(b) of the Convention expresses that it will govern the contract if the rules of private
international law lead to the application of the law of a Contracting State.
The rules of private international law lead to the application of Astorian law as it has the
closest and most real connection with the transaction. Since Astoria is a Contracting State,
the Convention would apply to the present dispute.
V. RESPONDENT HAS BREACHED ITS OBLIGATIONS UNDER THE CONTRACT
FOB Contract entails that the seller will be responsible till the goods cross the ship‟s rails.
RESPONDENT did not pack the goods in accordance with CLAIMANT‟s requirements and
also did not provide for insurance. The instructions given to Pinafore‟s Captain was
inadequate. A clean bill of lading does not provide adequate evidence of proper shipment.
RESPONDENT is guilty of fundamental non-performance and fundamental breach of
contract under both CISG and UNIDROIT Principles, thereby giving CLAIMANT the option
to avoid the contract.
VI. CLAIMANT DID NOT HAVE A LEGAL OBLIGATION TO ATTEMPT TO SELL
THE BANANAS
CLAIMANT is not claiming any damages, and hence it is not obligated to mitigate. Under
the principle of good faith, CLAIMANT is only expected to act reasonably. It would be
unreasonable to sell the non-conforming goods to customers. Considering the perishable
nature of the goods, CLAIMANT duly sent a notice in time to RESPONDENT for taking
care of the goods. This is an act of good faith. It is unreasonable to fix the responsibility of
selling and storing the goods on CLAIMANT as both parties were still negotiating as to who
should take requisite steps.
1
PLEADINGS
I. KLRCA HAS THE AUTHORITY TO RESOLVE THIS DISPUTE.
A. The Arbitration Agreement Is Valid
1. The agreement satisfies the requirements of lex arbitri.
The parties have not provided an “Applicable Law” clause in the Bill of Sale.1 When parties
have not expressly agreed to the law governing the arbitration, selecting the law governing the
arbitration agreement requires choosing between two alternatives – the substantive law of the
underlying contract or the law of the seat of the arbitration.2
a. Substantive law of contract will apply to arbitration agreement.
CLAIMANT states that when parties have not specified the law applicable to the arbitration, the
law of the arbitration agreement follows the substantive law of contract.3 As will be established
in Issue IV, CISG is applicable as the substantive law applying to the contract.
One of the primary factors behind enacting CISG was to provide parties to international contracts
for sale of goods with some certainty as to the principles of law that would govern their
disputes.4 Hence CLAIMANT states that when the substantive law of the contract is CISG, the
law governing the forum selection clause in that same contract should also be CISG.5
1 Corrections and Clarifications, B.7
2 Gary Born, International Commercial Arbitration, (Kluwer Law International, 2001, 2
nd edn.), p.111
3 Sonatrach Petroleum Inc. v. Ferrell International, [2002] 1 All ER 627
4 Beijing Metals v. American Business Center, 993 F.2d 1178 (5th Cir. 1993)
5 Janet Walker, Agreeing to Disagree: Can We Just Have Words? CISG Article 11 and the Model Law Writing
Requirement, (25) Journal of Law and Commerce 153 at 163 [hereinafter Walker]
2
i. Form requirements not necessary under Art.11 CISG
When deciding the validity of an arbitration agreement, resort can be made to permissive form
requirements under the substantive law of contract.6 Art.11 provides freedom from formality,
i.e., the conclusion of agreements in writing or any other form is not required. The reference to
arbitration agreements in Art.19(3) and Art.81(2) implies that the freedom from form provision
under Art.11 extends to arbitration agreements as well.7
In light of Art.11, RESPONDENT not reverting back to the CLAIMANT on the amended forum
selection clause is irrelevant while determining the validity of the arbitration agreement. On the
contrary, the RESPONDENT‟s subsequent actions lead to the conclusion that it accepted all the
terms of the contract, including the revised forum selection clause.
ii. Acceptance of counter-offer
Pursuant to Art.19, a counter-offer was constituted when the acceptance to the offer contained
additional terms materially altering the offer.8 In particular, different terms relating to the
settlement of dispute are considered material changes under Art.19(3).9 The CLAIMANT
modified the forum selection clause in the Bill of Sale, which constitutes a material alteration
under Art.19(3).10
Performance of contractual duties pursuant to a counter-offer amounts to
assent to such an offer.11
RESPONDENT‟s tacit acceptance of the terms of the contract by
performing the acts of arranging shipment and loading the goods on the carrier subsequent to the
CLAIMANT returning the Bill of Sale show its tacit acceptance of the arbitration agreement as
well under Art.18(1) and Art.18(3).
6 Bundesgerichtshof, 21 September 2005, as cited in Robert Koch, The CISG as the Law Applicable to Arbitration
Agreements?, Sharing International Commercial Law across National Boundaries (Wildy, Simmons & Hill
Publishing, 2008, p.273[hereinafter Koch] 7 Koch, at p.271
8 UNCITRAL Digest, Art.19
9 Koch, at p.272
10 Printed Shoes case, OLG Frankfurt am Main 26 June 2006 (Germany)
11 Doors Case, OS Germany 13/01/1993
3
iii. Art.90 not applicable for domestic legal systems.
Arbitration agreements are subject to international agreements under Art.90.12
The term
„international agreement‟ is used generically and applies to bilateral and multilateral treaties.13
Therefore, a domestic legal system is not an international agreement concluded between States.
Hence The Arbitration Act, 2005 is not an agreement in the sense of Art.90, and the CISG will
prevail over any written form requirement contained in this domestic law.14
b. “Writing” requirements of Law of the Seat satisfied.
Even if this Tribunal finds that the lex loci, i.e., The Malaysian Arbitration Act, 2005 is the lex
arbitri, CLAIMANT states that the requirements of a valid arbitration agreement under S.9 of
The Arbitration Act, 2005 has been fulfilled.
S.9 is modelled on Art.7 of the UNCITRAL Model Law on International Commercial
Arbitration, 1985 prior to the 2006 Amendment. The objective of Art.7 is a written
demonstration that the contracting parties intended to incorporate an arbitration clause into the
contract.15
The main requirement for arbitration is that there must be intention to arbitrate. The
parties‟ intention to arbitrate may be evidenced by both parties signing a document providing
arbitration as a chosen form of dispute resolution.16
12
H.P. Westermann, Munchener Kommentar zum Burgerlichen Gesetzbuch at Art 4 para 7, as cited in Koch 13
F. Enderlein and D. Mascow, International Sales Law, as cited in Koch 14
Koch, at p.273 15
Christofer Coakley, In The Growing Role of Customized Consent in International and Commercial Arbitration, 29
GA. J. INT‟L & COMP. L. 127, p.143 16
Peter Kucherepa, Reviewing Trends And Proposals To recognize Oral Agreements To Arbitrate In International
Arbitration Law, (2005) 16 Am. Rev. Int‟l Arb. 409
4
Thus when the CLAIMANT sent the Bill of Sale to the RESPONDENT, and the RESPONDENT
performed its contractual obligations thereto, the contract stands confirmed and the arbitration
clause contained therein is binding on both parties.17
2. The agreement is valid under the New York Convention.
i. The requirements of Art.II(2) met.
CLAIMANT states that Art.II is non-exhaustive, and the words „shall include‟ in Art.II(2) should
be read expansively as „shall include but not limited to‟ to allow other written forms of
arbitration. This interpretation allows tacit acceptance of a contract containing an arbitration
clause, provided that the clause is contained in a written contract or other forms of writing.18
This
view has been endorsed by UNCITRAL.19
In the alternative, CLAIMANT states that the Sphere Drake formula20
should be applied,
whereby the requirements of „signature‟ and „exchange‟ under Art.II(2) applies only to an
arbitration agreement, i.e., a self contained arbitration agreement but not to an arbitration clause
in a contract. In light of this Formula, the forum selection clause is valid under Art.II(2).
ii. Art.VII(1) allows relaxing requirements of Art.II(2)
Art.VII entitles a party to rely upon the more liberal domestic provisions of the country where
enforcement is sought.21
Rolga and Astoria are both signatories to the UNCITRAL Model Law
on International Commercial Arbitration, 1985.22
The provisions of the UNCITRAL Model Law
on International Commercial Arbitration, 1985 are a part of Astoria and Rolga‟s domestic legal
17
Smita Conductors Ltd. v. Euro Alloys Ltd., (2001) 7 SCC 328 18
Albert van den Berg, ICCA Yearbook Commercial Arbitration XXVIII 2003, Kluwer Law International, p.585 19
2006- Recommendation regarding the Interpretation of article II (2) and article VII (1) of the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards ( New York, 1958), A/6/17 20
Sphere Drake Insurance PLC v. Marine Towing INC, 16 F.3d 666 (5th Cir. 1994) 21
Pieter Sanders, The Work of UNCITRAL on Arbitration and Conciliation, (Kluwer Law International, 2001), p.30 22
Compromis, 9
5
system. UNCITRAL encourages States to interpret the provisions of Art.II(2) in light of
domestic provisions while interpreting Art.VII(1).23
Post the amendments, Art.7 of the Model Law require EDI of the arbitration agreement. This
requirement is fulfilled by the forum selection clause, and hence it is valid.
B. Award Rendered Pursuant To This Agreement Will Be Enforceable.
According to Art.V(1)(a) of The New York Convention, recognition and enforcement of an
award may be refused when the arbitration agreement is not valid under the law to which the
parties have subjected it, or in its absence, is not valid under the law of the country where the
award was made.24
In the present matter, the agreement is subject to and is valid under the CISG.
Hence any award rendered will be enforceable.
If The Malaysian Arbitration Act, 2005 is applicable, even then the agreement is valid and award
will be enforceable. Even if this Tribunal finds that the agreement is invalid under The
Arbitration Act, 2005 the award will still be enforced because the parties did not validly
designate Malaysian law as applying to their agreement.25
Further, an award can be enforced even though the strict signature requirement of The New York
Convention is not fulfilled when the conduct of parties shows their acceptance of the
agreement.26
Hence any award passed by this Tribunal pursuant will not be refused enforcement
by courts under Art. V(1)(a).
23
2006- Recommendation regarding the Interpretation of article II (2) and article VII (1) of the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards ( New York, 1958), A/6/17 24
Albert Jan van den Berg, New York Convention of 1958: Refusals of Enforcement, ICC International Court of
Arbitration Bulletin Vol. 18 No.2, 2007 [hereinafter Van den Berg] 25
American Construction Machinery & Equipment Corp. v. Mechanized Construction of Pakistan Ltd, 659 F. Supp.
426 (S.D.N.Y.), aff‟d, 828 F.2d 117 (2d Cir. 1987) 26
Schiff Food Products Inc v. Naber Seed & Grain Co. Ltd., ICCA Yearbook Commercial Arbitration XXVI (2001)
p.365
6
II. THE TRIBUNAL HAS BEEN PROPERLY CONSTITUTED.
A. Ms. Benti‟s appointment in accordance with the parties‟ agreement.
1. RESPONDENT failed to appoint its arbitrator in time.
In the present matter, the forum selection clause specifies the number of arbitrators as three.27
According to Art.9(1) of the KLRCA Rules, when the parties have agreed on a Tribunal to
comprise of three arbitrators, each party shall appoint one arbitrator, and the two party-appointed
arbitrators shall choose the third arbitrator who will act as the presiding arbitrator.
Pursuant to Art.9(1), CLAIMANT designated Bernard Bodd as its party appointed arbitrator.28
Art.9(2) of the KLRCA Rules states that when a party fails to notify the arbitrator it has
appointed within 30 days after the receipt of the other party‟s notification of the appointment of
its arbitrator, the appointing authority can appoint the second arbitrator. The Director of The
KLRCA had expressly requested the RESPONDENT to notify its party-appointed arbitrator
within 30 days of receiving the request for arbitration.29
Upon RESPONDENT‟s failure to make any appointment even after 45 days,30
the Director was
empowered under Art.9(2) to appoint Ms. Riska Benti as the second arbitrator.
2. No grounds for replacing Ms. Benti.
Replacement of an arbitrator by a substituted arbitrator is provided for under Art.14 of the
KLRCA Rules. This provision deals with the procedure for appointing a substitute arbitrator
where an arbitrator has to be replaced during the course of the arbitral proceedings. However the
circumstances in which an arbitrator will have to be replaced is not enumerated either under
Art.14 or any other provision of the KLRCA Rules.
27
Compromis, 1 28
Compromis, 4 29
Ibid 30
Ibid
7
When there is no procedure prescribed in the institutional rules, resort can be made to the law of
the arbitration.31
Therefore, this apparent lacuna in the KLRCA Rules can be filled by referring
to the lex arbitri, i.e., the Malaysian Arbitration Act, 2005. S.17(1) states that a substitute
arbitrator shall be appointed where his mandate terminates due to a challenge, the arbitrator
withdraws from office for any other reason, his mandate is revoked by agreement of the parties
and in any other case of termination of mandate.
In the present matter, the RESPONDENT seeks to replace Ms. Riska Benti on the ground that it
should be given the opportunity to appoint its “party appointed arbitrator”.32
S.17(1) of the
Arbitration Act does not envision replacement of arbitrator on such a ground. Even if the
RESPONDENT were to argue that Ms. Benti‟s mandate as the second arbitrator was terminated
when the RESPONDENT sought to appoint its own party-appointed arbitrator, the CLAIMANT
states that the RESPONDENT had already waived its right to appoint an arbitrator by not
promptly objecting to the appointment of Ms. Benti.33
The RESPONDENT is thus precluded
from seeking to exercise this right after the constitution of the Tribunal.
B. Presiding Arbitrator has been properly appointed.
1. 30 days time limit not applicable.
Art.9(3) of the KLRCA Rules states that if the two arbitrators have not agreed on the choice of
the presiding arbitrator within 30 days of the appointment of the second arbitrator, the presiding
arbitrator shall be appointed by the appointing authority in the same way as a sole arbitrator
would be appointed under article 8.
31
Gary B. Born, International Commercial Arbitration (Kluwer Law International, The Hague, 3rd
ed., 2009), p.407
[hereinafter Born] 32
Compromis, 5 33
Art.32, KLRCA Rules of Arbitration
8
Such an appointment procedure may be undermined by a party not appointing its arbitrator or a
party-appointed arbitrator refusing to agree on the presiding arbitrator.34
The RESPONDENT‟s
non-participation in the constitution of this Arbitral Tribunal shows that it is seeking to delay the
proceedings. CLAIMANT states that such dilatory tactics can be avoided by allowing the arbitral
institution to intervene and make the appointment.35
A party-appointed arbitrator is expected to consult the party appointing him while deciding upon
the appropriate attributes of a Presiding Arbitrator. The importance of this practice is reflected in
the wording of Art.9(1) of the KLRCA Rules, which states that “the two arbitrators thus
appointed” by both parties will choose the Presiding Arbitrator.
While a co-arbitrator is not bound to follow any instructions on such matters,36
such consultation
is in line with contemporary practice of giving weightage to the parties‟ knowledge of the needs
of their case and the desire of participating in the constitution of “their” Tribunal.37
CLAIMANT states that when a co-arbitrator is appointed by the appointing authority and not a
party, the time period of 30 days under Art.9(3) will not come into play. The institution can
appoint the presiding arbitrator to expedite the constitution of the Tribunal.
When parties agree to arbitrate before an institution under its institutional Rules, they are bound
by the institution‟s interpretation of such Rules.38 Therefore, the RESPONDENT cannot question
the Director of the KLRCA‟s decision to appoint the Presiding Arbitrator under Art.9(3) without
waiting for the co-arbitrators to agree on their choice of presiding arbitrator.
34
Preventing Delay or Disruption of Arbitration, ICCA Congress Series No. 5 (Kluwer, 1991) p.61 35
Ibid 36
XL Ins. Ltd. v. Toyota Motor Sales USA Inc., Q.B. 14 July 1999, as cited in Born, at p.1405 37
Born, at p.1405 38
Diemaco v. Colt’s Mfg. Co., 11 F.Supp.2d 228 (D.Conn.1998)
9
2. List procedure not compulsory.
Art.8(2) requires the Director to appoint the Presiding Arbitrator as promptly as possible.
Further, under Art.8(2)(d), the Director has the discretion of not following the list-procedure and
appointing the presiding arbitrator himself.
Considering the fact that the RESPONDENT had delayed the proceedings by not participating in
the appointment of its co-arbitrator, it would have been futile to follow the list procedure. Hence
the Director was justified in appointing Judge Chong as the Presiding Arbitrator.
C. Any Award passed by this Tribunal will be enforceable.
According to Art.V(1)(d) of the New York Convention, enforcement of an award may be refused
when the composition of the Tribunal is not in accordance with the agreement of the parties.39
However, since the Tribunal has been constituted in accordance with the parties‟ agreement,
there is no risk of an award being refused enforcement. Even if the Tribunal was not constituted
in accordance with the arbitration agreement, such a lapse is not fatal and the award granted will
still be enforceable.40
39
Van den Berg 40
Al Haddad Bros. Enterprises, Inc. v. M/S Agapi, 635 F.Supp.205 (D.Del.1986), aff‟f without op., 813 F.2d 396
(3d Cir. 1987)
10
III. THE ARBITRAL TRIBUNAL HAS THE AUTHORITY TO IMPOSE
SANCTIONS.
A. Procedural Discretion of the Arbitrators
The UNCITRAL Rules41
provides that, “unless a mode of conducting the proceedings has been
prescribed by the parties, arbitrators have a general discretion over the proceedings and are not
bound by formal rules of procedure, and the standard of review of arbitration procedures is
merely whether a party has been denied a fundamentally fair hearing.”42
A closely related objective of international arbitration is the use of arbitral procedures that are
flexible and tailored to the parties‟ particular dispute.43
This flexibility enables the arbitral
tribunal to take decisions that take into account the circumstances of the case and the need for a
just and cost-efficient resolution of the dispute.44
It is observed that tailoring of procedures may
even involve establishing an expedited “fast-track” arbitral procedure.45
An aspect of the arbitrators‟ procedural discretion is the freedom to adopt more “judicial”
procedures that appear best-suited for handling one or more aspects of a dispute.46
Although, in
discharging the judicial functions, an arbitral tribunal is to be guided by its constitutive
instruments, in the case of a lacuna, the tribunal can rely on inherent powers to fill the gap.47
The
existence of these inherent powers, are necessary to ensure the proper administration of justice.48
Thus, whether or not the instruments of the tribunal explicitly or implicitly vest it with such
41
Art.17(1), UNCITRAL Arbitration Rules 42
In re Arbitration Between U.S. Turnkey Exploration 577 So.2d 1131 (La. App. 1991) 43
G Petrochilos, Procedural Law in International Arbitration, 81 (2004) 44
Redfern, Hunter, Blackaby & Partasides, Law and Practice of International Commercial Arbitration, (Sweet &
Maxwell, London, 4th
Edn., 2004) 45
Born, at p.2231 46
Ibid 47
Prosecutor v. Kanya, ICTY Appeals Chamber Decision, 3 June 1999 48
Prosecutor v. Blaskic, Appeals Chamber Judgement, Review, Trial Chamber II, 18 July 1997
11
authority, it can always rely on its inherent powers as a basis of jurisdiction so as to resolve the
disputes effectively.49
This clearly indicates that an arbitral tribunal can exercise jurisdiction over numerous procedural
issues, even though such powers are not expressly provided for in its constitutive instruments.
B. Tribunal‟s Duty to Minimize Delay.
It is settled law that the arbitral tribunal, in exercising its discretion, shall conduct the
proceedings so as to avoid unnecessary delay and expense and provide an efficient process for
resolving the parties‟ dispute.50
Also, arbitrators are obligated to conduct arbitration with
expedition.51
This requirement of expedition forms an essential feature of the Kompetenz-
Kompetenz principle to ensure that a party cannot succeed in delaying the arbitral proceedings by
alleging that the arbitration agreement is invalid or non-existent.52
Thus, in the light of such requirements, the arbitration panel may use its procedural discretion in
order to fulfill its obligations.
C. Power To Impose Sanctions.
There is no question that arbitrators have power to make an award of monetary damages which
extends to practical aspects and logistics of payment.53
There have been doubts concerning the
power of arbitrators to award punitive damages, however, these doubts were resolved decisively
in favor of arbitrability of punitive damage claims in Mastrobuono v. Shearson Lehman Inc.54
49
Abba Kolo, Witness Intimidation, Tampering & other Related Abuses of Process in Investment Arbitration:
Possible Remedies Avilable to the Arbitral Tribunal, 43 Arbitration International Vol.26, No.1 (2010) 50
Art.17(1), UNCITRAL Arbitration Rules 51
Born, at p.2435 52
Fouchard, Gaillard & Goldman, International Commercial Arbitration, (Kluwer Law International, Hague, 1999) 53
Merkin, Arbitration Law (Informa legal Publishing, London, 2004) 54
514 U.S. 52 (U.S. S.Ct., 1995)
12
Also, in Fahnestock v. Waltman,55
the court held that general language of a certain Arbitration
Rules, which provided that the arbitrators may award “any remedy which [is] just and equitable
and within the scope of the agreement,” evidence a presumption that punitive damages may be
pursued in the arbitration.
More importantly, it is clear that the tribunal may award monetary compensation for breach of
the arbitration agreement.56
Several arbitral tribunals have used such discretion in costs
allocation by taking into account uncooperative behaviour of the parties.57
Gaillard asserts “the
arbitrators‟ jurisdiction to sanction all breaches of the arbitration agreement and the arbitrators‟
power to take any appropriate measures to ensure the effectiveness of their future award.”58
Further, damages for breach of an arbitration agreement can be an appropriate means of
enforcing arbitration agreements, by increasing the disincentives for such conduct.59
In the light of the above arguments, it is submitted that the arbitration panel has the authority to
impose sanctions in the form of a fine on the RFE for failing to appear at the initial hearing
without providing adequate notice.
55
935 F.2d 512, 519 (2d Cir. 1991) 56
Friedland, Provisional Measures in ICSID Arbitration (1986) 2 Arb. Int‟l 335 57
Rubins, Allocation of Costs and Attorney’s Fees in Investor-State Arbitartion, 18 ICSID Rev. FILJ 109 (2003) 58
Ricardo Quass Duarte, Anti-Suit Injunctions in the Context of International Commercial Arbitration,
<www.trenchrossiewatanabe.com.br/_noticias/Antitruste%20texto_integral.pdf> 59
Ball v. Versar 2006 WL 2568057 (S.D. Ind. 2006)
13
IV. CISG SHOULD GOVERN THE CONTRACT
A. Applying CISG through Art.1(1)(b)
1. The Convention prevails over Private International Law
The 1980 Vienna Convention is an international agreement on uniform substantive rules
governing international sales of goods. This uniform sales law has been incorporated within the
national substantive laws of the Contracting States.60
It is agreed that both the Convention and the private international law rules of a forum address
international contracts. However, it must be first determined whether the Convention applies
before resorting to private international law.61
This is because of the following two reasons:
(a) Uniform substantive law is more specific per definitionem than the rules of private
international law because the former settles "directly" the question of applicable substantive
law.62
(b) Most importantly, the rules of uniform substantive law must always prevail over the rules of
private international law.63
Thus, contrary to initial appearances, the substantive law applicable to this international
transaction should not be determined by reference to the rules of private international law on the
matter but rather by reference to the 1980 United Nations Convention on Contracts for the
International Sale of Goods.
60
Carolina Saf, A Study of the Interplay between the Conventions Governing International Contracts of Sale,
September 1999 http://www.cisg.law.pace.edu/cisg/text/saf96.html 61
2008 UNCITRAL Digest of Case Law, United Nations Convention on the International Sale of Goods; T. SA v..
Établissement, HG Zürich, 30 November 1998, HG 930634/O 62
Rheinland Versicherungen v. Atlarex., Tribunale di Vigevano, Italy, 12 July 2000, No. 405 63
Ibid
14
2. Applicability of Art.1(1)(b)
This provision expresses that even if CISG is not directly applicable under Art.1(1)(a), the
Convention rules will still govern the contract when the rules of private international law lead to
the application of the law of a Contracting State. Due to the substantive character of the
Convention, the rule in Art.1(1)(b) will apply whether the forum country is a Contracting State
or not.
The trend in the case law, both arbitral awards and State court decisions, to apply the Convention
on the basis of the criterion laid down in Art.1(1)(b) also in cases where the forum is that of a
non-Contracting State, by now appears sufficiently established.64
Thus, even though the
Convention does not bind non-Contracting States, it has been applied in courts of non-
Contracting States.65
Thus, in the present matter, since the CLAIMANT‟s place of business is in a Contracting State.
i.e. Astoria, CISG would apply if the rules of private international law lead to the application of
Astorian law.
3. Rules of Private International Law leading to application of laws of Astoria.
a. Choice-of-law rules of the forum
Various sources proceed from the premise that an international arbitration is based on or rooted
in a particular national legal system which has materially greater legal significance for and
control over a locally-seated arbitration than other legal systems.
64
Bonell & Liguori, The U.N. Convention on the International Sale of Goods: A Critical Analysis of Current
International Case Law, http://www.cisg.law.pace.edu/cisg/biblio/libo1.html 65
N.V. Namur v. N.V. Wesco, Rechtbank van koophandel Kortrijk, ,16 December 1996, A.R. 4328/93; Société
Nouvelle. v. Import - en Exportmaatschappis, Rb Alkmaar, Netherlands, 30 November 1989, 674/1989
15
By choosing a country in which to arbitrate, the parties ex hypothesi, create a close connection
between the arbitration and the country.66
Thus, the national arbitration legislation of the arbitral
seat will almost always govern both the internal procedural conduct of the arbitral and the
external relationship between the arbitration and national courts.67
In the present matter, the arbitration agreement lays down Kuala Lumpur as the seat of
arbitration. Thus, the relevant national arbitration legislation governing both the internal and
external procedural aspects of the arbitration is the Malaysian Arbitration Act, 2005.
According to Professor Mann, “The law of the arbitral tribunal‟s seat initially governs the whole
of the tribunal‟s life and work. In particular it governs…the rules of the conflict of laws to be
followed by [the arbitrators].”68
Properly understood, the parties‟ agreement to arbitrate in a
particular arbitral seat generally constitutes an implied acceptance, in cases involving true
conflicts, of application of the seat‟s choice-of-law rules. In most cases, this provides the
simplest, most neutral, most predictable and fairest choice-of-law rule.69
Moreover, a few
tribunals have reasoned that it is inappropriate to apply the conflicts rules or substantive law of
either party on the theory that it would be one-sided.70
Thus, in the present matter, since there is no evidence of an intention of applying any other
choice-of-law rules, the choice-of-law rules of Malaysia must be applied.
66
Union of India v. McDonnell Douglas Corp. [1993] 2 Lloyd‟s Rep. 48, 50 (Q.B.)‟; Hirsch, The Place of
Arbitration and the Lex Arbitri 34 Arb. J 43, 45 (1979) 67
G Petrochilos, Procedural Law in International Arbitration, 6 (2004) 68
Mann, Lex Facit Arbitrum, 2 Arb Int‟l 241, 244-245, 248, (1986) 69
Born, at p.1045 70
Grigera Naon, Choice-of-law Problems in International Commercial Arbitration, 289 Recueil des Cours 9, 285-86
(2001)
16
b. Application of laws of Astoria
The conflict-of-law rules applicable in Malaysia prescribes that the applicable substantive law is
to be the one with which “has the closest and most real connection with the transaction.”71
This
takes into account such factors as the place of business of the parties, the place where the
contract was made or was to be performed or the nature and subject matter of the contract, etc.72
The different factors applicable to the instant matter are:
(i) Place of business
It has been held that rights over the movables are to be governed by the law of the owner‟s
domicil.73
In the present matter, since the title of goods had passed from RESPONDENT to
CLAIMANT, the CLAIMANT was the rightful owner of the tangible movable property i.e. the
bananas.
(ii) Lex Situs of tangible goods
The lex situs determines the right of the parties in a transaction relating to tangible movables.74
Further, it has the great advantage of being a single and exclusive system that can act as an
independent arbiter of conflicting claims.75
It is settled law that the situs of chattels, that is, tangible movable property, is the place where
they are located.76
According to Maugham J, nobody “can doubt that with regard to the transfer
71
Belden Premaraj, The Choices of Law – Better Safe Than Sorry,The Malaysian Arbitration Perspective; YK Fung
Securities v. James Cape Ltd. (CA) [1997] 4 CLJ 300 72
North & Fawcett, Cheshire & North’s Private International Law, (LexisNexis Butterworths, London, 13th
Edn.,1999) [hereinafter North/Fawcett], p.267 73
Re Ewin (1830) 1 Cr & J 151 74
Re First National Bank (1975) 60 DLR (3d) 751; Canada Insurance Corpn. v. Canadian Commercial Bank (1994)
121 DLR (4th
) 360 75
North/Fawcett, p.267 76
Dicey & Morris, The Conflict of Laws, (Sweet & Maxwell, London, 2000, 13th
edn.) pp.923-924
17
of goods the law applicable must be the law of the country where the movable is situate.”77
In the
present matter, the lex situs of the chattels i.e. the shipment of bananas, is Astoria. Also, although
the shipment was dumped as waste, if goods are represented by a document of title such as a bill
of lading, the document itself may be treated as chattel.78
Thus, the lex situs of the shipment of
bananas is Astoria.
(iii) Place of characteristic performance
The characteristic performance is usually the performance for which the payment is due, for
example, the delivery of goods, the provision of a service.79
It is conceded that the place of
performance in the instant matter is Rolga, however, it is observed that the merits of the concept
of characteristic performance become less important when the concept is diluted by the addition
of other connecting factors.80
In the present matter, the more important factors of place of
business and lex situs dilute the importance of the place of characteristic performance.
Thus, in the light of the above arguments, CLAIMANT states that the rules of private
international law of the forum lead to the application of Astorian law leading to the application
of CISG by the virtue of its Article 1(1)(b).
B. UNIDROIT Principles cannot be applied.
1. Requirement of Arbitration Act, 2005
Art.28(1) of the UNCITRAL Model Law allows the arbitral tribunal to apply the “rules of law”
selected by the parties. In contrast, Art.28(2) of the Model Law provides for the parties to apply
the “law” determined by applicable conflict of laws rules. This difference in the text has been
77
Re Anziani [1930] 1 Ch 407 78
Nygh & Davies, Conflict of Laws in Australia, (Butterworths, Sydney, 2002, 7th
ed.), para 32.16 79
Credit Lyonnais v. New Insurance Co. [1997] 2 Lloyd‟s Rep 1; AIG Group Ltd. v. Ethinki [1998] 4 All ER 301 80
North/Fawcett, p.267
18
interpreted as requiring the arbitrators, in the absence of choice-of-law agreement, to not apply
non-national rules of law.81
In a few jurisdictions, arbitration legislation has recently been
adopted that modifies Article 28(2) of the Model Law to refer to “rules of law”. Nonetheless,
several influential jurisdictions82
including Malaysia83
have expressly declined follow this
approach. Thus, the rules traditionally limit the choice of law applicable to the international
contracts to the national laws, excluding any a-national or supranational set of rules, such as the
UNIDROIT Principles.84
UNIDROIT Principles are drafted by private individuals and endorsed by a private organisation,
however reputable they may be, and, accordingly, the Principles have no legal power
whatsoever, as the Principles themselves recognise.85
2. UNIDROIT Principles vis-à-vis CISG
The adoption of the CISG will lead to greater legal certainty in international trade relations and
negotiations. The codified nature of the rules, simplicity of their formulation, exclusion of
conflicts intricacies and foreign law, and the availability of sources, all help to create greater
legal certainty for importers and exporters.86
Also, although it may be as such desirable and reasonable, the use of the UNIDROIT Principles
for gap-filling under Art.7(2) of CISG is hard to justify. In fact, Art.7(2) makes it clear that the
gap has to be filled by recourse to general principles which are to be found within the CISG.
81
Holtzmann & Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial Arbitration:
Legislative History and Commentary, (1989) 82
S.46, English Arbitration Act; Section 1051(2), German ZPO 83
S.30(4), Malaysian Arbitration Act 2005 84
Bonell, The UNIDROIT Principles and Transnational Law, 5 Uniform Law Review 199 (2000). 85
Markiyan Kliuchkovskyi, Applicability of UNIDROIT Principles of International Commercial Contracts in
Courts and Arbitration Tribunals, International Arbitration & L.P., Magisters 86
Sieg Eiselen, Adoption of the Vienna Convention for the International Sale of Goods (the CISG) in South Africa,
116 South African LJ, Part II (1996), 323-370
19
Thus, the use of provisions from an external instrument which came into existence considerably
later than the CISG is not really in line with that rule.87
In the light of the above arguments,
CLAIMANT states that CISG should apply to the present dispute.
87
Dr. Peter Huber, Some Introductory Remarks on the CISG, (Sellier European Law Publishers, Munich, 2006)
20
V. RESPONDENT HAS BREACHED ITS OBLIGATIONS UNDER THE CONTRACT
A. RESPONDENT was under an obligation to dispatch the packed bananas in
accordance with the contract.
1. RESPONDENT‟s duty under FOB contract to deliver goods in accordance with
the contract.
RESPONDENT was obliged to deliver the goods to CLAIMANT under the contract. This
“obligation to deliver” consists of taking all steps necessary under the contract.88
In FOB
contracts, the seller is obliged to have the goods packaged and ready for shipment.89
Thus, a duty
was cast on RESPONDENT to ensure that the goods were packed properly before they were
loaded onto the Pinafore.
a. Goods not adequately packed
The packing of the goods was done in proper boxes according to the report of the surveyor.
However, some of the bananas had been hung by the stem and the others had not. This shows the
lackadaisical approach adopted by the seller while shipping the goods.
b. Goods not insured by RESPONDENT
The contract existing between the parties was of a nature of an extended FOB contract whereby
the Seller had to insure the goods before handling them over to the carrier. This kind of
flexibility in FOB contracts is recognised90
as the FOB contract is not susceptible to the rigid
definition.91
88
CLOUT Case No 338, Appellate Court Hamburg Germany 23 June 1998,
http://cisgw3.law.pace.edu/cases/980623g1.html 89
2004 WL 2075351, World Trade Organization, Report of the Panel, UNITED STATES - SUBSIDIES ON
UPLAND COTTON, September 8, 2004 90
Carlos Federspiel & Co v Charles Twigg & Co Ltd, [1957] 1 Lloyd's Rep 240 91
Griffin Day & Griffin, The Law of International Trade (3rd
ed., 2003) p. 52
21
The non-fulfilment of contractual obligations of appropriate packing and insurance of the goods
holds the RESPONDENT in breach of the contract.
2. Clean bill of lading does not prove goods were properly packed.
A clean bill of lading was issued by the Seller. However, it cannot be always called as prima
facie evidence of the condition of the goods upon delivery to the carrier.92
There have been
instances where clean bill of lading has been granted looking at the external conditions, even
when the goods are in a damaged condition.93
It cannot be determined whether the packing conditions were actually mentioned in the bill or
not. Art.15 of the Hamburg Rules provides that the absence in the bill of lading of any specific
particulars does not affect the legal character of the bill. The non-mandatory obligation to
mention the condition of packing establishes that the bill of lading might not have any such
particulars mentioned on it.
A clean bill of lading is defined Halsbury's Laws of England,94
as one which does not contain
any reservation as to the apparent good order and condition of the goods or the packing. This
“condition” refers to the external and apparent condition.95
As the surveyor‟s report already
establishes that the bananas were properly packed in cartons, it can follow that the external
condition was proper, but, there existed a fault in how the bananas were kept inside them (stowed
by stem or not).
3. Bananas deteriorated due to inadequate packing and lack of instructions given
to Pinafore‟s Captain.
92
Kaiser Aluminum & Chemical Corp. v. Illinois Central Gulf R.R., 615 F.2d 470 (8th Cir.), 93
Silver v. Ocean Steamship Co. Ltd, L.R. [1906] 1 K.B. 237 94
3rd Edn., Vol. 2, at p. 218 95
[1952] 2 Q.B. 84
22
The special Instructions on the Bill of Lading stated that no temperature mentioned (cool, dry
location with good circulation to prevent spoilage). There is no mention on how the bananas
should be stored and whether they should be hung by stem or not. Apart from this, the most
pertinent fact is that these instructions were issued a couple of days after loading of the cargo,
i.e., passing of the risk.
As the sale was agreed on as FOB-term, the shipping instructions were binding on the Seller
even though someone else took care of the practical matter.96
Furthermore, the goods were loaded on the Pinafore which was a general cargo ship. The
RESPONDENT should have taken due care to ensure that the goods were shipped on a vessel
especially meant for the purpose. Thus, the lack of proper care in delivering the goods upto the
rails of the ship can be hold the RESPONDENT in breach of his obligation.
4. RESPONDENT liable for not dispatching the goods in suitable packages for the
long transit period.
The fact that the goods were not properly packed and stored on the ship even before passing of
the goods across the rail of the ship makes it easy to establish, that the risk had never passed onto
the buyer in the first place.
If the defect in a good occurs due to improper canning and packing, when the goods are at the
seller‟s risk rather than the buyer‟s risk, the seller is held responsible.97
Thus, by establishing on the above mentioned facts and authorities, it can be clearly ascertained
that the RESPONDENT had breached his obligations when he was in charge of the goods,
thereby making him responsible for the non- conforming goods.
96
Crudex Chemicals Oy v. Landmark Chemicals S.A, Finland 31 May 2004 Hovioikeus [Appellate Court] Helsinki,
http://cisgw3.law.pace.edu/cases/040531f5.html 97
Conservas La Costeña v. Lanín, Mexico 29 April 1996 Compromex Arbitration proceeding ,
http://cisgw3.law.pace.edu/cases/960429m1.html
23
B. CLAIMANT can avoid the contract.
1. Non-conformity occurred before passing of risk
As already proved above, the goods were in non-conforming condition when the risk passed on
to the buyer. Art.36 makes the seller liable in such a situation. The seller is to be held responsible
for rotting of food due to non-addition of preservatives before packing, even when the rotting
occurred later.98
Therefore, the fact that the ripening occurred at a later stage, cannot prevent
CLAIMANT from affixing liability on RESPONDENT who did not ensure proper delivery.
2. Goods did not comply with specified quality and description.
a. CLAIMANT wanted „green bananas‟.
The subjects of the mails exchanged between the parties was „Green Bananas‟ showing that they
had agreed on a common intention. The intention of the parties from conversations can become a
part of the contract, if the party is entering into the contract under certain conditions.99
CLAIMANT had even stated the temperature at which the bananas should have been shipped in
order to ensure proper quality of the cargo.
b. CLAIMANT only catered to retail grocery stores of Astoria
It has been mentioned that the CLAIMANT was engaged in catering to the grocery stores.
Therefore, ripened bananas would not serve the ordinary purpose for which it needed the
bananas.
3. The breach is fundamental.
a. Purpose cannot be fulfilled with ripened bananas.
The CLAIMANT entered into the contract with the RESPONDENT with the sole purpose of
purchasing green bananas, the seller did not conform to this requirement thereby committing a
98
Bianca, in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan, 1987, p. 284-289 99
CLOUT case No. 176 [Oberster Gerichtshof, Austria, 6 February 1996]
24
fundamental breach under Art.25. A seller must provide goods of “reasonable quality” according
to the parties‟ normal expectations in the concerned market.100
This expectation of the
CLAIMANT was not fulfilled by the delivery of the ripened bananas.
The fact that the very purpose for which the „Green Bananas‟ had to be purchased cannot be
achieved makes the delivery of no consequence.
It has been held that if the buyer cannot use the goods for its intended purpose it should be
permitted to terminate the contract. 101
If the non-conforming goods cannot be used or resold
with reasonable effort this constitutes a fundamental breach and entitles the buyer to declare the
contract avoided.102
As both these conditions preceding avoidance and termination are satisfied in the present case,
the CLAIMANT can be said to be justified in rejecting the goods soon after inspecting them.
The fact that the bananas did not reach the CLAIMANT in the green condition and made it
impossible for him to sell it to the local grocery stores makes the breach a fundamental. To
determine fundamental breach, many authors focus on whether or not the purpose of the contract
has been frustrated by the breach.103
The purpose of the contract to sell goods to grocery stores is
frustrated hereby causing a fundamental breach.
A breach of contract is fundamental when the purpose of the contract is endangered so seriously
that, for the concerned party to the contract, interest in the fulfillment of the contract ceases to
exist as a consequence of the breach of the contract.104
100
Netherlands Arbitration Institute No. 2319 (15 October 2002). http://cisgw3.law.pace.edu/cases/021015n1.html 101
PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS, Study L – Doc. 98, Rome 2004,
www.unidroit.org/english/documents/2004/study50/s-50-098-e.pd 102
CLOUT case No. 150 [Cour de Cassation, France, 23 January 1996] ; CLOUT case No. 79 [Oberlandesgericht
Frankfurt., Germany, 18 January 1994] 103
http://www.cisg.law.pace.edu/cisg/biblio/koch.html 104
Shoes case, Germany 17 September 1991 Appellate Court Frankfurt
http://cisgw3.law.pace.edu/cases/910917g1.html
25
Even though the bananas can be usable to an extent, but, not in conformity with the original
purpose, the breach can be said to be fundamental. 105
b. Consignment has been rejected
CLAIMANT has rightly rejected the goods in its entirely as they did not conform to the contract.
Art.49(1)(a) entitles the buyer to declare the contract avoided. Such a declaration of avoidance is
effective only if made by notice to the seller in accordance with Art.26 which has been made in a
timely manner in the present case.
C. Alternately, RESPONDENT has committed material breach under UNIDROIT
Principles.
1. Quality of bananas not in accordance with the contract
The conduct of the CLAIMANT by categorically mentioning „Green bananas‟ and the
temperature at which he wants them to be transported manifests his intentions.106
Under the
UNIDROIT principles, the conduct of the parties sufficient to show the agreement can be taken
as intention.107
Thus, it is clear that the intention of the CLAIMANT was only to purchase
unripened bananas.
2. There is fundamental non-performance.
The CLAIMANT had ordered the „Green bananas‟ keeping in mind a purpose. He wanted to sell
the bananas to the retail grocery stores. Had he wanted to sell the bananas to bakery stores, as
advised by the RESPONDENT he would not have categorically specified the temperature at
which he wanted them to be transported. Thus, owing to the action of the RESPONDENT, he
105
CLOUT case No. 107 [Oberlandesgericht Innsbruck, Austria, 1 July 1994]. 106
Compromis, 7 107
Administrative Determination, USA, 08.02.2005, http://www.unilex.info/case.cfm?id=1125
26
has been substantially deprived of what he was entitled to expect under the contract, which
amounts to fundamental non-performance.108
The quality of bananas contracted for differs from the ones which got delivered. The difference
in the quality of the goods contracted for and the quality of the goods received can be a reason
for fundamental non performance.109
3. Consignment has been rejected
The material breach of the contract entitles CLAIMANT to reject the entire consignment. A non-
performance amounting fundamental non- performance can culminate in giving right of
termination of the contract to the other party under Article 7.3.1 of the UNIDROIT principles if
notice under 7.3.2 has been duly served. Art.7.1.1 brings defective performance under the ambit
of non-performance of the contract. Thus, it can be well established that the RESPONDENT was
in breach of his obligations under the contract which amounted to fundamental non-performance
which clearly justifies the action of the CLAIMANT to reject the consignment.
108
30.11.2006, Centro de Arbitraje de México, http://www.unilex.info/case.cfm?id=1149; Case No. 812/2007,
09.07.2007, Tribunal Supremo, Spain, http://www.unilex.info/case.cfm?id=1216; Case No. 383, 26.11.2007,
Audiencia Provincial de Tarragona, http://www.unilex.info/case.cfm?id=1359 109
Case No. 35/201017.02.2010, Tribunal Supremo, Spain, http://www.unilex.info/case.cfm?id=1524
27
VI. CLAIMANT DID NOT HAVE A LEGAL OBLIGATION TO ATTEMPT TO SELL
THE BANANAS.
A. CLAIMANT is under no obligation to sell the bananas under CISG.
1. Duty to mitigate under Art.77 only when damages claimed.
CLAIMANT is only seeking to get refund of the money it paid for the bananas in the first place
and not seeking any damages.110
The mitigation rule is a fundamental principle of the law of
damages.111
Therefore, the question of mitigation does not arise.
1. CLAIMANT not obligated to sell the goods
a. Lack of good faith from RESPONDENT.
RESPONDENT should have applied the principle of good faith in the first instance and should
have reimbursed the purchase price due to the delivery of non- conforming goods.
b. CLAIMANT only required to take reasonable measures.
It is extremely difficult to separate the ripening and ripened bananas from the green ones in the
particular case, and so, the CLAIMANT cannot be held responsible for the dumping of the
shipment of the waste. Had, the warehouse owner‟s attempt to salvage the non – ripening
bananas taken place before hand, the entire shipment would not have been described as waste.
What is 'reasonable' mitigation will depend on the court's evaluation of the concrete case.112
It
was certainly not reasonable to begin to sell the non-conforming bananas to bakery stores, as
suggested by the RESPONDENT, because they did not form a part of the customer base of the
CLAIMANT. It will also not be reasonable on part of the Claimant to sell goods in a condition
110
Compromis, 3 111
Michael G. Bridge (2 Sale of Goods, 2nd
ed. 1997) [„Michael Bridge‟] p. 546. 112
Amtsgericht München (Germany), 23 June 1995, <http://cisgw3.law.pace.edu/cases/950623g1.html>
28
which would culminate in loss of its reputation as an obligation to mitigate did not require seller
to put at risk its commercial reputation.113
c. No inaction by CLAIMANT
The CLAIMANT has fulfilled its reasonable duties by sending notice to the RESPONDENT and
informing him to take care of the rejected shipment.114
The Claimant has categorically stated in
the notice tendered to the Respondent that requisite advice should be given to the Captain of
Pinafore to dispose of the goods which shows that the buyer took certain steps to prevent
spoilage. If the seller did not offer any evidence which would suffice to hold that the buyer did
not take necessary measures to mitigate damages, the buyer cannot be held responsible.115
The fact that the contract is being avoided by the CLAIMANT gives it the right under Art.81(2)
to force the seller to take back his goods.116
The buyer has no duty to mitigate, and mitigating of
damages by re-selling of goods can deprive the buyer of his right to avoid. 117
d. Non-Applicability of Art.86
The Claimant has not received the goods in the present case as they are still in custody of the
Captain of the ship. Therefore, the legal obligation cast on a person „receiving the goods‟ fails to
be applicable on him.
113
Downs Investments Pvt Ltd v. Perwaja Steel, SDN BHD [2000] QSC 421, 17 Nov. 2000 (Supreme Court of
Queensland) 114
Compromis, 3 115
I.C.C. International Court of Arbitration, Case No. 8786 of January 1995 116
Landgericht Krefeld, Germany, 24 November 1992, http://cisgw3.law.pace.edu/cases/921124g1.html 117
CLOUT case No. 82 [Oberlandesgericht Düsseldorf, Germany, 10 February 1994].
29
B. Alternately, if UNIDROIT Principles applied, CLAIMANT had no duty to sell the
bananas.
1. There cannot be obligation when there is no right to sell.
While interpreting, Art.7.4.8, it has been said, that „It does not give a right to the aggrieved party
to go beyond it and sell or otherwise dispose of such goods.‟118
When there is no right, it shall
follow that there will be no obligation as well to dispose of the goods. The Court has rejected the
merchant buyer‟s duty to "make reasonable efforts to sell [the goods] for seller‟s account if they
are perishable or threaten to decline in value speedily. 119
2. No fixed responsibility.
Mitigation not required while the parties were, subsequent to termination, in negotiation to find
an alternative arrangement.120
In the present case, both parties to the dispute were attributing the
responsibility of mitigating the loss caused to each other. This can be termed as the negotiation
stage, so, the question of affixing liability of the loss caused to one party cannot be held to be
reasonable.
118
Case No. 7110, 00.04.1998, http://www.unilex.info/case.cfm?id=650, ICC International Court of Arbitration 119
§ 2-603(1) (1978) , http://www.cisg.law.pace.edu/cisg/text/flecht81,85,88.html 120
Case No. 2103 in 1972, ICC International Court of Arbitration
30
PRAYER
In light of the above submissions, CLAIMANT requests this Tribunal to find that:
I. The arbitration agreement is valid.
II. The Tribunal has been properly constituted.
III. The Tribunal has the authority to impose sanctions on the RESPONDENT.
IV. CISG should govern the contract.
V. RESPONDENT is in breach of its contractual obligations.
VI. CLAIMANT has not failed in performing its legal obligation of attempting to sell the
bananas.
s/d-
Counsel for CLAIMANT