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Twenty-Third Annual
Willem C. Vis International Commercial
Arbitration Moot
CASE NO. SCH-1975
IN THE MATTER OF AN ARBITRATION
Between:
KAIHARI WAINA LTD (Equatoriana)
CLAIMANT
-v-
VINO VERITAS LTD (Mediterraneo)
RESPONDENT
Memorandum for Claimant
April 15, 2016
NOVA LISBON LAW SCHOOL
Carolina Paz • Diana Ranito • Sebastião Burnay • Vanessa Freitas
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TABLE OF CONTENTS
ABREVIATIONS ............................................................................................................. 4
LEGAL AUTHORITIES .................................................................................................. 5
CASE LAW ...................................................................................................................... 5
ARBITRAL AWARDS .................................................................................................... 6
LEGAL SOURCES .......................................................................................................... 7
EXHIBITS ........................................................................................................................ 8
STATEMENTS OF FACTS ............................................................................................. 9
SUMMARY OF THE ARGUMENT ............................................................................. 12
ARGUMENT ................................................................................................................. 14
I. DOCUMENT PRODUCTION ................................................................................... 14
A. PARTIES ONLY EXCLUDED THE EXTENSIVE DISCOVERY PROCEEDINGS
..................................................................................................................................... 14
B. THE TRIBUNAL HAS THE POWER TO COMPEL DOCUMENT PRODUCTION
..................................................................................................................................... 15
1. THE VIENNA RULES AUTHORIZE THE ARBITRAL TRIBUNAL TO
ORDER DOCUMENT PRODUCTION ................................................................. 15
2. UNCITRAL MODEL LAW RATIFIES ARBITRATORS AUTHORITY ........ 16
C. THE TRIBUNAL SHALL GRANT ORDER FOR DOCUMENT PRODUCTION
..................................................................................................................................... 17
1. ISSUANCE OF ORDER FOR DOCUMENT PRODUCTION IS JUSTIFIED . 17
2. CLAIMANT’S PROCEDURAL DEMAND IS SUITABLE ACCORDING TO
IBA RULES ............................................................................................................. 18
II THE COSTS INCURRED AS A RESULT OF THE INITIATION OF THE STATE
COURT PROCEEDINGS SHALL BE RECOVERED AS DAMAGES FOR BREACH
OF ARBITRATION AGREEMENT ............................................................................. 21
A. THE ARBITRATION CLAUSE IS VALID SO HIGH COURT PROCEEDINGS
ARE A RESULTA OF RESPONDENT’S BREACH OF ARBITRATION
AGREEMENT ............................................................................................................ 22
B. THE CLAIMANTS’ ACTIONS FOR INTERIM INJUNCTION WAS
NECESSARY AND COMPATIBLE WITH ARBITRATION AGREEMENT ........ 23
3. RESPONDENT SHOULD BE AWARD WITH DAMAGES FOR DAMAGES IN
RESULT OF THE VIOLATION OF THE ARBITRATION AGREEMENT ........... 24
III CLAIMANT IS ENTITLED TO THE DAMAGES IT CLAIMS, INCLUDING
FURTHER PROFITS ..................................................................................................... 25
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A. CLAIMANT CAN CLAIM THE PROFITS RESPONDENT MADE BY SELLING
THE BOTTLES TO SUPERWINES AS PART OF ITS DAMAGES UNDER A
THEORY OF RESTORATIVE DAMAGES ............................................................. 26
B. RESPONDENT SHOULD NOT BE ALLOWED TO PROFIT FROM BREACH
OF CONTRACT, EVEN IF THIS AWARDS FURTHER DAMAGES TO
CLAIMANT ................................................................................................................ 28
C. CLAIMANT’S LOST PROFITS WERE FORESEEABLE UNDER ARTICLE 74
OF THE CISG ............................................................................................................. 29
D. CLAIMANT HAS TAKEN ALL REASONABLE MEASURES TO MITIGATE
LOSSES, INCLUDING LOSS OF PROFIT, RESULTING FROM RESPONDENT’S
BREACH ..................................................................................................................... 30
IV THE CLAIMANT IS ENTITLED TO BE REIMBURSED OF LITIGATION COSTS
REGARDING INTERIMN RELIEF. ............................................................................ 31
A. THE PRINCIPLE OF FULL COMPENSATION IS APPLICABLE .................... 31
1. ARTICLES 74.º CISG AND 7.4.2. DANUBIA CONTRACT LAW INCLUDE
THE PRINCIPLE OF FULL COMPENSATION ................................................... 32
2. LEGAL DOCTRINE AND JURISPRUDENCE HAVE ALREADY
SUPPORTED THE INCLUSION OF SOME LITIGATIONS COSTS ON THE
FULL COMPENSATION CONCEPT .................................................................... 32
3. THE CLAIMANT HAD COMPLIED WITH 77.º CISG ON WHAT CONCERNS
TO AVOIDAL OF FURTHER DAMAGES AFTER THE BREACH BY THE
COUNTERPARTY ................................................................................................. 33
B. IF THE CISG IS NOT APPLICABLE, THE RIGHT TO REIMBURSEMENT OF
LITIGATION COSTS STILL APPLIES .................................................................... 33
1. THE VIENNA RULES DON’T SPECIFY WHICH PARTY SHOULD BEAR
THE LITIGATION COSTS .................................................................................... 33
2. THE PRINCIPLE OF COSTS FOLLOW THE EVENT IS APPLICABLE ....... 34
REQUEST FOR RELIEF ............................................................................................... 35
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ABREVIATIONS
AAL Austrian Arbitration Law
Answer Answer to Statement of Claim
Art. Article
CEO Chief Executive Officer
CISG United Nations Convention on the International Sale of
Goods
Contract Framework contract dated 22 April 2009
Ex.C Exhibit of Claimant
Ex.R Exhibit of Respondent
IBA Rules International Bar Association Rules on the Taking of
Evidence in International Arbitration
ICC International Chamber of Commerce
Ltd. Limited
No. Number
p. Page
Proc. O. 1 Procedural Order no. 1
Proc. O. 2 Procedural Order no. 2
St. Of Cl Statement of Claim
UNICITRAL United Nations Commission on International Trade Law
US United States
v. Versus
VIAC Vienna International Arbitral Center
Vienna Rules Vienna International Arbitral Center Rules of
Arbitration
§ Paragraph
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LEGAL AUTHORITIES
Abbreviation Citation
Born
Born, Gary B. INTERNATIONAL COMMERCIAL
ARBITRATION. 2nd ed. Kluwer Law International
(2014).
Cooke
Cooke, Timothy
http://www.lexology.com/library/detail.aspx?g=eb4b4fa6-
d82d-4982-b61d-7f1c7a5d7608
Fouchard, Gaillard
Fouchard, Gaillard, Godman. INTERNATIONAL
COMMERCIAL ARBITRATION. Kluwer Law
International (1999)
Scherer
Scherer, Mathias.
http://kluwerarbitrationblog.com/2014/02/21/damages-as-
a-sanction-for-commencing-court-proceedings-in-breach-
of-an-arbitration-agreement/
Schlechtriem and
Schwenzer
Schlechtriem and Schwenzer. COMMENTARY ON THE
UN CONVENTION ON THE INTERNATIONAL SALE
OF GOODS (2010).
CASE LAW
Case Cited as
England
Channel Group v Balfourd Beatty Ltd.,
1993, Adj.L.R. 01/21 Channel Group v Balfourd Beatty Ltd
Greece
Polimeles Protodikio Athinon (Multi-
Member Court of First Instance of Athens,
2009). Case no. 4505/2009
Bullet Proof Vest Case
Singapore
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Beng Tee & Co Pte Ltd v. Fairmount
Development Pte Ltd.
CA 100/2006 (Singapore Court of Appeal,
09 May 2007)
Soh Beng Tee & Co v. Fairmount
Devel
Front Carriers Ltd v Atlantic & Orient
Shipping Corp, 2006, 3 SLR 854
Front Carriers Ltd v Atlantic & Orient
Shipping Corp
Swift—Fortune Ltd v Magnifica Marine SA,
2007, 1 SLR 629
Swift—Fortune Ltd v Magnifica
Marine SA
Tjong Very Sumito and others v. Anting
Investments Pte Ltd, 2009, 4 SLR® 732
Tjong Very Sumito and others v.
Anting Investments Pte Ltd
Switzerland
Bundesgericht (Supreme Court, 17
December 2009)
Watches Case
X. SA v Z. Ltd. 4A_232/2013, September
30, 2013 X. SA v Z. Ltd.
ARBITRAL AWARDS
Award Cited as
International Centre for Settlement of Investment Disputes
R.R. Dev. Corp. (U.S.A.) v. Repub. of
Guatemala, Decision on Provisional
Measures in ICSID Case No. ARB/07/23
of 15 October 2008.
R.R. Dev. Corp. v. Guatemala
International Chamber of Commerce
ICC Case no. 6345 (1991) Case 6345
ICC Case no. 6959 (1992) Case 6959
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LEGAL SOURCES
Abbreviation Citation
AAL Austrian Arbitration Law
CISG United Nations Convention on Contracts for the
International Sale of Goods (1980)
IBA Rules International Bar Association Rules on the Taking of
Evidence in International Arbitration
NBW Netherlands Burgerlijk Wetboek (Dutch Civil Code).
NYC New York Convention
UNCITRAL Arbitration
Rules
United Nations Commission on International Trade
Law Arbitration Rules, Vienna 2010
UNCITRAL Dig. UNCITRAL 2012 Digest of Case Law on the Model
Law on International Commercial Arbitration
UNCITRAL Model Law United Nations Commission on International Trade
Law, Arbitraton Rules
Vienna Rules Vienna International Arbitration Center Rules of
Arbitration, Vienna, 2013
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EXHIBITS
Exhibit No. Date Description
C-1 22 April 2009 Framework Contract
C-2 4 November 2014 Order of 10.000 bottles by Kaihari Waina Ltd
C-3 1 December 2014 E-mail from Mr Weinbauer
C-4 1, 2 December 2014 Publicity
C-5 8 July 2015 Witness Statement Isme Buharit
C-6 2 December 2014 Letter from Mr Friedensreich
C-7 4 December 2014 E-mail from Mr Weinbauer
C-8 12 December 2014 High Court Order
C-9 23 April 2015 High Court Declaration
C-10 5 December 2014 Contingent Fee Agreemet
C-11 25 May 2015 Invoice 1254
C-12 8 July 2015 Witness Statement Mrs. Kim Lee
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STATEMENTS OF FACTS
Claimant, Kaihari Waina Ltd (“Kaihari”) is a wine merchant located in Equatoriana. It
is specialized in top quality wines for collectors and high end gastronomy market and has
a particular expertise in Mediterranean Mata Weltin wines from the Vuachoua region.
Respondent, Vino Veritas Ltd (“Vino Veritas”) is one of the top vineyards in the Vuachoua region
of Mediterraneo. Its Mata Weltin wine has won the Mediterranean gold medal for the last five years.
1. On 22 April 2009, Claimant and Respondent entered into a Framework
Agreement, where Respondent guaranteed Claimant annual delivery of up to 10,000
bottles in exchange for a yearly minimum purchase of at least 7,500 bottles.
2. Claimant’s successful business is dependent on the quantity of wine guaranteed
by Respondent because the majority of Claimant’s customers rely on a preorder system.
Claimant explained to Respondent its need for the guarantee during negotiations.
3. Art. 20 of the Contract included an Arbitration Clause stating, “No discovery shall
be allowed”. Consequently, in its contacts with Claimant, Respondent wished to avoid
broad document requests prevalent in common law jurisdictions to ensure fast and
informal arbitration.
4. The Contract provided that the substantive law governing the Contract would be
the CISG and the law of Danubia, which has adopted the UNCITRAL Model Law on
International Commercial Arbitration. The parties agreed that any disputes would be
decided by arbitration under VIAC’s International Arbitration Rules in accordance with
international practice.
5. Claimant annually ordered the designated quantity of that year’s vintage wine no
later than 20 December. Every year, Claimant placed its orders prior to Respondent’s
negotiations with other customers, who concluded their contracts with Respondent in
January. Claimant always ordered between 7,500 and 8,500 bottles, generally increasing
the quantity each year.
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6. In August 2014, due to poor weather conditions, Respondent had one of its lowest
quantity harvests. This exquisite harvest won multiple awards, increasing Caimant’s
preorders by 20%. Respondent entered into an agreement with Claimant’s main
competitor, SuperWines, reducing Respondent’s overall wine supply. Respondent
eventually provided SuperWines with a total of 5,500 bottles.
7. On 4 November 2014, Claimant ordered 10,000 bottles of Mata Weltin 2014, the
maximum amount permitted under the Contract. On 25 November, Claimant’s
development manager, Isme Buharit, met with Respondent’s CEO, Mr. Weinbauer, to
discuss the importance of its order. Claimant explained to Respondent that it had incurred
a significant number of preorders, many of which had already been accepted. Respondent
stated that due to a decrease in the supply of wine, it would not be able to provide more
than 10,000 bottles however, it did not indicate an inability to honor its contractual
obligations to Claimant. In fact, Ms. Buharit left the meeting with the impression that
Respondent was going to deliver the quantity requested by Claimant.
8. However, on 1 December 2014, Claimant received a letter from Respondent
stating it would only deliver between 4,500 to 5,000 bottles of wine, 3,000 less than
Respondent guaranteed Claimant under the Contract. When Claimant notified
Respondent that it wished to enforce the Contract, Respondent accused Claimant of
outrageous behavior, stating that it would not deliver any of the wine, even if Respondent
had to drink all of it.
9. Claimant, conscious of its own contractual obligations, immediately sought
interim relief in the High Court of Mediterraneo to prevent Respondent from distributing
the wine guaranteed to Claimant under the Contract. Claimant had retained Lawfix, a
local Mediterranean firm, on a contingency fee basis to represent it in all matters in the
Courts of Mediterraneo that dealt with the parties’ Contract.
10. On 12 December 2014, the High Court granted Claimant’s injunction, and
Respondent did not challenge the Court’s order. For the interim injunction, Claimant
incurred $33,750 in attorney’s fees.
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11. Around this same time, Claimant contacted other top vineyards to make
alternative arrangements to fulfill the needs of its own customers. On 2 February 2015,
Claimant purchased 5,500 bottles of wine from Vignobilia Ltd, another high-end
producer of wine from Mediterraneo’s Vuachoua region. When Respondent figured out
that Claimant had secured 5,500 bottles from Vignobilia, it entered into further contracts
for the same amount without first seeking permission from the High Court of
Mediterraneo.
12. On 30 January 2015, Respondent required a declaratory judgment in
Mediterraneo, asking the court to find that Respondent was not liable for the breach of
the Contract, specifically the non-delivery of 10,000 bottles of diamond Mata Weltin
2014. The High Court dismissed the action for lack of jurisdiction, based on the
Arbitration Clause. As a result of Claimant’s successful defense, it incurred an additional
$16,530 in attorney’s fees.
13. Claimant started the current arbitral proceeding on 11 July 2015, with the Vienna
International Arbitral Centre, requesting the payment of damages for breach of contract.
During a telephone conference on 1 October 2015, the parties consented to the VIAC
Rules for this arbitration. The Tribunal also decided, for the purposes of this hearing, that
Respondent’s termination of the Contract constituted a breach.
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SUMMARY OF THE ARGUMENT
I: Parties Have Not Excluded the Standard Type of Document Production. While the
Framework Agreement provides that “no discovery shall be allowed” [Cl. Ex. 1, Art. 20],
this provision still allows for document production. Considering the different meaning of
discovery in the parties’ two legal systems, the parties did not agree to foreclose document
production.
II: The Arbitral Tribunal Has the Power to Compel Document Production. The
Vienna Rules, namely Art. 29, authorize the Arbitral Tribunal to order document
production on its own discretion. Also, UNCITRAL Model Law, which defines the terms
of document production ratifies arbitrator’s authority.
III: The Tribunal Shall Grant Order for Document Production. The Tribunal should
compel document production since the requested documents are crucial to the fair
settlement of the current dispute. Also, the request to produce made by CLAIMANT
meets all IBA Rules stipulated requirements for document production.
IV: The Arbitration Clause Is Valid So High Court Proceedings Are a Result of
Respondent’s Breach of Arbitration Agreement. As the Article 20 of the Framework
Agreement is valid and effective, the Respondent’s attempts to seek a declaration of non-
liability by the court in Mediterraneo was a merits-based claim, which is considered a
breach of an arbitration clause in international law. For that Claimant shall be reimbursed
for the damages of that breach.
V: The Claimants’ Actions for Interim Injunction Was Necessary and Compatible
with an Arbitration Agreement. The High Court Order is compatible with the Article
20 of the Framework Agreement.
VI: Respondent Should Be Award with Damages for Damages in Result of the
Violation of the Arbitration Agreement. The Claimant as innocent party can claim the
costs, as damages for damages, it incurred in responding to High Court proceedings and
for Respondent’s violation of the arbitration agreement because it resisted commencing
the arbitral proceedings.
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VII: Claimant can claim the profits that Respondent made by selling the bottles to
SuperWines as part of its damages, including further profits. Claimant’s request for
lost profits is uniform with the text of Article 74 of the CISG, which states “damages for
breach of contract by one party consist of a sum equal to the loss, including loss of profit,
suffered by the other party as a consequence of the breach” [CISG Art. 74].
VIII: Respondent Should Not Be Allowed to Profit from Breach of Contract, Even
If This Awards Further Damages to Claimant. Restorative and preventative theories
of damages support Claimant’s argument. Under the restorative theory of damages,
Article 74 of the CISG and the principle of full compensation (principe de la réparation
intégrale) entitle Claimant to these profits. The preventative theory of damages prevents
Respondent from profiting from its breach of contract.
IX: Claimant’s Lost Profits Were Foreseeable under Article 74 of the CISG. Article
74 includes two limiting principles that preclude parties from recovery of lost profits: the
principles of foreseeability and mitigation.
X: Claimant Has Taken All Reasonable Measures to Mitigate Losses, Including Loss
of Profit, Resulting from Respondent’s Breach. Claimant took reasonable measures to
mitigate the losses, including loss of profit, it suffered due to Respondent’s breach of
contract.
XI: The Principle of Full Compensation is Applicable. The Principle of full
compensation is applicable due to a liberal interpretation of the 74.º CISG and 7.4.2.
Danubia contract law.
XII: If The CISG Is Not Applicable, The Right to Reimbursement of Litigation Costs
Still Applies. In this case, the applicable rules to the arbitration is the Vienna Rules which
is omissive on what concerns to payment of litigation costs. Therefore, general principles
should be applied.
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ARGUMENT
I. DOCUMENT PRODUCTION
1. Faced with the impossibility of measuring damages caused by the breach of contract
by RESPONDENT and in order to facilitate the calculation of such damages,
CLAIMANT claims RESPONDENT´s profits from selling the 5.500 bottles to
SuperWines [St. of Cl., Statement of Relief sought]. Therefore, CLAIMANT requested
the Arbitral Tribunal to order RESPONDENT to provide documents pertaining to
communications, negotiations and contracting between RESPONDENT and SuperWines
concerning the purchase of diamond Mata Weltin 2014 [St. Of Cl., §27].
2. The parties stipulated that “no discovery shall be allowed” [Ex.C1]. This stipulation
gave rise to objections of RESPONDENT regarding the order for document production
[Answer, § 27]. The Arbitral Tribunal is requested to find that it has the power to issue an
order obliging RESPONDENT to produce the requested documents.
3. CLAIMANT submits that, in their Arbitration Agreement, the Parties only excluded
the extensive discovery proceedings (A). The Arbitral Tribunal has the power to compel
document production under the Vienna Rules and UNCITRAL Model Law (B) and should
do so, since the issuance of order for document production is justified and suitable
According to IBA Rules (C).
A. PARTIES ONLY EXCLUDED THE EXTENSIVE DISCOVERY PROCEEDINGS
4. RESPONDENT claims that this Arbitral Tribunal has no power to enforce the
production of documents through the procedure arguing that the parties expressly
excluded the possibility of discovery [Answer, §27].
5. CLAIMANT submits that, in their Arbitration Agreement the Parties did not excluded
standard document production requests and only intended to avoid the discovery similar
to the extensive pre-trial discovery in the US Courts. Discovery and document production
are not the same and must not be confused. The contractual provision “no discovery shall
be allowed” still permits the Tribunal to compel document production, since the exclusion
of “discovery” in the Arbitration Agreement was meant only to cover extensive discovery
proceedings.
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6. CLAIMANT has never meant to remove the whole process of document production,
which would have violated the parties' right to be heard. Such context would give ground
for refusing recognition of the award [Soh Beng Tee & Co v. Fairmount Development
(Singapore)].
7. Moreover, the interpretation of the Arbitral Agreement should take into account the
Parties legal background. CLAIMANT and RESPONDENT come from different legal
systems that have two distinct meanings of discovery. CLAIMANT comes from a
common law jurisdiction, Equatoriana, with broad discovery and RESPONDENT comes
from a civil law jurisdiction, that “only allows for disclosure requests directed to one or
several particular documents” [Answer, §30]. Furthermore, CLAIMANT was aware that
RESPONDENT had been involved in litigation in which the other party wanted to see
large quantities of documents [Ex.C12, §6]. The CEO of RESPONDENT admits in his
witness statement that based on the previous experience “[the company] wanted to avoid
having to face such requests again [Ex.R1, §6]. Accordingly, RESPONDENT shared
common intention with CLAIMANT and wished to exclude extensive discovery requests
in arbitral proceedings. Therefore, by introduction of Art. 20 in the Framework
Agreement the Parties' intention was to be protected from broad-style discovery.
B. THE TRIBUNAL HAS THE POWER TO COMPEL DOCUMENT PRODUCTION
8. CLAIMANT submits that based on the Parties' Agreement and the chosen procedural
laws the Arbitral Tribunal has power to issue the Order for Document Production.
As it shall be approached at a first moment, Vienna Rules authorize the Arbitral Tribunal
to order document production (1), as UNCITRAL Model Law ratifies arbitrator’s
authority (2).
1. THE VIENNA RULES AUTHORIZE THE ARBITRAL TRIBUNAL TO ORDER
DOCUMENT PRODUCTION
9. CLAIMANT submits that the power of the Arbitral Tribunal to order document
production from RESPONDENT stems from Art. 29 of the Vienna Rules.
10. The parties referred their dispute to the Arbitral Tribunal under the VIAC Rules
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[Ex.C1, Art.20]. Article 28 of the VIAC Rules provides that “the arbitral tribunal shall
conduct the arbitration in accordance with the Vienna Rules and the agreement of the
parties but otherwise in the manner it deems appropriate”.
11. The Vienna Rules provisions regarding document production must be taken in full
account as they authorize the Arbitral Tribunal to request the parties to collect evidence
according to the arbitrators' own discretion [Art. 29 Vienna Rules]. In the other hand, the
Vienna Rules have no provisions limiting the arbitrators' authority towards the collection
of documentary evidence. As a consequence, the Vienna Rules' provisions are not
compatible with the complete exclusion of document production as claimed by the
RESPONDENT.
12. Therefore, under the Vienna Rules the Arbitral Tribunal has power to order document
production from RESPONDENT.
2. UNCITRAL MODEL LAW RATIFIES ARBITRATORS AUTHORITY
13. The law that applies to this arbitration agreement and defines the terms of document
production is the UNCITRAL Model Law [Answer, §37; Proc. Ord. No. 1, §5 (3)], which
gives arbitrators the power to compel document production.
14. The Model Law states that the authority conferred to the arbitral tribunal includes the
power to determine the admissibility, relevance, materiality and weight of any evidence
[UNCITRAL Model Law, Art. 19(2)]. Thus, the procedural law undeniably ratifies this
Tribunal's authority to order document production. As well, the UNCITRAL Model Law
creates no obstacles the enforcement of document production.
15. Also, “article 27 grants arbitrators the power to seek judicial assistance in 'taking
evidence', which strongly implies the existence of authority on the part of the arbitrators
to order either party to produce evidence in the arbitral proceedings. Similarly, Article
26(1)(b) strongly implies that a tribunal has the power to order disclosure, by recognizing
a specific instance of such power in the context of providing information to experts; it is
very difficult to see whhy similar powers would not exist with regard to ordering the
parties to disclose information to the tribunal itself. The Model Law's drafting history also
leaves no question that the arbitral tribunal's general procedural powers, including
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particularly with regard to evidence-taking, include the inherent authority to order
disclosure by the parties” [Born, p. 2326].
16. Within the broad discretion that the UNCITRAL Model Law gives to arbitrators to
conduct proceedings as they consider appropriate, this Tribunal may order
RESPONDENT to produce the requested documents [Born, p.2326].
C. THE TRIBUNAL SHALL GRANT ORDER FOR DOCUMENT PRODUCTION
17. Once established that this Arbitral Tribunal has power to enforce document
production, it shall be hereinafter demonstrated that the Tribunal should order
RESPONDENT to produce the documents requested by CLAIMANT. Indeed, issuance
of order for document production is justified (1) since the requested documents are
indispensable to the fair settlement of the current dispute. Also, the request for document
production is suitable according to the IBA Rules (2).
1. ISSUANCE OF ORDER FOR DOCUMENT PRODUCTION IS JUSTIFIED
18. CLAIMANT submits that production for the requested documents is essential for two
main purposes: firstly, to establish whether RESPONDENT acted in good faith while
denying the delivery of the guaranteed amount of Mata Weltin wines; and secondly, to
calculate the actual amount of damages, in case the Arbitral Tribunal grants CLAIMANT
the profits of RESPONDENT made by selling the bottles to SuperWines.
19. CLAIMANT submits that RESPONDENT breached its obligation to deliver ordered
wine to CLAIMANT [Proc. Order no.1 §4], which caused CLAIMANT to suffer lost
profits in regard to 5.500 bottles it will not be able to sell [St. Cl., §26]. In order to
calculate damages resulting from the breach, CLAIMANT needs to have access to certain
documents possessed by RESPONDENT.
20. The requested documents pertain to communications and contractual negotiations
between RESPONDENT and SuperWines on the sale of Mata Weltin 2014. These
documents are supposed to specify the purchase price and the number of bottles purchased
by SuperWines. As so, it is not possible to measure the damages pursued by the
CLAIMANT without them.
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21. Furthermore, “there is an emerging consensus among experienced arbitrators and
practitioners that a measure of documents disclosure is desirable in most international
disputes. Justice is almost always best served by a degree of transparency, which brings
the relevant facts before the arbitrators; justice as well as efficiency is also best served by
ensuring disclosure of the relevants facts sufficiently in advance of the witness hearing
that the parties can prepare and present their cases in light of these facts” [Born, p. 2346].
22. Having said that, this Arbitral Tribunal should order RESPONDENT to produce the
Requested Documents. Once this court enforces the production of documents,
RESPONDENT's lack of good faith as the resulting profits shall be definitely
demonstrated.
2. CLAIMANT’S PROCEDURAL DEMAND IS SUITABLE ACCORDING TO IBA
RULES
23. The IBA Rules, which may and should be applied in the current procedure (a), also
enhance the suitability of CLAIMANT's procedural demand. Indeed, the request to
produce documents made by CLAIMANT meets all IBA Rules stipulated requirements
for document production (b).
(a) IBA RULES MAY AND SHOULD BE APPLIED IN THE CURRENT
PROCEDURE
24. The Tribunal may apply the IBA Rules on the Taking of Evidence, which grant the
Tribunal power to order document production, even though neither party refers to the IBA
Rules in the agreement to arbitrate. Art. 1.1 allows the application of the IBA rules either
when the parties agree to them or when “the Arbitral Tribunal has determined to apply
the IBA Rules of Evidence” [IBA Rules, Art. 1.1].
25. The IBA Rules are particularly advised in the present cases [IBA Rules, Preamble],
where the parties are from different legal traditions – CLAIMANT is settled in
Equatoriana, a common law jurisdiction, while RESPONDENT is from Mediterraneo,
which has a civil law tradition [Proc. Order no.2 §68] – and have different conceptions
on evidentiary procedures.
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26. Furthermore, the Vienna Rules provide general procedure rules, being vacant on
detailed regulation on evidentiary process. The IBA Rules constitute, therefore, suitable
supplement to the applicable legal framework.
27. Even if the Tribunal choose not to apply the IBA Rules as binding measure, it should
apply as guideline. Tribunals use the rules as a “guide even when not binding upon them”
[R.R. Dev. Corp v. Guatemala, 15].
(b) CLAIMANT’S PROCEDURAL REQUEST MEETS ALL STIPULATED
REQUIREMENTS FOR DOCUMENT PRODUCTION
28. As demonstrated above, the IBA Rules must be applied to the current litigation and
should guide the Tribunal to the fair settlement of the particular case. CLAIMANT
submits that the request for documents complies with the requirements of Arts. 3 and 9
of the IBA Rules.
29. According to article 3(3) of the IBA Rules, a request to produce should demonstrate
the description of the requested category of documents (i), their relevance and materiality
(ii), and state that the Documents are not in possession of the requesting Party and there
are reasons to believe they are under control of RESPONDENT (iii). Article 9.2 of the
IBA Rules relates to admissibility and assessment of evidence and sets out specific
grounds for exclusion from evidence or production any document. One of such grounds
is commercial or technical confidenciality (iv) [IBA Rules, Art. 9.2(e)].
(i) Description of the Requested Category of Documents
30. Article 3(3) (a) (ii) of the IBA Rules provides that a request to produce should contain
a description of the aimed documents.
31. CLAIMANT requests the production of documents exchanged between
RESPONDENT and SuperWines regarding the purchase of diamon Mata Welt in 2014
wine in the period from 1 January 2014 to 12 July 2015. Such documents include
contractual documents and their negotiation, relating the number of bottles acquired and
the price paid for each one of them [St. of Cl., §27]. Since several e-mails were exchanged
regarding meetings and details of trade between RESPONDENT and SuperWines [Proc.
Order no.2, §23], their production is also necessary.
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(ii) The Requested Documents Relevance and Materiality
32. Following Article 3(3)(b) of the IBA Rules, all mentioned documents are material and
essential to the outcome of the case, since the requested documents are the only source of
information necessary to establish that the breach of the Framework Agreement by
RESPONDENT was caused by internal arrangements between RESPONDENT and
SuperWines.
33. CLAIMANT is convinced that the 5.500 bottles sold to SuperWine rightfully
belonged to CLAIMANT and they were sold to SuperWines only because it paid
substantial premium [St. Of Cl. §26]. The requested documents include communications
between RESPONDENT and SuperWines and, therefore, will show that CLAIMANT's
conviction are true.
34. The Arbitral Tribunal needs to ascertain whether SuperWines did in fact pay any
premium to RESPONDENT, prompting it to breach of its obligations towards
CLAIMANT under the Framework Agreement. The requested documents are the only
source for establishing this fact.
35. Therefore, the Requested Documents are relevant and material to the dispute.
(iii) Document Possession
36. The production of these documents must be ordered since they are not in possession
of CLAIMANT, but in control of RESPONDENT. Documents concerning the
relationship between RESPONDENT and SuperWines are not public and CLAIMANT
has no access to them [St. Of Cl., §28]. In cases where one party alone has access to
essential factual materials, disclosure may be particularly appropriate [Born, p. 2346].
37. It is known that RESPONDENT has exchanged several e-mails summarizing
meetings and setting out details of its cooperation with SuperWines and had created
several internal memoranda and minutes discussing the cooperation with SuperWine
[Proc. Order no.2 §23]. Hence, it is undeniable that RESPONDENT possesses documents
regarding such business relationship.
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(iv) The Requested Documents Are Not Protected by Confidentiality
38. CLAIMANT submits that the Requested Documents are not confidential and shall be
admitted into the arbitral proceedings.
39. RESPONDENT has not entered into any express or formal confidentiality agreement
with SuperWines [Proc. Order no.2 §25]. Accordingly, the requested documents are not
confidential and are not protected against disclosure within the arbitration proceedings.
40. Furthermore, the requested documents are restricted to the arbitration, as provides Art.
3(13) of the IBA Rules.
“Any Document submitted or produced by a Party or non-Party in the arbitration
and not otherwise in the public domain shall be kept confidential by the Arbitral Tribunal
and the other Parties, and shall be used only in connection with the arbitration. This
requirement shall apply except and to the extent that disclosure may be required of a Party
to fulfil a legal duty, protect or pursue a legal right, or enforce or challenge an award in
bona fide legal proceedings before a state court or other judicial authority. The Arbitral
Tribunal may issue orders to set forth the terms of this confidentiality. This requirement
shall be without prejudice to all other obligations of confidentiality in the arbitration.”
41. Moreover, protective orders are generally issued to safeguard the confidentiality of
materials produced in discovery in the arbitration, particularly commercial confidences
[Born, p. 2388].
42. Therefore, the Tribunal shall grant order for document production, since the requested
documents are not protected by confidentiality and the disclosure will not inflict
unnecessary damage on the RESPONDENT once the documents will be kept confidential
by the Arbitral Tribunal [Born, p. 2387].
II THE COSTS INCURRED AS A RESULT OF THE INITIATION OF THE
STATE COURT PROCEEDINGS SHALL BE RECOVERED AS DAMAGES FOR
BREACH OF ARBITRATION AGREEMENT
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A. THE ARBITRATION CLAUSE IS VALID SO HIGH COURT PROCEEDINGS
ARE A RESULTA OF RESPONDENT’S BREACH OF ARBITRATION
AGREEMENT
43. As the Art. 20 of the Framework Agreement is valid and effective, the Respondent’s
attempts to seek a declaration of non-liability by the court in Mediterraneo was a merits-
based claim, which is considered a breach of an arbitration clause in international law.
For that Claimant shall be reimbursed for the damages of that breach.
44. Art. II (3) NYC provides that a State Court shall refer the parties to arbitration when
one of the parties to the litigation invokes the arbitration agreement made between them
in the related subject. UNCITRAL Art. 8 (1) provides that a court for “which an action is
brought in a matter which the subject of an arbitration agreement shall, if a party so
requests not later than when submitting his first statement on the substance of the dispute,
refer the parties to arbitration”.
45. Therefore, in accordance to Art. II (3) NYC and Art. 8 UNCITRAL Model Law, the
State Court cannot decide on a merits-based request because of its lack of jurisdiction
when facing a valid arbitration agreement. The request must be submitted to the arbitral
tribunal according to the contractual obligations between Claimant and Respondent.
46. Respondent started a court proceeding in the Courts of Mediterraneo to discuss its
liability on the delivery of the 10.000 bottles of Mata Weltin 2014 to Claimant.
Respondent’s action of starting a proceeding in the courts constituted a clear breach of
the Art. 20 of the Framework Agreement [Ex. C1] which covered all matter in relation to
the contract of 22 April 2009 and the order of 4 November 2014 made by Claimant. Also,
it is clear that the acronym “VIAC” contained on the Article 20 shows the willing of the
parties to arbitrate under the Vienna Rules and that the place of arbitration should be
Vindobona. The clause should be interpreted in the eyes of “pro-arbitration”, because that
was the true intention of the parties. It is possible to identify the institution with a degree
of certainty, for that, the clause remains effective [Fouchard, Gaillard, p. 262, 264].
Respondents’ action can be compared to the monopoly game, when you pass in the other
player’s property and try not to get attention so that with a bit of luck you get away with
the payment. In the present case, Respondent tried to pass through the arbitration
agreement so that it could escape from a neutral arbitral tribunal or at least delay any
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arbitral proceedings known in international arbitration as “Guerilla tactics”.
47. State Court denied Respondent’s request for a declaration on non-liability when
Claimant’s defense invoked the arbitration agreement. The declaratory relief issued by
the State Court stated that the action initiated by Respondent was dismissed since the
court did not have jurisdiction due to the existence of a valid and binding arbitration
clause.
Again, commencing court proceedings in disrespect of a valid and binding arbitration
agreement is a breach of that agreement, it is a direct attack on the jurisdiction of an
arbitral tribunal to determine the parties’ disputes [Cooke, §13].
B. THE CLAIMANTS’ ACTIONS FOR INTERIM INJUNCTION WAS NECESSARY
AND COMPATIBLE WITH ARBITRATION AGREEMENT
48. Due to the Respondent transgression, Claimant was forced to seek the High Court of
Mediterraneo for interim injunction [Ex. C8] because of the imminent risk of irreparable
damages, since it might have been deprived from accomplishing its duties with the clients.
The High Court Order is compatible with the Art. 20 of the Framework Agreement.
49. Art. 9 UNCITRAL Model Law provides that “It is not incompatible with an arbitration
agreement for a party to request, before or during arbitral proceedings, from a court an
interim measure of protection and for a court to grant such measure” so it is compatible
with an arbitration agreement for a party to request, or for a court to grant an interim
measure [UNCITRAL Dig., 52]. Additionally, Art. 33 (5) VIAC Rules provides that it
“does not prevent the parties from applying to any competent State authority for interim
or conservatory measures” [Art. 33 (5) VIAC Rules] and that a request or grant of interim
relief “shall not constitute an infringement waiver of the arbitration agreement and shall
not affect the powers of the arbitral tribunal” [Art. 33(5) VIAC Rules]. It applies to this
case because Claimant requested interim injunction to the High Court of Mediterraneo
before arbitral proceedings and according to the VIAC Rules it is compatible with the
arbitration agreement that parties made.
50. Therefore, the arbitral tribunal should consider the interim relief compatible with the
arbitration agreement, according the provision above mentioned. The measure could only
be effectively take by the state court. Besides, “The intervention of the court it not such
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an infringement of the jurisdiction of the arbitral tribunal as a means of assisting the
tribunal so that the award will be as effective as possible” [Fouchard, Gaillard, p. 414].
As held by England’s House of Lords, “The purpose of interim measures of protection
[...] is not to encroach on the procedural powers of the arbitrators but to reinforce them,
and to render more effective the decision at which the arbitrators will ultimately arrive on
the substance of the dispute” [Channel Group v Balfour Beatty Ltd.; Front Carriers Ltd v
Atlantic & Orient Shipping Corp; Swift—Fortune Ltd v Magnifica Marine SA].
51. In the present case, Claimant was forced to take action to seek interim relief because
it did not have an alternative option available. First, Claimant’s need to seek interim relief
was a direct result of Respondent’s breach when it refused to sell and deliver the
Claimant’s order for 10.000 bottles of wine. Second, Claimant’s need to seek interim
relief is further strengthened by Respondent’s threats of subsequent breach through Mr.
Weinbauer’s refusal to make the partial performance for delivery of 4.500 or 5.000 bottles
of wine that was promised by Respondent in its letter to Claimant [Ex. C3]. Third,
Respondent’s breach could not be diminishing through Claimant finding a substitute
supplier for the wine because the wine was a limited resource and a specific wine wanted
from Claimant’s customers. Once more when comparing to monopoly game, Claimant
didn’t jump any step or house of the game, it followed the rules through all the houses,
but the lucky card allowed it to go directly to the starting point to earn the money.
52. Again, as the arbitral tribunal was not constituted at the time of the urgency it was
necessary to apply to High Court in an attempt to prevent irreparable harm, because
Claimant is a successful and responsible business company and wanted to reach its
obligations to its customers and Respondent’s action lead to a breach of those Claimant’s
obligations. For all of that the interim injunction was necessary and in full harmony with
the Art. 20 of Framework Agreement.
3. RESPONDENT SHOULD BE AWARD WITH DAMAGES FOR DAMAGES IN
RESULT OF THE VIOLATION OF THE ARBITRATION AGREEMENT
53. The Claimant as innocent party can claim the costs, as damages for damages, it
incurred in responding to High Court proceedings and for Respondent’s violation of the
arbitration agreement because it resisted commencing the arbitral proceedings. The
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breach has caused the innocent party to incur legal costs, and those costs shall be
recoverable on an indemnity basis [Tjong Very Sumito and others v. Anting Investments
Pte Ltd].
54. The art. II, (I) NYC provides that arbitration agreement arises a positive effect, the
obligation to submit disputes covered by the arbitration agreement to arbitration. An
arbitration agreement obliges the parties to honor the commitment [Fouchard, Gaillard,
p. 381, 382, and 383]. In addition, the art. II (3) relates the negative effect of the arbitration
agreement, establishing that State Courts shall refer the parties to arbitration when seized
of an action in a matter in respect of which the parties have made an agreement. The same
provides art. 584 AAL.
55. Therefore, the arbitral tribunal must award Respondent with the damages for damages
that Claimant incurred with the High Court proceedings, namely the time and cost
incurred in responding to the other party’s wrongful conduct [Cooke, §5]. The Swiss
Federal Supreme Court sustained an award made by an arbitral tribunal for any damages
that were subsequently ordered to be paid in the wrongfully-invoked litigation, known as
damages for damages [X. SA v Z. Ltd].
56. Respondent violated its duty to arbitrate when going to the High Court, betraying their
arbitration agreement for tactial reasons with the hope of obtaining a more favorable
decision from the courts and delaying the arbitration proceedings. Like in monopoly game
if you stop at the property of the player you will have to reimburse him because he has
some costs or damages with your accommodation.
57. Again, the choice made by Respondent when tried to obtain a non-liability declaration
from its local court, deferring the right resolution of the case under an arbitral tribunal
caused costs to the Claimant. Respondent shall compensate Claimant for those cost
damages and this might have a deterring effect on parties contemplating initiating state
court proceedings in order to obstruct the arbitration or to burden the counterparty.
III CLAIMANT IS ENTITLED TO THE DAMAGES IT CLAIMS, INCLUDING
FURTHER PROFITS
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58. Claimant will suffer lost profits from the 5.500 bottles it will not be able to sell and
demands damages in accordance with Article 74 of the CISG. Both to facilitate the
calculation of damages and as a sign of goodwill, Claimant requests the profits made by
Respondent from selling the 5.500 bottles to SuperWines.
59. Claimant’s request for lost profits is uniform with the text of Article 74 of the CISG,
which states “damages for breach of contract by one party consist of a sum equal to the
loss, including loss of profit, suffered by the other party as a consequence of the breach”
[CISG Art. 74]. This article contains two essential notions: the principle of full
compensation (principe de la réparation intégrale) and limitation of liability by the
foreseeability rule. Article 74 is proposed to place parties in as good of a position as if the
contract had been performed. Furthermore, this article also allows Claimant to recover
these profits. The promise has the right to be fully compensated for all disadvantages
suffered as a result of the breach of contract. In the case we have in hands, Claimant will
suffer lost profits from the wine it will not be able to sell
60. Claimant should be allowed to claim Respondent’s profits from the sale of the 5.500
bottles to SuperWines for two reasons. Firstly, Claimant’s profits from sales to its
customers may have been higher than the premium paid by SuperWines as a trader to
Respondent. This means, Respondent’s profits are much less than Claimant’s damages.
Secondly, Respondent should not be allowed to profit from selling the bottles rightfully
belonging to Claimant to a third party and breaching the contract with the Claimant.
Moreover, under Article 74 Claimant can recover lost profits because damages were both
subjectively and objectively foreseeable by Respondent and were mitigated by Claimant.
Liability for damages agreeable to Articles 74 to 77 arises when the buyer or seller ‘fails
to perform any of his obligations under the contract or this Convention’. Consequently,
Claimant is entitled to recover its lost profits.
A. CLAIMANT CAN CLAIM THE PROFITS RESPONDENT MADE BY SELLING
THE BOTTLES TO SUPERWINES AS PART OF ITS DAMAGES UNDER A
THEORY OF RESTORATIVE DAMAGES
61. Claimant is entitled under Article 74 of the CISG to claim the profits Respondent
made by selling the 5.500 bottles of diamond Mata Weltin to SuperWines. Article 74
provides that “damages for breach of contract by one party consist of a sum equal to the
loss, including loss of profit, suffered by the other party as a consequence of the breach”
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[CISG Art. 74]. This agreement for loss compensation reflects a principle of full
compensation, one of the general principles on which the CISG is founded. Full
compensation is to be gained through a monetary claim aimed at “the positive interest,
i.e., everything the damaged party would have had if the contract was performed” [Bullet-
Proof Vest Case]. As such, the term “damages” in Article 74 predicts compensation for
direct losses to Claimant due to non-performance, as well as consequential losses
originated by the breach of contract, including loss of profits and loss to reputation.
62. Claimant has suffered direct losses in the amount of €3.850,00, for which Respondent
is legally responsible under Article 74 of the CISG. If Respondent had fulfilled its
contractual obligations and delivered the 5.500 bottles of diamond Mata Weltin to
Claimant, the contractual price per bottle would have been €41,50. Because of doubts that
Respondent would remain in breach of contract in spite of the Mediterranean court’s
order, Claimant was forced to look for transactions with other high-end wine producers.
The result of Claimant’s efforts was a deal for 5.500 bottles of Mata Weltin with
Vignobilia on 2 February 2015. The terms of this substitute contract set a price of €42,20
per bottle. The price differential between the two contracts, €3.850,00, represents
Claimant’s direct losses due to Respondent’s breach of contract.
63. As well as direct losses, Claimant has suffered lost profits due to Respondent’s breach
of contract for which it must be compensated. Under Article 74 of the CISG, Respondent
must restore Claimant to the position it would have been in had the contract been
performed. It has been recognized that, “when the goods were not delivered and when,
being known to the seller, they were meant to be sold at retail, the buyer can claim as lost
profit the profit that was expected according to the common [profit] margins” [Watches
Case]. This principle is applicable to the present claim. In an email on 1 December 2014,
Mr. Weinbauer offered Claimant a price of €41,50 per bottle of 2014 diamond Mata
Weltin. Specialized wine merchants, including Claimant, are currently selling bottles of
the 2014 vintage at prices between €90 and €100. Using this common profit margin,
Claimant’s lost profits per bottle could possibly range as high as €58,50 per bottle, or
€321.750,00 in total. Under Article 74, Respondent is liable for this amount.
64. Once the calculation above is a reasonable way to approximate lost profits, Claimant
acknowledges that it is impossible to precisely calculate its loss. Furthermore, the
relationship with Respondent could irreparably be damaged by claiming the full amount
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of lost profits. Furthermore, Claimant recognizes that Respondent is an important
business partner. Consequently, to facilitate the calculation of damages and demonstrate
goodwill, the most appropriate way to measure Claimant’s lost profits is to use the most
immediate and relevant substitute transaction – Respondent’s transaction with
SuperWines. This approach also comports with previous applications of Article 74.
B. RESPONDENT SHOULD NOT BE ALLOWED TO PROFIT FROM BREACH OF
CONTRACT, EVEN IF THIS AWARDS FURTHER DAMAGES TO CLAIMANT
65. Claimant should be able to recover the profits Respondent made by selling 5.500
bottles of diamond Mata Weltin to SuperWines as part of its damages, even if that
includes further profits, under the theory of preventive damages.
1. Under a Preventive Theory of Damages, Respondent Should Not Profit from Its
Breach of Contract
66. Using Respondent’s profits to estimate Claimant’s lost profits is very unlikely to
include further profits. However, even if recovering the amount of Respondent’s profits
does put Claimant in a better position than it would have been had the contract been
performed, Claimant should still be able to recover Respondent’s profits. Under a
preventive theory of damages, Respondent should not be able to profit from its breach of
contract. In keeping with principles of good faith and reasonable behaviour, Respondent
should be made to reimburse the profits that it made in breaching its contract with
Claimant
2. Scholarship Supports Ordering Respondent to Disgorge the Profits It Made from
Breaching Its Contract with Claimant
67. Ordering Respondent to disgorge the profits it made from its breach of contract does
justice in this particular case, and also sets up the correct incentives for other international
commercial actors. Commentators support these two lines of argumentation. First, a
doctrine of forced disgorgement of profits will “prevent the defendant’s unjust
enrichment by recapturing the gains the defendant secured in a transaction,” as Professor
Dan Dobbs has advanced. Preventing unjust enrichment gained through a breach of
contract not only serves principles of justice, but also sets up the correct incentive system
for all commercial actors. If Respondent is allowed to keep its profits, the breach will
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have been riskless and sellers will be able to speculate at the expense of buyers in the
wine market.
3. Recent Shifts in Doctrine Have Allowed for Restitution of Profits
68. Further, there has been an increasing shift in national doctrines to allow for an injured
party to claim the breaching party’s profits in a variety of circumstances.
1) Dutch law states that in cases where a party receives profit due to non-performance
“which benefit he would not have enjoyed if he would have performed in conformity with
his obligation, he has to undo, in accordance with the rules for an unjustified enrichment,
the damage that the creditor has suffered from his non-performance” [NBW Art. 6:78].
2) In Great Britain, Attorney General v. Blake established that under English law, an
injured party may receive the wrongdoer’s profits when normal remedies are inadequate
[Attorney General].
3) In the U.S. context, Zippertubing Co. v. Teleflex Inc. also held that the “law says that
when one has unlawfully deprived another of a contract or a business opportunity and has
made that opportunity his own, he is not to be permitted to retain any of the profits, any
of the benefits of its unlawful conduct” [Zippertubing, 1411].
C. CLAIMANT’S LOST PROFITS WERE FORESEEABLE UNDER ARTICLE 74 OF
THE CISG
69. Article 74 includes two limiting principles that exclude parties from recovery of lost
profits: the principles of foreseeability and mitigation.
13. In terms of foreseeability, Article 74 of the CISG only allows parties to recover
damages that the breaching party foresaw or ought to have foreseen as a consequence of
the breach of contract. This limitation on liability allowed both parties to carefully
estimate and insure themselves from the financial risks arising from the contract. The
limitation of foreseeability incentivizes parties to openly exchange information and
disclose any particularly unusual risks, which in turn allows both parties to create stronger
contracts.
70. Under Article 74, damages are foreseeable if the party in breach foresaw or ought to
have foreseen the damage as a “possible consequence” of the breach at the time of the
conclusion of the contract. Arbitrators determine what a party foresaw or ought to have
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foreseen by applying an objective standard. To apply the objective test, arbitrators first
ask what a reasonable person in the position of the promisor and aware of the
circumstances at the time of the conclusion of the contract would have foreseen.
71. The lost profits that Claimant suffered from Respondent’s breach of contract were
foreseeable at the time of contracting both on an objective and subjective basis.
Respondent ought to have foreseen that a breach of the contract would cause Claimant to
lose profits. This was evident for several reasons. First, Article 2 of the Contract stipulated
that Claimant would “market and resell the wine,” and therefore put Respondent on notice
that the Mata Weltin wine was merchantable [Cl. Ex. 1, Art. 2]. Second, the quantity of
wine ordered—“up to 10.000 bottles”—likewise indicated that Claimant viewed the
goods as merchantable and not for private use [Id.]. “When merchantable goods are sold
to commercial traders, profits from resale of the goods are regularly foreseeable”.
Furthermore, Article 20 of the Contract is evidence that Respondent subjectively knew
that its breach of contract would result in Claimant losing profits. Claimant and
Respondent provided that arbitration proceedings would be conducted in a “fast and cost
efficient way” [Cl. Ex. 1, Art. 20]. To reallocate Respondent’s unlawfully acquired profits
to Claimant is the fastest way to determine the value of the lost profits.
72. Because Claimant’s lost profits are foreseeable both under an objective and a
subjective standard, Respondent cannot argue that Article 74’s foreseeability requirement
bars recovery. Claimant is therefore entitled to recover lost profits under Article 74, as
Respondent foresaw that Claimant would lose profits as a consequence of any breach of
the contract at the time the contract was made.
D. CLAIMANT HAS TAKEN ALL REASONABLE MEASURES TO MITIGATE
LOSSES, INCLUDING LOSS OF PROFIT, RESULTING FROM RESPONDENT’S
BREACH
73. Claimant took reasonable measures to mitigate the losses, including loss of profit, it
suffered due to Respondent’s breach of contract. consequently, Claimant’s claim for
damages is not reducible under Article 77 of the CISG.
74. Article 77 provides that: “A party who relies on a breach of contract must take “such
measures as are reasonable in the circumstances to mitigate the loss, including loss of
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profit, resulting from the breach. If he fails to take such measures, the party in breach may
claim a reduction in the damages in the amount by which the loss should have been
mitigated” [CISG Art. 77].
75. Courts have interpreted this language as requiring injured parties to activate
themselves, instead of remaining passive, to reduce damage already incurred and to
prevent further damage from materializing. The CISG does not define “reasonable” under
Article 77, and so it has been left to courts and tribunals to develop a doctrine through
application. Multiple jurisdictions have come to recognize as “reasonable” the conclusion
of cover sales within a reasonable time and at reasonable prices to replace goods that were
not delivered.
76. Applying Article 77 and multi-jurisdictional doctrine under the Article, Claimant
acted reasonably to mitigate its damages in three instances. Firstly, Claimant’s agreement
to purchase 4.500 bottles of diamond Mata Weltin from Respondent served to mitigate
both present and future damages by obtaining at least partial fulfillment of the contract.
Secondly, Claimant’s subsequent successful motion in Mediterranean court to prevent
Respondent from selling the 5.500 bottles of diamond Mata Weltin to SuperWines also
mitigated damages by preserving the possibility that Respondent would fully fulfil its
contractual obligations. Thirdly, Claimant alerted its customers of a trouble in supply,
required their approval to substitute wine of non-identical qualities, and reached an
agreement with Vignobilia that would limit reputational damage from the disruption in
supply. These reasonable actions to mitigate damages preclude any claims for reduction
in damages by Respondent. Therefore, Claimant’s recovery of lost profits is not precluded
under Article 74’s principle of mitigation.
IV THE CLAIMANT IS ENTITLED TO BE REIMBURSED OF LITIGATION
COSTS REGARDING INTERIMN RELIEF.
A. THE PRINCIPLE OF FULL COMPENSATION IS APPLICABLE
78. The Principle of full compensation is applicable due to a liberal interpretation of the
74.º CISG and 7.4.2. Danubia contract law.
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1. ARTICLES 74.º CISG AND 7.4.2. DANUBIA CONTRACT LAW INCLUDE THE
PRINCIPLE OF FULL COMPENSATION
79. In fact, both articles 74.º CISG and 7.4.2. Danubia contract law – which foresee a
principle of full compensation – are applicable. The aforementioned norms are a result of
UNIDROIT principles doctrine. In both cases it is clearly defeasible that the choice for
an interim relief on a court that was not chosen by the parties on the Agreement is a choice
that was or ought to be “foreseeable by both parties” at the time of the conclusion of the
contract and in the light of available facts then. Indeed, the interim relief was an action
taken by the Claimant in order to avoid further damages on the specific emergent context.
As such, it would be perfectly foreseeable, at the time of the contract elaboration that both
parties could count on the resource for an emergent interim relief in case of such a sudden
and unrespecting breach such as the break of wine supply by the Respondent.
Additionally, not only the choice for this interim relief was foreseeable, but also the costs
involved due to the fact that conditional and contingency fee structures are permitted
under the laws of both Danubia and Mediterraneo [Proc. Order no.2, p.58, §40].
2. LEGAL DOCTRINE AND JURISPRUDENCE HAVE ALREADY SUPPORTED
THE INCLUSION OF SOME LITIGATIONS COSTS ON THE FULL
COMPENSATION CONCEPT
80. On an article published on Kluwer Arbitration Blog, Mathias Scherer wrote that “[...]
Seizing a state court in the face of a valid arbitration agreement without any reasonable
ground to do so might not go unpunished if the arbitral tribunal is sufficiently “robust”.
Pragmatic considerations might, however, persuade a party to nevertheless seize a state
court, especially if the court is likely to favor the local party because of a lack of
impartiality (particularly if the party is a state agency or state-owned company), or
because of specificities of the local law, which may also simply be invoked to disguise a
lack of impartiality. The attractiveness of such court proceedings will be heightened if the
other party has assets in the country of the court, while the seizing party has none outside
[...]” Specific jurisprudence approaches this issue: Swiss Federal Supreme Court’s
decision of 30 September 2013 (4A_232/2013) where there is compensation for costs
incurred as a result of court proceedings initiated in breach of an arbitration clause.
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3. THE CLAIMANT HAD COMPLIED WITH 77.º CISG ON WHAT CONCERNS TO
AVOIDAL OF FURTHER DAMAGES AFTER THE BREACH BY THE
COUNTERPARTY
81. In conclusion, the litigation costs spent on the interim relief by the Claimant were,
due to the specific circumstances, impreterible costs to avoid further damage – in
compliance with article 77.º CISG – and able to be defined as “damage” on the lato sensu
that both articles 74.º CISG and 7.4.2 Danubia contract law permit to be interpreted.
Indeed, some courts in multiple countries have decided to interpret Article 74 as granting
recovery of damages for litigation costs. Under Article 7.º/1 CISG, the CISG should be
read to “promote uniformity in its application” [CISG Art. 7.º/1]. Therefore, recovery of
litigation costs is consistent with the object and purpose of the CISG.
82. As what concerns more specifically to compliance with the duty of further damage
avoidable of 77.º CISG, it is reasonable to defend that on the specific circumstances due
to the urge on defending the Claimant's reputation with its clients, to avoid further
pecuniary damage to both parties that would arise in case there was no interim relief – in
fact, in that case the consequence would be of a much higher liability to the Respondent
due to absolute non-compliance added to further compensations – and having in account
that the payment arrangement with LawFix was standard practice on the law of
Mediterraneo [Proc. Order no.2, p.58, §40], it is evident that the access to the interim
relief was the most reasonable and unexpansive solution to both parties on a short and
long term evaluation.
B. IF THE CISG IS NOT APPLICABLE, THE RIGHT TO REIMBURSEMENT OF
LITIGATION COSTS STILL APPLIES
83. In this case, the applicable rules to the arbitration is the Vienna Rules which is
omissive on what concerns to payment of litigation costs. Therefore, general principles
should be applied.
1. THE VIENNA RULES DON’T SPECIFY WHICH PARTY SHOULD BEAR THE
LITIGATION COSTS
84. In fact, what it stipulates on article 37.º is that in case there is lack of agreement
between parties, “[...] the arbitral tribunal shall decide on the allocation of costs in the
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manner it deems appropriate.” In casu there was no such agreement and, therefore, the
Tribunal has discretionarily to decide the litigation costs issue.
2. THE PRINCIPLE OF COSTS FOLLOW THE EVENT IS APPLICABLE
85. This principle, according to which the losing party on a judicial procedure is bound
to support the litigation costs, is, according to UNIDROIT rules, to be considered as a
quasi-universal principle of international law. Additionally, that is the provision of
UNCITRAL Arbitration rules (article 42.º/1) and it is a repeated jurisprudence by the ICC
[Maxime, cases 6345 and 6959]. The Danubia law adopted the UNCITRAL model on
what concerns to arbitration rules. However, this model is silent as to litigation costs. In
this case, the Tribunal must find a solution having in account the fact that local tribunals
in Danubia have always followed the principle according to which the losing party on the
litigation procedure is bound to assume the procedural costs [Proc. Order no.2, p. 59,
§43].
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REQUEST FOR RELIEF
In light of the above submissions, Claimant respectfully requests the Tribunal to:
1) Order Respondent to produce the documents requested by Claimant;
2) Respondent compensate Claimant for the damages from the breaching of
arbitration agreement
3) Find that Claimant can claim the profits Respondent made by selling the
bottles to SuperWines as part of its damages, including further profits;
4) Find that Claimant is entitled to recover litigation costs of US$50.280.
Claimant reserves the right to amend its request for relief as may be required.