MEMORANDUM FOR RESPONDENT - Electronic Library … · Eighteenth Annual Willem C. Vis International...

Eighteenth Annual

Willem C. Vis International Commercial Arbitration Moot

15 April – 21 April 2011

Vienna, Austria

MEMORANDUM FOR RESPONDENT

On Behalf of: Against:

Equatoriana Fishing Ltd. Mediterraneo Trawler Supply S.A.

30 Seaview Terrace 1 Harbour View Street

Oceanside, Equatoriana Capital City, Mediterraneo

Tel. (0) 927-8515 Tel. (0) 148-2010

Fax. (0) 927-8516 Fax. (0) 148-2011

Email: [email protected] Email: [email protected]

RESPONDENT CLAIMANT

QUEEN’S UNIVERSITY FACULTY OF LAW

BENJAMIN ADELSON · VANESSA BEAMISH · LARA FITZGERALD-HUSEK · JACK MASLEN


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TABLE OF CONTENTS

TABLE OF ABBREVIATIONS ....................................................................................... VI!TABLE OF AUTHORITIES ........................................................................................ VIII!TABLE OF CASES ........................................................................................................ XIV!SUMMARY OF ARGUMENT ............................................................................................ 1!ARGUMENT ...................................................................................................................... 2!PART ONE: THE TRIBUNAL LACKS JURISDICTION TO HEAR THE PARTIES’ DISPUTE. ........................................................................................................................... 2!

I. THE TRIBUNAL WAS NOT CONSTITUTED ACCORDING TO THE PARTIES’ AGREEMENT. ..... 2!A.! The Council did not comply with the Parties’ Agreement in denying

confirmation of Mr. Y. ................................................................................................ 3!1.! Both Parties waived any objection to Mr. Y’s qualified statement of

independence. ............................................................................................ 3!2.! The Parties’ mutual decision to accept Mr. Y’s appointment as

presiding arbitrator was entitled to deference from the Council. ..... 3!3.! The Council should have regard for the Parties’ expectations and

should have applied the IBA Guidelines to confirm Mr. Y. .............. 4!4.! The Council’s decision to deny Mr. Y’s confirmation was

premature. .................................................................................................. 5!B.! The Council did not comply with the Parties’ Agreement in appointing Mr. Z

as presiding arbitrator. ................................................................................................. 5!1.! The Council did not have authority to substitute a replacement

arbitrator because there was no replacement arbitrator. .................... 5!2.! The Council should have invited the party-appointed arbitrators to

make another appointment. .................................................................... 6!II. RESPONDENT DID NOT WAIVE ITS RIGHT TO OBJECT TO THE JURISDICTION OF THE TRIBUNAL. ........................................................................................................................................... 6!

A.! Respondent was unaware of the improper constitution of the Tribunal when it submitted its Statement of Defence. ......................................................................... 7!

B.! The time between the improper constitution and Respondent’s objection does not amount to undue delay. ........................................................................................ 7!

C.! Respondent’s objection is not disruptive of the arbitral proceedings. ................ 7!III. IF THE TRIBUNAL AFFIRMS ITS JURISDICTION, AN EVENTUAL AWARD IS AT RISK OF BEING SET ASIDE OR DENIED RECOGNITION AND ENFORCEMENT. .......................................... 8!

PART TWO: CLAIMANT BREACHED ITS DUTY OF CONFIDENTIALITY. .......... 9!I. THE 2010 MILAN RULES APPLY TO THE ISSUE OF CONFIDENTIALITY. ................................ 10!

A.! The Tribunal should follow the presumption that the most recent version of the Milan Rules governs the dispute. ...................................................................... 10!

B.! Even if the 2004 Milan Rules apply to substantive duties, the confidentiality duty is procedural in character, and so the 2010 Milan Rules apply. ................. 11!


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C.! Claimant’s statements violated the duty of confidentiality under art. 8(1) 2010 Milan Rules. ................................................................................................................. 11!

1.! Claimant divulged the existence of arbitration and the content and subject matter of the dispute. ............................................................... 12!

2.! There is no applicable exception to the duty of confidentiality that would have permitted Claimant’s disclosure. ..................................... 12!

II. IF THE 2004 MILAN RULES APPLY, CLAIMANT IS BOUND BY AN IMPLIED DUTY OF CONFIDENTIALITY. .......................................................................................................................... 13!

A.! Claimant was bound by an implied duty of confidentiality because of the nature of international arbitration proceedings. .................................................... 13!

B.! Claimant’s disclosures violated its implied confidentiality obligation. ............... 15!PART THREE: CLAIMANT’S BREACH OF CONFIDENTIALITY JUSTIFIES AN INJUNCTIVE ORDER AND DAMAGES. ...................................................................... 15!

I. THE TRIBUNAL SHOULD ISSUE AN ORDER ENFORCING CONFIDENTIALITY. ...................... 15!A.! Damages are insufficient to protect against future breaches of confidentiality. ..

.............................................................................................................................. 16!B.! There is a reasonable possibility that Respondent will succeed on the merits of

the dispute. .................................................................................................................. 17!II. THE TRIBUNAL SHOULD DECLARE THAT CLAIMANT IS LIABLE FOR PROVABLE DAMAGES ARISING FROM PAST OR FUTURE BREACHES OF CONFIDENTIALITY. ........................................ 17!

PART FOUR: THE SQUID CONFORMED TO THE CONTRACT. ........................... 18!I. RESPONDENT DELIVERED CONFORMING GOODS UNDER ART. 35(1) CISG. ...................... 18!

A.! Claimant knew, or could not have been unaware, that Respondent intended the Squid to be unsized. ............................................................................................ 19!

B.! A reasonable person in Claimant’s position would have understood that Respondent intended to sell unsized squid. ........................................................... 20!

II. THE SQUID WERE FIT FOR THE PURPOSES FOR WHICH GOODS OF THE SAME DESCRIPTION WOULD ORDINARILY BE USED. .............................................................................. 20!III. THE SQUID WERE FIT FOR ANY PARTICULAR PURPOSE MADE KNOWN TO RESPONDENT. ............................................................................................................................................................ 21!

A.! Claimant did not expressly or impliedly make known to Respondent at the conclusion of the Contract that the Squid were to be used as bait for long-liners. ............................................................................................................................ 21!

B.! Even if Claimant made known the Squid would be used as bait, it did not reasonably rely on Respondent’s skill and judgment. ........................................... 22!

IV. RESPONDENT DID NOT BREACH UNDER ART. 35(2)(C) CISG. ........................................... 23!A.! Claimant knew that Respondent did not intend the Contract to be a sale by

sample. ......................................................................................................................... 23!B.! A reasonable business person would have understood that Respondent did not

intend the Contract to be a sale by sample. ........................................................... 24!C.! In the alternative, if the Contract was concluded on the basis of a sample,

Respondent informed Claimant that the bulk goods would deviate from the sample. ......................................................................................................................... 25!


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V. EVEN IF THE SQUID DID NOT CONFORM UNDER ART. 35(2), ART. 35(3) CISG EXCLUDES RESPONDENT’S LIABILITY. ............................................................................................................. 25!

PART FIVE: CLAIMANT CANNOT RELY ON THE ALLEGED NON-CONFORMITY. ................................................................................................................ 25!

I. CLAIMANT FAILED TO PROVIDE REASONABLE NOTICE OF THE NON-CONFORMITY IN ACCORDANCE WITH ARTS. 38 AND 39 CISG. ............................................................................... 26!

A.! A reasonable examination of the goods, conducted on or around 1 July 2008, would have discovered the alleged non-conformity. ............................................ 26!

1.! Claimant failed to take a reasonable sample of the Squid. ............... 27!a. ! Claimant’s sample was unreasonably smal l . . . . . . . . . . . . . . 27 !b. ! Claimant did not examine a random sample o f the

Squid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 !2.! Claimant did not exercise the requisite degree of diligence in its

examination. ............................................................................................ 28!B.! Claimant did not give notice of the non-conformity until 16 August 2008,

which was not within a reasonable time under art. 39(1) CISG. ........................ 28!1.! Claimant did not provide notice specifying the lack of conformity

until 16 August 2008. ............................................................................. 29!a.! Claimant’s 29 July 2008 le t t er did not convey suf f i c i ent

detai l for Respondent to know what would be necessary to cure the non-conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 !

b.! The 16 August 2008 le t t er was Claimant’s f i rs t communicat ion that spec i f i ed the nature o f the non-conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 !

2.! By providing notice 45 days after it ought to have discovered the non-conformity, Claimant’s notice was late. ...................................... 30!

a. ! The c ir cumstances required not i ce be g iven in less than 45 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 !

b. ! Notice was not g iven within the presumptive one month per iod. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 !

C.! Even if Claimant’s 29 July 2008 letter specified the nature of the non-conformity, it was still not given within a reasonable time. ................................ 31!

1.! The circumstances required notice be given within 27 days. ........... 31!2.! The noble month should be reduced because the Squid were

perishable and seasonal. ......................................................................... 31!II. RESPONDENT IS NOT PREVENTED FROM RELYING ON ART. 39 CISG BY VIRTUE OF ART. 40 CISG. ............................................................................................................................................ 32!

A.! Claimant cannot prove Respondent was aware of the facts related to the non-conformity, so art. 40 CISG does not apply. ......................................................... 32!

B.! In the alternative, Respondent disclosed the risk of a non-conformity to Claimant, so art. 40 CISG does not apply. ............................................................. 33!

PART SIX: CLAIMANT FAILED TO MITIGATE ITS LOSSES. .................................. 33!I. CLAIMANT FAILED TO MAKE REASONABLE ATTEMPTS TO RESELL THE SQUID TO ALTERNATIVE BUYERS. .................................................................................................................... 33!II. CLAIMANT INCURRED UNREASONABLE WAREHOUSE STORAGE COSTS. ............................. 34!


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III. CLAIMANT FAILED TO MITIGATE ITS LOSS OF PROFIT BY NOT SEEKING A SUBSTITUTE PURCHASE FOR LONG-LINE BAIT. .................................................................................................. 35!

PRAYER FOR RELIEF .................................................................................................... 35!


vi

TABLE OF ABBREVIATIONS

Abbreviation Explanation

¶ Paragraph

AG Appellationsgericht [Appeal Court—Switzerland]

Amd. Amended

art./arts. Article / Articles

BGH Bundesgerichthof [Federal Supreme Court—Germany]

BGer Bundesgericht [Federal Supreme Court—Switzerland]

BOL Higher Court of Appeal [Germany]

CISG United Nations Convention on Contracts for the International Sale of Goods

Cl. Ex. Claimant’s Exhibit

Cl. Memo. Claimant’s Memorandum

Clar. Clarification

ed. Edition

ed. / eds. Editor / Editors

e.g. Exemplum gratii [for example]

et al. Et alii [and others]

etc. Et cetra [and other things]

ft Footnote

g Gram

Gen. Stn. General Standard

HG Handelsgericht [Commercial Court—Switzerland]

IBA International Bar Association

IBA Guidelines International Bar Association Guidelines on Conflict of Interest in International Arbitration

ICC International Chamber of Commerce

ICC Rules International Chamber of Commerce Rules of Arbitration 2008

ICSID International Centre for the Settlement of Investment Disputes

Id. Ibidem [in the same source]


vii

i.e. Id est [that is]

kg Kilogram

LG Landgericht [District Court—Germany]

Ltd. Limited Company

Ltr. Letter

Milan Rules Rules of Arbitration of the Chamber of Arbitration of Milan

MT Metric Ton

No. Number

NY Convention United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards

OGH Oberster Gerichthof [Supreme Court—Austria]

OLG Oberlandesgericht [Court of Appeal—Germany and Austria]

Para. Paragraph

Passim To be found at various places throughout the text

Pt. Part

Proc. Ord. Procedural Order

Req. for Arb. Request for Arbitration

Resp. Ex. Respondent’s Exhibit

S.A. Société Anonyme [Public Limited Company]

St. of Def. Statement of Defense

UK United Kingdom

UN United Nations

UNCITRAL United Nations Commission on International Trade Law

UNCITRAL Rules UNCITRAL Arbitration Rules

UNIDROIT International Institute for the Unification of Private Law

UNIDROIT Principles UNIDROIT Principles of International Commercial Contracts of 2004

USA United States of America

Vol. Volume


viii

TABLE OF AUTHORITIES

Andersen, Camilla B.

“Reasonable Time in Article 39(1) of the CISG – Is Article 39(1) Truly a Uniform Provision” UNIVERSITY OF COPENHAGEN: PACE ESSAY SUBMISSION September (1998) cited as: Andersen

102, 105

Ashford, Peter HANDBOOK ON INTERNATIONAL COMMERCIAL

ARBITRATION JurisNet, Huntington, NY 2009 cited as: Ashford

8

Bernstein, Herbert and Joseph Lookofsky

UNDERSTANDING THE CISG IN EUROPE, 2nd ed. Kluwer Law International, New York 2003 cited as: Bernstein/Lookofsky

110

Bianca, Cesare Massimo and Michael Joachim Bonell (eds.)

COMMENTARY ON THE INTERNATIONAL SALES LAW: THE 1980 VIENNA SALES CONVENTION Giuffrè, Milan 1987 cited as: Author in Bianca/Bonell

64, 86, 111, 115

Binder, Peter INTERNATIONAL COMMERCIAL ARBITRATION AND

CONCILIATION IN UNCITRAL MODEL LAW JURISDICTIONS, 3rd ed. Sweet & Maxwell, London 2010 cited as: Binder

16, 17, 19, 22, 24

Blackaby, Nigel, et al.

REDFERN AND HUNTER ON INTERNATIONAL ARBITRATION, 5th ed. Oxford University Press 2009 cited as: Blackaby et al.

1, 7, 10

Böckstiegel, Karl-Heinz

“The Role of Party Autonomy in International Arbitration” DISPUTE RESOLUTION JOURNAL 52:3 (1997) 24 cited as: Böckstiegel

8

Born, Gary B. INTERNATIONAL COMMERCIAL ARBITRATION

Kluwer Law International 2009 cited as: Born

1, 7, 8, 22, 37, 39, 40, 41, 44, 45, 46, 48, 50, 51


ix

Brown, Alexis “Presumption Meets Reality: An exploration of the Confidentiality Obligation in International Commercial Arbitration” AM. U. INTERNATIONAL REVIEW 16 (2001) 969, available at: http://www.wcl.american.edu/ cited as: Brown

51, 55

Bühring-Uhle, Christian et al.

ARBITRATION AND MEDIATION IN INTERNATIONAL BUSINESS Kluwer Law International 1996 cited as: Bühring-Uhle et al. 1996

39

Bühring-Uhle, Christian et al.

ARBITRATION AND MEDIATION IN INTERNATIONAL BUSINESS Kluwer Law International 2006 cited as: Bühring-Uhle et al. 2006

1

Chamber of Arbitration of Milan

RULES OF ARBITRATION OF THE CHAMBER OF ARBITRATION OF MILAN 2004 cited as: 2004 Milan Rules

passim

Chamber of Arbitration of Milan

RULES OF ARBITRATION OF THE CHAMBER OF ARBITRATION OF MILAN 2010 cited as: 2010 Milan Rules

passim

CISG United Nations Convention on Contracts for the International

Sales Goods, Vienna, 1980 cited as: CISG

passim

CISG Advisory Council

“CISG-AC Opinion no 2, Examination of the Goods and Notice of Non-Conformity: Articles 38 and 39” Rapporteur: Professor Eric E. Bergsten, Emeritus, Pace University School of Law, New York 2004 cited as: CISG-AC2

100, 104

Cook, Trevor and Alejandro Garcia

• INTERNATIONAL INTELLECTUAL PROPERTY ARBITRATION Kluwer Law International 2010

• cited as: Cook/Garcia

7, 51, 55

Dessemontet, Francois

“Arbitration and Confidentiality” AMERICAN REVIEW OF INTERNATIONAL ARBITRATION 7:3-4 (1996) 299 cited as: Dessemontet

32, 37, 43

DiMatteo, Larry A. et. al.

“The Interpretative Turn in International Sales Law: An Analysis of Fifteen Years of CISG Jurisprudence” NORTHWESTERN JOURNAL OF INTERNATIONAL LAW & BUSINESS 34 Winter (2004) 299-440 cited as: DiMatteo

93, 95, 99, 110

Enderlein, Fritz and Dietrich Maskow

INTERNATIONAL SALES LAW Oceana Publications, New York 1992 cited as: Enderlein/Maskow

71, 73, 115


x

Fernández-Ballesteros, M.Á., and David Arias (eds.)

LIBER AMICORUM BERNARDO CREMADES La Ley 2010 cited as: Author in Fernández-Ballesteros/Arias

10

Ferrari, Franco INTERNATIONAL SALE OF GOODS: APPLICABILITY AND

APPLICATION OF THE UNITED NATIONS CONVENTION FOR THE INTERNATIONAL SALE OF GOODS Helbing & Lichtenhahn, Bruylant 1999 cited as: Ferrari

93, 98, 99, 100

Finkelstein et al.

“The New Arbitration Rules of the Chamber of Arbitration of Milan” ARBITRAGEM INTERNACIONAL: UNIDROIT, CISG E DIREITO BRASILEIRO (2010) 23 cited as: Coppo in Finkelstein

26, 33, 34, 36

Fortier, L. Yves “The Occasionally Unwarranted Assumption of

Confidentiality” ARBITRATION INTERNATIONAL 15 (1999) 131 cited as: Fortier

32, 40, 44

Gaillard, Emmanuel and John Savage (eds.)

FOUCHARD GAILLARD GOLDMAN ON INTERNATIONAL COMMERCIAL ARBITRATION Kluwer Law International 1999 cited as: Gaillard/Savage

9, 15, 23

Greenberg, Simon and Flavia Mange

“Institutional and Ad Hoc Perspectives on the Temporal Conflict of Arbitral Rules” JOURNAL OF INTERNATIONAL ARBITRATION 27:2 (2010) 199 cited as: Greenberg/Mange

28, 30, 31

Henschel, René Franz

THE CONFORMITY OF GOODS IN INTERNATIONAL SALES: AN ANALYSIS OF ARTICLE 35 IN THE UNITED NATIONS CONVENTION ON THE CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (CISG) Thomson/GadJura, Copenhagen 2005 cited as: Henschel 2005

68, 75

Honnold, John O.

UNIFORM LAW FOR INTERNATIONAL SALES UNDER THE 1980 UNITED NATIONS CONVENTION, 3rd ed. Kluwer Law International 1999 cited as: Honnold

78, 80, 84, 95, 99

Horvath, Günther J.

“The Duty of the Tribunal to Render an Enforceable Award” JOURNAL OF INTERNATIONAL ARBITRATION 18 (2001) 135 cited as: Horvath

22


xi

Hwang, Michael and Katie Chung

“Defining the Indefinable: Practical Problems of Confidentiality in Arbitration” ARBITRATION INTERNATIONAL 26:5 (2009) 609 cited as: Hwang/Chung

32, 51

International Bar Association

IBA GUIDELINES ON CONFLICT OF INTEREST IN INTERNATIONAL ARBITRATION 2004 cited as: IBA Guidelines

11

International Law Association

“International Commercial Arbitration: Resolution 1/2010” from the 74th Conference of the International Law Association held in the Hague, Netherlands, 15-20 August 2010 cited as: ILA Resolution 1/2010

32

Klausegger, Christian, et al. (eds.)

AUSTRIAN ARBITRATION YEARBOOK 2008 C.H. Beck, Stämpfli & Manz 2008 cited as: Author in Klausegger et al.

10

Kronke, Herbert, et al. (eds.)

RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS: A GLOBAL COMMENTARY ON THE NEW YORK CONVENTION Kluwer Law International 2010 cited as: Author in Kronke et al.

2, 3, 6, 23, 24

Lew, Judith M., et al.

COMPARATIVE INTERNATIONAL COMMERCIAL ARBITRATION Kluwer Law International 2003 cited as: Lew et al.

1, 6, 7, 9, 15, 21, 22

Lewison, Kim

“The Interpretation of Contracts”, 3rd ed. Sweet & Maxwell, London 2004 cited as: Lewison

31

Luttrell, Sam BIAS CHALLENGES IN INTERNATIONAL COMMERCIAL

ARBITRATION: THE NEED FOR A “REAL DANGER” TEST Kluwer Law International 2009 cited as: Luttrell

15, 23

Magnus, Ulrich and Lisa Haberfellner

GENERAL PRINCIPLES OF UN-SALES LAW 1995, available at: http://www.cisg.law.pace.edu/cisg/biblio/magnus.html cited as: Magnus/Haberfellner

75

McIlwrath, Michael and John Savage

INTERNATIONAL ARBITRATION AND MEDIATION: A PRACTICAL GUIDE Kluwer Law International 2010 cited as: McIlwrath/Savage

7, 10, 20, 23


xii

Moses, Margaret L.

THE PRINCIPLES AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION Cambridge University Press, Cambridge 2008 cited as: Moses

7, 11, 15

Noussia, Kyriaki CONFIDENTIALITY IN INTERNATIONAL COMMERCIAL

ARBITRATION: A COMPARATIVE ANALYSIS OF THE POSITION UNDER ENGLISH, US, GERMAN AND FRENCH LAW Springer-Verlag Berlin Heidelberg 2010 cited as: Noussia

32, 34, 36, 37, 39, 41, 43, 44, 45, 46, 50, 55

New York Convention

CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS 1958 cited as: NY Convention

passim

Oxford English Dictionary

THE OXFORD ENGLISH DICTIONARY, 2nd ed. Clarendon Press, Oxford, England cited as: Oxford

96

Paulsson, Jan “Ethics, Elitism, Eligibility”

JOURNAL OF INTERNATIONAL ARBITRATION 14:4 (1997) 13 cited as: Paulsson

7

Paulsson, Jan and Nigel Rawding

“The Trouble with Confidentiality” ARBITRATION INTERNATIONAL 11:3 (1995) 303 cited as: Paulsson/Rawding

34

Poudret, Jean-François and Sébastien Besson

COMPARATIVE LAW OF INTERNATIONAL ARBITRATION Sweet & Maxwell, London 2007 cited as: Poudret/Besson

24, 35, 42, 52, 53

Redfern, Allan and Martin Hunter

LAW AND PRACTICE OF COMMERCIAL ARBITRATION, 4th ed. Sweet & Maxwell, London 2004 cited as: Redfern/Hunter

8

Schlechtriem, Peter (ed.)

COMMENTARY ON THE UN CONVENTION ON THE INTERNATIONAL SALE OF GOODS (CISG), 2nd ed. Oxford University Press, New York 1998 cited as: Author in Schlectriem 1998

77, 84, 88, 89, 91


xiii

Schlechtriem, Peter and Ingeborg Schwenzer (eds.)

COMMENTARY ON THE UN CONVENTION ON THE INTERNATIONAL SALE OF GOODS (CISG), 3rd ed. Oxford University Press, Oxford 2010 cited as: Schlechtriem/Schwenzer 2010

77, 86, 88, 89, 93, 95, 106, 107, 109, 110, 116

Schlechtriem, Peter and Ingeborg Schwenzer (eds.)

COMMENTARY ON THE UN CONVENTION ON THE INTERNATIONAL SALE OF GOODS (CISG), 2nd ed. Oxford University Press, New York 2005 cited as: Author in Schlechtriem/Schwenzer 2005

60, 64, 68, 69, 71, 73

Schwenzer, Ingeborg

“National Preconceptions that Endanger Uniformity” PACE INTERNATIONAL LAW REVIEW 19:1 (2007) 103 cited as: Schwenzer 2007

99, 102, 105

UNCITRAL “Secretariat Commentary on the Draft Convention on

Contracts for the International Sale of Goods” UN DOC. A/CONF. 97/5, 1979 cited as: Sec. Comm.

68, 71, 82

UNCITRAL Model Law on International Commercial Arbitration

UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION 1985 with amendments as adopted in 2006 cited as: Model Law

passim

Waibel, Michael, et al. (eds.)

THE BACKLASH AGAINST INVESTMENT ARBITRATION Kluwer Law International 2010 cited as: Author in Waibel et al.

7

Zuberbühler, Tobias, et al. (eds.)

SWISS RULES OF INTERNATIONAL ARBITRATION: COMMENTARY Kluwer Law International 2005 cited as: Zuberbühler et al.

6, 9, 19, 20, 22


xiv

TABLE OF CASES

Australia Esso Australia Resources Ltd. v. Plowman [1995], High Court of Australia, 128 ALR 391 cited as: Esso v. Plowman (Australia 1995)

43

Transfield Philippines Inc & Ors v. Pacific Hydro Ltd. & Ors [2006], Victorian Supreme Court, VSC175 cited as: Transfield v. Pacific Hydro (Australia 2006)

44

Austria Oberster Gerichtshof [Supreme Court] [27 August 1999] cited as: OGH Aug 1999

86

Belgium N.V. Namur-Kreidverzekering v. N.V. Wesco [16 December 1996], Rechtbanl [District Court] cited as: Namur-Kreidverzekering v. Wesco (Belgium 1996)

100

Canada Ghiradosi v. British Columbia (Minister of Highways) [1966], Supreme Court of Canada, SCR 367 cited as: Ghiradosi v. B.C. (Canada 1966)

22

Denmark Dr. S. Sergueev Handelsagentur v. DAT-SCHAUB A/S [31 January 2002], So og Handelsretten [Maritime Commercial Court] cited as: Sergueev v. DAT (Denmark 2002)

92, 101, 104

Finland Crudex Chemicals Oy v. Landmark Chemicals S.A. [31 May 2004], Helsinki Court of Appeal cited as: Crudex v. Landmark (Finland 2004)

88

EP S.A. v. FP Oy [11 June 1995], Helsinki Court of First Instance, (95/11481) cited as: EP v. FP (Finland 1995)

71

France Aita v. Ojjeh [18 February 1986], Cour d’ Appel de Paris [Appeals Court] cited as: Aita v. Ojjeh (France 1986)

34, 42,

55

Caito Roger v. Société francaise de factoring [13 September 1995], Cour d’Appel de Grenoble cited as: Caito v. Société (France 1995)

60

Société True North et Société FCB Internationale v. Bleustein et al [22 February 1999], Commercial Court of Paris, overturned on procedural grounds in TGI and CA Paris [2003], cited in Rev. Arb. (2003) 189 cited as: True North v. Bleustein (France 1999) cited in Poudret/Besson 316-317

35, 42,

52, 53


xv

Germany Bayerisches Oberstes Landesgericht [Bavarian Supreme Court] [23 September 2004], (4Z Sch 005-04) cited as: BOL Sept 2004

24, 25

Bayerisches Oberstes Landesgericht [24 February 1999], (4Z Sch 17/98) cited as: BOL Feb 1999

25

Bundesgerichtshof [Federal Supreme Court] [3 November 1999], (CLOUT case No. 319) cited as: BGH Nov 1999

99, 102

Bundesgerichtshof [25 June 1997], (CLOUT case No. 235) cited as: BGH Jun 1997

115

Oberlandesgericht Celle [Court of Appeal] [2 September 1998] cited as: OLG Sept 1998

116

Oberlandesgericht Frankfurt [29 January 2004] cited as: OLG Jan 2004

68

Oberlandesgericht Thüringen [26 May 1998] cited as: OLG May 1998

105

Oberlandesgericht Zweibrücken [2 February 2004] cited as: OLG Feb 2004

107

Landgericht Coburg [District Court] [12 December 2006] cited as: LG Dec 2006

75

Landgericht Darmstadt [9 May 2000] cited as: LG May 2000

71

Landgericht Düsseldorf [25 August 1994] Cited as: LG Aug 1994

114

Landgericht Erfurt [29 July 1998] Cited as: LG Jul 1998

95

Landgericht Kassel [15 February 1996] cited as: LG Kassel Feb 1996

60

Landgericht München [27 February 2002] cited as: LG Feb 2002

71


xvi

Landgericht Oldenburg [28 February 1996] cited as: LG Feb 1996

64

Landgericht Stuttgart [31 August 1989] cited as: LG Aug 1989

90

Hong Kong Werner A. Bock KG v. The N's Co. Ltd. [1978] Hong Kong Court of Appeal, HKLR 281 cited as: Werner v. The N’s Co. (Hong Kong 1978)

24, 25

Italy Rheinland Versicherungen v. Altarex and Allianz Subalpina [12 July 2000], Tribunale di Vigevano [District Court] cited as: Rheinland v. Altarex (Italy 2000)

71

Netherlands Fallini Stefano & Co. S.N.C. v. Foodik BV [19 December 1991], Rb Roermond [District Court] cited as: Fallini v. Foodik (Netherlands 1991)

89

Netherlands Arbitration Institute, Case No. 2319, 15 October 2002

cited as: Rijn Blend Case (Netherlands 2002) 68, 71

New Zealand International Housewares Limited v. SEB [2003], High Court of Auckland, CP 395 SD 01 cited as: Housewares v. SEB (New Zealand 2003)

69

Singapore Myanma Young Chi Oo Co v. Win Win Nu [2003] Singapore High

Court, S.L.R. 547 cited as: Myanma v. Win (Singapore 2003)

44

Spain Kingfisher Seafoods Limited v. Comercial Eloy Rocio Mar SL [12

December 2007], Audiencia Provincial de la Pontevedra [Appellate Court], sección 1 cited as: Kingfisher v. Comercial (Spain 2007)

93, 101, 104

Manipulados del Papel y Cartón SA v. Sugem Europa SL [4 February 1997], Audiencia Provincial de Barcelona, sección 16 cited as: Manipulados v. Sugem (Spain 1997)

74

Pescados J. Gutiérrez, S.I. v. Port Said Export Fish [12 September 2001], Audiencia Provincial de Barcelona, sección 4 cited as: Pescados v. Port Said Export (Spain 2001)

101, 104

Sweden Beijing Light Automobile Co., Ltd v. Connell Limited Partnership [5 June 1998], Arbitration Institute of the Stockholm Chamber of Commerce cited as: Beijing Light v. Connell (Sweden 1998)

107


xvii

Switzerland Bundesgericht [Federal Supreme Court] [18 May 2009] cited as: BGer May 2009

60

Appellationsgericht [Appeal Court] Basel-Stadt [26 September 2008] 58 cited as: AG Sept 2008

60

United Kingdom

Associated Electric & Gas Insurance Services Ltd v. European Reinsurance Co. of Zurich [2003], Privy Council, 1 All E.R. 253 cited as: AEGIS v. European Reinsurance (UK 2003)

46

Ali Shipping Corp. v. Shipyard Trogir [1998], English Court of

Appeal, 1 Lloyd’s Rep. 643 cited as: Ali Shipping v. Shipyard (UK 1998)

36, 40, 41, 46, 53

Department of Economic Policy and Development of the City of

Moscow v. Bankers Trust Co. [2004], English and Wales Court of Appeal Civil Division, EWCA 314 cited as: Moscow v. Bankers (UK 2004)

43

Dolling-Baker v. Merrett [1991], English Court of Appeal, 2 All E.R.

890 cited as: Dolling-Baker v. Merrett (UK 1991)

39, 41, 45, 46, 53

Emmott v. Michael Wilson & Partners Ltd. [2008], English and

Wales Court of Appeal Civil Division, EWCA 184 cited as: Emmott v. Michael Wilson (UK 2008)

39, 41, 46

Hassneh Insurance Co. of Israel v. Mew [1993], Court of Queen’s

Bench, 2 Lloyd’s Rep. 243 cited as: Hassneh Insurance v. Mew (UK 1993)

34, 41, 46

Insurance Co v. Lloyd’s Syndicate [1995], Court of Queen’s Bench, 1

Lloyd’s Rep. 272 cited as: Insurance v. Lloyd’s Syndicate (UK 1995)

36, 41, 53

Bunge v. Kruse [1979], English High Court, 1 Lloyd's Rep. 279

cited as: Bunge v. Kruse (UK 1979) 31

United States Schmitz-Werke GmbH & Co. v. Rockland Industries Inc. [21 June

2002], United States Court of Appeal 4th Circuit cited as: Schmitz-Werke v. Rockland (USA 2002)

71, 74

United States v. Panhandle Eastern Corp et al. [1988], United States

Court of Appeal 3rd Circuit, 118 FRD 346 cited as: US v. Panhandle (USA 1988)

43


xviii

Compagnie des Bauxites de Guinee v. Hammermills Inc. [29 May 1992], United States District Court, U.S. Dist. Lexis 8046, No. 90-0169, 1992 WL 122712 cited as: Compagnie v. Hammermills (USA 1992)

25

Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara [2001], United States District Court, 190 F. Supp. 2d 936 cited as: Karaha v. Perusahaan (USA 2001)

25

Other Biwater Gauff (Tanzania) Ltd., v. United Republic of Tanzania, Procedural Order No. 3, ICSID Case No. ARB/05/22 cited as: Biwater Gauff v. Tanzania

48, 52

Giovanna a Beccara and Others v. The Argentine Republic, Procedural Order No. 3 (Confidentiality Order), ICSID Case No. ARB/07/5 cited as: Giovanna a Beccara v. Argentine Republic

32, 52

ICC Case No. 2671 (1976) unpublished interim award as cited in Mobil Oil Indonesia v. Asamera Oil [1977] 43 N.Y. 2d 276 cited as: ICC 1976

30


1

SUMMARY OF ARGUMENT

PART ONE: THE TRIBUNAL LACKS JURISDICTION TO HEAR THE PARTIES’ DISPUTE. The Tribunal was not constituted according to the Parties’ Agreement. The Arbitral Council did

not comply with the Parties’ Agreement in denying confirmation of Mr. Y and in appointing Mr.

Z. Moreover, Respondent did not waive its right to object to the constitution of the Tribunal. If

the Tribunal affirms its jurisdiction, an eventual award is at risk of being set aside or refused

recognition and enforcement

PART TWO: CLAIMANT BREACHED ITS DUTY OF CONFIDENTIALITY.

The Tribunal should find that Claimant was bound by an express duty of confidentiality in art.

8(1) 2010 Milan Rules. If the Tribunal finds that the 2004 Milan Rules are applicable to

confidentiality, then Claimant was bound by an implied duty of confidentiality. Mr. Schwitz’s

statements constituted a breach of both the express confidentiality obligation in the 2010 Rules

and the implied obligation in the 2004 Rules.

PART THREE: CLAIMANT’S BREACH OF CONFIDENTIALITY JUSTIFIES AN INJUNCTIVE ORDER AND DAMAGES. The Tribunal should issue an interim order enjoining Claimant from further disclosures. The

Tribunal should declare that Claimant is liable for any quantifiable damages resulting from a

breach of confidentiality. These two measures are not inconsistent; a declaration that damages

will ensue from future violations is a means of ensuring compliance with an injunctive order.

PART FOUR: THE SQUID CONFORMED TO THE CONTRACT. The Parties agreed that the Squid would be unsized and, accordingly, the Squid conformed to art.

35(1) CISG. The Squid also conformed under art. 35(2) CISG: they were fit for their ordinary

purposes and any particular purpose made known to Respondent. Furthermore, the Contract

was not a sale by sample. Finally, even if the Squid did not conform under art. 35(2), art. 35(3)

CISG excludes Respondent’s liability.

PART FIVE: CLAIMANT CANNOT RELY ON THE ALLEGED NON-CONFORMITY. Even if the Squid did not conform, Claimant may not rely on the non-conformity. Claimant

failed to conduct a reasonable examination of the goods, which would have discovered the non-

conformity. Thereafter, Claimant waited 45 days before giving notice on 16 August 2008. This

was beyond a reasonable time. Even if Claimant gave notice on 29 July 2008, this was still not

within a reasonable time.

PART SIX: CLAIMANT FAILED TO MITIGATE ITS LOSSES. Claimant failed to make reasonable attempts to resell the Squid to alternative buyers, incurred

unreasonable warehouse storage costs and failed to seek a substitute purchase. Accordingly, any

damages awarded should be reduced under art. 77 CISG.


2

ARGUMENT

PART ONE: THE TRIBUNAL LACKS JURISDICTION TO HEAR THE PARTIES’ DISPUTE.

1. The Tribunal does not have jurisdiction to hear the Parties’ dispute because the Tribunal was not

constituted according to the Parties’ agreement. As a preliminary matter, Respondent does not

contest that the Parties executed a valid arbitration agreement. Both Parties agree that the

Dispute Settlement clause in the Sale Confirmation constituted an arbitration agreement

(“Agreement”), and provided that Danubia would be the seat of the arbitration [Cl. Ex. 4; Resp.

Ex. 2]. Accordingly, the Parties are bound by Danubia’s national arbitration law, the

UNCITRAL Model Law on International Commercial Arbitration, 2006 Amendments (“Model

Law”) [Req. for Arb. ¶25; Blackaby et al. 164]. Art. 16 Model Law, which codifies the widely-

accepted principle of competence-competence [Blackaby et al. 346; Born 868; Bühring-Uhle et al.

2006 47; Lew et al. 332], confers on the Tribunal the power to rule on its own jurisdiction. The

Tribunal should invoke its competence to conclude that it was not constituted according to the

Parties’ Agreement [I]. Respondent did not waive its right to raise an objection [II]; and, if the

Tribunal affirms its jurisdiction, an eventual award is at risk of being set aside or refused

recognition and enforcement [III].

I. THE TRIBUNAL WAS NOT CONSTITUTED ACCORDING TO THE PARTIES’ AGREEMENT.

2. By referring to the “Rules of the Chamber of Arbitration of Milan” in the Agreement, the Parties

expressly agreed to be bound by the Milan Rules [Cl. Ex. 4; Resp. Ex. 2; art. 1 2010 Milan Rules;

Nacimiento in Kronke et al. 282]. Both art. 14(1) of those Rules and art. 11(2) Model Law allow

parties to agree on a procedure for constituting a tribunal. The Parties exercised this power to

require that each appoint one arbitrator, and that the two party-appointed arbitrators jointly

appoint the presiding arbitrator [Cl. Ex. 4; Resp. Ex. 2].

3. An arbitral tribunal lacks jurisdiction when it has not been constituted according to the parties’

agreement [art. V(1)(d) NY Convention; Nacimiento in Kronke et al. 281]. Here, contrary to the

Parties’ Agreement, the presiding arbitrator of the Tribunal was chosen by the Arbitral Council

(“Council”)—not by the two party-appointed arbitrators. As a result, the Tribunal lacks

jurisdiction [art. 34(2)(a)(iv) Model Law; art. V(1)(d) NY Convention]. The Council did not comply

with the Parties’ Agreement in denying confirmation of Mr. Y [A], nor in appointing Mr. Z as

the presiding arbitrator [B].


3

A. The Council did not comply with the Parties’ Agreement in denying confirmation of Mr. Y.

4. The Council acted contrary to the Parties’ Agreement by denying confirmation of Mr. Y’s

appointment. The Parties agreed that the appointment of arbitrators would be subject to

confirmation by the Council if the prospective arbitrator submitted a qualified statement of

independence [art. 18(4) 2010 Milan Rules]. Mr. Y did submit a qualified statement of

independence [Ltr. 19 July 2010]; however, the Council’s decision to deny confirmation was

contrary to the Parties’ Agreement because both Parties waived any objection to the qualification

[1] and because the Parties’ choice was entitled to deference from the Council [2]. Moreover,

application of the IBA Guidelines, which the Council indicated would guide its decisions, should

have led the Council to confirm Mr. Y [3]. The Council’s decision to deny Mr. Y’s confirmation

was also premature under the Milan Rules [4].

1. Both Parties waived any objection to Mr. Y’s qualified statement of independence.

5. The Tribunal should find that the Council’s decision to deny confirmation of Mr. Y’s

appointment was contrary to the Parties’ Agreement because both Parties waived any objection

to Mr. Y. Under art. 18(3) Milan Rules, the Parties were given 10 days to submit comments on a

qualified statement of independence. During this time, both Parties waived any objection to Mr.

Y [Ltrs. 26 and 27 July 2010]. The Parties’ waivers constituted an unequivocal endorsement of Mr.

Y as a suitable presiding arbitrator. They indicate the Parties’ agreement that Mr. Y’s relationship

with one of the Parties did not raise justifiable doubts about his impartiality or independence.

6. Moreover, the Parties’ waivers prevented either party from making a subsequent challenge to Mr.

Y’s independence and impartiality [Lew et al. 314; Nacimiento in Kronke et al. 289; Zuberbühler et al.

51]. As a result, a tribunal chaired by Mr. Y, and any award rendered, could not be challenged on

the basis of Mr. Y’s relationship with Claimant. In contrast, the current Tribunal is vulnerable to

challenge because the appointment of Mr. Z was not according to the Parties’ Agreement.

2. The Parties’ mutual decision to accept Mr. Y’s appointment as presiding arbitrator was entitled to deference from the Council.

7. Both Parties waived any objections to Mr. Y and the Council should have deferred to their

decision. The ability of parties and party-appointed arbitrators to participate in the constitution

of the arbitral tribunal is a distinctive feature of arbitration and is considered crucial to the

success of arbitral proceedings [Born 1363; Lew et al. 231]. Participation in the selection of

arbitrators ensures confidence in the qualifications of arbitrators hearing the dispute [Blackaby et

al. 252; Park in Waibel et al. 200], increases co-operation between members of the tribunal


4

[Cook/Garcia 145; Lew et al. 236; McIlwrath/Savage 257; Moses 125] and improves the efficiency and

legitimacy of the arbitral process as a whole [Paulsson 13].

8. The Parties, and not the Council, are in the best position to determine the suitability of potential

arbitrators [Born 1366, 1382]. Parties to an arbitration have a unique understanding of the

particularities of their dispute and the qualities their arbitrators should possess. For this reason,

administering institutions rarely deny appointments [Born 1407]. Here, the Parties were

unequivocal in their endorsement of Mr. Y [Ltrs. of 26 and 27 July 2010]; thus, the Council should

defer to their agreement. Party autonomy is the basis of international commercial arbitration

[Ashford 81; Redfern/Hunter 315; Böckstiegel 25] and an administering institution should only

overrule the parties’ choice in exceptional circumstances. These circumstances do not exist here.

9. The Council should only exercise its discretion when the appointed arbitrator is so unsuitable

that his or her presence on the tribunal poses a significant danger of rendering an award

unenforceable or bringing the arbitral proceedings into disrepute. An institution’s role in

confirming arbitrators is to ensure a minimum standard of independence and impartiality [Lew et

al. 237; Gaillard/Savage 552], to preserve the reputation of the arbitral institution [Bühring-Uhle et

al. 2006 35] and to ensure efficient administration of the proceedings [Gaillard/Savage 483;

Zuberbühler et al. 48]. Given the primacy of party autonomy in arbitration, an institution should

not step beyond that role. The integrity of the arbitral process is undermined not only by the

appointment of unsuitable arbitrators, but also where the administering institution improperly

overrules the parties’ agreement. Here, the Council should defer to the Parties’ acceptance of a

presiding arbitrator unless an arbitrator is patently unsuitable. Indeed, there is no evidence that

Mr. Y’s relationship with Claimant was so improper that the Parties could not waive it.

3. The Council should have regard for the Parties’ expectations and should have applied the IBA Guidelines to confirm Mr. Y.

10. The Council should have applied the IBA Guidelines to confirm Mr. Y. The Council referred to

the IBA Guidelines in the letter informing Mr. Y of his appointment [Ltr. 15 July 2010]. This

reference shows the Council intended to rely on, or at least consider, the IBA Guidelines when

determining if Mr. Y would be confirmed. Furthermore, this reference created a reasonable

expectation by the Parties that the IBA Guidelines would be applied. Institutions should respect

not just the letter of the applicable rules, but also the reasonable expectations of the parties

[Leaua in Klausegger et al. 110]. The IBA Guidelines have been widely accepted as the standard for

determining independence and impartiality in international arbitration [Blackaby et al. 270;

McIlwrath/Savage 246; Rozas in Fernández-Ballesteros/Arias 417]. Accordingly, the Council, although

not formally bound by the IBA Guidelines, should have applied them to confirm Mr. Y.


5

11. The relationship disclosed by Mr. Y falls under the “waivable red list” as set out in the IBA

Guidelines [IBA Guidelines Pt. 2 (2.3.3)]. Mr. Y indicated that a partner from his firm is advising

Claimant in this dispute [Ltr. 19 July 2010]. Relationships listed on the waivable red list can be

waived if parties are aware of the improper relationship and expressly agree to waive the resulting

conflict of interest [IBA Guidelines Gen. Stn. 2; Moses 133]. In this case, both Parties expressly

waived any objection to Mr. Y’s disclosure and reaffirmed their confidence in his independence

and impartiality [Ltrs. of 26 and 27 July 2010]. Applying the IBA Guidelines, the Council should

have confirmed Mr. Y.

4. The Council’s decision to deny Mr. Y’s confirmation was premature.

12. Under the Milan Rules, the Parties have ten days to object to the independence or impartiality of

an arbitrator [art. 18(3) 2010 Milan Rules]. In its letter of 26 July 2010, the Secretariat informed

the Parties that they had ten days to raise any objections to Mr. Y’s appointment. However, only

four days later, the Council denied Mr. Y’s confirmation [Ltr. 2 August 2010]. This departure

from the Milan Rules may not have resulted in substantial prejudice to the Parties, but it does

indicate the Council’s disregard for the Parties’ Agreement and its own Rules.

B. The Council did not comply with the Parties’ Agreement in appointing Mr. Z as presiding arbitrator.

13. Even if the Tribunal finds that the Council acted according to the Parties’ Agreement by denying

confirmation of Mr. Y, the Council did not comply with the Parties’ Agreement in appointing

Mr. Z. According to the Parties’ Agreement, if an arbitrator is not confirmed, a new arbitrator

must be appointed by the original appointing authority [art. 20(3) 2010 Milan Rules; art. 15 Model

Law]. The party-appointed arbitrators were the original appointing authority [Cl. Ex. 4]. The

Council acknowledged this when it initially requested that the party-appointed arbitrators make

another appointment after Mr. Y was not confirmed [Ltr. 2 August 2010]. Only if “a replacement

arbitrator must also be substituted”, is the Council then authorized to make the appointment

itself [art. 20(3) 2010 Milan Rules]. Here, the Council’s authority to substitute a replacement

arbitrator was not engaged [1] and the Council should have invited the party-appointed

arbitrators to make another appointment [2].

1. The Council did not have authority to substitute a replacement arbitrator because there was no replacement arbitrator.

14. Art. 20(3) Milan Rules is limited to situations where a replacement arbitrator must also be

substituted. The Council does not have the authority to appoint an arbitrator except as a

substitute for a “new” arbitrator. Here, when the party-appointed arbitrators were informed that

the Council had denied Mr. Y’s confirmation they did not appoint a new arbitrator. Instead, they


6

reappointed Mr. Y [Ltr. 13 August 2010]. The Milan Rules do not contemplate the reappointment

of an arbitrator previously denied confirmation. Accordingly, Mr. Y’s reappointment did not give

rise to the Council’s authority to appoint a substitute; Mr. Y was not a replacement arbitrator.

The Council acted outside its authority in appointing Mr. Z.

2. The Council should have invited the party-appointed arbitrators to make another appointment.

15. The reappointment of Mr. Y did not warrant direct intervention by the Council. Instead, the

Council should have invited the party-appointed arbitrators to make a new appointment. The

Council should respect the Parties’ intentions to have the party-appointed arbitrators appoint the

presiding arbitrator. This would facilitate cooperation between members of the Tribunal [Moses

125]. Furthermore, the appointment procedure chosen by the Parties gives the Parties an indirect

influence on the selection of the presiding arbitrator [Lew et al. 250]. The Parties’ mutual

intentions should not be abrogated merely because the Milan Rules do not address the situation

before the Tribunal. None of the other bases that might justify the intervention of the

administering institution were present here. Neither party was attempting to delay or frustrate

the arbitral proceedings [Luttrell 3; Gaillard/Savage 483, 554; Lew et al. 318]. Instead, the party-

appointed arbitrators were exercising their delegated authority to appoint a presiding arbitrator.

Faced with a situation not contemplated by its Rules, the Council should simply have abided by

the Parties’ Agreement and given the party-appointed arbitrators another opportunity to select a

new presiding arbitrator.

II. RESPONDENT DID NOT WAIVE ITS RIGHT TO OBJECT TO THE JURISDICTION OF THE

TRIBUNAL.

16. Claimant may argue that Respondent waived its right to object to the jurisdiction of the Tribunal.

The Tribunal should find that Respondent raised a valid objection; the waiver conditions in the

Parties’ Agreement have not been met. According to the Parties’ Agreement, an objection must

be raised “in the first brief or at the first hearing following the claim to which the objection

relates” [art. 12 2010 Milan Rules] or, under the Model Law, “without undue delay” [art. 4].

Accordingly, to find a valid waiver, a party must know of the non-compliance, proceed to

arbitration and fail to state an objection without undue delay [Binder 55]. These requirements

have not been met. Respondent was unaware of the improper constitution of the Tribunal when

it submitted its Statement of Defence [A]. The time between the improper constitution and

Respondent’s objection does not amount to undue delay [B], and Respondent’s objection is not

disruptive of the proceedings [C]. Respondent acted within its rights to object.


7

A. Respondent was unaware of the improper constitution of the Tribunal when it submitted its Statement of Defence.

17. To invoke art. 4 Model Law, Claimant must first establish that Respondent knew of the non-

compliance with the Parties’ Agreement and still proceeded with the arbitration [Binder 59].

Claimant may argue that Respondent waived the right to object by not objecting as soon as Mr.

Y was denied confirmation [Ltr. 2 August 2010], or at the latest, when Mr. Z was confirmed [Ltr.

10 September 2010]. While art. 11(1) Milan Rules allows the Council to rule on objections before

the constitution of a tribunal, any decision reached by the Council is not binding on the Tribunal

[art. 11(2) 2010 Milan Rules]. Therefore, regardless of the Council’s response, Respondent would

have been required to raise the objection again once the Tribunal was constituted. Respondent’s

decision to wait until the Tribunal was constituted to raise an objection cannot constitute a

waiver of its right to raise that objection.

18. Furthermore, Respondent did not waive its right to challenge the Tribunal’s jurisdiction by

raising the objection after submitting its Statement of Defence. Here, Respondent raised an

objection to the Tribunal’s jurisdiction in an amendment to its Statement of Defence [Amd. St. of

Def. 24 September 2010]. Claimant may argue that a challenge to the jurisdiction of a tribunal is to

be raised “no later than the submission of the statement of defence” [art. 16(2) Model Law].

However, Respondent first became aware of the improper constitution of the Tribunal on 20

September 2010 [Proc. Ord. 2], long after it submitted its Statement of Defence on 24 June 2010.

Art. 23(2) Model Law permits parties to amend their claims during arbitral proceedings.

Accordingly, Respondent did not proceed with the arbitration without stating an objection.

B. The time between the improper constitution and Respondent’s objection does not amount to undue delay.

19. Respondent raised its objection without undue delay. Respondent raised its objection on 24

September 2010—just four days after it became aware the Tribunal was constituted with Mr. Z

as the presiding arbitrator. Art. 4 Model Law is silent as to what amounts to undue delay [Binder

60]; however, a four-day delay is miniscule in the context of an international arbitration

[Zuberbühler et al. 271]. Furthermore, it is reasonable to allow parties time to adequately prepare

their objections, including time to draft and submit a statement [Zuberbühler et al. 271].

Accordingly, the conditions for waiver of the right to object under art. 12 Milan Rules and art. 4

Model Law have not been met; Respondent raised a timely objection.

C. Respondent’s objection is not disruptive of the arbitral proceedings.

20. An objection to the jurisdiction of the Tribunal at such an early stage in the proceedings is not

disruptive to the resolution of the dispute. Since the objection was raised before the arbitration


8

progressed any further, and the Tribunal has not yet considered the substantive merits of the

dispute, none of the proceedings will need to be repeated [McIlwrath/Savage 263; Zuberbühler et al.

271]. Furthermore, both the jurisdiction and merits of the dispute will be heard by the Tribunal

at the same time [Proc. Ord. 2], so there will be no delay in rendering a final award. As a result, the

cost of proceeding with Respondent’s challenge to the Tribunal’s jurisdiction, in terms of time or

money, is negligible.

21. Moreover, the reconstitution of the Tribunal according to the Parties’ Agreement will not result

in protracted delays of the proceedings. If jurisdiction of the Tribunal is denied, the proceedings

will only be suspended to appoint a new presiding arbitrator. There is nothing to suggest that the

reconstitution of the Tribunal would be unduly prolonged—the Milan Rules set out efficient

appointment procedures and both the Parties and party-appointed arbitrators were cooperative

in the constitution of the present Tribunal. On the other hand, if the Tribunal proceeds to issue

an award and that award is set aside or refused enforcement, the entire arbitral process would

have to be repeated. A Tribunal with the full confidence of both Parties is the best means to

ensure voluntary compliance with an eventual award [Lew et al. 236].

III. IF THE TRIBUNAL AFFIRMS ITS JURISDICTION, AN EVENTUAL AWARD IS AT RISK OF

BEING SET ASIDE OR DENIED RECOGNITION AND ENFORCEMENT.

22. A central duty of a tribunal in any arbitral proceeding is to render an enforceable award [Born

2537; Horvath 135; Lew et al. 119]. If the Tribunal finds that it was properly constituted and

renders an award on the merits, this award would likely be set aside or refused recognition and

enforcement. The courts of Danubia, the seat of arbitration, would have jurisdiction over an

application to set aside an award; enforcement can be sought in jurisdictions where parties have

assets [Lew et al. 703]. There are sufficient grounds for a Danubian court to set aside an eventual

award [art. 34(2)(a)(iv) Model Law] or for courts in Equatoriana or Mediterraneo to refuse it

recognition or enforcement [art. V(1)(d) NY Convention]. Respondent preserved its right to

challenge an award by raising an objection to the Tribunal’s constitution during the arbitral

proceedings [Amd. St. of Def. ¶1; Born 2592; Binder 61; Zuberbühler et al. 272; Ghiradosi v. B.C.

(Canada 1966) ¶17].

23. Under art. V(1)(d) NY Convention, an award may be challenged where “the composition of the

arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the

parties” [Luttrell 11; Gaillard/Savage 453]. This provision is mirrored in art. 34(2)(a)(iv) Model

Law. Here, all states involved are signatories to the NY Convention [Req. for Arb. ¶25], and the

national arbitration laws of Equatoriana and Mediterraneo must be at least as favourable to


9

recognition and enforcement as art. V NY Convention [Darwazeh in Kronke et al. 333;

McIlwrath/Savage 344].

24. Courts look at the parties’ agreement and the national law of the seat of arbitration to determine

whether a tribunal has been improperly constituted [Nacimiento in Kronke et al. 281]. The types of

defects sufficiently serious to justify setting aside an award, or refusing to enforce it, are not

defined in art. 34(2)(a)(iv) Model Law or art. V(1)(d) NY Convention [Poudret/Besson 840].

Commentators and courts agree that a defect in the composition of a tribunal constitutes

grounds for setting aside an award if the defect potentially affected the award [Binder 382;

Nacimiento in Kronke et al. 297; BOL Sept 2004; Werner v. The N's (Hong Kong 1978)].

25. Claimant may argue that for an award to be set aside or refused enforcement, Respondent must

prove that the defect—the Council’s refusal to confirm Mr. Y and the appointment of Mr. Z—

resulted in “substantial prejudice” to Respondent. A standard of “substantial prejudice” has been

applied by some courts, particularly in the United States [Compagnie v. Hammermills (USA 1992);

Karaha v. Perusahaan (USA 2001)]. However, courts in some Model Law jurisdictions have set

aside awards when the defect is one that “potentially cause[d] an unfavourable outcome” [BOL

Feb 1999; BOL Sept 2004; Werner v. The N's (Hong Kong 1978)]. Applying this standard, an award

rendered by the Highest Arbitral Tribunal of the Bavarian Commodities Trading Association was

set aside by the Bavarian Court of Appeal for deviating from the appointment and challenge

process in the arbitration agreement. Applying national legislation based on the Model Law, the

Court found that the Highest Arbitral Tribunal “might have decided—in a different

composition—differently on the appeal” and that the procedural irregularity “potentially caused

an unfavourable outcome for the claimant” [BOL Feb 1999]. It is unclear which standard a

Danubian court would apply. Accordingly, the Tribunal should proceed with caution. The only

way to ensure that an award issued in this dispute will be enforceable is for the dispute to be

submitted to a properly constituted tribunal.

PART TWO: CLAIMANT BREACHED ITS DUTY OF CONFIDENTIALITY.

26. Four days after Claimant commenced this arbitration, Claimant’s CEO, Mr. Herbert Schwitz,

gave an interview to Commercial Fishing Today, a trade newspaper distributed in 45 countries

[Resp. Ex. 1; St. of Def. ¶4]. He divulged the subject matter of this dispute, the existence of

arbitration and made inflammatory allegations about Respondent’s conduct [Resp. Ex. 1]. This

interview constituted a breach of confidentiality. Admittedly, the scope of the duty of

confidentiality in international arbitration remains uncertain; the major international arbitration

conventions do not mention the issue at all, and institutional rules and national arbitration laws

vary widely with respect to confidentiality [Coppo in Finkelstein 28]. However, there is no


10

uncertainty in this dispute, because the 2010 Milan Rules expressly impose a duty of

confidentiality: “[t]he Chamber of Arbitration, the parties, the Arbitral Tribunal and the expert

witnesses shall keep the proceedings and the arbitral award confidential, except in the case it has

to be used to protect one’s rights” [art. 8(1)].

27. The Tribunal should hold that the duty of confidentiality expressed in art. 8(1) of the 2010 Milan

Rules applies [I]. Even if the Tribunal finds that the 2004 Milan Rules apply, those rules impose

an implied duty of confidentiality on the Parties [II]. Mr. Schwitz’s statements constituted a

breach of both the express confidentiality duty in the 2010 Rules and the implied duty in the

2004 Rules.

I. THE 2010 MILAN RULES APPLY TO THE ISSUE OF CONFIDENTIALITY.

28. Where institutional rules have been amended between the conclusion of an arbitration agreement

and the commencement of arbitral proceedings, the more recent version of the rules is presumed

to govern the dispute unless the parties agree otherwise [Greenberg/Mange 201-204]. The 2004 and

2010 versions of the Milan Rules expressly stipulate that the most recently enacted version of the

rules applies [art. 43(3) 2004 Milan Rules; art. 39(2) 2010 Milan Rules].

29. The Parties did not rebut this presumption by indicating a preference for a specific version of

the Milan Rules in their Agreement [Cl. Ex. 4]. Absent a provision rebutting this presumption,

the Tribunal should apply the most recent version of the Milan Rules [A]. The exception to this

presumption, that older versions of institutional rules apply to substantive aspects of the dispute,

is irrelevant because the duty of confidentiality is procedural in character [B]. Claimant’s

disclosure violated the duty of confidentiality contained in art. 8(1) 2010 Milan Rules [C].

A. The Tribunal should follow the presumption that the most recent version of the Milan Rules governs the dispute.

30. The Tribunal should apply the 2010 version of the Milan Rules to all aspects of this dispute. Art.

3(2) 2004 Milan Rules indicates that “the rules chosen by the parties in the arbitration

agreement” apply. However, the Parties’ Agreement does not specify any particular version of

the Milan Rules [Cl. Ex. 4]. If Claimant wished to “freeze” the rules existing when the

Agreement was concluded in 2008, it needed to expressly stipulate this in the Agreement

[Greenberg/Mange 208]. Absent an express provision, there is a presumption favouring rules as

they appear at the commencement of arbitration, not as they appeared at the time the agreement

was made [ICC 1976; Greenberg/Mange 201]. Accordingly, the 2010 Milan Rules—which expressly

place the Parties under a duty to maintain confidentiality—govern this issue.


11

B. Even if the 2004 Milan Rules apply to substantive duties, the confidentiality duty is procedural in character, and so the 2010 Milan Rules apply.

31. Confidentiality is a procedural issue, and so the 2010 Milan Rules govern the dispute. When rules

of procedure have been amended between the conclusion of a contract and the commencement

of arbitration, as in this dispute, an “overwhelming consensus” in the case law favours the

application of the most current version of the rules to procedural matters [Greenberg/Mange 204;

Lewison 64; Bunge v. Kruse (UK 1979)]. In Bunge v. Kruse, the English High Court distinguished

between procedural and substantive provisions, holding that rules amended after the arbitration

agreement may not apply to substantive issues [Greenberg/Mange 204].

32. Although some commentators allege there is a substantive character to confidentiality

[Hwang/Chung 611], the majority position is that the confidentiality duty is procedural in

character. First, confidentiality has been categorized as a procedural matter in institutional rules

and by arbitral tribunals and national courts [Giovanna a Beccara v. Argentine Republic ¶5; Dessemontet

319]. Second, domestic legal systems regulate confidentiality using procedural statutes. For

example, in an arbitration governed by Swiss law, the tribunal applied the Swiss Federal Rules on

Civil Procedure to confidentiality issues [Dessemontet 303]. Third, orders to respect confidentiality

are almost exclusively made in tribunals’ procedural orders rather than in partial awards [ILA

Resolution 1/2010 ¶B2; Giovanna a Beccara v. Argentine Republic]. Finally, many commentators

describe confidentiality as a rule of arbitral procedure [Fortier 130; Noussia 85]. Therefore, even if

the 2004 Milan Rules apply to substantive duties, the confidentiality duty is procedural in

character, and so the 2010 Milan Rules apply.

C. Claimant’s statements violated the duty of confidentiality under art. 8(1) 2010 Milan Rules.

33. Mr. Schwitz’s disclosure to Commercial Fishing Today violated art. 8(1) 2010 Milan Rules. The

duty of confidentiality applies to the “proceedings” and therefore attaches upon their

commencement. As a result, Claimant’s duty was triggered when it filed the Request for

Arbitration [art. 9 2010 Milan Rules]. Art. 8(1) imposes a broad confidentiality duty that includes

“any kind of material, brief, hearings, etc.” related to the arbitration [Coppo in Finkelstein 28]. It

requires the Chamber, Tribunal, witnesses and the Parties to “keep the proceedings and the

arbitral award confidential”. Mr. Schwitz spoke not only about the existence of the arbitration,

but also alleged that Respondent knowingly sold “completely inappropriate” squid [Resp. Ex. 1].

His statements violated confidentiality [1] and Claimant cannot take advantage of any exceptions

in the 2010 Milan Rules [2].


12

1. Claimant divulged the existence of arbitration and the content and subject matter of the dispute.

34. Even if Claimant had merely divulged the existence of this arbitration, that alone would have

constituted a breach of art. 8(1) 2010 Milan Rules, which restrict disclosure not only of the

“award”, but also of the “proceedings”. This language was adopted to give an expansive scope to

the duty of confidentiality [Coppo in Finkelstein 28]. In international arbitrations, “the mere fact

that an arbitration is pending may be viewed as a secret” [Noussia 129; Hassneh Insurance v. Mew

(UK 1993) 247]. For example, in Aita v. Ojjeh, the Paris Court of Appeal found that Aita

challenged the arbitration in a court that it knew lacked jurisdiction for the sole purpose of

publicizing the dispute [(France 1986)]. The Court found Aita breached confidentiality by causing

“a public debate of facts which should remain confidential” [Paulsson/Rawding 312; Noussia 121].

Here, Mr. Schwitz told Commerical Fishing Today that it had “started arbitration proceedings”

against Respondent [Resp. Ex. 1]; this disclosure on its own constituted a breach of art. 8(1).

35. However, Claimant not only disclosed the existence of the arbitration, but also revealed its

subject matter and allegations made in the Request for Arbitration [Resp. Ex. 1]. Art. 8(1)

stipulates that parties must keep the proceedings confidential, which Claimant violated in its

interview with Commercial Fishing Today. The Paris Commercial Court held that a party

breached confidentiality when it released a statement divulging the existence of the dispute, the

existence of the arbitration, and the amount of the claim [True North v. Bleustein (France 1999) cited

in Poudret/Besson 316-317]. Claimant’s disclosure mirrors that in True North: it divulged the

existence of the dispute, the existence of the arbitration and facts and arguments pertaining to

the merits of the dispute. Mr. Schwitz stated that Respondent had supplied “completely

inappropriate” squid to Claimant and “they knew it” [Resp. Ex. 1].

2. There is no applicable exception to the duty of confidentiality that would have permitted Claimant’s disclosure.

36. Claimant may argue that its breach of confidentiality was permissible. Art. 8(1) 2010 Milan Rules

provides that a party may breach confidentiality to the extent required to protect its rights. This

provision protects legal rights, such as “the right to enforce or challenge the award”, but does

not extend to commercial rights [Coppo in Finkelstein 28-29]. Any disclosure must be “reasonably

necessary” to establish the party’s legal rights against a third party [Noussia 31, 110; Insurance v.

Lloyd’s Syndicate (UK 1995); Ali Shipping v. Shipyard (UK 1998)]. Art. 8(1) also permits breaches of

confidentiality where parties have a legal duty to disclose [Coppo in Finkelstein 29; Noussia 29].

However, Claimant did not owe any legal duty to disclose this arbitration, nor was Claimant

enforcing or protecting a legal right [Clar. 15].


13

37. Moreover, confidentiality only applies to material that is objectively secret; the obligation cannot

extend to matters that are public knowledge [Dessemontet 314; Noussia 26]. Claimant’s disclosure

revealed facts that were not public knowledge. Although Commercial Fishing Today had

previously reported on the existence of a dispute, those reports contained no prejudicial

comments, nor any mention of the means by which the dispute might be resolved or the content

of either Party’s claims [Clar. 17]. By contrast, Claimant not only revealed the existence of the

proceedings, but also asserted that Respondent was liable for Claimant’s losses [Resp. Ex. 1].

Claimant was attempting to conduct a “trial by press release” and its conduct cannot be

condoned [Born 2282]. The only other exception to confidentiality in art. 8 2010 Milan Rules

pertains to the Chamber and not to the parties [art. 8(2)], so Claimant’s disclosure is not saved by

any exceptions to its duty of confidentiality.

II. IF THE 2004 MILAN RULES APPLY, CLAIMANT IS BOUND BY AN IMPLIED DUTY OF

CONFIDENTIALITY.

38. The 2004 Milan Rules do not contain an express duty of confidentiality. However, if the

Tribunal finds that the 2004 Milan Rules govern this issue, a duty of confidentiality is implied.

The prevailing conception of confidentiality affirms the existence of an implied duty

encompassing the proceedings [A], and Claimant violated this duty by divulging the existence

and subject matter of the arbitration proceedings [B].

A. Claimant was bound by an implied duty of confidentiality because of the nature of international arbitration proceedings.

39. All parties to international arbitrations are presumed to owe an implied duty of confidentiality

[Born 2282; Dolling-Baker v. Merrett (UK 1991); Emmott v. Michael Wilson (UK 2008)]. This implied

duty is one of the most important considerations for parties choosing to arbitrate their disputes

[Bühring-Uhle et al. 1996; Noussia 125]. The objectives of arbitration—neutral, efficient, and

binding dispute resolution—compel the imposition of confidentiality obligations on parties. This

duty focuses the parties’ efforts toward dispute resolution, rather than on “trial by press release”

and restrains “the aggravation of the parties’ disputes, rather than extending them to additional,

more public forums” [Born 2282]. Arbitration preserves privacy and confidentiality “to the

greatest extent possible” [Noussia 22].

40. The privacy of arbitration proceedings would be meaningless without implied confidentiality

obligations [Fortier 131]. Privacy requirements exclude third parties from attendance and

participation in proceedings and are present in “virtually all national arbitration statutes and

institutional rules” [Born 2251]. Confidentiality is an “essential corollary of the privacy of


14

arbitration proceedings” [Ali Shipping v. Shipyard (UK 1998)]. The Tribunal should recognize that

by its very nature, arbitration requires implied confidentiality obligations.

41. This implied duty prohibits disclosure of any evidence, communication, or information about

arbitration proceedings [Noussia 40; Born 2252]. English courts have long implied an obligation of

confidentiality arising from the parties’ arbitration agreement [Born 2259; Noussia 79; Dolling-Baker

v. Merrett (UK 1991); Hassneh Insurance v. Mew (UK 1993); Insurance v. Lloyd’s Syndicate (UK 1995);

Ali Shipping v. Shipyard (UK 1998)]. The English Court of Appeal recently affirmed that implied

confidentiality obligations prohibit the disclosure of any documents or evidence related to

arbitral proceedings [Emmott v. Michael Wilson (UK 2008) ¶495].

42. Similarly, the Paris Court of Appeal found that a party breached implied confidentiality

obligations by initiating court proceedings it knew to be fruitless that publicized the arbitration

[Aita v. Ojjeh (France 1986)]. More recently, the Commercial Court of Paris recognized that even

where there is no express confidentiality obligation, parties must avoid any publicity relating to

the dispute [True North v. Bleustein (France 1999) cited in Poudret/Besson 316-317]. The Tribunal

should find Claimant was bound by a similar implied duty of confidentiality.

43. Cases in which courts have permitted parties to breach confidentiality are distinguishable from

the facts here. For example, in Esso v. Plowman, the Australian High Court permitted disclosure of

arbitration documents because public interests and an express duty of disclosure overrode the

confidentiality obligation [(Australia 1995); Dessemontet 316, 321]. The public interest has been

held to override confidentiality only where public figures or public agencies are involved [Esso v.

Plowman (Australia 1995); Moscow v. Bankers (UK 2004); Noussia 27]. This is inapplicable to the

current dispute because both Parties are privately held companies and have no disclosure

obligations [Clar. 15]. In US v. Panhandle, an American trial court held that no implied

confidentiality existed under the ICC Rules [(USA 1988)]. However, this statement was an obiter

dictum and was expressly restricted to the ICC Rules [Dessemontet 321], which are inapplicable

here.

44. The Esso and Panhandle judgments have been criticized as “ill-considered” for international

arbitration, since they focus on domestic concerns and overlook underlying privacy requirements

in international arbitration [Born 2282-3]. Another tribunal applying the ICC Rules after the

Panhandle decision, found that international arbitrations are confidential even if the applicable

rules do not expressly mention confidentiality [Unidentified ICC Case, cited in Fortier 132-133]. More

recent case law suggests that Esso is the exception, rather than the rule, for confidentiality

obligations [Noussia 82; Transfield v. Pacific Hydro (Australia 2006); Myanma v. Win (Singapore 2003)].


15

B. Claimant’s disclosures violated its implied confidentiality obligation.

45. Under the implied duty of confidentiality that pertains to the 2004 Milan Rules, Claimant was

obliged to keep confidential the existence of the arbitration and any documents prepared for or

disclosed in the arbitral proceedings [Noussia 40; Born 2252; Dolling-Baker v. Merrett (UK 1991)]. In

his interview with Commercial Fishing Today, Mr. Schwitz exposed the existence and subject

matter of the arbitral proceedings and divulged the contents of Claimant’s Request for

Arbitration, in breach of its implied confidentiality obligations. Mr. Schwitz stated that

Respondent had supplied “completely inappropriate” squid to Claimant and “they knew it” [Resp.

Ex. 1]. In the Request for Arbitration, Claimant alleged Respondent “knew at all times” what the

squid was to be used for, but supplied squid not fit for that purpose [Req. for Arb. ¶27].

Accordingly, Claimant’s interview divulged not only the existence of the arbitration, but also the

content of documents prepared for arbitration proceedings.

46. While confidentiality obligations are not absolute, none of the generally recognized exceptions

applies here. Several exceptions to the duty have been recognized, such as protection of third

parties’ rights, compelling public interest, or application for setting aside or enforcing an award

[Born 2280; Noussia 27; Dolling-Baker v. Merrett (UK 1991); Hassneh Insurance v. Mew (UK 1993); Ali

Shipping v. Shipyard (UK 1998); AEGIS v. European Reinsurance (UK 2003); Emmott v. Michael Wilson

UK 2008)]. Claimant owed no duty of disclosure, the public interest was not implicated in this

dispute, and Claimant was not protecting its legal rights in its interview with Commercial Fishing

Today [see supra ¶36, ¶43]. Claimant’s disclosure revealed information confidential to the

arbitration, and is not saved by any exception to confidentiality. The Tribunal should find that

Claimant has breached its implied obligation and should issue an appropriate order to sanction

the violation.

PART THREE: CLAIMANT’S BREACH OF CONFIDENTIALITY JUSTIFIES AN INJUNCTIVE ORDER AND DAMAGES.

47. Consequences should ensue from Claimant’s breach of confidentiality. The Tribunal should issue

an interim order enjoining Claimant from further disclosures, which is not inconsistent with an

order for damages [I]. The Tribunal should also declare that Claimant is liable for any

quantifiable damages resulting from a breach of confidentiality [II].

I. THE TRIBUNAL SHOULD ISSUE AN ORDER ENFORCING CONFIDENTIALITY.

48. Respondent requests that the Tribunal issue an injunctive order requiring Claimant to maintain

confidentiality [St. of Def. ¶8]. The Tribunal is empowered to issue “urgent and provisional

measures of protection” if it deems them necessary [art. 22(2) 2010 Milan Rules]. Claimant’s

disclosure has threatened the integrity of the arbitration proceedings, and threatens to turn them


16

into a “trial by press release” [Born 2282]. The Tribunal is entitled to take steps to protect the

integrity of the arbitration [Biwater Gauff v. Tanzania ¶135], and should do so by issuing an

injunctive order.

49. The circumstances of the current dispute meet the conditions for granting an interim measure

under art. 17A of the Model Law. First, harm “not adequately reparable by an award of damages

is likely” if the Tribunal does not grant the desired relief; this does not conflict with an order for

damages [A] Second, Respondent has a reasonable prospect of success on the claim’s merits [B].

A. Damages are insufficient to protect against future breaches of confidentiality.

50. The Tribunal should issue an injunctive order protecting confidentiality to preserve the status quo

and prevent harm from future disclosures. The Tribunal is empowered by art. 17(2)(a) to issue

measures preserving the status quo, including orders prohibiting public statements that breach

confidentiality [Born 1999]. Article 17A(1)(a) Model Law stipulates that Respondent would have

to show that harm not adequately reparable by damages would result if a protective measure was

not ordered. Claimant may argue that it is contradictory for Respondent to ask for both an

interim measure and damages, but that assertion mischaracterizes the remedies. The two

remedies work together with respect to future breaches of confidentiality: a declaration that

damages will ensue from future violations is a way of ensuring compliance with an injunctive

order. An injunctive order protects Respondent against future disclosures in breach of the

confidentiality obligation. Damages, on the other hand, redress past disclosures [Noussia 169].

Hence, although each remedy relates to confidentiality, the two are not mutually exclusive.

51. Damages are often considered to be an inadequate or unsatisfactory remedy for breaches of

confidentiality. For this reason, it is “appropriate, and generally necessary, for tribunals to issue

provisional measures ordering compliance with confidentiality obligations” [Born 2008;

Cook/Garcia ft 121]. By definition, damages can only be sought after harm from a breach of

confidentiality has already occurred [Hwang/Chung 640; Brown 1016]. An injunctive order, on the

other hand, protects against future breaches of confidentiality.

52. Respondent could suffer economic loss as a result of Claimant’s disclosures. In True North v.

Bleustein, True North’s disclosure of the existence of the dispute and the arbitration proceedings

resulted in negative economic consequences for the other party, specifically a drop in share value

[(France 1999); Poudret/Besson 316]. The Commercial Court of Paris enjoined True North from

making any further disclosures about the arbitration. Claimant’s past disclosure and any future

disclosures may result in similar negative consequences for Respondent. The threat of negative

publicity has been held to be sufficient basis to issue an injunctive order, so long as there is not a

countervailing public interest in disclosure [Biwater Gauff v. Tanzania; Giovanna a Beccara v. Argentine


17

Republic]. This case involves only private commercial actors, and there is no public interest that

might outweigh the negative consequences of disclosure [Clar. 15].

53. Claimant may argue that there is no evidence that it will commit future breaches of

confidentiality. Nevertheless, it has been found that parties who have breached confidentiality

should be enjoined from making future disclosures [Dolling-Baker v. Merrett (UK 1991); Insurance v.

Lloyd’s Syndicate (UK 1995); Ali Shipping v. Shipyard (UK 1998); True North v. Bleustein (France 1999)

cited in Poudret/Besson 317]. Moreover, the fact that future disclosures may be unlikely does not

justify refusing to issue an injunctive order. If Claimant does not make future disclosures, the

order will do no harm.!On the other hand, the order will reassure both Parties that neither will

breach confidentiality in the future.

B. There is a reasonable possibility that Respondent will succeed on the merits of the dispute.

54. The Tribunal should also find that Respondent has a reasonable prospect of success on the

merits of the dispute, as required by art. 17A(1)(b) Model Law. Respondent delivered squid

which conformed to the Contract. In particular, Respondent’s delivery conformed with the

terms of the Sale Confirmation, the final communication between the Parties at the time of the

conclusion of the Contract. Therefore, there is a reasonable possibility that the goods

conformed. In addition, even if Respondent’s squid did not conform, Claimant lost its right to

rely on the breach by failing to give Respondent reasonable notice. The squid delivered were

perishable and seasonal goods, yet Claimant waited 45 days from the time of its examination to

give notice. Accordingly, there is a reasonable possibility that the Tribunal will find Claimant’s

claim to be barred. Harm not adequately reparable by damages is likely to ensue from future

breaches of confidentiality, and Respondent has a reasonable possibility to succeed on the merits

of its claim. Therefore, an interim order should be made.

II. THE TRIBUNAL SHOULD DECLARE THAT CLAIMANT IS LIABLE FOR PROVABLE DAMAGES

ARISING FROM PAST OR FUTURE BREACHES OF CONFIDENTIALITY.

55. The Tribunal should declare Claimant is liable for provable damages arising from breaches of

confidentiality. If the Tribunal finds that Claimant has breached its duty of confidentiality, now

or in the future, Respondent need only quantify its resulting monetary losses to justify an award

of damages [Brown 1016; Cook/Garcia 269]. At this point, Respondent merely seeks a declaration

that Claimant must pay damages in the event that such losses can be quantified [St. of Def. ¶9].

Breaches of confidentiality have been sanctioned through the award of damages in the past. For

example, in Aita v. Ojjeh, the Paris Court of Appeal assessed damages against Aita for challenging


18

an award from a London arbitration in a Paris court, since doing so publicized previously

confidential matters [(France 1986); Noussia 121].

56. Claimant may argue that there is no harm stemming from past disclosures, since the existence of

the dispute had already been revealed. This assertion is inaccurate. Commercial Fishing Today’s

previous publications did not mention this arbitration and revealed no information that

prejudiced Respondent’s position [Clar. 17]. Mr. Schwitz’s statement, on the other hand, revealed

the existence and substance of this arbitration. He insinuated that Respondent was at fault in the

dispute, claiming, “the only way to get them to live up to their responsibilities is to force them to

do so” [Resp. Ex. 1]. Claimant’s disclosure included allegations about Respondent’s integrity and

business practices. Those accusations could harm Respondent financially, by damaging

Respondent’s credibility or driving away future customers. It is foreseeable that Claimant’s

allegations will result in quantifiable and compensable monetary harm to Respondent, which

should be sanctioned through an order for damages.

PART FOUR: THE SQUID CONFORMED TO THE CONTRACT.

57. Respondent delivered squid to Claimant on 1 July 2008 (the “Squid”). The Squid were of the

quantity, quality, and description required by the Contract, as required by art. 35(1) CISG [I]. The

Squid were fit for the purposes for which goods of the same description are ordinarily used, as

required by art. 35(2)(a) CISG [II]. In addition, art. 35(2)(b) CISG does not apply because

Claimant did not make known any particular purpose to Respondent [III]. Furthermore, the

Contract was not a sale by sample under art. 35(2)(c) CISG [IV]. Finally, even if the Squid did

not conform under art. 35(2) CISG, Respondent’s liability is excluded by art. 35(3) CISG [V].

I. RESPONDENT DELIVERED CONFORMING GOODS UNDER ART. 35(1) CISG.

58. Art. 35(1) CISG requires that the seller deliver goods of the quantity, quality and description

required by the contract. Here, the Contract expressly required that the Squid be: fit for human

consumption, of the species illex danubecus, landfrozen, Grade A, blast frozen, and packaged in

poly-line blocks [Cl. Ex. 3; Cl. Ex. 4]. It is not disputed that the Squid conformed to all these

characteristics. Claimant alleges that the Contract required squid weighing 100-150 g; however,

the Contract instead called for delivery of unsized squid. This is evident from both a subjective

interpretation of the Parties’ intentions [A], and an objective interpretation according to the

understanding of a reasonable person [B]. In both cases, according to art. 8(3) CISG, the

Tribunal should consider all relevant circumstances, including the Parties’ negotiations.


19

A. Claimant knew, or could not have been unaware, that Respondent intended the Squid to be unsized.

59. Claimant contends that the Squid had to be of a certain size [Cl. Memo. ¶30]; however, the

Contract actually called for unsized squid. Art. 8(1) CISG gives priority to the subjective intent

of a party where the other party knew or could not have been unaware of that intent.

Respondent’s intent was to sell unsized squid to Claimant. Claimant knew or could not have

been unaware of that intent, and is therefore bound by it according to art. 8(1) CISG.

60. Respondent’s intent was made clear in the course of the Parties’ negotiations. If, in the course of

negotiations, one party clearly expresses its intent and the other party does not object, the

Tribunal will presume agreement [AG Sept 2008; LG Kassel Feb 1996; Caito v. Société (France 1995);

Schmidt-Kessel in Schlechtriem/Schwenzer 2005 118-9]. For example, in a case concerning machinery

for producing glass vials, the seller did not object to the buyer’s request for a machine capable of

producing 180 vials per minute. A Swiss Court of Appeal held that the seller knew the buyer’s

intent and so, under art. 8(1) CISG, the contract required delivery of a machine matching those

requirements [AG Sept 2008 aff’d in BGer May 2009].

61. Throughout the Parties’ negotiations, Respondent repeatedly expressed its intent to sell unsized

squid. On 17 May 2008, Respondent brought Claimant squid from the 2007 catch [St. of Def.

¶12]. The squid were not sized, nor was any size indicated on the packaging [St. of Def. ¶10, 12].

Respondent was not present when the squid was weighed [Req. for Arb. ¶14; Cl. Ex. 10 ¶7; St. of

Def. ¶10]. These squid had been caught late in the growing season, between mid-June and mid-

August, and had an average weight of 130 g [Cl. Ex. 10 ¶7; St. of Def. ¶13]. However, this weight

was a mere coincidence; there is no evidence the size of this squid was ever promised by—or

even known to—Respondent.

62. Claimant was no doubt pleased that this lot of discounted, “run of the catch” squid weighed an

average of 130 g and could be used as bait [St. of Def. ¶12]. Claimant was no doubt hopeful that

the discounted, unsized squid delivered in July would also weigh 130 g. But Claimant never

expressed these hopes, nor did Respondent say or do anything that would lead Claimant to

reasonably expect delivery of sized squid.

63. Respondent’s only other communication with Claimant before the dispute arose, the Sale

Confirmation, similarly expressed Respondent’s intention to deliver unsized Squid. The Sale

Confirmation, received by Claimant on 29 May 2008, indicated the Squid would come from the

“2007/2008 Catch” [Cl. Ex. 4]. When the Contract was formed in May 2008, Claimant knew it

was still early in the season for harvesting illex danubecus [Clar. 27]. Since delivery of the Squid

would occur mid-way through the 2008 season, Claimant knew or could not have been unaware

that squid from the 2008 catch would be younger and weigh less than 100 g [St. of Def. ¶13]. As a


20

result, Claimant knew or could not have been unaware that the Contract did not contain a size

requirement. Claimant declined to object to this description of the goods. Consequently,

Claimant became bound by Respondent’s intent that the squid be unsized.

B. A reasonable person in Claimant’s position would have understood that Respondent intended to sell unsized squid.

64. Should the Tribunal find that Claimant was not aware of Respondent’s intention to deliver

unsized squid, an objective interpretation of the Contract under art. 8(2) CISG yields the same

result. Respondent’s intention should prevail if it would have been understood by a reasonable

business person in the same industry and position as Claimant [Farnsworth in Bianca/Bonell 98;

Schmidt-Kessel in Schlechtriem/Schwenzer 2005 119-121; LG Feb 1996].

65. A reasonable interpretation of the Parties’ negotiations indicates agreement that the Squid were

to be unsized. In its 29 May 2008 Sale Confirmation, Respondent indicated that the Squid would

come from the “2007/2008 Catch” [Cl. Ex. 4]. As indicated above [see supra ¶63], this meant that

the catch would include younger, smaller squid caught early in the 2008 season. Claimant is an

experienced participant in the fisheries trade [St. of Def. ¶16; Clar. 27]. In the face of

Respondent’s stated intent to supply squid caught early in the 2008 season, a reasonable business

person in Claimant’s position would understand that the Contract was for unsized squid.

66. Furthermore, there are no weight requirements in either the Order Form or Sale Confirmation

[Cl. Ex. 3; Cl. Ex. 4]. The CISG does not preclude extrinsic information from becoming a term

of the Contract; however, a reasonable and experienced purchaser in the fishing industry would

indicate the basic requirements of the fish it wanted in its order—including size. It is

unreasonable to bind the Parties to a requirement that is not found in either the Order Form or

the Sale Confirmation. Accordingly, the Tribunal should find that a reasonable business person

in Claimant’s position would understand the Contract was for unsized squid.

II. THE SQUID WERE FIT FOR THE PURPOSES FOR WHICH GOODS OF THE SAME

DESCRIPTION WOULD ORDINARILY BE USED.

67. Claimant alleges that the Squid could not be used as bait and therefore were not “fit for the

purposes for which [squid] of the same description would ordinarily be used” [Cl. Memo. ¶37; art.

35(2)(a) CISG]. This argument must fail. The ordinary use for squid as described in the Contract

is human consumption [Cl. Ex. 3; Cl. Ex. 4], and the squid were fit for this purpose [Cl. Ex. 8].

68. The goods must meet the reasonable expectations in the industry for goods of that description

[Schwenzer in Schlechtriem/Schwenzer 2005 417; Rijn Blend Case (Netherlands 2002)]. While the goods

must be fit for all purposes for which goods of the same description are ordinarily used [Henschel

2005 194; Sec. Comm. art. 35], the scope of the ordinary purposes is limited by the description of


21

the goods in the agreement [Henschel 2005 194]. In other words, the goods need to be suitable for

all uses that are implied by their description—not all possible uses. Here, both Claimant and

Respondent describe the Squid as “fit for human consumption” [Cl. Ex. 3; Cl. Ex. 4]. This

implies that the Squid will be used as food. To be fit for this ordinary purpose, they must be fit

to eat [OLG Jan 2004]. The TGT Laboratory Report found the Squid were fit for human

consumption [Cl. Ex. 8]; thus, the Squid were fit to eat. Claimant argues that the only reason the

Squid were described as fit for human consumption was to comply with food regulations in

Mediterraneo [Cl. Ex. 10 ¶8]. However, Claimant never communicated this to Respondent. As a

result, Respondent understood that the goods were for human consumption and ensured that

the Squid were fit for the ordinary purposes that goods of this description are normally used.

69. Furthermore, art. 35(2)(a) CISG is primarily concerned with the commercial salability of the

goods, namely that they are capable of being re-sold without significant price abatement

[Schwenzer in Schlechtriem/Schwenzer 2005 416; Housewares v. SEB (New Zealand 2003)]. Claimant re-

sold 20 MT of the Squid through Reliable Trading House; however, there is no evidence

Claimant needed to reduce the price [Cl. Ex. 10 ¶15]. Therefore, the Squid were fit for all the

purposes for which goods of that description would ordinarily be used.

III. THE SQUID WERE FIT FOR ANY PARTICULAR PURPOSE MADE KNOWN TO RESPONDENT.

70. Claimant alleges that the Contract required squid fit to be used as bait [Cl. Memo. ¶41]; this claim

is unfounded. Under art. 35(2)(b) CISG, Claimant must demonstrate that it expressly or

impliedly made the particular purpose—that the Squid were to be used as bait for long-liners—

known to Respondent at the time of the conclusion of the Contract [A], and that Claimant

reasonably relied on Respondent’s skill and judgment [B]. Neither criterion is satisfied here.

A. Claimant did not expressly or impliedly make known to Respondent at the conclusion of the Contract that the Squid were to be used as bait for long-liners.

71. If the buyer communicates to the seller a particular purpose for the goods, and the seller does

not object, the seller must deliver goods fit for that purpose [Rheinland v. Altarex (Italy 2000); Sec.

Comm. art. 35; Schwenzer in Schlechtriem/Schwenzer 2005 421]. A buyer must communicate the

particular purpose in a “crystal clear and recognizable” way, particularly where the goods have

multiple uses [Rijn Blend Case (Netherlands 2002); LG Feb 2002; LG May 2000]. This requirement

gives a seller the opportunity to decline the contract and avoid liability if it cannot deliver suitable

goods [LG May 2000; Schmitz-Werke v. Rockland (USA 2002); EP v. FP (Finland 1995);

Enderlein/Maskow 144].


22

72. Here, the only particular purpose Claimant made known to Respondent was that the Squid be fit

for human consumption, which it was [Cl. Ex. 3; Cl. Ex. 8]. Claimant argues that it made known

to Respondent that the Squid would be used as bait [Cl. Memo. ¶41]. However, Claimant did not

make this purpose known in a “crystal clear and recognizable” way. Claimant mentioned “bait”

to Respondent only once—in a standard circular delivered to several fish suppliers [Cl. Ex. 1;

Req. for Arb. ¶11]. Throughout the negotiations, including at a face-to-face meeting, Claimant

never mentioned bait to Respondent [Cl. Ex. 10 ¶6; St. of Def. ¶10]. In fact, the next time

Claimant used the term “bait” was 29 July 2008, 61 days after the conclusion of the Contract,

and only after it had trouble re-selling the Squid [Cl. Ex. 5]. This sole, fleeting mention of “bait”

does not meet the standard set out in art. 35(2)(b) CISG.

B. Even if Claimant made known the Squid would be used as bait, it did not reasonably rely on Respondent’s skill and judgment.

73. Even if Claimant made known that the Squid would be used as bait, it never relied on

Respondent’s skill and judgment to select appropriate goods. There is no reliance when the

buyer participates in the selection or inspection of the goods prior to purchase [Enderlein/Maskow

146; Schwenzer in Schlechtriem/Schwenzer 2005 422]. Here, Claimant not only participated in the

selection process, but also inspected the goods prior to the conclusion of the Contract. On 17

May 2008 Respondent’s sales agent, Mr. Weeg, brought squid to Claimant labelled “illex danubecus

2007” [Clar. 32]. After independently examining the squid, Claimant placed its order and asked

for illex danubecus by name [Cl. Ex. 3]. Evidently, Claimant was satisfied that this species would

be suitable for its purpose.

74. Where the seller recommends specific goods in response to a clearly communicated purpose,

reliance on the seller is presumed [Manipulados v. Sugem (Spain 1997); Schmitz-Werke v. Rockland

(USA 2002)]. However, when Respondent brought illex danubecus to Claimant on 17 May 2008,

Respondent never recommended the squid would be suitable for anything, let alone bait [Clar.

25]. Similarly, there is no evidence Respondent made a recommendation at any other time. Since

Respondent made no recommendation to Claimant, there can be no presumption of reliance.

75. Even if the Tribunal finds that Claimant relied on Respondent, the reliance was unreasonable.

The standard for reasonableness is the conduct expected of a reasonably prudent person in the

same position as Claimant [Magnus/Haberfellner; Henschel 2005 236]. Moreover, a seller can only be

relied upon if it is more skilled than the buyer in relevant area of expertise [LG Dec 2006]. Here,

Claimant had at least as much expertise as Respondent. Claimant is a specialist; it has been

supplying bait to long-liners in Mediterraneo for over 20 years [Req. for Arb. ¶6]. In contrast,

Respondent is a generalist; it supplies squid for both bait and human consumption both in


23

Equatoriana and internationally [St. of Def. 2; St. of Def. 7]. As a result, Claimant had at least as

much expertise as Respondent in selling squid for bait to long-liners in Mediterraneo.

Accordingly, any reliance on Respondent was unreasonable.

76. In sum, Claimant did not rely on Respondent and even if it did, its reliance was unreasonable. As

a result, art. 35(2)(b) CISG does not apply.

IV. RESPONDENT DID NOT BREACH UNDER ART. 35(2)(C) CISG.

77. Art. 35(2)(c) CISG creates an implied warranty that when a seller “holds out” goods as a sample

to a buyer; the goods must possess “the qualities” of the sample [Schwenzer in

Schlechtriem/Schwenzer 2010 582]. However, this provision does not apply “where the parties have

agreed otherwise” [art. 35(2) CISG; Schwenzer in Schlechtriem 1998 278]. On 17 May 2008,

Respondent showed Claimant squid it was providing to other buyers in Mediterraneo [St. of Def.

¶10]. This did not create an implied warranty because the Parties “agreed otherwise”. Claimant

knew Respondent did not intend the Contract to be a sale by sample [A], and a reasonable

business person would have understood the same [B]. In the alternative, if the Contract was

concluded on the basis of a sample, Respondent informed Claimant that the bulk of the Squid

would deviate from the qualities of the sample [C].

A. Claimant knew that Respondent did not intend the Contract to be a sale by sample.

78. Although squid was shown to Claimant on 17 May 2008 [St. of Def. ¶10], prior to the conclusion

of the Contract, this did not transform the Parties’ agreement into a sale by sample. Art. 8(1)

CISG instructs tribunals to interpret contracts based on the subjective intention of a party, where

the other party knew or could not have been unaware of that intention [Honnold 118]. Here,

Respondent’s Sale Confirmation indicated that it did not intend to be bound by any qualities of

the squid shown to Claimant on 17 May 2008.

79. On 29 May 2008, Respondent sent Claimant the Sale Confirmation. It described the Squid as

coming from the “2007/2008 Catch” [Cl. Ex. 4]. This demonstrated Respondent’s intention to

deliver squid from both the 2007 and 2008 seasons. In contrast, the squid shown to Claimant on

17 May 2008 were exclusively from the 2007 season [Clar. 32]. The Sale Confirmation also

indicated that the quality of the Squid would be “Grade A” [Cl. Ex. 4]. Although the squid

shown to Claimant may have exhibited some of the attributes of Grade A squid, they were never

certified as such [Cl. Ex. 10 ¶10]. On the same day that Respondent sent the Sale Confirmation,

Claimant sent Respondent a letter demonstrating it had thoroughly read the Sale Confirmation

and did not object to its contents (i.e., Claimant noted the presence of the arbitration clause)

[Resp. Ex. 2]. Accordingly, on 29 May 2008, Claimant knew that Respondent did not intend to be


24

bound by any qualities that the squid shown on 17 May 2008 happened to possess. Instead,

Claimant knew Respondent intended to contract based on its description of the Squid in the Sale

Confirmation. Since the Parties formed a mutual intention that the Squid would possess different

characteristics from the squid previously shown to Claimant, no warranty can be implied under

art. 35(2)(c) on the basis of the squid shown to Claimant on 17 May 2008.

B. A reasonable business person would have understood that Respondent did not intend the Contract to be a sale by sample.

80. A reasonable business person would understand that Respondent did not intend to contract on

the basis of a sample. Where doubt exists concerning a party’s intention, or the other party’s

awareness of that intention, statements should be interpreted according to the understanding of

a reasonable person in the circumstances [art. 8(2) CISG; Honnold 118]. On 17 May 2008, Mr.

Weeg, Respondent’s representative, delivered squid to Claimant [St. of Def. ¶10]. During Mr.

Weeg’s visit, there was “little time for discussion” between the Parties [Clar. 25]. Moreover, Mr.

Weeg departed before Claimant defrosted or examined the carton of squid [St. of Def. ¶10]. In

contrast, the Sale Confirmation provided to Claimant on 29 May 2008, included a

comprehensive description of the squid to be delivered [Cl. Ex. 4]. It described their quantity,

price, quality and catch season, among other characteristics [Cl. Ex. 4]. A reasonable person

presented with the description in the Sale Confirmation would know that Respondent did not

intend to be bound by squid haphazardly shown weeks earlier.

81. A reasonable person would also understand Respondent did not intend a sale by sample because

of the term “2007/2008 Catch” in the Sale Confirmation [Cl. Ex. 4]. The only reasonable

interpretation of this term is that some of the squid delivered would be caught in 2007 and some

in 2008. Experienced fishing firms know that squid grow throughout the catching season, and

that illex danubecus increase in size between April and September [Clar. 27; St. of Def ¶16]. Indeed,

Claimant was aware of these facts [Clar. 27]. A reasonable person in Claimant’s position would

have known that a delivery of squid from the 2008 catch in the middle of the 2008 growing

season would contain young squid, unlikely to weigh at least 100 g. In contrast, the squid shown

to Claimant weighed on average 130 g [Cl. Ex. 10 ¶7]. Thus, a reasonable person presented with

the Sale Confirmation would know Respondent did not intend to contract on the basis of the

squid shown 17 May 2008 and so art. 35(2)(c) CISG does not apply.


25

C. In the alternative, if the Contract was concluded on the basis of a sample, Respondent informed Claimant that the bulk goods would deviate from the sample.

82. Even if the Contract constituted a sale by sample, concluded on the basis of the squid shown to

Claimant by Mr. Weeg, Respondent informed Claimant the goods would deviate from the

sample. Where a contract is negotiated on the basis of a sample but the seller indicates that the

qualities of the goods will deviate in certain respects, the seller is only bound to the qualities

indicated [Sec. Comm. art. 35 ¶11]. Here, the squid provided on 17 May 2008 were “illex danubecus

2007”, meaning squid caught in 2007 [Clar. 32]. The squid also happened to weigh 100-150 g [Cl.

Ex. 10 ¶7]. However, the Sale Confirmation indicated the Squid would come from both the 2007

and 2008 catches [Cl. Ex. 4]. Thus, the Sale Confirmation notified Claimant that the qualities of

the bulk of the Squid would deviate from those in the sample: some would come from 2008.

Squid from the bulk that were caught in 2007 did in fact match the characteristics of the sample;

only those caught in 2008 weighed less than 100 g [Cl. Ex. 8]. Accordingly, only squid caught in

2008 deviated from the Sample, just as Respondent indicated prior to the conclusion of the

Contract. Therefore, Respondent is not liable under art. 35(2)(c) CISG.

V. EVEN IF THE SQUID DID NOT CONFORM UNDER ART. 35(2), ART. 35(3) CISG EXCLUDES

RESPONDENT’S LIABILITY.

83. Even if the Tribunal finds that the Squid did not conform to the Contract under any or all of the

subsections of art. 35(2) CISG, Respondent is not liable. A seller is not liable for non-

conformities under any provision of art. 35(2) “if at the time of conclusion of the contract the

buyer knew or could not have been unaware of such lack of conformity” [art. 35(3) CISG].

Claimant could not have been unaware that the Squid would be unfit for use as bait.

Respondent’s Sale Confirmation indicated that a portion of the Squid would come from the 2008

catch [Cl. Ex. 4]. Claimant must have known that squid caught early in the 2008 season would

weigh less than 100 g. Moreover, Claimant understood that the Squid would be delivered as soon

as possible after the Contract was concluded [Cl. Ex. 10 ¶10]. Accordingly, Claimant could not

have been unaware the 2008 squid would be weigh less than 100 g. Therefore, even if the weight

of the Squid rendered them non-conforming under art. 35(2) CISG, Claimant could not have

been unaware that Respondent planned to deliver non-conforming squid. For these reasons, art.

35(3) CISG excluded Respondent’s liability.

PART FIVE: CLAIMANT CANNOT RELY ON THE ALLEGED NON-CONFORMITY.

84. Art. 39(1) CISG requires the buyer to notify the seller of a non-conformity within a “reasonable

time” after it “knew or ought to have known” of the non-conformity. A buyer who fails to notify


26

within a reasonable time loses its right to all remedies relating to the non-conformity [Honnold

259; Schwenzer in Schlectriem 1998 319]. Even if the Squid did not conform to the Contract,

Claimant failed to notify Respondent within a reasonable time and thus forfeited its right to rely

on any alleged non-conformity [I]. In addition, Respondent was unaware of facts related to the

non-conformity at the time of delivery and, therefore, is not prevented by art. 40 CISG from

relying on art. 39 [II].

I. CLAIMANT FAILED TO PROVIDE REASONABLE NOTICE OF THE NON-CONFORMITY IN

ACCORDANCE WITH ARTS. 38 AND 39 CISG.

85. Claimant notified Respondent of the alleged non-conformity on 16 August 2008 [Cl. Ex. 8; Cl.

Ex. 9], after the expiry of the notice period under the CISG. The time when a buyer “ought to

have discovered” a lack of conformity is determined by art. 38(1) CISG. This provision requires

a buyer to reasonably examine the goods “within as short a period as is practicable” [art. 38(1)

CISG]. Here, Claimant failed to perform a reasonable examination within as short a period as is

practicable after taking delivery and, accordingly, failed to discover the alleged non-conformity

when it ought to have done so [A]. By notifying Respondent on 16 August 2008, 45 days after it

ought to have discovered the non-conformity, it failed to provide notice in accordance with art.

39(1) CISG [B]. Even if Claimant gave notice of the non-conformity on 29 July 2008, this was

still not within a reasonable time [C].

A. A reasonable examination of the goods, conducted on or around 1 July 2008, would have discovered the alleged non-conformity.

86. Claimant examined the goods shortly after taking delivery on 1 July 2008. However, this

examination unreasonably failed to discover the non-conformity. The reasonableness of a

buyer’s examination of goods is determined according to the circumstances [Schwenzer in

Schlechtriem/Schwenzer 2010 612; Bianca in Bianca/Bonell 298]. It need not be a “complex

technological analysis” [Bianca in Bianca/Bonell 297], but must be “thorough and professional”

[OGH Aug 1999], according to prevailing industry standards.

87. Respondent packed the Squid into approximately 20,000 cartons and labelled the cartons by

catch season [Cl. Ex. 4; Clar. 32]. Respondent organized the cartons into pallets and placed the

pallets into 12 shipping containers [Cl. Ex. 10 ¶9]. When the Squid arrived, Claimant opened

only two of the 12 containers. From those, Claimant selected just 20 cartons for weighing—all of

which were labelled “illex danubecus 2007” [Cl. Ex. 10 ¶10; Clar. 32]. Of these 20, Claimant

defrosted only five [Cl. Ex. 10 ¶9-10]. This level of scrutiny was unreasonable in the

circumstances. Had Claimant reasonably examined the Squid, it would have easily identified the


27

alleged non-conformity. Here, Claimant failed to take a reasonable sample of the Squid [1].

Moreover, Claimant failed to exercise the requisite degree of diligence in its examination [2].

1. Claimant failed to take a reasonable sample of the Squid.

88. Claimant failed to conduct a reasonable sampling and thus did not conduct a reasonable

examination [art. 38(1) CISG]. Where large quantities of goods are delivered, it is reasonable for

buyers to examine a sample of the goods. However, the sample must be random and statistically

representative of the bulk of the goods [Schwenzer in Schlechtriem 1998 304; Schwenzer in

Schlechtriem/Schwenzer 2010 613; Crudex v. Landmark (Finland 2004)]. Here, Claimant did examine

the goods by inspecting a sample of the Squid on 1 July 2008. However, this sample was

unreasonable because it was too small [a] and not randomly selected [b]. A reasonable sampling

would have identified the alleged non-conformity on 1 July 2008.

a. Claimant’s sample was unreasonably smal l . 89. Claimant failed to examine a sufficiently large sample of squid. To be statistically representative,

the number of goods sampled should be at least “a few…per thousand” [Schwenzer in Schlechtriem

1998 304]. Claimant weighed 20 of the 20,000 cartons delivered, but defrosted a sample of only

five—just 0.025% of the Squid. Since defrosting is a necessary part of sampling frozen

perishables [Clar. 33; Schwenzer in Schlechtriem/Schwenzer 2010 613; Fallini v. Foodik (Netherlands

1991)], defrosting less than “a few per thousand” was unreasonable.

90. Even if Claimant had defrosted all 20 cartons, the sample would still have been too small to

constitute a thorough and professional examination. TGT Laboratories, a firm that specializes in

scientific reports of this kind, examined a sample of 120 cartons [Cl. Ex. 8]. Its sampling

discovered the alleged non-conformity [Cl. Ex. 9]. Had Claimant selected a statistically

representative sample, similar to TGT Laboratories’, it would have discovered the non-

conformity [Cl. Ex. 8]. By defrosting a sample representing only 0.025% of the Squid, Claimant

failed to perform a reasonable sampling.

b. Claimant did not examine a random sample o f the Squid . 91. Claimant did not randomly select the cartons to be examined and thus its examination was

unreasonable. A buyer who relies on sampling must ensure the sample is selected randomly

[Schwenzer in Schlechtriem 1998 304]. The cartons Claimant defrosted and weighed were selected

from just two of the 12 containers [Cl. Ex. 10 ¶10]. Since Claimant unpacked all of the

containers [Cl. Ex. 10 ¶9], there was no commercial explanation for not broadening the sample

and examining cartons from other containers.

92. In addition, Claimant acted unreasonably by sampling only cartons labelled “illex danubecus

2007”—instead of cartons labelled 2007 and 2008. A case concerning the delivery of frozen


28

mackerel found an examination nearly identical to Claimant’s to be unreasonable. Mackerel, like

squid, is a “predominant” bait for long-liners in Mediterraneo [Req. for Arb. ¶7]. Frozen mackerel

were delivered from multiple catch seasons but the buyer only sampled boxes from one season.

The court found the buyer should have examined boxes from all seasons [Sergueev v. DAT

(Denmark 2002)]. Similarly, Claimant should have examined cartons from both 2007 and 2008

seasons. Had it done so, Claimant would have discovered the non-conformity. By failing to

examine a random or sufficiently large sample of the Squid, Claimant failed to discharge its duty

under art. 38(1) CISG and discover the non-conformity on 1 July 2008.

2. Claimant did not exercise the requisite degree of diligence in its examination.

93. Claimant failed to reasonably examine the Squid by not exercising the degree of diligence

required in the circumstances. The adequacy of an examination under art. 38(1) CISG depends

on the circumstances of the case [DiMatteo 362]. Here, two circumstances compelled a rigorous

examination. First, where a buyer has previously purchased non-conforming goods from a seller,

subsequent purchases require a more diligent examination [Ferrari 192; LG Aug 1989]. Although

the Contract was the first transaction between the Parties, Claimant knew that Danubian squid

were “not consistent in quality” [Req. for Arb. ¶11-12; Cl. Ex. 10 ¶4]. Given that knowledge,

Claimant was required to perform an especially diligent examination. Second, perishable goods

for human consumption have been held to require rigorous examination [Schwenzer in

Schlechtriem/Schwenzer 2010 613; Kingfisher v. Comercial (Spain 2007)]. Here, the Contract required

the Squid be “fit for human consumption” [Cl. Ex. 4], a requirement on which Claimant insisted.

However, far from being especially diligent, Claimant examined only squid from the 2007 catch,

and defrosted only 0.025%, or USD 80 worth of squid, from a delivery worth USD 320,000 [Cl.

Ex. 4]. This examination cannot be considered diligent. By failing to examine a reasonable

sample or exercise the requisite degree of diligence, Claimant failed to discover the non-

conformity when it ought to have done so.

B. Claimant did not give notice of the non-conformity until 16 August 2008, which was not within a reasonable time under art. 39(1) CISG.

94. Claimant alleges that it gave notice of the non-conformity on 29 July 2008 [Cl. Memo. ¶70].

However, Claimant did not provide notice sufficient to satisfy art. 39(1) CISG until 16 August

2008, after the reasonable notice period had expired. Art. 39(1) CISG requires the buyer to

provide the seller notice, specifying “the nature of the lack of conformity” within a “reasonable

time” after the non-conformity was or ought to have been discovered. Claimant did not give

notice specifying the nature of the non-conformity until 16 August 2008 [1]. Notice 45 days after


29

the non-conformity was discoverable constitutes unreasonable delay [2]. Consequently, Claimant

has lost its right to rely on the alleged breach.

1. Claimant did not provide notice specifying the lack of conformity until 16 August 2008.

95. Claimant did not properly communicate the nature of the alleged non-conformity to Respondent

until 16 August 2008. To constitute notice “specifying the nature of the non-conformity” [art.

39(1) CISG], the notice must contain sufficient detail for the seller to know what would be

necessary to cure the deficiency [Honnold 279; DiMatteo 368; Schwenzer in Schlechtriem/Schwenzer

2010 609]. Notice merely stating the goods are of “defective quality” does not suffice [Schwenzer

in Schlechtriem/Schwenzer 2010 626; LG Jul 1998]. Claimant argues that its 29 July 2008 letter

constituted proper notice [Cl. Mem. ¶70]. In that letter, Claimant stated that “the squid was hardly

useable as bait” [Cl. Ex. 5]. This fails to meet the required degree of detail [a]. Claimant’s notice

came only in its 16 August 2008 letter, which described the Squid’s size range and TGT

Laboratories’ inspection results [b].

a. Claimant’s 29 July 2008 le t t er did not convey suf f i c i ent detai l for Respondent to know what would be necessary to cure the non-conformity .

96. The 29 July 2008 letter described the Squid only as “hardly useable as bait” [Cl. Ex. 5]. This

statement did not convey sufficient detail for Respondent to know what steps were necessary to

cure the alleged lack of conformity. First, “hardly” is a vague word capable of several meanings.

Its definitions include: “barely, only just; almost not; not quite...” [Oxford 1112]. Squid which is

“barely, only just” or “almost not” useable implies a less degree of non-conformity than Squid

which is “not quite” useable. Squid which is “almost not” useable implies that the Squid could be

used as intended, albeit with difficulty. Without further clarification, Respondent cannot

reasonably be expected to have understood the nature of the non-conformity, or the appropriate

cure—if one was even required.

97. Even if “hardly” means completely unusable, squid can be unusable as bait for a variety of

reasons, most of them unrelated to the alleged non-conformity. For example, long-line bait can

be too large or show signs of decay [Cl. Ex. 7 ¶4-7]. Accordingly, based only on “hardly useable

as bait”, Respondent could not know whether curing the non-conformity would require re-

shipping squid from earlier in the season, re-shipping squid from later in the season, or re-

shipping squid using different freezing and packing methods. Moreover, “hardly usable as bait”

could also mean that the fish Mediterraneo long-liners target are not attracted to illex danubecus, in

which case a completely different species would be required. In these proceedings, Claimant

argues the Squid did not conform because “it was too small” [Req. for Arb. ¶18]. However,


30

“hardly usable as bait” has a much broader meaning than “too small”. Since the 29 July 2008

letter did not specify the nature of the non-conformity, it did not constitute notice under art.

39(1) CISG.

b. The 16 August 2008 le t t er was Claimant’s f i rs t communicat ion that spec i f i ed the nature o f the non-conformity .

98. Claimant’s 16 August 2008 letter adequately described Claimant’s complaint—that the Squid did

not weigh 100-150 g [Cl. Ex. 7]. After Claimant’s ambiguous 29 July 2008 letter, Respondent

requested the Squid be examined by a certified testing agency to resolve the confusion [Cl. Ex.

6]. Claimant complied with this request, and reported the results of the test on 16 August 2008.

This letter was the first time Claimant described the Squid as not weighing 100-150 g [Cl. Ex. 7],

a description that enabled Respondent to understand how to cure the non-conformity [Ferrari

198]. Therefore, Claimant first gave notice to Respondent on 16 August 2008, 45 days after 1

July 2008, when it ought to have discovered the non-conformity.

2. By providing notice 45 days after it ought to have discovered the non-conformity, Claimant’s notice was late.

99. Forty-five days passed from the date Claimant ought to have discovered the non-conformity to

the date it notified Respondent. This was beyond a reasonable time. There are two approaches to

determine the length of a “reasonable time” under art. 39(1) CISG. The most widely used is a

“flexible” analysis with “regard to the circumstances of the case” [Ferrari 193; DiMatteo 365;

Honnold 280]. However, some courts, particularly in Germany, apply a presumptive notice period

of one month [Schwenzer 2007; BGH Nov 1999]. Under either the flexible approach [a], or the

presumptive approach [b], Claimant failed to provide notice within a reasonable time.

a. The c ir cumstances required not i ce be g iven in l ess than 45 days . 100. In the circumstances, notice given after 45 days was not within a reasonable time. The “flexible”

approach to a reasonable time calculates the notice period based on “the nature of the goods, the

nature of the defect, the situation of the parties and relevant trade usages” [CISG-AC2 ¶39(3)]. A

reasonable time for perishable or seasonal goods is shorter than for durable goods [Ferrari 195].

Similarly, a reasonable time is shorter if the nature of the defect is easily identifiable [Namur-

Kreidverzekering v. Wesco (Belgium 1996)]. The Squid are a frozen perishable and seasonal good [St.

of Def. ¶13]. Moreover, the defect in the Squid could be easily discovered through defrosting and

a visual inspection [Cl. Ex. 10 ¶10]. These circumstances compel a short reasonable time period.

101. In cases concerning sales of similar frozen commodities, courts have found a reasonable time to

range from a few days to two weeks. In a dispute concerning frozen mackerel, the court held that

notice would have been reasonable were it given “within a few days” [Sergueev v. DAT (Denmark


31

2002)]. Similarly, in a case concerning frozen crab, the court found notice after a “few weeks”

was unreasonable [Kingfisher v. Comercial (Spain 2007)]. Finally, in a case involving frozen cuttlefish,

11 days was found to be a reasonable time [Pescados v. Port Said Export (Spain 2001)]. Thus, cases

involving similar commodities indicate a reasonable time to be two weeks at most. At 45 days,

Respondent’s notice was three times longer—late by any standard.

b. Notice was not g iven within the presumptive one month per iod. 102. If the Tribunal were to adopt the presumptive approach, Claimant still has not provided timely

notice. Under this approach, tribunals presume a reasonable time to be one month from the date

the non-conformity ought to have been discovered (the “noble month”) [Schwenzer 2007; BGH

Nov 1999]. Tribunals then adjust this period based on the circumstances—for example, where

goods are seasonal or perishable, the month is reduced [Andersen VI.2]. Only in “rare

circumstances” should the presumptive period be extended [Andersen VI.2]. Here, Claimant gave

notice after the one month presumptive period, a period ending on 1 August 2008. In any event,

the noble month should be reduced because of the seasonal and perishable character of the

Squid [St. of Def. ¶13]. By giving notice on 16 August 2008, Claimant failed to give notice within a

reasonable time under either the flexible or presumptive approach.

C. Even if Claimant’s 29 July 2008 letter specified the nature of the non-conformity, it was still not given within a reasonable time.

103. Even if Claimant’s 29 July 2008 letter adequately specified the nature of the non-conformity and

thus constitutes notice, it was still late [Cl. Ex. 5; art. 39(1) CISG]. Claimant’s 29 July 2008 letter

was sent 28 days after Claimant ought to have discovered the non-conformity. A flexible analysis

shows that notice after 27 days was late [1]. Similarly, notice after 27 days failed to be within the

noble month properly reduced for the circumstances [2].

1. The circumstances required notice be given within 27 days.

104. Notice given after 27 days was not within a reasonable time according to the flexible approach.

The flexible approach determines reasonable time based on the nature of the goods [CISG-AC2

¶39(3)]. Cases concerning the sales of similar frozen seafood interpret a reasonable time to be at

most two weeks [Sergueev v. DAT (Denmark 2002); Kingfisher v. Comercial (Spain 2007); Pescados v.

Port Said Export (Spain 2001)]. Accordingly, even if notice had been given on 29 July 2008, it was

not within two weeks and therefore was late.

2. The noble month should be reduced because the Squid were perishable and seasonal.

105. Even if the noble month was applied to notice given on 29 July 2008, it was not timely. The

noble month should be modified according to the circumstances [Schwenzer 2007; Andersen VI.2].


32

Perishable and seasonal goods compel the noble month to be reduced [Andersen VI.2]. In a case

concerning the sale of live fish, a German Court of Appeal considered the noble month, but

nonetheless found the circumstances required a reasonable time period of eight days [OLG May

1998]. Similarly, here the noble month should be reduced. Since Claimant’s notice took 28 days,

it was barely within a month, and when the noble month is adjusted downward in accordance

with the circumstances, Claimant’s notice was late. By failing to provide notice within a

reasonable time, Claimant has lost its right to rely on the non-conformity.

II. RESPONDENT IS NOT PREVENTED FROM RELYING ON ART. 39 CISG BY VIRTUE OF ART. 40 CISG.

106. Claimant argues that Respondent was not entitled to reasonable notice by operation of art. 40

CISG [Cl. Memo. ¶74]. This argument must fail. Art. 40 CISG prevents a seller from relying on

arts. 38 and 39 CISG if it “knew or could not have been unaware” of facts related to the non-

conformity, but did not disclose them. Claimant has the burden of proving Respondent “knew

or could not have been unaware” [Schwenzer in Schlechtriem/Schwenzer 2010 647]. Here, Claimant

cannot prove Respondent possessed the awareness required for art. 40 CISG [A]. In the

alternative, Respondent disclosed the risk of non-conformity to Claimant [B].

A. Claimant cannot prove Respondent was aware of the facts related to the non-conformity, so art. 40 CISG does not apply.

107. Respondent was not aware of the facts related to the non-conformity. Art. 40 CISG requires the

seller to have displayed an “obvious” knowledge of the facts related to the non-conformity

[Schwenzer in Schlechtriem/Schwenzer 2010 644]. A German Court of Appeal held that the seller

must have knowledge akin to bad faith or fraud for the provision to apply [OLG Feb 2004].

Another arbitral tribunal held that the seller’s awareness must “amount to at least a conscious

disregard” of the facts related to the non-conformity [Beijing Light v. Connell (Sweden 1998)].

Claimant cannot meet this high standard.

108. Claimant alleges the Squid failed to conform because it did not weigh 100-150 g. Accordingly, it

must prove Respondent was aware the Squid would weigh less than 100 g. Admittedly,

Respondent knew illex danubecus caught earlier in the harvesting season “tend to be small” [St. of

Def. ¶13]. However, Respondent never weighed the Squid, nor is there any evidence Respondent

knew—or ever even considered—their actual weight. Accordingly, Respondent did not

“obviously” know the Squid weighed less than 100 g. Nor did Respondent hide its knowledge so

as to deceive or defraud Claimant. Finally, there is no evidence that Respondent closed its mind

to, or consciously disregarded, the fact that the Squid weighed less than 100 g. Ultimately,

Respondent’s general awareness of the harvesting season of illex danubecus cannot rise to the


33

standard imposed by art. 40 CISG. For this reason, Respondent was entitled to reasonable notice

under art. 39(1) CISG.

B. In the alternative, Respondent disclosed the risk of a non-conformity to Claimant, so art. 40 CISG does not apply.

109. Even if Claimant meets the high standard set out in art. 40 CISG, Respondent disclosed the risk

of a non-conformity to Claimant and therefore art. 40 CISG does not apply. Where a seller

discloses “the risk of a defect”, the buyer remains bound to give notice, regardless of the seller’s

knowledge [Schwenzer in Schlechtriem/Schwenzer 2010 646; art. 40 CISG]. Here, Claimant knew there

was a risk the Squid would weigh less than 100 g. Claimant “knew ... the squid grew larger as the

season progressed” [Clar. 27], and Respondent informed Claimant in the Sale Confirmation that

the delivery would consist partly of 2008 catch squid [Cl. Ex. 4]. Given that the Squid would be

delivered at the mid-point of the 2008 growing season, Claimant must have known there was a

risk the 2008 squid would be small. Therefore, Respondent’s Sale Confirmation disclosed the

risk of a non-conformity and Claimant remains bound to provide reasonable notice. By failing to

provide reasonable notice, Claimant has lost its right to rely on any non-conformity.

PART SIX: CLAIMANT FAILED TO MITIGATE ITS LOSSES.

110. Even if the Tribunal finds Claimant is entitled to damages, the damages should be almost entirely

reduced because Claimant failed to mitigate its losses under art. 77 CISG. An injured party is

required to take measures that are reasonable under the circumstances to mitigate its losses

[Schwenzer in Schlechtriem/Schwenzer 2010 1045; DiMatteo 422]. The injured party’s “ingenuity,

experience, and financial resources” determine what measures are reasonable [Bernstein/Lookofsky

103]. Here, Claimant acted unreasonably. Claimant failed to make reasonable efforts to resell the

Squid [I], incurred unreasonable storage costs [II], and failed to seek a substitute purchase [III].

I. CLAIMANT FAILED TO MAKE REASONABLE ATTEMPTS TO RESELL THE SQUID TO

ALTERNATIVE BUYERS.

111. Claimant failed to exercise its experience and ingenuity in its attempts to resell the Squid [Req. for

Arb. ¶30]. Mitigation often includes the profitable resale of goods [Knapp in Bianca/Bonell 559].

Here, Claimant failed to take reasonable measures to resell the Squid.

112. First, Claimant made only half-hearted attempts to resell the Squid at a discount to long-liners in

Mediterraneo. Although Claimant argues there was a “general reluctance” to purchase the Squid

at a discount [Cl. Ex. 10 ¶14; Req. for Arb. ¶19-20], it has adduced no evidence showing it actually

solicited offers or attempted negotiations. An experienced long-line supplier, such as Claimant,

ought to be aware of discount schemes capable of selling some of the Squid to long-liners

despite “reluctance”.


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113. Second, Claimant failed to make reasonable attempts to resell the Squid for human consumption.

Claimant describes itself as being in the business of selling “supplies to fishing fleets operating

out of Mediterraneo ... [and] fish for human consumption” [Req. for Arb. ¶2]. Accordingly,

Claimant must possess significant expertise and understanding of the human consumption

market. The Squid were fit for human consumption [Cl. Ex. 8], but Claimant made no attempts

to resell it, claiming only that the market for human consumption in Mediterraneo was

“saturated” [Cl. Ex. 10 ¶15]. Even when a market is “saturated”, a reasonable person with

expertise and experience in the industry would make some attempt to negotiate sales. There is no

evidence Claimant did so.

114. Finally, Claimant acted unreasonably by relying entirely on Reliable Trading House (“RTH”) to

resell the Squid outside Mediterraneo [Cl. Ex. 10 ¶15]. Relying entirely on an agent to perform

mitigation measures is reasonable only where the agent possesses greater expertise than the

injured party [LG Aug 1994]. Here, Claimant hired RTH to perform all of its reselling outside

Mediterraneo, but has adduced no evidence that RTH possessed greater expertise than Claimant

[Cl. Ex. 10 ¶15]. In fact, Claimant has expertise in foreign markets because it imports its squid

[Cl. Ex. 10 ¶3]. Had Claimant sold the Squid itself, it would have received all of the proceeds. At

the very least, Claimant also ought to have pursued its own attempts to resell the squid outside

Mediterraneo. By failing to conclude any alternative sales in Mediterraneo and relying entirely on

RTH for foreign sales, Claimant acted unreasonably.

II. CLAIMANT INCURRED UNREASONABLE WAREHOUSE STORAGE COSTS.

115. Claimant failed to reasonably mitigate its losses by storing the Squid for months after it no longer

intended to resell it. An injured party cannot claim compensation for expenses incurred in the

course of mitigation when those expenses are unreasonable [Knapp in Bianca/Bonell 560;

Enderlien/Maskow 308]. A reasonable expense is one that prevents or reduces a greater loss [BGH

Jun 1997]. From August 2008 through May 2009, Claimant incurred extraordinary warehouse

costs for storing the Squid [Req. for Arb. ¶21-23]. However, it appears Claimant ceased any

attempts to resell the Squid in autumn 2008 [Req. for Arb. ¶21-23]. If Claimant did not intend to

resell the Squid after that time, it was unreasonable to store it at significant cost. In addition,

since Claimant never intended to avoid the Contract, it should have destroyed the Squid as soon

as it ceased all attempts to make a substitute sale [Req. for Arb. ¶30]. Accordingly, these

extraordinary warehouse expenses had no prospect of preventing or reducing Claimant’s loss;

instead, it increased it by USD 44,750 [Req. for Arb. ¶30]. For this reason, Claimant should not

be awarded damages for extraordinary storage costs.


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III. CLAIMANT FAILED TO MITIGATE ITS LOSS OF PROFIT BY NOT SEEKING A SUBSTITUTE

PURCHASE FOR LONG-LINE BAIT.

116. Claimant is not entitled to damages for loss of profit on the unsold squid because it did not seek

a substitute purchase. An injured party has an obligation to carry out a substitute transaction if

doing so would reduce a loss of profit [Schwenzer in Schlechtriem/Schwenzer 2010 1046]. If a

substitute transaction is too expensive or unavailable, the injured party must show the tribunal

the offers it solicited [OLG Sept 1998]. Here, Claimant made no attempt to secure a substitute

purchase; this was unreasonable. Regardless of the market for substitute bait, Claimant must at

least show the Tribunal the offers it solicited. Claimant presented no offers. Therefore, if the

Tribunal finds Claimant is entitled to damages, the damages should be almost entirely reduced

because Claimant failed to mitigate its losses.

PRAYER FOR RELIEF

In light of the above submissions, Counsel respectfully requests that the Tribunal:

• Find it does not have jurisdiction to hear the Parties’ dispute;

• Find that Claimant breached confidentiality;

• Order Claimant to respect the confidentiality of the proceedings;

• Find that Claimant is liable for any damages resulting from its breach of confidentiality;

• Find Respondent delivered goods in conformity with the Contract;

• Find Claimant failed to give Respondent notice within a reasonable time; and

• Find Claimant failed to take reasonable measures to mitigate its losses.

(signed)

______________ ______________

Benjamin Adelson Vanessa Beamish

______________ ______________

Lara Fitzgerald-Husek Jack Maslen

20 January 2011

MEMORANDUM FOR RESPONDENT - Electronic Library … · Eighteenth Annual Willem C. Vis International...

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