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M3080 – C

IN THE KUALA LUMPUR REGIONAL CENTRE FOR ARBITRATION

6TH LAWASIA INTERNATIONAL MOOT

ASTORIA PRODUCE COMPANY

Claimant

v.

ROLGA FARMER’S EXCHANGE

Respondent

MEMORIAL FOR THE CLAIMANT

SAN BEDA COLLEGE OF LAW

Philippines

Quinto, Ramiila L.

Parreñas, Princess

Cero, Iris Fatima V.

Atty. Pablito Perez

Coach

October 8 – 12, 2011 Seoul, Korea

M3080 – C

IN THE KUALA LUMPUR REGIONAL CENTRE FOR ARBITRATION

6TH LAWASIA INTERNATIONAL MOOT

ASTORIA PRODUCE COMPANY Claimant

v.

ROLGA FARMER’S EXCHANGE

Respondent

MEMORIAL FOR THE CLAIMANT

MEMORIAL FOR THE CLAIMANT (ASTORIA PRODUCE COMPANY) -Preliminaries-

-i-

TABLE OF CONTENTS

TABLE OF CONTENTS i

INDEX OF AUTHORITIES iv

STATEMENT OF JURISDICTION viii

QUESTIONS PRESENTED ix

STATEMENT OF FACTS x

SUMMARY OF PLEADINGS xii

PLEADINGS AND AUTHORITIES 1

I. KLRCA has the authority to resolve the dispute between Astoria Produce

Company and the Rolga Farmer’s Exchange.

1

A. The source of authority and jurisdiction 1

A.1. Astoria Produce Company decides place and rules of arbitration 2

B. The offer to arbitrate is independent from the contract of sale 3

C. Rolga Farmer’s Exchange did not question the revised forum clause 4

D. The Arbitral Proceeding has already commenced 6

D.1 Dispute settlement by means of arbitration was the parties’ intention 6

II. The three arbitrators were properly appointed. RFE was given the opportunity

to select its “party appointed arbitrator. The presiding arbitrator or chairman was

properly appointed.

8

A. Commencement of Arbitral Proceedings 8

B. Appointment of Arbitrators 9

C. Challenges to appointed arbitrators 10


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III. The arbitration panel has the authority to impose sanctions in the form of the

fine on RFE for failing to appear at the initial hearing and/or for not providing

adequate notice that it would not appear.

12

A. Art. 17 of the UNCITRAL Model on International Commercial Arbitration

authorizes the grant of interim measure 12

B. The imposition of the fine ensures just, expeditious, economical determination of

the dispute 13

IV. The United Nations Convention on International Sale of Goods is applicable in

the present dispute

15

A. An international sale was concluded 15

B. The rules of private international law lead to the application of the CISG. 16

C. Astoria and Rolga’s domestic law resorts to the application of the CISG 16

V. Rolga Farmer’s Exchange Breached its obligation because the shipment of

bananas arrive at Astoria in an unsatisfactory condition due to improper storage

during the voyage from Rolga to Astoria

18

A. Seller’s obligation while the bananas are in transit 18

B. The delivery of ripe or ripening bananas constituted a fundamental breach of

contract committed by RFE.

20

B.1 AP suffered a detriment by receiving the ripe or ripening bananas 21

B.2 The breach of contract deprived AP of what it was entitled to expect under

the contract 22

VI. Astoria Produce has no legal obligation to sell the bananas – or a portion of

them soon after the M/S Pinafore docked at the port of Astoria

23


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A. Astoria has no obligation to sell under its domestic laws. 23

B. Astoria has no obligation under the CISG and general principles of international

law

25

B.1 The interpretation of CISG 25

C. RFE’s proposal to resell the bananas were too speculative 26

PRAYER FOR RELIEF


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INDEX OF AUTHORITIES

Laws, Treaties, Conventions

1985 UNCITRAL Model Law on International Commercial Arbitration 3,6,10,12

American Arbitration Association’s International Rules 8

American Uniform Commercial Code 20,23,24,26

European Community Regulation 593/2008 16

Incoterms 2000: ICC Official Rules for the Interpretation of Trade Terms 18

International Chamber of Commerce Arbitration Rules 8

Kuala Lumpur Regional Center for Arbitration Model Clause 2,6,10,13,14

London Court of International Arbitration 8

UNCITRAL Arbitration Rules 6,8,9,15

UNIDROIT Principles of International Commercial Contracts 26

United Nations Convention on International Sale of Goods 15,20,22,23,25

Articles & Books

A Redfern And M Hunter, Law And Practice Of International Commercial

Arbitration 4th Edition (2004)

13

Bond, The Selection of ICC Arbitrators and the Requirement of Independence, 4 Arb.

Int’l 300, 303 (1988). 8

CALAVROS, Constantin, Das UNCITRAL-Modellgesetz über die international

Handelsschiedsgerichtsbarkeit, Bielefeld (1988) 14

Carter, Living with the Party-Appointed Arbitrator: Judicial Confusion, Ethical Codes 10


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and Practical Advice, 3 Am. Rev. Int'l Arb. 153, 164 (1992

C.M. Bianca & M.J. Bonell, Commentary on the International Sales Law: The 1980

Vienna Sales Convention 72-73 (l987).

25

Harry M. Flechtner, Remedies Under the New International Sales Convention: The

Perspective from Article 2 of the U.C.C., 8 JL&C 53, 104 (1988) 25

Holtzmann, Howard M. And Neuhaus, Joseph E., A Guide To The UNCITRAL

Model Law On International Commercial Arbitration: Legislative History And

Commentary, Boston (1989).

6

Huber, Peter, Mullis, Alastair, The CISG – A new textbook for students and

practitioners, Munich (2007) 22

Hußlein-Stich, Gabriele, Das UNCITRAL-Modellgesetz über die international

Handelsschiedsgerichtsbarkeit Köln, Berlin et al. (1990) 14

Hunter & Paulsson, A Code of Ethics for Arbitrators in International 10

Hunter, Ethics of the International Arbitrator, 53 Arbitration 219, 223 (1987); Carter,

Living with the Party-Appointed Arbitrator: Judicial Confusion, Ethical Codes and

Practical Advice, 3 Am. Rev. Int'l Arb. 153, 164 (1992); Hunter & Paulsson, A Code

of Ethics for Arbitrators in International Commercial Arbitration?, 19 Int’l Bus. Law

153, 155 (1985

10

John O. Honnold, Documentary History of the Uniform Law for International Sales

(l989). 25

John O. Honnold, Uniform Law for International Sales Under the 1980 United

Nations Convention, 3d ed., 519 (1999) 25

John O. Honnold, Uniform Law for International Sales under the 1980 United Nations 25


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Convention 136-37, 142-44 (2d ed. l991).

Michael Young (Herbert Smith) & Carine Dupeyron (Cleary Gottlieb Steen &

Hamilton Llp), To Prevent Irreparable Harm: What Can Be Done By The Arbitral

Tribunal?

12

Peter Schlechtriem, Recent Developments in International Sales Law, 18 Israel L.

Rev. 325-26 (l983). 25

Reichold, Klaus and HÜßTEGE, Rainer and Thomas, Heinz and Putzo, Hans,

Zivilprozessordnung, 28th Edition, München (2007)

14

Saenger, Ingo, Zivilprozessordnung: Handkommentar, 2nd Edition, Baden-Baden

(2007) 14

Schlechtriem, Peter Kommentar zum Einheitlichen UN-Kaufrecht,

5th Edition, München, Basel (2008); 19

ZÖLLER, Richard and GEIMER, Reinhold, Zivilprozessordung, 26th Edition, Köln

(2007)

14

Cases

Brunner, Christoph, UN-Kaufrecht – CISG, Kommentar Zum Ubereinkommen Der

Vereinten Nationen Uber Vertrage Uber Den Internationalen Warenkauf Von 1980,

Bern (2004)

22

Conservas La Costeña S.A. Case. De C.V. V. Lanín San Luis S.A. & Agroindustrial

Santa Adela S.A., 19960429 (29 April 1996)

16

Enderlein, Fritz and Maskow, Dietrich and Strohbach, Heinz, Internationales

Kaufrecht: Kaufrechtskonvention,Verjährungskonvention, Vertretungskonvention,

22


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Rechtsanwendungskonvention, Haufe, Berlin (1991)

Fouchard, Philippe, Gaillard, Emmanuel, Goldman Berthold, On International

Commercial Arbitration, The Hague (et.al.) (1999)

6

Galston, Nina M. and Smit, Hans International Sales: The United Nation Convention

on Contracts for the International Sale of Goods, New York (1984

22

Holtzmann, Howard M. and Neuhaus, Joseph E., A Guide to the UNCITRAL Model

Law on International Commercial Arbitration: Legislative History and Commentary,

Boston (1989)

6

HUßLEIN-STICH, Gabriele, Das UNCITRAL-Modellgesetz über die international

Handelsschiedsgerichtsbarkeit Köln, Berlin et al. (1990)

14

Supplier (USA) v Buyer (India) ICC AWARD NO. 4367 (1984) 6

Thomson-CSF, S.A. v. American Arbitration Ass’n, 64 F.3d 773, 776 (2d Cir 1995). 5


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STATEMENT OF JURISDICTION

At the request of the Astoria Produce Company, a written claim was submitted before the

Kuala Lumpur Regional Centre for Arbitration. The respondent, Rolga Farmer’s Exchange

questions the authority of the KLRCA. Hence this Tribunal is called upon to rule on its

jurisdiction.


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QUESTIONS PRESENTED

1. Does the KLRCA have the authority to resolve the dispute between the parties, specifically,

was there an agreement between the parties to submit this dispute to it?

2. Were the three arbitrators properly appointed, specifically, was RFE improperly denied the

opportunity to select its “party appointed arbitrator and was the Presiding Arbitrator or Chairman

improperly appointed?

3. Does the arbitration panel have the authority to impose sanctions in the form of a fine on RFE

for failing to appear at the initial hearing and/or for not providing adequate notice that it would

not appear and, assuming it does, what sanction would be appropriate under the c ircumstances?

4. What law or legal principles apply to this dispute? {The parties advised the Tribunal that it is

REF’s position that general principles of international law, i.e., UNIDROIT, should govern this

dispute while AP asserts that the United Nations Convention of the International Sale of Goods

should apply.}

5. Did the shipment of bananas arrive at its destination in an unsatisfactory condition due to

improper storage during the voyage from Rolga to Astoria and, if so, does this constitute a

breach of the seller’s obligation under the contract between the parties?

6. Did either party have a legal obligation to attempt to sell the bananas – or a portion of them –

soon after the Pinafore docked at the Port of Astoria?


-x-

STATEMENT OF FACTS

The Claimant, Astoria Produce Company

Astoria Produce Company [AP] is a major distributor of produce to retail grocery stores

throughout Astoria. Michael Vogel is AP’s Chief Purchasing Agent and Dr. Basilio Bartolo,

PhD, is its Director of Food Safety.

The Respondent, Rolga Farmer’s Exchange

The Rolga Farmer’s Exchange [RFE] is an agricultural cooperative organized under the

laws of Rolga, a large tropical island in the Western Pacific. One of its major export crops is

bananas. Lenore Rocco is RFE’s General Sales Manager.

The Negotiations and the Bill of Sale

AP ordered a large quantity of bananas from RFE. Ms. Rocco sent a confirming Bill of

Sale to Mr. Vogel which indicated that the shipment would be made “FOB Rolga City”. It also

contained that any claim arising out of the contract shall be settled by one arbitrator in

accordance with the Rules of Western Pacific Regional Centre for Arbitration. The place shall be

Rolga City.


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Mr. Vogel signed the Bill of Sale; he modified the forum selection clause and indicated

that any dispute shall be settled by three arbitrators in accordance with the Kuala Lumpur

Regional Centre for Arbitration. The place shall be Kuala Lumpur. He then after returned the bill

of Sale to Ms. Rocco.

The Shipment of Bananas

RFE prepared a clean bill of lading and arranged for shipment on the M/S PINAFORE.

Captain Renas Vermelho signed the bill of lading which contains a special instructions that the

cargo of bananas must be stored in a cool, dry location with circulation to prevent spoilage.

M/S PINAFORE sailed on October 1, 2010 and arrived at Astoria City on the night of

November 24, 2010. Before unloading, the bananas were inspected and it was found out that

30% of the bananas ripened during the ocean voyage.

The Arbitration

While the AP and RFE were arguing on who should be held responsible, the bananas

became rotten and had to be destroyed.

AP and RFE agreed to arbitrate all the disputes arising from their contract, but they have

failed to agree on the place of arbitration and the arbitration rules to apply.


-xii-

SUMMARY OF PLEADINGS

I. KLRCA has the authority to resolve the dispute between AP and RFE and acquired such

jurisdiction from the agreement to submit their dispute for arbitration. RFE impliedly gave its

consent by its failure to question the revised forum clause. In the event that the parties failed to

agree on the place and the rules that will govern the arbitration the claimant shall submit

information as to the place of arbitration and the applicable rules. Moreover, the doctrine of

separability applies in the case. Therefore, the claimant’s counter-offer to arbitrate needs a

separate revocation.

II. RFE has been given proper notice of arbitration based on Art. 3 of the UNCITRAL

Arbitration rules. They were given due time to respond to the notice and to appoint their

arbitrator based on Art. 4. The respondent failed to give its response in due time which prompted

the director to appoint the second arbitrator. The presiding arbitrator has been appointed

accordingly based on Art. 8.

III. The arbitral tribunal has the authority to impose a fine as an interim measure to ensure that

the parties comply with the notices and orders. Under Art. 13 of the UNCITRAL Arbitration

rules, the arbitral tribunal shall have the power to ensure the just, expeditious, economical and

final determination of the dispute. Both parties were given equal opportunity and RFE’s failure

to appear and to even give notice resulted in delay and is prejudicial to the arbitration proceeding

itself giving the tribunal the authority to impose a fine.

IV. The United Nations Convention on International Sale of Goods is applicable in the present

dispute under Art. 1 (1)(b).In the absence of the choice of law between the parties, resort must be


-xiii-

had to the rules of private international law. The rules of private international law, particularly

Art 4 without prejudice to Art 5 of the European Community Regulation, which RFE adopts as

its domestic law, lead to the application of the law of the country where delivery is to be made.

The goods are deliverable to Astoria who is a Contracting Party to the CISG. Thus, CISG is

applicable.

V. The term FOB will not exempt the seller from liability. Under Art 36 (1) and (2) of the CISG,

RFE should still be liable even after the goods were delivered to the carrier. Moreover, the

instruction in the bill of lading were merely general and was not detailed enough to include

specific caring, particularly the temperature, for the bananas. RFE guaranteed that the bananas

will arrive in a satisfactory condition. RFE was well aware that AP as a distributor needs the

bananas to still be in green condition. The delivery of the bananas in a ripe or ripening condition

constitutes a fundamental breach in the obligation of RFE under Art 25 of the CISG.

VI. Astoria under its domestic laws has no obligation to sell the bananas. Under Art 2-603 of the

UCC, the seller has to give instructions to the buyer as to the selling of the bananas. The email of

RFE constitutes an unreasonable instruction, because there was no intention on the part of the

respondent to indemnify the buyer for the expenses. Moreover, under the provisions of CISG, no

obligation is imposed to AP to sell the bananas. In the absence of provision that will apply under

the CISG, the situation shall be governed by general principles of law. The UNIDROIT

principles does not provide for such obligation as well.

MEMORIAL FOR THE CLAIMANT (ASTORIA PRODUCE COMPANY) -Pleadings & Authorities-

-1-

PLEADINGS AND AUTHORITIES

ISSUE I: THE KLRCA HAS THE AUTHORITY TO RESOLVE THE DISPUTE

BETWEEN THE ASTORIA PRODUCE COMPANY AND ROLGA FARMER’S

EXCHANGE

A. The Source of Authority and Jurisdiction

Astoria Produce Company [AP] and Rolga Farmers Exchange [RFE] agreed in the forum

selection clause of the Bill of Sale that any dispute, controversy or claim arising out of or relating

to their contract, or the breach, termination or invalidity thereof shall be settled by arbitration.1

The Kuala Lumpur Regional Centre for Arbitration (KLRCA) derived its jurisdiction to

arbitrate the present dispute from the revised Bill of Sale sent by Mr. Vogel to Ms. Rocco, which

is quoted in verbatim, as follows:

Any dispute, controversy or claim arising out of or relating to this contract, or the

breach, termination or invalidity thereof shall be settled by arbitration in

accordance with the Rules of the Kuala Lumpur Regional Centre for

1 Compromis, page 2


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Arbitration. The number of arbitrators shall be three. The place of arbitration

shall be Kuala Lumpur.2

Under the KLRCA model clause,3 an arbitration agreement between the parties is

essential for KLRCA to acquire authority to resolve the dispute.

On July 15, 2010, Astoria Produce Company [AP] contracted Rolga Farmer’s Exchange

[RFE] and ordered a large quantity of Banana. Later that day, RFE sent a confirming Bill of Sale

to AP which provides that arbitration in accordance with the Rules of the Western Pacific

Regional Centre for Arbitration was selected.

On August 4, 2010, Mr. Vogel [AP] signed and returned the Bill of Sale which contained

the revised forum clause.4 No subsequent email was sent by Ms. Rocco [RFE]. The revised

forum clause constitutes the arbitration clause.

A.I Astoria Produce Company, [Claimant] decides place and rules of arbitration

In cross-border arbitration, the genesis of decision-making power derives from no

single legal system. Arbitration arises from the parties’ decision that the dispute should

not be sent to national courts.5 In this case, the parties did not intend to submit the dispute

2 Compromis, page 2

3 http://www.klrca.o rg.my/Arbitration-@-Model_Clause.aspx

4 Further Clarifications and Corrections, question 5

5 Alan Scott Rau, “Consent” to Arbitral Jurisdiction: Disputes with Non-signatories, in this volume at p. 69; John

M. Townsend, Non-Signatories in International Arbitration: An American Perspective , 13 ICCA Congress Series p.

359 (Kluwer Law International 2007); Hanotiau, Bernard Complex Arbit rations: Multi-Issue and class Actions The


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before their own national courts, both claimant and respondent asserted the applicat ion of

rules other than their own domestic law.6 In the event that the parties failed to agree as to

the place and rules to apply in their arbitration, the claimant shall submit information as

to the place of arbitration and the applicable rules of law. 7

B. The offer to arbitrate is independent from the contract of Sale

Art 7, 1985 UNCITRAL Model Law on International Commercial Arbitration defines

“Arbitration agreement” as an agreement by the parties to submit to arbitration all or certain

disputes which have arisen or which may arise between them in respect of a defined legal

relationship, whether contractual or not.

When Ms. Rocco [RFE] sent a confirming Bill of Sale it included an offer to arbitrate

arising dispute in AP’s purchase order. When Mr. Vogel [AP] accepted the purchase offer on

August 4, 2010, he returned the Bill of Sale, with revisions on the forum clause. At that precise

moment, the arbitration agreement came into existence independently.

The claimant’s offer to arbitrate was autonomous; its effectiveness does not depend on

the validity of the contract of sale. This is in conformity with the doctrine of separability, a

general recognized principle of international commercial arbitration. 8 In essence, it clarifies that

Hague (2005); William W. Park, The Arbitrator’s Jurisdiction to Determine Jurisdiction , 13 ICCA Congress Series

p. 55 (2007). 6 Compromis, page 2

7 Payal Enterprises Vs Union Of India

8 Prima Paint V. Flood & Conklin, U. S. Ct. App. (2nd Cir.); Cour Decassation, 7 May 1963, Gosset C/ Carapelli”;

Lesotho Highlands V. Impreglio,House of Lords; Cámara Nacional De Apelaciones En Lo Commercial, 26 Sep


-4-

the parties to arbitration conclude not one but two agreements. The forum or arbitral clause

survives any birth defect or acquired disability of the principal agreement of the parties to enter

into the contract of Sale.9

According to the doctrine of separability, the offer to conclude the main contract was to

be distinguished from the offer to arbitrate. Therefore, the formal requirements that affected the

conclusion of the main contract did not extend to the offer to arbitrate. As it was sufficient to

accept the offer to arbitrate with a single signature, an arbitration agreement was effectively

concluded.

Applying the well established doctrine of separability as well as the decision of the

Bermuda Court of Appeals10 to the present case, the claimant’s counter-offer to arbitrate

according to the KLRCA rules required an independent revocation from the respondent.

C. Rolga Farmer’s Exchange did not question the revised forum clause

Contrary to Respondents allegation, that KLRCA has no jurisdiction, there was neither

revocation nor any objection on respondent’s part to settle the dispute before the KLRCA. An

1988; Company (Germany) V. A South-East Asian State . Award No. 1507 (1970), Jdi 1974, P. 913-914; Company

(France) V. State Company (Iran) Award No. 4381 (1986) Jdi 1986, Pp. 1102-1113icc Award No. 4381 (1986); A

Redfern And M Hunter, Law And Practice Of International Commercial Arbitration 4th Edition (2004); Varady,

Tibor Barcelo, John J. Von Mehren, Arthur T. International Commercial Arbitration: A Transnational Perspective;

Lew, Julian D. M. Mistelis, Loukas A. Kröll, Stefan M. Comparative International Commercial Arbitration, The

Hague (2003). 9 Schwebel, Stephen M. International Arbitration: Three Salient Problems, Cambridge (1987),

10 Bermuda Sojuznefteexport v. JOC Oil, 7 July 1989 Bermuda Court of Appeal XV Y. B. Com. Arb. (1990), pp.

384 et seq.


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interpretation of the exchange of emails between Mr. Vogel and Ms. Rocco clarifies that RFE

did not intent to question the revised forum section clause sent by Mr. Vogel.

There is an implied consent from RFE to arbitrate in accordance with the KLRCA rules

from its failure to question the revised forum clause. Agreements of all sorts can be inferred from

behavior.11 An example would be… “A couple dining in a fancy restaurant, consuming their

lamb cutlets with gusto while sipping a 1982 Cheval Blanc Saint-Emilion, will be bound to pay

the chef’s exorbitant prices even without a formal offer and acceptance.” Likewise, two business

entities might act in a way that reasonable observers construe as a commitment to arbitrate

disputes.

Had the respondent intended to resolve potential disputes in accordance with the Rules

other than the KLRCA, it must reasonably be expected to have expressly said so. RFE does not

even make any implied reference to discontent with the application of KLRCA rules. Still, any

objection requires to be communicated.

As respondent strictly focused on the arrangement for shipment of the bananas,

neglecting the rules to apply in case of arbitration, it was reasonable to assume that the revised

forum clause sent by the claimant was meant to be accepted and effective.

11

Thomson-CSF, S.A. v. American Arbit ration Ass’n, 64 F.3d 773, 776 (2d Cir 1995).


-6-

D. The Arbitral Proceedings have already commenced

Astoria Produce, the claimant filed its request for arbitration on June 1, 2011 pursuant to

Rule 3 of the UNCITRAL Arbitration Rules (2010). The Center notified RFE of the filing of the

request for arbitration in June 15, 2011 and enclosed a copy of the KLRCA 2010 Rules.

The claimant shall communicate to the other party a no tice of arbitration. Arbitral

proceedings shall be deemed to commence on the date on which the notice of arbitration is

received by the respondent.12 Therefore, arbitration has commenced on June 15, 2011 by virtue

of the provisions on Art 3 UNCITRAL Arbitration Rules.

Pursuant to the principle of competence-competence, the KLRCA has the power to

decide on its own jurisdiction, including any objections with respect to the existence or validity

of the arbitration agreement.13 This is set out in Article 23 KLRCA Rules and generally accepted

in international arbitration.14

D.1 Dispute settlement by means of arbitration was the parties’ intention

Arbitration with the KLRCA should proceed as both AP and RFE demonstrated

their intention to settle disputes by arbitration. Irrespective of whether the parties

12

Article 3, par1&2, 2010 UNCITRAL Model Law on Arbitration Rules 13

Article 23, KLRCA 14

Germany v. Germany Award No. 4472 (1984) JDI 1984, pp. 946-950; Supplier (USA) v Buyer (India) ICC

AWARD NO. 4367 (1984); Bahamas, Luxembourg v. France Award No. 4402 (1983) IX Y. B. Com. Arb. (1984),

pp. 138-141; Fouchard, Philippe, Gaillard, Emmanuel, Goldman Berthold, On International Commercial

Arbitration, The Hague (et.al.) (1999); Holtzmann, Howard M. and Neuhaus, Joseph E., A Guide to the UNCITRAL

Model Law on International Commercial Arbitration: Legislative History and Commentary, Boston (1989)


-7-

eventually concluded or agreed to arbitrate using KLRC rules or Western Pacific

Regional rules, they both demonstrated their general will in favor of arbitration dispute

settlement.

In conclusion, Arbitration in accordance with KLRCA should proceed as the very

purpose of the rules necessitates the continuation of the Arbitral Proceedings, as dispute

resolution by arbitration is faster than state litigation and as it corresponds with the parties’

original intent. Moreover, the RFE [respondent] should not gain advantage from its assumed

breach of the arbitration agreement.


-8-

ISSUE 2: THE THREE ARBITRATORS WERE PROPERLY APPOINTED. RFE WAS

GIVEN THE OPPORTUNITY TO SELECT ITS “PARTY APPOINTED

ARBITRATOR”. THE PRESIDING ARBITRATOR OR CHAIRMAN WAS PROPERLY

APPOINTED.

All of the major private international arbitration rules contain some variation of the most

fundamental standards for the qualification and conduct of arbitrators: impartiality and

independence. These standards, or one standard in two-pronged form, are embodied in the

arbitration rules of the United Nations Commission on International Trade Law

("UNCITRAL"),15 the London Court of International Arbitration ("LCIA"), 16 and the American

Arbitration Association's (AAA) International Rules. The International Chamber of Commerce

("ICC") Arbitration Rules expressly require only independence. 17

A. Commencement of the Arbitral Proceedings

The KLRCA 2010 Rules has adopted the UNCITRAL Arbitration Rules (2010).18 Based

on Article 3 of the UNCITRAL Arbitration Rules: Arbitral proceedings shall be deemed to

commence on the date on which the notice of arbitration is received by the respondent.

On June 1, 2011, Astoria Produce [claimant] commenced arbitration by filing a request

15

Art. 10, para. 1, UNCITRAL Arbitration Rules 16

Art. 5, para. 2 &Art. 10 para 3,LCIA Arbit ration Rules (effective Jan. 1, 1998). 17

Art. 7, para. 1, ICC Arb itration Rules (effective Jan. 1, 1998). All arb itrators in an ICC proceeding must sign a

Statement of Independence. Id. art. 7(2); Bond, The Selection of ICC Arbitrators and the Requirement of

Independence, 4 Arb. Int’l 300, 303 (1988). The ICC Arbitration Rules also provide, however, that an arbitrator

may be challenged for lack of independence “or otherwise.” ICC Arb itration Rules, Art. 11(1). 18

Compromis, page 4


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for arbitration with the Kuala Lumpur Regional Centre for Arbitration pursuant to Rule 3 of the

2010 UNCITRAL Arbitration Rules. KLRCA’s Director notified RFE of the filing of the

Request for Arbitration on June 15, 2011 and enclosed a copy of the KLRCA 2010 Rules.

Therefore, proper notice of arbitration was sent to the respondent [RFE] on June 15,

2011.

Article 4 of the UNCITRAL Arbitration rules states that “Within 30 days of the receipt of

the notice of arbitration, the respondent shall communicate to the claimant a response to the

notice of arbitration…” RFE [respondent] does not deny that it received the notices. Therefore,

the period in which RFE should respond and appoint its arbitrator began to run.

B. Appointment of the Arbitrators

Article 9, UNCITRAL Arbitration Rules provides that: 1) If three arbitrators are to be

appointed, each party shall appoint one arbitrator. The two arbitrators thus appointed shall

choose the third arbitrator who will act as the presiding arbitrator of the arbitral tribunal.

The Director requested that RFE appoint its party appointed arbitrator within 30 days

from receipt of notice.19 Astoria Produce [AP] designed Bernard Bodd as its party appointed

arbitrator. On the other hand, RFE [respondent] did not timely reply to the notice.

19

Compromis, page 4


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After 45 days without RFE making an appointment, the rules provide that the first party

[claimant] may request the appointing authority [director] to appoint the second arbitrator. 20 The

Director appointed Riska Benti, a prominent Rolgan attorney as the second arbitrator. The rules

further provide that: the presiding arbitrator shall be appointed by the appointing authority in the

same way as a sole arbitrator would be appointed under article 8, i.e. within 15 days after receipt

of notice to appoint the presiding arbitrator, and if for any reason the appointment cannot be

made within the period, the director may exercise its discretion.

Pursuant to the above mentioned rules, the Director appointed Judge John Chong, the

former Chief Justice of Malaysia as the presiding arbitrator. Neither party questions the

competence or integrity of any of the three arbitrators.

C. Challenges to the Appointed Arbitrators

The UNCITRAL Model Law for International Commercial Arbitration, which has been

adopted in many countries (e.g., Australia, Canada and Hong Kong), provides that an arbitrator

may be challenged "only if circumstances exist that give rise to justifiable doubts as to his

impartiality or independence."21 This indicates that independence and impartiality are required of

all arbitrators. The attorney who would represent RFE at the October hearing cannot be

appointed as its “party appointed arbitrator”. Such relationship must be assumed to be fiduciary

to pass the test of impartiality.22

20

Article 9, KLRCA rules 21

Art. 12 para. 2, UNCITRAL Model Law 22

Hunter, Ethics of the International Arb itrator, 53 Arbit ration 219, 223 (1987); Carter, Living

with the Party-Appointed Arbitrator: Judicial Confusion, Ethical Codes and Practical Advice, 3 Am. Rev.


-11-

It was only on August 15, 2011 or two months after the first notice to arbitrate was

received by RFE that it take action to inform the KLRCA Director of its intention to challenge

the authority of the tribunal to hear the dispute. It was only that time that RFE selected its “party

appointed arbitrator.” As such time, it is too late to substitute Riska Benti as member of the

arbitration panel.

In conclusion, all appointments were made accordingly. Astoria [claimant] upholds the

authority of the KLRCA Director to appoint the 2nd and presiding arbitrator. The arbitrator’s

authorities were from (1) the stipulation on the Bill of Sale; (2) the respondent’s failure to

respond within 30 days; and (3) the UNCITRL Arbitration Rules.

Int'l Arb. 153, 164 (1992); Hunter & Paulsson, A Code of Ethics for Arbit rators in International

Commercial Arb itration?, 19 Int’l Bus. Law 153, 155 (1985


-12-

ISSUE 3: THE ARBITRATION PANEL HAS THE AUTHORITY TO IMPOSE

SANCTIONS IN THE FORM OF A FINE ON RFE FOR FAILING TO APPEAR AT

THE INITIAL HEARING AND/OR FOR NOT PROVIDING ADEQUATE NOTICE

THAT IT WOULD NOT APPEAR

A. Article 17 of the UNCITRAL Model on International Commercial Arbitration

authorizes the grant of interim measure

In international arbitration, due to the lapse of time between commencement of arbitral

proceedings and issuance of the final award, interim measures often constitute a ke y tool to

prevent irreparable and non-compensatory harm to one party.23

An interim measure is defined as any temporary measure, whether in the form of an

award or in another form, by which, at any time prior to the issuance of the award by which the

dispute is finally decided, the arbitral tribunal orders the party to take action that would prevent,

or refrain from taking action that is likely to cause current or imminent harm or prejudice to the

arbitral process itself.24

An arbitral tribunal frequently does not have the power to issue coercive measures. They

cannot impose penalties, but arbitrators can draw adverse inferences if a party does not comply

23

Michael Young (Herbert Smith) & Carine Dupeyron (Cleary Gottlieb Steen & Hamilton Llp), To Prevent

Irreparab le Harm: What Can Be Done By The Arbitral Tribunal? 24

Art. 17 para. 2, Uncit ral Model On International Commercial Arbit ration


-13-

with its order.25 Thus, in the present case, it is necessary for KLRCA to impose fines on RFE to

ensure its compliance with its further notices and orders.

RFE was duly informed by the Director of the KLRCA that AP commenced arbitration

proceedings on June 15, 2011. They were given 30 days to choose a party appointed arbitrator.

Together with these notices, RFE was also duly informed of the date given for their 1st hearing,

August 15, 2011, which RFE itself did not deny to have received. RFE have 60 days from the

date that it gained knowledge of the date of the 1st hearing to inform the arbitral tribunal that it

did not intend to appear on the scheduled hearing. Instead, RFE waited August 15, 2011, until an

hour before the hearing was to begin before it informed the tribunal that it will not appear. As a

result, the scheduled first hearing did not take place and the AP needed to wait 2 more months

for the arbitration to begin.26

Failure of the respondent to appear and its lack of notice are prejudicial to AP and the

arbitration proceedings itself. Therefore, the arbitral tribunal may impose such fine to RFE as its

actions constitute delay and prejudice to the arbitration proceedings

B.) The imposition of the fine ensures just, expeditious, economical determination of the

dispute

Art. 13 of the KLRCA Rules provide that: the arbitrator shall have the power permitted

by law and under the act to ensure the just, expeditious, economical and final determination of

25

A Redfern And M Hunter, Law And Practice Of International Commercial Arbitration 4th Edit ion (2004) 26

Compromis, page 4 &5


-14-

the dispute.27 This power of the arbitral tribunal is subject to the condition that the parties to the

proceeding will be treated equally and both are given equal opportunity to present its case.28

AP and RFE were both given sufficient time with which to choose their party appointed

arbitrator, both are well notified that the scheduled first hearing was August 15, 2011, they were

given equal time before the date if the scheduled first hearing. However, despite such sufficient

notice, RFE failed to appear, and worse, even failed to notify that it will not attend the scheduled

first hearing. This particular action of the RFE resulted in the cancellation of the first hearing.

The KLRCA arbitral tribunal, with its power to ensure that the proceeding shall be conducted in

an expeditious manner may impose a fine upon RFE for the delay it caused to the whole

proceedings.

In conclusion, the provisions of the UNCITRAL Model Law on International Arbitration

and KLRA rules were meant to avoid any delays in arbitral proceedings. It aims at contributing

to fast and cost-saving procedures and to dispute resolution without delay. 29 Accordingly the

action of RFE obstructed the proceedings and must not be excused.

27

Art. 13, KLRCA Rules 28

Art. 13, KLRCA Rules 29

Holtzmann, Howard M. And Neuhaus, Joseph E, A Guide To The UNCITRAL Model Law On Internationalcommercial Arbitration: Legislative History And Commentary, Boston (1989); Calavros, Constantin,

Das UNCITRAL-Modellgesetz über die international Handelsschiedsgerichtsbarkeit, Bielefeld (1988); Saenger,

Ingo, Zivilprozessordnung: Handkommentar, 2nd Edition, Baden-Baden (2007); Reichold, Klaus and Hüßtege,

Rainer and Thomas, Heinz and Putzo, Hans, Zivilprozessordnung, 28th Edition, München (2007); Zöller, Richard

and Geimer, Reinhold, Zivilprozessordung, 26th Edit ion, Köln (2007); Hußlein-Stich, Gabriele, Das UNCITRAL-

Modellgesetz über die international Handelsschiedsgerichtsbarkeit Köln , Berlin et al. (1990)


-15-

ISSUE 4: THE UNITED NATIONS CONVENTIONS ON THE INTERNATIONAL SALE

OF GOODS IS APPLICABLE IN THE PRESENT DISPUTE.

A. An International Sale was concluded

There is an international sale when the buyer and seller in transaction are from different

nations.30Astoria Produce [claimant] and Rolga Farmer’s Exchange [respondent] effectively

entered into a contract of sale.

The CISG governs the sales contract between AP and RFE pursuant to Article 35(3) of

UNCITRAL Arbitration Rules which states that “in all cases, the arbitral tribunal shall decide

in accordance with the terms of the contract, if any, and shall take into account any usage of

trade applicable to the transaction.”

The CISG governs First, contract of sale of goods between parties whose place of

business are in different states when the States are contracting parties, 31 and; Second, in contract

of sale of goods between parties whose place of business are in different States when the rules of

private international law lead to the law of a Contracting State. 32 The dispute at hand arouse out

of a sale contract wherein the parties are from different States. Thus, the CISG is the law most

appropriate according to the terms of the contract and Art. 35(3) UNCITRAL Arbitration Rules

30

Blacks Law Dict ionary 31

Article 1(1)(A), United Nat ions Convention On International Sale Of Goods 32

Article 1 (1)(B), United Nations Convention On International Sale Of Goods


-16-

B. The rules of private international law lead to the application of the CISG

In order that Article 1 (1)(b) of CISG be applicable the rules of private international law

must lead to the law of the contracting State. AP and RFE may freely choose the law which shall

govern their transaction. However, when no choice has been made, or the choice is invalid, resort

must be had to the rules of private international law to determine whether or not the CISG be

applicable.

Astoria is a contracting party to the United Nations Conventions on the International Sale

of Goods,33 Rolga is not a signatory.34 However, in their contract, AP and RFE parties failed to

mention, much less agree, on the law that shall govern their transaction. In absence of an

agreement, resort must be had to the domestic laws of the parties to determine the law applicable.

C. Astoria and Rolga’s domestic law resorts to the application of CISG

Astoria, as a contracting party to the UN CISG, is necessarily bound by the provisions

thereof. Such fact is not questionable.

Generally, Rolga, a non-contracting party is not bound by the provisions of a convention.

However, as part of its domestic law, Rolga enacted provisions similar to Article 3 and 4 of the

European Community Regulation No 593/800.35 It provides that “parties shall be governed by

33

Compromis, page 9 34


Compromis, page 10


-17-

the law chosen by them.” The choice shall be made expressly or clearly demonstrated by the

terms of the contract or the circumstances of the case.

Article 4 takes into consideration the provisions of article 5 which provides that

“To the extent that the law applicable to a contract for the carriage of goods has not been

chosen in accordance with Article 3, the law applicable shall be the law of the country of

habitual residence of the carrier, provided that the place of receipt or the place of delivery

or the habitual residence of the consignor is also situated in that country. If those

requirements are not met, the law of the country where the place of delivery as agreed b y

the parties is situated shall apply.

The habitual residence of the M/S PINAFORE, carrier was not determined, therefore the

law of the country where the place of delivery as agreed by the parties is situated shall apply.

The bananas are deliverable to Astoria City where Astoria Produce Company is a major

distributor of produce to retail grocery stores.36

Therefore, based on the domestic laws of Rolga, particularly Article 5 of the European

Community Regulation, the applicable law shall be the law of the country where the place of

delivery as agreed by the parties shall apply. The law to which Astoria adheres is the United

Nations Conventions on International Sale of Goods. Thus, although not a contracting party,

Rolga shall be bound by the provision thereof.

36

Compromis, page 2


-18-

ISSUE 5: ROLGA FARMER’S EXCHANGE BREACHED ITS OBLIGATION

BECAUSE THE SHIPMENT OF BANANAS ARRIVE AT ASTORIA IN AN

UNSATISFACTORY CONDITION DUE TO IMPROPER STORAGE DURING THE

VOYAGE FROM ROLGA TO ASTORIA

The bananas that were shipped to AP [claimant] were undisputedly ripening.37 The

delivery of ripe or ripening bananas constituted a fundamental breach of contracted committed

by RFE [respondents], which gave AP [claimant] the right to avoid the contract.

A. Seller’s obligation while the bananas are in transit

The contract indicated FOB “Rolga City”. This means that when the seller delivers the

goods to the shipper, and the goods pass the ship's rail at the named port of shipment, all costs

and risks of loss of or damage to the goods shall pass to the buyer. The FOB term further

requires the seller to clear the goods for export.38

However, the term FOB (origin) will not necessarily exempt the seller from liability,

because under CISG Article 36(1) “the seller remains liable for any lack of conformity existing

at the moment the risk shifts to the buyer, even if such lack of conformity becomes apparent later

on” Also, Article 36(2) provides that “the seller is also liable for any lack of conformity which

occurs after the time indicated in the preceding paragraph and which is due to a breach of any

of his obligations, including a breach of any guarantee that for a period of time the goods will

37

Compromis, Page 6 38

Incoterms 2000: ICC Official Rules For The Interpretation Of Trade Terms


-19-

remain fit for their ordinary purpose or for some particular purpose or will retain specified

qualities or characteristics”. This is in conformity with the ruling of the court in the Conservas

La Costeña S.A. case.39

The Bill of Lading prepared by RFE contained a special instruction which states “This

cargo of bananas must be stored in a cool, dry location with good circulation to prevent

spoilage”.40 Such instruction was not detailed enough as to include what appropriate or specific

temperature the bananas should be subjected to, and as to how the proper placement of the

bananas in the storage of the vessel in order to promote a good circulation and prevent spoilage

should be done. The instruction was merely general. There was a failure on the part of RFE to

supervise the proper loading and delivery of the bananas despite its guarantee that the bananas

will retain a satisfactory condition, as disclosed in the following email sent by Lenore Rocco:

“Don’t worry – we fully understand your concern. We are

experienced in ocean shipping and have never have had a

problem. We will make sure that the Captain is well aware of the

special care that our lovely bananas must receive while under his

protection.”41

In the No. 2 hold the cartons of bananas were tightly stowed. No slots or wooden

separators had been used to facilitate the flow of air between the cartons. The cartons were

39

Conservas La Costeña S.A. Case. De C.V. V. Lan ín San Luis S.A. & Agroindustrial Santa Adela S.A., 19960429

(29 April 1996) 40


Compromis, Exhibit 2


-20-

stowed an average of eight tiers high in both compartments of the No. 2 hold. No space was left

between the cartons.42

It is clear that RFE is liable under Art. 36(2) of the CISG. RFE cannot escape liability on

the basis of a usage of a trade term FOB (origin), the seller is not discharged from all his

obligations regarding any detriment that the goods might suffer. The requirement that the seller

must comply with all the terms and conditions agreed upon have not been complied with. RFE

failed to supervise and to additionally take measure to make sure proper loading and placement

of the bananas to ensure a good circulation.

B. The delivery of ripe or ripening bananas constituted a fundamental breach of contract

committed by RFE

Pursuant to Art. 25 CISG a fundamental breach of contract is committed when such

detriment to the other party substantially deprive it of what is entitled to expect under the

contract. The buyer’s detriment must have been reasonable foreseeable. AP [claimant] suffered a

detriment by receiving the bananas. The detriment substantially deprived it of what it was

entitled to expect under the contract; and this detriment was reasonably foreseeable for RFE

[respondent].

42

Compromis, page 8


-21-

B.1 AP suffered a detriment by receiving the ripe or ripening bananas.

On August 1, 2010, Michael Vogel sent an email specifying that they must

receive the bananas in its green state.43 On November 24, 2010, when the shipment

was examined by both Dr. Bartolo and John Sparrow they found out that most of the

bananas in the number 2 hold were ripe or ripening.44 Moreover, it was reported by

Sparrow that:

“Approximately 30% of the bananas were ripe or ripening. The normal and expected

percentage of ripe or ripening bananas reaching the port of destination is from 3% to

5%; more than 10% s considered excessive. The ripened state of the bananas was

clearly due to the high temperatures at which they had been transported.

Not having the bananas in a merchantable quality caused a detriment to AP.45

Claimant operates as a major distributor of produce to retail grocery stores throughout

Astoria. It entered into contract with RFE with the intention to resell the purchased

green bananas. This intention has been incorporated in the contract. 46 As the bananas

are ripe and ripening, AP could not resell the bananas to the retail grocery stores. The

intention wherefore it entered the contract was frustrated. Hence, AP suffered a

detriment by receiving the ripe and ripening bananas.

43

Compromis, exh ibit 1 44

Compromise, page 7 45

Schlechtriem, Peter Kommentar zum Einheitlichen UN-Kaufrecht,

5th Edition, München, Basel (2008); Schmidt, Karsten Münchener Kommentar zum Handelsgesetzbuch-CISG

Grunewald, Barbara 2nd Edit ion, München (2007) 46

Compromis, page 1; Exhib it 1


-22-

B.2 The breach of contract deprived AP of what it was entitled to expect under the

contract

The function of Art. 25 CISG is to allow a contract to be canceled. 47 This purpose

has to be considered when determining whether a party is substantially deprived of

what it was entitled to expect under the contract. 48 The state of the bananas that were

shipped were of different quality than that agreed upon, as a matter of fact, 30% of

the bananas were considered to be ripe, an unsatisfactory condition which is not in

conformity with the instructions of Astoria and a quality different from that of the

agreement between them. Hence, there is substantial detriment to AP because it

reasonably expects to hold on the contract. In this case, AP’s legitimate interest

justified an immediate avoidance of the contract. 49

47

Honnold, John O.,Uniform Law For International Sales Under The 1980 United Nations Convention, 2nd

Edition, Boston (1991); Ibid 4;Galston, Nina M. and Smit, Hans, International Sales; The United Nations

Convention for the International Sale of Goods, New York (1984); Enderlein, Fritz and Maskow, Dietrich and

Strohbach, Heinz, Internationales Kaufrecht: Kaufrechtskonvention,Verjährungskonvention,

Vertretungskonvention, Rechtsanwendungskonvention, Haufe , Berlin (1991); Brunner, Christoph, UN-Kaufrecht –

CISG, Kommentar Zum Ubereinkommen Der Vereinten Nationen Uber Vertrage Uber Den Internationalen

Warenkauf Von 1980, Bern (2004) 48

Ibid, 45 49

Huber, Peter, Mullis, Alastair, The CISG – A new textbook for students and

practitioners, Munich (2007)


-23-

ISSUE 6: ASTORIA PRODUCE HAS NO LEGAL OBLIGATION TO SELL THE

BANANAS – OR A PORTION OF THEM SOON AFTER THE PINAFORE DOCKED

AT THE PORT OF ASTORIA

A. Astoria has no obligation to sell under its domestic laws

A buyer's basic obligations are to accept the goods and pay the sale price. If the goods are

nonconforming, the buyer may rightfully reject the goods. 50

Astoria is a common law country; it has adopted a domestic law similar to the American

Uniform Commercial Code.

Under its domestic law, “when a transaction bears a reasonable relation to this state and

also to another state or nation the parties may agree that the law either of this state or of such

other state or nation shall govern their rights and duties.” Failing such agreement this Act

applies to transactions bearing an appropriate relation to this state. 51

The international sale between Astoria Produce Company and Rolga Farmer’s Exchange

involved a transaction bearing an appropriate relation to Astoria as a state. The fact that Astoria

Produce is a large distributing company operating in Astoria, such contract of sale between the

latter and RFE would necessarily bear a connection and/or relation to Astoria.

50

Article 53 UNCITRAL Convention on International Sale of Goods ; 51

Art. 1-105(1) of the American Uniform Commercial Code


-24-

The email of RFE in response to the demand of Astoria of the reimbursement of the

purchase price did not constitute a reasonable instruction that would impose an obligation on

Astoria to sell the bananas under the provisions of its domestic laws.

Under Art. 2-603, UCC, “subject to any security interest in the buyer (subsection (3) of

Section 2-711), when the seller has no agent or place of business at the market of rejection a

merchant buyer is under a duty after rejection of goods in his possession or control to follow any

reasonable instructions received from the seller with respect to the goods and in the absence of

such instructions to make reasonable efforts to sell them for the seller's account if they are

perishable or threaten to decline in value speedily.” Instructions are not reasonable if on demand

indemnity for expenses is not forthcoming.

RFE sent an email in response to the demand for reimbursement made by AP. RFE

instructed AP to sell the bananas even those which are fully ripe to many of the numerous

commercial bakers in Astoria who use them to make banana bread and muffins. 52

In reading the last sentence of Art. 2-603(1), the instructions sent by RFE is not

reasonable. The email contained a statement expressing RFE’s intention of not reimbursing AP

of its demand. The effect of the unreasonableness of such instruction gives the buyer, as in this

case, AP, no obligation to comply with the instruction given by the seller. Thus, AP has no

obligation to sell the bananas after the Pinafore had docked at the Port of Astoria.

52

Compromis, page 11


-25-

B. Astoria has no obligation under CISG and general principles of international law.

B.1 The interpretation of CISG

Article 88(1) CISG allows the party who is bound to preserve the goods to sell them if

the other party fails to take action in a reasonable time (also known as self-help sale). It is an

option (not an obligation). 53 Therefore, there is no specific under CISG which imposes an

obligation to AP to sell the bananas.

According to Article 7(1), interpreters of the CISG should be guided by 1.) its

"international character;"54 2.) "the need to promote uniformity in its application;" and (3) "the

need to promote . . . the observance of good faith in international trade."55

Art. 7(2) of the CISG provides that “questions concerning matters governed by this

Convention which are not expressly settled in it are to be settled in conformity with the general

principles on which it is based or, in the absence of such principles, in conformity with the law

applicable by virtue of the rules of private international law.”

53

John O. Honnold, Uniform Law For International Sales Under The 1980 United Nations Convention, 3d ed., 519

(1999); Harry M. Flechtner, Remedies Under the New International Sales Convention: The Perspective from Article

2 of the U.C.C., 8 JL&C 53, 104 (1988); Jelena Vilus, Provisions Common to the Obligations of the Seller and the

Buyer in International Sales Of Goods: Dubrovnik Lectures, Oceana Publications 259, 237-264 (Petar Sarcev ic &

Paul Volken eds., 1986) 54

John O. Honnold, Uniform Law for International Sales under the 1980 United Nations Convention 2d ed. l991 55

Bianca, Caesare Massimo & Bonell, Michael Joachim, Commentary on the International Sales Law: The 1980

Vienna Sales Convention, Milano (l987).; John O. Honnold, Documentary History of the Uniform Law for

International Sales (l989).; Peter Schlechtriem, Recent Developments in International Sales Law, l983.


-26-

Since CISG do not provide for any legal obligation on the part of the buyer to sell the

bananas, the matter may be governed by the general principles of law. However, the UNIDROIT

Principles of International Commercial Contracts likewise do not provide for any obligation on

the part of the AP to resell the bananas.

C. RFE’s proposal to resell the bananas were too speculative

In arguing for respondents, proposed mitigation of loss. RFE relies on its email “that the

fully ripe bananas can be sold to many bakers in Astoria to be used to make banana bread and

muffins.”56 However, Ms. Rocco’s statement offers no assurance that the reselling would avert

the purchase price paid by AP. Further, the bananas were fully ripe. The entire shipment was

unloaded and stored in a nearby warehouse. AP has no obligation to dispose the bananas, as it

previously submitted its claim for reimbursement. The buyer has no further obligations with

regard to goods rightfully rejected.57

The buyer’s obligation to take reasonable steps to preserve goods was limited to periods

when goods were in buyer’s possession. The goods were not in AP’s possession. AP

immediately rejected the goods after its inspection. Therefore the obligation imposed by art 87

of the CISG will not lie.

In conclusion, AP has no obligation to sell the bananas or a portion of them after the

Pinafore had docked at the Port of Astoria because the provisions of the CISG and the general

56


Art 2-602(2)(C), American Uniform Commercial Code


-27-

principles of law did not warrant the imposition of such obligation on the part of the buyer, as in

this case, AP. Moreover, under the provisions of the UCC, the instruction given by RFE did not

constitute a reasonable instruction as to compel the buyer to obey such instruction of the seller.

Thus, the obligation of selling on the part of Astoria did not exist.


-28-

PRAYER FOR RELIEF

On the basis of the foregoing facts and points of law, Astoria Produce respectfully

requests this Arbitral Tribunal to:

I. Declare its authority and jurisdiction to resolve the dispute between claimant and

respondent pursuant to 2010 UNCITRAL Arbitration Rules

II. Declare that the three arbitrators were properly appointed and RFE waived its

opportunity to select its party arbitrator

III. Declare the tribunal’s authority to impose fines on RFE for failure to appear at the

initial hearing

IV. Declare that the UN Convention of the International Sale of Goods should apply

V. Declare that the arrival of the shipment of bananas in an unsatisfactory condition

constitutes a breach of RFE obligation under the contract

VI. Declare that AP has no legal obligation to sell the bananas or a portion of them

Respectfully Yours,

Counsel for the Claimant

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