Analysis of the Problem

For use of the Arbitrators

Organiszed by:

Association for the organisation and promotion of the Willem C. Vis International Commercial Arbitration Moot

And

Twelfth Annual Willem C. Vis (East)

International Commercial Arbitration Moot Hong Kong

Organized by:

Vis East Moot Foundation Limited

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Introduction

If you do not already have a copy of the Problem, it is available on the Vis Moot website,https://vismoot.pace.edu/site/22nd-vis-moot. Ifyoudownloaded theProblemduringOctoberyouwillneed todownload the revisedversion issuedat thebeginningofNovember includingProceduralOrder№.2andsubsequentcomments.

This analysis of the Problem is primarily for the use of arbitrators. Arbitratorswhomay beassociated with a team in the Moot are stronglyurged not to communicate any of the ideascontained in this analysis to their teams before the submission of the Memorandum forRESPONDENT.

The analysis will be sent to all teams after all Memoranda for RESPONDENT have beensubmitted. Many of the team coaches/professors participate as arbitrators in the Moot andthereforereceivethisanalysis. Itonlyseemsfairthatall teamsshouldhavetheanalysisof theproblemfortheoralarguments.Iftheanalysiscontainsideasteamshadnotthoughtofbefore,therespectiveteamswillstillhavetoturnthoseideasintoconvincingargumentstosupportthepositiontheyaretaking.Forthatreasontheanalysisoftendoesnotmorethanmerelyflaggingtheissuewithoutmentioningtheargumentsagainstorforacertainpositionorcontainingafullanalysisoftheproblem.

AllarbitratorsshouldbeawarethatthelegalanalysiscontainedhereinmaynotbetheonlywaytheProblemcanbeanalyzed.Itmaynotevenbethebestwaythatoneormoreoftheissuescanbeanalyzed.Theamountofissuesthatariseoutofthefactsituationmakesitnecessaryfortheteams to take a decision which of the issues they emphasize in their submissions and oralpresentations. Arbitrators should keep in mind that the team’s background might influence its approach to the Problem and its analysis. In addition, the decision may be influenced by thepresentationa teamhastorespondto.Fullcreditshouldbegiventothoseteamsthatpresentdifferent,thoughfullyappropriate,argumentsandemphasizedifferentissues.

In theoralhearings, inparticular in the laterrounds,arbitratorsmay informthe teamswhichissuestheyshouldprimarilyfocusonintheirpresentation,iftheywanttodiscusscertainissuesspecifically.Theyshoulddoso,iftheywanttomakethein‐depthdiscussionofaparticularissuepartoftheirevaluation.

TheFacts

On 11 July 2014 Mr Fasttrack initiated arbitral proceedings with the Secretariat of theInternationalCourtofArbitrationoftheInternationalChamberofCommerce(ICC)forhisclient,VulcanColtanLtd(CLAIMANT),againstMediterraneoMiningSOE(RESPONDENT).AtthesametimeMrFastrackaskedforanEmergencyMeasurepursuanttoArticle29ICC‐ArbitrationRulespreventingRESPONDENT“fromdisposinganyofthe100metrictonsofcoltanwhichareneededtofulfilthecontractwithCLAIMANT”.

CLAIMANTisabrokerofrareminerals,inparticularcoltan,basedinEquatoriana.Itisa100%subsidiaryofGlobalMineralsLtd(“GlobalMinerals”),whichbrokersraremineralsworld‐wideandisbasedinRuritania.CLAIMANThasbeencreatedbyitsparentcompanyespeciallytoentertheverydifficultcompetitivemarketinEquatoriana.Equatorianahasahighlydevelopedelectronicsindustrywhichisresponsiblefor10%oftheEquatoriana’sGDP.

RESPONDENTisastate‐ownedenterprisebasedinMediterraneo.ItoperatesalltheminesinMediterraneoincludingtheonlycoltanmine.InadditiontocoltanRESPONDENTextractscopperandgold.

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Coltanisamineralcomposedofcolumbiteandtantalite.Itisprimarilyusedintheproductionofthetantalumcapacitorswhicharefoundinmanyelectronicdevices.Themarketconditionsforcoltanarecharacterisedbyhighvolatilityand instability.Timesofoversupplyare followedbytimeswhereitisevendifficulttogetsufficientcoltanatall, inparticularconflictfreecoltan.Inthepast,thevolatilitycouldbeattributedtothereleaseofmajorelectronicinnovations,likeplayconsoles and smartphone additions. Increasingly also political crises influence the price ofcoltan. Someof theworld’s larger coltandepositsare found in conflict areas.Likemanyof itscustomersCLAIMANT is aGlobalCompact company.Therefore it onlypurchases conflict freecoltanwhichconsiderablylimitsitschoiceofsuppliers.

On23March2014MrStorm,theChiefOperatingOfficerofGlobalMinerals,andMrSummer,theChief Operating Officer of CLAIMANT, approached Mr Winter, the general sales manager ofRESPONDENT, to enquire about a delivery of 100 metric tons of coltan to CLAIMANT. Theoriginal proposal was that CLAIMANT would buy the coltan and get the same payment anddeliveryconditionsasGlobalMinerals.Theofferwas inacceptabletoRESPONDENT. In lightofpreviousexperienceswithaninsolventsubsidiaryofGlobalMineralsin2010,CLAIMANT’slackof assets and the difficult market in Equatoriana, RESPONDENT wanted to either contractdirectly with Global Minerals or at least some security for payment by them. In the end anagreementwasreachedprovidingforthepurchaseof30metrictonsbyCLAIMANTforUS$45perkilogram.Thecontract,whichlistedCLAIMANTandRESPONDENTasbuyerandseller,wassignedbythem28March2014(ExhibitC1).AsrequestedbyRESPONDENT, thecontractwas“Endorsed forGlobalMinerals” byMr. Stormwho signed directly below the signatures of theParties.Thepartiesdidnotdiscusstheexactlegalnatureofthis“endorsement”.Aswasstatedinthe witness statement of Winter (Exhibit R 1) RESPONDENT, while thinking that theendorsementmadeGlobalMinerals“atleasta“quasi”‐party[tothecontract]responsibleforthepayment”, was not really concerned about the Global Minerals exact legal status due to theexistingothersecurityfortheprice.

ThepriceforthecoltanwasUS$1,350,000andwastobepaidbyanirrevocableletterofcreditto“beestablishedbytheBuyernotlaterthanfourteendaysaftertheBuyerreceivedtheNoticeofTransport in regard to shipment”.TheNoticeofTransporthad tobegivenonce theagreedquantityofcoltanbecameavailablefortransport,butatthelatestby31August2014.DuringthenegotiationCLAIMANTmadeclearthatitwasinterestedindeliveryatanearliertime.

Thecontractfurthermorecontainedthefollowingarbitrationclause:

Art20:Arbitration

All disputes arising out of or in connectionwith the present contract shall be finallysettled under the Rules of Arbitration of the International Chamber of Commerce bythree arbitrators appointed in accordancewith the saidRules. The seat of arbitrationshall be Vindobona, Danubia, and the language of the arbitrationwill be English. Thecontract,includingthisclause,shallbegovernedbythelawofDanubia.

RESPONDENTsend theNoticeofTransport (ExhibitC2)onWednesday,25 June2014. In theaccompanyinge‐mail(ExhibitC3)RESPONDENTinformedtheCLAIMANTandGlobalMineralsthatoneofitsmajorcustomershadbecomeinsolventandhaddefaultedonapurchaseofcoltan.As a consequence RESPONDENT had 150 tons coltan available at short notice and could alsoperformthecontractwithCLAIMANTearlierthanoriginallyanticipated.

On Friday, 27 June 2014 at 15:05 Ruritanian Standard Time (“RST”), Mr Storm sent a fax toRESPONDENTofferingtotakedeliveryof100metrictons,onthetermswhichhadbeenoffered

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for such an amount during the original negotiations (Exhibit C 4). CLAIMANT presented thatofferinitsRequestforArbitrationas“afavour”itwantedtodotoRESPONDENT.AccordingtoRESPONDENT,however,thebackgroundofthisofferwasprobablyprivilegedinformationaboutthepoliticalsituationinXanaduwhichMrStormhadmostlikelyreceivedfromhisbrother,theRuritanianAmbassadorinXanadu.Xanaduisoneofthemajorproducersofconflictfreecoltanand the Ambassador had been informed on Friday that the government would probably bedissolvedovertheweekend(ExhibitR3).

Duetothetimedifferenceof5hoursbetweenRST,relevantforEquatorianaandRuritania,ontheonehand,andMediterraneoStandardTime(“MST”)ontheotherhand,thefaxonlyarrivedat20:05MSTatRESPONDENT’sofficeinMediterraneo.BythattimeMrWinterhadalreadyleftthecompany.HeonlyreadthefaxthenextMonday;atwhichpointthenewsaboutthefailureofthegovernmentinXanaduhadspreadandhadledtonervousreactionsonthemarketforColtanresultingfinallyinamoderatepriceincreaseof1US$attheendofMonday(PO2para30).

Mr Winter was very annoyed by the actions of CLAIMANT which in his view tried to takeadvantageofprivilegedinformationtothedetrimentof itscontractualpartners.Consequently,andinlightofthechangedmarketsituation,hemadecleartohisownpersonnelthathehadnointention to accept the offer. MrWinter did, however, not inform CLAIMANT officially of hisintentiontorejecttheoffer.Asitturnedoutlaterduringtheproceedingstheinformationabouttherejectionoftheofferhad,however,beenpassedonbyMrWinter’sassistantMsMasrovtoMrRüthlia friendworkingatthetimeforCLAIMANTinaprivatetelephonecall (ExhibitR2).MrRüthli,whohadbeenfireddirectlyafterthetelephonecall,hadnotpassedthat informationtoMrStormoranyotherpersonatCLAIMANT(PO2para26).

After waiting for some days for an official reply to its offer CLAIMANT then asked GlobalMineralstoinstructRSTTradeBankLtd(“TradeBank”),GlobalMinerals’bankinRuritania,toissueaLetterofCredit.On4July2014at10:00TradeBankfaxedanirrevocableLetterofCredit(145/2014)toRESPONDENT(ExhibitC5).Theoriginalwasthensentbycourier.Theunusualwayof issuingtheLetterofCreditwasin linewiththeparties’agreement(PO2para25).TheLetterofCreditwasissuedforUS$4,500,000relatingto100metrictonsofcoltan.Itallowedforpartialshippingandprovidedforpaymentagainstthefollowingdocuments:

• TransportDocument(CIPVulcanColtan,21MagmaStreet,Oceanside,Equatoriana)

• PackingList(Coltan–notlessthan30metrictonspershipment)

• ExaminationCertificate

Bythattimenewshadleakedoutthattheworld largestproducerofelectronicgameconsoles,whichhasalargemanufacturingplantinEquatoriana,haddevelopedanewgameconsole.Asaconsequence the price of coltan increased immediately by nearly 1US$/kg, as an increaseddemandofcoltanwasexpected.

About an hour laterMrWinter left a voicemailmessage onMr Summer’s phone rejecting theLetterofCreditprovidedasnotconformingtothecontractualrequirements,whichinhisviewwerestilldeterminedbytheoriginalcontractof28March2014.HeaskedforthecorrectLetterofCredittobeprovidedimmediatelyandthreatenedtoterminatethecontract,ifnoletterwouldbereceivedbyMondaymorning.MrStorm,whenbeinginformedofthemessagebyMrSummer,immediately emailedMrWinter stating that the Letter of Credit was largely in line with thechangedcontract (ExhibitC6)with theexceptionof thedelivery termwhichprovided forCIPCLAIMANT’saddress.ThatcouldbechangedtoCIFOceansideandthatCLAIMANTwouldthenexpectdeliverywithinthenext2months.

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On7July2014,RESPONDENTrepliedbysendingaletterdeclaringavoidanceofthecontractof28March2014(ExhibitC7).IrrespectiveofthatCLAIMANThadTradeBankissueanewletterof credit the following day allegedly complying with the terms of the original contract.CLAIMANTmadeclearthatitwasstilloftheviewthatthecontracthadbeenvalidlychangedandthattheletterwasprimarilyissuedasaprecautionarymeasure,toensureatleastadeliveryofthe30metrictonsagreedundertheoriginalcontractwhichCLAIMANThadalreadysoldontoitscustomers(ExhibitC10).

TradeBanksentthenewLetterofCredit(ExhibitC8)overUS$1,350,000by24hourscourieron8 July2014 (ExhibitC9) toRESPONDENT. Inaddition,GlobalMinerals faxed theLetterofCredittoRESPONDENTon8July2014toensurethatthedeadlinewasadheredto.Thefaxwassentat17.42RST,whichmeant22.42MST(ExhibitC10).ItwasonlyreadbyMrWinterthenextmorning.BythattimehehadalreadyreceivedtheoriginaloftheLetterofCredit.Workinglate,hehadbeencalledbythenightportershortlyaftermidnightMST,whichwas19.05RST,whenthecourierhadarrivedwiththeoriginalLetterofCredit.

Mr Winter replied directly on 9 July 2014 (Exhibit R 4). He made clear that RESPONDENTconsidered the contract terminated by its letter of 7 July 2014, returned the second letter ofcreditandmadeclearthatRESPONDENTwouldnotdeliveranycoltan.Furthermore,asa“purely‘precautionarymeasure’ ”MrWinterdeclared thecontractoncemore terminated. Inhisview,the second letter of credit had been delivered too late and was not conforming to therequirementsasking for thepresentationofacommercial invoice foranypayment,whichhadnotbeenaconditionunderthefirstletter.

ThatrefusaltodeliverresultedinCLAIMANT’sRequestforArbitrationaswellasitsapplicationfor emergency measures. In the main proceedings CLAIMANT originally made the followingrequestinrelationtothedeliveryofthecoltan:

1)a) orderRESPONDENTtodelivertoCLAIMANTimmediatelyaftertheissuanceofanaward100metric tonsofcoltanasrequiredby theprovisionsof thecontractasamendedbyGlobalMinerals’faxof27June2014;

inthealternativeto

b) orderRESPONDENTtodelivertoCLAIMANTimmediatelyaftertheissuanceofanaward 30 metric tons of coltan as required by the provisions of the contractconcludedbetweenCLAIMANTandRESPONDENTon28March2014.

From the Emergency Arbitrator CLAIMANT requested the following two orders in relation tocoltan.

1) a) order RESPONDENT to refrain from disposing of any of the 100metric tons ofcoltan which are needed to fulfil the contract with CLAIMANT in line with theprovisionsof thecontractasamendedbyGlobalMinerals’faxof27June2014;

inthealternativeto

b) orderRESPONDENTfromdisposingofanyof the30metric tonsofcoltanwhichareneededtofulfilthecontractwithCLAIMANTinlinewiththeprovisionsofthecontractconcludedbetweenCLAIMANTandRESPONDETon28March2014

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RESPONDENTobjectedtothejurisdictionoftheEmergencyArbitrator,asinitsviewthepartieshad implicitly excluded the application of Article 29 ICC‐Rules in their contract by regulatinginterimreliefinArticle21.

Moreover, RESPONDENT considered neither the emergency measures requested nor therequests in the main proceedings to be justified as in its view it had rightfully avoided thecontract.

On 26 July 2014 the Emergency Arbitrator appointed by the ICC, Ms Chin Hu, rendered thefollowingdecision:

1. TheApplicationisadmissiblepursuanttoArticle29(1)oftheRulesandtheEmergencyArbitratorhasjurisdictiontoordertheemergencymeasuressoughtbytheApplicant.

2. Respondingpartyistorefrainfromdisposingofanyofthe100metrictonsofcoltanwhichareneededtofulfilthecontractwithCLAIMANTinlinewiththeprovisionsofthecontractasamendedbyGlobalMinerals’faxof27June2014

3. RespondingpartyshallbearthecostsoftheEmergencyArbitratorproceedingsandshallconsequentlyreimbursetheApplicanttheamountofUS$40000.

On 8 August 2014, RESPONDENT in its Answer to the Request for Arbitration requestedrejection of CLAIMANT’s main requests as well as the lifting of the order of the EmergencyArbitrator.Furthermore,RESPONDENTrequestedthejoinderofGlobalMineralstothearbitralproceedingsasanadditionalpartyandbroughtacounterclaimfordamagesresultingfromtheorderoftheEmergencyArbitrator.

CLAIMANTandGlobalMineralsobjectedtotheinclusionofthelatterasanAdditionalPartyintotoarbitralproceedingsasGlobalMineralwas in theirviewnotaparty to theunderlyingsalescontract.Atthesametime,GlobalMineralacceptedthearbitratorsappointeduntilthen.

Moreover, following theadditional information from thewitness statementofMsMasrov thatsheinformedMrRüthliaboutRESPONDENT’sunwillingnesstoacceptthenewoffer,CLAIMANTamended its prayers for relief. Without formally acknowledging that RESPONDENT validlyrejectedtheofferof27June2014,CLAIMANT“asasignofgoodwilldoesnotpursueitsdoesnotpursue its claim for an order for 100metric tons (claim1a) any further. Instead it reduces itclaims to an order for the delivery of 30metric tons as originally agreed in the contract andrequested as claim 1b”. Equally the CLAIMANT agreed that the order of the EmergencyArbitrator couldbe changed accordingly, i.e. limiting the amount tobe kept at 30metric tons(AnswertoCounterclaimandJoinder,para.4)

The Tribunal decided to bifurcate the proceedings for reasons of procedural economy, afterestablishingwith theparties theTermsofReference for thecompleteproceedings. In the firstpartoftheproceedings,whicharetheobjectofthisMootthepartiesshouldconcentrateon

thequestionsofjurisdictionovertheAdditionalParty, theclaimsforperformanceraisedbytheCLAIMANT theliftingoftheremainingpartoftheorderoftheemergencyarbitrator

By contrast the merits of RESPONDENT’s counterclaims would be determined in the secondphaseofthearbitration,whichisnotpartofthisMoot.

TheIssues

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The issuesbefore theTribunal, and thereforeat issue in theMoot, are set forth inProceduralOrder No.1, paragraph 5 (p 60 et seq). That paragraph of the Procedural Order states in itsrelevantpartthat

a. HasRESPONDENTrightfullyavoidedthecontractof28March2014byitsdeclarationsofavoidanceof

i. 7July2014orii. 9July2014?

b. ShouldtheArbitralTribunallifttheremainingpartoftheordermadebytheEmergencyArbitratoragainstRESPONDENTon26July2014?

c. DoestheArbitralTribunalhavejurisdictionovertheAdditionalParty,i.e.GlobalMinerals?

Nofurtherquestionsgoingtothemeritsoftheclaimsshouldbeaddressed.

GeneralConsiderations

Thecaseincludesanumberofproblemsencounteredfrequentlyininternationalbusinesstransactions.Notallofthemareintheendrelevantforthe“solution”ofthecaseandwillhavetobediscussedindetailinthewrittensubmissionsortheoralpleadings.InpartthatonlybecomesobviousoncethestudentshaveunderstoodtherelevantinstrumentssuchastheletterofcreditandthecontentofthevariousINCOTERMSused.Someofthe“mistakes”(e.g.referencetothewrongINCOTERMSCIPinNoticeofTransportation;overlookeddiscrepancyinsecondletterofcredit“commercialinvoice”)orthenotcompletelyaccuratepresentationofthefactsinthesubmissions(CLAIMANTnotclearlydistinguishingbetweenitsownrelationshipwithRESPONDENTandthatoftheparentcompany)areincludedbypurposetomakethestudentsthinkandgiveroomfordiscussions.

Thebroadtopicstobediscussedbythestudentsarethefollowing:

1) Inrelationtoarbitration:a. InterimReliefbytheEmergencyArbitratorundertheICC‐Rulesb. Extensionofthearbitrationagreementtonon‐signatoriesunderthegroupof

companiesdoctrineandundergoodfaith2) InrelationstotheCISG:

a. Fundamentalbreachincaseofcommoditytradeb. Calculatingtimeininternationaltrade

There are several ways to structure the submissions and presentations. Procedural Order No 1 left it to the parties “to decide in which order they address the various issues”. The particularities of the present case could justify to answer the questions in the order asked and to deviate from the normal order that first procedural issues are discussed. That is due to the fact that Global Minerals was only joined after the order of the Emergency Arbitrator had already been issued and for the sole purpose of having a solvent debtor should the counterclaim succeed. Until the joinder the proceedings including the whole Emergency Arbitrator proceedings were only conducted between CLAIMANT and RESPONDENT. Furthermore, also the substantive issues to be discussed in this part of the arbitration largely only concern CLAIMANT and RESPONDENT.

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ArbitrationQuestions:

I. JoinderofGlobalMinerals:Procedural Order No 1- #5(c)1. Background

Thequestionof joiningGlobalMinerals as anadditionalpartypursuant toArticle7 ICC‐Rulesconcernsthescopeofthearbitrationagreementanditsextensiontothirdparties.InaccordancewithitsRulestheICChaslistedGlobalMineralasanAdditionalPartybeing“primafaciesatisfiedthatanarbitrationagreementmayexist”whichbindsGlobalMinerals.Theactualdecisionaboutwhetherthatisactuallythecaseislefttothetribunal.

The two doctrines upon which RESPONDENT relies to support its request for extending thearbitration agreement are “group of companies” and “good faith”. Thematerials contain onlylimitedinformationabouttherecognitionofthedoctrinesandtheirrequirementsinthevariousjurisdictions involved (Answer toCounterclaimpara.7;PO2paras46,47).Consequently, thediscussionwillinprincipleinvolveabalancingexercisebetweenthevariousfactorsspeakingforaninclusionandthefactorsspeakingagainstanextensionoftheagreement.Therearesufficientarguments forboth sides in the facts given the strong involvementofGlobalMinerals (viaMrStorm) in the negotiation and the performance of the contract on the one hand and thecontractualprovisionsandnegotiationsontheotherhand,showingthat,atleastlegally,GlobalMinerals did not want to become a party to the contract. There is abundant case law aboutfactorswhichmayormaynotberelevantforsuchanextension.Whilethereisatleastonecasedealingwith an “endorsement”, in the end, the decision is solely dependent on the particularcircumstancesofthiscaseandtheparties’intentionsandunderstanding.

2. ExtensiontoGlobalMinerals

RESPONDENT wants to join Global Minerals to the arbitration to have a solvent debtor “toensurethat[its]counterclaimanditsclaimforcostsarenotfrustrated”incaseRESPONDENTissuccessfulwithitsclaims.InitsviewGlobalMineralsissubjecttothearbitrationclauseduetoitssignatureunderthecontractcontainingtheclauseanditsroleinthenegotiationandfulfilmentof the contract. As confirmed by Mr Winter’s witness statement due to CLAIMANT’s limitedfinancial resources and previous bad experiences, RESPONDENT always required theinvolvement of Global Minerals during the negotiation. That was the background for the“endorsement”ofthecontractbyGlobalMinerals(ExhibitR1).

Inlightofthenegotiationandthewordingofthecontract,whichonlymentionsCLAIMANTandRESPONDENTasbuyerandsellerandthespecialformofthesignature(notasabuyer/sellerbutendorsingthecontract), it isverydifficult toarguethatGlobalMineralswasanormalpartytothecontract.Itis,however,notimpossible.PursuanttoArticle4ofthecontractthebuyerhadtoestablishaLetterofCredit. Itwasalwaysclear thatGlobalMineralswouldorganize thecreditandthelettersprovidedhavebeenissued“fortheaccountofGlobalMinerals”(ExhibitsC5;C8).AtthesametimeRESPONDENTsendmostofitscorrespondenceconcerningthecontracttobothpartiesandalsoonthe“buyer’sside”correspondencewasregularlyconductedbyMrStormofGlobalMineralsandnotbyCLAIMANT(e.g.ExhibitsC4;C6).

In light of the above difficulties, RESPONDENT’s primary arguments for the inclusion are the“groupofcompaniesdoctrine”and“goodfaith”considerations,wherealltheabovementionedfactorsmayalsobecomerelevant. Inarealarbitrationthefirst issuetobediscussedwouldbewhichlawgovernstheextensionofthearbitrationagreementtoGlobalMineralsunderthetwodoctrines. In light of the complex questions of characterisation involved (procedural orcontractualnatureofthetheories),andthedivergentapproachesindifferentjurisdictions(law

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applicable to thearbitrationagreement/ lawgoverning thegroup) theproblem isdrafted inawaythat thestudentscould leave thatquestionopenanddidnothave toaddress itexplicitly.Therewassolittleinformationprovidedaboutthecontentofthedifferentlawsthatadetaileddiscussionwasnottriggeredorevennecessaryduetoexistingdifferencesbetweenthevariouslaw.TheverygoodteamswouldatleastflagtheconflictoflawsproblemandprobablyargueinfavourofanapplicationofDanubianlaw,atleastforthegroupofcompaniesdoctrine.

Thelimitedinformationavailablealsomadeitverydifficultforthestudentstodefineexactlythecontentofthetwodoctrines.Forthegroupofcompaniesdoctrineatleastsomeindicationsweregiven. The file contains an explicit reference to an endorsement by a Ruritanian Court of thefamous ICC‐award in Dow Chemical (Answer to Counterclaim and Joinder, para. 7) which isgeneral considered tobe the startingpoint for thegroupof companiesdoctrine.For thegoodfaith doctrine the students had to rely largely on the different factors mentioned in courtdecisionsortheliteraturefortheconceptingeneralwithouthavingthebenefitofaspecificcase.Someguidance couldbedrawn from theprovisionofRuritanianContractLawwhichadoptedverbatimArticle1.7UNIDROITPrinciples. Inbothcases thequestionarose,however,whethertheRuritanianlawplayedaroleatall.

InconnectionwiththegroupofcompaniesdoctrinefactorswhichwouldspeakforaninclusionarethestrongroleMrStormasrepresentativeforGlobalMineralsplayedinthenegotiationandimplementationofthecontract,thatRESPONDENTinsistedonaroleofGlobalMinerals,thattheLetterofCreditwasprovidedbyGlobalMineralsandthatCLAIMANTinitscorrespondenceoftendidnotclearlydistinguishbetweenCLAIMANTandGlobalMinerals.Whethertheseconnectionsare sufficient to overcome the factors which speak against applying the doctrine is open todiscussion.SpeakingagainsttheinclusionofGlobalMineralsarethatCLAIMANTwascreatedasaspecialpurposevehicledistinctfromGlobalMineralsprimarilyforthepurposeofshieldingthelatterfrombecomingpartytocontractswithrelationtoEquatoriana,thatGlobalMineralsmadeclear during the discussions that it did not want to become a party, that the contract onlymentions CLAIMANT and RESPONDENT as seller and buyer, that Mr Storm in some of hiscommunicationswasmakingclearthathewasactingforCLAIMANTandnotGlobalMineralsandthatitwasalwayscleartoRESPONDENTthatonlyCLAIMANTwouldbeapartytothecontractand itsarbitrationagreementandnotGlobalMinerals. Teamswhichhaddetermined that theinclusion of Global Minerals under the group of companies doctrine would be governed byDanubian law might also have discussed whether the doctrine is recognized at all underDanubian law. There are some statements to the contrary in the literature which have beenpickedupbytheClaimantside.Thereare,however,nocourtdecisionsastothisissuesitandtheconclusiondrawnfromtheSupremeCourt’semphasisonpartyautonomyisnotcompelling.Thedoctrineofgroupsofcompany–unlikegoodfaith–isoftenconsideredtobebasedonanimpliedconsent.

ThethrustofRESPONDENT’sgoodfaithargumentisthatGlobalMineralsbyitsbehaviourandinparticular theendorsementof thecontractcreatedthe impressionthat itwould“standbehindthe contract, inducing RESPONDENT to sign it” (RESPONDENTs Answer to the Request, para.28). On the one hand the witness statement of Mr Winter shows that it was crucial forRESPONDENTtohavethefinancialbackingofGlobalMineralsforthecontract.AtthesametimeRESPONDENT stated, however, that the exact legal consequences associated with theendorsement of the contract by GlobalMineralswere not of greater relevance as at least thepaymentofthecontractpricewaslargelysecuredbyaletterofcredit.

II. EmergencyArbitrator:Procedural Order No 1- #5(b)

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Thequestionrelatingtothewithdrawaloftheemergencymeasureissuedisinthepresentcaseofhybridnature.Whileitcouldbeconsideredtoformpartofthetribunal’sdecisiononthemerits,formingalsothebasisofthecounterclaimincaseofliftingthedecision,itinvolvesprimarilyproceduralquestionsconcerningtheinstitutionofanemergencyarbitrator.TheICC,likemanyotherinstitutions,hassincethelastrevisionofitsarbitrationrulesspecialprovisionsforarbitralinterimreliefatthetimebeforethetribunalhasbeenappointed.Partiesnolongerhavetooptintothatmechanismbutmustoptoutiftheydonotwanttosubmittotheemergencyarbitrator.

1. JurisdictionRESPONDENTisoftheviewthatthepartiesimplicitlyagreedtoexcludetheprovisionsonemergencyreliefbytheregulationinArticle21whichprovides

Art21:Provisionalmeasures

Thecourtsattheplaceofbusinessofthepartyagainstwhichprovisionalmeasuresaresoughtshallhaveexclusivejurisdictiontograntsuchmeasures.

Thewordingoftheclauseisnotclear.Thereferenceto“exclusivejurisdiction”canbeusedbybothparties,inparticularifonetakesintoaccountthedraftinghistoryoftheprovision.Onecanunderstand“exclusive”asreferringmerelytothedistributionofthejurisdictionsbetweenthecourts.Thatistheinterpretationadoptedbytheemergencyarbitratorinherdecision(OrderofEmergencyArbitratorpara9).Onecan,however,alsointerpretittorefertoarbitralinterimreliefaswell.Infavorofthatpositiononecouldthecontraproferentemrulemightalsobeinvoked.Article21wasoriginallydraftedforthe“GlobalMinerals”sideandincludedupontheirrequestintothesubsequentcontracts.(PO2para13)Thelaterargumentisprobablymoredifficulttomake.TheprovisionwasincludedatatimewhentheICCRulesdidnotyetcontainArticle29.Thus,therewasnoneedtoexcludeemergencyarbitrationsothatitisdoubtfulwhethertheexclusionwasmeantthatway.Anotherargumentinthiscontextcouldbethatthearbitrationclausewasusedinthatformincontractssince2010(PO2para.10).AtthattimeitdidnotresultingrantingacompetencetotheemergencyarbitratorsothattheideaunderlyingArticle29(6)(a)ICC‐Rulesmightapply.TheargumentisweakenedbythefactthatthepartieswereawareofthechangesintheICC‐Rulesatthetimewhentheyenteredintothecontractinquestion(PO2para.14).IntheonereportedICCcasewheretheissueofexclusionwasraiseditwasrejected.

2. Measuresgranted.TheICCrulesarelargelysilentastothesubstantiverequirementsforthegrantofemergencymeasures.InherdecisiontheEmergencyArbitratorreliedon“internationallyacceptedprinciplesofarbitralinterimreliefwhicharealsothebasisforArt.17AoftheDanubianArbitrationLaw”(OrderofEmergencyArbitratorpara11).Thus,sheexaminedwhetherCLAIMANThadagoodarguablecaseonthemeritsandwhetherwithoutthemeasurerequestedafuturedecisiononthemeritswouldbefrustrated.Therewasalsosomesortofcommonunderstandingbythepartiesthatanarguablecaseonthemeritswouldbeoneoftherequirements(PO2para.32).

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TherelianceonArt.17AoftheDanubianArbitrationLawbytheEmergencyArbitratoristhemostobvioussolutionbutbynomeanscompelling.Art.17AdealsdirectlyonlywithinterimreliefbyanarbitraltribunalnotbytheemergencyarbitratorandonecouldalsotrytoarguethattheabsenceofanyspecificcriteriainArticle29ICC‐RulesgoingbeyondtheurgencyrequirementinArticle29(1)givesEmergencyArbitratorwidediscretion.Whethertherequirementsweremetatthetimeofgrantingtheorderandarestillmetatthetimewhenthetribunalmakesitsdecisionisanopenquestionandrequiresargumentationbythestudents.Factswhichmayplayarolearethemarketstructureanddevelopment,CLAIMANTs’needtosupplyitscustomers,thetimepassedsincetheorderandsubsequentdevelopmentsinXanaduaswellasthelikelihoodtoreceivecoltanfromothersuppliers.

CISGIssues:Procedural Order No 1- #5(a)

I. Background

ThesubstantiveparthasasitsbroadtopictheissueofwhatconstitutesafundamentalbreachundertheCISGinthefieldofcommoditytrade.Inlightoffluctuatingmarketsstrictcompliancewithtimelimits,specificationsanddocumentstobeprovidedisofconsiderableimportanceinthatareaoftradeandalsohasabearingonwhatdeviationsconstituteafundamentalbreach.TheuncertaintiessurroundingthatconceptanditssuitabilityforthecommoditytradeisoneofthereasonswhymoststandardcontractsinthatareaoftradeexcludetheCISG.ItisalsooneofthemainargumentsagainstthesuitabilityoftheCISGforcommoditytrade.

Themainissuestobediscussedarethecalculationoftimelimits(starting/relevanttimezone),theimportanceofdeviationsindeliveryterms(CIFandCIP)aswellastheimportanceofthedocumentstobepresentedforadrawingundertheletterofcredit.Toallowdiscussionsofthesetopicstheletterofcreditisissuedinaveryunusualwaywhichallows,however,foradditionalargumentsconcerningwhatisactuallyrequiredbythecontract.AgoodunderstandingofthelawoflettersofcreditaswelloftheINCOTERMSisrequiredforthediscussion.

II. Questiona(i):

HasRESPONDENTrightfullyavoidedthecontractof28March2014byitsdeclarationofavoidanceof7July2014?

Followingreceiptofthefirstletterofcrediton4July2014andMrStorm’semailof5July2014reactingtheMrWinter’scomplaintfromthedaybefore,RESPONDENTdeclaredavoidanceofthesalescontractforthefirsttimeon7July2014.RESPONDENTjustifiedthatavoidancewiththefactthattheletterofcreditdidnotconformtotherequirementsoftheoriginalcontractconcludedon28March2014.MrWinterparticularlycriticizedthattheletterisfor“100metrictonsofcoltaninsteadof30metrictons”andthat“itcontainsdifferentdeliveryterms”.Hethenwentontostatethat“[i]ntradingcommoditiessuchascoltananydeviationfromthecontractisconsideredtobeafundamentalbreachofcontract”(ExhibitC7).

Whetherthatstatementistrueisoneofthemainissuestobediscussedbytheparties.Itisbeyonddoubtthatincommoditytradeaswellasinletterofcreditlawstrictcompliancewithrequirementsisofhighestimportance.Thequestionarises,however,whetherthatalsoappliesforthedeviationsinthepresentcase.Ontheonehandtheletterofcreditisprimarilyasecurityprovidedbythebuyerforthefulfilmentofitspaymentobligationthroughtheinvolvementofa

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solventthirdparty.Ontheotherhandthisinvolvementofathirdrequiresatleastforallissuesconcerningthedrawingundertheletterstrictcompliancewiththerequirements.

Thefirstletterofcredit,deviatesinseveralaspectsfromtheprovisionsoftheoriginalcontract.Itwas

overahigherquantityandahigheramount, providedforalaterlast‐shipment‐dateand foraslightlydifferentdeliveryterm(CIF/CIP).

ThedeviationsareconnectedtoCLAIMANT’seffortstoamendthecontracttocoverahigherquantitybyitsofferof27June2014(ExhibitC4).InlightofthewitnessstatementbyMsMasrov,statingthatCLAIMANT’sMrRüthlihadbeeninformedaboutRESPONDENT’srejectionoftheoffer,itisveryhardtoarguethattherewasactuallyanamendmentofthecontract.CLAIMANTseemstohavegivenupthatpositionbutthefactsarenotunequivocalinthisrespectanddonotcompletelyexcludesuchanargumentation.

ThedeviationsoftheletterofcreditfromtheoriginalcontractaremainlyinfavorofRESPONDENT.AtacloserlookandtakingletterofcreditlawintoaccountthehigheramountandthehigherquantityrequireddonotpreventRESPONDENTfromdrawingundertheletterofcredit.Theallowanceofpartialshipmentandpartialdrawingsmakeitpossibletoshiponly30metrictonsasagreedandreceive30%ofthepayment.

Thatisdifferent,however,forthedeliveryterms.Whiletheletterofcreditprovidedfor“CIPVulcanColtan,21MagmaStreet,Oceanside,Equatoriana”,thecontractforesaw“CIF(INCOTERMS2010)Oceanside,Equatoriana,thoughtheICCsuggestsnottouseCIFforcontainersales.Fortheirargumentsstudentshavetounderstandthedifferencesbetweenthetwotermsandhowtheseadditionaldutiesaffectoneside.ThepricefortheadditionaltransportneededinEquatorianacostsbetweenUSD800–1000(PO2para36).Inthiscontextitmayberelevant,eitherarguingthefundamentalityofthebreachoreveninvokingArticle80CISG,thatRESPONDENTinitsNoticeofTransportmixedupthetwoINCOTERMSitselfandtickedtheCIPboxinsteadoftheCIFbox.SometeamsmayevenarguethattheNoticeofTransportconstitutedanoffertoamendthecontracttoaCIPcontractwhichwasthenacceptedthroughtheissuanceoftheletterofcredit.Thatseemstobealittlebitfarfetchedandignoresthattheletteralsodeviatesinsomeotherrespectsfromtheoriginalcontract.

Intheendithastobediscussedbythepartieswhetheralltheabovementioneddeviationstakentogetherconstituteafundamentalbreachduetotheparticularitiesofthecommoditytrade.Inthiscontextthequestionofforeseeabilityplaysarole,albeitalimitedone.Ifoneconsidersthattheparticularitiesofthecommoditytraderequirestrictcompliancewithcontractualprovisionsthesamereasoningwouldleadtotheforeseeabilityofthefundamentalcharacterofthebreach.

SometeamsmayalsotrytorelyonArticle64(1)(b)CISG.InthemessageleftonMrSummer’svoicemailMrWinteraskedforanewletterofcredit.Theexactwordingwas“Pleaseprovideanewconformingletterimmediately,atthelatestbyMondaymorningourtime.Otherwisewewillterminatethecontract”(PO2para.21).Iftheargumentisraisedtheteamshavetodiscusswhetherthatwasreallyintendedtobea“Nachfrist”andwhetherthattimelimitwasreasonable.Forthelatterquestionitmayberelevant,thatevenunderthemostrestrictivereadingofthetimelimitinthecontract,CLAIMANThadtimeuntil8July2014toprovidealetterofcreditsothatatimelimitwhichexpiresbeforethattimemaynotbereasonable.

Theavoidanceofthecontractbeforethetimeforprovidingaletterofcredithasexpiredmayalsoraiseadditionalquestions.TeamsmayleadthewholediscussionasonerelatingtoananticipatorybreachunderArticle72.Othersmayraisethequestionastoapossiblecureofthe

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deficienciesthroughthesecondletterofcredit.Thoseareallvalidapproachesthoughthepresentanalysis–basedonRespondentsallegationthattheClaimantthroughtheprovisionofthefirstletterofcredithasfixedthetimeforperformance–hasapproachedtheproblemunderArticle64CISG.

III. Questiona(ii):

HasRESPONDENTrightfullyavoidedthecontractof28March2014byitsdeclarationofavoidanceof9July2014?

On9July2014RESPONDENTdeclaredasecondtimethatitwantedtoavoidthecontractforfundamentalbreachofcontract(ExhibitR4).Thatdeclarationwasprimarilya“precautionarymeasure”asRESPONDENTconsideredthecontractalreadyterminatedbythedeclarationof7July2014.Thereasonsforthatrenewedavoidanceweretheallegedlybelatedprovisionofthesecondletterofcreditaswellastheadditionaldocumentrequired.BothissuesconstitutedinRESPONDENT’sviewconstitutedafundamentalbreachofthecontract.

1. Belatedprovisionoftheletterofcredit

InitsAnswertotheRequestforArbitrationRESPONDENTgavetwodifferentreasonsofwhyinitsviewtheletterofcreditwasprovidedtoolate.Thefirstargumentwasthatby

“sendingthefirstLetterofCreditCLAIMANTandGlobalMineralshadexercisedtheirrighttodeterminetheexactdateofperformancewithintheperiodgiven.Fromthattimeonwardsthetimeforperformancewasfixedandallsubsequentperformancewasoutoftime”

Thesecondargumentwasthattheletterdid

“onlyarriveatRESPONDENT’spremiseson9July2014andnotasrequiredon8July2014”

Inrelationtothisargumentthefirstissuetobedeterminediswhatisrequiredunderthecontract.InthepertinentpartofArticle4thepartieshaveagreedasfollows:

Art4:Payment&LetterofCredit

ALetterofCreditintheamountofUS$1,350,000shallbeestablishedbytheBuyernotlaterthanfourteendaysaftertheBuyerreceivedthenoticeoftransportinregardtoshipment.…

ItcanbearguedthatthemereconsentofthebanktoissuealetterofcreditissufficienttomeettherequirementsofArticle4.ThewordingofArticle4onlyreferstoestablishingaletterofcreditandnottoprovidingtheotherpartywithit.However,theunusualwayofinformingtheothersideabouttheletterofcredittheconsiderableeffortsmadebyCLAIMANTtosendtheletterofcredittoRESPONDENTonthe8thJulycouldbetakenasindicationsthatthesellerhadtobeinformedabouttheprovisionoftheletterofcreditwithinthementionedtime.IninterpretingArticle4ofthecontract,Article8CISGrequirestakingintoaccountallcircumstances,includingthesubsequentbehavioroftheparties.

Incasethesellerhadtobeinformedabouttheprovisionoftheletterofcreditthequestionarises,howtocalculatetherelevanttimelimitof“fourteendaysaftertheBuyerreceivedthe

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NoticeofTransport”.Undernumerousarbitrationrulesthedayatwhichthetriggeringeventoccurredisnotcountedforthecalculationbutthetimeonlystartstorunthenextday.TheCISGdoesnotaddresstheissuedirectly.Itcontains,however,inArticle20aruleforcalculatingaperiodoftimeforacceptancefixedbytheofferor.Accordingtothatrulethetimestartstorunimmediatelyaftertheoccurrencesofthetriggeringevent.TheruleisconsideredtoenshrineoneofthegeneralprinciplesunderlyingtheCISG.Thereareconflictingrulesinthenationallawsofthe

InthepresentcontextthebetterargumentseemstobetheonebasedontheCISGsincetheissueisoneofsubstantivelawandnotoneofprocedurallaw.Inthatcasetherelevantperiodexpiredonthe8July2014.Thatleadstotheadditionalquestionsofwhether,first,thesendingofthefaxisoritsreceiptrelevantand,second,whichtimezoneisrelevanttodeterminetheexpiryofthetimelimit.

RESPONDENT,arguingthatthefaxonlyarrivedon9Julyandnoton8Julygavethefollowingreasonsforitsviewinpara34ofitsReplytotheRequestforArbitration

“ThefaxwassentoutsideRESPONDENT’stheordinarybusinesshoursandwasonlydiscoveredon9July2014.Therefore,itcannotbeconsideredtohavearrivedintime.Itisnotthetimeofsendingbutthetimeofreceiptwhichisrelevantinthisregard.Consequently,itisalsonotthetimezoneofthepartyperformingthecontractwhichisrelevant,i.e.RSTapplicableinRuritaniaandEquatoriana,butthezonewheretheobligationistobeperformed,i.e.MSTrelevantinMediterraneo,whichisfivehoursahead.”

CLAIMANTbycontrastconsideredthetimezoneofthesendertoberelevantfordeterminingtheexpiryofthetimelimit(RequestforArbitrationpara.20).

2. Additionalrequirementofacommercialinvoice

ThesecondgroundmentionedbyRESPONDENTforitsavoidanceisthatunlikethefirstletterofcreditthesecondletterrequiredasanadditionaldocumentforpresentationtheprovisionofacommercialinvoice.Againthefirstquestiontobeanswered,applyingArticle8CISG,iswhatthecontractrequiresforthepresentation.Article4islargelysilentonthequestion.Itreadsinitspertinentpart:

Art4:Payment&LetterofCredit

…

TheletterofcreditshallbeinfavouroftheSelleroritsdesignee,beacceptableincontenttoSeller,beconsistentwiththetermsofthisContract,beirrevocableandissuedatafirstclassbankofRuritania,bevaliduntil15December2014.TheLetterofCreditissubjecttotheUniformCustomsandPracticeforDocumentaryCreditspublishedbytheInternationalChamberofCommerce(UCP600).

Paymentisdue30daysafterpresentationofthedocumentsundertheLetterofCredit.

ThusonewouldhavetolookforotherguidanceeitherunderArticle8(3)orArticle9CISG.Theinformationprovidedisverylimitedandstudentsmaytrytoarguewiththeroleofcommercialinvoicesinsuchtransactionaswellasthewordingofthefirstletterofcredit.

Theoutcomeofthisinterpretationdetermineswhethertherequirementofacommercialinvoiceconstitutesabreachornot.

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3. Fundamentalnatureofbreach

Incasetheletterofcredithaseitherbeenestablishedtoolateorisconsideredtobenon‐conformingthequestionarisesagainwhetherthatbreachcanbeconsideredtoconstituteafundamentalbreachinthesenseofArticle64(1)(b)CISG.Againthequestionturnsonhowmuchweightisgiventotheparticularitiesofthecommoditytrade.

4. Article64(2)

Teamsmayadditionallyarguethattherighttoavoidthecontractisexcludedduetotheprovisionofthesecondletterofcreditbeforeavoidancehasbeendeclared.InmakingthatargumentteamsshouldbeawarethatArticle64(2)requiresthat“thebuyerhaspaidtheprice”whiletheprovisionofaletterofcreditisnotpaymentbutprovisionofapaymentsecurity.Itshouldatleastbediscussedwhethertheprovisioncanalsobeappliedtotheprovisionofaletterofcredit.