#1 really this is it final final 9 deckluwer law international, the netherlands, 2003 66 lookofsky...

EIGHTEENTH ANNUAL

WILLEM C. VIS INTERNATIONAL COMMERCIAL ARBITRATION MOOT

15 TO 21 APRIL 2011

VIENNA

MEMORANDUM FOR CLAIMANT

STOCKHOLM UNIVERSITY

ON BEHALF OF:

MEDITERRANEO TRAWLER SUPPLY SA 1 HARBOR VIEW STREET

CAPITAL CITY MEDITERRANEO

CLAIMANT

AGAINST:

EQUATORIANA FISHING LTD 30 SEAVIEW TERRACE

OCEANSIDE EQUATORIANA

RESPONDENT

LILJA GUMRICH • HEIDI PAANANEN • DANIELA PALACIOS

MARIA TEDER • EWELINA WETRYS


MEMORANDUM FOR CLAIMANT | ii

TABLE OF CONTENTS INDEX OF AUTHORITIES.............................................................................................. v

INDEX OF CASES ...........................................................................................................xii

INDEX OF STATUTES, RULES, AND TREATIES ................................................... xvii

TABLE OF ABBREVIATIONS ......................................................................................xix

INTRODUCTION ............................................................................................................. 1

STATEMENT OF FACTS .................................................................................................. 2

SUMMARY OF THE ARGUMENT .................................................................................. 3

ARGUMENT ON JURISDICTION .................................................................................. 5

I. THE TRIBUNAL HAS JURISDICTION TO DECIDE THE DISPUTE................................................................................................................. 5

A. THE TRIBUNAL WAS CONSTITUTED PROPERLY ............................................ 5 1. The composi t ion pr ocedur e complied with the par t ies ’

agr eement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

2. The conf irmation pr ocedur e i s a mandator y par t o f the Milan Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3. Non-compliance with mandator y pr ovis ions j eopardizes f inal r eso lut ion o f the dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

B. FISHING WAIVED ITS RIGHT TO OBJECT TO THE COMPOSITION PROCEDURE......................................................................... 10

C. FISHING’S CHALLENGE WILL DELAY THE ARBITRAL

PROCEEDINGS ............................................................................................. 10 II. THIS TRIBUNAL SHOULD NOT ADMIT THE COUNTER-

CLAIM AND NO BREACH OF CONFIDENTIALITY EXISTS.......................11

A. THE TRIBUNAL SHOULD NOT ADMIT THE COUNTER-CLAIM .....................11 B. TRAWLER DID NOT BREACH ARTICLE 8(1) OF THE MILAN

RULES .......................................................................................................... 12 1. The 2010 Milan Rules cannot r e tr oact i ve ly cr eate

substant i ve obl igat ions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

2. Ther e was no br each o f Arti c l e 8(1) o f the Milan Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

3. Fishing has not pr esented a l egal basis for awarding damages for the al l eged br each . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14


MEMORANDUM FOR CLAIMANT | iii

4. The inter v iew fa l l s under the except ion in Arti c l e 8(1) o f the Milan Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

C. THE INTERIM MEASURE ENFORCING CONFIDENTIALITY SHOULD NOT BE GRANTED ........................................................................ 15 1. The r equest does not sat is fy the condit ions o f the

DAL for inter im r e l i e f . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

2. The r equested inter im measur e i s moot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

ARGUMENT ON THE MERITS.................................................................................... 17

III. FISHING BREACHED THE CONTRACT BY DELIVERING UNDERSIZED SQUID .................................................................................... 17

A. FISHING BREACHED THE CONTRACT UNDER ARTICLE 35(1) OF THE CISG.............................................................................................. 17 1. Fishing’s conf irmation o f Trawler ’s o f f er es tabl i shed

the par t i es ’ agr eement that the squid would conform to the s iz e range o f 100/150 grams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

2. The r equir ed s iz e o f the squid was impl ied by the agr eed descr ipt ion o f pur pose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

B. ALTERNATIVELY, FISHING BREACHED ITS OBLIGATIONS

UNDER ART. 35(2) CISG.............................................................................. 20 1. The squid was not f i t for the par t i cular pur pose made

known to Fishing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

2. The squid did not possess the qual i t i es o f the sample . . . . . . . . . . . . . . . . . . 21

C. THE NON-CONFORMITY OF THE SQUID CONSTITUTED A FUNDAMENTAL BREACH PURSUANT TO ART. 25 OF THE CISG............................................................................................................ 21 1. Trawler was substant ia l ly depr i ved fr om what i t was

ent i t l ed to . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

2. Trawler ’s substant ia l loss was for eseeable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

IV. TRAWLER HAD THE RIGHT TO RELY ON THE LACK OF CONFORMITY SINCE IT COMPLIED WITH ITS OBLIGATION TO EXAMINE THE GOODS AND TO GIVE PROPER NOTICE................................................................................................ 23

A. TRAWLER DULY INSPECTED THE DELIVERED SQUID PURSUANT TO ART. 38(1) OF THE CISG.................................................... 23 1. Trawler pr oper ly examined the squid under Art . 38

of the CISG .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23


MEMORANDUM FOR CLAIMANT | iv

2. The randomness o f Trawler ’s se l e c t ion o f car tons did not depend on the fac t whether they wer e labe led as 2007 or 2008 catch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

B. TRAWLER NOTIFIED FISHING ABOUT THE NON-CONFORMITY WITHIN REASONABLE TIME................................................. 24

V. TRAWLER RIGHTFULLY AVOIDED THE CONTRACT PURSUANT TO ART. 49 OF THE CISG............................................................. 25

A. TRAWLER PROPERLY DECLARED THE CONTRACT AVOIDED ON 16 AUGUST 2008 ..................................................................................... 25 1. Trawler ’s l e t t er was a c l ear dec larat ion o f avoidance . . . . . . . . . . . . . . . . . . 26

2. Trawler ’s avoidance was t imely . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

B. FISHING’S REFUSAL TO TAKE BACK THE SQUID DOES NOT BAR TRAWLER’S RIGHT TO AVOID THE CONTRACT.................................... 27

C. TRAWLER IS ENTITLED TO REIMBURSEMENT OF THE

PURCHASE PRICE......................................................................................... 27 VI. TRAWLER IS ENTITLED TO DAMAGES FOR ACTUAL LOSS

AND LOST PROFITS........................................................................................... 28

A. TRAWLER IS ENTITLED TO DAMAGES FOR LOST PROFITS.......................... 28 B. TRAWLER IS ENTITLED TO MITIGATION COSTS ......................................... 29

VII. REQUEST FOR RELIEF..................................................................................... 30


MEMORANDUM FOR CLAIMANT | v

INDEX OF AUTHORITIES COMMENTARY ABBREVIATION CITATION CITED ON Asken Asken, Gerald

Ad Hoc Versus Institutional Arbitration 2(1) The ICC International Court of Arbitration Bulletin 8, 1991

36

Bernstein/Lookofsky Bernstein, Herbert; Lookofsky, Joseph Understanding the CISG in Europe: a Compact Guide to the 1980 United Nations Convention on Contracts for the International Sale of Goods Kluwer Law International, Cambridge, 2003

78, 122

Author in Bianca/Bonell Bianca, Cesare Massimo; Bonell, Michael Jochim (Eds.) Commentary on the International Sales Law: The 1980 Vienna Sales Convention Giuffrè, Milan, 1987

85

Bond 1987 Bond, Stephen R. The Selection of ICC Arbitration and the Requirement of Independence 3(1) Arbitration International 300, 1987

38

Born 2006 Born, Gary B. International Arbitration and Forum Selection Agreements, 2nd Ed. Kluwer Law International, The Netherlands, 2006

???

Born 2009 Born, Gary B. International Commercial Arbitration Kluwer Law International, The Netherlands, 2009

25, 32, 40, 50, 53

Brown Brown, Alexis C. Presumption Meets Reality: An Exploration of the Confidentiality Obligation in International Commercial Arbitration American University International Law Review 969, 2001

59

Bühler in Zuberbühler Zuberbühler, Tobias; Müller, Christoph; Habegger, Philipp (Eds.) Swiss Rules of International Arbitration. Commentary Kluwer Law International, Zürich/Basel/Genf, 2005

32, 36

Buonfrate/Giovannucci Orlandi

Buonfrate, Angelo; Orlandi Giovannucci, Chiara Codice Degli Arbitrati delle Conciliazioni e di Altre ADR Wolters Kluwer Italia Giuridica S.r.l, Torino, 2006

36, 37


MEMORANDUM FOR CLAIMANT | vi

CISG-AC Opinion No. 9

Bridge, Michael CISG-AC Opinion No. 9, Consequences of Avoidance of the Contract Rapporteur: Professor Michael Bridge, London School of Economics, London, United Kingdom. Adopted by the CISG-AC following its 12th meeting in Tokyo, Japan on 15 November 2008

117

Coppo 2010a Coppo, Benedetta Comparing Institutional Arbitration Rules: Differences and Similarities in a Developing International Practice 13(3) International Arbitration Law Review 100, 2010

37

Coppo 2010b Coppo, Benedetta The New Arbitration Rules of the Chamber of Arbitration of Milan, in: Finkelstein, Cláudio/Vita, Jonathan B./Casado Filho, Napoleão (Coord.), Arbitragem Internacional: Unidroit, CISG e Direito Brasileiro Quartier Latin, São Paulo, 2010

36, 37

Coppo 2010c Coppo, Benedetta The 2010 Revision of the Arbitration Rules of the Chamber of Arbitration of Milan 14(2) The Vindobona Journal of International Commercial Law and Arbitration 283, 2010

32, 37, 38, 40

Craig/Park/Paulsson Craig, W. Laurence; Park, William W.; Paulsson, Jan International Chamber of Commerce Arbitration, 3rd Ed. Oceana Publications Inc., New York, 2000

36

Crookenden Crookenden, Simon Who Should Decide Arbitration Confidential Issues? 25(4) Arbitration International 603, 2009

48, 55

Derains/Schwartz Derains, Yves ; Schwartz, Eric A. A Guide to the ICC Rules of Arbitration, 2nd Ed. Kluwer Law International, The Netherlands, 2005

34, 53

Dessemontet Dessemontet, François Arbitration and Confidentiality 7(3-4) The American Review of International Arbitration 299, 1996

55

Dimolista Dimolista, Antonias Institutional Rules and National Regimes Relating to the Obligation of Confidentiality on Parties in Arbitration Confidentiality in Arbitration—2009 Special Supplement ICC International Court of Arbitration Bulletin 5, 2009

53, 57


MEMORANDUM FOR CLAIMANT | vii

Duncan/Moriarty Duncan, Tom; Moriarty, Sandra E.

A Communication-Based Marketing Model for Managing Relationships 62(2) The Journal of Marketing 1, 1998

63

Eastwood Eastwood, Gillian A Real Danger of Confusion? The English Law Relating to Bias in Arbitrators 17(3) Arbitration International 287, 2001

37

Enderlein/Maskow Enderlein, Fritz; Maskow, Dietrich United Nations Convention on Contracts for the International Sale of Goods. Convention on the Limitation Period in the International Sale of Goods: Commentary Oceana Publications, New York, 1992

77, 78, 90, 106, 109, 120

Ferguson Ferguson, Stephen M. Interim Measures of Protection in International Commercial Arbitration: Problems, Proposed Solutions, and Anticipated Results 12 Currents: International Trade Law Journal 55, 2003

68

Ferrari Ferrari, Franco Fundamental Breach of Contract Under the UN Sales Convention – 25 Years of Article 25 CISG (Spring 2006)

92

Fouchard/Gaillard/ Goldman

Gaillard, Emmanuel; Savage, John (eds.) Fouchard Gaillard Goldman on International Commercial Arbitration Kluwer Law International, The Netherlands, 1999

40

Giannini Giannini, Giulio The Formation of the Contract in the UN Convention on the International Sale of Goods: A Comparative Analysis 1 Nordic Journal of Commercial Law 1, 2006

77

Gotanda Gotanda, John Y. Recovering Lost Profits in International Disputes 36 Georgetown Journal of International Law 61, 2004

120

Greenberg Greenberg, Simon Tackling Guerrilla Challenges Against Arbitrators: Institutional Perspective 7(2) Transnational Dispute Management 1, 2010

45

Henschel Henschel, René Franz The Conformity of Goods in International Sales

78, 80, 85, 87


MEMORANDUM FOR CLAIMANT | viii

Forlaget Thomson A/S, Copenhagen, 2005

Honnold Honnold, John Uniform Law for International Sales under the 1980 united Nations Convention, 4th Ed. Kluwer Law International, The Netherlands, 2009

84, 110, 115

Huber/Mullis Huber, Peter; Mullis, Alastair The CISG. A new textbook for students and practitioners Sellier, European Law Publishers, 2007

115, 122

Hwang/Chung Hwang, Michael; Chung, Katie Defining the Indefinable: Practical Problems of Confidentiality in Arbitration 26(5) Journal of International Arbitration 609

59

Jacobs Jacobs, Christopher M. Notice of Avoidance under the CISG: A Practical Examination of Substance and Form Considerations, the Validity of Implicit Notice, and the Question of Revocability University of Pittsburgh Law Review (Winter 2003)

109

Kavoussanos/Pouliezos Kavoussanos, Manolis M.; Pouliezos, Anastasios D. Cost Effective Industrial Robotic Systems. A Depalletizing Case.

98

Koneru Koneru, Phanesh The International Interpretation of the UN Convention on Contracts for the International Sale of Goods: An Approach Based on General Principles 6 Minnesota Journal of Global Trade 105, 1997

117

Lazareff Lazareff, Serge Confidentiality and Arbitration. Theoretical and Philosophical Reflections Confidentiality in Arbitration—2009 Special Supplement ICC International Court of Arbitration Bulletin 81, 2009

59

Lew/Mistelis/Kröll Lew, Julian; Mistelis, Loukas A.; Kröll, Stefan M. Comparative International Commercial Arbitration Kluwer Law International, The Netherlands, 2003

66

Lookofsky Lookofsky, Joseph The 1980 United Nations Convention on Contracts for the International Sale of Goods, in: J. Herbots (Ed.)/ R. Blanpain (Gen. Ed.), International Encyclopaedia of Laws - Contracts, Suppl. 29 (December 2000) Kluwer Law International, The Netherlands, 2000

96


MEMORANDUM FOR CLAIMANT | ix

Magnus Magnus, Ulrich

The Remedy of Avoidance of Contract Under CISG - General Remarks and Special Cases 25 Journal of Law and Commerce 423, 2005-06

107, 120

Magnus in Staudinger von Staudinger, Julius Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetzen, Wiener UN Kaufrecht (CISG), Revision 2005 Sellier de Gruyter, Berlin, 2005

120

Huber in MüKo Säcker, Franz Jürgen; Rixecker, Roland (Eds.), Münchner Kommentar: Band 3, Schuldrecht Besonderer Teil I, §§ 433-610, 5th Ed. C.H. Beck, Munich, 2008

122

Noussia Noussia, Kyriaki Confidentiality In International Commercial Arbitration. A Comparative Analysis Of The Position Under English, Us, German And French Law Springer, Berlin/Heidelberg, 2010

59

Poudret/Besson Poudret, Jean-François; Besson, Sébastien Comparative Law of International Arbitration, 2nd Ed. Sweet & Maxwell Ltd., London, 2007

48

Pryles 2007 Pryles, Michael Limits to Party Autonomy in Arbitral Procedure 24(3) Journal of International Arbitration 327, 2007

36

Pryles 2008 Pryles, Michael Confidentiality, in: Newman, Lawrence W./Hill, Richard D. (Eds.) The Leading Arbitrators’ Guide to International Arbitration, 2nd Ed. Juris Publishing Inc., New York 2008

62

Redfern/Hunter Blackaby, Nigel; Partasides, Constantine; Redfern, Alan; Hunter, Martin Redfern and Hunter on International Arbitration, 5th Ed. Oxford University Press, New York, 2009

38, 40, 45

Sali 2005 Sali, Rinaldo Chamber of National and International Arbitration of Milan XXIX-2004 Yearbook Commercial Arbitration 349, 2005

37, 39

Sali 2010 Sali, Rinaldo How to choose the ideal arbitrator: the institutional point of

39


MEMORANDUM FOR CLAIMANT | x

view Chartered Institute of Arbitrators’ webpage, 2010

Scherer 2010 Scherer, Matthias The IBA Guidelines on conflicts of interest in International Arbitration. The First Five Years 2004-2009 The IBA Conflicts Committee, a Sub-committee of the IBA Arbitration Committee

38

Author in Schlechtriem Schlechtriem, Peter; Schwenzer, Ingeborg Commentary on the UN Convention on the International Sale of Goods (CISG), 3rd Ed. Oxford University Press, Northants, 2010

89, 109, 111

Shaughnessy Shaughnessy, Patricia Pre-arbitral Urgent Relief: The New SCC Emergency Arbitrator Rules 27(4) Journal of International Arbitration 337–360, 2010

54

Smit Smit, Hans Breach of Confidentiality as a Ground for a Avoidance of the Arbitration Agreement 11(4) The American Review of International Arbitration 567, 2000

67

Sugg Sugg, R. Jeremy Interim Relief and International Commercial Arbitration in North Carolina: Where We Are and Where We Should Be Looking 30 Campbell Law Review 389, 2008

68

Trakman Trakman, Leon E. Confidentiality in International Commercial Arbitration 18(1) Arbitration International 1, 2002

62

Wang Wang, Sheng Chang Formation of the Arbitral Tribunal 17(1) Arbitration International 401, 2001

40

Webster Webster, Thomas H. Party Control in International Arbitration 19(1) Arbitration International 119, 2003

35

Weixia Weixia Gu Confidentiality Revisited: Blessing or Curse in International Commercial Arbitration? 15(1) The American Review of International Arbitration 607, 2004

62, 66


MEMORANDUM FOR CLAIMANT | xi

Yesilirmak Yesilirmak, Ali Provisional Measures in International Commercial Arbitration Kluwer Law International, The Netherlands, 2005

65, 69

Zeller Zeller, Bruno Damages Under The Convention Of Contracts For The International Sale Of Goods, 2nd Ed. Oxford University Press, New York, 2009

124


MEMORANDUM FOR CLAIMANT | xii

INDEX OF CASES CASE LAW Australia Esso Australia Resources Ltd. v. Plowman

High Supreme Court of Australia 7 April 1995, Case No. 95/014 Esso Australia Resources Ltd. v. Plowman

55

Austria Frozen pork liver case Oberster Gerichtshof (Supreme Court)

25 January 2006, Case No. 7 Ob 302/05w

81

Cooling system case Oberster Gerichtshof (Supreme Court) 14 January 2002, Case No. 7 Ob 301/01t

124

Frames for mountain bikes case

Oberster Gerichtshof (Supreme Court) 11 March 1999, Case No. 2 Ob 163/97b

87

China WS China Import GmbH v. Longkou Guangyuan Food Company

High People’s Court of Shandong Province (Appellate Court) 10 September 2004 WS China Import GmbH v. Longkou Guangyuan Food Company

127

Denmark Dr. S. Sergueev Handelsagentur v. DAT-SCHAUB A/S

Sø og Handelsretten (The Maritime and Commercial Court of Copenhagen) 31 January 2002, Case No. H-0126-98 Dr. S. Sergueev Handelsagentur v. DAT-SCHAUB A/S

80

Christmas Tree Case Randers Byret (Randers County Court) 4 November 1998, Case No. BS 9700016-4

111

Finland Forestry equipment case Turun hoveikeus (Turku Court of Appeal)

12 April 2002

111

Skin care products case Helsingin hoveikeus (Helsinki Court of Appeal), 30 June 1998, Case No. S 96/1215

83

Canned food case Turun hoveikeus (Turku Court of Appeal) 12 November 1997, Case No. S 97/324

96, 102

France Nafimco v. Foster Wheeler Trading

Cour d’Appel de Paris (Paris Court of Appeal) 22 January 2004, 3 Revue de l’arbitrage 646, 2004

55


MEMORANDUM FOR CLAIMANT | xiii

Company AG

Nafimco v. Foster Wheeler Trading Company AG

Pia Investments Ltd. v. Cassia

Cour de cassation (Court of Cassation) 10 July 1990, 4 Revue de l’arbitrage 851, 1990 Pia Investments Ltd. v. Cassia

29

République de Guinée v. MM. R […] et O

Tribunal de grande instance de Paris (District Court of Paris) 23 June 1988, 4 Revue de l’arbitrage 657, 1988 République de Guinée v. MM. R […] et O

29

Raffineries de pétrole d’Homs et de Banias v. Chambre de Commerce Internationale

Cour d’Appel de Paris (Paris Court of Appeal) 15 May 1985, 1 Revue de l’arbitrage 141, 1985 Raffineries de pétrole d’Homs et de Banias v. Chambre de Commerce Internationale

29

Germany Funnel covers case Oberlandesgericht Dresden (Appellate Court

Dresden) 8 November 2007, Case No. 9 U 68/07

96

Court of Appeals, Celle, 31 May 2007

Oberlandesgericht Celle (Appellate Court Celle) 31 May 2007, Case No. 8 Sch 06/06

29

Paperboard containers case

Oberlandesgericht Köln (Appellate Court Köln) 12 January 2007, Case No. 19 U 11/07

97

Dust ventilator case Amtsgericht Landsberg am Lech (Lower Court Landsberg) 21 June 2006, Case No. 1 C 1025/05

117

Tiles case Landgericht Saarbrücken (District Court) 2 July 2002, Case No. 8 O 49/02

89

Plug-couplings case Oberlandesgericht Köln (Appellate Court Köln) 13 November 2000, Case No. 16 U 45/00

98

Live fish case Oberlandesgericht Thüringen Jena (Appellate Court Thüringen Jena) 26 May 1998, Case No. 8 U 1667/97

97

Cobalt sulphate case Bundesgerichtshof (Federal Supreme Court) 3 April 1996, Case No. VIII ZR 51/95

91

Case No. 8 HKO 24667/93

Landgericht München (District Court München) 8 February 1995, Case No. 8 HKO 24667/93

87

Spanish paprika case Landgericht Ellwangen (District Court) 21 August 1995, Case No. 1 KfH O 32/95

114


MEMORANDUM FOR CLAIMANT | xiv

Shoes case no. 3 Landgericht Berlin (District Court Berlin) 15 September 1994, Case No. 52 S 247/94

125

Shoes case no. 2 Landgericht Krefeld (District Court Krefeld) 24 November 1992, Case No. 12 O 153/92

117

Shoes case no. 1 Oberlandesgericht Frankfurt (Appellate Court Frankfurt) 17 September 1991, Case No. 5 U 164/90

115

Greece Automobile catalyst case Efetio Athinon (Athens Court of Appeals)

2006, Case No. 4861/2006

120

Italy Machinery case Tribunale di Busto Arsizio (District Court Busto

Arsizio) 13 December 2001

111

Mexico R.C. 311/2005-13 Decimotercer Tribunal Colegiado en Materia Civil del

Primer Circuito (Thirteenth Civil Collegiate Court of the First Circuit) 11 June 2008, Case No. R.C. 311/2005-13

42

Poland Shoe leather case Sąd Najwyższy (Supreme Court)

11 May 2007, Case No. V CSK 456/06

120

Singapore Cars & Cars Pte Ltd v. Volkswagen AG

Singapore High Court 19 October 2009, Case No. 960/2008, RA 136/2009 Cars & Cars Pte Ltd v. Volkswagen AG

53

Singapore Court of Appeal, 29 September 2009

Singapore Court of Appeal 29 September 2009, Case No. CA 5/2009

62

Black and Veatch Singapore Pte Ltd v. Jurong Engineering Ltd.

Singapore Court of Appeal 8 July 2004, Case No. CA 125/2003, [2004] SGCA 30 Black and Veatch Singapore Pte Ltd v. Jurong Engineering Ltd.

53

Myanma Yaung Chi Oo Co Ltd v. Win Win Nu

Singapore High Court 6 June 2003, [2003] 2 SLR 547 Myanma Yaung Chi Oo Co. Ltd. v. Win Win Nu

62

Slovakia Mitsubishi automobile case

Regional Court in Košice 28 May 2007, Case No. 2 Cob/187/2006

111

Spain Cuttlefish case Audiencia Provincial de Barcelona sección 13ª 90


MEMORANDUM FOR CLAIMANT | xv

(Appellate Court Barcelona) 24 March 2009, Case No. Recurso de Apelación No. 403/2008

Dye for clothes case Audiencia Provincial de Barcelona, sección 16ª (Appellate Court Barcelona) 20 June 1997, Case No. 755/95-C

102

Sweden Svea Court of Appeal, T10321-06

Svea hovrätt (Svea Court of Appeal) 10 December 2008, Case No. T10321-06

38

Swedish Supreme Court, T2448-06

Högsta domstolen (Swedish Supreme Court) 19 November 2007, Case No. T2448-06

37

Swedish Supreme Court, T1881-99

Högsta domstolen (Swedish Supreme Court) 27 October 2000, Case No. T1881-99

55, 57

Switzerland GMS Modules case Kantonsgericht Zug (District Court Zug)

30 August 2007, Case No. A3 2006 79

109

Chemical products case Bundesgericht (Supreme Court) 5 April 2005, Case No. 4C.474/2004

76

Meat case Bundesgericht (Supreme Court) 28 October 1998, Case No. 4C.179/1998/odi

91

Frozen meat case Obergericht Zug (Appellate Court Zug) 24 March 1998, Case No. OG 1996/2

97

Blood infusion devices case

Obergericht Kanton Luzern (Appellate Court Luzern) 8 January 1997, Case No. 11 95 123/357

97

Firm in Hamburg v. Corporation (A.G.) in Basel

Appellationsgericht Kanton Baselstadt (Basel Court of Appeals) 6 September 1968 Firm in Hamburg v. Corporation (A.G.) in Basel

40

United Kingdom Fiona Trust & Holding Corp. v. Privalov

Court of Appeal, Civil Division 24 January 2007, [2007] 1 All E.R. (Comm.) 891

25

United States CNA Int’l, Inc. v. Guangdong Kelon Electrical Holdings Company et al.

U.S. District Court, Northern District of Illinois 10 April 2009, 05-CV-5734 CNA Int’l, Inc. v. Guangdong Kelon Electrical Holdings Company et al.

92


MEMORANDUM FOR CLAIMANT | xvi

Encyclopaedia Universalis , S.A. v. Encyclopaedia Britannica, Inc.

U.S. Court of Appeals, Second Circuit 31 May 2005, 403 F.3d 85 Encyclopaedia Universalis, S.A. v. Encyclopaedia Britannica, Inc.,

40

Reeves Bros., Inc. v. Capital Mercury Shirt Corp.

U.S. District Court, Southern District of New York, 24 April 1997, 962 F. Supp. 408 Reeves Bros., Inc. v. Capital Mercury Shirt Corp.

32

St. Lawrence Explosives Corp. v. Worthy Bros. Pipeline Corp.

U.S. Court of Appeals, Second Circuit 17 April 1997, 111 F.3d 124 St. Lawrence Explosives Corp. v. Worthy Bros. Pipeline Corp.

29

Cargill Rice v. Empresa U.S. Court of Appeals, Fourth Circuit, 27 May 1994, 25 F.3d 223 Cargill Rice v. Empresa

40

United States v. Panhandle Eastern Corp.

U.S. District Court, District of Delaware, 7 January 1988, 118 F.R.D. 346 United States v. Panhandle Eastern Corp.

57, 67

Koch Oil, S.A. v. Transocean Gulf Oil Co.

U.S. Court of Appeals, Second Circuit, 7 January 1985, 751 F.2d 551 Koch Oil, S.A. v. Transocean Gulf Oil Co.

32

Reed & Martin, Inc. v. Westinghouse Electric Corp.

U.S. Court of Appeals, Second Circuit 12 March 1971, 439 F.2d 1268 Reed & Martin, Inc. v. Westinghouse Electric Corp.

29

ARBITRATION AWARDS

Court of Arbitration of the International Chamber of Commerce ICC Award 11961/2009

ICC Award Case No. 11961 XXXIV Yearbook Commercial Arbitration 32, 2009

57, 59

ICC Award 12363/2003

ICC Award Case No. 12363 of 23 December 2003 24(3) ASA Bulletin 462, 2006

66


ICC Award Case No. 10623 of 7 December 2001 21(1) ASA Bulletin 82, 2003

40


ICC Award Case No. 10973 of 2001 XXX Yearbook Commercial Arbitration 77, 2005

67

Books case ICC Award Case No. 9083 of August 1999

103

ICC Award 9302/1998

ICC Award Case No. 9302 of 1998 XXVIII Yearbook Commercial Arbitration 54, 2003

43


MEMORANDUM FOR CLAIMANT | xvii

Scaffold fittings case ICC Arbitration Case No. 7531 of 1994

89

ICC Award 7489/1992

ICC Award Case No. 7489 of 1992 Journal du Droit International 1078, 1993

66

ICC Award 7402/1992

ICC Award Case No. 7402 of 1992 XVIII Yearbook Commercial Arbitration 68, 1993

36

ICC Award 7385/1992

ICC Award Case No. 7385 of 1992 XVIII Yearbook Commercial Arbitration 68, 1993

36

ICC Award 2114/1972

ICC Award Case No. 2114 of 10 October 1972 Yearbook Commercial Arbitration 187, 1980

32

ICSID Amco Asia Corp et al v. Republic of Indonesia

9 December 1983 24 International Legal Materials 365, 1985 Amco Asia Corp et al v. Republic of Indonesia

57

Iran-US Claims Tribunal Harris Int'l Telecomm., Inc. v. Islamic Republic of Iran

2 November 1987, Partial Award No. 323-409-1 Harris Int'l Telecomm., Inc. v. Islamic Republic of Iran

50

Stockholm Chamber of Commerce SCC Board Decision, 053/2005

SCC Arbitration V (053/2005)

38

Permanent Court of Arbitration Saluka Investments BV v. Czech Republic

Decision on Jurisdiction 7 May 2004 Saluka Investments BV v. Czech Republic

48

Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry Varnish and paint machine case

18 October 2005, Arbitration proceeding 21/2005

114

INDEX OF STATUTES, RULES, AND TREATIES DAL UNCITRAL Model Law on International Commercial

Arbitration 1985 With amendments as adopted in 2006

passim

CISG United Nations Convention on Contracts for the passim


MEMORANDUM FOR CLAIMANT | xviii

International Sale of Goods, Vienna 1980

NY Conv. Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 1958

40

IBA Guidelines IBA Guidelines on Conflicts of Interest in International Arbitration

38

Milan Rules Arbitration Rules of the Chamber of Arbitration of Milan, 1 January 2010

passim

2004 Milan Rules Arbitration Rules of the Chamber of Arbitration of Milan, 1 January 2004

52


MEMORANDUM FOR CLAIMANT | xix

TABLE OF ABBREVIATIONS 2d Cir. Second Circuit (U.S. Court of Appeal)

AG Aktiengesellschaft (Corporation)

A/S Aktieselskab (Joint Stock Company)

All E.R. (Comm) All England Commercial Cases

Art./Arts. Article/Articles

ASA Association suisse de l’arbitrage (Swiss Arbitration Association)

ASoD Amendment to Statement of Defense

Bros. Brothers

CA Court of Appeal

CEO Chief Executive Officer

cf. compare

CISG United Nations Convention on Contracts for the International Sale of Goods, Vienna 1980

Cl. Ex. Claimant’s Exhibit

Clar. Q. Clarification Question

Co. Company

Conv. Convention

Corp. Corporation

Council Arbitral Council of the Chamber of Arbitration of Milan

DAL Danubian Arbitration Law

Dr. Doctor

Ed. Edition

ed./eds. editor/editors

et al. and others

F.2d Federal Reporter, Second Series


MEMORANDUM FOR CLAIMANT | xx

F.3d Federal Reporter, Third Series

F.Supp. Federal Supplement (District Court Reports)

Fishing Equatoriana Fishing Ltd

F.R.D. Federal Rules Decisions

GmbH Gesellschaft mit begrenzter Haftung (Limited Liability Company)

Hrsg Herausgeber (Editor)

IBA International Bar Association

ICC International Chamber of Commerce

ILA International Law Association

Inc. Incorporated

Int’l/Intern. International

Ltd. Limited

Milan Rules Arbitration Rules of the Chamber of Arbitration of Milan, 1 January 2010

Mr. Mister

N.C.App. North Carolina Court of Appeals Reports

No./Nos. Number/Numbers

NY Conv. Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 1958

p./pp. Page/pages

para./paras. paragraph/paragraphs

PO No./Nos. Procedural Order Number/Numbers

Prot. Protocol

Pte Private

RA Registrar‘s Appeal

Resp. Ex. Respondent’s Exhibit

RfA Request for Arbitration


MEMORANDUM FOR CLAIMANT | xxi

S.A. Société anonyme (Public Limited Company)

S.E.2d South Eastern Reporter, Second Series

S.r.l. Società a responsabilità limitata (Limited Liability Company)

SCC Stockholm Chamber of Commerce

SDNY Southern District of New York

Secretariat Secretariat of the Chamber of Arbitration of Milan

SGCA Singapore Court of Appeal

SIAR Stockholm International Arbitration Review

SLR Singapore Law Reports

SoC Statement of Claim

SoD Statement of Defence

SoI Statement of Independence

Trawler Mediterraneo Trawler Supply AS

U.S. United States

UNCITRAL United Nations Commission on International Trade Law

V CSK Izba Cywilna (Civil Chamber), Wydział V (Division V) Repertorium dla spraw przedstawionych ze skargą kasacyjną (Index for cases with cassation complaint)

v. versus (against)

WL Westlaw


MEMORANDUM FOR CLAIMANT | 1

INTRODUCTION

1. This dispute arises out of sale of squid for bait. Claimant, Mediterraneo Trawler Supply SA

(“Trawler”), bought 200 metric tons of squid from Respondent, Equatoriana Fishing Ltd.

(“Fishing”), to satisfy its clients’ demands for squid for bait at competative prices. Fishing did

not deliver squid in the agreed size range. Size is a crucial characteristic for squid to be used as

bait. Should the squid fall outside the size range of 100/150 grams, it cannot properly function

as bait. Consequently, Trawler was unable to supply its clients with bait and instead incurred

substantial losses as no other uses could be found for the delivered squid.

2. Trawler’s main business is selling bait and fishing supplies to commercial fishing fleets, but it also

sells small quantities of fish for human consumption. Over the years, Trawler developed an

excellent reputation among its clients. Fishing, an experienced retailer of squid, sells squid for

both bait and human consumption and owns and operates a Pacific commercial fishing fleet.

3. Fishing’s failure to provide the squid as contracted for resulted in significant loss of Trawler’s

reputation as a reliable provider of squid and resulted in significant financial losses, as the whole

year’s supply of squid proved to be virtually without value for Trawler. Trawler had carried out a

reasonable and suitable inspection of the squid upon delivery but it was not before Trawler’s

long-liner clients actually defrosted the squid out at sea that it was discovered that over half of

the squid was too small to be used as bait. Consequently, Trawler’s clients returned the unusable

squid. Despite Trawler’s considerable efforts, no other buyers showed interest in taking the

significant risks involved in purchasing the squid of questionable size.

4. To this day Trawler continues to face difficulties in rebuilding client trust to the level prior to

contracting with Fishing. Importantly, Trawler has not been reimbursed the money it paid

Fishing for the entire year’s worth of unusable squid. Fishing was unresponsive to Trawler’s

attempts to find a commercial solution to the problem and bluntly refused any responsibility in

the matter. Facing losses and no cooperation from Fishing, Trawler commenced arbitration

proceedings pursuant to the arbitration clause added to the contract by Fishing, only to

encounter delays in the arbitral proceedings.

5. Trawler fully performed its part of the contract. Fishing failed to perform its corresponding

obligations. Now that the Tribunal has been constituted, Fishing has challenged the jurisdiction

of the Tribunal and introduced a counter-claim alleging that Trawler has breached the duty of



confidentiality under the Milan Rules. Fishing’s actions have put Trawler in a disadvantaged

position in terms of seeking relief.

6. Accordingly, Trawler requests the Tribunal to find the following: (1) the Tribunal has jurisdiction

over the matter; (2) Fishing’s counter-claim and request for an interim measure should be

dismissed; (4) Fishing delivered non-conforming squid; (5) Trawler validly declared the contract

avoided and is entitled to the reimbursement of the purchase price; and (6) Trawler is entitled to

damages constituting of lost profits, storage costs and costs incurred in attempts to sell the squid

and in destruction of the squid, plus interest and arbitration costs.

STATEMENT OF FACTS

7. On 14 April 2008, Trawler sent a letter to Fishing inquiring about the availability and pricing of

Danubian squid to be used as bait and welcomed corresponding offers [Cl. Ex. No. 1].

8. On 17 May 2008, Fishing presented Trawler with a sample consisting of one carton of frozen

squid obtained from another client who dealt in squid exclusively for bait. Fishing stated that the

sample was representative of the squid being offered to Trawler [RfA, para. 13].

9. The sample squid were defrosted, weighed and fell within the optimal weight range for bait of

100/150 grams. The sample was pronounced “very satisfactory” in general, and Trawler’s clients

confirmed it as being suitable for their needs [RfA, para. 14].

10. On 29 May 2008, Trawler ordered 200 metric tons of squid “as per sample” from Fishing,

noting that the squid had to be certified as fit for human consumption to comply with the

storage regulations [Cl. Ex. Nos. 2, 3]. Fishing confirmed the order and added an arbitration

clause [Cl. Ex. No. 4].

11. On 1 July 2008, the squid were delivered in twelve containers loaded with cartons packed on

pallets [RfA, para. 17]. Trawler weighed twenty random cartons and defrosted and inspected five

of these [RfA, para. 17]. The inspected squid met the agreed size standard [RfA, para. 17].

Trawler subsequently sold the squid to five fishing vessels [RfA. para. 18].

12. On 29 July 2008, Trawler received reports from two vessels that the squid were too small to

function as bait [Cl. Ex. No. 5]. All five vessels returned a majority of the squid to Trawler [Cl.

Ex. No. 10, para 12]. Two long-liner vessels returned to port immediately and the other three

were able to stay at sea, using other stock bait [RfA, para. 18].



13. On the same day, Trawler informed Fishing of the complaints that the squid were “hardly

useable as bait” [Cl. Ex. No. 5], thus communicating the non-conformity of the goods. A

laboratory report requested by Fishing, dated 12 August 2008, confirmed that 54.6 per cent of

the squid was undersized [Cl. Ex. No. 8].

14. On 16 August 2008, Trawler notified Fishing of the results of the laboratory report and stated

that the squid would be “stored at Fishing’s disposition” and that Trawler “would look to sell the

squid for Fishing’s account” [Cl. Ex. No. 7]. After Fishing repeatedly refused to take back the

squid, Trawler was eventually forced to destroy the remaining squid [Cl. Ex. No. 10, para. 16;

RfA, para. 23].

15. On 20 May 2010, Trawler filed the Request for Arbitration against Fishing with the Chamber of

Arbitration of Milan, seeking damages for the costs of goods, lost profits and expenses incurred

[RfA, para. 29].

16. On 22 May 2010, Trawler’s CEO gave an interview to Commercial Fishing Today where he

mentioned that an arbitration would commence on Thursday [Resp. Ex. No. 1; PO No. 3, Clar. Q.

13].

17. On 10 September 2010, the Arbitral Council of the Chamber of Arbitration of Milan (the

“Milan Chamber”) finalized the composition of the Tribunal with the nomination of Mr.

Horace Z as the Presiding Arbitrator [PO No. 1, para. 1].

18. On 24 September 2010, Fishing contested the jurisdiction of the Tribunal on the basis that the

Arbitral Council of the Chamber of Arbitration of Milan did not confirm the party-appointed

arbitrators’ choice for a presiding arbitrator [ASoD, paras. 1, 7, 8; Prot. Nos. 9410/7, 9]. The

Arbitral Council had decided not to confirm the party-appointed arbitrators’ choice of Mr.

Malcolm Y due to a risk of conflict of interest [SoI; Mr. Malcolm Y], and pursuant to the

Arbitration Rules of the Chamber of Arbitration of Milan (the “Milan Rules”), the Arbitral

Council finally appointed Mr. Horace Z as the presiding arbitrator when the party-appointed

arbitrators re-appointed their previous choice of Mr. Malcolm Y [Prot. No. 9410/9; Letter from

Ms. Arbitrator 1, dated 13 August 2010].

SUMMARY OF THE ARGUMENT

19. The Tribunal has jurisdiction to decide the dispute. The Tribunal has jurisdiction over the

dispute arising out of the sale of non-conforming squid. The Tribunal was constituted in



accordance with the parties’ arbitration agreement, which incorporated the Milan Rules. The

confirmation procedure that led to the non-confirmation of Mr. Malcolm Y and the subsequent

appointment of Mr. Horace Z is a mandatory part of arbitration under the Chamber of

Arbitration of Milan and cannot be deviated from without risking the finality of the arbitral

award pursuant to Articles 34(2)(a)(iv) and 36(1)(a)(iv) of the DAL. Moreover, Fishing’s

challenge should be dismissed due to it being untimely. The result of Fishing’s challenge will not

lead to a more competent arbitral tribunal and therefore the delays the challenge will cause are

unwarranted.

20. The counter-claim should not be admitted, Trawler did not breach a duty of

confidentiality and the interim measure should be denied. The counter-claim regarding the

alleged breach of confidentiality should not be admitted due to it falling outside the scope of the

current arbitration. Further, the counter-claim should be dismissed because first, Article 8(1) of

the Milan Rules creates a new substantive obligation that cannot bind the parties retroactively;

second, Trawler has not breached a duty of confidentiality as expressed in Article 8(1) of the

Milan Rules; third, Fishing failed to introduce a legal basis for awarding damages for the alleged

breach and finally, even if considered a breach of Article 8(1) of the Milan Rules, Trawler’s

actions fall within the exception in the same Article. Further, Fishing’s request for an interim

measure should be denied due to the request not satisfying the conditions of the DAL and being

moot.

21. Fishing fundamentally breached the contract. Fishing breached the contract under Article

35(1) of the CISG by delivering non-conforming squid. The contractual terms specified that the

squid must be in the size range of 100/150 grams. This was further demonstrated by the

provided sample and the agreed purpose for the squid. Additionally, the squid did not meet the

standards of Articles 35(2)(b) and 35(2)(c) of the CISG. Under Article 25 of the CISG, the

breach was fundamental because the delivery was unusable, and the purpose of the contract was

frustrated.

22. Trawler carried out a proper inspection of the goods. Trawler had the right to rely on the

non-conformity of the squid as it properly inspected the squid upon delivery as required by

Article 38 of the CISG. Once Trawler’s clients discovered the non-conformity of the goods,

Trawler timely notified Fishing of the non-conformity in accordance with Article 39 of the

CISG.



23. Trawler validly avoided the contract. Pursuant to Articles 26 and 49 of the CISG, Trawler

timely and expressly declared the contract avoided and offered to restitute the squid.

Consequently, Trawler is entitled to reimbursement of the purchase price in accordance with

Article 81(2) of the CISG.

24. Trawler is entitled to damages. Due to the above, Trawler is entitled to recover damages for

loss of profits and for mitigation costs pursuant to Articles 45(1)(b) and 77 of the CISG, as well

as interest and cost of arbitration.

ARGUMENT ON JURISDICTION

I. THE TRIBUNAL HAS JURISDICTION TO DECIDE THE DISPUTE

25. The Tribunal has jurisdiction to decide the dispute concerning the sale of squid for bait. As the

seat of arbitration is Danubia, the DAL is the lex arbitri applicable to these proceedings [Cl. Ex.

No. 4]. The DAL follows the provisions of the MLA with the 2006 amendments [RfA, para 25].

Under the widely accepted principle of competence-competence, an arbitral tribunal has the

authority to rule on its own jurisdiction [Art. 16(1) DAL; Born 2009, pp. 855-856; Fiona Trust &

Holding Corp. v. Privalov]. The Tribunal is thus competent to determine whether it was constituted

properly.

26. The Tribunal was constituted in accordance with the appointment procedure agreed by the

parties in the arbitration agreement (A). Moreover, Fishing waived its right to challenge the

constitution of the Tribunal (B). As such, Fishing’s challenge to the constitution of the Tribunal

will merely frustrate the arbitral proceedings (C).

A. THE TRIBUNAL WAS CONSTITUTED PROPERLY

27. The Tribunal was constituted properly because the composition procedure complied with the

parties’ agreement and the Milan Rules, as expressly incorporated in the arbitration agreement

(1). The confirmation procedure is a mandatory part of the Milan Rules, which cannot be

contracted out of (2). As such, non-compliance with these procedure jeopardizes enforcement

of any future award (3).

1. The composi t ion pr ocedur e complied with the par t i es ’ agr eement

28. The procedure for composing this Tribunal complies with the parties’ arbitration agreement.

The arbitration agreement states: “All disputes arising out of or related to this contract shall be

settled by arbitration under the Rules of the Chamber of Arbitration of Milan (the Rules), by



three arbitrators. Each party shall appoint one arbitrator and the two arbitrators shall appoint the

presiding arbitrator….” [Cl. Ex. No. 4].

29. The incorporation of the Milan Rules in the arbitration clause creates a two-tier composition

procedure. The actual appointment of an arbitrator is the first step and subsequent confirmation

by the Milan Chamber is the second step [Art. 18(4) Milan Rules]. Because the parties agreed to

have the Milan Rules govern the arbitral proceedings, the composition procedure was subject to

the provisions of the Milan Rules [Art. 1(1) Milan Rules; see Court of Appeals, Celle, 31 May 2007].

By choosing an institution, parties agree to adhere to its rules and empower the institution to

organize the proceedings in accordance with those rules [St. Lawrence Explosives Corp. v. Worthy

Bros. Pipeline Corp.; Pia Investments Ltd. v. Cassia; République de Guinée v. MM.R […] et O; Raffineries de

pétrole d’Homs et de Banias v. Chambre de Commerce Internationale; Reed & Martin, Inc. v. Westinghouse

Electric Corp.].

30. In accordance with the first tier of the arbitration agreement, Trawler appointed Ms. Arbitrator 1

as its arbitrator [RfA, para. 28] and Fishing appointed Professor Arbitrator 2 [SoD, para. 23].

Following this, the two party-appointed arbitrators appointed Mr. Malcolm Y as the presiding

arbitrator [Letter from Ms. Arbitrator 1, dated 15 July 2010].

31. In accordance with the second tier, these appointments were subject to confirmation by the

Milan Chamber [Art. 18(4) Milan Rules]. Ms. Arbitrator 1 and Professor Arbitrator 2 filed

unqualified statements of independence and were confirmed by the Secretariat pursuant to

Article 18(4) of the Milan Rules [SoI, Ms. Arbitrator 1, dated 27 June 2010; Prot. No. 9410/4]. Mr.

Malcolm Y, however, filed a qualified statement of independence, making his confirmation

subject to decision by the Arbitral Council [SoI, Mr. Malcolm Y, dated 19 July 2010; Art. 18(4) Milan

Rules]. In this qualified statement, Mr. Malcolm Y disclosed that he is a partner in the same law

firm as Trawler’s counsel [SoI, Mr. Malcolm Y].

32. The appointment of the presiding arbitrator by the party-appointed arbitrators is not a definitive

choice when institutional rules provide a confirmation procedure to ensure the arbitrator’s

impartiality and independence [Born 2009, pp. 1382, 1407; Bühler in Zuberbühler, p. 49; Coppo 2010c,

p. 290]. By agreeing to institutional rules, the parties agree to be bound by the institution’s

determination of an arbitrator’s suitability [Reeves Bros., Inc. v. Capital Mercury Shirt Corp.; Koch Oil,

S.A. v. Transocean Gulf Oil Co.; see ICC Award 2114/1972]. In carrying out the confirmation



procedure, the Arbitral Council acted in accordance with the arbitration agreement providing for

the Milan Rules.

33. After reviewing the qualified statement of independence and considering the potential conflict

arising thereof, the Arbitral Council did not confirm Mr. Malcolm Y’s appointment because his

independence did not meet the required standard, and invited the party-appointed arbitrators to

make a substitute appointment [Prot. No. 9410/7; Arts. 20(1)(b), 20(3) Milan Rules]. Without any

indication that the conflict of interest no longer existed, the co-arbitrators re-affirmed their

previous choice of Mr. Malcolm Y [Letter from Ms Arbitrator 1, dated 13 August 2010]. This

appointment was again subject to subsequent confirmation of the Arbitral Council [Art. 18(3)

Milan Rules]. The Arbitral Council reaffirmed its decision, and as a consequence did not confirm

Mr. Malcolm Y [Prot. No. 9410/9].

34. As the parties’ second attempt to appoint a presiding arbitrator failed to provide a confirmable

candidate, the Arbitral Council became responsible for appointing a replacement arbitrator [Art.

20(3) Milan Rules; Derains/Schwartz, p. 166]. Pursuant to this responsibility, the Arbitral Council

appointed Mr. Horace Z as the presiding arbitrator and transferred the file to the Tribunal [Prot.

Nos. 9410/9, 11].

35. In challenging the Tribunal’s jurisdiction, Fishing raises no objection to Mr. Horace Z’s

qualification as the presiding arbitrator. Rather, Fishing objects to the confirmation procedure of

the Milan Rules as contrary to the arbitration agreement [ASoD, para. 7]. Notably, Fishing

selected and suggested the Milan Rules, which included the confirmation procedure that led to

the appointment of Mr. Horace Z [Cl. Ex. No. 4; Resp. Ex. No. 2]. This choice of institutional

rules constitutes a basic and important form of party autonomy in itself [Webster, pp. 123-124].

As a consequence, the parties’ choice of the Milan Chamber includes its particular process for

confirming the appointment of the arbitrators. This exercise of party autonomy creates a

binding agreement on the arbitral procedure. In asserting that the Tribunal lacks jurisdiction

because the Tribunal was constituted in accordance with the Milan Rules that Fishing itself

incorporated into the arbitration agreement, Fishing’s assertion contradicts its own choice of

arbitral procedure.

2. The conf irmation pr ocedur e i s a mandator y par t o f the Milan Rules

36. The confirmation procedure is a mandatory provision of the Milan Rules that Trawler and

Fishing agreed to when selecting the Milan Chamber to administer the arbitration [Art. 18(4)



Milan Rules]. According to Article 2 of the Milan Rules, mandatory provisions of applicable law

and principles of due process and equal treatment prevail over party agreement. These

confirmations provisions serve the important function of ensuring the integrity of the arbitral

process [Asken, p. 10; Buonfrate/Giovannucci Orlandi, p. 132-133; Coppo 2010b, p. 7]. Because the

confirmation procedure is a fundamental characteristic of arbitration under the Milan Rules, it is

a mandatory part of proceedings under the Milan Rules, and the parties may not opt out of this

provision [See generally Bühler in Zuberbühler, p. 48; Craig/Park/Paulsson, p. 295; Pryles 2007, p. 329].

Mandatory provisions that cannot be contracted out of are common in institutional rules

[Compare ICC Award 7402/1992; ICC Award 7385/1992]. The independence of arbitrators, as

supervised by the Arbitral Council, is a key part of the integrity of arbitrations administered by

the Milan Chamber [Coppo 2010b, p. 7; Buonfrate/Giovannucci Orlandi, p. 132-133;], and also instills

greater confidence in arbitration in general.

37. Independence and impartiality of the arbitrators are of “paramount importance” in arbitral

proceedings [Swedish Supreme Court, T2448-06]. Preserving these characteristics is best ensured by

a strict control at the time of the arbitrator’s appointment [Eastwood, p. 290]. Under the Milan

Rules, the Milan Chamber has an absolute duty to control the independence of the arbitrators it

confirms [Buonfrate/Giovannucci Orlandi, pp. 132-133; Coppo 2010b, p. 2; Sali 2005, p. 351]. The

Arbitral Council is responsible for examining all qualified statements of independence to ensure

that the required standards are met [Coppo 2010a, p. 104]. The Arbitral Council has general

competence and full discretion in deciding whether to confirm an arbitrator when the candidate

in question files a qualified statement of independence [Preamble, The Arbitral Council, para. 1,

Milan Rules; Art. 18(4) Milan Rules; Coppo 2010a, pp. 103-104]. The Arbitral Council is comprised

of experienced academics and practitioners who have the special expertise required to make such

decisions from an objective point of view [Coppo 2010c, p. 285].

38. In fulfilling this mandatory duty, the Arbitral Council considers any ground that “casts a doubt”

on an arbitrator’s impartiality [Art. 19(1) Milan Rules]. The mere appearance of impartiality is

sufficient to compromise a candidate’s suitability [Svea Court of Appeal, T10321-06]. Professional

links are the most common grounds that undermine an arbitrator’s impartiality and

independence and consequently, warrant an institute’s non-confirmation [Bond 1987, p. 308].

Likewise, the IBA Guidelines on Conflicts of Interest in International Arbitration, which reflect

international best practices, indicate that professional connections may endanger an arbitrator’s

independence and impartiality [IBA Guidelines, Non-waivable Red List Sections 1.1, 1.4; Waivable Red

List Section 2.3; Orange List Section 3.1-3.4]. Arbitral institutions, like the Milan Chamber, often rely



on or consider the IBA Guidelines in adjudging an arbitrator’s independence and impartiality

[Coppo 2010c, p. 290; Redfern/Hunter, pp. 271; Scherer 2010, p. 30; compare to SCC Board Decision,

053/2005]. In fact, the Milan Chamber of Arbitration invites the possible arbitrators to consider

the IBA Guidelines when they file their statements of independence [Prot. Nos. 9410/3, 5, 8].

39. Here, Mr. Malcolm Y disclosed in a qualified statement of independence that he is a partner in

the same law firm that represents Trawler in the current proceedings [SoI, Mr. Malcolm Y, dated 19

July 2010]. The Arbitral Council, therefore, had the mandatory obligation to carefully determine

based on their expertise whether the disclosed connection “casts a doubt” on Mr. Malcolm Y’s

independence, as to warrant his non-confirmation [Sali 2005, p. 350]. The Arbitral Council acted

within its competence and consistently with its obligations when it did not confirm Mr. Malcolm

Y’s appointment out of significant concern for his independence [Art. 18(4) Milan Rules; Sali

2010, pp. 5-6]. The parties should respect the decisions the Arbitral Council makes in its

supervisory role under the Milan Rules.

3. Non-compliance with mandator y pr ovis ions j eopardizes f inal r eso lut ion o f the dispute

40. Failure to comply with mandatory provisions of the Milan Rules that the parties incorporated

into the arbitration agreement endangers enforcement of any future arbitral award. When parties

agree on mechanisms determining the appointment procedure, these mechanisms must be

complied with [Born 2009, p. 1384; Fouchard/Gaillard/Goldman para. 782; Redfern/Hunter, para.

6.03]. National laws, including Article 36(1) (a)(iv) of the DAL, place great importance on the

proper constitution of an arbitral tribunal [Wang, p. 401]. Deviation from the composition

procedures agreed to by the parties creates a significant risk for the award to be set aside or not

enforced [Art. 34(2)(a)(iv) DAL; Art. V(1)(d) NY Conv.; Cargill Rice v. Empresa; Encyclopaedia

Universalis, S.A. v. Encyclopaedia Britannica, Inc.; Firm in Hamburg v. Corporation (A.G.) in Basel; Rederi

Aktiebolaget Sally v. S.r.l. Termare]. Additionally, an arbitrator’s lack of independence directly

undermines the fundamental principle of due process and could result in a challengeable award

[Coppo 2010c, p. 290]. Issuing an enforceable award is of primary concern to an arbitral tribunal

[Redfern/Hunter, para. 9.09; see ICC Award 10623/2001].

41. Non-compliance with the procedures in the parties’ arbitration agreement, which incorporated

the mandatory provisions of the Milan Rules, jeopardizes the final resolution of this dispute.

Likewise, confirming an arbitrator with compromised independence creates a similar opportunity

to challenge the award. Fishing is well aware of this risk, as it implies that Mr. Malcolm Y’s non-



confirmation will result in challenge proceedings [ASoD, para. 7]. By enforcing the agreed

procedure and ensuring the integrity of this arbitration, the Tribunal is optimizing the

enforceability of any future award.

B. FISHING WAIVED ITS RIGHT TO OBJECT TO THE COMPOSITION PROCEDURE

42. To validly contest the composition of the Tribunal by objecting to Mr. Horace Z’s appointment,

Fishing had to do so within ten days of receipt of his statement of independence as required by

Article 19(2) of the Milan Rules [Prot. No. 9410/10]. Because it failed to object within this time,

Fishing waived the right to object to Mr. Horace Z’s appointment and the current composition

of the Tribunal [R.C. 311/2005‐13].

43. The Secretariat of the Milan Chamber communicated Mr. Horace Z’s appointment as the

presiding arbitrator on 26 August 2010 [Prot. No. 9410/9] and provided the parties with Mr.

Horace Z’s statement of independence on 31 August 2010. In compliance with Article 19(2) of

the Milan Rules, the Secretariat invited the parties to submit any written comments thereon

within ten days from receipt of the letter [Prot. No. 9410/10]. Such time limits ensure fairness

and equality between the parties and the orderly conduct of the proceedings [ICC Award

9302/1998]. Fishing submitted no comments within the required timeframe [Prot. No. 9410/11].

44. On 24 September 2010, almost one month after the appointment of Mr. Horace Z, Fishing first

raised its objection to the composition procedure and contested the jurisdiction of the Tribunal

[ASoD, paras. 1, 7]. Fishing therefore waived its right to object by failing to comply with the time

limits. This challenge is untimely and should accordingly be dismissed.

C. FISHING’S CHALLENGE WILL DELAY THE ARBITRAL PROCEEDINGS

45. From a practical point of view, besides a considerable loss of time and additional costs, little can

be gained from Fishing’s untimely challenge. If the challenge is granted, this fully functional

Tribunal will be dismissed, but the arbitration agreement will remain valid [Redfern/Hunter, para.

10.90]. This dispute would still be referred to arbitration under the Milan Chamber, and a new

tribunal would need to be similarly constituted in accordance with the Milan Rules. The parties

would have to appoint arbitrators, and the presiding arbitrator would be chosen again in

accordance with the Milan Rules. This dispute arose more than two years ago, and it took four

months to appoint the current Tribunal [RfA, para. 8; Cl. Ex. No. 5; PO No. 1, paras. 1-2].

Allowing this challenge will not promote the speedy and final resolution of the dispute by an

impartial tribunal but will only delay the arbitration, which is sometimes a party’s true aim in



introducing a challenge [Greenberg, p. 3]. Fishing’s delayed jurisdictional challenge is without merit

as the Tribunal’s composition complied with the parties’ agreement.

* * *

46. Conclusion: The composition procedure followed the parties’ agreement that incorporated the

Milan Rules. The Arbitral Council, based on mandatory provisions of the Milan Rules, properly

denied confirmation of an arbitrator candidate with compromised independence. Deviation

from the parties’ agreed composition procedure jeopardizes the final resolution of the dispute.

Moreover, Fishing waived its right to object to the composition of the Tribunal. As a result,

Fishing’s challenge will only frustrate the arbitral proceedings and should be dismissed.

II. THIS TRIBUNAL SHOULD NOT ADMIT THE COUNTER-CLAIM AND NO BREACH OF CONFIDENTIALITY EXISTS

47. This Tribunal should not admit Fishing’s counter-claim regarding the alleged breach of

confidentiality (A). Additionally, Trawler did not breach the confidentiality provision under

Article 8(1) of the Milan Rules (B). Finally, the interim measure should not be granted as Fishing

has failed to demonstrate the requisite need for it (C).

A. THE TRIBUNAL SHOULD NOT ADMIT THE COUNTER-CLAIM

48. Fishing’s counter-claim alleging a breach of confidentiality and seeking damages for this breach

[SoD, paras. 4-9; PO No. 2, para. 4] falls outside the scope of the current arbitration. To be

admissible, a counter-claim must have a connection with the primary claim [Saluka Investments BV

v. Czech Republic]. The initial claim in the request for arbitration restricts a tribunal’s freedom to

admit counter-claims [Crookenden, p. 608; Poudret/Besson, pp. 494-495].

49. Here, the issue of the breach of confidentiality is not within the scope of the current arbitration.

Trawler’s Request for Arbitration defines the dispute as concerning a breach of contract by

delivery of non-conforming goods [RfA, para. 27]. The counter-claim concerns an alleged

breach of confidentiality under Article 8(1) of the Milan Rules [SoD, paras. 4-9]. The issues of

non-conforming goods and confidentiality requirements are not closely connected. Therefore,

the Tribunal should not admit the counter-claim because this would mean introducing an

unrelated issue into the scope of this arbitration.

50. Pursuant to Article 27 of the Milan Rules, the Tribunal decides on the admissibility of a counter-

claim after consulting the parties. Trawler opposes the admission of the counter-claim. Generally,



an arbitral tribunal should also make sure that the counter-claim would not cause an

inappropriate delay to the proceedings [Art. 23(2) DAL]. Where the addition of counter-claims

causes unfairness or serious inefficiency, a tribunal should not allow such counter-claims [Born

2009, pp. 1818-1819; Harris Int'l Telecomm., Inc. v. Islamic Republic of Iran]. The original dispute in

this case arose on 29 July 2008 [Cl. Ex. No. 5], more than two years ago. Time and efficiency are

concerns in the current proceedings. Considering that the already extended time limit for

rendering the final award is currently expiring on 20 July 2011, admission of the counter-claim

would most likely constitute an inappropriate delay, especially considering the Fishing itself has

admitted that the claim has not yet matured [SoD, para. 9; Prot. No. 9410/12]. Adding to this that

the counter-claim does not directly relate to the original claim, the resulting delay to these

proceedings is not justified.

B. TRAWLER DID NOT BREACH ARTICLE 8(1) OF THE MILAN RULES

51. Trawler did not breach any confidentiality obligation arising under Article 8(1) of the Milan

Rules. First, the confidentiality provision of the 2010 Milan Rules creates a new substantive

obligation, which the parties did not agree to in the arbitration agreement (1). Second, due to the

timing and the content of Trawler’s interview, no breach of Article 8(1) of the Milan Rules

occurred (2). Third, Fishing failed to establish a legal basis for its request for damages (3).

Finally, even if the Tribunal finds that Trawler’s actions breached Article 8(1) of the Milan Rules,

the actions fall within the exception in the confidentiality provision (4).

1. The 2010 Milan Rules cannot r e tr oact i ve ly cr eate substant i ve obl igat ions

52. The parties entered the arbitration agreement in 2008 when the 2004 Milan Rules were in force

[Art. 43(1) 2004 Milan Rules; Art. 39(1) 2010 Milan Rules]. The 2004 Milan Rules imposed the

duty of confidentiality only on “the Chamber of Arbitration, the Arbitral Tribunal and the

expert witnesses” [Art. 8(1) 2004 Milan Rules]. Parties, however, were not obliged to keep the

proceedings confidential.

53. Consequently, Article 8(1) of the 2010 Milan Rules imposes a new substantive obligation on the

parties. The duty of confidentiality is a substantive obligation because it does not concern any

procedural matter, such as administering the arbitral proceedings. Rather, it is an obligation

parties must contract to undertake [Dimolitsa, pp. 21-22]. If amended arbitration rules introduce a

new substantive duty, the rules in force at the time the arbitration agreement was entered apply

[Cars & Cars Pte Ltd v. Volkswagen AG; Black and Veatch Singapore Pte Ltd. v. Jurong Engineering Ltd.],

as the parties have not legitimately consented to the new rules [Derains/Schwartz, p. 75]. A duty



of confidentiality binding the parties is uncommon in institutional rules and as such, it is an

unexpected obligation when imposed retroactively [Born 2009, pp. 224-225].

54. Because the 2010 Milan Rules introduce a new substantive obligation, the new obligation cannot

retroactively apply to arbitral proceedings based on an agreement entered into in 2008.

Enforcing the new substantive obligation on the parties would mean not meeting their

reasonable and legitimate expectations [See Shaughnessy, p. 353], as the parties could not have been

aware of the content of the revised rule. As neither party is bound by the substantive obligation

of Article 8(1) of the 2010 Milan Rules at the time of the alleged breach, Fishing cannot base its

counter-claim on this provision.

2. Ther e was no br each o f Arti c l e 8(1) o f the Milan Rules

55. Even if the confidentiality provision in the 2010 Milan Rules applies, neither the timing nor the

content of Trawler’s interview to Commercial Fishing Today are within the scope of confidentiality

as expressed in Article 8(1) of the Milan Rules. No presumptive duty of confidentiality, meaning

a duty not arising out of a statutory or contractual provision, exists in arbitration [Dessemontet, p.

318; Esso Australia Resources Ltd. v. Plowman; Nafimco v. Foster Wheeler Trading Company AG; Swedish

Supreme Court, T1881‐99]. If the parties have agreed to a duty of confidentiality, it arises only

when arbitral proceedings have commenced [Crookenden, p. 607]. While the Milan Rules do not

specify when arbitration commences, Article 21 of the DAL states that the proceedings

commence on the date the respondent receives the request for arbitration.

56. Fishing received the Request for Arbitration on 25 May 2010 [SoD, para. 4], which marked the

commencement of the proceedings and the initiation of the duty of confidentiality under Article

8(1) of the Milan Rules. Trawler gave the interview to Commercial Fishing Today on 22 May 2010,

three days before the arbitration commenced [SoD, para. 4; Resp. Ex. No. 1]. Because the

proceedings had not yet begun, the Milan Rules were not yet applicable to the parties. Trawler

could not have breached Article 8(1) of the Milan Rules at that time.

57. In addition, the interview did not disclose information considered confidential within the scope

of Article 8(1) of the Milan Rules. Where confidentiality exists, the extent of the duty is solely

dependent on party agreement [Dimolista, p. 13; Swedish Supreme Court, T1881‐99; United States v.

Panhandle Eastern Corp]. No general duty to keep a conflict secret exists [Amco Asia Corp et al v.

Republic of Indonesia; ICC Award 11961]. If a duty exists here, Article 8(1) of Milan Rules, as

incorporated into the parties’ agreement, defines the scope of the duty of confidentiality. Article



8(1) of the Milan Rules limits the scope of the duty of confidentiality to cover “the proceedings”

and “the arbitral award”. In the interview, Trawler only referred to existence of the conflict

between the parties and to the fact that Trawler had taken steps to start arbitration proceedings

[Resp. Ex. No. 1]. Thus, Trawler revealed no information regarding the proceedings or the

arbitral award, as prohibited by Article 8(1) of the Milan Rules.

58. Consequently, Trawler has not breached the duty of confidentiality as expressed in Article 8(1)

of the Milan Rules.

3. Fishing has not pr esented a l egal basis for awarding damages for the al l eged br each

59. Fishing has no legal basis for seeking damages under its counter-claim. Generally, in addition to

proving that a duty of confidentiality exists between the parties, a party claiming damages for

breach of confidentiality must also establish a breach of a statutory or contractual provision and

that the breach resulted in actual, quantifiable and compensable monetary damages [Brown, p.

1016; Lazareff, pp. 88-89]. Establishing damages for this kind of a breach is difficult

[Hwang/Chung, p. 614; Lazareff, p. 89; Noussia, p. 141]. It is also notoriously difficult to quantify

damages resulting from breach of a duty of confidentiality, and failure to do so leads to dismissal

of the claim [ILA: Confidentiality in International Commercial Arbitration, p. 22; ICC Award

11961/2009].

60. Fishing has failed to establish statutory or contractual grounds for assessment of damages for

the alleged breach of confidentiality. In fact, no such grounds exist under the Milan Rules or the

DAL. Article 8(1) of the Milan Rules provides no sanction for a breach of the obligations it

contains. Moreover, the parties did not agree a contractual provision providing for damages for a

confidentiality breach.

61. Additionally, Fishing is unable to define the damage further than “monetary loss”, and openly

admits to being unable to assess the amount of damages, despite the passage of nearly seven

months since the alleged breach [SoD, para. 9]. Consequently, Fishing failed to establish the legal

basis for damages under its counter-claim.

4. The inter v iew fa l l s under the except ion in Arti c l e 8(1) o f the Milan Rules

62. Even if the interview fell within Article 8(1) of the Milan Rules, the interview is within the

exception in the same Article. Trawler sought to protect its rights by publicizing the

commencement of the arbitral proceedings. The duty of confidentiality is never absolute



[Singapore Court of Appeal, 29 September 2009] and requires exceptions [Pryles 2008, p. 539]. Article

8(1) of the Milan Rules allows disclosure of information related to arbitral proceedings where

disclosure is necessary to protect a party’s rights. These rights include private rights [Weixia, p.

621], especially to prevent economic ruin of a party [Trakman, p. 5]. Prohibiting the disclosure of

the mere existence of arbitral proceedings is unrealistic and undesirable because when a party’s

legitimate interests demand disclosure [Weixia, p. 618]. Such exceptions to a duty of

confidentiality are reasonable [Myanma Yaung Chi Oo Co. Ltd. v. Win Win Nu].

63. Trawler enjoyed an excellent reputation as a provider of squid in Mediterraneo [PO No. 3, Clar.

Q. 13]. That reputation suffered severely due to Fishing’s failure to deliver squid as ordered [Resp.

Ex. No. 1], as evidenced by loss of three important clients [Cl. Ex. No. 10, para. 18]. On-going

customer relationships are one of a company’s most valuable assets [Duncan/Moriarty, p. 3].

Fishing’s breach forced Trawler to assure its clients that Trawler was taking steps to remedy the

problem. The interview was therefore necessary for Trawler to rebuild client trust and to stay in

business. Commercial Fishing Today is a reputable trade newspaper [PO No. 3, Clar. Q. 17].

Commercial Fishing Today was the appropriate forum as it provided a broad and efficient means of

disseminating this message and preventing further loss. Trawler acted prudently in its disclosure

and limited its remarks to the essential information needed to mollify anxious clients.

C. THE INTERIM MEASURE ENFORCING CONFIDENTIALITY SHOULD NOT BE

GRANTED

64. Fishing’s request for an interim measure should be denied because Fishing failed to satisfy the

conditions of the DAL (1). Moreover, if granted, the interim measure would be moot (2).

1. The r equest does not sat i s fy the condit ions o f the DAL for inter im r e l i e f

65. The Tribunal should deny Fishing’s request for an order to further enforce confidentiality on the

parties. In accordance with Article 17(2)(b) of the DAL, a procedural order enforcing

confidentiality of “the arbitral proceedings and any eventual award” is an interim measure [SoD,

para. 8; Yesilirmak, p. 12].

66. Article 17A(1) of the DAL establishes the grounds for interim measures. The required

conditions for interim relief are (i) harm, which will not be adequately reparable by a later award

of damages, and outweighs the harm the measure will cause to the other party, and (ii) a

reasonable possibility of the requesting party’s success on the merits of the claim. A cautious

approach of “checks and balances” in assessing such a request is necessary to prevent misuse



and injustice to the opposing party [Lew/Mistelis/Kröll, p. 585; Weixia, p. 635, 634-635; ICC Award

12363/2003; ICC Award 7489/1992].

67. Fishing has satisfied neither requirement. First, Fishing admits that it cannot establish harm

caused by the alleged breach, let alone quantify that its harm outweighs the harm that the interim

measure would cause to Trawler, or that the harm could not be adequately reparable by a later

award of damages [SoD, para. 9; Smit, p. 577; United States v. Panhandle Eastern Corp.]. Second, as

demonstrated above, Fishing failed to establish a legal basis for the alleged breach of

confidentiality and has no reasonable possibly of success on the merits of this claim [supra paras.

51-63]. Additionally, an interim measure should not constitute a prejudgment of the case [Art.

17(A)(1)(b) DAL; ICC Interim Award 10973/2001]. If awarded as sought, the interim measure

suggests that there is a reasonable possibility that Trawler breached Article 8(1) of the Milan

Rules. In this case, where there is no on-going breach, there is no need for such an evasive

measure.

68. Fishing’s request does not meet the mandatory conditions set in Article 17A(1) of the DAL for

interim relief. Both requirements of Article 17A(1) of the DAL must be satisfied before an

interim measure can be granted [Ferguson, p. 55; Sugg, p. 405]. As the request meets none of the

prerequisites of Article 17(1) of the DAL, it should be dismissed.

2. The r equested inter im measur e i s moot

69. Because the requested procedural order brings no new legal obligation on the parties and only

re-enforces Article 8(1) of the Milan Rules [SoD, para 8; Art. 8(1) Milan Rules], Fishing’s request

for interim relief is moot. The request would only lead to a restatement of an already existing

duty [SoD, para. 8]. Consequently, the request is moot, and as such, the interim measure should

be denied [Yesilirmak 2006, p. 190].

* * *

70. Conclusion: The counter-claim should not be admitted as it falls outside the scope of this

arbitration. The parties are not bound by Article 8(1) of the Milan Rules that the parties did not

consent to at the time of entering into the arbitration agreement. Furthermore, Trawler’s actions

do not constitute a breach of Article 8(1) of the Milan Rules. Additionally, Fishing failed to

introduce a legal basis for awarding damages for the alleged breach. Even if a breach of Article

8(1) of the Milan Rules occurred, Trawler’s actions would fall within the exception in the same



Article. Finally, the requested interim measure enforcing confidentiality should be denied because

it fails to satisfy the conditions of the applicable law and it would be moot.

71. CONCLUSION ON JURISDICTION: The Tribunal has jurisdiction over the original contractual

dispute. The composition procedure complied with the parties’ arbitration agreement, which

incorporated the Milan Rules. This Tribunal should not admit Fishing’s counter-claim. Fishing

failed to establish a legal basis for its counter-claim or the requested interim measure, and both

should be dismissed.

ARGUMENT ON THE MERITS

III. FISHING BREACHED THE CONTRACT BY DELIVERING UNDERSIZED SQUID

72. Trawler contracted with Fishing for 200 metric tons of squid in the size range of 100/150 grams

to be used as bait [Cl. Ex. Nos. 1, 2, 3, 4]. Fishing failed to deliver squid that conformed to these

requirements and thus breached the contract. By delivering non-conforming squid, Fishing

breached the contract under Article 35(1) of the CISG (A), or, alternatively, under Article 35(2)

of the CISG (B). Moreover, Fishing’s breach was fundamental (C).

73. The CISG applies to this dispute over the sale and purchase of squid because the parties’ places

of business are in different contracting states to the CISG [RfA para. 24; Art. 1(1)(a) CISG].

A. FISHING BREACHED THE CONTRACT UNDER ARTICLE 35(1) OF THE CISG

74. The squid did not meet the requirements agreed to in the contract. Article 35(1) of the CISG

provides that the goods conform to the quantity, quality and description required by the

contract. Pursuant to the contract Fishing had to deliver squid in the specific size range of

100/150 grams. The requirement of the specific size was incorporated into the parties’ contract

by Fishing’s confirmation of Trawler’s offer (1) and by the agreed description of the squid’s

purpose (2).

1. Fishing’s conf irmation o f Trawler ’s o f f er es tabl i shed the par t i es ’ agr eement that the squid would conform to the s iz e range o f 100/150 grams

75. When Fishing confirmed Trawler’s order, Fishing contractually agreed to provide squid that

complied with the order’s size requirement [Cl. Ex. Nos. 3, 4; Art. 18 CISG]. Trawler’s offer to

purchase squid was expressly made clear by the size requirement in the cover letter and in the

“quality” standard in the order form.



76. First, Trawler’s cover letter of 29 May 2008 emphasized the importance that the squid fall

“almost exclusively in the range of 100/150 grams” [Cl. Ex. No. 2], making it impossible for

Fishing to be unaware of Trawler’s contractual intent. Trawler’s express intent in the cover letter

should demonstrate the common assent of the parties [Art. 8(1) CISG; Chemical products case].

Consequently, the fact that Trawler only wished to purchase squid of this size could not have

been unknown to Fishing.

77. With evidence of Trawler’s clear intent to purchase squid of the specified size, Fishing never

informed Trawler that it could not, or did not intend to, meet the size requirement expressly

stated in the offer [Cl. Ex. No. 2]. If a seller does not explicitly communicate its objection to the

buyer’s requirements, the order in its entirety becomes a binding contractual agreement at the

conclusion of the contract [Enderlein/Maskow, p. 142] An effective acceptance need simply

indicate assent and not reiterate all the terms of the offer [Art. 18(1) CISG; Giannini, p. 15 ]. The

fact that Fishing did not expressly repeat “100/150 grams” in its confirmation is irrelevant to the

parties’ agreement as to size of the squid [Cl. Ex. No. 4]. The size requirement of 100/150

grams became a contractually binding term when Fishing accepted Trawler’s offer by confirming

the order.

78. Second, Trawler’s offer to purchase squid established the necessary size by requiring that the

squid’s quality be “as per sample” [Cl. Ex. No. 3]. When a sample is referenced in a contract, the

characteristics of the sample become a contractual term pursuant to Article 35(1) of the CISG

[Enderlein/Maskow, p. 146; Bernstein/Lookofsky, pp. 77, 86]. A party can rely on that contractual

term and expect to receive goods of the same quality as the sample [Henschel, p. 244]. Fishing

provided Trawler with a sample that was “representative” of the future delivery [RfA, para. 13],

meaning that Fishing obliged to provide squid with the same characteristics as the sample. The

most important characteristics of squid used as bait are the size and the freshness of individual

squid [Cl. Ex. No. 10, para 4]. This is well know to Fishing [PO No. 3, Clar. Q. 26]. Thus, size

and freshness were the characteristics that the sample could reasonably have been seen to

represent. While Fishing now asserts that the sample was unsized [SoD, para. 12], Fishing did not

communicate this fact to Trawler when Trawler examined the sample. Trawler even re-

emphasized the importance of the sample’s size, stating that it was particularly pleased that

almost all of the sample squid was “in the range of 100/150 grams” [Cl. Ex. No. 2]. The sample

represented the standard of quality as to the size, which Trawler expressly demanded in its offer

to purchase squid. In confirming Trawler’s order, Fishing agreed to deliver squid that

conformed to Trawler’s needs.



79. Finally, Fishing’s addition of the years “2007/2008” in the confirmation is irrelevant to the

parties’ agreement on the size of the squid [Cl. Ex. No. 4; SoD, paras. 13-16]. In adding the years,

Fishing did not communicate that the inclusion of the year “2008” was indicative of its inability

to meet the size requirement. Notably, Fishing did not add the years to the “quality”

requirements in the confirmation but rather identified the year as merely indicative of the

“catch” description [Cl. Ex. No. 4]. A seller may only make specifications that comply with the

buyer’s requirements [Art. 65(1) CISG]. A reasonable buyer in Trawler's position would conclude

that the year indicated, if anything, the freshness of the squid, as even Fishing did not identify

the year as representative of the size [Art. 8(2) CISG; Cl. Ex. No. 10, para. 4]. Fishing did not

inform Trawler that the majority of the squid would come from the 2008 catch, and some of the

squid from the 2008 catch did conform to the size requirement [Cl. Ex. No. 8]. Fishing failed to

object the size requirements in the offer to purchase squid, which subsequently became the

terms of the contract and obliged Fishing to deliver squid weighing between 100/150 grams.

2. The r equir ed s iz e o f the squid was impl ied by the agr eed descr ipt ion o f pur pose

80. Fishing and Trawler contracted for squid to be used as bait. In Trawler’s first communication, in

the invitation for offers, to Fishing, Trawler expressly stated its intent to use squid only as bait

[Cl. Ex. No. 1]. Fishing demonstrated a clear understanding of the description of purpose

because it provided a sample specifically representative of squid used for bait [RfA, paras. 12, 13].

Statements and agreements made during the negotiation process become contractual terms if

the statements are meant to be essential and binding [Dr. S. Sergueev Handelsagentur v. DAT-

SCHAUB A/S]. In the present case, this requirement was fulfilled, due to Trawler indicating the

important nature of the stated purpose. Trawler made the purpose known expressly and in

writing [Cl. Ex. No. 1; cf. Henschel, p. 227]. Fishing could not have been unaware of Trawler’s

purpose, and further did not object to it, which made Trawler’s purpose a contractually agreed

term.

81. Trawler required that the squid to be fit for human consumption [Cl. Ex. No. 3]. This was a

characteristic of the quality required from the squid, and had no bearing on the agreed purpose

[Cl. Ex. No. 2]. Moreover, this requirement is based on a public regulation in force in both the

seller’s and buyer’s countries [PO. No. 3, Clar. Q. 22]. Fishing must have been aware of the

regulation and thus understand the relevance of this provision to storage concerns only [Frozen

pork liver case].



82. In addition, Fishing’s argument it was not known that the squid was meant to be used solely for

bait further demonstrates that Fishing was aware of the communicated purpose [Cl. Ex. No. 9].

Trawler, in its communications with Fishing, never expressed any other purpose for the squid

than bait. In requesting squid suitable for human consumption, Trawler merely specified a

characteristic of squid, whose purpose was to be used for bait. Even if Trawler had indicated

several purposes, the squid would still need to be fit for all agreed purposes. Fishing, as an

experienced trader of squid for bait, must infer that the particular size of squid was crucial [Arts.

8(1) and 9(1) CISG].

B. ALTERNATIVELY, FISHING BREACHED ITS OBLIGATIONS UNDER ART. 35(2) CISG

83. Should the Tribunal find that the quality of the squid was not agreed, either explicitly or

implicitly, the standard for conformity is to be assessed under Article 35(2) of the CISG [Skin

care products case]. Under this Article of the CISG, Fishing also breached its obligations because

the squid was not fit for the particular purpose made known [Art. 35(2)(b) CISG] (1), and did not

possess the qualities of the sample [Art. 35(2)(c) CISG] (2).

1. The squid was not f i t for the par t i cular pur pose made known to Fishing

84. Trawler informed Fishing that it wanted to buy squid for bait for a fleet based in Mediterraneo

before the conclusion of the contract [Cl. Ex. No. 1]. Trawler was entitled, according to Article

35(2)(b) of the CISG, to receive squid fit for this purpose since the latter did not object [Honnold,

Art. 35 para. 226]. As Fishing did not ask for clarifications, the particular purpose communicated

by Trawler became a binding standard. Thus, Fishing was required to deliver squid conforming

to that particular purpose pursuant to Article 35 (2)(b) of the CISG.

85. Trawler also reasonably relied on Fishing to deliver squid for stated particular purpose due to

Fishing’s previous experience of selling squid for bait to other Mediterranean companies, as

stated by Fishing’s sales representative, Mr. Weeg [RfA, para. 13; Cl. Ex. No. 10, para. 6]. The

right to rely on Fishing’s judgment is not frustrated by Trawler itself being an equally skilled and

experienced actor in the trade [Henschel, p. 236; Karollus, p. 117]. As Trawler made clear what the

goods would be used for, it could rely on Fishing’s complying performance with respect to that

purpose [Bianca in Bianca-Bonell, p. 275].

86. Due to its prior experience in the Mediterranean market, Fishing should have known that 200

metric tons of squid could not be intended for the human consumption market [RfA, para. 20;



Cl. Ex. No. 3]. The Mediterranean market is small and saturated for squid for human

consumption [RfA, para. 20]. Accordingly, Fishing had to know the particular purpose of the

squid pursuant to Article 35(2)(b) of the CISG, and Fishing therefore took on the responsibility

to deliver goods conforming to this purpose.

2. The squid did not possess the qual i t i es o f the sample

87. Fishing breached the contract by providing squid without the traits of the sample. A party

breaches a contract under Article 35(2)(c) of the CISG when a seller offers a sample and the

goods do not comply with the sample [Henschel, p. 242; Frames for mountain bikes case]. The goods

needed to conform to all the characteristics of the sample under Article 35(2)(c) of the CISG

[Case No. 8 HKO 24667/93]. Fishing’s sales representative, Mr. Weeg, provided Trawler with a

sample that was satisfactory as to size and freshness [Cl. Ex. No. 10]. The average size of the

sample squid was 130 grams and very few items were less than 100 grams [RfA, paras. 13-14].

The laboratory report, however, evidenced that a majority of the delivered squid fell below 100

grams in weight [Cl. Ex. No. 8]. The delivery did not conform to the sample.

C. THE NON-CONFORMITY OF THE SQUID CONSTITUTED A FUNDAMENTAL BREACH PURSUANT TO ART. 25 OF THE CISG

88. The delivered squid did not conform to the explicit and the implicit terms of the contract, was

not fit for the buyer’s particular and communicated purpose and was not in conformity with the

sample Fishing had provided prior to the contract. The majority of the squid was non-

conforming for the intended use as bait and could not be used in any other way [RfA, para. 19-

20; Cl. Ex. No. 8]. Accordingly, Fishing breached the contract to a significant degree. This breach

is fundamental because it substantially deprived Trawler of its legitimate expectations under the

contract (1), and this detriment was foreseeable (2).

1. Trawler was substant ial ly depri ved fr om what i t was ent i t l ed to

89. Trawler gained none of the benefits it expected after having performed its part of the contract

[RfA, para. 20; Cl. Ex. No. 5]. When the injured party is substantially deprived of what it was

entitled to under the contract, such breach is fundamental [Art. 25 CISG; Schroeter in Schlechtriem,

Art. 25 para. 9; Scaffold fittings case; Tiles case].

90. Under Article 25 of the CISG, the expectations of a party must have been evident from the

contract [Enderlein/Maskow, pp. 113-114; Art. 25 para. 3.3 CISG]. Trawler was explicit in stating

the “particular importance” of the size requirement in the communication between the parties



[Cl. Ex. No. 2]. This language demonstrated clearly the fundamentality of the obligation, a

breach of which is fundamental [Koch, pp. 217-218]. In this case, the majority of the squid was

not in the required size range [Cl. Ex. No. 8], and this high percentage of defective goods

constitutes a fundamental breach [Graffi, p.342; Cuttlefish case].

91. Trawler was unable to resell any of the squid as its customers returned the goods and no other

interested buyers could be found for the squid even at a heavy discount [RfA, para. 19-20]. As

the squid could not be sold as bait, Fishing’s breach frustrated the purpose of the contract and

was thus fundamental [Koch, p. 120]. In this case, the squid were frozen and packed in a manner

that it made it difficult for Trawler to separate the conforming squid from the non-conforming

without destroying the squid [RfA, para. 17; Cl. Ex. No. 10, para. 10]. The risk that some squid

might be undersized also alarmed any potential buyers as none could be found despite every

effort [RfA, paras. 19-20]. In the end, except for twenty metric tons the squid was not sellable

through reasonable efforts, adding to the conclusion that Fishing’s breach was fundamental

[Cobalt sulphate case; Meat case]. Trawler, therefore, lost all benefits it was expecting from the

successful completion of the contract.

2. Trawler ’s substant ia l loss was for eseeable

92. Fishing cannot limit its liability since the losses incurred were reasonably foreseeable at the time

of conclusion of the contract [Ferrari, p. 499; CNA Int’l, Inc. v. Guangdong Kelon Electronical Holdings

et al]. Fishing owns a professional fishing fleet that sells squid for bait with expert knowledge of

the common characteristics of squid for bait [Cl. Ex. No. 4]. Therefore, Fishing as a reasonable

merchant should have anticipated the losses that resulted from the non-conformity of such a

large part of the delivered frozen squid. Fishing also knew that the squid was intended to be

resold [Cl. Ex. No. 1], meaning that any detriment from the loss of sales must have been

foreseeable to Fishing.

* * *

93. Conclusion: Fishing breached the contract by delivering squid that did not conform to the size

requirement agreed as required by Article 35 of the CISG. Further, the squid did not meet the

standard set by Articles 37(2)(b) and (c) of the CISG. This breach was fundamental.



IV. TRAWLER HAD THE RIGHT TO RELY ON THE LACK OF CONFORMITY SINCE IT COMPLIED WITH ITS OBLIGATION TO EXAMINE THE GOODS AND TO GIVE PROPER NOTICE

94. Trawler duly inspected the delivered squid (A) and notified Fishing of the non-conformity of

the squid in a timely manner (B).

A. TRAWLER DULY INSPECTED THE DELIVERED SQUID PURSUANT TO ART. 38(1) OF THE CISG

95. Trawler fulfilled its duty to examine the delivered squid as required by Article 38(1) of the CISG.

The chosen methods were reasonable in the circumstances (1), and the inspection was random

(2).

1. Trawler pr oper ly examined the squid under Art . 38 of the CISG

96. Trawler properly examined the delivery on the day the containers containing the squid arrived by

randomly selecting five cartons and defrosting, weighing and visually inspecting the contained

squid. The delivery comprised of twelve containers loaded with 200 metric tons of frozen squid,

out of which five cartons, weighing a total amount of 50 kilos were selected for inspection [RfA

para. 17]. Under Article 38 of the CISG, such an inspection was reasonable in terms of costs,

time and examination method used [Lookofsky, p. 103; Canned food case; Funnel covers case].

97. Where large quantities of goods are delivered in accordance with the contract, it is not necessary

that the buyer examines all the goods, and a random representative suffices [Paperboard containers

case; Live fish case; Blood infusion devices case]. Inspecting a percentage of delivered goods amounting

only to “a few per mille” is sufficient, when the examinations cause substantial damages to the

goods, and assuming that the requirement of randomness is still met [Frozen meat case]. Inspecting

the frozen squid required defrosting it and causing it to lose its value almost completely, being

only suited for use as cheap fishmeal [RfA para. 17; Cl. Ex. No. 10, para. 10]. This squid became

essentially worthless after the inspection. Thus, Trawler reasonably only examined the content of

five random cartons.

98. In addition, Trawler sells and delivers the squid to its customers in the original packaging of

poly-lined cartons stacked on pallets [Cl. Ex. Nos. 4, 10, para. 9]. The pallets must be broken out

in order to inspect individual cartons [Cl. Ex. No. 10, para. 10]. To be resold, the non-used

cartons have to be palletised and poly-lined again, which is both a time-consuming and a costly

procedure [Kavoussanos/Pouliezos, p. 1]. Based on the promised average weight of 130 grams,

Trawler inspected approximately 380 squid that all perfectly conformed to what was agreed



[RfA, para. 17]. The inspected squid conformed precisely to the sample presented prior to the

contract, making it unnecessary to defrost further cartons because the primary results did not

warrant further examinations [Gruber in MüKo, Art. 38 para. 29; Plug-couplings case]. The

examination method was proper under the circumstances of the present case.

2. The randomness o f Trawler ’s se l e c t ion o f car tons did not depend on the fac t whether they wer e labe led as 2007 or 2008 catch

99. Since it was reasonable that Trawler only inspected random samples amounting to a small

percentage of the delivery, it was a question of chance what catches the inspection covered. It

was a mere chance that the random sample did not happen to encompass a carton from the 2008

catch that accounted for 60 per cent of the delivery [Cl. Ex. No. 8]. The cartons themselves were

marked with the year of catch but they were stacked in pallets that had to be broken out to

remove individual cartons. Each of the two containers that Trawler opened upon arrival was

loaded with approximately 1,666 cartons, making it impossible for Trawler to know which catch

it would inspect before undoing the pallet.

100. Reasonable means of examination did not require “fishing” for a certain catch year. The CISG

does not require Trawler to search for cartons labeled 2008. The parties only contracted for one

purchase, namely the purchase of 2007/2008 catch, and the percentage of these catches was

never made known to Trawler [Cl. Ex. No. 4]. As the year of the catch was not a decisive

contract term, the year was neither decisive factor in inspecting the goods.

101. In conclusion, Trawler’s examination method was reasonable and random, and thus in

accordance with Article 38(1) of the CISG.

B. TRAWLER NOTIFIED FISHING ABOUT THE NON-CONFORMITY WITHIN REASONABLE TIME

102. Trawler’s mail to Fishing on 29 July 2008 [Cl. Ex. No. 5] constitutes a timely and proper notice

according to Article 39 of the CISG. Trawler did not discover that the majority of the squid was

undersized upon the initial inspection when the goods arrived. Notice can naturally only be

given when non-conformity is detected and should be given within a reasonable time of this

discovery [Canned food case; Dye for clothes case].

103. When Trawler received reports from two of their customers that the squid was “hardly useable

as bait”, Trawler immediately – on the same day – informed Fishing [Cl. Ex. No. 5]. The

timeliness of this notice is evident [Books case]. Furthermore, Fishing’s actions are the reason why



Fishing only received the final report on the non-conformity of the goods on 16 August 2008,

18 days after the initial notice [Cl. Ex. Nos. 5 and 7]. Fishing requested Trawler to have the squid

inspected by a certified testing agency [Cl. Ex. No. 6], which inspection would naturally cause

delay.

104. Trawler can rely on the fundamental breach of contract by Fishing, since Trawler gave proper

and timely notification as soon as it discovered the non-conformity of the squid through their

clients’ complaints on 29 July 2008. Considering the factors relating to the nature of the goods in

question and the proper inspection method, it was reasonable that the non-conformity was

revealed only at this stage. Additional delay after that date is not attributable to Trawler. In

consequence, Trawler has the right to resort to all remedies under the CISG.

* * *

105. Conclusion: Trawler duly inspected and thus has not lost its right to rely on the non-conformity

of the squid.

V. TRAWLER RIGHTFULLY AVOIDED THE CONTRACT PURSUANT TO ART. 49 OF THE CISG

106. Trawler was entitled to avoid the contract because Fishing’s fundamentally breached the contract

[supra paras. 88-92]. Pursuant to Article 49 of the CISG, a buyer may declare a contract avoided

if the seller’s failure to perform any of its obligations under the contract amounts to a

fundamental breach. As Trawler’s sole purpose for pursuing the contract was foiled, it lost

interest in the performance of the contract [Enderlein/Maskow, p. 113]. Therefore, Trawler had

the right to avoid the contract under the Convention, and did so validly.

107. A party exercising its right to avoid a contract must further give notice of the non-conformity

constituting a fundamental breach and offer the goods to be returned in a substantially

unchanged condition [Magnus, p. 425]. Trawler clearly and timely gave notice of its avoidance (A)

and, at the time of avoidance, offered the goods to be returned in substantially the same

condition as received (B). Consequently, Trawler validly avoided the contract and is entitled to

reimbursement of the purchase price (C).

A. TRAWLER PROPERLY DECLARED THE CONTRACT AVOIDED ON 16 AUGUST 2008

108. Trawler validly declared the contract avoided by its 16 August 2008 letter [Cl. Ex. Nos. 5, 7],

constituting effective notice to Fishing of Trawler’s intent to avoid the contract (1). Trawler



submitted this letter to Fishing within a reasonable time after the discovery of the squid’s non-

conformity (2).

1. Trawler ’s l e t t er was a c l ear dec larat ion o f avoidance

109. Trawler’s letter dated 16 August 2008 to Fishing made it abundantly clear that it intended to

immediately avoid the contract on said date. Avoidance is effective when the other party receives

a notice of the avoidance [Art. 26 CISG]. The CISG does not require the use of any particular

form or language, for example use of the term “avoidance”. A declaration of avoidance is valid

when it is sufficiently clear that the contract is avoided [Enderlein/Maskow, p. 315; Fountoulakis in

Schlechtriem, Art. 26 para. 6; Jacobs, p. 407; GMS modules case].

110. The language clearly demonstrates that Trawler did not intend to keep the squid, as the letter of

16 August 2008 constitutes a clear indication of avoidance [Honnold, Art. 26 para. 187.2].

Trawler’s letter clearly rejected the entire delivery of squid by stating that Trawler was “holding

[the goods] at [Fishing’s] disposition”, that Trawler would rent “additional warehouse space at

[Fishing’s] expense”, and that they would be looking “to sell the squid for [Fishing’s] account”

[Cl. Ex. No. 7]. Each of these actions may only occur after avoidance of a contract [Arts. 86, 88

CISG]. The contents of the letter leave no doubt that Trawler was no longer willing to engage in

this contractual relationship.

2. Trawler ’s avoidance was t imely

111. Trawler timely informed Fishing of the avoidance. Trawler gave notice of avoidance on 16

August 2008 after receiving the laboratory reports confirming the fundamentality of the non-

conformity of the squid [Cl. Ex. No. 9; cf, Müller-Chen in Schlechtriem, Art. 49 para. 34]. Article

49(2)(b)(i) of the CISG requires notification of avoidance to be communicated within a

reasonable time of the injured party learning of circumstances that allow avoidance [Müller-Chen

in Schlechtriem, Art. 49 para. 32; Machinery case]. The reasonableness of the timing depends on the

particulars case [Christmas tree case; Forestry equipment case; Mitsubishi automobile case]. Trawler gave

notice of avoidance within four days after the laboratory results of 12 August 2008 revealed the

fundamental nature of the breach [Cl. Ex. Nos. 7, 8].

112. Trawler communicated avoidance to Fishing on 16 August 2008 [Cl. Ex. No. 7]. Trawler declared

its contract with Fishing avoided within a reasonable time from the date at which the

fundamental nature of Fishing’s breach became known [Cl. Ex. No. 8]. While Trawler learned

that some squid was not useable as bait as required by the contract, it could not give notice of



avoidance until it learned that the breach was fundamental [Art. 49(1)(a) CISG]. The time taken

to determine the fundamentality is explained, firstly, by the squid being out on the open sea and

secondly, by Fishing’s request for time-consuming laboratory examinations [Cl. Ex. Nos. 5, 6, 8].

No excess delay in declaring avoidance can be attributed to Trawler. Trawler’s notification was

timely.

B. FISHING’S REFUSAL TO TAKE BACK THE SQUID DOES NOT BAR TRAWLER’S RIGHT TO AVOID THE CONTRACT

113. Fishing’s fundamental breach gave the right to avoid the contract under Article 49 (1)(a) of the

CISG and was not barred by the requirements of restitution stipulated in Article 82 of the

CISG.

114. Trawler was able to restitute the goods at the time it avoided the contract. For proper restitution,

the goods must be substantially in the same condition as when buyer received them [Art. 82(1)

CISG; Varnish and paint machine case]. When Trawler avoided the contract, the squid in Trawler’s

possession was in substantially in the same condition as received [Cl. Ex. No. 10, para. 12] with

the exception of a limited amount of the goods that were damaged due to Trawler’s duty to

inspect them [RfA, para. 17; Spanish paprika case], some partly having been consumed by Trawler’s

clients [Cl. Ex. Nos. 5, 10, para. 12] and some destroyed in the process of the laboratory

examinations requested by Fishing [Cl. Ex. Nos. 6, 8]. These small losses incurred in the ordinary

course of examination or business action and are covered by the exemptions under Articles

82(2)(a)-(c) of the CISG.

115. The assessment whether the goods were substantially in the same condition as received is carried

out at the moment of avoidance [Honnold, Art. 82, para. 448.1A; Shoes case No. 1]. If the goods

can be restituted at the time of declaring avoidance, the subsequent loss of the goods does not

eliminate the right to avoid [Huber/Mullis, p. 211]. In this case, the moment of assessing whether

Trawler could restitute is 16 August 2008 when Trawler avoided the contract in accordance with

Article 49(1)(a). The subsequent destruction of the goods [RfA, para. 23] is irrelevant in relation

to the right to avoid the contract. Consequently, Trawler had validly avoided the contract.

C. TRAWLER IS ENTITLED TO REIMBURSEMENT OF THE PURCHASE PRICE

116. Trawler validly avoided the contract and is thus entitled to restitution of the purchase price

pursuant to Article 81(2) of the CISG. Trawler duly opened the letter of credit on Fishing’s



request [Cl. Ex. No. 4] and Fishing thus received the whole purchase price 30 days from the bill

of lading date [Cl. Ex. No. 4].

117. After the contract was avoided and pursuant to Trawler’s attempt to restitute the goods, Fishing

had a contractual duty to take back the goods [Fountoulakis in Schlechtriem, Art. 81 para. 33; Shoes

case No. 2]. Fishing rejected Trawler’s restitution attempts on several occasions and thus failed its

contractual obligation to take back the goods [CISG-AC Opinion No. 9, para. 3.17]. In such

situations, the buyer is entitled to reimbursement of the purchase price irrespective of whether

or not the seller takes back the goods [Dust ventilators case]. Fishing refused to take back the

goods, and consequently Trawler was bound by the obligation to mitigate the loss [Koneru, p.

146]. As the squid was losing almost all of its marketable value, the related storage costs became

disproportionate to the value of the goods [PO No. 3, Clar. Q. 29]. Due to this, Trawler was

under the duty to dispose of the goods to mitigate the storage costs [RfA, para. 23].

Subsequently, restitution of the goods could not be longer demanded of Trawler in good faith

[Koneru, p. 146]. Trawler is thus entitled to restitution of the purchase price of the squid

irrespective of whether or not Trawler actually restituted the squid.

* * *

118. Conclusion: Fishing’s fundamental breach gave Trawler the right to avoid the contract under

the CISG. Trawler did so validly by providing an effective and timely notice of avoidance to

Fishing, and by holding the squid at Fishing’s disposal. Therefore, Trawler is entitled to receive

restitution of the purchase price of the squid pursuant to the CISG.

VI. TRAWLER IS ENTITLED TO DAMAGES FOR ACTUAL LOSS AND LOST PROFITS

119. In addition to the reimbursement of purchase price due to avoidance, Trawler is entitled to

recover damages for loss of profits, incurred as a result of the breach, (A) and for mitigation

costs (B) pursuant to Articles 45(1)(b) and 77 of the CISG, respectively.

A. TRAWLER IS ENTITLED TO DAMAGES FOR LOST PROFITS

120. Fishing’s fundamental breach caused negative consequences and Trawler is therefore entitled to

recover all incurred damages in addition to the reimbursement of the purchase price [Art. 45(2)

CISG; Enderlein/Maskow, p. 175; Automobile catalyst case; Shoe leather case]. Under Article 74 of the

CISG, the injured party is entitled to foreseeable damages [Enderlein/Maskow p. 300; Gotanda, p.

81; Magnus in Staudinger, Art. 74, para. 36].



121. Fishing should reasonably have foreseen the consequences of its breach. Trawler communicated

that the squid would be used to supply customers with bait, thus the profits from sales were fully

expected. Under these circumstances, a reasonable party in the Fishing’s position would have

foreseen the loss of profits as a result of delivering non-conforming squid, particularly as

Fishing is an experienced retailer [SoD, para. 2; PO No. 3; Clar. Q. 26].

122. Trawler is also entitled to recover storage costs arising as a result of its attempts to preserve the

squid [Bernstein/Lookofsky, p. 134]. According to Article 86(1) of the CISG, a buyer who is bound

to take steps to preserve the goods may deposit them with a third party at the expense of the

other party, provided that the expense incurred is not unreasonable [Huber/Mullis, p. 364]. If the

party stores and sells the goods itself, it must be allowed to charge an appropriate compensation

for these services [Huber in MüKo, Art. 85 para.14].

123. In the letter of 18 August 2008, Trawler informed Fishing that it would be holding the squid at

Fishing’s disposition for purposes of restitution [Cl. Ex. No. 7]. The storage costs amounted

approximately to 15 per cent of the actual value of the goods at the time of purchase [RfA, para.

30], as Trawler stored the squid for approximately nine months [RfA, para. 22]. Pursuant to

Article 86(1) of the CISG, Trawler is entitled to be reimbursed for the reasonable storage costs

of squid.

B. TRAWLER IS ENTITLED TO MITIGATION COSTS

124. Trawler had the duty to mitigate its loss, and is now entitled to costs incurred in reasonable

efforts of mitigation [Arts. 77, 45(1)(b) CISG]. Where reasonable measures to mitigate the losses

have been taken, the buyer can claim the resulting costs [Huber in MüKo, Art. 77 para. 12; Cooling

System Case]. Thus the additional costs relating to the reasonable measures of mitigation can be

claimed from the party in breach [Zeller, p. 106].

125. Should the storage costs rise to an unreasonable level, in fact a duty to attempt to sell the goods

arises [Art. 88(2) CISG; Shoes case No. 3]. Here, the storage costs amounted to a level amounting

to 15 per cent of the purchase price of the goods [RfA, para. 30]. This amounts to unreasonable

level.

126. Trawler attempted to sell the squid inside and outside Mediterraneo in order to reduce the

storage costs, given Fishing’s persistent refusal to co-operate in the restitution of the squid.

Trawler tried to sell the squid for Fishing’s account to other fishing vessels [Cl. Ex. No. 10 para.

14], for human consumption [Cl. Ex. No. 10, para. 15], and even employed the help of a third-



party retailer for attempts at sale in foreign markets [Cl. Ex. No. 10, para. 15]. Trawler’s attempts

to sell were appropriate measures to reduce costs that could be expected from a reasonable

businessman. Trawler can accordingly claim the costs for this reasonable measure of mitigation.

127. Most importantly, the squid was quickly becoming unfit for human consumption, meaning that it

was effectively losing all of its marketable value [PO No. 3, Clar. Q. 29]. The storage costs

became increasingly disproportional to the squid’s actual value [PO No. 3, Clar. Q. 30]. Trawler

also needed storage place for a new delivery of squid it had purchased in large quantities due to

the short harvesting period [RfA, para. 8]. The CISG allows for destroying non-conforming

goods when they cannot be sold, and such mitigation costs are recoverable under the CISG [WS

China Import GmbH v. Longkou Guangyuan Food Company]. Trawler’s only recourse in light of the

circumstances was to destroy the squid, as it would have been unreasonable to store unsellable

squid with no commercial value when storage place was needed [PO No. 3, Clar. Q. 30].

Therefore, in order to mitigate the costs for storage, the squid eventually had to be destroyed.

Trawler requests damages for their disposal.

128. Trawler as a prudent business entity took every reasonable measure to minimize the losses

arising as a consequence of Fishing’s refusal to take back the squid after the avoidance of the

contract [Cl. Ex. No. 7; RfA, para. 23]. Trawler is therefore entitled to mitigation costs.

* * *

129. Conclusion: Trawler’s losses arising from Fishing’s breach were foreseeable. Trawler also made

reasonable attempts to mitigate these losses and is thus entitled to damages in connection to

Fishing’s breach.

130. CONCLUSION ON THE MERITS: The Tribunal should decide that pursuant to the provisions of

the CISG, Fishing fundamentally breached the contract of sale by delivering non-conforming

squid. Thus, Trawler validly avoided the contract in its entirety and is entitled to reimbursement

of the purchase price, damages, interest, and costs of arbitration.

VII. REQUEST FOR RELIEF

131. In light of the submissions made above, Trawler respectfully requests the Tribunal to:

(1) find that the Tribunal has jurisdiction to decide on the matter;

(2) reject the challenge to Mr. Horace Z.;

(3) find Fishing’s counter-claim to be without merit;



(4) reject Fishing’s request for interim relief;

(5) declare that the Fishing breached the contract by failing to comply with its contractual

obligations;

(6) find that Fishing’s breach was a fundamental breach, authorizing Trawler to avoid the

contract in its entirety;

(7) award Trawler full damages for breach of contract in the amount set out in the Request for

Arbitration, plus interest.

Respectfully signed and submitted by counsel on 9 December 2010,

______/s/___________

Lilja Gumrich

______/s/___________

Heidi Paananen

______/s/___________

Daniela Palacios

______/s/___________

Maria Teder

______/s/___________

Ewelina Wetrys

on behalf of Claimant:

Mediterraneo Trawler Supply

#1 really this is it final final 9 deckluwer law international, the netherlands, 2003 66 lookofsky...

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