counsel for respondent
TRANSCRIPT
INTERNATIONAL
CONSTRUCTION
ARBITRATION
MOOT
MEMORANDUM FOR RESPONDENT
COUNSEL FOR RESPONDENT
ON BEHALF OF:
AGAINST:
Employer
(From Commonia)
Contractor
(From Civilia)
RESPONDENT
CLAIMANT
i
Table of Contents
TABLE OF ABBREVIATIONS ......................................................................................................................... iii
TABLE OF AUTHORITIES ................................................................................................................................ iv
STATEMENT OF FACTS .................................................................................................................................... 1
TIMELINE OF EVENTS ...................................................................................................................................... 3
SUMMARY OF ARGUMENTS ........................................................................................................................... 4
ARGUMENTS ........................................................................................................................................................ 6
I. ISSUE 1: THE PARTIES DO NOT HAVE VAILD ARBITRATION AGREEMENT BETWEEN
THEM ...................................................................................................................................................................... 6
A. Arbitration Agreement is Invalid under UNCITRAL and RAC Rules................................................. 6
1. Claimant did not Adhere to Arbitration Clause .................................................................................. 6
2. Arbitration Clause does not fulfil formal requirements of International Arbitration .................... 7
B. Arbitration Clause does not refer to the Russian Arbitration Centre ................................................... 7
1. Parties’ intention was to choose an institution used primarily for international arbitration ......... 8
2. Interpretation does not lead to the conclusion that the Russian Arbitral Institution refers to
Russian Arbitration Centre ........................................................................................................................... 8
3. There is Substantial difference between the arbitration clause in contract and the Model Clause
of RAC. ............................................................................................................................................................ 8
C. Answer to Request for Arbitration does not indicate the validity of arbitration Agreement ............. 9
D. Even if Arbitration agreement is valid, preconditions to arbitration have not been fulfilled. ............ 9
E. Russian Arbitration Center is authorized to determine its own jurisdiction even if Respondent fails
to challenge. ....................................................................................................................................................... 10
II. ISSUE 2: CLAIMANT DID NOT TAKE REASONABLE STEPS TO RESOLVE THE DISPUTE
AMICABLY. ......................................................................................................................................................... 10
A. Condition precedent of multi-tier arbitration clause was not satisfied ............................................... 11
B. Claimant did not respond to Pre-trial by Respondent .......................................................................... 11
C. Claimant raised baseless argument of raising issue of pre-arbitral steps at time of filing request... 11
D. Demanding a waiver from Respondent is not reasonable step to resolve dispute amicably. ............ 12
E. Not a single Reasonable step was taken by claimant ............................................................................. 12
F. Claimant did not file request with consultation of Respondent ........................................................... 13
G. “To take reasonable steps to resolve dispute amicably” is a mandatory clause ................................. 13
H. “To take reasonable steps to resolve dispute amicably” is enforceable ............................................... 13
I. Burden lies on both parties ...................................................................................................................... 14
J. No one should be given excessive advantage .......................................................................................... 14
K. RAC Rules recommend pre-trail negotiations or mediation ................................................................ 14
ii
III. Issue 3: Respondent is entitled to recover the costs associated with preparing for the jurisdictional
hearing that was adjourn. .................................................................................................................................... 15
A. Respondent has right to recover costs under the UNCITRAL, RAC Rules and UNIDROIT
Principles ........................................................................................................................................................... 15
1. Laws does not prevent entitlement to recover costs for adjourned hearing ................................... 15
2. Claimant exercised his due process right in bad faith ...................................................................... 16
B. Cost follows Conduct principle is recognized in Arbitration ............................................................... 16
C. Parties should be treated equally ............................................................................................................ 16
D. Extra expense occurred of Respondent due to adjourned hearing ...................................................... 16
E. Respondent Supports Cost follows event ............................................................................................... 17
F. Delay caused by Claimant could have been avoided ............................................................................. 17
IV. ISSUE 4: THE RESPONDENT IS ENTITLED TO A COMPLETE INDEMNITY FOR THE
COSTS OF PREPARATION AND PRESENTATION OF ITS DEFENCES EVEN IF THE TRIBUNAL’S
JURISDICTION IS NOT DEVELOPED ........................................................................................................... 17
A. The plea for challenging jurisdiction can be made at the procedural stage: ...................................... 18
B. The ‘loser pays’ rule is not only applicable if the respondent loses: .................................................... 18
V. ISSUE 5 ......................................................................................................................................................... 19
A. ISSUE 5(A): THE LIABILITY FOR THE PREPARATION OF A NEW DESIGN
CORRESPONDING TO A NOVEL SITUATION FALL ON THE SHOULDER OF CONTRACTOR.
19
1. The respondent did not lay extra burden on the claimant: .............................................................. 19
2. The contractor cannot be let go of his responsibility if a new situation is emerged ....................... 19
3. The contractor is not liable for time-related costs for the unexpected design difficulty. ............... 19
B. ISSUE 5 (B): THE CONTRACTOR HAD NOT THE RIGHT TO RECOVER THE
TIMERELEATED COSTS INCURRED DURING THE COURSE OF NEGOTIATION WITH THE
EMPLOYER. .................................................................................................................................................... 20
1. The claimant is not facing hardship ................................................................................................... 20
2. The claimant was not allowed to stop the work, fearing non-performance by respondent if any 20
3. The claimant was not entitled to waiver ............................................................................................. 21
C. ISSUE 5 (C): CLAIMANT BEARS THE COSTS FOR ADMINISTRATIVE MOBILIZATION. . 21
1. The mobilization works fall under the duty of the claimant ............................................................ 21
VI. ISSUE 6: THE EMPLOYER IS ENTITLED TO CREDIT FOR THE ANTICIPATED WORK. .. 22
A. The claimant is liable for any delays and defects during the construction work ............................... 22
B. The claimant is not allowed to nonperformance if the work is sophisticated ..................................... 22
C. The employer can ask for the credit for the flawed job performed by the contractor ...................... 22
REQUEST FOR RELIEF.................................................................................................................................... 23
iii
TABLE OF ABBREVIATIONS
¶/¶¶ Paragraph/Paragraphs
Art./Arts. Article/Articles
Claim. Memo Claimant Memorandum
Clar. ICAM Clarifications 2021
GC General Conditions
ICC International Chamber of Commerce
No. Number
NYC The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards
p./pp. Page/Pages
PC Particular Conditions
Prob. ICAM Problem 2021
RAC Russian Arbitration Center
RAC Rules RAC Arbitration Rules
RIMA Russian Institute of Modern Arbitration
UNCITRAL UNCITRAL Model Law on International Commercial Arbitration with 2006
amendments
UNIDROIT UNIDROIT Principles of International Commercial Contracts, 2016
iv
TABLE OF AUTHORITIES
PRIMARY SOURCES
Cited as Full Citation Cited in ¶/¶¶
NYC
Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (New
York, 1958.
26
RAC Rules Russian Arbitration Center’s Arbitration Rules
15-17,22-
25,31,37,39,42,
43,45,47,53,54,62,71-
76,79,85,87,88,91.
UNCITRAL UNCITRAL Model Law on International
Commercial Arbitration with the 2006
amendments
15,17,22-
26,36,42,45,53,75,78,82-
84,87,90
UNIDROIT UNIDROIT Principles of International
Commercial Contracts (2016)
17,70,74,87,94,97,98,99
CASES
Cited as Full Citation Cited in ¶/¶¶
McCron Case
Canada
Birtzu v McCron, 2019 ONCA 777
91
Düsseldorf Case
Germany
Oberlandesgericht Düsseldorf; 14 January 1994
17U 146/93
52
NTPC v Singer Case
India
National Thermal Power Corporation v Singer Co.
and Ors, Supreme Court of India, 7 th May, 1992.
1992 3 SCC, 551.
36
Board of Intermediate
Case
Pakistan
Board of Intermediate and Secondary Education,
Multan v. Fine Star & Company, Engineers and
Contractors [1993 SCMR 530],
64
Hanover Case
Hanover Contractors v. Pakistan Defence Officers
Housing Authority [2002 CLC 1880]
64
Pak. U.K. Association
Case
Pak. U.K. Association (Pvt.) Ltd. v. Hashemite
Kingdom of Jordan [2017 CLC 599]
56
v
WAPDA Case
WAPDA v. S.H. Haq Noor and Company [2008
MLD 1606]
64
International Research
Corp Case
Singapore
International Research Corp PLC v. Lufthansa
Systems Asia Pacific Pte Ltd [2013 SGCA 55]
57
Singapore High Court
case
Singapore High Court case of HKL Group Co Ltd
v Rizq International Holdings Pte Ltd, [2013]
SGHCR 5
26
Swizz Case
Switzerland
(4A_628/2015) 2016
58
Cable & Wireless Case
United Kingdom
Cable & Wireless v IBM United Kingdom
60
Emirates Trading Case
Emirates Trading Agency LLC v. Prime Mineral
Exports Private Ltd [2014 EWHC 2104 (Comm)]
57
Emirates Trading Case
Emirates Trading Agency LLC v Prime Mineral
Exports Private Ltd [2014] EWHC 2104 (Comm)
61
Paradine Case
Paradine v Jane (1647) EWHC KB J5
104
Steamboat Case
Herne Bay Steamboat Co. v Hutton (1903) 2 KB
683
99
United Group Rail Case
United Group Rail Services Limited v. Rail
Corporation New South Wales [2009 NSWCA
177]
57
William Case
William Cory & Son v Wingate Investments,
(1980) 17 BLR 109
105
Street-Car Case
United States
Klauber v. San Diego Street-Car Co.(1893), 95
Cal. 353
99
Transatlantic Case
Transatlantic Fin. Corp. v. United States - 124
U.S. App. D.C. 183, 363 F.2d 312 (1966)
96
AWARD
ICC Award 6276 ICC International Court of Arbitration, Arbitral
Award 1990, ICC Case No. 6276
48
LETCO Case LETCO v. Liberia, ICSID Case No. ARB/83/2, para.
378
74
vi
SECONDARY SOURCES
Cited as Full Citation Cited in ¶/¶¶
Berg Albert Jan van den Berg, The New York
Arbitration Convention of 1958: Towards a
Uniform Judicial Interpretation, Deventer:
Boston: Kluwer Law and Taxation 1981
80
Blackaby/Partasides Nigel Blackaby, Constantine Partasides
with Alan Redfern and Martin Hunter,
Redfern and Hunter on International
Commercial Arbitration (5th Ed.) (New
York, Oxford University Press: 2009).
42
Born Gary B. Born, International Commercial
Arbitration Kluwer Law International: New
York, 2nd edn. (2014), pp. 779-780.
28,36,80
BORN Gary Born, International Commercial
Arbitration Austin (2009)
42
Delvolvé/Jean/Gerald Jean-Louis Delvolvé, Jean Rouche and
Gerald H. Pointon, French Arbitration Law
and Practice: A Dynamic Civil Law
Approach to International Arbitration (2nd
ed, Kluwer Law International 2009), pp.
65-67 and Blackaby, n 5, pp. 146-149
27
Derains/Schwartz Derains, Schwartz; Eric A Guide to ICC
Rules of Arbitration, 2nd Ed. Hague (2005)
34
DOUG JONES DOUG JONES, Using Costs Orders to
Control the Expense of International
Commercial Arbitration, The International
Journal of Arbitration, Mediation and
Dispute Management, 2016, p. 298 et seq
81
FOUCHARD/GAILLARD/GOLDMAN Fouchard, Philippe Gaillard, Emmanuel
Goldman, Berthold; On International
Arbitration 1st Edition 1999, Kluwer Law
International, The Hague.
33, 36, 41,44
Frédéric Eisemann
(Frédéric Eisemann, ‘La clause d’arbitrage
pathologique’ in Commercial Arbitration
Essays in Memoriam Eugenio Minoli
(Torino: Unione Tipografico-editrice
Torinese 1974)
27
vii
Gaillard/Savage Emmanuel Gaillard, John Savage,
Fouchard Gaillard Goldman on
International Commercial Arbitration,
Kluwer Law International (1999)
80
Honnold/Fletcher John O Honnold, Harry Flechtner, Law for
International Sales under the 1980 United
Nations Convention Wolters Kluwers Law
& Business (2009)
52
ICC ICC Case No. 11490 in Albert Jan van den
Berg (ed), Yearbook Commercial
Arbitration, vol. XXXVII (Kluwer Law
International 2012), p. 35.
48
ICC COMMISSION REPORT ICC COMMISSION REPORT, Decisions
on Costs in International Arbitration, ICC
Disp. Resolution Bull 2015/2, para. 78-84,
and Appendix A, p. 23
81
POUDRET, BESSON Comparative Law of International
Arbitration 2nd ed. Zurich (2007)
41
REDFERN, HUNTER Alan Redfern, Martin Hunter, Law and
Practice of International Commercial
Arbitration, 4th Ed. London (2004)
42
Schlectriem/Schwenzer Peter Schlechtriem, Ingeborg Schwenzer,
Commentary on the UN Convention on the
International sale of Goods (CISG), Oxford
University Press (2005)
52
UNIDROIT COMMENTARY Commentary on UNIDROIT Principles of
International Commercial Contracts, Rome,
2010
70
1
STATEMENT OF FACTS
1. The employer (respondent) from Commonia hires a contractor (claimant), from Civilia. for the
construction of a flood alleviation culvert of 1.5 km in length and 2.4 m in diameter. The culvert was to
be constructed beneath the four-lane highway.
2. A dispute arose after the commencement of construction when uncontemplated 150-year-old iron cast
water main of 1.07m diameter running under the main road was discovered. This iron cast water main
was running at a short distance above the culvert.
3. The information about a similarly aged brick oval main sewer was given by the employer to the
contractor. The contractual price included the stabilizing work for the brick-built water sewer.
4. The water main was discovered during the 3rd week of the construction. It took further 3 weeks to find
its exact position. Then it took 12 more weeks to find a solution acceptable to the statutory water and
local authorities for safely protecting the water main. During these 12 weeks, 7 weeks were passed
preparing the design and 5 weeks for obtaining approvals.
5. The work was stopped during all this time except for an unsuccessful attempt of fiberglass lining
around the brick sewer and it is delayed further because before commencing the stabilization work for
the water main, the contractor seeks a waiver from the Employer for any risk arising from this additional
work. The employer showed reluctance as the contractor is responsible for the ground risks.
6. There is a delay of 3 more weeks before the employer reluctantly gives the waiver. The additional
temporary works last for 8 weeks and the total delay of work is 26 weeks.
7. Due to the huge delay the employer argues the contractor’s entitlement to time-related costs arising
and seeks credit for the additional temporary works required on the basis that the contractor was
responsible for the in-ground risks, so any delay is the contractor’s risk. Secondly, the contractor’s
originally intended work for sewer failed so a similar solution to that of water mains was required
anyway. The contractor should not have delayed construction until the employer signed the waiver.
8. It was agreed by both the parties in the contract to take all reasonable steps to resolve the dispute
amicably, at first and if they choose to arbitrate, they will go to Russian Arbitral Institution. Contractor
bypassed the pre-arbitral steps and directly filed request for arbitration to Russian Arbitration Centre.
9. In his submission before the tribunal, the employer denied the liability for time-related costs and
claimed credit for the temporary works that would always have been required for the brick sewer. The
employer also challenged the jurisdiction of the arbitral tribunal on the basis that parties did not choose
RAC as the administering institution.
10. The employer requested the tribunal for the jurisdictional issue to be heard first to save the cost of
preparing the cases and to keep the merits of the case from being heard until the Tribunal's locale was
established.
2
11. Due to travel restrictions in the covid pandemic, the tribunal decided to hold the preliminary hearing
on jurisdiction through videoconference. The employer objected, saying that he was entitled under the
arbitration agreement and the RAC Rules to an in-person hearing at the hearing venue. Despite this
objection, the Tribunal ordered a videoconference hearing to determine jurisdiction
12. Three days before the hearing on jurisdiction, the spouse of the Claimant’s counsel contracted Covid-
19. Counsel along with his family was obligated to isolate in their apartment and could not attend the
video hearing.
13. The claimant moved an application for the adjournment of the jurisdictional hearing but with no other
timeslot available between then and the main hearing, the Tribunal indicated to parties that granting the
adjournment could result in the jurisdictional challenge at the outset of the main evidentiary hearing.
14. Claimant maintained its application and the jurisdictional challenge was left to be determined at the
main evidentiary hearing, the Respondent added to its plea a claim for wasted costs, both for the delay
in the jurisdictional determination and for the preparation of the main evidentiary hearing if the Tribunal
finds itself without jurisdiction.
3
Week 3
• Existance of the water main is discovered in week 3 of construction of the culvert.
Next 3 Weeks
• Survey and ascertainment of exact position of the water main. Work is suspended.
Next 12 Weeks
• Arrive at solution acceptable to the statutory water authority and the local authoirty. 7 Weeks for Preparing Designs & 5 Weeks for Approval to be obtained.
Next 3 Weeks
• Employer refusal to give waiver for any risk arising from additional work. Work is dealyed.
Next 8 Weeks
• Additional Temporary Work
Total Delay
• The total dealy to re-commencement of the tunnel boring work is 26 Weeks.
1.5 month gap
• Gap between the Employer's Pre Trial Letter and Contractor's request for arbitration.
2 Month gap
• Gap between the video conference hearing scheduled (and consequently adjourned) and the main hearing scheduled after that.
TIMELINE OF EVENTS
4
SUMMARY OF ARGUMENTS
15. The Respondent respectfully submits that the parties do not have a valid arbitration agreement, and
the Russian Arbitration Center does not have the requisite jurisdiction to settle the dispute. Arbitration
agreement is invalid under UNCITRAL and RAC rules. Arbitration Clause does not refer to RAC as
arbitral institution. Claimant did not Adhere to Arbitration Clause. Arbitration Clause does not fulfil
formal requirements of International Arbitration. Arbitration Clause is Ambiguous, defective, unclear
and does not mention seat, applicable rules, and procedure. Answer to Request for Arbitration does not
indicate the validity of arbitration Agreement. Even if there is valid arbitration agreement, the
preconditions to arbitration have not been fulfilled. The Tribunal has the right to decide on its own
jurisdiction and Respondent requests the Tribunal to decide that it has no jurisdiction over the dispute.
[I].
16. Claimant did not take reasonable steps to resolve the dispute amicably. Condition precedent of multi-
tier arbitration clause was not satisfied, Claimant did not respond to Pre-trial by Respondent. Claimant
raised baseless argument of raising issue of pre-arbitral steps at time of filing request. Demanding a
waiver from Respondent is not reasonable step to resolve dispute amicably. Not a single Reasonable step
was taken by claimant. Claimant did not file request with consultation of Respondent. “To take
reasonable steps to resolve dispute amicably” is a mandatory clause. “To take reasonable steps to resolve
dispute amicably” is enforceable. Burden lies on both parties. No one should be given excessive
advantage and RAC Rules recommend pre-trail negotiations or mediation. [II].
17. The respondent is entitled to recover the costs associated with preparing for the jurisdictional hearing
that was adjourned. Respondent has right to recover costs under the UNCITRAL, RAC Rules and
UNIDROIT Principles. Laws does not prevent entitlement to recover costs for adjourned hearing.
Claimant exercised his due process right in bad faith. Cost follows Conduct principle is recognized in
Arbitration. Parties should be treated equally. Extra expense occurred of Respondent due to adjourned
hearing. Respondent Supports Cost follows event. Delay caused by Claimant could have been avoided.
[III].
18. The claimant initiated the proceedings before the tribunal without opting for any amicable resolution.
The arbitration clause clearly stated the prerequisite of the friendly resolution before matter can be taken
up before the tribunal. As a response to the claimant’s wantonly request for the arbitration, the respondent
filed a counterclaim as the last option to still convince the claimant to resort to a mutual friendly
resolution. However, even this step could not convince the claimant to sit for talks which led the
respondent to challenge the jurisdiction of the tribunal in the very next procedural document. As the case
was taken up by the claimant before the tribunal, the respondent is fully liable to be indemnified for the
costs and fees of the arbitration and for presenting the case on the merits of the dispute when the tribunal
finds itself without jurisdiction. [IV].
19. Since the conditions stipulated in the contract, i.e., GC-21, GC-22(B), PC-21, make it the
responsibility of the claimant to have himself satisfied regarding all the risks and novel situations that
may arise during the course of construction. Therefore, the claimant cannot shift the burden on the
shoulders of the respondent. The risk taken by the claimant was foreseen, hence the doctrine of ‘hardship’
cannot be invoked. Also, the mobilization work falls under the duty of the claimant as a normal course
of business. The claimant, consequently, is not entitled to recover time-related costs incurred during
5
identifying acceptable additional temporary works engineering solution, obtaining waiver from the
employer, and mobilizing the additional temporary works solution. [V].
20. The claimant failed to provide a workable solution for the intended safety work required for the water
sewer, although the contractual price deemed to include it. Though the failed intended safety solution
was a defect on part of the claimant in performing his responsibility, the respondent still agreed to
reimburse for the temporary safety works required for the water main. The mala fide intention of claimant
was obvious when he argued that his liability to provide an alternative solution for the failure to
accomplish his task was not the common intention of the parties. Therefore, the respondent, on the basis
of reimbursement principle developed in the Wingate Investments case, is entitled to credit for the less
extensive temporary works that would always have been required to support the brick sewer. [VI].
6
ARGUMENTS
I. ISSUE 1: THE PARTIES DO NOT HAVE VAILD ARBITRATION AGREEMENT
BETWEEN THEM
21. The dispute is between the respondent who is employer and the claimant who is contractor in this
case and is about the validity of the arbitration agreement. Employer (Respondent) challenges the
jurisdiction of the arbitral tribunal on the basis that parties did not choose RAC as administering
institution. However, even if the arbitration clause is valid the protracted dealings between the Parties on
these issues cannot be considered reasonable steps taken to resolve the dispute amicably.
22. Claimant puts forth three arguments to show that the Tribunal should have jurisdiction and there is a
valid arbitration agreement. First, Claimant relies on the UNCITRAL and RAC Rules to demonstrate
that there is a valid arbitration clause. Second, it claims that it was the Parties’ intention was to choose
the RAC as the relevant arbitration institution, and third that response to request for arbitration made by
claimant indicated that respondent did recognize the validity of the Arbitration agreement [Claim. Memo.
P. 10].
23. The Respondent submits that all three arguments made by claimant are incorrect. The parties did not
have valid arbitration agreement and the Russian Arbitration Center does not have the requisite
jurisdiction to settle the dispute because: (A) Arbitration agreement is invalid under UNCITRAL and
RAC rules; (B) Arbitration Clause does not refer to RAC as arbitral institution; (C) Answer to Request
for Arbitration does not indicate the validity of arbitration Agreement; (D) Even if there is valid
arbitration agreement, the preconditions to arbitration have not been fulfilled; and (E) The Tribunal has
the right to decide on its own jurisdiction and Respondent requests the Tribunal to decide that it has no
jurisdiction over the dispute.
A. Arbitration Agreement is Invalid under UNCITRAL and RAC Rules
24. Contrary, to Claimant’s assertion, Respondent will prove that the Clause is pathological and invalid
under UNCITRAL and RAC rules because: (1) Claimant did not adhere to arbitration clause (2)
Arbitration clause does not fulfil formal requirements of International Arbitration.
1. Claimant did not Adhere to Arbitration Clause
25. Claimant claims that the validity of the agreement will depend on whether the parties adhered to the
provisions of UNCITRAL Model Law, RAC rules and the contract’s arbitration clause [Claim. Memo, ¶
1, p.10]. Claimant itself did not fulfil the above requirement as both the parties should agree before they
move towards arbitration. The UNCITRAL Art. 7 Option I explicitly require for consent of the parties.
Further that, parties never choose RAC as arbitral institution in arbitration clause. Claimant did not follow
the pre-arbitral steps; hence, claimant itself did not adhere to arbitration clause.
7
2. Arbitration Clause does not fulfil formal requirements of International Arbitration
26. The Respondent argues that agreement to arbitrate is invalid because it is ambiguous, defective,
unclear, inoperative and does not mention seat, applicable rules, and procedure. Arbitration agreement
will be declared invalid if it is inoperative or incapable of being performed [Art. II (3) NYC; Art. 8(1)
UNCITRAL]. Singapore High Court case which involved a good example of how a badly drafted
arbitration clause increases uncertainty, time and costs for the parties involved. This was because the
arbitration clause in issue was a so-called pathological arbitration clause i.e., a defective arbitration
clause. Clause might be so defective such that it cannot be enforced as an arbitration clause at all.
a) Arbitration Clause is Ambiguous
27. If arbitration agreement is incomplete, ambiguous, incoherent, or contradictory it should not be given
effect and is invalid [Frédéric Eisemann; Delvolvé/Jean/ Gerald].
b) Arbitration Clause is Defective
28. Agreement does not comply with the formal requirements of the law governing the arbitration
agreement. The arbitration agreement is defective as agreement refer to an incorrectly described or a non-
existent arbitral institution or a set of arbitration rules [Born]. Arbitration agreement is inoperative
because it does not state that arbitral tribunal has jurisdiction to hear all disputes relating to the
Agreement.
c) Arbitration Clause is unclear
29. The Tribunal will notice that the Clause differs from the Model Clause. The Clause is so unclear as
to the selected institution and rules that it is impossible for a reader to detect the Parties’ intention, or for
there to be a quick and effective arbitration. Therefore, the Clause frustrates an effective settlement of
the dispute between the Parties and must be considered as incurable and ineffective.
d) Arbitration Clause does not mention seat, applicable rules, and procedure
30. The requirement that the agreement should address issues such as the place of arbitration, the
applicable rules of procedure, the language of the arbitration or the number of arbitrators and the method
pursuant to which they are to be appointed is not fulfilled in arbitration clause in contract.
B. Arbitration Clause does not refer to the Russian Arbitration Centre
31. Arbitration agreement provides that “The Parties agree to resolve all disputes that may arise between
them by arbitration in Russian arbitral institution.”. [Prob., ¶1, p.4]. Claimant asserts that the Parties
intended to choose RAC. However, Respondent claims that the Clause does not refer to RAC for the
following reasons, (1) Parties intention was to choose an institution used primarily for international
arbitration (2) Interpretation does not lead to the conclusion that the Russian Arbitral Institution refers to
Russian Arbitration Centre and (3) There is substantial difference between Arbitration clause in contract
and Model Arbitration clause in RAC Rules.
32. Claimant referred to Hiscox Dedicated Corporate Member v Weyerhaeuser Co [Claim. Memo., ¶2,
P. 10] which is irrelevant to this case because there the question was whether to pursue claim before the
District Court, or to go for arbitration. But in present case, it is unclear which arbitration institution is
meant and which procedure should be followed. The contention of Claimant that parties choose RAC as
Russian Arbitral institution is totally wrong.
8
1. Parties’ intention was to choose an institution used primarily for international
arbitration
33. In international commercial arbitration it is also a general concept that there should be arbitrational
clause that refers the arising dispute to the arbitration center. According to the principle of interpretation
in good faith, the Parties’ intention was to choose an institution used primarily for international
arbitration. The principle of interpretation in good faith means that the parties’ true intention should
prevail over their declared intention [Fouchard/Gaillard/Goldman]. It states that “when interpreting a
contract, one must look for the parties’ common intention” [Fouchard/Gaillard/Goldman, p. 257].
34. Where the parties involved in an arbitration clause are of different nationalities with no connection
to the place specified in the arbitration clause, tribunals tend to assume that it must have been their wish
to refer their disputes to an institution used primarily for international arbitration [Derains/Schwartz].
The Parties in this case have different nationalites, Commonia and Civilia, and have no connection to the
place specified in the Clause, Russian arbitral institution. It must therefore be assumed that they wished
to refer their disputes to an institution used primarily for international arbitration.
35. Derived from the principles of interpretation applied to arbitration agreements: according to the
principle of interpretation in good faith, the Parties intention was to choose an institution used primarily
for international arbitration. Consequently, the Clause does not refer to the RAC. The most popular and
reliable arbitral institution in Russia for international disputes is the International Commercial Arbitration
Court at the Russian Federation Chamber of Commerce (ICAC). Parties might have intention to choose
the International Commercial Arbitration Court at the Russian Federation Chamber of Commerce
(ICAC) or any other arbitral institution. In any event, the Clause must be interpreted against Claimant
because he itself choose the arbitral institution without consulting respondent.
2. Interpretation does not lead to the conclusion that the Russian Arbitral Institution
refers to Russian Arbitration Centre
36. The interpretation of the arbitration agreement is governed by the law of seat of arbitration [Born p.
489; NTPC v Singer Case], which in the present case is the UNCITRAL Model Law. [Clar., ¶3, p. 3].
According to the principle of effective interpretation, arbitration clauses selecting an inadequately
defined institution can still remain effective when only one such institution exists, i. e. where the
institution can be identified with a sufficient degree of certainty [Fouchard/Gaillard/Goldman, p. 264]
However, the principle of effective interpretation in this case does not lead to the conclusion that the
Russian Arbitral Institution refers to Russian Arbitration Centre.
3. There is Substantial difference between the arbitration clause in contract and the
Model Clause of RAC.
37. RAC provides the standard recommended arbitration clause [RAC Rules, ¶1, p. 8], The clause given
in the problem reads differently [Prob., ¶1, p.4]. There is substantial difference between the arbitration
clause in contract and the Model Clause of RAC. This shows that arbitration clause recommended under
the RAC rules was not made by the parties. In any event, the Clause must be interpreted against Claimant.
9
Difference between the Clause in Contract and the Model Clause of the RAC
Arbitration Clause Model Clause
Contract RAC Rules
The Parties agree to resolve all disputes that may
arise between them by arbitration in Russian
arbitral institution. The Parties agree first to take
all reasonable steps to resolve the dispute
amicably. Should they choose to arbitrate, they
agree to make all efforts to prepare their claims
and defenses expeditiously and to present their
respective cases at the hearing venue in an
efficient manner.
Any and all disputes, controversies or claims
arising out of or in connection with this
Contract, or a breach, termination or invalidity
hereof, shall be settled by arbitration at the
Russian Arbitration Center at the Autonomous
Non-Profit Organisation “Russian Institute of
Modern Arbitration” in accordance with the
Arbitration Rules.
C. Answer to Request for Arbitration does not indicate the validity of arbitration Agreement
38. Claimant’s contention that giving response or answer to request for arbitration indicates that they did
recognize the validity of the Arbitration agreement [Claim. Memo, ¶3, p.10] is incorrect and false
assumption. Parties does not choose RAC as administrating institution. Even if RAC is considered
arbitral institution then, answer by respondent in request for arbitration made by claimant does not make
arbitration clause valid.
39. The party denying that the tribunal has jurisdiction can file objections to the tribunal's jurisdiction
until the filing of the statement of defences against the claim (counterclaim). Objections to the Arbitral
Tribunal’s jurisdiction may be raised by a Party as it files its first submission related to the merits of the
dispute, i.e. an Answer, a Response to the Claim, a Counterclaim or a Response to the Counterclaim.
[Art. 83(3) RAC Rules]
D. Even if Arbitration agreement is valid, preconditions to arbitration have not been
fulfilled.
40. The preconditions to arbitration have not been fulfilled because the contractor did not take a single
reasonable step to resolve dispute amicably before arbitration can commence. The requirement to “take
reasonable steps to resolve dispute amicably” is a mandatory obligation. Agreements to negotiate in good
faith are enforceable. Claimant is bound to mutually resolve the dispute amicably.
41. In an arbitration proceeding, the primary source of the Arbitral institution’s authority to decide the
dispute is whether the arbitration agreement is entered freely by the parties.
[FOUCHARD/GAILLARD/GOLDMAN, p. 650; POUDRET/BESSON, p. 457]. In present case parties
first agree to take all reasonable steps to resolve the dispute amicably and then if they choose to arbitrate
by arbitration in Russian arbitral institution [Prob., ¶ 1, p.4].
10
E. Russian Arbitration Center is authorized to determine its own jurisdiction even if
Respondent fails to challenge.
42. RAC must decide its own competence and can rule on its own jurisdiction under the doctrine of
Kompetenz/Kompetenz. It can hear the arguments as to jurisdiction and proceed to decide on its own
jurisdiction [Art. 16, UNCITRAL; Article 5.2 RAC Rules; Art. 83 RAC Rules; BORN, pp. 855-856;
REDFERN/HUNTER, pp. 5-37; Blackaby/Partasides ¶5.99].
43. Objections to the Arbitral Tribunal’s jurisdiction may be raised by a Party as it files its first
submission related to the merits of the dispute, i.e., an Answer, a Response to the Claim, a Counterclaim
or a Response to the Counterclaim. [Art. 83(3) RAC Rules]. In the case it was filed after answer in the
next procedural document. Objection raised by the respondent on jurisdiction is valid.
44. The fact that a party failing to challenge the arbitrators’ jurisdiction does not prevent the arbitrators
from determining whether they do, or do not, have jurisdiction. This is based upon the universally
accepted principle in modern international arbitration according to which arbitrators have the inherent
power to determine whether they have jurisdiction. In other words, arbitrators are competent to determine
their own competence [Gaillard, Savage, Goldman, pp. 395-397].
45. Issue 1 Conclusion: Arbitration agreement is invalid under UNCITRAL and RAC rules. Arbitration
Clause does not refer to RAC as arbitral institution. Claimant did not Adhere to Arbitration Clause.
Arbitration Clause does not fulfil formal requirements of International Arbitration. Arbitration Clause is
Ambiguous, defective, unclear and does not mention seat, applicable rules, and procedure. Answer to
Request for Arbitration does not indicate the validity of arbitration Agreement. Even if there is valid
arbitration agreement, the preconditions to arbitration have not been fulfilled. The Tribunal has the right
to decide on its own jurisdiction and Respondent requests the Tribunal to decide that it has no jurisdiction
over the dispute.
II. ISSUE 2: CLAIMANT DID NOT TAKE REASONABLE STEPS TO RESOLVE THE
DISPUTE AMICABLY.
46. Claimant instead of stating the reasonable steps, made two baseless arguments. Claimant argues first
that respondent should have raised this issue at the time of filing the request. Second, that sought a waiver
from the Respondent by stopping and delaying the work is a reasonable step.
47. The Respondent respectfully submits that claimant did not take reasonable steps to resolve the dispute
amicably and protracted dealings between the Parties on these issues cannot be considered steps taken to
resolve the dispute amicably as: (A) Condition precedent of multi-tier arbitration clause was not satisfied;
(B) Claimant did not respond to pre-trial letter by respondent (C) Claimant raised baseless argument of
raising issue of pre-arbitral steps at time of filing request; (D) Sought of waiver from respondent is not
a reasonable step; (E) Not a single reasonable step was taken by claimant (F) Claimant did not file request
with consultation of Respondent; (G) “To take reasonable to resolve dispute amicably” is a mandatory
clause; (H) “To take reasonable steps to resolve dispute amicably” is enforceable; (I) Burden lies on both
parties; (J) Nobody should be given excessive advantage and; (K) RAC Rules recommend pre-trail
negotiations or mediation.
11
A. Condition precedent of multi-tier arbitration clause was not satisfied
48. Claimant has admitted that the question on amicable settlement of disputes was a requirement on the
arbitration clause which was part of a contract signed by both parties [Claim. Memo. ¶1, p.11].
Clause imposes an obligation, and such an obligation has not been satisfied.
Where there is a clear and precise condition that was intended to be binding on the parties and was not
fulfilled, arbitrators should reject the request for arbitration as procedurally inadmissible [ICC Award
6276, ICC].
49. Multi-tire clauses, a MTDR clause involves a series of steps in the overall dispute resolution process.
The main point of this type of clause is to offer parties the chance to settle their disputes outside of court
or arbitration. The clauses state, step-by-step, the procedure that the parties should follow to in order to
resolve a dispute. They usually contain different phases, each one independent from the other, such as
negotiation, mediation or expert determination.
50. Arbitration clauses must be construed “strictly”, therefore requiring completion of the “pre-
conditions” to arbitration.
B. Claimant did not respond to Pre-trial by Respondent
51. Claimant instead answering pre-trial letter and trying to solve the despite amicably directly filed
request for arbitration. The time gap between Employer’s Pre-trial Letter and the Contractor’s Request
for Arbitration is 1.5 months [Clar, ¶5 p.3]. Claimant did not make any communication during this time
to resolve the dispute. This statement of claimant is false that respondent did not raise any objection that
claimant did not provide amicable solutions to the dispute.
52. The absence of an assurance of performance in response to a notice constitutes a clear indication that
a breach is going to occur [Düsseldorf case]. Failure to provide adequate assurance is sufficient to permit
avoidance because it becomes clear that claimant will commit a fundamental breach
[Schlectriem/Schwenzer, p. 720; Honnold/Fletcher p. 565]. Additionally, mere retraction of a declaration
of repudiation is no adequate source of future performance [Schlectriem/Schwenzer p. 724].
C. Claimant raised baseless argument of raising issue of pre-arbitral steps at time of filing
request
53. Statement made by Claimant “the claimant sent a request for arbitration to the respondent before
filing. the request” [Claim. Memo., ¶2, p.7] is false and misinterpretation of facts of the case. Right of
respondent to object was not waived under Article 8 of RAC Rules and Article 4 of UNCITRAL. Article
83 of RAC states that “A Party’s claim that the Arbitral Tribunal has exceeded its jurisdiction shall be
advanced as soon as the issue that the Party believes to fall beyond the Arbitral Tribunal’s jurisdiction is
raised in the arbitration.”
54. Article 29 Arbitral Tribunal may for good cause and considering the circumstances of the specific
case, extend the period for submitting the Counterclaim. Under Article 67(2) RAC Rules the Respondent
may file a Counterclaim in accordance with the requirements stipulated by Article 29 of the Arbitration
Rules together with the Response.
12
D. Demanding a waiver from Respondent is not reasonable step to resolve dispute amicably.
55. The claimant submitted that he sought a waiver from the employer for any risks that may arise from
the additional work and delayed commencing the solution by a further three weeks during which the
issue was being debated, is proof that the Claimant took reasonable steps to resolve the dispute.
Respondent submits that Issue being debated at that time was waiver not entitlement to time-related costs
arising, and credit for the additional temporary works. Pre-trial letter was sent by respondent. Claimant
instead of replying to pre-trial letter of respondent move towards arbitration bypassing the dispute
resolution clause.
56. In Pak. U.K. Association case, court expressed the view that if parties have agreed on certain
conditions that precede the operation of an arbitration clause, such conditions precedent need to be
fulfilled before the arbitration clause can be invoked. The Court noted that in construction or engineering
contracts which provide for a multi-tiered dispute resolution process, an aggrieved party’s right to refer
contractual disputes to arbitration is pre-conditioned with a reference of such disputes, prior to the
commencement of arbitration, to the dispute resolution mechanism agreed upon by the parties.
57. In Emirates Trading Case, the English High Court has held that it is in the public interest to enforce
conditions precedent to arbitration agreements, since commercial entities expect courts to enforce
obligations that they have entered into freely. In International Research Corp case, the Singapore Court
of Appeal determined that preconditions for arbitration must be fulfilled where the parties have clearly
contracted for a specific set of dispute resolution procedures. In United Group Rail Services Case, the
New South Wales Court of Appeal in Australia found a dispute resolution clause in an engineering
contract, which required senior representatives of the parties to undertake “good faith negotiations” prior
to commencing arbitration, to be valid and enforceable.
58. In a Swizz Case,the Swiss Supreme Court decided the long-open question of the consequence of a
failure to comply with a mandatory pre-tier to arbitration, finding that such failure leads to the stay of
the arbitration proceedings until the pre-arbitral tier has been conducted. The case holds that where a
party skips without a valid excuse a mandatory contractual pre-arbitration tier – whether by failing to
initiate the tier at all or by prematurely terminating the tier – the arbitral tribunal must stay the arbitration
until the pre-arbitral tier has been complied with.
E. Not a single Reasonable step was taken by claimant
59. The claimant took no reasonable steps to resolve the matter amicably. Facts quantified that the issue
was deteriorated from the claimant [Prob., ¶5, p.3]. Claimant does not reply to pre-trial letter by
respondent, which is deemed to be the failures in amicably resolving the issue [Prob., ¶3, p.4].
Respondent tried to bring the claimant for the solution, but no response was given by claimant.
60. In Cable & Wireless Case in which the court ruled that pre-arbitral consultation clauses would be
enforced if they were ‘sufficiently defined’ and set out tangible obligations capable of enforcement by
courts (such as requiring parties to initiate mediation, appoint a mediator and present their case).
However, even absent an ‘identifiable procedure’ such clauses would be enforced so long as there was
‘an unqualified reference to ADR, a sufficiently certain and definable minimum duty of participation
should not be hard to find’.
13
61. Emirates Trading Case has effectively broken new ground by holding that arbitration cannot proceed
unless and until that obligation is satisfied. In the more recent case of Emirates Trading Case the English
High Court upheld a tiered clause which required parties to attempt to resolve their dispute by ‘friendly
discussion’ for a continuous period of four weeks before initiating arbitration. The court enforced the
clause because it was complete and certain in that it required ‘fair, honest and genuine discussions. The
court cautioned against conflating the difficulty of proving a breach with uncertainty and further held
that such clauses were in the public interest (in helping parties avoid an ‘expensive and time-consuming
arbitration’).
F. Claimant did not file request with consultation of Respondent
62. Claimant has filed a ‘claim’ that includes the ‘request’ for commencement of arbitration and that
claim is to be filed after consultation and intimidation to the respondent [Art. 10 of RAC rules].
The claimant made no effort to resolve the dispute amicably but directly approached to the RAC [Prob.,
¶1, p.4].
G. “To take reasonable steps to resolve dispute amicably” is a mandatory clause
63. Claimant took no reasonable steps to resolve dispute amicably before arbitration can commence. The
requirement to “take reasonable steps to resolve dispute amicably” is a mandatory obligation.
Agreements to negotiate in good faith are enforceable. Claimant is bound to mutually resolve the dispute
amicably.
64. In Board of Intermediate Case, the Supreme Court of Pakistan dismissed an application under Section
20 of the Arbitration Act because the applicant had failed to approach the Chairman of the appellant
Board for his decision on the dispute, as provided for in the applicable dispute resolution clause. The
Sindh High Court followed this decision in Hanover Case and the Lahore High Court in WAPDA Case,
with both courts holding that a pre-condition contained in a dispute resolution clause is binding upon the
parties.
H. “To take reasonable steps to resolve dispute amicably” is enforceable
65. In Emirates Trading Agency case, it was held that an agreement to settle disputes amicably is
enforceable. Where the wording of a clause is clear and unambiguous, the provision must be applied as
it reads.
66. It is settled law in most jurisdictions that only when the language is ambiguous can surrounding
circumstances and the commercial purpose of a contract be used as an aid to interpretation. Courts have
applied the same principles of interpretation to dispute resolution and pre-arbitration consultation clauses.
Such clauses are strictly enforceable as pre-conditions to the commencement of arbitration, if they are
sufficiently specific and drafted in mandatory terms [Cable & Wireless Case].
67. In HSBC Institutional Trust Services (Singapore) Ltd (trustee of Starhill Global Real Estate
Investment Trust) v Toshin Development Singapore Pte Ltd [[2012] SGCA 48.] the Singapore Court of
Appeal held that a requirement that parties ‘in good faith endeavour to agree’ was mandatory because it
was in the public interest and because a breakdown of negotiations would cause no harm to the parties,
since the dispute could still be resolved by other means. The decision in HSBC Institutional Trust
Services was followed by the Singapore Court of Appeal in International Research Corp Plc v Lufthansa
Systems Asia Pacific Pte Ltd. [2013] 1 SLR 973.] In Lufthansa, parties had provided for a four-tier
dispute resolution clause requiring consultation by three different committees followed by arbitration as
the final step. The court rejected the argument that seven meetings conducted between the parties
14
constituted compliance with the clause because ‘the precise persons required to be involved pursuant to
the clause 37.2 process were not so involved’.The court ruled that where parties have stipulated a
‘specific set of dispute resolution procedures as preconditions for arbitration’, substantial compliance
with such preconditions would not be sufficient, actual compliance must be proved.
I. Burden lies on both parties
68. The arbitration clause reads as: "Parties agree first to take all reasonable steps to resolve the dispute
amicably” [Prob., ¶1, p.3]. If we interpret it we see here the word “parties” is mentioned not the party,
so it is not the burden of one party only (claimant) but both.
69. The question here is how effective the language of the clause cited above is helping the parties to
settle their differences. This is because amicably can mean any effort, regardless of how useful that effort
is, for a meaningful and healthy consultation process. Good healthy communication is impossible without
openness, honesty, and vulnerability. But sometimes, one may say, is not healthy to be very open, as
vulnerabilities shared in support of a possible settlement can be used against us in case the attempt is not
successful.
J. No one should be given excessive advantage
70. UNIDROIT vests the right to a party to the contract to avoid an individual term of the contract which
unjustifiably gives the other party an excessive advantage [UNIDROIT, Art. 3.2.7(1)]. It is clear that the
advantage must be one which leads to disequilibrium between the procedural and substantive rights of
the parties to the contract [UNIDROIT COMMENTARY, pp. 108-109]. Mere fact that at the time of the
conclusion of the contract the performance of the obligation assumed was impossible does not affect the
validity of the contract [UNIDROIT Art. 3.1.3].
K. RAC Rules recommend pre-trail negotiations or mediation
71. Article 21(2) RAC provides Prior to the negotiation of the Timetable of Arbitration Proceedings, the
Arbitral Tribunal shall recommend that the Parties consider settling the dispute through negotiation or
mediation. If the Parties agree, the Arbitral Tribunal shall allocate them time and (if required) place to
discuss the issue.
72. Issue 2 Conclusion: Claimant does not take reasonable steps to resolve the dispute amicably.
Condition precedent of multi-tier arbitration clause was not satisfied, Claimant did not respond to Pre-
trial by Respondent. Claimant raised baseless argument of raising issue of pre-arbitral steps at time of
filing request. Demanding a waiver from Respondent is not reasonable step to resolve dispute amicably.
Not a single Reasonable step was taken by claimant. Claimant did not file request with consultation of
Respondent. “To take reasonable steps to resolve dispute amicably” is a mandatory clause. “To take
reasonable steps to resolve dispute amicably” is enforceable. Burden lies on both parties. No one should
be given excessive advantage and RAC Rules recommend pre-trail negotiations or mediation.
15
III. Issue 3: Respondent is entitled to recover the costs associated with preparing for the
jurisdictional hearing that was adjourn.
73. The Respondent respectfully submits that it is entitled to recover the costs associated with preparing
for the jurisdictional hearing that was adjourn because: (A) Laws give entitlement to recover costs for
adjourned hearing; (B) “Cost follows Conduct” Principle is recognized in Arbitration; (C) Delay caused
by claimant could be avoided; (D) Parties should be treated equally; (E) To determine the question of
jurisdiction is inherent right of tribunal; and (F) Claimant exercised their due process right in bad faith.
A. Respondent has right to recover costs under the UNCITRAL, RAC Rules and
UNIDROIT Principles
74. The respondent is entitled to complete indemnity for the costs of preparing and presenting its defenses
in case the tribunal finds itself without jurisdiction as it is his right given under the article 14(1) of the
RAC rules (Annex I) regarding costs incurred by the parties. It is also evident from the fact the delay of
jurisdictional hearing was because of nonperformance by the claimant so it gives the right to respondent
to complete indemnity of costs under the article 7.4.1 of the UNIDROIT. In LETCO Case, the tribunal
awarded the full costs of arbitration to the claimants including their own expenses holding that “the
decision is based largely on Liberia’s procedural bad faith.
1. Laws does not prevent entitlement to recover costs for adjourned hearing
75. If we analyze different laws of arbitration, we will come to know that a party can recover costs for
adjournment from other party. It is nowhere mentioned in (1) RAC Rules or (2) UNCITRAL that a party
cannot claim for wasted costs, both for the delay in the jurisdictional determination and for the
preparation of the main evidentiary hearing if the Tribunal finds itself without jurisdiction. Claimant
himself caused the delay by moving application for adjournment and therefore respondent is entitled to
recover any costs caused by such delay.
a) RAC Rules does not prevent respondent to recover costs for adjourned hearing
76. RAC Rules mentions the instances where the arbitration fee can be reduced and refunded but it is not
described anywhere that any party is not entitled to the recovery of the cost when the hearing is adjourned.
[Rules on Arbitration Fees and Arbitration Costs RAC Rules]. Hence, respondent is entitled to the
complete indemnity of the costs of preparation. The related provision Art. 13 RAC Chapter: Rules on
Arbitration Fees and Arbitration Costs clearly states this rule that in a case where the arbitration cannot
proceed “, the arbitration fee and arbitration costs shall be paid by the Claimant.” [Art. 13 RAC Chapter:
Rules on Arbitration Fees and Arbitration Costs]. Under the ambit of Article 60, lack of jurisdiction also
serves as the basis for the termination of the arbitration proceedings [Art. 60(2)(B), RAC Rules].
77. The Arbitral Tribunal shall consider the amount of the claims advanced, the value of the claim, the
complexity of the dispute, the scope of the representative’s services, the time necessary for drafting
procedural documents, the length of dispute resolution when placing the costs incurred by that Party as
well as other specific circumstances of the dispute. If the Arbitral Tribunal decreases the amount of the
costs of the Parties and third parties. The arbitral award shall be accompanied by a reasoned opinion of
the Arbitral Tribunal specifying the reasons for decreasing the amount of the costs [Article 14 (2,3,4)
Rules on Arbitration Fees and Arbitration Costs RAC procedural rules]. Therefore, respondent is entitled
to recover the cost based on adjournment of hearing.
16
b) UNCITRAL does not prevent respondent to recover costs for adjourned hearing
78. UNCITRAL is silent about the allocation and recovery of the cost of arbitration and arbitration fee by
a party from another in case of adjournment of hearing.
2. Claimant exercised his due process right in bad faith
79. The Parties shall exercise their due process rights in good faith without abuse and comply with the
specified terms (periods of time) for exercising the same. The Parties shall cooperate in good faith and
take all possible measures to increase the efficiency of arbitration and resolution of disputes [Art. 20(2)
,21(5) RAC Rules]. Claimant exercised due process right in bad faith to adjourn the hearing and
maintaining application to adjourn hearing knowing that no other time slot is available.
80. Good faith and Bad faith are one of the most universally applied principles in interpreting
international arbitration agreements [Gaillard/Savage ¶ 256]. This is the result of the belief that good
faith is enshrined in the provisions of the New York Convention [Berg ¶ 185; Born p. 1475]. Further,
the principle is recognized in most civil law [French Civil Code, Art. 1156; German BGB, Art. 133] and
common law [UCC Sec. 1-304] jurisdictions. Therefore, good faith and bad faith are applicable here in
this case based on international law practices.
B. Cost follows Conduct principle is recognized in Arbitration
81. There are various scenarios that might warrant considering the parties’ conduct in cost decisions. In
general, the circumstances that call for the application of the “costs follow conduct” rule have been
described such as falsifying witness or expert evidence, late counsel appointments that create a conflict
of interest, repeated unsuccessful challenges against an arbitrator, voluminous or continuous document
requests, unjustified failure to meet deadlines, false submissions to the tribunal, failure to comply with
procedural orders, excessive legal arguments or exaggerated claims, dilatory tactics, due process paranoia
etc. [DOUG JONES; ICC COMMISSION REPORT].
C. Parties should be treated equally
82. Claimant stated that According to Article 18 of the UNCITRAL Model Law on International
Arbitration, the parties shall be treated with equality and each party shall be given a full opportunity of
presenting his case. Claimant’s counsel was unable to attend these proceedings as a result of the isolation
requirements. [Claim. Memo, ¶1, p.11] Claimant counsel could have attended hearing from home. Both
parties should be treated equally, why respondent should have extra burden for the adjourned hearing
This case law Fontaine v Amesbury [Claim. Memo, ¶1, p.11] has no relevance with arbitration and is
based on civil procedure rules which are quite different and have different procedure and jurisprudence.
83. Parties shall be treated with equality. [Art. 18 UNCITRAL]. So as the claimant counsel’s spouse is
infected with COVID-19 not the claimant counsel. Claimant has enough opportunity to avoid the delay
of hearing.
D. Extra expense occurred of Respondent due to adjourned hearing
84. Article 28 (1) of the RAC Arbitration rules states that “The Respondent is entitled to file with the
Claimant, the Arbitral Tribunal and the RIMA a Response to the Claim…” Moreover, article 23(1) of
the UNCITRAL Model Law stipulates that “...the respondent shall state his defence in respect of these
particulars, unless the parties have otherwise agreed as to the required elements of such statements...”
Extra expense occurred of Respondent due to adjourned hearing.
17
E. Respondent Supports Cost follows event
85. With regard to the fees and costs payable to the Arbitration Institution, Article 13(1) of the RAC
Rules of Arbitration Fees and Arbitration Costs aligns itself with the arbitration principle that “costs
follow events”. The Article stipulates that the arbitration fee and arbitration costs shall be paid by the
Party against which the arbitral award is rendered. These fees and costs are therefore to be borne by the
claimant against whom the arbitral award should be made as shown by the arguments presented in this
document.
F. Delay caused by Claimant could have been avoided
86. Three days before the hearing on jurisdiction claimant’s spouse contracted Covid-19 and the
claimant’s counsel said that the obligation for the family to isolate together in their small apartments
prevented him from attending the video conference and there was no time to retain and instruct another
advocate [Prob., ¶5, p.4]. The restrictions are the part of public regulations which are mandatory and are
like those, imposed all over the world during the severe stage of the pandemic [Clar, ¶5, p.3]. Claimant
counsel had enough time to manage online hearing at home. Claimant only wanted to delay the
jurisdictional hearing knowing that no other time slot is available.
87. Issue 3 Conclusion: The respondent is entitled to recover the costs associated with preparing for the
jurisdictional hearing that was adjourned. Respondent has right to recover costs under the UNCITRAL,
RAC Rules and UNIDROIT Principles. Laws does not prevent entitlement to recover costs for adjourned
hearing. Claimant exercised his due process right in bad faith. Cost follows Conduct principle is
recognized in Arbitration. Parties should be treated equally. Extra expense occurred of Respondent due
to adjourned hearing. Respondent Supports Cost follows event. Delay caused by Claimant could have
been avoided.
IV. ISSUE 4: THE RESPONDENT IS ENTITLED TO A COMPLETE INDEMNITY FOR
THE COSTS OF PREPARATION AND PRESENTATION OF ITS DEFENCES EVEN IF THE
TRIBUNAL’S JURISDICTION IS NOT DEVELOPED
88. The issue in dispute corresponds to the eligibility of the respondent for the indemnity of the arbitration
fee and costs. The facts of the case state that the issue was taken by the claimant before the tribunal. The
bar to bear all the costs lies on the claimant if the tribunal’s jurisdiction is not established. The related
provision Art. 13 RAC Chapter: Rules on Arbitration Fees and Arbitration Costs clearly states this rule
that in a case where the arbitration cannot proceed “, the arbitration fee and arbitration costs shall be
paid by the Claimant.” [Art. 13 RAC Chapter: Rules on Arbitration Fees and Arbitration Costs]. Under
the ambit of Article 60, lack of jurisdiction also serves as the basis for the termination of the arbitration
proceedings [Art. 60(2)(B), RAC Rules]. This force behind this rule is further elaborated in Article 83(6)
as, “If the Arbitral Tribunal renders an order on the lack of jurisdiction, it shall not examine the dispute
on the merits” [Art. 83(6), RAC Rules]. Because of the tribunal’s termination of arbitration to proceed
on the merits of the case, the costs and fees incurred are to be borne only by the person who took the
matter before the tribunal.
18
A. The plea for challenging jurisdiction can be made at the procedural stage:
89. The claim made by the claimant regarding the illegality of the respondent to question the Jurisdiction
of the tribunal in the first procedural document does not stand ground [Claim. Memo. ¶1, p.13].
According to the Director of the Australian Centre for International Commercial Arbitration and the
Australian Disputes Centre, Mrs. Bronwyn, plea for Challenging jurisdiction of the tribunal can be made
at the procedural stage even at the enforcement stage of the award [Challenges to the jurisdiction of an
arbitral tribunal at the award enforcement stage (2018) Brown Lincoln].
90. Furthermore, there is a vivid proviso that is very stated in the said article about the admission of the
jurisdictional plea, ‘‘The arbitral tribunal may admit a later plea if it considers the delay justified”
[UNCITRAL, Art 16(2)]. The facts of the case state that the counterclaim was not initiated in the first
instance when the matter was filed before the arbitration institution, it was the ‘reaffirmation’ of the
respondent’s stance that was already reiterated before the initiation of the proceedings. The respondent
already conveyed his concerns [Prob., p.3] to the claimant, and the claimant without paying any heed to
such concerns and opting for a an ‘amicable resolution’ [Prob, p.4] directly took the matter before the
arbitration. The conduct of the claimant shows reluctancy to sort the matter out in a friendly and workable
environment. The respondent never wanted to put the dispute before the worthy arbitrators when there
was an opportunity for an easier solution. The counterclaim by the respondent before the arbitration
center was a result of the disheartened feelings and the reaffirmation of the respondent’s stance against
the scheme of the claimant. The intentions of the respondent remained for a friendly solution even after
he filed the counterclaims but even this step did not make the claimant to recourse to an amicable
solution, and he remained persistent by sorting this issue out from the worthy arbitrators. When the
respondent was convinced that there left no chance for a recourse, he finally decided to get along with
the method that the claimant has been persistent to adopt and thus raised the question of jurisdiction in
the very first procedural document before the tribunal [Prob., p.4].
B. The ‘loser pays’ rule is not only applicable if the respondent loses:
91. The claimant made reference to the Article 13 sub-clause 1 of the RAC Rules on Arbitration Fees
and Arbitration Costs [Claim. Memo, ¶ 3, p. 13] in which he reiterated the principle that the party against
whom the award is rendered is liable to bear the costs and fee of the arbitration. The principle of ‘loser
pays’ as mentioned in the claimant’s memo [ibid] is not merely applicable if the claimant wins the case.
This principle has its application vice-versa, i.e., any litigant party winning the case has the right for
credit for the costs borne by that party. The application of this principle was clearly evident in the McCron
case, where the court of appeal for Ontario order the claimant to compensate the defendant for her costs
that she incurred in the proceedings. The issue framed by the arbitrators asks for the eligibility of the
respondent for indemnity in case the tribunal finds itself without jurisdiction. The comments made by
the claimant himself and the caselaw mentioned makes it the vested right of the respondent for indemnity
when the tribunal finds itself with no jurisdiction.
92. Issue IV Conclusion: The claimant initiated the proceedings before the tribunal without opting for
any amicable resolution. The arbitration clause clearly stated the prerequisite of the friendly resolution
before matter can be taken up before the tribunal. As a response to the claimant’s wantonly request for
the arbitration, the respondent filed a counterclaim as the last option to still convince the claimant to
resort to a mutual friendly resolution. However, even this step could not convince the claimant to sit for
talks which led the respondent to challenge the jurisdiction of the tribunal in the very next procedural
document. As the case was taken up by the claimant before the tribunal, the respondent is fully liable to
19
be indemnified for the costs and fees of the arbitration and for presenting the case on the merits of the
dispute when the tribunal finds itself without jurisdiction.
V. ISSUE 5
A. ISSUE 5(A): THE LIABILITY FOR THE PREPARATION OF A NEW DESIGN
CORRESPONDING TO A NOVEL SITUATION FALL ON THE SHOULDER OF
CONTRACTOR.
1. The respondent did not lay extra burden on the claimant:
93. The contractor is deemed to have obtained all the necessary information and is satisfied with the
contract and all the inground requirements. The contractor was given ample time to analyze the area. The
clause GC-21 of the contract establishes that the Contractor shall be deemed to have inspected and
examined the Site, access to the Site, its surroundings, the information available, and to have been
satisfied before submitting the Tender as to all matters relevant to the execution of the Works. Even in
the presence of this condition, the respondent did not burden the claimant when the water main was
discovered and agreed to bear the time-related costs that incurred in its discovery, investigation, and the
execution of its temporary engineering works.
2. The contractor cannot be let go of his responsibility if a new situation is emerged
94. Furthermore, in the Particular Condition 21, the contractor was not bound to assume the details only
about the sewer or the similar structure. The contractor was to submit his tender by assuming all the
possible conditions that can exist in the sub-soil. Corbin explained this situation as, “He (the contractor)
is not discharged from duty by actually unexpected difficulties or expense, and he has no right to extra
pay for completing job “[Corbin on Contracts, sec 1333]. The argument made by the opposing counsel
that since the work was unseen, “therefore it would be the duty of the employer to pay as priced by the
contractor for such works” [Claim. Memo, ¶ 1, p. 14] are clearly ultra-virus to the vivid conditions
stipulated in GC-21, GC-22(B), and PC-21 of the contract. In their memorandum the claimant has argued
that the article 1.9 of the UNIDROIT Principle binds the parties by usage [Claim. Memo, ¶ 2, p. 14].
However, the commentary of the said article vividly elaborates that not every transaction can be said to
have constituted a usage to be followed. “Whether a particular practice can be deemed to be
“established” between the parties will naturally depend on the circumstances of the case, but behaviour
on only one previous transaction between the parties will not normally suffice.” [UNIDROIT Principles
Art. 1.9, ¶ 2, p. 24]. The previous transactions made between the parties had the force of the very contract
contracted by the parties. Therefore, the driving force for the future transactions shall also be the contract.
3. The contractor is not liable for time-related costs for the unexpected design difficulty.
95. In one of the most famous construction cases, the House of Lords decided on the matter related to
unexpected difficulty that emerged during the construction [Tharsis Sulphur & Copper Co v M’Elroy
(1878)]. the respondents were employed to erect a structure including cast-iron trough girders. They
attempted to cast the girders in accordance with the specified dimensions but found that the girders were
liable to warp and crack at that thickness. Girders with increased thickness to overcome the problem. On
completion of the work, the respondent contractor claimed a considerable amount in excess of the
contract price for the extra weight of metal supplied however, the claim was rejected. All the in-grounds
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risks were the responsibility of the claimant. Therefore, the respondent cannot be asked to bear the load
of the claimant’s responsibility.
96. In Transatlantic case the court did not accept the excuse of impracticality of the voyage when there
was another possible route. Therefore, the court did not excuse the plaintiff of his responsibility to sort
to the other possible means to do the job. The time-related costs for the acceptable works engineering
solution falls on the shoulders of the claimant to bear as a part of the overall contract that the claimant
willfully entered into, to get the job done. The claimant implied in his arguments that the Engineer being
working for the respondent was liable for the delay caused to the project, hence, the respondent would
be liable for the delay caused by the Engineer. The Engineers works as an independent body; therefore,
the respondent cannot be said to have the vicarious liability of the Engineer. Furthermore, the works were
stalled during this inspection which is also contrary to the GC-23 clause B as stipulated in the contract.
Therefore, the claimant is not entitled for the time-related costs for the identification of the temporary
works engineering solution.
B. ISSUE 5 (B): THE CONTRACTOR HAD NOT THE RIGHT TO RECOVER THE
TIMERELEATED COSTS INCURRED DURING THE COURSE OF NEGOTIATION
WITH THE EMPLOYER.
1. The claimant is not facing hardship
97. The claimant stated in his memorandum, “Additionally, the Claimant ‘foresaw’ significant risks
arising from the execution of these extra works. This amounted to hardship as defined in the Article
6.2.2(b)of the UNIDROIT Principles of International Commercial Contracts.” [Claimant’s memo, ¶ 4,
p. 15]. The claimant agreed to condition that the risks were foreseen. In sub-clause D of the said principle,
it is clearly stated that the hardship would only be constituted if “the risk of the events was not assumed
by the disadvantaged party.” [Art. 6.2(2)(D) UNIDROIT Principles 2016]. As the claimant admitted that
the risks were foreseen by him, his claim regarding the constitution of the hardship will stand ultra-virus
to the condition stipulated in the UNIDROIT Principles.
2. The claimant was not allowed to stop the work, fearing non-performance by
respondent if any
98. The opposing counsel argued the application of the Article 7.3(4) of the UNIDROIT Principles and
stated in their memorandum, “The works to be undertaken would have resulted in significant losses to
the Claimant if the Respondent did not perform.” [ Claim. Memo, ¶ 4, p. 15]. The facts of the case do
not point out to any responsibility that the respondent was liable to perform, nor there was any such
condition stipulated in the contract. The respondent is only liable in terms of payment to the claimant for
the work done as stipulated in the agreement. The only performance was on the part of the claimant to
carry the work as agreed upon. Here the only non-performance is on part of the contactor himself because
he intentionally paused the works which cost the employer a lot of additional time to complete the project.
The claimant further argued that because of the ‘equitable estoppel’ as enshrined in ‘Hughes v.
Metropolitan Rly’ [Claimant’s memo, ¶ 5, p. 15], the respondent is estopped from denying the
responsibility. The facts of the case nowhere state that the respondent backed from the waiver. The
respondent, till the completion of safety work, took full responsibility of any damage arising out of the
work. The claimant argument clearly depicts misappropriation of the facts.
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3. The claimant was not entitled to waiver
99. In Street-car case it was held that mere difficulty of performance cannot serve as an excuse for the
non-performance of an act. Same view was reiterated in the Steamboat case where it was stated that the
difficulty cannot frustrate a contract. According to clause G-23 of the contract, the contractor signed after
taking into account all the risks that could arise. The demand for waiver was not an inherent right of the
claimant because it is duty of the contractor to deal with the risks involved in the work [ibid]. The
employer could not have been forced to take responsibility of the claimant’s job. But the coercion made
respondent to reluctantly acquiesce to waiver, as his work was stopped for the whole three weeks, and
he was suffering substantial loss during that time. Article 7.1(1) defines non-performance, and the
employer is entitled to claim damages for this deliberate non-performance under article 7.4(1) of the
UNIDROIT Principles [Art. 7.1(1) & 7.4(1) UNIDROIT]. Furthermore, article 1.7 of UNIDROIT
establishes principle of good faith and fair dealings and the claimant also violated this law by
intentionally withholding the execution of work and coercing the respondent to accept the waiver. Hence
the respondent is entitled to recover the time-related costs during the time claimant stalled the work to
get the waiver.
100. The claimant argued that he is entitled to costs incurred in the process of negotiations and gave
reference to Rees & Kirby v. Swansea City Council [Claimant memo, ¶ 6, p. 15]. The mentioned case
only allows for the entitlement when the event falls under the auspices of the contract. The event of
waiver is an independent one and was not contemplated while entering into contract. Therefore, this
referenced case by the opposing counsel cannot be applied to our situation.
C. ISSUE 5 (C): CLAIMANT BEARS THE COSTS FOR ADMINISTRATIVE
MOBILIZATION.
1. The mobilization works fall under the duty of the claimant
101. The claimant, being the contractor, is responsible for all the risks emerging out of the work. This
condition was not imposed on the claimant, rather he willfully agreed to such conditions while entering
into the contract. GC-22 makes the claimant to bear any responsibility related to his course of work i.e.,
“Contractor’s obligations under the Contract and all things necessary for the proper execution of the
Works in accordance with the Contract.” The mobilization work is required for the proper execution of
the work. This work falls under the routinely conduct of contractor’s business. Mobilization, be it
administrative, is a precursor for any work. It is not prudent to put the liability of a person on the shoulders
on another. Any work-related situation emerging in the construction is the duty of the contractor to
handle. Therefore, any delay should be answered by the contractor managing the contract. Condition
2.32 & 2.3.7 of the Standard Form of Building Contract allows the employer to recover liquidated or
delay damages where “the contractor has failed to complete the works by the Completion
Date”[Standard Form of Building Contract SBC(2005) Condition 2.32 & 2.3.7]. Therefore, the claimant
cannot be made entitled to recover the time-related costs for the mobilisation works that were actually a
part of his duty.
102. Issue 5 Conclusion: Since the conditions stipulated in the contract, i.e., GC-21, GC-22(B), PC-21,
make it the responsibility of the claimant to have himself satisfied regarding all the risks and novel
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situations that may arise during the course of construction. Therefore, the claimant cannot shift the burden
on the shoulders of the respondent. The risk taken by the claimant was foreseen, hence the doctrine of
‘hardship’ cannot be invoked. Also, the mobilization work falls under the duty of the claimant as a normal
course of business. The claimant, consequently, is not entitled to recover time-related costs incurred
during identifying acceptable additional temporary works engineering solution, obtaining waiver from
the employer, and mobilizing the additional temporary works solution.
VI. ISSUE 6: THE EMPLOYER IS ENTITLED TO CREDIT FOR THE ANTICIPATED
WORK.
A. The claimant is liable for any delays and defects during the construction work
103. The solution anticipated for the water sewer was not up to the mark in the first place. Therefore, a
more substantial solution would have always been required. The employer is eligible to ask for the better
solution at the cost of contractor’s money. Condition 3.18 of the SBC provides that if the work is not
followed as stipulated in the contract, then “it is made good at the contractor’s cost (in terms of time and
money).” [Standard Form of Building Contract SBC(2005) Condition 3.18]. Condition 2.1 further
elaborates that if there happens to be some defects during the during the construction, against what was
stipulated in the contract, “the contractor will be responsible if the need to remedy these defects causes
delay to the project” [Standard Form of Building Contract SBC (2005) Section 2.1]. The defect in the
workable safety solution should be rectified by the claimant under the same cost as stipulated in the
contract.
B. The claimant is not allowed to nonperformance if the work is sophisticated
104. In Paradine case it was developed that the impossibility to perform a duty cannot serve as an excuse
for nonperformance. It was maintained that “Where a party creates a duty or charge upon himself by
virtue of a contract, he is bound to perform the duty or pay the charge” [Paradine Case]. The employer
cannot be expected to pay for the nonperformance on part of the claimant, therefore, making claimant
liable for the costs emerging out of it. The claimant argued that there was no common intention between
the “any amounts of works not accomplished would be diverted to any extra scope of works.” [Claimant
memo, ¶ 1, p. 16]. This argument portrays the mala fide intention of the claimant for the nonperformance
of his duty.
C. The employer can ask for the credit for the flawed job performed by the contractor
105. According to Jeremy Glover where an employer can be seen to rely on a contractor for the design,
the contractor’s legal responsibility is to produce (in the absence of express provision in the contract) a
final work which is reasonably suitable for its purpose [Jeremy Glover, Liability for Defects in
Construction Contracts - who pays and how much? ¶ 38, p. 8]. The claimant is bound to offer the work
as it was stipulated in the contract. It was construed in the contract that the cost for a workable solution
for the protection of water sewer would be deemed to be included in the contractual price. It was later
revealed that the intended solution to be provided was flawed. Though the employer paid for the
temporary works required for the new solution, but he cannot be burdened to bear the costs of the flawed
intended solution. This view was maintained in Wingate Investments case, where the claimants were
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warehousemen who had entered into arrangements whereby the hardstanding’s should have been
concrete. Instead, they were constructed of tarmacadam. It was maintained by the court that “the prima
facie rule is that the Plaintiff is entitled to such damages as will put him in a position to have the building
to which he contracted”[William Case]. Accordingly, it can be said that, as the intended safety work for
the water sewer failed and the respondent even agreed to reimburse the claimant for the costs incurred
during the temporary work adopted for the safety of the water main, the respondent is entitled for the
credit of the temporary works that would always have been required for the brick sewer and were
construed when entering into the contract.
106. Issue 6 Conclusion: The claimant failed to provide a workable solution for the intended safety work
required for the water sewer, although the contractual price deemed to include it. Though the failed
intended safety solution was a defect on part of the claimant in performing his responsibility, the
respondent still agreed to reimburse for the temporary safety works required for the water main. The
malafide intention of claimant was obvious when he argued that his liability to provide an alternative
solution for the failure to accomplish his task was not the common intention of the parties. Therefore,
the respondent, on the basis of reimbursement principle developed in the Wingate Investments case, is
entitled to credit for the less extensive temporary works that would always have been required to support
the brick sewer.
REQUEST FOR RELIEF
In the light of the above submissions, the Counsel for Respondent requests the Arbitral Tribunal to:
1. Declare that parties do not have a valid arbitration agreement between them;
2. Declare that Respondent is entitled to recover the costs associated with preparing for the
jurisdictional hearing that was adjourn;
3. Admit the respondent’s claim for indemnity.
4. Reject the claimant’s claim of time-related costs incurred during the process of:
a) Reaching an acceptable temporary engineering works solution,
b) Negotiating with the respondent for waiver, and
c) Mobilising temporary works solution.
5. Accept respondent’s claim to credit for the less extensive anticipated work;
6. Order the Claimant to pay the costs of these arbitration proceedings;
7. Grant any other relief that the Arbitral Tribunal deems necessary.
12 September 2021