TWENTY FOURTH ANNUAL
WILLEM C. VIS INTERNATIONAL COMMERCIAL ARBITRATION MOOT
Vienna, Austria 8 April – 13 April 2017
Memorandum for Claimant
Dar Al-Hekma University
On behalf of Against
Wright LTD SantosD KG
232 Garrincha Street 77 Avenida O Rei
Ocenside Cafucopa
Equatoriana Medditerraneo
(CLAIMANT)
(RESPONDENT)
Ayah Hashim – Duaa Amer – Lina Samaha – Nouf Bannan Rahaf Zaini – Tala Bukhari – Wid Massoud
Dar Al-Hekma University
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TABLE OF CONTENT
INDEX OF ABBREVIATIONS .............................................................................................. VII
INDEX OF AUTHORITIES ...................................................................................................... IX
INDEX OF LEGAL SOURCES ............................................................................................. XXI
INDEX OF CASES ................................................................................................................. XXII
INDEX OF ARBITRAL AWARDS ................................................................................... XXVII
STATEMENT OF FACTS ............................................................................................................. 1
SUMMARY OF ARGUMENT ...................................................................................................... 3
ISSUE 1: CLAIMANT’S CLAIMS ARE ADMISSIBLE, DUE TO THEIR TIMELY
SUBMISSION ............................................................................................................................... 4
A. CLAIMANT’s Claims are Admissible as Initiation of Arbitral Proceedings Occurred on
May 31 2016 as Per Section 21 DSA .......................................................................................... 4
I. Failure of Negotiation and Initiation of Arbitral Proceedings Occurred on May 31 2016
......................................................................................................................................................... 4
II. CLAIMANT Expressed its Willingness to Attempt Further Negotiations on April 1
2016 ................................................................................................................................................ 6
III. Commencement of Arbitral Proceedings Occurred on June 7 2016 .............................. 6
IV. Even If the Arbitral Tribunal Considers that Failure of Negotiations Occurred on
April 1 2016, CLAIMANT’s Claims are Still Admissible ...................................................... 7
B. CLAIMANT’s Request for Arbitration is in Line with the Requirements Set Out under the
DSA and CAM-CCBC Rules ...................................................................................................... 7
I. CLAIMANT Fulfilled the Condition Precedent Set Forth under Section 21 DSA ......... 7
II. CLAIMANT’s Request for Arbitration Satisfied the Requirements Prescribed Under
the CAM-CCBC Rules ................................................................................................................ 8
1. The Requirements Set Out by Art. 4.1 CAM-CCBC Rules are Met ............................ 9
2. The Requirements Set Under Art. 4.2 CAM-CCBC Rules are Satisfied ................... 10
Dar Al-Hekma University
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CONCLUSION OF THE FIRST ISSUE .................................................................................. 10
ISSUE 2: CLAIMANT IS ENTITLED TO THE FULL PAYMENT OF THE PURCHASE
PRICE ACCORDING TO THE DSA AND CISG .................................................................. 10
A. CLAIMANT is Entitled to the Outstanding Amount of US$ 2,285,240.00 from
RESPONDENT as the Remainder of the Purchase Price for the Fan Blades ........................... 11
I. The Purchase Price for the Fan Blades is Determined on the Basis of the Current
Exchange Rate ............................................................................................................................ 11
1. The Purchase Price for the Fan Blades is Determined in Accordance with the DSA 11
2. There is No Practice Established Between the Parties in Regards to the Use of the
Exchange Rate at the Time of Contracting. ....................................................................... 13
3. Even if There was an Established Practice Between Parties, Such Practice Will Not Be
Binding upon Parties in the Present Case. ......................................................................... 14
II. The Fixed Exchange Rate Provision in the Addendum Applies Only to the Purchase
of the Clamps .............................................................................................................................. 14
1. The Addendum in Relation to the Clamps is a Separate Agreement, and Therefore, the
Fixed Exchange Rate Clause Does Not Apply to the DSA ............................................... 14
2. Even if the Tribunal were to Find that the Addendum is Not a Separate Agreement, the
Fixed Exchange Rate Clause Must Be Interpreted to Apply Only to the Clamps .............. 15
a. The Fixed Exchange Rate Clause in the Addendum Applies Only to the Clamps
Pursuant to Art. 8(1) CISG ............................................................................................. 16
i. CLAIMANT Did Not Know and Could Not Have Been Aware of
RESPONDENT’s Intention to Apply the Fixed Exchange Rate Clause to the DSA . 16
ii. CLAIMANT’s Reply to RESPONDENT’s Email Refers to the Clamps’ Purchase
.................................................................................................................................... 17
b. The Fixed Exchange Rate in the Addendum Applies Only to the Purchase of the
Clamps Pursuant to Article 8(2) CISG ........................................................................... 18
Dar Al-Hekma University
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i. A Reasonable Person in the Position of CLAIMANT and under the Same
Circumstances Would Have Understood the Fixed Exchange Rate Clause to Apply
Solely to the Clamps ................................................................................................... 18
ii. In Any Case, Any Ambiguity in the Addendum Must be Interpreted Against
RESPONDENT According to the Contra Proferentem Rule ..................................... 18
B. CLAIMANT is Entitled to the Outstanding Payment of US$ 102,192.80 for the Bank
Inspection Levy from RESPONDENT ..................................................................................... 19
I. RESPONDENT is under a Contractual Obligation to Pay the Full Price to CLAIMANT
....................................................................................................................................................... 19
1.RESPONDENT is Contractually Obliged to Bear the Transfer Fee as Per Sec. 4.3 DSA
............................................................................................................................................ 19
2.RESPONDENT Must Pay the Bank Inspection Charge to CLAIMANT Based on the
Principle of Pacta Sunt Servanda ....................................................................................... 20
II. Art. 54 CISG Imposes an Obligation on RESPONDENT to Pay the Transfer Fee ...... 21
1. Art. 54 CISG Imposes an Obligation on RESPONDENT to Take Necessary Measures
to Pay the Price .................................................................................................................. 21
2. RESPONDENT’s Failure to Take Necessary Steps for Payment Constitutes a Breach of
Contract .............................................................................................................................. 22
3. CLAIMANT is Not Bound by its Own Past Practice in Previous Dealings According to
Art. 9(1) CISG ................................................................................................................... 22
III. RESPONDENT Cannot Rely on Art. 35(2) CISG to be Exempted from its Liability to
Pay the Levy Amount ................................................................................................................ 23
1. New Zealand Mussels Case Does Not Apply to the Case at Hand ............................ 23
2. Following the Mussels Case Approach Conflicts with the Fundamental Objective of
Art. 7(1) CISG ................................................................................................................... 24
CONCLUSION OF THE SECOND ISSUE ............................................................................. 25
ISSUE 3: THE TRIBUNAL DOES NOT HAVE THE AUTHORITY TO ORDER
CLAIMANT TO PROVIDE SECURITY FOR RESPONDENT’S COSTS ......................... 25
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A. The Tribunal Does Not Have the Authority to Grant Security for Costs Order ................ 25
I. Section 21 DSA is Silent on the Matter of Security for Costs .......................................... 25
II. Danubian Arbitration Law Does Not Explicitly Grant the Tribunal the Power to Order
Security for Costs ....................................................................................................................... 26
III. RESPONDENT Cannot Base its Argument on International Arbitration Practice ..... 27
1. Granting the Tribunal the Power to Order Security for Costs is Not Common in
International Arbitration Practice ...................................................................................... 27
2. RESPONDENT Has Not Met Any International Criteria to Qualify for a Security for
Costs Order .................................................................................................................................. 28
IV. RESPONDENT’s Has Not Established Prima Facie that CLAIMANT Will Bear the
Costs of the Arbitration .............................................................................................................. 28
1. RESPONDENT’s Assumption that the Unsuccessful Party Will Bear the Costs of
Arbitration is Wrong .................................................................................................................. 29
2. RESPONDENT’s Assumption is a Prejudgment to the Merits ..................................... 29
B. Even if the Tribunal Has the Power to Order CLAIMANT to Provide Security for
RESPONDENT’s Costs, it Should Not Exercise this Power .................................................... 30
I. RESPONDENT’s Request for Security for Costs is Not Admissible According to Art.
4.21 CAM-CCBC ....................................................................................................................... 30
II. RESPONDENT Carries the Burden of Proof with Respect to the Existence of
Exceptional Circumstances in CLAIMANT’s Financial Situation ...................................... 31
1. RESPONDENT Carries the Burden of Proof ................................................................ 31
2. RESPONDENT Has Not Met its Burden of Proof ........................................................ 32
III. Even if RESPONDENT Has Met its Burden of Proof, CLAIMANT’s Financial
Situation Has Not Changed Substantially ............................................................................... 33
1. CLAIMANT’s Financial Situation Has Not Changed Substantially .......................... 33
2. Even if CLAIMANT’s Financial Situation Has Changed Substantially, that Change is
Justifiable ........................................................................................................................... 33
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a) The Change in CLAIMANT’s Financial Situation was Due to RESPONDENT’s
Breach ............................................................................................................................. 33
b) The Change in CLAIMANT’s Financial Situation is a Normal Commercial Risk 34
c) The Change in CLAIMANT’s Financial Situation is Not Enough to Grant Security
for Costs ......................................................................................................................... 34
CONCLUSION OF THE THIRD ISSUE ................................................................................. 35
REQUEST FOR RELIEF .......................................................................................................... 35
CERTIFICATE .................................................................................................................. XXXIII
Dar Al-Hekma University
VII
INDEX OF ABBREVIATIONS
Ans. to Req. for Arb. Answer to Request for Arbitration
Ans. to Security for Costs Answer to Request for Security for Costs
Art. / Artt. Article / Articles
Aug August
Bank Equatoriana National Bank
BGH The Federal Court of Justice (Bundesgerichtshof)
BIS Bank of International Settlements 2013
CAM-CCBC Center for Arbitration and Mediation of the Chamber of Commerce
Brazil-Canada
CFO Chief Financial Officer
CISG United Nations Convention on Contracts for the International Sale
of Goods of 11 April 1980
CISG Digest UNCITRAL Digest of Case Law on the United Nations Convention
on Contracts for the International Sale of Goods—2012 & 2016
CLAIMANT Wright Ltd
Cl.Ex. Claimant’s exhibit
COO Chief Operations Officer
DAL Danubian Arbitration Law
Dec December
DSA Development and Sales Agreement
ed. Editions
EISA Engineering International SA
EQD Equatorianian Denars
etc. et cetera (and so on)
ICC International Chamber of Commerce
ICSID International Centre For Settlement of Investment Disputes
Jan January
MAL UNCITRAL Digest
Ms. Miss
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Ltd. Limited
No. Number
NYC 1958
New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards
Oct October
Ordr. of Pres. Order of CAM-CCBC President
p. /pp. Page / Pages
PoA Power of Attorney
PO1 Procedural Order Number 1
PO2 Procedural Order Number 2
Para./paras. Paragraph/paragraphs
R. Record
Req. for Arb. Request for Arbitration
Req. for Relief Request for Relief
Req. for Security for Costs Request for Security for Costs
RESPONDENT SantosD
Resp.Ex. Respondent’s Exhibit
Sec. Section
Sep September
Terms of Ref. Terms of Reference
UNCITRAL United Nations Commission on International Trade Law
UNIDROIT International Institute for the Unification of Private Law
US$ US dollars
v. versus (against)
Vol Volume
WIPO World Intellectual Property Organization
WS Witness statement
Xanadu Government of Xanadu
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INDEX OF AUTHORITIES
Angus, Paul
Paquet, Priya
Maiorana, Nicholas
Court of Appeal upholds order for security for costs in
favour of insurer: Hassoun v Wesfarmers General
Insurance Ltd t/a Lumley General [2015] NSWCA 33,
Turks Legal, (2015)
Available at:
http://bit.ly/2eNBpif
Cited as: Angus/Paquet/Maiorana
in para. 152
Bank for International
Settlements
A glossary of terms used in payments and settlement
systems,
(2003)
Available at:
http://www.bis.org/cpmi/glossary_030301
Cited as: BIS, 2003
in para. 99
Blackaby, Nigel
Partasides, Constantine
Redfern, Alan
Hunter, Martin
Redfern and Hunter on International Commercial
Arbitration,
5th ed., Oxford University Press, (2009)
Cited as: Blackaby/Partasides/Redfern/Hunter
in paras. 38, 48,126,146
Born, Gary B.
International Arbitration: Law and Practice,
1st ed., Kluwer Law International, (2012)
Cited as: Born (2012)
in para. 142
Born, Gary B. International Commercial Arbitration,
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2nd ed., Kluwer Law International, (2014)
Cited as: Born (2014)
in paras. 44,128,145,156,157,168
Bout, Patrick X.
Trade Usages: Article 9 of the Convention on Contracts
for the International Sale of Goods,
(1998)
Available at:
http://www.cisg.law.pace.edu/cisg/biblio/bout.html
Cited as: Bout
in para. 72
Caron, David D.
Schill, Stephan W.
Smutny, Abbey Cohen
Triantafilou, Epaminontas E.
Practicing Virtue: Inside International Arbitration,
1st ed., Oxford Scholarship, (2015)
Ch. Pre-Arbitration Procedural Requirements; Born, Gary
B. & Marija Scekic.
Cited as: Born/Scekic
in paras. 41,45,55
Chartered Institute of
Arbitrators
International arbitration practice guideline: Applications
for Security for Costs,
Chartered Institute of Arbitrators, (2015)
Available at:
http://bit.ly/2frWWu6
Cited as: CIoA (1)
in para. 171
Chartered Institute of
Arbitrators
International arbitration practice guideline: Applications
for Interim Measures,
Chartered Institute of Arbitrators, (2015)
Available at:
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http://bit.ly/2gnqYSZ
Cited as: CIoA (2)
in para. 148
Derains, Yves
Schwartz, Eric A.
A Guide to the ICC Rules of Arbitration,
2nd ed., Kluwer Law International, (2005)
Cited as: Schwartz/Derains
in para. 28
Eiselen, Sieg CISG-AC Opinion No. 13, Inclusion of Standard Terms
under the CISG,
(2013)
Available at:
http://www.cisg.law.pace.edu/cisg/CISG-AC-op13.html
Cited as: CISG-AC Opinion No.13
in para. 93
Farnsworth, E. Allan Article 8
(1987)
Available at:
http://cisgw3.law.pace.edu/cisg/biblio/farnsworth-
bb8.html
Cited as: Farnsworth
in para. 81
Flechtner, Harry M. Funky Mussels, A Stolen Car, and Decrepit Used Shoes:
Non-Conforming Goods and Notice Thereof under the
United Nations Sales Convention ("CISG"),
Vol. 26:1, (2008)
Available at:
http://bit.ly/2gDXZq8
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Cited as: Flechtner
in paras. 116,117,121,122
Gabriel, Henry Journal of Law and Commerce,
(2005)
Cited as: Gabirel
Available at:
https://goo.gl/MSARaJ
in para. 105
Gilson, Ronald
Sabel, Charles
Scott, Robert
Contract Interpretation as Contract Design
Available at:
goo.gl/DalVN0
Cited as: Gilson/Sabel/Scott
in para. 96
González-Bueno, Carlos
Third Party Funding Again Under the Spotlight,
Kluwer Arbitration Blog, (2014)
Available at:
https://goo.gl/RR8l0t
Cited as: González-Bueno
in paras. 135,137
Graffi, Leonardo
Remarks on trade usages and business practices in
international sales law,
(2011)
Available at:
http://bit.ly/2gE5uNy
Cited as: Graffi
in para. 111
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Greenberg, Simon
Kee, Christopher
Weeramantry, J. Romesh
International Commercial Arbitration: An Asia-Pacific
Perspective,
1st ed., Cambridge, (2011)
Available at:
http://bit.ly/2ePgwTZ
Cited as: Greenberg/Kee/Weeramantry
in para. 131
Herbst, Ludmila B.
Interpretation of Arbitration Agreements,
Farris, Vaughan, Wills & Murphy LLP, Vancouver, BC
(2012)
Available at:
https://goo.gl/E8VJ0U
Cited as: Herbst
in para. 126
Hoad, T. F.
The Concise Oxford Dictionary of English Etymology,
1st ed., Oxford University Press, (1993)
Cited as: Oxford ED
in paras. 30,31
Holtzmann, Howard M.
Neuhaus, Joseph E.
Kristjánsdóttir, Edda
Walsh, Thomas W.
A Guide to the 2006 Amendments to the UNCITRAL
Model Law,
Kluwer Law International, (2015)
Available at:
http://www.kluwerarbitration.com/CommonUI/book-
toc.aspx?book=TOC_Holtzmann_2006
Cited as: Holtzmann/Neuhaus/Kristjánsdóttir/Walsh
in para. 131
Honnold, John O. Interpretation of Statements or Other Conduct of a Party,
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(1999)
Available at:
http://cisgw3.law.pace.edu/cisg/biblio/ho8.html
Cited as: Honnold 1999
in paras. 80, 110,116,118
Honnold, John O.
Uniform Law for International Sales under the 1980
United Nations Convention,
4th ed., Kluwer Law International, (2009)
Cited as: Honnold
in para. 60
Hussey, Anthony Security for Costs,
Hussey Fraser Solicitors, (2008)
Available at:
http://bit.ly/2g2v7HO
Cited as: Hussey
in paras. 151,168
Johnson, Lise New UNCITRAL Arbitration Rules on Transparency:
Application, Content and Next Steps,
International Institute for Sustainable Development,
(2013)
Available at:
http://www.iisd.org/pdf/2013/uncitral_rules_on_transpare
ncy_commentary.pdf
Cited as: Johnson
in para. 161
Karrer, Pierre A.
Desax, Marcus
Security for Costs in International Arbitration – Why,
when, and what if…,
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Carl Heymanns Verlag, (2002)
Cited as: Karrer/Desax
in paras. 131,156,158
Kazazi, Mojtaba
Burden of Proof and Related Issues: A Study on Evidence
Before International Tribunals,
Kluwer Law International, (1996)
Available at:
http://bit.ly/2gahV8d
Cited as: Kazazi
in para. 156
Kröll, Stefan
Mistelis, Loukas
Viscasillas, Pilar Perales
UN Convention on Contracts for the International Sale of
Goods (CISG),
C.H. Beck, (2011)
Cited as: Kröll/Mistelis/Viscasillas
in para. 106
Lemaire, Gillian
Costs in international commercial arbitration: the case for
predictability,
Dewey & LeBoeuf, (2009)
Cited as: Lemaire
in para. 130
Lew, Julian D. M.
Mistelis, Loukas A.
Kröll, Stefan Michael
Comparative International Commercial Arbitration
Kluwer Law International, (2003)
Available at:
http://www.kluwerarbitration.com/CommonUI/book-
toc.aspx?book=TOC_Lew_2003_V05_V06IBA
Cited as: Lew/Mistelis/Kröl
in para. 126
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Lim, Steven
Interim Relief in International Arbitration,
SIAC Conference, (2014)
Available at:
https://goo.gl/QRsd30
Cited as: Lim
in paras. 138,139
Limparangsri, Sorawit
Strengthening Investor-State Arbitration Through
Transparency Measures,
(n.d).
Available at:
http://www.aseanlawassociation.org/12GAdocs/workshop
2-thailand.pdf
Cited as: Limparangsri
in para. 162
Lookofsky, Joseph Freedom of Contract: Convention as Supplementary
Regime,
(2000)
Available at:
http://cisgw3.law.pace.edu/cisg/biblio/loo6.html
Cited as: Lookofsky
in para. 93
Miles, Wendy
Speller, Duncan
Security for costs in international arbitration – emerging
consensus or continuing difference?,
WilmerHale, (2007)
Available at:
http://bit.ly/2gE1PQ5
Cited as: Miles/Speller
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in paras. 131,137,138,158
Pearson Education Limited
Longman Dictionary of Contemporary English,
6th ed., Pearson Longman, (2014)
Cited as: Longman
in para. 30
Pessey, Jean-Baptiste
When to Grant Security for Costs in International
Commercial Arbitration: the Complex Quest for a
Uniform Test (2011 Writing Contest Winner),
(2011)
Available at:
http://bit.ly/2goEYf5
Cited as: Pessey
in para. 133
Roth, Marianne
Geistlinger, Michael
Stegner, Marianne
Yearbook on International Arbitration,
Vol. III, the Deutsche Nationalbiblionthek, (2013)
Available at:
http://www.winston.com/images/content/8/1/81776.pdf
Cited as: Roth/Geistlinger/Stegner
in paras. 159,171
Saidov, Djakhongir Art. 35 of the CISG: Reflecting on the Present and
Thinking about the Future,
Vol. 58, Villanova Law Review, (2013)
Available at:
http://bit.ly/2fHxe34
Cited as: Saidov
in para.114
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Schlechtriem, Peter
Schwenzer, Ingeborg
Commentary on the UN Convention on the International
Sale of Goods (CISG),
4th ed., Oxford University Press, (2016)
Cited as: Schlechtriem/Schwenzer
in paras. 60,68,70,71,93,99,107,116,118,122
Schwenzer, Ingeborg Commentary on Art. 7 CISG, Commentary on the UN
Convention on the International Sale of Goods (CISG),
3rd ed., Oxford University Press, (2010),
Cited as: Schwenzer
in para.102
Straube, Frederico José
Finkelstein, Claudio
Filho, Napoleão Casado
The CAM-CCBC Rules: A Commentary,
1st ed., Eleven International Publishing, (2016)
Cited as: Straube/Finkelstien/Filho
in paras. 29,32,35,37,48,49,54,156
Sun, Chan Leng
Interpreting an International Sale Contract,
(2005)
Available at:
http://cisgw3.law.pace.edu/cisg/biblio/sun1.html
Cited as: Sun
in para. 88
Uchkunove, Inna Security for Costs in ICSID Arbitration,
Kluwer Arbitration Blog, (2015)
Available at:
http://kluwerarbitrationblog.com/2015/02/10/security-for-
costs-in-icsid-arbitration/
Cited as: Uchkunove
in paras. 158,168,174
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UNCITRAL UNCITRAL Digest of Case Law on the united nations
Convention on Contracts for the International Sale of
Goods United Nations,
(2012)
Cited as: CISG Digest 2012
in para. 105
UNCITRAL UNCITRAL Digest of Case Law on the united nations
Convention on Contracts for the International Sale of
Goods United Nations,
(2016)
Cited as: CISG Digest
in paras. 63,65,68,86,93
UNCITRAL Working Group II
on Arbitration and Conciliation
/ Dispute Settlement
Report of the Working Group on Arbitration and
Conciliation on the work of its forty-first session. Note by
the Secretariat of the meeting of Working Group II
(Arbitration) of UNCITRAL in Vienna on 13 – 17
September (2004)
Available at:
https://goo.gl/I1QvbV
Cited as: Working Group II (Sep 2004)
in para. 132
Várady, Tibor
Barceló III, John J.
Kröll, Stefan
Mehren, Arthur T.von
International Commercial Arbitration: A Transnational
Perspective,
6th ed., West Academic Publishing, (2015)
Cited as: Varady/Barcelona/Kroll/Mehren,
in paras. 106,156
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Vries, Justin De
Security for costs motions,
De Vires Litigation,
(n.d)
Available at:
http://bit.ly/2guVTw6
Cited as: Vries
in paras. 151,156
Waincymer, Jeffrey
Procedure and Evidence in International Arbitration,
1st ed., Kluwer Law International, (2012)
Cited as: Waincymer
in paras. 126,137,138,148,155,156,168,174
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INDEX OF LEGAL SOURCES
CAM-CCBC Rules Center For Arbitration And Mediation Of The
Chamber Of Commerce Brazil-Canada
(CAM-CCBC) Arbitration Rules
CISG United Nations Convention on Contracts for
the International Sale of Goods (1980)
New York Convention Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958)
UNCITRAL Model Law United Nations Commission on International
Trade Law (UNCITRAL), UNCITRAL
Model Law on International Commercial
Arbitration (1985)
UNCITRAL Rules on Transparency UNCITRAL Rules on Transparency in
Treaty-based Investor-State Arbitration
UNIDROIT Principles
UNIDROIT Principles of International
Commercial Contracts (2010)
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INDEX OF CASES
Australia
Hassoun v. Wesfarmers General Insurance Ltd t/a Lumley General
New South Wales Court of Appeal
2015
Case No. NSWCA 33
Cited as: Hassoun v. WGI Ltd
in paras. 152,158
Belgium
GmbH Lothringer Gunther Grosshandelsgesellschaft für Bauelemente und Holzwerkstoffe v. NV
Fepco International
Hof van Beroep Appellate Court
April 14 2006
Cited as: GmbH v. NV Fepco International
in para. 97
Canada
Teva Canada Limited v. Bank of Montréal
Ontario Court of Appeal
1998
Case No. ONCA 94
Cited as: Ont. Ltd. v. Bank of Montreal
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in para. 151
France
M. Caiato Roger v. La Société française de factoring international
CA Grenoble Court of Appeal
September 13 1995
CLOUT Case No. 202
Cited as: M. Caiato Roger v. La Société
in para. 120
Germany
Oberlandesgericht Appellate Court
October 14 2002
CISG Case No. 709
Cited as: CISG Case No. 709 (GER, 2002)
in para. 102
Lower Court Duisburg
April 13 2000
Case No. 49 C 502/00
CLOUT Case No. 360
Cited as: LC Duisburg, 49 C 502/00
in para. 70
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Appellate Court Dresden
December 27 1999
Case No. 2 U 2723/99
Cited as: AC Dresden, Case No. 2 U 2723/99
in para. 65
Landgericht District Court
April 17 1996
Cited as: LandgerichtDuisburg, Germany, 17 Apr. 1996
in para. 108
Bundesgerichtshof Federal Supreme Court
March 8 1995
CLOUT No. 123
Cited as: Mussels Case
in paras. 115,119
District Court Hamburg
September 26 1990
Case No. 5 O 543/88
CLOUT No. 5
Cited as: DC Hamburg, Case No. 5 O 543/88
in para. 82
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New Zealand
Court of Appeal of New Zealand
July 22 2011
CLOUT Case No. 1256
Cited as: Smallmon v. Transport Sales Ltd.
in para. 120
United Kingdom
Emirates Trading Agency LLC v. Prime Mineral Exports Private Ltd
English High Court
July 1 2014
Case No. EWHC 2104
Cited as: Emirates Trading Agency LLC v. Prime Mineral Exports Private Ltd
in para. 43
Procter & Gamble v. Svenska Cellulosa Aktiebolaget
The High Court of Justice
March 8 2012
Cited as: P&G v. Svenska Cellulosa Aktiebolaget
in para. 61
Rainy Sky SA and others v. Kookmin Bank
United Kingdom Supreme Court
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November 2 2011
Cited as: Rainy Sky v. Kookmin Bank
in para. 66
Walford v. Miles
House of Lords
January 23 1992
Case No. 2 AC 128
Cited as: Walford v. Miles
in para. 45
United States
CSS Antenna, Inc. v. Amphenol-Tuchel Electronics, GMBH
Federal District Court
February 8 2011
Case No. CCB-09-2008
Cited as: CSS Antenna, Inc. v. ATE, GMBH
in para. 82
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INDEX OF ARBITRAL AWARDS
International Centre for Settlement of Investment Disputes
The Renco Group Inc v. Republic of Peru
November 9 2016
ICSID Case No. UNCT/13/1
Cited as: ICSID Case No. UNCT/13/1
Available at: http://www.italaw.com/sites/default/files/case-documents/italaw7744_1.pdf
in para. 146
Suez, Sociedad General de Aguas de Barcelona, S.A.and Vivendi Universal, S.A. v. Argentine
Republic
April 9 2015
ICSID Case No. ARB/03/19
Cited as: ICSID Case No. ARB/03/19
Available at: http://www.italaw.com/cases/1057
in para. 146
RSM Production Corporation v. Saint Lucia
August 13 2014
Case No. ARB/12/10
Cited as: RSM Production Corporation v. Saint Lucia
Available at: http://www.italaw.com/sites/default/files/case-documents/italaw3318.pdf
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in paras. 133,134
Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. Argentine
Republic
December 21 2012
ICSID Case No. ARB/09/1
Cited as: ICSID Case No. ARB/09/1
Available at
https://icsid.worldbank.org/apps/ICSIDWEB/cases/Pages/casedetail.aspx?caseno=ARB/09/1&ta
b=DOC
in paras. 151,168
Commerce Group Corporation & San Sebastian Gold Mines, Inc. v. Republic of El Salvador
September 20 2012
Case No. ARB/09/17
Cited as: CGC & SSGM v. El Salvador
Available at:
https://icsid.worldbank.org/ICSID/FrontServlet?requestType=CasesRH&actionVal=showDoc&d
ocId=DC2653_En&caseId=C741
in paras. 157,167,173
Merrill & Ring Forestry L.P. v. Canada
March 31 2010
ICSID Case No. UNCT/07/1
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Cited as: ICSID Case No. UNCT/07/1
Available at: http://www.italaw.com/sites/default/files/case-documents/ita0504.pdf
in para. 146
Tokios Tokeles v. Ukraine
July 1 2003
ICSID Case No. ARB/02/18
Cited as: Tokios Tokelės v. Ukraine, Case No. ARB/02/18
Available at: http://www.italaw.com/cases/1099
in para. 141
Victor Pey Casado and President Allende Foundation v. Republic of Chile
September 2001
Case No. ARB/98/2
Cited as: Pey Casado v. Chile
Available at: http://www.italaw.com/cases/829#sthash.ZxJFrx5O.dpuf
in para. 158
Emilio Agustín Maffezini Claimant v. Kingdom of Spain Respondent
October 28 1999
Case No. ARB/97/7
Cited as: Maffezini v. Spain
Available at: http://www.italaw.com/sites/default/files/case-documents/ita0477.pdf
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in para. 148
International Chamber of Commerce
M v. T
September 3 2003
ICC Case No. 11670
Cited as: ICC Case No. 11670
Available at: http://www.kluwerarbitration.com/CommonUI/document.aspx?id=ipn25737
in para. 146
European Union v. the Government of the Federal Republic of Yugoslavia and/or the
Government of the Republic of Serbia
November 9 1999
Case no. 10032
Cited as: EU v. Yugoslavia and/or Serbia
in para. 167
Seller v. Buyer
September 1996
ICC Case No. 8786/2000
Cited as: ICC Case No. 8786/2000
Available at: http://cisgw3.law.pace.edu/cases/978786i1.html
in para. 148
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Manufacturer v. Buyer
October 1996
ICC Case No. 8486
Cited as: ICC Case No. 8486
Available at: http://www.unilex.info/case.cfm?pid=2&do=case&id=630&step=FullText &
https://goo.gl/5zSka4
in para. 146
Syrian Agent v. German Trading Company
October 1995
ICC Case No. 8113
Cited as: ICC Case No. 8113
in para. 148
Tribunal of International Commercial Arbitration at the Russian Federation Chamber of
Commerce and Industry
RF CCI
October 17 1995
CLOUT Case No. 142
Cited as: RF CCI, 123/1992
in para. 108
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Ad Hoc
Thailand
Walter Bau AG (In Liquidation) V. The Kingdom of Thailand
July 1 2009
Cited as: Walter BAG v. Thailand
Available at: http://www.italaw.com/sites/default/files/case-documents/ita0067.pdf
in para. 159
Iran
Sapphire vs. National Iranian Oil Company
March 15 1963
Cited as: Sapphire vs. National Iranian Oil Company
Available at: http://www.biicl.org/files/3940_1963_sapphire_v_nioc.pdf
in para. 102
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STATEMENT OF FACTS
The parties to this arbitration are Wright Ltd (“CLAIMANT”) and SantosD KG (“RESPONDENT”).
CLAIMANT is a highly specialized manufacturer of fan blades for jet engines, located in Equatoriana.
RESPONDENT is a medium-sized manufacturer of jet engines, located in Mediterraneo.
1. CLAIMANT and RESPONDENT (the “Parties”) entered into negotiations during 2010, when
they were still subsidiaries to Engineering International SA (“EISA”), to develop jointly a new
fan blade for RESPONDENT’s jet engine JE 76/TL14b (the “Engine”), which is made for use in
the executive line 100 jet of Earhart, an aircraft manufacturer.
2. During the negotiations, RESPONDENT insisted on a fixed maximum price so that it could offer
the Engine to Earhart. Despite the difficulty of such request due to the cost’s uncertainty,
CLAIMANT agreed on a flexible price structure. In addition, the production costs are incurred in
Equatorianian Denars (“EQD”), however CLAIMANT agreed to base the price in US dollars
(“US$”) to satisfy RESPONDENT’s preference.
3. On Aug 1 2010, the Parties concluded a Development and Sales Agreement (“DSA”) by which
RESPONDENT agreed to buy 2,000 swept fan blades from CLAIMANT to be delivered on Jan
14 2015. The Parties agreed upon a minimum price of US$ 9,975 and a maximum price of US$
13,125 per fan blade, determined on a cost-plus basis.
4. Pursuant to RESPONDENT’s need to purchase clamps, its Chief Executive Officer (“CEO”)
emailed CLAIMANT’s Chief Operation Officer (“COO”) on Oct 22 2010, stating that signing
an addendum would be easier than writing a separate contract for the clamps.
5. As a result, the addendum was signed on Oct 26 2010, by which CLAIMANT will deliver 2,000
clamps for a price determined on a cost-coverage basis with a fixed exchange rate of US$
1=EQD 2.01 for the clamps.
6. In line with the DSA, CLAIMANT delivered the fan blades and clamps, alongside their
respective invoices to RESPONDENT on Jan 14 2015. The latter accepted the delivery and
approved the goods’ conformity with the DSA.
7. On Jan 15 2015, RESPONDENT effected the payment of US$ 20,438,560 for the fan blades,
and US$ 183,343.28 for the clamps to the Equatoriana National Bank (the “Bank”).
8. On the same day, CLAIMANT immediately emailed RESPONDENT apologizing for its mistake
of applying the wrong exchange rate. Instead of applying the fixed rate of US$ 1 = EQD 2.01
exclusively for the clamps, it was also applied to the fan blades as well. Despite CLAIMANT’s
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clarification on its mistake, CLAIMANT received an amount of US$ 20,336,367.20 rather than
the due amount of US$ 22,723,800 on Jan 29 2015.
9. On February 9 2015, CLAIMANT communicated its concern regarding the outstanding amount
of US$ 2,387,432.80. However, RESPONDENT refused to pay the outstanding amount, and
insisted on the application of the fixed exchange rate to both the blades and clamps.
10. Furthermore, due to an investigation by the Bank for money laundering, a 0.5% levy was
deducted during the transfer of the sum credited to CLAIMANT’s account. Despite clear
contract terms requiring RESPONDENT to bear this cost, it refused to pay this levy.
11. As per the DSA, CLAIMANT tried to solve the dispute amicably. However, negotiations
remained stagnant as RESPONDENT declined the offers. Nevertheless, CLAIMANT emailed
RESPONDENT on April 1 2016 expressing its willingness to further negotiate the dispute.
12. Due to RESPONDENT’s uncooperative behavior in resolving the dispute, CLAIMANT
submitted a comprehensive request of arbitration to the Center for Arbitration and Mediation of
the Chamber of Commerce Brazil-Canada (“CAM-CCBC”) on May 31 2016; hence, initiating
arbitral proceedings.
13. On June 1 2016, CAM-CCBC notified CLAIMANT of receiving the arbitration request. In the
same notice, CAM-CCBC notified CLAIMANT that it had paid US$ 400 instead of US$ 4,000
as a registration fee as well as made a mistake in the Power of Attorney (“PoA”).
14. Therefore, an amendment to the PoA and to the Registration fee had to be made to cure the
simple errors, and so on June 7 2016 CLAIMANT sent the supplemented request.
15. CAM-CCBC sent a notice informing RESPONDENT that the arbitration request had been
received on May 31 2016 and supplemented on June 7 2016.
16. RESPONDENT replied to the arbitration request on June 24 2016. Also, the Terms of Reference
were signed by the Parties and CAM-CCBC arbitral tribunal (the “Tribunal”).
17. On Sep 6 2016, RESPONDENT requested the Tribunal to grant it security for its costs from
CLAIMANT.
18. On Sep 16 2016, CLAIMANT notified CAM-CCBC of its objection to RESPONDENT’s
unreasonable request.
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SUMMARY OF ARGUMENT
19. In drafting the DSA, care was given to attain to RESPONDENT's needs whilst protecting
CLAIMANT's interests. Although costs were uncertain, the price calculation method agreed
upon allowed RESPONDENT to make an offer to Earhart. Consequently, RESPONDENT's
wishes of winning the chance to showcase its newly developed jet engine via the prestigious
world renowned Earhart came true.
20. RESPONDENT nonetheless refuses to pay the full purchase price agreed upon, alleging that a
fixed exchange rate set in an addendum for the purchase of the clamps also applies to the
calculation of fan blades; thus, shifting the currency exchange risk on CLAIMANT. Although
nowhere in the contract did CLAIMANT agree to bear this risk with respect to the fan blades.
21. In complying with the DSA's terms, CLAIMANT tried to resolve this dispute amicably but failed
due to RESPONDENT’s unwillingness to cooperate. Thus, CLAIMANT resorted to arbitration,
however RESPONDENT is trying to challenge the admissibility of CLAIMANT’s claim even
though minor errors in the arbitration request do not render its submission void (Issue 1).
22. CLAIMANT is requesting for the total amount of US$ 2,387,432.80 as a result of
RESPONDENT's breach of its payment obligations under both the DSA and the CISG. The
outstanding amount of US$ 2,285,240.00 is consequent to RESPONDENT’s false assumption of
applying the fixed exchange rate to the fan blades, while the amount of US$ 102,192.80 resulted
from RESPONDENT’s failure to comply with its obligation to bear the bank inspection charge
(Issue 2).
23. Finally, RESPONDENT submitted a request for security for costs from CLAIMANT, even
though the Tribunal does not have the power to grant such measure, neither under Sec. 21 DSA,
nor under the lex arbitri selected by the Parties (Issue 3).
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ISSUE 1: CLAIMANT’S CLAIMS ARE ADMISSIBLE DUE TO THEIR TIMELY
SUBMISSION
24. On May 31 2016, CLAIMANT initiated arbitral proceedings and accordingly declared failure of
negotiations as its reasoning [R.3, Req. for Arb.]. Hence, the period of sixty days mentioned in
Sec. 21 DSA [R.11, Cl.Ex.2] is not applicable to the case at hand. However, the request for
arbitration submitted at the aforementioned date required an amendment to the registration fee
and the PoA to comply with Artt. 4.1 and 4.2 CAM-CCBC. These amendments were executed
and therefore the arbitration was commenced on June 7 2016 [R.40, Ordr. of Pres., para.1].
25. As a result, CLAIMANT’s claims are wholly admissible as initiation of arbitral proceedings
occurred on time as per Section 21 DSA (A). In addition, CLAIMANT’s request for arbitration
is in line with the requirements set out under the DSA and CAM-CCBC rules (B).
A. CLAIMANT’s Claims are Admissible as Initiation of Arbitral Proceedings Occurred on
May 31 2016 as Per Section 21 DSA
26. By virtue of Sec. 21 DSA, both Parties have agreed to resort to arbitration in case they are unable
to resolve any dispute amicably. This is to occur sixty days after they fail to resolve their issues
despite negotiations [R.11, Cl.Ex.2]. Failure of negotiation and initiation of arbitral proceedings
occurred on May 31 2016 (I). That being said, CLAIMANT communicated its willingness to
attempt further negotiations on April 1 2016 (II). In addition, commencement of arbitral
proceedings occurred on June 7 2016 (III). Even if the Arbitral Tribunal considers that failure of
negotiations occurred on April 1 2016, CLAIMANT’s claims are still admissible (IV).
I. Failure of Negotiation and Initiation of Arbitral Proceedings Occurred on May 31 2016
27. Taking into account previous communications between the Parties, it becomes evident that
failure of negotiations occurred on May 31 2016 as did the initiation of arbitral proceedings. This
corresponds to the date the President of CAM-CCBC (“President”) officially received notice of a
valid arbitration request by CLAIMANT [R.3, Req. for Arb.].
28. The date it was received was later validated through the order of the President [R.40, Ordr. of
Pres.]. Within this order, the President states that CLAIMANT submitted the request for
arbitration on the aforementioned date; hence, impliedly accepting the notice. Had the notice
been invalid, and led to CLAIMANT’s claims being inadmissible, a new request for arbitral
proceedings would have been demanded rather than a mere request for amendment
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[Schwartz/Derains, pp.52-53].
29. The CAM-CCBC states that a request for commencement of arbitral proceedings occurs when
the President is notified of the request for arbitration [Straube/Finkelstien/Filho, p.65, para.2]. It
is important to note the difference between the terms initiation and commencement, as doing so
has a direct effect on the interpretation of both Parties’ actions.
30. According to Longman Dictionary of Contemporary English (2014), to initiate is “to arrange for
something important to start such as an official process” [Longman, p.906, para.6] while to
commence is “to begin something” [Longman, p.329, para.15]. Other established dictionaries,
such as but not limited to, Cambridge, Oxford, Macmillan, and Merriam-Webster dictionary also
put forth definitions that show the same distinction between both words. What is deduced is that
the former refers to the earliest steps of a process, before development is deemed a must.
Commencement, the latter, regards the stage when inaction changes into action. On that account,
while the words may initially seem synonymous, there is a subtle semantic difference between
them that is often overlooked.
31. Further support can be acquired through studying the word’s etymology. With regards to using
them as verbs, initiate which was from the late 1600 century Latin word initiatus is to “introduce
some practice” or “set going” [Oxford ED, p.236]. On the other hand, to commence is from the
old 1300 century French word comencier which means “to begin, start” [Oxford ED, p.86].
32. Consequently, CAM-CCBC presents instances when a request for arbitration may be considered
time-barred. It mentions that the only risk to CLAIMANT’s claim is if there were a problem with
the request’s validity [Straube/Finkelstien/Filho, p.66, para.5]. For example, invalidity occurs
when requests are submitted to CAM-CCBC with problems such as a missing copy of the
arbitration request and amendments were only done after the respective limitation period had
passed [Straube/Finkelstien/Filho, p.66, para.5]. In this case, such a limitation period is
inapplicable due to both initiation and failure of negotiations occurring on the same day, which is
May 31 2016. Therefore, the risk of invalidity may be dismissed.
33. Moreover, the requirements set forth in Artt. 4.1 and 4.2 CAM-CCBC that validate a request for
arbitration have been satisfied [See paras.48 et seq.]. Taking that into account, all matters of
paramount importance were included in the initial request and were later amended within the
appropriate time frame before commencement was to be achieved. Consequently, the slight delay
brought about with the need for two amendments should not intervene with the validity of the
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request; and subsequently, CLAIMANT’s claims are admissible.
II. CLAIMANT Expressed its Willingness to Attempt Further Negotiations on April 1 2016
34. To determine the date of failure of negotiations, it is required to highlight the communications
that occurred between Parties. On April 1 2016, CLAIMANT’s COO emailed RESPONDENT
regarding the failure of negotiations. She mentions that “it is presently not possible to find an
amicable solution” [R.29, Resp.Ex.3]. Her use of the word “presently” limits the failure of
negotiations only to the past and current times. She then expressly conveys that CLAIMANT
“remains open for any meaningful negotiations” [R.29, Resp.Ex.3], a patent expression showing
CLAIMANT’s willingness to further discuss the issue at hand with RESPONDENT in the future
without the need to resort to arbitral proceedings. Thus, complete failure of negotiations did not
occur on April 1 2016.
III. Commencement of Arbitral Proceedings Occurred on June 7 2016
35. As per CAM-CCBC, “whenever a dispute arises… the damaged party should notify the CAM-
CCBC President requesting commencement” [Straube/Finkelstien/Filho, p.65, para.2]. Through
this excerpt, it may be reiterated that commencement is when arbitral proceedings actually begin
to take place. Thus, initiation would be deemed equivalent to a request for commencement,
whereas the requirements of said request mentioned in Artt. 4.1 and 4.2 CAM-CCBC have been
adequately met, but positive action towards dispute resolution has not occurred yet.
36. Given that, failure of negotiations and initiation had occurred on May 31 2016, commencement
of arbitral proceedings accordingly started on June 7 2016, when the supplements were received.
This date is to be significantly marked, as it was the day CLAIMANT amended the required
documents submitted thereby completely fulfilling the requirements of 4.1 and 4.2 CAM-CCBC.
CLAIMANT fulfilled the amendment condition set forth by the President, as he had stated that to
send notice to RESPONDENT “claimant must first amend the Request for Arbitration within ten
days and provide evidence that all the requirements of Article 4.1 have been complied with”
[R.19, Ordr. of Pres.]. This condition was satisfied as CLAIMANT did so within eight days.
37. Accordingly, the President received the supplemented request for arbitration from CLAIMANT
against RESPONDENT on June 7 2016 [R.20, Amendment notification]. Consequently, the
arbitral proceedings shifted from the initiation to the commencement phase on that same day
through the above notice. Art. 4.21 CAM-CCBC states, “The parties can change, modify or
amend the claims and cases of action until the date of Terms of Reference are signed”
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[Straube/Finkelstien/Filho, p.111, para.3]. If one were to address both articles in combination,
CLAIMANT has satisfied all requirements needed to commence arbitral proceedings on June 7
2016 due to submitting all documents and their respective amendment on time.
IV. Even if the Arbitral Tribunal Considers that Failure of Negotiations Occurred on April
1 2016, CLAIMANT’s Claims are Still Admissible
38. If failure of negotiations were to have occurred on April 1 2016, then the sixty-day limitation
period for arbitration would deem applicable. This is because the email sent by CLAIMANT’s
COO reflects its intent to resort to arbitration as of the day it was sent if further negotiations
failed [R.29, Resp.Ex.3]. Regardless, since initiation occurred on May 31 2016, CLAIMANT’s
claims are still admissible as request for arbitration occurred within the time limit set in Sec. 21
DSA [R.11, Cl.Ex.2]. This was supported through the President’s assertion that the request was
submitted on May 31 2016 and supplemented on June 7 2016 [R.40, Ordr. of Pres., para.1].
B. CLAIMANT’s Request for Arbitration is in Line with the Requirements Set Out under the
DSA and CAM-CCBC Rules
39. The Tribunal is requested to determine the admissibility of CLAIMANT’s claims in accordance
with the DSA and the requirements of the chosen arbitration rules
[Blackaby/Partasides/Redfern/Hunter, p.195, para.3.94]. The Parties chose CAM-CCBC as their
arbitral institution [R.11, Cl.Ex.2], and therefore, the CAM-CCBC rules are to apply in
regulating the arbitral proceedings.
40. In this regard, CLAIMANT fulfilled the condition precedent set forth under Sec. 21 DSA (I). In
addition, its request for arbitration also satisfied the requirements prescribed under the CAM-
CCBC rules (II) and therefore, CLAIMANT’s claims should be considered admissible.
I. CLAIMANT Fulfilled the Condition Precedent Set Forth under Section 21 DSA
41. Pursuant to the DSA signed by the Parties, a condition precedent was incorporated within the
multi-tier dispute resolution clause of Sec. 21 DSA [R.11, Cl.Ex.2]. The clause contained a pre-
arbitration procedural requirement, which is to resort to negotiations in the event of a dispute
[R.11, Cl.Ex.2]. This requirement is to be satisfied prior to initiation of arbitration as it is a
mandatory contractual obligation [Born/Scekic, p.237, para.1].
42. In order for CLAIMANT to comply with the pre-arbitration requirement, a meeting was held on
March 31 2016 between the Parties in which CLAIMANT negotiated its willingness to a fixed
exchange rate and a rebate in conjunction with further orders [R.58, PO2, para.23]. However,
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RESPONDENT did not cooperate and was not willing to commit to the purchase of another
2000 blades [R.58, PO2, para.23]. Therefore, CLAIMANT’s offers were not welcomed with an
open mind from RESPONDENT and so its duty to negotiate before initiating arbitration under
Sec. 21 DSA [R.21, Cl.Ex.2] was fulfilled.
43. In a judgment of the English courts in the case of Emirates Trading Agency LLC v. Prime
Mineral Exports Private Ltd, the judge held that the condition precedent of negotiating the
dispute through friendly discussions prior to arbitration was enforceable. Therefore, when
CLAIMANT tried to negotiate the dispute amicably [R.58, PO2, para.23], it honored the
provisions of the DSA and satisfied the pre-arbitration requirement. As a result, initiating
arbitration became valid.
44. Moreover, Sec. 21 DSA [R.11, Cl.Ex.2] did not require a fruitful negotiation between the Parties,
but rather merely stated that the Parties should negotiate in the case of a dispute prior to initiating
arbitration. In fact, “the agreement to negotiate . . . is not an agreement to negotiate successfully
or to agree on any particular terms, but only an agreement to discuss a particular issue” [Born
(2014), p.922, para.4]. Thus, CLAIMANT was not under an obligation to ensure that the
negotiations with RESPONDENT were successful. On the contrary, the only duty imposed on
CLAIMANT according to Sec. 21 DSA [R.11, Cl.Ex.2] is to try to solve the dispute amicably to
satisfy the condition precedent.
45. Similarly, in the case of Walford v. Miles, the court held that an “obligation to seek to resolve a
claim by friendly discussions is no more than an agreement to negotiate with a view to settling
the dispute”. Hence, such condition precedents that involve negotiating the dispute do not have
to be successful but rather they only must be complied with prior to arbitration [Born/Scekic,
p.252, para.2].
46. Finally, the Parties are contracting states of the NYC 1958 [R.60, PO2, para.35] and therefore no
party can contest the enforceability of the arbitration agreement of Sec. 21 DSA [R.11, Cl.Ex.2]
by virtue of Art.2 NYC 1958.
II. CLAIMANT’s Request for Arbitration Satisfied the Requirements Prescribed Under
the CAM-CCBC Rules
47. RESPONDENT alleges that CLAIMANT’s claim is inadmissible due to non-compliance with
Artt. 4.1 and 4.2 CAM-CCBC rules on the day of initiating arbitration [R.25, Ans. to Req. for
Arb. para.12]. However, this allegation is groundless as CLAIMANT complied with the rules of
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CAM-CCBC. Therefore, the requirements set out by Art. 4.1 CAM-CCBC rules are met (1) In
addition, the requirements set under Art. 4.2 CAM-CCBC rules are also satisfied (2).
1. The Requirements Set Out by Art. 4.1 CAM-CCBC Rules are Met
48. Despite RESPONDENT’s allegation, CLAIMANT satisfied the requirements for initiating
arbitration mentioned in Art. 4.1 CAM-CCBC. Art. 4.1 CAM-CCBC requires the notification of
CAM-CCBC’s President upon requesting the commencement of arbitration
[Straube/Finkelstien,/Filho, p.65, para.1]. In an arbitral institution, it is usual for “the notice to
be given to the relevant institution by a ‘request for arbitration’ or similar document, and the
institution then notifies the respondent” [Blackaby/Partasides/Redfern/Hunter, p.24, para.1.67].
49. In addition, Art. 4.1 CAM-CCBC lists a number of documents that must be attached to the
request for arbitration. The request must contain a copy of the arbitration agreement, the amount
involved, the express reference to the seat, language, law or rules of law applicable to the
arbitration, summary of the dispute, the full name of the Parties, and the PoA
[Straube/Finkelstien/Filho, p.66, para.3].
50. CLAIMANT’s request for arbitration contained all the requirements mentioned hereinabove
[R.3, Req. for Arb.] as the request contained a copy of the arbitration agreement, the seat,
language, laws, and rules applicable [R.6, St. of Cl., para.19]. It also contained the amount in
dispute [R.7, St. of Cl.], its summary, and the Parties’ names [R.3, St. of Cl.].
51. The only amendment required was the PoA, which contained the name of CLAIMANT’s parent
company, Wright Holding PLC instead of Wright Ltd. [R.18, PoA]. This occurred because
CLAIMANT’s parent company that owns 88% of CLAIMANT’s limited company [R.54, PO2,
para.2] had originally approached the lawyer to prepare the PoA [R.20, Fasttrack to CAM-
CCBC]. Nonetheless, CLAIMANT’s lawyer submitted the amended PoA promptly to CAM-
CCBC [R.21, PoA].
52. Moreover, RESPONDENT alleges that CLAIMANT’s lawyer lacked any proper authority to
submit the claim as the PoA had a minor mistake [R.25, Ans. to Req. for Arb., para.13].
However, it is vital to highlight the explicit wording of the amended PoA stating, “the grant of
this Power of Attorney shall thereby approve any actions already undertaken by the Lawyer”
[R.18, PoA]. Accordingly, any actions done by CLAIMANT’s lawyer prior to correcting the PoA
shall be deemed valid. Therefore, CLAIMANT fulfilled all the requirements of Art. 4.1 CAM-
CCBC, and the request for arbitration should be deemed admissible.
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2. The Requirements Set Under Art. 4.2 CAM-CCBC Rules are Satisfied
53. RESPONDENT states that CLAIMANT did not satisfy the requirements of Art. 4.2 CAM-
CCBC [R.25, Ans. to Req. for Arb., para.12]. This claim lacks any legal basis. Art. 4.2 CAM-
CCBC obliges the parties wishing to arbitrate to attach the proof of payment of the registration
fee when submitting the request for arbitration. CLAIMANT fulfilled this obligation, as the
request had the proof of payment attached to it [R.3, Req. for Arb.].
54. Notwithstanding this fact, Art. 4.2 CAM-CCBC requires the payment to be in accordance with
Art. 12.5 CAM-CCBC, which states that the registration fee must be paid corresponding to the
table of expenses. The table of expenses provide that the current cost of registration is R$ 4000
[Straube/Finkelstien/Filho, p.192, para.4]. CLAIMANT’s mistake of paying $400 instead of
$4000 was a minor one as the error was simply an oversight. Regardless, this oversight was
immediately fixed on June 7 2016 when CLAIMANT paid the remainder of the fee [R.20,
Fasttrack to CAM-CCBC].
55. CLAIMANT met its obligations under Art. 12 CAM-CCBC [R.60, PO2, para.35] thus satisfying
Artt. 4.2 and 12.5 CAM-CCBC. Hence, “it would be inappropriate to bar a presumptively valid
claim on either jurisdictional or admissibility grounds” [Born/Scekic, p.254, para.2].
CONCLUSION OF THE FIRST ISSUE
56. CLAIMANT’s claims are admissible as they have been submitted on time. Sec. 21 DSA supports
that the arbitration proceedings were initiated on time as both initiation and failure of negotiation
occurred on May 31 2016. Therefore, the request to arbitration was supplemented on June 7
2016, which then commenced arbitral proceedings. CLAIMANT’s claims were also in
compliance with the DSA and CAM-CCBC Rules.
ISSUE 2: CLAIMANT IS ENTITLED TO THE FULL PAYMENT OF THE PURCHASE
PRICE ACCORDING TO THE DSA AND CISG
57. RESPONDENT is under an obligation to pay the full purchase price to CLAIMANT by virtue of
the DSA, the CISG, which is the governing law of the contract [R.11, Cl.Ex.2], and the
UNIDROIT principles [R.53, PO1]. Accordingly, CLAIMANT is entitled to the outstanding
amount of US$ 2,285,240.00 from RESPONDENT as the remainder of the purchase price for the
fan blades (A). In addition, CLAIMANT is also entitled to the amount of US$ 102,192.80 for the
bank inspection charge from RESPONDENT (B).
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A. CLAIMANT is Entitled to the Outstanding Amount of US$ 2,285,240.00 from
RESPONDENT as the Remainder of the Purchase Price for the Fan Blades
58. Sec. 4 DSA included a price structure calculated on a cost-plus basis with a minimum and a
maximum price [R.10, Cl.Ex.2]. Even though the price of each blade was not yet certain and the
costs would be incurred in EQD, CLAIMANT kindly agreed on this provision due to
RESPONDENT’s insistence on offering Earhart a price [R.8, Cl.Ex.1]. Nonetheless, the DSA did
not specify a fixed exchange rate and so the purchase price for the fan blades is determined on
the basis of the current exchange rate (I). Additionally, the fixed exchange rate set out in the
addendum applies only to the clamps and not to the fan blades (II).
I. The Purchase Price for the Fan Blades is Determined on the Basis of the Current
Exchange Rate
59. Sec. 4 DSA did not specify a fixed exchange rate nor did it address the issue of the exchange rate
in general [R.10, Cl.Ex.2]. Therefore, the purchase price for the fan blades is to be determined
based on the current exchange rate (1). In addition, there is no established practice between the
Parties on the use of the exchange rate at the time of contracting (2). Even if there was an
established practice between the Parties, it will not be binding upon them in the present case (3).
1. The Purchase Price for the Fan Blades is Determined in Accordance with the DSA
60. Parties are only bound by the terms and provisions found within their contract [Honnold, p.19,
para.1] and so any matters that are not addressed in the contract cannot be deemed obligatory on
them. Usually, the parties to a contract will provide for a fixed price or make provision for
determining the price [Schlechtriem/Schwenzer, p.822, para.2] and so the Parties in the issue at
hand chose to agree upon a pricing structure with a minimum and a maximum price per blade
[R.10, Cl.Ex.2]. Accordingly, in order to determine that the purchase price is based on the current
exchange rate which is equivalent to US$ 1 = EQD 1.79 [R.14, Cl.Ex.5], it is essential to initially
understand the objective of the price structure found in Sec.4 DSA [R.10, Cl.Ex2].
61. First, Sec. 4 DSA did not expressly nor impliedly address the matter of the exchange rate nor did
the Parties discuss its application during their negotiations [R.54, PO2, para.15] and so
RESPONDENT cannot argue that there was any fixed rate in relation to the blades [R.10,
Cl.Ex2]. In the case of P&G Co v. Svenska Cellulosa Aktiebolaget, the court held that there was
no express or implied term incorporating a fixed exchange rate but rather stated that the parties
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should not be bound by any rate other than the market rate at the date of tendering payment.
Similarly, the fan blades should be determined in accordance with the current exchange rate.
62. Second, it is also essential to highlight that RESPONDENT is merely taking advantage of
CLAIMANT’s mistake. RESPONDENT never insinuated that the exchange rate for the fan
blades was fixed at any point before CLAIMANT’s erroneous billing. CLAIMANT emailed
RESPONDENT on Jan 15 2016 informing it of the mistake in calculation in regards to the
exchange rate and apologizing for the oversight along with attaching the corrected invoice for the
blades [R.14, Cl.Ex.5]. However, RESPONDENT disregarded CLAIMANT and insisted upon
applying the fixed exchange rate [R.16, Cl.Ex.7].
63. Third, in their previous co-operations, the Parties used a price structure that is “largely identical”
to the one demonstrated in Sec. 4 DSA excluding the minimum and maximum prices [R.54,
PO2, para.5]. The previous price structure ensured that CLAIMANT would “at least recover its
costs and make a profit of 1%” [R.54, PO2, para.5]. Art. 8 CISG requires a party, in performing
its own obligation, to take into consideration the other party’s interest [CISG Digest, p.54,
para.4]. Considering the prior dealings between the Parties, RESPONDENT cannot be unaware
that it is in CLAIMANT’s interest to at least recover its production costs.
64. In this case, the DSA provides an actual cost-plus price structure [R.14, Cl.Ex.5] the purpose of
which is to recover the incurred costs. Sec. 4 DSA specifies a maximum price of US$ 13,125 for
the fan blades [R.10, Cl.Ex.2]; as long as the production costs do not exceed this price,
CLAIMANT should recover its costs and make some profit. CLAIMANT’s production costs for
a single fan blade is EQD 19,586 which is equivalent to US$ 10,941.90 [R.14, Cl.Ex.5] and so it
did not reach the maximum price. Yet, CLAIMANT did not recover its actual production costs
due to RESPONDENT’s insistence on the application of the wrong exchange rate that violates
the purpose of the cost-plus price structure. This is evident from the table below:
Comparison of Production Costs of the Fan Blades v. Price Offered by Each Party
Currency CLAIMANT’s Position RESPONDENT’s Position
Price US$ US$ 22,723,800 US$ 20,438,560
Price EQD EQD 40,675,602 EQD 36,585,022.4
The total for the production costs of the fan blades = EQD 39,172,000
The current exchange rate used for the conversion from US$ to EQD = 1.79
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65. As shown in the table, the price RESPONDENT allegedly paid does not even cover
CLAIMANT’s production costs, which is a commercially unreasonable result. In applying Art. 8
(2) CISG, one court took into consideration the parties’ interest under the contract and found that
the buyer’s performance of its obligation was commercially unreasonable for they contradicted
the seller’s interest. Consequently, it ruled in favor of the seller [CISG Digest, p.55, para.15; AC
Dresden, Case No.2 U 2723/99].
66. In Rainy Sky v. Kookmin Bank, there were two suggested interpretations of the contract one of
which “defies commercial common sense”. The court adopted the other interpretation, which
fulfilled the commercial purpose of the contract. Henceforth, the current exchange rate must be
applied since it fulfills the commercial purpose of the contract.
67. RESPONDENT cannot rely on the de-risking decision made by its former parent company
[R.27, Resp.Ex.1] as the Parties are no longer subsidiaries to EISA [R.54, PO2, para.1].
Therefore, RESPONDENT’s argument in regards to CLAIMANT bearing the currency risk is
groundless.
68. Also, RESPONDENT’s refusal to pay the outstanding price constitutes a breach of the DSA and
Art. 53 CISG due to the fact that “if the buyer fails to pay the seller in full but performs a partial
payment, his partial performance constitutes as a breach of contract” [Schlechtriem/Schwenzer,
p.831, para.8]. Accordingly, CLAIMANT can require RESPONDENT to pay the price by virtue
of Art. 62 CISG, which enables the seller to require payment of the price [CISG Digest, p.298;
Schlechtriem/Schwenzer, p.908, para.9]. Art. 62 CISG requires the seller to only demand
payment from the buyer [CISG Digest, p.298] and so CLAIMANT satisfies this requirement in
its email when it requested RESPONDENT to pay the outstanding price [R.14, Cl.Ex.5].
69. CLAIMANT is entitled to the purchase price that is to be calculated based on the current
exchange rate. In addition, RESPONDENT is in breach of the DSA as well as Art. 53 CISG, and
therefore is required to pay the outstanding price by virtue of Art. 62 CISG.
2. There is No Practice Established Between the Parties in Regards to the Use of the
Exchange Rate at the Time of Contracting.
70. Art. 9(1) CISG bounds parties by their practices, however it does not apply to the case at hand.
The Parties previously had only two co-operations where they applied the exchange rate evident
at the time of contract conclusion [R.54, PO2, para.5]. Courts have established that following a
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certain conduct during two previous dealings is not sufficient to establish a practice between the
parties [LC Duisburg, Case No.49 C 502/00; Schlechtriem & Schwenzer, p.185, para.8].
71. Moreover, to establish a practice parties to a contract must “recognise their conduct as practice”,
which will create a “justified expectation” that such practice will be observed by the parties in
the future [Schlechtriem & Schwenzer, p.185, para.8]. This was not the case since the Parties did
not refer to practice but rather selectively applied the exchange rate that was most favorable to
RESPONDENT in both previous contracts in compliance with their parent company’s request to
satisfy its tax planning [R.54-55, PO2]. Accordingly, it is unjustifiable for RESPONDENT to
expect that using the exchange rate at the time of contracting would apply to future contracts.
3. Even if There was an Established Practice Between Parties, Such Practice Will
Not Be Binding Upon Parties in the Present Case.
72. Had the Parties recognized that the use of the exchange rate at the time of contracting was an
established practice, such practice is not binding in relation to the DSA since the two previous
co-operations were substantially different from the case at hand. Where “circumstances are so
different from a previous case that the expectation of a particular behavior is not justified. . . the
practice will not be valid” [Bout, para.18].
73. RESPONDENT recognizes the major difference in the circumstances that resulted from the
CLAIMANT having its parent company changed [R. 31, Resp.Ex.5]. Accordingly, since it is not
explicitly stated that the exchange rate at the time of contracting should apply to this case [R.10,
Cl.Ex.2], the Parties are not obligated to use it.
II. The Fixed Exchange Rate Provision in the Addendum Applies Only to the Purchase of
the Clamps
74. Almost three months after concluding the DSA, the Parties signed an addendum for the purchase
of clamps [R.11, Cl.Ex.2]. The addendum included a fixed exchange rate clause [R.11, Cl.Ex.2],
which RESPONDENT alleges to apply to the “whole contract” [R.25, Ans. to Req. for Arb.,
para.10]. CLAIMANT rejects this allegation as the addendum is an additional separate
agreement and does not amend the provisions of the DSA even if physically attached to it (1).
Even if the addendum is not considered a separate agreement, its terms should only apply to the
clamps (2).
1. The Addendum in Relation to the Clamps is a Separate Agreement, and Therefore,
the Fixed Exchange Rate Clause Does Not Apply to the DSA
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75. RESPONDENT suggested signing an addendum [R.57, PO2, para.16], rather than a separate
agreement for the clamps for the sole purpose of ease [R.28, Resp.Ex.2] and “convenience”
[R.57, PO2, para.16]. The addendum was not meant to change anything in the DSA. Therefore,
linking the clamps agreement, as an addendum, to the DSA was only done physically without
undermining the fact that the addendum is a separate agreement. Moreover, the fact that
RESPONDENT considered the alternative of signing a physically separate agreement indicates
that it acknowledges the purchase of the clamps as a separate agreement.
76. Additionally, the addendum relates to the purchase of clamps [R.11, Cl.Ex.2], which is a subject
matter that is completely different from that of the DSA, the object of which is the purchase of
fan blades [R.9, Cl.Ex.2]. This indicates that the addendum is indeed a separate agreement.
77. RESPONDENT’s inclusion of the clause that states “other terms as per main Agreement” [R.11,
Cl.Ex.2] further indicates that the purchase of the clamps is a separate agreement. First, this
clause refers to the DSA provisions to apply to the addendum. In other words, the terms of the
DSA apply to the purchase of the clamps and not vice versa. Accordingly, the provisions of the
DSA remain unchanged. Second, the use of the phrase “main Agreement” [R.11, Cl.Ex.2]
distinguishes the DSA from the clamps purchase agreement. If only one agreement existed, there
would not be the need to use the term “main” alongside “Agreement”. The use of the term “main
Agreement” signifies the existence of another agreement that is secondary to it, which in this
case is the clamps purchase agreement.
78. Furthermore, in its email, CLAIMANT clearly distinguished between the clamps and the blades
by referring to them respectively as “the agreement in regard to the clamp . . . contract in regard
to the TRF 192-I fan blades” [R.30, Resp.Ex.4]. CLAIMANT used the term “agreement”, which
was used by RESPONDENT in the fixed exchange rate clause, to refer to the clamps.
Accordingly, as far as the CLAIMANT is concerned, the term “agreement” in mentioned clause
is a reference to the clamps purchase agreement.
79. Thus, the clamps purchase agreement is a separate agreement and therefore, the fixed exchange
rate clause applies only to the purchase of the clamps.
2. Even if the Tribunal were to Find that the Addendum is Not a Separate Agreement,
the Fixed Exchange Rate Clause Must Be Interpreted to Apply Only to the Clamps
80. Article 8 CISG applies to the interpretation of statements made by the parties and to the
interpretation of contracts, which have not been the subject of in-depth negotiations and were
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entered into and concluded by correspondence between the Parties [Honnold (1999), p.116]. At
hand, the fixed exchange rate clause was included into the provisions for the purchase of the
clamps in the absence of any prior discussion between the Parties regarding its scope of
application [R.57, PO2, para.17]. Since the Parties understood the scope of application of the
fixed exchange rate differently, Art. 8 CISG will apply to determine whether the fixed exchange
rate clause applies to the DSA. Thus, the fixed exchange rate clause in the addendum applies
only to the clamps pursuant to Artt. 8(1) (a), and 8(2) CISG (b).
a. The Fixed Exchange Rate Clause in the Addendum Applies Only to the Clamps
Pursuant to Art. 8(1) CISG
81. Applying the subjective test [Farnsworth, p.98] set forth in Art. 8(1) CISG, it becomes evident
that CLAIMANT did not know and could not have been aware of RESPONDENT’s intention to
apply the fixed exchange rate clause to the DSA (i) and therefore, CLAIMANT’s reply to
RESPONDENT’s email refers to the purchase of the clamps (ii).
i. CLAIMANT Did Not Know and Could Not Have Been Aware of RESPONDENT’s
Intention to Apply the Fixed Exchange Rate Clause to the DSA
82. In one case, where the CISG was applied, the court was certain that the seller neither knew nor
could have been aware of the buyer’s intention where the latter “neither mentioned its pure
internal and secret intention nor made the [seller] become aware of it” [DC Hamburg, Case
No.5 O 543/88]. Applying the CISG, another court could not establish that the buyer was aware
of the seller’s intention to include its general conditions into their contract where these condition
“were never discussed during their negotiations” [CSS Antenna, Inc. v. ATE, GMBH]. In the
present case, it is evident from the circumstances that RESPONDENT did not communicate to
CLAIMANT its intention of applying the fixed exchange rate clause to the DSA.
83. First, RESPONDENT’s email of Oct 22 2010 was the first and only time the fixed exchange rate
clause was introduced [R.57, PO2, para.17]. This email made no mention of the application of
the fixed exchange rate clause to the DSA [R.28, Resp. Ex.2]. Moreover, during the telephone
call [R.57, PO2, para.16] and in their emails of 22 Oct [R.28, Resp.Ex.2] and 24 Oct [R.30,
Resp.Ex.4], the Parties’ statements were limited to the clamps. There was no mention of the
blades at all by either party.
84. Second, RESPONDENT alleges that it “insisted” on the application of the fixed exchange rate to
the “whole contract” [R.25, Ans. to Req. for Arb., para.10]. The use of the word “insisted”
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indicates the existence of resistance from CLAIMANT’s part which would ultimately result in
either its consent or objection to the application of the fixed exchange rate to the DSA. However,
RESPONDENT did not insist nor manifest such intention. This is evident from the statement
made by RESPONDENT’s negotiator, which reads “I cannot say whether CLAIMANT’s
negotiators had the same view” [R.31, Resp.Ex.5]. Had RESPONDENT’s intention been the
subject of discussion between the Parties, its negotiator would not be hesitant to confirm that
CLAIMANT at the least could not have been unaware of RESPONDENT’s intention.
85. Third, Ms. Beinhorn, CLAIMANT’s negotiator, had asked the CFO whether CLAIMANT can
accept a fixed exchange rate for the clamps agreement [R.50, Cl.Ex.9]. Ms. Beinhorn’s inquiry
was limited to the clamps agreement, which is an indication of her understanding that the fixed
exchange rate clause applies specifically to the clamps. The CFO consented to the application of
the fixed exchange rate to the clamps due to the “limited size of the contract” [R.50, Cl.Ex.9].
Accordingly, had Ms. Beinhorn understood the fixed exchange rate clause to apply to the DSA,
she would have asked whether CLAIMANT can accept a fixed exchange rate for the blades,
which is of a much larger amount, rather than enquiring about the clamps.
86. Since RESPONDENT did not, in any manner, reveal its intention of applying the fixed exchange
rate to the DSA, its intention is “irrelevant” [CISG Digest, p.54, para.8]. Accordingly, it cannot
be established that CLAIMANT knew or could not have been unaware of RESPONDENT’s
intention to apply the fixed exchange rate clause of the addendum to the DSA. In fact, it is
unreasonable to expect the application of the fixed exchange rate clause to the DSA when such a
matter was not explicitly mentioned nor implied at any point.
ii. CLAIMANT’s Reply to RESPONDENT’s Email Refers to the Clamps’ Purchase
87. In its reply to RESPONDENT’s email, which related specifically to the purchase of the clamps
[R.28, Resp.Ex2], CLAIMANT stated that it consents to the fixed exchange rate [R.30,
Resp.Ex.4]. Thus, RESPONDENT alleges that CLAIMANT had agreed to the application of the
fixed exchange rate clause to the DSA [R.25, Ans. to Req. for Arb., para.10].
88. Art. 8(3) CISG states that in interpreting a statement made by a party, “all relevant
circumstances” should be taken into consideration. Accordingly, “there is no limit under Article
8(3) as to what one can refer to in order to get at the meaning of a statement or conduct” [Sun,
p.79]. Therefore, it must be noted that CLAIMANT’s email is merely a reply to
RESPONDENT’s email, which was solely discussing the clamps purchase agreement. As a
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result, CLAIMANT’s consent to the fixed exchange rate clause should not be interpreted in
isolation of this fact.
89. After establishing that CLAIMANT did not know and could not have been aware of
RESPONDENT’s intention to apply the fixed exchange rate clause to the DSA, it becomes
evident that CLAIMANT’s consent to the fixed exchange rate clause [R.30, Resp.Ex.4] is a
consent to the use of mentioned clause for the purchase of the clamps.
b. The Fixed Exchange Rate in the Addendum Applies Only to the Purchase of the
Clamps Pursuant to Article 8(2) CISG
90. Since it is impossible to establish CLAIMANT’s knowledge about RESPONDENT’s intention to
apply the fixed exchange rate to the DSA, Art. 8(2) CISG will apply to determine the
understanding of a reasonable person in the position of CLAIMANT under the same
circumstances (i). In any case, any ambiguity in the addendum must be interpreted against
respondent pursuant to the contra proferentem rule (ii).
i. A Reasonable Person in the Position of CLAIMANT and under the Same
Circumstances Would Have Understood the Fixed Exchange Rate Clause to Apply
Solely to the Clamps
91. When establishing the understanding of the Parties, due regard should be given to the
negotiations between them in accordance with Art. 8(3) CISG.
92. In its email, RESPONDENT stated that “the easiest way to regulate the purchase of the clamps
is to sign an addendum” [R.28, Resp.Ex.2]. This indicates that the sole purpose of signing an
addendum was to regulate the clamps purchase agreement. RESPONDENT did not mention
anything in its email to indicate that the fixed exchange rate clause applies to the DSA.
Accordingly, a reasonable person in the shoes of CLAIMANT would understand from
RESPONDENT’s email that the addendum addresses the purchase of the clamps and would not
assume the application of any terms of the addendum to the purchase of the blades.
ii. In Any Case, Any Ambiguity in the Addendum Must be Interpreted Against
Respondent According to the Contra Proferentem Rule
93. The contra proferentem rule is internationally recognized [Lookofsky, p.48]. It is addressed under
Art. 4.6 of the UINIDROIT principles and it also applies to the CISG [CISG-AC Opinion No.13,
para.9.1; Schlechtriem/Schwenzer, p.168, para.49]. In fact, it is a principle on which Art. 8(2)
CISG is founded [CISG Digest, p.56, para.20]. According to the contra proferentem rule, “the
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party that has drafted or otherwise supplied the formulation of a certain term must bear the risk
of its possible ambiguity” [Schlechtriem/Schwenzer, p.168, para.49].
94. In the present case, RESPONDENT provided the provisions of the clamps purchase agreement
[R.28, Resp.Ex.2]. In incorporating the provisions of the DSA into the addendum,
RESPONDENT explicitly referred to the DSA as the “main Agreement” [R.11, Cl.Ex.2].
However, RESPONDENT used the word “agreement” in the fixed exchange rate clause. Since
“main Agreement” is a reference to the DSA, the word “agreement” is a reference to the clamps.
Should the Tribunal consider the clause ambiguous due to the fact that both Parties have
different interpretations of the same clause, such ambiguity should be interpreted against
RESPONDENT as the supplier of mentioned clause.
B. CLAIMANT is Entitled to the Outstanding Payment of US$ 102,192.80 for the Bank
Inspection Levy from RESPONDENT
95. RESPONDENT is contractually obligated to pay the full price as per Sec. 4.3 DSA (I). In
addition, Art. 54 CISG imposes an obligation on RESPONDENT to pay the transfer fee (II).
Also, RESPONDENT is not exempted from its liability to pay the levy amount under Art. 35(2)
CISG (III). Thus, CLAIMANT is entitled to the payment of the bank inspection charges.
I. RESPONDENT is under a Contractual Obligation to Pay the Full Price to CLAIMANT
96. Since contracts are a reflection of the parties’ intentions [Gilson/Sabel/Scott, p.37, para.42],
Parties must fulfill their contractual obligations found within the DSA. RESPONDENT is
contractually obligated to pay the full price as per Sec. 4 DSA (1). In addition, RESPONDENT
must pay the bank inspection charge to CLAIMANT based on the principle of pacta sunt
servanda (2).
1.RESPONDENT is Contractually Obliged to Bear the Transfer Fee Per Sec. 4.3 DSA 97. Contractual terms generally prevail over the CISG in the hierarchy of rules [GmbH v. NV Fepco
International]. Pursuant to Sec. 4 DSA, the Parties agreed that “the bank charges for the transfer
of the amount are to be borne by the BUYER” [R.10, Cl.Ex.2].
98. Contrary to RESPONDENT’s allegation that the 0.5% levy deducted by the Bank for money
laundering inspection should be borne by CLAIMANT [R.26, Ans. to Cl., para.18],
RESPONDENT had agreed to pay all the bank charges for the transfer fee as provided under the
DSA [R.10, Cl.Ex.2], and had showed no objection to the suggestion of including the provision
[R.55, PO2, para.6]. Sec. 4 DSA does not specify the type of “bank charges” in particular;
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therefore, RESPONDENT must bear the risk of covering any and all “bank charges” that are
necessary for the transfer of the full purchase price to CLAIMANT’s place of business.
99. Generally, the term “transfer” refers to the process of sending of funds from one party to another
[BIS, 2003]. Moreover, the buyer and seller must agree upon the place of payment, and in cases
where the contract payment is relevant to a bank account, the bank would be the place of
payment [Schlechtriem/Schwenzer, p.855, para.5]. The latter party’s place of payment in the
case at hand is CLAIMANT’s bank account [R.10, Cl.Ex.2]. Furthermore, by virtue of Art.
57(1)(a) CISG, the buyer must to bear any cost arising from the transport of cash or any requisite
transaction until the money equivalent to the purchase price reaches the seller’s place of
business. These costs include any commissions or charges due to banks for using the contractual
means for payment. [Schlechtriem/Schewnzer, p.830, para.22].
100. The amount of US$ 102,192.80 was deducted by the Central Bank during the transfer process
and before reaching CLAIMANT’s account, as the Financial Investigation Unit deducts a 0.5%
levy when investigating every sum of money [R.17, Cl.Ex.8]. Consequently, RESPONDENT is
under the duty to pay the bank charges that are incurred during the transfer process, until the
price reaches the place of payment agreed by the parties, which is CLAIMANT’s bank account
at the Bank [R.10, Cl.Ex.2].
101. In the present case, the levy is a bank transfer fee that must be contemplated by the contract, as
the money laundering inspection is a governmental process that must be made for the transfer of
funds [Gonzalez, p.304, para.3]. In summary, RESPONDENT’s failure to pay the investigation
fee is considered a breach of Sec. 4.3 DSA.
2.RESPONDENT Must Pay the Bank Inspection Charge to CLAIMANT Based on
the Principle of Pacta Sunt Servanda
102. The CISG is built upon the international law principle of pacta sunt servanda, which provides
that contractual promises must be kept [Schwenzer, para.35; Sapphire v. National Iranian Oil
Company]. “The legal concept that the oblige has a right to require the obligor to perform the
agreed obligations following the principle of pacta sunt servanda that is knowing in all legal
systems” [Schlechtriem/Schwenzer, p.906, para.2]. This principle is further affirmed by the strict
rules of avoidance of international commercial contracts [CISG Case No.709 (GER, 2002)].
103. In this case, RESPONDENT’s constant refusal to pay the bank transfer charge to CLAIMANT is
a violation to the principle of pacta sunt servanda, which resulted in CLAIMANT not receiving
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the full purchase price as per agreed under the DSA between the parties. Therefore, to be in line
with the principle of pacta sunt servanda, CLAIMANT should be entitled to receive the amount
of US$ 102,192.80 from RESPONDNET for the bank transfer fee.
II. Art. 54 CISG Imposes an Obligation on RESPONDENT to Pay the Transfer Fee
104. Art. 54 CISG imposes an obligation on RESPONDENT to take necessary measures to pay the
price (1). Additionally, RESPONDENT’s failure to take necessary steps for payment constitutes
a breach of contract (2). In any case, CLAIMANT is not bound by its own past practice in
previous dealings according to Art. 9(1) CISG (3).
1. Art. 54 CISG Imposes an Obligation on RESPONDENT to Take Necessary Measures to Pay the Price
105. Pursuant to Art. 54 CISG, the buyer’s obligation to pay the price extends to taking necessary
steps to enable payment, but not confined to the mere obligation of paying the price [Gabriel,
p.274]. These obligations must be borne by the buyer unless stated otherwise in the contract
between the parties [CISG Digest 2012, p.264, para.3].
106. The term “formalities” in Art. 54 CISG includes all the steps and arrangements that need to be
made in order to dispose the money owed at the agreed time [Kroll/Mistelis/Perales/Viscasillas,
p.805, para.6]. Thus, the levy deducted due to the money laundering investigation is considered
a step that must be taken in order to dispose the money to CLAIMANT.
107. The buyer’s obligation under Art. 54 CISG is to comply with the necessary formalities, which
include compliance with governmental and banking procedures [Schlechtriem/Schwenzer p.840,
para.2]. Pursuant to Art. 54 CISG, buyer’s performance of his enabling steps to pay the price
includes conforming to commercial and administrative requirements. The administrative
requirements are those that are imposed by the government, statute or administrative ordinance,
which include payment of transfer funds aboard [Gonzalez, p.304, para.3]. In this case, the Bank
is a government entity, and the bank inspection charges are under a governmental regulation that
must be made for the enablement of the price [R.55, PO2, para.7]. Hence, RESPONDENT is
obliged to comply with the necessary formalities to make the full payment.
108. Likewise, in CLOUT Case No.142, respondent was held liable for not taking the necessary steps
to ensure that payment was made [RF CCI, 123/1992]. The tribunal in the said case held that
mere instruction to the bank to pay the amount does not suffice as ensuring the enabling steps for
the payment of the price. Similarly, in the case at hand, RESPONDENT did not ensure taking the
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necessary steps to pay the bank charges that were crucial for enablement of the payment. As
underlined by most cases, any costs associated to effect payment are rightfully borne by the
buyer [LandgerichtDuisburg, Germany, 17 Apr. 1996], Therefore, the Tribunal should order
RESPONDENT to take all necessary steps to enable full payment to CLAIMANT.
109. Furthermore, bearing transportation costs in delivering goods and bank commissions in making
monetary transfer are mandated under Art. 6.1.11 UNIDROIT principles under the obligations of
the performing party.
2.RESPONDENT’s Failure to Take Necessary Steps for Payment Constitutes a Breach of Contract
110. The buyer’s failure to follow the necessary formalities enabling the payment of the price
constitutes a breach of contract, as it is an independent obligation that the buyer must comply
with [Schlechtriem/Schwenzer p.842, para.3; Honnold 1999, p.323, para.2].
3.CLAIMANT is Not Bound by its Own Past Practice in Previous Dealings According to Art. 9(1) CISG
111. RESPONDENT mentions that the levy has been charged by the Bank on two previous occasions
which CLAIMANT paid the levy [R.26, Ans. to Cl., para.19]. However, practices are deemed
established when they are among the same parties involved in specific series of transactions
through repeated courses of dealings. Thus, other practices with other parties are regarded as
irrelevant [Graffi, p.105].
112. As per Art. 9(1) CISG, parties are bound by any practice established between them. Any practice
that is derived CLAIMANT’s dealings with other companies is only restricted to the relationship
of the specific parties between each other, and therefore may not be binding under the DSA
between the Parties. In brief, RESPONDENT shall not demand CLAIMANT to make any
payment according to the latter’s own course of dealings with other parties in which
RESPONDENT was not involved.
113. Contrary to RESPONDENT’s allegation regarding CLAIMANT’s previous dealing with
JetPropulse [R.26, Ans. to Cl., para.8], the contract between CLAIMANT and JetPropulse did
not specify who is responsible for the charges of the transfer [R.55, PO2, para.8]. The DSA,
however, imposed an explicit obligation on RESPONDENT to bear the transfer fee [R.10,
Cl.Ex.2]. The same applies to CLAIMANT’s contract in its dealing with JumboFly [R.26, Ans. to
Cl., para.9].
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III. RESPONDENT Cannot Rely on Art. 35(2) CISG to be Exempted from its Liability to
Pay the Levy Amount
114. Art. 35(2) CISG concerns delivery of goods and not payment. There is no complete uniformity in
cases dealing with whether the buyer or the seller should bear the risk of non-conformity with the
relevant regulations [Saidov, p.542]. Due to the broad formulation of the rules, they must be
applied on a case-by-case basis [Saidov, p.543]. Contrary to RESPONDENT’s allegation New
Zealand Mussels case does not apply to the case at hand (1). Following the Mussels Case
approach conflicts with the fundamental objective of Art. 7(1) CISG (2).
1. New Zealand Mussels Case Does Not Apply to the Case at Hand
115. The well-known New Zealand Mussels Case dealt with the issue of non-compliance with public
law regulations. The case relates to a contract governed by the CISG, which involved a Swiss
seller that delivered mussels to a German buyer, without complying with the German health
authorities’ recommendation concerning the mussels’ cadmium content [BGH, 1995].
116. The German Supreme Court held as a general rule that the seller is not liable for not complying
with the buyer’s country regulations unless: the seller’s country had the same regulations; or the
buyer informed the seller of the regulations; or the seller had a good reason to know about them.
Since none of these exceptions were applicable, the seller was not under a duty to comply with
the German authority recommendation [Flechtner, p.8]. In any case, the approach followed by
the German Supreme Court is neither a fixed rule nor a presumption; it is merely a general
guideline [Honnold 1999, p.355].
117. Furthermore, the Mussels Case did not trigger any of the three exceptions to the BGH court’s
general rule, as none of the exceptions were applicable. Whereas in the present case, it falls
under the third exception to the general rule, which is that RESPONDENT had a good reason to
know about the regulations based on the circumstances. In other words, the third exception states
that a seller who knew or ought to have been aware of the standards because of “special
circumstances” will be expected to deliver the goods in compliance with the specialized public
regulations of the buyer’s country [Flechtner, p.8, para.14].
118. Additionally, there is an obligation on the seller to comply with the special legislative
requirements if it had already been aware of them, and that depends on the circumstances of the
case at dispute [Schlechtriem/Schwenzer, p.605, para.18]. As further mandated by Art. 8(3)
CISG, all relevant circumstances must be assessed when determining the intentions of the
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parties, “the fact that the buyer is likely to be more familiar with the requirements of its own
jurisdiction is certainly relevant, but suppose those requirements are very well known
internationally?” [Honnold 1999, p.225].
119. In the present circumstances, RESPONDENT ought to have been aware of the implementation of
the legislation that is based on the UN-Model provisions that was considerably covered in the
press and frequently reported in the newspapers [R.55, PO2, para.8], all which suffice
reasonably as “special circumstances”. Consequently, RESPONDENT may not base its claim on
the Mussels Case to release itself from its duty to pay the bank inspection fee, as it is impliedly
responsible under Art. 35(2) CISG to meet the regulations of CLAIMANT’s country.
120. In the case of Smallmon v. Transport Sales Ltd., the court followed the Mussels Case approach
in its decision and held that the fact that the seller had previously sold goods in the buyer’s
jurisdiction establishes the requirement of “special circumstances”. Moreover, in the judgment
of M. Caiato Roger v. La Société, the court found that the seller was obliged to comply with the
buyer’s country’s standards on the grounds that the dealings with the buyer for several months
was sufficient to establish the obligation.
2. Following the Mussels Case Approach Conflicts with the Fundamental Objective of
Art. 7(1) CISG
121. Even if the Tribunal decides to follow the Mussels Case approach, it is vital to note that the
decision of BGH includes elements that suggest the “homeward trend” and signify a failure to
achieve a complete international perspective [Flechtner, p.10]. As per Art. 7(1) CISG, in order to
fulfill the Convention’s aim, a uniform interpretation in the variety of legal systems around the
world must be applied by the formation of various perspectives [Flechtner, p.9].
122. Furthermore, the international character emphasized by Art. 7(1) CISG embodies the principle of
autonomous interpretation; it underlines that terms must be determined independently from any
domestic preconception [Schlechtriem/Schwenzer, p.122, para.8]. Thus, relying on the Mussels
Case degrades the significance of the Convention’s uniform application and demonstrates
inconsistency with the mandate of Art. 7(1) CISG to interpret the CISG regarding its
“international character” [Flechtner, p.18]. Accordingly, RESPONDENT cannot rely on the
Mussels Case to release itself from its responsibility to bear the investigation levy cost as per
Sec. 4.3 DSA.
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CONCLUSION OF THE SECOND ISSUE
123. Based on the above, RESPONDENT is obliged to pay the full amount of US$ 22,723,800,
which is a combination of US$ 102,192.80 for the Bank inspection levy and US$ 2,285,240
based on the current exchange rate by virtue of Sec 4. DSA, and Artt. 53, 54, 62 CISG.
ISSUE 3: THE TRIBUNAL DOES NOT HAVE THE AUTHORITY TO ORDER
CLAIMANT TO PROVIDE SECURITY FOR RESPONDENT’S COSTS
124. RESPONDENT’s request to the Tribunal for an order that CLAIMANT pay security for
arbitration costs must be denied [R.46, Req. for Security for Costs]. The Tribunal does not have
the authority to grant such a request neither by the DSA nor by the DAL (A). Even if the
Tribunal is authorized to order CLAIMANT to provide security for costs, it should not exercise
this authority in this particular case (B).
A. The Tribunal Does Not Have the Authority to Grant Security for Costs Order
125. The Arbitration Agreement illustrated in Sec. 21 DSA [R.11, Cl.Ex.2] does not include any
explicit or implicit clause granting the Tribunal the authority to order security for costs (I). It
only assigns the seat of Arbitration as in Danubia, in which DAL does not grant the Tribunal the
power to confer security for costs (II), and affirms that the arbitration shall be conducted in line
with international arbitration practice, in which granting security for costs is not commonly a
power the tribunals enjoy (III). In any case, RESPONDENT’s assumption that the unsuccessful
party in the dispute will bear all costs is wrong (IV).
I. Section 21 DSA is Silent on the Matter of Security for Costs
126. According to the general principle of party autonomy, the parties have broad degree of autonomy
in introducing powers or limitations to the functioning of the arbitral tribunal in the arbitration
agreement [Herbst, p.1.2.2; Blackaby/Partasides/Redfern/Hunter, p.366, para.6.10]. It is well
established that the parties’ arbitration agreement is the primary source of the arbitrators’ power,
and in most lex arbitri, party autonomy is prioritized above the other arbitrator discretions
[Waincymer, pp.51-52]. It is also accepted that the authority of the arbitral tribunal comes solely
from the parties’ agreement [Lew/Mistelis/Kröl, p.99].
127. In the case at hand, it is worth noticing that the Parties, despite their ability to include an explicit
clause in the arbitration agreement that grants the Tribunal the power to grant security for costs
upon the request of one party, chose not to [R.11, Cl.Ex.2].
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128. The standards that the arbitral tribunal applies are heavily influenced by the contractual
agreement between the parties [Born (2014), p.2467]. The consideration of such standards is
consistent with the general principle of party autonomy. Here, the Parties did not express their
intention to grant the Tribunal the authority to confer security for costs, and so RESPONDENT
cannot suggest that the Tribunal derives any power to award security for costs from the DSA.
II. Danubian Arbitration Law Does Not Explicitly Grant the Tribunal the Power to Order
Security for Costs
129. As per the Parties’ agreement, the seat of arbitration is Vindobona, Danubia, which has adopted
the UNICTRAL Model Arbitration Law (as amended in 2006) as its domestic arbitration law
verbatim [R.60, PO2, para.37]. Consequently, the UNICTRAL Model Arbitration Law, or the
Danubian Arbitration Law (“DAL”) applies as the lex arbitri in this dispute.
130. Under Art. 17(1) DAL, “Unless otherwise agreed by the parties, the arbitral tribunal may, at the
request of a party, grant interim measures”. A traditional interpretation at the first instant would
suggest that the said article grants the tribunal the authority to confer interim measures, including
security for costs [Lemaire, para.4.8]. However, the DAL does not show any explicit provision
that grants the tribunal such power.
131. Art. 17 DAL does not expand the tribunal’s authority
[Holtzmann/Neuhaus/Kristjánsdóttir/Walsh, p.530], and does not explicitly encompass security
for costs under the wide category of interim measures. This does not explicitly grant the tribunal
the power to accept security for costs applications [Miles/Speller, p.34;
Greenberg/Kee/Weeramantry, para.7.210, p.370]. It has long been accepted that when the lex
arbitri is silent on security for costs, it means that the tribunal has no power to grant it
[Karrer/Desax, p.341, para.13].
132. The language of Art. 17 DAL demonstrates that the tribunal is not compelled to grant such
measures, ranking it as a non-mandatory provision. This interpretation is in line with the
suggestion mentioned during the Working Group II meeting in Sep 2004, where the use of the
word “may” was considered an indication to the non-binding nature of Art. 17 [Working Group
II (A/CN.9/569), p.13, para.35]. The same Working Group decided not to incorporate the matter
of security for costs explicitly in the drafting of Art. 17 DAL after the failure to reach consensus.
133. A decision by the tribunal in RSM Production Corporation v. Saint Lucia has raised controversy
regarding the tribunal’s power to grant security for costs [ICSID Case No. ARB/12/10, 2014].
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The tribunal acting under the International Centre for Settlement of Investment Disputes rules
(“ICSID”), which shares a similar lack of preciseness regarding interim measures with DAL
[Pessey, para.25], could not reach consensus as to whether it had the power to grant a security
for costs order or not. Eventually, the majority of the tribunal decided to order claimant to pay
the security for costs requested by respondent.
134. As the dissenting arbitrator pointed out, the ICSID Rules do not include an explicit clause that
expresses the classification of security for costs as a “provisional measure” that would “be taken
to preserve the rights” of the requesting party, in contrast to other sets of arbitral rules. This
exclusion, says the dissenting arbitrator, reflects the drafters’ intention not to include security for
costs as a provisional measure which the tribunal can order from one party in favor of the other
[ICSID Case No. ARB/12/10, 2014, Dissenting opinion of Edward Nottingham, p.4, para.8].
135. The latter award has been subject to criticism, particularly because it was the first investor-state
dispute in which security for costs was granted [González-Bueno, paras.6,17]. The dissenting
arbitrator demonstrates that articles dealing generally with provisional measures without explicit
reference to security for costs do not grant tribunals the power to issue security for costs orders.
III. RESPONDENT Cannot Base its Argument on International Arbitration Practice
136. Sec. 21 DSA affirms that the arbitration proceedings should be in line with international
arbitration practice [R.11, Cl.Ex.2]. However, granting the Tribunal the power to order security
for costs is not common in most international arbitration practices (1). Even if the Tribunal has
the authority to order CLAIMANT to provide security for arbitration and legal costs,
RESPONDENT has not met any of the criteria recognized in the international arbitration practice
to qualify for such order (2).
1. Granting the Tribunal the Power to Order Security for Costs is Not Common in
International Arbitration Practice
137. Until recently, the concept of security for costs was considered an unexplored area of interim
measures. It is safe to say that the grant of security for costs is not, by any means, a universal
practice [González-Bueno, para.7]. Only limited national arbitration rules, mostly in
Commonwealth jurisdictions, expressly give power for an arbitral tribunal to make an order for
security for costs [Waincymer, p.643; Miles/Speller, p.32].
138. Traditional courts and tribunals in most European jurisdictions, such as in Italy, are reluctant to
grant power to the tribunal to order for security for costs. Additionally, other non-European
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states, such as Argentina, China, Singapore and Quebec follow the same practice. [Miles/Speller,
p.32; Waincymer, p.623; Lim, para.5]. These major jurisdictions shape the international
arbitration practice which tends not to grant tribunals the power to order security for costs.
2. RESPONDENT Has Not Met Any International Criteria to Qualify for a Security
for Costs Order
139. Where security for costs is a permitted practice, it is widely accepted that the key determination
to whether the interim relief will be granted by the tribunal is governed by the transnational test,
which is inspired by Art. 17A of DAL. Under this test, the Arbitral Tribunal must take into
consideration three essential elements; a) whether the requesting party has a prima facie case on
the merits, b) whether there is an urgent need for interim relief, c) whether the requesting party
will suffer serious or irreparable harm if the emergency relief is not granted [Lim, para.11].
140. In the case at hand, RESPONDENT does not fulfill any of these elements in its request for
security for costs. Firstly, RESPONDENT does by no means have a prima facie case as it has not
met its burden of proof [See para. 156].
141. Moreover, RESPONDENT has not presented any evidence of the urgent nature of its request. As
established in many arbitral decisions, the criteria of urgency are met when a request may not
wait for the final award to be concluded. A measure is urgent where “action prejudicial to the
rights of either party is likely to be taken before such final decision is taken” [Tokios Tokelės v.
Ukraine, Case No. ARB/02/18].
142. Lastly, the definition of irreparable harm, approved by some commentaries, as a harm that
cannot be “compensated by a monetary award” makes it very difficult to RESPONDENT to
prove that such harm occurred. Even relying on less strict definitions of irreparable harm, such as
those limiting such harm to be “serious” or “substantial” only [Born (2012), p.266],
RESPONDANT has not provided any evidence showing the irreparability of the harm caused, if
any [R. 46, Req. for Security for Costs].
143. RESPONDENT has failed in fulfilling the transnational test’s requirements, therefore, is not
entitled for security of its arbitration and legal costs from CLAIMANT.
IV. RESPONDENT Has Not Established Prima Facie that CLAIMANT Will Bear the
Costs of the Arbitration
144. In its request for security for costs, RESPONDENT assumes that, at end of this proceeding, all
arbitration and legal representation costs will be borne by the unsuccessful party. However, in
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fact, there has never been any “loser-pays” clause in the arbitration agreement between the
parties, neither within the CAM-CCBC Rules, nor within the DAL [R.11, Cl.Ex.2] (1).
RESPONDENT’s assumption also unfairly attempts to prejudge the dispute (2).
1. RESPONDENT’s Assumption that the Unsuccessful Party Will Bear the Costs of
Arbitration is Wrong
145. While DAL is completely silent on the matter of costs allocation, it is not questioned that it
entitles the Tribunal to issue awards of arbitration and legal costs [Born (2014), p.3088]. In
addition, Art. 10.4.1 CAM-CCBC Rules provides that the award issued by the tribunal may
include the parties’ liabilities regarding costs, including attorney’s fees, only “observing that
which was agreed upon by the parties in the Terms of Reference”. The Terms of Reference in its
Art. 12.3 affirms that the Tribunal is entitled to decide on parties’ liabilities regarding costs,
including the attorney’s fees, stressing that “The Arbitral Tribunal shall also fix the amount or
the proportion of the refund of one party to another. The Arbitrators will consider the behavior
of the parties in order to reduce the amount of cost refund” [R.43, Terms of Ref.].
146. Thus, while an award on costs is permitted under the applicable rules and terms of reference, it
would require a finding of poor “behavior” on behalf of one of the parties to issue such a cost-
shifting award. Indeed, tribunals in international commercial arbitrations are mostly hesitant to
require the unsuccessful party solely to pay the whole costs of arbitration, and it is certainly not a
universal practice [Blackaby/Partasides/Redfern/Hunter, p.547, para.9.94]. In many cases of
international arbitration, even in those under arbitration rules that explicitly require the
unsuccessful party to bear the arbitration costs such as the UNICTRAL Arbitration Rules or
other rules, tribunals have considered the parties’ behavior and the extent of the success of their
claims in allocating arbitration and legal representation costs [ICSID Case No. UNCT/13/1;
ICSID Case No. UNCT/07/1; ICSID Case No. ARB/03/19; ICC Case No. 8486; ICC Case No.
11670; Born (2014), p.3096].
147. The Tribunal thus has a duty to take the Parties’ behavior into account when considering the
costs borne by each [R.43, Terms of Ref.]. So far, CLAIMANT’s behavior has been entirely
appropriate, and its claims are forthright and genuine without any element of frivolousness.
Hence, at least at this stage in the arbitration, RESPONDENT cannot demonstrate prima facie
that it is likely to be awarded costs.
2. RESPONDENT’s Assumption is a Prejudgment to the Merits
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148. According to the tribunal in Maffezini v. Spain, rights in dispute in provisional measures must be
existing at the time of the request and should not be regarding rights that may be acquired in the
future. The Maffezini tribunal stated that a claim of a provisional measure regarding a non-
existing right is a claim that contains many hypothetical situations and might prejudge the case.
Thus, it shall be dismissed, [ICSID Case No. ARB/97/7, pp.3-5, paras.13,14,17,18,27; ICC Case
No. 8113; ICC Case No. 8786/2000] as tribunals must be selective when granting provisional
measures by ensuring that a determination of this kind does not prejudge the dispute
[Waincymer, p.650]. Moreover, if granting an interim measure requires deciding on the merits of
the case as a whole by the tribunal, it should refrain from granting such measure [CIoA (2),
pp.10-11]. By seeking security for costs, RESPONDENT may be leading the Tribunal to
prejudge the case [R.23, Ans. to Req. for Arb., para.1].
B. Even if the Tribunal Has the Power to Order CLAIMANT to Provide Security for
RESPONDENT’s Costs, it Should Not Exercise this Power
149. According to Art. 4.21 CAM-CCBC Rules, RESPONDENT’s security for costs request should
not be admissible, as it was late in the arbitration proceedings (I). RESPONDENT also carries
the burden of proof of any exceptional change in CLAIMANT’s financial situation, and it has
not met it when it relied on poor evidences (II). Even if RESPONDENT met its burden of proof,
CLAIMANT’s financial situation did not change substantially; therefore, the Tribunal should not
order it to deposit any amount of money for security (III).
I.RESPONDENT’s Request for Security for Costs is Not Admissible According to Art.
4.21 CAM-CCBC
150. Art. 4.21 CAM-CCBC Rules allows parties to modify or amend their claims or causes of action
only until the Terms of References are signed. By requesting the security for costs after the
parties have signed the Terms of Reference, RESPONDENT has violated Art. 4.21 CAM-CCBC
Rules. The Tribunal is bound by the provisions defined by the parties in the Terms of Reference,
and any action against those provisions would subject the award issued by the Tribunal to a
challenge within the national court [Straube/Finkelstien,/Filho, p.111].
151. Many legal precedents and arbitral decisions are in line with such approach. It was held by the
Canadian courts, for example, that an unjustified delay in bringing a motion for security for costs
at a date that is late in the proceedings is a reason to dismiss such request [Vries, p.2; Ont. Ltd. v.
Bank of Montreal, Case No. ONCA 94]. The case law of many international tribunals including
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the International Chamber of Commerce (“ICC”) and ICSID consider these grounds as well
[ICSID Case No. ARB/09/1, p.9, paras.50-51; Hussey, p.2].
152. Granting security for costs to one party should only be the last resort for a tribunal [Hassoun v.
WGI Ltd, p.1, para.2], and the gradation of such resorts in the arbitral proceedings must be
considered by the requesting party [Argus/Paquet/Maiorana, para.13].
153. In the case at hand, on Aug 22 2016, RESPONDENT signed the Terms of Reference together
with CLAIMANT and the arbitrators. Two weeks later, on Sep 6 2016, RESPONDENT
submitted its security for costs request [R.43, Terms of Ref., R.46, Security for Costs]. Although
RESPONDENT had mentioned its request to order CLAIMANT to pay its arbitration costs on its
answer to arbitration request on June 24 2016, such request was not submitted in the form of
security for costs [R.26, Ans. to Req. for Arb., para.20]. Hence, RESPONDENT’s security for
costs request was late in the arbitration proceedings, thus, the Tribunal may refuse granting it.
154. Art. V(d) NYC 1958 states that the enforceability of an award would be affected if the arbitral
proceedings were not held in accordance to the arbitration agreement. In the case at hand,
RESPONDENT’s violation of the CAM-CCBC Rules agreed upon within the arbitration
agreement jeopardizes the enforceability of the future award.
II.RESPONDENT Carries the Burden of Proof with Respect to the Existence of Exceptional
Circumstances in CLAIMANT’s Financial Situation
155. One of the well-known legal principles is that a party claiming a legal right carries the burden of
proving its eligibility to it [Waincymer, p.653]. RESPONDENT carries the burden of proof in
relation to the existence of exceptional circumstances in CLAIMANT’s current financial
situation (1), and has not met it (2).
1. RESPONDENT Carries the Burden of Proof
156. The practice of almost all arbitrators in international arbitration is to require each party to prove
the facts upon which it relies in support of its case, that goes in line with the concept of Actori
incumbit onus probandi, which is the basic rule to be applied regarding carrying the burden of
proof. [Varady/Barcelona/Roll/Mehren, p.387; Kazazi, p.88]. The obligation to offer an evidence
to prove CLAIMANT’s exceptional financial state must be borne by the requesting party
[Waincymer, p.653; Karrer/Desax, p.346, para.36]. It is a known legal principle that “the
presumption casts an evidentiary burden on those attacking the will” [Sopinka J. noted in Vout v.
Hay, [1995] as cited in Vries, p.8, para.1]. Thus, RESPONDENT carries the burden of proof in
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respect to the existence of exceptional circumstances in CLAIMANT’s financial situation.
2. RESPONDENT Has Not Met its Burden of Proof
157. In determining whether security for costs is warranted, tribunals typically consider the financial
state of the party from whom security is requested [Born (2014), p.2496]. The power to grant
such request should only be practiced in extreme circumstances, like the appearance of an abuse
or misconduct situation that is proved by evidences [ICSID Case No. ARB/09/17, p.8, para.45].
158. Nevertheless, RESPONDENT failed to introduce strong evidence regarding CLAIMANT’s
financial situation. A sufficient evidence of CLAIMANT’s financial situation could be either its
account data provided by RESPONDENT [Karrer/Desax, p.346, para.36], or proving the
insolvency of CLAIMANT [ICSID Case No. ARB/98/2; Miles/Speller, p.33; Uchkunova,
para.4], or providing the Tribunal with a proof of CLAIMANT’s non-compliance with
contractual obligations [Hassoun v. WGI Ltd, p.1, para.7].
159. However, RESPONDENT must show that it is threatened by a substantial risk if it was not
granted the security for costs. Evidence that prove such risks could include “statutory returns,
audited annual accounts, low valuation of operating assets or previous history of entering into
voluntary arrangements, receivership or liquidation” [Roth/Geistlinger/Stegner, p.167; Walter
BAG v. Thailand, p. 9, paras.1.34-1.35].
160. RESPONDENT’s evidence does not meet these standards, as it solely relied on an article in a
business newspaper for its security for costs request. It, however, did not provide the Tribunal
with any sufficient evidence that are issued before reliable institutions; such as banks or the
government [R.47, Resp.Ex.6].
161. As RESPONDENT correctly pointed, the UNCITRAL Rules on Transparency in Treaty-based
Investor-State Arbitration were not applicable to the dispute between CLAIMANT and the
government of Xanadu [R.46, Req. for Security for Costs, para.4; Johnson, p.10], and the award
in that case is otherwise confidential. There is no basis for breaching that confidentiality or for
assuming that CLAIMANT will be rendered insolvent as a result of that case.
162. Also, RESPONDENT’s expectation of being informed of CLAIMAINT’s previous award with
the government of Xanadu [R.46, Req. for Security for Costs, para.4] does not comply with the
main purpose of UNCITRAL Rules on Transparency. The main purpose is allowing states’
nationals to be aware of their government’s international commercial activities and disputes
which would probably affect their lives and well-being [Limparangsri, p.7].
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163. Consequently, CLAIMANT is not obliged to comply with RESPONDENT’s suggestion of being
informed of CLAIMANT’s other arbitral awards [R.46, Req. for Security for Costs, para.4].
III.Even if RESPONDENT Has Met Iis Burden of Proof, CLAIMANT’s Financial Situation
Has Not Changed Substantially
164. Even if RESPONDENT has met its burden of proof by submitting sufficient evidence to the
Tribunal, it should not issue a security for costs order against CLAIMANT, as its financial
situation has not changed substantially (1). However, even if CLAIMANT’s financial situation
has changed substantially, there are many justifications to such change (2).
1. CLAIMANT’s Financial Situation Has Not Changed Substantially
165. The audited accounts of CLAIMANT for the years 2009, 2010, and 2015 were publicly available
and RESPONDENT had access to them. They stand as evidence that a substantial change in
CLAIMANT’s financial situation has not occurred. Instead, CLAIMANT overcame the financial
difficulties it was facing in 2010 and it recovered its 2009 financial state in 2015 [R. 58-59, PO2,
para.28]. Thus, RESPONDENT cannot rely on the change in CLAIMANT’s financial situation
to request security, as such change did not occur.
2. Even if CLAIMANT’s Financial Situation Has Changed Substantially, that Change
is Justifiable
166. Even if there was a substantial change in CLAIMANT’s financial situation, it is justifiable and
does not entitle RESPONDENT to security for costs. Firstly, RESPONDENT’s incompliance
with its obligations under the DSA caused that change (a). Secondly, such change is a normal
commercial risk (b). Lastly, even if a substantial change occurred, it is not enough to order
CLAIMANT to satisfy RESPONDENT’s security for costs request (c).
a. The Change in CLAIMANT’s Financial Situation was Due to RESPONDENT’s
Breach
167. Previously rendered awards established that tribunals may deny the request of an interim
measure when it is extremely unjust for CLAIMANT [ICC Case No. 10032], and in cases where
the respondent has a hand in in raising the financial difficulties faced by the claimant [ICSID
Case No. ARB/09/17, p.7, paras.36-37].
168. In fact, tribunals may decide that the party seeking security for costs had at least played a part in
its disputant’s financial condition. In such cases, the requesting party is not entitled to be
protected against the condition he contributed in making [Born (2014), p.2496; Uchkunova,
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para.16]. The requesting party’s actions resulted in the impecuniosity could be a reason to not
grant security, whether such action was legally and contractually valid or otherwise [Waincymer,
p.651]. Additionally, an international arbitrator may refuse to order security for costs when the
insolvency of the claimant is a direct result of the respondent’s breach, even if the former clearly
cannot meet latter’s costs [ICSID Case No. ARB/09/1, p.9, paras.50-51; Hussey, p.2].
169. In the case at hand, RESPONDENT’s non-payment of the full purchase price was a breach of a
preponderant element of DSA, although it was informed of the importance of paying the
outstanding purchase price to prevent any extra pressure on CLAIMANT’s accounting liquidity
while it was in the final development phase of the fan blades [R.15, Cl.Ex.6]. RESPONDENT’s
refusal to pay the outstanding price of US$ 2,387,432.80 has led CLAIMANT to submit its
request for arbitration [R.29, Resp.Ex.3].
170. Consequently, RESPONDENT would be unjustifiably seeking to be put above all other
CLAIMANT’s creditors should it go bankrupt, even though RESPONDENT has no contractual
or legal ground for being a superior creditor, and it caused CLAIMANT’s bankruptcy.
RESPONDENT cannot unjustly take advantage of such situation and advance in line of
CLAIMANT’s other creditors [R.49, Ans. to Security for Costs, para.2].
b. The Change in CLAIMANT’s Financial Situation is a Normal Commercial Risk
171. Tribunals may consider the decline in a party’s ability to pay a normal commercial risk that does
not permit the granting of security [CIoA (1), p.8]. Also, many tribunals ordered a fundamental
change in the claimant’s financial situation to be proven by the respondent, as the impecuniosity
of the claimant alone was not sufficient. The ground of such requirement is the possibility that
the respondent had voluntarily accepted the claimant’s financial situation, regardless of its
strength or weakness, when the business relationship was established [Roth/Geistlinger/Stegner,
pp.167-168]. Granting RESPONDENT security for costs would disturb the equilibrium of DSA
and would develop an unequal play for CLAIMANT.
172. Nevertheless, CLAIMANT’s audited accounts for the years 2009, 2010, and 2015 acknowledge
that the differences between the profit of each year is slightly lower in 2015 as a result of a
regular commercial risk [See para.165]. Additionally, RESPONDENT knows that the previous
parent company of both Parties was going through a financial crisis while negotiating the DSA,
which resulted in selling both subsidiaries to other companies [R.3, Req. for Arb., para.2].
c. The Change in CLAIMANT’s Financial Situation is Not Enough to Grant
Dar Al-Hekma University
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Security for Costs
173. In the award of CGC & SSGM v. El Salvador, the security for costs request was dismissed
because the tribunal held that a mild change in the claimant’s financial situation is not enough to
grant the request [ICSID Case No. ARB/09/17, p.7, paras.37,48].
174. Other tribunals have similarly concluded that the claimant’s lack of ability to pay the award or its
lack of assets are inadequate bases for a security order. Likewise, such decisions were made in
connection with respondent’s failure to prove the poor financial situation of its opponent.
Instead, those claims were filed based on the possibility and assumption of such financial
situation [Uchkunova, para.15]. Even if a fundamental difference in financial circumstances of a
party exists, this cannot by itself be the sole reason for granting security for costs; other evidence
must be presented to the tribunal [Waincymer, p.650]. In any event, CLAIMANT did not suffer
from such fundamental changes in its financial condition, and therefore an order for security for
costs is not warranted [R.58-59, PO2, para.28].
CONCLUSION OF THE THIRD ISSUE
175. In accordance with the DSA and the DAL, the Tribunal does not have the authority to issue an
order for security for costs against CLAIMANT. Even if the Tribunal does enjoy such power,
RESPONDENT has not fulfilled any of the requirements to qualify for such order. As a
consequence, the Tribunal is requested to dismiss RESPONDENT’s request.
REQUEST FOR RELIEF
In light of the above arguments, Counsel for CLAIMANT respectfully requests the Tribunal:
(1) To find that CLAIMANT’s claims are admissible and in accordance with the DSA and
CAM-CCBC rules;
(2) To request RESPONDENT to pay CLAIMANT the outstanding amount of US$
2,387,432.80; and
(3) To dismiss RESPONDENT’s request for security for costs.
The CLAIMANT reserves the right to amend this request for relief as necessary.
Dar Al-Hekma University
XXXIII
CERTIFICATE
We hereby confirm that only the persons whose names are listed below and who signed this
certificate wrote this Memorandum.
Jeddah, December 8th 2016
Aya Hashim
(Signed)
Duaa Amer
(Signed)
Lina Samaha
(Signed)
Nouf Bannan
(Signed)
Rahaf Zaini
(Signed)
Tala Bukhari
(Signed)
Wid Massoud
(Signed)