DELICATESY WHOLE FOODS SP (CLAIMANT) International Bar Association ICSID International Centre for Settlement of Investment Disputes ICDR International Centre for Dispute Resolution

TWENTY FIFTH ANNUAL VIS INTERNATIONAL COMMERCIAL ARBITRATION MOOT

DELICATESY WHOLE FOODS SP (CLAIMANT)

v

COMESTIBLES FINOS LTD (RESPONDENT)

MEMORANDUM FOR CLAIMANT

Counsel for CLAIMANT

VIVA DADWAL CAMERON HOGG-TISSHAW

DAVID MATYAS GUILLAUME RENAUD

McGILL LAW SCHOOL

MONTREAL, CANADA

Memorandum for CLAIMANT I

TABLE OF CONTENTS

INDEX OF LEGAL AUTHORITIES ................................................................................................................ V

INDEX OF COURT JUDGEMENTS ............................................................................................................ XIV

INDEX OF ARBITRAL CASES .................................................................................................................... XVII

SUMMARY OF FACTS ......................................................................................................................................... 1

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

ARGUMENT .......................................................................................................................................................... 4

THE TRIBUNAL CANNOT DECIDE THIS CHALLENGE TO MR. PRASAD ............................... 4

A. THE APPOINTING AUTHORITY HAS POWER OVER THE CHALLENGE DECISION .......................................... 4

i. CLAIMANT did not know that RESPONDENT intended to exclude the application of UNCITRAL

Rules Art. 13(4) ................................................................................................................................................................ 4

ii. A reasonable person in CLAIMANT’s position could not have known that RESPONDENT intended

to exclude the application of UNCITRAL Rules Art. 13(4) ...................................................................................... 6

B. IF THE APPLICATION OF UNCITRAL RULES ART. 13(4) IS DENIED, ONLY THE SUPREME COURT OF

DANUBIA HAS THE POWER TO RULE ON THE UNSUCCESSFUL CHALLENGE .................................................................. 9

C. ONLY IF THE TRIBUNAL WERE TO FIND THAT THE PARTIES HAD NO AGREEMENT ON THE CHALLENGE

PROCEDURE, COULD THE FULL TRIBUNAL, INCLUDING MR. PRASAD, DECIDE THE CHALLENGE ........................... 10

i. The Tribunal must decide the challenge with the participation of Mr. Prasad ............................................ 10

ii. Even if he were allowed, Mr. Prasad cannot unilaterally withdraw from the challenge decision .............. 11

iii. RESPONDENT cannot overcome fatal delays by insisting that the Tribunal decide on its challenge ... 11

THE CHALLENGE TO MR. PRASAD IS WITHOUT MERIT AND SHOULD BE DISMISSED 12

A. RESPONDENT MUST DEMONSTRATE THE EXISTENCE OF JUSTIFIABLE DOUBTS UNDER UNCITRAL

RULES ART. 12(1) IN ORDER TO REMOVE MR. PRASAD ................................................................................................. 12

B. RESPONDENT HAS FAILED TO DEMONSTRATE THE EXISTENCE OF JUSTIFIABLE DOUBTS AS TO MR.

PRASAD’S INDEPENDENCE OR IMPARTIALITY ................................................................................................................. 13

i. Mr. Prasad’s previous appointments do not raise justifiable doubts ............................................................ 14

ii. Mr. Prasad’s law firm connections do not raise justifiable doubts................................................................ 15

iii. Mr. Prasad’s past publications are irrelevant to the present proceedings..................................................... 17

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Memorandum for CLAIMANT

II

iv. Even cumulatively, the grounds cited by RESPONDENT do not raise justifiable doubts as to Mr.

Prasad’s independence or impartiality ......................................................................................................................... 18

CLAIMANT’S GENERAL CONDITIONS GOVERN THE CONTRACT ........................................ 19

A. CLAIMANT’S GENERAL CONDITIONS, AND AT THE VERY LEAST ITS CODES OF CONDUCT, GOVERN

THE CONTRACT................................................................................................................................................................... 19

i. Through its Sales Offer form with accompanying letter, CLAIMANT made an Offer to

RESPONDENT incorporating CLAIMANT’s General Conditions and Codes of Conduct ............................. 19

ii. RESPONDENT accepted CLAIMANT’s Offer, which incorporated CLAIMANT’s General

Conditions and Codes of Conduct, thereby excluding its own................................................................................ 21

C. IF THE TRIBUNAL FINDS THAT BOTH THE PARTIES’ GENERAL CONDITIONS WERE INCORPORATED

INTO THE CONTRACT, IT SHOULD FIND BOTH CLAIMANT’S AND RESPONDENT’S GENERAL CONDITIONS

APPLICABLE TO THE EXCLUSION OF ANY CONFLICTING TERMS ................................................................................... 23

EVEN IF RESPONDENT’S GENERAL CONDITIONS APPLY, CLAIMANT STILL

DELIVERED CONFORMING GOODS PURSUANT TO CISG ART. 35................................................... 24

A. THE CONTRACT DOES NOT EXPLICITLY CREATE AN OBLIGATION UNDER CISG ART. 35(1) THAT

CLAIMANT GUARANTEE THE PRODUCTION METHODS OF ITS SUPPLIER, BUT MERELY CREATES MECHANISMS

FOR CLAIMANT TO EXERCISE ITS BEST EFFORTS ........................................................................................................ 25

RESPONDENT’s claim of non-conformity has no basis in the terms of the Contract ........................... 25

iii. Under Principle F of RESPONDENT’s Code of Conduct, RESPONDENT’s allegation of non-

conformity is unsubstantiated ...................................................................................................................................... 28

B. THE CIRCUMSTANCES SURROUNDING THE CONTRACT IMPLY, UNDER CISG ART. 35(1), THAT

CLAIMANT MERELY OWED RESPONDENT AN OBLIGATION TO USE ITS BEST EFFORTS TO ENSURE ITS SUB-

SUPPLIERS ADHERED TO ETHICAL STANDARDS, AN OBLIGATION IT DISCHARGED .................................................... 30

i. There are no external trade usages that impliedly create an obligation for CLAIMANT to guarantee its

supplier provide ethically conforming goods ............................................................................................................. 30

ii. Given the UN Global Compact’s aversion to concrete ends, the Parties’ shared UN Global Compact

membership demonstrates best effort obligations regarding supplier compliance................................................ 32

iii. RESPONDENT’s interest in CLAIMANT’s management processes over production steps such as

certification schemes emphasizes best efforts to ensure that its suppliers would deliver ethical goods ............. 32

C. ANY PUTATIVE ARGUMENT REGARDING OBLIGATIONS OF CONFORMITY BASED ON A PARTICULAR

PURPOSE UNDER CISG ART. 35(2)(B) IS BOUND TO FAIL SINCE THE FACTS OF THE PRESENT CASE DISCLOSE NO

SUCH PARTICULAR PURPOSE .............................................................................................................................................. 33

D. IT WOULD BE UNREASONABLE FOR RESPONDENT TO HAVE CONSIDERED THAT CLAIMANT COULD

GUARANTEE RESULTS FROM ITS SUPPLIER IN ALL CIRCUMSTANCES ............................................................................. 34

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III

LIST OF ABBREVIATIONS

& And

¶ Paragraph(s)

Art(s). Article(s)

CISG

United Nations Convention on Contracts for the International Sale

of Goods

CLAIMANT’s General

Conditions

CLAIMANT’s General Conditions of Sale

Commitment Commitment to a Fairer and Better World

Cover Letter NoC Letter Langweiler (14 September 2017)

Declaration Prasad Declaration Prasad (Connections with Funder – 11 September

2017)

Disclosure Order Letter Rizzo (Decision on Request to Name Funder – 1 September

2017)

et al. And others

FN(s) Footnote(s)

Funding Disclosure Letter Fasttrack (Disclosure of Funder – 7 September 2017)

IBA International Bar Association

ICSID International Centre for Settlement of Investment Disputes

ICDR International Centre for Dispute Resolution

ISO International Organization for Standardization

INCOTERMS International Commercial Terms

Letter Rizzo Invitation to Case Management Conference – 22 August 2017

LP Limited Partnership

LCIA London Court of International Arbitration

Ltd Limited

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IV

Model Law UNCITRAL Model Law

Mr. Mister

NoA Notice of Arbitration (30 June 2017)

NoC Notice of Challenge of Arbitrator (14 September 2017)

P(P) Page(s)

PCA Permanent Court of Arbitration

PO Procedural Order

PO2 Second Procedural Order

Prasad Decision Letter Prasad (Refusal to Step Down – 21 September 2017)

RESPONDENT’s General

Conditions

RESPONDENT’s General Conditions of Contract

Response NoA Response to the Notice of Arbitration (31 July 2017)

Response to Challenge Letter Fasttrack (Refusal to Agree to Removal – 19 September

2017)

SCC Arbitration Institute of the Stockholm Chamber of Commerce

Tribunal Arbitral Tribunal

v Against (versus)

UCP 600 Uniform Customs and Practice for Documentary Credits

UN United Nations

UNGC United Nations Global Compact

UNCITRAL United Nations Commission on International Trade Law

UNCITRAL Rules [YEAR] United Nations Commission on International Trade Law

Arbitration Rules

UNEP United Nations Environment Program

USD United States Dollar

WIPO Word Intellectual Property Organization

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V

INDEX OF LEGAL AUTHORITIES

Rules and Laws

CISG United Nations Convention on Contracts for the International

Sales of Goods

Vienna, 11 April 1980

Cited throughout

Egypt Arbitration Act Law No. 27/1994 Promulgating the Law Concerning Arbitration

in Civil and Commercial Matters

Available at:

http://www.wipo.int/edocs/lexdocs/laws/en/eg/eg020en.pdf

Cited in ¶: 48

IBA Guidelines IBA Guidelines on Conflicts of Interest in International

Arbitration (2014)

Cited in ¶: 59, 62, 66, 69, 72, 75

ICC Internal Rules ICC Rules of Arbitration, Appendix II: Internal Rules of the

International Court of Arbitration

Available at:

https://iccwbo.org/dispute-resolution-services/arbitration/rules-

of-arbitration/#article_b1

Cited in ¶: 39

ICSID Rules ICSID Arbitration Rules (2006)

Cited in ¶: 64

LCIA Notes LCIA Notes for Parties

August 2017

Available at:

http://www.lcia.org//adr-services/lcia-notes-for-parties.aspx

Cited in ¶: 39

UNCITRAL Rules UNCITRAL Arbitration Rules (2010)

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Cited throughout

UNCITRAL Transparency

Rules

UNCITRAL Rules on Transparency in Treaty-based Investor-

State Arbitration (2014)

Cited in ¶: 36

UNIDROIT Principles UNIDROIT Principles of International Commercial Contracts

Rome, 2010

Cited in ¶: 43

PCA Internal Rules Rules Concerning the Organization and Internal Working of the

International Bureau of the Permanent Court of Arbitration

September 1900

Cited in ¶: 39

SCC Institute Rules Arbitration Institute of the Stockholm Chamber of Commerce

(2010)

Cited in ¶: 39

UNCITRAL Explanatory Note Explanatory Note by the UNCITRAL Secretariat on the 1985

Model Law on International Commercial Arbitration as amended

in 2006

Available at:

www.uncitral.org/pdf/english/texts/arbitration/ml-

arb/MLARB-explanatoryNote20-9-07.pdf

Cited in ¶: 49

Commentaries

Advisory Council 13 CISG Advisory Council

Opinion No. 13

Available at:

http://www.cisg.law.pace.edu/cisg/CISG-AC-op13.html

Cited in ¶: 88, 90, 96

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VII

Amado/Kern/Doe Jose Daniel Amado, Jackson Shaw Kern & Martin Doe Rodriguez

Arbitrating the Conduct of International Investors

(New York: Cambridge University Press, 2018)

Cited in ¶: 124

Audit Bernard Audit

La vente internationale de marchandises : convention des Nations-

Unies du 11 avril 1980

(Paris: L.G.D.J., 1990)

Cited in ¶: 96

Binder 2013 Peter Binder

Analytical Commentary to the UNCITRAL Arbitration Rules

(London: Sweet & Maxwell Press, 2013)

Cited in ¶: 31, 40

Binder 2010 Peter Binder

International Commercial Arbitration and Conciliation in

UNCITRAL Model Law Jurisdictions, Third Edition

(London: Thomson Reuters, 2010)

Cited in ¶: 49

Blackaby et al. Nigel Blackaby, Constantine Partasides, Alan Redfern & Martin

Hunter

Redfern and Hunter on International Arbitration, Sixth Edition

(New York: Oxford University Press, 2015)

Cited in ¶: 70

Born Gary Born

International Commercial Arbitration, Second Edition

(Alphen aan den Rijn: Kluwer Law International, 2014)

Cited in ¶: 51, 56, 58, 66, 72, 75

Butler Petra Butler

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The CISG – A Secret Weapon in the Fight for a Fairer World?

In: Ingeborg Schwenzer (ed.)

35 Years CISG and Beyond

(Portland: International Specialized Book Services, 2016)

Cited in ¶: 122

Daele Karel Daele

Challenge and Disqualification of Arbitrators in International

Arbitration, International Arbitration Law Library

(Alphen aan den Rijn: Kluwer Law International 2016)

Cited in ¶: 33, 57, 58

Caron/Caplan

David D Caplan & Lee M Caron

The UNCITRAL Arbitration Rules: A Commentary, Second

Edition

(Oxford: Oxford University Press, 2013)

Cited in ¶: 31, 35, 42, 43

Cronstedt/Thompson Claes Cronstedt & Robert C Thompson

An International Arbitration Tribunal on Business and Human

Rights (Version Five)

Working Group on International Arbitration Tribunal on

Business and Human Rights

April 2015

Available at: www.l4bb.org/news/TribunalV5B.pdf on Dec 4

2017

Cited in ¶: 124

Ross Alison Ross

Rise in Challenges Headache for Lawyers

In: Global Arbitration Review 5(1) (2010)

Available at:

http://globalarbitrationreview.com/article/1028952/rise-in-

challenges-a-headache-for-lawyers

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Cited in ¶: 33

Ferrari Franco Ferrari

Contracts for the International Sale of Goods: Applicability and

Applications of the 1980 United Nations Sales Convention

(Boston: Martinus Nijhoff Publishers, 2012)

Cited in ¶: 130

Grimmer Sarah Grimmer

The determination of arbitrator challenges by the Secretary-

General of the Permanent Court of Arbitration

In: Chiara Giorgetti (ed.)

The Challenge and Recusal of Judges and Arbitrators in

International Courts and Tribunals

(Leiden: Brill 2015)

Cited in ¶: 74

Nalin Paulo Nalin

International Fair Trade (Fair Trade in International Contracts

and Ethical Standard)

In: Schwenzer (ed.)

35 Years CISG and Beyond

(Portland: International Specialized Book Services 2016)

Cited in ¶: 132

Paulsson 2006 Jan Paulsson & Georgios Petrochilos

Revision of the UNCITRAL Arbitration Rules

(Unpublished report prepared for the UNCITRAL Secretariat)

Available at:

http://www.uncitral.org/pdf/english/news/arbrules_report.pdf

Cited in ¶: 43

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Paulsson 2010 Jan Paulsson

“Moral Hazard in International Dispute Resolution”

In: ICSID

Review – Foreign Investment Law Journal 25:2 (2010) 339

Available at:

www.arbitrationicca.org/media/0/12773749999020/paulsson_m

oral_hazard.pdf

Cited in ¶: 36

Ramberg Christina Ramberg

Emotional Non-Conformity in the International Sale of Goods,

Particularly in Relation to CSR-Policies and Codes of Conduct

In: Ingeborg Schwenzer & Lisa Spagnolo

Boundaries and Intersections, 5th Annual MAA Schlechtriem

CISG Conference

(The Hague: Eleven International Publishing, 2015)

Cited in ¶: 121

Schmidt-Kessel Martin Schmidt-Kessel

In: Peter Schlechtriem & Ingeborg Schwenzer (eds.)

Commentary on the UN Convention on the International

Sale of Goods (CISG), Fourth Edition


Cited in ¶: 92, 121, 122

Schroeter

Ulrich G Schroeter





Cited in ¶: 82, 84, 88, 90, 91, 96

Schwebel Stephen M Schwebel

International Arbitration: Three Salient Problems

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(Cambridge: Grotius, 1987)

Cited in ¶: 51

Schwenzer 2016 Ingeborg Schwenzer





Cited in ¶: 100, 119, 121, 129, 130

Schwenzer 2017 Ingeborg Schwenzer

Ethical Standards in CISG Contracts

In: Uniform Law Review 1 (2017) 122-131

Cited in ¶: 127

Schwenzer/Leisinger Ingeborg Schwenzer & Benjamin Leisinger

Ethical Values and International Sales Contracts

In: Ross Cranston, Jan Ramberg & Jacob Ziegel (eds.)

Commercial Law Challenges in the 21st Century: Jan Hellner in

Memorium

(Stockholm: Stockholm Centre for Commercial Law, 2007).

Cited in ¶: 121, 132

Smeureanu Ileana M. Smeureanu

Confidentiality in International Commercial Arbitration

(Alphen aan den Rijn: Kluwer Law International, 2011)

Cited in ¶: 39

UN Doc A/10017 Report of the United Nations Commission on International

Trade Law on the Work of its Eighth Session

UN Doc A/10017 (1975)

Cited in ¶: 42, 48, 49

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UN Doc A/40/17 Report of the United Nations Commission on International

Trade Law on the Work of its Eighteenth Session

United Nations Commission on International Trade Law

UN Doc A/40/17 (1985)

Cited in ¶: 46, 48

UN Doc A/CN.9/97

Preliminary Draft Set of Arbitration Rules for Optional Use in

Ad Hoc Arbitration Relating to International Trade

UN Doc A/CN.9/97 (1975)

Cited in ¶: 33, 39, 41

UN Doc A/CN.9/112/Add.1 Revised Draft Set of Arbitration Rules for Optional Use in Ad

Hoc Arbitration Relating to International Trade (UNCITRAL

Arbitration Rules) (Addendum): Commentary on the Draft

UNCITRAL Arbitration Rules

UN Doc A/CN.9/112/Add.1 (1976)

Cited in ¶: 43

UN Doc A/CN.9/264

Analytical Commentary on Draft Text of a Model Law on

International Commercial Arbitration

UN Doc A/CN.9/264 (1985)

Cited in ¶: 49

UN Doc A/CN.9/634 UNCITRAL Arbitration Rules: Report of the Secretary-General

of the Permanent Court of Arbitration on its activities under the

UNCITRAL Arbitration Rules since 1976

UN Doc A/CN.9/634 (2007)

Cited in ¶: 35

UNGC 2010 United Nations Global Compact (2010)

United Nations Global Compact Management Model

Available at:

www.unglobalcompact.org/docs/news_events/9.1_news_archiv

es/2010_06_17/UN_Global_Compact_Management_Model.pdf

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Cited in ¶: 124


Supply Chain Sustainability: A Practical Guide for Continuous

Improvement 2nd ed.

Available at:

www.unglobalcompact.org/docs/issues_doc/supply_chain/Supp

lyChainRep_spread.pdf

Cited in ¶: 123


Fighting Corruption in the Supply Chain: A Guide for Customers

and Suppliers Second Edition.

Available at:

www.unglobalcompact.org/docs/issues_doc/Anti-

Corruption/Fighting_Corruption_Supply_Chain.pdf

Cited in ¶: 115


United Nations Global Compact: The Ten Principles

Available at:

www.unglobalcompact.org/what-is-gc/mission/principles

Cited in ¶:

Varady et al. Tibor Varady, John J Barcelo III & Arthur T von Mehren

International Commercial Arbitration: a Transnational

Perspective, Fourth Edition

(St. Paul: Thomson Reuters, 2009)

Cited in ¶: 48

Zeller Bruno Zeller

In: Larry A DiMatteo (ed.)

International Sales Law: A Global Challenge

(New York: Cambridge University Press, 2014)

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XIV

INDEX OF COURT JUDGEMENTS

Austria

Conveyor Bands

Conveyor Bands Case

Supreme Court of Austria

23 March 2005

Case No. 6 R 200/04f

Available at:

http://cisgw3.law.pace.edu/cases/050323a3.html

Cited in ¶: 90

Tantalum Powder Tantalum Powder Case

Supreme Court of Austria

17 December 2003

Case No. 7 Ob 275/03x

Available at:

http://cisgw3.law.pace.edu/cases/031217a3.html

Cited in ¶: 87

Canada

Geci Española Government of The Dominican Republic c Geci Española

Superior Court of Quebec

2017 Canlii QCCS 2619

Available at:

https://www.canlii.org/en/qc/qccs/doc/2017/2017qccs2619/

2017qccs2619.html?autocompleteStr=2017%20Canlii%20QCC

S%202619%C2%A0&autocompletePos=1

Cited in ¶: 41

France

Verreries de Saint Gobain Société Les Verreries de Saint Gobain, SA v. Martinswerk

GmbH

Cour de Cassation

16 July 1998

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Case No. J 96-11.984

Available at:

http://cisgw3.law.pace.edu/cases/980716f1.html

Cited in ¶: 96

Germany

Knitware Knitware Case

Petty District Court

6 October 1995

Case No. 3 C 925/93

Available at:

http://cisgw3.law.pace.edu/cases/951006g1.html

Cited in ¶: 96

Machinery Machinery Case

Federal Supreme Court of Germany

31 October 2001

Case No. VIII ZR 60/01

Available at:


Cited in ¶: 82, 88

Powdered Milk Powdered Milk Case

Federal Supreme Court of Germany

9 January 2002

Case No. VIII ZR 304/00

Available at:


Cited in ¶: 96

Rubber Sealing Parts Rubber Sealing Parts Case

Provincial Appellate Court

25 July 2003

Case No. 17 U 22/03

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XVI

Available at:


Cited in ¶: 96

Netherlands

Wavin Wavin Overseas B.V. v. Picenum Plast SPA

District Court

December 3, 2014

Case No. C-07-198594 - HZ ZA 12-139

Available at:

http://www.globalsaleslaw.org/content/api/cisg/urteile/2568.

pdf

Cited in ¶: 96

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XVII

INDEX OF ARBITRAL CASES

Ad Hoc Tribunals

XXII Y.B. Challenge Decision of the Appointing Authority Designated by

Secretary-General of the PCA

11 January 1995

XXII Y.B. Comm. Arb. 227, 234

Cited in ¶: 56

London Court of International Arbitration

National Grid National Grid PLC v The Republic of Argentina

Decision on the Challenge to Mr. Judd L. Kessler

3 December 2007

Case No. UN 7949

Cited in ¶: 55

International Centre for Settlement of Investment Disputes

AWG Group AWG Group Ltd. v. The Argentine Republic, UNCITRAL

Decision on a Second Proposal for the Disqualification of A

Member of the Arbitral Tribunal

12 May 2008

ICSID Case No. ARB/03/17

Cited in ¶: 70

Tidewater Tidewater v The Bolivarian Republic of Venezuala

Decision on Claimants’ Proposal to Disqualify Professor

Brigette Stern, Arbitrator

23 December 2010

ICSID Case No. ARB/10/5

Cited in ¶: 64

North American Free Trade Agreement

Methanex Methanex Corporation v United States of America,

UNCITRAL

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Final Award of the Tribunal on Jurisdiction and Merits

3 August 2005

Cited in ¶: 31

Permanent Court of Arbitration

Aeroport Belbek Press Release: Aeroport Belbek LLC and Mr. Igor Valerievich

Kolomoisky v. The Russian Federation

January 2016

Available at:

https://pcacases.com/web/sendAttach/1553

Cited in ¶: 41

Gallo Gallo v Canada

Decision on the Challenge to Mr. J. Christopher Thomas

14 October 2009

PCA Case No. 2008-02

Cited in ¶: 55

Merck Merck Sharp & Dohme v The Republic of Ecuador

Decision on Challenge to Arbitrator Judge Stephen M.

Schwebel

8 August 2012

PCA Case No. AA442

Cited in ¶: 55, 59, 62, 65

Perenco Perenco v Ecuador

Decision on Challenge to Arbitrator

8 December 2009

PCA Case No. IR-2009/1

Cited in ¶: 75

PJSC CB Privatbank Press Release: PJSC CB Privatbank and Finance Company

Finilon LLC v. the Russian Federation

March 2016

Available at:

https://pcacases.com/web/sendAttach/1619

Cited in ¶: 41

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INDEX OF OTHER AUTHORITIES

ISO 14001 International Organization for Standardization,

Environmental Management

Available at:

www.iso.org/iso-14001-environmental-management.html

Cited in ¶: 122

McInerney-Lankford Siobhán McInerney-Lankford

“Human Rights and the SDGs: Progress or a Missed

Opportunity”

In: Oxford Human Rights Hub

January 2017

Available at:

http://ohrh.law.ox.ac.uk/human-rights-and-the-sdgs-

progress-or-a-missed-opportunity/

Cited in ¶:

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SUMMARY OF FACTS

1. Delicatesy Whole Foods Sp. (the “CLAIMANT”), registered in Equatoria, is a manufacturer of fine

bakery products committed to using its best efforts to produce goods in accordance with the highest

possible ethical standards [NoA ¶1].

2. Comestibles Finos Ltd (the “RESPONDENT”) is a gourmet supermarket chain in Mediterraneo

[NoA ¶2].

3. CLAIMANT and RESPONDENT (the “Parties”) met on 3 March 2014 at the Cucina Food Fair

in Danubia where they initiated negotiations for the sale of CLAIMANT’s cakes [NoA ¶3].

4. The Parties subscribe to the ethical business principles of the UN Global Compact [R5 ¶4].

Previously, there have been allegations of unethical behavior against RESPONDENT [R5 ¶4].

5. On 10 March 2014, RESPONDENT invited CLAIMANT to submit a tender to supply chocolate

cakes (the “Tender”) [NoA ¶4]. There, RESPONDENT expressed interest in CLAIMANT’s

supply chain management and in their shared ethical values [C1 ¶3].

6. Given CLAIMANT’s negative experience with ad-hoc arbitration and RESPONDENT’s concern

for confidentiality, the Parties contemplated dispute resolution early on [R5 ¶5]. RESPONDENT

reassured CLAIMANT that its arbitration clause would not cause any problems in practice [C1 ¶5].

7. On 27 March 2014, CLAIMANT communicated to RESPONDENT its completed Sales Offer

form [C4] with accompanying letter [C3] making an offer to supply chocolate cakes (the “Offer”).

CLAIMANT restated its understanding of the arbitration clause as precluding the possibility of

recourse to arbitral institutions for the composition of the Tribunal [C3 ¶4].

8. On 7 April 2014, RESPONDENT informed CLAIMANT that they had been awarded the supply

contract (the “Contract”) [C5 ¶1]. In the letter, RESPONDENT wrote that CLAIMANT’s

commitment to sustainable production had been a decisive factor in awarding the Contract [C5 ¶2].

9. For three years, delivery and payment between the Parties proceeded without incident [NoA ¶6].

10. On 27 January 2017, RESPONDENT emailed CLAIMANT, abruptly indicating its unilateral

decision to withhold payment to CLAIMANT for recently-delivered 600 000 cakes and inquiring

about the source of CLAIMANT’s cocoa [C6 ¶2]. Citing the UNEP Special Rapporteur’s

investigation revealing widespread corruption in Ruritania, RESPONDENT expressed concern

about whether CLAIMANT’s cocoa supplier “strictly [adhered] to UN Global Compact” [C6 ¶2].

11. Given past compliance assessments, CLAIMANT promptly responded that it was “fairly confident”

its cocoa complied with the UN Global Compact [C8 ¶2]. CLAIMANT then stressed the

importance of making payment for chocolate cakes that had already been delivered [C8 ¶3].

12. On 10 February 2017, CLAIMANT informed RESPONDENT of their discovery that it had been

defrauded by their cocoa supplier [C9 ¶1]. CLAIMANT immediately terminated their Contract,

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2

secured an alternate source of cocoa, and informed RESPONDENT accordingly [C9 ¶2].

RESPONDENT, while still refusing to pay for the cakes, proceeded to use them in a special

marketing campaign [PO2 ¶38].

13. On 12 February 2017, RESPONDENT purported to terminate the Contract and asserted that the

cost of the delivered cakes would be set off against alleged reputational harm [C10 ¶5]. To date,

RESPONDENT’s customers have not complained [PO2 ¶38] nor has RESPONDENT put

forward any proof of its purported reputational harm [Response NoA ¶28].

14. On 30 June 2017, CLAIMANT served RESPONDENT with a Notice of Arbitration initiating the

present proceedings and nominating Mr. Rodrigo Prasad as their appointed arbitrator [NoA ¶22].

15. In his declaration of independence and impartiality dated 26 June 2017, Mr. Prasad disclosed that

he had twice been appointed to tribunals by CLAIMANT’s legal counsel [C11 ¶3]. He also reserved

the right to allow partners at his firm to be involved on matters pertaining to the Parties and related

companies [C11 ¶5].

16. On 31 July 2017, RESPONDENT submitted a Response to Notice of Arbitration recognizing the

jurisdiction of the Tribunal. At that time, RESPONDENT had no objections to the appointment

of Mr. Prasad “despite the restrictions in his declaration of independence” [Response NoA ¶22].

17. On 22 August 2017, the full Tribunal was constituted [Letter Rizzo].

18. On 29 August 2017, RESPONDENT inquired about the involvement of a third-party funder in

this arbitration [Disclosure Order ¶3].

19. On 7 September 2017, CLAIMANT disclosed that its claim was partially funded by Funding 12

Ltd., which is owned primarily by Findfunds LP [Funding Disclosure ¶1].

20. On 11 September 2017, Mr. Prasad disclosed that he had acted as an arbitrator in two cases funded

by other subsidiaries of Findfunds LP [Declaration Prasad ¶1]. He also disclosed his law firm’s

merger to create Prasad & Slowfood, and that a new partner was representing a client funded by

Findfunds LP [Declaration Prasad ¶3]. All necessary precautions had been put in place to avoid

conflicts [Declaration Prasad ¶3].

21. On 14 September 2017, RESPONDENT challenged Mr. Prasad under UNCITRAL Rules Art. 13

for lack of impartiality and independence [NoC].

22. On 21 September 2017, Mr. Prasad rejected RESPONDENT’s challenge by reasserting his

independence and declining to withdraw from the Tribunal [Prasad Decision ¶8].

23. On 29 September 2017, CLAIMANT rejected RESPONDENT’s challenge and proposed a

potential replacement arbitrator who could attend the hearing and immediately take over the role of

Mr. Prasad, in the unlikely event that RESPONDENT’s challenge was successful [Response to

Challenge ¶12].

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SUMMARY OF ARGUMENT

24. RESPONDENT is opportunistically scapegoating CLAIMANT to protect against imagined harms.

In the wake of Ruritania’s corruption scandal, RESPONDENT has hijacked the Parties’ shared

ethical commitments in order to obfuscate its contractual breach. Faced now with the possibility of

financial repercussion for the non-payment of delivered goods, RESPONDENT resorts to guerilla

tactics to deny CLAIMANT its choice of arbitrator and the right to a fair hearing. By challenging

both the arbitrator and the challenge procedure itself, RESPONDENT seeks to unjustly derail the

proceedings and to delay payment long overdue.

25. The Tribunal cannot decide this challenge to CLAIMANT’s arbitrator [I]. The Parties agreed,

pursuant to UNCITRAL Rules Art. 13(4), that an Appointing Authority would have competence

over any challenge decision. Even if the Parties excluded UNCITRAL Rules Art. 13(4), the

competent authority to decide RESPONDENT’s groundless challenge would be the Supreme Court

of Danubia, not the Tribunal. In any event, if the Tribunal decides on the challenge, it may only do

so with the involvement of Mr. Prasad.

26. Even if the Tribunal decides the challenge, it must be rejected [II]. In an attempt to delay

justice, RESPONDENT has cobbled together a disparate series of circumstances which they allege

are grounds for the removal of Mr. Prasad. In fact, RESPONDENT has failed to show that there

are any objectively justifiable doubts as to Mr. Prasad’s independence and impartiality.

27. CLAIMANT’s General Conditions govern the Contract [III]. CLAIMANT incorporated its

General Conditions, and at the very least, its Codes of Conduct into its Offer, whereas

RESPONDENT did not incorporate its General Conditions into its acceptance. Accordingly,

CLAIMANT’s General Conditions and Codes govern the Contract to the exclusion of

RESPONDENT’s. No “battle of the forms” arises. Even if the Tribunal finds that both the Parties’

standard terms were incorporated, conflicting terms should be removed, applying the “knock-out”

approach.

28. Even if RESPONDENT’s General Conditions apply, CLAIMANT still delivered

conforming goods pursuant to CISG Art. 35 [IV]. The conformity of the goods delivered by

CLAIMANT is not affected by the its supplier’s production methods. The Contract does not

explicitly or implicitly create obligations under CISG Art. 35(1) for CLAIMANT to guarantee its

supplier’s production methods and, similarly, no particular purpose creates this obligation.

29. RESPONDENT’s attempt to misconstrue CLAIMANT’s best efforts obligation as one of

guaranteed results is merely a distraction from its own self-serving and legally untenable position.

For a supermarket allegedly subscribing to ethical production, its failure to pay CLAIMANT

fundamentally undermines the ethical objectives it has committed to uphold.

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ARGUMENT

THE TRIBUNAL CANNOT DECIDE THIS CHALLENGE TO MR. PRASAD

30. RESPONDENT seeks to deny CLAIMANT its choice of arbitrator and the right to a fair hearing.

It contends that when the Parties excluded institutional arbitration, any challenges to an arbitrator

would have to be resolved by the remaining members of the Tribunal. This position is clearly

incorrect. In the present case, the Parties had agreed, pursuant to UNCITRAL Rules Art. 13(4), that

an Appointing Authority would have competence over the challenge decision [A]. Even if the

Parties had excluded the application of UNCITRAL Rules Art. 13(4), the competent authority to

decide RESPONDENT’s challenge would be the Supreme Court of Danubia [B]. Failing that, only

if the Tribunal were to find that the Parties had no agreement on the challenge procedure, could the

full Tribunal, including Mr. Prasad, decide the challenge [C].

31. Under the Parties’ arbitration agreement, the Appointing Authority has competence over the

challenge decision. RESPONDENT contends that the Parties excluded the application of

UNCITRAL Rules Art. 13(4) when they agreed to settling disputes “without the involvement of any

arbitral institution” [R4 ¶8]. This is false. When the Parties agreed to limit the involvement of an

arbitral institution, they did not exclude the application of UNCITRAL Rules Art. 13(4), which gives

the Appointing Authority exclusive power to decide the challenge [UNCITRAL Rules Art. 13(4);

Methanex II.E ¶35; Caron P256; Binder 2013 P148].

32. Since the Parties agree that the CISG governs their arbitration agreement, CISG Art. 8 guides the

interpretation of the arbitration clause, taking into account all relevant circumstances, practices, and

usages [PO ¶1]. Arts. 8(1) and 8(2) set forth two hierarchical criteria. First, Art. 8(1) requires a

subjective inquiry into the Parties’ real intent, and the party proffering such statement has the burden

of proof [Schwenzer P180]. If subjective intent cannot be determined, Art. 8(2) requires an objective

analysis pursuant to the ‘reasonable person’ standard. Here, CLAIMANT did not know and could

not have been aware of RESPONDENT’s intention to exclude the application of UNCITRAL

Rules Art. 13(4) [i]. Further, a reasonable person in the CLAIMANT’s position could not have been

aware of RESPONDENT’s intention to exclude the application of UNCITRAL Rules Art. 13(4)

[ii].

CLAIMANT did not know that RESPONDENT intended to exclude the application of

UNCITRAL Rules Art. 13(4)

33. Under CISG Art. 8(1), RESPONDENT neither intended to exclude the application of UNCITRAL

Rules Art. 13(4), nor the jurisdiction of the Appointing Authority to rule on the challenge.

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CLAIMANT understood RESPONDENT’s clear intention as wishing to establish a “practicable”

arbitration clause that “would not cause any problems in its application” [C1 ¶5]. If

RESPONDENT’s actions were to be interpreted as wanting to exclude UNCITRAL Rules Art.

13(4) from the challenge procedure, this would create an unworkable process for choosing a

decision-maker during a potential challenge. This would run contrary to RESPONDENT’s own

wishes. Indeed, CLAIMANT understood that RESPONDENT wanted an Appointing Authority

mechanism precisely because it was designed to avoid deadlocks and procedural quagmires seen in

challenges [UN Doc A/CN.9/97 ¶5(a)], and as well as affronts to due process created by arbitrators

reviewing challenges to themselves or their peers [Ross; Daele P171].

34. Nor can RESPONDENT, whose clear intention was to safeguard confidentiality [R5 ¶4], be

interpreted as wishing to exclude UNCITRAL Rules Art. 13(4), as this would ultimately force

confidential matters into the public court proceedings before the Supreme Court of Danubia, who

is competent to hear the challenge under Model Law Art. 13(3). Even though RESPONDENT

contends that it wanted “as few persons as possible to know about the arbitration,” it nevertheless

reassured CLAIMANT that its arbitration clause would avoid repeating CLAIMANT’s “bad

experience” with State courts [R5 ¶5]. In these circumstances, it is hard to believe that

RESPONDENT and its lawyers, who “did not see the necessity to make any changes” [R5 ¶6],

would have wished to exclude the competence of a trusted party-appointed adjudicator, i.e., an

Appointing Authority, to resolve similar challenges.

35. Similarly, the inclusion of UNCITRAL Rules Art. 13(4) does not necessarily lead to the involvement

of an arbitral institution. Indeed, there are many instances where disputing parties apply

UNCITRAL Rules Art. 13(4) without resorting to arbitral institutions [UN Doc A/CN.9/634 ¶5;

Caron/Caplan P150]. For example, the PCA regularly designates individuals to act as appointing

authorities [Webster P114; UN Doc A/CN.9/634 ¶5], and the UNCITRAL Rules already provide

for arbitration “where no arbitral institution is involved” [UNCITRAL Recommendations ¶1]. This

is because UNCITRAL Rules Art. 6(1)(b) specifically allows “[either party to propose to the other]

the name or names of one or more institutions or persons, [to] serve as appointing authority”

[emphasis added]. CLAIMANT understood RESPONDENT’s intention to exclude the

“involvement of any arbitral institution” [R5 ¶4]. Accordingly, the Parties’ agreement relates only to

the exclusion of “institutional arbitration” [C1 ¶5; C3 ¶4; R5 ¶5]. Therefore, the CLAIMANT never

expected that its agreement to exclude institutional arbitration could also mean excluding

UNCITRAL Rules Art. 13(4).

36. Finally, CLAIMANT could not have been aware of RESPONDENT’s intention to exclude the

application of UNCITRAL Rules Art. 13(4) given the lack of sophistication exhibited by

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RESPONDENT’s legal counsel. On one hand, RESPONDENT consulted its lawyers during the

Parties’ negotiations to ensure a “practicable” dispute resolution clause [C1 ¶5]. On the other,

RESPONDENT showed naivety towards arbitration: first, by excluding the already-inapplicable

Transparency Rules [UNCITRAL Transparency Rules Art. 1(1)]; second, by taking a monolithic

attitude that all arbitral institutions are liable to confidentiality breaches [Paulsson 2010 PP12-13];

and, third by introducing a potential pathology in saying that the presiding arbitrator would be

“appointed by the party-appointed arbitrators or by agreement of the Parties” [UNCITRAL Rules

Art. 9(1); Contract Clause 20, emphasis added]. Indeed, in RESPONDENT’s own recent

submissions, the challenge is “entrusted to the Appointing Authority” [NoC ¶8], which evinces

either a prior ignorance or a new-found familiarity with the challenge process. Given such mixed

signals, CLAIMANT could not have known of RESPONDENT’s intention to exclude the

application of UNCITRAL Rules Art. 13(4).

37. It is well established that a party who asserts the application of CISG Art. 8(1) must prove its

assertion. In fact, the standard for imputable knowledge in Art. 8(1) is the formula “could not have

been unaware,” which is understood to require a greater degree of carelessness or gross negligence

than the standard “ought to have known” [Schwenzer P152]. In the present case, the Parties only

actually ever spoke to the exclusion of “institutional arbitration” [C1 ¶5; C3 ¶4; R5 ¶5], and not the

specific exclusion of Art. 13(4). In light of the above arguments, RESPONDENT has not met the

burden of proving that the Parties excluded the application of UNCITRAL Rules Art. 13(4) [NoC

¶8]. Neither has RESPONDENT met the burden of proving that CLAIMANT could not have been

unaware that its intent was to specifically exclude the competence of the Appointing Authority from

the challenge procedure.

A reasonable person in CLAIMANT’s position could not have known that

RESPONDENT intended to exclude the application of UNCITRAL Rules Art. 13(4)

38. Under CISG Art. 8(2), a reasonable person in CLAIMANT’s position could not have been aware

that RESPONDENT intended to exclude UNCITRAL Rules Art. 13(4), or the competence of the

Appointing Authority from the challenge procedure. A reasonable person would not interpret an

agreement to exclude institutional arbitration to also exclude the Appointing Authority [a]. Indeed,

even if a reasonable person meant to deviate from the challenge procedure, she would not interpret

RESPONDENT’s intent as excluding the Appointing Authority in favour of a two-person tribunal

[b]. Finally, absent clear and unambiguous language, the provision has to be interpreted contra

proferentem [c].

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39. Under the reasonable person standard of CISG Art. 8(2), special weight is attached to the usual

meaning of the words used by the parties [Schwenzer P163]. In its Notice of Challenge,

RESPONDENT contends that it “had explained to CLAIMANT that it…had no confidence that

a dispute would be kept confidential by any institution” [NoC ¶8, emphasis added]. It is widely

known that arbitration generally provides greater privacy and confidentiality than litigation. It is

therefore difficult to understand how a reasonable person could so quickly dismiss the reputation

of all arbitration institutions, including those serving as Appointing Authorities, based on one

negative experience for which RESPONDENT lacked any “definitive proof” [R5 ¶4]. Indeed, no

reasonable person in the CLAIMANT’s shoes would mistake RESPONDENT’s caution towards

arbitral institutions as a valid reason for extending their understanding of the phrase “without the

involvement of any arbitral institution” to mean “without the involvement of any Appointing

Authority,” much less an Appointing Authority that is not an institution but a person, as is often

the case [see ¶35 above]. Furthermore, secretariats within arbitration institutions are known to work

in a strictly confidential manner [ICC Internal Rules Art. 1; PCA Internal Rules Art. 5; SCC Institute

Rules Art. 9; LCIA Notes s. 19; Smeureanu PP148-149]. Even so, a reasonable person reading the

Contract would interpret RESPONDENT’s confidentiality clause as being open to certain

principled exceptions, including “to protect or pursue a legal right in bona fide legal proceedings”

[Contract Clause 21].

40. Additionally, the Parties agreed to resolve disputes “without the involvement of any arbitral

institution” [Contract Clause 20] at the request of RESPONDENT, who had “switched [its]

arbitration clause from an institutional…to an ad-hoc clause…under the UNCITRAL Arbitration

Rules” [R1 ¶5]. A reasonable person dealing with RESPONDENT in the context of the Parties’

negotiations would presume that in making such an important decision, RESPONDENT would

have carefully assessed how to transfer the various functions performed by an institution to other

non-institutional actors under the UNCITRAL Rules. Indeed, a reasonable person in CLAIMANT’s

position would have expected that even if RESPONDENT had not considered the various

advantages and disadvantages of switching its arbitration clause, it would have at least rectified any

mistakes when CLAIMANT made known its negative experience with state courts under ad-hoc

arbitration [R5 ¶5]. The fact that RESPONDENT’s “legal department was confident that [their

new] arbitration clause would not cause any problems in its application in practice” [C1 ¶5] would

have led a reasonable person to believe that RESPONDENT sought to use the services of the

Appointing Authority, which is standard practice under the UNCITRAL Rules. That

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RESPONDENT intended to establish a “practicable” arbitration clause that “would not cause any

problems in its application” [C1 ¶5] confirms the interpretation that RESPONDENT favoured the

competence of an Appointing Authority [UN Doc A/CN.9/97 ¶5(a); Binder 2013 P78].

41. Lastly, the UNCITRAL Rules place no limitations on who the parties may propose to serve as

Appointing Authority. Indeed, the drafters of the Rules stated, “any third party may be chosen as

an appointing authority [which] may be a physical or a legal person” [UN Doc A/CN.9/97 ¶5(a)]

and which have today included many eminent jurists like Bruno Simma [Aeroport Belbek], Yves

Fortier [Geci Española ¶9], and Michael Hwang [PJSC CB Privatbank] to name but a few. UNCITRAL

Rules Art. 6(1) allows a disputing party to make proposals for the name of one or more persons to

serve as Appointing Authority “at any time” during the arbitration. Given these considerations, a

reasonable person would not have known and could not have been aware that RESPONDENT’s

sensitivity towards arbitration institutions also extended to non-institutional appointing authorities,

leading it to request a restrictive interpretation of UNCITRAL Rules Art. 13(4). Indeed, a reasonable

person in CLAIMANT’s shoes would not have known about RESPONDENT’s “unilateral and

undisclosed” mental reservations, which are in any case irrelevant under CISG Art. 8 [Schwenzer

P148].

42. RESPONDENT states that drafters of the UNCITRAL Rules wished to have an Appointing

Authority decide challenges to avoid a challenged arbitrator deciding in her own cause [NoC ¶8]. It

then transplants this logic to Model Law Art. 13(2). However, a reasonable person would not

interpret the RESPONDENT’s intent as excluding the role of the Appointing Authority. In fact,

the primary concern of drafters in devising Art. 12(1) of the original 1976 UNCITRAL Rules was

to ensure that the authority called upon to decide the challenge be an impartial and independent one

[Caron/Caplan P269]. In considering several possibilities for an authority to decide the challenge,

state representatives declined a two-member proposal in favour of the Appointing Authority [UN

Doc A/10017 ¶85]. Therefore, contrary to RESPONDENT’s erroneous claims, the drafters of

UNCITRAL Rules Art. 13(4) did not envision a two-person tribunal deciding on the challenge.

Under these circumstances, no reasonable person would interpret RESPONDENT’s intent as

excluding the Appointing Authority.

43. While UNCITRAL Rules Art. 1(1) does not require that a modification of the Rules be in writing,

it requires that such modification be expressed clearly and unambiguously to “avoid uncertainty as

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to whether the Rules have been made applicable” [UN Doc A/CN.9/112/Add.1 P167; Paulsson

2010 ¶22; Caron/Caplan ¶12]. Consequently, clearer wording would have been required to deviate

from UNCITRAL Rules Art. 13(4). In the present case, CLAIMANT clearly and unambiguously

confirmed its understanding of the terms “without the involvement of any arbitral institution” as

applying only to the constitution of arbitral tribunals [C1 ¶5; C3 ¶4; R5 ¶5]. Risks emanating from

RESPONDENT’s lack of care in confirming relevant circumstances should be borne by

RESPONDENT. This is confirmed by the doctrine of contra proferentem, whereby any ambiguity in

a contract is interpreted in favor of the party who did not write the clause [Schwenzer P168;

UNIDROIT Principles Art. 4(6)].

44. Even excluding the application of UNCITRAL Rules Art. 13(4), the Tribunal does not have

jurisdiction to decide on the challenge. Under Model Law Art. 13(3), which constitutes the lex arbitri

in this Danubia-seated arbitration, arbitrator challenges must be decided by the Supreme Court of

Danubia “if a challenge under any procedure agreed upon by the parties…is not successful” [Model

Law Art. 13(3), emphasis added; PO2 ¶47]. The Tribunal is only allowed to decide challenges under

Model Law Art. 13(2) “[f]ailing such agreement” on a challenge procedure.

45. Here, when the Parties excluded UNCITRAL Rules Art. 13(4) from the challenge procedure, their

challenge remained subject to the rest of Art. 13, i.e., Arts. 13(1) to 13(3), and therefore the Tribunal

still lacks competence to decide the challenge under Model Law Art. 13(2). By its own accounts,

RESPONDENT only argues for the exclusion of UNCITRAL Rules Art. 13(4), not the rest of Art.

13. This is also confirmed by RESPONDENT’s unreserved and explicit reliance upon UNCITRAL

Rules Art. 13 in its Notice of Challenge and Cover Letter to the Notice of Challenge. Therefore,

even according to RESPONDENT’s case, UNCITRAL Arts. 13(1) to 13(3) continue to apply and

constitute the applicable challenge procedure.

46. Under this procedure, an arbitrator’s refusal to withdraw from office constitutes a decision rejecting

the challenge. This procedure is akin to the challenge of a sole-arbitrator, where there is no need for

a formal decision because the “refusal of a sole arbitrator to resign…constitute[s] a rejection of the

challenge” [UN Doc A/40/17 ¶129]. Similarly, RESPONDENT invoked a challenge to Mr. Prasad

when, pursuant to UNCITRAL 13(2), it communicated its notice and reasons for the challenge to

CLAIMANT, to Mr. Prasad, and the other arbitrators [NoC]. When Mr. Prasad communicated to

the Parties his decision “not [to] withdraw from [his] office as arbitrator” [Prasad Letter ¶8] pursuant

to UNCITRAL Rules Art. 13(3), RESPONDENT’s only further recourse would have been to the

Supreme Court of Danubia under Model Law Art. 13(3)—and not to the Tribunal.

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47. Contrary to RESPONDENT’s assertion, it is not “normal in ad hoc proceedings [for the] Arbitral

Tribunal…to decide the challenge” [NoC ¶8]. Rather, under Model Law Art. 13(2), the tribunal has

competence to decide the challenge only if it finds that the parties failed to agree to a procedure for

challenging an arbitrator. Should the Tribunal decide this was the case here, CLAIMANT submits

without prejudice that, pursuant to Model Law Art. 13(2), the full Tribunal, including the impugned

arbitrator, must decide the challenge [i]. Indeed, Mr. Prasad cannot unilaterally withdraw from his

mandate even if he were allowed to [ii]. In its deliberations, the Tribunal should give consideration

to the fact that RESPONDENT has carelessly lost its ability to bring the challenge before the proper

authorities who hold exclusive jurisdiction over this matter [iii].

The Tribunal must decide the challenge with the participation of Mr. Prasad

48. RESPONDENT erroneously argues that a challenged arbitrator cannot participate in his own

challenge decision. Given that Danubia adopted the UNCITRAL Model Law without amendments

[PO ¶3(4)], the full Tribunal, including Mr. Prasad, would have to decide the challenge, should the

Tribunal decide that the Parties had not agreed on a challenge procedure. The words “arbitral

tribunal” in Model Law Art. 13(2) mean the full Tribunal, including the challenged arbitrator. This

is because the possibility of a two-member Tribunal deciding the challenge was explicitly dismissed

by drafters [UN Doc A/40/17 ¶128]. Notably absent are any domestic amendments by Danubia

that would indicate that an arbitrator cannot be “a judge in his own cause” [NoC ¶8]. In contrast,

Egypt omitted the words “the arbitral tribunal shall decide on the challenge” in its Arbitration Act

[Egypt Arbitration Act Art. 19] after deciding that the impugned provision was unconstitutional

[Varady et al. P456]. Likewise, as previously mentioned, the drafters of the UNCITRAL Rules

specifically rejected the possibility of allowing two other members of the arbitral tribunal to decide

the challenge, as proposed by RESPONDENT [UN Doc A/10017 ¶85]. RESPONDENT

therefore asks the Tribunal to violate the intentions of the drafters of the Model Law and

UNCITRAL Rules, as well as those of the Danubian legislator, when it seeks to exclude Mr. Prasad

from the decision on his challenge.

49. RESPONDENT further fails to consider the practicability of a two-person tribunal. This was a

specific concern voiced by the drafters of the UNCITRAL Rules, who feared that a two-person

tribunal “might not lead to any decision, as these members might not agree” [UN Doc A/10017

¶85]. The UNCITRAL Rules and the Model Law both permit certain procedural matters to be

delegated to the presiding arbitrator [UNCITRAL Rules Art. 33(2); UNCITRAL Explanatory Note

¶41]. However, the Tribunal could not use UNCITRAL Rules Art. 33(2) to delegate the decision to

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the competence of the presiding arbitrator even if it wanted to. Deciding a challenge is a distinctly

legal and judicial task, requiring both application of the law, assessment of evidence and fair

administration of procedure. This is confirmed by the UNCITRAL Model Law Working Group,

which does not consider a challenge “to be…a decision on a question of procedure in the terms of

Art. 29 [of the UNCITRAL Model Law] and [entrusts this decision] to all members of the tribunal,

including the challenged arbitrator” [Binder 2010 P195; A/CN.9/246 ¶38]. Thus, should the

Tribunal decide that the Parties did not agree on a challenge procedure, the challenge cannot be

delegated to a presiding arbitrator, but rather must be decided by a majority or unanimous vote of

the entire panel [UN Doc A/CN.9/264 P32 ¶4].

Even if he were allowed, Mr. Prasad cannot unilaterally withdraw from the challenge

decision

50. Mr. Prasad is bound to respect the equality of the Parties and CLAIMANT’s fundamental right to

equal representation on the Tribunal. Once a mandate is accepted, it cannot be unilaterally rejected

without valid cause [Waincymer PP326-27]. Moreover, to allow a challenge procedure which is

strongly advantageous to only one party would violate Model Law Art. 18. RESPONDENT’s

proposal that a two-person tribunal decide the challenge would directly contravene the equality of

the Parties.

51. Likewise, in their dispute resolution clause, the Parties explicitly agreed that “the number of

arbitrators shall be three” [Contract Clause 20, emphasis added]. While some institutional rules

provide for truncated tribunals (e.g., LCIA, ICDR, and WIPO), such provisions are notably absent

from the UNCITRAL Rules. Indeed, the Parties to this dispute neither expressly, nor impliedly,

ever agreed to have a truncated tribunal decide on the challenge. A decision by a truncated tribunal,

without CLAIMANT’s consent, may well lead to an annulment by the Supreme Court of Danubia,

or refusal of enforcement under Art. V(1)(d) of the New York Convention on the basis that the

award was rendered by an improperly constituted tribunal [Born P1739; Himpurna ¶194; Schwebel

P146].

RESPONDENT cannot overcome fatal delays by insisting that the Tribunal decide on

its challenge

52. RESPONDENT has effectively twice waived its right to challenge by failing to bring it before the

proper authorities. Both the UNCITRAL Rules and the Model Law aim to discourage dilatory tactics

and avoid waiting out a challenge until the rendering of a final award. Even if it is not directly

relevant to the Tribunal’s own competence, it is worth raising the fact that RESPONDENT’s

heedless challenge is inadmissible in any other forum. The 30-day time period to submit the

challenge to the Appointing Authority under UNCITRAL Rules Art. 13(4) has long lapsed.

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Similarly, the 30-day time period to submit the challenge to the Supreme Court of Danubia under

Model Law Art. 13(3) has also expired. RESPONDENT cannot now seek to unfairly revive its

challenge by soliciting a decision from the Tribunal. Challenging the challenge procedure itself is a

guerilla tactic that must be discouraged. As expected, RESPONDENT’s suggestion that a two-

person Tribunal can rule on the challenge to Mr. Prasad is self-serving and legally untenable.

REPONDENT seeks to derail the proceedings and deny CLAIMANT its choice or arbitrator and

the right to a fair hearing. As expected, RESPONDENT’s suggestion that a two-person Tribunal

can rule on the challenge to Mr. Prasad is self-serving and legally untenable. RESPONDENT seeks

to derail the proceedings and deny CLAIMANT its choice of arbitrator and the right to a fair

hearing.

THE CHALLENGE TO MR. PRASAD IS WITHOUT MERIT AND SHOULD BE DISMISSED

53. In an obvious attempt to deny CLAIMANT its right to a fair and balanced Tribunal,

RESPONDENT seeks to remove Mr. Prasad, CLAIMANT’s party-appointed arbitrator, from the

arbitral proceedings [NoC ¶13]. RESPONDENT supports its spurious challenge by cobbling

together a disparate series of facts and circumstances, which it erroneously claims raises justifiable

doubts as to Mr. Prasad’s independence or impartiality. By triggering this protracted legal skirmish,

RESPONDENT not only seeks to strain CLAIMANT’s financial position, but further delays any

possible resolution on the merits.

54. The Tribunal must reject RESPONDENT’s meritless proposition that there are justifiable doubts

as to Mr. Prasad’s independence or impartiality. RESPONDENT has failed to identify the

appropriate objective standard of review for the challenge of an arbitrator and has instead proposed

a subjective threshold of review which is informed by non-binding guidelines [A]. Under the correct

standard of review, REPONDENT has failed to establish objectively justifiable doubts as to Mr.

Prasad’s independence or impartiality [B].

55. RESPONDENT has failed to discharge its burden of proof of demonstrating that there are

objective grounds to remove Mr. Prasad from the Tribunal. Instead, RESPONDENT has

erroneously suggested a lower, subjective standard of review by which to remove Mr. Prasad.

56. The correct test for the removal of an arbitrator requires circumstances which give “justifiable

doubts as to the arbitrator’s impartiality or independence” [UNCITRAL Rules Art. 12(1), emphasis

added]. The standard for justifiable doubts is widely recognized to be objective, requiring the

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tribunal to consider the perspective of “a reasonable and fair-minded third person, having

knowledge of the relevant facts” [Merck ¶73; National Grid ¶73; Gallo ¶19; XXII YB ¶23]. It has been

highlighted that this standard adopts the perspective of a disinterested third-person, rather than the

view of the tribunal or the parties [Born P1780]. In order to apply this standard, tribunals must pay

particular attention to the unique factual scenario of a given challenge; as one tribunal observed, “it

is only logical to conclude that all relevant facts and circumstances must be considered in reaching

[a] judgement” [Gallo ¶19].

57. RESPONDENT misleadingly suggests that the Tribunal should use an alternative, subjective

standard in an attempt to lower its evidentiary burden to show justifiable doubts as to Mr. Prasad’s

independence and impartiality. While a party’s subjective concerns may be sufficient to raise a

challenge, they are insufficient to support the removal of an arbitrator [Daele P241]. As noted by

one appointing authority, “[i]f the doubt had merely to arise in the mind of a party contesting the

impartiality of an arbitrator, ‘justifiable’ would have been almost redundant” [XXII YB ¶23].

58. RESPONDENT also suggests that the early stage of the proceedings strengthens the merits of their

challenge [NoC ¶12]. This proposition is incorrect, as the standard of review for a challenge remains

an objective one at all stages of the arbitral proceedings [Daele P250]. While it may be relevant for

the Tribunal to consider how the progression of the proceedings might contribute to objectively

justifiable doubts concerning Mr. Prasad, this factor alone “should not be permitted to preempt an

objective, careful analysis of partiality or bias” [Born, P1822]. The stage of the proceedings is

therefore not determinative in the assessment of the challenge against Mr. Prasad.

59. Lastly, RESPONDENT has suggested that the Tribunal “should take into account” the IBA

Guidelines in deciding the challenge [NoC ¶9]. However, the IBA Guidelines are merely the “non-

binding views of one group of practitioners on arbitrator conflicts of interest” [Merck ¶75]. The IBA

Guidelines “are not legal provisions and do not override any applicable national law or arbitral rules

chosen by the parties” [IBA Rules, Introduction, Art. 6]. Furthermore, they should not be applied

in a strictly mechanistic fashion [Waincymer P297]. In considering the challenge to Mr. Prasad, the

Tribunal must refrain from following the IBA Guidelines in isolation as RESPONDENT suggests

and instead apply the correct objective standard of justifiable doubts.

60. The grounds cited by RESPONDENT do not indicate bias that rises to the level of justifiable doubts

as to Mr. Prasad’s independence or impartiality. None of Mr. Prasad’s previous appointments [i],

firm connections [ii], or past publications [iii] are sufficient grounds to have Mr. Prasad removed

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from the Tribunal. Nor is the cumulative effect of the circumstances raised by RESPONDENT

sufficient to raise justifiable doubts [iv].

Mr. Prasad’s previous appointments do not raise justifiable doubts

61. Contrary to the views of RESPONDENT, the fact that Mr. Prasad has been previously appointed

by the Parties indirectly related to CLAIMANT of the present arbitration is not a source of concern

[NoC ¶10]. RESPONDENT claims that these previous appointments raise justifiable doubts as to

Mr. Prasad's independence and impartiality. However, when considered in the context of the

applicable test [a], none of these appointments raise justifiable doubts [b].

62. The relevant test to determine the impact of repeat appointments is whether “the number and

significance of the appointments considered in context, and in light of the period of time over which

the appointments were made, raise justifiable doubts in the eyes of a reasonable and fair-minded

third person as to the arbitrator’s independence or impartiality” [Merck ¶87]. This is a stark

difference to the purely numerical IBA Guidelines criteria proposed by RESPONDENT [IBA

Guidelines Art. 3.1.3 and 3.3.8]. In the present case, the factual surroundings of each appointment

are sufficient to convince the Tribunal that there are no justifiable doubts as to Mr. Prasad’s

independence or impartiality.

63. RESPONDENT cites four appointments which they claim must be considered collectively in

assessing Mr. Prasad’s alleged bias [NoC ¶10]. However, when considered in context and over the

three-year time period in which they occurred, these appointments fail to rise to the level of

objectively justifiable doubts as to Mr. Prasad’s independence or impartiality.

64. First, none of these appointments were made directly by any of the Parties involved in the present

arbitration. Two of the appointments were made by Mr. Fasttrack’s law firm, in the context of cases

in which Mr. Fasttrack was not involved [PO2 ¶9]. The two other appointments were made by

third-parties entirely unrelated to the present arbitration, but whose claims were funded in part by

other subsidiaries of Findfunds LP, the same parent company which partially funds CLAIMANT’s

case [PO2 ¶6]. Thus, the previous nominations were made by third-parties with only distant

connections to the present arbitration. These connections are all the more tenuous, given that

Findfunds LP does not typically involve itself in the appointment of arbitrators [PO2 ¶4]. In one of

the cases, the funder only ever became involved after Mr. Prasad’s appointment [Letter Prasad ¶4].

As one ICSID tribunal observed, “multiple appointments as arbitrator by the same party in unrelated

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cases are neutral, since in each case the arbitrator exercises the same independent arbitral function”

[Tidewater ¶60]. The difference in challenge under ICSID Rules does not detract from the pertinence

of this general comment. The previous appointments cited by RESPONDENT therefore have little

relevance on the present proceedings.

65. Second, while the quantum of Mr. Prasad’s earnings is unknown, the proportions derived from the

impugned appointments represent an immaterial part of Mr. Prasad’s arbitration income. In the past

three years, Mr. Prasad has acted as an arbitrator in 21 proceedings, which have accounted for at

most 40% of his earnings [PO2 ¶10]. The cases in which he was appointed by Mr. Fasttack’s law

firm were of minor value and the disputes involving the third-party funder accounted for only 20%

of the fees that he generated in the past three years [PO2 ¶10]. This means that in a given year, Mr.

Prasad has earned approximately 8% of his income from the cases cited by RESPONDENT. This

is insufficient to create the “financial dependence” that previous tribunals have held necessary to

raise justifiable doubts [Merck ¶87].

66. Third, RESPONDENT offers no justification as to why these four separate appointments should

be amalgamated [NoC ¶10]. While not explicitly cited by RESPONDENT, the relevant IBA

Guidelines state as a ground for challenge that “[t]he arbitrator has, within the past three years, been

appointed as arbitrator on two or more occasions by one of the parties, or an affiliate of one of the

parties” [IBA Guidelines 3.1.3, emphasis added]. Nothing in the language of this provision suggests

that previous appointments from different parties should be considered cumulatively. In criticizing

the IBA Guidelines on the issue of previous appointments, Born has suggested that “[t]he better

approach would be to consider repeat appointments by a single party or lawyer only where they

constituted a material part of the arbitrator’s professional activities and income” [Born P1883].

RESPONDENT has therefore failed to indicate why the Tribunal should consider these four

previous appointments as a whole.

67. Under the factual context of the previous appointments cited by RESPONDENT, it is clear that

Mr. Prasad is not financially, or otherwise dependent on any of the parties involved in these cases

as they account for only a small portion of his arbitrator practice. Nor is there any reason to believe

that Mr. Prasad has any history of judging partially. In fact, all of the cases cited by RESPONDENT

were resolved by unanimous decision [PO2 ¶15]. The Tribunal must reject RESPONDENT’s claim

that the four previous cases are relevant to the present proceedings and that they raise justifiable

doubts as to Mr. Prasad’s independence or impartiality.

Mr. Prasad’s law firm connections do not raise justifiable doubts

68. RESPONDENT alleges that Mr. Prasad’s connection to a third-party funder raises doubts as to his

independence or impartiality. Specifically, RESPONDENT cites that one of Mr. Prasad’s new

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partners currently represents a client in a matter that is funded by a subsidiary of the same parent

company that has provided support to CLAIMANT in the present matter [NoC ¶11].

RESPONDENT has expressly waived its right to challenge Mr. Prasad’s law firm connections and

should be barred from doing so now [a]. In the event that the Tribunal chooses to consider these

grounds for challenge, under the correct test [b], Mr. Prasad’s law firm connections do not raise

justifiable doubts [c].

69. RESPONDENT is barred from citing the connection to Mr. Prasad’s new law firm as justification

of bias as it expressly waived its right to challenge Mr. Prasad on such grounds. In his Declaration

of Independence, Mr. Prasad stated that “his colleagues at Prasad & Partners may continue current

matters and may also accept further instructions involving the Parties as well as related companies”

[Declaration of Independence ¶6]. RESPONDENT subsequently accepted this current objection

in writing, stating that it “had no objection to the appointment of Mr. Rodrigo Prasad despite the

restrictions in his declaration of independence” [Response NoA ¶22]. This prior exercise of party

autonomy serves to waive these grounds of objection under the IBA Guidelines that

RESPONDENT relies on [Explanation to General Standard 4(c)]. Yet over one month later,

RESPONDENT challenged Mr. Prasad for the exact circumstances relating to the explicit

reservation he made in his Declaration of Independence. RESPONDENT offers no justification as

to why Mr. Prasad’s new colleagues should not be contemplated in the reservation that he made.

Therefore, there is no reason why RESPONDENT should now be able to challenge Mr. Prasad on

these grounds.

70. In the interconnected world of international arbitration, any allegation of bias based on an

arbitrator’s connections must be evaluated qualitatively [Blackaby et al. P269]. As one tribunal

observed, “arbitrators are not disembodied spirits dwelling on Mars, who descend to earth to

arbitrate a case and then immediately return to their Martian retreat to await inertly the call to

arbitrate another,” but rather are “professionals [with] a variety of complex connections with all

sorts of persons and institutions” [AWG Group ¶32]. The test to consider allegations of bias based

on the arbitrator’s supposed connections must take into account four factors: proximity, intensity,

dependence, and materiality [AWG Group ¶35]. In light of these factors, none of the circumstances

of the present case raise justifiable doubts as to Mr. Prasad’s independence or impartiality.

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71. When considered in light of the relevant factors, Mr. Prasad’s indirect connection to the third-party

funder do not raise justifiable doubts about his independence or impartiality. First, Mr. Prasad has

only a distant link to his new partner’s case, which began years before the contemplated merger

[PO2 ¶6], and which involves a distinct legal entity with no direct connection to the present

arbitration [PO2 ¶2]. Second, the intensity of the interaction between Mr. Prasad and his partner is

low, given that “all of the necessary precautions have been put in place to avoid contact between

Mr. Prasad and the partner’s case” [Declaration Prasad ¶3]. Third, as previously mentioned, as an

arbitrator and lawyer with multiple streams of income, Mr. Prasad is in no way financially dependent

on the distant connection with the third-party funder of his partner’s case [PO2 ¶10]. Fourth, the

case has nearly finished and the law firm’s involvement has already concluded with the post-hearing

submission filed last month. They are now merely awaiting for the award and nothing more [Prasad

Letter ¶3]. Fifth, Mr. Prasad receives only indirect benefit from the case. In a law firm with 20 equity

partners and 60 associates [PO2 ¶8], he derives limited financial benefit from the case. For all of

these reasons, the connection that Mr. Prasad has with the partner at his new law firm does not raise

justifiable doubts as to his independence or impartiality.

72. In their argument, RESPONDENT claims the relevance of IBA Guidelines 2.3.6, which states as a

potential circumstance for an arbitrator challenge that “[t]he arbitrator’s law firm currently has a

significant commercial relationship with one of the parties, or an affiliate of one of the parties.” As

previously discussed, the IBA Guidelines are not binding on the present arbitration [¶59 see above].

Further, scholars have criticized the approach of the IBA Guidelines as being too arbitrary and

mechanistic, suggesting instead that “[t]he better approach would be to focus largely on the personal

activities and circumstances of the arbitrator, rather than his or her law firm” [Born P1894]. Lastly,

the specific circumstance raised by RESPONDENT only appear on the Guideline’s “Orange List”,

which does not necessitate the automatic removal of an arbitrator. For these reasons,

RESPONDENT’s invocation of the IBA Guidelines cannot be used to bolster its claim of bias

against Mr. Prasad.

Mr. Prasad’s past publications are irrelevant to the present proceedings

73. RESPONDENT cites a previous publication written by Mr. Prasad as grounds for justifiable doubts

as to his independence and impartiality. This claim must be rejected. The time period to raise a

challenge on the grounds of Mr. Prasad’s article has expired [a]. Even in the event that the Tribunal

considers this ground for challenge, Mr. Prasad’s article does not raise justifiable doubts as to his

independence or impartiality [b].

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74. The article cited by RESPONDENT cannot be used as grounds for a challenge because the requisite

time period for doing so has elapsed. Under UNCITRAL Rules Art. 13(1), a party seeking to

challenge an arbitrator must send notice of its challenge within fifteen days after its notification of

the appointment or its discovery of the grounds of the challenge. The Secretary-General of the PCA

has observed that “there are important reasons for time limits to apply to the filing of challenge

proceedings,” which serves to “protect the integrity of the proceedings” [Grimmer P89]. Mr.

Prasad’s article was publicly available since the beginning of the proceedings both on his personal

website and through legal databases. RESPONDENT had 15 days from the appointment of Mr.

Prasad to raise a challenge. Having failed to do so at the time, it is barred from doing so now.

75. Mr. Prasad’s article does not raise justifiable doubts because it is general in nature. Academic articles

pertaining to legal issues in the abstract are not grounds for establishing bias against a particular

party [Born P1888]. Even the IBA Guidelines, which RESPONDENT frequently cites, include

previous publications on their non-conflict “Green List” [IBA Guidelines 4.1.1]. Tribunals have

previously adopted the perspective of the “reasonable reader” in determining whether or not an

arbitrator’s publication raises justifiable doubts that the arbitrator would prejudge the specific

dispute at hand [Perenco ¶56]. In the present case, no reasonable reader would infer from Mr. Prasad’s

article that he would have prejudged the dispute between the Parties.

Even cumulatively, the grounds cited by RESPONDENT do not raise justifiable doubts

as to Mr. Prasad’s independence or impartiality

76. RESPONDENT argues that the cumulative effect of the grounds of challenge create justifiable

doubts [NoC ¶12]. This proposition must be rejected. As previously discussed, none of the

individual grounds on which RESPONDENT bases its claim is sufficient to raise justifiable doubts

as to Mr. Prasad’s independence or impartiality. The mere act of cobbling together a disparate set

of circumstances, regardless of how numerous, is insufficient to justify the removal of an arbitrator.

77. RESPONDENT’s motivation in raising various grounds of challenge is surely part of a broader

tactic to prevent CLAIMANT from finally obtaining relief. RESPONDENT is seeking to enter into

a protracted legal battle aimed at sapping CLAIMANT’s resources. The Tribunal should deny this

underhanded approach, and reject the proposition that there is a cumulative effect of the grounds

raised by RESPONDENT.

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CLAIMANT’S GENERAL CONDITIONS GOVERN THE CONTRACT

78. CLAIMANT’s General Conditions, upon which the Contract is formed, create obligations of best

efforts with respect to the ethical properties of the cakes. In an attempt to shirk its obligations under

the Contract and to retroactively impose upon CLAIMANT a burden it never agreed to bear,

RESPONDENT claims that its own General Conditions apply, which it erroneously asserts

imposed upon CLAIMANT an obligation of guarantee in respect to the ethical quality of the cakes.

79. Contrary to RESPONDENT’s assertions, CLAIMANT’s General Conditions, and at the very least,

its Codes of Conduct [R3] govern the Contract [A]. If the Tribunal finds that both the Parties’

General Conditions were incorporated into the Contract, thus giving rise to a “battle of the forms,”

it should find both CLAIMANT's and RESPONDENT’s general conditions applicable to the

exclusion of any conflicting terms [B].

80. CLAIMANT’s General Conditions, and at the very least, its Codes of Conduct, govern the Parties’

contractual relationship. CLAIMANT made a proposal to RESPONDENT that incorporated

CLAIMANT’s General Conditions and Codes [i]. Further, RESPONDENT accepted

CLAIMANT’s Offer, which incorporated CLAIMANT’s General Conditions and Codes, to the

exclusion of RESPONDENT’s own General Conditions [ii].

Through its Sales Offer form with accompanying letter, CLAIMANT made an Offer to

RESPONDENT incorporating CLAIMANT’s General Conditions and Codes of

Conduct

81. On 27 March 2016 CLAIMANT replied to RESPONDENT’s Tender Documents with its Sales

Offer form [C4] and accompanying letter [C3]. Here, CLAIMANT made an Offer to

RESPONDENT which incorporated CLAIMANT’s General Conditions and Codes, thus carving

out RESPONDENT’s General Conditions, Business Philosophy, and Code of Conduct.

82. Under the CISG, where a definite offer, evincing the offeror’s intention to be bound [CISG Art.

14(1)], is accepted by the offeree by a statement or other conduct signifying his assent [CISG Art.

18(1)], a contract will be formed on the terms of the offer. This holds so long as the would-be

acceptor’s reply does not contain additions, limitations or other modifications that materially alter

the terms of the offer, in which case said reply will constitute a counter-offer [CISG Art. 19(1)]. The

offer will typically contain the basic terms of the contract and may include standard business terms

[Schroeter P289]. To ascertain whether standard terms were incorporated into an offer, it must be

determined whether a reasonable addressee would conclude that the offeror intended to incorporate

its standard terms. Indeed, “it must be analyzed how a ‘reasonable person of the same kind as the

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other party’ would have understood the offer (CISG Art. 8(2))” [Machinery ¶III.2]. There are two

stages to this test. First, the offeror’s intention to include her standard terms into the contract must

have been apparent to the offeree. Second, the offeror must have provided the offeree with the

possibility of becoming aware of the standard terms in a reasonable manner [Machinery ¶III.3].

83. CLAIMANT’s Sales Offer form, dated 27 March 2017 [C4], clearly incorporated its General

Conditions and Codes as it contained a clear reference therein. [a]. Further, CLAIMANT made the

text of its General Conditions reasonably available to RESPONDENT [b].

84. Generally, calls for tenders constitute mere invitations to treat—also known as invitatio ad

offerendum—[Schroeter P252 FN251] and a tender submitted in response constitutes an offer

pursuant to CISG Art. 14(1) [Schroeter PP252, 274]. The offer is then accepted, in accordance with

the terms of CISG Art. 18(1), when the purchaser (here, RESPONDENT) awards the contract to

the successful tenderer (here, CLAIMANT) [Schroeter P333].

85. RESPONDENT’s communication of its Invitation to Tender [C1] and Tender Documents [C2] to

CLAIMANT thus constituted a mere invitation to treat. In response, CLAIMANT made a valid

“proposal for concluding a contract” by sending its completed Sales Offer form [C4] with the

accompanying letter [C3] on 27 March 2017 to RESPONDENT. RESPONDENT then accepted

CLAIMANT’s Offer by way of a letter [C5] informing CLAIMANT that it had been awarded the

Contract.

86. CLAIMANT’s Sales Offer form contained a conspicuous reference to its General Conditions and

Codes. This reference indicated CLAIMANT’s clear intention that its General Conditions and

Codes would govern the Contract. CLAIMANT’s Sales Offer form provides that CLAIMANT’s

“[O]ffer is subject to the General Conditions of Sale and [its] Commitment to a Fairer and Better

World,” the latter of which is “set out in [its] Codes of Conduct” [C4]. In the Sales Offer form,

written directly below the above clause, CLAIMANT referred RESPONDENT to CLAIMANT’s

website where RESPONDENT could find CLAIMANT’s General Conditions and Codes [C4; PO2

¶28]. The express incorporation of CLAIMANT’s General Conditions and Codes was referenced

prominently on the first and only page of CLAIMANT’s Sales Offer form; it was not set out in

small print, hidden away, or otherwise printed in a way or location that it might be overlooked.

RESPONDENT had also been prompted to view CLAIMANT’s Codes on three prior occasions:

first, in CLAIMANT’s advertisement for its “King’s Delight” Vanilla-Chocolate Cake [Response

NoA ¶11; R2], second, in CLAIMANT’s Letter of Acknowledgment dated 17 March 2014 [R1], and

third, in the letter dated 27 March 2014 that accompanied CLAIMANT’s Sales Offer form [C3].

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87. In fact, RESPONDENT confirms that it indeed visited CLAIMANT’s website and reviewed its

Codes prior to accepting CLAIMANT’s Offer [C5 ¶2]. The “commitment to sustainable

production” shown in CLAIMANT’s Codes were the “decisive element” for RESPONDENT’s

decision to accept the Offer [C5 ¶2, emphasis added]. RESPONDENT thus “knew or could not

have been reasonably unaware of [CLAIMANT’s] intent” [CISG Art.8(1); Tantalum Powder ¶33] to

incorporate its Codes and General Conditions into the Contract.

88. CLAIMANT provided RESPONDENT with the reasonable opportunity to take notice of the terms

of CLAIMANT’s General Conditions. Standard terms will be incorporated into the contract

provided the party relying on them can demonstrate that the offeree had a “reasonable opportunity

to take notice of the terms” [Machinery ¶III.2; Advisory Council 13 Art. 2]. For this requirement to

be met, most commentators and courts agree that the offeror need not have transmitted the text to

the offeree as “[t]his sets too strict a standard” [Advisory Council 13 ¶B.2.5]. Rather, it suffices that

the reference to the standard terms direct the offeree to the offeror’s website where “a reasonable

person of a same kind as the other party in the same circumstances (art 8(2) CISG) [can] find and

download them” [Schroeter P299; Advisory Council 13 ¶B.2.5]. This is exactly what

RESPONDENT did in this case [C5 ¶2].

RESPONDENT accepted CLAIMANT’s Offer, which incorporated CLAIMANT’s

General Conditions and Codes of Conduct, thereby excluding its own

89. For the following four reasons, RESPONDENT accepted CLAIMANT’s Offer, which

incorporated CLAIMANT’s General Conditions and Codes of Conduct, thereby excluding its own.

90. First, RESPONDENT awarded CLAIMANT the tender notwithstanding the changes proposed by

CLAIMANT and thus assented to the exclusive applicability of CLAIMANT’s General Conditions

and Codes. When RESPONDENT sent its letter dated 7 April 2014 [C5] awarding the Tender to

CLAIMANT, RESPONDENT accepted CLAIMANT’s Offer, which incorporated CLAIMANT’s

General Conditions and Codes. Pursuant to CISG Art. 18(1), a valid acceptance is formed by “a

statement made by or other conduct of the offeree indicating assent to an offer” [Art. 18(1); Conveyor

Bands ¶5.1; Schroeter P333]. In RESPONDENT’s acceptance, RESPONDENT indicated that

CLAIMANT’s tender “was successful notwithstanding the changes suggested by [CLAIMANT]”

[C5 ¶1]. RESPONDENT merely reiterated part of CLAIMANT’s Offer and did not reject the

incorporation of CLAIMANT’s General Conditions and Codes. Accordingly, RESPONDENT

expressed its assent to the Offer thereby conveying its intention to be bound. CLAIMANT was

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then reasonably entitled to “rely on such unqualified acceptance and to accept that its terms [would]

apply” [Advisory Council 13 ¶B1.9].

91. Second, RESPONDENT’s silence in respect of the incorporation of CLAIMANT’s General

Conditions and Codes, and the fact that RESPONDENT did not expressly confirm their

applicability, is immaterial. RESPONDENT did not need actual knowledge of the terms of

CLAIMANT’s General Conditions and Codes—though it did have actual knowledge of the terms

of the latter. Moreover, REPONDENT did not need to provide a signed copy thereof [Schroeter

P311]. Furthermore, the incorporation of standard terms into the contract did not need to be

confirmed [Schroeter P311].

92. Third, RESPONDENT did not incorporate its own General Conditions into its acceptance of

CLAIMANT’s Offer [C5]. RESPONDENT did not refuse the applicability of CLAIMANT’s

General Conditions or indicate that its own General Conditions were to govern the Contract.

Rather, RESPONDENT remained silent in this respect. However, “the effective incorporation of

conditions as a rule requires at least an explicit reference to the standard terms [and that reference]

has to be sufficiently clear” [Schmidt-Kessel P172]. No such reference was present in the acceptance.

93. Finally, RESPONDENT’s conduct following its acceptance of CLAIMANT’s Offer shows

RESPONDENT’s assent to the applicability of CLAIMANT’s General Conditions and Codes.

CISG Art. 8(3) provides that when “determining the intent of a party or the understanding a

reasonable person would have had, due consideration is to be given to all relevant circumstances of

the case including…any subsequent conduct of the parties.” In the present case, the references

included in CLAIMANT’s Sales Offer form [see ¶86 above] were contained in every single invoice

communicated by CLAIMANT to RESPONDENT when it purchased its cakes [PO2 ¶24]. For

nearly three years, RESPONDENT was provided with written confirmation of the applicability of

CLAIMANT’s General Conditions and Codes to the exclusion of RESPONDENT’s. Conveniently,

RESPONDENT never protested until the current controversy arose. This demonstrates not only

that CLAIMANT intended its General Conditions and Codes to govern the Contract, but also that

RESPONDENT assented to it.

94. Since RESPONDENT’s General Conditions were never incorporated into the Contract, no “battle

of the forms” arises, and CLAIMANT’s General Conditions and Codes govern the Contract.

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95. If this Tribunal determines that both the Parties’ general conditions were incorporated into the

Contract, thus giving rise to a “battle of the forms,” it should find both the Parties’ general

conditions applicable to the exclusion of any conflicting terms.

96. Should a “battle of the forms” conundrum exist, which CLAIMANT contends is not the case here,

the Tribunal should adopt the “knock out approach” to resolve it. This approach posits that where

both parties have incorporated their respective standard terms into the contact, they will be taken

to have agreed on the main terms and all non-conflicting terms will form part of the agreement. Any

conflicting term will be “excluded and replaced by the dispositive or residual law applicable”

[Advisory Council 13 ¶10.5(b)]. This approach for resolving a “battle of the forms” issue is preferred

by most commentators [see Schroeter P367; Advisory Council 13 ¶10.6; Audit ¶71; Zeller PP213-

14] and courts [see Powdered Milk ¶II.1.b; Verreries de Saint Gobain; Knitware; Rubber Sealing Parts

¶B.II.3.bbb; Wavin ¶¶4.3.9-4.3.10]. In the Powdered Milk case, the German Federal Supreme Court

indicated that “[a]ccording to the (probably) prevailing opinion, partially diverging general terms and

conditions become an integral part of a contract (only) insofar as they do not contradict each other;

the statutory provisions apply to the rest” [Powdered Milk ¶II.1.b]. The CISG Advisory Council

favours the “knock-out approach” to its alternatives when resolving “battle of the form” issues,

observing “[w]here both parties seek to incorporate standard terms and reach agreement except on

those terms, a contract is concluded on the basis of the negotiated terms and of any standard terms

which are common in substance unless one party clearly indicates in advance, or later but without

undue delay objects to the conclusion of the contract on that basis” [Advisory Council 13 Art. 10].

97. In the event that the Tribunal finds that RESPONDENT’s Code of Conduct creates an obligation

of result in respect to the ethical quality of the cakes—which is here not the case—the terms creating

these obligations would conflict with CLAIMANT’s General Conditions and Codes and must be

knocked out. CLAIMANT’s General Conditions create an obligation of best efforts as evidenced

by its preamble which provides that “Delicatesy Whole Foods will always use its best effort to

guarantee that the goods sold match the highest standards in line with its Business Code of Conduct

and is Suppliers Code of Conduct” [PO2 ¶29, emphasis added]. This obligation of best efforts is

confirmed in the letter dated 27 March 2014 which accompanies CLAIMANT’s Sale Offer form [C3

¶5]. Further, CLAIMANT’s Codes do not create an obligation of result in respect to the ethical

quality of the cakes, as is evidenced by the aspirational nature of the language used. Thus, any term

in RESPONDENT's Code of Conduct found to create an obligation of result in respect to the

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ethical quality of the cakes would conflict with CLAIMANT’s General Conditions and Codes and

must be knocked-out.

98. In any event, CLAIMANT contends that no such conflict exists between CLAIMANT’s and

RESPONDENT’s codes of conduct, as neither creates an obligation of result regarding the ethical

quality of the cakes. Both the Parties acknowledged as much on multiple occasions, for example,

when RESPONDENT indicated that CLAIMANT’s “Codes show that Delicatesy Whole Foods

and Comestible Finos share the same values” [C5 ¶2], and when CLAIMANT indicated that both

the Parties share a “joint commitment to UN Global Compact Principles” [C3 ¶5]. In fact,

RESPONDENT admits that it accepted CLAIMANT’s Offer as it “had been impressed with

CLAIMANT’s commitment to ethical production” [Response NoA ¶11; C5 ¶2] as “evidenced in

[its] impressive Codes of Conduct” [C5 ¶2]. These validations of CLAIMANT’s “comparable”

Codes of Conduct, replete with allusions to best efforts, reinforce the Parties’ understanding that

these codes created no obligation for CLAIMANT to guarantee the production methods of its

suppliers.

EVEN IF RESPONDENT’S GENERAL CONDITIONS APPLY, CLAIMANT STILL DELIVERED CONFORMING GOODS PURSUANT TO CISG ART. 35

99. CLAIMANT did not deliver non-conforming goods merely because one of its suppliers produced

cocoa in an unsustainable manner. The Contract does not explicitly create an obligation under CISG

Art. 35(1) that CLAIMANT guarantee the production methods of its supplier, but merely creates

mechanisms for CLAIMANT to exercise its best efforts [A]. The circumstances surrounding the

Contract imply, under CISG Art. 35(1), that CLAIMANT solely owed RESPONDENT an

obligation to use its best efforts to ensure its supplier adhered to ethical standards, an obligation it

discharged [B]. Any putative argument regarding obligations of conformity based on a particular

purpose under CISG Art. 35(2)(b) is bound to fail since the facts of the present case disclose no

such particular purpose [C]. It would be unreasonable for RESPONDENT to have considered that

CLAIMANT could guarantee results from its supplier in all circumstances [D]. In the wake of the

Ruritania scandal, RESPONDENT’s attempt to re-frame a clear best efforts obligation as a

guarantee of results is an opportunistic attempt to scapegoat CLAIMANT and avoid imaginary

harm.

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100. The primary test of conformity under CISG Art. 35(1) inquires into which characteristics are

explicitly established in the contract [Schwenzer 2016 P594]. The burden of proving non-conformity

fell on the buyer (here, RESPONDENT) given that it had physically taken possession of the cakes

[Schwenzer 2016 P620]. RESPONDENT’s claim of non-conformity has no basis in the terms of

the Contract [i]. Furthermore, under Principle F of RESPONDENT’s Code of Conduct,

RESPONDENT’s allegation of non-conformity is unsubstantiated [ii]. Self-serving efforts by

RESPONDENT to spawn obligations ex post facto to safeguard its reputation distracts from the

obligations it owes CLAIMANT.

RESPONDENT’s claim of non-conformity has no basis in the terms of the Contract

101. RESPONDENT contends that its Code of Conduct obliges CLAIMANT to guarantee that its own

supplier complies with the values of its Code of Conduct [Response NoA ¶26]. RESPONDENT

alleges that this guarantee is “clearly stated” in Principles E and C of its Code of Conduct [Response

NoA ¶26]. This position is unfounded. Principle E of RESPONDENT’s Code of Conduct does

not oblige CLAIMANT to guarantee that its supplier conforms with RESPONDENT’s Code of

Conduct [a]. Principle C of RESPONDENT’s Code of Conduct merely creates an obligation that

CLAIMANT use its best efforts to ensure that its supplier complies with standards of health, safety,

and environmental management [b].

102. CLAIMANT did not guarantee that its supplier conforms with sustainable standards in their own

production processes but merely undertook to use its best efforts to ensure that its supplier

conducted itself in an ethically responsible manner. The preamble of Principle E is too vague to

create independent obligations that CLAIMANT guarantee its supplier provide ethically conforming

goods [1]. Principle E, Paragraph 1 of RESPONDENT’s Code of Conduct is a best efforts

obligation that focusses on sub-supplier selection [2]. Principle E, Paragraph 2 of

RESPONDENT’s Code of Conduct only refers to RESPONDENT’s General Business

Philosophy, which itself is too vague to create any binding obligations [3].

The preamble of Principle E is too vague to create independent obligations that

CLAIMANT guarantee that its supplier provide ethically conforming goods

103. Principle E begins with a preamble that CLAIMANT “must under all circumstances procure goods

and services in a responsible manner” [C2 Principle E]. Despite the mandatory language, the phrase

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“procure goods and services in a responsible manner” [C2 Principle E] is itself too vague to create

obligations independent of any subsequent paragraphs. Certainly, the narrow obligation alleged by

RESPONDENT, that CLAIMANT guaranteed its supplier provides ethically conforming goods, is

neither mentioned in, nor can it be inferred from this general preamble. If there is to be an obligation

arising from Principle E that CLAIMANT guarantee the production processes of its supplier, it

must be found in the paragraphs of Principle E and not independently in the preamble.

Principle E, Paragraph 1 of RESPONDENT’s Code of Conduct is a best efforts

obligation that focusses on supplier selection

104. The obligations that CLAIMANT undertook in Principle E, Paragraph 1 of RESPONDENT’s

Code of Conduct are restricted to supplier selection and CLAIMANT’s best efforts. This paragraph

notes, “[you will] select your own tier one suppliers…based on them agreeing to adhere to standards

comparable to those set forth [in RESPONDENT’s Code of Conduct]” [C2 Principle E]. This

obligation focusses on how CLAIMANT selects its suppliers. There is no indication that this

selection criterion guarantees adherence, nor that it creates ongoing monitoring obligations. Rather,

the obligation is focused on the supplier’s agreement as a selection criterion [C2 Principle E].

105. Moreover, the selection criterion is limited to ensuring that the sub-supplier adopt “comparable

standards” to those in RESPONDENT’s Code of Conduct. As discussed, CLAIMANT’s

comparable Code of Conduct implicitly creates obligations of best efforts and not obligations of

results [see ¶96 above; R3]. As these comparable standards do not guarantee conformity by

CLAIMANT’s supplier, by extension, there can be no guarantee that CLAIMANT will ensure that

its supplier provides ethically conforming goods.

106. Effectively, CLAIMANT’s obligation was discharged when CLAIMANT selected its supplier

through a process in which the supplier “agreed to adhere” to CLAIMANT’s “comparable” Code

of Conduct [C2 Principle E]. CLAIMANT does not owe RESPONDENT an obligation to

guarantee that its upstream supplier will conform with RESPONDENT’s Code of Conduct.

Principle E, Paragraph 2 of RESPONDENT’s Code of Conduct only refers to

RESPONDENT’s General Business Philosophy, which is too vague to create binding

obligations

107. RESPONDENT’s General Business Philosophy is too vague to create binding obligations on the

part of CLAIMANT. Principle E, Paragraph 2 notes, “you will make sure that [your suppliers]

comply with standards agreed upon to avoid that goods or services delivered are in breach of

Comestibles Finos’ General Business Philosophy” [C2 Principle E, emphasis added]. This obligation

is limited to the General Business Philosophy and has no bearing on RESPONDENT’s Code of

Conduct.

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108. RESPONDENT’s General Business Philosophy is too vague to establish binding obligations on

behalf of CLAIMANT to guarantee that its supplier provides ethically conforming goods.

RESPONDENT’s General Business Philosophy consists of a list of principles “largely identical to

the UN Global Compact Principles” and also includes an indication that RESPONDENT is

committed to the UN Sustainable Development Goals (SDGs) [PO2 ¶31]. The UN Global Compact

Principles are generally averse to concrete ends and rigid obligations, preferring processes of

continual improvement that lend themselves to best effort obligations [see ¶¶123-124 below].

Similarly, the accountability relating to human rights that underlies the SDGs has been viewed as

“diffuse and political rather than legal,” as reflected by the absence of international human rights

law references in the SDGs themselves [McInerney-Lankford].

109. CLAIMANT did not guarantee that its supplier would conform to standards of health, safety and

environmental management but merely undertook to use its best efforts to ensure its compliance.

CLAIMANT’s obligations regarding its supplier’s compliance with Principle C is limited to the sub-

paragraph requirements detailed therein [1]. Given that the processes set out in the paragraphs of

Principle C are solely safeguard mechanisms that do not guarantee ethical results, CLAIMANT

could not have reasonably agreed to guarantee a specific outcome regarding its supplier’s production

methods [2].

CLAIMANT’s obligations regarding its supplier’s compliance with Principle C are

limited to its sub-paragraph requirements

110. Principle C, Paragraph 4 observes that CLAIMANT will “ensure that [its] suppliers comply with the

above requirements” [C2 Principle C]. The broad preamble to Principle C to “conduct business in

an environmentally sustainable way” [C2 Principle C] is substantiated by the particular actions

outlined within its constituent sub-paragraphs. The words “[i]n particular you will” [C2 Principle C]

within the preamble and before the paragraphs indicate that these paragraphs are to be read as a

definition of this environmental obligation. These paragraphs constitute an exhaustive list of the

actions CLAIMANT was obliged to undertake regarding environmental sustainability.

Given the processes in Principle C’s paragraphs do not guarantee ethical results, it would

be unreasonable under CISG Art. 8(2) to consider that CLAIMANT, using its best efforts

to hold its supplier to these processes, would have guaranteed results

111. RESPONDENT is reproaching CLAIMANT for failing to prevent corruption and environmentally

harmful practices. However, it would be unreasonable to hold CLAIMANT to a guarantee of ethical

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results given the very processes put forward by RESPONDENT in Principle C do not guarantee

this outcome. Under CISG Art. 8(2), if parties’ subjective intent cannot be determined, Art. 8(2)

requires an objective analysis pursuant to the “reasonable person” standard [see ¶32 above]. The

processes in Principle C include appointing a person to manage environmental programs,

establishing organizational structures to manage environmental risks, and ensuring workers are

aware and appropriately trained [C2 Principle C]. While these actions could increase the probability

of a particular environmental result, they cannot guarantee this outcome either individually or

collectively. This is because a reasonable supplier in CLAIMANT’s shoes could appoint an

environmental champion, establish organizational structures, and train its employees, all the while

still manufacturing a product in an environmentally unsustainable way. These processes merely

increase the likelihood of an outcome—they do not guarantee it. Since the scope of CLAIMANT’s

obligations was to ensure that its supplier follows requirements which do not themselves guarantee

results, it would be untenable to hold that a reasonable supplier in CLAIMANT’s position would in

any way obligate itself to guarantee results from processes that do not themselves guarantee results.

Under Principle F of RESPONDENT’s Code of Conduct, RESPONDENT’s allegation

of non-conformity is unsubstantiated

112. RESPONDENT failed to follow the correct procedure regarding corrective actions. Under

Principle F of RESPONDENT’s Code of Conduct, non-conformity cannot arise until

RESPONDENT is given an opportunity to take corrective actions [a]. Moreover, finding non-

conformity without allowing for, or taking consideration of, CLAIMANT’s corrective actions, is

both contrary to Principle F and contravenes the spirit of the UN Global Compact [b]. Finally,

RESPONDENT misused the remedy provided for in Principle F by applying it to non-compliance

by a sub-supplier [c].

113. The non-conformity of goods can only be established once RESPONDENT has followed the

procedure outlined in Principle F and provided the supplier with the opportunity to take corrective

actions [C2 Principle F]. Principle F provides that before suspending a supplier, RESPONDENT

has an obligation to conduct its own audit or inspection, focused specifically on the operations and

facilities of the supplier, and then to give the supplier time to take corrective action [C2 Principle

F]. RESPONDENT did not follow Principle F: it failed, first, to conduct its own investigation;

second, to look specifically at the operations of CLAIMANT; and, third and most importantly, to

allow CLAIMANT time to take corrective action. As a result, there can be no finding of non-

conformity of goods.

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114. Following the release of UNEP Special Rapporteur’s report on the Ruritanian cocoa production,

RESPONDENT suspended delivery from, and payment to, CLAIMANT [C6 ¶4]. In breach of

Principle F, RESPONDENT’s decision was not based on its own audit or inspection, but rather

third party information [C6 ¶1]. Furthermore, RESPONDENT’s decision was not predicated on

information about CLAIMANT’s operations and facilities, but rather general information

concerning the entire country of Ruritania [C6 ¶1]. Most significantly, RESPONDENT did not give

CLAIMANT time to take corrective action. RESPONDENT suspended taking delivery and

withheld payment before even contacting CLAIMANT [C6]. The time provided by

RESPONDENT did not reasonably allow for corrective actions. RESPONDENT contacted

CLAIMANT on Friday, 27 January 2017, expecting a response by close of business on Monday, 30

January 2017, giving CLAIMANT less than two full business days to investigate [C6]. These facts

demonstrate that RESPONDENT failed to follow its obligations to allow CLAIMANT reasonable

time to take corrective actions. Since RESPONDENT did not follow the process outlined in

Principle F, it is not possible for the goods to be non-conforming.

115. The UN Global Compact’s Guide for Fighting Corruption in the Supply Chain provides a number

of scenarios intended to provide “practice guidance” that address “the appropriate response to the

corruption demands or acts of corruption when they occur” [UNGC 2016 P18]. Scenario 9 in the

Guide details a manufacturer whose supplier bribes a government official to overlook non-

complying goods. The guide advises that the appropriate response in this situation involves

conducting an investigation of the supplier to assess the risks, terminating the contract if the

corruption is found to be systemic, and making disclosures regarding the product that might be

needed [UNGC 2016 PP26-27].

116. Scenario 9 is precisely what happened in the present case. First, upon learning of possible

corruption, CLAIMANT investigated the allegation [C8 ¶3]. Then, upon discovering that some of

the cocoa was not produced in an ethical manner, CLAIMANT immediately terminated the

Contract with its supplier and secured another supplier [C9 ¶2]. Finally, CLAIMANT was upfront

and transparent with RESPONDENT throughout this process, promptly disclosing the situation to

it [C9 ¶1].

117. Upon discovering non-compliance by its supplier, CLAIMANT not only took corrective action

pursuant to Principle F, but did so in a manner that followed UN Global Compact best practices.

Finding non-conformity without allowing for, or taking consideration of, CLAIMANT’s corrective

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actions contravenes both Principle F and the spirit of the UN Global Compact, to which the Parties

both subscribe.

118. Principle F applies exclusively to non-compliance by RESPONDENT’s supplier and thus the

remedies therein are limited to non-compliance by CLAIMANT, not its sub-suppliers. This

principle points directly to the supplier and no other upstream parties. It provides RESPONDENT

the right to inspect supplier’s “operations and facilities,” indicates that if “you do not comply…you

shall take necessary corrective actions…[and if] you fail to comply…we may take action against you”

[C2 Principle F]. Unlike Principles A through D, Principle F contains no “standards” pertinent to

sub-suppliers through Principle E, Paragraph 1 [C2 Principle E; Principle F]. Instead, Principle F

establishes obligations limited to the Parties [C2 Principle F]. While suspension and termination are

given as remedies for continued non-compliance, these can only be applied following non-

compliance by CLAIMANT. Thus, RESPONDENT misuses the remedy provided for in Principle

F by suspending CLAIMANT’s delivery and payment for the behavior of an upstream cocoa

supplier [C6 Principle F].

119. Absent explicit contractual obligations, the circumstances surrounding the Contract in general, and

specifically in the Code of Conduct, imply that CLAIMANT owed RESPONDENT an obligation

to use its best efforts to provide ethical goods. Under CISG Art. 35(1), contractual requirements

may be impliedly determined [Schwenzer 2016 P595]. RESPONDENT alleges that the surrounding

circumstances imply a guarantee by CLAIMANT that the ingredients supplied by its supplier were

ethically produced [Response NoA ¶26]. This is unsubstantiated. There are no external trade usages

that impliedly create obligations for CLAIMANT to guarantee its suppliers provide ethically

conforming goods [i]. Given the UN Global Compact’s aversion to concrete ends, CLAIMANT

and RESPONDENT’s shared UN Global Compact membership demonstrates best efforts

obligations regarding supplier compliance [ii]. RESPONDENT’s interest in CLAIMANT’s

management processes over production steps such as certification schemes emphasizes

CLAIMANT’s best efforts to ensure that its suppliers would deliver ethical goods [iii].

There are no external trade usages that impliedly create an obligation for CLAIMANT

to guarantee its supplier provide ethically conforming goods

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120. There are no relevant trade usages in the bakery industry related to environmental, ethical or

sustainable production [PO2 ¶35]. Nor is the Parties’ shared membership in the UN Global

Compact sufficient to establish a trade usage that CLAIMANT guaranteed that its supplier provides

ethically conforming goods.

121. Through CISG Art. 9(2), a trade usage can be established where the majority of persons doing

business in a particular industry recognize the practice [Schmidt-Kessel P189]. The existence of

industry or manufacturing standards can imply agreement regarding a trade usage [Schwenzer 2016

P595] particularly where both parties are members of that agreement [Schwenzer/Leisinger P265].

This membership, however, is not sufficient to establish a trade usage. As Ramberg writes “[i]t is

one thing to generally participate and sponsor a UN initiative. It is another thing to contractually

agree that a contractual party is entitled to contractual remedies if an ethical standard is not met”

[Ramberg P80].

122. The lynchpin of the creation of a trade usage is the definitiveness of the content of the agreement:

it “has to be so concrete in its terms that it is applicable to an international sales contract without

the parties particularly negotiating its content” [Butler P311]. Whereas select provisions of

agreements such as INCOTERMS and UCP 600 may be deemed sufficiently definitive to establish

a trade usage under CISG Art. 9(2) [Schmidt-Kessel PP195–196], ISO 14001, in contrast, would not

be found to be sufficiently concrete to establish implied contractual obligations [Butler PP311-312].

Notably, ISO 14001 remains insufficient despite having set criteria for environmental management,

certification possibilities, and means of measuring improvements [ISO 14001].

123. The UN Global Compact’s provisions related to compliance by sub-suppliers are far too vague to

establish a trade usage for guaranteed results. Unlike ISO 14001, the UN Global Compact does not

even have set criteria for sub-supplier management, certification possibilities, or definitive means of

measuring improvements. Instead, as illustrated in the UN Global Compact guide, “Supply Chain

Sustainability,” engagement with suppliers in the UN Global Compact is focused on continual

improvements and particular relations, and demonstrates aversion to concrete ends [UNGC 2015

PP37-49]. In individual monitoring schemes, the Guide even discourages compliance-based

approaches noting, “compliance-based approaches to monitoring have resulted in concerns about

costs, disruptions to production suppliers, doubts about accuracy of the information and potential

risks to safety of workers” [UNGC 2015 P39]. Given such vagueness, it is not possible to find that

the majority of persons who are members in the UN Global Compact recognize the practice of

guaranteeing results from sub-suppliers.

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Given the UN Global Compact’s aversion to concrete ends, the Parties’ shared UN

Global Compact membership demonstrates best effort obligations regarding supplier

compliance

124. In the absence of explicit contractual obligations, the shared membership of the Parties in the UN

Global Compact indicates an obligation of CLAIMANT to use its best efforts to ensure ethical

production processes by its supplier. The UN Global Compact is averse to concrete ends and rigid

obligations, instead focusing on continuous ethical improvements as processes rather than results.

George Kell, Executive Director of the UN Global Compact describes how the UN Global

Compact’s Ten Principles “will find expression in different ways, as companies and industries can

vary significantly [UNGC 2010]. Expressing the UN Global Compact’s aversion to concrete ends

and rigid obligations, Kell underlines that no “one-size fits-all.” Rigid obligations risk undermining

these “performance aspirations” and obstructing the broad ethical goals of the UN Global Compact

[UNGC 2010]. Instead of supporting concrete ends, the UN Global Compact fosters innovative

and unique applications that “reflect the realities of a given company’s journey towards corporate

sustainability” [UNGC 2010]. This accords with the “due diligence” approach popular in the

broader “Business & Human Rights” field, where a preventative logic is favoured over establishing

strict liability for non-compliance [Amado PP123-125]. In fact, as authorities in this field recognize,

“[i]f the goal is to stop the human rights impacts as soon as possible while maintaining an otherwise

advantageous business relationship, then termination or court litigation may achieve neither [while]

compounding [the] victims…suffering” [Cronstedt/Thompson P10].

125. The Environment and Corruption principles are stark examples of this aversion to rigid obligations

and focus on best efforts. Principle 8 indicates that businesses should undertake initiatives to

promote greater environmental responsibility [UNGC 2017]. Principle 10 notes that businesses

should work against corruption [UNGC 2017]. Both principles present vague best efforts language

rather than specific language focused on concrete ends. Held against Principle 5—one of the few

UN Global Compact Principles that uses the language of concrete ends, stating “businesses should

uphold the effective abolition of child labour”—the Environment and Corruption principles

demonstrate the UN Global Compact’s aversion to rigid obligations [UNGC 2017].

RESPONDENT’s interest in CLAIMANT’s management processes over production

steps such as certification schemes emphasizes best efforts to ensure that its suppliers

would deliver ethical goods

126. In preliminary negotiations, RESPONDENT explicitly indicated its interest in CLAIMANT’s

supply-chain management processes. In correspondence dated 10 March 2014, RESPONDENT

noted that it was “particularly impressed by [CLAIMANT’s] report about the management of [its]

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supply chain, including the regular audits and reporting obligations” [C1 ¶3]. RESPONDENT

indicated that it was CLAIMANT’s supply-chain management that motivated its interest in

CLAIMANT participating in the tender process.

127. RESPONDENT could have, but did not, demand a certification scheme—an instrument more

likely to signal a guarantee of ethical conformity [Schwenzer 2017 PP124-125], and the very

instrument that was part of the supplier’s elaborate conspiracy for defrauding CLAIMANT [C7; C9

¶1]. Instead of demanding such a conformity-signaling instrument, RESPONDENT focused on

CLAIMANT management processes such as audits; systems which provide no guarantee [Wilson

P38] but instead signal that a supplier is simply increasing the likelihood of conformity and reducing

the risks of non-compliance. CLAIMANT acknowledged this limitation noting, “the reporting

obligations and the auditing possibilities…allowed [it] to monitor…suppliers in a way, that [it] could

largely guarantee compliance” [R5 ¶3, emphasis added]. RESPONDENT’s interest in a tool focused

on increasing the likelihood of conformity suggests that the Parties’ agreement was always a best

efforts obligation for CLAIMANT to ensure that its suppliers provide ethically conforming goods.

128. Given that there are no contractual obligations of ethical conformity under CISG Art. 35(1),

RESPONDENT may invoke CISG Art. 35(2)(b) to try and establish a particular purpose that

creates obligations of conformity. However, as with CISG Art. 35(1), no such obligation exists.

129. In order to establish a particular purpose under CISG Art. 35(2)(b), RESPONDENT must, first,

demonstrate that the purpose had been expressly or impliedly made known to CLAIMANT; second,

that it relied on CLAIMANT’s skill and judgement; and, third, that this reliance was reasonable

[Schwenzer 2016 PP606-609].

130. RESPONDENT made the particular purpose of avoiding bad press known to the CLAIMANT [C1

¶3]. However, RESPONDENT did not rely on CLAIMANT’s skill and judgment in avoiding bad

press, nor would such reliance have been reasonable. Reliance may be established where the seller

is an expert in a particular domain or where the seller holds herself out as such [Schwenzer 2016

P608]. Where the knowledge of the buyer is greater than [Schwenzer 2016 P608], or equal to [Ferrari

P199], that of the seller, reliance may be cancelled. CLAIMANT had no expertise in avoiding bad

press nor did CLAIMANT hold itself out as such. Furthermore, as RESPONDENT had far more

experience in avoiding bad press than CLAIMANT, reliance is not reasonable. If anything,

CLAIMANT relied on RESPONDENT’s validations of its supply chain management system as

sufficient to meet any obligations related to this particular purpose [C1 ¶3].

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131. Finally, no bad press has been shown to arise for RESPONDENT from the situation in Ruritania.

Indeed, RESPONDENT even went ahead and used the cakes as part of its promotional campaign

after the issue was discovered [PO2 ¶38]. While this imagined harm is sufficient for

RESPONDENT to scapegoat CLAIMANT, it did not dissuade RESPONDENT from gaining

benefit, using the very cakes it has yet to pay for.

132. In the market for ethical goods, situations may arise that constitute “ethical hardship”

[Schwenzer/Leisinger P273]. Some particularly grave ethical violations may fall “outside the sphere

of risk of the promisor” [Schwenzer/Leisinger P273]. CISG accounts for these grave violations

through Art. 79 on hardship, which can be of an ethical nature where “systemic violation[s] of

human rights in a country, only come to the fore after the execution of the contract” [Nalin P339]

and “prevents the debtor from performing the obligation” [Schwenzer/Leisinger P272]. These types

of situations are typically beyond the contemplation of contracting parties.

133. The corruption in Ruritania was of a magnitude and complexity that would constitute ethical

hardship. The scheme uncovered reached the highest levels of Ruritanian power [C7] and was

revealed only through a UN Special Rapporteur investigation. The situation was beyond the risks

that the Parties could have taken account of when drafting their Contract.

134. Neither CLAIMANT nor its expert auditor [PO2 ¶33] had the skills to uncover a risk of this

magnitude, nor would it have been reasonable for RESPONDENT to rely on CLAIMANT to do

so. CLAIMANT had robust systems in place to safeguard against ethical violations. However, it

never held itself out as having systems sufficient to uncover, much less prevent, ethical violations

that required UN Special Rapporteur-levels of scrutiny and sophistication.

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REQUEST FOR RELIEF

For the above reasons, Counsel for CLAIMANT respectfully requests that the Tribunal:

1. decline to decide the challenge, or alternatively, if the Tribunal chooses to decide the challenge, do

so with the participation of Mr. Prasad.

2. declare that the contractual relationship between CLAIMANT and RESPONDENT is governed by

CLAIMANT’s Standard Terms;

3. declare that CLAIMANT delivered conforming goods

4. order RESPONDENT to pay damages in the amount of at least USD 2,500,000;

5. order RESPONDENT to bear the costs of the arbitration.

VIVA DADWAL

CAMERON HOGG-TISSHAW

DAVID MATYAS

GUILLAUME RENAUD