Upload
phungminh
View
241
Download
4
Embed Size (px)
Citation preview
TENTH ANNUAL WILLEM C. VIS
INTERNATIONAL COMMERCIAL ARBITRATION MOOT
MEMORANDUM FOR CLAIMANT
Rheinische Friedrich-Wilhelms-Universität Bonn
On Behalf of
Against
Equafilm Co. 214 Commercial Ave. Oceanside Equatoriana CLAIMANT
Medipack S.A. 395 Industrial Place
Capital City Mediterraneo
RESPONDENT
Counsel
Nadine Bläser • Dirk Langner • Sabrina Mlynek
Mathias Neumann • Katrin Ommer • Dimce Sikoski
Rheinische Friedrich-Wilhelms-Universität Bonn
II
Table of Contents
List of Abbreviations VI
Index of Authorities VIII
Cases XVII
Statement of Facts 1
Arguments 3
I. The challenge to Dr. Arbitrator is to be rejected 3
A. Dr. Arbitrator participates in the decision on his challenge 3
B. The challenge is governed by §§ 15, 18 DIS Rules 3
C. There are no reasons to doubt Dr. Arbitrator’s impartiality or his independence
3
a. Dr. Arbitrator’s expectation to become a partner of a law firm that has represented CLAIMANT is not sufficient to raise doubts as to his impartiality or independence
3
b. Dr. Arbitrator has no financial interest in the outcome of the arbitration 6
c. Dr. Arbitrator’ disclosure underlines his impartiality and independence 6
Rheinische Friedrich-Wilhelms-Universität Bonn
III
II. The challenge to the jurisdiction of the Tribunal is to be rejected
7
A. The Tribunal has authority to decide on its own jurisdiction pursuant to Art. 16(1) Model Law
7
B. CLAIMANT and RESPONDENT concluded a valid arbitration agreement
8
a. The parties agreed to refer any dispute arising out of the contract to arbitration
8
b. This arbitration agreement meets the writing requirement according to Art. 7(2) Model Law
8
C. The parties chose validly the “German Institution of Arbitration” 9
a. CLAIMANT’s reference to an erroneously designated institution leaves the validity of the arbitration clause unaffected
10
b. The parties intended to choose the “German Institution of Arbitration” 10
c. CLAIMANT can rely on the doctrine of ‘effet utile’ 11
d. Courts incline to give effect even to highly ambiguous arbitration clauses 12
e. The reference to the „German Arbitration Association“ belongs to the category „erroneously designated institutions“
13
D. CLAIMANT and RESPONDENT concluded a valid arbitration agreement, irrespective of the validity of the commercial contract
13
a. According to the doctrine of separability, the arbitration agreement is not affected by the alleged invalidity of the commercial contract
13
b. The application of the doctrine of separability is not excluded since the commercial contract is not void ab initio
14
c. The arbitration agreement itself does not suffer from any defects 15
Rheinische Friedrich-Wilhelms-Universität Bonn
IV
III. The CISG is the law applicable to the contract and its formation
15
A. The parties have chosen the commercial law of Equatoriana 16
B. The CISG is the pertinent part of the commercial law of Equatoriana for the contract at issue
16
C. Reference to the “commercial law of Equatoriana” does not amount to an implied exclusion of the CISG
16
IV. A contract of sale was concluded between CLAIMANT and RESPONDENT
19
A. A contract containing all elements of Art. 14 CISG has been concluded during the telephone conversation between Mr. Storck and Mr. Black
19
a. Mr. Storck and Mr. Black concluded a contract during their conversation 19
b. The agreement contained all elements of Art. 14 CISG 20
B. Irrespective of the fact whether there was an agreement on the discount, a contract would still have been validly concluded even if the parties had not fixed the discount
20
a. Since CLAIMANT and RESPONDENT did not conclude the contract by virtue of offer and acceptance, the requirements of Art. 14 CISG were not mandatory for the formation of the contract at issue
21
b. An agreement on the discount was not necessary in order to conclude a valid contract
21
c. The domestic law of Equatoriana has no impact on the validity of the contract
23
Rheinische Friedrich-Wilhelms-Universität Bonn
V
V. The contract was concluded including a 4% discount 23
A. The agreement the parties reached during their telephone conversation can only be interpreted as including a discount of 4% from CLAIMANT's list price
24
a. The agreement has to be interpreted according to Article 8 CISG 24
b. RESPONDENT could not have been unaware of CLAIMANT's intent to grant only a 4% discount
24
c. Neither Mr. Storck nor any other reasonable person could have been aware of Mr. Black's intent to contract with a discount of 8% from the list price
25
B. If the Tribunal finds that the parties' agreement did not fix the price, a contract has nevertheless been concluded including a 4% discount
26
VI. RESPONDENT was in breach of its obligations under the contract
27
A. RESPONDENT’s fax of 2 May 2001 was an anticipatory breach of contract
27
B. RESPONDENT’s fax was an anticipatory repudiation of the contract concluded on 3 April 2001
27
C. RESPONDENT was not entitled to refuse performance 28
Rheinische Friedrich-Wilhelms-Universität Bonn
VI
VII. EQUAFILM is entitled to claim damages for lost profit in the amount of $ 575,477.98
28
A. RESPONDENT’s breach of contract entitles CLAIMANT to claim damages
29
B. CLAIMANT suffered lost volume damages in the amount of $ 575,477.98 as a consequence of RESPONDENT’s breach
29
a. CLAIMANT is entitled to recover its loss of profit 29
b. CLAIMANT was in a lost volume situation 30
c. CLAIMANT’s loss of profit was a consequence of RESPONDENT’s breach
30
d. CLAIMANT lost profit in the amount of $ 575,477.98 31
C. The damages were foreseeable to RESPONDENT 31
D. CLAIMANT did not fail to take measures to mitigate its loss according to Art. 77 CISG
32
VIII. CLAIMANT is entitled to interest on the damages 32
A. Art. 78 CISG grants the right to claim interest on damages 32
B. CLAIMANT is entitled to interest from the date payment was due 33
Request for relief 34
Rheinische Friedrich-Wilhelms-Universität Bonn
VII
List of Abbreviations
§ / §§ Section / Sections
1st Cir. United States Court of Appeal First Circuit
2d Cir. United States Court of Appeal Second Circuit
3d Cir. United States Court of Appeal Third Circuit
7th Cir. United States Court of Appeal Seventh Circuit
9th Cir. United States Court of Appeal Ninth Circuit
11th Cir. United States Court of Appeal Eleventh Circuit
Arb. Int. Arbitration International (Periodical, England) Art. / Artt. article / articles
BG Bezirksgericht (District Court)
BGH Bundesgerichtshof (supreme court, Germany)
Ch Switzerland
CISG United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980
cl. clause
Co. Company
Corp. Corporation
DIS Rules Deutsche Institution für Schiedsgerichtbarkeit e.V. Arbitration Rules
e.g. exempli gratia (for example)
ed. edition
et al Et alii / et alia (and other persons)
F.2d Federal Reporter, Second Series
F.3d Federal Reporter, Third Series
F.Supp. Federal Supplement
Fr France
FS Festschrift
GB Great Britain
HG Handelsgericht (= Commercial Court)
i.e. id est (that is)
ICC International Chamber of Commerce
Rheinische Friedrich-Wilhelms-Universität Bonn
VIII
Inc. Incorporated
IPrax Praxis des Internationalen Privat- und Verfahrensrechts
J. Int’l Arb. Journal of International Arbitration
J. L. & Comm Journal of Law and Commerce
J.D.I. Journal du droit international
J. of Int. Com. Law and Arb.
Journal of International Commercial Law and Arbitration
LG Landgericht (trial court, Germany) Lloyd´s Rep. Lloyd´s Reporter
Ltd. Limited
Model Law UNCITRAL Model Law on International Commercial Arbitration
New York Convention United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1985
No. number
OGH Oberster Gerichtshof (Austria)
OLG Oberlandesgericht (Regional Court of Appeal, Germany)
p. / pp. page / pages
Para. / paras. paragraph / paragraphs
Q.B. High Court of Justice (Queen´s Bench, England)
RabelsZ Rabels Zeitschrift für ausländisches und internationales Privatrecht (Periodical, Germany)
Rev.Arb. Revue de l´arbitrage
RIW Recht der Internationalen Wirtschaft
S.D.N.Y. United States District Court, Southern District of New York
U.S. United States
UK United Kingdom
ULR Uniform Law Review
v. versus (against)
Y.B. Yearbook Commercial Arbitration
Rheinische Friedrich-Wilhelms-Universität Bonn
IX
Index of Authorities
Adami, Francesco Les contrats “open price” dans la Convention des
Nations Unies sur les Contrats de vente internationale de Marchandises Revue de droit des affaires internationales 1989,
cited as: Adami, Revue de droit des affaires internationales 1989,
Amato, Paul U.N. Convention on Contracts for the International Sale
of Goods -- The Open Price Term and Uniform Application: An Early Interpretation by the Hungarian Courts 13 Journal of Law and Commerce (1993)
cited as: Amato, J. L. & Comm 1993,
Audit, Bernard La vente internationale de Marchandises, Convention des Nations-Unies du 11. Avril 1980
Paris 1990
cited as: Audit
Barker, Steward Abercrombie / Davis, Mark David
The UNCITRAL Arbitration Rules in Practise • The experience of the Iran-United States Tribunal
Deventer/Bosten 1992
cited as: Barker/Davis
Bernstein, Ronald / Tackaberry, John / Marriott, Arthur L. / Wood, Derek
Handbook of arbitration practise, 3rd ed.
London 1998
cited as: Bernstein et al
Bianca, Cesare Massimo / Bonell, Michael Joachim
Commentary on the International Sales Law, The 1980 Vienna Sales Convention
Milano 1987
cited as: Bianca/Bonell/author
Rheinische Friedrich-Wilhelms-Universität Bonn
X
Bishop, Doak / Reed, Lucy
Practical Guide for Interviewing, Selecting and Challenging Party-Appointed Arbitrators in International Commercial Arbitration
Arbitration International Volume 14, No. 4 (1998)
cited as: Bishop/Reed, Arb.Int. 1998,
Böckstiegel, Karl-Heiz DIS-Materialien
The New German Arbitration Act 1998, Preface and Introduction
cited as: Böckstiegel, DIS-Mat III, 1998
Boisséson, Matthieu de
Le droit français de l’arbitrage interne et international, GLN-éditions
Paris 1990
cited as: Boisséson
Bonell, Michael Joachim / Liguori, Fabio
The U.N. Convention on the International Sale of Goods: a Critical Analyses of Current International Case Law Uniform Law Review 1997
cited as: Bonell/Liguori, ULR 1997,
Born, Gary B. International Commercial Arbitration in the United
States, Commentary and Materials, 2nd ed.
The Hague 2001
cited as: Born
Born, Gary B. International Commercial Arbitration in the United
States, Commentary and Materials, 1st ed.
Deventer, Boston 1994
cited as: Born (1st ed.)
Broches, Aron Commentary on the UNCITRAL Model Law on
International Commercial Arbitration
The Hague, Deventer, Boston 1990
cited as: Broches
Bucher, Eugen Wiener Kaufrecht
Bern 1991
cited as: Bucher
Rheinische Friedrich-Wilhelms-Universität Bonn
XI
Derains, Yves / Schwartz, Eric A.
A guide to the new ICC rules of arbitration,
The Hague 1998
cited as: Derains/Schwartz
Drago, Thomas J. / Zoccolillo, Alan F.
Be Explicit: Drafting Choice of Law Clauses in International Sale of Goods Contracts The Metropolitan Corporate Counsel (May 2002) http://www.cisg.law.pace.edu/cisg/biblio/zoccolillo1.html
cited as: Drago/Zoccolillo, The Metropolitan Corporate Counsel 2002,
Enderlein, Fritz / Maskow, Dietrich
International Sales Law
New York, London, Rome 1992
cited as: Enderlein/Maskow
Fouchard, Philippe / Gaillard, Emmanuel / Goldmann, Berthold
Traité de l’arbitrage commercial international, Litec libraire de la Cour de cassation
Paris 1996
cited as: Fouchard et al
Granzow, Joachim H. Das UNCITRAL Model Gesetz über die internationale
Handelsgerichtsbarkeit von 1985
Munich 1988
cited as: Granzow
Hof van, Joachim J. Commentray on the UNCITRAL Arbitration Rules
The Application by the Iran-U.S. Claims Tribunal
Deventer, Boston 1991
cited as: van Hof
Holtzmann, Howard M. / Neuhaus, Joseph E.
A guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary
Deventer 1991
cited as: Holtzmann/Neuhaus
Rheinische Friedrich-Wilhelms-Universität Bonn
XII
Honnold, John O Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed.
The Hague 1999
cited as: Honnold et al
Honnold, John O. Uniform Law for International Sales under the 1980
United Nations Convention, 1st ed.
Deventer et al 1982
cited as: Honnold et al (1st ed.)
Honsell, Heinrich Kommentar zum UN-Kaufrecht
Berlin, Heidelberg, New York 1997
cited as: Honsell
Houtte, Vera van Consent to Arbitration Through Agreement to Printed
Contracts: The Continental Experience
Arbitration International Volume 16, No. 1 (2000)
cited as: Houtte, Arb.Int. 2000,
Koch, Robert The Concept of Fundamental Breach of Contract under
the United Nations Convention on Contracts for the International Sale of Goods Review of the Convention on Contracts for the International Sale of Goods (CISG) 1998, <http://www.cisg.law.pace.edu/cisg/biblio/koch-72.html>
cited as: Koch
Lookofsky, Joseph
Understanding the CISG in Europe: A Compact Guide to the 1980 United Nations Convention on Contracts for the International Sale of Goods
The Hague, London, Boston 1995
cited as: Lookofsky, (CISG in Europe)
Lookofsky, Joseph
Understanding the CISG in the USA: A Compact Guide to the 1980 United Nations Convention on Contracts for the International Sale of Goods
The Hague 1995
cited as: Lookofsky, (CISG in USA)
Rheinische Friedrich-Wilhelms-Universität Bonn
XIII
Ludwig, Katharina S. Der Vertragsschluss nach UN-Kaufrecht im Spannungs-verhältnis von Common Law und Civil Law
Frankfurt am Main Berlin New York 1994
cited as: Ludwig
Magnus, Ulrich Unbestimmter Preis und UN-Kaufrecht
IPRax 1996
cited as: Magnus, IPRax1996,
Neumayer, Karl H. Der Vertragsschluss nach dem Recht des internationalen
Warenkaufs (Wiener Übereinkommen von 1980) – Anwendungsprobleme Festschrift für Werner Lorenz zum 70. Geburtstag,
Tübingen 1991
cited as: Neumayer, Lorenz-FS 1991,
Neumayer, Karl Heinz / Ming, Catherine
Convention de Vienne sur les contrats de vente internationale de marchandises, Commentaire
Lausanne 1993
cited as: Neumayer/Ming
Nicholas, Barry Certainty of Price
Comparative and Private International Law, Essays in Honor of John Henry Merryman on his Seventieth Birthday
Berlin 1990
cited as: Nicholas
Pellonpää, Matti / Caron, David D.
The UNCITRAL arbitration rules as interpreted and applied
Helsinki 1994
cited as: Pellonpää/Caron
Rabel, Ernst
Das Recht des Warenkaufs
Berlin Tübingen 1958
cited as: Rabel
Rheinische Friedrich-Wilhelms-Universität Bonn
XIV
Redfern, Alan / Hunter, Martin
Law and Practice of International Commercial Arbitration, 3rd ed.
London 1999
cited as: Redfern/Hunter
Roth, Wulf-Henning Kunz, Christian
Zur Bestimmbarkeit des Preises im UN-Kaufrecht
RIW 1997
cited as: Roth/Kunz, RIW 1997,
Saidov, Djakhongir Methods of Limiting Damages under the Vienna
Convention on Contracts for the International Sales of Goods (2001) http://cisg.law.pace.edu/cisg/biblio/saidov.html
cited as: Saidov
Scalbert, Hugues / Marville, Laurent
Les clauses compromissoires pathologiques,
Revue de l’arbitrage 1988
cited as: Scalbert/Marville, Rev.arb 1988,
Schlechtriem, Peter
Commentary on the United Nation Convention on International Sales of Goods (CISG), 2nd ed
Munich 1998
cited as: Schlechtriem (2nd ed.) et al
Schlechtriem, Peter Einheitliches Kaufrecht und nationales
Obligationenrecht
Baden-Baden 1987
cited as: Schlechtriem/author, Einheitliches Kaufrecht,
Schlechtriem, Peter Internationales UN-Kaufrecht
Tübingen 1996
cited as: Schlechtriem
Schlechtriem, Peter
Kommentar zum Einheitlichen UN – Kaufrecht, 3rd ed.
Munich 2000
cited as: Schlechtriem et al
Rheinische Friedrich-Wilhelms-Universität Bonn
XV
Semler, Franz-Jörg German Arbitration Law
The 1998 Reform and Recent Case Law
Journal of International Arbitration 18(5) 2001
cited as: Semler, J.Arb.Int. 2001,
Soergel, Hans Theodor Kommentar zum Bürgerlichen Gesetzbuch
Band 13, Übereinkommen der Vereinten Nationen über Verträge über den internationalen Warenkauf (CISG)
Stuttgart, Berlin, Köln, Mainz 2000
cited as: Soergel et al/author
Sono, Kazuaki Formation of International Contracts under the Vienna
Convention: A shift above the Comparative Law
New York, London, Rome 1986
cited as: Sono, Dubrovnik Lectures 1986,
Staudinger, Julius von Kommentar zum Bürgerlichen Gesetzbuch mit
Einführungsgesetz und Nebengesetzen Wiener UN-Kaufrecht (CISG), 14th ed.
Berlin 1999
cited as: Staudinger et al/author
Stoll, Hans Zur Haftung bei Erfüllungsverweigerung im
Einheitlichen Kaufrecht
RabelsZ 1998,
cited as: Stoll, RabelsZ 1998,
Sutton, Jeffrey S. Measuring Damages Under the United Nations
Convention on the International Sale of Goods Ohio State Law Journal (1989) http://www.cisg.law.pace.edu/cisg/biblio/sutton.html
cited as: Sutton, Ohio State Journal 1989,
Tampirie, Tiziana
International Arbitration and Impartiality of Arbitrators The Italian Perspective Journal of International Arbitration 18(5) 2001
cited as: Tampirie, J.Arb.Int. 2001,
Rheinische Friedrich-Wilhelms-Universität Bonn
XVI
Thiele, Christian Interest on Damages and Rate of Interest Under Art. 78
of the U.N. Convention for the International Sale of Goods, Vindobona Journal of International Commercial Law and Arbitration (1998) http://www.cisg.law.pace.edu/cisg/biblio/thiele.html
cited as: Thiele, J. of Int. Com. Law and Arb., 1998
UNCITRAL Fifth Working Group Report, A/CN.9/264
cited as: Fifth Working Group Report, A/CN.9/264
UNCITRAL Official Records of the United Nations Conference on
Contracts for the International Sale of Goods, Vienna, 10 March-11 April 1980
cited as: Official Records
UNCITRAL Proposal by Belgium [A/CONF.97/C.1/L.45]
cited as: A/CONF.97/C.1/L.45
UNCITRAL Secretariat Commentary
cited as: Secretariat Commentary
UNCITRAL Secretariat Study on the N.Y. Convention, A/CN.9/168
cited as: Secretariat Study on the N.Y. Convention, A/CN.9/168
UNCITRAL Seventh Secretariat Note, A/CN.9/264
cited as: Seventh Secretariat Note, A/CN.9/264
UNCITRAL Seventh Secretariat Note, Analytical Commentary on
Draft Text A/CN.9/264
cited as: Seventh Secretariat Note, Analytical Commentary on Draft Text A/CN.9/264
UNCITRAL
UNCITRAL digest of CISG article 6 case law <http://www.cisg.law.pace.edu/cisg/digest/art06.html>
cited as: UNCITRAL digest of CISG article 6 case law, para.
Rheinische Friedrich-Wilhelms-Universität Bonn
XVII
Witz, Wolfgang / Salger, Hanns Christian / Lorenz, Manuel
Internationales Einheitliches Kaufrecht, Kommentar Recht und Wirtschaft
Heidelberg 2000
cited as: Witz et al
Ziegel, Jacob S. / Samson, Claude
Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods, July 1981 http://www.cisg.law.pace.edu/cisg/wais/db/articles/english2.html
cited as: Ziegel/Samson
Rheinische Friedrich-Wilhelms-Universität Bonn
XVIII
Cases
Argentina Enrique C. Wellbers S.A.I.C. A.G. v. Extraktionstechnik Gesellschaft für Anlagenbau M.B.M.: S/Ordinario, Y.B. XIX (1994), 254
cited as: Enrique C. Wellbers S.A.I.C. A.G. v. Extraktionstechnik Gesellschaft für Anlagenbau (Argentina)
Australia Downs Investments v. Perwaja Steel, Australia, 17 November 2000, Supreme Court of Queensland <http://cisgw3.law.pace.edu/cases/001117a2.html>
cited as: Downs Investments v. Perwaja Steel (Australia)
Austria Arbitral Award 52/97, Schiedsgericht der Börse für landwirtschaftliche Produkte, 10 December 1997 Published in „Österreichische Zeitschrift für Rechtsvergleichung“ 1998, p. 211 – 220
cited as: Arbitral Award 52/97, 10 December1997 (Austria)
Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft (SCH-4366; arbitration proceeding), Vienna, 15 June 1994 CLOUT case No. 93
cited as: Int. Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft – Vienna, 15 June 1994 (Austria)
Oberster Gerichtshof = Supreme Court (Austria): 2 Ob 547/93 of 10 November 1994 CLOUT-Case No. 106, Published in „Praxis des Internationalen Privat- und Verfahrensrechts“ 1996 p. 137 – 139
cited as: OGH, 10 November 1994 (Austria)
Oberster Gerichtshof, 1 OB 292/99 of 28 April 2000 http://cisgw3.law.pace.edu/cases/000428a3.html
cited as: OGH, 28 April 2000 (Austria)
Rheinische Friedrich-Wilhelms-Universität Bonn
XIX
Belgium Margon Srl v. NV Sadeco, Rechtbank (District Court) von Koophandel, Hasselt, A.R.2012/96, 9 octobre 1996 http://cisgw3.law.pace.edu/cases/961009b1.html
cited as: Margon Srl v. VN Sadelco (Belgium)
Société Van Hopplynus c/ société Coherent Inc., Tribunal de Commerce de Bruxelles 5 octobre 1994, Revue de l’arbitrage 1995, 311-326 avec note de Bernard Hanotiau
cited as: Société Van Hopplynus c/ société Coherent Inc. (Belgium)
Bulgaria Court of Arbitration at the Bulgarian Chamber of Commerce and Industry, award of 3 December 1984, case No. 151/1984, Y.B. XV (1990), 63
cited as: Bulgaria Court of Arbitration case No. 151/1984 (Bulgaria)
Canada Globe Union Industrial Corp. v. G.A.P. Marketing Corp., 2 Western Weekly Reports (1995), 696
cited as: Globe Union Industrial Corp. v. G.A.P. Marketing Corp. (Canada) France Comité populaire de la Municipalité d’el Mergeb c/ société Dalico contractors, Court d’Appel de Paris (1re Ch.suppl.) 26 March 1991, Revue de l’arbitrage 1991, 456-469 avec note d’Hélène Gaudamet-Tallon
cited as: Comité populaire de la Municipalité d’El Mergeb c/ société Dalico contractors (Fr)
Cour de Cassation (Supreme Court), Sté Ceramique Culinaire de France v. Sté Musgrave Ltd., 17 December 1996 CLOUT case No. 206
cited as: Sté Ceramique Culinaire de France v. Sté Musgrave Ltd. (Fr)
Epoux Convert c/ société Droga, Court de cassation (1re Ch.civ.) 14 December 1983, Revue de l’arbitrage 1984, 483-491 avec note de M. C. Rondeau-Rivier
cited as: Epoux Convert c/ société Droga (Fr)
Rheinische Friedrich-Wilhelms-Universität Bonn
XX
Gosset C. Soc. Carapelli, Cour de cassation (1re Ch.civ.) 7 May 1963, Recueil Dalloz Chroniques Jurisprudence 1963, 545
cited as: Gosset C. Soc. Carapelli (Fr)
Hecht c/ Société Buisman’s, Court de cassation (1re Ch.civ.) 4 July 1972, Journal du droit international 1972, 843 avec note de Bruno Oppetit
cited as: Hecht c/ Société Buisman’s (Fr)
ICC Court of Arbitration, award No. 1434 (1975)
cited as: ICC Court of Arbitration, 1434/1975 (Fr)
ICC Court of Arbitration, award No. 2626 (1977)
cited as: ICC Court of Arbitration, 2626/1977 (Fr)
ICC Court of Arbitration, award No. 2694 (1977)
cited as: ICC Court of Arbitration, 2694/1977 (Fr)
ICC Court of Arbitration, award No. 3380 (1980)
cited as: ICC Court of Arbitration, 3380/1980 (Fr)
ICC Court of Arbitration, award No. 3460 (1980)
cited as: ICC Court of Arbitration, 3460/1980 (Fr)
ICC Court of Arbitration, award No. 4145 (1984)
cited as: ICC Court of Arbitration, 4145/1984 (Fr)
ICC Court of Arbitration, award No. 4472 (1984)
cited as: ICC Court of Arbitration, 4472/1984 (Fr)
ICC Court of Arbitration, award No. 5103 (1988)
cited as: ICC Court of Arbitration, 5103/1988 (Fr)
ICC Court of Arbitration, award No. 6653 (1993) http://www.cisg.law.pace.edu/cisg/wais/db/cases2/936653i1.html
cited as: ICC Court of Arbitration, 6653/1993 (Fr)
ICC Court of Arbitration, award No. 6709 (1991)
cited as: ICC Court of Arbitration, 6709/1991 (Fr)
Rheinische Friedrich-Wilhelms-Universität Bonn
XXI
ICC Court of Arbitration, award No. 7656 (1994) http://www.cisg.law.pace.edu/cisg/wais/db/cases2/947565i1.html
cited as: ICC Court of Arbitration, 7656/1994 (Fr)
ICC Court of Arbitration, award No. 7844 (1994) http://www.cisg.law.pace.edu/cisg/wais/db/cases2/947844i1.html
cited as: ICC Court of Arbitration, 7844/1994 (Fr)
ICC Court of Arbitration, award No. 8324 (1995) http://www.cisg.law.pace.edu/cisg/wais/db/cases2/958234i1.html
cited as: ICC Court of Arbitration, 8324/1995 (Fr)
ICC Court of Arbitration, award No. 7585 (1992) http://www.cisg.law.pace.edu/cisg/wais/db/cases2/927585i1.html
cited as: ICC Court of Arbitration, 7585/1992 (Fr)
Société Asland c/ société European Energy Corporation, Tribunal de grande instance de Paris, Revue de l’arbitrage 1990, 521-522
cited as: Société Asland c/ société European Energy Corp. (Fr)
Société Bomar Oil NV c/ ETAP, Cour de cassation (1re Ch.civ.) 9 November 1993, Revue de l’arbitrage 1994, 108 avec note de Catherine Kessedijan
cited as: Société Bomar Oil NV c/ ETAP (Fr)
Société Deko c/ G. Dingler et société Meva, Cour d’Appel de Paris (1re Ch.C), 24 March 1994, Revue de l’arbitrage 1994, 515-524 avec note de Charles Jarrosson
cited as: Société Deko c/ G. Dingler et société Meva (Fr)
Société Tuvomon c/ société Amaltex, Cour d’Appel de Paris, 14 February 1985, Revue de l’arbitrage 1987, 325 avec note de P.Level
cited as: Société Tuvomon c/ société Amaltex (Fr)
Germany BGH, VIII ZR 134/96 of 23 July 1997 CLOUT case No. 236
cited as: BGH, 23 July 1997 (Germany)
Rheinische Friedrich-Wilhelms-Universität Bonn
XXII
BGH, VIII ZR 259/97 of 25 November 1998 CLOUT case No. 270
cited as: BGH, 25 November 1998 (Germany)
German Coffee Association, final award of 28 September 1992, Y.B. XIX (1994), 48
cited as: German Coffee Association, 28 September 1992 (Germany) Hamburg Commodity Exchange Grain Merchants’ Association, Award of 18 March 1994, Y.B. XXII (1997), 53
cited as: Hamburg Award, 18 March 1994 (Germany)
Landgericht Hamburg (Germany), 5 O 543/88 of 26 September 1990 CLOUT-Case No. 5, Published in „Praxis des Internationalen Privat- und Verfahrensrechts“ 1991 p. 400 - 403
cited as: LG Hamburg, 26 September 1990 (Germany)
Landgericht Heidelberg, O 42/91, 3 July 1992, Unilex
cited as: LG Heidelberg, 3 July 1992 (Germany)
Landgericht Landshut, 54 O 644/94 of 5 April 1995 < http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/193.htm>
cited as: LG Landshut, 5 Apri1 995 (Germany)
OLG Düsseldorf, 17 U 146/93 of 10 February 1994 <http://cisgw3.law.pace.edu/cases/940114g1.html>
cited as: OLG Düsseldorf, 10 February 1994 (Germany)
OLG Naumburg: 10 Sch 03/01 of 19 December 2001
cited as: OLG Naumburg, 19 December 2001 (Germany)
Schiedsgericht der Handelskammer Hamburg, 21 March 1996 CLOUT case No. 166
cited as: Schiedsgericht der Handelskammer Hamburg, 21 March 1996 (Germany)
Great Britain Central Meat Products Company, Ltd. V. J.V. McDaniel, Q.B.D. [1952] 1 Lloyd’s Rep. 562
cited as: Central Meat Products Company, Ltd. V. J.V. McDaniel, Ltd. (GB)
Rheinische Friedrich-Wilhelms-Universität Bonn
XXIII
Harbour Assurance Co. (U.K.) Ltd. V. Kansa General International Insurance Co., Ltd., Q.B.D. (Com.Ct.) 1992, 1 Lloyd’s Rep., 81
cited as: Harbour Assurance Co. v. Kansa Gen. Int’l Ins. Co., (GB)
Mangistaumunaigaz Oil Production Association v. United World Trade Inc., Q.B.D. (1995) 1 Lloyd’s Law Reports 617
cited as: Mangistaumunaigaz Oil Production Assoc. v. United World Trade Inc. (GB)
Star Shipping A.S. v. China National Foreign Trade Transportation Corporation, Court of Appeal (1993), 2 Lloyd’s Law Reports, 445
cited as: Star Shipping A.S. v. China Nat. Foreign Trade Transp. Corp. (GB)
Hong Kong Fung Sang Trading Limited v. Kai Sun Sea Products and Food Company Limited, Y.B. XIX (1994), 269
cited as: Fung Sang Trading, Ltd. V. Kai Sun Sea Products and Food Co., Ltd. (Hongkong) Lucky-Goldstar International (H.K.) Limited v. Ng Moo Kee Engineering Limited, 2 Hong Kong Law Reports (HKLR), 73 = Y.B. XX (1995), 280
cited as: Lucky-Goldstar Intern., Ltd. V. Ng Moo Kee Engineering, Ltd. (Hongkong)
USSR All-Union Foreign Trade Association Sojuznefteexport v. JOC OIL Limited, Y.B. XVIII (1993), 92
cited as: All-Union Export-Import Assoc. Sojuznefteexport (Moscow) v. JOC OIL (USSR) Switzerland Bezirksgericht St. Gallen (District Court Switzerland) 3PZ 97/18: 3 July 1997 CLOUT case No. 215
cited as: BG St. Gallen, 3 July 1997(Ch)
Zürich Chamber of Commerce (arbitration proceeding), Switzerland, 31 May 1996, <http://cisgw3.law.pace.edu/cases/960531s1.html>
cited as: Zürich Chamber of Commerce, 31 May 1996 (Ch)
Rheinische Friedrich-Wilhelms-Universität Bonn
XXIV
Kantonsgericht (District Court) Nidwalden, 3 December 1997 CLOUT case No. 220
cited as: Kantonsgericht Nidwalden, 3 December 1997 (Ch)
HG950347, 5 February 1997, Commercial Court = Handelsgericht Zürich http://cisgw3.law.pace.edu/cases/970205s1.html
cited as: Commercial Court Zürich, 5 February 1997 (Ch)
United States of America
Assante Technologies, Inc. v. PMC-Sierra, Inc., 164 F.Supp. 2d 1142 (2001)
cited as: Assante Technologies, Inc. v. PMC-Sierra, Inc. (U.S.)
Astra Footwear Industry v. Harwyn Intern., Inc., 442 F.Supp. 907 (S.D.N.Y. 1978)
cited as: Astra Footwear Industry v. Harwyn Intern., Inc. (U.S.)
Becker Autoradio USA, Inc. v. Becker Autoradiowerk GmbH, 585 F.2d 39 (3rd Cir. 1978)
cited as: Becker Autoradio USA, Inc. v. Becker Autoradiowerk GmbH (U.S.)
Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145 (1968)
cited as: Commonwealth Coatings Corp. v. Continental Casualty (U.S.)
Delchi Carrier, S.p.A. v. Rotorex Corp., 6 December 1995, 10 F. 3d. 1024 (2nd Cir. 1995)
cited as: Delchi Carrier SpA v. Rotorex Corporation (U.S.)
Erving v. Virginia Squires Basketball Club, 468 F.2d 1064 (2d Cir. 1972)
cited as: Erving v. Virginia Squires Basketball Club (U.S.)
Euro-Mec Import, Inc. v. Pantrem & C., S.p.A., 1992 WL 350211, (E.D.Pa.)
cited as: Euro-Mec Import, Inc. v. Pantrem & C., S.p.A. (U.S.)
Florasynth, Inc. v. Pickholz, 750 F.2d 171(2d Cir. 1984)
cited as: Florasynth, Inc. v. Pickholz (U.S.)
Garfield & Co. v. Wiest, 432 F.2d 849 (2d Cir. 1970)
cited as: Garfield & Co. v. Wies (U.S.)
Giddens v. Board of education of the city of Chicago 75 NE 2d 286 (1947)
cited as: Giddens v. Board of education of the city of Chicago (U.S.)
Rheinische Friedrich-Wilhelms-Universität Bonn
XXV
Hunt v. Mobil Oil Corp. 654 F.Supp. 1487 (S.D.N.Y.,1987)
cited as: Hunt v. Mobil Oil Corp. (U.S.)
HZI Research Center v. Sun Instruments Japan Co., Inc., 1995 WL 562181, (S.D.N.Y.)
cited as: HZI Research Center v. Sun Instruments Japan Co., Inc. (U.S.)
Ilios Shipping & Trading Corp. v. American Anthracite & Bitumius Coal Corp,148 F.Supp. 698 (S.D.N.Y. 1957)
cited as: Ilios S. & T. Corp. and American (U.S.)
Laboratorios Grossman, S.A. v. Forest Laboratories, Inc., 295 N.Y.S.2d 756, (1968)
cited as: Laboratorios Grossman, S.A. v. Forest Laboratories, Inc. (U.S.)
Local 814, Intern. Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers of America v. J & B Systems Installers & Moving, Inc. 878 F.2d 38, (1989)
cited as: Local 814, Int'l Bhd. of Teamsters v. J & B Installers & Moving, Inc. (U.S.)
MCC-Marble Ceramic Center, Inc., v. Ceramica Nuova d'Agostino, S.p.A. 144 F.3d 1384 (11th Circuit Florida) of 29 June 1998.
cited as: MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova d'Agostino, S.p.A (U.S.)
Merit Insurance Company v. Leatherby Insurance Company, 714 F.2d 673 (7th Cir. 1983)
cited as: Merit Insurance Company v. Leatherby Insurance Company (U.S.)
Middlesex Mutual Ins. Co. v. Levine, 675 F.2d 1197 (11th Cir. 1982)
cited as: Middlesex Mutual Ins. Co. v. Levine (U.S.)
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Corp., 473 U.S. 614 (1985)
cited as: Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Corp. (U.S.)
Morelite Constr. Corp. v. New York City Dist. Council Carpenters’ Benefit Funds, 748 F.2d 79 (2d Cir. 1984)
cited as: Morelite Constr. Corp. v. New York City Dist. Council Carpenters Benefit Funds (U.S.)
Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)
cited as: Moses H. Cone Memorial Hospital v. Mercury Constr. Corp. (U.S.)
Rheinische Friedrich-Wilhelms-Universität Bonn
XXVI
National Shipping Co. of Saudi Arabi v. Transamerican Steamship Corp. 1992 U.S. Dist. Lexis 18725 (S.D.N.Y. 1992)
cited as: National Shipping Company of Saudi Arabia, Transamerican Steamship Corp. (U.S.)
Neri v. Retail Marine Corporation, 285 NE 2d 311 (N.Y. 1972)
cited as: Neri v. Retail Marine Corp., 1972 (U.S.)
Nicaragua Interocean Shipping Co. v. National Shipping & Trad. Corp., 462 F.2d 673, 1972 A.M.C. 1687
cited as: Nicaragua Interocean Shipping Co. v. National Shipping & Trad. Corp. (U.S.)
Orbisphere Corp. v. United States, 726 F. Supp. 1344 (1989)
cited as: Orbisphere Corp. v. United States (U.S.)
Pitta v. Hotel Ass'n of New York City, Inc., 806 F.2d 419 (2d Cir. 1986)
cited as: Pitta v. Hotel Ass'n, Inc. (U.S.)
Prima Paint v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967)
cited as: Prima Paint v. Flood & Conklin Mfg. Co. (U.S.)
Reed & Martin, Inc. v. Westinghouse Electronic Corp., 439 F.2d 1268, (2d Cir. 1971)
cited as: Reed & Martin, Inc. v. Westinghouse Elec. Corp. (U.S.)
Republic of Nicaragua v. Standard Fruit Company, 937 F.2d 469 (9th Cir. 1991)
cited as: Republic of Nicaragua v. Standard Fruit Co. (U.S.)
Rosgoscirc on Behalf of SOY/CPI v. Circus Show, Corp., 1993 WL 277333, (S.D.N.Y.)
cited as: Rosgoscirc, Co. v. Circus Show, Corp. (U.S.)
Sanford Home for Adults v. Local 6, IFHP, 665 F.Supp. 312 (S.D.N.Y. 1987)
cited as: Sanford Home for Adults v. Local (U.S.)
Standard Tankers (Bahamas) Co. v. Motor Tank Vessel, Akti, 438 F2d 153 (E.D.N.C. 1977)
cited as: Standard Tankers (Bahamas) Co., Ltd. V. Motor Tank Vessel (U.S.)
Rheinische Friedrich-Wilhelms-Universität Bonn
XXVII
Sun Refining & Marketing Co. v. Statheros Shipping Corp. of Monrovia, Liberia 761 F.Supp. 293, (1991)
cited as: Sun Refining & Marketing Co. v. Statheros Shipping Corp. of Monrovia, Liberia (U.S.)
Tennessee Imports, Inc. v. Pier Paulo Filippi and Prix Italia, 745 F.Supp. (1990), 1314-1331
cited as: Tennessee Imports, Inc. v. Pier Paulo Filippi and Prix Italia (U.S.)
Transmarine Seaways Corp. of Monrovia v. Marc Rich & Co. A.G. 480 F.Supp. 352, (S.D.N.Y 1979)
cited as: Transmarine Seaways Corp. of Monrovia v. Marc Rich & Co. A. G. (U.S.)
U. S. Wrestling Federation v. Wrestling Division of AAU, Inc. 605 F.2d 313 (7th Cir. 1979)
cited as: U. S. Wrestling Federation v. Wrestling Division of AAU, Inc. (U.S.)
Rheinische Friedrich-Wilhelms-Universität Bonn Page 1
1
Statements of Facts
On 3 April 2001, CLAIMANT, Equafilm Co. (hereafter referred to as CLAIMANT),
concluded a contract with Medipack SA (hereafter referred to as RESPONDENT) during a
telephone conversation.
After this telephone conversation, Mr. Black, Purchasing Manager of RESPONDENT, faxed
Mr. Storck, Sales Manager of CLAIMANT a confirmation of this contract. In this fax, he
confirmed the order of 1350 tons of polypropylene film, to be delivered over a nine-month
period of time. The conditions of sale were to be the same as in the previous contract
CLAIMANT and RESPONDENT had concluded on 15 December 2000, with adjustments for
the dates of shipment and the fact that CLAIMANT’s list prise had risen to $ 1,900 per ton.
The same day, Mr. Storck also sent a confirmation of RESPONDENT’s order to Mr. Black in
which the price set forth was $ 2,615,809, i.e. CLAIMANT’s current list price of $ 1,900 per
ton less 4% discount. All other provisions of the previous contract dated 15 December 2000
should apply.
The contract of 15 December 2000 to which both parties referred in their letters of
confirmation contained an arbitration clause and a choice of law clause. According to this
arbitration clause, “any dispute arising out of or relating to the contract concluded between
CLAIMANT and RESPONDENT should be determined by arbitration in accordance with the
rules of the German Arbitration Association”. The choice of law clause determined that the
contract was subject to the commercial law of Equatoriana. Equatoriana is a party to the
CISG.
In response to Mr. Storck’s letter of confirmation, Mr. Black contested the price indicated by
Mr. Storck claiming that RESPONDENT was to receive an 8% discount.
In his letter dated 9 April 2001, Mr. Storck regretted the confusion about the discount rate
which had arisen although Mr. Storck stated explicitly in his fax of 7 December 2000 that the
8% discount was only granted as in incentive for the first order. He affirmed that
RESPONDENT would receive their best price which includes a 4% discount.
In response, Mr. Black intimated that RESPONDENT would have to consider seriously
Rheinische Friedrich-Wilhelms-Universität Bonn
2
returning to Polyfilm GmbH, its former supplier, if CLAIMANT did not offer an 8% discount
to RESPONDENT.
On 2 May 2001, RESPONDENT refused definitely to comply with its obligations under the
contract concluded with CLAIMANT, since RESPONDENT had already placed the order
with Polyfilm GmbH.
As a result of this refusal, CLAIMANT suffered a loss of $ 575.477,98 which is the lost profit
it would have earned on the contract.
Counsel, prepared this Memorandum for CLAIMANT in compliance with the Arbitral
Tribunal’s Procedural Order No. 1.
It is argued that:
• There is no reason to challenge Dr. Arbitrator
• The Tribunal has authority to rule the case at issue
• The CISG is the law applicable to the contract
• A contract was concluded between CLAIMANT and RESPONDENT during their
telephone conversation dated 3 April 2001
• The price included a 4% discount
• RESPONDENT was in breach of its obligations under the contract
• CLAIMANT is entitled to claim damages in the amount of $ 575,477.98 caused by
RESPONDENT’s breach of its obligations
• CLAIMANT is entitled to claim interest on the damages
In arguing these propositions, CLAIMANT will demonstrate the legal and factual basis for its
claim.
Rheinische Friedrich-Wilhelms-Universität Bonn
3
Arguments
I. The challenge to Dr. Arbitrator is to be rejected
1. Arbitrator will participate in the decision on his own challenge (A.), which is governed by
§§ 15, 18 DIS Rules (B.). The challenge is to be rejected because there are no reasonable doubts
as to his impartiality or his independence (C.).
A. Dr. Arbitrator participates in the decision on his challenge
2. In accordance with § 18.2 DIS Rules, the arbitral Tribunal itself decides on the challenge.
Dr. Arbitrator participates in the decision on the challenge as a member of the Tribunal
[Procedural Order No. 1, para No. 4].
B. The challenge is governed by §§ 15, 18 DIS Rules
3. § 15 DIS Rules calls for „impartial and independent“ arbitrators. § 18.1 DIS Rules provides
for the challenge of an arbitrator if “circumstances exist that give rise to justifiable doubts as
to his impartiality or independence“. The terms “impartiality and independence” are not
defined in the DIS Rules. As the DIS Rules are based upon the Model Law [Böckstiegel, DIS-
Mat III 1998, p. 5; Semler, J.Arb.Int. 2001, p. 579], case law relating to the Model Law may
be used as persuasive authority.
C. There are no reasons to doubt Dr. Arbitrator’s impartiality or his independence
a. Dr. Arbitrator’s expectation to become a partner of a law firm that has represented
CLAIMANT is not sufficient to raise doubts as to his impartiality or independence
4. Dr. Arbitrator’s expectation of becoming a member of the law firm during a period when
he is acting as an arbitrator in a matter involving a former client of the firm is not sufficient to
raise justifiable doubts as to his impartiality or independence
5. Such justifiable doubts would have to be direct, definite, and capable of demonstration
rather than remote, uncertain, or speculative [Giddens v. Board of education of the city of
Chicago (U.S.); Pitta v. Hotel Ass'n, Inc. (U.S.); Florasynth, Inc. v. Pickholz (U.S.); Morelite
Rheinische Friedrich-Wilhelms-Universität Bonn
4
Constr. Corp. v. New York City Dist. Council Carpenters Benefit Funds (U.S.); Barker/Davis,
p. 49]. Personal or business relationships between an arbitrator and one of the parties are
possible grounds for justifiable doubts as to the impartiality or independence [Middlesex
Mutual Ins. Co. v. Levine (U.S.); National Shipping Company of Saudi Arabia,
Transamerican Steamship Corp. (U.S.); Ilios S. & T. Corp. and American (U.S.);
Bishop/Reed, Arb.Int. 1998, p. 398]. However, just being one out of 75 partners and 216
associates [Procedural Order No. 2, Clarification No. 22] of a law firm which has represented
a party to the arbitration before [cf. Standard Tankers (Bahamas) Co., Ltd. v. Motor Tank
Vessel (U.S.); Erving v. Virginia Squires Basketball Club (U.S.)] cannot be sufficient to raise
such doubts. Like Dr. Arbitrator, most persons who are qualified to appear as arbitrators in
international disputes work in international law firms with hundreds of clients. If all these
arbitrators were deemed to be partial or dependent, merely because another partner or
associate of the same firm has represented a party to the arbitration before, after a short time
the pool of skilled arbitrators eligible to be appointed to serve on Tribunals in international
disputes would be empty. Arbitration without arbitrators willing and able to serve, however,
cannot work.
6. In the case at hand, the only circumstance that might effect Dr. Arbitrator’s impartiality or
independence is his capacity as a partner of Multiland Associates. Dr. Arbitrator expects to
become one partner of a law firm which has represented a party to the arbitration before. He
had no business or personal relationship to CLAIMANT himself. The law firm he is
associated with entered into an agreement to merge with the well-known international law
firm Multiland Associates effective 1 January 2003 [Dr. Arbitrator in his letter to Mr. Bredow
dated 22 August 2002]. Only one office of Multiland Associates, located in Faraway City,
Oceania has represented CLAIMANT in two matters. These matters ended before the
arbitration started and they were unrelated to the dispute in this arbitration [Dr. Arbitrator in
his letter to Mr. Bredow dated 22 August 2002; Procedural Order No. 2, Clarification
No. 18]. Dr. Arbitrator himself has had no contact to CLAIMANT. In addition, there is no
continuing representation of CLAIMANT by Multiland Associates, and the new office of
Dr. Arbitrator has no expectation of representing CLAIMANT in the future [Procedural
Order No. 2, Clarification No. 18; importance of that issue: National Shipping Co. of Saudi
Arabia, Transamerican Steamship Corp. (U.S.); Hunt v. Mobil Oil Corp. (U.S.); Morelite
Constr. Corp. v. New York City Dist. Council Carpenters Benefit Funds (U.S.); Sanford Home
for Adults v. Local (U.S.); Holtzmann/Neuhaus, p. 389; Pellonpää/Caron, p. 162; Tampirie,
Rheinische Friedrich-Wilhelms-Universität Bonn
5
J.Arb.Int. 2001, p. 563]. Apart from the arbitration proceedings, Dr. Arbitrator will not have
any business relationship to CLAIMANT.
7. Even if he had some kind of business relationship to CLAIMANT, this would not be
sufficient to consider him partial or dependent. The mere fact that there is some business
relationship between an arbitrator and one of the parties to the arbitration is not in and of itself
sufficient to disqualify the arbitrator [Commonwealth Coatings Corp. v. Continental Casualty
(U.S.); Reed & Martin, Inc. v. Westinghouse Elec. Corp. (U.S.); Ilios S. & T. Corp. and
American (U.S.); Granzow, p. 110; Bernstein et al, No. 2-179] because arbitration
proceedings are not in all circumstances comparable to dispute resolution by public courts.
8. The major advantage of arbitration as a means of dispute resolution is the opportunity to
have a Tribunal that is more aware of the subject matter of the dispute than a court skilled in
legal argument but with only limited knowledge of the subject matter [Merit Insurance
Company v. Leatherby Insurance Company (U.S.); Commonwealth Coatings Corp. v.
Continental Casualty Co. (U.S.); Garfield & Co. v. Wiest. (U.S.); Born (1st ed.), p. 600].
Arbitration is the resolution of international commercial disputes by experts who have great
knowledge of international trade law. Being an expert is the result of being engaged in
occupations in the commercial world before, during and after the arbitral proceedings.
Working in an international law firm, which has hundreds of clients, offers the best
opportunity to become such an expert. Dr. Arbitrator is one of those experts with a great
reputation in his field of business [Procedural Order No. 2, Clarification No. 26], meaning he
has accumulated considerable knowledge of international trade law, based on previous
professional experience. The number of such experts is limited and in addition there is a
growing demand for qualified arbitrators because the popularity of arbitration as a means for
resolving international commercial disputes has increased significantly over the past decades
[for example, the world’s leading international arbitration institution – the ICC – handled
request for 32 arbitrations in 1956, 210 arbitrations in 1976, 337 arbitrations in 1992, 452
arbitrations in 1997, and 529 arbitrations in 1999].
9. As a result, the mere fact that someone is acting as an arbitrator in a matter involving a
former client of the law firm cannot raise justifiable doubts as to his impartiality or
independence.
Rheinische Friedrich-Wilhelms-Universität Bonn
6
b. Dr. Arbitrator has no financial interest in the outcome of the arbitration
10. Since the relationship between Dr. Arbitrator and CLAIMANT is not sufficiently close to
make any reasonable person doubt his impartiality or independence [Commonwealth Coatings
Corp. v. Continental Casualty Co. (U.S.); Hunt v. Mobil Oil Corp. (U.S.); Local 814, Int'l
Bhd. of Teamsters v. J & B Installers & Moving, Inc. (U.S.); National Shipping Company of
Saudi Arabia v. Transamerican Steamship Corp. (U.S.); OLG Naumburg, 19 December 2001
(Germany); von Hof, p. 80; Y.B. XXII (1997) p. 234], there have to be additional matters to
justify his challenge. An indication for bias would be given if Dr. Arbitrator had any financial
interest in the outcome of the arbitration [cf. Middlesex Mutual Ins. Co. v. Levine (U.S.);
Transmarine Seaways Corp. of Monrovia v. Marc Rich & Co. A.G. (U.S.); Reed & Martin,
Inc. v. Westinghouse Elec. Corp. (U.S.); National Shipping Company of Saudi Arabia,
Transamerican Steamship Corp. (U.S.); Sun Refining & Marketing Co. v. Statheros Shipping
Corp. of Monrovia, Liberia (U.S.); U.S. Wrestling Federation v. Wrestling Division of AAU,
Inc. (U.S.); Born (1st ed.), p. 601; Pellonpää/Caron, p. 160]. This would be the case if he had
a reasonable expectation of increasing his own income unduly favoring CLAIMANT during
the arbitration proceedings, in order to procure additional business for Multiland Associates.
11. However, his participation in this law firm is far too unimportant to suggest any direct
financial interest in the outcome of the arbitration. After the merger of 1 January 2003 there
will be 75 partners in 15 offices at different locations [Procedural Order No. 2, Clarification
No. 18]. The income earned by each partner is in large part determined by the profits of the
particular individual office and only in small part the profits of the entire firm [Procedural
Order No. 2, Clarification No. 19]. Dr. Arbitrator’s participation in hypothetical fees earned
in future cases is so negligible that a financial interest in the outcome of the arbitration cannot
be assumed.
c. Dr. Arbitrator’s disclosure underlines his impartiality and independence
12. In addition, Dr. Arbitrator disclosed the merger of the law firms and therefore complied
exactly with his obligations under § 16.3 DIS Rules. He even met the high requirements set
by the leading U.S. Supreme Court decision in a domestic case, Commonwealth Coatings
Corp. v. Continental Casualty Co. (U.S.) [Y.B. XXII (1997) p. 232; Born (1st ed.), p. 598]. In
this decision, the Supreme Court held that arbitrators have to disclose any circumstances that
might impact their impartiality, since the same ethical standards apply to both judges and
Rheinische Friedrich-Wilhelms-Universität Bonn
7
arbitrators. This ambition standard was criticized by several other courts finding that
arbitrators should be held to a lower ethical standard than judges [Pitta v. Hotel Ass'n, Inc.
(U.S.); Morelite Constr. Corp. v. New York City Dist. Council Carpenters Benefit Funds
(U.S.); Hunt v. Mobil Oil Corp. (U.S.)]. Nevertheless, Dr. Arbitrator disclosed the relationship
on 22 August 2002, [Dr. Arbitrator in his letter to Mr. Bredow dated 22 August 2002] merely
two days after he had received the information about the nature of the representation
[Procedural Order No. 2, Clarification No. 18]. He behaved in a truly honourable way.
13. As there is no further indication of circumstances that could justify the challenge of
Dr. Arbitrator, he cannot reasonably be considered partial or dependent. Therefore,
CLAIMANT respectfully requests the Arbitral Tribunal to reject the challenge to
Dr. Arbitrator.
II. The challenge to the jurisdiction of the Tribunal is to
be rejected
14. The Tribunal can rely on the Competence-Competence doctrine embodied in Art. 16(1)
Model Law and find that it has jurisdiction to decide on the merits of the case at hand (A.).
CLAIMANT and RESPONDENT concluded a valid arbitration agreement (B.). This
arbitration agreement is neither invalid because it refers to the arbitration rules of the
“German Arbitration Association” (C.) nor does the alleged invalidity of the commercial
contract have any effect on the arbitration agreement (D.).
A. The Tribunal has authority to decide on its own jurisdiction pursuant to Art. 16(1)
Model Law
15. CLAIMANT and RESPONDENT agreed that arbitration proceedings, if necessary,
should take place in Vindobona, Danubia. Danubia has enacted the UNCITRAL Model Law
[Rules p. 3]. Therefore, the Model Law applies to the case at issue since the Model Law is the
lex fori of Danubia. Art. 16(1) Model Law provides that “the arbitral Tribunal may rule on its
own jurisdiction, including any objections with respect to the existence or validity of the
arbitration agreement”. Since Art. 16(1) Model Law is mandatory [Holtzmann/Neuhaus,
p. 480], the DIS Rules cannot deviate from this provision, irrespective of whether they apply
Rheinische Friedrich-Wilhelms-Universität Bonn
8
to the instant dispute or not. This is confirmed by Section 24.1 DIS Rules. Therefore, the
Tribunal has authority to rule on its own jurisdiction.
B. CLAIMANT and RESPONDENT concluded a valid arbitration agreement
a. The parties agreed to refer any dispute arising out of the contract to arbitration
16. During their telephone conversation on 3 April 2001 CLAIMANT and RESPONDENT
concluded a sales contract in which they referred to the sales conditions they had agreed upon
in their previous contract dated 15 December 2000 [CLAIMANT’s Exhibit No. 1, 3, 4]. In the
subsequent correspondence, neither CLAIMANT nor RESPONDENT doubted the validity of
the arbitration agreement; only the amount of the discount rate was in dispute.
b. This arbitration agreement meets the writing requirement according to Art. 7(2) Model
Law
17. Pursuant to Art. 7(2) Model Law, the arbitration agreement of 3 April 2001 has to be in
writing in order to be effective. Art. 7(2) Model Law provides that “the writing requirement is
met by reference in the contract to a document containing an arbitration clause if the contract is
in writing and the reference is such to make that clause part of the contract”. Although the
contract dated 3 April 2001 was concluded orally, the formal requirements are satisfied, since
both CLAIMANT and RESPONDENT agreed in their confirmations of the telephone
conversation that the provisions of the contract dated 15 December 2000 should apply. This
contract contained an arbitration clause and both parties signed the contract [CLAIMANT’s
Exhibit No. 2]. These letters of confirmation constitute a record of the orally concluded contract.
Since those letters of confirmation represent an exchange of letters pursuant to Art. 7(2)(2)
Model Law, the contract containing the reference to the arbitration clause is in writing pursuant
to Art. 7(2)(3) Model Law [Holtzmann/Neuhaus, p. 264; Seventh Secretariat Note, A/CN.9/264,
Art. 7, para. 8].
18. The contract of 3 April 2001 need not reproduce the arbitration clause or make explicit
reference to it [Holtzmann/Neuhaus, pp. 263-264; Fifth Working Group Report, A/CN.9/264,
Art. 7, para. 19; Seventh Secretariat Note, A/CN.9/264, Art. 7, para. 8; Houtte, Arb.Int. 2000,
p. 10; Société Van Hopplynus c/ société Coherent Inc. (Belgium); Becker Autoradio USA, Inc.
Rheinische Friedrich-Wilhelms-Universität Bonn
9
v. Becker Autoradiowerk GmbH (U.S.); Central Meat Products Company, Ltd. v. J.V.
McDaniel, Ltd. (GB); Interocean Shipping Co. v. National Shipping & Trad. Corp. (U.S.);
Comité populaire de la Municipalité d’El Mergeb c/ société Dalico contractors (Fr)]. What is
only sought is a written form of assent to arbitration from each party [Holtzmann/Neuhaus,
p. 263; Secretariat Study on the N.Y. Convention, A/CN.9/168, para. 21].
19. Mr. Storck stated in his letter of 7 December 2000 that, since this had been
RESPONDENT’s first order, he would send them a formal contract [CLAIMANT’s Exhibit
No. 1]. Both CLAIMANT and RESPONDENT were convinced that they entered into a long
time contractual relationship, so that RESPONDENT would place all future orders with
CLAIMANT. For the first order, the parties drafted a formal contract in order to facilitate
further transactions. The purpose of this formal contract was to enable the parties to refer to it
and thereby incorporate its terms in subsequent agreements. The reference is perfectly
sufficient, since the parties agreed to this procedure. This is affirmed by RESPONDENT’s
statement of defence [statement of defence para. 12]. Since Mr. Black knew that the contract
dated 15 December 2000 contained an arbitration clause, he accepted the renewal of the
arbitration clause by referring himself to the sales conditions of the previous contract [cf.
Fouchard et al, pp. 294-295; Société Bomar Oil NV c/ ETAP (Fr); Houtte, Arb.Int. 2000,
p. 10].
20. Thus, the general reference to the conditions of the contract dated 15 December 2000
which contained an arbitration agreement in section 13 [CLAIMANT’s Exhibit No. 2] is
sufficient in order to incorporate this clause in the contract concluded on 3 April 2001 [cf.
Republic of Nicaragua v. Standard Fruit Company (U.S.); Becker Autoradio USA Inc. v.
Becker Autoradiowerk GmbH (U.S.); Hamburg Award, 18 March 1994 (Germany)].
21. An arbitration agreement between CLAIMANT and RESPONDENT has been concluded
and the writing requirement pursuant to Art. 7(2) Model Law is met.
C. The parties chose validly the “German Institution of Arbitration”
22. The arbitration agreement is effective even though it refers to the arbitration rules of the
“German Arbitration Association” instead of the “German Institution of Arbitration”.
Rheinische Friedrich-Wilhelms-Universität Bonn
10
a. CLAIMANT’s reference to an erroneously designated institution leaves the validity of
the arbitration clause unaffected
23. In cases in which the arbitration clause does not refer in an unambiguous way to an
existing arbitration institution, it is essential to differentiate between the reference to a non-
existent and to an erroneously designated institution [Boisséson, p. 480; Derains/Schwartz,
p. 91]. If CLAIMANT and RESPONDENT had chosen a non-existent institution, the
arbitration clause might be invalid [Fouchard et al, pp. 283-286; Scalbert/Marville, Rev.arb.
1988, p. 119; Born, p. 189], whereas the designation of an arbitral institution existing in
reality, but referred to under a false name will leave the validity of the arbitration clause
unaffected if the actually meant institution can be clearly determined by interpreting the
parties’ agreement [Fouchard et al, p. 284; Boisséson, p. 481].
24. In fact, the designation “German Arbitration Association” is simply an erroneous
translation of the official German name “Deutsche Institution für Schiedsgerichtsbarkeit
e.V.”. CLAIMANT and RESPONDENT both meant the “German Institution of Arbitration”,
as is evidenced by the interpretation of the arbitration agreement contained in the contract
dated 15 December 2000.
b. The parties intended to choose the “German Institution of Arbitration”
25. In first instance, full respect has to be given to the real intent of the parties rather than the
wording of the agreement [Laboratorios Grossman, S.A. v. Forest Laboratories, Inc. (U.S.);
Mangistaumunaigaz Oil Production Assoc. v. United World Trade Inc. (GB); ICC Court of
Arbitration, 6709/1991 (Fr); 1434/1975 (Fr)].
26. The arbitration clause contained in the contract dated 15 December 2000 clearly indicates
that CLAIMANT chose the German Institution of Arbitration for conducting any dispute
arising out of the contractual relationship with RESPONDENT. RESPONDENT accepted this
arbitration clause by signing the contract. Since there is no other arbitration institution in
Germany that conducts international commercial arbitrations [Procedural Order No. 2,
Clarification No. 32], it is obvious that only the “German Institution of Arbitration” could be
meant. The designation “German Arbitration Association” does not deviate so much from the
correct name “German Institution of Arbitration” that RESPONDENT could have been
mistaken as to which arbitration institution the arbitration clause refers [cf. ICC Court of
Rheinische Friedrich-Wilhelms-Universität Bonn
11
Arbitration, 2626/1977 (Fr)]. This being so, there is no danger that the objectively chosen
arbitration institution would be confounded with an institution not covered by the will of the
parties [société Tuvomon c/ société Amaltex (Fr); cf. ICC Court of Arbitration, 5103/1988
(Fr)].
27. Furthermore, if the parties involved come from different countries with no connection to
the place specified in the arbitration clause or to the arbitration rules of an institution, it can be
assumed that it must have been their wish to refer their dispute to an institution primarily used
for international rather than for domestic arbitration [Derains/Schwartz, p. 90; ICC Court of
Arbitration, 3460/1980 (Fr); 6709/1991 (Fr); Rosgoscirc v. Circus Show, Corp. (U.S.)].
CLAIMANT has its seat in Equatoriana, RESPONDENT in Mediterraneo. There is no
indication that either party had any connections to Germany or Danubia [Procedural Order
No. 2, Clarification No. 31]. Accordingly, it can be assumed that they chose Danubia and the
“German Institution of Arbitration” as a neutral basis for any disputes.
c. CLAIMANT can rely on the doctrine of ‘effet utile’
28. Furthermore, CLAIMANT can also rely on the doctrine of ‘effet utile’, generally applied
in arbitration proceedings. According to this doctrine, arbitration clauses which are not
exactly clear have to be interpreted in a way that gives reasonable sense to them, rather than
rendering those clauses ineffective [Fouchard et al, pp. 279-280; ICC Court of Arbitration,
1434/1975 (Fr); 3380/1980 (Fr); 4145/1984 (Fr); 5103/1988 (Fr); Star Shipping A.S. v.
China Nat. Foreign Trade Transp. Corp. (GB)]. Arbitration agreements in which the chosen
arbitration institution is named wrongly [ICC Court of Arbitration, 6709/1991 (Fr);
5103/1988 (Fr); 3460/1980 (Fr); 4472/1984 (Fr); Société Asland c/ société European Energy
Corp. (Fr); société Tuvomon c/ société Amaltex (Fr); Epoux Convert c/ société Droga,
14 December 1983 (Fr); Republic Nicaragua v. Standard Fruit Co. (U.S.); Lucky-Goldstar
Intern., Ltd. V. Ng Moo Kee Engineering, Ltd (Hongkong); Laboratorios Grossman, S.A. v.
Forest Laboratories, Inc. (U.S.); Astra Footwear Industry v. Harwyn Intern., Inc. (U.S.); HZI
Research Center v. Sun Instruments Japan Co, Inc. (U.S.)] or that are ambiguous in any other
way appear quite often in arbitral proceedings [Star Shipping A.S. v. China Nat. Foreign
Trade Transp. Corp. (GB); Mangistaumunaigaz Oil Production Assoc. v. United World Trade
Inc. (GB); Tennessee Imports, Inc. v. Pier Paulo Filippi and Prix Italia (U.S.); Bulgaria
Court of Arbitration case No. 151/1984 (Bulgaria); German Coffee Association,
Rheinische Friedrich-Wilhelms-Universität Bonn
12
28 September 1992 (Germany)]. Nevertheless, both arbitral Tribunals and courts give full
effect to the arbitration clause if the parties intended to choose a particular organization and if
no other arbitration institution exists which could have been alternatively meant [ICC Court
of Arbitration, 2626/1977 (Fr); 5103/1988 (Fr); observation de la ICC Court of Arbitration,
6709/1991 (Fr); note de la sentence Epoux Convert c/ société Droga (Fr); Laboratorios
Grossman, S.A. v. Forest Laboratories, Inc. (U.S.)]. In the case at hand, the interpretation of
the arbitration clause according to the parties’ intent clearly leads to the conclusion that they
intended to choose the “German Institution of Arbitration”
29. Thus, pursuant to the doctrine of ‘effet utile’, full effect has to be given to the arbitration
clause including the choice of the “German Institution of Arbitration”, especially since the
parties’ decision in favor of arbitration has to be respected in any circumstances [Moses H.
Cone Memorial Hospital v. Mercury Constr. Corp. (U.S.); Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth Corp. (U.S.); Republic of Nicaragua v. Standard Fruit Co. (U.S.);
Laboratorios Grossman, S.A. v. Forest Laboratories, Inc. (U.S.)].
d. Courts are inclined to give effect even to highly ambiguous arbitration clauses
30. Even if the interpretation of the arbitration agreement did not lead to an unequivocal
conclusion with regard to the meaning of the agreement, that would not necessarily render the
arbitration clause invalid. [Lucky-Goldstar Intern., Ltd v. Ng Moo Kee Engineering. Ltd
(Hongkong); Astra Footwear Industry v. Harwyn Intern., Inc. (U.S.); Euro-Mec Import, Inc.
v. Pantrem & C., S.p.A (U.S.); HZI Research Center v. Sun Instruments Japan Co., Inc.
(U.S.)]. In Astra Footwear Industry v. Harwyn International, Inc. (U.S.), the parties agreed to
arbitrate any disputes before the New York Chamber of Commerce, but this institution had
ceased to arbitrate disputes when it merged to become the New York Chamber of Commerce
& Industry. Nevertheless, the United States District Court of New York referred the case to
arbitration, although the parties had chosen an arbitration institution which did not exist any
more. In Laboratorios Grossman, S.A. v. Forest Laboratories, Inc. (U.S.), the parties chose
the rules and procedures of the “Pan-American Arbitration Association”, an organization
which had never existed. The Court decided that “if it should be found that the parties really
intended to arbitrate pursuant to the rules of the Inter-American Commercial Arbitration
Commission, an organization created by the Pan American Union, then arbitration before that
Tribunal should be directed, and nothing further need be determined”. Those examples
Rheinische Friedrich-Wilhelms-Universität Bonn
13
illustrate the courts’ attitude towards arbitration: they are inclined to give effect even to highly
ambiguous arbitration clauses to respect the parties’ intent to refer a dispute to arbitration [cf.
Redfern/Hunter, p. 172 including further references].
e. The reference to the „German Arbitration Association“ belongs to the category
„erroneously designated institutions“
31. Since the interpretation of the arbitration agreement between CLAIMANT and RESPON-
DENT clearly leads to the conclusion that the “German Institution of Arbitration” was meant,
there can be no doubt that the case at hand belongs to the category “erroneously designated
institutions” and not to the category “non-existent institutions”. Consequently, the choice of
the “German Institution of Arbitration”, including its procedural rules, is valid.
D. CLAIMANT and RESPONDENT concluded a valid arbitration agreement, irrespec-
tive of the validity of the commercial contract
32. The validity of the arbitration agreement between CLAIMANT and RESPONDENT is not
affected by the fate of the commercial contract dated 3 April 2001. RESPONDENT claims
that the arbitration agreement did not come into existence because no sales contract was
concluded between the parties. That is not correct for several reasons. In first instance,
CLAIMANT and RESPONDENT concluded a valid sales contract [cf. paras. 51 et seq.]
a. According to the doctrine of separability, the arbitration agreement is not affected by
the alleged invalidity of the commercial contract
33. Assuming, but not conceding, that no sales contract was concluded between CLAIMANT
and RESPONDENT, the validity of the arbitration agreement stands unimpaired.
34. The arbitration agreement constitutes a contract separate from the commercial contract
[Prima Paint v. Flood & Conklin Mfg. Co. (U.S.); observations de la cited as: ICC Court of
Arbitration, 2694/1977 (Fr); note de la sentence Epoux Convert c/ société Droga (Fr);
Comité populaire de la Municipalité d’el Mergeb c/ société Dalico contractors (Fr)]. In this
regard, it is of no relevance whether the arbitration clause is included in the principal contract
or whether it physically constitutes a separate agreement; in either case the arbitration agree-
ment is independent from the principal contract [Gosset C. Soc. Carapelli (Fr); Born, p. 56].
Rheinische Friedrich-Wilhelms-Universität Bonn
14
35. According to the separability-doctrine, which the rules of procedure in Danubia [Art.
16(2) Model Law] and also Art. II(3) New York Convention have adopted, the arbitral
agreement “survives any birth defect or acquired disability of the principal agreement”
[Varady/Barcelor/Mehren, p. 125; Holtzmann/Neuhaus, p. 480; Redfern/Hunter, p. 175,
Prima Paint v. Flood & Conklin Mfg. Co. (U.S.); Republic of Nicaragua v. Standard Fruit
Co. (U.S.); Interocean Shipping Co. v. National Shipping & Trad. Corp. (U.S.); Globe Union
Industrial Corp. v. G.A.P. Marketing Corp. (U.S.); Enrique C. Wellbers S.A.I.C. A.G. v.
Extraktionstechnik Gesellschaft für Anlagenbau (Argentina); Fung Sang Trading, Ltd. V. Kai
Sun Sea Products and Food Co., Ltd. (Hongkong); Gosset C. Soc. Carapelli (Fr); Hecht c/
Société Buisman’s (Fr); société Deko c/ G. Dingler et société Meva (Fr); Epoux Convert c/
société Droga (Fr)].
36. The main purpose of the separability doctrine is to maintain the competence of a validly
appointed arbitral Tribunal, irrespective of the fate of the principal contract [Broches, p. 75;
Fouchard et al, p. 216; cf. Holtzmann/Neuhaus, p. 259]. With regard to this pursued object, it
would frustrate the intent of an arbitration clause if a party could prevent an arbitration
agreement from coming into force by claiming that the commercial contract had not been
validly concluded or was terminated either by performance or by some intervening event
[Redfern/Hunter, p. 176; Fouchard et al, pp. 226-227; Harbour Assurance Co. v. Kansa Gen.
Int’l Ins. Co., (GB)]. Besides, it often it cannot be decided easily if the objections raised by
RESPONDENT are justified. That is why it is essential that an independent Tribunal decides
on these objections.
b. The application of the doctrine of separability is not excluded since the commercial
contract is not void ab initio
37. The application of the doctrine of separability is not excluded by RESPONDENT’s
allegation that no contract was concluded. Although it is true that some authorities exclude
the application of the doctrine of separability in cases in which the principal contract is void
ab initio [Varady/Barcelo/Mehren, pp. 126, 138; Broches, p. 78], however, this exception
does not apply to this case. Those authorities only refer to situations in which there had never
been a contract between the parties. In the case at hand, both parties were convinced that they
had concluded a contract during the telephone conversation, which is proved by their letters
of confirmation dated 3 April 2001 [CLAIMANT’ s Exhibit No. 3,4]. This is sufficient prima
Rheinische Friedrich-Wilhelms-Universität Bonn
15
facie evidence that a contract between CLAIMANT and RESPONDENT has been concluded
[Varady/Barcelo/Mehren, p. 126; Interocean Shipping Co. v. National Shipping & Trad.
Corp. (U.S.)]. Special regard has to be paid to the Legislative History of Art. 16 Model Law
which explicitly states that Art. 16(1) Model Law (as part of the procedural law of Danubia)
applies regardless of whether there are initial defects or later grounds for nullity of the
arbitration agreement [Seventh Secretariat Note, Analytical Commentary on Draft Text
A/CN.9./264, Art. 16, para. 2]. Therefore the doctrine of separability governs the case at issue.
c. The arbitration agreement itself does not suffer from any defects
38. Since the arbitration agreement constitutes a contract independent from the commercial
contract pursuant to the doctrine of separability, the arbitration clause can only be recognized
as invalid if it itself suffers from any defects in will (e.g. mistake, fraud) [All-Union Export-
Import Assoc. Sojuznefteexport (Moscow) v. JOC OIL (USSR); Euro-Mec Import, Inc. v.
Pantrem & C., S.p.A. (U.S.); Tennessee Imports, Inc. v. Pier Paulo Filippi and Prix Italia
(U.S.)]. Neither of these defects is alleged with regard to the arbitration agreement concluded
between CLAIMANT and RESPONDENT.
39. The parties have agreed upon the arbitration clause including the choice of the “German
Institution of Arbitration”. CLAIMANT and RESPONDENT concluded a valid and binding
arbitration agreement, notwithstanding the validity or invalidity of the commercial contract.
III. The CISG is the law applicable to the contract and its
formation
40. Since the provisions concerning the formation of contracts under the domestic law of
Equatoriana significantly differ from those of the CISG, it is essential to identify the CISG as
the law applicable to the contract [cf. Procedural Order No. 1, para. No. 8; Procedural Order
No. 2, Clarification No. 35]. CLAIMANT and RESPONDENT have subjected their
contracted to the commercial law of Equatoriana (A.). The choice of law clause at issue
cannot be interpreted as implied exclusion of the CISG (C.). It rather means that the CISG as
the pertinent part of the Equatorian law (B.) is applicable to the contract.
Rheinische Friedrich-Wilhelms-Universität Bonn
16
A. The parties have chosen the commercial law of Equatoriana
41. CLAIMANT and RESPONDENT agree that by virtue of reference to their contract of
15 December 2000 [CLAIMANT’s Exhibit No. 2] the choice of law clause contained therein
also applies to the contract at issue [Statement of Claim, paras. 5, 12; Statement of Defence,
para. 14, 15]. According to this clause, the contract is to be “subject to the commercial law of
Equatoriana” [CLAIMANT’s Exhibit No. 2]. Both Section 23.1 DIS Rules and Art. 28(1)
Model Law provide that “the arbitral Tribunal shall decide the dispute in accordance with
such rules of law as are chosen by the parties as applicable to the substance of the dispute”.
B. The CISG is the pertinent part of the commercial law of Equatoriana for the contract
at issue
42. Equatoriana is a party to the CISG [Statement of Claim, para. 13]. Thus, the CISG has
become part of the commercial law of Equatoriana and confers rights and obligations upon
the parties [Procedural Order No. 2, Clarification No. 5]. CLAIMANT and RESPONDENT
have their places of business in different states, and the contract at issue is one for the sale of
goods for the purposes of the CISG, Art. 1(1). Accordingly, the transaction falls within the
scope of the CISG. Since the CISG covers only the international sale of goods whereas the
domestic law of Equatoriana applies to all (other) contracts of sale, the CISG is the lex
specialis and excludes application of the law governing domestic transactions [cf. Procedural
Order No. 2, Clarification No. 5]. Thus, under the commercial law of Equatoriana the CISG is
the law governing contracts like the one between CLAIMANT and RESPONDENT.
C. Reference to the “commercial law of Equatoriana” does not amount to an implied
exclusion of the CISG
43. The choice of law clause making the contract subject to the commercial law of
Equatoriana does not amount to an implied exclusion of the CISG because the clause does not
indicate the parties’ actual intent to exclude the CISG. While a few decisions even deny the
possibility of an implied exclusion [Orbisphere Corp. v. United States (U.S.); LG Landshut,
5 May 1995 (Germany)], the majority opinion accepts it as possible to exclude the CISG
according to Art. 6 CISG implicitly as long as there is an adequate indication of the parties’
actual intent to do so [Assante Technologies, Inc. v. PMC-Sierra, Inc. (U.S.); Staudinger et
Rheinische Friedrich-Wilhelms-Universität Bonn
17
al/Magnus, Art. 6, note 20; Schlechtriem et al, Art. 6 note 13]. The parties have to indicate
their intention in an objectively recognizable way [Schlechtriem et al, Art. 6 note 16]. A
choice of law clause in an international sale of goods contract that selects the law of a
Contracting State means that the CISG applies to the contract and not the domestic law of the
Contracting State unless the domestic law is referred to in particular in the clause. This is the
rule supported and applied by the overwhelming majority of national courts, arbitral Tribunals
and scholars around the world [BGH, 25 November 1998 (Germany); BGH, 23 July 1997
(Germany); Kantonsgericht Nidwalden, 3 December 1997 (Ch); Assante Technologies, Inc. v.
PMC-Sierra, Inc. (U.S.); Sté Ceramique Culinaire de France v. Sté Musgrave Ltd. (Fr); ICC
Court of Arbitration, 8324/1995; 7844/1994; 7656/1994; 6653/1993 (Fr); Schiedsgericht der
Handelskammer Hamburg, 21 March 1996 (Germany); Int. Schiedsgericht der
Bundeskammer der gewerblichen Wirtschaft – Vienna, 15 June 1994 (Austria); for further
reference cf. UNCITRAL digest of CISG article 6 case law, para. 8; Honnold et al, Art. 77
note 1; Staudinger et al/Magnus, Art. 6, note 24 et seq.; Schlechtriem et al, Art. 6 note 16;
Bonell/Liguori, ULR 1997, p. 392; Drago/Zoccolillo, The Metropolitan Corporate Counsel
2002, p. 9].
44. The rule is also supported by legislative history. It corresponds to the intention of the
majority of delegations at the Vienna Conference. During the Conference, a large number of
delegations rejected proposals by Canada and Belgium [A/CONF.97/C.1/L.45] suggesting that
the domestic sales law, and not the Convention, would have to be applied whenever the
parties chose the law of a Contracting State for their contract [Official Records, p. 250].
Therefore, it is generally agreed that the CISG applies if the parties simply chose the law of a
Contracting State.
45. According to these requirements, reference to the “commercial law of Equatoriana” in
general was not sufficient to exclude the application of the CISG. One generally accepted way
of an implied exclusion of the CISG is making reference to a certain (domestic) codification,
such as the U.C.C. or any other national commercial code [Assante Technologies, Inc. v.
PMC-Sierra, Inc. (U.S.); Staudinger et al/Magnus, Art. 6, note 30; Schlechtriem (2nd ed.) et
al, Art. 6 note 14]. However, since there is no formal field of commercial law in Equatoriana
[Procedural Order No. 2, Clarification No. 35] reference simply to the “commercial law of
Equatoriana” is by no means comparable to cases where the parties refer to a certain
commercial code.
Rheinische Friedrich-Wilhelms-Universität Bonn
18
46. Furthermore, interpretation of the choice of law clause pursuant to Art. 8 CISG shows that
it cannot reasonably be understood as an exclusion of the CISG. The “commercial law” of
Equatoriana covers various kinds of transactions [Procedural Order No. 2, Clarification
No. 35; cf. Art. 1 Model Law, note 2: “the term ‘commercial’ should be given a wide
interpretation so as to cover matters arising from all relationships of a commercial nature”].
Accordingly, applying the standards for interpretation as set forth in Art. 8(2) CISG, one has
to consider that a reasonable person would understand “commercial law of Equatoriana” in a
very broad sense. This understanding of the term “commercial law” in Equatoriana is
significant as well as the fact that the CISG is the part of the commercial law of Equatoriana
governing international sale of goods [cf. para. 42]. Especially in the context of an
international sale of goods contract, a reasonable person could only understand the reference
to the “commercial law of Equatoriana” as including the CISG. Since the choice of law clause
was not a negotiated term [Procedural Order No. 2, Clarification No. 30], there is no
indication of a different understanding of the clause by either of the parties. Thus,
interpretation according to Art. 8 CISG confirms that the choice of law clause does not
amount to an implied exclusion of the CISG.
47. Further supporting this conclusion, recent case law shows that strong requirements have to
be met with respect to a clear indication in the choice of law clause that the parties intended to
opt out of the CISG. In Assante Technologies, Inc. v. PMC-Sierra, Inc. [U.S.], the court held
that even the choice of the law of one region of a Contracting State (“the laws of the State of
California”) does not suffice to presume the exclusion of the CISG. It stated that in the
absence of clear language indicating that both contracting parties intended to opt out of the
CISG the contention that the choice of law of a Contracting State precludes the applicability
of the CISG has to be rejected. This decision manifests the tendency to resolve any doubts in
favor of the applicability of the CISG. This tendency corresponds to the ratio of Art. 6 CISG,
which was intended to discourage exclusion of the CISG by implication [Secretariat
Commentary, p. 44; Ziegel/Samson, Art. 6].
48. Finally, one cannot draw a different conclusion from the fact that the law of Equatoriana
(and thus the CISG) would have to be applied even without the choice of law clause. In
practice, contracts often contain clauses of pure declaratory nature. Especially if there is a
constellation that could give rise to doubts as to the applicable law, parties may wish to clarify
which law applies. In the case at hand where buyer and seller have their places of business in
Rheinische Friedrich-Wilhelms-Universität Bonn
19
two different states and even choose a third state as the place of arbitration, determining the
applicable law appears to be a complex issue. It cannot be assumed that the parties had
knowledge of the relevant rules of conflict of laws, and thus it made perfect sense for them to
choose the law of Equatoriana.
49. Furthermore, the application of the CISG does not render the choice of law clause
meaningless. It still has the important effect of determining the law applicable to all those
issues that are not governed by the CISG [cf. Art. 4 CISG], thus avoiding the necessity to
invoke conflict of laws rules to solve such issues.
50. After all, the requirements for an implied exclusion of the CISG have not been met.
Reference merely to the “commercial law” is not sufficiently particular reference to the
domestic law of Equatoriana to indicate clearly the intention of the parties to exclude the
application of the CISG. Thus, CLAIMANT and RESPONDENT have not excluded the CISG
by virtue of the choice of law clause. The CISG is the law applicable to the contract.
IV. A contract of sale was concluded between CLAIMANT
and RESPONDENT
51. The parties reached an agreement that was sufficiently definite (A.). If the Tribunal finds
that the parties did not agree on the discount, a valid contract of sale has still been concluded
(B.).
A. A contract containing all elements of Art. 14 CISG has been concluded during the
telephone conversation between Mr. Storck and Mr. Black
a. Mr. Storck and Mr. Black concluded a contract during their conversation
52. According to Art. 11 CISG, a contract can be concluded orally. Mr. Storck explicitly
declared that the written form of the contract dated 15 December 2000 was necessary only
because it was the first order RESPONDENT was placing with CLAIMANT [CLAIMANT’s
Exhibit No. 1]. Neither Mr. Storck nor Mr. Black showed any intention for a requirement as to
a written form for future contracts.
Rheinische Friedrich-Wilhelms-Universität Bonn
20
53. In the fax of 3 April 2001, Mr. Black, purchasing manager of RESPONDENT, declared
that he considered himself to have concluded a contract of sale during the telephone
conversation he and Mr. Storck had held the same day [CLAIMANT’s Exhibit No. 3]. The
responding fax shows the same was true for Mr. Storck [CLAIMANT’s Exhibit No. 4].
Therefore, there is no doubt that both parties were in agreement that they had concluded a
contract and intended to be bound. A contract has thus been concluded.
b. The agreement contained all elements of Art. 14 CISG
54. As the agreement indicates the goods, fixes the quantity and determines the price, it is
sufficiently definite to culminate in the formation of a contract according to Art. 14 CISG.
During their conversation, Mr. Storck and Mr. Black agreed that RESPONDENT would
purchase 1350 tons of polypropylene film. Payment, shipping and similar terms were to be the
same as in the written contract of 15 December 2000 [CLAIMANT’s Exhibit No. 3, No. 4].
Several adjustments were made for the dates of shipment and the price RESPONDENT had to
pay, since the list price had risen to $ 1,900 per ton [CLAIMANT’s Exhibit No. 3]. According
to the commitments Mr. Storck made in his letter of 7 December 2000, he agreed that
RESPONDENT would receive a discounted price [CLAIMANT’s Exhibit No.4]. They hereby
fixed the exact price for the goods, although they did not expressly mention the percentage of
the discount RESPONDENT was to receive [cf. paras. 64 et seq.]. Therefore, a valid contract
of sale was concluded during the telephone conversation between Mr. Storck and Mr. Black
on 3 April 2001, containing all elements of an offer set by Art. 14 CISG.
B. Irrespective of the fact whether there was an agreement on the discount, a contract
would still have been validly concluded even if the parties had not fixed the discount
55. The requirements Art. 14 CISG stipulates for an offer need not be met as to the formation
of the contract between CLAIMANT and RESPONDENT, since they did not follow the offer-
acceptance pattern of Part II of the CISG (a.). An agreement on the discount was not
necessary on order to conclude a valid contract of sale (b.). The domestic law of Equatoriana
has no impact on the present contract (c.).
Rheinische Friedrich-Wilhelms-Universität Bonn
21
a. Since CLAIMANT and RESPONDENT did not conclude the contract by virtue of
offer and acceptance, the requirements of Art. 14 CISG were not mandatory for the
formation of the contract at issue
56. If a contract is not concluded by means of an exchange of “offer” and “acceptance”, the
requirements of Art. 14 CISG are not mandatory. Although most of the provisions of Part II
of the CISG are only concerned with the formation of a contract by the exchange of two
corresponding declarations, the CISG does by no means contain a mandatory requirement that
a contract must be concluded by exchanging an identifiable “offer” and “acceptance”
[Schlechtriem/Lüderitz, Einheitliches Kaufrecht, p. 188; Honnold et al, before Art. 14 note
132.1]. This point of view is confirmed by Artt. 18(3) and 29(2) CISG. According to these
rules, a contract may be concluded simply by “performing an act” (Art. 18(3) CISG) or with
an agreement that did not arise out of an exchange of declarations, but out of a document
which is signed by both parties (Art. 29(2) CISG) [Honnold et al, Art. 14 note 137.5;
Roth/Kunz, RIW 1997, p. 19]. Art. 14 CISG only applies if there is nothing else than a
proposal that may (or may not) constitute an “offer” or an “invitation to make offers”
[Neumayer/Ming, Art. 14 note 11; Honnold et al, before Art. 14 note 132.1; Neumayer, FS-
Lorenz, p. 751]. CLAIMANT and RESPONDENT did not agree upon the purchase by
exchanging isolated declarations of “offer” and “acceptance”. Instead, they had a telephone
conversation that matured into the present contract of sale. Since they did not follow the offer-
acceptance pattern of Part II of the CISG, the requirements of Art. 14 CISG were not
mandatory for the present contract [Honnold et al, Art. 14 note 137.5; Neumayer, FS-Lorenz,
p. 751; Enderlein/Maskow, Art. 55 note 2; Staudinger et al/Magnus, Art. 55 note 5].
b. An agreement on the discount was not necessary in order to conclude a valid contract
57. It was not necessary to determine the discount RESPONDENT was to receive during the
telephone conversation. RESPONDENT claims that the price was not determined and
therefore no contract of sale could have been concluded under Article 14 CISG [Statement of
Defence No. 18]. Assuming that there was no agreement on the discount, due regard has to be
paid to the wording of Art. 14 CISG. This provision states that the issue is whether a proposal
is sufficiently definite to constitute an offer [cf. Neumayer/Ming, Art. 14 note 11; Honnold et
al, Art. 14 note 137.5]. It does not, however, constitute minimum requirements for contracts
[Staudinger et al/Magnus, Art. 55 note 5; Bucher, p. 66].
Rheinische Friedrich-Wilhelms-Universität Bonn
22
58. Art. 14 CISG provides that an offer is sufficiently definite if it determines the price or
makes provision to do so. According to this rule, such an offer is always deemed to be
effective. The offeree of such a declaration is free to conclude a contract by way of an
acceptance according to Art. 18 CISG. However, it may not be argued e contrario that a CISG
contract which does not fix or make provision for determining the price is not sufficiently
definite and thus not binding, as the CISG itself proves the contrary: According to Art. 55
CISG there can be a “validly concluded” contract without a predetermined price
[Bianca/Bonell/Eörsi, Art. 55 note 2.2; Lookofsky, (CISG in USA) p. 28; Schlechtriem, note
212].
59. With regard to Artt. 6 and 8(1) CISG it becomes evident that under CISG rules the most
important element of a contract is the intention of the parties to be bound by their agreement
[Honnold et al, (1st edition) Art. 14 note 134 “The Ultimate Criterion: Indication of Intent to
be Bound”; Sono, p. 121; Enderlein/Maskow, Art. 14 note 5, 11; Soergel et
al/Lüderitz/Fenge, before Art. 14 note 1; Karollus, p. 62; Roth/Kunz, RIW 1997, p. 19]. A
contract that the parties intended to conclude must be respected [Adami, Revue de droit des
affaires internationales 1989, p. 107; Honnold et al, Art. 14 note 137.8; Ludwig, p. 297]. A
missing provision for the determination of the price cannot hinder the conclusion of the
contract, since it would run contrary to this general principle of the CISG [cf. Adami, Revue
de droit des affaires internationales 1989, p. 110; Karollus, p. 62]. The result would be that
the parties’ willingness to be bound would be disregarded.
60. Additionally, the necessity for contracts without a predetermined price must not be
ignored. These contracts facilitate international commercial relationships and have already
been very common in the life of commerce for a long time [cf. Rabel, p. 7]. The mechanism
for the determination of the price provided by the CISG in Art. 55 CISG responds to this need
of trade and corresponds to the purpose of the CISG to facilitate and promote trade [Adami,
Revue de droit des affaires internationales 1989, p. 120]. If a predetermined price was a
mandatory requirement of a contract, this mechanism would be useless. [Bianca/Bonell/Eörsi,
Art. 55 note 2.2.4].
61. Furthermore, it has to be considered that Art. 14 CISG is only concerned with problems
regarding offers, while Art. 55 CISG deals with the issue of contracts [Bianca/Bonell/Eörsi,
Art. 55 note 2.2.4; Neumayer, FS-Lorenz, p. 750]. Therefore, it is no longer appropriate to
concentrate on the issue whether there was a determined discount in the offer after it became
Rheinische Friedrich-Wilhelms-Universität Bonn
23
evident that CLAIMANT and RESPONDENT intended to be bound by contract
[Bianca/Bonell/Eörsi, Art. 55 note 2.2.4; Bucher, p. 58]. Instead, the offer becomes irrelevant
and the contract in itself proves that it is sufficiently definite, irrespective of whether the offer
contained a provision for the determination of the exact rate of the discount [cf. Ludwig,
p. 297; Bianca/Bonell/Eörsi, Art. 55 note 2.2.4]. As Art. 55 CISG provides, the question is
not “Was there a contract?” but rather “What were its terms?” [cf. Honnold et al, Art. 55 note
325.1]. The answer under CISG rules is that the parties are considered to have impliedly made
reference to the price generally charged at the time of the conclusion of the contract for such
goods sold under comparable circumstances in the trade concerned [Art. 55 CISG]. For this
reason, it was not necessary for CLAIMANT and RESPONDENT to determine the discount
RESPONDENT was to receive during their conversation.
62. In conclusion, even if the Tribunal finds that there was no agreement on the discount, the
parties have nevertheless concluded a valid contract. The discount is then to be determined
according to Art. 55 CISG.
c. The domestic law of Equatoriana has no impact on the validity of the contract
63. The domestic law of Equatoriana does not affect the validity of the contract between
CLAIMANT and RESPONDENT. Art. 4 CISG states that the Convention is not concerned
with the validity of a contract “except as otherwise expressly provided” in the CISG. As Artt.
55 and 14 CISG explicitly deal with price determination, the “validly concluded” contract in
Art. 55 CISG refers to reasons for invalidity under national laws other than invalidity for an
open price [Nicholas, p. 255; Staudinger et al/Magnus, Art. 14 note 34]. Therefore, these
rules prevail over the Equatorian law [Schlechtriem/Lüderitz, Einheitliches Kaufrecht, p. 189;
Magnus, IPRax 1996, p. 146].
V. The contract was concluded including a 4% discount
64. The parties agreed on a discount of 4% (A.). Even if the Tribunal finds that the parties did
not agree on a discount, the contract has been concluded including a 4% discount (B.).
Rheinische Friedrich-Wilhelms-Universität Bonn
24
A. The agreement the parties reached during their telephone conversation can only be
interpreted as including a discount of 4% from CLAIMANT's list price
a. The agreement has to be interpreted according to Article 8 CISG
65. During their telephone conversation Mr. Black and Mr. Storck agreed to apply
CLAIMANT's conditions of sale as stated in the contract dated 15 December 2000
[cf. CLAIMANT’s Exhibits No. 3 and No. 4]. RESPONDENT claims that this agreement leads
to an 8% discount, similar to the discount given for the last order. However, it can be clearly
shown that a 4% discount was agreed upon and that the 8% discount was an incentive offer
only applying to the previous order. To determine the meaning of the agreement, it has to be
interpreted according to Art. 8 CISG. This article applies to any kind of declaration and also
to statements about the price made during a telephone conversation. [cf. OGH, 10 November
1994 (Austria); MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova d'Agostino, S.p.A
(U.S.); Honnold et al, Art. 8 p. 116; Amato, J. L. & Comm 1993, p. 6; Secretariat
Commentary to Art. 12, para. 7]
66. Pursuant to Art. 8(1) CISG, the agreement reached is to be interpreted according to the
intent of each party "where the other party … could not have been unaware what that intent
was". Due consideration has to be given to all relevant circumstances of the case
[Art. 8(3) CISG].
b. RESPONDENT could not have been unaware of CLAIMANT's intent to grant only a
4% discount
67. When Mr. Storck agreed on 3 April 2001 to sell polypropylene film to RESPONDENT,
he intended to grant a discount of 4%. The 8% discount granted in the previous contract was
an incentive one time offer applying to the previous contract only.
68. CLAIMANT drafted the written contract of 15 December 2000 because RESPONDENT
placed an order with CLAIMANT for the first time [cf. CLAIMANT’s Exhibit No. 1]. By
stating to draft a formal contract only for this first time order, CLAIMANT expressed the
intention of being able to refer to that contract in future agreements. When Mr. Storck did so
during the telephone conversation, Mr. Black could not have been unaware that only those
explicit provisions or implicit arrangements are referred to, that were drafted to serve as
Rheinische Friedrich-Wilhelms-Universität Bonn
25
samples for future contracts. The letter sent to Mr. Black on 7 December 2000 announcing the
first agreement between CLAIMANT and RESPONDENT points out that the discount of 8%
is the highest discount ever given by CLAIMANT to any customer for any purchase. It is
dealt with in a section separated from the announcement of the prospect of a long term
relationship [cf. CLAIMANT’s Exhibit No. 1]. Therefore, Mr. Black could not have been
unaware that the price stated in the written contract reflecting the 8% discount was an
incentive offer only and not meant to govern all subsequent contracts to be concluded by the
parties.
69. Since RESPONDENT knew that the 8% discount was unusually high and the list price
already low [cf. CLAIMANT’s Exhibit No. 1], RESPONDENT could not have been unaware
of its incentive nature. Also, as sales manager of a large international company, Mr. Black
could not have been unaware that special discounts are given in the polypropylene market for
special reasons such as first time orders [cf. Procedural Order No. 2, Clarification No. 40].
70. In his letter of 7 December 2000 Mr. Storck pointed out that CLAIMANT’s discount to
favored customers is 4%. In the same letter he promised that RESPONDENT would always
receive CLAIMANT's best price, since a long term business relationship was expected
[CLAIMANT’s Exhibit No. 1]. When Mr. Black subsequently called Mr. Storck to place an
order with CLAIMANT, they moved along the expected line of a long term
relationship. Thus, Mr. Black could expect Mr. Storck to keep his promise and receive the
best price. A best price is received as long as no other customer is given a better price.
CLAIMANT never granted a discount higher than 4% to any customer except on first orders
as incentive offers [cf. Procedural Order No. 2, Clarification No. 38, Procedural Order
No. 3, Clarification No. 5]. Therefore, a 4% discount was CLAIMANT’s best price and by
granting 4% to RESPONDENT Mr. Storck kept his promise. Since RESPONDENT knew that
CLAIMANT grants a 4% discount to favored customers, RESPONDENT could not have
been unaware that a 4% discount reflected CLAIMANT’s best price. Consequently,
Mr. Black could not have been unaware of Mr. Storck's intent to grant a 4% discount.
c. Neither Mr. Storck nor any other reasonable person could have been aware of
Mr. Black's intent to contract with a discount of 8% from the list price
71. Mr. Storck had no reason to believe that Mr. Black was only willing to contract with
CLAIMANT in the event that an 8% discount was accepted. Mr. Black first revealed his
Rheinische Friedrich-Wilhelms-Universität Bonn
26
intention as late as in his letter of 10 April 2001 [cf. CLAIMANT’s Exhibit No. 7].
72. Furthermore, the written contract of 15 December 2000 does not mention the discount
given. When Mr. Black referred to that written contract during their telephone conversation,
Mr. Storck could not know that this reference meant to introduce an 8% discount as a
requirement to contract [cf. CLAIMANT’s Exhibit No. 3].
73. Consequently, Mr. Storck could not have been aware of Mr. Black's intent to conclude a
contract with a discount of 8% while on the other hand Mr. Black could not have been
unaware of Mr. Storck's intent to sell with an 4% discount. Thus, the agreement of the parties
must be understood as including a 4% discount.
74. For the reasons given above [paras. 67 - 72], the agreement also includes a 4% discount if
interpreted according to the understanding of a reasonable person of the same kind as
RESPONDENT [Art. 8(2) CISG; cf. LG Hamburg, 26 September 1990 (Germany)]
B. If the Tribunal finds that the parties' agreement did not fix the price, a contract has
nevertheless been concluded including a 4% discount
75. In this event the price has to be determined according to Art. 55 CISG [cf. paras. 55 et
seq.]. Pursuant to this provision, the parties are considered to have made reference to the price
generally charged for such goods sold under comparable circumstances in the trade concerned
[Art. 55 CISG]. The dispute between CLAIMANT and RESPONDENT did not arise with
regard to the list price of the polypropylene film but with regard to the discount on that price.
Nevertheless, there is no doubt that Art. 55 CISG is applicable not only to list prices but also
to discounts as the award of discounts is a "comparable circumstance" for the purpose of
Art. 55 [cf. Schlechtriem/Hager, Art. 55 note 8; Enderlein/Maskow, Art. 55 note 10]. Since
CLAIMANT’s discount practice of granting a 4% discount to favored customers is much like
the practice in the industry [cf. Procedural Order No. 2 Clarification No. 40], it is the practice
"under comparable circumstances in the trade concerned" [cf. ICC Court of Arbitration,
8324/1995 (Fr); BG St. Gallen, 3 July 1997 (Ch); Witz et al, Art. 55 note 3]. Therefore, even
if assuming the parties had not reached an agreement that includes a 4% discount, the contract
between CLAIMANT and RESPONDENT would have been concluded including a 4%
discount.
Rheinische Friedrich-Wilhelms-Universität Bonn
27
VI. RESPONDENT was in breach of its obligations under
the contract
76. As shown above, on 3 April 2001 CLAIMANT and RESPONDENT concluded a contract
of sale for 1350 tons of polypropylene film, the price being $ 1,900 per ton with a 4%
discount. RESPONDENT’s obligations under this contract were to pay the price and to take
delivery of the goods, Artt. 53 et seq. CISG. RESPONDENTS’s fax of 2 May 2001 was an
anticipatory breach according to Art. 72(1) CISG (A.) This fax was a repudiation of the
contract (B.), and RESPONDENT was not entitled to refuse performance (C.).
A. RESPONDENT’s fax of 2 May 2001 was an anticipatory breach of contract
77. With its fax of 2 May 2001 RESPONDENT repudiated and thereby breached the contract
between the parties according to Art. 72(1) CISG. This article refers to a situation where “it is
clear that one of the parties will commit a fundamental breach”. Such a future fundamental
breach may be clear because of the words or actions of the party which constitute a
repudiation of the contract [Secretariat Commentary on 1978 Draft Con. Art. 63, para. 2].
Accordingly, one party’s express and definite refusal to perform its obligations constitutes a
fundamental breach of contract, except where the party is entitled to refuse performance
[Zürich Chamber of Commerce, 31 May 1996 (Ch); OLG Düsseldorf, 10 February 1994
(Germany); Schlechtriem et al, Art. 25, note 17, 22; Stoll, RabelsZ 1998, pp. 624 et seq.;
Koch, p. 256].
B. RESPONDENT’s fax was an anticipatory repudiation of the contract concluded on
3 April 2001
78. Like every statement or conduct of the parties relevant under the CISG, the fax has to be
interpreted with regard to the guidelines of Art. 8 CISG. RESPONDENT stated in the fax that
it had “. . . placed an order with Polyfilm GmbH for the polypropylene film that (it) had
expected to purchase from (CLAIMANT)” [CLAIMANT’s Exhibit No. 10]. This statement
unequivocally proves RESPONDENT’s intent not to perform any obligations under its
contract with CLAIMANT. Moreover, the fact that RESPONDENT had entered into another
contract for the supply of the same goods it was to receive from CLAIMANT makes clear that
Rheinische Friedrich-Wilhelms-Universität Bonn
28
the refusal was meant to be definite. Thus, the statement RESPONDENT made in its fax of
2 May 2001 can reasonably be interpreted only as an express and definite refusal to perform
any obligation under the contract.
C. RESPONDENT was not entitled to refuse performance
79. Since the contract concluded on 3 April 2001 contained a 4% discount, RESPONDENT
had no right to make its performance dependent on an 8% discount. Furthermore,
CLAIMANT had complied with all of its own obligations under the contract until receiving
RESPONDENT’s fax of 2 May 2001. There can be no doubt that CLAIMANT was ready,
willing and able to perform its obligations, and that it would have done so absent
RESPONDENT’s anticipatory repudiation. CLAIMANT had already booked space for
shipment of the first installment [CLAIMANT’s Exhibits No. 6, No. 9]. Thus, there was neither
breach of contract nor any other misconduct on behalf of CLAIMANT that could have given
RESPONDENT a right to avoid the contract according to Art. 49 CISG. Likewise,
RESPONDENT had no right to claim that the contract was invalid for any reason under the
domestic law of Equatoriana, which applies to the contract as far as its validity is concerned,
Art. 4(a) CISG. In particular, the domestic law of Equatoriana does not provide for invalidity
of the contract under theories of mistake or otherwise [Procedural Order No. 2, Clarification
No. 36]. Consequently, RESPONDENT had no right to repudiate the contract or to refuse
performance of its obligations respectively. Thus, its fax of 2 May 2001 constituted a breach
of contract.
VII. EQUAFILM is entitled to claim damages for lost
profit in the amount of $ 575,477.98
80. As a consequence of RESPONDENT’s breach, CLAIMANT is entitled to claim damages
(A.). Since the damages have to be calculated according to Art. 74 CISG, CLAIMANT has
the right to recover its loss of profit, i.e. $ 575,477.98 (B.). RESPONDENT could foresee that
it would cause such damages by its repudiation of the contract (C.). Since CLAIMANT was
in a lost volume situation, it did not fail to take measures to mitigate its loss (D.). Thus,
CLAIMANT is entitled to claim damages in the amount of $ 575,477.98.
Rheinische Friedrich-Wilhelms-Universität Bonn
29
A. RESPONDENT’s breach of contract entitles CLAIMANT to claim damages
81. RESPONDENT repudiated and thereby breached the contract pursuant to Art. 72 CISG
and subsequently failed to perform its obligations as set forth in Artt. 53 et seq. CISG. Both
the repudiation [Art. 72 CISG] and the subsequent failure to perform any obligations
[Art. 61(1)(b)] give CLAIMANT the right to claim damages. Though Art. 72 CISG does not
explicitly provide a right to claim damages, it is clear that in case of an anticipatory
repudiation the aggrieved party is entitled to recover against the other party damages it
suffered as a consequence of the other party’s repudiation [Downs Investments v. Perwaja
Steel (Australia)]. Since it is a basic principle of the CISG that damages are payable in respect
of any breach of contract, it was decided at an early stage of the drafting of the CISG that no
express provision would be necessary [Schlechtriem et al, Art. 72 note 25, 35 with reference
to the legislative history].
82. In any event, CLAIMANT is entitled to claim damages as a consequence of
RESPONDENT’s anticipatory breach.
B. CLAIMANT suffered lost volume damages in the amount of $ 575,477.98 as a
consequence of RESPONDENT’s breach
83. As provided in Art. 74 CISG, CLAIMANT is entitled to recover its lost profit (a.).
CLAIMANT has to be given this loss of profit as compensation for its lost volume damages
(b.). These damages were a consequence of RESPONDENT’s breach (c.). The profit
CLAIMANT lost is 22% of the contract price, i.e. $ 575,477.98 (d.).
a. CLAIMANT is entitled to recover its loss of profit
84. CLAIMANT’s damages have to be calculated according to Art. 74 CISG. This article
provides the basic rule for the calculation of damages for losses suffered by one party as a
result of the other party’s breach [Schlechtriem et al, Art. 74 note 2]. The rule seeks to place
the injured party in the same economic position it would have been in had the other party
properly performed its contractual obligations [Secretariat Commentary on Art. 70 of the
1978 Draft Convention; Delchi Carrier SpA v. Rotorex Corporation (U.S.); Honnold et al,
Art. 74 note 503]. In other words, CLAIMANT has to be given the benefit of its bargain,
Rheinische Friedrich-Wilhelms-Universität Bonn
30
which consists inter alia of the expectation interest [cf. Sutton, Ohio State Journal 1989,
III.B.1.]. As explicitly stated in Art. 74 CISG, this includes CLAIMANT’s loss of profit.
b. CLAIMANT was in a lost volume situation
85. RESPONDENT’s breach of contract diminished the total volume of sales CLAIMANT
could have carried out by one, namely the sale to RESPONDENT. Therefore, it put
CLAIMANT in a lost volume situation [cf. OGH, 28 April 2000 (Austria); Honnold et al,
Art. 74 note 503, Saidov, I.2.(c)]. Due to RESPONDENT’s breach, CLAIMANT suffered lost
volume damages because it lost the (additional) profit it would have earned from the contract
with RESPONDENT.
86. CLAIMANT has to be compensated for its lost volume damages since any subsequent
sale of polypropylene film to other customers cannot be regarded as a replacement for the
contract between CLAIMANT and RESPONDENT [cf. OGH, 28 April 2000 (Austria); Neri
v. Retail Marine Corp. (U.S.); Saidov, I 2. (c)]. The polypropylene film is a standard product
that CLAIMANT would not have manufactured specifically for RESPONDENT [Procedural
Order 2, Clarification No. 53]. CLAIMANT had the manufacturing capacity to produce the
1350 tons for RESPONDENT in addition to any quantity to be produced for other customers
[Procedural Order 2, Clarification No. 54]. Thus, CLAIMANT had the capacity to supply
any quantity to other customers independently from its contract with RESPONDENT. For this
reason, there is no causal connection between RESPONDENT’s breach and any subsequent
transaction. CLAIMANT would have made other sales in any event. Accordingly, in order to
put CLAIMANT in the position it would have been in had the contract with RESPONDENT
been performed, it has to be awarded the additional profit it would have earned from the
contract with RESPONDENT.
c. CLAIMANT’s loss of profit was a consequence of RESPONDENT’s breach
87. RESPONDENT’s breach directly caused CLAIMANT’s lost volume damages.
CLAIMANT would not have suffered a loss of profit but for RESPONDENT’s repudiation of
the contract.
Rheinische Friedrich-Wilhelms-Universität Bonn
31
d. CLAIMANT lost profit in the amount of $ 575,477.98
88. The amount of CLAIMANT’s lost profit can be determined according to CLAIMANT’s
profit margin and the contract price. If RESPONDENT had performed its obligations under
the contract, CLAIMANT would have received $ 2,615,809, the price RESPONDENT was to
pay [cf. CLAIMANT’s Exhibit No. 4]. This price reflected the 4% discount CLAIMANT
granted [cf. paras. 51 et seq.]. CLAIMANT’s profit margin would have been 22% of this sum
[cf. Statement of Claim, para. 11]. The CISG does not explicitly present a method for
calculating the lost profit. However, it is generally agreed that the loss can be calculated using
the seller`s profit margin [OGH, 28 April 2000 (Austria); Delchi Carrier SpA v. Rotorex
Corporation (U.S.); Schlechtriem et al, Art. 74 note 23]. Thus, CLAIMANT’s lost profit was
22% of the contract price, i.e. $ 575,477.98.
89. After all, CLAIMANT suffered lost volume damages as a consequence of
RESPONDENT’s breach. These damages can be measured by CLAIMANT’s loss of profit,
which amounts to $ 575,477.98.
C. The damages were foreseeable to RESPONDENT
90. CLAIMANT’s lost volume damages in the amount of $ 575,477.98 were foreseeable loss
for the purposes of Art. 74 CISG. The pertinent standard for the foreseeability of loss is what
a reasonable person ought to have foreseen at the time of the conclusion of the contract [ICC
Court of Arbitration, 8324/1995 (Fr); Downs Investment v. Perjawa Steel (Australia);
Schlechtriem et al, Art. 74 note 12; Audit, note 172; Bianca/Bonell/Knapp, Art. 74, note 26].
Since CLAIMANT is a merchant and not a non-profit organization, it is obvious to any
reasonable person entering into a contract with CLAIMANT that the latter intends to make
profit from this contract.
91. The actual amount of the damages need not be foreseen [Schlechtriem et al, Art. 74 note
37; Staudinger et al/Magnus, Art. 74 note 31]. However, CLAIMANT’s gross margin of 22%
was foreseeable since it is a percentage that is in line with what can be expected in the
industry [Procedural Order 2, Clarification No. 55].
Rheinische Friedrich-Wilhelms-Universität Bonn
32
D. CLAIMANT did not fail to take measures to mitigate its loss according to Art. 77
CISG
92. Since RESPONDENT bears the burden of proof if it wants to invoke Art. 77 CISG
[Schlechtriem et al, Art. 77 note 12], unless RESPONDENT raises this issue, it need not be
discussed in detail. However, it is obvious that due to the lost volume situation CLAIMANT
did not fail to mitigate its loss as stipulated in Art. 77 CISG. There were no mitigation
measures that were “reasonable in the circumstances to mitigate the loss", Art. 77 CISG [cf.
Saidov, II.4.(d)]. The only mitigation measure one could think of would have been finding a
substitute buyer and reselling the polypropylene film originally reserved for RESPONDENT.
However, as shown above [cf. paras. 85, 86], no sale following RESPONDENT’s breach can
be regarded as a resale because each and every subsequent sale would have been made even if
RESPONDENT had not breached the contract with CLAIMANT. Accordingly, no subsequent
transaction could help to avoid CLAIMANT’s loss. Accordingly, CLAIMANT did not fail to
mitigate the damages. Thus, it is entitled to recover the entire lost profit.
93. After all, CLAIMANT is entitled to claim damages in the amount of $ 575,477.98.
VIII. CLAIMANT is entitled to interest on the damages
94. Art. 78 CISG grants the right to claim interest on damages (A.). The period of time during
which interest has to be charged begins with the date when the damages occurred and ends
with payment (B.).
A. Art. 78 CISG grants the right to claim interest on damages
95. Art. 78 CISG grants the right to interest on any “sum that is in arrears”. This wording
includes damages that are due even though such damages are not explicitly mentioned in Art.
78 CISG [Schlechtriem et al, Art. 78 note 15]. Accordingly, it is not a requirement for the
right to claim interest that there is a claim liquidated or established by judgment [Delchi
Carrier SpA v. Rotorex Corporation (U.S.); Margon Srl v. VN Sadelco (Belgium);
Commercial Court Zürich, 5 February 1997 (Ch); Arbitral Award 52/97, 10 December 1997
(Austria)].
Rheinische Friedrich-Wilhelms-Universität Bonn
33
96. Art. 7 CISG supports this conclusion. Since there is no explicit reference to interest on
damages in Art. 78 CISG, it has to be interpreted according to Art. 7(1) CISG. In doing so,
particular regard is to be had to the purpose of the provision. The intended purpose is to
prevent the debtor’s unjust enrichment and to protect the creditor [Thiele, J. of Int. Com. Law
and Arb. 1998, III.B.5.]. To serve this purpose in cases of breach of contract, the party that
has suffered a loss has to be granted interest on this loss from the time of the breach.
Likewise, gap-filling according to Art. 7(2) CISG would lead to the application of the general
principle of full compensation as expressed in Art. 74 CISG and, thus, to the same conclusion
[Lookofsky, (CISG in Europe) p. 106, note 165]. After all, CLAIMANT is entitled to interest
on its loss of profit.
B. CLAIMANT is entitled to interest from the date payment was due
97. The duty to pay pre-award interest begins when the payment of the sum becomes due
[Honsell, Art. 78 note 8; Staudinger et al/Magnus, Art. 78 note 9]. Payment of damages
becomes due when the damage occurs [Schlechtriem et al, Art. 78 note 15; Staudinger et
al/Magnus, Art. 78 note 10; LG Heidelberg, 3 July 1992 (Germany)]. In the case at hand, the
damages occurred when RESPONDENT failed to pay the price for the goods though payment
was due.
98. The time payment was due has to be determined separately for each of the nine
installments. Each payment was due 30 days after the date CLAIMANT had to deliver an
installment under the contract with RESPONDENT [CLAIMANT’s Exhibit No. 2]. The dates
agreed on for CLAIMANT’s deliveries were the 10th of each month from May 2001 through
January 2002 [CLAIMANT’s Exhibit No. 3].
99. Every time a certain amount was to pay and RESPONDENT failed to do so, the damages
CLAIMANT has suffered increased by the loss of the profit CLAIMANT would have
generated from the pertinent installment. Consequently, CLAIMANT is entitled to interest on
each fraction amount of damages from the time each installment was due, i.e. 30 days from
the 10th day of each month from May 2001 through January 2002.
100. If the Tribunal considers it not appropriate to award interest corresponding to the dates
specified above, interest should be awarded from the beginning of the arbitration proceedings.
With commencement of the arbitration against RESPONDENT, CLAIMANT has taken an
Rheinische Friedrich-Wilhelms-Universität Bonn
34
appropriate measure to secure payment of the damages. In any case, interest should be
awarded from the date of the award.
101. The period of time during which interest should be awarded ends with RESPONDENT’s
payment of the entire amount of damages towards CLAIMANT.
102. As a result, CLAIMANT is entitled to interest on each fraction amount of its loss of
profit from the time each installment by RESPONDENT was due, i.e. 30 days from the 10th
day of each month from May 2001 through January 2002, until payment of the damages.
Request for relief
In the light of the submissions above, Counsel respectfully requests the Tribunal
• to reject the challenge to Dr. Arbitrator
• to find that the Tribunal has jurisdiction to decide on the case at issue
• to declare that the CISG is the law applicable to the contract
• to find that CLAIMANT and RESPONDENT concluded a contract including a 4%
discount
• to declare that RESPONDENT breached the contract by refusing to comply with its
contractual obligations
• to award damages for breach of contract in the amount of $ 575,477.98
• to award interest on the said sum from the day payment was due, i.e. 30 days from the
10th of each named month, up to payment of the damages
(signed)_____________________________________________________________________
12 December 2002