MEMORANDUM FOR RESPONDENT - Willem C. Vis Moot · LUDWIG-MAXIMILIANS-UNIVERSITÄT MÜNCHEN TWENTY FOURTH ANNUAL WILLEM C. VIS INTERNATIONAL COMMERCIAL ARBITRATION MOOT 7 APRIL TO

LUDWIG -MAXIMILIANS-UNIVERSITÄT MÜNCHEN

_____________________________________________________

TWENTY FOURTH ANNUAL

WILLEM C. VIS INTERNATIONAL COMMERCIAL ARBITRATION MOOT

7 APRIL TO 13 APRIL 2017

MEMORANDUM FOR RESPONDENT

LUDWIG-MAXIMILIANS-UNIVERSITÄT MÜNCHEN

On Behalf of:

SantosD KG

77 Avenida O Rei

Cafucopa

Mediterraneo

RESPONDENT

Against:

Wright Ltd

232 Garrincha Street

Oceanside

Equatoriana

CLAIMANT

COUNSEL:

Antonio Aufiero ∙ Dina Kagan ∙ Katharina Lillich ∙

Mareike Neumayer ∙ Tobias Targosz ∙ Miriam Trotter


_____________________________________________________

I

TABLE OF CONTENTS

INDEX OF AUTHORITIES ...................................................................................................... IV

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

INDEX OF ARBITRAL AWARDS ......................................................................................... XXII

INDEX OF LEGAL SOURCES .............................................................................................. XXV

LIST OF ABBREVIATIONS ................................................................................................ XXVI

STATEMENT OF FACTS ........................................................................................................... 1

SUMMARY OF ARGUMENTS ..................................................................................................... 3

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

I. THE TRIBUNAL SHOULD GRANT RESPONDENT SECURITY FOR ITS COSTS .................... 4

A. The Tribunal Has the Power to Order Security for Costs ...................................... 4

1. Neither the Terms of Reference nor the Rules restrict the Tribunal’s power to order

security for costs ........................................................................................................................... 4

(a) The Terms of Reference do not exclude the Tribunal’s power to order security

for costs ................................................................................................................................. 5

(b) A request for security for costs does not unlawfully amend the Terms of

Reference ............................................................................................................................... 5

(i) The restrictive effect of Art. 4.21 of the Rules does not extend to security

for costs ......................................................................................................................... 5

(ii) Even if the restrictive effect of Art. 4.21 of the Rules extended to security

for costs, the Tribunal would still have the power to order security for costs ... 6

2. Initiating a new arbitral proceeding to obtain security for costs would undermine

the latter’s nature .......................................................................................................................... 7

B. The Tribunal Should Exercise Its Power to Order Security for Costs ................... 7

1. RESPONDENT is in danger of suffering irreparable harm ............................................... 8

(a) CLAIMANT’s incapacity to comply with an award is evidenced by its balance

sheets ...................................................................................................................................... 8

(b) CLAIMANT’s non-compliance with a previous award further indicates that

RESPONDENT faces the risk of being deprived of its award .......................................... 9

(c) Seeking third party funding implies that CLAIMANT is impecunious ................. 10

2. RESPONDENT is not prevented from relying on CLAIMANT’s poor financial situation10

3. RESPONDENT’s request is urgent ..................................................................................... 11

4. RESPONDENT met its burden of proof ........................................................................... 11


_____________________________________________________

II

5. An order for security for costs is just in the present circumstances ........................... 12

II. THE CLAIMS WERE SUBMITTED OUT OF TIME AND ARE THEREFORE INADMISSIBLE 13

A. CLAIMANT’s Email of April 1, 2016 Constituted the Failure of Negotiations ....... 13

B. CLAIMANT Failed to Meet the Sixty-Day Time Limit ........................................... 14

1. Initiation of arbitration requires the receipt of the request for arbitration by

RESPONDENT .............................................................................................................................. 15

2. Even if the receipt of the request for arbitration by the CAM-CCBC was decisive,

the arbitration was not commenced in time ........................................................................... 16

(a) The request of May 31, 2016 was incomplete and thus invalid .......................... 16

(i) The submitted power of attorney was defective ........................................... 16

(ii) The registration fee had not been paid in full ................................................ 17

(b) The defective request was not remedied ................................................................ 17

(i) The President does not have the power to extend the contractual deadline

for commencing arbitration by virtue of Art. 6.4 of the Rules ........................... 18

(ii) The amended power of attorney does not have a retroactive effect .......... 18

(iii) The payment of the remainder of the registration fee does not have a

retroactive effect ......................................................................................................... 19

C. The Delay is Not Justified by the Reasoning Brought Forward by CLAIMANT ... 19

1. The “pro-arbitration” rule does not extend to the question of CLAIMANT’s

compliance with the contractual deadline............................................................................... 20

2. CLAIMANT’s right to access to justice is not jeopardized ............................................. 20

3. Justification of the delay cannot be based on the cases cited by CLAIMANT ............ 21

4. CLAIMANT cannot justify its exceeding of the deadline by relying on the swift

transmission of the amended request to RESPONDENT by the CAM-CCBC .................... 22

III. CLAIMANT IS NOT ENTITLED TO THE ADDITIONAL PAYMENTS OF USD 2,285,240.00

AND USD 102,192.80 ............................................................................................................ 23

A. RESPONDENT Is Not Obliged to Pay Another USD 2,285,240.00 for the Fan

Blades ........................................................................................................................... 23

1. The fixed exchange rate of the Addendum applies to the entire Contract ............... 23

(a) The sale of the Parties made an agreement on a fixed exchange rate necessary24

(b) The Addendum’s wording supports the application of the fixed exchange rate25

(c) CLAIMANT’s subsequent behavior leads to the conclusion that the Parties

agreed on the fixed exchange rate .................................................................................... 25

(d) The contra proferentem rule does not apply ................................................................ 26


_____________________________________________________

III

2. In any case, the exchange rate at the time of contract conclusion has to be applied26

(a) Fixing an exchange was necessary to comply with the Contract’s principles and

underlying circumstances .................................................................................................. 27

(i) Fixing an exchange rate corresponds with the Contract’s principle of risk-

sharing .......................................................................................................................... 27

(ii) The de-risking strategy calls for the fixation of an exchange rate ............... 28

(iii) The alleged principle of complete reimbursement is of no relevance ........ 28

(b) The Parties’ earlier conduct leads to the applicability of the exchange rate at the

time of contract conclusion .............................................................................................. 29

B. RESPONDENT Is Not Obliged to Pay the Levy ..................................................... 30

1. The Contract does not oblige RESPONDENT to bear the Levy ................................... 30

2. The CISG does not oblige RESPONDENT to bear the Levy ........................................ 30

(a) RESPONDENT is not obliged to pay the Levy under Art. 54 CISG ..................... 31

(i) Art. 80 CISG exempts RESPONDENT from its obligation to pay the Levy 31

(ii) The legal notion of Art. 35(2) CISG confirms that RESPONDENT is

exempt from its obligation to bear the Levy .......................................................... 32

(b) Art. 57 CISG does not oblige RESPONDENT to bear the Levy ........................... 33


_____________________________________________________

IV

INDEX OF AUTHORITIES

Cambridge Business English Dictionary

Cambridge University Press, Cambridge 2011

Cited as: Cambridge Business English Dictionary

In § 165

ALTENKIRCH, Markus Die Sicherheitsleistung für die Prozesskosten, Ein

Vergleich des deutschen und englischen

Zivilprozessrechts und ein Vorschlag für das

Schiedsverfahrensrecht

Sellier. European Law Publishers, Munich 2013

Cited as: ALTENKIRCH

In §§ 21, 28, 59

BAMBERGER, Heinz G.

ROTH, Herbert

Beck’scher Online-Kommentar BGB

C. H. Beck, 40th ed., Munich 2016

Cited as: AUTHOR in: Bamberger/Roth

In § 123

BENEDICK, Gilles Die Informationspflichten im CISG und ihre

Verletzung, Unter Berücksichtigung des

Zusammenspiels mit dem nationalen schweizerischen

Recht


Cited as: BENEDICK

In § 170

BERG, Albert Jan van den International Arbitration: The Coming of a New Age?

ICCA Congress Series, Vol. 17

Kluwer Law International, Alphen aan den Rijn 2013

Cited as: AUTHOR in: van den Berg

In § 53


_____________________________________________________

V

BERGER, Bernhard

Arbitration Practice – Security for Costs: Trends and

Developments in Swiss Arbitral Case Law

ASA Bulletin (2010/Vol. 28, Issue 1), pp. 7-81

Cited as: BERGER

In § 45

BERGER, Bernhard

KELLERHALS, Franz

International and Domestic Arbitration in Switzerland

Stämpfli Publications, 3rd ed., Berne 2015

Cited as: BERGER/KELLERHALS

In §§ 8, 57

BIANCA, Cesare M.

BONELL, Michael J.

Commentary on the International Sales Law

Giuffré, Milan 1987

Cited as: AUTHOR in: Bianca/Bonell

In § 170

BINDER, Peter International Commercial Arbitration and Conciliation

in UNCITRAL Model Law Jurisdiction

Sweet & Maxwell, 3rd ed., London 2010

Cited as: BINDER

In § 89

BISHOP, R. Doak

CRAWFORD, James

ET AL.

Foreign Investment Disputes: Cases, Materials and

Commentary

Kluwer Law International, 2nd ed., Alphen aan den

Rijn 2014

Cited as: BISHOP ET AL.

In § 54

BÖCKSTIEGEL, Karl-Heinz

KRÖLL, Stefan

ET AL.

Arbitration in Germany: The Model Law in Practice


Rijn 2015

Cited as: AUTHOR in: Böckstiegel et al.

In § 35


_____________________________________________________

VI

BORN, Gary B.

International Commercial Arbitration Volume I-III


Rijn 2014

Cited as: BORN

In §§ 3, 49, 53, 101, 105, 108, 123

BRABANT, Alexander

LAPUNZINA VERONELLI, Andrea

ELLINGTON, Sarah

Et al.

Third Party Funding in International Arbitration,

Practical Consequences and Tactical Considerations

International Arbitration Law Review (2016/Vol. 19,

Issue 5), pp. 113-120

Cited as: BRABANT ET AL.

In § 59

BRUNNER, Christoph UN-Kaufrecht – CISG. Kommentar zum

Übereinkommen der Vereinten Nationen über

Verträge über den internationalen Warenkauf von 1980

Stämpfli Verlag AG, Bern 2004

Cited as: BRUNNER

In § 106

BUSCH, Danny

MACGREGOR, Laura (eds.)

The Unauthorised Agent, Perspectives from European

and Comparative Law

Cambridge University Press, Cambridge 2009

Cited as: AUTHOR in: The Unauthorised Agent

In § 93

CAM-CCBC Model Arbitration Clause

http://www.ccbc.org.br/Materia/1070/modelo-de-

clausula

Last visited: 16 January 2017

Cited as: Model Clause of the CAM-CCBC

In § 107


_____________________________________________________

VII

CARON, David D.

CAPLAN, Lee M.

PELLONPÄÄ, Matti

The UNCITRAL Arbitration Rules: A Commentary

Oxford University Press, New York 2006

Cited as: CARON ET AL.

In § 90

CHUPRUNOV, Ivan The Arbitration Agreement and Arbitrability: Effects

of Contractual Assignment on an Arbitration Clause –

Substantive and Private International Law Perspectives

Repr. in: Austrian Yearbook on International

Arbitration (Vol. 2012), pp. 31-61

Cited as: CHUPRUNOV

In § 108

DARWAZEH, Nadia

LELEU, Adrien

Disclosure and Security for Costs or How to Address

Imbalances Created by Third-Party Funding

Journal of International Arbitration (2016/Volume 33,

Issue 2), pp. 125-150

Cited as: DARWAZEH/LELEU

In § 41

DRAETTA, Ugo

Short Practical Notes on Security for Costs in

Arbitration

The Paris Journal of International Arbitration

(2011/Issue 1), pp. 49-60

Cited as: DRAETTA

In §§ 41, 45, 57

FERRARI, Franco

KIENINGER, Eva-Maria

MANKOWSKI, Peter

Et al.

Internationales Vertragsrecht, Kommentar

C. H. Beck, 2nd ed., Munich 2012

Cited as AUTHOR in: Ferrari et al.

In §§ 123, 170, 176, 183


_____________________________________________________

VIII

FERRARI, Franco

KRÖLL, Stefan

Conflict of Laws in International Arbitration

Sellier., Munich 2011

Cited as: AUTHOR in: Ferrari/Kröll

In § 89

FOUCHARD, Philippe

GAILLARD, Emmanuel

SAVAGE, John

Fouchard, Gaillard, Goldman on International

Commercial Arbitration

Kluwer Law International, The Hague 1999

Cited as: FOUCHARD/GAILLARD/SAVAGE

In § 108

GARNER, Bryan A. Black’s Law Dictionary

West Group, 5th ed., Eagan 1979

Cited as: BLACK

In § 74

GERBAY, Rémy

RICHMAN, Lisa

SCHERER, Maxi

Arbitrating under the 2014 LCIA Rules: A User’s

Guide


Cited as: GERBAY/RICHMAN/SCHERER

In § 28

GIRSBERGER, Daniel

VOSER, Nathalie

International Arbitration: Comparative and Swiss

Perspectives

Nomos/Schulthess, Zurich 2016

Cited as: GIRSBERGER/VOSER

In § 79

VON GOELER, Jonas Third Party Funding in International Arbitration and

its Impact on Procedure


Cited as: VON GOELER

In § 41


_____________________________________________________

IX

GOLDSMITH, Aren;

MELCHIONDA, Lorenzo

Third party funding in international arbitration:

everything you ever wanted to know (but were afraid to

ask): Part 2

International Business Law Journal (2012/Vol. 2),

pp. 221-243

Cited as: GOLDSMITH/MELCHIONDA

In §§ 8, 57, 59

GU, Weixia

Security for Costs in International Commercial

Arbitration

Journal of International Arbitration (2005/Vol. 22,

Issue 3), pp. 167-206

Cited as: GU

In § 3

HUBER, Peter

MULLIS, Alastair

The CISG, A New Textbook for Students and

Practitioners


Cited as: AUTHOR in: Huber/Mullis

In § 176

ICC ICC International Court of Arbitration Bulletin

(2014/Vol. 25), p.29 (New Claims)

Cited as: ICC Bulletin (2014/Vol. 25, Supplement)

In § 17

KARRER, Pierre;

DESAX, Marcus

Security for Costs in International Arbitration, Why,

when, and what if…

In: Liber amicorum Karl-Heinz Böckstiegel,

pp. 339 et seqq.

Carl Heymanns, Cologne 2001

Cited as: KARRER/DESAX

In §§ 3, 21, 59


_____________________________________________________

X

KOLLER, Christian Arbitration Agreement and Arbitrability –

Contemplations on Set-off and Counterclaim in

International Commercial Arbitration

Repr. in: Austrian Arbitration Yearbook 2008

Cited as: KOLLER in: Austrian Arbitration Yearbook 2008

In § 38

KRÖLL, Stefan

MISTELIS, Loukas

VISCASILLAS, Pilar P

UN Convention on Contracts for the International Sale

of Goods (CISG)

C. H. Beck, Munich 2011

Cited as: AUTHOR in: Kröll et al.

In §§ 106, 157, 170, 176, 183

KÜHNER, Detlev The Impact of Party Impecuniosity on Arbitration

Agreements: The Example of France and Germany


Issue 6), pp. 807-818

Cited as: KÜHNER

In § 105

KUNZ, Catherine A. Enforcement of Arbitral Awards under the New York

Convention in Switzerland – An overview of the

current practice and case law of the Swiss Supreme

Court

ASA Bulletin (2016/Vol. 34, Issue 4), pp. 836-865

Cited as: KUNZ

In § 89

LEONARD, Sarah

DHARMANANDA, Kanaga

Peace Talks Before War: The Enforcement of Clauses

for Dispute Resolution Before Arbitration

Journal of International Arbitration (2006/Vol. 23),

pp. 301 et seqq.

Cited as: LEONARD/DHARMANANDA

In § 63


_____________________________________________________

XI

LEW, Julian D. M.

MISTELIS, Loukas A.

KRÖLL, Stefan M.

Comparative International Commercial Arbitration

Kluwer Law International, The Hague/London/New

York 2003

Cited as: LEW/MISTELIS/KRÖLL

In §§ 90, 94

MAGNUS, Ulrich

HABERMANN, Norbert

J. von Staudingers Kommentar zum Bürgerlichen

Gesetzbuch, Allgemeiner Teil 5

Sellier – de Gruyter, 1st ed., Berlin

Cited as: AUTHOR in: Staudinger BGB

In § 63

MARTINEK, Michael

MAGNUS, Ulrich

J. von Staudingers Kommentar zum Bürgerlichen

Gesetzbuch Band 2, (CISG)

Sellier – de Gruyter, lst ed. 2013

Cited as: AUTHOR in: Staudinger

In §§ 106, 124, 170

MAZZONI, Alberto

AONDOAKKA, Chief M.K.

UNIDROIT Principles of International Commercial

Contracts 2010

International Institute for the Unification of Private

Law (UNIDROIT), Rome 2010

Cited as: Official Commentary

In § 93

MOSES, Margaret L.

The Principles and Practice of International

Commercial Arbitration

Cambridge University Press, 2nd ed., New York 2012

Cited as: MOSES

In §§ 14, 21, 53


_____________________________________________________

XII

NEWMAN, Lawrence W.

DAVIDSON, Charles M.

Arbitrability of Timeliness Defense: Who decides?

Journal of International Arbitration (2004/Vol. 14),

pp. 137-144

Cited as: NEWMAN/DAVIDSON

In § 112

ÖHLBERGER, Veit Arbitration Agreement and Arbitrability – China-

Related Contracts: What to Consider When Agreeing

on CIETAC Arbitration

Repr. in: Austrian Yearbook of International

Arbitration 2009

Cited as: ÖHLBERGER in: Austrian Yearbook of

International Arbitration 2009

In § 34

PILTZ, Burghard Internationales Kaufrecht – Das UN-Kaufrecht in

praxisorientierter Darstellung

C.H. Beck, 2nd ed., Munich 2008

Cited as: PILTZ

In § 106

PÖRNBACHER, Karl

THIEL, Sophie

Kostensicherheit in Schiedsverfahren

German Arbitration Journal (SchiedsVZ) (2010/Vol. 8,

Issue 1), pp. 14-21

Cited as: PÖRNBACHER/THIEL

In §§ 3, 21, 45

REDFERN, Alan

HUNTER, Martin

BLACKABY, Nigel

PARTASIDES, Constantine

Law and Practice of International Commercial

Arbitration

Sweet & Maxwell, 4th ed., London 2014

Cited as: REDFERN ET AL.

In §§ 90, 94


_____________________________________________________

XIII

REDFERN, Alan;

HUNTER, Martin

BLACKABY, Nigel

PARTASIDES, Constantine

Redfern and Hunter on International Arbitration

Oxford University Press, 6th ed., Oxford 2015

Cited as: REDFERN/HUNTER

In §§ 21, 34, 53, 89, 123

REDFERN, Alan;

O’LEARY, Sam

Why It Is Time for International Arbitration to

Embrace Security for Costs

Arbitration International (2016/Vol. 32, Issue 3),

pp. 397-413

Cited as: REDFERN/O’LEARY

In §§ 3, 21, 28, 49, 57

ROSENGREN, Jonas Contract Interpretation in International Arbitration


Issue 1), pp. 1-16

Cited as: ROSENGREN

In § 137

RUBINS, Noah In God We Trust, All Others Pay Cash, Security for

Costs in International Commercial Arbitration

The American Review of International Arbitration

(2000/Vol. 11, Issue 3), pp. 307-378

Cited as: RUBINS

In §§ 57, 59

SÄCKER, Franz Jürgen

RIXECKER, Roland

OETKER, Hartmut

LIMPERG, Bettina

Münchener Kommentar zum Bürgerlichen

Gesetzbuch, Vol. 3


Cited as: AUTHOR in: MüKo

In §§ 157, 170


_____________________________________________________

XIV

VON SCHLABRENDORFF, Fabian The Arbitral Tribunal’s Authority to Order Security for

Underlying Claims: Some Observations on How (Not)

to Exercise It

In: Liber amicorum Elsing, pp.493-507

Deutscher Fachverlag Gmbh, Frankfurt 2015

Cited as: VON SCHLABRENDORFF

In §§ 3, 28, 59

SCHMIDT, Karsten Münchener Kommentar zum Handelsgesetzbuch,

Vol. 5

C. H. Beck, 3rd ed., Munich 2013

Cited as: AUTHOR in: MüKo HGB

In § 157

SCHWENZER, Ingeborg Schlechtriem & Schwenzer, Commentary on the UN

Convention on the International Sale of Goods (CISG)

Oxford University Press, 4th ed., Oxford 2016

Cited as: AUTHOR in: Schlechtriem/Schwenzer

In §§ 106, 123, 124, 137, 157, 167, 170, 176, 183

SCHWENZER, Ingeborg Schlechtriem/Schwenzer, Kommentar zum

einheitlichen UN-Kaufrecht. Das Übereinkommen der

Vereinten Nationen über Verträge über den

internationalen Warenkauf, CISG

C.H. Beck, 6th ed., Munich 2013

Cited as: AUTHOR in: Schlechtriem/Schwenzer Ger. ed.

In § 170


_____________________________________________________

XV

SHAHDADPURI, Khushboo H. Third-Party Funding in International Arbitration:

Regulating the Treacherous Trajectory

Asian International Arbitration Journal (2016/Vol. 12,

Issue 2), pp. 77-106

Cited as: SHAHDADPURI

In § 41

STRAUBE, Frederico José

FINKELSTEIN, Claudio

CASADO FILHO, Napoleão (eds.)

The CAM-CCBC Arbitration Rules 2012, A

Commentary, Eleven International Publishing, The

Hague 2016

Cited as: AUTHOR in: Commentary of CAM-CCBC Rules

In §§ 14, 84, 90

SUN, Wei

WILLEMS, Melanie

Arbitration in China. A Practitioner’s Guide


Cited as: SUN/WILLEMS

In § 63

SUTTON, David St. John

GILL, Judith

GEARING, Matthew

Russel on Arbitration

Sweet & Maxwell, 23rd ed., London 2007

Cited as: SUTTON/GILL/GEARING

In § 14

TSANG, Alan Transnational rules on interim measures in

international courts and arbitrations

International Arbitration Law Review (2011/Vol. 14,

Issue 2), pp. 35-42

Cited as: TSANG

In § 14

VÖGELE, Alexander

BORSTELL, Thomas

ENGLER, Gerhard

Verrechnungspreise, Betriebswirtschaft, Steuerrecht


Cited as: AUTHOR in: Vögele/Borstell/Engler

In § 127


_____________________________________________________

XVI

VOGENAUER, Stefan

KLEINHEISTERKAMP, Jan

Commentary on the UNIDROIT Principles of

International Commercial Contracts (PICC)

Oxford University Press, Oxford 2009

Cited as: AUTHOR in: Vogenauer/Kleinheisterkamp

In §§ 93, 94, 137

WAINCYMER, Jeff Procedure and Evidence in International Arbitration


Cited as: WAINCYMER

In §§ 28, 34, 53, 54


_____________________________________________________

XVII

INDEX OF CASES

Austria

Oberster Gerichtshof, 19 April 2007

No. 6 Ob 56/07i, CISG-online No. 1495

Cited as: OGH, 19 April 2007 (Austria)

In § 176

Germany

Bundesgerichtshof, 6 February 1986

III ZR 109/84

Neue Juristische Wochenzeitschrift (NJW) 1986, p. 2309

Cited as: BGH, 6 February 1986 (Germany)

In § 63

Bundesgerichtshof, 8 March 1995

VIII ZR 159/94, CISG-online No. 144

Neue Juristische Wochenzeitschrift (NJW) 1995, pp. 2099 et seqq.

Cited as: BGH, 8 March 1995 (Germany)

In § 176

Landgericht Frankenthal, 17 April 1997

No. 8 O 1995/95, CISG-online No. 479

Cited as: LG Frankenthal, 17 April 1997 (Germany)

In § 157

Oberlandesgericht München, 9 July 1997

No. 7 U 2070/97, CISG-online No. 282

Cited as: OLG Munich, 9 July 1997 (Germany)

In § 38


_____________________________________________________

XVIII

Oberlandesgericht Dresden, 27 December 1999

2 U 2723/99, CISG-online No. 511

International Commercial Law (Beilage zur Zeitschrift Transport) 2000, pp. 20 et seqq.

Cited as: OLG Dresden, 27 December 1999 (Germany)

In §§ 106, 124

Bundesgerichtshof, 31 October 2001

No. VIII ZR 60/01, CISG-online No. 617

Neue Juristische Wochenschrift 2002, pp. 370 et seqq.

Cited as: BGH, 31 October 2001 (Germany)

In § 170

Bundesgerichtshof, 2 March 2005

VIII ZR 67/04, Cisg Online No. 999

NJW-Rechts-Report (NJW-RR) 2005, pp. 1218 et seqq.

Cited as: BGH, 2 March 2005 (Germany)

In § 176

Oberlandesgericht Stuttgart, 15 May 2006

5 U 21/06, CISG-online No. 1414

Cited as: OLG Stuttgart, 15 May 2006 (Germany)

In § 106

Oberlandesgericht Düsseldorf, 23 March 2011

No. I-15 U 18/10, CISG-online No. 2218

International Commercial Law 2012, pp. 237 et seqq.

Cited as: OLG Düsseldorf, 23 March 2011 (Germany)

In § 106

VG Augsburg, 27 March 2012

No. Au 3 K 11.1298

Cited as: VG Augsburg, 27 March 2012 (Germany)

In § 35


_____________________________________________________

XIX

Oberlandesgericht Rostock, 18 October 2013

No. 1 Ss 9/13 (11/13)

Rechtspfleger 2015, pp. 160 et seqq.

Cited as: OLG Rostock, 18 October 2013 (Germany)

In § 35

Bundesgerichtshof, 28 May 2014

VIII ZR 410/12, CISG-online No. 2513

NJW-Rechtsprechungs-Report (NJW-RR) 2014, 1202

Cited as: BGH, 28 May 2014 (Germany)

In § 137

Landessozialgericht Baden-Württemberg, 29 January 2015

No. L 7 AS 1406/12

Cited as: LSG Baden-Württemberg, 29 January 2015 (Germany)

In § 35

New Zealand

RJ & AM Smallmon v Transport Sales Limited and Grant Alan Miller

Court of Appeal New Zealand, 22 July 2011

No. C A545/2010 [2011] NZ C A 340, CISG-online No. 2215

Cited as: RJ & AM Smallmon v Transport Sales and Grant Alan Miller (New Zealand)

In § 176

Switzerland

Bundesgericht, 17 August 1995

Transporten Handelsmaatschappij “Vekoma” BV v Maran Coal Corporation

ASA Bulletin 1996, pp. 673 et seqq.

Cited as: Vekoma v Maran Coal (Switzerland)

In § 63


_____________________________________________________

XX

Obergericht des Kantons Zug, 08 November 2011

No. OG 2010 8, CISG-online No. 2425

Cited as: OG Kanton Zug, 08 November 2011 (Switzerland)

In § 106

United Kingdom

Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Hydropower Plant LLP

No. UKSC 35

12 June 2013

Cited as: Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Hydropower Plant

LLP (United Kingdom)

In § 108

Sonatrach Petroleum Corporation (BVI) v Ferrell International Ltd

No. [2001] EWHC 481 (Comm)

Commercial Court, 04 October 2001

Arbitration Law Reports and Review 2001 pp. 693 et seqq.

Cited as: Sonatrach v Ferrell (United Kingdom)

In § 123

USA

Bechtel do Brasil Construcoes Ltda. v UEG Araucária Ltda., 638 F.3d 150 (2d Cir. 2011)

United States Court of Appeals for the Second Circuit

Cited as: Bechtel v UEG Araucária (USA)

In §§ 111, 112

Château des Charmes Wines Ltd v Sabaté USA, Sabaté SA

No. 02-15727, CISG-online No. 1139

U.S. Circuit Court of Appeals (9th Circuit), 05 May 2003

Cited as: Château des Charmes Wines v Sabaté (USA)

In § 106


_____________________________________________________

XXI

Medical Marketing International, Inc. v Internazionale Medico Scientifica S.r.l

No. 99-0380 Section “K” (1), CISG-online No. 387

United States District Court, E. D. of Louisiana, 17 May 1999

Cited as: Medical Marketing International, Inc. v Internazionale Medico Scientifica (USA)

In § 176

Mid-Ohio Sec. Corp. v. Estate of Burns

United States District Court, District of Nevada, 14 June 201, 790 F. Supp. 2d 1263

(D. Nev. 2011)

Cited as: Mid-Ohio Sec. Corp. v. E/O Burns (USA)

In §§ 111, 113

Princz v. Federal Republic of Germany, 813 F. Supp. 22 (D.D.C. 1992)

United States District Court for the District of Columbia, 23 December 1992

Cited as: Princz v Federal Republic of Germany (USA)

In § 105


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XXII

INDEX OF ARBITRAL AWARDS

International Commercial Arbitration Court [ICAC]

ICAC Russia Case No. 107/2002 of 2002

CISG-online No. 1181

Cited as: ICAC Case No. 107/2002

In § 123

International Chamber of Commerce [ICC]

ICC Case No. 2626 of 1977

Cited as: ICC Case No. 2626 (1977)

In § 123


Available at: ICC International Court of Arbitration Bulletin (Vol. 11/No. 1), p. 91


In § 108



In § 57


Assignee of buyer (Republic of Korea) Respondent: Seller (Australia) v Seller (Australia), Award


In § 137


Procedural Order January 2006

Available at: ICC International Court of Arbitration Bulletin (Vol. 25/Supplement), p. 62


In § 17


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XXIII



In § 3



In §§ 45, 57



In § 57


Summarized in: ICC Bulletin (2014/Vol. 25, Supplement), pp. 35 et seq.


In § 17

Iran-United States Claims Tribunal [IUSCT]

The Government of the Islamic Republic of Iran v The Government of the United States of

America

Cases No. A-4 and A-15, Award No. ITL 33-A/A-15(III)-2

1 February 1984

Cited as: Iran v United States (IUSCT)

In § 28

Sylvania Technical Systems Inc v The Government of the Islamic Republic of Iran

Award, Case No. 64 (180-64-1)

27 June 1985

Cited as: IUSCT Case No. 64 (1985)

In § 54


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XXIV

Nederlands Arbitrage Instituut [NAI]

Producer v Construction Company,

Interim Award, NAI Case No. 1694,

12 December 1996

Yearbook Commercial Arbitration 1998

Cited as: NAI Case No. 1694 (1996)

In § 57

Permanent Court of Arbitration [PCA]

Hulley Enterprises Limited (Cyprus) v The Russian Federation

Final Award, Case No. AA226

18 July 2014

Cited as: Hulley Enterprises Limited v The Russian Federation (PCA)

In § 34

South American Silver Limited (Bermuda) v The Plurinational State of Bolivia

Procedural Order No. 10 in: PCA Case No. 2013-15 of 2016

Cited as: South American Silver Ltd v Bolivia (PCA)

In § 3

Swiss Chambers’ Arbitration Institution [SCAI]

Claimants 1-2 v Respondents 1-16, Order No. 1

19 December 2008

ASA Bulletin 2010, pp. 47 et seqq.

Cited as: Claimants 1-2 v Respondents 1-16 (SCAI)

In § 57


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XXV

INDEX OF LEGAL SOURCES

Bürgerliches Gesetzbuch, 2016 (BGB)

CAM-CCBC Arbitration Rules, 2012 (Rules)

Convention on the Recognition and Enforcement of Foreign Arbitral Awards (= New

York Convention), 1958 (NYC)

DIAC Arbitration Rules 2007

DIS Arbitration Rules, 1998 (DIS Rules)

Handelsgesetzbuch, 2016 (HGB)

ICC Rules of Arbitration, 2012 (with Standard Clauses) (ICC Rules)

ICDR International Arbitration Rules 2014

ICSID Convention Arbitration Rules, 2006 (ICSID Rules)

International Arbitration Practice Guideline – Applications for Security for Costs, of the

Chartered Institute of Arbitrators, as revised on 29 November 2016 (Guideline for

Security for Costs)

KLRCA Arbitration Rules 2013

LCIA Arbitration Rules 2014

MKAS Rules

SIAC Rules 2016

Swiss Rules of International Arbitration, 2012 (Swiss Rules)

UNICTRAL Arbitration Rules, 2013 (UNCITRAL Rules)

UNCITRAL Model Law on International Commercial Arbitration, 1985 with

amendments as adopted in 2006 (Model Law)

UNIDROIT Principles of International Commercial Law, 2010 (UPICC)

United Nations Convention on the International Sale of Goods, 1980 (CISG)

Vienna Rules 2013


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XXVI

LIST OF ABBREVIATIONS

§(§) paragraph(s)

% per cent

Answ. Answer

Art(t). Article(s)

BGH Bundesgerichtshof

CAM-CCBC Center for Arbitration and Mediation of the

Chamber of Commerce Brazil-Canada

CEO Chief Executive Officer

cf. confer

Chapt. Chapter

Cl. Claimant

Corp. Corporation

DIAC Dubai International Arbitration Centre

DIS Deutsche Institution für Schiedsgerichtsbarkeit

E/O Estate of

ed. Edition

EQD Equatorianian Denars

et al. et alia/et aliae/et alii

et seq. et sequentia

et seqq. et sequentes

Exh. exhibit

GmbH Gesellschaft mit beschränkter Haftung

ibid. ibidem

ICAC International Commercial Arbitration Court


_____________________________________________________

XXVII

ICAC International Commercial Arbitration Court

ICC International Chamber of Commerce

ICDR International Centre for Dispute Resolution

ICSID International Centre for Settlement of

Investment Disputes

IUSICT Iran-United States Claims Tribunal

KG Kommanditgesellschaft

KLRCA Kuala Lumpur Regional Centre for Arbitration

LCIA London Court of International Arbitration

LG Landesgericht

Ltd Limited

Memo. Memorandum

MKAS Chamber of Commerce and Industry of the Russian

Federation

MüKo Münchener Kommentar

NAI Nederlands Arbitrage Intituut

No. Number

OG Obergericht

OLG Oberlandesgericht

p(p). Page(s)

PCA Permanent Court of Arbitration

Plc Public limited company

Proc. Procedural

R$ Brazilian Reais

Req. Request


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XXVIII

Resp. Respondent

SA Sociedad Anónima

SCAI Swiss Chambers’ Arbitration Institution

SIAC Singapore International Arbitration Centre

SP Sociedad Participada

UN United Nations

UNCITRAL United Nations Commission on International

Trade Law

UNIDROIT International Institute for the Unification of

Private Law

USA United States of America

USD United States Dollar

v versus

Vol. Volume

ZG Zivilgericht


_____________________________________________________

1

STATEMENT OF FACTS

The parties to this arbitration are Wright Ltd (hereinafter “CLAIMANT”) and

SantosD KG (hereinafter “RESPONDENT”, collectively “the Parties”).

CLAIMANT is a producer of fan blades, incorporated in Equatoriana. Its bank account is held in

Equatorianian Denars (EQD).

RESPONDENT is a manufacturer of jet engines, incorporated in Mediterraneo. Its bank account is

held in United States Dollars (USD).

Until 2010 CLAIMANT and RESPONDENT both were subsidiaries of the same

parent company, Engineering International SA. During this time, the

Parties had two cooperations.

27 July 2010 Engineering International SA sold CLAIMANT to its current parent

company Wright Holding Plc. Due to confidentiality, RESPONDENT

only learned about this sale shortly before it was executed.

01 August 2010 Three days after the sale of CLAIMANT, the Parties entered into a

“Development and Sales Agreement” (hereinafter “the Contract”), in

order to jointly develop the TRF 192-I, a new generation of fan blades.

03 August 2010 RESPONDENT was sold.

26 October 2010 The Parties attached an addendum to the Contract (hereinafter “the

Addendum”), agreeing on the purchase of 2,000 clamps for the fan

blades. The Parties further agreed on a fixed exchange rate of

USD 1.00 = EQD 2.01.

14 January 2015 RESPONDENT received the fan blades and the clamps. An invoice was

attached to the delivery. Its depicted purchase price was based on the

exchange rate of USD 1.00 = EQD 2.01.

15 January 2015 As soon as RESPONDENT effected payment of the invoiced amount

and informed CLAIMANT about the transaction, CLAIMANT declared

that a “wrong” exchange rate had been applied. It demanded an

additional payment of USD 2,285,240.00 for the fan blades.

29 January 2015 USD 20,336,367.20 were credited to CLAIMANT’s bank account. The

transferred sum had been investigated for money laundering. In order

to reimburse the investigation expenses, a 0.5 %

levy (USD 102,190.80) was deducted according to the Equatorianian


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2

public law regulation ML/2010C.

09 February 2015 CLAIMANT demanded payment for this levy and repeated its allegation

that the invoice applied a “wrong” exchange rate.

10 February 2015 RESPONDENT declared to have complied with all its contractual

obligations. It pointed out the correctness of the invoice.

31 March 2016 A meeting between the Parties did not lead to an amicable solution, as

they insisted upon their respective positions.

01 April 2016 CLAIMANT declared that it had instructed its lawyer to initiate

arbitration proceedings.

31 May 2016 The CAM-CCBC received CLAIMANT’s request for arbitration.

01 June 2016 The President of the CAM-CCBC required CLAIMANT to supplement

its request for arbitration.

07 June 2016 CLAIMANT supplemented its request.

08 June 2016 The CAM-CCBC notified RESPONDENT about the commencement of

arbitration.

22 August 2016 The Terms of Reference were signed.

05 September 2016 Facts were disclosed which caused serious doubts as to CLAIMANT’s

compliance with an award rendered against it.

06 September 2016 Based on these facts, RESPONDENT submitted a request for security

for costs.


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3

SUMMARY OF ARGUMENTS

CLAIMANT’s and RESPONDENT’s contractual relationship got off to a flying start when the Parties

agreed to jointly develop a new generation of fan blades. However, after the Contract had already

been performed, things took a wrong turn. CLAIMANT – in what now appears to be an attempt to

replenish its financial resources – decided to ask for more than it was entitled to by virtue of their

Contract. To this end, it dragged RESPONDENT into an arbitral proceeding and continues to give

alternative facts to support its claim.

Some of those facts were set straight by a diligent journalist, since CLAIMANT saw no need to

communicate with RESPONDENT itself. As soon as RESPONDENT found out about CLAIMANT’s

precarious financial situation, it took action and made a request for security for costs. To deprive

RESPONDENT of this appropriate means of defense, CLAIMANT argues that the request was

submitted too late. However, as RESPONDENT could not have made it any sooner, the request is

admissible. Furthermore, since CLAIMANT’s financial situation leaves little hope for recovery, it is

very likely that RESPONDENT will be left with its legal expenses. As a consequence, RESPONDENT

should be granted security for its legal costs (Issue I).

Funnily enough, CLAIMANT itself did not set a very good example at keeping deadlines. It has

proven itself incapable of observing the contractual time limit to commencing the arbitral

proceeding, and now intends to obliterate this failure by pointing to subsequent amendments to

its request for arbitration. As those amendments do not alter the fact that CLAIMANT initiated the

arbitration after the contractual time limit had expired, its request for arbitration should be

rejected as inadmissible (Issue II).

It is also not clear why RESPONDENT should top up CLAIMANT’s empty pockets after having

effected payment of the exact amount invoiced by CLAIMANT itself. It was afterwards that it

declared to be entitled to an additional USD 2,285,240.00 and, out of the blue, produced an

exchange rate favorable to its own interests. However, this not only goes against their contractual

agreement itself but also against the Contract’s inherent principle of risk-sharing. Moreover,

having failed to take into account the public law regulations of its own country, CLAIMANT now

wants to offload the costs for the observance thereof onto RESPONDENT. However, CLAIMANT is

not entitled to this additional payment neither by agreement nor by law. Therefore, RESPONDENT

is not obliged to pay either of the amounts demanded by CLAIMANT (Issue III).


_____________________________________________________

4

ARGUMENT

I. THE TRIBUNAL SHOULD GRANT RESPONDENT SECURITY FOR ITS COSTS

1 On September 6, 2016, RESPONDENT submitted a request for security for costs in the

amount of USD 200,000.00. The Tribunal is respectfully requested to order CLAIMANT to

provide security for RESPONDENT’s costs. Contrary to CLAIMANT’s submission (Cl. Memo., § 11),

the Tribunal has the power to do so (A.). Since all prerequisites for such an order are met, the

Tribunal should exercise its power in favor of RESPONDENT (B.).

A. The Tribunal Has the Power to Order Security for Costs

2 Contrary to CLAIMANT’s submission (Cl. Memo., § 11), the Tribunal has the power to grant

RESPONDENT security for its costs.

3 CLAIMANT alleges that the Tribunal’s general power to grant interim measures under Art. 8

of the CAM-CCBC Rules and Art. 17 Model Law does not encompass the Tribunal’s power to

order security for costs (ibid.). It bases its reasoning on the fact that neither article explicitly

provides for this power (Cl. Memo., § 13). However, it is generally acknowledged that the power

to order interim measures does encompass the power to order security for costs, irrespective of

whether it is explicitly addressed (BORN, p. 2495; cf. KARRER/DESAX, p. 343; cf. GU, p. 182;

cf. PÖRNBACHER/THIEL, pp. 16 et seq.; cf. REDFERN/O’LEARY p. 402; cf. VON SCHLABRENDORFF,

pp. 494 et seq.; South American Silver Ltd v Bolivia (PCA); ICC Case No. 13620 (2006)). Since the

Parties agreed on the application of the Rules of the CAM-CCBC (Cl. Exh. C 2, Sec. 21), the

Tribunal has the power to order security for costs according to Art. 8 of the Rules.

4 Contrary to CLAIMANT’s submissions (Cl. Memo., §§ 7, 10), neither the Terms of Reference

nor the Rules restrict this power (1.). Further, contrary to what CLAIMANT alleges (Cl. Memo., §10)

initiating a new arbitral proceeding in order for RESPONDENT to obtain security for its legal costs

would be nonsensical (2.).

1. Neither the Terms of Reference nor the Rules restrict the Tribunal’s power to order

security for costs

5 The Tribunal has the power to order security for RESPONDENT’s costs as the Parties did not

conclude an agreement to the contrary. CLAIMANT’s submission that the power to order security

for costs is restricted by the Terms of Reference (Cl. Memo., § 7) is not persuasive.


_____________________________________________________

5

6 In the Terms of Reference, the Parties did not agree to each bear their own costs. They did

therefore not exclude the right to request security for costs (a). Requesting security for costs does

not constitute an inadmissible modification of the Terms of Reference either (b).

(a) The Terms of Reference do not exclude the Tribunal’s power to order security for

costs

7 Contrary to CLAIMANT’s allegation (Cl. Memo., § 9), Art. 12.4 Terms of Reference does not

require the Parties to each bear their own legal costs. Therefore, the Terms of Reference do not

bar the Parties from seeking security for costs.

8 If, in the Terms of Reference, the parties agree to each bear their own costs, there is no

room for an order for security for costs (cf. BERGER/KELLERHALS, § 1595,

cf. GOLDSMITH/MELCHIONDA, p. 222). The Tribunal would then lack the power to order security

for costs in the present case.

9 However, Art. 12.4 Terms of Reference merely establishes that “[d]uring the course of the

arbitration proceedings, each party shall bear the fees of its respective attorneys”. The provision

does not preclude the Tribunal from allocating the costs to either one of the Parties at the end of

the proceeding. The Parties are only required to each bear their own legal costs during the

proceeding.

10 Instead, Art. 12.3 Terms of Reference expressly grants the Tribunal the authority to allocate

the costs of the proceeding.

11 To conclude, the Terms of Reference do not restrict the Tribunal’s power to order security

for costs.

(b) A request for security for costs does not unlawfully amend the Terms of Reference

12 Contrary to CLAIMANT’s allegations (Cl. Memo., § 10), requesting security for costs does not

result in an unlawful amendment of the Terms of Reference. Art. 4.21 of the Rules does not

apply to security for costs (i). Even if it applied, the Tribunal would still have the power to order

security for costs (ii).

(i) The restrictive effect of Art. 4.21 of the Rules does not extend to security for costs

13 Contrary to CLAIMANT’s submission (Cl. Memo., § 10), an order for security for costs would

not unlawfully amend the Terms of Reference as Art. 4.21 of the Rules does not apply to security

for costs.

14 According to Art. 4.21 of the Rules, the claims and causes of action may no longer be

amended after the Terms of Reference were signed. This only pertains to new claims or other


_____________________________________________________

6

causes of action concerning the subject matter (WALD ET AL. in: Commentary of CAM-CCBC Rules,

Art. 4.21 p. 111). However, interim measures, such as security for costs, are neither new claims

nor causes of action regarding the subject matter. They rather serve to protect the parties’ rights

in the course of the proceeding (TSANG, p. 35; SUTTON/GILL/GEARING, § 5-074; cf. MOSES,

p. 105).

15 Thus, the Rules do not impose a ban on requesting security for costs after the signing of the

Terms of Reference. It follows that RESPONDENT’s request does not constitute an unlawful

amendment of the Terms of Reference.

(ii) Even if the restrictive effect of Art. 4.21 of the Rules extended to security for costs, the Tribunal would still

have the power to order security for costs

16 Contrary to CLAIMANT’s submission (Cl. Memo., § 32), RESPONDENT could not have made its

request any sooner. Therefore, the Tribunal would still have the power to order security for costs

after the signing of the Terms of Reference even if Art. 4.21 of the Rules applied to security for

costs.

17 A request for security for costs is admissible even after the signing of the Terms of

Reference if the relevant causes of action were not known at that time (ICC Case No. 12732

(2006); cf. ICC Case No. 19581 (2014); cf. ICC Bulletin (2014/Vol. 25, Supplement), p. 29).

18 RESPONDENT submitted the request as soon as the facts on which it is based came to light.

The revealed information had not been publicly available before and RESPONDENT was therefore

dependent on CLAIMANT’s cooperation (Req. for Security). However, CLAIMANT did not inform

RESPONDENT about its refusal to comply with an award rendered against it (ibid.). Nor did it let

RESPONDENT know that it sought third party funding to pursue its claims in this arbitration (ibid.).

These facts are substantial to evaluating CLAIMANT’s financial situation as they give rise to

legitimate concerns about the latter’s solvency. The relevant information could not have been

deduced from the balance sheets of 2015 (cf. Proc. Order No. 2, § 28), rather it was only revealed

after signing the Terms of Reference (Resp. Exh. R 6). RESPONDENT therefore submitted its

request as soon as possible.

19 Hence, the request is admissible and the Tribunal has the power to order security for

RESPONDENT’s costs.


_____________________________________________________

7

2. Initiating a new arbitral proceeding to obtain security for costs would undermine the

latter’s nature

20 According to CLAIMANT, “RESPONDENT’s only other option in this situation is to initiate a

new arbitration proceeding” (Cl. Memo., § 10). However, initiating a new proceeding for obtaining

security for costs would in fact contradict the latter’s nature. This is because security for costs is

inseparably linked to the pending arbitral proceeding.

21 An order for security for costs necessarily precedes the rendering of the arbitral

award (REDFERN/O’LEARY, p. 399; MOSES, p. 105; REDFERN/HUNTER, § 7.14). Proceedings

may be paused or even terminated if the order is not adhered to (PÖRNBACHER/THIEL, p. 20;

ALTENKIRCH, p. 273; KARRER/DESAX, pp. 351 et seq.). Thus, it has a direct impact on the

proceeding (ibid.). It is only once the Tribunal renders the award that it decides whether the

requesting party actually receives the secured sum (cf. Art. 12.3 Terms of Reference). If the request

for security for costs were to be dealt with in a separate proceeding, it would be void of meaning.

22 Thus, initiating a new proceeding in order to obtain security for RESPONDENT’s costs would

be nonsensical.

23 According to Art. 8 of the Rules, the Tribunal has the power to order security for costs. This

power is neither restricted by the Terms of Reference nor by the relevant.

B. The Tribunal Should Exercise Its Power to Order Security for Costs

24 The Tribunal should order security for costs in the present case. Contrary to CLAIMANT’s

allegations (Cl. Memo., §§ 9, 14, 17, 25), the prerequisites for such an order are met.

25 CLAIMANT establishes that the following prerequisites need to be adhered to in order to

grant security for costs: First, RESPONDENT must be in danger of suffering irreparable

harm (Cl. Memo., §§ 14, 21 et seq.). Second, this must be due to a fundamental change in

CLAIMANT’s financial situation after contract conclusion (Cl. Memo., §§ 27 et seq.). Third,

RESPONDENT’s request has to be urgent (Cl. Memo., § 14). Fourth, RESPONDENT must meet its

burden of proof for the abovementioned requirements (Cl. Memo., §§ 11, 16 et seqq.). Finally,

granting security for costs has to be just under the present circumstances (Cl. Memo., §§ 24 et seq.,

32).

26 Insofar, RESPONDENT has no objections. However, contrary to CLAIMANT’s submission, the

abovementioned prerequisites are met: RESPONDENT runs the risk of suffering irreparable

harm (1.). RESPONDENT is not prevented from relying on CLAIMANT’s poor financial situation as

it deteriorated substantially since contract conclusion (2.). The submitted request for security for


_____________________________________________________

8

costs is urgent (3.) RESPONDENT also met its burden of proof (4.). An evaluation of the

exceptional circumstances of this case shows that ordering security for costs is just (5.).

1. RESPONDENT is in danger of suffering irreparable harm

27 Contrary to CLAIMANT’s allegations (Cl. Memo., §§ 14, 21), RESPONDENT faces the danger of

suffering irreparable harm.

28 CLAIMANT submits that “an injury that can be ‘made whole’ by monetary relief does not

constitute irreparable harm” (Cl. Memo., § 21). Thereby, it relies on a single award from 1984 (ibid.;

cf. Iran v United States (IUSCT)). The case refers to ‘irreparable harm’ as harm which cannot be

compensated by an award of damages. By relying on this case, CLAIMANT neglects that an award

of damages will in fact be futile if CLAIMANT is financially unable to comply with it. Therefore,

the more recent consensus is that for an order for security for costs it suffices to establish the

danger of “incurring substantial expense in defending a claim only to find that any costs order

made in its favor goes unfulfilled” (REDFERN/O’LEARY, p. 410). This very standard is the bar for

ordering security for costs (ALTENKIRCH, p. 214; cf. VON SCHLABRENDORFF, p. 504;

GERBAY/RICHMAN/SCHERER, p. 267, WAINCYMER, p. 646).

29 Correspondingly, RESPONDENT is merely obliged to establish that it is in danger of being

deprived of an award rendered against CLAIMANT.

30 As CLAIMANT would not be able to comply with an award in RESPONDENT’s favor,

RESPONDENT faces the risk of being deprived of this award. This becomes apparent from

CLAIMANT’s balance sheets (a) and its previous conduct (b). Further, seeking third party funding

implies that CLAIMANT is impecunious (c).

(a) CLAIMANT’s incapacity to comply with an award is evidenced by its balance sheets

31 Contrary to CLAIMANT’s allegation (Cl. Memo., § 19), the balance sheets show its incapacity to

comply with a future award.

32 CLAIMANT’s overall financial situation prevents it from complying with a future award.

CLAIMANT asserts that its largely depleted liquidity is usually built up again as soon as the newly

developed products are sold (Cl. Memo., § 28; Cl. Exh. C 9). However this is merely an uncertain

expectation. Since 2009, CLAIMANT did not build up any liquid means but suffered a loss of more

than USD 800,000.00 (Proc. Order No. 2, § 28), despite selling fan blades (cf. Cl. Exh. C 9). This

raises legitimate doubts as to whether liquid means will indeed be built up again. What is more,

CLAIMANT could be developing a new product by the time the award is rendered, leaving it with

depleted liquidity once again.


_____________________________________________________

9

33 In addition, enforcing an award into CLAIMANT’s assets also runs the risk of being fruitless.

34 The execution into a company’s assets entails liquidating its property, plant and intangible

assets (REDFERN/HUNTER, § 11.13; Hulley Enterprises Limited v The Russian Federation (PCA)). If

there are not enough assets, the enforcement of the award is endangered (cf. WAINCYMER, p. 600;

ÖHLBERGER in: Austrian Yearbook of International Arbitration 2009, p. 142).

35 In case the award needs to be enforced, it is not guaranteed that RESPONDENT’s interest in

receiving the amount it is entitled to will be satisfied. According to the balance sheets,

CLAIMANT’s assets equal USD 42,757,950.00, whereas all its liabilities amount to

US 40,532,950.00 (Proc. Order No. 2, § 28). However, the liquidated amount of the assets will not

necessarily equal the worth ascribed to them in the balance sheets (cf. RÜTZEL/KRAPFL in:

Böckstiegel et al., p. 1070; cf. LSG Baden-Württemberg, 29 January 2015 (Germany); cf. OLG Rostock, 18

October 2013 (Germany); cf. VG Augsburg, 27 March 2012 (Germany)). In fact, if less than 95 % of the

assets’ value listed in the balance sheets were obtained through liquidation, not all of CLAIMANT’s

creditors including RESPONDENT could be fully satisfied. Thus, the enforcement of an award

runs the risk of being fruitless.

36 To conclude, the balance sheets show that RESPONDENT faces the risk of being deprived of

its award due to CLAIMANT’s precarious financial situation.

(b) CLAIMANT’s non-compliance with a previous award further indicates that

RESPONDENT faces the risk of being deprived of its award

37 Contrary to CLAIMANT’s allegations (Cl. Memo., § 23), its non-compliance with an award

rendered against it in a different arbitral proceeding gives reason to doubt its future compliance.

38 In a proceeding between CLAIMANT and one of its suppliers in January 2016, CLAIMANT was

ordered to pay USD 2,500,000 (Req. for Security, § 2; Resp. Exh. R 6). To the present day,

CLAIMANT has not complied with this payment obligation (Proc. Order No. 2, § 30). In an attempt

to justify this, CLAIMANT points to an alleged set-off with a pending claim of its parent

company (Cl. Memo., § 23; Answ. to Req. for Security; Proc. Order No. 2, § 30). However, this is not

persuasive: set-off is only possible where the parties have two certainly existing mutual claims

against each other (KOLLER in: Austrian Arbitration Yearbook 2008, p. 62; OLG Munich, 9 July 1997

(Germany)). Meanwhile, CLAIMANT’s parent company has not yet transferred its claim to

CLAIMANT (cf. Answ. to Req. for Security). Further, the existence of the claim is uncertain as long as

it has not been decided by the courts of Ruritania (ibid.). Therefore, CLAIMANT cannot justify its

non-compliance with the award of the proceeding against its supplier. It must also be considered


_____________________________________________________

10

that an amount of USD 2,500,000.00 might soon have to be paid by CLAIMANT. This sum will

then no longer be available for the satisfaction of RESPONDENT’s future costs award.

39 To conclude, RESPONDENT has good reason to fear non-compliance with an award rendered

in its favor.

(c) Seeking third party funding implies that CLAIMANT is impecunious

40 Contrary to CLAIMANT’s allegation (Cl. Memo., § 29), CLAIMANT’s efforts to obtain third

party funding confirm RESPONDENT’s doubts as to CLAIMANT’s liquidity.

41 It is usually impecunious parties who make use of third party funding in order to pursue

their claims (SHAHDADPURI, p. 81; cf. DARWAZEH/LELEU, p. 125; VON GOELER, p. 333). Thus,

the fact that CLAIMANT made efforts to obtain third party funding (Proc. Order No. 2, § 29), gives

reason to believe that it is unable to bear the costs of the arbitration (cf. DRAETTA, p. 55).

Consequently, it becomes doubtful whether CLAIMANT will comply with an award rendered

against it. This is all the more true, given that it was only able to pursue its claim by misusing a

loan from its parent company, originally provided for product development (Proc. Order No. 2,

§ 29). All of this affirms the conclusions already drawn by RESPONDENT regarding CLAIMANT’s

precarious financial situation (see supra §§ 31 et seqq.).

42 CLAIMANT’s search for third party funding therefore shows that RESPONDENT runs the risk

of being deprived of a future award.

43 In conclusion, RESPONDENT runs the risk of being deprived of an award rendered in its

favor. CLAIMANT’s poor financial standing is evidenced by its balance sheets, its previous non-

compliance and its efforts to receive third party funding.

2. RESPONDENT is not prevented from relying on CLAIMANT’s poor financial situation

44 RESPONDENT can rely on CLAIMANT’s poor financial situation as it deteriorated substantially

after contract conclusion.

45 An order for security for costs requires a serious deterioration in the relevant party’s financial

situation since the conclusion of the arbitration agreement (DRAETTA, pp. 53 et seq.; BERGER,

p. 10; PÖRNBACHER/THIEL, p. 18; ICC Case No. 14433 (2008)).

46 The balance sheet of 2009, which was the most recent one at the time of contract conclusion,

shows that CLAIMANT’s total assets amounted to USD 57,775,000.00 (Proc. Order No. 2, § 28). By

2015, they have deteriorated by about USD 15,000,000.00 (ibid.). Further, CLAIMANT’s liquidity

diminished from USD 875,000.00 in 2009 to USD 199,950.00 in 2015 (ibid.). This amounts to a


_____________________________________________________

11

decrease of more than 75 %. Moreover, the annual profit decreased from about

USD 2,500,000.00 in 2009 to USD 657,000.00 in 2015 (ibid.), which equals a decrease of 73 %.

47 This development is bound to be qualified as a serious deterioration. Thus, RESPONDENT is

not prevented from relying on CLAIMANT’s poor financial situation.

3. RESPONDENT’s request is urgent

48 Contrary to CLAIMANT’s lines of argument (Cl. Memo., § 14), the matter of security for

RESPONDENT’s legal costs is urgent.

49 Interim measures, such as security for costs, are urgent if the decision cannot await the final

award (BORN, p. 2474; REDFERN/O’LEARY, p. 410). Security for costs serves its purpose best if it

is granted as soon as possible (cf. REDFERN/O’LEARY, p. 399). If the opposing party does not

adhere to the order for security for costs, the proceeding is stopped and the applicant is left with

all the costs it incurred. The longer the tribunal waits with its decision, the more costs the

applicant accumulates.

50 RESPONDENT’s costs for this proceeding are increasing from day to day. It cannot be sure

whether it will be able to recover these costs from CLAIMANT, unless RESPONDENT is granted

security for its costs.

51 Thus, the request is urgent.

4. RESPONDENT met its burden of proof

52 Contrary to CLAIMANT’s allegations (Cl. Memo., § 17), RESPONDENT met its burden of proof

by submitting the newspaper article.

53 It lies within the tribunal’s discretion to weigh the evidentiary value of submitted

documents (WAINCYMER, p. 793, BORN, pp. 2309 et seq.; MOSES, p. 172). Thereby, it should

consider whether the submitted evidence was the most suitable at this point in

time (REDFERN/HUNTER, § 6.90; HOFFMANN/SHETTY in: van den Berg, pp. 198 et seq.;

cf. WAINCYMER, p. 794; cf. BORN, p. 2310).

54 RESPONDENT submitted its request as soon as the necessity became apparent; namely on the

day following the publication of the article in the Carioca Business News (cf. Req. for Security;

cf. Resp. Exh. R 6). By including the newspaper article, it immediately provided the best piece of

evidence available at the time. After all, further proof can be submitted at a later stage of the

proceeding if needed. For the time being, a newspaper article can be considered sufficient

evidence (cf. IUSCT Case No. 64 (1985); cf. BISHOP ET AL., § 12.07; WAINCYMER, p. 794).

CLAIMANT has not contested any of the facts in the article on which RESPONDENT relied. Instead,


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12

CLAIMANT even confirmed them by explaining its motivation (Answ. to Req. for Security; Cl. Memo.,

§§ 23, 29).

55 To conclude, the newspaper article constitutes sufficient proof for RESPONDENT’s

statements.

5. An order for security for costs is just in the present circumstances

56 Ordering security for RESPONDENT’s costs is just under the present circumstances.

57 RESPONDENT agrees with CLAIMANT’s lines of argument (Cl. Memo., § 24) that the Tribunal

ought to weigh the Parties’ opposing interests under the given circumstances (cf. ICC

Case No. 15218 (2008); cf. ICC Case No. 14433 (2008); cf. ICC Case No. 10032 (1999); cf. Claimants

1-2 v Respondents 1-16 (SCAI); cf. NAI Case No. 1694; cf. REDFERN/O’LEARY, p. 411; cf. DRAETTA,

p. 55; cf. RUBINS, pp. 374 et seq.). Thereby, it should take into account whether the applicant has a

prima facie chance of prevailing in the arbitration (RUBINS, p. 371; BERGER/KELLERHALS, § 1595;

DRAETTA, p. 53). A party has such a prima facie chance of succeeding if its case does not seem

completely unsubstantiated at first sight (cf. GOLDSMITH/MELCHIONDA, p. 222; cf. REDFERN/

O’LEARY, p. 410).

58 Contrary to CLAIMANT’s allegations (Cl. Memo., § 25), RESPONDENT has a prima facie chance

of succeeding. It has brought forward a well-argued case including proof regarding its defense. As

RESPONDENT’s case is thus not completely unsubstantiated at first sight, there is no necessity to

pre-judge the merits of the case. Therefore, the Tribunal’s “impartiality” – as alleged by

CLAIMANT (Cl. Memo., § 26) – cannot be doubted. Hence, CLAIMANT’s concerns about the

enforceability of the award (ibid.) are unfounded.

59 Further, RESPONDENT’s legitimate concerns as to whether it will be able to recover its

arbitral costs by far outweigh CLAIMANT’s interest to pursue its claim. CLAIMANT could provide

security for costs with the help of a bank guarantee (cf. ALTENKIRCH, p. 270; cf. VON

SCHLABRENDORFF, p. 499; cf. KARRER/DESAX, p. 349; cf. RUBINS, p. 320). Further, its parent

company could also accommodate with a letter of comfort or another loan, should it find

CLAIMANT’s claims worth pursuing. This would enable CLAIMANT to safeguard its right to

present its claim. By contrast, RESPONDENT faces the risk of not being reimbursed for its legal

costs. In case RESPONDENT is awarded its costs, it is limited to executing into CLAIMANT’s assets.

It cannot draw on the assets of CLAIMANT’s parent company, as the latter is not a party to this

arbitration (cf. BRABANT ET AL., p. 117; cf. GOLDSMITH/MELCHIODA, p. 223). Thus, the risk

RESPONDENT has to face is much more imminent.

60 To conclude, an order for security for costs would be just under the present circumstances.


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Conclusion to the First Issue

The Tribunal has the power to grant security for costs. It should also exercise this power in favor

of RESPONDENT as all prerequisites for such an order are met. Consequently, CLAIMANT should

be ordered to provide security for RESPONDENT’s costs in the amount of USD 200,000.00.

II. THE CLAIMS WERE SUBMITTED OUT OF TIME AND ARE THEREFORE

INADMISSIBLE

61 The arbitration clause in the Contract provides that “each party has the right to initiate

arbitration proceedings within sixty days after the failure of the negotiation” (Cl. Exh. C 2,

Sec. 21). The failure of negotiations between the Parties occurred on April 1, 2016, thereby

triggering the sixty-day time limit (A.). Contrary to what CLAIMANT submits (Cl. Memo., §§ 42

et seqq.), it failed to comply with this time limit, which renders its request inadmissible (B.). This

delay cannot be justified by the reasoning brought forward by CLAIMANT (C.).

A. CLAIMANT’s Email of April 1, 2016 Constituted the Failure of Negotiations

62 Contrary to CLAIMANT’s allegations (Cl. Memo., §§ 34 et seqq.), its email of April 1, 2016

marked the failure of the Parties’ negotiations. Consequently, the time limit began to run on the

following day and expired on May 31, 2016.

63 The time limit is triggered by the failure of negotiations (Cl. Exh. C 2, Sec. 21). Whether

negotiations are still ongoing or have already come to a standstill is to be determined from an

objective point of view (cf. SUN/WILLEMS, p. 141; LEONARD/DHARMANANDA, p. 315; Vekoma v

Maran Coal (Switzerland)). A party’s assertion that it is, in principle, ready to negotiate does not

necessarily affirm the existence of negotiations between the parties (BGH, 6 February

1986 (Germany)). Rather, negotiations only continue as long as the parties hold an actual exchange

of views on a particular dispute (PETERS/JACOBY in: Staudinger BGB, Art. 203 § 7).

64 The present dispute had already been a matter of disagreement between the Parties for over

a year when they held a meeting on this subject on March 31, 2016 (Resp. Exh. R 3). The meeting,

however, did not help to resolve the fundamental differences between the Parties (ibid.; Proc.

Order No. 2, § 23). Rather, it reinforced those differences as neither of them was willing to move

away from its respective position (ibid.). In fact, already during that meeting, CLAIMANT refused


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14

to even discuss some of the key points, such as the fixed exchange rate, unless RESPONDENT

agreed to place further orders (ibid.). Therefore, the negotiations had already come to a standstill

at that meeting.

65 On the following day, RESPONDENT received the abovementioned email. CLAIMANT

reiterated its position and at the same time announced that it had already “instructed [its] lawyer

to take the necessary steps to initiate arbitration proceedings” (Resp. Exh. R 3). It is true that

CLAIMANT further on declared that it would “remain open to any meaningful negotiations” (ibid.).

However, this needs to be seen in context with the disillusioning outcome of the meeting held

only a day earlier. Except for the fact that CLAIMANT decided to initiate legal proceedings, the

email did not contain any information which had not already been communicated in the

meeting (cf. ibid.; Proc. Order No. 2, § 23). After all, CLAIMANT’s insistence upon receiving

additional payment was already known to RESPONDENT. Thus, from an objective point of view,

the email served as a written documentation of the failure of the negotiation.

66 Therefore, CLAIMANT’s assertion that “the email clearly evidences CLAIMANT’s intent to

continue negotiations” (Cl. Memo., § 33) is not convincing. Such negotiations would only take

place should RESPONDENT “reconsider [its] view” (Resp. Exh. R 3). Thus, the phrase “open to

any meaningful negotiations” must be understood as a mere courtesy, allowing CLAIMANT to save

face.

67 By objective standards, the recipient of the email could only understand its content as

follows: Unless RESPONDENT concedes to CLAIMANT’s demands, the latter will proceed with

taking legal actions against the former. The fact that on the very next day, CLAIMANT’s parent

company attempted to authorize their lawyer (cf. Power of Attorney by Wright Holding Plc) also shows

that it did not actually expect any further negotiations to take place.

68 The email therefore cannot be qualified as a continuation of an exchange of views.

Consequently, the negotiation failed on April 1, 2016, thereby triggering the sixty-day time limit

stipulated in the Contract.

B. CLAIMANT Failed to Meet the Sixty-Day Time Limit

69 Contrary to CLAIMANT’s submission (Cl. Memo., §§ 42 et seqq.), CLAIMANT failed to submit its

request for arbitration within the period of sixty days. The request is therefore inadmissible.

70 In order to comply with the sixty-day time limit, CLAIMANT was obliged to initiate

arbitration by May 31, 2016 at the latest. It is therefore necessary to define at which point in time

arbitration was initiated. Since the Rules do not provide such a definition, recourse must be had

to Art. 21 Model Law. Accordingly, arbitration was only initiated on June 8, 2016, when


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15

RESPONDENT received a copy of the request for arbitration (1.). Even if the receipt of the request

by the CAM-CCBC was decisive, proceedings were not validly commenced on May 31, 2016.

CLAIMANT’s request of that date was incomplete (2.).

1. Initiation of arbitration requires the receipt of the request for arbitration by

RESPONDENT

71 Contrary to CLAIMANT’s submission (Cl. Memo., §§ 42 et seqq.), the arbitration proceeding is

initiated when the request of arbitration is received by RESPONDENT. As correctly pointed out by

CLAIMANT (Cl. Memo., § 43), Art. 21 Model Law requires the receipt of the request by the

respondent for the arbitration to commence, unless the parties agreed otherwise.

72 The Parties did not reach such an agreement in the present case. They agreed upon the

application of the institutional rules of the CAM-CCBC (Cl. Exh. C 2, Sec. 21). However, contrary

to CLAIMANT’s submission (Cl. Memo., § 44), these Rules, in particular Art. 4, do not define when

arbitral proceedings are deemed to be commenced.

73 Art. 4.1 of the Rules enumerates a number of documents which must be enclosed with a

request for arbitration filed with the CAM-CCBC. This misled CLAIMANT to assuming that “once

these documents are submitted to the President of the CAM-CCBC, arbitration is considered to

have commenced” (Cl. Memo., § 44). However, Art. 4.1 of the Rules merely sets forth that “a

party desiring to commence arbitration will notify the CAM-CCBC” (emphasis added). There are

numerous important arbitral institutions which, in turn, do include provisions such as: “arbitral

proceedings shall be deemed to commence on the date on which […]” (Art. 2(2) ICDR-IAR

cf. Art. 4(2) ICC Rules; cf. Art. 2(2) KLRCA Rules,; cf. Art. 3(2) Swiss Rules; cf. Art. 3(2) UNICTRAL

Rules), “arbitration shall be deemed to commence […]” (Art. 7(1) Vienna Rules), “arbitral

proceedings shall commence when […]” (Art. 8(1) MKAS Rules) or “the date […] shall be treated

as the date on which the arbitration has commenced for all purposes” (Art. 1.4.1.4 LCIA Rules;

cf. Art. 3 SIAC Rules; cf. Art. 4.6 DIAC Rules). Those institutional rules provide definitions of the

commencement of arbitration. No comparable wording can be found in the Rules of the CAM-

CCBC. Consequently, they do not contain a definition of a point in time at which the arbitration

is deemed to have commenced.

74 This makes it necessary to have recourse to Art. 21 Model Law, which applies as the lex loci

arbitri (Proc. Order No. 1, § 5(4)). CLAIMANT objects (Cl. Memo., § 37) to the application of the

Model Law on the grounds of an alleged difference in the meaning of the words

“initiate” (Cl. Exh. C 2, Sec. 21) and “commence” (Art. 21 Model Law). However, “initiate” is

simply a synonym for “commence” (BLACK, “initiate”) and CLAIMANT’s argument does not hold.


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16

75 For a timely commencement of the arbitration, RESPONDENT must have received the request

by May 31, 2016. However, this was only the case on June 8, 2016 (CAM-CCBC’s letter to the

Respondent, June 8, 2016). CLAIMANT therefore did not comply with the contractual time limit.

2. Even if the receipt of the request for arbitration by the CAM-CCBC was decisive, the

arbitration was not commenced in time

76 Even if the Tribunal were to consider the receipt of the request by the CAM-CCBC to be

decisive, the proceeding was not commenced in time. The request received by the CAM-CCBC

on May 31, 2016 was incomplete and therefore invalid (a). Further, the contractual time limit was

not extended by the President (b).

(a) The request of May 31, 2016 was incomplete and thus invalid

77 The requirements for a valid request for arbitration are enumerated in Art. 4(1), (2) of the

Rules. Meanwhile, CLAIMANT’s request of May 31, 2016 is defective in two respects. First, the

power of attorney enclosed with the request does not comply with Art. 4.1(b) of the Rules (i).

Second, CLAIMANT did not pay the registration fee pursuant to Art. 4.2 of the Rules (ii).

(i) The submitted power of attorney was defective

78 The power of attorney submitted to the CAM-CCBC on May 31, 2016 was not in line with

Art. 4.1(b) of the Rules. First, it indicates the wrong client, namely CLAIMANT’s parent company,

Wright Holding Plc. Second, it was the CEO of that parent company who signed the power of

attorney, rather than CLAIMANT.

79 According to Art. 4.1(b) of the Rules, the party wishing to commence arbitration must attach

to its request a power of attorney for any lawyer providing for adequate representation. As an

initiating document, the power of attorney needs to be “clear and unambiguous”, irrespective of

the applicable law or rules (cf. GIRSBERGER/VOSER, p. 212).

80 The submitted power of attorney failed to satisfy Art. 4.1(b) of the Rules, as shown by the

reaction of the President of the CAM-CCBC: On June 1, 2016, the President ordered CLAIMANT

to amend its request (CAM-CCBC’s letter to the Claimant of June 1, 2016). Thereby, he explicitly

rebuked CLAIMANT for submitting a power of attorney referring to the wrong claimant.

81 CLAIMANT itself does not contest that its power of attorney was defective (Cl. Memo., §§ 47

et seqq.). Instead, it relies on the fact that it provided an amended power of attorney upon the

President’s request to do so (Cl. Memo., § 47). It is true that the President gave CLAIMANT ten

days to implement the necessary amendments (CAM-CCBC’s letter to the Claimant of June 1, 2016)

and that CLAIMANT complied with this order (Fasttrack to CAM-CCBC, June 7, 2016). However,


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CLAIMANT’s observance of the deadline set by the President does not change the fact that it

failed to abide by the contractual time limit in the first place. The correct power of attorney was

submitted a week after expiration of this time limit.

82 CLAIMANT did not provide a valid power of attorney within the deadline. As it thus failed to

comply with Art. 4.1(b) of the Rules, its request for arbitration was incomplete.

(ii) The registration fee had not been paid in full

83 The insufficient payment of the registration fee further hinders the commencement of the

proceeding on May 31, 2016. Of the R$ 4,000.00 due, CLAIMANT had only paid R$ 400.00 by

May 31, 2016 (CAM-CCBC’s letter to the Claimant of June 1, 2016).

84 Art. 4.2 of the Rules sets forth that the claimant “must” pay a registration fee (WALD ET AL.

in: Commentary of CAM-CCBC Rules, Art. 4.2, p. 67). The registration fee serves the critical purpose

of deterring parties from submitting an evidently unsubstantiated request for arbitration (WALD

ET AL. in: Commentary of CAM-CCBC Rules, Art. 4.2, pp. 66 et seq.).

85 CLAIMANT appears to be of the opinion (Cl. Memo., § 49) that the registration fee does not

have to be paid when submitting the request. This is not, however, the view of the President: He

regards the fulfillment of Art. 4.2 of the Rules as an indispensable element to a complete request

for arbitration (CAM-CCBC’s letter to the Claimant of June 1, 2016). This is why he waited for

CLAIMANT to comply with his orders before transmitting a copy of the request to

RESPONDENT (ibid.). After all, the CAM-CCBC has a legitimate interest in knowing whether the

claimant has a serious and unambiguous intent to arbitrate. This can only be reliably determined

by demanding the claimant to pay a registration fee, which CLAIMANT did not do in the present

case.

86 Thus, the lacking payment of the registration fee was such a significant deficiency of the

request that the proceeding could not be commenced before complete payment was effectuated.

As a consequence, CLAIMANT’s request for arbitration of May 31, 2016 was incomplete.

(b) The defective request was not remedied

87 Contrary to CLAIMANT’s allegations (Cl. Memo., §§ 45 et seqq.), the defects of the request of

May 31, 2016 were not remedied. The President does not have the power to extend contractual

time limits by virtue of Art. 6.4 of the Rules (i.). Nor does the amended power of attorney have a

retroactive effect (ii.). The subsequent payment of the complete registration fee does not have a

retroactive effect either (iii.).


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(i) The President does not have the power to extend the contractual deadline for commencing arbitration by virtue

of Art. 6.4 of the Rules

88 Contrary to CLAIMANT’s submission (Cl. Memo., §§ 45 et seq.), Art. 6.4 of the Rules does not

authorize the President to extend the contractual deadline for commencing arbitration.

89 Art. 6.4 of the Rules only applies to time periods “provided in these Rules”. It was in the

Parties’ Contract that they agreed that an arbitration proceeding needs to be commenced within

sixty days after failure of negotiations (Cl. Exh. C 2, Sec. 21). Therefore, granting the CAM-CCBC

the power to extend contractual time limits would undermine the principle of party autonomy,

which is the central pillar of commercial arbitration (REDFERN/HUNTER, § 6.07; BINDER, §§ 5-

014, 5-017; BOOG in: Ferrari/Kröll, p. 416; cf. KUNZ, p. 850).

90 Moreover, Art. 6 of the Rules applies to time limits in the course of the arbitral

proceeding (cf. VERÇOSA in: Commentary of CAM-CCBC Rules, Art. 6, p. 125). In the case at hand,

CLAIMANT failed to meet the deadline to initiate arbitration proceedings. Those distinct types of

time limits are not comparable to one another: Time limits for submissions in the ongoing

arbitration proceeding serve the need for speedy proceedings (CARON ET AL., p. 618). However,

as compliance with rigid time limits cannot always be guaranteed in practice, there must be an

option to extend such time limits (ibid.). By contrast, time bars for the commencement of

arbitration are included in the contract for the sake of legal certainty (LEW/MISTELIS/KRÖLL,

p. 507; cf. REDFERN ET AL., § 4-04). Parties have a legitimate expectation that upon expiry of the

deadline, they will not be confronted with any legal claims (ibid.). The possibility of a

discretionary extension of such a time limit would thus completely defeat the purpose of legal

certainty.

91 Hence, the contractual time limit could not have been extended by the President of the

CAM-CCBC.

(ii) The amended power of attorney does not have a retroactive effect

92 Contrary to CLAIMANT’s submission (cf. Cl. Memo., §§ 45 et seq.), the second power of

attorney did not amend the request retroactively.

93 The only way to achieve such an effect is to retroactively amend the provided power of

attorney by virtue of Art. 2.2.9 UPICC. This article provides for the retroactive authorization of

an agent’s acts (Official Commentary, Art. 2.2.9 p. 90; KREBS in: Vogenauer/Kleinheisterkamp, Art. 2.2.9

§ 1; BUSCH in: The Unauthorised Agent, p. 372).

94 However, such a retroactive authorization is only possible where it does not contradict the

parties’ agreement (cf. KREBS in: Vogenauer/Kleinheisterkamp, Art. 2.2.9 § 18). The Parties’


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contractual time limit precludes the possibility to retroactively remedy a request after its expiry.

The purpose of this time limit is to provide legal certainty (cf. LEW/MISTELIS/KRÖLL, p. 507;

cf. REDFERN ET AL., § 4-04). The Parties have a legitimate expectation not to be confronted with

any legal claims upon the expiry of the sixty days (cf. ibid.). If the amendment provided a week

after expiry of the deadline were to retroactively remedy the invalid request, CLAIMANT would be

able to open a loophole in the contractual time limit. This would render the agreement upon a

time limit to commencing arbitration void of meaning.

95 CLAIMANT did not retroactively remedy its request by submitting a second power of attorney.

(iii) The payment of the remainder of the registration fee does not have a retroactive effect

96 As correctly described by CLAIMANT (Cl. Memo., § 49), the President of the CAM-CCBC

requested payment of the additional amount, which CLAIMANT effected (CAM-CCBC’s letter to the

Claimant of June 1, 2016). However, CLAIMANT does not establish why the proceeding should

commence when only 10 % of the required amount has been paid.

97 CLAIMANT merely mentions Art. 4(4) of the ICC Rules (Cl. Memo., § 48). This rule stipulates

that a claimant who failed to make payment of the registration fee may be granted a further time

limit to do so by the Secretariat of the ICC. However, the rules governing this arbitration are

those of the CAM-CCBC (Cl. Exh. C 2, Sec. 21), which do not include a corresponding nor even

a similar regulation. This aligns with the fact that CLAIMANT found itself compelled to resort to

the ICC Rules rather than the set of rules applicable to this arbitration.

98 Therefore, the payment of the remainder of the registration fee does not retroactively amend

the failure to effect payment in time.

C. The Delay is Not Justified by the Reasoning Brought Forward by CLAIMANT

99 CLAIMANT introduces a number of reasons why its request should not be deemed

inadmissible (Cl. Memo., §§ 50 et seqq.). However, its attempts to justify exceeding the contractual

time limit are not convincing. First, the cited “pro-arbitration” rule only governs the

interpretation of the scope of arbitration clauses and does not apply to time bars (1.). Second, the

Tribunal should consider that the expiry of the contractual time limit does not preclude

CLAIMANT from pursuing its right before a state court (2.). Third, the cases invoked by

CLAIMANT are not persuasive authorities for this arbitration (3.). Fourth, CLAIMANT cannot

justify its exceeding of the deadline by relying on the swift transmission of the amended request

to RESPONDENT by the CAM-CCBC (4.).


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1. The “pro-arbitration” rule does not extend to the question of CLAIMANT’s

compliance with the contractual deadline

100 CLAIMANT invokes “a ‘pro arbitration rule’ in interpreting arbitration clauses” (Cl. Memo.,

§ 51). However, the pro-arbitration rule does not alter the fact that its request was submitted out

of time and that it is therefore inadmissible.

101 CLAIMANT cites an author who indeed argues for a presumption in favor of

arbitration (BORN, pp. 1326 et seqq.). However, the quoted passage deals with “‘Pro-Arbitration’

presumptions regarding [the] scope of international arbitration agreement[s]” (BORN, p. 1326).

The presumption thus concerns the question whether or not a particular dispute was intended to

be submitted to arbitration instead of state courts (ibid.). The rationale behind such an extensive

interpretation of the scope of arbitration agreements is the interest of commercially reasonable

parties to resolve all of their disputes in a single, centralized proceeding (BORN, p. 1319).

102 The scope of the arbitration clause is not contested in the case at hand. Sec. 21 of the

Contract encompasses “all disputes arising out of or in connection with” the Contract (Cl. Exh.

C 2). Instead, the issue is whether CLAIMANT submitted its request for arbitration in time. Since

the “pro-arbitration” rule does not give any support in solving this question, there is no room for

its application.

103 The “pro-arbitration” rule does not make CLAIMANT’s belated request admissible.

2. CLAIMANT’s right to access to justice is not jeopardized

104 The inadmissibility of CLAIMANT’s request for arbitration does not result in an infringement

of its right to access to justice.

105 CLAIMANT submits that declaring the belated request inadmissible would infringe

“established international arbitral practice” (Cl. Memo., § 56). It thereby appears to be referring to

the right of each party to have access to justice, which is indeed a fundamental and internationally

recognized principle (Princz v Federal Republic of Germany (USA); cf BORN, p. 1083; cf. KÜHNER,

p. 806). However, CLAIMANT is not prevented from bringing its case before a state court upon

the expiry of the sixty-day time limit. This follows from an interpretation of the arbitration

agreement in accordance with Art. 8 CISG.

106 It is acknowledged that Art. 8 CISG governs the interpretation of arbitration

clauses (SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 5; Château des Charmes Wines v

Sabaté (USA); OLG Stuttgart, 15 May 2006 (Germany)). As the common intent of the Parties

(Art. 8(1) CISG) cannot be determined (cf. Proc. Order No. 2, § 23), the understanding of a

reasonable business person within the meaning of Art. 8(2) CISG is decisive (cf. PILTZ, § 2-189;


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cf. ZUPPI in: Kröll et al., Art. 8 § 21; cf. OG Kanton Zug, 8 November 2011 (Switzerland); OLG Düsseldorf,

23 March 2011 (Germany)). A reasonable business person would analyze the wording of the

clause (BRUNNER, Art. 8 § 13; MAGNUS in: Staudinger, Art. 8 § 24; OLG Dresden, 27 December 1999

(Germany)).

107 Sec. 21 of the Contract provides that “if no agreement can be reached each party has the right

to initiate arbitration proceedings within sixty days after the failure of the negotiation to have the

dispute decided by an arbitrator” (Cl. Exh. C 2, Sec. 21; emphasis added). By contrast, the standard

arbitration clause recommended by the CAM-CCBC reads: “Any dispute arising out of the

present contract, including its interpretation or performance, shall be finally settled by

arbitration […]” (Model Clause of the CAM-CCBC; emphasis added). The Parties did not adopt this

model clause. Sec. 21 of the Contract deviates from this wording in two respects. First, it does

not provide for the dispute to be “finally” decided by an arbitrator. Second, the Parties are given

the “right” to have recourse to arbitration, without being imposed the obligation to do so.

108 The negative effect of an arbitration clause is a “mirror-image” of its positive effect (BORN,

p. 1270). It is recognized that the stipulation of a strict positive obligation to solve disputes

through arbitration leads to a strict negative obligation to refrain from state court

proceedings (BORN, p. 1272; cf. Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk

Hydropower Plant LLP (United Kingdom); cf. CHUPRUNOV, p. 38; cf. FOUCHARD/GAILLARD/

SAVAGE, p. 380; ICC Case No. 8887 (1997)).

109 As Sec. 21 of the Contract is comparably ‘soft’, a reasonable business person would not

understand it as excluding the Parties’ right to initiate state court proceedings upon the expiration

time limit.

110 In conclusion, the time bar in Sec. 21 of the Contract does not deprive CLAIMANT of this

right, but merely sets forth a time limit in which the right to refer to arbitration may be exercised.

The inadmissibility of the request does not infringe CLAIMANT’s right to access to justice.

3. Justification of the delay cannot be based on the cases cited by CLAIMANT

111 Contrary to CLAIMANT’s allegations (Cl. Memo., § 55), neither the ruling of Bechtel v UEG

Araucária (USA) nor of Mid-Ohio Sec. Corp v E/O Burns (USA) should be considered persuasive

authority for the admissibility of its request.

112 Bechtel v UEG Araucária (USA) is concerned with the arbitrability of the timeliness defense,

i.e. the question of whether it is the courts or the arbitrators who may decide whether a claim was

timely submitted (cf. NEWMAN/DAVIDSON, p. 137). The dispute arose due to a choice-of-law

provision which was in conflict with the arbitration agreement. It was ultimately a question of the


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22

scope of the arbitrator’s power. This is not a matter of disagreement in the present case. Nor is

there a conflicting choice-of-law provision. Therefore, the reasoning cannot be transferred.

113 Nor is Mid-Ohio Sec. Corp. v. E/O Burns (USA) comparable to the present case. In that case, it

was unclear whether the claim was filed within the timeframe of a particular institutional rule.

This rule did not define what event triggers the time limit. By contrast, the arbitration clause in

the present case sets forth that it is the failure of the negotiation which triggers the time limit.

114 To conclude, neither of the cases are persuasive authority when determining the

inadmissibility of CLAIMANT’s request.

4. CLAIMANT cannot justify its exceeding of the deadline by relying on the swift

transmission of the amended request to RESPONDENT by the CAM-CCBC

115 The fact that the CAM-CCBC transmitted the request as soon as on June 8, 2016 does not

justify CLAIMANT’s non-compliance with the contractual deadline.

116 CLAIMANT argues (Cl. Memo., § 58) that if arbitration had been initiated on May 31, 2016,

RESPONDENT would have been notified by June 15, 2016 at the latest (Art. 4.3 of the Rules). As it

received a copy of the request on June 8, 2016, CLAIMANT alleges that RESPONDENT cannot rely

on the delay (ibid.).

117 However, the fast transmission of the request was only due to the efficiency of the CAM-

CCBC, which processed the amendments immediately upon their receipt. CLAIMANT should not

be able to benefit from a circumstance which evidently lies within the sphere of responsibility of

the CAM-CCBC (Art. 4.3 of the Rules). The fact that the CAM-CCBC did not exhaust the fifteen-

day time limit under Art. 4.3 of the Rules to forward the request happened to play into

CLAIMANT’s hands but was a mere coincidence.

118 As a conclusion, CLAIMANT cannot rely on the CAM-CCBC’s quick reaction to CLAIMANT’s

belated request.

Conclusion to the Second Issue

The contractual sixty-day time limit was triggered by the failure of negotiation on April 1, 2016.

CLAIMANT failed to abide by this time limit. Its submitted request for arbitration was deficient

and not remedied. As CLAIMANT was unable to justify this exceeding of the deadline, its request

for arbitration should be dismissed.


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23

III. CLAIMANT IS NOT ENTITLED TO THE ADDITIONAL PAYMENTS OF

USD 2,285,240.00 AND USD 102,192.80

119 When the Parties signed their Contract, they did not expressly determine the exchange rate

applicable to the purchase price calculation of the fan blades (Cl. Exh. C 2). Upon

RESPONDENT’s initiative, the Parties concluded the Addendum providing for a fixed exchange

rate of USD 1.00 = EQD 2.01 (hereinafter “fixed exchange rate”) (Cl. Exh. C 2; Answ. to Req.,

§ 10). Immediately upon the receipt of the fan blades, RESPONDENT effected payment of the

purchase price of USD 20,438,560.00 (Cl. Exh. C 3). Afterwards, CLAIMANT alleged that the

Parties had agreed on a different exchange rate, namely that at the time of

delivery (USD 1.00 = EQD 1.79) (Cl. Exh. C 5). On the basis of this allegation, CLAIMANT

demands an additional payment of USD 2,285,240.00 (ibid.). Further, after RESPONDENT had

effected payment, the Equatoriana Central Bank deducted a levy of USD 102,192.80 (hereinafter

“the Levy”) by virtue of the Equatorianian public law regulation ML/2010C (hereinafter “the

Regulation”) (Cl. Exh. C 8). CLAIMANT argues that this sum must be borne by RESPONDENT as

well (Cl. Exh. C 6).

120 Contrary to CLAIMANT’s submission (Cl. Memo., §§ 60 et seqq.), it is not entitled to the

additional payment of USD 2,285,240.00 for the fan blades (A.). Nor is RESPONDENT obliged to

bear the Levy in the amount of USD 102,192.80 (B.).

A. RESPONDENT Is Not Obliged to Pay Another USD 2,285,240.00 for the

Fan Blades

121 Contrary to CLAIMANT’s submission (Cl. Memo., §§ 60 et seqq.), it is not entitled to the

payment of USD 2,285,240.00. This is because the fixed exchange rate of the

Addendum (USD 1.00 = EQD 2.01) is applicable to the calculation of the purchase price (1.).

Even if the Tribunal were to disagree, CLAIMANT is still not entitled to this additional payment.

Rather, it would merely be entitled to the payment of USD 97,440.00 as the exchange rate at the

time of contract conclusion (USD 1.00 = EQD 2.00) would have to be applied (2.).

1. The fixed exchange rate of the Addendum applies to the entire Contract

122 Contrary to CLAIMANT’s allegations (Cl. Memo., §§ 75 et seqq.), the Addendum amended the

Contract. Consequently, the Contract is governed by the fixed exchange rate of the Addendum.

Therefore, the purchase price due under the Contract amounts to USD 20,438,560.00, the

payment of which was effected by RESPONDENT (Cl. Exh. C 3).


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24

123 According to Art. 29(1) CISG, a mere agreement between the contracting parties is sufficient

to amend a contract (cf. SCHROETER in: Schlechtriem/Schwenzer, Art. 29 §§ 6 et seq.; cf. SAENGER in:

Bamberger/Roth, Art. 9 § 1; cf. FERRARI in: Ferrari et al., Art. 29 § 7; cf. ICAC Case No 107/2002).

Whether the parties agreed to amend a contract is a matter of interpretation, which is to be

conducted pursuant to the law governing the contract (REDFERN/HUNTER, § 3.93; BORN, pp. 505,

515, Sonatrach v Ferrell (United Kingdom); ICC Case No. 2626 (1977)). As the Parties agreed that the

CISG applies to the Addendum (Cl. Exh. C 2, Addendum, Sec. 20), it must be interpreted in

accordance with Art. 8 CISG.

124 RESPONDENT agrees with CLAIMANT that there has been no common intent (Art. 8(1) CISG)

regarding the Addendum’s effect on the Contract (Cl. Memo., §§ 62 et seqq.). Therefore, the

understanding of a reasonable business person is decisive (Art. 8(2) CISG). When interpreting a

contract under Art. 8(2) CISG, the wording and all relevant circumstances shall be taken into

account, such as the parties’ negotiations, practices and subsequent conduct (Art. 8(3) CISG;

SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 21; MAGNUS in: Staudinger, Art. 8 § 24;

cf. OLG Dresden, 27 December 1999 (Germany)).

125 Contrary to CLAIMANT’s allegations (Cl. Memo., §§ 75 et seqq.), an interpretation pursuant to

Art. 8(2) CISG leads to the conclusion that the fixed exchange rate stipulated in the Addendum

was to govern the whole Contract. This is due to several reasons: The sale of the Parties made it

necessary to agree on a fixed exchange rate for the Contract (a). Thus, as evidenced by the

Addendum’s wording, the fixed exchange rate is to be applied to the Contract (b). This also

corresponds with the Parties’ subsequent conduct (c). Lastly, contrary to CLAIMANT’s

submission, the contra proferentem rule does not apply (d).

(a) The sale of the Parties made an agreement on a fixed exchange rate necessary

126 Since the Parties were no longer subsidiaries of Engineering International SA (cf. Proc. Order

No. 2, § 1), they needed to provide for an exchange rate. Therefore, a reasonable business person

would find that the fixed exchange rate of the Addendum applies to the Contract.

127 One of the Contract’s underlying principles is the equal distribution of risks (Req. for Arb.,

§ 6; cf. Cl. Exh. C 1; cf. Resp. Exh. R 5). The exchange rate has a major impact on the currency risk

associated with the Contract (Resp. Exh. R 5; cf. BORSTELL/HÜLSTER in: Vögele/Borstell/Engler,

Chapt. M §§ 129 et seqq.).

128 When the Parties were subsidiaries of Engineering International SA, their parent company

used to determine the applicable exchange rate (Proc. Order No. 2, § 5). Thus, during the

negotiations, the Parties did not agree upon an applicable exchange rate (cf. Cl. Exh. C 1;


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25

Resp. Exh. R 5). However, CLAIMANT was sold four days before contract conclusion and

RESPONDENT shortly after (Proc. Order No. 2, § 1). The established way to determine an applicable

exchange rate could thus not be followed anymore. In light of the Contract’s underlying principle

of the distribution of risks, the necessity to fix an exchange rate arose (Resp. Exh. R 5). To this

end, RESPONDENT suggested on October 22, 2010 to fix the exchange rate to

USD 1.00 = EQD 2.01 when adding the Addendum to the Contract (cf. Resp. Exh. R 2, 5). This

was the exchange rate of that day (cf. Proc. Order No. 2, § 12). A reasonable business person would

have realized this need of a new approach to determine the applicable exchange rate. It would

have regarded the fixed exchange rate of the Addendum as such.

129 Therefore, a reasonable business person would come the conclusion that the fixed exchange

rate also governs the Contract.

(b) The Addendum’s wording supports the application of the fixed exchange rate

130 When analyzing the wording of the Addendum (Cl. Memo., §§ 77 et seq.), CLAIMANT drew the

wrong conclusions. The wording, in fact, supports the applicability of the fixed exchange rate to

the entire Contract.

131 The decisive sentence of the Addendum states “The exchange rate for the agreement is fixed

to US$ 1 = EQD 2.01” (Cl. Exh. C 2, Addendum, emphasis added). Its heading reads “Addendum”,

whereas the Contract is referred to as the “main Agreement” in the Addendum’s body (ibid.).

Therefore, the term ‘agreement’ must stand for something other than either of the two – namely

the Contract and the Addendum taken together. A reasonable business person would recognize

that the Parties would have chosen a different term than ‘agreement’ if they had wanted to restrict

the effect of the fixed exchange rate to the Addendum only.

132 To conclude, a reasonable business person would find the fixed exchange rate of the

Addendum to govern the Contract.

(c) CLAIMANT’s subsequent behavior leads to the conclusion that the Parties agreed on

the fixed exchange rate

133 CLAIMANT issued an invoice based on the fixed exchange rate (Req. for Arb. § 10; Cl. Exh.

C 4). This subsequent behavior evidences that CLAIMANT itself was of the opinion that the

purchase price must be calculated based on the fixed exchange. Only after RESPONDENT effected

payment of the invoiced amount, CLAIMANT contested the applicability of the fixed exchange

rate to the Contract (Cl. Exh. C 3, 5).


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26

134 CLAIMANT attempts to diminish the legal relevance of the invoice by relying on its

employee’s lack of knowledge regarding the details of the Contract (Cl. Memo., §§ 84 et seq.).

However, the fact that an impartial employee understood the fixed exchange rate as pertaining

the purchase of the fan blades (Cl. Exh. C 4) contradicts CLAIMANT’s submission. The employee

itself admits to “not realizing that the main contract […] did not contain a fixed exchange

rate” (ibid.) even after consulting “all correspondence” (ibid.). This indicates that a reasonable

business person would also come to the conclusion that the correct exchange rate is

USD 1.00 = EQD 2.01.

135 To conclude, CLAIMANT’s subsequent conduct leads to the applicability of the fixed

exchange rate to the calculation of the purchase price.

(d) The contra proferentem rule does not apply

136 CLAIMANT invokes the contra proferentem rule to establish that the Addendum must be

interpreted in its favor (Cl. Memo., §§ 79 et seqq.). CLAIMANT derives this from Art. 4.6

UPICC (ibid.). However the contra proferentem rule does not apply.

137 Art. 4.6 UPICC and Art. 8 CISG both include the contra proferentem rule (VOGENAUER in:

Vogenauer/Kleinheisterkamp, Art. 4.6 § 5; SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8, § 49;

BGH, 28 May 2014 (Germany)). This rule states that where a clause is ambiguous even after

interpretation, the wording will be construed against the party who drafted it (ICC Case

No. 11869 (2011); ROSENGREN, p. 11; VOGENAUER in: Vogenauer/Kleinheisterkamp, Art. 4.6 § 5).

138 As Sec. 20 of the Contract provides that the UPICC is only applicable for issues not dealt

with in the CISG (Cl. Exh. C 2), Art. 4.6 UPICC shall not apply. In any case, the interpretation of

the Addendum leads to an unambiguous result: The fixed exchange rate governs the Contract (see

supra §§ 122 et seqq.).

139 To conclude, the contra proferentem rule does not apply.

2. In any case, the exchange rate at the time of contract conclusion has to be applied

140 If the Tribunal were to find that the Addendum did not amend the Contract in regard to the

exchange rate, recourse must be had to the Contract. In this case, an interpretation of the original

Contract would provide for the application of the exchange rate at the time of contract

conclusion (USD 1.00 = 2.00 EQD). Thus, CLAIMANT would still not be entitled to the

additional payment of USD 2,285,240.00 as the exchange rate at the time of delivery is not

applicable (contrary to Cl. Memo., §§ 60 et seqq.). Rather only USD 97,440.00 would be due.


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27

141 There is no common intent (Art. 8(1) CISG) of the Parties regarding the application of a

certain exchange rate (Proc. Order No. 2, § 15). Therefore, the understanding of a reasonable

business person (Art. 8(2) CISG) is the relevant standard in interpretation. Thereby, pursuant to

Art. 8(3) CISG, any relevant circumstances of the case shall be taken into account.

142 Such interpretation leads to the following conclusions: In order to comply with the

principles and circumstances underlying the Contract, it was necessary to fix an exchange rate (a).

This should be the one at the time of contract conclusion (b).

(a) Fixing an exchange was necessary to comply with the Contract’s principles and

underlying circumstances

143 The Contract’s underlying principle of risk-sharing calls for a fixed exchange rate (i).This is

further supported by the de-risking strategy (ii). The cost-plus basis for the price calculation does

not alter this result (iii).

(i) Fixing an exchange rate corresponds with the Contract’s principle of risk-sharing

144 Fixing an exchange rate is the only means to achieve the Contract’s principle of risk-sharing.

145 The Parties agreed that the Contract shall be based on risk-sharing (Cl. Memo., § 68; Cl. Exh.

C 1, 2; Req. for Arb., § 6). Applying a floating exchange rate, as suggested by

CLAIMANT (Cl. Memo., §§ 60 et seqq.), would in fact contradict this principle.

146 CLAIMANT recognized that RESPONDENT bore the risk that the price of the components of

the jet engine exceeded the price offered to Earhart SP (Cl. Memo. §§ 68 et seqq.). This is because

the purchase price of some of those components was indeterminable when RESPONDENT had to

offer a fixed price to Earhart SP (cf. Resp. Exh. R 5). CLAIMANT on the other hand bore the risk

that its production costs were to exceed the agreed maximum price of USD 13,125.00 (Req. for

Arb., § 7; Cl. Exh. C 2, Sec. 4). Both Parties were aware of the fact that the two risks were

“minor” (Req. for Arb., § 7; Cl. Memo., § 69; Resp. Exh. R 5).

147 What remains is the currency risk. In order to comply with the principle of risk-sharing, this

risk has to be equally divided between the Parties. Fixing an exchange rate is ideal to share the

currency risk associated with the Contract: Both Parties bear the risk that the exchange rate may

develop to their disadvantage.

148 A reasonable business person would thus conclude that in order to adhere with the

Contract’s underlying principle of risk sharing, it was necessary to fix an exchange rate.


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28

(ii) The de-risking strategy calls for the fixation of an exchange rate

149 The strategy to de-risk RESPONDENT necessitates the fixation of an exchange rate.

150 In a meeting held on November 10, 2009, Engineering International SA announced that

RESPONDENT had to be de-risked (Resp. Exh. R 1). For this purpose, all other subsidiaries were

ordered to reduce the risks in existing contracts with RESPONDENT. Also, the risks in future

contracts were to be kept to a minimum (ibid.). One of the objectives explicitly mentioned by

Engineering International SA was to reduce any currency risks involved (ibid.). In particular, it

suggested using fixed exchange rates (ibid.). The CEOs of both Parties passed these orders on to

the negotiators of the Contract (Proc. Order No. 2, § 18).

151 When the Parties entered into negotiations, they were still affiliates (cf. Proc. Order No. 2, § 1).

As negotiations continued, the situation remained unchanged (ibid.). Just shortly before the

Contract was supposed to be signed, the signing had to be postponed due to CLAIMANT’s

sale (ibid.). Since the negotiations about CLAIMANT’s sale had been kept confidential,

RESPONDENT only found out about the sale when the signing date had to be postponed (ibid.).

Therefore, the main part of the Contract was drafted under the assumption that CLAIMANT

would contribute to RESPONDENT’s de-risking (cf. ibid.). All this time, CLAIMANT did not give

RESPONDENT any reason to doubt the former’s compliance with the de-risking strategy.

152 Therefore, a reasonable business person would conclude that an exchange rate had to be

fixed due to the de-risking strategy.

(iii) The alleged principle of complete reimbursement is of no relevance

153 Contrary to CLAIMANT’s submission (Cl. Memo., §§ 60, 67), the alleged principle of complete

reimbursement (Cl. Exh. C 2, Sec. 4(1)) does not lead to the application of a floating exchange rate.

154 In order for CLAIMANT to be fully reimbursed for its costs, a floating exchange rate has to be

applied (Cl. Memo., § 60). With such a floating exchange rate, RESPONDENT would bear the entire

currency risk – CLAIMANT would bear none of it. However, CLAIMANT itself noted that in respect

of the conversion from EQD to USD “no major risk [was] involved” (Cl. Exh. C 1). It therefore

thought that it does bear a certain risk. Had they agreed on a floating exchange rate, CLAIMANT

would not have faced any risk at all regarding the conversion (see supra § 146). CLAIMANT

contradicts itself: On the one hand, it wants to be reimbursed for its entire costs. On the other

hand, it acknowledges that the Contract provides for a fixed exchange rate. A reasonable business

person would conclude that the principle both Parties ascribed to the Contract, is the prevailing

one.


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29

155 Therefore, the alleged principle of complete reimbursement does not alter the conclusion

that an exchange rate has to be fixed.

(b) The Parties’ earlier conduct leads to the applicability of the exchange rate at the time

of contract conclusion3

156 Contrary to CLAIMANT’s submission (Cl. Memo., §§ 71 et seq.), the Parties’ previous business

practice calls for the application of the exchange rate at the time of contract conclusion.

157 When discerning the understanding of a reasonable business person, the practices

established between the contracting parties are to be taken into account (Art. 8(3) CISG;

SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 46; GRUBER in: MüKo, Art. 8 § 20; ZUPPI in:

Kröll et al., Art. 8 § 25). The key element to establishing a business practice between two parties is

the creation of a justified expectation that they will proceed correspondingly (SCHMIDT-KESSEL in:

Schlechtriem/ Schwenzer, Art. 9 § 8; FERRARI in: MüKo HGB, Art. 9 § 8; LG Frankenthal, 17 April

1997 (Germany)).

158 CLAIMANT and RESPONDENT have been business partners since 2003 (Proc. Order No. 2, § 5).

During this time, they entered into two contracts: The first was concluded in March 2003 and

performed in January 2006, the second was concluded in January 2005 and performed in May

2008 (ibid.). In both contracts, the exchange rate at the time of contract conclusion had been

applied when calculating the purchase price (ibid.). RESPONDENT could legitimately expect that

the exchange rate at the time of contract conclusion would also be applied to this Contract, as

CLAIMANT did not raise any doubts as to the continuation of the practice. The fact that

CLAIMANT did not simply forget about the issue of the exchange rate is evidenced by its own

documentations of the negotiations (Cl. Exh. C 1).

159 A reasonable business person would conclude that, in light of the Parties’ previous business

practice, the exchange rate at the contract conclusion has to be applied.

160 To conclude, RESPONDENT does not have to pay an additional USD 2,285,240.00. It paid

the full amount of the purchase price due under the Contract, calculated on the basis of the fixed

exchange rate provided for in the Addendum. Even if the fixed exchange rate of the Addendum

did not extend to the Contract, the exchange rate at the time of contract conclusion would have

to be applied. CLAIMANT would then merely be entitled to USD 97,440.00


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30

B. RESPONDENT Is Not Obliged to Pay the Levy

161 RESPONDENT is under no duty to pay the Levy in the amount of USD 102,192.80. First, the

Contract does not put an obligation on RESPONDENT to pay the Levy (1.). Second, the CISG

does not impose such an obligation on RESPONDENT either (2.).

1. The Contract does not oblige RESPONDENT to bear the Levy

162 Contrary to CLAIMANT’s allegations (Cl. Memo., §§ 86 et seqq.), RESPONDENT is not obliged to

pay the Levy by virtue of the Parties’ agreement.

163 Sec. 4(3) of the Contract provides that the buyer shall transfer the purchase price to the seller

and that “the bank charges for the transfer of the amount are to be borne by the

BUYER” (Cl. Exh. C 2).

164 As the drafters of the Contract were not aware of the existence of the Regulation (Proc. Order

No. 2, § 6), there was no common intent (Art. 8(1) CISG) as to whether the Levy should be

excluded. Insofar, CLAIMANT comes to the same result (cf. Cl. Memo., §§ 90 et seq.). Thus, the

understanding of a reasonable business person is decisive (Art. 8(2) CISG).

165 A reasonable business person would understand the term ‘bank charges’ to refer to

“amounts of money paid by a customer for a bank’s services” (CAMBRIDGE BUSINESS ENGLISH

DICTIONARY, “bank charges”). In view of this definition, it would expect a ‘bank charge’ to be used

for a service either CLAIMANT or RESPONDENT asked for. Further, it would assume that this

service is provided by CLAIMANT’s bank, the Equatoriana National Bank (Cl. Exh. C 2, Sec. 4(3)).

However, the Levy is deducted by the Equatoriana Central Bank in the course of an examination

for money laundering (Proc. Order No. 2, § 7). This procedure was introduced by the

Equatorianian government by virtue of the Regulation ML/2010C (ibid.). The profit derived from

the investigations is eventually brought to the Equatorianian Ministry of Finance (ibid.). Therefore,

a reasonable business person would not consider the Levy to be a bank charge paid by a

customer for a bank’s service. The investigation serves the state’s interests only.

166 In conclusion, the Levy is not encompassed by Sec. 4(3) of the Contract, wherefore

RESPONDENT is not contractually obliged to bear it.

2. The CISG does not oblige RESPONDENT to bear the Levy

167 RESPONDENT does not have to bear the Levy by virtue of the CISG. That is because,

contrary to CLAIMANT’s lines of argument (Cl. Memo., § 133), Art. 62 CISG does not impose the

obligation to bear the Levy. Art. 62 CISG corresponds with the obligation to pay the purchase

price set forth in Art. 53 CISG (MOHS in: Schlechtriem/Schwenzer, Art. 62 § 1), which is further


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31

specified by Artt. 54, 57 CISG (MOHS in: Schlechtriem/Schwenzer, Art. 53 § 1). However, neither

Art. 54 CISG (a) nor Art. 57 CISG (b) impose such an obligation on RESPONDENT.

(a) RESPONDENT is not obliged to pay the Levy under Art. 54 CISG

168 RESPONDENT is not obliged to pay the Levy. CLAIMANT correctly points out that the

obligation to bear the Levy is theoretically encompassed by Art. 54 CISG (Cl. Memo., §§ 96

et seqq.). Art. 54 CISG sets forth the buyer’s obligation to take all steps necessary in order to

enable payment to be made. Yet, CLAIMANT disregards that RESPONDENT is exempt from the

obligation to pay the Levy by virtue of Art. 80 CISG (i). This result is also in line with the legal

notion of Art. 35(2) CISG (ii).

(i) Art. 80 CISG exempts RESPONDENT from its obligation to pay the Levy

169 Contrary to what CLAIMANT submits (Cl. Memo., §§ 95 et seqq.), RESPONDENT is not required

to pay the Levy under Art. 54 CISG. As CLAIMANT did not fulfill its duty to inform

RESPONDENT about the Regulation, the latter is exempt from the obligation to pay the Levy by

virtue of Art. 80 CISG.

170 If a party causes another party’s failure to perform by act or omission, the former party

cannot rely on this failure (Art. 80 CISG; ATAMER in: Kröll et al., Art. 80 § 4; SAENGER in: Ferrari

et al., Art. 80 § 1; HUBER in: MüKo, Art. 80, § 1). Such omission may be a violation of one’s duty

to cooperate, which also encompasses a duty to inform (Art. 7(1) CISG; FERRARI in:

Schlechtriem/Schwenzer Ger. ed., Art. 7 § 54; MAGNUS in: Staudinger, Art. 7 § 41; ATAMER in: Kröll

et al., Art. 80 § 7; BGH, 31 October 2001 (Germany)). Artt. 54, 7(1) CISG impose the duty upon the

seller to inform the buyer about the former’s domestic public law regulations (cf. HUBER in: MüKo,

Art. 54 § 3; cf. MOHS, in: Schlechtriem/Schwenzer, Art. 54 § 4; cf. MASKOW in: Bianca/Bonell, Art. 54

§ 2.7). In order for the seller to be under such a duty to inform, the public law regulations must

first be unknown to the buyer (cf. BENEDICK, §§ 1021 et seqq.). Second, the seller must have reason

to believe that the buyer is unaware of the regulation (cf. BENEDICK, §§ 1032 et seqq.). Third, the

knowledge of the regulation has to be of relevance for the contract conclusion (cf. BENEDICK,

§§ 1038 et seqq.).

171 First, RESPONDENT did not know about the Regulation when the Parties concluded their

contract (Cl. Exh. C 7; Proc. Order No. 2, § 8). RESPONDENT can further not be expected to know

about the Regulation. This follows from the fact that it is a quite extraordinary regulation which

only came into force recently (Proc. Order No. 2, § 7). There are only five other states with a

comparable rule in force (ibid.). No such rule exists in RESPONDENT’s country


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32

Mediterraneo (Proc. Order No. 2, § 8.). What is more, none of RESPONDENT’s domestic

newspapers published information regarding the Levy when the Regulation entered into

force (cf. Proc. Order No. 2, § 7). Furthermore, RESPONDENT’s only business partner in

Equatoriana is CLAIMANT (ibid.). Therefore, RESPONDENT cannot be expected to know about the

Regulation.

172 Second, CLAIMANT had reason to believe that RESPONDENT was not aware of the

Regulation. CLAIMANT knew about Equatoriana’s intention to fight money laundering due to

press reports before the Contract was concluded (Proc Order No. 2, § 8). However, it only found

out about the Regulation when a levy was actually deducted from another payment in June

2010 (ibid.). Therefore, as CLAIMANT was not aware of the Regulation, in spite of the press

reports, it cannot reasonably expect RESPONDENT, seated in another country (Req. for Arb., § 2),

to know it.

173 Third, knowledge of the Regulation was of relevance for the contract conclusion. Had

RESPONDENT been aware of a levy being charged, the Parties would have discussed this issue

during their negotiations and would have met an agreement regarding the Levy (Answ. to Req.,

§ 18). Therefore, it was essential for RESPONDENT to know about the Regulation.

174 Thus, all prerequisites for a duty to inform on behalf of CLAIMANT according to Artt. 54, 7(1)

CISG are fulfilled. However, CLAIMANT did not comply with this duty. It did not inform

RESPONDENT about the Regulation. Therefore, RESPONDENT is exempt from bearing the Levy

by virtue of Art. 80 CISG.

(ii) The legal notion of Art. 35(2) CISG confirms that RESPONDENT is exempt from its obligation to bear the

Levy

175 Contrary to CLAIMANT’s allegations (Cl. Memo., §§ 107 et seqq.), Art. 35(2) CISG confirms

that RESPONDENT is not obliged to bear the Levy.

176 Art. 35(2) CISG sets out objective standards to determine the conformity of delivered

goods (KRÖLL in: Kröll et al., Art. 35 § 60; MULLIS in: Huber/Mullis, p. 135; SCHWENZER in:

Schlechtriem/Schwenzer, Art. 35 § 13). For assessing this conformity, the domestic standard of the

seller’s country is decisive, unless he knew or ought to have known about the buyer’s domestic

regulations (cf. FERRARI in: Ferrari et al., Art. 35 § 14; KRÖLL in: Kröll et al., Art. 35 § 96; MULLIS in:

Huber/Mullis, pp. 136 et seq.; Medical Marketing International, Inc. v Internazionale Medico Scientifica

(USA); RJ & AM Smallmon v Transport Sales and Grant Alan Miller (New Zealand); OGH, 19 April

2007 (Austria); BGH, 2 March 2005 (Germany); BGH, 8 March 1995 (Germany)). The reason is that a

foreign seller cannot be expected to “know the not easily determinable public law provisions […]


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33

of the country to which he exports” (BGH, 8 March 1995 (Germany)). The buyer, however, “can

be expected to have such expert knowledge” (ibid.). He therefore cannot rely on a non-

compliance with the domestic regulations of his country unless he informed the seller (ibid.).

177 In other words, the recipient of a delivery cannot invoke a non-compliance with its domestic

public law provisions if the foreign deliverer was unaware of them and did not have to be aware.

In the case at hand, CLAIMANT was the recipient of the purchase price, whereas RESPONDENT

was the one who ‘delivered’ the purchase price.

178 Therefore, the legal notion of Art. 35(2) CISG can be transferred onto the present case.

179 RESPONDENT does not have to comply with the Regulation since RESPONDENT neither

knew nor ought to have known about it (see supra § 171). Contrary to CLAIMANT’s

allegations (Cl. Memo., § 132), it cannot be expected of RESPONDENT to know the Regulation.

CLAIMANT wrongfully alleges (ibid.) that RESPONDENT would necessarily have come across the

Levy when inquiring about the ‘bank charges’ for the transfer. However, the Levy was not

charged for the purpose of transfer but was to pay for an investigation for money laundering (see

supra § 165). In fact, it is an extraordinary regulation (see supra § 171). Therefore, RESPONDENT

could not have been expected to inform itself about the Equatorianian legal development.

180 To conclude, RESPONDENT does not have to bear the Levy due to the legal notion of

Art. 35(2) CISG.

(b) Art. 57 CISG does not oblige RESPONDENT to bear the Levy

181 CLAIMANT invokes Art. 57 CISG which regulates the place of payment (Cl. Memo., § 103) to

establish that RESPONDENT has to bear the Levy.

182 However, the default rule of Art. 57(1) CISG only applies if the parties have not agreed on a

place of payment (Art. 57(1) CISG). As the Parties included Sec. 4(3) into their Contract, recourse

cannot be had to Art. 57 CISG. Sec. 4(3) of the Contract determines that the purchase price is to

be deposited into CLAIMANT’s bank account. Place of payment is therefore CLAIMANT’s place of

business, Equatoriana. Further, Sec. 4(3) of the Contract shifts the responsibility to bear bank

charges onto RESPONDENT (Cl. Exh. C 2). However, since the Levy is not a bank charge for

transfer (see supra § 165) it is carved out from RESPONDENT’s obligations (contrary Cl. Memo.,

§ 106).

183 Even if Art. 57 CISG were applicable, the result would be the same. Both, Artt. 54, 57 CISG

define the scope of the obligation to pay the purchase price under the CISG and thereby

complement each other (MOHS in: Schlechtriem/Schwenzer, Art. 57 § 20; MANKOWSKI in: Ferrari et al.,

Art. 53 § 5; BUTLER/HARINDRANATH in: Kröll et al., Art. 53 § 1). As RESPONDENT is exempt


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34

from the obligation to bear the Levy under Art. 54 CISG (see supra §§ 168 et seqq.), Art. 57 CISG

cannot not reinstate this duty.

184 Therefore, the obligation to bear the Levy on RESPONDENT’s part cannot be derived from

Art. 57 CISG.

Conclusion to the Third Issue

CLAIMANT is not entitled to the additional payment of USD 2,285,240.00. RESPONDENT does not

have to bear the Levy in the amount of USD 102,192.80.

REQUEST FOR RELIEF

In light of the submissions made above, RESPONDENT respectfully requests the Tribunal to find

that:

I. RESPONDENT’s request for security for costs should be granted.

II. The claims brought forward by CLAIMANT are inadmissible.

III. CLAIMANT is neither entitled to USD 2,285,240.00 for the fan blades nor to

USD 102,192.80 for the Levy


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Documents

MEMORANDUM FOR RESPONDENT - Willem C. Vis Moot · LUDWIG-MAXIMILIANS-UNIVERSITÄT MÜNCHEN TWENTY FOURTH ANNUAL WILLEM C. VIS INTERNATIONAL COMMERCIAL ARBITRATION MOOT 7 APRIL TO