TWENTY-FIRST NNUAL WILLEM C. VIS - Pace Universitycisgw3.law.pace.edu/cisg/moot/respondent21-2.pdf · in International Arbitration – A Case ... ase_law/digests/ cisg.html> 99

TWENTY-FIRST ANNUAL WILLEM C. VIS

INTERNATIONAL COMMERCIAL ARBITRATION MOOT

12 – 17 APRIL 2014

MEMORANDUM FOR RESPONDENT

COUNSELS

CHEN CHI LEE MING SHAN HANNAH KOK YEE KEONG

KONG YING JIE KENNETH YEO JIANHAO MITCHELL YONG MANLING JASMINE

ON BEHALF OF: AGAINST:

HOPE HOSPITAL

1-3 HOSPITAL ROAD

OCEANSIDE

EQUATORIANA

INNOVATIVE CANCER TREATMENT LTD

46 COMMERCE ROAD

CAPITAL CITY

MEDITERRANEO

RESPONDENT CLAIMANT

NATIONAL UNIVERSITY OF SINGAPORE

MEMORANDUM FOR RESPONDENT | I

TABLE OF CONTENTS

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

INDEX OF ABBREVIATIONS............................................................................................ XVII

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

SUMMARY OF THE ARGUMENTS ........................................................................................ 2

ARGUMENTS............................................................................................................................... 4

I. THIS TRIBUNAL HAS NO JURISDICTION OVER THE FSA CLAIM BECAUSE

ART. 23 FSA DOES NOT CONTAIN A VALID ARBITRATION AGREEMENT. ...... 4

A. PARTIES’ DELIBERATE INCLUSION OF AN APPEAL AND REVIEW MECHANISM IN ART.

23(4) FSA SHOWED THEY DID NOT HAVE THE NECESSARY INTENTION OF AGREEING TO

ARBITRATION THAT WOULD GIVE RISE TO A FINAL AND BINDING AWARD. .......................... 5

B. EVEN IF PARTIES INTENDED TO ARBITRATE, THE INCLUSION OF ARTS. 23(4) AND (6)

FSA RENDERS THE ART. 23 FSA ARBITRATION CLAUSE INVALID. ...................................... 7

1. The Art. 23 FSA arbitration clause is invalidated by the appeal and review

mechanism in Art. 23(4) FSA. .................................................................................... 7

a. Art. 23(4) FSA derogates from the mandatory and exhaustive nature of Art.

34 Model Law by allowing state courts to review the merits of the award. ......... 7

b. Art 23(4) FSA cannot be severed as it was the condition upon which

RESPONDENT entered into arbitration. ............................................................. 9

2. The Art. 23 FSA arbitration clause is invalidated by Art. 23(6) FSA which gives

CLAIMANT a unilateral right to litigate in the courts of Mediterraneo. ................. 10

a. Art. 23(6) FSA is invalid under Art. 3.2.7 UNIDROIT Principles because it

gives CLAIMANT an entirely unjustified and excessive advantage of

dictating the dispute resolution process. ............................................................ 10

b. The unfairness of Art. 23(6) FSA cannot be cured by severance because

CLAIMANT has already taken advantage of its unilateral right by

commencing arbitration. .................................................................................... 12

II. THIS TRIBUNAL HAS NO JURISDICTION OVER THE SLA CLAIM BECAUSE

PARTIES EXPRESSLY AGREED TO LITIGATE PURSUANT TO THE

JURISDICTION CLAUSE IN ART. 23 SLA. ................................................................... 13

A. THE ART. 23 FSA ARBITRATION CLAUSE DOES NOT APPLY TO THE SLA. ......................... 13

1. The general reference to the FSA in the SLA Preamble, which is only an

interpretive aid, does not incorporate Art. 23 FSA into the SLA. ............................ 13

2. Even if the other provisions of the FSA governed the SLA, Art. 23 FSA would not

apply because Art. 23 SLA is a specific provision to the contrary of Art. 23 FSA. . 14


MEMORANDUM FOR RESPONDENT | II

B. THE ARBITRATION CLAUSE IN S. 21 STANDARD TERMS 2000 DOES NOT APPLY TO THE

SLA BECAUSE IT WOULD HAVE BEEN REPLACED BY ART. 23 SLA. .................................. 15

III. EVEN IF PARTIES HAD AGREED TO ARBITRATE THE FSA AND SLA

CLAIMS, THEY SHOULD NOT BE HEARD IN A SINGLE PROCEEDING

UNDER ART. 10 CEPANI RULES. ................................................................................... 16

A. ART. 10(1)(B) CEPANI RULES IS NOT SATISFIED BECAUSE PARTIES HAD NEVER

EXPRESSLY OR IMPLIEDLY INTENDED FOR THE FSA AND SLA CLAIMS TO BE HEARD IN

A SINGLE PROCEEDING. ..................................................................................................... 16

B. EVEN IF ART. 10(1)(B) CEPANI RULES WERE SATISFIED, THIS TRIBUNAL SHOULD

REFRAIN FROM HEARING THE FSA AND SLA CLAIMS TOGETHER. .................................... 18

1. It is not inefficient for the SLA Claim to be heard by a separate tribunal with the

requisite software engineering expertise. .................................................................. 18

2. Conflicting awards are unlikely since this Tribunal is to render an award by 15

May 2014, which will have res judicata effect and preclude Parties from raising

the same issues before the SLA Tribunal. ................................................................. 19

IV. ART. 46 SLA INCORPORATES A CHOICE OF LAW CLAUSE SELECTING

DOMESTIC MEDITERRANEO LAW TO THE EXCLUSION OF THE CISG. ........ 21

A. PARTIES WERE REFERRING TO THE 2000 VERSION WHICH SELECTS DOMESTIC

MEDITERRANEO LAW TO THE EXCLUSION OF THE CISG WHEN THEY INCORPORATED

CLAIMANT’S “STANDARD TERMS” THROUGH ART. 46 SLA . ....................................... 21

1. The Standard Terms 2011 were not incorporated because RESPONDENT neither

understood nor agreed to them when it signed the SLA. .......................................... 21

a. RESPONDENT could not be expected to understand or agree to the

Standard Terms 2011 given that CLAIMANT had failed to provide an

English translation. ............................................................................................ 21

b. As the burden to provide a translation lay on CLAIMANT, RESPONDENT

had no duty to clarify the meaning of the Standard Terms 2011 and did not

accept them by signing the SLA. ......................................................................... 23

2. Since the Standard Terms 2011 do not apply, it is reasonable to interpret Art. 46

SLA as referring to the Standard Terms 2000, which Parties agree excludes the

CISG. ......................................................................................................................... 24

B. EVEN IF PARTIES HAD INTENDED TO REFER TO THE 2011 VERSION IN ART. 46, S. 22 OF

THOSE TERMS SHOULD BE READ AS EXCLUDING THE CISG IN LIGHT OF DR VIS’S

REPRESENTATION IMPLYING THAT THE CISG WOULD NOT APPLY. .................................... 25

V. THE CISG DOES NOT APPLY TO THE SLA BECAUSE CLAIMANT’S

PREPONDERANT OBLIGATIONS INVOLVE NEITHER A “SALE” NOR

“GOODS” WITHIN THE MEANING OF ART. 1(1) CISG. .......................................... 26


MEMORANDUM FOR RESPONDENT | III

A. THE PREPONDERANT PART OF CLAIMANT’S CONTRACTUAL OBLIGATIONS DOES NOT

INVOLVE “GOODS” WITHIN ART. 1(1) CISG . .................................................................... 27

1. CLAIMANT’s development of AST software for RESPONDENT is not a “good”

but a service. ............................................................................................................. 27

a. CLAIMANT’s development of AST software is a service because it is

customised to RESPONDENT’s needs. .............................................................. 27

b. Alternatively, CLAIMANT’s development of AST software is a service under

Art. 3(1) CISG because RESPONDENT’s contribution of medical data is a

“substantial part of the materials necessary” for its development. ................... 28

2. Even if the development of AST software is not a service, it still would not be a

“good” within the meaning of Art. 1(1) CISG. ......................................................... 29

a. Software is intangible intellectual property which is implicitly excluded from

the definition of “good” within Art. 1(1)CISG. .................................................. 29

b. Even if the AST software were characterised as software embodied in a

physical medium, it would still not be governed by the CISG because the

focus of the dispute relates to the intangible intellectual property. ................... 30

3. The development of AST software, whether characterised as a service or non-

CISG "good", as well as the obligation to train personnel, form a preponderant

part of CLAIMANT’s obligations. ........................................................................... 32

B. EVEN IF THE PREPONDERANT PART OF CLAIMANT'S OBLIGATIONS RELATES TO

“GOODS”, THE SLA IS NOT A “SALE” WITHIN THE MEANING OF ART. 1(1) CISG. ............. 33

1. The SLA is preponderantly a contract for licensing of software and hiring of

training services, and not a sale of software. ............................................................ 33

a. CLAIMANT's licensing of the AST software did not amount to a “sale”

because property did not pass to RESPONDENT. ............................................. 33

b. Since licensing of the AST software and hiring of training services form the

preponderant part of CLAIMANT’s obligations, the SLA is not a “sales”

transaction within the CISG. .............................................................................. 34

2. Alternatively, there is no “sales” transaction because the SLA is a partial barter

agreement which is not covered by CISG provisions. .............................................. 34

VI. REQUEST FOR RELIEF ................................................................................................... 35


MEMORANDUM FOR RESPONDENT | IV

INDEX OF AUTHORITIES

TREATIES, CONVENTIONS AND RULES

Abbreviation Citation Paragraphs

1964 Hague Convention Convention relating to a Uniform

Law on the International Sale of

Goods, The Hague, 1 July 1964

89

CEPANI Rules

CEPANI Arbitration Rules, 1 January

2013

39, 40, 41, 46

CISG United Nations Convention on Con-

tracts for the International Sale of

Goods, Vienna, 11 April 1980

56, 58, 64, 77, 84, 88,

91, 98, 100, 107, 108,

109

ICC Rules International Chamber of Commerce

Rules of Arbitration, 1 January 2012

41

Model Law UNCITRAL Model Law on Interna-

tional Commercial Arbitration (with

amendments as adopted in 2006), 21

June 1985

3, 6, 7, 8, 11, 12, 13,

14, 15, 19, 28

NY Convention Convention on the Recognition and

Enforcement of Foreign Arbitral

Awards, New York, 10 June 1958

3, 12

UNIDROIT Principles International Institute for the Unifica-

tion of Private Law (UNIDROIT)

Principles of International Commer-

cial Contracts 2010

19, 37

COMMENTARIES / ARTICLES

Abedian Abedian, Hossein

“Judicial Review of Arbitral Awards

in International Arbitration – A Case

for an Efficient System of Judicial Re-

view”

Journal of International Arbitration,

Kluwer Law International 2011, Vol-

ume 28 Issue 6

13

Analytical Commentary UNCITRAL, 18th Session “Analytical

Commentary on Draft Text of a Model

Law on International Commercial Ar-

bitration”

6, 8, 10


MEMORANDUM FOR RESPONDENT | V

UN Doc. A/CN.9/264

Bainbridge (1994) Bainbridge, David

Software Copyright Law, 2nd

Ed.

London: Butterworths, 1994

103

Bainbridge (2010) Bainbridge, David

Intellectual Property, 8th

Ed.

England: Pearson Education Limited,

2010

90

Balganesh Balganesh, Shyamkrishna

“The Uneasy Case Against Copyright

Trolls”

(2013) 86 S. Cal. L. Rev. 723

90

Born Born, Gary B.

International Commercial Arbitration

The Netherlands: Kluwer Law Interna-

tional, 2009

3, 4, 53, 54, 96

Caron et al. Caron, David; Caplan, Lee; Pellonpää,

Matti

The UNCITRAL Arbitration Rules: A

Commentary, 1st Ed.

USA: Oxford University Press, 2006

3

Casey Casey, Brian

International and Domestic Commer-

cial Arbitration

Ontario: Carswell Thomson Profes-

sional Publishing, 1993

48

CISG Digest

UNCITRAL Digest of Case Law on

the United Nations Convention of the

International Sale of Goods

Available at:

<http://www.uncitral.org/uncitral/en/c

ase_law/digests/ cisg.html>

99

CISG-AC Opinion 3 CISG-AC Opinion No. 3,

“Parol Evidence Rule, Plain Meaning

Rule, Contractual Merger Clause and

the CISG”

Rapporteur: Professor Richard Hy-

land, Rutgers Law School, Camden,

NJ, USA.

Adopted by the CISG Advisory Coun-

74


MEMORANDUM FOR RESPONDENT | VI

cil on 24 October 2004

CISG-AC Opinion 4 CISG-AC Opinion No. 4

“Contracts for the Sale of Goods to Be

Manufactured or Produced and Mixed

Contracts (Article 3 CISG)”

Rapporteur: Professor Pilar Perales

Viscasillas, Universidad Carlos III de

Madrid.


cil on 24 October 2004

86, 98

CISG-AC Opinion 13 CISG-AC Opinion No. 13,

“Inclusion of Standard Terms under

the CISG”

Rapporteur: Professor Sieg Eiselen,

College of Law, University of South

Africa, Pretoria, South Africa.


cil on 20 January 2013

58, 59, 74

Diedrich Diedrich, Frank

“The CISG and Computer Software

Revisited”

(2002) 6 Vindobona J. of Int. Com-

mercial Law & Arb. Supplement 55

79, 85, 89, 90, 91

Drafting Int. Contracts Fontaine, Marcel; De Ly, Filip

Drafting International Contracts: An

Analysis of Contract Clauses

New York: Transnational Publishers,

Inc., 2006

29

Dutson et al. Dutson, Stuart; Moody, Andy;

Newing, Neil

International Arbitration: A Practical

Guide, 1st Ed.

United Kingdom: Globe Business

Publishing Ltd, 2012

12

Explanatory Note Explanatory Note by the UNCITRAL

Secretariat on the 1985 Model Law on

International Commercial Arbitration

as amended in 2006

In United Nations Commission on In-

ternational Trade Law (UNCITRAL)

Model Law on International Commer-

cial Arbitration (with amendments as

adopted in 2006), 21 June 1985

3, 4, 8, 10, 14


MEMORANDUM FOR RESPONDENT | VII

Fakes Fakes, Arthur

“The Application of the United Na-

tions Convention on the Contracts for

the International Sale of Goods to

Computer, Software, and Database

Transactions”

(1989-1990) 3 Software Law J. 559

84

Ferrari Ferrari, Franco

“Specific Topics of the CISG in the

Light of Judicial Application and

Scholarly Writing”

(1995) 15 J.l of Law and Commerce 1

89

Fry et al. Fry, Jason; Greenberg, Simon; Mazza,

Francesca

“The Secretariat's Guide to ICC Arbi-

tration: A Practical Commentary on

the 2012 ICC Rules of Arbitration

from the Secretariat of the ICC Inter-

national Court of Arbitration”

ICC Publication No. 729 (2012)

41, 44

Greenberg et al. Simon Greenberg, Simon; Kee, Chris-

topher; Weeramantry, Romesh

International Commercial Arbitration:

An Asia-Pacific Perspective

England: Cambridge University Press,

2011

10

Gutterman/Erlich Gutterman, Alan; Erlich, Jacho

Technology Development and Trans-

fer: the Transaction and Legal Envi-

ronment, 1st Ed.

Connecticut: Quorom Books, 1997

104

Hanotiau Hanotiau, Bernard

Complex Arbitrations: Multiparty,

MultiContract, Multi-Issue and Class

Actions


tional, 2006

41, 52

Holtzmann/Neuhaus Holtzmann, Howard; Neuhaus, Joseph

A Guide to The UNCITRAL Model

Law on International Commercial Ar-

bitration: Legislative History and

Commentary

The Hague: Kluwer Law and Taxation

29


MEMORANDUM FOR RESPONDENT | VIII

Publishers, 1989

Honnold Honnold, John

Uniform Law for International Sales

under the 1980 United Nations Con-

vention, 3rd

Ed.

The Hague: Kluwer Law International,

1999

89

Huber/Mullis Peter Huber; Alastir Mullis

The CISG: a New Textbook for Stu-

dents and Practitioners

Munich: European Law Publishers,

2007

56, 58, 77, 98, 99

Leboulanger Leboulanger, Phillipe

“Multi-Contract Arbitration”

(1996) 13 J.l of Int.l Arb.n 43

42

Lookofsky Lookofsky, Joseph

Understanding the CISG in the USA:

A Compact Guide to the 1980 United

Nations Convention on Contracts for

the International Sale of Goods, 3rd

Ed.


tional, 2004

72

Mather Mather, Henry

“Choice of Law for International Sales

Issues Not Resolved by the CISG”

(2001) 20 J.l of Law and Commerce

155

96

Megantz Megantz, Robert

How to License Technology, 1st Ed.

New York: John Wiey & Sons Inc.,

1996

94

Meulemeester De Meulemeester, Dirk

“Multicontract Arbitration Under the

CEPANI Arbitration Rules (Article

10)” 23 October 2013

Available at:

<http://kluwerarbitrationblog.com/blo

g/2013/10/23/multicontract- arbitra-

tion-under-the-cepani- arbitration-

rules-article-10/>

41


MEMORANDUM FOR RESPONDENT | IX

Model Law Digest UNCITRAL 2012 Digest of Case Law

on the Model Law on International

Commercial Arbitration

Available at:

<http://www.uncitral.org/pdf/english/c

lout/MAL-digest-2012-e.pdf>

99

Moon Moon, Ken

“The Nature of Computer Programs:

Tangible? Goods? Personal Property?

Intellectual Property?”

(2009) 31 EIPR 396

88

Nimmer Nimmer, Raymond

The Law of Computer Technology -

Rights, Licenses, Liabilities, 2nd

Ed.

Massachusetts: Warren Gorham La-

mont, 1992

103

Passman Passman, Michael

“Transactions of Virtual Items in Vir-

tual Worlds”

(2008) 18 Alb. L.J. Sci & Tech 259

104

Pearson Pearson, Hilary

Computer Contracts: An International

Guide to Agreements and Software

Protection

New York: Chapman and Hall, 1985

82

Schlectriem (2005) Schlechtriem, Peter

“Requirements of Application and

Sphere of Applicability of the CISG”

(2005) 35 Victoria University of Wel-

lington Law Review 781

107

Schlechtriem/Butler Schlechtriem, Peter; Butler, Petra

UN Law on International Sales: The

UN Convention on the International

Sale of Goods

Germany: Springer, 2009

89

Secretariat Commentary Commentary on the 1978 Draft Con-

vention on Secretariat’s Commentary

on Article 2, United Nations Confer-

ence on Contracts for the International

Sale of Goods

91


MEMORANDUM FOR RESPONDENT | X

In Official Records: Documents of the

Conference and Summary Records of

the Plenary Meetings and of the Meet-

ings of the Main Committees (Vienna,

10 March - 11 April 1980)

U.N. Doc. A/Conf.97/19, 19 (United

Nations ed., 1981)

Schlechtriem/Schwenzer Schwenzer, Ingeborg ed.

Schlechtriem & Schwenzer: Commen-

tary on the UN Convention on the In-

ternational Sale of Goods (CISG), 3rd

Ed.

New York: Oxford University Press,

2010

58, 69, 72, 91, 106

Sono Sono, Hiroo

“The Applicability and Non-

Applicability of the CISG to Software

Transactions”

In Sharing International Commercial

Law across National Boundaries: Fest-

schrift for Albert H. Kritzer on the

Occasion of his Eightieth Birthday

Wildy, Simmons & Hill Publishing

(2008) 512

90

Summary Record Summary Records for Meetings on the

UNCITRAL Model Law on Interna-

tional Commercial Arbitration

In UNCITRAL Yearbook XVI

(1985) A/CN.9/SR.318

9

UNIDROIT Comment International Institute for the Unifica-

tion of Private Law (UNIDROIT)

Principles of International Commercial

Contracts 201 Official Comments

Available at:

<http://www.unidroit.org/english/princ

iples/contracts/principles2010/integral

versionprinciples2010-e.pdf>

19

UN Report 1979 Report of the Secretary-General: Bar-

ter or Exchange in International Trade

UN Doc. A/CN.9/159

108


MEMORANDUM FOR RESPONDENT | XI

Verbist Verbist, Herman

“New CEPANI Rules of Arbitration in

Force as from 1 January 2013.”

Available at:

<https://biblio.ugent.be/record/311161

1>

41

Weigand Weigand, Frank-Bernd

Practitioner's Handbook on interna-

tional Commercial Arbitration, 2nd

Ed.

New York: Oxford University Press,

2009

9

CASES AND ARBITRAL AWARDS

Australia

Conagra Case Conagra International Fertiliser v.

Lief Investments

New South Wales Court of Appeal, 16

July 1998

[1998] NSWSC 481

28

TCL Case TCL Air Contioner (Zhongshan) v.

Judges of the Federal Court of Aus-

tralia

High Court of Australia, 13 March

2013

[2013] HCA 5

11

The Golden Glory The Golden Glory

Federal Court of Australia, 5 June

1991

[1991] FCA 235

34

Austria

Software Case Oberster Gerichtshof [Austrian Su-

preme Court]

21 June 2005, Case No.: 5 Ob 45/05m

94

Belgium

Hardware-Software Case Hof van Beroep [Belgium Appellate

Court]

24 November 2004, Case No.:

1998/AR/2613

82

Canada

Noble China Case Noble China Inc. v. Lei Kat Cheong,

Ontario Court of Justice, 4 November

9


MEMORANDUM FOR RESPONDENT | XII

1998

42 O.R. (3d) 69

Québec Case Québec Inc. v. Fafard

Quebec Court of Appeal, 31 March

2004

[2004] QJ No. 4085, REJB 2004-6064

3, 34

Sport Maska Case Sport Maska Inc. v. Zittrer

Supreme Court of Canada, 24 March

1988

[1988] 1 S.C.R. 564

3

Xerox Case Xerox Canada Ltd., Xerox Corpora-

tion v. MPI Techologies Inc., MPI

Tech. S.A.

Ontario Superior Court of Justice, 30

November 2006

[2006] O.J. No. 4895 (QL)

11

France

ACADI Case Acadi v. Thomson-Answare

Paris Court of Appeal, 9 December

1987

1988 Rev. Arb. 573

34

Bomar Case Cour de Cassation [Supreme Court]

11 October 1989, Case No.: 1178P

(1989)

30

Rothschild Case Cour de Cassation [Supreme Court]

26 September 2012, Case No.:

2012:C100983

20

Germany

Cylinder Case Landgericht Mainz [German District

Court]

26 November 1998, Case No.: 12

HKO 70/97

99

Filter Plates Case Landgericht Memmingen [German

District Court]

13 September 2000, Case No.: 2H O

382/99

61

Knitware Case Amtsgericht Kehl [German Local

Court]

59, 60


MEMORANDUM FOR RESPONDENT | XIII

6 October 1995, Case No.: 3 C

925/93

Machinery Case Bundesgerichtshof [German Federal

Supreme Court]

31 October 2001, Case No.: VIII ZR

60/01

58, 64

Market Study Case Oberlandesgericht Köln [German

Provincial Court of Appeal]

26 August 1994, Case No.: 19 U

282/93

79, 94, 95

Tools Case Oberlandesgericht Oldenburg [Ger-

man Provincial Court of Appeal]

20 December 2007, Case No.: 8 U

138/07

72

Hong Kong SAR, China

Pacific Case Pacific China Holdings Ltd (In Liq-

uidation) v. Grand Pacific Holdings

Ltd

Court of First Instance, 29 June 2011

[2011] HKCFI 424

11

William Co Case William Co v. Chu Kong Agency Co

Ltd

High Court of Hong Kong, 17 Febru-

ary 1993

[1993] 2 HKC 377

33

Hungary

Containers Case Arbitration Court Budapest Chamber

of Commerce and Industry

5 December 1995, Case No.: Vb

94131

86

India

M/S. Centrotrade Case M/S. Centrotrade Minerals & Metal.

Inc. v. Hindustan Copper Ltd.,

Supreme Court of India, 9 May 2006

[2006] INSC 293

9

Shin Satellite Case Shin Satellite Public Co. Ltd. v. Jain

Studios Ltd.,

Supreme Court of India, 31 January

2006

[2006] 2 SCC 628

9


MEMORANDUM FOR RESPONDENT | XIV

Venture Global Case Venture Global Eng'g v. Satyam

Computer Serv. Ltd

Supreme Court of India, 10 January

2008

[2008] INSC 40

13

New Zealand

Doug Hood Case Gold & Resources Dev. (NZ) Ltd v.

Doug Hood Ltd

New Zealand Court of Appeal

18 October 2012, Case No.:

CA437/2012

4

Gallaway Case Gallaway v. Cook


15 February 2013, Case No.:

CA437/2012

16

Methanex Case Methanex Motunui Ltd. v. Spellman,


17 June 2004, Case No.: 171/03

4, 11

Pakistan

Hitachi Case Hitachi Ltd v. Mitsui & Co and Ru-

pali Polyester

[2000] XXV YBCA 486

10 June 1998

13

Russia

Sony Ericsson Case Russian Telephone Company OJSC v

Sony Ericsson Mobile Communica-

tions Rus LLC

Supreme Arbitration Court of Russia

19 June 2012, Case No.: 1831/12

20

Singapore

Concordia Case Concordia Agritrading Pte Ltd v

Cornelder Hoogewerff (Singapore)

Pte Ltd

High Court of Singapore, 13 October

1999

[2001] 1 SLR 222

28

PT Asuransi Case PT Asuransi Jasa Indonesia

(Persero) v Dexia Bank SA

11


MEMORANDUM FOR RESPONDENT | XV

Singapore Court of Appeal, 20 Octo-

ber 2005

[2006] 1 SLR(R) 597

Switzerland

PVC Case KG Zug [Swiss District Court]

21 October 1999, Case No. A3 1997

61

107

United Kingdom

Fraser Case House of Fraser Ltd v. Scottish Wid-

ows Plc

England and Wales High Court, 28

October 2011

[2011] EWHC 2800

14

Habas Case

Habas Sinai Ve Tibbi Gazlar Isthisal

Endustri AS v Sometal SAL

England and Wales High Court, 18

January 2010

[2010] EWHC 29

30

United States

Hall Street Case Hall Street Associates, L.L.C. v. Mat-

tel, Inc.

United States Court of Appeals for

the 9th

Circuit [Federal Appellate

Court]

29 May 2007, Case No.: 06-989

11

MCC-Marble case MCC-Marble Ceramic Center v. Ce-

ramica Nuova D'Agostino

United States Court of Appeals for

the 11th Circuit [Federal Appellate

Court]

29 June 1998, Case No.: 97-4250

59

DOMESTIC LEGISLATION

AAA Rules American Arbitration Association

Optional Appellate Arbitration

Rules, 1 November 2013

14

English Arb. Act English Arbitration Act 1996, 17

June 1996

14


MEMORANDUM FOR RESPONDENT | XVI

NZ Arb. Act New Zealand Arbitration Act 1996, 2

September 1996

14

SOURCES ON TRADE PRACTICE

PTF Companies

Optivus Proton Therapy Inc.

Available at:

<http://www.optivus.com/>

IBA Proton Therapy

Available at:

<http://www.iba-protontherapy.com/>

Varian Medical Systems

Available at:

<http://www.varian.com/us/oncology/p

roton/>

42


MEMORANDUM FOR RESPONDENT | XVII

INDEX OF ABBREVIATIONS

&

And

¶ / ¶¶ Paragraph / Paragraphs

% Per cent

$ United States Dollar

Arb. Arbitration

Art. / Arts. Article / Articles

Ans. RESPONDENT’s Answer to Request for Arbitration

AST Active scanning technology

Bus. Business

Cl. Ex. CLAIMANT’s Exhibit No.

Cl. Memo Friedrich Schiller University of Jena’s Claimant Memorandum

Circular No. 265 Circular No. 265 issued by the Equatorianean Auditor-General on

23 October 2007

ed./eds. Editor/editors

Ed. Edition

e.g. Exempli gratia; for example

FSA Framework and Sales Agreement, contract between CLAIMANT

and RESPONDENT signed on 13 January 2008

the FSA Claim The claim arising out of the FSA in the present arbitration,

CEPANI Arbitration No. 22780

i.e. Id est; that is

Int. International

IP Intellectual Property

J.

Letter CEPANI

Journal

Letter from CEPANI Secretary-General to this Tribunal dated 4

October 2013 on p. 55 of Moot Problem

m Million

No./Nos. Number/Numbers

Parties/Party CLAIMANT and/or RESPONDENT


MEMORANDUM FOR RESPONDENT | XVIII

P. O. 1 Procedural Order No. 1 (4 October 2013), CEPANI Arbitration

No. 22780

P. O. 2 Procedural Order No. 2 (31 October 2013), CEPANI Arbitration

No. 22780

Req. CLAIMANT’s Request for Arbitration

Rp. Ex. RESPONDENT’s Exhibit No.

SLA Sales and Licensing Agreement, contract between CLAIMANT

and RESPONDENT signed on 20 July 2011

the SLA Claim The claim arising out of the SLA in the present arbitration,

CEPANI Arbitration No. 22780

the Agreements The FSA and SLA collectively

this Tribunal The present tribunal constituted to hear CEPANI Arbitration No.

22780

Standard Terms 2000 CLAIMANT's Standard Terms and Conditions for Sale (Novem-

ber 2000)

Standard Terms 2011 CLAIMANT's Standard Terms and Conditions for Sale (July

2011)


MEMORANDUM FOR RESPONDENT | 1

STATEMENT OF FACTS

1. RESPONDENT is a university teaching hospital in Equatoriana specialising in cancer

research [Cl. Ex. 1]. On 13 January 2008, it agreed to purchase from CLAIMANT, a

Mediterranean manufacturer, a proton therapy facility comprising a proton accelerator

and two treatment rooms using passive-beam scattering technique [Req. ¶4]. This

agreement was contained in the FSA, which was concluded over 4 meetings [Cl. Ex. 3].

2. The FSA addressed two major concerns. First, as an extensively state-funded public

hospital, RESPONDENT was expected to comply with Circular No. 265 not to be

irrevocably bound by manifestly erroneous decisions [Rp. Ex. 1; Cl. Ex. 3]. Thus, Parties

replaced s. 21 of CLAIMANT’s Standard Terms 2000, which excluded all rights of

appeal, with Art. 23 FSA. In particular, Art. 23(4) allows Parties to refer arbitral awards

"obviously wrong in fact or in law" to state courts. This clause was specifically

negotiated by Parties without their lawyers and was included verbatim into the FSA.

Although Parties’ lawyers later reviewed Art. 23(4), none of them were arbitration

specialists [P.O.2 ¶10]. The second major concern was RESPONDENT’s budgetary

constraints. In order to obtain the right to pay in instalments, RESPONDENT gave

CLAIMANT the unilateral right to litigate in Art. 23(6) [Cl. Ex. 3]. In addition to these

concerns, Parties inserted Art. 45, which provides that the FSA would govern all “further

and future contracts” in relation to the proton therapy facility as long as they do not

contain “a specific provision to the contrary”.

3. After the conclusion of the FSA contract on 13 January 2008, operation of the facility

began on 15 April 2010 [Req. ¶8]. Parties had no further dealings apart from a supply

and maintenance contract entered into under the framework of the FSA [P.O. 2 ¶6]. It

was only over a year later, on 6 May 2011, that RESPONDENT approached

CLAIMANT to install a third treatment room under the SLA, for which CLAIMANT

had to develop and license AST software [Cl. Ex. 4].

4. At the final meeting on 2 June 2011, CLAIMANT’s Dr Vis informed RESPONDENT

that it had revised its standard terms, but the changes in the terms were minor apart from

the liability regime [Rp. Ex. 2]. When asked about these changes, Dr Vis answered that

the “major change” was a limitation of liability [P.O. 2 ¶31]. Subsequently, on 5 July

2011, Dr Vis informed RESPONDENT that the Standard Terms 2011 would apply to

contracts concluded from 1 July 2011 onwards [Rp. Ex. 2]. Since the terms were only



available in Mediterranean, he promised to send an English translation [Cl. Ex. 5].

However, CLAIMANT never sent it [Rp. Ex. 2]. On 14 July 2011, RESPONDENT went

to check CLAIMANT’s website for the mentioned changes in liability regime. However

no English translation was available, except a banner stating that it was forthcoming

[P.O. 2 ¶¶32&33].

5. Parties signed the SLA on 20 July 2011. Pursuant to the SLA, CLAIMANT developed

the first version of the basic AST software "primarily” for RESPONDENT’s needs [P.O.

2 ¶24]. However, as CLAIMANT wanted to be able to sell the AST software in the

future, Art. 11 SLA provided that all IP rights in the software vested in CLAIMANT

[P.O. 2 ¶24]. Also, as RESPONDENT contributed to the development of the AST

software, Parties agreed to value these contributions at $6m, which was offset against the

initial price of $9.5m [Rp. Ex. 3]. Thus, the monetary sum payable was $3.5m [Art. 3(1)

SLA]. In light of its contributions, RESPONDENT also successfully bargained for the

right to bring all SLA claims in Mediterraneo or Equatoriana [Art. 23 SLA].

6. Subsequently, RESPONDENT found that CLAIMANT’s pre-sale budgeting analysis

was inaccurate and the AST software was defective [Ans. ¶22&24]. On 15 August 2012,

RESPONDENT informed CLAIMANT that it was withholding final payments under the

FSA and SLA [Cl. Ex. 7]. On 6 June 2013, CLAIMANT commenced arbitration,

allegedly for the sums due under the Agreements. While the FSA Claim related to the

commercial viability of the proton therapy facility, the SLA Claim concerned the

suitability of the calibration software for the active scanning technology [Ans. ¶13]. On 5

July 2013, RESPONDENT contested this Tribunal’s jurisdiction and the sums due under

the Agreements. This Tribunal then ordered a preliminary hearing on jurisdiction.

SUMMARY OF THE ARGUMENTS

7. This Tribunal has no jurisdiction over the FSA Claim because Art. 23 FSA does not

contain a valid arbitration agreement. Parties lacked the necessary intention to submit

disputes to final and binding arbitration. Art. 23 was drafted by Parties without advice

from lawyers specialising in arbitration. The inclusion of the appeal and review

mechanism in Art. 23(4) FSA shows Parties’ lack of understanding that arbitration must

result in a final and binding award. Even if Parties intended to arbitrate, the insertion of

Arts. 23(4) and (6) renders the Art. 23 arbitration clause invalid. Art. 23(4) invalidates

Art. 23 by derogating from the mandatory and exhaustive setting aside provision in Art.



34 Model Law by allowing state courts to review the merits of the award. Art. 23(4)

cannot be severed as it is the condition upon which RESPONDENT entered into

arbitration. Further and in the alternative, CLAIMANT’s unilateral right to litigate

payment disputes in Art. 23(6) invalidates the arbitration clause by giving CLAIMANT

an unjustified advantage to choose between litigation and arbitration. Severing this

clause will not cure the unfairness.

8. Even if the arbitration agreement in the FSA is valid, this Tribunal has no

jurisdiction over the SLA Claim because Parties clearly intended to litigate all SLA

claims. Art. 23(2) SLA clearly stipulates for litigation in Mediterraneo or Equatoriana

without mentioning arbitration. The general reference to the FSA in the SLA Preamble,

which is only an interpretive aid, does not incorporate Art. 23 FSA into the SLA. Even if

the FSA governs the SLA by virtue of Art. 45 FSA, Art. 23 FSA does not apply to the

SLA. Art. 45 FSA stipulates that the FSA governs “further and future contracts” unless

there is a “specific provision to the contrary”. The choice to litigate in Art. 23(2) SLA is

clearly “contrary”. Reconciling the provisions would be against the express intention of

Parties and create unworkable results.

9. This Tribunal should hear the FSA and SLA Claims in separate proceedings. Art. 10

CEPANI Rules grants this Tribunal the discretion to hear the Claims together. The

requirement that Parties must have agreed to a single hearing in Art. 10(1)(b) is not

satisfied because Parties have never considered the possibility of resolving disputes

together. Even if one were to objectively construe Parties’ implied intentions, the

presumption in Art. 10(3) that Parties did not intend to hear the Claims together would

apply. This is because the Claims arise out of separate economic transactions. Further and

in the alternative, CLAIMANT has not discharged its burden of showing why this

Tribunal should exercise its discretion to order a single hearing. It is not inefficient for the

SLA Claim to be heard by a specialized tribunal which would be familiar with the

software issues in the SLA Claim. Also, conflicting awards are unlikely since this

Tribunal is to render an award by 15 May 2014, which will have res judicata effect and

preclude Parties from raising the same issues before the SLA Tribunal.

10. The CISG does not apply to the SLA because Art. 46 SLA incorporated s. 22

Standard Terms 2000, which selects domestic Mediterraneo sales law. The Standard

Terms 2011 were not incorporated because RESPONDENT could not be expected to

understand or agree to them given that CLAIMANT failed to provide an English



translation. CLAIMANT’s conduct also shows that it intended to bear the burden of

providing the translation. Hence, RESPONDENT had no duty to clarify the meaning of

the Standard Terms 2011, and did not accept them by signing the SLA. Given that the

Standard Terms 2011 were not incorporated, the most reasonable interpretation of Art.

46 SLA is that it incorporated the Standard Terms 2000, which selects domestic

Mediterraneo law excluding CISG. Alternatively, even if the Standard Terms 2011 were

incorporated, s. 22 of those terms excludes the CISG in light of Dr Vis’ representation

that the choice of law would remain as domestic Mediterraneo law.

11. The CISG does not apply to the SLA because it does not involve a “sale” or “goods”

within the meaning of Art. 1(1) CISG. The SLA is excluded from the CISG under Art.

3(2) CISG because a preponderant part of CLAIMANT’s obligations does not involve

“goods”. CLAIMANT’s development of AST software is a service because the software

has been customised and RESPONDENT has contributed a substantial part of the

material necessary to the software development. Even if software development were not

a service, software is still not a “good” because intangible IP are non-CISG “goods”.

Since the preponderant part of CLAIMANT’s obligations – development of software and

the training of personnel – involves services or non-CISG “goods”, the CISG does not

apply to the SLA. Alternatively, even if software were a “good”, the SLA is not a “sales”

transaction. First, on an extension of the principle of Art. 3(2) CISG, where the

preponderant part of a seller’s obligations is not a “sale”, the CISG does not apply. Since

the preponderant part of CLAIMANT’s obligations pertains to the licensing of software

and hiring of training services, which are not “sales”, the CISG is excluded. Second,

RESPONDENT’s non-monetary obligations amount to a partial barter agreement that is

not covered by CISG provisions.

ARGUMENTS

I. THIS TRIBUNAL HAS NO JURISDICTION OVER THE FSA CLAIM BECAUSE

ART. 23 FSA DOES NOT CONTAIN A VALID ARBITRATION AGREEMENT.

1. This Tribunal has no jurisdiction over the FSA Claim because [A] Art. 23(4) FSA, which

is an appeal and review mechanism, shows that Parties did not have the necessary

intention to agree to an arbitration that would give rise to a final and binding award. [B]

In any event, any such agreement is invalidated by Art. 23(4) FSA and CLAIMANT’s

unilateral right to litigate in Art. 23(6) FSA.



A. PARTIES’ DELIBERATE INCLUSION OF AN APPEAL AND REVIEW MECHANISM IN

ART. 23(4) FSA SHOWED THEY DID NOT HAVE THE NECESSARY INTENTION OF

AGREEING TO ARBITRATION THAT WOULD GIVE RISE TO A FINAL AND BINDING

AWARD.

2. Although Art. 23(3) FSA superficially refers to “arbitration”, the appeal and review

mechanism in Art. 23(4) shows that awards rendered were not intended to be final and

binding if a party was dissatisfied with the result. Therefore, their submission to

arbitration in Art. 23 is defective.

3. The validity of an arbitration agreement is determined in accordance with the lex arbitri

i.e. Danubian law which includes Model Law [P.O. 2 ¶13; Cl. Memo ¶24]. An intention

to enter into an arbitration resulting in a “final” and “binding” award is essential to the

framework of the Model Law and is a pre-requisite of a valid arbitration agreement. A

“final” award is one that can only be set aside on specified grounds stipulated in the

Model Law and not overturned on appeal by courts, while a “binding” award is one

which can be executed without delay [Caron et al. 740-742]. The requirement for an

intention that arbitration be “final” and “binding” can be found in the Model Law. Art.

34 Model Law ensures the finality of awards by providing that parties’ only recourse

against an award is in setting aside proceedings on specific grounds [Born 81;

Explanatory Note ¶45], while Art. 35(1) Model Law provides that an arbitral award

“shall be recognized as binding”. These provisions are mirrored in Arts. III and V NY

Convention. Crucially, Art. III requires awards to be “binding” before they can be

enforced. Otherwise, the winning party would not be able to recover the relief it is

awarded, undermining the very purpose of arbitration to resolve disputes. [Born 2891]

Based on these provisions, courts have ruled that for there to be a sufficient intention to

arbitrate, parties must intend that the award be final and binding [Sport Maska Case;

Québec Case].

4. The requirement that parties must intend for awards to be final and binding is sound.

First, arbitration is by definition a private dispute resolution forum that excludes the

original competence of state courts [Methanex Case; Explanatory Note ¶15]. The

recognition that an arbitral award is final and binding forms the clearest evidence of

Parties’ understanding of the nature of arbitration as a limitation of their right of access

to state courts. Second, the effectiveness of arbitration as a dispute resolution forum

depends heavily on the award being final and binding [Doug Hood Case]. Otherwise, a



losing party will almost always appeal against the award, or start litigation afresh, which

renders the arbitral process otiose. During this period, the winning party would not be

able to enforce the award [see ¶3, supra], while the losing party could have seized the

opportunity to dispose of its assets, thus frustrating the whole arbitral process [Born

2877].

5. RESPONDENT clearly intended for Art. 23(4) to provide a channel of appeal to courts.

First, this is reflected in the plain reading of Art. 23(4), which provides that the “state

court [shall have] jurisdiction to review the case and to decide the issue in accordance

with the applicable law” upon Parties’ application (emphasis added). This allows the

court to “review” the merits of Parties’ case and re-decide “issues” that Parties claim to

be obviously wrong in fact or law, thereby substituting the arbitral tribunal’s decision

with its own. Second, this interpretation of Art. 23(4) is consistent with Parties’

negotiating history. As RESPONDENT is a public hospital accountable to Equatoriana’s

taxpayers, it insisted on a dispute resolution mechanism providing for appeal against

obviously wrong decisions. Thus, CLAIMANT, in acknowledgement of

RESPONDENT’s difficulties [Cl. Ex. No. 3], agreed for Art. 23(4) to replace the

arbitration clause in the Standard Terms 2000, where s. 21(4) specifically excludes “any

right of appeal”. Hence, CLAIMANT wrongly characterised Art. 23(4) as a limited

review mechanism that results in the setting aside of the award [Cl. Memo ¶52]. This

demonstrates Parties’ clear intentions for arbitration to be subject to an appeal to state

courts, which undermines the final and binding nature of the award.

6. By agreeing to the appeal and review mechanism in Art. 23(4), Parties could not have

intended for the award to be final and binding, and thereby enforceable against the losing

Party. In fact, CLAIMANT acknowledges that Art. 23(4) is “a condition to the

acceptance of the award by the parties” and posits that the award is binding only if

Parties “do not request for an appeal within three months” [Cl. Memo ¶38]. To allow the

winning Party to enforce the award only after three months is clearly contrary to the

object of the Model Law to make awards “binding between parties from the date of the

award[s]” [Analytical Commentary 76¶4], as explained above [see ¶¶3-4, supra]. In fact,

if Parties appeal against the award, the status of the award becomes uncertain not only

for three months but also for the entire duration pending the results of the appeal. This

uncertainty stems from the possibility that the award may be overturned, which

compromises the finality of the award. However, Parties were totally oblivious to these



problems as they did not have the benefit of advice from lawyers specialising in

arbitration [P.O. 2 ¶10]. Hence, they went ahead to include Art. 23(4) despite their

choice of CEPANI Rules, of which Art. 32(1) stipulates that the “award is final and not

subject to appeal”.

7. In agreeing to Art. 23 FSA as worded, Parties may have thought they were agreeing to

arbitration. However, by agreeing to Art. 23(4), Parties demonstrated a clear intention for

arbitration to be subject to an appeal to state courts, which undermines the final and

binding nature of the award. This meant that in reality, they lacked the necessary

intention to submit to arbitration. Thus, Art. 23 is not a valid arbitration clause under the

Model Law.

B. EVEN IF PARTIES INTENDED TO ARBITRATE, THE INCLUSION OF ARTS. 23(4) AND

(6) FSA RENDERS THE ART. 23 FSA ARBITRATION CLAUSE INVALID.

1. The Art. 23 FSA arbitration clause is invalidated by the appeal and review

mechanism in Art. 23(4) FSA.

a. Art. 23(4) FSA derogates from the mandatory and exhaustive nature of Art.

34 Model Law by allowing state courts to review the merits of the award.

8. The mandatory and exhaustive nature of Art. 34 Model Law is reflected in its text and

purpose. Art. 34 is mandatory because it stipulates that it is the “exclusive recourse”

against an arbitral award. Specifically, Art. 34(1) states that recourse to a court may be

made “only” by an application for setting aside. Art. 34(2) further establishes the

exhaustive nature of the grounds by stipulating that an arbitral award may be set aside

“only if” the grounds in Art. 34(2) are made out [Analytical Commentary 72¶5].

Separately, the exhaustive nature of these grounds is confirmed by the travaux

préparatoires [Explanatory Note ¶46]. By making Art. 34 mandatory and exhaustive, the

drafters intended to remedy the “inadequacies and disparities” in national arbitration

laws as regards the types and grounds of recourse against an arbitral award [Explanatory

Note ¶¶44-45].

9. Various courts have thus held that parties’ agreements to exclude, contract or expand

curial review under Art. 34 are invalid [Shin Satellite Case; M/S. Centrotrade Case].

Contrary to this line of authorities, the Ontario Court of Justice in Noble China held that

Art. 34 is non-mandatory on the ground that Art. 34(1) does not use the familiar



mandatory language of “shall”. This interpretation is erroneous as the use of “may” in

Art. 34 merely gives the court discretion not to set aside the award when there has been a

trivial breach [Summary Record ¶65; Weigand 1102¶14.526]. It does not give Parties

liberty to modify Art. 34.

10. In fact, the test of whether a provision is mandatory should not be based on plain

language alone, but whether altering the provision would run contrary to a fundamental

quality of international arbitration [Greenberg et al. 89¶2.129]. Art. 34 should be

regarded as mandatory as it upholds the fundamental qualities of fairness and finality

[Analytical Commentary 45¶1-3]. It ensures that parties are able to set aside arbitral

awards where there has been a breach of procedural fairness, while limiting court

intervention to ensure the finality of the arbitral process [Explanatory Note ¶15]. Should

parties be allowed to waive their right to set aside awards or stipulate for a more intrusive

form of recourse, this would upset the balance struck in Art. 34 between the fairness and

finality of awards.

11. In the present case, the provision of an appeal and review mechanism to courts in Art.

23(4) FSA derogates from Art. 34 Model Law and thereby invalidates the arbitration

clause. Art. 34(1) provides that an award may only be set aside by the court on the

grounds provided for in Art. 34(2), with the effect that it ceases to exist and cannot be

enforced [Pacific Case]. This prevents the court from reviewing the merits of the case

and re-deciding the issues heard by the arbitral tribunal to vary the award [Hall Street

Case; Methanex Case]. Consequently, all errors of fact and law are final and binding on

the Parties and may not be appealed against or set aside by a court except as prescribed

under Art. 34 [Xerox Case; TCL Case], such as where an award with such errors falls

outside the scope of the submission to arbitration under Art. 34(2)(a)(iii). However, such

errors do not fall within the public policy provision under Art 34(2)(b)(ii) [PT Asuransi

Case].

12. Furthermore, recognising Art. 23(4) FSA as valid would create practical problems. First,

under the Model Law, there is no available mechanism for states courts to vary the

award. They may only confirm it, set it aside or remit it to the arbitral tribunal for

reconsideration under Art. 34(4) Model Law. If a court varies an award, this may create

enforcement issues as the court must issue an order alongside the award. As court orders

are not covered by the NY Convention, it is unlikely that such hybrid awards would be

enforced [Dutson et al. 213].



13. Second, Art. 6 Model Law provides that only the competent court at the seat of

arbitration may review the arbitral award. This prevents the unpredictability of courts

claiming jurisdiction in the presence of the slightest connecting factor, the risk of

conflicting judgments and the impediment of arbitration by state courts [Hitachi Case,

Venture Global Case; Abedian 583]. However, Art. 23(4) FSA contradicts the Model

Law provisions by allowing Parties to appeal and review the award before the

“applicable state courts”, which arguably refers to Parties’ national courts and not just

the court at the seat of arbitration.

14. Third, providing the courts with the power to review the merits of the award is not a

widely accepted practice. While some jurisdictions have provided for appeal on errors of

law in their international or domestic arbitral laws [s. 69 Eng. Arb. Act, Art. 34(2) NZ

Arb. Act], as has domestic Danubian Arbitration Law [DAL] under Art. 34A, this is not

applicable to the present international arbitration proceeding. In fact, Art. 34A(4)(b)

DAL prohibits the review of errors of fact. This resistance against reviewing issues of

fact has and should be maintained given that it is the arbitrators who would have the

benefit of assessing the evidence [Fraser Case]. If parties wish to appeal against awards

that are obviously wrong in law or fact, they should have agreed to appeal to an arbitral

tribunal of second instance at the time of contracting [Explanatory Note ¶45; A-10 of

AAA Rules], since this retains the independence of arbitration as a private dispute

resolution forum.

15. In conclusion, Art. 23(4) FSA derogates from Art. 34 Model Law by allowing courts to

review the merits of the award instead of setting it aside. This invalidates Art. 23 FSA

since any derogation from the mandatory and exhaustive provision in Art. 34 is

prohibited and to otherwise recognise Art. 23(4) as valid would create practical

problems.

b. Art 23(4) FSA cannot be severed as it was the condition upon which RE-

SPONDENT entered into arbitration.

16. The invalid Art. 23(4) FSA cannot be severed to preserve the Art. 23 FSA arbitration

clause. A provision is not severable where it is in substance so connected with other

provisions so as to form an indivisible whole [Gallaway Case]. In the present case,

RESPONDENT had made it clear to CLAIMANT that it would not enter into arbitration

without an appeal and review mechanism, as acknowledged by CLAIMANT [see ¶5,



supra; Cl. Memo ¶19]. This is because Circular No. 265 provides that government

entities must not forego the right of review of manifestly erroneous decisions of tribunals

[Rp. Ex. 1]. Although CLAIMANT asserts that the Circular is not legally binding [Cl.

Memo ¶46], RESPONDENT is expected to comply with as an extensively state-funded

hospital. In particular, RESPONDENT was keen to avoid a repeat of a previous occasion

where it became mired in controversy after agreeing to arbitration without a right of

appeal against obviously wrong decisions [P.O. 2 ¶9].

17. CLAIMANT must have known that RESPONDENT would not have entered into the

agreement without the appeal and review mechanism in Art. 23(4). CLAIMANT

expressly acknowledged that RESPONDENT would have to overcome considerable

resistance if the dispute resolution clause did not provide for an appeal mechanism [Cl.

Ex. 3]. Thus, it inserted Art. 23(4) into the FSA in order to obtain RESPONDENT’s

agreement to arbitrate. Given that CLAIMANT was aware of RESPONDENT’s

insistence on Art. 23(4), it is irrelevant that CLAIMANT did not know the exact wording

of the Circular or its background [P.O. 2 ¶9]. Thus, CLAIMANT is wrong to contend

that RESPONDENT had never communicated its intention to have an appeal and review

mechanism [Cl. Memo ¶54].

18. Since Art. 23(4) FSA was the condition upon which RESPONDENT agreed to

arbitration, severing it to preserve the arbitration clause in Art. 23 would be completely

contrary to Parties’ intentions, and is thus an inappropriate remedy for the invalid Art.

23(4) FSA.

2. The Art. 23 FSA arbitration clause is invalidated by Art. 23(6) FSA which

gives CLAIMANT a unilateral right to litigate in the courts of Mediterraneo.

a. Art. 23(6) FSA is invalid under Art. 3.2.7 UNIDROIT Principles because it

gives CLAIMANT an entirely unjustified and excessive advantage of

dictating the dispute resolution process.

19. Under the Model Law, an arbitration clause is null and void when it is “so unfair or one-

sided as to be non-binding under the rules of contract applicable” [Model Law Digest

41]. The applicable contract law of the FSA is Mediterraneo law, i.e. UNIDROIT

Principles [P.O. 2 ¶4]. Under Art. 3.2.7 UNIDROIT Principles, a term that unjustifiably

gives the other party an excessive advantage can be avoided. This is an advantage where



the “disequilibrium is in the circumstances so great as to shock the conscience of a

reasonable person”, taking into account Parties’ bargaining positions [Art. 3.2.7

UNIDROIT Comment 1&2]. Art. 23(6) gives rise to a grossly unfair procedure that

offends fundamental notions of justice by allowing CLAIMANT to entirely dictate the

dispute resolution process.

20. On a proper construction of Art. 23(6), CLAIMANT has full control over the dispute

resolution method of all FSA claims [Rothschild Case]. Although Art. 23(6) ostensibly

limits CLAIMANT to litigating payment disputes, such disputes are in fact the only

claims that CLAIMANT, as a seller, could conceivably have against RESPONDENT.

Thus, CLAIMANT essentially has carte blanche to choose litigation or arbitration,

whereas RESPONDENT can only arbitrate. Clearly, Parties do not enjoy equal access to

justice [Sony Ericsson Case]. RESPONDENT may be deprived of its contractually

expressed right to arbitrate if CLAIMANT circumvents the process by counterclaiming

in a Mediterraneo court. While RESPONDENT could continue with arbitration, for

reasons of cost and efficiency, and to avoid conflicting decisions, it may be cornered into

waiving its right to arbitrate and to litigate instead. CLAIMANT could also try to exploit

its position by obtaining and enforcing a negative declaration from the court first for the

same claim. Short of being able to discharge the heavy burden of proving bad faith,

RESPONDENT would unlikely be in a position to object because by Art. 23(6) FSA it

would have been taken to have “submitted” to the jurisdiction of the Mediterraneo court.

The best it can hope for is for a stay of court proceedings – but even then it is unclear if

the court would acquiesce. From the above, Art. 23(6) is a shockingly unfair clause that

gives CLAIMANT the opportunity to use oppressive litigation tactics that leave

RESPONDENT at the mercy of CLAIMANT.

21. Furthermore, Art. 23(6) FSA grants jurisdiction exclusively to Mediterraneo courts,

where CLAIMANT is located. CLAIMANT’s suggestion that the Mediterraneo court is a

neutral forum is unfounded [Cl. Memo ¶61]. For instance, CLAIMANT may initiate

proceedings in Mediterraneo even if the dispute has no connecting factors to

Mediterraneo, and all the witnesses and evidence are in Equatoriana. RESPONDENT

would be denied de facto justice if its witnesses cannot be compelled but CLAIMANT’s

witnesses can be compelled. RESPONDENT thus faces an uneven playing field if the

Mediterraneo courts were the chosen forum.



22. CLAIMANT argues that it gave RESPONDENT a “concession” to pay in instalments in

exchange for the unilateral right to litigate [Cl. Memo ¶62]. However, Parties’

negotiating history and the unconscionable effects of Art. 23(6) FSA reflect less a

“concession” but more a “coercion”. Art. 23(6) was foisted onto RESPONDENT when it

was in a position of extreme disadvantage. CLAIMANT knew that RESPONDENT

faced budgetary constraints [Rp. Ex. 2] and would likely be unable to afford the proton

therapy facility without instalment terms. CLAIMANT used this as leverage to make

RESPONDENT accept Art. 23(6). The huge concession in Art. 23(6) is entirely

incommensurate with the right to pay in instalments, which is common in contracts

involving large purchase prices. Only during the SLA negotiations, when

RESPONDENT had stronger bargaining power, could it avoid such exploitation [see

¶34, infra]. Without a reasonable justification, the unilateral right to litigate appears less

a viable means of dispute resolution, and more a self-serving tactic by CLAIMANT to

exploit RESPONDENT’s weak economic position.

23. Thus, Art. 23(6) FSA allows CLAIMANT to single-handedly manipulate the dispute

resolution process to benefit itself, with the possibility of leaving RESPONDENT

helpless in a foreign court. CLAIMANT used its dominant bargaining position so that

RESPONDENT would agree to a clause where CLAIMANT dominates the dispute

resolution process. Art. 23(6) thus renders the arbitration clause null and void.

b. The unfairness of Art. 23(6) FSA cannot be cured by severance because

CLAIMANT has already taken advantage of its unilateral right by

commencing arbitration.

24. Art. 23(6) FSA continues to taint the arbitration clause and cannot be validly severed to

preserve the rest of Art. 23 FSA. First, CLAIMANT may argue that since it has chosen

not to litigate the FSA Claim, any advantage it has is theoretical. However, the wording

of Art. 23(6) FSA does not preclude CLAIMANT from commencing litigation after

invoking arbitration. This means that the creation of a lis pendens situation is still a live

possibility [see ¶21, supra]. Thus, the unfairness of Art. 23(6) persists even though

arbitration has been commenced.

25. Second, by choosing to arbitrate instead of litigating, CLAIMANT has already taken

advantage of the one-sided benefit it has under Art. 23(6). Severance does not remedy

the unfairness, which arises from the very fact that only CLAIMANT has the choice to



litigate or arbitrate [see ¶¶20-23, supra]. Severing the unilateral right to litigate is only

an ex post facto solution and will in fact encourage future parties to try their luck by

incorporating such unfair unilateral clauses, and arguing for severance where necessary.

26. Given the above, this Tribunal has no jurisdiction over the FSA Claim because there was

no valid arbitration agreement in Art. 23 FSA.

II. THIS TRIBUNAL HAS NO JURISDICTION OVER THE SLA CLAIM BE-

CAUSE PARTIES EXPRESSLY AGREED TO LITIGATE PURSUANT TO THE

JURISDICTION CLAUSE IN ART. 23 SLA.

A. THE ART. 23 FSA ARBITRATION CLAUSE DOES NOT APPLY TO THE SLA.

27. By Art. 23(2) SLA, Parties have expressly chosen to litigate in either Mediterraneo or

Equatoriana. The SLA does not mention arbitration unlike the FSA. CLAIMANT asserts

that the Art. 23 FSA arbitration clause applies to the SLA [Cl. Memo ¶65]. However, [1]

the general reference to the FSA in the SLA Preamble, which is only an interpretive aid,

does not incorporate Art. 23 FSA into the SLA. [2] Also, although Art. 45 FSA provides

that the FSA governs all “further and future contracts”, this is only where there is no

“specific provision to the contrary”. Art. 23 FSA does not apply because Art. 23 SLA is

specifically contrary to Art. 23 FSA and supersedes the latter.

1. The general reference to the FSA in the SLA Preamble, which is only an inter-

pretive aid, does not incorporate Art. 23 FSA into the SLA.

28. Under Art. 7(6) Model Law, Parties may form an arbitration agreement by making

reference to a prior document containing an arbitration clause. To do so, Parties must

refer to the prior document in the terms of the agreement and demonstrate a clear

intention to incorporate the arbitration clause [Conagra Case; Concordia Case].

29. The only reference to the FSA is found in the SLA Preamble, which provides that “the

general relationship between [Parties] is governed by [FSA]…” However, preambles are

merely interpretive aids used to clarify Parties’ objectives in entering a contract [Drafting

Int. Contracts 88-90]. They are not contractual terms. Hence, a reference to another

contract in the preamble is insufficient to incorporate terms from that contract

[Holtzmann/Neuhaus 264]. Moreover, the SLA Preamble only refers broadly to the

general relationship of Parties and not Art. 23 FSA. This reference is too imprecise to



evince an intention to incorporate the Art. 23 arbitration clause as it makes no mention of

the dispute resolution process.

30. Although there are cases where a general reference to a contract containing an arbitration

clause was sufficient, this was usually on the basis of a previous working relationship

between the parties such that they would be fully aware of the written terms governing

their relationship [Habas Case; Bomar Case]. Presently, prior to the SLA, Parties only

contracted with each other twice: the FSA and one supply contract [P.O. 2 ¶6]. Thus,

Parties’ relationship was not so longstanding that a general reference would suffice as

evidence of their intention to incorporate Art. 23 FSA into the SLA.

2. Even if the other provisions of the FSA governed the SLA, Art. 23 FSA would

not apply because Art. 23 SLA is a specific provision to the contrary of Art. 23

FSA.

31. Even if, as CLAIMANT asserts [Cl. Memo ¶¶65-69], the FSA governed the SLA, Art.

23 FSA would not apply to the SLA because Art. 23 SLA is a “specific provision to the

contrary” which falls within the exception in Art. 45 FSA. It thus replaces Art. 23 FSA.

32. The two jurisdiction clauses are entirely contradictory. While Art. 23(2) SLA is a

jurisdiction clause giving Parties the right to litigate in either Mediterraneo or

Equatoriana, Art. 23 FSA is an arbitration clause. Under Arts. 23(1) and (2) FSA, Parties

are required to first resolve all disputes through negotiation and mediation. Art. 23 SLA,

however, imposes no such condition. Also, while Art. 23(6) FSA grants only

CLAIMANT a unilateral right to litigate all payment claims, Art. 23(2) SLA allows both

Parties to litigate, and its scope was expanded to “any and all claims” arising out of the

SLA.

33. CLAIMANT posits that Art. 23 FSA applies to the SLA, and Art. 23 SLA merely

amends Arts. 23(5) and (6) FSA such that arbitration and litigation are alternatives [Cl.

Memo ¶¶65&68]. This would be similar to the outcome in the William Co Case.

However, unlike Arts. 23 FSA and SLA, in that case, the intention to arbitrate was clear

because the clause in question expressly stated that arbitration and litigation were

alternatives to each other.

34. In the present case, nothing in the negotiating history supports CLAIMANT’s assertion.

On the contrary, Parties’ negotiations also show that Parties intended to replace Art. 23



FSA with Art. 23 SLA. RESPONDENT has always preferred litigation to arbitration

because litigation best suited RESPONDENT’s need to be able to appeal manifestly

wrong decisions [see ¶5, supra]. During SLA negotiations, RESPONDENT, as an

important contributor in developing and testing the AST software [Req. ¶21], was able to

request the right to be able to litigate all disputes. CLAIMANT acceded by inserting Art.

23 SLA. In doing so, Parties believed that they were overriding Art. 45 FSA by

providing a “specific provision to the contrary”, and thereby waiving arbitration [ACADI

Case; The Golden Glory]. This Tribunal should therefore give effect to those intentions.

35. Furthermore, Art. 23 SLA cannot be read as an amendment of Art. 23 FSA. First, the

presence of Art. 23 SLA itself makes uncertain the intention to proceed to arbitration.

Second, the results are untenable because real and practical problems would result: one

party could invoke arbitration while the other party proceeds to litigation. This lis

pendens situation is similar to the problem faced when there is a unilateral right to

litigate as mention above [see ¶¶20-21, supra]. Thus, Parties could not have intended for

the Art. 23 SLA to modify Art. 23 FSA with such results.

36. Therefore, in light of the wording of the SLA and its negotiating history, it is not

appropriate to read Art. 23 SLA as a mere amendment of Art. 23 FSA. Art. 23 SLA is a

jurisdiction clause that is specifically contrary to Art. 23 FSA and the former thus

supersedes the latter.

B. THE ARBITRATION CLAUSE IN S. 21 STANDARD TERMS 2000 DOES NOT APPLY TO

THE SLA BECAUSE IT WOULD HAVE BEEN REPLACED BY ART. 23 SLA.

37. In the event that this Tribunal accepts RESPONDENT’s case that the reference in Art. 46

SLA to “Standard Terms” was to the Standard Terms 2000 [see ¶¶56-71, infra],

CLAIMANT may argue that the arbitration clause in s. 21 Standard Terms 2000 was

incorporated. However, according to Art. 2.1.21 UNIDROIT Principles, a specifically

negotiated term prevails over any conflicting provisions in the standard terms because

the former is “more likely to reflect the intention of the parties. Art. 23 SLA conflicts

with the arbitration clause in s. 21 Standard Terms 2000 and thereby replaces it.

38. The only relevant contracts between Parties containing an arbitration clause are the FSA

and the standard terms. Since none of the arbitration clauses in these contracts apply to

the SLA, this Tribunal does not have jurisdiction over the SLA Claim.



III. EVEN IF PARTIES HAD AGREED TO ARBITRATE THE FSA AND SLA

CLAIMS, THEY SHOULD NOT BE HEARD IN A SINGLE PROCEEDING UN-

DER ART. 10 CEPANI RULES.

39. Art. 10(1) CEPANI Rules states that multiple claims “may” be heard together.

CLAIMANT rightly acknowledges that this is a “discretionary decision” [Cl. Memo

¶74]. A tribunal may only exercise this discretion when Parties have agreed, under Art.

10(1)(a), to CEPANI arbitration and, under Art. 10(1)(b), to hear the Claims together.

Should Art. 23 FSA apply to the SLA, Art. 10(1)(a) is satisfied because Art. 23(3)

provides for arbitration under the CEPANI Rules. [A] However, Art. 10(1)(b) is not

satisfied. Parties never considered the possibility, let alone formed the express intention,

of resolving disputes together. Even if one were to objectively construe Parties’ implied

intentions, the presumption in Art. 10(3) that Parties did not intend to hear the Claims

together would apply. This is because the Claims arise out of separate economic

transactions. [B] Further and in the alternative, CLAIMANT has not shown why this

Tribunal should exercise its discretion to order a single hearing when hearing the Claims

separately is neither inefficient nor results in conflicting awards.

A. ART. 10(1)(B) CEPANI RULES IS NOT SATISFIED BECAUSE PARTIES HAD NEVER

EXPRESSLY OR IMPLIEDLY INTENDED FOR THE FSA AND SLA CLAIMS TO BE

HEARD IN A SINGLE PROCEEDING.

40. Art. 10(1)(b) requires Parties to have consented to hear the Claims together. However,

Parties have never considered this issue. This is clear from the text of the FSA and SLA,

which do not provide for any joint resolution of disputes. Parties’ negotiating history also

reveals no discussion on the matter. Since Parties never considered the possibility of joint

resolution, there logically can be no consent to hear the Claims together.

41. Even if this Tribunal were to search for an implied intention, Parties likely intended to

hear the Claims separately. To determine consent under Art. 10(1)(b), this Tribunal may

rely on the presumption in Art. 10(3) that parties have not agreed to arbitrate their claims

together if the arbitration agreements concern unrelated matters. Contracts are unrelated

if they are separate economic transactions. This can be gleaned from ICC cases

interpreting Art. 6(4)(ii)(b) ICC Rules, which Art. 10(1)(b) CEPANI Rules is modelled

upon [Verbist ¶51-53]. ICC cases interpreting Art. 6(4)(ii)(b) have held that Parties

intend to arbitrate claims together if they arise out of a single economic transaction [Fry



et al. 82]. A single economic transaction is one that parties see as being so related that

they are indivisible [Hanotiau 160]. On the basis that hearing such closely related claims

together is usually more efficient, courts have inferred that where there is a single

economic transaction, parties intend to hear the claims together. By logical inference,

where contracts are not seen as a single economic transaction, they are unrelated. It is

this principle that is encapsulated by Art. 10(3) CEPANI Rules [Meulemeester]. The

negative presumption in Art. 10(3) aids the party resisting the single hearing, unlike the

positive interpretation adopted in ICC cases. Here, contrary to CLAIMANT’s position

[Cl. Memo ¶88], the FSA and SLA are unrelated because they are separate economic

transactions and the presumption in Art. 10(3) applies.

42. First, the signing of the SLA was independent of the FSA. Multiple contracts form a

single economic transaction when the signing of one contract leads to the signing of the

other [Leboulanger 51]. For example, Parties would not have entered into the additional

contract for protons, consumables and maintenance work [P.O. 2 ¶6] but for the FSA,

because it is essential to the operation of the proton therapy facility. In contrast,

RESPONDENT could have purchased its proton therapy facility from various companies

such as IBA, Optivus and Varian [PTF Companies], and still have purchased

CLAIMANT’s customised AST software. This is similar to CLAIMANT's sale of

generic AST software without the facility to two other clients [Req. ¶17]. Hence, the

FSA and SLA free-standing transactions.

43. Second, the nature of the transactions is entirely different. The FSA is a simple sales

contract [Art. 2 FSA]. In contrast, the SLA is a contract for services to develop the AST

software [see ¶79-87, infra]. Art. 10 SLA requires CLAIMANT to develop the AST

software while RESPONDENT provides medical data, conducts clinical trials and assists

in getting medical approval. Hence, the obligations and potential disputes under the FSA

and SLA are different and unlikely to be seen as economically linked.

44. Third, although the AST software is used together with the proton therapy facility,

Parties have nevertheless structured the FSA and SLA as separate transactions.

RESPONDENT intentionally excluded the AST software from the FSA because of

financial constraints and operational risks due to the novelty of the technology [Cl. Ex.

4]. CLAIMANT itself also saw the FSA as a completed transaction. It did not follow-up

with RESPONDENT to purchase the AST software. Instead, it was RESPONDENT who

approached CLAIMANT regarding it [Cl. Ex. 4]. Also, the long lapse of 3.5 years



between the signing of the FSA and SLA implies that Parties saw the two contracts as

separate transactions [Fry et al. 83].

45. CLAIMANT argues that the SLA is a further contract within the meaning of Art. 45 FSA

[Cl. Memo ¶¶65-69]. Even if that were so, and the Agreements formed a single

economic transaction, this factor ought to be outweighed by Parties’ express stipulation

for different dispute resolution processes. On CLAIMANT’s case, if Art. 23 FSA applied

to the SLA, it would be modified by Art. 23 SLA, which allows Parties to bring any SLA

dispute to court [Cl. Memo ¶65]. Thus, Parties may arbitrate an FSA dispute while

choosing to litigate an SLA dispute. This is inconsistent with any purported intention for

single hearing based on business considerations of cost and efficiency. Hence, Art.

10(1)(b) is not satisfied.

B. EVEN IF ART. 10(1)(B) CEPANI RULES WERE SATISFIED, THIS TRIBUNAL

SHOULD REFRAIN FROM HEARING THE FSA AND SLA CLAIMS TOGETHER.

46. Even if Arts. 10(1)(a) and (b) were satisfied, this Tribunal’s discretion to hear multiple

claims is not triggered until CLAIMANT shows sufficient grounds. Art. 10(1) states that

claims “may” be heard together and "[t]his is the case when" the factors in Arts. 10(1)(a)

and (b) are present (emphasis added). Hence, Arts. 10(1)(a) and (b) are pre-conditions

for the exercise of discretion, and their satisfaction do not automatically warrant a single

hearing. Accordingly, Art. 10(1) contains a bias against single hearing, which is

consistent with the negative presumption in Art. 10(3) that aids the party resisting single

hearing [see ¶41, supra]. There are sound reasons for such a bias. First, disputes on Art.

10 usually arise when Parties’ intentions are unclear. A high threshold guards against

erroneously forcing a party into single hearing against its original intention. Second,

besides Parties’ intentions, other significant considerations are cost, efficiency and

feasibility. Presently, even if Art. 10(1)(b) were satisfied, CLAIMANT has not shown

why this Tribunal should exercise its discretion when separate hearings are neither [1]

inefficient nor [2] likely to result in conflicting awards.

1. It is not inefficient for the SLA Claim to be heard by a separate tribunal with

the requisite software engineering expertise.

47. The Claims involve starkly different issues. This main issue in the FSA Claim is whether

CLAIMANT had misrepresented the financial viability of the proton therapy facility



[Req. ¶¶16-18]. The FSA Tribunal thus requires financial accounting and legal expertise

to determine respectively whether the facility was commercially viable and whether there

had been misrepresentation. In contrast, the sole issue in the SLA Claim is whether the

AST software was able to accurately model the proton beam to hit its target [Ans. ¶24].

This requires software engineering expertise, especially since the technology is novel.

48. Since the Claims require different expertise to resolve, it is not any less efficient for the

SLA Claim to be heard by a separate tribunal with software engineering expertise.

CLAIMANT may argue that the need for a specialised tribunal may be satisfied by

appointing expert witnesses. However, expert witnesses do not have any decision-

making powers [Casey 7-19], thus time and cost will still be spent trying to familiarise

this Tribunal with the technical software issues in the SLA Claim. This may result in

“false efficiency” because less experienced arbitrators would have to deal with matters

that could be readily resolved by those who are more familiar with them [Waincymer

550]. Should this Tribunal hear the SLA Claim, Parties are likely to spend more time and

money on expert witnesses and submissions to equip this Tribunal with the necessary

software engineering knowledge in order to hear the SLA Claim.

49. Furthermore, although the FSA Claim also involves software issues [Cl. Memo ¶81],

having separate hearings will not increase costs. The evidence on software issues in the

FSA Claim will not be repeated for the SLA Claim because the software issues are

different. The FSA software concerns the acceleration of protons in the accelerator

whereas the SLA software concerns the modelling of proton beam in the treatment room

[P.O. 2 ¶22].

2. Conflicting awards are unlikely since this Tribunal is to render an award by 15

May 2014, which will have res judicata effect and preclude Parties from rais-

ing the same issues before the SLA Tribunal.

50. Contrary to CLAIMANT’s contention, hearing the Claims separately is unlikely to result

in conflicting awards [Cl. Memo ¶80]. Since the reliefs sought concern separate

payments under different contracts, the only concern is conflicting findings and not

conflicting remedies. A possible example of a conflicting finding is where this Tribunal

decides that it does not have jurisdiction because Art. 23 FSA is an invalid arbitration

agreement, whereas the SLA Tribunal decides that it has jurisdiction because Art. 23



FSA is a valid arbitration agreement that applies to the SLA. However, the risk of such

conflicting findings is remote.

51. First, this Tribunal will render an award before the SLA Tribunal hears the SLA Claim.

The CEPANI Secretariat has instructed this Tribunal to render an award by 15 May 2014

with no further extension [Letter CEPANI]. CLAIMANT is likely to initiate SLA

proceedings only if this Tribunal decides not to hear the SLA Claim, which will only be

announced after the oral arguments scheduled for 12 - 17 April 2014 [P.O. 1 ¶4]. Since

there is no expedited arbitration process in the SLA or CEPANI Rules, it is unlikely that

the SLA Tribunal will hear any overlapping issues during this one-month period, even if

a fresh request for arbitration is taken out immediately.

52. Second, once this Tribunal makes a finding on an overlapping issue that is essential to

the making of the FSA Award, the finding becomes res judicata. Res judicata has two

effects: it prevents the same issue from being disputed again between the same parties,

and the award is binding upon all parties [Hanotiau 240]. Hence, Parties are estopped

from raising the same issue before the later constituted SLA Tribunal, thus preventing

conflicting decisions.

53. CLAIMANT may argue that the SLA Tribunal’s independence is compromised because

issue estoppel requires the SLA Tribunal to adopt this Tribunal’s findings on overlapping

issues. This contention, however, is unjustified. The purpose of issue estoppel is to

prevent the injustice of allowing a party to re-litigate the same issues in repeated

proceedings [Born 2880]. It only operates on parties, precluding them from re-litigating

the same issue again. It does not require that tribunal to adopt the prior tribunal’s finding.

54. In summary, Parties did not intend to hear the Claims together. Also, hearing the Claims

separately is neither inefficient nor does it result in conflicting awards. Thus, there is

insufficient reason for this Tribunal to exercise its discretion to hear the Claims together.



IV. ART. 46 SLA INCORPORATES A CHOICE OF LAW CLAUSE SELECTING

DOMESTIC MEDITERRANEO LAW TO THE EXCLUSION OF THE CISG.

A. PARTIES WERE REFERRING TO THE 2000 VERSION WHICH SELECTS DOMESTIC

MEDITERRANEO LAW TO THE EXCLUSION OF THE CISG WHEN THEY INCORPO-

RATED CLAIMANT’S “STANDARD TERMS” THROUGH ART. 46 SLA .

55. CLAIMANT asserts that Art. 46 SLA incorporates the Standard Terms 2011 into the

SLA [Cl. Memo ¶123]. However, Art. 46 states that the SLA is subject to “Standard

Terms” without specifying a version. [1] The Standard Terms 2011 could not have been

incorporated because RESPONDENT did not understand those terms and cannot be

taken to have agreed to them. [2] Since the Standard Terms 2011 were not incorporated,

a reasonable interpretation of the reference to “Standard Terms” in Art. 46 SLA is that it

incorporates the Standard Terms 2000, of which s. 22 excludes the CISG.

1. The Standard Terms 2011 were not incorporated because RESPONDENT nei-

ther understood nor agreed to them when it signed the SLA.

56. A valid agreement to incorporate standard terms requires a meeting of minds

[Huber/Mullis 12-13; Arts. 14-24 CISG]. [a] CLAIMANT could not reasonably have

expected RESPONDENT to understand, let alone agree, to the Standard Terms 2011

without translation. Also, [b] as the burden of providing a translation was on

CLAIMANT, RESPONDENT had no duty to clarify and did not accept the terms by

signing the SLA.

a. RESPONDENT could not be expected to understand or agree to the Stand-

ard Terms 2011 given that CLAIMANT had failed to provide an English

translation.

57. Although CLAIMANT had informed RESPONDENT of its wish to incorporate the

Standard Terms 2011 into the SLA [Cl. Ex. 5], they were not incorporated because

CLAIMANT failed to provide RESPONDENT with an understandable translation.

58. As with any other term, standard terms are only incorporated when they are objectively

accepted [Huber/Mullis 12-13; Arts. 14-24 CISG]. The signing of a contract will only

constitute acceptance of standard terms if the offeree is reasonably expected to

understand the language and the contract refers to those terms [Art. 8(2) CISG;



Schlechtriem/Schwenzer 176¶59; CISG-AC Opinion 13 ¶¶1.8-1.9,5&6.2]. Therefore,

CLAIMANT must in good faith provide the Standard Terms 2011 in a language that

RESPONDENT is expected to understand [Machinery Case] if it wishes for the terms to

be validly incorporated.

59. A party is only reasonably expected to understand the languages that it uses for

contracting, negotiations and ordinary use [Schlechtriem/Schwenzer 166¶43,176¶59;

CISG-AC Opinion 13 ¶6.2]. For example, in the Knitware Case, the District Court of

Berlin held that a buyer’s standard terms were not incorporated because they were in

German while the main contract was in Italian. Without any Italian translation, the Italian

seller was not expected to understand the standard terms. CLAIMANT argues that MCC-

Marble Case supports the proposition that an offeree is bound by the standard terms even

if it cannot understand the language of those terms [Cl. Memo ¶136]. However, this is an

incorrect reading of the case. In that case, the entire sales contract, including the standard

terms, was written in Italian. When the buyer signed the contract, he bore the risk of not

understanding Italian. Thus, the court was merely reiterating the rule that a party is

expected to understand the contracting language or bear the risk of not understanding it.

60. The present case is more analogous to the Knitware Case. The Standard Terms 2011

were in Mediterranean while the SLA was in English. RESPONDENT did not use

Mediterranean for negotiations or ordinary use, and Mediterranean is not a widely used

business language [P.O. 2 ¶36]. Instead, the FSA and SLA were written and negotiated

entirely in English [P.O. 2 ¶35]. Since no English translation was provided,

RESPONDENT was not expected to understand the Standard Terms 2011which were in

Mediterranean.

61. Although RESPONDENT employed a Mediterranean-speaking doctor [Cl. Memo ¶131],

English remained the sole language of negotiations. This doctor could not have had the

authority to negotiate because he was not a permanent member of RESPONDENT’s

negotiation team [Rp. Ex. 2]. He was present at only two of Parties’ meetings over four

years [P.O. 2 ¶35]. He also did not negotiate at those meetings, and only discussed the

usability of proton therapy to his research with CLAIMANT’s technicians [Rp. Ex. 2;

P.O. 2 ¶35]. This brief use of Mediterranean did not make it a language of negotiations

[Filter Plates Case].

62. In light of the above, RESPONDENT could not be taken to understand or agree to the

Standard Terms 2011 because CLAIMANT failed to provide the translation.



b. As the burden to provide a translation lay on CLAIMANT, RESPONDENT

had no duty to clarify the meaning of the Standard Terms 2011 and did not

accept them by signing the SLA.

63. CLAIMANT should [Machinery Case; see ¶58, supra], and Parties’ conduct clearly

indicates that it did, assume the burden of providing a translation of the Standard Terms

2011. RESPONDENT did not agree to take on the burden or accept the terms without

translation.

64. RESPONDENT’s conduct never implied that it understood the terms or that

CLAIMANT’s burden had been discharged. Instead, it was CLAIMANT’s Dr Vis, who,

upon proposing the Standard Terms 2011, had promised to send a translation of those

terms [Cl. Ex. 5]. This shows that even CLAIMANT did not expect RESPONDENT to

understand those terms, which were written in Mediterranean. It also demonstrates that

CLAIMANT understood that the Standard Terms 2011 would not apply until and unless

it provided a translation [see ¶59, supra]. This was not a mere courtesy, but a legal

necessity. CLAIMANT cannot now in good faith argue that RESPONDENT bore the

burden of clarifying the terms or that its signing of the SLA signalled acceptance [Art.

7(1) CISG; Machinery Case]. It would be in bad faith for CLAIMANT to promise to

send the English translation but then foist the consequences of its failure to do so upon

RESPONDENT.

65. CLAIMANT asserts that its promise to send the translation could not be relied on

because Dr Vis had suffered a stroke [Cl. Memo ¶138]. However, it was reasonable to

expect that CLAIMANT had proper internal procedures for Ms Maier to take over Dr

Vis’ role. Since Dr Vis made his promise in a letter by courier [Cl. Ex. 5], Ms Maier, as

chief negotiator, would have had access to an internal copy of this and ought to have

been aware of the promise.

66. In addition, it was not reasonable for RESPONDENT to bear the burden of clarifying the

Standard Terms 2011 by obtaining a translation. As CLAIMANT had failed to send the

translation within the week after 5 July 2011 [Cl. Ex. 5], it could not expect

RESPONDENT to obtain a translation in just a few days to meet the planned 20 July

2011 date for signing the SLA [Rp. Ex. 3]. This is especially since CLAIMANT itself

could not complete the translation from 2 June 2011 to 20 July 2011 [Rp. Ex. 2; P.O. 2

¶32]. Furthermore, given CLAIMANT’s assurance that changes to the standard terms



were minor [Cl. Ex. 5], RESPONDENT had even less reason to obtain its own

translation.

67. When RESPONDENT did not receive a translation by 14 July 2011, it attempted,

reasonably, to access CLAIMANT’s website [P.O. 2 ¶33]. However, even then, the

translation was unavailable then. Instead, there was a banner again reassuring

RESPONDENT that CLAIMANT would provide the translation soon [P.O. 2 ¶32]. This

confirmed that CLAIMANT knew it should provide the translation. Although the

translation was available when RESPONDENT checked CLAIMANT’s website again on

30 July 2011, after the signing of the SLA, RESPONDENT was only checking for the

limitation of liability clause that Dr Vis had said was the major change in the Standard

Terms 2011 [P.O. 2 ¶31]. Taken at its highest, the only part of the Standard Terms 2011

that RESPONDENT could be taken to have agreed to was the limitation of liability

clause.

68. In summary, the Standard Terms 2011 were not incorporated into the SLA. There was no

meeting of the minds given that RESPONDENT could not reasonably be expected to

understand those terms without a translation. CLAIMANT knew it bore the burden of

translation and RESPONDENT never behaved as if it understood or accepted the terms.

2. Since the Standard Terms 2011 do not apply, it is reasonable to interpret Art.

46 SLA as referring to the Standard Terms 2000, which Parties agree excludes

the CISG.

69. CLAIMANT does not challenge that Art. 46 SLA, which generically refers to “Standard

Terms”, is valid [Cl. Memo ¶123]. The reasonable interpretation of Art. 46 SLA is that it

incorporated the Standard Terms 2000 if the Standard Terms 2011 were not

incorporated. This is because Parties are assumed, under the general interpretation

principle of favor negotii in Art. 8 CISG, to want Art. 46 SLA to have a meaningful

effect [Schlechtriem/Schwenzer 171¶51].

70. Parties’ negotiations also support this interpretation. First, despite notifying

RESPONDENT of the Standard Terms 2011, CLAIMANT drafted Art. 46 SLA to be

silent as to which version would apply [Cl. Ex. 5]. In contrast, Art. 46 FSA specifically

stipulates that the Standard Terms 2000 applies. CLAIMANT’s intention to incorporate

the Standard Terms 2011 was not absolute and unqualified. Second, Parties saw the



Standard Terms 2000 as the default – the Standard Terms 2011 were seen as a “revision”

of the Standard Terms 2000 that involved minor “changes” [Rp. Ex. 2; Cl. Ex. 5].

71. Under s. 22 Standard Terms 2000, the applicable law is the “national law of

Mediterraneo as set out in the statutes of Mediterraneo and developed by its courts”.

Parties agree that it refers to the Mediterraneo Sale of Goods Act 2005, which excludes

the CISG [P.O. 2 ¶20]. Since the Standard Terms 2000 were incorporated, the CISG was

excluded from the SLA.

B. EVEN IF PARTIES HAD INTENDED TO REFER TO THE 2011 VERSION IN ART. 46, S.

22 OF THOSE TERMS SHOULD BE READ AS EXCLUDING THE CISG IN LIGHT OF DR

VIS’S REPRESENTATION IMPLYING THAT THE CISG WOULD NOT APPLY.

72. A reference to domestic sales provisions will sufficiently indicate an intention to

derogate from the CISG [Tools Case]. The choice of law in s.22 Standard Terms 2011 is

to “the law of Mediterraneo”, which on a proper interpretation, is a reference to domestic

Mediterraneo law. Dr Vis’ implied representation at the meeting on 2 June 2011 that the

CISG would be excluded should be taken into account in the interpretation of term. He

assured RESPONDENT that the changes to the standard terms were minor, and that the

“important changes” were to the “liability regime” [Rp. Ex. 2]. When asked, he explained

this “major change” to be the inclusion of a limitation of liability clause [P.O. 2 ¶31].

This implied that there was no change from the choice of law in s. 22 Standard Terms

2000, which Parties agree refers to the Mediterraneo Sale of Goods Act 2005 to the

exclusion of the CISG [P.O. 2 ¶20]. A choice of law concerns the rules of liability

governing a contract and is hence a “liability regime”. Thus a potential change in the

choice of law to include the CISG, which is a “liability regime” [Schlechtriem/Schwenzer

699¶23; Lookofsky 118], can reasonably be understood as a major change to the

“liability regime”. Since Dr Vis did not represent that there had been a change in the

choice of law that would affect the liability regime, s. 22 Standard Terms 2011 must be

taken as a reference to domestic sales provisions to the exclusion of the CISG.

73. Moreover, it was reasonable for RESPONDENT to rely on Dr Vis’ representations. First,

Dr Vis was CLAIMANT's chief negotiator. Although he disclaimed at the meeting on 2

June 2011 that he was not a lawyer [P.O. 2 ¶31], he reiterated to RESPONDENT on 5

July 2011 that the changes in the Standard Terms 2011 were of “a minor nature and

hardly affect [Parties’] relationship” [Cl. Ex. 5]. Significantly, the latter opinion was



offered without disclaimer. Second, as explained earlier, it was not viable for

RESPONDENT to obtain a translation of the Standard Terms 2011 [see ¶66, supra].

These facts taken together makes it reasonable for RESPONDENT to rely in good faith

on Dr Vis’s representations when it signed the SLA.

74. CLAIMANT argues that the plain wording of s. 22 Standard Terms 2011 does not

exclude the CISG [Cl. Memo ¶¶141-145]. The purposive interpretation, however, is

preferable to the plain reading. The CISG does not require this Tribunal to adopt the

“plain meaning rule”, i.e. a literal reading of an unambiguous term [CISG-AC Opinion 3

¶3]. Just as courts strive to give effect to negotiated terms over non-negotiated standard

terms [CISG-AC Opinion 13 ¶8], this Tribunal should give effect to the negotiated rather

than plain meaning of otherwise non-negotiated standard terms. This is because a

negotiated term better reflects parties’ intentions than the plain meaning of a non-

negotiated standard term. Finally, given CLAIMANT’s obligation to conduct itself in

good faith [s. 1 Standard Terms 2011], it cannot now argue that s. 22 should not be read

in light of Parties’ negotiations.

75. In summary, even if the Standard Terms 2011 were incorporated, the CISG is excluded.

Dr Vis implied that the choice of law clause in s. 22 of the Standard Terms 2011 was the

same as that of the Standard Terms 2000, i.e. domestic Mediterraneo law instead of the

CISG. As RESPONDENT reasonably relied on his representations, this Tribunal should

give effect to such an interpretation of s. 22 of the Standard Terms 2011.

V. THE CISG DOES NOT APPLY TO THE SLA BECAUSE CLAIMANT’S PRE-

PONDERANT OBLIGATIONS INVOLVE NEITHER A “SALE” NOR “GOODS”

WITHIN THE MEANING OF ART. 1(1) CISG.

76. The CISG only applies to contracts of “sale” of “goods” within the meaning of Art. 1(1)

CISG. CLAIMANT's obligations under the SLA were valued at $9.5m. Of this, 40% is

attributed to equipment, 50% to the “development, testing and installation of the

software” and 10% to training RESPONDENT’s personnel [Rp. Ex. 3]. Although the

provision of equipment is a “sale” of “goods”, it only constitutes 40% of the transaction.

The CISG will not apply to the SLA because [A] the preponderant part of CLAIMANT’s

obligations, i.e. the remaining 60%, does not involve “goods” within Art. 1(1) CISG. [B]

Even if it did, the CISG does not apply to the SLA, which is not a “sale” within Art. 1(1)



CISG, because the SLA is preponderantly an agreement to license software and hire

training services or alternatively a partial barter agreement.

A. THE PREPONDERANT PART OF CLAIMANT’S CONTRACTUAL OBLIGATIONS

DOES NOT INVOLVE “GOODS” WITHIN ART. 1(1) CISG .

77. Under Art. 3(2) CISG, the CISG does not apply to contracts where the “preponderant

part of [the supplier’s obligation’s] consists in the supply of labour or other services”.

Art. 3(2) also excludes contracts where the preponderant part of the seller’s obligations

relates to components “outside the scope of the CISG” [Huber/Mullis 42]. Applying Art.

3(2), the CISG does not govern the SLA. [1] CLAIMANT’s development of AST

software for RESPONDENT is not a “good” but a service. [2] Alternatively, the AST

software is not a “good” within Art. 1(1) CISG as it comprises intangible IP. [3]

Therefore, Art. 3(2) excludes the CISG from the SLA because the preponderant part of

CLAIMANT’s obligations comprises either services or components “outside the scope of

the CISG”.

1. CLAIMANT’s development of AST software for RESPONDENT is not a

“good” but a service.

78. [a] CLAIMANT’s development of AST software under the SLA is a service because it

was customised. [b] Alternatively, CLAIMANT’s contractual obligations amount to a

service under Art. 3(1) CISG because RESPONDENT’s contribution of medical data is a

“substantial part of the materials necessary” for the development of AST software.

a. CLAIMANT’s development of AST software is a service because it is cus-

tomised to RESPONDENT’s needs.

79. The provision of custom software is a service because the skilled labour in developing

the software becomes the subject matter of the contract [Diedrich 62; Market Study

Case]. Whether or not they understood the consequences, Parties’ conduct clearly

indicates that they intended for the AST software to be customised.

80. First, CLAIMANT’s correspondence shows that 50% of the value of the SLA is

attributable to the “development, testing and installation of the [AST] software” [Rp. Ex.

3]. CLAIMANT’s specific choice of action words indicates that it saw this component of



the transaction as the provision of services rather than a good. These actions are in fact

aspects of customisation.

81. Second, contrary to CLAIMANT’s submission, the AST software was not developed for

all kinds of cancer [Cl. Memo ¶113] but “developed particularly for” RESPONDENT

[Cl. Ex. 5] to treat prostrate cancer [Req. ¶26]. Since no working model was available

before the conclusion of the SLA, CLAIMANT developed the first basic version

primarily for RESPONDENT’s needs [P.O. 2 ¶24].

82. Third, customisation is a continuous process [Pearson 114] and post-delivery

customisation is relevant in determining if the provision of software is a service. In the

Hardware-Software Case, the Belgium Appellate Court held that the software was

customised because it was “repeatedly adjust[ed]” to the buyer’s needs after delivery. In

the present case, Parties used RESPONDENT’s data to modify and fine-tune the

software for four months after installation [P.O. 2 ¶26]. The fully modified software was

not sold to CLAIMANT’s other clients, who only received the “initial version” of it

[P.O. 2 ¶28]. This long process shows that the AST software was specifically developed

for RESPONDENT.

83. In light of the above, Parties’ conduct indicates that the AST software was customised to

RESPONDENT’s needs. As the customisation required CLAIMANT’s skilled labour,

CLAIMANT’s provision of the AST software constitutes a service.

b. Alternatively, CLAIMANT’s development of AST software is a service un-

der Art. 3(1) CISG because RESPONDENT’s contribution of medical data

is a “substantial part of the materials necessary” for its development.

84. A contract where a buyer supplies a “substantial part of the materials necessary” for the

production of goods is a contract for services under Art. 3(1) CISG [Fakes 578].

CLAIMANT’s provision of the AST software is a service because RESPONDENT’s

provision of data is a “substantial part of the materials necessary” for its development.

85. First, the “materials” contributed by a buyer include data supplied to produce software

[Diedrich 64]. RESPONDENT’s data was “necessary” to develop the AST software.

Although the software was installed on 13 January 2012 [Req. ¶13], it was not “finally

approved for cancer treatment” [Cl. Ex. 5] and it could only be finalised and approved if



CLAIMANT incorporated the data [P.O. 2 ¶28]. Therefore, CLAIMANT acknowledged

that RESPONDENT’s data was “necessary… to develop the software” [Req. ¶12].

86. Second, the economic value of the materials provided by RESPONDENT makes it a

“substantial part” of the materials necessary for the software development. In assessing

Parties’ contributions, the value of the buyer’s materials must be compared against that

of the seller’s [Containers Case]. The buyer’s contributions are “substantial” where the

value of its materials is 15-40% of the seller’s materials [CISG-AC Opinion 4 87¶2.8].

RESPONDENT’s data was valued at $6m while CLAIMANT’s input was valued at

$9.5m [Rp. Ex. 3]. Accordingly, RESPONDENT, as buyer, has contributed a “substantial

part of the materials necessary” because RESPONDENT’s input amounts to a staggering

63% of the total value of the materials contributed by CLAIMANT.

87. Since Parties intended to customise the AST software, or alternatively, because

RESPONDENT contributed a “substantial part of the materials necessary” for its

development, CLAIMANT’s obligations in relation to the AST are services and not

goods.

2. Even if the development of AST software is not a service, it still would not be

a “good” within the meaning of Art. 1(1) CISG.

a. Software is intangible intellectual property which is implicitly excluded

from the definition of “good” within Art. 1(1)CISG.

88. Even if CLAIMANT’s skilled labour in developing the AST software is not the subject

matter of the SLA, the CISG is nevertheless excluded under Art. 3(2) CISG because the

software is not a “good” within Art. 1(1) CISG. The provision of software comprises a

set of copyrighted instructions [Moon 397] and an accompanying right to use the

copyright. This is intangible IP that is implicitly excluded from the scope of the CISG.

89. IP and its accompanying rights are not CISG “goods” [Schlechtriem/Butler 29¶31]

because the CISG only contemplates goods that are “moveable and tangible” [Honnold

50-51]. CLAIMANT asserts that the CISG removed the distinction between tangible and

intangible goods because the French version of the CISG used the term “marchandises”

(goods), instead of “objets mobiliers corporels” (corporeal moveable goods) which was

used in the 1964 Hague Convention [Cl. Memo ¶99]. However, this goes against the

intentions of the state representatives involved in the CISG drafting process, who did not



consider that the change in terms would alter the nature of CISG “goods” [Ferrari 64;

Diedrich 60]. Therefore, the distinction between tangible and intangible goods should be

retained.

90. In fact, pursuant to sellers’ obligations under Art. 30 CISG, goods must be deliverable

and the property in the goods must be transferrable [Diedrich 58]. These attributes,

which allow the owner exclusive access to the good and to exclude third parties, are

lacking in the AST software. No delivery of the AST software occurred when it was

installed in the equipment [P.O. 2 ¶23] because software is copied from the originator

when it is transmitted to the end user [Sono 520], who only has a right to use the copy.

Thus, nothing left CLAIMANT’s “possession”. Furthermore, copyright owners, unlike

owners of tangible goods, cannot physically exclude third parties’ access to the software.

A copyright owner can only exclude third parties from using the software through

copyright law, which contemplates legal action [Bainbridge (2010) 31]. RESPONDENT

cannot exclude third parties from its copy because it has no right to sue for copyright

infringement as a licensee [Balganesh 726].

91. Furthermore, software shares many characteristics of the goods excluded by Art. 2 CISG

and should be excluded for the same reasons [Art. 7(2) CISG]. Software was not

expressly excluded under Art. 2 because at the time of drafting, software was not

common and therefore not within the drafters’ contemplation [Diedrich 60]. Consumer

sales and negotiable instruments are excluded by Art. 2 because they are governed by

mandatory domestic laws [Schlechtriem/Schwenzer 54¶16&57¶23]. Electricity was

excluded because it is intangible in nature and not a “good” in many legal systems

[Secretariat Commentary ¶10]. Since AST software is intangible and is protected by

mandatory domestic copyright laws, it should also be excluded from the CISG.

92. Thus, the provision of software involves intangible IP and an accompanying IP right to

use it. This does not fall within the CISG’s conception of “goods”, which requires the

goods to be moveable and tangible, and that property in the good be transferrable.

b. Even if the AST software were characterised as software embodied in a

physical medium, it would still not be governed by the CISG because the

focus of the dispute relates to the intangible intellectual property.

93. CLAIMANT argues that the AST software is indivisible from the equipment [Cl. Memo

¶95]. Even if this were so, the CISG does not apply to the composite because the



disputed issue in the SLA Claim relates to defects in the intangible software [Req. ¶26],

which is not a CISG “good” [see ¶¶88-92, supra], and not to physical defects in the

equipment.

94. The applicability of the CISG to the composite depends on whether the disputed issues

relate to tangible or intangible components. This is appropriate because the CISG cannot

govern intangible IP, which is excluded from the definition of a CISG “good” [see ¶¶88-

92, supra]. In fact, the physical embodiment of an IP should not matter when IP is the

disputed issue, because IP necessarily needs to be embodied in a tangible medium in

order to qualify for copyright protection [Megantz 24]. Therefore, in the Market Study

Case, the German Court of Appeal recognised that the disputed issues related to an

intangible good – market analysis information – and disregarded its physical

embodiment in a report. Although the Software Case suggests that software transmitted

on physical media such as CD-ROMs could be “goods” under the CISG, this decision

can be distinguished. In that case, the disputed issue was that the seller failed to deliver

certain software components on the physical CD-ROM, and not that there was a defect in

the software programming itself. The two cases taken together strongly suggest that

whether the CISG applies to a composite depends on whether it is the physical or

intangible components that are being complained of.

95. CLAIMANT’s use of the “book” example to demonstrate that the CISG should always

apply to composites regardless of the complaint [Cl. Memo ¶102] is inappropriate. The

CISG is undoubtedly applicable to the physical defects of the book like torn pages.

However, extending the Market Study Case by analogy, the CISG is inapplicable when

the defect relates to the content of the book. The same distinction can be drawn in

disputes concerning laptops. When there is a defect in the hardware, the CISG applies to

the dispute. In contrast, the CISG is inapplicable when the defect is in the software.

96. CLAIMANT may argue that determining whether the CISG applies based on the subject

matter of the dispute is unsatisfactory because it may result in the CISG governing issues

relating to tangible goods but not issues relating to intangible goods in the same

transaction. However this concern is overstated as it can be resolved using the principle

of dépeçage, which allows tribunals to apply different laws to issues in the same

transaction. This is principle is commonly used in international arbitration where the lex

arbitri and lex contractus may be from different national laws [Born 1312]. Thus,



tribunals should apply the CISG selectively to issues in a transaction that can be resolved

by the CISG [Mather 186].

97. In the present case, the dispute concerns the “content” of the software and its failure to

model the proton beam [Ans ¶24]. It would be a mistake for this Tribunal to consider the

tangible medium in which the software was installed instead of focusing on the

intangible software itself. Since the applicability of the CISG depends on the nature of

the good that is the issue in dispute, the CISG should not be applied to the SLA Claim

which concerns defects in the programming of the AST software and not physical defects

in the equipment.

3. The development of AST software, whether characterised as a service or non-

CISG "good", as well as the obligation to train personnel, form a preponderant

part of CLAIMANT’s obligations.

98. As mentioned above [see ¶77, supra], under Art. 3(2) CISG, the CISG is excluded when

the preponderant part of the supplier’s obligations consists in the supply of services, or

components outside the scope of the CISG [Huber/Mullis 42]. This extension of Art. 3(2)

CISG is justified because Art. 7(2) CISG allows for issues “not expressly settled in [the

CISG]… to be settled in conformity” with a general principle extracted from the CISG

[Huber/Mullis 42]. The CISG is excluded because a preponderant part of CLAIMANT’s

obligations relates to training and the provision of AST software, which are services [see

¶¶79-87, supra] or components outside the scope of the CISG [see ¶¶88-97, supra].

Whether an obligation is “preponderant” depends on its economic value and parties’

intentions [Huber/Mullis 45-47; CISG-AC Opinion 4 95 ¶3.4].

99. First, a seller’s obligation is “preponderant” if its economic value exceeds 50% of the

economic value of the contract [Huber/Mullis 47; CISG Digest 15]. Since 60% of the

market value of CLAIMANT’s obligations comprises training and the provision of AST

software, the CISG is excluded. Second, even if the valuation was attributable to tax

purposes [Rp. Ex. 3], Parties nevertheless intended for the provision of training and AST

software to be the “preponderant part” because these were of crucial importance to the

SLA [Cylinder Case]. This is because CLAIMANT’s customisation of AST software

was an important obligation under the SLA lasting 4 months [P.O. 2¶¶25&26].



100. In summary, the CISG does not apply to the SLA pursuant to Art. 3(2) CISG because

CLAIMANT’s obligations to provide training and develop the AST software constituted

a “preponderant part” of CLAIMANT’s obligations under the SLA.

B. EVEN IF THE PREPONDERANT PART OF CLAIMANT'S OBLIGATIONS RELATES TO

“GOODS”, THE SLA IS NOT A “SALE” WITHIN THE MEANING OF ART. 1(1) CISG.

101. Even if the preponderant part of CLAIMANT’s obligations relates to a “good”, the CISG

still does not apply because [1] the SLA is preponderantly a licensing agreement to use

the AST software and hiring of training services under which property was not

transferred and [2] the SLA involves a partial barter arrangement which is not covered by

the CISG provisions.

1. The SLA is preponderantly a contract for licensing of software and hiring of

training services, and not a sale of software.

a. CLAIMANT's licensing of the AST software did not amount to a “sale” be-

cause property did not pass to RESPONDENT.

102. CLAIMANT has licensed the software to RESPONDENT for the “life cycle” of the

proton therapy facility, which is estimated to be 30 years [Art. 2 SLA]. This licence

agreement is not a sales transaction because no property in the software passes to

RESPONDENT, who only received a non-exclusive licence to use its copy of the

software [Art. 2 SLA].

103. A “sale” takes place only if the seller “[transfers] the property in the goods” pursuant to

Art. 30 CISG. However, where a non-exclusive licence is granted, there is no transfer of

property in the software because it is merely a promise by the licensor not to sue the

licensee who complies with the licence terms [Nimmer 7-43¶7.09]. RESPONDENT only

received a non-exclusive licence to use its copy of the software. CLAIMANT retained all

IP rights in the AST software [Art. 11 SLA] and granted licences to two clients [Req.

¶17; Bainbridge (1994) 19]. This is inconsistent with the concept of a sale that an owner

must have exclusive access to a good once property is transferred [see ¶90, supra].

104. Furthermore, there is no transfer of property under the SLA because RESPONDENT

cannot freely deal with the AST software. A licence is structured in such a way to restrict

the licensee’s ability to duplicate and resell software so that all potential licensees would



have to purchase the licence from the copyright owners [Passman 275]. A licensee also

generally cannot assign a licence without the licensor’s assent [Gutterman/Erlich 109].

Art. 2 SLA grants RESPONDENT a licence to use the AST software without giving

RESPONDENT a right to assign it. Art. 11(2) SLA also evinces CLAIMANT’s intention

to retain the sole right to sell it. Hence, Parties clearly intended for the software to be

licensed on a non-exclusive basis which is inconsistent with the transfer of ownership.

b. Since licensing of the AST software and hiring of training services form the

preponderant part of CLAIMANT’s obligations, the SLA is not a “sales”

transaction within the CISG.

105. The licensing of software and hiring of training services, which amount to 60% of the

economic value of the SLA, are not “sales” transactions because no property is

transferred in the process. Since the preponderant part of CLAIMANT’s obligations is

not a “sale”, the CISG is excluded on an extension of the principle in Art. 3(2) CISG.

106. Although the plain wording of Art. 3(2) CISG only excludes the CISG from applying to

mixed contracts in which the subject matter is services, Art. 3(2) CISG can be “applied

by analogy” to exclude mixed contracts that do not involve a “sale” [see ¶98, supra].

Thus, the CISG does not apply to financial-leasing contracts since the preponderant part

of the obligations does not involve a “sale” [Schlectriem/Schwenzer 72¶22]. In the

present case, the CISG does not apply to the SLA because a preponderant part of

CLAIMANT’s obligations, i.e. 60% of the SLA economic value, relates to the licensing

of software and training, which are not “sales”.

2. Alternatively, there is no “sales” transaction because the SLA is a partial barter

agreement which is not covered by CISG provisions.

107. RESPONDENT’s contractual obligations comprise $3.5m monetary consideration and

non-monetary obligations of providing data, conducting trials and obtaining medical

approvals [Arts. 3&10 SLA]. Since the CISG only applies to transactions where goods

are exchanged for money [PVC Case; Schlechtriem (2005) 786], the CISG is

inapplicable to SLA.

108. The CISG should not apply to partial barter transactions because they are complex and

involve agreements of different legal natures [UN Report 1979 ¶16]. The CISG

provisions, which are drafted strictly to handle transactions involving the exchange of



goods for monetary consideration, are ill-suited to the complexity of such transactions.

For example, Art. 78 CISG provides for the payment of interest “if a party fails to pay

the price or any other sum that is in arrears”. This shows that the CISG only

contemplates monetary consideration because interest on a buyer’s provision of services

cannot be calculated. Therefore, the CISG provisions were drafted to address issues

arising from contracts where buyers pay monetary consideration, and not partial barter

agreements. The CISG cannot apply here where RESPONDENT has to provide

monetary and non-monetary consideration.

109. In conclusion, the CISG does not apply to the SLA because the preponderant part of

CLAIMANT’s obligations is a service or a component outside the CISG, and is not a

“good”. Alternatively, the SLA is not a “sales” transaction because it is preponderantly a

contract to license software and hire training services and RESPONDENT’s non-

monetary obligations amount to a partial barter arrangement.

VI. REQUEST FOR RELIEF

110. For the foregoing reasons, RESPONDENT humbly requests this Tribunal to find that:

a. This Tribunal does not have jurisdiction over the FSA Claim;

b. This Tribunal does not have jurisdiction over the SLA Claim;

c. Even if this Tribunal has jurisdiction over both Claims, it should not hear them

together in a single proceeding;

d. The Standard Terms 2000 have been incorporated into the SLA; and

e. The CISG does not apply to the SLA.

Respectfully signed and submitted by counsel on 23 January 2014,

/s/

Chen Chi

/s/

Lee Ming Shan Hannah

/s/

Kok Yee Keong

/s/

Kong Ying Jie Kenneth

/s/

Yeo Jianhao Mitchell

/s/

Yong Manling Jasmine