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RESPONDENT
CLAIMANT
QUEENS UNIVERSITY
FACULTY OF LAW
BENJAMIN ADELSON VANESSA BEAMISH LARA FITZGERALD-HUSEK JACK MASLEN
TABLE OF CONTENTS
TABLE OF ABBREVIATIONS ....................................................................................... VI!
TABLE OF AUTHORITIES ........................................................................................ VIII!
TABLE OF CASES ........................................................................................................ XIV!
SUMMARY OF ARGUMENT ............................................................................................ 1!
ARGUMENT ...................................................................................................................... 2!
PART ONE: THE TRIBUNAL LACKS JURISDICTION TO HEAR THE PARTIES
DISPUTE. ........................................................................................................................... 2!
I. THE TRIBUNAL WAS NOT CONSTITUTED ACCORDING TO THE PARTIES AGREEMENT. ..... 2!
A.!
The Council did not comply with the Parties Agreement in denying
confirmation of Mr. Y. ................................................................................................ 3!
1.!
2.!
3.!
4.!
B.!
The Council did not comply with the Parties Agreement in appointing Mr. Z
as presiding arbitrator. ................................................................................................. 5!
1.!
2.!
II. RESPONDENT DID NOT WAIVE ITS RIGHT TO OBJECT TO THE JURISDICTION OF THE
TRIBUNAL. ........................................................................................................................................... 6!
A.!
B.!
C.!
The Tribunal should follow the presumption that the most recent version of
the Milan Rules governs the dispute. ......................................................................10!
Even if the 2004 Milan Rules apply to substantive duties, the confidentiality
duty is procedural in character, and so the 2010 Milan Rules apply. .................11!
ii
Claimants statements violated the duty of confidentiality under art. 8(1) 2010
Milan Rules..................................................................................................................11!
1.!
2.!
II. IF THE 2004 MILAN RULES APPLY, CLAIMANT IS BOUND BY AN IMPLIED DUTY OF
CONFIDENTIALITY. ..........................................................................................................................13!
A.!
B.!
II. THE TRIBUNAL SHOULD DECLARE THAT CLAIMANT IS LIABLE FOR PROVABLE DAMAGES
ARISING FROM PAST OR FUTURE BREACHES OF CONFIDENTIALITY. ........................................17!
PART FOUR: THE SQUID CONFORMED TO THE CONTRACT............................ 18!
I. RESPONDENT DELIVERED CONFORMING GOODS UNDER ART. 35(1) CISG. ......................18!
A.!
B.!
Claimant knew, or could not have been unaware, that Respondent intended
the Squid to be unsized. ............................................................................................19!
A reasonable person in Claimants position would have understood that
Respondent intended to sell unsized squid. ...........................................................20!
II. THE SQUID WERE FIT FOR THE PURPOSES FOR WHICH GOODS OF THE SAME
DESCRIPTION WOULD ORDINARILY BE USED. ..............................................................................20!
III. THE SQUID WERE FIT FOR ANY PARTICULAR PURPOSE MADE KNOWN TO RESPONDENT.
............................................................................................................................................................21!
A.!
B.!
IV. RESPONDENT DID NOT BREACH UNDER ART. 35(2)(C) CISG. ...........................................23!
A.!
B.!
C.!
Claimant knew that Respondent did not intend the Contract to be a sale by
sample. .........................................................................................................................23!
A reasonable business person would have understood that Respondent did not
intend the Contract to be a sale by sample. ...........................................................24!
In the alternative, if the Contract was concluded on the basis of a sample,
Respondent informed Claimant that the bulk goods would deviate from the
sample. .........................................................................................................................25!
iii
2.!
B.!
Claimant did not give notice of the non-conformity until 16 August 2008,
which was not within a reasonable time under art. 39(1) CISG. ........................28!
1.!
2.!
C.!
II. RESPONDENT IS NOT PREVENTED FROM RELYING ON ART. 39 CISG BY VIRTUE OF ART.
40 CISG. ............................................................................................................................................32!
A.!
B.!
Claimant cannot prove Respondent was aware of the facts related to the nonconformity, so art. 40 CISG does not apply. .........................................................32!
In the alternative, Respondent disclosed the risk of a non-conformity to
Claimant, so art. 40 CISG does not apply. .............................................................33!
Explanation
Paragraph
AG
Amd.
Amended
art./arts.
Article / Articles
BGH
BGer
BOL
CISG
Cl. Ex.
Claimants Exhibit
Cl. Memo.
Claimants Memorandum
Clar.
Clarification
ed.
Edition
ed. / eds.
Editor / Editors
e.g.
et al.
etc.
ft
Footnote
Gram
Gen. Stn.
General Standard
HG
IBA
IBA Guidelines
ICC
ICC Rules
ICSID
Id.
kg
Kilogram
LG
Ltd.
Limited Company
Ltr.
Letter
Milan Rules
MT
Metric Ton
No.
Number
NY Convention
OGH
OLG
Para.
Paragraph
Passim
Pt.
Part
Proc. Ord.
Procedural Order
Resp. Ex.
Respondents Exhibit
S.A.
St. of Def.
Statement of Defense
UK
United Kingdom
UN
United Nations
UNCITRAL
UNCITRAL Rules
UNIDROIT
UNIDROIT Principles
USA
Vol.
Volume
vii
102,
105
Ashford, Peter
Bernstein,
Herbert and
Joseph
Lookofsky
110
Bianca, Cesare
Massimo and
Michael
Joachim Bonell
(eds.)
64,
86,
111,
115
Binder, Peter
16,
17,
19,
22, 24
Born, Gary B.
1, 7,
8, 22,
37,
39,
40,
41,
44,
45,
46,
48,
50, 51
viii
51, 55
Bhring-Uhle,
Christian et al.
39
Bhring-Uhle,
Christian et al.
Chamber of
Arbitration of
Milan
passim
Chamber of
Arbitration of
Milan
passim
CISG
passim
CISG Advisory
Council
100,
104
Cook, Trevor
and Alejandro
Garcia
7, 51,
55
Dessemontet,
Francois
32,
37, 43
DiMatteo, Larry
A. et. al.
93,
95,
99,
110
Enderlein, Fritz
and Dietrich
Maskow
71,
73,
115
ix
FernndezBallesteros,
M.., and David
Arias (eds.)
10
Ferrari, Franco
93,
98,
99,
100
Finkelstein et al.
Fortier, L. Yves
32,
40, 44
Gaillard,
Emmanuel and
John Savage
(eds.)
9, 15,
23
Greenberg,
Simon and
Flavia Mange
28,
30, 31
Henschel, Ren
Franz
68, 75
Honnold, John
O.
78,
80,
84,
95,
99
Horvath,
Gnther J.
22
32, 51
International
Bar Association
11
International
Law Association
32
Klausegger,
Christian, et al.
(eds.)
10
Kronke,
Herbert, et al.
(eds.)
2, 3,
6, 23,
24
1, 6,
7,
9,
15,
21,
22
Lewison, Kim
31
Luttrell, Sam
15, 23
Magnus, Ulrich
and Lisa
Haberfellner
75
McIlwrath,
Michael and
John Savage
7, 10,
20, 23
xi
7,
11,
15
32,
34,
36,
37,
39,
41,
43,
44,
45,
46,
50, 55
New York
Convention
passim
Oxford English
Dictionary
96
Paulsson, Jan
Paulsson, Jan
and Nigel
Rawding
34
24,
35,
42,
52, 53
Redfern, Allan
and Martin
Hunter
Schlechtriem,
Peter (ed.)
77,
84,
88,
89, 91
xii
Schlechtriem,
Peter and
Ingeborg
Schwenzer
(eds.)
77,
86,
88,
89,
93,
95,
106,
107,
109,
110,
116
Schlechtriem,
Peter and
Ingeborg
Schwenzer
(eds.)
60,
64,
68,
69,
71, 73
Schwenzer,
Ingeborg
99,
102,
105
UNCITRAL
68,
71, 82
UNCITRAL
Model Law on
International
Commercial
Arbitration
passim
Zuberbhler,
Tobias, et al.
(eds.)
6,
9,
19,
20,
22
xiii
44
Austria
86
Belgium
100
Canada
Denmark
Finland
88
Aita v. Ojjeh [18 February 1986], Cour d Appel de Paris [Appeals 34, 42,
Court]
55
cited as: Aita v. Ojjeh (France 1986)
Caito Roger v. Socit francaise de factoring [13 September 1995], 60
Cour dAppel de Grenoble
cited as: Caito v. Socit (France 1995)
Socit True North et Socit FCB Internationale v. Bleustein et al 35, 42,
[22 February 1999], Commercial Court of Paris, overturned on
52, 53
procedural grounds in TGI and CA Paris [2003], cited in Rev. Arb.
(2003) 189
cited as: True North v. Bleustein (France 1999) cited in Poudret/Besson 316317
xiv
Germany
115
116
68
105
107
75
71
114
95
60
71
xv
64
90
Hong Kong
Werner A. Bock KG v. The N's Co. Ltd. [1978] Hong Kong Court 24, 25
of Appeal, HKLR 281
cited as: Werner v. The Ns Co. (Hong Kong 1978)
Italy
Netherlands
68, 71
New Zealand
Singapore
Spain
Sweden
Switzerland
United
Kingdom
60
60
58
United States
31
Schmitz-Werke GmbH & Co. v. Rockland Industries Inc. [21 June 71, 74
2002], United States Court of Appeal 4th Circuit
cited as: Schmitz-Werke v. Rockland (USA 2002)
United States v. Panhandle Eastern Corp et al. [1988], United States 43
Court of Appeal 3rd Circuit, 118 FRD 346
cited as: US v. Panhandle (USA 1988)
xvii
25
xviii
The Tribunal does not have jurisdiction to hear the Parties dispute because the Tribunal was not
constituted according to the Parties agreement. As a preliminary matter, Respondent does not
contest that the Parties executed a valid arbitration agreement. Both Parties agree that the
Dispute Settlement clause in the Sale Confirmation constituted an arbitration agreement
(Agreement), and provided that Danubia would be the seat of the arbitration [Cl. Ex. 4; Resp.
Ex. 2]. Accordingly, the Parties are bound by Danubias national arbitration law, the
UNCITRAL Model Law on International Commercial Arbitration, 2006 Amendments (Model
Law) [Req. for Arb. 25; Blackaby et al. 164]. Art. 16 Model Law, which codifies the widelyaccepted principle of competence-competence [Blackaby et al. 346; Born 868; Bhring-Uhle et al.
2006 47; Lew et al. 332], confers on the Tribunal the power to rule on its own jurisdiction. The
Tribunal should invoke its competence to conclude that it was not constituted according to the
Parties Agreement [I]. Respondent did not waive its right to raise an objection [II]; and, if the
Tribunal affirms its jurisdiction, an eventual award is at risk of being set aside or refused
recognition and enforcement [III].
I. THE TRIBUNAL WAS NOT CONSTITUTED ACCORDING TO THE PARTIES AGREEMENT.
2.
By referring to the Rules of the Chamber of Arbitration of Milan in the Agreement, the Parties
expressly agreed to be bound by the Milan Rules [Cl. Ex. 4; Resp. Ex. 2; art. 1 2010 Milan Rules;
Nacimiento in Kronke et al. 282]. Both art. 14(1) of those Rules and art. 11(2) Model Law allow
parties to agree on a procedure for constituting a tribunal. The Parties exercised this power to
require that each appoint one arbitrator, and that the two party-appointed arbitrators jointly
appoint the presiding arbitrator [Cl. Ex. 4; Resp. Ex. 2].
3.
An arbitral tribunal lacks jurisdiction when it has not been constituted according to the parties
agreement [art. V(1)(d) NY Convention; Nacimiento in Kronke et al. 281]. Here, contrary to the
Parties Agreement, the presiding arbitrator of the Tribunal was chosen by the Arbitral Council
(Council)not by the two party-appointed arbitrators. As a result, the Tribunal lacks
jurisdiction [art. 34(2)(a)(iv) Model Law; art. V(1)(d) NY Convention]. The Council did not comply
with the Parties Agreement in denying confirmation of Mr. Y [A], nor in appointing Mr. Z as
the presiding arbitrator [B].
The Council acted contrary to the Parties Agreement by denying confirmation of Mr. Ys
appointment. The Parties agreed that the appointment of arbitrators would be subject to
confirmation by the Council if the prospective arbitrator submitted a qualified statement of
independence [art. 18(4) 2010 Milan Rules]. Mr. Y did submit a qualified statement of
independence [Ltr. 19 July 2010]; however, the Councils decision to deny confirmation was
contrary to the Parties Agreement because both Parties waived any objection to the qualification
[1] and because the Parties choice was entitled to deference from the Council [2]. Moreover,
application of the IBA Guidelines, which the Council indicated would guide its decisions, should
have led the Council to confirm Mr. Y [3]. The Councils decision to deny Mr. Ys confirmation
was also premature under the Milan Rules [4].
1. Both Parties waived any objection to Mr. Ys qualified statement of
independence.
5.
The Tribunal should find that the Councils decision to deny confirmation of Mr. Ys
appointment was contrary to the Parties Agreement because both Parties waived any objection
to Mr. Y. Under art. 18(3) Milan Rules, the Parties were given 10 days to submit comments on a
qualified statement of independence. During this time, both Parties waived any objection to Mr.
Y [Ltrs. 26 and 27 July 2010]. The Parties waivers constituted an unequivocal endorsement of Mr.
Y as a suitable presiding arbitrator. They indicate the Parties agreement that Mr. Ys relationship
with one of the Parties did not raise justifiable doubts about his impartiality or independence.
6.
Moreover, the Parties waivers prevented either party from making a subsequent challenge to Mr.
Ys independence and impartiality [Lew et al. 314; Nacimiento in Kronke et al. 289; Zuberbhler et al.
51]. As a result, a tribunal chaired by Mr. Y, and any award rendered, could not be challenged on
the basis of Mr. Ys relationship with Claimant. In contrast, the current Tribunal is vulnerable to
challenge because the appointment of Mr. Z was not according to the Parties Agreement.
2. The Parties mutual decision to accept Mr. Ys appointment as presiding
arbitrator was entitled to deference from the Council.
7.
Both Parties waived any objections to Mr. Y and the Council should have deferred to their
decision. The ability of parties and party-appointed arbitrators to participate in the constitution
of the arbitral tribunal is a distinctive feature of arbitration and is considered crucial to the
success of arbitral proceedings [Born 1363; Lew et al. 231]. Participation in the selection of
arbitrators ensures confidence in the qualifications of arbitrators hearing the dispute [Blackaby et
al. 252; Park in Waibel et al. 200], increases co-operation between members of the tribunal
The Parties, and not the Council, are in the best position to determine the suitability of potential
arbitrators [Born 1366, 1382]. Parties to an arbitration have a unique understanding of the
particularities of their dispute and the qualities their arbitrators should possess. For this reason,
administering institutions rarely deny appointments [Born 1407]. Here, the Parties were
unequivocal in their endorsement of Mr. Y [Ltrs. of 26 and 27 July 2010]; thus, the Council should
defer to their agreement. Party autonomy is the basis of international commercial arbitration
[Ashford 81; Redfern/Hunter 315; Bckstiegel 25] and an administering institution should only
overrule the parties choice in exceptional circumstances. These circumstances do not exist here.
9.
The Council should only exercise its discretion when the appointed arbitrator is so unsuitable
that his or her presence on the tribunal poses a significant danger of rendering an award
unenforceable or bringing the arbitral proceedings into disrepute. An institutions role in
confirming arbitrators is to ensure a minimum standard of independence and impartiality [Lew et
al. 237; Gaillard/Savage 552], to preserve the reputation of the arbitral institution [Bhring-Uhle et
al. 2006 35] and to ensure efficient administration of the proceedings [Gaillard/Savage 483;
Zuberbhler et al. 48]. Given the primacy of party autonomy in arbitration, an institution should
not step beyond that role. The integrity of the arbitral process is undermined not only by the
appointment of unsuitable arbitrators, but also where the administering institution improperly
overrules the parties agreement. Here, the Council should defer to the Parties acceptance of a
presiding arbitrator unless an arbitrator is patently unsuitable. Indeed, there is no evidence that
Mr. Ys relationship with Claimant was so improper that the Parties could not waive it.
3. The Council should have regard for the Parties expectations and should have
applied the IBA Guidelines to confirm Mr. Y.
10.
The Council should have applied the IBA Guidelines to confirm Mr. Y. The Council referred to
the IBA Guidelines in the letter informing Mr. Y of his appointment [Ltr. 15 July 2010]. This
reference shows the Council intended to rely on, or at least consider, the IBA Guidelines when
determining if Mr. Y would be confirmed. Furthermore, this reference created a reasonable
expectation by the Parties that the IBA Guidelines would be applied. Institutions should respect
not just the letter of the applicable rules, but also the reasonable expectations of the parties
[Leaua in Klausegger et al. 110]. The IBA Guidelines have been widely accepted as the standard for
determining independence and impartiality in international arbitration [Blackaby et al. 270;
McIlwrath/Savage 246; Rozas in Fernndez-Ballesteros/Arias 417]. Accordingly, the Council, although
not formally bound by the IBA Guidelines, should have applied them to confirm Mr. Y.
4
The relationship disclosed by Mr. Y falls under the waivable red list as set out in the IBA
Guidelines [IBA Guidelines Pt. 2 (2.3.3)]. Mr. Y indicated that a partner from his firm is advising
Claimant in this dispute [Ltr. 19 July 2010]. Relationships listed on the waivable red list can be
waived if parties are aware of the improper relationship and expressly agree to waive the resulting
conflict of interest [IBA Guidelines Gen. Stn. 2; Moses 133]. In this case, both Parties expressly
waived any objection to Mr. Ys disclosure and reaffirmed their confidence in his independence
and impartiality [Ltrs. of 26 and 27 July 2010]. Applying the IBA Guidelines, the Council should
have confirmed Mr. Y.
4. The Councils decision to deny Mr. Ys confirmation was premature.
12.
Under the Milan Rules, the Parties have ten days to object to the independence or impartiality of
an arbitrator [art. 18(3) 2010 Milan Rules]. In its letter of 26 July 2010, the Secretariat informed
the Parties that they had ten days to raise any objections to Mr. Ys appointment. However, only
four days later, the Council denied Mr. Ys confirmation [Ltr. 2 August 2010]. This departure
from the Milan Rules may not have resulted in substantial prejudice to the Parties, but it does
indicate the Councils disregard for the Parties Agreement and its own Rules.
B. The Council did not comply with the Parties Agreement in appointing Mr. Z
as presiding arbitrator.
13.
Even if the Tribunal finds that the Council acted according to the Parties Agreement by denying
confirmation of Mr. Y, the Council did not comply with the Parties Agreement in appointing
Mr. Z. According to the Parties Agreement, if an arbitrator is not confirmed, a new arbitrator
must be appointed by the original appointing authority [art. 20(3) 2010 Milan Rules; art. 15 Model
Law]. The party-appointed arbitrators were the original appointing authority [Cl. Ex. 4]. The
Council acknowledged this when it initially requested that the party-appointed arbitrators make
another appointment after Mr. Y was not confirmed [Ltr. 2 August 2010]. Only if a replacement
arbitrator must also be substituted, is the Council then authorized to make the appointment
itself [art. 20(3) 2010 Milan Rules]. Here, the Councils authority to substitute a replacement
arbitrator was not engaged [1] and the Council should have invited the party-appointed
arbitrators to make another appointment [2].
1. The Council did not have authority to substitute a replacement arbitrator
because there was no replacement arbitrator.
14.
Art. 20(3) Milan Rules is limited to situations where a replacement arbitrator must also be
substituted. The Council does not have the authority to appoint an arbitrator except as a
substitute for a new arbitrator. Here, when the party-appointed arbitrators were informed that
the Council had denied Mr. Ys confirmation they did not appoint a new arbitrator. Instead, they
5
The reappointment of Mr. Y did not warrant direct intervention by the Council. Instead, the
Council should have invited the party-appointed arbitrators to make a new appointment. The
Council should respect the Parties intentions to have the party-appointed arbitrators appoint the
presiding arbitrator. This would facilitate cooperation between members of the Tribunal [Moses
125]. Furthermore, the appointment procedure chosen by the Parties gives the Parties an indirect
influence on the selection of the presiding arbitrator [Lew et al. 250]. The Parties mutual
intentions should not be abrogated merely because the Milan Rules do not address the situation
before the Tribunal. None of the other bases that might justify the intervention of the
administering institution were present here. Neither party was attempting to delay or frustrate
the arbitral proceedings [Luttrell 3; Gaillard/Savage 483, 554; Lew et al. 318]. Instead, the partyappointed arbitrators were exercising their delegated authority to appoint a presiding arbitrator.
Faced with a situation not contemplated by its Rules, the Council should simply have abided by
the Parties Agreement and given the party-appointed arbitrators another opportunity to select a
new presiding arbitrator.
II. RESPONDENT
TRIBUNAL.
16.
Claimant may argue that Respondent waived its right to object to the jurisdiction of the Tribunal.
The Tribunal should find that Respondent raised a valid objection; the waiver conditions in the
Parties Agreement have not been met. According to the Parties Agreement, an objection must
be raised in the first brief or at the first hearing following the claim to which the objection
relates [art. 12 2010 Milan Rules] or, under the Model Law, without undue delay [art. 4].
Accordingly, to find a valid waiver, a party must know of the non-compliance, proceed to
arbitration and fail to state an objection without undue delay [Binder 55]. These requirements
have not been met. Respondent was unaware of the improper constitution of the Tribunal when
it submitted its Statement of Defence [A]. The time between the improper constitution and
Respondents objection does not amount to undue delay [B], and Respondents objection is not
disruptive of the proceedings [C]. Respondent acted within its rights to object.
To invoke art. 4 Model Law, Claimant must first establish that Respondent knew of the noncompliance with the Parties Agreement and still proceeded with the arbitration [Binder 59].
Claimant may argue that Respondent waived the right to object by not objecting as soon as Mr.
Y was denied confirmation [Ltr. 2 August 2010], or at the latest, when Mr. Z was confirmed [Ltr.
10 September 2010]. While art. 11(1) Milan Rules allows the Council to rule on objections before
the constitution of a tribunal, any decision reached by the Council is not binding on the Tribunal
[art. 11(2) 2010 Milan Rules]. Therefore, regardless of the Councils response, Respondent would
have been required to raise the objection again once the Tribunal was constituted. Respondents
decision to wait until the Tribunal was constituted to raise an objection cannot constitute a
waiver of its right to raise that objection.
18.
Furthermore, Respondent did not waive its right to challenge the Tribunals jurisdiction by
raising the objection after submitting its Statement of Defence. Here, Respondent raised an
objection to the Tribunals jurisdiction in an amendment to its Statement of Defence [Amd. St. of
Def. 24 September 2010]. Claimant may argue that a challenge to the jurisdiction of a tribunal is to
be raised no later than the submission of the statement of defence [art. 16(2) Model Law].
However, Respondent first became aware of the improper constitution of the Tribunal on 20
September 2010 [Proc. Ord. 2], long after it submitted its Statement of Defence on 24 June 2010.
Art. 23(2) Model Law permits parties to amend their claims during arbitral proceedings.
Accordingly, Respondent did not proceed with the arbitration without stating an objection.
B. The time between the improper constitution and Respondents objection does
not amount to undue delay.
19.
Respondent raised its objection without undue delay. Respondent raised its objection on 24
September 2010just four days after it became aware the Tribunal was constituted with Mr. Z
as the presiding arbitrator. Art. 4 Model Law is silent as to what amounts to undue delay [Binder
60]; however, a four-day delay is miniscule in the context of an international arbitration
[Zuberbhler et al. 271]. Furthermore, it is reasonable to allow parties time to adequately prepare
their objections, including time to draft and submit a statement [Zuberbhler et al. 271].
Accordingly, the conditions for waiver of the right to object under art. 12 Milan Rules and art. 4
Model Law have not been met; Respondent raised a timely objection.
C. Respondents objection is not disruptive of the arbitral proceedings.
20.
An objection to the jurisdiction of the Tribunal at such an early stage in the proceedings is not
disruptive to the resolution of the dispute. Since the objection was raised before the arbitration
7
Moreover, the reconstitution of the Tribunal according to the Parties Agreement will not result
in protracted delays of the proceedings. If jurisdiction of the Tribunal is denied, the proceedings
will only be suspended to appoint a new presiding arbitrator. There is nothing to suggest that the
reconstitution of the Tribunal would be unduly prolongedthe Milan Rules set out efficient
appointment procedures and both the Parties and party-appointed arbitrators were cooperative
in the constitution of the present Tribunal. On the other hand, if the Tribunal proceeds to issue
an award and that award is set aside or refused enforcement, the entire arbitral process would
have to be repeated. A Tribunal with the full confidence of both Parties is the best means to
ensure voluntary compliance with an eventual award [Lew et al. 236].
III. IF
22.
A central duty of a tribunal in any arbitral proceeding is to render an enforceable award [Born
2537; Horvath 135; Lew et al. 119]. If the Tribunal finds that it was properly constituted and
renders an award on the merits, this award would likely be set aside or refused recognition and
enforcement. The courts of Danubia, the seat of arbitration, would have jurisdiction over an
application to set aside an award; enforcement can be sought in jurisdictions where parties have
assets [Lew et al. 703]. There are sufficient grounds for a Danubian court to set aside an eventual
award [art. 34(2)(a)(iv) Model Law] or for courts in Equatoriana or Mediterraneo to refuse it
recognition or enforcement [art. V(1)(d) NY Convention]. Respondent preserved its right to
challenge an award by raising an objection to the Tribunals constitution during the arbitral
proceedings [Amd. St. of Def. 1; Born 2592; Binder 61; Zuberbhler et al. 272; Ghiradosi v. B.C.
(Canada 1966) 17].
23.
Under art. V(1)(d) NY Convention, an award may be challenged where the composition of the
arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the
parties [Luttrell 11; Gaillard/Savage 453]. This provision is mirrored in art. 34(2)(a)(iv) Model
Law. Here, all states involved are signatories to the NY Convention [Req. for Arb. 25], and the
national arbitration laws of Equatoriana and Mediterraneo must be at least as favourable to
Courts look at the parties agreement and the national law of the seat of arbitration to determine
whether a tribunal has been improperly constituted [Nacimiento in Kronke et al. 281]. The types of
defects sufficiently serious to justify setting aside an award, or refusing to enforce it, are not
defined in art. 34(2)(a)(iv) Model Law or art. V(1)(d) NY Convention [Poudret/Besson 840].
Commentators and courts agree that a defect in the composition of a tribunal constitutes
grounds for setting aside an award if the defect potentially affected the award [Binder 382;
Nacimiento in Kronke et al. 297; BOL Sept 2004; Werner v. The N's (Hong Kong 1978)].
25.
Claimant may argue that for an award to be set aside or refused enforcement, Respondent must
prove that the defectthe Councils refusal to confirm Mr. Y and the appointment of Mr. Z
resulted in substantial prejudice to Respondent. A standard of substantial prejudice has been
applied by some courts, particularly in the United States [Compagnie v. Hammermills (USA 1992);
Karaha v. Perusahaan (USA 2001)]. However, courts in some Model Law jurisdictions have set
aside awards when the defect is one that potentially cause[d] an unfavourable outcome [BOL
Feb 1999; BOL Sept 2004; Werner v. The N's (Hong Kong 1978)]. Applying this standard, an award
rendered by the Highest Arbitral Tribunal of the Bavarian Commodities Trading Association was
set aside by the Bavarian Court of Appeal for deviating from the appointment and challenge
process in the arbitration agreement. Applying national legislation based on the Model Law, the
Court found that the Highest Arbitral Tribunal might have decidedin a different
compositiondifferently on the appeal and that the procedural irregularity potentially caused
an unfavourable outcome for the claimant [BOL Feb 1999]. It is unclear which standard a
Danubian court would apply. Accordingly, the Tribunal should proceed with caution. The only
way to ensure that an award issued in this dispute will be enforceable is for the dispute to be
submitted to a properly constituted tribunal.
PART TWO: CLAIMANT BREACHED ITS DUTY OF CONFIDENTIALITY.
26.
Four days after Claimant commenced this arbitration, Claimants CEO, Mr. Herbert Schwitz,
gave an interview to Commercial Fishing Today, a trade newspaper distributed in 45 countries
[Resp. Ex. 1; St. of Def. 4]. He divulged the subject matter of this dispute, the existence of
arbitration and made inflammatory allegations about Respondents conduct [Resp. Ex. 1]. This
interview constituted a breach of confidentiality. Admittedly, the scope of the duty of
confidentiality in international arbitration remains uncertain; the major international arbitration
conventions do not mention the issue at all, and institutional rules and national arbitration laws
vary widely with respect to confidentiality [Coppo in Finkelstein 28]. However, there is no
9
The Tribunal should hold that the duty of confidentiality expressed in art. 8(1) of the 2010 Milan
Rules applies [I]. Even if the Tribunal finds that the 2004 Milan Rules apply, those rules impose
an implied duty of confidentiality on the Parties [II]. Mr. Schwitzs statements constituted a
breach of both the express confidentiality duty in the 2010 Rules and the implied duty in the
2004 Rules.
I. THE 2010 MILAN RULES APPLY TO THE ISSUE OF CONFIDENTIALITY.
28.
Where institutional rules have been amended between the conclusion of an arbitration agreement
and the commencement of arbitral proceedings, the more recent version of the rules is presumed
to govern the dispute unless the parties agree otherwise [Greenberg/Mange 201-204]. The 2004 and
2010 versions of the Milan Rules expressly stipulate that the most recently enacted version of the
rules applies [art. 43(3) 2004 Milan Rules; art. 39(2) 2010 Milan Rules].
29.
The Parties did not rebut this presumption by indicating a preference for a specific version of
the Milan Rules in their Agreement [Cl. Ex. 4]. Absent a provision rebutting this presumption,
the Tribunal should apply the most recent version of the Milan Rules [A]. The exception to this
presumption, that older versions of institutional rules apply to substantive aspects of the dispute,
is irrelevant because the duty of confidentiality is procedural in character [B]. Claimants
disclosure violated the duty of confidentiality contained in art. 8(1) 2010 Milan Rules [C].
A. The Tribunal should follow the presumption that the most recent version of
the Milan Rules governs the dispute.
30.
The Tribunal should apply the 2010 version of the Milan Rules to all aspects of this dispute. Art.
3(2) 2004 Milan Rules indicates that the rules chosen by the parties in the arbitration
agreement apply. However, the Parties Agreement does not specify any particular version of
the Milan Rules [Cl. Ex. 4]. If Claimant wished to freeze the rules existing when the
Agreement was concluded in 2008, it needed to expressly stipulate this in the Agreement
[Greenberg/Mange 208]. Absent an express provision, there is a presumption favouring rules as
they appear at the commencement of arbitration, not as they appeared at the time the agreement
was made [ICC 1976; Greenberg/Mange 201]. Accordingly, the 2010 Milan Ruleswhich expressly
place the Parties under a duty to maintain confidentialitygovern this issue.
10
Confidentiality is a procedural issue, and so the 2010 Milan Rules govern the dispute. When rules
of procedure have been amended between the conclusion of a contract and the commencement
of arbitration, as in this dispute, an overwhelming consensus in the case law favours the
application of the most current version of the rules to procedural matters [Greenberg/Mange 204;
Lewison 64; Bunge v. Kruse (UK 1979)]. In Bunge v. Kruse, the English High Court distinguished
between procedural and substantive provisions, holding that rules amended after the arbitration
agreement may not apply to substantive issues [Greenberg/Mange 204].
32.
33.
Mr. Schwitzs disclosure to Commercial Fishing Today violated art. 8(1) 2010 Milan Rules. The
duty of confidentiality applies to the proceedings and therefore attaches upon their
commencement. As a result, Claimants duty was triggered when it filed the Request for
Arbitration [art. 9 2010 Milan Rules]. Art. 8(1) imposes a broad confidentiality duty that includes
any kind of material, brief, hearings, etc. related to the arbitration [Coppo in Finkelstein 28]. It
requires the Chamber, Tribunal, witnesses and the Parties to keep the proceedings and the
arbitral award confidential. Mr. Schwitz spoke not only about the existence of the arbitration,
but also alleged that Respondent knowingly sold completely inappropriate squid [Resp. Ex. 1].
His statements violated confidentiality [1] and Claimant cannot take advantage of any exceptions
in the 2010 Milan Rules [2].
11
Even if Claimant had merely divulged the existence of this arbitration, that alone would have
constituted a breach of art. 8(1) 2010 Milan Rules, which restrict disclosure not only of the
award, but also of the proceedings. This language was adopted to give an expansive scope to
the duty of confidentiality [Coppo in Finkelstein 28]. In international arbitrations, the mere fact
that an arbitration is pending may be viewed as a secret [Noussia 129; Hassneh Insurance v. Mew
(UK 1993) 247]. For example, in Aita v. Ojjeh, the Paris Court of Appeal found that Aita
challenged the arbitration in a court that it knew lacked jurisdiction for the sole purpose of
publicizing the dispute [(France 1986)]. The Court found Aita breached confidentiality by causing
a public debate of facts which should remain confidential [Paulsson/Rawding 312; Noussia 121].
Here, Mr. Schwitz told Commerical Fishing Today that it had started arbitration proceedings
against Respondent [Resp. Ex. 1]; this disclosure on its own constituted a breach of art. 8(1).
35.
However, Claimant not only disclosed the existence of the arbitration, but also revealed its
subject matter and allegations made in the Request for Arbitration [Resp. Ex. 1]. Art. 8(1)
stipulates that parties must keep the proceedings confidential, which Claimant violated in its
interview with Commercial Fishing Today. The Paris Commercial Court held that a party
breached confidentiality when it released a statement divulging the existence of the dispute, the
existence of the arbitration, and the amount of the claim [True North v. Bleustein (France 1999) cited
in Poudret/Besson 316-317]. Claimants disclosure mirrors that in True North: it divulged the
existence of the dispute, the existence of the arbitration and facts and arguments pertaining to
the merits of the dispute. Mr. Schwitz stated that Respondent had supplied completely
inappropriate squid to Claimant and they knew it [Resp. Ex. 1].
2. There is no applicable exception to the duty of confidentiality that would
have permitted Claimants disclosure.
36.
Claimant may argue that its breach of confidentiality was permissible. Art. 8(1) 2010 Milan Rules
provides that a party may breach confidentiality to the extent required to protect its rights. This
provision protects legal rights, such as the right to enforce or challenge the award, but does
not extend to commercial rights [Coppo in Finkelstein 28-29]. Any disclosure must be reasonably
necessary to establish the partys legal rights against a third party [Noussia 31, 110; Insurance v.
Lloyds Syndicate (UK 1995); Ali Shipping v. Shipyard (UK 1998)]. Art. 8(1) also permits breaches of
confidentiality where parties have a legal duty to disclose [Coppo in Finkelstein 29; Noussia 29].
However, Claimant did not owe any legal duty to disclose this arbitration, nor was Claimant
enforcing or protecting a legal right [Clar. 15].
12
Moreover, confidentiality only applies to material that is objectively secret; the obligation cannot
extend to matters that are public knowledge [Dessemontet 314; Noussia 26]. Claimants disclosure
revealed facts that were not public knowledge. Although Commercial Fishing Today had
previously reported on the existence of a dispute, those reports contained no prejudicial
comments, nor any mention of the means by which the dispute might be resolved or the content
of either Partys claims [Clar. 17]. By contrast, Claimant not only revealed the existence of the
proceedings, but also asserted that Respondent was liable for Claimants losses [Resp. Ex. 1].
Claimant was attempting to conduct a trial by press release and its conduct cannot be
condoned [Born 2282]. The only other exception to confidentiality in art. 8 2010 Milan Rules
pertains to the Chamber and not to the parties [art. 8(2)], so Claimants disclosure is not saved by
any exceptions to its duty of confidentiality.
II. IF
38.
RULES
APPLY,
CLAIMANT
The 2004 Milan Rules do not contain an express duty of confidentiality. However, if the
Tribunal finds that the 2004 Milan Rules govern this issue, a duty of confidentiality is implied.
The prevailing conception of confidentiality affirms the existence of an implied duty
encompassing the proceedings [A], and Claimant violated this duty by divulging the existence
and subject matter of the arbitration proceedings [B].
A. Claimant was bound by an implied duty of confidentiality because of the
nature of international arbitration proceedings.
39.
All parties to international arbitrations are presumed to owe an implied duty of confidentiality
[Born 2282; Dolling-Baker v. Merrett (UK 1991); Emmott v. Michael Wilson (UK 2008)]. This implied
duty is one of the most important considerations for parties choosing to arbitrate their disputes
[Bhring-Uhle et al. 1996; Noussia 125]. The objectives of arbitrationneutral, efficient, and
binding dispute resolutioncompel the imposition of confidentiality obligations on parties. This
duty focuses the parties efforts toward dispute resolution, rather than on trial by press release
and restrains the aggravation of the parties disputes, rather than extending them to additional,
more public forums [Born 2282]. Arbitration preserves privacy and confidentiality to the
greatest extent possible [Noussia 22].
40.
13
This implied duty prohibits disclosure of any evidence, communication, or information about
arbitration proceedings [Noussia 40; Born 2252]. English courts have long implied an obligation of
confidentiality arising from the parties arbitration agreement [Born 2259; Noussia 79; Dolling-Baker
v. Merrett (UK 1991); Hassneh Insurance v. Mew (UK 1993); Insurance v. Lloyds Syndicate (UK 1995);
Ali Shipping v. Shipyard (UK 1998)]. The English Court of Appeal recently affirmed that implied
confidentiality obligations prohibit the disclosure of any documents or evidence related to
arbitral proceedings [Emmott v. Michael Wilson (UK 2008) 495].
42.
Similarly, the Paris Court of Appeal found that a party breached implied confidentiality
obligations by initiating court proceedings it knew to be fruitless that publicized the arbitration
[Aita v. Ojjeh (France 1986)]. More recently, the Commercial Court of Paris recognized that even
where there is no express confidentiality obligation, parties must avoid any publicity relating to
the dispute [True North v. Bleustein (France 1999) cited in Poudret/Besson 316-317]. The Tribunal
should find Claimant was bound by a similar implied duty of confidentiality.
43.
Cases in which courts have permitted parties to breach confidentiality are distinguishable from
the facts here. For example, in Esso v. Plowman, the Australian High Court permitted disclosure of
arbitration documents because public interests and an express duty of disclosure overrode the
confidentiality obligation [(Australia 1995); Dessemontet 316, 321]. The public interest has been
held to override confidentiality only where public figures or public agencies are involved [Esso v.
Plowman (Australia 1995); Moscow v. Bankers (UK 2004); Noussia 27]. This is inapplicable to the
current dispute because both Parties are privately held companies and have no disclosure
obligations [Clar. 15]. In US v. Panhandle, an American trial court held that no implied
confidentiality existed under the ICC Rules [(USA 1988)]. However, this statement was an obiter
dictum and was expressly restricted to the ICC Rules [Dessemontet 321], which are inapplicable
here.
44.
The Esso and Panhandle judgments have been criticized as ill-considered for international
arbitration, since they focus on domestic concerns and overlook underlying privacy requirements
in international arbitration [Born 2282-3]. Another tribunal applying the ICC Rules after the
Panhandle decision, found that international arbitrations are confidential even if the applicable
rules do not expressly mention confidentiality [Unidentified ICC Case, cited in Fortier 132-133]. More
recent case law suggests that Esso is the exception, rather than the rule, for confidentiality
obligations [Noussia 82; Transfield v. Pacific Hydro (Australia 2006); Myanma v. Win (Singapore 2003)].
14
Under the implied duty of confidentiality that pertains to the 2004 Milan Rules, Claimant was
obliged to keep confidential the existence of the arbitration and any documents prepared for or
disclosed in the arbitral proceedings [Noussia 40; Born 2252; Dolling-Baker v. Merrett (UK 1991)]. In
his interview with Commercial Fishing Today, Mr. Schwitz exposed the existence and subject
matter of the arbitral proceedings and divulged the contents of Claimants Request for
Arbitration, in breach of its implied confidentiality obligations. Mr. Schwitz stated that
Respondent had supplied completely inappropriate squid to Claimant and they knew it [Resp.
Ex. 1]. In the Request for Arbitration, Claimant alleged Respondent knew at all times what the
squid was to be used for, but supplied squid not fit for that purpose [Req. for Arb. 27].
Accordingly, Claimants interview divulged not only the existence of the arbitration, but also the
content of documents prepared for arbitration proceedings.
46.
While confidentiality obligations are not absolute, none of the generally recognized exceptions
applies here. Several exceptions to the duty have been recognized, such as protection of third
parties rights, compelling public interest, or application for setting aside or enforcing an award
[Born 2280; Noussia 27; Dolling-Baker v. Merrett (UK 1991); Hassneh Insurance v. Mew (UK 1993); Ali
Shipping v. Shipyard (UK 1998); AEGIS v. European Reinsurance (UK 2003); Emmott v. Michael Wilson
UK 2008)]. Claimant owed no duty of disclosure, the public interest was not implicated in this
dispute, and Claimant was not protecting its legal rights in its interview with Commercial Fishing
Today [see supra 36, 43]. Claimants disclosure revealed information confidential to the
arbitration, and is not saved by any exception to confidentiality. The Tribunal should find that
Claimant has breached its implied obligation and should issue an appropriate order to sanction
the violation.
PART THREE: CLAIMANTS BREACH OF CONFIDENTIALITY JUSTIFIES AN
INJUNCTIVE ORDER AND DAMAGES.
47.
Consequences should ensue from Claimants breach of confidentiality. The Tribunal should issue
an interim order enjoining Claimant from further disclosures, which is not inconsistent with an
order for damages [I]. The Tribunal should also declare that Claimant is liable for any
quantifiable damages resulting from a breach of confidentiality [II].
I. THE TRIBUNAL SHOULD ISSUE AN ORDER ENFORCING CONFIDENTIALITY.
48.
Respondent requests that the Tribunal issue an injunctive order requiring Claimant to maintain
confidentiality [St. of Def. 8]. The Tribunal is empowered to issue urgent and provisional
measures of protection if it deems them necessary [art. 22(2) 2010 Milan Rules]. Claimants
disclosure has threatened the integrity of the arbitration proceedings, and threatens to turn them
15
The circumstances of the current dispute meet the conditions for granting an interim measure
under art. 17A of the Model Law. First, harm not adequately reparable by an award of damages
is likely if the Tribunal does not grant the desired relief; this does not conflict with an order for
damages [A] Second, Respondent has a reasonable prospect of success on the claims merits [B].
A. Damages are insufficient to protect against future breaches of confidentiality.
50.
The Tribunal should issue an injunctive order protecting confidentiality to preserve the status quo
and prevent harm from future disclosures. The Tribunal is empowered by art. 17(2)(a) to issue
measures preserving the status quo, including orders prohibiting public statements that breach
confidentiality [Born 1999]. Article 17A(1)(a) Model Law stipulates that Respondent would have
to show that harm not adequately reparable by damages would result if a protective measure was
not ordered. Claimant may argue that it is contradictory for Respondent to ask for both an
interim measure and damages, but that assertion mischaracterizes the remedies. The two
remedies work together with respect to future breaches of confidentiality: a declaration that
damages will ensue from future violations is a way of ensuring compliance with an injunctive
order. An injunctive order protects Respondent against future disclosures in breach of the
confidentiality obligation. Damages, on the other hand, redress past disclosures [Noussia 169].
Hence, although each remedy relates to confidentiality, the two are not mutually exclusive.
51.
52.
Respondent could suffer economic loss as a result of Claimants disclosures. In True North v.
Bleustein, True Norths disclosure of the existence of the dispute and the arbitration proceedings
resulted in negative economic consequences for the other party, specifically a drop in share value
[(France 1999); Poudret/Besson 316]. The Commercial Court of Paris enjoined True North from
making any further disclosures about the arbitration. Claimants past disclosure and any future
disclosures may result in similar negative consequences for Respondent. The threat of negative
publicity has been held to be sufficient basis to issue an injunctive order, so long as there is not a
countervailing public interest in disclosure [Biwater Gauff v. Tanzania; Giovanna a Beccara v. Argentine
16
Claimant may argue that there is no evidence that it will commit future breaches of
confidentiality. Nevertheless, it has been found that parties who have breached confidentiality
should be enjoined from making future disclosures [Dolling-Baker v. Merrett (UK 1991); Insurance v.
Lloyds Syndicate (UK 1995); Ali Shipping v. Shipyard (UK 1998); True North v. Bleustein (France 1999)
cited in Poudret/Besson 317]. Moreover, the fact that future disclosures may be unlikely does not
justify refusing to issue an injunctive order. If Claimant does not make future disclosures, the
order will do no harm.! On the other hand, the order will reassure both Parties that neither will
breach confidentiality in the future.
B. There is a reasonable possibility that Respondent will succeed on the merits
of the dispute.
54.
The Tribunal should also find that Respondent has a reasonable prospect of success on the
merits of the dispute, as required by art. 17A(1)(b) Model Law. Respondent delivered squid
which conformed to the Contract. In particular, Respondents delivery conformed with the
terms of the Sale Confirmation, the final communication between the Parties at the time of the
conclusion of the Contract. Therefore, there is a reasonable possibility that the goods
conformed. In addition, even if Respondents squid did not conform, Claimant lost its right to
rely on the breach by failing to give Respondent reasonable notice. The squid delivered were
perishable and seasonal goods, yet Claimant waited 45 days from the time of its examination to
give notice. Accordingly, there is a reasonable possibility that the Tribunal will find Claimants
claim to be barred. Harm not adequately reparable by damages is likely to ensue from future
breaches of confidentiality, and Respondent has a reasonable possibility to succeed on the merits
of its claim. Therefore, an interim order should be made.
II. THE TRIBUNAL SHOULD DECLARE THAT CLAIMANT IS LIABLE FOR PROVABLE DAMAGES
ARISING FROM PAST OR FUTURE BREACHES OF CONFIDENTIALITY.
55.
The Tribunal should declare Claimant is liable for provable damages arising from breaches of
confidentiality. If the Tribunal finds that Claimant has breached its duty of confidentiality, now
or in the future, Respondent need only quantify its resulting monetary losses to justify an award
of damages [Brown 1016; Cook/Garcia 269]. At this point, Respondent merely seeks a declaration
that Claimant must pay damages in the event that such losses can be quantified [St. of Def. 9].
Breaches of confidentiality have been sanctioned through the award of damages in the past. For
example, in Aita v. Ojjeh, the Paris Court of Appeal assessed damages against Aita for challenging
17
Claimant may argue that there is no harm stemming from past disclosures, since the existence of
the dispute had already been revealed. This assertion is inaccurate. Commercial Fishing Todays
previous publications did not mention this arbitration and revealed no information that
prejudiced Respondents position [Clar. 17]. Mr. Schwitzs statement, on the other hand, revealed
the existence and substance of this arbitration. He insinuated that Respondent was at fault in the
dispute, claiming, the only way to get them to live up to their responsibilities is to force them to
do so [Resp. Ex. 1]. Claimants disclosure included allegations about Respondents integrity and
business practices. Those accusations could harm Respondent financially, by damaging
Respondents credibility or driving away future customers. It is foreseeable that Claimants
allegations will result in quantifiable and compensable monetary harm to Respondent, which
should be sanctioned through an order for damages.
PART FOUR: THE SQUID CONFORMED TO THE CONTRACT.
57.
Respondent delivered squid to Claimant on 1 July 2008 (the Squid). The Squid were of the
quantity, quality, and description required by the Contract, as required by art. 35(1) CISG [I]. The
Squid were fit for the purposes for which goods of the same description are ordinarily used, as
required by art. 35(2)(a) CISG [II]. In addition, art. 35(2)(b) CISG does not apply because
Claimant did not make known any particular purpose to Respondent [III]. Furthermore, the
Contract was not a sale by sample under art. 35(2)(c) CISG [IV]. Finally, even if the Squid did
not conform under art. 35(2) CISG, Respondents liability is excluded by art. 35(3) CISG [V].
I. RESPONDENT DELIVERED CONFORMING GOODS UNDER ART. 35(1) CISG.
58.
Art. 35(1) CISG requires that the seller deliver goods of the quantity, quality and description
required by the contract. Here, the Contract expressly required that the Squid be: fit for human
consumption, of the species illex danubecus, landfrozen, Grade A, blast frozen, and packaged in
poly-line blocks [Cl. Ex. 3; Cl. Ex. 4]. It is not disputed that the Squid conformed to all these
characteristics. Claimant alleges that the Contract required squid weighing 100-150 g; however,
the Contract instead called for delivery of unsized squid. This is evident from both a subjective
interpretation of the Parties intentions [A], and an objective interpretation according to the
understanding of a reasonable person [B]. In both cases, according to art. 8(3) CISG, the
Tribunal should consider all relevant circumstances, including the Parties negotiations.
18
Claimant contends that the Squid had to be of a certain size [Cl. Memo. 30]; however, the
Contract actually called for unsized squid. Art. 8(1) CISG gives priority to the subjective intent
of a party where the other party knew or could not have been unaware of that intent.
Respondents intent was to sell unsized squid to Claimant. Claimant knew or could not have
been unaware of that intent, and is therefore bound by it according to art. 8(1) CISG.
60.
Respondents intent was made clear in the course of the Parties negotiations. If, in the course of
negotiations, one party clearly expresses its intent and the other party does not object, the
Tribunal will presume agreement [AG Sept 2008; LG Kassel Feb 1996; Caito v. Socit (France 1995);
Schmidt-Kessel in Schlechtriem/Schwenzer 2005 118-9]. For example, in a case concerning machinery
for producing glass vials, the seller did not object to the buyers request for a machine capable of
producing 180 vials per minute. A Swiss Court of Appeal held that the seller knew the buyers
intent and so, under art. 8(1) CISG, the contract required delivery of a machine matching those
requirements [AG Sept 2008 affd in BGer May 2009].
61.
Throughout the Parties negotiations, Respondent repeatedly expressed its intent to sell unsized
squid. On 17 May 2008, Respondent brought Claimant squid from the 2007 catch [St. of Def.
12]. The squid were not sized, nor was any size indicated on the packaging [St. of Def. 10, 12].
Respondent was not present when the squid was weighed [Req. for Arb. 14; Cl. Ex. 10 7; St. of
Def. 10]. These squid had been caught late in the growing season, between mid-June and midAugust, and had an average weight of 130 g [Cl. Ex. 10 7; St. of Def. 13]. However, this weight
was a mere coincidence; there is no evidence the size of this squid was ever promised byor
even known toRespondent.
62.
Claimant was no doubt pleased that this lot of discounted, run of the catch squid weighed an
average of 130 g and could be used as bait [St. of Def. 12]. Claimant was no doubt hopeful that
the discounted, unsized squid delivered in July would also weigh 130 g. But Claimant never
expressed these hopes, nor did Respondent say or do anything that would lead Claimant to
reasonably expect delivery of sized squid.
63.
Respondents only other communication with Claimant before the dispute arose, the Sale
Confirmation, similarly expressed Respondents intention to deliver unsized Squid. The Sale
Confirmation, received by Claimant on 29 May 2008, indicated the Squid would come from the
2007/2008 Catch [Cl. Ex. 4]. When the Contract was formed in May 2008, Claimant knew it
was still early in the season for harvesting illex danubecus [Clar. 27]. Since delivery of the Squid
would occur mid-way through the 2008 season, Claimant knew or could not have been unaware
that squid from the 2008 catch would be younger and weigh less than 100 g [St. of Def. 13]. As a
19
Should the Tribunal find that Claimant was not aware of Respondents intention to deliver
unsized squid, an objective interpretation of the Contract under art. 8(2) CISG yields the same
result. Respondents intention should prevail if it would have been understood by a reasonable
business person in the same industry and position as Claimant [Farnsworth in Bianca/Bonell 98;
Schmidt-Kessel in Schlechtriem/Schwenzer 2005 119-121; LG Feb 1996].
65.
A reasonable interpretation of the Parties negotiations indicates agreement that the Squid were
to be unsized. In its 29 May 2008 Sale Confirmation, Respondent indicated that the Squid would
come from the 2007/2008 Catch [Cl. Ex. 4]. As indicated above [see supra 63], this meant that
the catch would include younger, smaller squid caught early in the 2008 season. Claimant is an
experienced participant in the fisheries trade [St. of Def. 16; Clar. 27]. In the face of
Respondents stated intent to supply squid caught early in the 2008 season, a reasonable business
person in Claimants position would understand that the Contract was for unsized squid.
66.
Furthermore, there are no weight requirements in either the Order Form or Sale Confirmation
[Cl. Ex. 3; Cl. Ex. 4]. The CISG does not preclude extrinsic information from becoming a term
of the Contract; however, a reasonable and experienced purchaser in the fishing industry would
indicate the basic requirements of the fish it wanted in its orderincluding size. It is
unreasonable to bind the Parties to a requirement that is not found in either the Order Form or
the Sale Confirmation. Accordingly, the Tribunal should find that a reasonable business person
in Claimants position would understand the Contract was for unsized squid.
II. THE SQUID
WERE FIT FOR THE PURPOSES FOR WHICH GOODS OF THE SAME
DESCRIPTION WOULD ORDINARILY BE USED.
67.
Claimant alleges that the Squid could not be used as bait and therefore were not fit for the
purposes for which [squid] of the same description would ordinarily be used [Cl. Memo. 37; art.
35(2)(a) CISG]. This argument must fail. The ordinary use for squid as described in the Contract
is human consumption [Cl. Ex. 3; Cl. Ex. 4], and the squid were fit for this purpose [Cl. Ex. 8].
68.
The goods must meet the reasonable expectations in the industry for goods of that description
[Schwenzer in Schlechtriem/Schwenzer 2005 417; Rijn Blend Case (Netherlands 2002)]. While the goods
must be fit for all purposes for which goods of the same description are ordinarily used [Henschel
2005 194; Sec. Comm. art. 35], the scope of the ordinary purposes is limited by the description of
20
Furthermore, art. 35(2)(a) CISG is primarily concerned with the commercial salability of the
goods, namely that they are capable of being re-sold without significant price abatement
[Schwenzer in Schlechtriem/Schwenzer 2005 416; Housewares v. SEB (New Zealand 2003)]. Claimant resold 20 MT of the Squid through Reliable Trading House; however, there is no evidence
Claimant needed to reduce the price [Cl. Ex. 10 15]. Therefore, the Squid were fit for all the
purposes for which goods of that description would ordinarily be used.
III. THE SQUID WERE FIT FOR ANY PARTICULAR PURPOSE MADE KNOWN TO RESPONDENT.
70.
Claimant alleges that the Contract required squid fit to be used as bait [Cl. Memo. 41]; this claim
is unfounded. Under art. 35(2)(b) CISG, Claimant must demonstrate that it expressly or
impliedly made the particular purposethat the Squid were to be used as bait for long-liners
known to Respondent at the time of the conclusion of the Contract [A], and that Claimant
reasonably relied on Respondents skill and judgment [B]. Neither criterion is satisfied here.
A. Claimant did not expressly or impliedly make known to Respondent at the
conclusion of the Contract that the Squid were to be used as bait for longliners.
71.
If the buyer communicates to the seller a particular purpose for the goods, and the seller does
not object, the seller must deliver goods fit for that purpose [Rheinland v. Altarex (Italy 2000); Sec.
Comm. art. 35; Schwenzer in Schlechtriem/Schwenzer 2005 421]. A buyer must communicate the
particular purpose in a crystal clear and recognizable way, particularly where the goods have
multiple uses [Rijn Blend Case (Netherlands 2002); LG Feb 2002; LG May 2000]. This requirement
gives a seller the opportunity to decline the contract and avoid liability if it cannot deliver suitable
goods [LG May 2000; Schmitz-Werke v. Rockland (USA 2002); EP v. FP (Finland 1995);
Enderlein/Maskow 144].
21
Here, the only particular purpose Claimant made known to Respondent was that the Squid be fit
for human consumption, which it was [Cl. Ex. 3; Cl. Ex. 8]. Claimant argues that it made known
to Respondent that the Squid would be used as bait [Cl. Memo. 41]. However, Claimant did not
make this purpose known in a crystal clear and recognizable way. Claimant mentioned bait
to Respondent only oncein a standard circular delivered to several fish suppliers [Cl. Ex. 1;
Req. for Arb. 11]. Throughout the negotiations, including at a face-to-face meeting, Claimant
never mentioned bait to Respondent [Cl. Ex. 10 6; St. of Def. 10]. In fact, the next time
Claimant used the term bait was 29 July 2008, 61 days after the conclusion of the Contract,
and only after it had trouble re-selling the Squid [Cl. Ex. 5]. This sole, fleeting mention of bait
does not meet the standard set out in art. 35(2)(b) CISG.
B. Even if Claimant made known the Squid would be used as bait, it did not
reasonably rely on Respondents skill and judgment.
73.
Even if Claimant made known that the Squid would be used as bait, it never relied on
Respondents skill and judgment to select appropriate goods. There is no reliance when the
buyer participates in the selection or inspection of the goods prior to purchase [Enderlein/Maskow
146; Schwenzer in Schlechtriem/Schwenzer 2005 422]. Here, Claimant not only participated in the
selection process, but also inspected the goods prior to the conclusion of the Contract. On 17
May 2008 Respondents sales agent, Mr. Weeg, brought squid to Claimant labelled illex danubecus
2007 [Clar. 32]. After independently examining the squid, Claimant placed its order and asked
for illex danubecus by name [Cl. Ex. 3]. Evidently, Claimant was satisfied that this species would
be suitable for its purpose.
74.
Where the seller recommends specific goods in response to a clearly communicated purpose,
reliance on the seller is presumed [Manipulados v. Sugem (Spain 1997); Schmitz-Werke v. Rockland
(USA 2002)]. However, when Respondent brought illex danubecus to Claimant on 17 May 2008,
Respondent never recommended the squid would be suitable for anything, let alone bait [Clar.
25]. Similarly, there is no evidence Respondent made a recommendation at any other time. Since
Respondent made no recommendation to Claimant, there can be no presumption of reliance.
75.
Even if the Tribunal finds that Claimant relied on Respondent, the reliance was unreasonable.
The standard for reasonableness is the conduct expected of a reasonably prudent person in the
same position as Claimant [Magnus/Haberfellner; Henschel 2005 236]. Moreover, a seller can only be
relied upon if it is more skilled than the buyer in relevant area of expertise [LG Dec 2006]. Here,
Claimant had at least as much expertise as Respondent. Claimant is a specialist; it has been
supplying bait to long-liners in Mediterraneo for over 20 years [Req. for Arb. 6]. In contrast,
Respondent is a generalist; it supplies squid for both bait and human consumption both in
22
In sum, Claimant did not rely on Respondent and even if it did, its reliance was unreasonable. As
a result, art. 35(2)(b) CISG does not apply.
IV. RESPONDENT DID NOT BREACH UNDER ART. 35(2)(C) CISG.
77.
Art. 35(2)(c) CISG creates an implied warranty that when a seller holds out goods as a sample
to a buyer; the goods must possess the qualities of the sample [Schwenzer in
Schlechtriem/Schwenzer 2010 582]. However, this provision does not apply where the parties have
agreed otherwise [art. 35(2) CISG; Schwenzer in Schlechtriem 1998 278]. On 17 May 2008,
Respondent showed Claimant squid it was providing to other buyers in Mediterraneo [St. of Def.
10]. This did not create an implied warranty because the Parties agreed otherwise. Claimant
knew Respondent did not intend the Contract to be a sale by sample [A], and a reasonable
business person would have understood the same [B]. In the alternative, if the Contract was
concluded on the basis of a sample, Respondent informed Claimant that the bulk of the Squid
would deviate from the qualities of the sample [C].
A. Claimant knew that Respondent did not intend the Contract to be a sale by
sample.
78.
Although squid was shown to Claimant on 17 May 2008 [St. of Def. 10], prior to the conclusion
of the Contract, this did not transform the Parties agreement into a sale by sample. Art. 8(1)
CISG instructs tribunals to interpret contracts based on the subjective intention of a party, where
the other party knew or could not have been unaware of that intention [Honnold 118]. Here,
Respondents Sale Confirmation indicated that it did not intend to be bound by any qualities of
the squid shown to Claimant on 17 May 2008.
79.
On 29 May 2008, Respondent sent Claimant the Sale Confirmation. It described the Squid as
coming from the 2007/2008 Catch [Cl. Ex. 4]. This demonstrated Respondents intention to
deliver squid from both the 2007 and 2008 seasons. In contrast, the squid shown to Claimant on
17 May 2008 were exclusively from the 2007 season [Clar. 32]. The Sale Confirmation also
indicated that the quality of the Squid would be Grade A [Cl. Ex. 4]. Although the squid
shown to Claimant may have exhibited some of the attributes of Grade A squid, they were never
certified as such [Cl. Ex. 10 10]. On the same day that Respondent sent the Sale Confirmation,
Claimant sent Respondent a letter demonstrating it had thoroughly read the Sale Confirmation
and did not object to its contents (i.e., Claimant noted the presence of the arbitration clause)
[Resp. Ex. 2]. Accordingly, on 29 May 2008, Claimant knew that Respondent did not intend to be
23
A reasonable business person would understand that Respondent did not intend to contract on
the basis of a sample. Where doubt exists concerning a partys intention, or the other partys
awareness of that intention, statements should be interpreted according to the understanding of
a reasonable person in the circumstances [art. 8(2) CISG; Honnold 118]. On 17 May 2008, Mr.
Weeg, Respondents representative, delivered squid to Claimant [St. of Def. 10]. During Mr.
Weegs visit, there was little time for discussion between the Parties [Clar. 25]. Moreover, Mr.
Weeg departed before Claimant defrosted or examined the carton of squid [St. of Def. 10]. In
contrast, the Sale Confirmation provided to Claimant on 29 May 2008, included a
comprehensive description of the squid to be delivered [Cl. Ex. 4]. It described their quantity,
price, quality and catch season, among other characteristics [Cl. Ex. 4]. A reasonable person
presented with the description in the Sale Confirmation would know that Respondent did not
intend to be bound by squid haphazardly shown weeks earlier.
81.
A reasonable person would also understand Respondent did not intend a sale by sample because
of the term 2007/2008 Catch in the Sale Confirmation [Cl. Ex. 4]. The only reasonable
interpretation of this term is that some of the squid delivered would be caught in 2007 and some
in 2008. Experienced fishing firms know that squid grow throughout the catching season, and
that illex danubecus increase in size between April and September [Clar. 27; St. of Def 16]. Indeed,
Claimant was aware of these facts [Clar. 27]. A reasonable person in Claimants position would
have known that a delivery of squid from the 2008 catch in the middle of the 2008 growing
season would contain young squid, unlikely to weigh at least 100 g. In contrast, the squid shown
to Claimant weighed on average 130 g [Cl. Ex. 10 7]. Thus, a reasonable person presented with
the Sale Confirmation would know Respondent did not intend to contract on the basis of the
squid shown 17 May 2008 and so art. 35(2)(c) CISG does not apply.
24
Even if the Contract constituted a sale by sample, concluded on the basis of the squid shown to
Claimant by Mr. Weeg, Respondent informed Claimant the goods would deviate from the
sample. Where a contract is negotiated on the basis of a sample but the seller indicates that the
qualities of the goods will deviate in certain respects, the seller is only bound to the qualities
indicated [Sec. Comm. art. 35 11]. Here, the squid provided on 17 May 2008 were illex danubecus
2007, meaning squid caught in 2007 [Clar. 32]. The squid also happened to weigh 100-150 g [Cl.
Ex. 10 7]. However, the Sale Confirmation indicated the Squid would come from both the 2007
and 2008 catches [Cl. Ex. 4]. Thus, the Sale Confirmation notified Claimant that the qualities of
the bulk of the Squid would deviate from those in the sample: some would come from 2008.
Squid from the bulk that were caught in 2007 did in fact match the characteristics of the sample;
only those caught in 2008 weighed less than 100 g [Cl. Ex. 8]. Accordingly, only squid caught in
2008 deviated from the Sample, just as Respondent indicated prior to the conclusion of the
Contract. Therefore, Respondent is not liable under art. 35(2)(c) CISG.
V. EVEN IF THE SQUID DID NOT CONFORM UNDER ART. 35(2), ART. 35(3) CISG EXCLUDES
RESPONDENTS LIABILITY.
83.
Even if the Tribunal finds that the Squid did not conform to the Contract under any or all of the
subsections of art. 35(2) CISG, Respondent is not liable. A seller is not liable for nonconformities under any provision of art. 35(2) if at the time of conclusion of the contract the
buyer knew or could not have been unaware of such lack of conformity [art. 35(3) CISG].
Claimant could not have been unaware that the Squid would be unfit for use as bait.
Respondents Sale Confirmation indicated that a portion of the Squid would come from the 2008
catch [Cl. Ex. 4]. Claimant must have known that squid caught early in the 2008 season would
weigh less than 100 g. Moreover, Claimant understood that the Squid would be delivered as soon
as possible after the Contract was concluded [Cl. Ex. 10 10]. Accordingly, Claimant could not
have been unaware the 2008 squid would be weigh less than 100 g. Therefore, even if the weight
of the Squid rendered them non-conforming under art. 35(2) CISG, Claimant could not have
been unaware that Respondent planned to deliver non-conforming squid. For these reasons, art.
35(3) CISG excluded Respondents liability.
PART FIVE: CLAIMANT CANNOT RELY ON THE ALLEGED NONCONFORMITY.
84.
Art. 39(1) CISG requires the buyer to notify the seller of a non-conformity within a reasonable
time after it knew or ought to have known of the non-conformity. A buyer who fails to notify
25
85.
Claimant notified Respondent of the alleged non-conformity on 16 August 2008 [Cl. Ex. 8; Cl.
Ex. 9], after the expiry of the notice period under the CISG. The time when a buyer ought to
have discovered a lack of conformity is determined by art. 38(1) CISG. This provision requires
a buyer to reasonably examine the goods within as short a period as is practicable [art. 38(1)
CISG]. Here, Claimant failed to perform a reasonable examination within as short a period as is
practicable after taking delivery and, accordingly, failed to discover the alleged non-conformity
when it ought to have done so [A]. By notifying Respondent on 16 August 2008, 45 days after it
ought to have discovered the non-conformity, it failed to provide notice in accordance with art.
39(1) CISG [B]. Even if Claimant gave notice of the non-conformity on 29 July 2008, this was
still not within a reasonable time [C].
A. A reasonable examination of the goods, conducted on or around 1 July 2008,
would have discovered the alleged non-conformity.
86.
Claimant examined the goods shortly after taking delivery on 1 July 2008. However, this
examination unreasonably failed to discover the non-conformity. The reasonableness of a
buyers examination of goods is determined according to the circumstances [Schwenzer in
Schlechtriem/Schwenzer 2010 612; Bianca in Bianca/Bonell 298]. It need not be a complex
technological analysis [Bianca in Bianca/Bonell 297], but must be thorough and professional
[OGH Aug 1999], according to prevailing industry standards.
87.
Respondent packed the Squid into approximately 20,000 cartons and labelled the cartons by
catch season [Cl. Ex. 4; Clar. 32]. Respondent organized the cartons into pallets and placed the
pallets into 12 shipping containers [Cl. Ex. 10 9]. When the Squid arrived, Claimant opened
only two of the 12 containers. From those, Claimant selected just 20 cartons for weighingall of
which were labelled illex danubecus 2007 [Cl. Ex. 10 10; Clar. 32]. Of these 20, Claimant
defrosted only five [Cl. Ex. 10 9-10]. This level of scrutiny was unreasonable in the
circumstances. Had Claimant reasonably examined the Squid, it would have easily identified the
26
Claimant failed to conduct a reasonable sampling and thus did not conduct a reasonable
examination [art. 38(1) CISG]. Where large quantities of goods are delivered, it is reasonable for
buyers to examine a sample of the goods. However, the sample must be random and statistically
representative of the bulk of the goods [Schwenzer in Schlechtriem 1998 304; Schwenzer in
Schlechtriem/Schwenzer 2010 613; Crudex v. Landmark (Finland 2004)]. Here, Claimant did examine
the goods by inspecting a sample of the Squid on 1 July 2008. However, this sample was
unreasonable because it was too small [a] and not randomly selected [b]. A reasonable sampling
would have identified the alleged non-conformity on 1 July 2008.
89.
90.
Even if Claimant had defrosted all 20 cartons, the sample would still have been too small to
constitute a thorough and professional examination. TGT Laboratories, a firm that specializes in
scientific reports of this kind, examined a sample of 120 cartons [Cl. Ex. 8]. Its sampling
discovered the alleged non-conformity [Cl. Ex. 9]. Had Claimant selected a statistically
representative sample, similar to TGT Laboratories, it would have discovered the nonconformity [Cl. Ex. 8]. By defrosting a sample representing only 0.025% of the Squid, Claimant
failed to perform a reasonable sampling.
91.
92.
In addition, Claimant acted unreasonably by sampling only cartons labelled illex danubecus
2007instead of cartons labelled 2007 and 2008. A case concerning the delivery of frozen
27
Claimant failed to reasonably examine the Squid by not exercising the degree of diligence
required in the circumstances. The adequacy of an examination under art. 38(1) CISG depends
on the circumstances of the case [DiMatteo 362]. Here, two circumstances compelled a rigorous
examination. First, where a buyer has previously purchased non-conforming goods from a seller,
subsequent purchases require a more diligent examination [Ferrari 192; LG Aug 1989]. Although
the Contract was the first transaction between the Parties, Claimant knew that Danubian squid
were not consistent in quality [Req. for Arb. 11-12; Cl. Ex. 10 4]. Given that knowledge,
Claimant was required to perform an especially diligent examination. Second, perishable goods
for human consumption have been held to require rigorous examination [Schwenzer in
Schlechtriem/Schwenzer 2010 613; Kingfisher v. Comercial (Spain 2007)]. Here, the Contract required
the Squid be fit for human consumption [Cl. Ex. 4], a requirement on which Claimant insisted.
However, far from being especially diligent, Claimant examined only squid from the 2007 catch,
and defrosted only 0.025%, or USD 80 worth of squid, from a delivery worth USD 320,000 [Cl.
Ex. 4]. This examination cannot be considered diligent. By failing to examine a reasonable
sample or exercise the requisite degree of diligence, Claimant failed to discover the nonconformity when it ought to have done so.
B. Claimant did not give notice of the non-conformity until 16 August 2008,
which was not within a reasonable time under art. 39(1) CISG.
94.
Claimant alleges that it gave notice of the non-conformity on 29 July 2008 [Cl. Memo. 70].
However, Claimant did not provide notice sufficient to satisfy art. 39(1) CISG until 16 August
2008, after the reasonable notice period had expired. Art. 39(1) CISG requires the buyer to
provide the seller notice, specifying the nature of the lack of conformity within a reasonable
time after the non-conformity was or ought to have been discovered. Claimant did not give
notice specifying the nature of the non-conformity until 16 August 2008 [1]. Notice 45 days after
28
Claimant did not properly communicate the nature of the alleged non-conformity to Respondent
until 16 August 2008. To constitute notice specifying the nature of the non-conformity [art.
39(1) CISG], the notice must contain sufficient detail for the seller to know what would be
necessary to cure the deficiency [Honnold 279; DiMatteo 368; Schwenzer in Schlechtriem/Schwenzer
2010 609]. Notice merely stating the goods are of defective quality does not suffice [Schwenzer
in Schlechtriem/Schwenzer 2010 626; LG Jul 1998]. Claimant argues that its 29 July 2008 letter
constituted proper notice [Cl. Mem. 70]. In that letter, Claimant stated that the squid was hardly
useable as bait [Cl. Ex. 5]. This fails to meet the required degree of detail [a]. Claimants notice
came only in its 16 August 2008 letter, which described the Squids size range and TGT
Laboratories inspection results [b].
96.
a. Claimants 29 July 2008 letter did not convey sufficient detail for
Respondent to know what would be necessary to cure the nonconformity.
The 29 July 2008 letter described the Squid only as hardly useable as bait [Cl. Ex. 5]. This
statement did not convey sufficient detail for Respondent to know what steps were necessary to
cure the alleged lack of conformity. First, hardly is a vague word capable of several meanings.
Its definitions include: barely, only just; almost not; not quite... [Oxford 1112]. Squid which is
barely, only just or almost not useable implies a less degree of non-conformity than Squid
which is not quite useable. Squid which is almost not useable implies that the Squid could be
used as intended, albeit with difficulty. Without further clarification, Respondent cannot
reasonably be expected to have understood the nature of the non-conformity, or the appropriate
cureif one was even required.
97.
Even if hardly means completely unusable, squid can be unusable as bait for a variety of
reasons, most of them unrelated to the alleged non-conformity. For example, long-line bait can
be too large or show signs of decay [Cl. Ex. 7 4-7]. Accordingly, based only on hardly useable
as bait, Respondent could not know whether curing the non-conformity would require reshipping squid from earlier in the season, re-shipping squid from later in the season, or reshipping squid using different freezing and packing methods. Moreover, hardly usable as bait
could also mean that the fish Mediterraneo long-liners target are not attracted to illex danubecus, in
which case a completely different species would be required. In these proceedings, Claimant
argues the Squid did not conform because it was too small [Req. for Arb. 18]. However,
29
98.
99.
Forty-five days passed from the date Claimant ought to have discovered the non-conformity to
the date it notified Respondent. This was beyond a reasonable time. There are two approaches to
determine the length of a reasonable time under art. 39(1) CISG. The most widely used is a
flexible analysis with regard to the circumstances of the case [Ferrari 193; DiMatteo 365;
Honnold 280]. However, some courts, particularly in Germany, apply a presumptive notice period
of one month [Schwenzer 2007; BGH Nov 1999]. Under either the flexible approach [a], or the
presumptive approach [b], Claimant failed to provide notice within a reasonable time.
SQUID
TO
111. Claimant failed to exercise its experience and ingenuity in its attempts to resell the Squid [Req. for
Arb. 30]. Mitigation often includes the profitable resale of goods [Knapp in Bianca/Bonell 559].
Here, Claimant failed to take reasonable measures to resell the Squid.
112. First, Claimant made only half-hearted attempts to resell the Squid at a discount to long-liners in
Mediterraneo. Although Claimant argues there was a general reluctance to purchase the Squid
at a discount [Cl. Ex. 10 14; Req. for Arb. 19-20], it has adduced no evidence showing it actually
solicited offers or attempted negotiations. An experienced long-line supplier, such as Claimant,
ought to be aware of discount schemes capable of selling some of the Squid to long-liners
despite reluctance.
33
34
116. Claimant is not entitled to damages for loss of profit on the unsold squid because it did not seek
a substitute purchase. An injured party has an obligation to carry out a substitute transaction if
doing so would reduce a loss of profit [Schwenzer in Schlechtriem/Schwenzer 2010 1046]. If a
substitute transaction is too expensive or unavailable, the injured party must show the tribunal
the offers it solicited [OLG Sept 1998]. Here, Claimant made no attempt to secure a substitute
purchase; this was unreasonable. Regardless of the market for substitute bait, Claimant must at
least show the Tribunal the offers it solicited. Claimant presented no offers. Therefore, if the
Tribunal finds Claimant is entitled to damages, the damages should be almost entirely reduced
because Claimant failed to mitigate its losses.
PRAYER FOR RELIEF
In light of the above submissions, Counsel respectfully requests that the Tribunal:
Find that Claimant is liable for any damages resulting from its breach of confidentiality;
Find Claimant failed to give Respondent notice within a reasonable time; and
(signed)
______________
______________
Benjamin Adelson
Vanessa Beamish
______________
______________
Lara Fitzgerald-Husek
Jack Maslen
20 January 2011
35