Post on 06-Mar-2018
EIGHTEENTH ANNUAL WILLEM C. VIS INTERNATIONAL
COMMERCIAL ARBITRATION MOOT
2010-2011
MEMORANDUM FOR CLAIMANT
Claimant Respondent
MEDITERRANEO TRAWLER SUPPLY SA 1 Harbour View Street
Capitol City, Mediterraneo
EQUATORIANA FISHING LTD 30 Seaview Terrace
Oceanside, Equatoriana
UNIVERSIDAD NACIONAL DE ASUNCIÓN
CÉSAR CAÑETE * FABRIZIO FRANCO * VERÓNICA FRANCO
SANTIAGO GÓMEZ * LORENA MERSÁN * MARCOS OTAZÚ
SEBASTIAN QUEVEDO * GUILLERMO SARUBBI * ALEJANDRA TABEL
In accordance with art. 75 of ‗The Rules‘, the UNA team for the 18th edition of the Willem C. Vis
International Commercial Arbitration Moot hereby certify that no person other than a student team
member participated in the writing of this memorandum.
TABLE OF CONTENTS
TABLE OF ABBREVIATIONS ..................................................................................I
TABLE OF AUTHORITIES ................................................................................. III
STATEMENT OF FACTS ........................................................................................1
SUMMARY OF ARGUMENT .................................................................................. 3
JURISDICTIONAL ARGUMENT ............................................................................. 5
I. THE ARBITRAL TRIBUNAL WAS CONSTITUTED IN ACCORDANCE WITH THE
ARBITRATION AGREEMENT AND THEREFORE HAS JURISDICTION OVER THE PRESENT
DISPUTE .............................................................................................................................. 5
A. The appointment process expressly established by the arbitration agreement was closely
followed ................................................................................................................................................................. 5
B. The CAM Rules regulate the arbitration procedure in all issues not specifically stipulated by the
parties ..................................................................................................................................................................... 6
i. The rules incorporated by reference in the arbitration agreement constitute the parties‘ real
intent .................................................................................................................................................................. 6
ii. The CAM rules have a gap-filling function with respect to aspects of the procedure that
parties have not explicitly settled .................................................................................................................. 7
iii. The parties did not expressly exclude the application of any of the provision of the CAM
Rules .................................................................................................................................................................. 7
C. The Rules of the Chamber of Arbitration of Milan were strictly complied with ............................. 7
i. The Arbitral Council did not confirm Mr. Y‘s appointment pursuant to art. 18(4) CAM Rules
8
1. The facts disclosed by Mr. Y objectively imply a lack of independence ................................... 8
2. According to the IBA Guidelines, disclosed facts fall under the scope of conflict of
interest; however, even if such facts are deemed to be waivable, the IBA Guidelines are not
binding .......................................................................................................................................................... 9
3. The Arbitral Council has the authority to decide whether or not the arbitrator shall be
confirmed ...................................................................................................................................................10
ii. The same appointing-authority re-affirmed the appointment of Mr. Malcolm Y, who later on,
was again not confirmed by the Arbitral Council under the same circumstances ..............................11
iii. Mr. Horace Z was appointed as chairman by the Arbitral Council in the light of the art. 20(3)
CAM Rules......................................................................................................................................................11
ARGUMENT ON THE MERITS ............................................................................ 12
II. RESPONDENT FAILED TO DELIVER CONFORMING SQUID IN COMPLIANCE WITH
ART. 35 CISG ................................................................................................................... 12
A. RESPONDENT breached the contract in the light of Art. 35(1) CISG ........................................12
i. The contract provided that each squid be between 100 and 150 g ..............................................12
1. In the light of Art. 8(1) CISG, the contract required 100-150 g squid ....................................12
2. In the light of Art. 8(2) CISG, the contract required 100-150 g squid as well .......................13
3. International trade usages of the fishing industry bound RESPONDENT to deliver squid
in the 100-150 g range ..............................................................................................................................14
ii. Other phrases in the Order Form and Sale Confirmation cannot be interpreted as having
modified said quality requirement ...............................................................................................................14
1. ‗Certified fit for human consumption‘ .........................................................................................15
2. ‗2007/2008 Catch‘ ...........................................................................................................................16
iii. By delivering undersized squid, RESPONDENT failed to supply goods of the quality
required by the contract ................................................................................................................................17
B. Alternatively, RESPONDENT failed to abide by Art. 35(2) CISG .................................................17
i. The delivered squid were unfit for the purposes for which goods of the same description are
ordinarily used [Art. 35(2)(a) CISG] ...........................................................................................................17
1. The squid could not be used as bait ..............................................................................................17
2. RESPONDENT‘s squid could not be resold .............................................................................18
ii. The squid supplied were unfit for the particular purpose made known to RESPONDENT at
the time of the conclusion of the contract [Art. 35(2)(b) CISG] ...........................................................19
1. Particular purpose expressly made known to RESPONDENT .................................................19
2. Particular purpose impliedly made known to RESPONDENT .................................................19
3. RESPONDENT cannot be exempted under Art. 35(2)(b) CISG ..........................................19
iii. The squid did not possess the qualities of the squid RESPONDENT held out to
CLAIMANT as a sample [Art. 35(2)(c) CISG] .........................................................................................20
1. The delivered squid lacked a main feature of the squid in the sample ....................................20
2. RESPONDENT contends that the sample and the supplied squid were unsized ...............20
a. CLAIMANT ignored and could not have known that the sample it was shown was of
unsized squid .........................................................................................................................................20
b. The fact that the sample was of unsized squid is immaterial to the case ...........................21
III. THE EXAMINATION OF THE SQUID AND THE NOTICE OF NON-CONFORMITY WERE
CISG COMPLIANT ............................................................................................................. 21
A. The examination of the squid was made in accordance with Art. 38 CISG ...................................21
i. CLAIMANT examined the squid in accordance with Art. 38(1) CISG ......................................21
ii. Alternatively, the Mediterranean long-liners were swift in inspecting the squid after their
reception under Art. 38(3) CISG ................................................................................................................24
B. CLAIMANT notified RESPONDENT of the nature of the lack of conformity within a
reasonable time after it was discovered pursuant to Art. 39(1) CISG .......................................................25
C. If the Tribunal is to deem the examination or notification of non-conformity to have been
insufficient, RESPONDENT would still be liable for the lack of conformity under Art. 40 CISG ...26
IV. RESPONDENT’S FAILURE TO DELIVER CONFORMING GOODS AMOUNTED TO A
FUNDAMENTAL BREACH WHICH ALLOWED CLAIMANT TO AVOID THE CONTRACT
UNDER ARTS. 25 AND 49 CISG .......................................................................................... 26
A. RESPONDENT‘s contractual breach was fundamental under Art. 25 CISG ...............................26
i. The squid supplied were not of the required quality ......................................................................27
ii. The squid did not serve their ordinary purpose ..............................................................................27
iii. It was likely for the RESPONDENT to foresee that providing squid below 100-150 g would
cause a substantial detriment to CLAIMANT ..........................................................................................28
B. CLAIMANT is entitled to avoid the contract in its entirety according to Art. 51(2) CISG.........28
C. CLAIMANT complied with the obligations imposed by Art. 82 CISG ..........................................28
D. CLAIMANT declared the contract avoided according to Art. 26 CISG.........................................29
E. RESPONDENT cannot be exempted of responsibility under Art. 80 CISG ................................29
V. CLAIMANT TOOK ALL NECESSARY MEASURES TO MITIGATE LOSSES AND IS
ENTITLED TO DAMAGES UNDER ART. 45 CISG ................................................................. 30
A. CLAIMANT took all measures that were reasonable to mitigate the losses ..................................30
B. In any case, the burden of the proof of lack of mitigation lies on RESPONDENT, who must
provide detailed facts and supporting evidence ............................................................................................32
ARGUMENT ON THE MERITS OF THE COUNTERCLAIM ................................... 32
VI. CLAIMANT IS NOT LIABLE FOR DAMAGES UNDER A CONFIDENTIALITY DUTY ........ 33
A. There was no confidentiality agreement between the parties ............................................................33
i. Substantive provisions of the amended CAM Rules 2010 do not apply when they affect the
parties‘ rights ..................................................................................................................................................33
ii. Neither was there an implicit confidentiality agreement when the parties agreed to submit to
arbitration ........................................................................................................................................................33
B. Alternatively, if the Tribunal considers that there was a confidentiality agreement between the
parties, CLAIMANT made the proceedings public to protect its own rights..........................................34
REQUEST FOR RELIEF ..................................................................................... 35
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
I
TABLE OF ABBREVIATIONS
¶ / ¶ ¶ Paragraph / Paragraphs
ADR Alternative Dispute Resolution
Aff’d affirmed
Am. to St. of D. Amendment to the Statement of Defence
Art. / Arts. Article / Articles
CAM Chamber of Arbitration of Milan
CAM Code of Ethics Code of Ethics of Milan Arbitration Rules
CAM Rules Chamber of Arbitration of Milan Arbitration Rules, 2010
CAM Rules 2004 Chamber of Arbitration of Milan Arbitration Rules, 2004
Cass. 1e civ Première chambre civile ( First Civil Division of Court of Cassation)
CEO Chief Executive Officer
CIETAC China International Economic and Trade Arbitration Commission
CISG United Nations Convention on Contracts for the International Sales of Goods, Vienna, 1980
Cl. Ex. Claimant‘s Exhibit
CLAIMANT Mediterraneo Trawler Supply SA
CLOUT Case Law on UNICTRAL Texts
Corp. Corporation
e.g. exemplum gratia (for example)
ed / eds editor/editors
ed. Edition
F. Supp Federal Supplement (District Court Reports)
GmbH Gesellschaft mit beschränkter Haftung (Company with limited liability)
i.e. id est (that is)
IBA International Bar Association
IBA Guidelines IBA Guidelines on Conflicts of Interest in International Arbitration, 2004
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
II
ICC International Chamber of Commerce
Inc. Incorporated
Ltd. Limited
MAL UNCITRAL Model Law on International Commercial Arbitration 1985 with amendments as adopted 2006
NAI Netherlands Arbitration Institute
No. Number
NYC New York Convention-Convention on the Recognition and Enforcement of Foreign Arbitral Awards
Obg. Obergericht (Regional Court of Appeals)
OG Oberster Gerichtshof (Supreme Court)
OLG Oberlandesgericht (Provincial Court of Appeal)
p. / pp. page / pages
PO Procedural Order
R. for A. Request for Arbitration
Resp. Ex. Respondent‘s Exhibit
RESPONDENT Equatoriana Fishing Ltd
Rev. Arb. Revue de l‘arbitrage, France
S.p.A. Società per azioni
sec. section
St. of D. Statement of Defence
U.K. United Kingdom
UN United Nations
UNCITRAL United Nations Commission on International Trade Law
UNIDROIT International Institute for the Unification of Private Law
v. versus (against)
WIPO World Intellectual Property Organization
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
III
TABLE OF AUTHORITIES
ABBREVIATION FULL CITATION CITED IN
CONVENTIONS AND LAWS
CISG United Nations Convention on Contracts for the
International Sale of Goods, Vienna, 1980
Passim
NY Convention Convention on the Recognition and Enforcement of Foreign Arbitral
Awards, New York, 1958
23
MAL UNCITRAL Model Law on International Commercial Arbitration,
1985. With amendments adopted in 2006.
Passim
RULES AND GUIDELINES
CAM Rules 2004 Arbitration Rules of the Chamber of Arbitration of Milan (2004) 170
CAM Rules Arbitration Rules of the Chamber of Arbitration of Milan (2010) Passim
CAM Code of Ethics Code of Ethics of the Chamber of Arbitration of Milan 32
IBA Guidelines IBA Guidelines on Conflicts of Interest in International Arbitration, 2004 31, 38, 39, 40,
41
COMMENTARY
Babiak Andrew Babiak. Defining ‘Fundamental Breach’ Under the United
Nations Convention on Contracts for the International Sale of Goods. 6
Temple International and Comparative Law Journal (1992)
137,141, 146
Bianca Cesare M. Bianca. Article 35 in: Cesare M. Bianca and Michael J.
Bonell (eds.). Commentary on the International Sales Law: The 1980
Vienna Sales Convention (1987) Milan, Giuffrè (1987) Available at:
http://www.cisg.law.pace.edu/cisg/biblio/bianca-
bb35.html
91
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
IV
Bond Stephen Bond. The Selection of ICC Arbitration and the Requirement of
Independence in: W. Michael Reisman, W. Laurence Craig, William.
Park and Jan Paulsson. International Commercial Arbitration. Cases,
Materials, and Notes on the Resolution of International Business Disputes.
New York, The Foundation Press Inc. (1997)
36, 44
Born Gary Born. International Commercial Arbitration (3rd ed.). New York,
Kluwer Law International (2009)
18, 22, 171
Bühring-Uhle/
Kirchhoff/Scherer
Christian Bühring-Uhle, Lars Kirchhoff and Matthias Scherer.
Arbitration and Mediation in International Business. Kluwer Law
International (2006)
18, 24
B’Uhler Michael B'Uhler. Handbook of ICC Arbitration: Commentary,
Precedents, Materials. ICC Publishing, Inc. (2008)
34
CISG - AC Opinion
No. 2
CISG-AC Opinion no 2, Examination of the Goods and Notice of Non-
Conformity: Articles 38 and 39, 7 June 2004. Rapporteur: Professor
Eric E. Bergsten, Emeritus, Pace University School of Law, New
York (2004). Available at:
106, 118
Coppo Benedetta Coppo. The 2010 Revision of The Arbitration Rules of The
Chamber of Arbitration Of Milan in: 14 Vindobona Journal of
International Commercial Law and Arbitration (2010)
46, 167
Dinner David Dinner. The Effect of Procedural and Substantive Changes in the
Law in Ontario Bar Association’s Young Lawyers’ Division Newsletter,
Volume 14, No. 2 (2006)
166
Enderlein/Maskow Fritz Enderlein and Dietrich Maskow. International Sales Law:
United Nations Convention on Contracts for the International Sale of
Goods - Convention on the Limitation Period in the International Sale of
Goods. New York, Oceana Publications (1992)
146
Ferrario Pietro Ferrario. Challenge to Arbitrators: Where a Counsel and an
Arbitrator Share the Same Office - The Italian Perspective in: Michael
Moser and Dominique Hascher (eds). Journal of International
Arbitration, Volume 27, Issue 4. Kluwer Law International (2010)
36
Flechtner Harry M. Flechtner. Conformity of Goods, Third Party Claims, and
Buyer's Notice of Breach under the CISG. Working Paper 64.
University of Pittsburgh School of Law Working Paper Series
70
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
V
(2007)
Folsom/Gordon/
Spanogle
Ralph H. Folsom Michael W. Gordon and John A. Spanogle.
International Business Transactions: In a Nutshell (3rd ed.). West
Group Publishing (1988)
86
Fouchard/Gaillard/
Goldman
Emmanuel Gaillard and John Savage (eds.). Fouchard Gaillard,
Goldman on International Commercial Arbitration. The Hague, Kluwer
Law International (1999)
22, 23, 26, 27,
44, 169
Giovannini/Renna Teresa Giovannini and Valentina Renna. The Italian Experience of
Arbitration and the Arbitration Rules of the Chamber of Arbitration of
Milan: a Parallel View in: Vindobona Journal of International
Commercial Law and Arbitration. Viena (2010)
24
Grigera Horacio A. Grigera Naón. Factors to Consider in Choosing an Efficient
Arbitrator in: Albert Jan van den Berg (ed). Improving the Efficiency
of Arbitration and Awards: 40 Years of Application of the New York
Convention. ICCA Congress Series, Volume 9, Paris (1998).
Kluwer Law International (1999)
35
Henschel Rene Franz Henschel. Conformity of the goods: Interpreting or
supplementing Article 35 of the CISG by using the UNIDROIT
Principles of International Commercial Contracts and the Principles of
European Contract Law in: John Felemegas: An international approach
to the interpretation of the United Nations Convention on Contracts for the
International Sale of Goods (1980) as uniform sales law. New York,
Cambridge University Press (2007)
82
Honnold John O. Honnold. Uniform Law for International Sales under the 1980
United Nations Convention (3rd ed.). Kluwer Law International
(1999)
120, 122, 140,
143
Huber Peter Huber. Münchener Kommentar zum Bürgerlichen Gesetzbuch, Vol.
3 Schuldrecht. (4th ed.). Munich, Verlag C.H. Beck (2004)
157, 160
Huber/Mullis Peter Huber and Alastair Mullis. The CISG. A New Textbook for
Students and Practitioners. Munich, Sellier – European Law
Publishers (2007)
88, 93, 150
IBA Background For the Working Group: Otto L. O. de Witt Wijnen, Nathalie 36
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
VI
Voser and Neomi Rao. Background Information on the IBA Guidelines
on Conlicts of Interes in International Arbitration. Available at:
http://www.ibanet.org/Publications/publications_IBA_gui
des_and_free_materials.aspx
Illescas/Perales Rafael Illescas and Pilar Perales. Derecho mercantil Internacional. El
Derecho Uniforme. Madrid, Editorial Centro de Estudios Ramón
Areces, S.A. (2003)
104
Lew/Mitellis/Kröll Julian D. Lew, Loukas A. Mistellis and Stefan M. Kröll.
Comparative International Commercial Arbitration. The Hague,
Kluwer Law International (2003)
22, 34, 35
Lookofsky Joseph Lookofsky. The 1980 United Nations Convention on contracts
for the International Sale of Goods in: J. Herbots and R. Blanpain
(eds.). International Encyclopaedia of Law - Contracts. The Hague,
Kluwer Law International (2000) Available at:
http://www.cisg.law.pace.edu/cisg/biblio/loo35.html
57
Luttrell Sam Luttrell. Bias Challenges in International Commercial Arbitration:
The Need for a ‘Real Danger’ Test. Kluwer Law International (2009)
35
MAL Explanatory
Note
Explanatory Note by the UNCITRAL Secretariat on the 1985 Model
Law on International Commercial Arbitration as amended in 2006.
Available at:
http://www.uncitral.org/pdf/english/texts/arbitration/ml-
arb/07-86998_Ebook.pdf
22
Maley Kristian Maley. The Limits to the Conformity of Goods in the United
Nations Convention on Contracts for the International Sale of Goods in: 12
International Trade & Business Law Review (2009)
71, 82, 88, 89
Neumann Thomas Neumann. Features of Article 35 in the Vienna Convention;
Equivalence, Burden of Proof and Awarenes in: 11 Vindabona Journal of
International Commercial Law and Arbitration (2007)
53, 57
Pascale/Götz/Graf Pascale Gola, Claudia Götz Staehelin and Karin Graf (Eds.).
Institutional Arbitration: Tasks and Powers of Different Arbitration
Institutions. Sellier - European Law Publishers GmbH (2009)
24
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
VII
Paulsson Jan Paulsson. The Conduct of Arbitral Proceedings Under the Rules of
Arbitration Institutions; The WIPO Arbitration Rules in a Comparative
perspective in The Conference on Rules for Institutional Arbitration and
Mediation. 20 January 1995, Geneva, Switzerland
172
Redfern/Hunter I Alan Redfern and J. Martin H. Hunter. Law and practice of
international commercial arbitration (4th ed.) London, Sweet &
Maxwell (2004)
34
Redfern/Hunter II Nigel Blackaby, Constantine Partasides, Alan Redfern and J.
Martin H. Hunter. Redfern and Hunter on International Arbitration.
Oxford University Press (2009)
34
Sali I Rinaldo Sali. The New Arbitration Rules of the Arbitration Chamber of
Milan in: Albert Jan van den Berg. Yearbook Commercial Arbitration,
Volume 29. Kluwer Law International (2004)
30, 42, 45
Sali II Rinaldo Sali. Arbitrato Amministrato in: Digesto Delle Discipline
Privatistiche Sezione Civile, Volumen 1.
45
Sali III How to choose the ideal arbitrator: the institutional point of view (CAM).
Avaliable at: http://www.european-
arbitrators.org/EUROPEANARBITRATORS_FILES/CO
NTENT/Papers/RS%20How%20to%20choose%20the%2
0ideal%20arbitrator.pdf
45
Schlechtriem Peter Schlechtriem. Commentary on the UN Convention on the
International Sale of Goods (CISG) (ed.). Munich, Oxford University
Press (1998)
133, 134
St.John Sutton/
Gill/Gearing
David St John Sutton, Judith Gill & Matthew Gearing, Russell on
Arbitration (23rd ed.). Sweet & Maxwell (2007)
25
Tallon Dennis Tallon. Article 80 in: Cesare M. Bianca and Michael J.
Bonell (eds.). Commentary on the International Sales Law: The 1980
Vienna Sales Convention (1987) Milan, Giuffrè (1987)
144
Trakman Leon Trakman. The Impartiality and Independence of Arbitrators
Reconsidered. University of New South Wales Law Research Paper
No. 2007-25, International Arbitration Law Review. Sweet &
Maxwell, Vol. 10, Int.ALR, p. 999 (2007). Available at:
41
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
VIII
http://ssrn.com/abstract=981085
UNCITRAL Digest UNCITRAL Digest of Case Law on the United Nations Convention on
the International Sale of Goods. (2008) Available at:
http://www.uncitral.org/uncitral/en/case_law/digests/cisg
.html
145, 147, 149
Will Michael Will. Article 25 in: Cesare M. Bianca and Michael J.
Bonell (eds.). Commentary on the International Sales Law: The 1980
Vienna Sales Convention (1987) Milan, Giuffrè (1987)
138
Zeller Bruno Zeller.The Remedy of Fundamental Breach and the United
Nations Convention on the International Sale of Goods (CISG) - A
Principle Lacking Certainty? in: Cesare M. Bianca and Michael J.
Bonell (eds.). Commentary on the International Sales Law: The 1980
Vienna Sales Convention (1987) Milan, Giuffrè (1987)
131
COURTS DECISIONS
AUSTRALIA
Esso v. Plowman Esso Australia Resources Ltd. et consorts v. The Honourable
Sidney James Plowman (The Minister for Energy and Minerals),
7 April 1995
172
AUSTRIA
Marble slabs case Oberlandesgericht Graz. 6 R 194/95, 9 November 1995 93
OG 06/02/96 Oberster Gerichtshof, 6 February 1996 150, 160
Machines Case Oberster Gerichtshof, Ob 100/00w, 13 April 20002 70, 77
Frozen fish case Oberster Gerichtshof, 2Ob48/02a, 27 February 2003 77
ENGLAND
AMS v. TTMI AMS Shipping Ltd. of India v. TTMI Ltd. of England. The High
Court of England, EWHC 2238, 19 October 2005
41
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
IX
R v. Sussex Justices R v. Sussex Justices ex parte McCarthy, King‘s Bench Division 9
(1924)
37
FRANCE
Gas del Estado v.
Ecofisa
Gas del Estado v. Ecofisa and E.T.P.M., Paris Cour d‘Apel, 11
February 1988, 1989 REV. ARB. 683, and L. Zollinger's note,
aff'd, Cass. 1e civ., Dec. 4, 1990, E.T.P.M. and Ecofisa v. Gas del
Estado, 1991 REV. ARB. 81, and P. Fouchard's note.
27
GERMANY
OLG Hamm
22/09/92
Oberlandesgericht Hamm 22 September 1992, 160
Mussels case Bundesgerichtshof, VIII ZR 159/94, 8 March 1995 70
Sport Clothing case Lansgericht Landshut, 54 644/94, 5 April 1995 136
Spanish paprika case Landesgericht Ellwangen, 1 KfH O 32/95, 21 August 1995 144
OLG Hamburg
28/02/97
Oberlandesgericht Hamburg 28 February 1997 160
Acrylic blankets case Oberlandesgericht Koblenz, 2 U 31/96, 31 January 1997 147
OLG Köln
02/12/1999
Oberlandesgericht Köln, 440, 22 December 1999 23
Shoes case I Oberlandesgericht Frankfurt, U 164/90, 17 September 1991 134
Shoes case II Oberlandesgericht Düsseldorf, 14 January 1994 159
INDIA
Indian Oil Corp. v. Raja
Transport
Indian Oil Corporation Ltd. & Ors. v. M/s Raja Transport Ltd,
Supreme Court Of India, Civil Appeal No. 5760, 24 August 2009
27
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
X
ITALY
Nigi v. Inter Eltra
Kommerz
Nigi Agricoltura SRL (Italy) v. Inter Eltra Kommerz und
Produktion GmbH (Germany), Corte di Appello, Firenze, Case
No. 17312, 11 March 2004
24, 43
SINGAPORE
Cars & Cars v.
Volkswagen
Cars & Cars Pte Ltd v. Volkswagen AG, High Court, Case No.
960/2008,RA 136/2009, 19 October 2009
167
Black & Veatch v.
Jurong
Jurong Engineering Ltd. v. Black & Veatch, High Court of
Singapore, 26 November 2003
158
Navigator Investment v.
Acclaim Insurance
Navigator Investment Services Ltd v. Acclaim Insurance Brokers
Ltd, Court of Appeal, Case No. 5/2009, 29 September 2009
174
SPAIN
Paletas de Cerdo Case Corte de Apelación de Zaragoza, Appeal No. 553/2008, 31
March 2009
82
SWITZERLAND
Blood infusion devices
case
Obergericht Kantons Luzern, 8 January 1997 107, 125
Clothes case Obergericht Appenzell Ausserhoden, 18 August 2008 125
UNITED
KINGDOM
Bunge v. Kruse Bunge SA v. Kruse (1979) 1 Lloyd‘s Rep 279. 168
UNITED STATES
Delchi Carrier v. Rotorex Delchi Carrier, S.p.A. v. Rotorex Corp., U.S. Circuit Court of
Appeals, Nos. 185, 717, Dockets 95-7182, 95-7186, 6 December
1995
93, 135
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
XI
Mustang v. Plug-in
Storage
Mustang Enterprises, Inc. v. Plug-In Storage Systems, Inc., 874
F. Supp. 881, United States District Court for the Northern
District of Illinois (1995)
36
AWARDS
NAI No. 2319 NAI Final award on Case No. 2319, 15 October 2002 77
ICC No. 5713 ICC Final award on Case No. 5713 127
ICC No. 7585 ICC Final Award on Case No. 7585 159
ICC No. 11961 ICC Final Award on Case No. 11961 169
PTA Powder Case CIETAC Final award, 18 April 2008 137
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
1
STATEMENT OF FACTS
Mediterraneo Trawler Supply SA, hereafter CLAIMANT, is a Mediterranean corporation that
trades in seafood and that furnishes the fishing fleet in its domestic market with various kinds of
supplies. Equatoriana Fishing Ltd, hereafter RESPONDENT, is an Equatorianan firm that owns a
fishing fleet in the Pacific Ocean and that deals in fish products for both human consumption
and bait.
On 14 April 2008, CLAIMANT emailed RESPONDENT expressing an interest in
acquiring squid for resale as bait to long-liners based in Mediterraneo and invited it to make
offers of appropriate products.
On 18 April 2008, Mr Weeg, an authorised sales representative for RESPONDENT,
indicated to CLAIMANT that he could visit CLAIMANT‘s premises and produce a sample of
the Danubian squid they had supplied to another customer of theirs in Mediterraneo.
On or around 17 May 2008, Mr Weeg presented CLAIMANT with the sample stating
that it was representative of the squid on offer. The sample consisted of one frozen carton
labelled ‗Illex Danubecus 2007‘ weighing 10 kg. After Mr Weeg‘s departure, CLAIMANT
inspected the sample: the carton was thawed and the individual squid were weighed. Almost all
pieces fell within the range of 100-150 g. CLAIMANT showed the sample to its customers who
all found the squid to be suitable to their needs.
On 29 May 2008, RESPONDENT received a purchase order from CLAIMANT for 200
tonnes of illex danubecus ‗[a]s per sample inspected‘ and ‗[c]ertified fit for human consumption‘.
In the accompanying email, CLAIMANT underscored that it was pleased that virtually all squid
in the sample weighed between 100 and 150 g and pointed out that this is the weight range that
gives its customers the best results. On the same date, RESPONDENT confirmed the order.
RESPONDENT‘s Sale Confirmation included an arbitration agreement and provided that the
squid would be from the 2007 and 2008 catches. Later in the day, CLAIMANT acknowledged
receipt of the sale confirmation.
The order was delivered on 1 July 2008 in twelve containers that arrived at
CLAIMANT‘s headquarters in several instalments during the day. CLAIMANT inspected a
random selection of 20 cartons from the two containers that arrived first. All cartons weighed the
required 10 kg and five were defrosted for visual inspection. CLAIMANT found that the squid
were of the expected quality and weight.
On 29 July 2008, RESPONDENT was informed that two of the vessels that had
acquired the Danubian squid reported that it was hardly usable as bait. Shortly afterwards,
RESPONDENT instructed CLAIMANT to have the squid inspected by a testing agency.
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
2
On 16 August 2008, CLAIMANT notified RESPONDENT that the squid were not in
conformity with the contract. The enclosed report by TGT Laboratories showed that a great
proportion of the squid did not fall within the 100-150 g bracket. CLAIMANT declared the
contract avoided and urged RESPONDENT to instruct it what to do with the goods. On 18
August 2008, RESPONDENT denied all responsibility alleging that nothing in the negotiations
provided that the squid would be exclusively used as bait and that the squid conformed with the
contract.
All of the five vessels CLAIMANT had sold RESPONDENT‘s Danubian squid to
returned practically their entire purchases and had to be reimbursed. CLAIMANT made multiple
attempts to sell the squid for RESPONDENT‘s account both in Mediterraneo and abroad to no
avail. After several and persistent appeals to reason asking RESPONDENT to take responsibility
for its contractual breach, CLAIMANT was forced to dispose of the squid as they were reaching
a point where one could no longer be assured that they had not gone off.
On 20 May 2010, CLAIMANT lodged a request for arbitration with the Chamber of
Arbitration of Milan (hereafter CAM) pursuant to the arbitration agreement contained in the sale
confirmation and appointed Ms. Arbitrator 1 to the arbitral tribunal.
On 24 May 2010, Commercial Fishing Today, a specialised periodical, published an interview
in which CLAIMANT‘s CEO discussed the arbitration proceedings his firm had commenced
against RESPONDENT.
On 27 May 2010, RESPONDENT received CLAIMANT‘s request for arbitration and
filed its statement of defence on 24 June 2010 appointing Prof. Arbitrator 2 to the tribunal.
On 15 July 2010 the CAM and the parties were notified of the co-arbitrators‘
determination to appoint Mr. Malcolm Y to the chair of the arbitral tribunal, in accordance with
the procedure agreed on in the arbitration agreement.
On 19 July 2010, Mr. Malcolm Y accepted his appointment and submitted his statement
of independence. Over 26-27 July 2010, both parties explicitly waived their right to object to Mr.
Malcolm Y‘s appointment. On 2 August 2010, the CAM Secretariat disclosed that the Arbitral
Council of the CAM rejected Mr. Y‘s appointment. The co-arbitrators were invited to appoint a
substitute chairperson.
On 13 August 2010, the CAM Secretariat is informed of the co-arbitrators‘ decision to
reaffirm Mr. Y‘s appointment as president. On 23 August 2010, the Arbitral Council of the CAM
rejects Mr. Y‘s second appointment and appoints Mr. Horace Z to the tribunal. This news was
broken to the parties and co-arbitrators on 26 August 2010.
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
3
On 10 September 2010, the CAM Secretariat‘s confirmation of Mr. Horace Z‘s
appointment was relayed to the parties and co-arbitrators. On 24 September 2010,
RESPONDENT lodged an amendment to its statement of defence contesting the jurisdiction of
the Tribunal on the grounds that the arbitration agreement provided that the party-appointed
arbitrators shall appoint the presiding arbitrator.
SUMMARY OF ARGUMENT
I. THE ARBITRAL TRIBUNAL WAS CONSTITUTED IN ACCORDANCE WITH THE
ARBITRATION AGREEMENT AND THEREFORE HAS JURISDICTION OVER THE PRESENT
DISPUTE
1. The parties established the appointment process in the arbitration agreement in accordance
with the principle of party autonomy. This process was strictly followed since both parties
appointed the co-arbitrators and subsequently the co-arbitrators appointed Mr. Y as
chairman.
2. All other issues not specifically stipulated by the parties are covered by the CAM Rules as the
objective intention of the parties was that it so be. Moreover, the CAM Rules are intended to
cover all the procedural issues not expressly stipulated by the parties and none of its
provisions were excluded, neither expressly nor impliedly.
3. The CAM Rules were strictly complied with since, pursuant to Art. 18(4) CAM Rules, the
Arbitral Council did not confirm Mr. Y‘s appointment in relation to the submission of a
qualified statement of independence and again did not confirm him for a second time after he
was re-appointment by the co-arbitrators since there were no changes since the last non-
confirmation. Therefore and in the light of art. 20(3), the Arbitral Council appointed Mr. Z as
chairman.
II. RESPONDENT FAILED TO DELIVER CONFORMING SQUID IN COMPLIANCE WITH
ART. 35 CISG
4. In not delivering squid of the quality required by the contract, RESPONDENT failed in its
obligation to supply conforming goods under Art. 35(1) CISG. In view of all relevant
circumstances, either subjectively or objectively [Art. 8 CISG], the contract demanded that
each squid weigh 100-150 g. Trade usages of the fishing industry imposed the same duty on
RESPONDENT [Art. 9(2) CISG]. Neither the phrase ‗[c]ertified fit for human consumption‘
nor ‗2007/2008 Catch‘ modified the contract in this respect.
5. Alternatively, RESPONDENT fell short of the standards set in sec. (2) of Art. 35 CISG. The
delivery of squid unfit for use as bait and thus unsaleable constituted a breach of lit.(a). The
supply of goods inadequate for the particular purpose made known to RESPONDENT
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
4
amounted to a transgression of lit. (b) of which RESPONDENT cannot be exempted.
Finally, in delivering squid lacking the main feature of the squid in the sample,
RESPONDENT violated lit. (c).
III. THE EXAMINATION OF THE SQUID AND THE NOTICE OF NON-CONFORMITY WERE
CISG COMPLIANT
6. As the squid were carefully examined the minute they arrived, CLAIMANT inspected the
goods within as short a period as was practicable in the circumstances. After the successful
initial examination, CLAIMANT had no reason to proceed with the inspection. Alternatively,
as the goods were redispatched, the examination could be deferred until the sub-purchasers
reached the fishing grounds.
7. RESPONDENT was informed of the nature of the lack of conformity eighteen days after it
was discovered. This was a reasonable time under the circumstances.
8. Even if the examination and notification are deemed to have been untimely, CLAIMANT
would still be able to rely on the lack of conformity under Art. 40 CISG, as RESPONDENT
could not have ignored the facts that resulted in the lack of conformity and these facts were
not disclosed to CLAIMANT.
IV. RESPONDENT’S FAILURE TO DELIVER CONFORMING GOODS AMOUNTED TO A
FUNDAMENTAL BREACH WHICH ALLOWED CLAIMANT TO AVOID THE CONTRACT
UNDER ARTS. 25 AND 49 CISG
9. RESPONDENT‘s contractual breach was fundamental. By lacking the requisite qualities the
squid could not serve their purpose and thus substantially deprived CLAIMANT of what it
was entitled to expect under the contract. Consequently, CLAIMANT was allowed to avoid
the contract under to Arts. 49 and 51(2) CISG.
10. CLAIMANT preserved the right to declare the contract avoided because it took all measures
to return the squid in compliance with the obligations imposed by Art. 82 CISG.
11. CLAIMANT duly notified the avoidance of the contract to RESPONDENT on 18 August
2008 fulfilling its obligation to do so under Art. 26 CISG.
12. CLAIMANT is entitled to rely on RESPONDENT's failure to perform, because said failure
was not caused by an act or omission of CLAIMANT‘s regarding Art. 80.
V. CLAIMANT TOOK ALL NECESSARY MEASURES TO MITIGATE LOSSES AND IS
ENTITLED TO DAMAGES UNDER ART. 45 CISG
13. Despite the rejection of all Danubian squid by the long-liners of Mediterraneo and the lack of
a local market in which to sell the squid as seafood, by properly storing and conserving the
squid at RESPONDENT‘s disposition and furthermore striving to sell the squid at any
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
5
means and concretely achieving a sale of 10% of the lot, CLAIMANT acted in good faith and
took all reasonable actions at its reach to mitigate losses. CLAIMANT is therefore entitled to
damages under art. 45 (1) lit. (b) CISG.
14. In any case, the burden of the proof of the lack of mitigation lies on RESPONDENT who
must forward detailed facts and supporting evidence that the duty to mitigate was in fact
infringed.
VI. CLAIMANT NEITHER VIOLATED THE CAM RULES NOR OWED A DUTY OF
CONFIDENTIALITY AND IS THUS IS NOT LIABLE FOR DAMAGES
15. The parties did not owe to each other a duty of confidentiality, since the substantive
provisions of the new CAM Rules enacted in 2010 do not govern the parties‘ relation.
Moreover, it is widely accepted that there is no implicit confidentiality duty in arbitration.
16. Notwithstanding, if the Tribunal finds that there was a duty of confidentiality, CLAIMANT
is not liable because it made the proceedings public to legitimately protect its own rights.
JURISDICTIONAL ARGUMENT
I. THE ARBITRAL TRIBUNAL WAS CONSTITUTED IN ACCORDANCE WITH THE
ARBITRATION AGREEMENT AND THEREFORE HAS JURISDICTION OVER THE PRESENT
DISPUTE
17. RESPONDENT argues that the tribunal has not been constituted in accordance with the
arbitration agreement and therefore that the tribunal has no jurisdiction to resolve the present
dispute [Am. to St. of D.]. CLAIMANT rejects this contention and will demonstrate that the
tribunal was constituted in accordance with the arbitration agreement and therefore has
jurisdiction over the present dispute on the grounds that: the appointment process expressly
established by the arbitration agreement was closely followed [A.]; the CAM Rules regulate
the arbitration procedure in all other issues not specifically stipulated by the parties [B.] and
the CAM Rules were strictly complied with [C.].
A. The appointment process expressly established by the arbitration
agreement was closely followed
18. According to the arbitral clause contained in the Sale Confirmation: ‗[T]he dispute shall be
settled [...] by three arbitrators. Each party shall appoint one arbitrator and the two arbitrators
shall appoint the presiding arbitrator.‘ [Cl. Ex. 4]. This procedure was established in
accordance with the widely accepted principle that the parties can freely agree the procedure
of appointing the arbitrators [Art. 11(2) MAL; Art. 14(1) CAM Rules; Born 1363; Bühring-
Uhle/Kirchhoff/Scherer p. 70].
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
6
19. The aforementioned appointment procedure was initiated and duly complied with as
CLAIMANT and RESPONDENT respectively appointed Ms. Arbitrator 1 [R. for A. ¶28]
and Prof. Arbitrator 2 [S. of D. ¶23] as co-arbitrators. Afterwards, both co-arbitrators
appointed Mr. Malcolm Y to serve as chairman of the arbitral tribunal [Case file p. 39].
20. Any other procedural issue, e.g. confirmation or replacement of an arbitrator, falls within the
scope of the CAM Rules.
B. The CAM Rules regulate the arbitration procedure in all issues not
specifically stipulated by the parties
21. The parties stipulated in the arbitration agreement that ‗[a]ll disputes arising out of or related
to the contract shall be settled by arbitration under the [CAM Rules]‘ [Cl. Ex. 4].
RESPONDENT‘s assertion that the arbitral tribunal was not constituted in accordance with
the arbitration agreement altogether ignores the application of the procedural rules expressly
incorporated by the parties in the arbitration agreement. The CAM Rules are directly
applicable on the grounds that the rules incorporated by reference in the arbitration
agreement constitute the parties‘ real intention [i.]; the CAM Rules have a gap-filling function
with respect to aspects of the procedure that the parties have not explicitly settled [ii.]; and
finally, the parties did not expressly exclude the application of any of the provisions of the
CAM Rules [iii.].
i. The rules incorporated by reference in the arbitration agreement
constitute the parties’ real intent
22. The rules incorporated by reference in the arbitration agreement constitute the parties‘ real
intent in accordance with the principle of party autonomy, one of the mainstays of arbitration
[Art. 19 (1) MAL]. Moreover, the MAL recognises the freedom of the parties to determine,
by reference to an existing set of arbitration rules or by an ad hoc agreement, the procedure
to be followed [MAL Explanatory Notes ¶23; Born p. 1380; Lew/Mitellis/Kröll p. 237]. In
consonance with this principle, the parties incorporated the CAM Rules, and by doing so,
they have included procedural mechanisms and substantive standards governing the selection,
challenge and replacement of arbitrators [Art. 1(1) CAM Rules; Born p. 1364;
Fouchard/Gaillard/Goldman ¶359]. Hence, the CAM Rules are applicable as a simple
consequence of the intent of the parties [Fouchard/Gaillard/Goldman ¶753].
23. In cases such as his, the courts ensure that the intent of the parties is observed and would
normally not set aside an award if the constitution of the arbitral tribunal complies with the
parties‘ agreement and with the chosen arbitration rules included therein [Art. I(2) NY
Convention; Art. 34(2) MAL; Fouchard/Gaillard/Goldman ¶781, OLG Köln 22/12/1999].
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
7
ii. The CAM rules have a gap-filling function with respect to aspects of
the procedure that parties have not explicitly settled
24. Institutional rules incorporated to the arbitration agreement have a gap-filling function
complementing the will of the parties with respect to several aspects of the proceedings that
parties have not explicitly governed [Bühring-Uhle/Kirchhoff/Scherer p. 35; Giovannini/Renna p.
304; Nigi v. Inter Eltra Kommerz]. In this case, the parties‘ approach in the arbitration clause
was minimal, providing solely for the appointment of arbitrators while remaining silent in
regard to all other aspects of the procedure [Cl. Ex. 4]. By incorporating the CAM Rules, not
only did the parties give themselves a set of procedural rules, at the same time, they
empowered the CAM to administer the arbitration with significant leeway [Pascale/Götz/Graf
p. 3].
25. Therefore, the CAM Rules shall apply, filling the loopholes and issues the parties have not
explicitly settled, such as the procedure for confirmation and replacement of arbitrators [St.
John Sutton/Gill/Gearing ¶3-052].
iii. The parties did not expressly exclude the application of any of the
provision of the CAM Rules
26. In interpreting the arbitration clause one must consider the consequences the parties‘ could
have reasonably and legitimately envisaged at the time the arbitration agreement was
concluded [Fouchard/Gaillard/Goldman ¶477]. The question that may arise is whether the
parties did actually exclude further procedures provided for the CAM Rules, implying a
derogatory connotation within the arbitration clause.
27. In any case, the parties must either expressly or impliedly derogate the CAM Rules by clearly
stating their intent to do so in the arbitration agreement; or, at the very least, including a
provision which directly contradicts the procedure laid down in said institutional rules
[Fouchard/Gaillard/Goldman ¶782; Gas del Estado v. Ecofisa; Indian Oil Corp. v. Raja Transport].
None of these derogatory mechanisms were provided for by the parties.
28. Considering that the parties did not exclude the application of any of the provision of the
CAM Rules in the arbitration agreement, an objective interpretation of the parties‘ intent
stands for the application of the proceedings as provided by the CAM.
C. The Rules of the Chamber of Arbitration of Milan were strictly complied
with
29. The procedure provided by the CAM Rules was strictly complied with, since the Arbitral
Council did not confirm Mr. Y‘s appointment pursuant to Art. 18(4) CAM Rules, [i.] the
same appointing-authority re-affirmed the appointment of Mr. Malcolm Y and consequently,
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
8
he was not confirmed by the Arbitral Council under the same circumstances and [ii.] finally,
Mr. Horace Z was appointed as chairman by the Arbitral Council in the light of art. 20(3)
CAM Rules [iii.].
i. The Arbitral Council did not confirm Mr. Y’s appointment pursuant
to art. 18(4) CAM Rules
30. In order to confirm an arbitrator, the CAM Rules impose two requirements, i.e. the
submission of an unqualified Statement of Independence and that none of the parties files
any comments thereon. If one of these requirements is not met, the Arbitral Council has the
power to decide whether or not confirm the appointed arbitrator [Art. 18(4) CAM Rules; Sali
I p.351].
31. Accordingly, Mr. Y submitted his statement of independence with a disclosure of facts and
none of the parties filed any comments. In addition, both parties filed a letter waiving their
right to object to Mr. Y‘s appointment [Case File p. 47]. Hence, the question is whether Mr.
Y‘s Statement of Independence was qualified. The answer is affirmative and Mr. Y was not
confirmed by the Arbitral Council‘s decision No. 1697/1 dated 30 July, 2010 [Case File p. 49]
on the grounds that: the facts disclosed by Mr. Y objectively implied a lack of independence
[1.] and also, according with the IBA Guidelines, the disclosed facts fall under the scope of a
conflict of interest, however even if such facts are deemed to be waivable, the IBA
Guidelines are not binding [2.]. Finally, whenever an arbitrator submits a qualified statement
of independence, the Arbitral Council has the authority to decide whether or not he shall be
confirmed [3.].
1. The facts disclosed by Mr. Y objectively imply a lack of
independence
32. An unqualified statement of independence implies an arbitrator who is impartial and
independent of the parties [Art. 18(1)(2) CAM Rules; Arts. 5-7 CAM Code of Ethics].
33. Mr. Y‘s Statement of Independence brought to the attention the fact that he is a partner in
the firm of Wise, Strong & Clever. The firm has approximately 150 lawyers in its six offices and
Mr. Samuel Z, a partner in the firm‘s office in Capital City, Mediterraneo, advises
CLAIMANT in this matter. The Statement of Independence also declares that Mr. Y had no
contact with Mr. Z about the case and knew nothing about it until he was notified that he
was under consideration for the chair of the tribunal [Case File p. 46].
34. It is a fundamental and universally accepted principle of international arbitration that
arbitrators have to be impartial and independent of the parties and must remain so during the
proceedings, as well as after the award is filed [Lew/Mitellis/Kröll p.256; Redfern/Hunter II
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
9
p.266, Redfern/Hunter I ¶4-52]. Independence and impartiality are not interchangeable.While
the existence of independence is established on an objective criterion (i.e. whether there is a
relationship between the arbitrator and the parties); impartiality is the state of mind of being
unbiased or disinterested and is thus put to a subjective test. [Redfern/Hunter II pp. 267-268;
B’Uhler p.119]. The present situation is clearly a matter of determining whether Mr. Y was
independent or not requiring an objective exam of the facts.
35. Independence involves no indirect financial or economic interests in the outcome of the
dispute and no access to exclusive information that could affect the arbitrator‘s judgement,
which might lead him to favour one of the parties [Grigera Naón p.303; Lew/Mitellis/Kröll p.
263; Luttrell p. 23]. The revealed situation could clearly involve a conflict of interests. The
outcome of the arbitration will necessarily affect Mr. Y‘s firm‘s financial interests and
reputation, which could encourage Mr. Y to tip the balance in favour of one side for the
wrong reasons.
36. Moreover, independence requires that there be no actual or past dependent relationship
between the parties or with one of the parties‘ counsel that may, or at least may appear to,
affect the arbitrator's freedom of judgment as it is unanimously accepted in different
jurisdictions.[Ferrario pp. 421-426; IBA Backgrounds 2(1)]. Likewise, the fact that Mr. Y is
currently a partner in the same law firm as the counsel of one of the parties, objectively
involves an actual circumstance which represents an impediment for a fair and independent
assessment of the facts subjected to arbitration [Bond p.563; Mustang v. Plug-in Storage].
37. Therefore, in the light of an objective analysis, the facts disclosed by Mr. Y could imply a
conflict of interest for lack of independence and the existence of ‗real danger of bias‘ in
consonance with the principle that not only must Justice be done; it also must be seen to be
done [Berkley v. Automobile ;R v. Sussex Justices] . Consequently, the statement of independence
is deemed to have been qualified.
2. According to the IBA Guidelines, disclosed facts fall under
the scope of conflict of interest; however, even if such facts
are deemed to be waivable, the IBA Guidelines are not
binding
38. The CAM also takes into consideration the IBA Guidelines on Conflicts of interest in International
Arbitration (hereafter IBA Guidelines) when examining the impartiality and independence of
the arbitrators [Case File p.42]
39. The IBA Guidelines include the fact that ‗[t]he arbitrator is a lawyer in the same law firm as
the counsel to one of the parties‘ as one of the conflictive relationships within the ‗Waivable
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
10
Red List‘. Furthermore, the IBA Guidelines establish that facts alone do not automatically
constitute a source for a conflict of interest. Instead, the particular circumstances should
reasonably be considered in each individual case and a challenge should be successful only if
an objective test is met.
40. According to these guidelines, the Waivable Red List sets forth situations that are deemed to
be waivable ‗[o]nly if and when the parties, being aware of the conflict of interest situation,
nevertheless expressly state their willingness to have such a person act as arbitrator despite
the conflict of interest‘ [IBA Guidelines Part 1 (4)(c)]. Therefore, the IBA Guidelines leave the
exam of the facts to the parties, allowing them to judge whether or not they agree with the
evaluation of the arbitrator and, if they so wish, to explore the situation further and as
another option, to waive their right to object to such circumstances.
41. Nevertheless, the CAM emphasises that the IBA Guidelines are not binding and as it is
implied in their name, their purpose is to provide guidance to arbitrators, parties and national
courts in identifying, responding to and resolving conflicts by both codifying existing arbitral
practice and filling gaps in the law to arrive at the most suitable international arbitral practice
[Landolt p.410; Trakman p.9]. For that reason, any provision stated therein can only be deemed
to be a guidance in order to facilitate and help a decision of the Arbitral Council [AMS v.
TTMI]. Hence, the Arbitral Institution has the final judgment on the exam of independence
as will be demonstrated in the following section [3.]
3. The Arbitral Council has the authority to decide whether or
not the arbitrator shall be confirmed
42. According to the CAM, the Secretariat confirms directly party-appointed arbitrators if a
statement of independence is filed without remarks and in the absence of comments thereto
from the parties [CAM Rules Art. 18(4); Sali I p.351]. Contrario sensu, when these two
requirements are not met, i.e. an unqualified statement of independence and the absence of
comments by the parties; confirmation depends exclusively on the Arbitral Council [CAM
Rules Art. 18(4].
43. The Arbitral Council simply carried out one of its typical tasks as an arbitral institution by not
confirming Mr. Y as the presiding arbitrator, and thereby overcoming possible obstacles in
the constitution of the arbitral tribunal [St. John Sutton/Gill/Gearing ¶3-052; Nigi v. Inter Eltra
Kommerz].
44. Additionally, the parties‘ views are not necessarily decisive [Bond p. 563]. They are limited in
some respects by the requirements of the proper administration of justice
[Fouchard/Gaillard/Goldman ¶783]. These principles include, in particular, the parties‘ right to a
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
11
fair trial and to equal treatment. Blatant violations of the parties‘ rights to equal treatment and
fair hearing would imply a serious risk which can involve that any award issued under these
doubtful circumstances may be revoked by the courts within areas where judicial revision is
acceptable [Coppo 290, Fouchard/Gaillard/Goldman ¶787; Avax v. Tecnimont].
45. If there are doubts about one of the arbitrator‘s independence, the Arbitral Council has the
power to rule in order to ensure that said principles are being respected and taking into
consideration the amount of refused appointments for lack of independence within the last 5
years, i.e. 7 %, the CAM cannot be deemed to have been severe [Sali III p.5-6]. In accordance
with this, the CAM seeks a minimal intervention in the appointment of arbitrators but a
maximal control of their independence [Sali I pp.349-350; Sali II p.10].
ii. The same appointing-authority re-affirmed the appointment of Mr.
Malcolm Y, who later on, was again not confirmed by the Arbitral
Council under the same circumstances
46. The CAM Rules establish that an arbitrator shall be replaced by another arbitrator when the
arbitrator is not confirmed [Art. 20(1)(b) CAM Rules]. Furthermore, said rules provide that the
new arbitrator shall be appointed by the same authority that appointed the substituted
arbitrator [Art. 20 (3) CAM Rules]. In accordance with these provisions, the CAM invited the
co-arbitrators to make a substitute appointment as for the chairman [Case File p.49]. As a
result, the co-arbitrators re-affirmed their appointment of Mr. Malcolm Y and requested the
Arbitral Council to confirm him [Case File pp.50-51].
47. The Arbitral Council, by its decision no. 1608/1 [Case File p. 57], for a second time, did not
confirm Mr. Malcolm Y. In view that the situation had not changed since, the Arbitral
Councils‘ decision was based on the same reasons that encouraged the first non confirmation
[supra ¶43].
iii. Mr. Horace Z was appointed as chairman by the Arbitral Council in
the light of the art. 20(3) CAM Rules
48. In the event that the replacement arbitrator must also be substituted, according to the CAM
Rules, the new arbitrator shall be appointed by the Arbitral Council [Art. 20(3) CAM Rules].
Accordingly, the Arbitral Council appointed Mr. Horace Z as President of the Arbitral
Tribunal[Case File p.57], and given that Mr. Horace Z filed an unqualified statement of
independence, and that parties filed no comments thereon, the Secretariat of the Chamber of
Arbitration confirmed him as chairman [Case File p.61].
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
12
49. CONCLUSION ON ISSUE I: The arbitral tribunal has jurisdiction to understand in this
matter since it has been constituted in accordance with the arbitration agreement, the
appointment- process agreed by the parties and the CAM rules incorporated thereby.
ARGUMENT ON THE MERITS
50. CLAIMANT‘s and RESPONDENT‘s places of business are respectively located in
Mediterraneo and Equatoriana, both of which are signatories without reservations to the
CISG. In the absence of a choice of law clause, the present dispute is governed by the CISG
pursuant to Art. 1(a) CISG [R. for A. ¶¶1, 3, 24; PO 3 ¶1].
II. RESPONDENT FAILED TO DELIVER CONFORMING SQUID IN COMPLIANCE WITH
ART. 35 CISG
51. RESPONDENT breached the contract in the light of Art. 35(1) CISG [A.] or, alternatively,
RESPONDENT failed to abide by Art. 35(2) CISG [B.].
A. RESPONDENT breached the contract in the light of Art. 35(1) CISG
52. Article 35(1) CISG imposed on RESPONDENT the duty to deliver squid of the quality
required by the contract. According to both a subjective and objective reading of the
contract, each squid had to be between 100 and 150 g [i.]. Other phrases in the Order Form
and Sale Confirmation cannot be interpreted as having modified said quality requirement
[ii.]. By delivering undersized squid, RESPONDENT failed to supply goods of the quality
required by the contract [iii.].
i. The contract provided that each squid be between 100 and 150 g
53. Even though neither the Order Form [Cl. Ex. 3] nor the Sale Confirmation [Cl. Ex. 4]
contains an express reference to weight, the contract required that every individual squid fall
within the 100-150 g bracket. The application of Art. 8 CISG leads to both express and
implied requirements constituting duties of the seller under Art. 35(1) CISG [Neumann ¶¶4,
5]. By putting the contract to either the subjective [Art. 8(1) CISG] [1.] or objective [Art. 8(2)
CISG] tests [2.] one concludes that it stipulated that the squid weigh 100-150 g each.
RESPONDENT was also bound to deliver squid in the 100-150 g range by international
trade usages of the fishing industry under Art. 9(2) CISG [3.].
1. In the light of Art. 8(1) CISG, the contract required 100-150 g
squid
54. Article 8(1) CISG mandates that a party‘s statements and conduct be construed in accordance
with that party‘s intent whenever ‗the other party knew or could not have been unaware [of]
what that intent was‘. To establish a party‘s intent, all relevant circumstances of the case must
be taken into account, including the negotiations [Art. 8(3) CISG].
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
13
55. CLAIMANT intended to acquire squid for resale as bait. To be used as bait, squid need
weigh 100-150 g. This intent was unequivocally conveyed to RESPONDENT during the
contract negotiation phase. RESPONDENT‘s conduct indicates that it had understood
CLAIMANT‘s intent.
56. CLAIMANT‘s specifically stated that it intended to purchase squid for resale to the long-liner
fishing fleet based in Mediterraneo ‗to be used as bait‘ and invited RESPONDENT to make
offers of ‗appropriate product‘ [Cl. Ex. 1]. In reply, RESPONDENT‘s proxy presented
CLAIMANT with a sample of squid representative of the squid on offer [R. for A. ¶13].
Virtually all squid in the sample fell within the 100-150 g range [R. for A. ¶14].
RESPONDENT obtained the sample from a lot of squid it had sold to another customer in
Mediterraneo who deals in squid exclusively for bait [PO 3 ¶24]. By offering to CLAIMANT
this specific type of squid, RESPONDENT‘s conduct clearly indicates that it ‗knew‘ that
CLAIMANT‘s intent was to contract for squid to be used as bait and that thus every
specimen had to weigh 100-150 g.
57. CLAIMANT made its intent abundantly clear to RESPONDENT in the email that
accompanied the Order Form [Cl. Ex. 2]. CLAIMANT stated that it was particularly pleased
that the squid in the sample ‗fell almost exclusively in the range of 100/150 g‘ and
emphasised that that is the size range that gives its customers the best results. Consequently,
RESPONDENT cannot claim to have been unaware that the contract provided for 100-150
g squid [Neumann ¶44; Lookofsky p.90].
2. In the light of Art. 8(2) CISG, the contract required 100-150 g
squid as well
58. If the Tribunal deems Art. 8(1) CISG to be inapplicable, the contract is to be interpreted
according to the standard set in Art. 8(2) CISG. The application of either section of Art. 8
CISG leads to the same conclusion.
59. Under Art. 8(2) CISG the statements and conduct of CLAIMANT must be interpreted
according to the understanding that a reasonable person of the same kind as
RESPONDENT would have had in the same circumstances [Honnold ¶107]. This begs the
question as to what kind of person RESPONDENT is.
60. RESPONDENT is a prominent privately owned Equatorianan fishing corporation [St. of D.
¶1; R. Ex. 1; PO 3 ¶15, 17]. RESPONDENT owns a fishing fleet in the Pacific Ocean and
trades in fish products [St of D. ¶2]. In regard to squid, RESPONDENT catches, purchases
and sells exclusively Danubian squid [St. of D. ¶2]. RESPONDENT‘s presence in the
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
14
Mediterranean market has been constant for a long time. Around 95% of all the squid
RESPONDENT has ever sold in Mediterraneo was intended for use as bait [PO 3 ¶12].
61. How then would a reasonable and prominent fishing corporation that is an acknowledged
expert in Danubian squid and who is acutely aware of the idiosyncrasies of the Mediterranean
market due to its long experience in selling squid for bait to Mediterranean purchasers have
understood CLAIMANT‘s statements and conduct?
62. A reasonable person with RESPONDENT‘s expertise in Danubian squid would have
grasped that, when it comes to squid to be used for bait, size is of utmost importance [PO 3
¶26]. A reasonable person with RESPONDENT‘s experience in the fishing trade would not
have ignored the well-known fact in the industry that the size range of squid used as bait that
optimises long-liners‘ catch is 100-150 g per piece [R. for A. ¶14]. A reasonable person with
RESPONDENT‘s experience in selling squid for bait in Mediterraneo cannot have ignored
that Mediterranean long-liners demand 100-150 g squid [R. for A. ¶10, Cl. Ex. 10 ¶¶4, 5]. A
reasonable person in RESPONDENT‘s position would not have failed to understand from
CLAIMANT‘s unambiguous statements that the contract provided for 100-150 g squid. As a
matter of fact, RESPONDENT‘s choice of showing CLAIMANT a sample in which
practically each and every squid weighed between 100-150 g conclusively demonstrates that
that is exactly what RESPONDENT understood CLAIMANT would require.
3. International trade usages of the fishing industry bound
RESPONDENT to deliver squid in the 100-150 g range
63. CLAIMANT and RESPONDENT are impliedly bound by usages widely known and
regularly observed by parties to international contracts for the supply of fish products
according to Art. 9(2) CISG.
64. A matter well-known in the trade is that the size range of squid that leads to acceptable
catches is 100-150 g [R. for A. ¶¶10, 14, 18; Cl. Ex. 2, 5, 7]. RESPONDENT was perfectly
aware of this usage [PO 3 ¶26; Cl. Ex. 9]. As the parties entered into a contract for the supply
of squid for bait, this trade usage—to which the parties have not expressly agreed not to be
bound by—required that RESPONDENT deliver 100-150 g squid [Art. 9(2) CISG]. Hence,
the delivery of undersized squid constituted a failure on the side of RESPONDENT to
observe an international usage it was under the obligation to follow.
ii. Other phrases in the Order Form and Sale Confirmation cannot be
interpreted as having modified said quality requirement
65. RESPONDENT asserts that CLAIMANT‘s inclusion in the Order Form of the phrase
‗[c]ertified fit for human consumption‘ [Cl. Ex. 3] [1.] and that its own addition in the Sale
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
15
Confirmation of the phrase ‗2007/2008 Catch‘ [Cl. Ex. 4] [2.] allowed RESPONDENT to
supply undersized squid. This is an untenable position.
1. ‘Certified fit for human consumption’
66. CLAIMANT included the provision ‗[c]ertified fit for human consumption‘ in its Order
Form [Cl. Ex. 3]; by doing so, CLAIMANT intended that the squid it would be supplied with
were in compliance with a Mediterranean health regulation. RESPONDENT affirms to have
interpreted this phrase as meaning that part of the consignment of squid would be resold as
human foodstuff and that thus the size of the individual squid would be inconsequential
allowing it to provide undersized squid [Cl. Ex. 9; St. of D. ¶18 ].
67. According to a regulation in place in Mediterraneo, all fish products stored in the same cool
house have to be certified as fit for human consumption if any are to be sold for human
consumption. As in multiple other countries, this ubiquitous health regulation is also law in
RESPONDENT‘s country, Equatoriana [R. for A. ¶15; PO 3 ¶22].
68. CLAIMANT trades in both fish products for bait and human consumption [R. for A ¶2].
CLAIMANT stores its stocks for bait and human consumption in the same location.
CLAIMANT‘s intent in including the phrase ‗[c]ertified fit for human consumption‘ in the
Order Form was to receive squid apt for use as bait and compliant with the abovementioned
health regulation. CLAIMANT did not intend to contract for a lot of squid in which some
were to be sold as bait and the rest as human foodstuff.
69. RESPONDENT could not have been unaware of CLAIMANT‘s intent [Art. 8(1) CISG].
RESPONDENT was plainly alerted to the fact that the squid would be resold for use as bait
[Cl. Ex. 1]. Furthermore, in an email to RESPONDENT, CLAIMANT made a reference to
the final consumers of the squid, the Mediterranean long-liners. When CLAIMANT
expressed that it had found the sample to its pleasure because the weight range of the squid
corresponded to the one that gives its customers the best results, CLAIMANT was self-
evidently referring to long-liners and not to outlets of human foodstuff as the size of the
squid is only relevant when they are used as bait [Cl. Ex. 2; Cl. Ex. 10 ¶4]. RESPONDENT,
as an experienced firm in the fish trade, was perfectly aware of this difference [PO 3 ¶26].
Consequently, RESPONDENT failed to give due consideration to all relevant circumstances
and interpret the phrase ‗[c]ertified fit for human consumption‘ in conjunction with the email
to which it was attached as mandated by Art. 8(3) CISG.
70. RESPONDENT is expected to be familiar with the relevant health regulation as
RESPONDENT‘s own jurisdiction imposes the same standard and because of the special
circumstance that RESPONDENT regularly exports squid for use as bait to CLAIMANT‘s
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
16
country [Fletchner p. 6; Mussels case; Machines case]. A reasonable Equatorianan fishing trader
with RESPONDENT‘s long history of dealing in squid in Mediterraneo would not have
attributed to the disputed phrase the meaning RESPONDENT did [Art. 8(2) CISG]. A
sensible Equatorianan fishing trader with RESPONDENT‘s knowledge of and experience in
Mediterraneo would have imagined, in the light of the negotiations, that CLAIMANT‘s intent
was to store the squid for bait along with its stock of fish products for human consumption.
71. In any event, a reasonable business person in RESPONDENT‘s position would not so rashly
have jumped from an isolated phrase to a conclusion that so fundamentally alters the contract
with every other visible sign pointing to the polar opposite direction. In this case, the
principle of reasonableness would have required that RESPONDENT confirm its
interpretation of the contract with CLAIMANT before deviating so significantly from the
negotiations [Art. 8(1) CISG; Maley p. 109]; especially when the requirements ‗[c]ertified fit for
human consumption‘ and of appropriate size for bait are not mutually exclusive.
2. ‘2007/2008 Catch’
72. In its Sale Confirmation, RESPONDENT included the line ‗Catch: 2007/2008 Catch‘.
RESPONDENT purports to have made this inclusion in order to convey to CLAIMANT its
intent of delivering a significant proportion of undersized squid [Cl. Ex. 8, 9; St. of D. ¶¶ 13,
14]. CLAIMANT understood said inclusion as meaning that the order would be completed
with a small proportion of squid of appropriate size caught in the year 2008.
73. CLAIMANT did not know that RESPONDENT‘s intent was to deliver squid unsuitable for
use as bait [Art. 8(1) CISG]. RESPONDENT never said so. CLAIMANT could not have
been aware of RESPONDENT‘s intent either, as nothing indicated that the 2008 squid
would not conform or that they would represent a high proportion of the lot [Art. 8(1)
CISG].
74. RESPONDENT asserts that CLAIMANT should have presumed that the 2008 squid would
be undersized as the contract was concluded at the beginning of the fishing season of
Danubian squid and that thus their size would still be small [St. of D. ¶14]. As an expert in the
trade, CLAIMANT is conscious of the harvesting seasons of the different species of squid
and of the pace of their development [PO 3 ¶26]. It was precisely because of this expertise,
that CLAIMANT knew that, at that time of the year, a by no means negligible proportion of
the squid would fall within the 100-150 g range. In fact, of the 2008 squid delivered by
RESPODENT, 13% were between 100 and 115 g and 32% of those below 100 g had 90-100
g [Cl. Ex. 8]. Besides, it would not have been objectionable if a small portion of the squid
were below 100 g [Cl. Ex. 10 ¶5].
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
17
75. The understanding of an expert squid merchant in CLAIMANT‘s position would have been
the same as CLAIMANT‘s [Art. 8(2) CISG]. In view of all pertinent circumstances [Art. 8(3)
CISG], a reasonable person in CLAIMANT‘s shoes would have interpreted
RESPONDENT‘s inclusion in good faith and arrive at the conclusion that the 2008 squid
would be above 100 g and that those that were below would only constitute a marginal
portion of the consignment.
iii. By delivering undersized squid, RESPONDENT failed to supply
goods of the quality required by the contract
76. The parties entered into a contract for the supply of squid solely for use as bait. Neither the
phrase ‗[c]ertified fit for human consumption‘ nor the inclusion of the line ‗Catch: 2007/2008
Catch‘ resulted in a modification of the contract. A quality requirement for squid to be used
as bait is that they be 100-150 g in weight. By delivering undersized squid, RESPONDENT
failed to supply goods of the quality required by the contract under Art. 35(1) CISG and
international trade usages of the fishing industry [Art. 9(2) CISG].
B. Alternatively, RESPONDENT failed to abide by Art. 35(2) CISG
77. If the Tribunal opines that the terms of the contract entered into by the parties did not
include the 100-150 g quality requirement, RESPONDENT has, nevertheless, failed to meet
the obligations Art. 35(2) CISG imposes. RESPONDENT did not deliver squid fit for the
purposes for which squid are ordinarily used [Machines case; NAI No. 2319; Frozen fish case] [i.].
Alternatively, the delivered squid were unfit for the particular purpose expressly or impliedly
made known to RESPONDENT at the time of the conclusion of the contract [ii.]. Finally,
the squid RESPONDENT supplied lacked the qualities of the squid RESPONDENT held
out to CLAIMANT as a sample [iii.].
i. The delivered squid were unfit for the purposes for which goods of
the same description are ordinarily used [Art. 35(2)(a) CISG]
78. Squid are ordinarily used as bait. A great proportion of the squid RESPONDENT supplied
could not be used as bait [1.]. Additionally, traders in fish products self-evidently acquire
squid with the purpose of reselling them; however, RESPONDENT‘s squid could not be
resold [2.].
1. The squid could not be used as bait
79. Under Art. 35(2)(a) CISG, the goods do not conform with the contract unless they are fit for
the purposes for which goods of the same description would ordinarily be used. All of the
five long-liners that were supplied with the squid RESPONDENT delivered found them to
be of inadequate quality for bait and returned their purchases [R. for A. ¶18].
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
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80. Only once in they had reached the fishing grounds did the five sub-purchasers discover that
the squid were inadequate. Due to the sub-standard weight of the squid, the long-liners
caught less fish than what they might have otherwise caught [Cl. Ex. 10 ¶12]. Two of the
long-liners had no option but to return to port to re-stock with new bait [R. for A. ¶18]; this
detour resulted in a significant loss of sea-time [Cl. Ex. 5] which one can safely assume
ensued in an even poorer overall catch. The three other fishing vessels remained at sea [R. for
A. ¶18]. Of these three, two had sufficient other bait to enable them to return with a normal
catch [Cl. Ex. 10 ¶12].
81. An ordinary use to which squid are put is to utilise them for bait [R. for A. ¶7]. All five
customers to which the delivered squid were sold could not economically use them for bait.
Hence, the delivered squid were unfit for a purpose for which squid are ordinarily used.
2. RESPONDENT’s squid could not be resold
82. A trader in squid acquires them with the sole and express purpose of reselling them [Maley p.
113; Henschel; Paletas de Cerdo Case]; but the supplied squid could neither be sold for bait nor
human consumption, not in Mediterraneo or abroad.
83. As already described in, all five long-liners returned the squid and CLAIMANT was forced to
reimburse them [Cl. Ex. 10 ¶12]. Even though a small portion of the squid could have been
used for bait, the other long-liners in Mediterraneo absolutely declined to acquire the
Danubian squid. All of CLAIMANT‘s gentle attempts to coax them into reconsidering that
decision failed. In their view, not even a discount in the sales price outweighed the risk of
putting out to sea with poor quality squid [Cl. Ex. 10 ¶14]. They undoubtedly adopted this
risk-averse and headstrong position because of the other long-liners‘ calamitous results with
RESPONDENT‘s squid [R. for A. ¶19; Cl. Ex. 10 ¶14].
84. The demand for squid for human consumption in Mediterraneo is extremely low.
Furthermore, this niche market is held hostage by its regular suppliers [Cl. Ex. 10 ¶14].
Despite aggressively marketing the goods to outlets of squid for human consumption,
CLAIMANT was unable to sell any. The huge discounts with which CLAIMANT tried to
entice customers into buying them were not sufficient to break into the already saturated
market [Cl. Ex. 10 ¶15]. As it became evident that the squid could not be sold locally,
CLAIMANT diligently turned to Reliable Trading House as a last resort and instructed it to
offer the squid in foreign markets [Cl. Ex. 10 ¶15].
85. In spite of having spared no effort, only 10% of the consignment could finally be sold [Cl.
Ex. 10 ¶15].
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
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ii. The squid supplied were unfit for the particular purpose made
known to RESPONDENT at the time of the conclusion of the
contract [Art. 35(2)(b) CISG]
86. If the Tribunal arrives at the conclusion that the use of squid as bait is extraordinary, this
particular purpose was expressly [1.] or, at the very least, impliedly [2.] made known to
RESPONDENT at the time of the conclusion of the contract [Folsom/Gordon/Spanogle p.
88]]. Additionally, RESPONDENT cannot be exempted under Art. 35(2)(b) CISG [3.].
1. Particular purpose expressly made known to
RESPONDENT
87. In its email of 14 April 2008, CLAIMANT explicitly informed RESPONDENT that the
squid to be acquired were to be used as bait; CLAIMANT‘s exact words were ‗Mediterraneo
Trawler Supply is interested in purchasing squid for resale to the long-liner fishing fleet based
in Mediterraneo to be used as bait‘‘ (emphasis added) [Cl. Ex. 1]. CLAIMANT could
hardly have chosen a more explicit way of making RESPONDENT aware of the use to
which the squid would be put.
2. Particular purpose impliedly made known to
RESPONDENT
88. The email that accompanied the order form strongly suggested that the squid were purchased
for use as bait [Cl. Ex. 2]. The phrase ‗that is the [size] range [of squid] that gives our
customers the best results‘ could only have been referring to long-liners that use squid for
fishing. The size range of the squid becomes only relevant when they are utilised as bait (see
also ¶69). When alleging that a particular purpose has been impliedly made known, it is
enough that a reasonable person in the position of the seller would have recognised the
purpose for which the buyer intended to use the goods [Huber/Mullis p. 138]. One must
reiterate that it would have been impossible for a reasonable person like RESPONDENT in
these circumstances to have missed to understand CLAIMANT‘s implied intent [Maley p.
118] (see also ¶69).
3. RESPONDENT cannot be exempted under Art. 35(2)(b)
CISG
89. RESPONDENT would be ill-advised to seek to be exempted under Art. 35(2)(b) CISG by
maintaining that CLAIMANT did not rely or that it was unreasonable of CLAIMANT to rely
on RESPONDENT‘s skill and judgement. CLAIMANT heavily relied on RESPONDENT‘s
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
20
advice and it was utterly reasonable of CLAIMANT to do so as everything indicated that it
was safe to rely on RESPONDENT‘s judgement [Maley p. 119] (see also ¶¶61,62).
90. RESPONDENT has consequently also failed against the benchmark of Art. 35(2)(b) CISG.
iii. The squid did not possess the qualities of the squid
RESPONDENT held out to CLAIMANT as a sample [Art. 35(2)(c)
CISG]
91. Apart from being an indisputable contractual provision RESPONDENT was absolutely
bound to observe under Art. 35(1) CISG [Bianca p. 276]—as the Order Form and Sale
Conformation [Cl. Ex. 3, 4] tallied exactly with each other in this respect [arts. 18(1), 19(2)
CISG]—, Art. 35(2)(c) imposed on RESPONDENT the obligation to deliver squid whose
qualities precisely correspond to those of the squid in the sample it held out to CLAIMANT.
Nevertheless, the supplied squid lacked a main feature of the squid RESPONDENT showed
CLAIMANT as way of a sample [1.]. RESPONDENT contends that the sample was of
unsized squid just like the squid it delivered [2.].
1. The delivered squid lacked a main feature of the squid in the
sample
92. On the one hand, the vast majority of the squid in the sample RESPONDENT lured
CLAIMANT into the contract with fell within the 100-150 g range [R. for A. ¶14]; on the
other, a substantial portion of the squid delivered did not [R. for A. ¶18, Cl. Ex. 8].
93. The weight was one of the key features and the most conspicuous property of the squid
found in the sample. By failing to deliver squid with a quality inherent in the sample that
would have been apparent on a reasonable examination, RESPONDENT breached Art.
35(2)(c) [Huber/Mullis p.139; Delchi Carrier v. Rotorex ; Marble slabs case].
2. RESPONDENT contends that the sample and the supplied
squid were unsized
94. RESPONDENT maintains that the sample was of unsized squid. Unsized squid are squid
that were not grouped according to their weight and that are sold in bulk. RESPONDENT
affirms that, at that early stage of the harvesting season, CLAIMANT should have expected
that unsized 2008 squid would tend to be small (see also ¶74). However, CLAIMANT ignored
and could not have known that the sample was of unsized squid [a.]; either way, the fact that
the sample was of unsized squid is immaterial to the case [b.].
a. CLAIMANT ignored and could not have known that
the sample it was shown was of unsized squid
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
21
95. CLAIMANT did not know that the sample of squid was unsized and neither could
CLAIMANT have been aware of this fact [Art. 8(1) CISG]. RESPONDENT never pointed
out to CLAIMANT that the sample was of unsized squid. All that the sample‘s label, ‗illex
danubecus 2007‘ [PO 3 ¶32], indicated was that the sample consisted of Danubian squid
caught in the year 2007; nothing in this short legend suggested that the sample was unsized. A
reasonable person in CLAIMANT‘s position and in view of the circumstances would not
even have suspected that the sample was of unsized squid [Art. 8(2)(3) CISG].
b. The fact that the sample was of unsized squid is
immaterial to the case
96. On any account, the fact that the sample was of unsized squid has no bearing whatsoever on
RESPONDENT‘s obligation to deliver squid mostly within the 100-150 g bracket.
97. Just like not all of the squid in the sample weighed 100-150 g, under the contractual provision
‗[a]s per sample already received‘ [Cl. Ex. 4] and Art. 35(2)(c) CISG all RESPONDENT was
obliged to deliver was a lot in which the proportion of squid within and without the 100-150
g bracket corresponded to that of the sample. RESPONDENT would have achieved this by
striking the correct balance in the consignment between unsized squid from the late and early
stages of the 2007 and 2008 harvesting seasons. By choosing to deliver 60% of undersized
2008 squid, RESPONDENT patently disregarded this obligation [Cl. Ex. 8].
98. CONCLUSION ON ISSUE II: RESPONDENT failed to deliver squid of the size
required by the contract. Hence, RESPONDENT did not comply with Art. 9(2) CISG; and,
either Art. 35(1) CISG or Art. 35(2) CISG.
III. THE EXAMINATION OF THE SQUID AND THE NOTICE OF NON-CONFORMITY WERE
CISG COMPLIANT
99. The examination of the squid was made in accordance with Art. 38 CISG [A.]. CLAIMANT
notified RESPONDENT pursuant to Art. 39(1) CISG of the nature of the lack of
conformity within a reasonable time after it was discovered [B.]. Notwithstanding, if the
examination or notification of non-conformity are found to have been insufficient,
RESPONDENT would still be liable for the lack of conformity under Art. 40 CISG [C.].
A. The examination of the squid was made in accordance with Art. 38 CISG
100. CLAIMANT examined the squid in accordance with Art. 38(1) CISG [i.]. Alternatively, if
CLAIMANT‘s examination is found wanting, the Mediterranean long-liners were swift in
inspecting the squid after their reception [ii.].
i. CLAIMANT examined the squid in accordance with Art. 38(1)
CISG
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
22
101. CLAIMANT performed a careful examination of the squid within as short a period as was
practicable under the circumstances [Art. 38(1) CISG]. The fact that the non-conformity of
the goods only became apparent time after CLAIMANT examined the lot was not the result
of a superficial inspection.
102. The order was delivered on 1 July 2008 in twelve containers that arrived at CLAIMANT‘s
headquarters in several instalments during the day [R. for A. ¶17]. Immediately after receiving
the first two containers, CLAIMANT proceeded to examine the consignment.
103. CLAIMANT randomly selected a by no means negligible sample of 20 cartons for
inspection. All 20 boxes weighed the required 10 kg. Five cartons were thawed to perform a
visual inspection of the individual squid. CLAIMANT rigorously checked, one by one, the
condition and weight of the squid. All were found to be in excellent condition. The
proportion of squid within the 100-150 g bracket corresponded, in each and every inspected
carton, exactly to that of the sample RESPONDENT had shown CLAIMANT. At that time,
CLAIMANT‘s satisfaction with the consignment could not have been greater. [Cl. Ex. 10
¶10].
104. By diligently inspecting the squid the very minute after they had arrived at its premises,
CLAIMANT not only complied with but exceeded the obligation art. 38(1) CISG imposes of
examining the goods within as short a period as is practicable in the circumstances
[Illescas/Perales p. 188].
105. The facts that CLAIMANT did not draw a sample for inspection from every container and
that none of the cartons that were examined were from the catch of 2008 should not be
taken to mean that CLAIMANT‘s examination was superficial.
106. After the successful initial examination, CLAIMANT regarded the continuation of the
examination as a pointless exercise. Besides, it made no sense from a commercial viewpoint;
as the Advisory Council puts it: ‗‗Whether and when it is practicable, and not just possible, to
examine the goods depends on all the circumstances of the case.‘ [CISG - AC Opinion No. 2].
Under these circumstances, CLAIMANT had no reason whatsoever to proceed with the
inspection. It is often commercially practicable to examine the goods immediately upon
receipt.
107. The initial examination revealed that all inspected squid fully conformed to the contract.
Therefore, CLAIMANT had every reason to believe that the whole lot would likewise
conform. When the delivery involves a large quantity of goods, the buyer need not examine
the entire load, but only test samples [Blood Infusion Devices case].
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
23
108. To have drawn further samples from the containers that arrived later in the day would have
rendered more cartons unsaleable. In order to examine the squid, CLAIMANT had no
alternative but to defrost them [PO 3 ¶33]. Defrosting the squid entailed making the goods
totally worthless [Cl. Ex. 10 ¶10]. Thus, Continuing with the examination would have
substantially deprived CLAIMANT of what it was entitled to expect under the contract, i.e.
to make a profit from the sale of the squid.
109. All of the 20 cartons CLAIMANT inspected were labelled ‗illex danubecus 2007‘ [PO 3 ¶32].
This means that all of the examined squid were caught in the year 2007. Even though the
contract also provided for squid from the catch of 2008, in view of all relevant
circumstances, CLAIMANT was under no obligation to specifically target squid from that
year for examination.
110. Squid increase in size as the season progresses. The harvesting season of Danubian squid
goes from April to September. At the beginning of the season, the squid run between 70 and
90 g; by the end, they run between 140 and 180 g [St. of D. ¶13].
111. The contract was concluded on 29 May 2008 [Re. Ex. 2] and the consignment of squid was
delivered on 1 July 2008 [R. for A. ¶17]. The contract stipulated that the squid would be from
the 2007 and 2008 catches [Cl. Ex. 4]. Therefore, any squid in the lot from the 2008 catch
would have been caught during the first half of the harvesting season and would have tended
to be rather small.
112. Squid are sold either sized or unsized. When squid are ‗sized‘, they are classified in boxes
according to their weight. Unsized squid have not been subjected to a classification and are
simply the ‗run of the catch‘ [St. of D. ¶12].
113. By stipulating that the squid be ‗[a]s per sample already received‘ [Cl. Ex. 4], the contract
demanded that the consignment of squid have the same proportion of squid within and
without the 100-150 g bracket as the sample CLAIMANT had been shown. To achieve this
RESPONDENT had two options. The first option was to deliver sized squid ensuring that
every carton replicates the proportion of 100-150 g in the sample. The second option was to
supply unsized squid taking care to balance the number of cartons with heavier (late 2007
catch) and lighter squid (early 2008 catch) to replicate in the entire lot the proportion of 100-
150 g squid in the sample.
114. CLAIMANT did not know which option RESPONDENT had chosen. It was none of
CLAIMANT‘s business. All that CLAIMANT knew was that RESPONDENT was at liberty
to choose between two paths that would lead to conforming goods and so imagined that
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
24
RESPONDENT would take either. All of this suggests the question: was CLAIMANT‘s
failure to examine cartons with 2008 squid appropriate for both alternatives?
115. If RESPONDENT had supplied sized squid, every carton would have presented the same
proportion of squid within the 100-150 g size bracket. Not being the ‗run of the catch‘, the
year in which the squid were caught would not have affected the size of the squid in the
cartons. The 2008 cartons would not have raised doubts in CLAIMANT‘s mind as it would
have been possible to supply contract-conforming 2008 squid at that time of the year. After
all, 13% of all the unsized 2008 squid RESPONDENT actually delivered fell within the
lower end of the 100-150 g spectrum [Cl. Ex. 8]. If the proportion of 100-150 g squid in the
2007 boxes was right, a reasonable person would have assumed that the ratio in the 2008
cartons would also be correct. Hence, under this option, CLAIMANT would have gained
nothing from specifically targeting boxes with squid caught in 2008.
116. If the squid were unsized, the cartons labelled ‗illex danubecus 2007‘ would have far
outnumbered those labelled ‗illex danubecus 2008‘. This overrepresentation of 2007 squid
would have been necessary to offset the proportion of squid without the 100-150 g range
that would have predominated amongst the smaller 2008 squid. Under these circumstances,
it would not have come as a surprise that in a sample of 20 cartons none was from the year
2008. Their frequency would have been expected to be extremely low. An attempt to search
for a carton labelled ‗illex danubecus 2008‘ would have been like looking for a needle in a
haystack and could have entailed breaking up a great number of pallets. Apart from
needlessly rendering more squid unsaleable, this persistence would have resulted in an even
greater detriment to CLAIMANT, as the squid are always transported in pallets to the docks
where they are loaded onto the long-liners [Cl. Ex. 10 ¶9]. Consequently, far from gaining,
under this option, CLAIMANT would have stood to lose a lot from persisting with the
inspection.
117. To sum up, CLAIMANT did not see the need to specifically examine cartons labelled ‗illex
danubecus 2008‘ because it supposed that they would either represent a very small
proportion of the consignment or have the same content as those cartons with 2007 squid.
ii. Alternatively, the Mediterranean long-liners were swift in inspecting
the squid after their reception under Art. 38(3) CISG
118. If the Tribunal finds that CLAIMANT‘s initial examination fell short of Art. 38(1) CISG, as
is often the case when goods are resold [CISG - AC Opinion No. 2], the sub-purchasers
conducted a swift and adequate inspection of the squid according to Art. 38(1)(3) CISG.
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
25
119. Since a substantial part of the lot was redispatched by CLAIMANT within the next week of
their arrival [Cl. Ex. 10 ¶11], CLAIMANT was entitled to defer the inspection of the squid to
the Mediterranean long-liners under Art. 38(3) CISG. At the time of the conclusion of the
contract, RESPONDENT was aware of the possibility of redispatch [Cl. Ex. 1].
120. As all of Art. 38 CISG is subject to the standard set in its sec. (1) [Honnold ¶252], the question
of whether the long-liners examined the squid within as short a period as was practicable in
the circumstances must be addressed.
121. As soon as the sub-purchasers arrived at the fishing grounds and were ready to fish, the
squid were inspected and their non-conformity became evident [Cl. Ex. 10 ¶12].
CLAIMANT was promptly informed of the lack of conformity on 29 July 2008 and the news
was broken to RESPONDENT on the very same day [Cl. Ex. 5].
122. Given the circumstances, it was entirely reasonable of the long-liners to wait until reaching
the fishing grounds to perform the inspection. Since once defrosted the squid could only be
used as fishmeal [R. for A. ¶17], one had to first reach the fishing grounds to have been able
to put the inspected goods to use [Honnold ¶252]. To have examined the squid beforehand
would have ensued in an unreasonable wastage of resources.
B. CLAIMANT notified RESPONDENT of the nature of the lack of
conformity within a reasonable time after it was discovered pursuant to Art.
39(1) CISG
123. CLAIMANT has not lost the right to rely on the non-conformity of the squid as it specified
the nature of the contractual breach to RESPONDENT within a reasonable time after its
discovery [Art. 39(1) CISG].
124. CLAIMANT was informed by its customers of the lack of conformity on 29 May 2008 [Cl.
Ex. 5]. On the same day, CLAIMANT sent RESPONDENT an email relaying the news. A
fortnight later (16 August 2008), RESPONDENT was emailed a report by a certified testing
agency (TGT Laboratories) in which the nature of the lack of conformity was specified in
fine detail.
125. During the brief time that elapsed between the discovery of the lack of conformity and the
notification of its nature, the goods made the journey from the fishing grounds far out at sea
back to CLAIMANT‘s cool stores, a testing agency had to be engaged at RESPONDENT‘s
request [Cl. Ex. 6], an inspection of the goods was performed and a report of the
examination was drafted. Eighteen days seem an extremely short and reasonable time span
for all this intense activity. In comparison, it has been held that a ‗rough average‘ of one
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
26
month was appropriate for the notice of the lack of conformity [Blood Infusion Devices case;
Clothes case].
C. If the Tribunal is to deem the examination or notification of non-
conformity to have been insufficient, RESPONDENT would still be liable
for the lack of conformity under Art. 40 CISG
126. In any case, whether the examination of the goods and the notification of the lack of
conformity were timely or not is irrelevant, as RESPONDENT is not entitled to rely on the
arts. 38 and 39 CISG which impose these duties on CLAIMANT according to art. 40 CISG.
127. RESPONDENT cannot claim to have ignored the nature of the lack of conformity. The
goods were non-conforming because a large percentage of the squid RESPONDENT
delivered were undersized. In asserting that it was unaware of the proportion of undersized
squid, RESPONDENT would be implying that it treated the order carelessly [ICC No. 5713]
and so, by extension, it would be conceding that the breach was the result of its own reckless
behaviour. RESPONDENT never disclosed that it intended to deliver undersized squid to
CLAIMANT.
128. As RESPONDENT ought to have known of the facts related to the lack of conformity and
as CLAIMANT ignored these same facts, the pre-requisites to apply Art. 40 CISG are
fulfilled. RESPONDENT must thus be deprived of the right to rely on Arts. 38 and 39
CISG.
129. CONCLUSION ON ISSUE III: CLAIMANT‘s and the long-liners‘ examination of the
squid were timely and adequate. The nature of the lack of conformity was relayed to
RESPONDENT in due time. Nevertheless, had the examination or notification not been
opportune, CLAIMANT would still be able to rely on the lack of conformity under Art. 40
CISG.
IV. RESPONDENT’S FAILURE TO DELIVER CONFORMING GOODS AMOUNTED TO A
FUNDAMENTAL BREACH WHICH ALLOWED CLAIMANT TO AVOID THE CONTRACT
UNDER ARTS. 25 AND 49 CISG
130. RESPONDENT‘s contractual breach was fundamental under Art. 25 CISG [A.].
CLAIMANT is entitled to avoid the contract in its entirety according to Art. 51(2) CISG
[B.]. CLAIMANT complied with the obligations imposed by Art. 82 CISG [C.].
CLAIMANT declared the contract avoided according to Art. 26 CISG [D.].
RESPONDENT cannot be exempted of responsibility under Art. 80 CISG [E.].
A. RESPONDENT’s contractual breach was fundamental under Art. 25 CISG
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
27
131. ‗To determine whether a fundamental breach occurred a dual test must be applied. The
elements of this dual test are: ―substantial detriment‖ and ―unforeseeability‖‘ [Zeller p. 225].
132. RESPONDENT did not deliver squid ‗[a]s per sample already received‘ as the contract
required [Cl. Ex. 4]. This substantially deprived CLAIMANT ‗of what [it was] entitled to
expect under the contract‘ [Art. 25 CISG] for the following two reasons: first, the squid
supplied were not of the required quality [i.]; and second, the squid did not serve for its
ordinary purpose[ii.]. Furthermore, it was likely for RESPONDENT to foresee that
providing squid below 100-150 g would cause a substantial detriment to CLAIMANT [iii.].
i. The squid supplied were not of the required quality
133. The ‗detriment‘ referred to in Art. 25 CISG is primarily measured by the ‗importance of the
interest which the contract [...] create[s] for the promise‘ [Schlechtriem 1998 p. 177].
134. CLAIMANT had not in the past purchased squid from Danubia because its quality did not
reach the desired level. Due to the soaring prices of squid from the Oceanian Islands,
CLAIMANT was forced to seek alternatives. Consequently, CLAIMANT contacted
providers of Danubian squid. CLAIMANT‘s interest in buying squid from RESPONDENT
was exclusively based on the quality and price offered. CLAIMANT expressly conveyed to
RESPONDENT that the 100-150 g size bracket was of particular importance [Cl. Ex. 2].
Since RESPONDENT failed to deliver squid within the requested weight range,
CLAIMANT‘s interest in the fulfilment of the contract ceased to exist as a consequence of
the breach of the contract [Schlechtriem p. 59; Shoes case I].
ii. The squid did not serve their ordinary purpose
135. CLAIMANT‘s expectations were that the squid bought from RESPONDENT be in the
range of 100-150 g and that their customers be satisfied with it. None of these expectations
were met: a large percentage of the delivered squid had not the requisite weight and thus
CLAIMANT‘s customers were far from pleased. The sold squid were returned because they
did not serve for their ordinary purpose; the squid were too small to function properly as
bait, moreover this ended in CLAIMANT having to reimburse its customers [Delchi Carrier, v.
Rotorex].
136. This situation provoked great harm to CLAIMANT‘s business. CLAIMANT‘s customers
endured all sorts of losses, both monetary and non-monetary, due to CLAIMANT‘s failure
to provide adequate squid. Furthermore, other fishing vessels from Mediterraneo did not
want to take the risk of buying squid from CLAIMANT due to its tarnished reputation [Sport
Clothing Case].
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
28
137. It is also necessary for the non-breaching party to behave in such a manner that would not
affect the breaching party‘s performance throughout the execution of the contract, i.e.
providing crucial and sufficient information so that the intentions of the parties are
understood [Andrew Babiak p. 122]. Claimant has diligently complied with its obligation by
informing that the squid would be used as bait and that the size needed was 100-150 g [Cl.
Ex. 1, 2] [PTA Powder Case].
iii. It was likely for the RESPONDENT to foresee that providing squid
below 100-150 g would cause a substantial detriment to
CLAIMANT
138. Finally, a reasonable person of the same kind in the same circumstances as RESPONDENT
[Art. 25 CISG] would have been able to foresee that a delivery of squid not fulfilling the
required characteristics would not fit for the purpose expressly and impliedly made known to
RESPONDENT. A reasonable person with RESPONDENT‘s vast experience in
Mediterraneo and knowledge of the fishing industry would have known that the size of the
squid would be important to the Mediterranean long-liners [Will p. 217].
139. Therefore, since it is patent that there has been a fundamental breach, CLAIMANT was
entitled to avoid the contract according to Art. 49 CISG.
B. CLAIMANT is entitled to avoid the contract in its entirety according to
Art. 51(2) CISG
140. Avoidance of the entire contract may ‗only‘ be based on fundamental breach [Honnold p.345].
A fundamental breach is a condition for the immediate avoidance of the contract in the case
of non-fulfilment of an obligation [Enderlein / Maskow, p. 111]. As demonstrated above,
RESPONDENT‘s failure to deliver conforming goods amounted to a fundamental breach,
depriving CLAIMANT of the main benefit of the contract ‗as a whole‘; consequently,
CLAIMANT was entitled to avoid the contract according to Art. 51(2) CISG.
C. CLAIMANT complied with the obligations imposed by Art. 82 CISG
141. Article 82 CISG deals with the effect of an aggrieved buyer‘s inability to make restitution of
goods substantially in the condition in which they were delivered. CLAIMANT preserves its
right to declare the contract avoided, as long as the reason for the impossibility or inability to
return the goods in substantially the same condition are not due to CLAIMANT‘S negligence
or deliberate actions [Babiak p. 136]. CLAIMANT has complied with the obligations set by
the mentioned article, in as far as CLAIMANT could have given back what had been
‗supplied under the contract‘ in the same condition it was delivered.
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
29
142. On 16 August 2008, CLAIMANT contacted RESPONDENT in order to receive
instructions as to the disposition of the squid. CLAIMANT specified that they would be able
to store the non-conforming goods for a limited period of time because CLAIMANT was to
receive new stock by the end of November and afterwards an additional warehouse would be
needed at RESPONDENT‘s expense [Cl. Ex. 7].
143. CLAIMANT acted in accordance with what is expected of a good merchant. Merchants
ordinarily do not think in terms of avoiding a contract; they think about what they may do with
particular goods [Honnold p. 34]. The only impediment to returning the goods was due to
RESPONDENT‘s rejection in taking back the squid, denying all responsibility [Cl. Ex. 9].
144. Nevertheless, CLAIMANT retained the right to declare the contract avoided because the
conditions in Art. 82(2)(a) were met [Spanish Paprika case] since the impossibility to return the
goods was not due ‗to his act or omission‘ [Tallon], but only to the RESPONDENT‘s refusal
to accept them at the time CLAIMANT offered.
D. CLAIMANT declared the contract avoided according to Art. 26 CISG
145. On 16 August 2008, CLAIMANT notified RESPONDENT that the squid were not in
conformity to the contract, enclosing the TGT Laboratories report, which showed that a
great proportion of the squid did not fall within the 100-150 g range [Cl. Ex. 7]. With this
letter CLAIMANT effectively made notice to RESPONDENT that the contract was
avoided, urging RESPONDENT to instruct them what actions to take regarding the goods.
In a similar case, one court found that the buyer effectively gave notice by declaring that it
could not use the defective goods and that it placed them at the disposal of the seller
[UNCITRAL Digest, Art. 26].
146. The party that declares the contract avoided has to make notice that there has been a
fundamental breach or the expiry of a Nachfrist without performance [Enderlein/Maskow, p.
117]. There are no other specifics or examples that should include the notice, however, it is
recommended, that the notice includes the reason for the declaration of the breach and that
the declaration be made in writing [Andrew Babiak, p.135]. CLAIMANT communicated to
RESPONDENT the motive of the breach, which was that the delivered squid were not
within the range of 100-150 g and made such declaration made in writing [Cl. Ex. 7].
E. RESPONDENT cannot be exempted of responsibility under Art. 80 CISG
147. RESPONDENT is neither allowed to claim exemption nor any liability reduction under Art.
80 CISG. The non-conformity of the squid cannot be attributed to CLAIMANT‘s acts or
omissions, considering that CLAIMAINT did not cause RESPONDENT‘S failure to
perform by its own conduct [Acrylic blankets case]. In the first place, RESPONDENT had the
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
30
sole obligation to deliver squid as required by the contract (i.e. as per sample and in the 100-
150 g range). There were no acts or omissions from CLAIMANT that could have caused
RESPONDENT‘s failure to perform [UNCITRAL Digest Art. 80]. Secondly, CLAIMANT
did not contribute to RESPONDENT‘s failure to deliver the non-conforming squid.
CLAIMANT‘S specifications regarding the quality of the squid were clear and precise, in
such a manner that said specifications could not in any way have led to RESPONDENT‘S
failure. Given this situation, RESPONDENT‘s breach of the contract is not exempted by
Art. 80 CISG.
148. CONCLUSION ON ISSUE IV: RESPONDENT‘s contractual breach was fundamental
enabling CLAIMANT to avoid the contract under Arts. 49 and 51(2) CISG. CLAIMANT
preserved the squid in accordance with Art. 82 CISG and has thus not lost the right to
declare the contract avoided. CLAIMANT‘s notice of avoidance was CISG compliant.
CLAIMANT is entitled to rely on RESPONDENT's failure to perform, because said failure
was not caused by an act or omission of CLAIMANT‘s regarding Art. 80.
V. CLAIMANT TOOK ALL NECESSARY MEASURES TO MITIGATE LOSSES AND IS
ENTITLED TO DAMAGES UNDER ART. 45 CISG
149. In accordance with Art. 77 CISG, CLAIMANT must take the steps that a reasonable
creditor acting in good faith would have taken under the same circumstances [UNCITRAL
Digest] so as to mitigate the losses caused by the failure of RESPONDENT to comply with
the contract. In compliance with this principle CLAIMANT took all measures that were
reasonable to mitigate the losses [A.]. In any case, the burden of the proof of lack of
mitigation lies on RESPONDENT, who must provide detailed facts and supporting
evidence [B.].
A. CLAIMANT took all measures that were reasonable to mitigate the losses
150. Article 77 CISG requires that a party relying on breach of contract take measures as are
reasonable in the circumstances to mitigate the loss. This criterion of reasonableness has been
said to be that of a prudent person in the position of the party claiming damages
[Huber/Mullis p. 290], or, in other words the bona fides (good faith) conduct that could have
been expected from a reasonable person in the position of the claimant under the same
circumstances [OG 06/02/96].
151. This raises the question: What kind of business person is CLAIMANT? CLAIMANT is a
company whose line of business includes the sale of supplies to fishing fleets operating in
Mediterraneo, including the supply of bait to the long-line fisheries and the production of
pelagic, wet salted and dry fish for human consumption [R. for A. ¶2]. In regard to the bait,
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
31
the Mediterraneo long-liners use both mackerel and squid [R. for A. ¶2]. The sale of squid for
human consumption (as seafood) is not part of CLAIMANT‘s line of business.
152. We must recall that the major portion of squid delivered by RESPONDENT was unfit for
bait and the lesser portion that resulted adequate for this purpose could not however be sold
even at a discount price. The long-liners had in fact outweighed the sales price to the risk of
purchasing undersized bait that would give poor results and that in the long run, despite a
discount price, could result more costly.
153. In this situation, a reasonable person like CLAIMANT to mitigate the losses had only two
options, conserve the squid and await RESPONDENT‘s instructions and, bearing in mind
that the entire stock was suitable for human consumption [Cl. Ex. 9], it could attempt to sell
some of the lot as human foodstuff.
154. In this respect, upon receiving TGT‘s Report [Cl. Ex. 8], in an act of good faith
CLAIMANT immediately informed RESPONDENT by email that it would store the squid
delivered in its warehouse until November, and that at that point it would have to rent out
additional warehouse space at its expense while awaiting instructions in regard to the
disposition of the squid. CLAIMANT also mentioned that it would seek to sell the squid on
RESPONDENT‘s account [Cl. Ex. 8].
155. However, CLAIMANT did not sell squid as seafood in its line of business as it lacked a local
or international market in which to place the delivered goods; the local market of squid for
human consumption was already saturated [R. for A. ¶20], and demand was small, especially
because restaurants are accustomed to buying squid by the kilo and not by the tonne [Cl. Ex.
10 ¶15], thus placing 20 tonnes of squid in the seafood market for someone like
CLAIMANT was utterly unachievable. Consequently, despite CLAIMANT‘s efforts it did
not achieve to sell any of the squid in the local market [R. for A. ¶20; Cl. Ex. 10 ¶15].
156. In spite of this, CLAIMANT did not rest inactive, exceeding the standards of its duty to
mitigate losses, it did what was at the point the only reasonable alternative for someone in its
position, it turned to a third party with proper contacts outside of Mediterraneo (Reliable
Trading House) and requested that they sell as much of the squid as they possibly could in any
foreign market [Cl. Ex. 10 ¶15], through this alternative it succeeded in selling 20 tonnes of
squid, the equivalent to 10% of the lot delivered [Cl. Ex. 10 ¶15; St. of D. ¶18].
157. Though the amount sold is but a small portion of the entire delivery, for the claim of
damages under Art. 45(1)(b) CISG to be awarded it is only necessary that the buyer
undertakes all reasonable measures, even if these measures have been
unsuccessful[Huber¶12].
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
32
158. In any case, the ultimate destruction of 90% of the squid lot, was not a result of inadequate
measures taken by CLAIMANT, but rather from RESPONDENTS reluctance to recognise
its breach of contract. CLAIMANT properly stored and conserved the squid at
RESPONDENT‘s disposition, but the latter preferred to remain reticent, and with the
understanding that ‗land frozen squid‘ stays fit for human consumption only for a limited
period of time, and that as time goes by it becomes harder to sell [PO 3 ¶29], it allowed the
squid to become unfit for the sole purpose the undersized squid could be used, i.e. human
consumption [PO 3 ¶30], and thus through its inaction caused its ultimate destruction.
159. CLAIMANT, by properly storing the squid in its warehouses, additionally renting out extra
warehouse space while awaiting RESPONDENT‘s instructions [ICC N° 7585] and
furthermore selling 10% of the squid lot through Reliable Trading House [Shoes case II], had in
fact, done all that was reasonably at its reach to mitigate losses.
B. In any case, the burden of the proof of lack of mitigation lies on
RESPONDENT, who must provide detailed facts and supporting
evidence
160. The courts have repeatedly established that the burden of the proof of lack of mitigation lies
on the party that is liable for damages and that consequently invokes the reduction of the
damages under Art. 77 CISG. Furthermore the claim of breach of duty is an exception that
leads to the exoneration [or reduction] of the damages owed by the liable party, with this
reasoning it has been submitted that the seller must put forward detailed facts and supporting
evidence showing why the buyer has breached its duty to mitigate damages, the possibilities
of alternative conduct and which part of the damages would have been prevented by this
alternative conduct [Huber¶16; OG 06/02/96, OLG Hamm 22/09/92, OLG Hamburg
28/02/97].
161. Consequently, even though it has been proved that CLAIMANT took all possible and
reasonable measures to mitigate losses, the burden of proof of lack of mitigation lies on
RESPONDENT who must forward detailed facts and supporting evidence, the sole claim of the
breach of duty to mitigate should otherwise be revoked.
162. CONCLUSION ON ISSUE V: CLAIMANT took all measures that where reasonable and
at its reach to mitigate losses and is thus entitled to damages under art. 45 (1) lit. (b) CISG. In
any case, the burden of the proof of the lack of mitigation lies on RESPONDENT who
must forward detailed facts and supporting evidence that the duty to mitigate was in fact
infringed.
ARGUMENT ON THE MERITS OF THE COUNTERCLAIM
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
33
VI. CLAIMANT IS NOT LIABLE FOR DAMAGES UNDER A CONFIDENTIALITY DUTY
163. RESPONDENT argues that CLAIMANT is liable for damages ‗[r]esulting from its breach
of the confidentiality of the proceedings‘ [S. of D. ¶24]. CLAIMANT will prove that it has
not violated the CAM Rules on the basis that: there was no confidentiality agreement
between the parties [A.] and, alternatively, if the Tribunal considers that there was a
confidentiality agreement between the parties, CLAIMANT is not liable because it made the
proceedings public to protect its own rights [B.].
A. There was no confidentiality agreement between the parties
164. CLAIMANT and RESPONDENT did not agreed on the confidentiality of the arbitral
proceedings for two core reasons: substantive provisions of the amended CAM Rules 2010
do not apply when they affect the parties‘ substantive rights [i.] and, neither was there an
implicit confidentiality agreement when the parties agreed to submit to arbitration [ii.].
i. Substantive provisions of the amended CAM Rules 2010 do not
apply when they affect the parties’ rights
165. As to 29 May 2008, when the parties incorporated the arbitration clause to their contract [Cl.
Ex. 4; Resp. Ex.2], the CAM Rules enacted in 2004 were in force.
166. By the commencement of the proceedings, the new CAM Rules, enacted on 1 January 2010,
were in force, and therefore, said rules are applicable to the case unless otherwise agreed by
the parties [Art. 39 CAM Rules]. This provision is in consonance with the principle that the
application of procedural rules is an exception to the presumption against retroactivity. Said
procedural rules are therefore ordinarily intended to have an immediate effect [Dinner].
167. However, a fundamental modification of the Rules concerning confidentiality was enacted
providing that ‗[t]he parties shall keep the proceedings and the arbitral award confidential‘
[Art. 8 CAM Rules; Coppo p. 287]. In any case, confidentiality is not a procedural feature; it is
in fact, deemed to be in its very nature, a substantial obligation imposed on the parties. The
confidentiality duty does not affect the proceedings themselves, it affects substantial rights of
the parties, which they did not have in mind when incorporating the CAM Rules.
168. Accordingly, even if said body of procedural rules were to be applicable to the case, a
substantive provision, affecting the rights and interfering with a substantive right or liability
of the parties should not be applicable [Bunge v. Kruse; Cars & Cars Pte v. Volkswagen; Black &
Veatch v. Jurong].
ii. Neither was there an implicit confidentiality agreement when the
parties agreed to submit to arbitration
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
34
169. It is well-known that the principle of confidentiality related to the parties in arbitration is not
universally accepted [Fouchard/Gaillard/Goldman ¶384]. Moreover, it is not accepted, as a
matter of principle, that confidentiality is inherent to international commercial arbitration
[ICC No. 11961].
170. Although arbitration is often a chosen ADR method for its confidential nature, the nature of
this relation only imposes the duty of confidentiality on arbitrators and administrative bodies.
In this sense, the 2004 CAM Rules refer to the confidential nature of arbitration; concerning
solely the work of the arbitrators and the CAM itself [Art 8 CAM Rules 2004].
171. On the other hand, even if some jurisdictions stand for an implicit duty of confidentiality in
arbitration (albeit not an absolute), e.g. England, France, Singapore; other jurisdictions
overtly deny this approach, such as Australia, the United States and Sweden. In any event,
the MAL, i.e. Danubia‘s national law, does not address the subject of confidentiality, neither
to impose general duties of confidentiality nor to negate or override them, leaving to the
parties the authority to settle this matter in accordance with their will [Born p.2254].
172. Likewise, when there is not an express contractual agreement concerning confidentiality, the
existence of the arbitration and its content are not confidential. Esso v. Plowman, a landmark
decision, ruled that the fact that a party enters into an arbitration agreement, does not imply
that all documents produced and information disclosed in the arbitration must be kept
strictly confidential. In addition, when the parties do not provide for an obligation of
confidentiality in the agreement itself, it should be the responsibility of the arbitral
institutions, with some limitations, as a part of arbitration, to make stipulations to that effect
in their rules [Paulsson].
173. Consequently, an obligation to confidentiality must arise from an express contractual
provision [BulBank v. AI]. Such provision was neither established by the parties in the
arbitration agreement nor by the rules thereby incorporated. For that reason, no
confidentiality duty is enforceable between the parties.
B. Alternatively, if the Tribunal considers that there was a confidentiality
agreement between the parties, CLAIMANT made the proceedings public
to protect its own rights
174. Even in the case that this Tribunal finds that there was a duty of confidentiality, this principle
is by no means absolute [Navigator Investment v. Acclaim Insurance]. According to the CAM
Rules, in the event of a breach of the confidentially duty, said duty is not enforceable when it
is necessary to protect one‘s right [Art. 8 CAM Rules]. Moreover, disclosures are acceptable
when they are reasonably necessary for the protection of a party legitimate interests [Emmott
UNIVERSIDAD NACIONAL DE ASUNCIÓN • MEMORANDUM FOR CLAIMANT
35
v. Michael Wilson]. In the present case, RESPONDENT‘s breach of the contract caused
CLAIMANT to lose its impeccable reputation among its long-liners customers. At least three
of them shifted to other suppliers [Cl. Ex. 1 ¶18 ]. This fact was remarked by CLAIMANT‘s
CEO in an interview published on 24 May 2010 [Resp. Ex. 1], expressing the reasons for
which they were not able to satisfy its customers, in order to protect future business with
these and other long-liners in Mediterraneo and abroad. Hence, the disclosure of information
falls under the scope of protection of legitimate interests and rights, considering that
RESPONDENT‘s failure to respect the contract caused a deficient performance of
CLAIMANT in its obligations as supplier of squid, causing a direct impact on CLAIMANT‘s
reputation among its customers and the potential business attached thereto. It has therefore
been proved, that CALIMANT‘s CEO statements were directed to protect CLAIMANT‘s
financial interests and recover its loyal customers, i.e. the protection of a legitimate right, a
universally accepted legitimate exception to the confidentiality duty.
175. CONLUSION ON ISSUE VI: The parties did not owe to each other a duty of
confidentiality. This duty was neither implicitly nor explicitly agreed on. However, if the
Tribunal finds that there was a duty of confidentiality; CLAIMANT‘s disclosure was
legitimate since it was made to protect its rights and interests.
REQUEST FOR RELIEF
CLAIMANT respectfully requests the Arbitral Tribunal to find that:
I. It has jurisdiction to understand in the present dispute as the arbitration agreement was
duly followed;
II. RESPONDENT infringed Art. 35(1) CISG by delivering undersized squid;
III. RESPONDENT, alternatively, failed to deliver saleable squid fit for use as bait in breach
of Art. 35(2)(a)(b) CISG;
IV. RESPONDENT failed to deliver sample compliant squid as mandated by Art. 35(2)(c)
CISG;
V. RESPONDENT‘S contractual breach is fundamental under Art. 25 CISG;
VI. CLAIMANT correctly avoided the contract according to Arts. 49, 51(2), 26 CISG;
VII. CLAIMANT dutifully mitigated losses pursuant to Art.77 CISG ;
VIII. CLAIMANT is thus entitled to recover the purchase price and damages under Art. 74
CISG;
IX. CLAIMANT is not liable for damages for the alleged breach of a duty of confidentiality.