THIRTEENTH ANNUAL
WILLEM C. VIS (EAST) INTERNATIONAL COMMERCIAL ARBITRATION MOOT
NATIONAL TAIPEI UNIVERSITY
On Behalf of (Claimant)
Against (Respondent)
Kaihari Waina Ltd
Vino Veritas Ltd
12 Riesling Street
56 Merlot Rd
Oceanside, Equatoriana
St Fundus, Vuachoua,
Mediterraneo
MEMORANDUM FOR CLAIMANT
LEE CHIA-HUA．LI SHIN-HAN
CHEN PO-CHUAN．HUNG JUNG-CHI
New Taipei City．Taiwan
NATIONAL TAIPEI UNIVERSITY
TABLE OF CONTENTS
INDEX OF ABBREVIATIONS ............................................................................................IV
INDEX OF AUTHORITIES ................................................................................................. V
INDEX OF CASES .......................................................................................................... VII
INDEX OF RULES AND LEGAL SOURCE ............................................................................ X
STATEMENT OF FACTS..................................................................................................... 1
SUMMARY OF ARGUMENT ............................................................................................... 2
ARGUMENT ..................................................................................................................... 4
RESPONDENT SHALL PRODUCE DOCUMENTS REQUESTED BY THE
CLAIMANT BECAUSE THE PARTIES ONLY EXCLUDED “DISCOVERY”
PROCEDURE IN THE FRAMEWORK AGREEMENT, PARTIES ARE
ENTITLED TO REQUEST DOCUMENT IN ACCORDANCE WITH ART.3.2
OF THE IBA RULES ............................................................................................. 4
IN ACCORDANCE WITH THE INTERPRETATION OF THE FRAMEWORK
AGREEMENT, BOTH PARTIES DID NOT EXCLUDE ALL DOCUMENT PRODUCTION
PROCESSES. THEY ONLY AGREED TO EXCLUDE “DISCOVERY” PROCEDURE ....... 4
1. Interpretation of the Agreement shall be made pursuant to Art. 4.1 of the
UNIDROIT Principles................................................................................................ 4
i. Art.4.1(1) of the UNIDROIT Principles provides that the contract
should be interpreted under the parties’ common intention ...................... 4
ii. Art.4.1(2) of the UNIDROIT provides that the contract should be
interpreted under reasonable persons who in the same circumstances ..... 5
2. Art.28 of the Vienna Rules requires the arbitral tribunal shall treat the parties
fairly ................................................................................................................................ 6
3. Art.19 of the Model Law provides that the arbitral tribunal may take appropriate
procedure ....................................................................................................................... 6
CLAIMANT’S REQUEST FOR PRODUCTION MEETS REQUIREMENTS SET FORTH
UNDER ART.3 OF THE IBA RULES, THEREFORE THE TRIBUNAL SHOULD ORDER
RESPONDENT TO PRODUCT THE DOCUMENTS............................................. 7
1. CLAIMANT’s request to production contains a description in sufficient detail
of a narrow and specific requested, and is also relevant to the case and material
to its outcome, which is already satisfy to the requirement of Art. 3.3 of the IBA
Rules ............................................................................................................................... 7
i. CLAIMANT sets forth a clear time frame for the particular documents it
requests, therefore the request meets Art. 3.3(a) of the IBA Rules ........... 8
ii. The documents are important in determining the loss of CLAMANT;
therefore, the request is satisfying to Art 3.3(b) of the IBA Rules ............ 8
iii. The documents are information between RESPONDENT with other
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party, which are not in the possession of CLAIMANT. Therefore, the
request is satisfying to Art 3.3(c) of the IBA Rules...................................... 9
2. To request these documents will not violate RESPONDENT’s commercial
secret since the arbitration shall be held in, and both party shall keep all
presented documents confidential according to Art.3.13 of the IBA Rules ....... 9
CLAIMANT IS ENTITLED TO REQUEST FOR DELIVERY OF 10,000
BOTTLES BECAUSE THE PARTIES HAVE AGREED TO SUCH TERM .....10
RESPONDENT FAILED TO PERFORM ITS THE CONTRACTUAL OBLIGATION; IT
BEARS THE DUTY TO DELIVERY 10,000 BOTTLES OF MATA WELTIN .................10
1. The Contract was concluded on 25 November 2014 ........................................... 10
2. Quantity of the delivery of Diamond Mata Weltin is 10,000 bottles of Diamnod
Mata Weltin ................................................................................................................. 10
ALTERNATIVELY, RESPONDENT’S “FAVOURABLE CONSIDERATION” IS THE
ACCEPTANCE OF THE QUANTITY REQUESTED BY CLAIMANT ........................ 11
1. The conduct of parties should be interpreted in accordance with Art.8 of the
CISG ............................................................................................................................ 11
2. Mr. Weinbauer’s “favorable consideration” means that the Respondent has
agreed and accepted 10,000 bottles ......................................................................... 12
RESPONDENT TERMINATED THE CONTRACT WRONGFULLY ......................12
CLAIMANT IS ENTITLED TO BE COMPENSATED FOR THE
LITIGATION COSTS OF USD 50,280 WHICH WERE INCURRED BY ITS
APPLICATION FOR INTERIM RELIEF AND BY ITS SUCCESSFUL
DEFENSE AGAINST RESPONDENT IN THE PROCEEDINGS IN THE
HIGH COURT OF CAPITAL CITY .....................................................................13
IN ACCORDANCE WITH ART. 74 OF THE CISG, RESPONDENT SHOULD PAY A
SUM EQUAL TO THE LOSS TO CLAIMANT AS A CONSEQUENCE OF THE BREACH,
WHICH INCLUDE COVERING OF THE LITIGATION EXPENSES INCLUDING THE
COSTS FOR AN INTERIM RELIEF AND ATTORNEY’S FEE.....................................13
1.
2.
Art.74 of the CISG provides the full compensation to the CLAIMANT ........ 13
Art.74 of the CISG entitles CLAIMANT to request for costs in relations to
interim relief and attorney’s fee ............................................................................... 14
i. The cost of an interim relief is the damages resulting from
RESPONDENT’s breach of contract ......................................................... 14
a). It is necessary for CLAIMANT to ask the court to file an interim relief .. 15
b). The cost of an interim relief is recoverable as damage under Art.74 of the
CISG .................................................................................................................... 15
c). RESPONDENT’s position that the cost of interim measures and court
fee cannot be requested pursuant to Art.74 of the CISG; however, this
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view is incorrect and groundless ...................................................................... 16
ii. The cost of attorney’s fee is the damages by virtue of RESPONDENT’s
breach of contract, which is foreseeable and reasonable .......................... 16
a). CLAIMANT had to make a reasonable contingency fee contract with the
local Mediterranean law firm, LawFix in view of its urgent need to seek
for court assistance ............................................................................................ 17
b). RESPONDENT should have have foreseen the attorney’s fee when it
refuse to perform in accordance with the Framework Agreement ............ 18
c). CLAIMANT did not fail to take measures of mitigation under Art.77 of
the CISG .............................................................................................................. 18
RESPONDENT SHALL PAY FOR CLAIMANT’S SUCCESSFUL DEFENSE
AGAINST THE PROCEEDINGS IN THE HIGH COURT OF CAPITAL CITY ..............18
1.
RESPONDENT should not take the legal proceeding in the High Court of
Capital City under the arbitration agreement of Framework Agreement ......... 19
2. CLAIMANT defends successfully against the proceedings in the High Court of
Capital City .................................................................................................................. 19
3. RESPONDENT should pay the cost of the proceedings in the High Court of
Capital City to CLAIMANT under Art.74 of the CISG ..................................... 19
CLAIMANT IS ENTITLED TO BE COMPENSATED FOR DAMAGE
SUFFERED IN ACCORDANCE WITH ART.74 OF THE CISG BECAUSE OF
NON-PERFORMANCE OF CONTRACTUAL OBLIGATION ....................... 20
RESPONDENT BREACHED THE CONTRACT OF DELIVERING 10,000 BOTTLES
OF MATA WELTIN TO CLAIMANT................................................................. 20
CLAIMANT SUFFERED LOSS OF PROFITS BECAUSE OF THE RESPONDENT’S
NON-PERFORMANCE ....................................................................................... 20
1. Loss of future profit can be claimed as the damages in Art.74 of the CISG ... 20
2. CLAIMANT suffered the losses because of RESPONDENT’s nonperformance ................................................................................................................ 21
RESPONDENT CAN FORESEE CLAIMANT’S LOSS OF PROFIT .................... 22
1. The seller is foreseeable of the buyer’s loss of profit as it knew the buyer resells
wine to third parties ................................................................................................... 22
2. RESPONDENT is foreseeable of the CLAIMANT’s loss of profit ................ 22
CLAIMANT
RESPONDENT TO PAY DAMAGES AT THE
AMOUNT OF LEAST EUR 110,000 ..................................................................... 23
REQUEST FOR RELIEF .................................................................................................. 24
CERTIFICATE ............................................................................................................... XII
CAN REQUEST
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INDEX OF ABBREVIATIONS
Cited As
Full Citation
Art. / Arts.
Article/ Articles
CLAIMANT
Kaihari Waina Ltd
Exhibit C
CLAIMANT’s Exhibition
Exhibit R
RESPONDENT’s Exhibition
IBA Rules
IBA Rules on the Taking of Evidence Adopted by a resolution of
the IBA Council 29 May 2010 International Bar Association
IBA Rules
COMMENTARY
Commentary on the revised text of the 2010 IBA Rules on the
ICC Rules
2012 Rules of Arbitration of the International Chamber of
Commerce
Model Law
UNCITRAL Model Law on International Commercial
Arbitration 1985 with amendments as adopted in 2006
Order 1
Procedural Order No. 1
Order 2
Procedural Order No. 2
P./ PP.
Page/ pages
Para. / Paras.
Paragraph / paragraphs
RESPONDENT
Vino Veritas Ltd
UNCITRAL
The United Nations Commission on International Trade Law
UNDER
Under Section 28 of the Declaratory Judgment Act 2013 It Is
hereby Declared As Follows[ Exhibit C9, P.17 ]
UNIDROIT
The UNIDROIT Principles of International Commercial
Contracts 2010
Taking of Evidence in International Arbitration
iv
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INDEX OF AUTHORITIES
Cited As
Full Citation
Paragraphs
Bruno Zeller
Bruno Zeller
Damages under the Convention on
Contracts For the International Sales of
Goods(Second Edition)
Oxford University Press(2009)
Para.110
CISG
Commentary
C.H. Beck, Hart, Nomos
UN Convention on Contracts for the
International Sale of Goods (CISG)
Commentary
Para.62, 63, 69, 117
Harry
Harry M. Fletcher
Recovering Attorneys' Fees as Damages
under the U.N. Sales Convention
(CISG): The Role of Case Law in the
New International Commercial Practice,
with Comments on Zapata Hermanos v.
Hearthside Baking
Northwestern Journal of International
Law & Business, Volume 22, Issue 2
Winter(2002)
Para.84
IBA Rules
COMMENTA
RY
IBA Rules on the Taking of Evidence
Adopted by a resolution of the IBA
Council 29 May 2010 International Bar
Association
Para.32
Nathan
Nathan D. O'Malley
Document production under Art.3 of
the 2010 IBA Rules of Evidence
International Arbitration Law Review,
Int.A.L.R. 2010, 13(5), 186-194(2010)
Para.34, 38
Oxford
Dictionary
Oxford Dictionary Online
http://www.oxforddictionaries.com/
(last view at 2015.12.1)
Para.55
Peter
Peter Schlechtriem
Case comment Attorneys' Fees as Part of
Recoverable Damages
http://www.cisg.law.pace.edu/cisg/biblio/s
chlechtriem4.html#14
Para.92, 94
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Redfern/Hunter
Nigel Blackaby and Constantine
Partasides QC with Alan Redfern and
Martin Hunter
Redfern and Hunter on International
Arbitration (Sixth Edition)
Oxford University Press(2015)
Para.12
Timo
Timo Ylikantola
Document Discovery in Current
International Arbitration Practice: Are
There Differences between Common
Law and Civil Law Traditions?
Vindobona Journal of International
Commercial Law & Arbitration 2012
Para.23, 27, 34
UNCITRAL
Digest
UNCITRAL Digest of Case Law on the
United Nations Convention on
Contracts for the International Sale of
Goods, 2012 edition
Para.53, 118, 119, 120
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INDEX OF CASES
Cited As
Full Citation
Paragraphs
Austria
CISG-Online No. 224
CISG-Online No. 643
CISG-Online No. 224
Oberster Gerichtshof
6 February 1996
http://cisgw3.law.pace.edu/cases/960206a3.html
CISG-Online No. 643
Oberster Gerichtshof
Para.121
Para.116
14 January 2002
http://cisgw3.law.pace.edu/cases/020114a3.html
Judgement of 14 January
2002
Judgement of 14 January 2002
7 Ob 301/01t, Oberster Gerichtshof
http://cisgw3.law.pace.edu/cases/020114a3.html
Para.65
Judgement of 9
December 2002
Judgement of 9 December 2002
Serbia, Foreign Trade Court of Arbitration
attached to the Yugoslav Chamber of Commerce
9 December 2002
http://cisgw3.law.pace.edu/cases/021209sb.html
Para.67
Switzerland
CLOUT case No. 877
CLOUT case No. 877
Bundesgericht
22 December 2000
Para.53
CLOUT Case No.214
CLOUT Case No.214
Handelsgericht des Kantons Zürich, HG950347
5 February 1997
http://cisgw3.law.pace.edu/cases/970205s1.html
Para.111
Judgement of 19
December 1997
Judgement of 19 December 1997
OR.97.00056, Handelsgericht des Kantons Aargau
http://cisgw3.law.pace.edu/cases/971219s1.html
Para.79
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England
Cory v. Thomas
Ironworks &
Shipbuilding Co Ltd.
Cory v. Thomas Ironworks & Shipbuilding Co
Ltd.
L.R. 3 Q.B 181.
Para.110
Netherlands
Eyroflam S.A. v. P.C.C.
Rotterdam B.V.
Eyroflam S.A. v. P.C.C. Rotterdam B.V.
295401/HA ZA 07-2802(Rechtbank Rotterdam)
15 October 2008
http://cisgw3.law.pace.edu/cases/081015n2.html
Para.86
Skoda Kovarny v. B. van
Dijk Jr.
Staalhandelmaatschappij
B.V.
Skoda Kovarny v. B. van Dijk Jr.
Staalhandelmaatschappij B.V.
District Court Arnhem
1 March 2006
http://cisgw3.law.pace.edu/cases/060301n1.html
Para.118
Germany
CLOUT case No. 166
CLOUT case No. 166
Schiedsgericht der Handelskammer Hamburg
21 March 1996, 21 June 1996
Para.120
CLOUT case No. 168
CLOUT case No. 168
Oberlandesgericht Köln
21 March 1996
Para.119
Judgement of 7 April
2009
Judgement of 7 April 2009
6 O 171/08, Landgericht Potsdam
http://cisgw3.law.pace.edu/cases/090407g1.html
Para.87
United States
Delchi Carrier, S.p.A. v.
Rotorex Corp
Delchi Carrier, S.p.A. v. Rotorex Corp
Nos. 185, 717, U.S. Court of Appeals for the
Second Circuit
6 December 1995
http://cisgw3.law.pace.edu/cases/951206u1.html
Para.66
Republic of Kazakhstan
v. Biedermann
International
Republic of Kazakhstan v. Biedermann
International
168 F.3d 880, U.S Court of Appeals for the Fifth
Para.26
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Circuit
11 March 1999
People’s Republic of China
Judgement of 21 May
2006
Judgement of 21 May 2006
CISG/2006/01, China International Economic
and Trade Arbitration Commission
http://cisgw3.law.pace.edu/cases/060521c1. html
Para.88
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INDEX OF RULES AND LEGAL SOURCE
Cited As
CISG
Full Citation
United Nations Convention on Contracts for the International
Sale of Goods of 11 April 1980
IBA Rules on the Taking of Evidence Adopted by a resolution
IBA Rules
IBA Rules
COMMENTARY
of the IBA Council 29 May 2010 International Bar Association
Commentary on the revised text of the 2010 IBA Rules on the
Taking of Evidence in International Arbitration
ICC Rules
2012 Rules of Arbitration of the International Chamber of
Commerce
Model Law
UNCITRAL Model Law on International Commercial
Arbitration 1985 with amendments as adopted in 2006
UNIDROIT
UNIDROIT Principles of International Commercial Contracts
2010
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STATEMENT OF FACTS
1
2
3
4
Originally, the parties to this arbitration were Kaihari Waina Ltd (hereinafter
“CLAIMANT”) and Vino Veritas Ltd (hereinafter “RESPONDENT”).
CLAIMANT is a wine merchant, in in particular selling top quality wines named Mata
Weltin wines of diamond quality.
RESPONDENT is the top vineyards in Mediterraneo specialized in making top quality
wines included Mata Weltin wines of diamond quality.
22 April 2009
In order to make a long term mutual reliance, the parties concluded a
Framework Agreement. It provides that, CLAIMANT would buy a certain minimum
number of bottles from RESPONDENT which in return committed to deliver bottles
up to a maximum of 10,000 bottles every year. The exact amount will be decided every
year by CLAIMANT at the end of the year.
4 November 2014
CLAIMANT notified RESPONDENT and ordered the
maximum of guaranteed bottles under the Framework Agreement, besides that,
CLAIMANT hoped to buy another 2,000 bottles.
25 November 2014
Ms. Buharit, the development manager of Kaihari Waina Ltd,
met Mr. Weinbauer, the CEO of Vino Veritas Ltd. Ms. Buharit made clear that
CLAIMANT needed as a minimum the full quantity of bottles ordered but preferably
more. Mr. Weinbauer had created the impression that RESPONDENT would honor its
contractual delivery commitments.
1 December 2014
be delivered.
RESPONDENT told to CLAIMANT that only 4,500 bottle would
2 December 2014
CLAIMANT informed RESPONDENT that they insisted the full
quantity of 10,000 bottles shall be delivered.
4 December 2014
Mr. Weinbauer terminated the relationship and told to
CLAIMANT that nothing would be delivered.
8 December 2014
CLAIMANT sought an interim injunction in the High Court of
Capital City, Mediterraneo, prohibiting RESPONDENT from selling the 10,000 bottles
of diamond Mata Weltin 2014 ordered by CLAIMANT
12 December 2014
The Court passed the interim injunction. Furthermore,
RESPONDENT refrained from challenging the order made by the Court.
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SUMMARY OF ARGUMENT
5
6
In order to maintain a stable, long-term relationship with each other, CLAIMANT and
RESPONDENT concluded a Framework Agreement with trust and commitment.
Under the Framework Agreement, each party can realize the rights and obligations
through transactions made year by year.
CLAIMANT and RESPONDENT had concluded an annual and valid purchase contract
that RESPONDENT has no right to terminate. After the certain contract has been
concluded, RESPONDENT shall fulfill the obligation under his commitment. However,
RESPONDENT denied to perform the full contract and even terminated the purchase
contract unrightfully. Hence, it is clearly obvious that RESPONDENT has to
7
compensate for the damages of his nonperformance to CLAIMANT.
First, according to Art.20 of the Framework Agreement, CLAIMANT and
RESPONDENT agree that no discovery shall be allowed. However, CLAIMANT states
8
9
10
that the document production does not be excluded. Producing documents is an
appropriate measure to treat the parties fairly, in addition the arbitral tribunal has power
to request RESPONDENT the document production. Also, IBA Rules on Taking
Evidence shall be applied for this case since it is an international arbitration practice when
considering evidence process. As CLAIMANT’s statement is fulfilled to the Art.3.3 of
the IBA Rules, and there is no confidential conscious during the arbitration, a document
production process shall be allowed. (I.)
Second, CLAIMANT is entitled to request for delivery of 10,000 bottles because the
parties have so agreed. The quantity of the delivery of Diamond Mata Weltin is 10,000
bottles of Diamnod Mata Weltin because of RESPONDENT’s contractual obligation
under Art.2 of the Framework Agreement and the practice between the parties.
Alternatively, RESPONDENT’s “favourable consideration” is the acceptance of the
quantity requested by CLAIMANT under the interpretation of Art.8 of the CISG. (II.)
Third, under the regulation of Art.74 of the CISG, it stipulates the principle of full
compensation, the aggrieved party can ask to refill its damages as the breach had not
happened. The reason why CLAIMANT should bear the litigation expenses is that
RESPONDENT breach his obligations under his commitment of the Contract.
Furthermore, RESPONDENT can foresee or could have foreseen the damages at the
time of the conclusion of the Contract. As a consequence, RESPONDENT shall make
compensation for CLAIMANT’s litigation expenses including the cost of filing an
interim relief, attorney’s fee and CLAIMANT’s successful defense in the High Court of
Capital City (III.)
Forth, CLAIMANT is entitled to compensate for damages suffered in pursuant of Art.74
of the CISG because of RESPONDENT’s non-performance of contractual obligation.
First, RESPONDENT’s rejection of delivering 5,500 bottles of Mata Weltin constitutes
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non-performance of its contractual obligation. Second, CLAIMANT suffered loss of
profits because of the RESPONDENT’s non-performance. CLAIMANT suffered the
loss of price margin between these two different trades. Furthermore, CLAIMANT
suffered loss of profit because he cannot gain any profit of resale as a result of nonperformances of the Contracts with its customers. Third, RESPONDENT is foreseeable
for the CLAIMANT’s loss of profit. In many cases, the tribunal stated that the seller is
foreseeable for the buyer’s loss of reselling to the third parties. In addition,
RESPONDENT foresaw the CLAIMANT’s loss of resale because of the Art.2 of the
Framework Agreement. Therefore, CLAIMANT can claim for damages to
RESPONDENT in pursuant of Art.74 of the CISG. Finally, CLAIMANT can request
RESPONDENT pay damages of at the amount least EUR 110,000 The CLAIMANT’s
lost profit is much more than the profit of RESPONDENT, so CLAIMANT can simply
claim damages for RESPONDENT’s profit made by selling 5,500 bottles of Mata Weltin
2014 to SuperWine. We do not seek specific performance. (IV.).
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ARGUMENT
RESPONDENT SHALL PRODUCE DOCUMENTS REQUESTED BY THE
CLAIMANT BECAUSE THE PARTIES ONLY EXCLUDED “DISCOVERY”
PROCEDURE IN THE FRAMEWORK AGREEMENT, PARTIES ARE
ENTITLED TO REQUEST DOCUMENT IN ACCORDANCE WITH ART.3.2 OF
THE IBA RULES
In accordance with the interpretation of the Framework Agreement, both parties did
not exclude all document production processes. They only agreed to exclude
“discovery” procedure
11
12
13
RESPONDENT refused to produce any documents CLAIMANT requested, citing
Art.20 of the Framework Agreement, which it stated, inter alia, that the parties have
explicitly agreed that no discovery should be allowed.
However, the parties’ intention and the wording of the clause is clear. The parties ONLY
agreed to exclude discovery, a board disclosure proceeding adopted most notably in the
United States federal and state jurisdictions. The word “discovery” is originated from the
United States and some other common law countries, which describes “a process
whereby the parties (and their lawyers) are legally obliged to produce documents that are
‘relevant to the pleaded issues’, even if they are prejudicial to that party’s case.”
[ Redfern/Hunter, P.380, Para.6.94, note74 ] Discovery proceeding is different from other
document production processes, such as disclosure in the United Kingdom or IBA Rules
document production process.
Art.19(2) of the Model Law provides that the tribunal should take appropriate measure
to conduct the arbitration, and adopting an appropriate document request procedure
should be considered as an appropriate measure. Furthermore, the Vienna Rules
provide that the Tribunal shall treat parties fairly. Therefore, the Tribunal shall order
RESPONDENT to produce relevant and material documents CLAIMANT requests.
1. Interpretation of the Agreement shall be made pursuant to Art. 4.1 of the
UNIDROIT Principles
i.
Art.4.1(1) of the UNIDROIT Principles provides that the contract should be
interpreted under the parties’ common intention
14
Art. 4.1(1) of the UNIDROIT provides that, “a contract shall be interpreted according
to the common intention of the parties.” In determining the meaning of a contract terms,
the preference is to seek for the parties’ common intention. Consequently, a contractual
term may be given its plain and ordinary meaning in the event that the parties do not
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explicitly define such term.
15
16
17
18
Under Art. 20 of the Framework Agreement, “the parties agree that no discovery shall
be allowed. ” The word “discovery”, as commonly understood, refers only to an extensive
discovery proceedings which are practiced in some jurisdictions such as the USA. The
distinct feature of the US discovery procedure is its ability to request production of
documents, the taking of depositions. In other words, when drafting Art. 20 of the
Framework Agreement, the parties did not exclude the other type of document
production.
Rules pertinent to the production of evidence in international arbitration is governed
most notably by the IBA rules [ CLAIMNT’s statement of fact No.29, P.8, line1-5 ]. On the
other hand, RESPONDENT argues that Art.20 excludes all types of discovery, including
document production, and stated that the IBA Rules does not apply to this arbitration.
[ RESPONDENT’s statement of fact No.28, P.28, line5-7] Clearly, the parties had different
interpretation of the term “discovery”.
At the time of signing the Framework Agreement, RESPONDENT did not provide any
comment or objection to Art.20 of the Framework Agreement. According to
RESPONDENT’s representative, Mr. Werner Weinbauer’s, RESPONDENT just wanted
to avoid such the request which would be seriously disruptive to its business and disclose
business secrets to the market [ Exhibit R 1, Para.6, line 2 ]. RESPONDENT also wish to
keep the costs of any dispute resolution low [ Exhibit R 1, Para.4, line4 ]. Furthermore, it
wishes that the document production does not disrupt RESPONDENT’s business and
not disclosure its business secrets. Finally, it desires that any document production does
not disturb the arbitration proceeding which will be conduct in a fast and cost efficient
way.
Therefore, it is clear that from the ordinary meaning of the word and the seeking party’s
true intention, the parties wanted to avoid US style discovery. Thus, not all document
production process had been ruled only. Only US discovery procedure has.
ii. Art.4.1(2) of the UNIDROIT provides that the contract should be interpreted
under reasonable persons who in the same circumstances
19
Even if the parties do not have common intention, in accordance with Art. 4.1(2) of
UNIDROIT Principles, the IBA Rules is also the applicable document production rule
for this case.
20
Art. 4.1(2) of the UNIDROIT Principles provides that, “if such an intention cannot be
established [mutually by the parties], the contract shall be interpreted according to the
meaning that reasonable persons of the same kind as the parties would give to it in the
same circumstances.” The contract shall be interpreted in accordance with the meaning
which reasonable persons of the same kind as the parties would give to it in the same
circumstances. The test is not a general and abstract criterion of reasonableness, but
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rather the understanding which could reasonably be expected of persons with, for
21
example, the same linguistic knowledge, technical skill, or business experience as the
parties.
In this case, CLAIMANT and RESPONDENT have no experience with arbitration and
are not international arbitration practitioners; therefore, they could not have envisaged
and agreed to contract out a rule which they do not know – i.e. the IBA Rules at the time
of drafting [ Order 2 No. 53, P.60, line3-6 ]. Therefore, RESPONDENT’s statement was
unreasonable and is entirely groundless.
2. Art.28 of the Vienna Rules requires the arbitral tribunal shall treat the parties
fairly
22
23
24
Art.28 of the Vienna Rules provides that “(1) the arbitral tribunal shall conduct the
arbitration in accordance with the Vienna Rules and the agreement of the parties but
otherwise in the manner it deems appropriate. The arbitral tribunal shall treat the parties
fairly and shall grant the parties the right to be heard at every stage of the proceedings.
(2) Subject to advance notice, the arbitral tribunal may inter alia declare that pleadings,
the submission of evidence, and requests for the taking of evidence shall be admissible
only up to a certain point in time of the proceedings.”
“The cornerstone in every arbitration must be that the parties are treated fairly and
equally and are afforded due process.” [ Timo, P.132, line1 ] Although the Vienna Rules
does not mention the word “document production” or “discovery”, discovery
proceeding is an important process in all arbitral proceedings. It is a necessary and
appropriate measure to solve the parties’ dispute by seeking for production of relevant
and important documents which can be in position of only one of the parties.
Furthermore, it prevents surprise, and ambush tactics, provides notice to the arbitral
tribunal, and ability for the tribunal to order the parties submission of evidence and
requests for the taking of evidence.
In the present case, the parties did not agree on the procedure how the arbitration shall
be conducted by the tribunal. Consequently, the arbitral tribunal shall adopt the
procedure which treats the parties fairly and preserves the parties its right to be heard.
The document production proceeding is an appropriate measure to treat the parties justly,
so the arbitral tribunal has the power to request RESPONDENT for the document
production.
3. Art.19 of the Model Law provides that the arbitral tribunal may take appropriate
procedure
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Furthermore, Art.19 of the UNCITRAL Model Law provides that “(1) subject to the
provisions of this Law, the parties are free to agree on the procedure to be followed by
the arbitral tribunal in conducting the proceedings. (2) Failing such agreement, the arbitral
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tribunal may, subject to the provisions of this Law, conduct the arbitration in such
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27
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manner as it considers appropriate. The power conferred upon the arbitral tribunal
includes the power to determine the admissibility, relevance, materiality and weight of
any evidence.”
In Republic of Kazakhstan v. Biedermann International, the 5th Circuit ruled that: ”as a
creature of contract, both the substance and procedure for arbitration can be agreed
upon in advance. The parties may pre-arrange discovery mechanisms directly or by
selecting an established forum or body of governing principles in which the conventions
of discovery are settled.” [ Republic of Kazakhstan v. Biedermann International ]
Any international arbitral proceedings shall be conducted according to the chosen
arbitration rules and, if these rules remain silent, the arbitral tribunal may conduct the
matter in such a manner as it considers appropriate. This reflects the doctrine of party
autonomy, whereby the parties are mainly free to agree on the procedure to be followed
in arbitration. The doctrine of party autonomy should also be applied as a starting point
when deciding on matters of evidence, including document discovery and the production
of documents. [ Timo, P.126 ]
In this case, CLAIMANT and RESPONDENT did not agree on the procedure to be
followed by the arbitral tribunal in conducting the proceedings, so the arbitral tribunal
may take appropriate procedure. CLAIMANT is in demand of the documents which are
in the possession of RESPONDENT, because these are relevant materials which are
important to determine the outcome of the arbitration, and without these documents,
CLAIMANT cannot calculate the damages it claims.
As the IBA Rules is the preferred and the most widely used rules on production of
evidence in international arbitration, it should be adopted by this Tribunal to aid this
arbitration.
CLAIMANT’s request for production meets requirements set forth under Art.3 of the
IBA Rules, therefore the Tribunal should order RESPONDENT to product the
documents
1. CLAIMANT’s request to production contains a description in sufficient detail
of a narrow and specific requested, and is also relevant to the case and material
to its outcome, which is already satisfy to the requirement of Art. 3.3 of the IBA
Rules
30
In accordance with Art.3.3 of the IBA Rules, party seeking for production must (1)
describe each requesting documents in sufficient details or details of a narrow and
specific category of documents; (2) A statement explaining how the documents are
relevant to the case and material to its outcome; (3) A statement that the documents are
not in the possession, custody or control of the requesting party, and also needs to state
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why the requesting party assumes the documents are in possession, custody or control
of another party.
i.
CLAIMANT sets forth a clear time frame for the particular documents it requests,
therefore the request meets Art. 3.3(a) of the IBA Rules
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32
CLAIMANT requests RESPONDENT to provide contractual documents relating to the
transaction about RESPONDENT selling diamond Mata Weltin 2014 to SuperWines,
including the number of bottles purchased and the purchase price, from 1 January 2014
to 14 July 2015. [ CLAIMANT’s statement of fact No.27, line3 ] The request is specific and
sets a clear time limit.
RESPONDENT claimed the request was extensive and was not foreseen. It also took
the law of Mediterraneo for example to advocate what the “normal” disclosure of
documents should be. However, Art .3.3(a) IBA Rules requires party to make a clear and
specific description of documents instead of mentioning whether a party could only
request the production of one or several specified documents. When the description is
fulfilled with “sufficient to identify the documents”, then it is fulfilled with the rule [ IBA
Rules COMMENTARY, P.9, line9 ]. In the view of the above, CLAIMANT’s statement
meets requirements set forth under Art. 3.3.
ii. The documents are important in determining the loss of CLAMANT; therefore, the
request is satisfying to Art 3.3(b) of the IBA Rules
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According to Art.3.3(b) of the IBA Rules, a party who requests documents have to clarify
the relevance between the documents and the case, also has to state that the documents
is material to its outcome.
In accordance with scholar interpretation, documents requested in accordance with Art.
3.3(b) shall meet the following criteria: 1. the documents should be “essential” to the
resolution of case, which is, they should be sufficiently presenting why the documents
are important and have the strong connection to the resolution of the case; 2. the
documents should be necessary for the resolution of the dispute, and the production will
have effect on the outcome of the case. Through these elements, the tribunal can be
available to determine whether the documents are needed and necessary to discharge the
party’s burden of proof, or whether the documents are able to prove on which a party’s
legal claims are based. [ Nathan, P.189; Timo, P.133 ]
As a sign of goodwill, CLAIMANT merely claimed the profits made by RESPONDENT
from selling the 5,500 bottles to SuperWines. CLAIMANT understood that it was not
easy for RESPONDENT to decide how to distribute their wine to its customers to fulfill
each requirement, especially in this bad harvest year. Therefore, CLAIMANT trying to
release messages that it still wanted to solve the dispute softly, which is, despite the fact
that CLAIMANT was more likely to get higher profits from selling 5,500 bottles of wine
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to its customers than the premium paid by SuperWines a trader to RESPONDENT
[ Order 2 No.17, P.55, line1 ], CLAIMANT only requested the lower price as its loss.
Documents in relation to these are essential and necessary to the resolution of the case.
Hence, request for production of these documents shall be granted.
iii. The documents are information between RESPONDENT with other party, which
are not in the possession of CLAIMANT. Therefore, the request is satisfying to
Art 3.3(c) of the IBA Rules
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37
To satisfy the element of this rule, CLAIMANT must show that the documents were not
in its possession and why the concerned documents were in the control of
RESPONDENT.
The documents relate to a transaction between RESPONDENT and a third party, so
they were not in CLAIMANT's possession, custody or control. Without the trade party's
assistant CLAIMANT couldn't get those documents, hence the conclusion is that
CLAIMANT requested RESPONDENT, who must preserve its own business
documents, to produce them fulfills the rule.
2. To request these documents will not violate RESPONDENT’s commercial
secret since the arbitration shall be held in, and both party shall keep all
presented documents confidential according to Art.3.13 of the IBA Rules
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Another question about producing the documents is that to submit these documents will
injure RESPONDENT’s trade secrets. Nevertheless, allowing CLAIMANT to request
documents production is also “to allow for whole categories of documents to be
produced including internal records which have not been circulated to third parties”.
[ Nathan, P.186 ]
Furthermore, due to the confidential process of arbitration, to produce the requested
documents will not be allowed to be disclosed to third party. According to Art.26(3) of
the ICC Rules, both tribunal and all parties shall be in present of the hearings all the time,
and persons who are not involved in the case shall not be admitted. Art.28(3) of the
UNCITRIAL Rules further points out that the hearing shall be held in camera. Art.22(3)
of the ICC Rules left the discretional of the tribunal in deciding taking property measure
when a party is concerning confidential problems.
In addition, matters discuss or produced in the arbitration shall be kept in confidence.
(see Art.35(5) of the UNCITRAL) Furthermore, Art.3.13 of the IBA Rules also states
that any documents submitted or produced, the tribunal and all parties shall keep them
confidential and shall only be used in relative to the arbitration.
In the present case, this arbitration is governed by the rules of confidentiality. All
presented information including trade secrets shall be used only in the proceeding. The
desirability of keeping confidential is not only what RESPONDENT considered about,
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CLAIMANT also concerning this principle shall be respect. Like other parties enter into
42
international arbitration agreements, CLAIMANT expects that the process should be
reliable and safety, which can make both parties be available to say what they want to say,
and produce any material in the hearings in order to solve the arguments quickly and
efficiently.
In the view of the above, CLAIMANT agrees that the arbitration process shall be kept
confidential so there will be no worries about trade secrets become infringed.
CLAIMANT IS ENTITLED TO REQUEST FOR DELIVERY OF 10,000 BOTTLES
BECAUSE THE PARTIES HAVE AGREED TO SUCH TERM
RESPONDENT failed to perform its the contractual obligation; It bears the duty to
delivery 10,000 bottles of Mata Weltin
1. The Contract was concluded on 25 November 2014
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On 4 November 2014, CLAIMANT order 10,000 bottles of Diamond Mata Weltin to
RESPONDENT. [ Exhibit C 2, P.10, Para.2, line 1-2 ] It is a proposal for concluding a
contract, and constituted an offer of the contract under Art.14 of the CISG. On 25
November 2014, at the meeting of Ms.Buharit, the development manager of
CLAIMANT, and Mr. Weinbauer, the manager of RESPONDENT, Mr. Weinbauer
promised to give CLAIMANT’s order “a favourable consideration”. [ Exhibit C5, Para.3,
line 10 ] It means that RESPONDENT indicated assent to CLAIIMANT’s offer. The
acceptance of the Contract was made by RESPNDENT. Therefore, the Contract was
concluded on 25 November 2014.
In accordance of Art.20 of the Framework Agreement, this contract is governed by the
law of Danubia including the CISG. Because Danubia is a Contracting State of the CISG,
and the general contract law of Danubia is a verbatim adoption of the UNIDROIT
Principle on International Commercial Contracts [ Order 1 No. 5(4) ], the provision of the
CISG and UNIDROIT Principle can be applied in this case.
2. Quantity of the delivery of Diamond Mata Weltin is 10,000 bottles of Diamnod
Mata Weltin
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In accordance of Art.9 of the CISG, the parties are bound by any practices which they
have established between themselves.
Under the Art.2 of the Framework Agreement, RESPONDENT is obligated to support
CLAIMANT in its marketing activities wherever possible without disruption to its
ordinary course of business. [ Exhibit C1, P.9, Art.2 ]
CLAIMANT and RESPONDENT have an established practice between them that
CLAILMANT would always order first, before negotiation with any other customers
start. [ Order 2 No.15, P. 55, line1-3 ] This practice allows RESPONDENT to guarantee
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CLAIMANT delivery up to the maximum amount agreed and then to negotiate with
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other customers concerning the remaining quantity. [ Exhibit C6, Para.2, line 4 ]
In this case, CLAIMANT has already largely been promised to CLAIMANT’s customers.
[ Exhibit C6, Para.1, line 3 ] We can know that 10,000 bottles requested by CLAIMANT
is necessary for CLAIMANT’s market activity.
Under the RESPONDENT’s obligation under Framework Agreement and the practice
between the parties, RESPONDENT is obligated to support CLAIMANT in this
marketing activity. 10,000 bottles of Diamond Mata Weltin should be delivered by
RESPONDENT.
Furthermore, in previous dealings, there has not been any instance where
RESPONDENT has provided less than the amount requested by CLAIMANT but over
the minimum amount. [ Order 2 No.51, P.60 ] We can be certain practice exists on which
RESPONDENT should offer the quantity requested by CLAIMANT. In this case,
CLAIMANT ordered 10,000 bottles, so RESPONDENT should deliver 10,000 bottles
of wine to CLAIMANT.
Consequently, CLAIMANT’s order of 10,000 bottles of Diamond Mata Weltin are
bound both parties. RESPONDENT has obligation to deliver 10,000 bottles of
Diamond Mata Weltin to CLAIMANT.
Alternatively, RESPONDENT’s “favourable consideration” is the acceptance of the
quantity requested by CLAIMANT
1. The conduct of parties should be interpreted in accordance with Art.8 of the
CISG
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Art.8 of the CISG provides that “statements and conduct of a party are to be interpreted
according to his intent where the other party knew or could not have been unaware what
that intent was.” If the other party was unaware or could not have known the adduced
subjective intent, statements made by and other conduct of a party are to be interpreted
according to the understanding that a reasonable person of the same kind as the other
party would have had in the same circumstances. In determining the intent of a party or
the understanding a reasonable person would have had, due consideration is to be given
to all relevant circumstances of the case including the negotiations, any practices which
the parties have established between themselves, usages and any subsequent conduct of
the parties.
In CLOUT case No. 877, one Supreme Court has stated that in determining the quality
of the goods required by the parties’ agreement, since the parties had a different
understanding of the meaning of the contract, the contract language should be
interpreted under Art.8(2) of the CISG —i.e., “according to the understanding that a
reasonable person of the same kind as the other party would have had in the same
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circumstances”. [ UNCITRAL Digest, P.56, Para.14, line 1-8 ]
2. Mr. Weinbauer’s “favorable consideration” means that the Respondent has
agreed and accepted 10,000 bottles
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On 25 November 2014, in the end of the meeting, Mr. Weinbauer promised Ms. Buharit
to give CLAIMANT’s offer “a favourable consideration.” Because CLAIMANT could
not know the intent of RESPONDENT, “favourable consideration” must to be
interpreted under Art.8 (2) according to the understanding of a reasonable person in the
same circumstances.
The word “favourable” means the advantage of someone or something. [ Oxford
Dictionary ] In the view of reasonable person, the “favourable” consideration means that
the speaker wants to give an advantage to offeree. In this case, Mr. Weinbauer’s
“favourable consideration” means he wanted to give an advantage to CLAIMANT, that
is, the delivery of 10,000 bottles of Diamond Mata Weltin. Therefore, the true meaning
of Weinbauer’s answer is that RESPONDENT accepted CLAIMANT’s order. Therefore,
the Contract of 10,000 bottles of Diamond Mata Weltin was concluded between the
parties.
RESPONDENT terminated the Contract wrongfully
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Under Art.29 of the CISG, parties may terminated the contract by the mere agreement.
In accordance of Art.7.3.1 of the UNIDROIT, a party may terminate that contract if
the other party fail to perform the obligation under the contract amounts to a
fundamental non-performance.
RESPONDENT terminated the Contract at 4 December 4, 2014. [ Exhibit C7, P.15,
Para.3, line 5-6 ] However, CLAIMANT did not fail to perform its contractual obligation.
RESPONDENT’s termination of contract violated Art.7.3.1 of the UNIDROIT. The
Contract is valid.
In addition, according to Art.19 of the Framework Agreement, unless either a party
terminates the Contract before 1 January of any year, the Contract is prolonged
automatically for one year. [ Exhibit C 1, P.9, Art.19, line 2-3 ] The Framework Agreement
was concluded on 22 April 2009. If any party of the Contract wants to terminate the
contract, he should terminate it before 1 January of the next year, or the Contract will be
prolonged for one year automatically.
Therefore, if RESPONDENT wanted to terminate the Contract after 22 April 2014, it
should have terminated the Contract before 21 April 2014. In this case, RESPONDENT
terminated the Contract on 4 December 2014. The Contract had continued binding the
parties until 21 April 2015. RESPONDENT’s termination cannot avoid the obligation
of delivering 10,000 bottles of Diamond Mata Weltin. Respondent cannot avoid its
contractual obligation.
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CLAIMANT IS ENTITLED TO BE COMPENSATED FOR THE LITIGATION
COSTS OF USD 50,280 WHICH WERE INCURRED BY ITS APPLICATION FOR
INTERIM RELIEF AND BY ITS SUCCESSFUL DEFENSE AGAINST
RESPONDENT IN THE PROCEEDINGS IN THE HIGH COURT OF CAPITAL
CITY
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The Contract has been concluded by CLAIMANT and RESPONDENT. CLAIMANT
is the buyer and the RESPONDENT is the seller. Each of them should fulfill their own
obligations under the Contract in accordance with the regulations of CISG. In this case,
the nonperformance of RESPONDENT makes CLAIMANT a certain degree of
damages.
According to Art.45 (b) of the CISG, CLAIMANT may claim damages as provided in
Art.74 to Art.77 of the CISG. Art.74 of the CISG provides that the damages for breach
of contract consist of a sum equal to the loss. This clause reflects the full compensation
principle, the full compensation principle covers direct loss, incidental loss and
consequential loss. The litigation cost is covered under this scope of compensation.
Therefore, RESPONDENT shall compensate for the litigation expenses of application
for an interim relief and attorney’s fee to CLAIMANT. (A.) Furthermore,
RESPONDENT shall have to pay to CLAIMANT’s successful defense against the
proceedings in the High Court of Capital City. (B.)
In accordance with Art. 74 of the CISG, RESPONDENT should pay a sum equal to
the loss to CLAIMANT as a consequence of the breach, which include covering of
the litigation expenses including the costs for an interim relief and attorney’s fee
1. Art.74 of the CISG provides the full compensation to the CLAIMANT
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Art.74 of the CISG provides the general rules for the recovery of damages for breach
of contract. The goal of this provision is to place the aggrieved party in the same
economic position as the breach had not happened. In other words, it is designed to give
the aggrieved party the benefit of the bargain or its performance interest. This approach
is commonly referred to as the principal of full compensation. [ CISG Commentary, P.991,
Para.2 ]
Furthermore, Art.74 of the CISG does not provide a basis for an aggrieved party to
claim damages, and it does not contain specific guidelines for calculation of damages.
Instead, Art.74 of the CISG grants a tribunal the authority to determine the
CLAIMANT’s “loss… suffered… as a consequence of the breach” based on the
circumstances of the particular case. [ CISG Commentary, P.991, Para.2 ]
Not only Art.74 of the CISG but also Art.7.4.2(1) of the UNIDROIT provides that “the
aggrieved party is entitled to full compensation …” It can say that the general principle
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of full compensation, which is generally acknowledged as an principle of the CISG, is
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also defined in Art.7.4.2(1) of the UNIDROIT.
In a case of Austria’s Supreme Court, the plaintiff ’s country is Germany and the
defendant’s cooutry is Austria, 14 January 2002, the court said that “the right to damages
under Art.74 of the CISG follows the principle of foreseeability and full compensation,
and that all losses, including expenses made in view of the performance of the contract
and loss of profit, are to be compensated to the extent they were foreseeable at the time
of the conclusion of the contract” [ Judgement of 14 January 2002 ]
In Delchi Carrier, S.p.A. v. Rotorex Corp, a case of U.S. Court of Appeals for the Second
Circuit, 6 December 1995, the court said that “ Art.74 of the CISG is designed to place
the aggrieved party in as good a position as if the other party had properly performed
the contract.” [ Delchi Carrier, S.p.A. v. Rotorex Corp ]
In a case of Serbia’s Foreign Trade Court of Arbitration attached to the Yugoslav
Chamber of Commerce, the claimant’s country is Serbia and the respondent’s country is
Ukraine, 9 December 2002, the court said that “On question of applicable law
considering interests, the applicable law is the one relevant for payment itself which is
the law of the creditor. According to the principle of full compensation, the creditor has
the right to be compensated for the loss of use of money by application of such interest
rate as he would be entitled to under the laws of his own country.” [ Judgement of 9 December
2002 ]
According to the cases and comments mentioned above, it is absolutely obvious that Art.
74 of the CISG stipulates the principle of full compensation.
2. Art.74 of the CISG entitles CLAIMANT to request for costs in relations to
interim relief and attorney’s fee
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Art.74 of the CISG does not specifically address whether attorneys’ fees and costs in
connection with seeking relief for the breach of contract from a court may be
recoverable as damages. Some courts and commentators argue that Art.74 of the CISG
must be broadly interpreted in accordance with the principle of full compensation, which
necessarily calls for the conclusion that an aggrieved party should be able to recover
expenses. [ CISG Commentary, PP.1009-1010, Para.69 ]
The litigation expenses include the costs of interim relief and attorney’s fee, both could
be foreseen by RESPONDENT when the Contract had been concluded.
i.
The cost of an interim relief is the damages resulting from RESPONDENT’s
breach of contract
71
The reason why CLAIMANT needed to apply an interim relief is that RESPONDENT
has breached his obligations to deliver 10,000 bottles of Mata Weltin wine under the
Contract of 25 November 2014. If RESPONDENT had not breach the Contract,
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CLAIMANT had no urgency to ask the court to file an interim relief. (a.) Further, the
cost of an interim relief is recoverable as damage under Art.74 of the CISG. (b.) And,
the cost of an interim relief is not a matter of procedural law, it is foreseeable to
RESPONDENT under substantive law (CISG). (c.) As a consequence, the cost of
interim relief is damages which can be recovered in accordance with Art.74 of the CISG.
a). It is necessary for CLAIMANT to ask the court to file an interim relief
72 CLAIMANT and RESPONDENT have concluded the Contract on 25 November 2014.
Later, RESPONDENT notified CLAIMANT that only 4,500 bottles of diamond Mata
Weltin 2014 would be delivered to CLAIMANT.
73 On 2 December 2014, CLAIMANT had filed its email and had demanded the delivery
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of 10,000 bottles of diamond Mata Weltin 2014. In response to CLAIMANT’s email of
insisting the delivery of 10,000 bottles, Mr. Weinbauer completely overreacted to this
request and purported to terminate the Contract. [ Exhibit C 7, P.15, paras. 2,3 ]
At the time which Mr. Weinbauer threatened that no delivery would be made,
CLAIMANT had already received a considerable number of orders for diamond Mata
Weltin 2014, some of which it had already accepted. Due to the termination of the
Contract, CLAIMANT would have very likely suffered harm. It has to be assumed that
RESPONDENT would have sold diamond Mata Weltin 2014 to someone else. Thus,
CLAIMANT would have been unable to fulfill its own contractual obligations and would
have consequently suffered reputational harm.
Furthermore, CLAIMANT is in the environment of highly competitive market and
having its high end customer base. Therefore, CLAIMANT obliged itself to purchase
and sell the best Mata Weltin wine 2014.The termination of the Contract would have
made it impossible for CLAIMANT to purchase enough Mata Weltin wine 2014
elsewhere to fulfill its contractual obligations to his clients.
Not being able to perform its contractual obligations, CLAIMANT would have suffered
severe reputational harm. CLAIMANT has developed a particular expertise in
Mediterranean Mata Weltin wines from the Vuachoua Region and has gained a reputation
with its customers of being a particularly reliable source. In times of extremely high
demand and lack of sufficient supply, CLAIMANT’s failure to deliver the Mata Weltin
wine 2014 in time would have given rise to an irrecoverable damage for its business
partners. As a consequence, they would doubt CLAIMANT’s ability in difficult times and
would consequently turn their backs on CLAIMANT.
Therefore, in order to protect CLAIMANT’s interest and business reputation,
CLAIMANT could seek an interim relief in the High Court of Capital City.
b). The cost of an interim relief is recoverable as damage under Art.74 of the CISG
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The reason why CLAIMANT have to ask the court to file an interim relief is that
RESPONDENT breached the Contract and CLAIMANT tried to protect his own
benefits.
In a case of Switzerland’s Commercial Court, the plaintiff ’s country is Germany and the
defendant’s country is Switzerland, 19 December 1997, the court said that “The seller
was also awarded as damages the legal expenses of its lawyers in Germany and
Switzerland. The court stated that all costs incurred in the reasonable pursuit of a claim
are refundable, which included retaining a lawyer in the country of each party [ Art.74 of
the CISG ].” We can tell from this case that all costs of legal expenses are recoverable,
including the cost of an interim relief. [ Judgement of 19 December 1997 ]
Under the Art.74 of the CISG, it provides the full compensation principle to make a
whole situation for the aggrieved party. The cost of an interim relief all results from the
RESPONDENT’s breach of the Contract, therefore, RESPONDENT shall bear the
responsibility to compensate the litigation expense of filing an interim relief.
c). RESPONDENT’s position that the cost of interim measures and court fee
cannot be requested pursuant to Art.74 of the CISG; however, this view is
incorrect and groundless
81 In order to prevent the further damages resulting from the RESPONDENT’s breach of
contract which could give rise to the loss of CLAIMANT’s clients and reputation,
CLAIMANT had to do something to prevent the awful consequence. Therefore,
CLAIMANT asked the court to file an interim relief reasonably and properly. Further,
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the cost of filing an interim relief should not be paid by CLAIMANT, RESPONDENT
shall bear the cost of his wrongful act of nonperformance. In other words, it is
RESPONDENT’s responsibility to cause the cost of an interim relief, CLAIMANT
could ask RESPONDENT to pay the loss.
In accordance with Art.74 of the CISG, when CLAIMANT and RESPONDENT
concluded the Contract, each of them could foresee or ought to have foreseen the
consequences and the responsibilities of breaching the Contract. It has been suggested
that Art.74 of the CISG does not demand that the specific details of the loss or the
precise amount of the loss be foreseeable. [ CISG digest 2012, P.349, Para.33 ]
Therefore, the cost of interim measures and court fee are foreseeable under the
regulations of substantive law, CISG.
ii. The cost of attorney’s fee is the damages by virtue of RESPONDENT’s breach of
contract, which is foreseeable and reasonable
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Art.74 of the CISG provides the principle of full compensation which means the
aggrieved party could ask compensation to fill its damages. Because Art.74 of the CISG
constitutes "a loss ... suffered ... as a consequence of the breach," and such a loss would
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have been foreseeable at the time the Contract was formed. This, in fact, is the reasoning
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of the cases that have awarded damages to cover attorney costs of an aggrieved party.
[ Harry, P.127 ]
It is clear that the decisions permitting recovery of damages for attorneys' fees under the
CISG impose no requirement that a provision specifically refer to such recovery. The
foreign cases find the general language of Art.74 of the CISG - "damages for breach of
contract by one party consist of a sum equal to the loss ... suffered by the other party as
a consequence of the breach" - quite sufficient to authorize recovery of damages for the
aggrieved party's attorney costs.
In Eyroflam S.A. v. P.C.C. Rotterdam B.V., a case of Netherland’s District Court, 15
October 2008, the court said that “Orders (Buyer) to compensate any costs, until this
decision on the side of (Seller) estimated on EUR 300,00 legal charges, on EUR 97,40
on other advances and on EUR 904,00 for attorney's fee” We can tell from this case that
the compensation includes attorney's fee. [ Eyroflam S.A. v. P.C.C. Rotterdam B.V. ]
In a case of German District Court, the plaintiff ’s country is Germany and the
defendant’s country is Turkey, 7 April 2009, the court said that “Due to Art.74 of the
CISG, [Seller] is also entitled to reimbursement of its attorneys' fees that were incurred
before the trial. In this regard, [Seller] conclusively argued that [Buyer] had refused due
payment despite all reminders. Hence, the employment of an attorney had been
necessary.” We can tell from this case that the regulation of Art.74 of the CISG provides
the compensation of attorney’s fee. [ Judgement of 7 April 2009 ]
In a case of China International Economic and Trade Arbitration Commission, 21 May
2006, the court said that “The First Respondent shall bear part of the reasonable expense
for processing this case (including the attorneys' fee) of USD 1,000 incurred by the
[Buyer]” We can tell from this case that the principle of loser’s pay included the
reasonable costs of the attorneys’ fee. [ Judgement of 21 May 2006 ]
In conclusion, we can say that attorney’s fee is recoverable under the regulation of Art.
74 of the CISG.
a). CLAIMANT had to make a reasonable contingency fee contract with the local
Mediterranean law firm, LawFix in view of its urgent need to seek for court
assistance
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In the proceedings of litigation, CLAIMANT incurred considerable costs. CLAIMANT
is a medium sized Equatorianean company that does not have sufficient liquid capital at
its disposal to pay Mediterranean legal fees which are – compared to the fees in
Equatorianean – very high. In addition the unfavourable exchange rate had exacerbated
CLAIMANT’s problem. Also, no third party funding could be obtained. Therefore,
CLAIMANT had engaged the local Mediterranean law firm, LawFix, on a contingency
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fee basis. [ CLAIMANT’s statement of fact, P.5, No.13, line1-5 ]
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The contingency fee is reasonable in ordinary circumstances, though in the present case
less time than anticipated was spent on the case as RESPONDENT did not challenge
the ex parte interim injunction and the High Court immediately denied jurisdiction once
the arbitration agreement was invoked without any pleading on the merits being necessary.
[ Order2, P.58, Para.39, line7-11 ]
b). RESPONDENT should have have foreseen the attorney’s fee when it refuse to
perform in accordance with the Framework Agreement
92 If legal costs are claimed as damages under the CISG, the claim has to be based on Art.74
of the CISG. A first limit is set by the second sentence Art.74 of the CISG, i.e., the so-
93
called foreseeability rule. However, that costs would necessarily be incurred in the pursuit
of one's rights, in particular the costs of attorneys' fees, is certainly foreseeable at the
time of conclusion of the Contract and thus a part of the risk undertaken. [ Peter, para.6 ]
Not only because RESPONDENT is familiar with these types of fee arrangements, but
also the long-term relationship between CLAIMANT and RESPONDENT,
RESPONDENT could have foreseen the contingency arrangement between
CLAIMANT and LawFix due to its insufficient liquid capital. In short, RESPONDENT
ought to have known the costs of attorney’s fee when the breach of contract happened.
[ Order 2, P.59, No.42, line1 ]
c). CLAIMANT did not fail to take measures of mitigation under Art.77 of the
CISG
94 An additional limit is the duty to mitigate the loss laid down in Art.77 of the CISG. It
restricts the efforts made by the aggrieved party confronted with a breach of contract to
what is necessary. Of course, the particular difficulties of a transnational pursuit of a
claim have to be taken into account. The aggrieved party should fulfill his obligation of
mitigation, otherwise, the other party could ask to reduce his compensation. [ Peter, Para.7 ]
95 Although CLAIMANT did not do anything else to take measures of mitigation under
Art.77 of the CISG, the damage of attorney’s fee has not exacerbated because of the
contingency fee agreement concluded in advance. Therefore, RESPONDENT could not
ask the reduction of his compensation.
RESPONDENT shall pay for CLAIMANT’s successful defense against the
proceedings in the High Court of Capital City
96
There is an Arbitration Agreement under the Framework Agreement concluded by
CLAIMANT and RESPONDENT. The reason why they want to make this stipulation
is that they hope to settle all disputes amicably and in good faith between two parties.
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[ Exhibit C 1, P.9, Art.20, line1 ]
97
Under the mutual understanding of an Arbitration Agreement, RESPONDENT should
not file an litigation in the High Court of Capital City. (1.) The dismiss of the litigation
by the court supporting that CLAIMANT defends successfully against the proceedings
in the High Court of Capital City. (2.) In accordance with Art.74 of the CISG, the cost
of litigation incurred by RESPONDENT is in the scope of the full compensation,
therefore, RESPONDENT shall compensate for the damages to CLAIMANT. (3.)
1. RESPONDENT should not take the legal proceeding in the High Court of
Capital City under the arbitration agreement of Framework Agreement
98
RESPONDENT is bound to the arbitration agreement due to its signature under the
Framework Agreement, it means that RESPONDENT consent to arbitrate.
99
The arbitration agreement is valid without a doubt. The argument from RESPONDENT
that the arbitration clause to be unclear and unworkable is not reasonable at all. Firstly,
the Arbitration Agreement could be in the Contract based on the mutual understanding.
Secondly, RESPONDENT is aware of the agreement because of its signature. Therefore,
the agreement is binding to each of the party.In other words, Respondent should not
take the legal proceeding in the High Court of Capital City under the arbitration
agreement of Framework Agreement.
100 It is not the CLAIMANT’s responsibility to answer the notification of RESPONDENT’s
doubt about the arbitration agreement. Whether CLAIMANT answered or not,
RESPONDENT shall not take action of the court proceedings. Instead,
RESPONDANT may ask to arbitrate under the agreement of arbitration.
2. CLAIMANT defends successfully against the proceedings in the High Court
of Capital City
101 The action initiated by the Plaintiff is hereby dismissed since the court lacks jurisdiction
due to the existence of an arbitration clause. [ Exhibit C 9, P.17, UNDER 1 ]
102 Once RESPONDENT filed a litigation, CLAIMANT should appear in the proceedings
to defend the RESPONDENT’s attack of merits. The outcome of dismissing the
litigation by the court means that CLAIMANT has won the litigation. So, CLAIMANT
defends successfully against the proceedings in the High Court of Capital City
3. RESPONDENT should pay the cost of the proceedings in the High Court of
Capital City to CLAIMANT under Art.74 of the CISG
103 The decision – each party bears its own costs – made by the High Court of Capital City
would not affect the arbitration tribunal’s decision on calculation the damages under the
regulation of CISG.
104 Thus, according to the full compensation principle under Art.74 of the CISG,
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RESPONDENT should bear the cost of litigation, that is, RESPONDENT have to
make compensation of the procedural costs for CLAIMANT.
CLAIMANT IS ENTITLED TO BE COMPENSATED FOR DAMAGE SUFFERED
IN ACCORDANCE WITH ART.74 OF THE CISG BECAUSE OF NONPERFORMANCE OF CONTRACTUAL OBLIGATION
RESPONDENT breached the Contract of delivering 10,000 bottles of Mata Weltin to
CLAIMANT
105 Under Art.35(1) of the CISG, the seller is obligated to deliver goods which are of the
quantity, required by the contract. Because of the conclusion of 10,000 bottles of
Diamond Mata Weltin, RESPONDENT is obligated to deliver 10,000 bottles of wine
under Art.35 of the CISG.
106 If RESPONDENT had not concluded the contract with SuperWines, it would have been
able to allocate 10,000 bottles to CLAIMANT in June 2015 [ Order 2 No.27, line 4 ]
However, because RESPONDENT concluded the contract with SuperWines,
RESPONDENT cannot allocate 10,000 bottles to CLAIMANT. RESPONDENT’s
rejection of delivering 5,500 bottles of Mata means that RESPONDENT failed to
perform its contractual obligation. In accordance of Art.45 of the CISG, CLAIMANT
has the right to claim damages as provided in Arts.74 to 77.
107 Moreover, in the action which RESONDENT brought on 30 January 2015, although the
court of Mediterraneo dismissed RESPONDENT’s action for the lack of jurisdiction
[ Exhibit C 9, P.17, UNDER 1 ], the court still considered that RESPONDENT breached
its obligations under the Contract. It means that the court in fact rejected the action not
only on the procedure, but also on the merits. Certainly, the RESPONDENT’s rejection
of delivering 5,500 bottles of Mata Weltin breached its contractual obligation.
CLAIMANT suffered loss of profits because of the RESPONDENT’s nonperformance
1. Loss of future profit can be claimed as the damages in Art.74 of the CISG
108 Art.74 of the CISG provides that damages for breach of contract by one party consist
of a sum equal to the loss, including loss of profit, suffered by the other party as a
consequence of the breach. Loss of profit can be recovered in pursuant of Art.74 of the
CISG.
109 Although the CISG does not provide whether loss of future can be claimed as damaged.
The UNIDROIT Principle, in Art.7.4.3, states that “Compensation is due only for harm,
including future harm that is established with a reasonable degree of certainty.” The
UNIDROIT Principle expressly states that loss of profit will be for profits hoped for in
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the future.
110 In Cory v. Thomas Ironworks & Shipbuilding Co Ltd., the court recognized that the
potential for future profits, which may not be the CLAIMANT actually suffered, must
be taken into account. [ Bruno Zeller, P.122, Para.3, line 4-6 ] Therefore, loss of future profit
can be claimed while the aggrieved party probably does not actually suffer.
111 In CLOUT Case No.214, as the buyer had proved that it had the opportunity to resell at
a higher price, the seller furthermore had to pay damages for profits the buyer could not
realize as a consequence of the breach of contract. [ CLOUT Case No.214, Case Abstract,
Para.2, line 2-3 ]
2. CLAIMANT suffered the losses because of
RESPONDENT’s non-
performance
112 Because of the RESPONDENT’s non-performance, CLAIMANT needed to purchase
5,500 bottles of wine from Vignobilia. [ Order 2 No.11, P.54, line1-2 ] The price
CLAIMANT paid to Vignobilia was EUR42.20 per bottle. [ Order 2 No.11, P.54, line 1213 ] , and the price CLAIMANT paid for 4,500 bottles of wine to RESPONDENT was
EUR41.50 per bottle [ Order 2 No.14, P.55, line1-2 ] There is a price margin of EUR 0.7
per bottle between these two different trade. The direct loss caused by non-performance
of RESPONDENT is EUR 3,850 (5,500*0.7).
113 Furthermore, CLAIMANT suffered loss of profit. RESPONDENT would have been
able to allocate 10,000 bottles to CLAIMANT in June 2015 if it had not concluded the
contract with SuperWines. [ Order 2 No.27, P.57, line 4 ] We can know that
RESPONDENT cannot allocate 10,000 bottles to CLAIMANT because
RESPONDENT concluded the contract with SuperWines. CLAIMANT’s profit of
reselling 5,500 bottles to CLAIMANT’s customers loses because he cannot resell
RESPONDENT’s Diamond Mata Weltin to its customers.
114 Besides, RESPONDENT is the only vineyard in the Vuachoua region winning the
Mediterranean gold medal for its Mata Weltin in each of last five years. Such achievement
caused that pre-orders from CLAIMANT’s customers had been a considerable increase.
[ Order 2 No.8, P.54, line 2-5 ] At the time when pre-order was made, it was the only top
quality Mata Weltin which RESPONDENT did offer. All pre-orders referred to the
Diamond Mata Weltin of RESPONDENT. [ Order 2 No.9, P.54, line1-2 ] As mentioned
above, we can know that contracts between CLAIMANT and its customers is purchasing
Diamond Mata Weltin of RESPONDENT. If CLAIMANT cannot deliver Diamond
Mata Weltin of RESPONDENT to its customers, it cannot gain any profit from
contracts. Consequently, CLAIMANT suffers the loss of profit because of
RESPONDENT’s non-performance.
115 Although a considerable number of CLAIMANT’s customers were willing to accept a
mixture of Mata Weltin from RESPONDENT and from other top vineyard where
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CLAIMANT had bought 5,500 bottles from. [ Order 2 No.10, P.54, line 5-8 ] However,
there is no profit gaining from CLAIMANT’s customers, and CLAIMANT does not gain
any profit as a result of non-performance of RESPONDENT. In addition, it cannot
state with any certainty whether some of CLAIMANT’s Customers which had made no
pre-orders would have bought same amount they finally bought if a mixture of both
wines had been available. [ Order 2 No.13, P.55, line 5-8 ] Therefore, CLAIMANT has the
potential loss of future profit because he bears the risk which all of its customers reject
the CLAIMANT’s supply of a mixture of both wine.
RESPONDENT can foresee CLAIMANT’s loss of profit
1. The seller is foreseeable of the buyer’s loss of profit as it knew the buyer resells
wine to third parties
116 Art.74 of the CISG provides that damages may not exceed the loss which the parties in
breach foresaw or ought to have foreseen at the time of the conclusion of the contract,
in the light of the facts and matters of which he then knew or ought to have known, as
a possible consequence of the breach of the contract. Foreseeability is that the obligor
must reckon with the consequences that a reasonable person in his situation would have
foreseen considering the particular circumstances of the case. Whether he actually did
foresee this is as insignificant as whether there was fault. [ CISG-Online No. 643, RULING
OF THE AUSTRIAN FEDERAL SUPREME COURT, Para.10, line 10-11 ]
117 The lack of foreseeability is that a breaching party did not actually foresee the damage;
only if a reasonable person in the same circumstance would not have foreseen the results.
[ CISG Commentary, P.341, Para.21, line 5-7 ]
118 In Skoda Kovarny v. B. van Dijk Jr. Staalhandelmaatschappij B.V., the tribunal recognized
that it was foreseeable that goods were purchased for resale at a profit. [ UNCITRAL
Digest, P.349, Para.29, line 9-11 ]
119 In CLOUT case No. 168, the tribunal stated that seller of goods to a retail buyer should
foresee that the buyer would resell the good. [ CLOUT case No. 168, case abstract, Para.2,
line 1-2; UNCITRAL Digest, P.349, Para.35, line 2-4 ]
120 In CLOUT case No. 166, the tribunal stated that breaching seller could have foreseen the
buyer’s losses because the parties had corresponded extensively on supply problems.
[ CLOUT case No. 166, UNCITRAL Digest, P.349, Para.29, line 4-7 ]
121 In CISG-Online No.224, if the buyer loses profits, which buyer could have realized by
reselling the goods had the seller not breached his obligations, the seller is only liable for
this loss of profit if he had to reckon with the buyer’s resale. In the case of the sale of
commercial goods to a merchant, this can always be assumed without any further
indications. [ CISG-Online No. 224, P.167 ]
2. RESPONDENT is foreseeable of the CLAIMANT’s loss of profit
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122 CLAIMANT is a wine merchant. The real purpose of CLAIMANT buying Mata Weltin
wine from RESPONDENT is to resell it to CLAIMANT’s customer. Therefore,
RESPONENT absolutely knew that CLAIMANT needed to resell RESPONDENT’s
Mata Weltin to CLAIMANT’s customer, and foresaw the loss of profit CLAIMANT
suffered.
123 As the tribunal’s decision mentioned above, RESPONDENT, as a seller in this case,
should have foreseen that the buyer would resell the good when the Contract was
concluded. In addition, under the Art.2 of the Framework Agreement, RESPONDENT
is liable for supporting CLAIMANT in its marketing activities wherever possible without
disruption to its ordinary of business. [ Exhibit C 1, P.9, Art.2, line 3-4 ] RESPONDENT
must have known CLAIMANT’s profit of resell, and foresaw the CLAIMANT’s loss.
Therefore, CLAIMANT can claim for damages to RESPONDENT in pursuant of
Art.74 of the CISG.
CLAIMANT can request RESPONDENT to pay damages at the amount of least
EUR 110,000
124 Price margin between CLAIMANT’s purchase of Mata Weltin from RESPONDENT
and Vignobilia is EUR 0.7. The direct loss of CLAIMANT is EUR 3,850.
125 The loss of profit CLAIMANT suffered is potential loss of future profit of 3,500 bottles
of Mata Weltin. Due to the confirmed extraordinary quality of the 2014 vintage, bottles
have been sold by the few specialized retailers to individual customers at the price
between EUR 90-100[ Order 2 No. 14, P.55, line 4]. Because the price per bottle which
CLAIMANT paid to RESPONDENT was EUR 41.50, the lost profit of 5,500 bottles
of Mata Weltin is EUR 266,750-321,750((90-41.5)*5,500 and (100-41.5)*5,500).
126 The total loss CLAIMANT suffered is EUR 270,600-325,600. There were rumors in the
industry that SuperWines paid a premium of EUR 15-20 per bottle [ Order 2 No.24, P.56,
line 12 ]. It is very likely that CLAIMANT’s profits from sales to its customers would have
been higher than the premium paid by SuperWines as a trader to RESPONDENT. [ Order
2 No.17, P.55, line 1 ] The CLAIMANT’s lost profit is much more than the profit of
RESPONDENT, so CLAIMANT can claim damages for RESPONDENT’s profit
which is at least EUR 110,000.
127 Therefore, the damage is the profit of RESPONDENT made by selling 5,500 bottles of
Mata Weltin 2014 to SuperWines. We do not seek specific performance.
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REQUEST FOR RELIEF
Based on the foregoing, the Tribunal shall grant CLAIMANT the following reliefs:
1. Order RESPONDENT to produce document containing the contract price of
RESPONDENT’s sale of 5,500 bottles of wine to SuperWines;
2. Request RESPONDENT to pay damage in the sum of EUR 110,000 shall be determined by
the profits the RESPONDENT made by selling 5,500 bottles of Mata Weltin 2014 to
SuperWines.
3. Request RESPONDENT to reimburse and cover CLAIMANT’s attorneys’ fees, court fees,
interim relief cost in the sum of USD 50,280.00.
4. RESPONDENT shall bear CLAIMANT s attorneys’ fees, cost of this arbitral proceedings;
and any other reliefs the Tribunal deems proper and fit.
5. Any other reliefs the Tribunal deems proper and fit.
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CERTIFICATE
We hereby certify that the attached memorandum was prepared by the members of the student
team, and that no person other than a student team member has participated in the writing of
this Memorandum.
Our School will be participating only in the Vis East Moot and is not competing in the Vienna
Vis Moot.
LEE CHIA-HUA
LI SHIN-HAN
CHEN PO-CHUAN
HUNG JUNG-CHI
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