M3030-C

KUALA LUMPUR REGIONAL CENTER FOR ARBITRATION

KUALA LUMPUR

2011

ASTORIA PRODUCE COMPANY

(CLAIMANT)

v.

ROLGA FARMER‟S EXCHANGE

(RESPONDENT)

MEMORIAL FOR CLAIMANT

ii

TABLE OF CONTENTS

INDEX OF AUTHORITIES ………………………………………………………………….. vi

STATEMENT OF JURISDICTION ………………………………………………………… xv

QUESTIONS PRESENTED ………………………………………………………………… xvi

STATEMENT OF FACTS …………………………………………………………….…… xvii

SUMMARY OF PLEADINGS ………………………………………………………………. xx

PLEADINGS …………………………………………………………………………………… 1

I. KLRCA HAS THE AUTHORITY TO RESOLVE THIS DISPUTE …………..….…… 1

A. The arbitration agreement is valid ………………………………………………………. 1

1. The agreement satisfies the requirements of lex arbitri …………………….……….. 1

a. Substantive law of contract will apply to arbitration agreement ……………….. 1

i. Form requirements not necessary under Art.11 CISG …………….…...….. 2

ii. Acceptance of counter-offer ………………………………………………. 2

iii. Art.90 not applicable for domestic legal systems …………………………. 3

b. “Writing” requirements of Law of the Seat satisfied …………………….……… 3

2. The agreement is valid under The New York Convention ………………………….. 4

i. Requirements of Art.II(2) met …………………………………………….. 4

ii. Art.VII(1) allows relaxing requirements of Art.II(2) ……………………… 4

B. Award rendered pursuant to this agreement will be enforceable ………………………... 5

II. THE TRIBUNAL HAS BEEN PROPERLY CONSTITUTED ………………….…….. 6

A. Ms. Benti‟s appointment in accordance with the parties‟ agreement …………………... 6

1. RESPONDENT failed to appoint its arbitrator in time …………………………… 6

iii

2. No grounds for replacing Ms. Benti ………………………………………………. 6

B. The Presiding Arbitrator has been properly appointed ……………………………….. 7

1. 30 days time limit not applicable …………………………………………..……… 7

2. List procedure not compulsory ……………………………………………..……... 9

C. Any award passed by this Tribunal will be enforceable ……………………….............. 9

III. THE TRIBUNAL HAS THE AUTHORITY TO IMPOSE SANCTIONS ………..…. 10

A. Procedural discretion of the arbitrators ……………………………………………….. 10

B. Tribunal‟s duty to minimize delay ……………………………………………………. 11

C. Power to impose sanctions ……………………………………………………………. 11

IV. CISG SHOULD GOVERN THE CONTRACT ……………………………………….. 13

A. Applying CISG through Art.1(1)(b) …………………………………………………... 13

1. The Convention prevails over Private International Law ………………………... 13

2. Applicability of Art.1(1)(b) ……………………………………………………… 14

3. Rules of Private International Law leading to application of laws of Astoria. …... 14

a. Choice-of-Law Rules of the forum ……………………………………….….. 14

b. Application of Laws of Astoria …………………………………………….… 16

i. Place of business …………………………………………………………. 16

ii. Lex situs of tangible goods ………………………………………………. 16

iii. Place of characteristic performance ……………………………………… 17

B. UNIDROIT Principles cannot be applied …………………………………………….. 17

1. Requirements of Arbitration Act, 2005 ………………………………………….. 17

2. UNIDROIT Principles vis-à-vis CISG …………………………………………... 18

iv

V. RESPONDENT HAS BREACHED ITS OBLIGATIONS UNDER THE CONTRACT

……………………………………………………………………………………………... 20

A. RESPONDENT has breached its obligations under the contract ……………………... 20

1. RESPONDENT‟s duty under FOB contract to deliver goods in accordance with the

contract ………………………………………………………………………….... 20

a. Goods not adequately packed ………………………………………………... 20

b. Goods not insured by RESPONDENT ………………………………….…… 20

2. Clean bill of lading does not prove goods were properly packed ………………... 21

3. Bananas deteriorated due to inadequate packing and lack of instructions given to the

Pinafore‟s Captain ………………………………………………………………... 22

4. RESPONDENT liable for not dispatching the goods in suitable packages for the

long transit period ………………………………………………………………... 22

B. CLAIMANT can avoid the contract ……………………………………………….….. 23

1. Non-conformity occurred before passing of risk ………………………………… 23

2. Goods did not comply with specified quality and description ………………….... 23

a. CLAIMANT wanted “green bananas” ……………………………………….. 23

b. CLAIMANT only catered to retail grocery stores of Astoria ………………... 23

3. The breach is fundamental ……………………………………………………….. 24

a. Purpose cannot be fulfilled with ripened bananas …………………………… 24

b. Consignment has been rejected ………………………………………………. 25

C. Alternately, RESPONDENT committed material breach under UNIDROIT Principles

…………………………………………………………………………………………. 25

1. Quality of bananas not in accordance with the contract …………………………. 25

v

2. There is fundamental non-performance ………………………………………….. 26

3. Consignment has been rejected …………………………………………………... 26

VI. CLAIMANT DID NOT HAVE A LEGAL OBLIGATION TO ATTEMPT TO SELL

THE BANANAS …………………………………………………………………………. 27

A. CLAIMANT is under no obligation to sell the bananas under CISG ………………… 27

1. Duty to mitigate under Art.77 only when damages claimed ……………………… 27

2. CLAIMANT not obligated to sell the goods ……………………………………… 27

a. Lack of good faith from RESPONDENT ……………………………………... 27

b. CLAIMANT only required to take reasonable measures ……………………... 27

c. No inaction by CLAIMANT ………………………………………………….. 28

d. Non-applicability of Art.86 …………………………………………………… 28

B. Alternately, if UNIDROIT Principles apply, CLAIMANT had no duty to sell the

bananas ………………………………………………………………………………... 29

1. There cannot be obligation when there is no right to sell ………………………… 29

2. No fixed responsibility ………………………………………………………….… 29

PRAYER ………………………………………………………………………………………. 30

vi

INDEX OF AUTHORTIES

ACTS

Malaysian Arbitration Act 2005 ……………………………………………………….. 18

English Arbitration Act , 1996 …………………………………………………………. 18

German ZPO ……………………………………………………………………..…….. 17

Uniform Commercial Code …………………………………………………….. en passim

ARTICLES

Belden Premaraj, The Choices of Law – Better Safe Than Sorry,The Malaysian

Arbitration Perspective

http://www.beldenlex.com/pdf/The%20Choices%20of%20Law%20%20Better%20Safe%

20Than%20Sorry.pdf …………………………………………………………………... 16

Robert Koch, The CISG as the Law Applicable to Arbitration Agreements?, Sharing

International Commercial Law across National Boundaries , Wildy, Simmons & Hill

Publishing, 2008, p.273 …………………………………………………………………. 2

Carolina Saf, A Study of the Interplay between the Conventions Governing International

Contracts of Sale, http://www.cisg.law.pace.edu/cisg/text/saf96.html ........................... 13

Ricardo Quass Duarte, Anti-Suit Injunctions in the Context of International Commercial

Arbitration,www.trenchrossiewatanabe.com.br/_noticias/Antitruste%20texto_integral.pdf

…………………………………………………………………………………………... 12

BOOKS

Albert van den Berg, ICCA Yearbook Commercial Arbitration XXVIII 2003, Kluwer

Law International ………………………………………………………………………... 4

vii

Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan, 1987, p. 284-

289 …………………………………………………………………………………….... 23

Bonell & Liguori, The U.N. Convention on the International Sale of Goods: A Critical

Analysis of Current International Case Law

http://www.cisg.law.pace.edu/cisg/biblio/libo1.html…………………………………..…... 14

Dr. Peter Huber, Some Introductory Remarks on the CISG, (Sellier European Law

Publishers, Munich, 2006) ………………………………………………………….….. 19

Fouchard, Gaillard & Goldman, International Commercial Arbitration, (Kluwer Law

International, Hague, 1999) ……………………………………………………………. 11

G Petrochilos, Procedural Law in International Arbitration, (Oxford University Press,

London, 2005) …………………………………………………………………....… 10, 15

Gary B. Born, International Commercial Arbitration (Kluwer Law International, The

Hague, 3rd

ed., 2009) ……………………………………………………….7, 8, 10, 11, 15

Gary Born, International Commercial Arbitration, (Kluwer Law International, 2001, 2nd

edn.) ……………………………………………………………………………………... 1

Griffin Day & Griffin The Law of International Trade, 3rd Ed, 2003 ………………… 20

Grigera Naon, Choice-of-law Problems in International Commercial Arbitration, 289

Recueil des Cours 9, 285-86 (2001) …………………………………………………… 15

Halsbury's Laws of England , 3rd Edn., Vol. 2, at p. 218 …………………..…………. 21

Robert Merkin, Arbitration Law (Informa Legal Publishing, London 2004) ………….. 11

Michael G. Bridge, Sale of Goods, 2nd

ed. 1997. ……………………………………..... 27

North & Fawcett, Cheshire & North’s Private International Law, (LexisNexis

Butterworths, London, 13th

Edn.,1999) ……………………………………………. 16, 17

viii

Dicey & Morris, The Conflict of Laws, (Sweet & Maxwell, London, 2000, 13th

edn.)

pp.923-924 ………………………………………………………………………...…… 16

Holtzmann & Neuhaus, A Guide to the UNCITRAL Model Law on International

Commercial Arbitration: Legislative History and Commentary, (1989) ………………. 18

Nygh & Davies, Conflict of Laws in Australia, (Butterworths, Sydney, 2002, 7th

ed.)

………………………………………………………………………………..…………. 17

Pieter Sanders, The Work of UNCITRAL on Arbitration and Conciliation, (Kluwer Law

International, 2001) …………………………………………………………………….... 4

Preventing Delay or Disruption of Arbitration, ICCA Congress Series No. 5 (Kluwer,

1991) …………………………………………………………………………………..… 8

PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS, Study L – Doc.

98, Rome 2004, www.unidroit.org/english/documents/2004/study50/s-50-098-e.pdf .... 24

Redfern, Hunter, Blackaby & Partasides, Law and Practice of International Commercial

Arbitration, (Sweet & Maxwell, London, 4th

Edn., 2004) …………………...……….. 10

CASES

AUSTRALIA

Downs Investments Pvt Ltd v. Perwaja Steel SDN BHD [2000] QSC 421, 17 Nov. 2000

(Supreme Court of Queensland) ……………………………………………………….. 28

AUSTRIA

CLOUT case No. 107 [Oberlandesgericht Innsbruck, Austria, 1 July 1994] ………..… 25

CLOUT case No. 176 [Oberster Gerichtshof, Austria, 6 February 1996] ……………... 23

CANADA

ix

Canada Insurance Corpn. v. Canadian Commercial Bank (1994) 121 DLR (4th

) 360 ... 16

Re First National Bank (1975) 60 DLR (3d) 751 ……………………………………… 16

FINLAND

Crudex Chemicals v. Landmark Chemicals S.A, Finland 31 May 2004 Hovioikeus

[Appellate Court] Helsinki, http://cisgw3.law.pace.edu/cases/040531f5.html ................ 22

FRANCE

CLOUT case No. 150 [Cour de Cassation, France, 23 January 1996] ………………… 24

GERMANY

CLOUT case No. 79 [Oberlandesgericht Frankfurt , Germany, 18 January 1994]….......24

CLOUT case No. 82 [Oberlandesgericht Düsseldorf, Germany, 10 February 1994] ..… 28

CLOUT Case No 338, Appellate Court Hamburg Germany 23 June 1998,

http://cisgw3.law.pace.edu/cases/980623g1.html ...................................................... 20, 27

Landgericht Krefeld, Germany, 24 November 1992,

http://cisgw3.law.pace.edu/cases/921124g1.html ............................................................ 28

Printed Goods case, OLG Frankfurt am Main 26 June 2006 (Germany) ………………. 2

Doors Case, OS Germany 13/01/1993 ……………………………….………………….. 2

Shoes case, Germany 17 September 1991 Appellate Court Frankfurt,

http://cisgw3.law.pace.edu/cases/910917g1.html ............................................................ 26

ICC

Case No. 2103 in 1972, ICC International Court of Arbitration ………………….…… 29

Case No. 7110, 00.04.1998, http://www.unilex.info/case.cfm?id=650, ICC International

Court of Arbitration ………………………..………………………………………...… 29

Case No. 8786, January 1995, I.C.C. International Court of Arbitration …………..…. 28

x

Schiff Food Products Inc v. Naber Seed & Grain Co. Ltd., ICCA Yearbook Commercial

Arbitration XXVI (2001) …………………………………………………………….….. 5

INDIA

YK Fung Securities v. James Cape Ltd. (CA) [1997] 4 CLJ 300 ……………………… 16

Smita Conductors Ltd. v. Euro Alloys Ltd., (2001) 7 SCC 328 ………………………..... 4

ITALY

Rheinland Versicherungen v. Atlarex., Tribunale di Vigevano, Italy, 12 July 2000, No.

405 …………………………………………………………………………………….... 13

LLYOD‟S CASES

Carlos Federspiel & Co v Charles Twigg & Co Ltd [1957] 1 Lloyd's Rep 240 …….… 20

Credit Lyonnais v. New Insurance Co. [1997] 2 Lloyd‟s Rep 1 ……………………….. 17

Union of India v. McDonnell Douglas Corp. [1993] 2 Lloyd‟s Rep. 48 ………………. 15

MEXICO

Conservas La Costeña v. Lanín, Mexico 29 April 1996 Compromex Arbitration

proceeding , http://cisgw3.law.pace.edu/cases/960429m1.html ...................................... 22

30.11.2006, Centro de Arbitraje de México,

http://www.unilex.info/case.cfm?id=1149........................................................................26

NETHERLANDS

Société Nouvelle. v. Import - en Exportmaatschappis, Rb Alkmaar, Netherlands, 30

November 1989, 674/1989 …………………………………………………………… 14

Netherlands Arbitration Institute No. 2319 (15 October 2002).

http://cisgw3.law.pace.edu/cases/021015n1.html ............................................................ 24

xi

MISCELLANEOUS

Prosecutor v. Blaskic Appeals Chamber Judgement, Review, Trial Chamber II, 18 July

1997 ………………………………………………………………………………..…… 10

Re Ewin (1830) 1 Cr & J 151 …………………………………………………………... 16

N.V. Namur v. N.V. Wesco, Rechtbank van koophandel Kortrijk, ,16 December 1996,

A.R. 4328/93 ………………………………………………………………………..….. 14

T. SA v. Établissement, HG Zürich, 30 November 1998, HG 930634/O ………………. 13

Prosecutor v. Kanya ICTY Appeals Chamber Decision, 3 June 1999 ……………..…. 10

SPAIN

Case No. 35/201017.02.2010, Tribunal Supremo, Spain,

http://www.unilex.info/case.cfm?id=1524 …………………………………………….. 26

Case No. 383, 26.11.2007, Audiencia Provincial de Tarragona, Spain,

http://www.unilex.info/case.cfm?id=1359 …………………………………………….. 27

Case No. 812/2007, 09.07.2007, Tribunal Supremo, Spain,

http://www.unilex.info/case.cfm?id=1216 …………………………………………….. 26

UNITED KINGDOM

AIG Group Ltd. v. Ethinki [1998] 4 All ER 301 ………………………………………. 17

Pavia & Co SpA v Thurmann–Nielsen, [1952] 2 Q.B. 84 …………………………...… 21

Re Anziani [1930] 1 Ch 407 …………………………………………..……………...… 17

Silver v. Ocean Steamship Co. Ltd, L.R. [1906] 1 K.B. 237 ………………………...… 21

Sonatrach Petroleum Inc. v. Ferrell International, [2002] 1 All ER 627 ………………. 1

XL Ins. Ltd. v. Toyota Motor Sales USA Inc., Q.B. 14 July 1999 ………………………. 8

UNITED STATES

xii

08.02.2005, Administrative Determination; USA,

http://www.unilex.info/case.cfm?id=1125 …………………………………………….. 26

Al Haddad Bros. Enterprises, Inc. v. M/S Agapi, 635 F.Supp.205 (D.Del.1986), aff‟f

without op., 813 F.2d 396 (3d Cir. 1987) ……………………………………………….. 9

American Construction Machinery & Equipment Corp. v. Mechanized Construction of

Pakistan Ltd, 659 F. Supp. 426 (S.D.N.Y.), aff‟d, 828 F.2d 117 (2d Cir. 1987) ……….. 5

Ball v. Versar, 2006 WL 2568057 (S.D. Ind. 2006) …………………………………… 12

Beijing Metals v. American Business Center, 993 F.2d 1178 (5th Cir. 1993) ……….….. 1

Diemaco v. Colt’s Mfg. Co., 11 F.Supp.2d 228 (D.Conn.1998) ………………………… 8

Fahnestock v. Waltman, 935 F.2d 512, 519 (2d Cir. 1991) ………………………….... 12

In re Arbitration Between U.S. Turnkey Exploration 577 So.2d 1131 (La. App. 1991)

…………………………………………………………………………………………... 10

Kaiser Aluminum & Chemical Corp. v. Illinois Central Gulf R.R., 615 F.2d 470 (8th Cir.)

…………………………………………………………………………………………... 22

Mastrobuono v. Shearson Lehman Inc , 514 U.S. 52 (U.S. S.Ct., 1995) ……………… 11

Sphere Drake Insurance PLC v. Marine Towing INC, 16 F.3d 666 (5th Cir. 1994) ……. 4

CONVENTIONS

INCOTERMS, www.iccwbo.org/incoterms/preambles/pdf/FOB.pdf .................. en passim

UNCITRAL Model Law on International Commercial Arbitration………...….. en passim

UNIDROIT Principles on International Commercial Contracts ……………….. en passim

United Nations Convention on the Carriage of Goods by Sea, 1978

(Hamburg)……………………..……………………………..…………………. en passim

xiii

United Nations Convention on the Recognition and Enforcement of Foreign Arbitral

Awards…………………………………………………….……………...……. en passim

DIGEST

2008 UNCITRAL Digest of Case Law, United Nations Convention on the International Sale of

Goods ……………………………………………………………………………………………. 2

HYPERLINKS

http://www.cisg.law.pace.edu/cisg/biblio/koch.html ....................................................... 24

http://www.cisg.law.pace.edu/cisg/text/flecht81,85,88.html …………………………... 29

JOURNALS

Abba Kolo, Witness Intimidation, Tampering & other Related Abuses of Process in

Investment Arbitration: Possible Remedies Available to the Arbitral Tribunal, 43

Arbitration International Vol.26, No.1 (2010) …………………………………….…… 11

Albert Jan van den Berg, New York Convention of 1958: Refusals of Enforcement, ICC

International Court of Arbitration Bulletin Vol. 18 No.2, 2007 …………………….... 5, 9

Bonell, The UNIDROIT Principles and Transnational Law, 5 Uniform Law Review 199

(2000) …………………………………………………………………………………... 18

Christofer Coakley, In The Growing Role of Customized Consent in International and

Commercial Arbitration, 29 GA. J. INT‟L & COMP. L. 127…………………………… 3

Friedland, Provisional Measures in ICSID Arbitration (1986) 2 Arb. Int‟l 335 ………. 13

Hirsch, The Place of Arbitration and the Lex Arbitri 34 Arb. J 43, 45 (1979) ………… 16

xiv

Janet Walker, Agreeing to Disagree: Can We Just Have Words? CISG Article 11 and the

Model Law Writing Requirement, (25) Journal of Law and Commerce 153 at 163 …..… 1

Mann, Lex Facit Arbitrum, 2 Arb Int‟l 241, 244-245, 248, (1986) ………………….... 15

Markiyan Kliuchkovskyi, Applicability of UNIDROIT Principles of International

Commercial Contracts in Courts and Arbitration Tribunals, International Arbitration &

L.P., Magisters …………………………………………………………………………. 18

Peter Kucherepa, Reviewing Trends And Proposals To recognize Oral Agreements To

Arbitrate In International Arbitration Law, (2005) 16 Am. Rev. Int‟l Arb. 409………... 3

Rubins, Allocation of Costs and Attorney’s Fees in Investor-State Arbitartion, 18 ICSID

Rev. FILJ 109 (2003) ………………………………………………………………...… 12

Sieg Eiselen, Adoption of the Vienna Convention for the International Sale of Goods (the

CISG) in South Africa, 116 South African LJ, Part II (1996), 323-370 ……………...… 18

REPORT

2004 WL 2075351, World Trade Organization, Report of the Panel, UNITED STATES -

SUBSIDIES ON UPLAND COTTON, September 8, 2004 …………………………… 20

RULES

Kuala Lumpur Regional Centre for Arbitration Rules ……………………….…………..7

UNCITRAL Arbitration Rules ……………………………………………..……… 10, 11

xv

STATEMENT OF JURISDICTION

Astoria Produce Company (The Claimant) has approached the Kuala Lumpur Regional Center

for Arbitration (KLRCA), Kuala Lumpur pursuant to the arbitration agreement between the

Claimant and Rolga Farmers‟ Exchange (The Respondent)and maintains that the claim is

admissible against the Respondent. The same has been argued further in the pleadings.

xvi

QUESTIONS PRESENTED

I. WHETHER THE KLRCA HAS THE AUTHORITY TO RESOLVE THE DISPUTE BETWEEN THE

PARTIES, AND SPECIFICALLY, WHETHER THERE WAS AN AGREEMENT BETWEEN THE

PARTIES TO SUBMIT THIS DISPUTE TO IT?

II. WHETHER THE THREE ARBITRATORS WERE PROPERLY APPOINTED, SPECIFICALLY,

WHETHER RESPONDENT WAS IMPROPERLY DENIED THE OPPORTUNITY TO SELECT ITS

„PARTY-APPOINTED ARBITRATOR‟ AND WHETHER THE PRESIDING ARBITRATOR WAS

IMPROPERLY APPOINTED?

III. WHETHER THE ARBITRATION PANEL HAS THE AUTHORITY TO IMPOSE SANCTIONS IN THE

FORM OF A FINE ON THE RESPONDENT FOR FAILING TO APPEAR AT THE INITIAL HEARING

AND/OR FOR NOT PROVIDING ADEQUATE NOTICE THAT IT WOULD NOT APPEAR AND,

ASSUMING IT DOES, WHAT SANCTION WOULD BE APPROPRIATE UNDER THE

CIRCUMSTANCES?

IV. WHAT LAW OR LEGAL PRINCIPLES APPLY TO THIS DISPUTE?

V. DID THE SHIPMENT OF BANANAS ARRIVE AT ITS DESTINATION IN AN UNSATISFACTORY

CONDITION DUE TO IMPROPER STORAGE DURING THE VOYAGE FROM ROLGA TO ASTORIA

AND, IF SO, DOES THIS CONSTITUTE A BREACH OF THE RESPONDENT‟S OBLIGATION UNDER

THE CONTRACT BETWEEN THE PARTIES?

VI. WHETHER EITHER PARTY HAD A LEGAL OBLIGATION TO ATTEMPT TO SELL OR STORE

THE BANANAS, OR A PORTION OF THEM, SOON AFTER THE PINAFORE DOCKED AT THE

PORT OF ASTORIA?

xvii

STATEMENT OF FACTS

The Parties

Rolga Farmer‟s Exchange (RFE) (hereinafter Respondent) is an agricultural cooperative Rolgan

law, which is a civil law jurisdiction.

Astoria Produce Company (AP) (hereinafter Claimant) is a major distributor of produce to retail

grocery stores throughout Astoria, which is a common law jurisdiction.

The Contract

On July 15, 2010, Mr. Vogel, the Claimant‟s Chief Purchasing Agent, contacted Ms Rocco, the

Respondent‟s General Sales Manager by telephone and ordered a large quantity of bananas. In

response, Ms. Rocco sent a confirming Bill of Sale (email attachment) to Mr. Vogel which

indicated that the shipment would be made “FOB Rolga City”, with a forum selection clause,

calling for settlement of disputes by a sole arbitrator, in Rolga City, with the rules of the Western

Pacific Regional Centre for Arbitration.

Mr. Vogel subsequently signed the Bill of Sale, after revising the original forum selection clause

changing the number of arbitrators to three, place to Kuala Lumpur and the Rules to the Kuala

Lumpur Regional Centre for Arbitration (KLRCA) Rules.

Loading of Shipment

The Respondent arranged for shipment on the M/S PINAFORE on which the loading of bananas

began on September 21, 2010. The captain of the Pinafore, signed a clean bill of lading prepared

by Respondent on September 23, 2010.

xviii

The Payment

On September 30, 2010; the Respondent was paid in full for the bananas, through a letter of

credit

Inspection of Shipment

The Pinafore departed from Rolga on October 1, 2010, and arrived in Astoria city on November

24, 2010. Before unloading, Dr. Bartolo, with an Astorian Department of Agriculture inspector,

inspected the shipment. Some of the bananas were found to be ripe or ripening. The degree of

ripening in the No.2 hold where the bananas had been packed in boxes was substantially greater

than ripening in the No.1 hold, where, the bananas had been stowed by the stem.

The next day, a professional Maritime Surveyor, inspected the bananas and reported that

approximately 30% of the bananas were ripe or ripening, when the normal percentage of ripe or

ripening is from 3-5 % and more than 10% is considered excessive. He attributed the ripened

state of the bananas to the high temperatures at which they had been transported.

Rejection of Shipment

Based on Dr. Bartolo‟s recommendation, Mr. Vogel sent an email to Ms Rocco on November 26,

2010, rejecting the entire shipment due to excessive ripening of the bananas. He also requested

Ms. Rocco to advise the Captain of M/S Pinafore as to how the bananas were to be disposed of.

Most importantly, Mr. Vogel also asked for a full refund of the purchase price within 30 days.

In response, Ms. Rocco contended that the Respondent‟s responsibility had ended when the

bananas were loaded onto the M/S Pinafore, and also conveyed that their non-intention of

paying for the damage to the bananas.

xix

Dumping of Shipment

As the Pinafore had other “ports of call,” the bananas were unloaded and stored in a nearby

warehouse. The following day, an inspector for the Astoria Department of Agriculture found that

54% of the bananas were over-ripe and the remainder ripe or ripening. The Respondent was

asked to pick up the bananas, but it refused to dispose of the bananas. Two days later, the

Department of Agriculture supervised the dumping of the entire shipment as waste.

The Arbitration

On June 1, 2011, the Claimant commenced arbitration with the KLRCA pursuant to Rule 3 of the

UNCITRAL Arbitration Rules (2010). It designated Bernard Bodd as its party appointed

arbitrator. KLRCA‟s Director notified RFE of the filing of the Request for Arbitration and

requested that RFE appoint its party appointed arbitrator within 30 days. After 45 days had

elapsed without RFE making an appointment, the Director appointed Riska Benti, as the second

arbitrator and Judge John Chong, as the presiding arbitrator.

Less than an hour before the initial hearing, scheduled on 15 August 2011, the Director received

an e‐ mail from Ms Rocco stating that the Respondent would not appear as it intends to

challenge the authority of the tribunal.

The Director then, arranged for another hearing to be scheduled on 10 October 2011. A

representative of RFE notified the Director that it would be represented by an attorney at the

hearing who should be appointed as its "party appointed arbitrator”. The Director refused the

replacement on the grounds that it was too late to substitute an attorney as a member of the

arbitration panel.

xx

SUMMARY OF PLEADINGS

I. KLRCA HAS THE AUTHORITY TO RESOLVE THIS DISPUTE

The arbitration agreement to submit disputes to the KLRCA is valid. It satisfies the

requirements of CISG, or in the alternative, is valid under S.9 of The Arbitration Act, 2005 of

Malaysia. Further it fulfils the requirements of Art.II(2) of The New York Convention, and

can further be validated under Art.VII(1). Any Award pursuant to this agreement will be

enforceable under Art.V(1)(a) of The Convention.

II. THE TRIBUNAL HAS BEEN PROPERLY CONSTITUTED

Ms. Benti‟s appointment by the Director as the second arbitrator is valid under the KLRCA

Rules. Further the appointment of the Presiding Arbitrator is also in accordance with the

Rules. Any Award rendered by this Tribunal will be enforceable under Art.V(1)(d) of The

New York Convention.

III. THE TRIBUNAL HAS THE AUTHORITY TO IMPOSE SANCTIONS

Unless a mode of conducting the proceedings has been prescribed by the parties, arbitrators

have a general discretion over the proceedings and are not bound by formal rules of

procedure. Whether or not the instruments of the tribunal explicitly or implicitly vest it with

such authority, it can always rely on its inherent powers as a basis of jurisdiction so as to

resolve the disputes effectively. Further, it may use its procedural discretion in the present

matter in order to fulfill its obligation of conducting the arbitration expeditiously.

xxi

IV. CISG SHOULD GOVERN THE CONTRACT

Art.1(1)(b) of the Convention expresses that it will govern the contract if the rules of private

international law lead to the application of the law of a Contracting State.

The rules of private international law lead to the application of Astorian law as it has the

closest and most real connection with the transaction. Since Astoria is a Contracting State,

the Convention would apply to the present dispute.

V. RESPONDENT HAS BREACHED ITS OBLIGATIONS UNDER THE CONTRACT

FOB Contract entails that the seller will be responsible till the goods cross the ship‟s rails.

RESPONDENT did not pack the goods in accordance with CLAIMANT‟s requirements and

also did not provide for insurance. The instructions given to Pinafore‟s Captain was

inadequate. A clean bill of lading does not provide adequate evidence of proper shipment.

RESPONDENT is guilty of fundamental non-performance and fundamental breach of

contract under both CISG and UNIDROIT Principles, thereby giving CLAIMANT the option

to avoid the contract.

VI. CLAIMANT DID NOT HAVE A LEGAL OBLIGATION TO ATTEMPT TO SELL

THE BANANAS

CLAIMANT is not claiming any damages, and hence it is not obligated to mitigate. Under

the principle of good faith, CLAIMANT is only expected to act reasonably. It would be

unreasonable to sell the non-conforming goods to customers. Considering the perishable

nature of the goods, CLAIMANT duly sent a notice in time to RESPONDENT for taking

care of the goods. This is an act of good faith. It is unreasonable to fix the responsibility of

selling and storing the goods on CLAIMANT as both parties were still negotiating as to who

should take requisite steps.

1

PLEADINGS

I. KLRCA HAS THE AUTHORITY TO RESOLVE THIS DISPUTE.

A. The Arbitration Agreement Is Valid

1. The agreement satisfies the requirements of lex arbitri.

The parties have not provided an “Applicable Law” clause in the Bill of Sale.1 When parties

have not expressly agreed to the law governing the arbitration, selecting the law governing the

arbitration agreement requires choosing between two alternatives – the substantive law of the

underlying contract or the law of the seat of the arbitration.2

a. Substantive law of contract will apply to arbitration agreement.

CLAIMANT states that when parties have not specified the law applicable to the arbitration, the

law of the arbitration agreement follows the substantive law of contract.3 As will be established

in Issue IV, CISG is applicable as the substantive law applying to the contract.

One of the primary factors behind enacting CISG was to provide parties to international contracts

for sale of goods with some certainty as to the principles of law that would govern their

disputes.4 Hence CLAIMANT states that when the substantive law of the contract is CISG, the

law governing the forum selection clause in that same contract should also be CISG.5

1 Corrections and Clarifications, B.7

2 Gary Born, International Commercial Arbitration, (Kluwer Law International, 2001, 2

nd edn.), p.111

3 Sonatrach Petroleum Inc. v. Ferrell International, [2002] 1 All ER 627

4 Beijing Metals v. American Business Center, 993 F.2d 1178 (5th Cir. 1993)

5 Janet Walker, Agreeing to Disagree: Can We Just Have Words? CISG Article 11 and the Model Law Writing

Requirement, (25) Journal of Law and Commerce 153 at 163 [hereinafter Walker]

2

i. Form requirements not necessary under Art.11 CISG

When deciding the validity of an arbitration agreement, resort can be made to permissive form

requirements under the substantive law of contract.6 Art.11 provides freedom from formality,

i.e., the conclusion of agreements in writing or any other form is not required. The reference to

arbitration agreements in Art.19(3) and Art.81(2) implies that the freedom from form provision

under Art.11 extends to arbitration agreements as well.7

In light of Art.11, RESPONDENT not reverting back to the CLAIMANT on the amended forum

selection clause is irrelevant while determining the validity of the arbitration agreement. On the

contrary, the RESPONDENT‟s subsequent actions lead to the conclusion that it accepted all the

terms of the contract, including the revised forum selection clause.

ii. Acceptance of counter-offer

Pursuant to Art.19, a counter-offer was constituted when the acceptance to the offer contained

additional terms materially altering the offer.8 In particular, different terms relating to the

settlement of dispute are considered material changes under Art.19(3).9 The CLAIMANT

modified the forum selection clause in the Bill of Sale, which constitutes a material alteration

under Art.19(3).10

Performance of contractual duties pursuant to a counter-offer amounts to

assent to such an offer.11

RESPONDENT‟s tacit acceptance of the terms of the contract by

performing the acts of arranging shipment and loading the goods on the carrier subsequent to the

CLAIMANT returning the Bill of Sale show its tacit acceptance of the arbitration agreement as

well under Art.18(1) and Art.18(3).

6 Bundesgerichtshof, 21 September 2005, as cited in Robert Koch, The CISG as the Law Applicable to Arbitration

Agreements?, Sharing International Commercial Law across National Boundaries (Wildy, Simmons & Hill

Publishing, 2008, p.273[hereinafter Koch] 7 Koch, at p.271

8 UNCITRAL Digest, Art.19

9 Koch, at p.272

10 Printed Shoes case, OLG Frankfurt am Main 26 June 2006 (Germany)

11 Doors Case, OS Germany 13/01/1993

3

iii. Art.90 not applicable for domestic legal systems.

Arbitration agreements are subject to international agreements under Art.90.12

The term

„international agreement‟ is used generically and applies to bilateral and multilateral treaties.13

Therefore, a domestic legal system is not an international agreement concluded between States.

Hence The Arbitration Act, 2005 is not an agreement in the sense of Art.90, and the CISG will

prevail over any written form requirement contained in this domestic law.14

b. “Writing” requirements of Law of the Seat satisfied.

Even if this Tribunal finds that the lex loci, i.e., The Malaysian Arbitration Act, 2005 is the lex

arbitri, CLAIMANT states that the requirements of a valid arbitration agreement under S.9 of

The Arbitration Act, 2005 has been fulfilled.

S.9 is modelled on Art.7 of the UNCITRAL Model Law on International Commercial

Arbitration, 1985 prior to the 2006 Amendment. The objective of Art.7 is a written

demonstration that the contracting parties intended to incorporate an arbitration clause into the

contract.15

The main requirement for arbitration is that there must be intention to arbitrate. The

parties‟ intention to arbitrate may be evidenced by both parties signing a document providing

arbitration as a chosen form of dispute resolution.16

12

H.P. Westermann, Munchener Kommentar zum Burgerlichen Gesetzbuch at Art 4 para 7, as cited in Koch 13

F. Enderlein and D. Mascow, International Sales Law, as cited in Koch 14

Koch, at p.273 15

Christofer Coakley, In The Growing Role of Customized Consent in International and Commercial Arbitration, 29

GA. J. INT‟L & COMP. L. 127, p.143 16

Peter Kucherepa, Reviewing Trends And Proposals To recognize Oral Agreements To Arbitrate In International

Arbitration Law, (2005) 16 Am. Rev. Int‟l Arb. 409

4

Thus when the CLAIMANT sent the Bill of Sale to the RESPONDENT, and the RESPONDENT

performed its contractual obligations thereto, the contract stands confirmed and the arbitration

clause contained therein is binding on both parties.17

2. The agreement is valid under the New York Convention.

i. The requirements of Art.II(2) met.

CLAIMANT states that Art.II is non-exhaustive, and the words „shall include‟ in Art.II(2) should

be read expansively as „shall include but not limited to‟ to allow other written forms of

arbitration. This interpretation allows tacit acceptance of a contract containing an arbitration

clause, provided that the clause is contained in a written contract or other forms of writing.18

This

view has been endorsed by UNCITRAL.19

In the alternative, CLAIMANT states that the Sphere Drake formula20

should be applied,

whereby the requirements of „signature‟ and „exchange‟ under Art.II(2) applies only to an

arbitration agreement, i.e., a self contained arbitration agreement but not to an arbitration clause

in a contract. In light of this Formula, the forum selection clause is valid under Art.II(2).

ii. Art.VII(1) allows relaxing requirements of Art.II(2)

Art.VII entitles a party to rely upon the more liberal domestic provisions of the country where

enforcement is sought.21

Rolga and Astoria are both signatories to the UNCITRAL Model Law

on International Commercial Arbitration, 1985.22

The provisions of the UNCITRAL Model Law

on International Commercial Arbitration, 1985 are a part of Astoria and Rolga‟s domestic legal

17

Smita Conductors Ltd. v. Euro Alloys Ltd., (2001) 7 SCC 328 18

Albert van den Berg, ICCA Yearbook Commercial Arbitration XXVIII 2003, Kluwer Law International, p.585 19

2006- Recommendation regarding the Interpretation of article II (2) and article VII (1) of the Convention on the

Recognition and Enforcement of Foreign Arbitral Awards ( New York, 1958), A/6/17 20

Sphere Drake Insurance PLC v. Marine Towing INC, 16 F.3d 666 (5th Cir. 1994) 21

Pieter Sanders, The Work of UNCITRAL on Arbitration and Conciliation, (Kluwer Law International, 2001), p.30 22

Compromis, 9

5

system. UNCITRAL encourages States to interpret the provisions of Art.II(2) in light of

domestic provisions while interpreting Art.VII(1).23

Post the amendments, Art.7 of the Model Law require EDI of the arbitration agreement. This

requirement is fulfilled by the forum selection clause, and hence it is valid.

B. Award Rendered Pursuant To This Agreement Will Be Enforceable.

According to Art.V(1)(a) of The New York Convention, recognition and enforcement of an

award may be refused when the arbitration agreement is not valid under the law to which the

parties have subjected it, or in its absence, is not valid under the law of the country where the

award was made.24

In the present matter, the agreement is subject to and is valid under the CISG.

Hence any award rendered will be enforceable.

If The Malaysian Arbitration Act, 2005 is applicable, even then the agreement is valid and award

will be enforceable. Even if this Tribunal finds that the agreement is invalid under The

Arbitration Act, 2005 the award will still be enforced because the parties did not validly

designate Malaysian law as applying to their agreement.25

Further, an award can be enforced even though the strict signature requirement of The New York

Convention is not fulfilled when the conduct of parties shows their acceptance of the

agreement.26

Hence any award passed by this Tribunal pursuant will not be refused enforcement

by courts under Art. V(1)(a).

23

2006- Recommendation regarding the Interpretation of article II (2) and article VII (1) of the Convention on the

Recognition and Enforcement of Foreign Arbitral Awards ( New York, 1958), A/6/17 24

Albert Jan van den Berg, New York Convention of 1958: Refusals of Enforcement, ICC International Court of

Arbitration Bulletin Vol. 18 No.2, 2007 [hereinafter Van den Berg] 25

American Construction Machinery & Equipment Corp. v. Mechanized Construction of Pakistan Ltd, 659 F. Supp.

426 (S.D.N.Y.), aff‟d, 828 F.2d 117 (2d Cir. 1987) 26

Schiff Food Products Inc v. Naber Seed & Grain Co. Ltd., ICCA Yearbook Commercial Arbitration XXVI (2001)

p.365

6

II. THE TRIBUNAL HAS BEEN PROPERLY CONSTITUTED.

A. Ms. Benti‟s appointment in accordance with the parties‟ agreement.

1. RESPONDENT failed to appoint its arbitrator in time.

In the present matter, the forum selection clause specifies the number of arbitrators as three.27

According to Art.9(1) of the KLRCA Rules, when the parties have agreed on a Tribunal to

comprise of three arbitrators, each party shall appoint one arbitrator, and the two party-appointed

arbitrators shall choose the third arbitrator who will act as the presiding arbitrator.

Pursuant to Art.9(1), CLAIMANT designated Bernard Bodd as its party appointed arbitrator.28

Art.9(2) of the KLRCA Rules states that when a party fails to notify the arbitrator it has

appointed within 30 days after the receipt of the other party‟s notification of the appointment of

its arbitrator, the appointing authority can appoint the second arbitrator. The Director of The

KLRCA had expressly requested the RESPONDENT to notify its party-appointed arbitrator

within 30 days of receiving the request for arbitration.29

Upon RESPONDENT‟s failure to make any appointment even after 45 days,30

the Director was

empowered under Art.9(2) to appoint Ms. Riska Benti as the second arbitrator.

2. No grounds for replacing Ms. Benti.

Replacement of an arbitrator by a substituted arbitrator is provided for under Art.14 of the

KLRCA Rules. This provision deals with the procedure for appointing a substitute arbitrator

where an arbitrator has to be replaced during the course of the arbitral proceedings. However the

circumstances in which an arbitrator will have to be replaced is not enumerated either under

Art.14 or any other provision of the KLRCA Rules.

27

Compromis, 1 28

Compromis, 4 29

Ibid 30

Ibid

7

When there is no procedure prescribed in the institutional rules, resort can be made to the law of

the arbitration.31

Therefore, this apparent lacuna in the KLRCA Rules can be filled by referring

to the lex arbitri, i.e., the Malaysian Arbitration Act, 2005. S.17(1) states that a substitute

arbitrator shall be appointed where his mandate terminates due to a challenge, the arbitrator

withdraws from office for any other reason, his mandate is revoked by agreement of the parties

and in any other case of termination of mandate.

In the present matter, the RESPONDENT seeks to replace Ms. Riska Benti on the ground that it

should be given the opportunity to appoint its “party appointed arbitrator”.32

S.17(1) of the

Arbitration Act does not envision replacement of arbitrator on such a ground. Even if the

RESPONDENT were to argue that Ms. Benti‟s mandate as the second arbitrator was terminated

when the RESPONDENT sought to appoint its own party-appointed arbitrator, the CLAIMANT

states that the RESPONDENT had already waived its right to appoint an arbitrator by not

promptly objecting to the appointment of Ms. Benti.33

The RESPONDENT is thus precluded

from seeking to exercise this right after the constitution of the Tribunal.

B. Presiding Arbitrator has been properly appointed.

1. 30 days time limit not applicable.

Art.9(3) of the KLRCA Rules states that if the two arbitrators have not agreed on the choice of

the presiding arbitrator within 30 days of the appointment of the second arbitrator, the presiding

arbitrator shall be appointed by the appointing authority in the same way as a sole arbitrator

would be appointed under article 8.

31

Gary B. Born, International Commercial Arbitration (Kluwer Law International, The Hague, 3rd

ed., 2009), p.407

[hereinafter Born] 32

Compromis, 5 33

Art.32, KLRCA Rules of Arbitration

8

Such an appointment procedure may be undermined by a party not appointing its arbitrator or a

party-appointed arbitrator refusing to agree on the presiding arbitrator.34

The RESPONDENT‟s

non-participation in the constitution of this Arbitral Tribunal shows that it is seeking to delay the

proceedings. CLAIMANT states that such dilatory tactics can be avoided by allowing the arbitral

institution to intervene and make the appointment.35

A party-appointed arbitrator is expected to consult the party appointing him while deciding upon

the appropriate attributes of a Presiding Arbitrator. The importance of this practice is reflected in

the wording of Art.9(1) of the KLRCA Rules, which states that “the two arbitrators thus

appointed” by both parties will choose the Presiding Arbitrator.

While a co-arbitrator is not bound to follow any instructions on such matters,36

such consultation

is in line with contemporary practice of giving weightage to the parties‟ knowledge of the needs

of their case and the desire of participating in the constitution of “their” Tribunal.37

CLAIMANT states that when a co-arbitrator is appointed by the appointing authority and not a

party, the time period of 30 days under Art.9(3) will not come into play. The institution can

appoint the presiding arbitrator to expedite the constitution of the Tribunal.

When parties agree to arbitrate before an institution under its institutional Rules, they are bound

by the institution‟s interpretation of such Rules.38 Therefore, the RESPONDENT cannot question

the Director of the KLRCA‟s decision to appoint the Presiding Arbitrator under Art.9(3) without

waiting for the co-arbitrators to agree on their choice of presiding arbitrator.

34

Preventing Delay or Disruption of Arbitration, ICCA Congress Series No. 5 (Kluwer, 1991) p.61 35

Ibid 36

XL Ins. Ltd. v. Toyota Motor Sales USA Inc., Q.B. 14 July 1999, as cited in Born, at p.1405 37

Born, at p.1405 38

Diemaco v. Colt’s Mfg. Co., 11 F.Supp.2d 228 (D.Conn.1998)

9

2. List procedure not compulsory.

Art.8(2) requires the Director to appoint the Presiding Arbitrator as promptly as possible.

Further, under Art.8(2)(d), the Director has the discretion of not following the list-procedure and

appointing the presiding arbitrator himself.

Considering the fact that the RESPONDENT had delayed the proceedings by not participating in

the appointment of its co-arbitrator, it would have been futile to follow the list procedure. Hence

the Director was justified in appointing Judge Chong as the Presiding Arbitrator.

C. Any Award passed by this Tribunal will be enforceable.

According to Art.V(1)(d) of the New York Convention, enforcement of an award may be refused

when the composition of the Tribunal is not in accordance with the agreement of the parties.39

However, since the Tribunal has been constituted in accordance with the parties‟ agreement,

there is no risk of an award being refused enforcement. Even if the Tribunal was not constituted

in accordance with the arbitration agreement, such a lapse is not fatal and the award granted will

still be enforceable.40

39

Van den Berg 40

Al Haddad Bros. Enterprises, Inc. v. M/S Agapi, 635 F.Supp.205 (D.Del.1986), aff‟f without op., 813 F.2d 396

(3d Cir. 1987)

10

III. THE ARBITRAL TRIBUNAL HAS THE AUTHORITY TO IMPOSE

SANCTIONS.

A. Procedural Discretion of the Arbitrators

The UNCITRAL Rules41

provides that, “unless a mode of conducting the proceedings has been

prescribed by the parties, arbitrators have a general discretion over the proceedings and are not

bound by formal rules of procedure, and the standard of review of arbitration procedures is

merely whether a party has been denied a fundamentally fair hearing.”42

A closely related objective of international arbitration is the use of arbitral procedures that are

flexible and tailored to the parties‟ particular dispute.43

This flexibility enables the arbitral

tribunal to take decisions that take into account the circumstances of the case and the need for a

just and cost-efficient resolution of the dispute.44

It is observed that tailoring of procedures may

even involve establishing an expedited “fast-track” arbitral procedure.45

An aspect of the arbitrators‟ procedural discretion is the freedom to adopt more “judicial”

procedures that appear best-suited for handling one or more aspects of a dispute.46

Although, in

discharging the judicial functions, an arbitral tribunal is to be guided by its constitutive

instruments, in the case of a lacuna, the tribunal can rely on inherent powers to fill the gap.47

The

existence of these inherent powers, are necessary to ensure the proper administration of justice.48

Thus, whether or not the instruments of the tribunal explicitly or implicitly vest it with such

41

Art.17(1), UNCITRAL Arbitration Rules 42

In re Arbitration Between U.S. Turnkey Exploration 577 So.2d 1131 (La. App. 1991) 43

G Petrochilos, Procedural Law in International Arbitration, 81 (2004) 44

Redfern, Hunter, Blackaby & Partasides, Law and Practice of International Commercial Arbitration, (Sweet &

Maxwell, London, 4th

Edn., 2004) 45

Born, at p.2231 46

Ibid 47

Prosecutor v. Kanya, ICTY Appeals Chamber Decision, 3 June 1999 48

Prosecutor v. Blaskic, Appeals Chamber Judgement, Review, Trial Chamber II, 18 July 1997

11

authority, it can always rely on its inherent powers as a basis of jurisdiction so as to resolve the

disputes effectively.49

This clearly indicates that an arbitral tribunal can exercise jurisdiction over numerous procedural

issues, even though such powers are not expressly provided for in its constitutive instruments.

B. Tribunal‟s Duty to Minimize Delay.

It is settled law that the arbitral tribunal, in exercising its discretion, shall conduct the

proceedings so as to avoid unnecessary delay and expense and provide an efficient process for

resolving the parties‟ dispute.50

Also, arbitrators are obligated to conduct arbitration with

expedition.51

This requirement of expedition forms an essential feature of the Kompetenz-

Kompetenz principle to ensure that a party cannot succeed in delaying the arbitral proceedings by

alleging that the arbitration agreement is invalid or non-existent.52

Thus, in the light of such requirements, the arbitration panel may use its procedural discretion in

order to fulfill its obligations.

C. Power To Impose Sanctions.

There is no question that arbitrators have power to make an award of monetary damages which

extends to practical aspects and logistics of payment.53

There have been doubts concerning the

power of arbitrators to award punitive damages, however, these doubts were resolved decisively

in favor of arbitrability of punitive damage claims in Mastrobuono v. Shearson Lehman Inc.54

49

Abba Kolo, Witness Intimidation, Tampering & other Related Abuses of Process in Investment Arbitration:

Possible Remedies Avilable to the Arbitral Tribunal, 43 Arbitration International Vol.26, No.1 (2010) 50

Art.17(1), UNCITRAL Arbitration Rules 51

Born, at p.2435 52

Fouchard, Gaillard & Goldman, International Commercial Arbitration, (Kluwer Law International, Hague, 1999) 53

Merkin, Arbitration Law (Informa legal Publishing, London, 2004) 54

514 U.S. 52 (U.S. S.Ct., 1995)

12

Also, in Fahnestock v. Waltman,55

the court held that general language of a certain Arbitration

Rules, which provided that the arbitrators may award “any remedy which [is] just and equitable

and within the scope of the agreement,” evidence a presumption that punitive damages may be

pursued in the arbitration.

More importantly, it is clear that the tribunal may award monetary compensation for breach of

the arbitration agreement.56

Several arbitral tribunals have used such discretion in costs

allocation by taking into account uncooperative behaviour of the parties.57

Gaillard asserts “the

arbitrators‟ jurisdiction to sanction all breaches of the arbitration agreement and the arbitrators‟

power to take any appropriate measures to ensure the effectiveness of their future award.”58

Further, damages for breach of an arbitration agreement can be an appropriate means of

enforcing arbitration agreements, by increasing the disincentives for such conduct.59

In the light of the above arguments, it is submitted that the arbitration panel has the authority to

impose sanctions in the form of a fine on the RFE for failing to appear at the initial hearing

without providing adequate notice.

55

935 F.2d 512, 519 (2d Cir. 1991) 56

Friedland, Provisional Measures in ICSID Arbitration (1986) 2 Arb. Int‟l 335 57

Rubins, Allocation of Costs and Attorney’s Fees in Investor-State Arbitartion, 18 ICSID Rev. FILJ 109 (2003) 58

Ricardo Quass Duarte, Anti-Suit Injunctions in the Context of International Commercial Arbitration,

<www.trenchrossiewatanabe.com.br/_noticias/Antitruste%20texto_integral.pdf> 59

Ball v. Versar 2006 WL 2568057 (S.D. Ind. 2006)

13

IV. CISG SHOULD GOVERN THE CONTRACT

A. Applying CISG through Art.1(1)(b)

1. The Convention prevails over Private International Law

The 1980 Vienna Convention is an international agreement on uniform substantive rules

governing international sales of goods. This uniform sales law has been incorporated within the

national substantive laws of the Contracting States.60

It is agreed that both the Convention and the private international law rules of a forum address

international contracts. However, it must be first determined whether the Convention applies

before resorting to private international law.61

This is because of the following two reasons:

(a) Uniform substantive law is more specific per definitionem than the rules of private

international law because the former settles "directly" the question of applicable substantive

law.62

(b) Most importantly, the rules of uniform substantive law must always prevail over the rules of

private international law.63

Thus, contrary to initial appearances, the substantive law applicable to this international

transaction should not be determined by reference to the rules of private international law on the

matter but rather by reference to the 1980 United Nations Convention on Contracts for the

International Sale of Goods.

60

Carolina Saf, A Study of the Interplay between the Conventions Governing International Contracts of Sale,

September 1999 http://www.cisg.law.pace.edu/cisg/text/saf96.html 61

2008 UNCITRAL Digest of Case Law, United Nations Convention on the International Sale of Goods; T. SA v..

Établissement, HG Zürich, 30 November 1998, HG 930634/O 62

Rheinland Versicherungen v. Atlarex., Tribunale di Vigevano, Italy, 12 July 2000, No. 405 63

Ibid

14

2. Applicability of Art.1(1)(b)

This provision expresses that even if CISG is not directly applicable under Art.1(1)(a), the

Convention rules will still govern the contract when the rules of private international law lead to

the application of the law of a Contracting State. Due to the substantive character of the

Convention, the rule in Art.1(1)(b) will apply whether the forum country is a Contracting State

or not.

The trend in the case law, both arbitral awards and State court decisions, to apply the Convention

on the basis of the criterion laid down in Art.1(1)(b) also in cases where the forum is that of a

non-Contracting State, by now appears sufficiently established.64

Thus, even though the

Convention does not bind non-Contracting States, it has been applied in courts of non-

Contracting States.65

Thus, in the present matter, since the CLAIMANT‟s place of business is in a Contracting State.

i.e. Astoria, CISG would apply if the rules of private international law lead to the application of

Astorian law.

3. Rules of Private International Law leading to application of laws of Astoria.

a. Choice-of-law rules of the forum

Various sources proceed from the premise that an international arbitration is based on or rooted

in a particular national legal system which has materially greater legal significance for and

control over a locally-seated arbitration than other legal systems.

64

Bonell & Liguori, The U.N. Convention on the International Sale of Goods: A Critical Analysis of Current

International Case Law, http://www.cisg.law.pace.edu/cisg/biblio/libo1.html 65

N.V. Namur v. N.V. Wesco, Rechtbank van koophandel Kortrijk, ,16 December 1996, A.R. 4328/93; Société

Nouvelle. v. Import - en Exportmaatschappis, Rb Alkmaar, Netherlands, 30 November 1989, 674/1989

15

By choosing a country in which to arbitrate, the parties ex hypothesi, create a close connection

between the arbitration and the country.66

Thus, the national arbitration legislation of the arbitral

seat will almost always govern both the internal procedural conduct of the arbitral and the

external relationship between the arbitration and national courts.67

In the present matter, the arbitration agreement lays down Kuala Lumpur as the seat of

arbitration. Thus, the relevant national arbitration legislation governing both the internal and

external procedural aspects of the arbitration is the Malaysian Arbitration Act, 2005.

According to Professor Mann, “The law of the arbitral tribunal‟s seat initially governs the whole

of the tribunal‟s life and work. In particular it governs…the rules of the conflict of laws to be

followed by [the arbitrators].”68

Properly understood, the parties‟ agreement to arbitrate in a

particular arbitral seat generally constitutes an implied acceptance, in cases involving true

conflicts, of application of the seat‟s choice-of-law rules. In most cases, this provides the

simplest, most neutral, most predictable and fairest choice-of-law rule.69

Moreover, a few

tribunals have reasoned that it is inappropriate to apply the conflicts rules or substantive law of

either party on the theory that it would be one-sided.70

Thus, in the present matter, since there is no evidence of an intention of applying any other

choice-of-law rules, the choice-of-law rules of Malaysia must be applied.

66

Union of India v. McDonnell Douglas Corp. [1993] 2 Lloyd‟s Rep. 48, 50 (Q.B.)‟; Hirsch, The Place of

Arbitration and the Lex Arbitri 34 Arb. J 43, 45 (1979) 67

G Petrochilos, Procedural Law in International Arbitration, 6 (2004) 68

Mann, Lex Facit Arbitrum, 2 Arb Int‟l 241, 244-245, 248, (1986) 69

Born, at p.1045 70

Grigera Naon, Choice-of-law Problems in International Commercial Arbitration, 289 Recueil des Cours 9, 285-86

(2001)

16

b. Application of laws of Astoria

The conflict-of-law rules applicable in Malaysia prescribes that the applicable substantive law is

to be the one with which “has the closest and most real connection with the transaction.”71

This

takes into account such factors as the place of business of the parties, the place where the

contract was made or was to be performed or the nature and subject matter of the contract, etc.72

The different factors applicable to the instant matter are:

(i) Place of business

It has been held that rights over the movables are to be governed by the law of the owner‟s

domicil.73

In the present matter, since the title of goods had passed from RESPONDENT to

CLAIMANT, the CLAIMANT was the rightful owner of the tangible movable property i.e. the

bananas.

(ii) Lex Situs of tangible goods

The lex situs determines the right of the parties in a transaction relating to tangible movables.74

Further, it has the great advantage of being a single and exclusive system that can act as an

independent arbiter of conflicting claims.75

It is settled law that the situs of chattels, that is, tangible movable property, is the place where

they are located.76

According to Maugham J, nobody “can doubt that with regard to the transfer

71

Belden Premaraj, The Choices of Law – Better Safe Than Sorry,The Malaysian Arbitration Perspective; YK Fung

Securities v. James Cape Ltd. (CA) [1997] 4 CLJ 300 72

North & Fawcett, Cheshire & North’s Private International Law, (LexisNexis Butterworths, London, 13th

Edn.,1999) [hereinafter North/Fawcett], p.267 73

Re Ewin (1830) 1 Cr & J 151 74

Re First National Bank (1975) 60 DLR (3d) 751; Canada Insurance Corpn. v. Canadian Commercial Bank (1994)

121 DLR (4th

) 360 75

North/Fawcett, p.267 76

Dicey & Morris, The Conflict of Laws, (Sweet & Maxwell, London, 2000, 13th

edn.) pp.923-924

17

of goods the law applicable must be the law of the country where the movable is situate.”77

In the

present matter, the lex situs of the chattels i.e. the shipment of bananas, is Astoria. Also, although

the shipment was dumped as waste, if goods are represented by a document of title such as a bill

of lading, the document itself may be treated as chattel.78

Thus, the lex situs of the shipment of

bananas is Astoria.

(iii) Place of characteristic performance

The characteristic performance is usually the performance for which the payment is due, for

example, the delivery of goods, the provision of a service.79

It is conceded that the place of

performance in the instant matter is Rolga, however, it is observed that the merits of the concept

of characteristic performance become less important when the concept is diluted by the addition

of other connecting factors.80

In the present matter, the more important factors of place of

business and lex situs dilute the importance of the place of characteristic performance.

Thus, in the light of the above arguments, CLAIMANT states that the rules of private

international law of the forum lead to the application of Astorian law leading to the application

of CISG by the virtue of its Article 1(1)(b).

B. UNIDROIT Principles cannot be applied.

1. Requirement of Arbitration Act, 2005

Art.28(1) of the UNCITRAL Model Law allows the arbitral tribunal to apply the “rules of law”

selected by the parties. In contrast, Art.28(2) of the Model Law provides for the parties to apply

the “law” determined by applicable conflict of laws rules. This difference in the text has been

77

Re Anziani [1930] 1 Ch 407 78

Nygh & Davies, Conflict of Laws in Australia, (Butterworths, Sydney, 2002, 7th

ed.), para 32.16 79

Credit Lyonnais v. New Insurance Co. [1997] 2 Lloyd‟s Rep 1; AIG Group Ltd. v. Ethinki [1998] 4 All ER 301 80

North/Fawcett, p.267

18

interpreted as requiring the arbitrators, in the absence of choice-of-law agreement, to not apply

non-national rules of law.81

In a few jurisdictions, arbitration legislation has recently been

adopted that modifies Article 28(2) of the Model Law to refer to “rules of law”. Nonetheless,

several influential jurisdictions82

including Malaysia83

have expressly declined follow this

approach. Thus, the rules traditionally limit the choice of law applicable to the international

contracts to the national laws, excluding any a-national or supranational set of rules, such as the

UNIDROIT Principles.84

UNIDROIT Principles are drafted by private individuals and endorsed by a private organisation,

however reputable they may be, and, accordingly, the Principles have no legal power

whatsoever, as the Principles themselves recognise.85

2. UNIDROIT Principles vis-à-vis CISG

The adoption of the CISG will lead to greater legal certainty in international trade relations and

negotiations. The codified nature of the rules, simplicity of their formulation, exclusion of

conflicts intricacies and foreign law, and the availability of sources, all help to create greater

legal certainty for importers and exporters.86

Also, although it may be as such desirable and reasonable, the use of the UNIDROIT Principles

for gap-filling under Art.7(2) of CISG is hard to justify. In fact, Art.7(2) makes it clear that the

gap has to be filled by recourse to general principles which are to be found within the CISG.

81

Holtzmann & Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial Arbitration:

Legislative History and Commentary, (1989) 82

S.46, English Arbitration Act; Section 1051(2), German ZPO 83

S.30(4), Malaysian Arbitration Act 2005 84

Bonell, The UNIDROIT Principles and Transnational Law, 5 Uniform Law Review 199 (2000). 85

Markiyan Kliuchkovskyi, Applicability of UNIDROIT Principles of International Commercial Contracts in

Courts and Arbitration Tribunals, International Arbitration & L.P., Magisters 86

Sieg Eiselen, Adoption of the Vienna Convention for the International Sale of Goods (the CISG) in South Africa,

116 South African LJ, Part II (1996), 323-370

19

Thus, the use of provisions from an external instrument which came into existence considerably

later than the CISG is not really in line with that rule.87

In the light of the above arguments,

CLAIMANT states that CISG should apply to the present dispute.

87

Dr. Peter Huber, Some Introductory Remarks on the CISG, (Sellier European Law Publishers, Munich, 2006)

20

V. RESPONDENT HAS BREACHED ITS OBLIGATIONS UNDER THE CONTRACT

A. RESPONDENT was under an obligation to dispatch the packed bananas in

accordance with the contract.

1. RESPONDENT‟s duty under FOB contract to deliver goods in accordance with

the contract.

RESPONDENT was obliged to deliver the goods to CLAIMANT under the contract. This

“obligation to deliver” consists of taking all steps necessary under the contract.88

In FOB

contracts, the seller is obliged to have the goods packaged and ready for shipment.89

Thus, a duty

was cast on RESPONDENT to ensure that the goods were packed properly before they were

loaded onto the Pinafore.

a. Goods not adequately packed

The packing of the goods was done in proper boxes according to the report of the surveyor.

However, some of the bananas had been hung by the stem and the others had not. This shows the

lackadaisical approach adopted by the seller while shipping the goods.

b. Goods not insured by RESPONDENT

The contract existing between the parties was of a nature of an extended FOB contract whereby

the Seller had to insure the goods before handling them over to the carrier. This kind of

flexibility in FOB contracts is recognised90

as the FOB contract is not susceptible to the rigid

definition.91

88

CLOUT Case No 338, Appellate Court Hamburg Germany 23 June 1998,

http://cisgw3.law.pace.edu/cases/980623g1.html 89

2004 WL 2075351, World Trade Organization, Report of the Panel, UNITED STATES - SUBSIDIES ON

UPLAND COTTON, September 8, 2004 90

Carlos Federspiel & Co v Charles Twigg & Co Ltd, [1957] 1 Lloyd's Rep 240 91

Griffin Day & Griffin, The Law of International Trade (3rd

ed., 2003) p. 52

21

The non-fulfilment of contractual obligations of appropriate packing and insurance of the goods

holds the RESPONDENT in breach of the contract.

2. Clean bill of lading does not prove goods were properly packed.

A clean bill of lading was issued by the Seller. However, it cannot be always called as prima

facie evidence of the condition of the goods upon delivery to the carrier.92

There have been

instances where clean bill of lading has been granted looking at the external conditions, even

when the goods are in a damaged condition.93

It cannot be determined whether the packing conditions were actually mentioned in the bill or

not. Art.15 of the Hamburg Rules provides that the absence in the bill of lading of any specific

particulars does not affect the legal character of the bill. The non-mandatory obligation to

mention the condition of packing establishes that the bill of lading might not have any such

particulars mentioned on it.

A clean bill of lading is defined Halsbury's Laws of England,94

as one which does not contain

any reservation as to the apparent good order and condition of the goods or the packing. This

“condition” refers to the external and apparent condition.95

As the surveyor‟s report already

establishes that the bananas were properly packed in cartons, it can follow that the external

condition was proper, but, there existed a fault in how the bananas were kept inside them (stowed

by stem or not).

3. Bananas deteriorated due to inadequate packing and lack of instructions given

to Pinafore‟s Captain.

92

Kaiser Aluminum & Chemical Corp. v. Illinois Central Gulf R.R., 615 F.2d 470 (8th Cir.), 93

Silver v. Ocean Steamship Co. Ltd, L.R. [1906] 1 K.B. 237 94

3rd Edn., Vol. 2, at p. 218 95

[1952] 2 Q.B. 84

22

The special Instructions on the Bill of Lading stated that no temperature mentioned (cool, dry

location with good circulation to prevent spoilage). There is no mention on how the bananas

should be stored and whether they should be hung by stem or not. Apart from this, the most

pertinent fact is that these instructions were issued a couple of days after loading of the cargo,

i.e., passing of the risk.

As the sale was agreed on as FOB-term, the shipping instructions were binding on the Seller

even though someone else took care of the practical matter.96

Furthermore, the goods were loaded on the Pinafore which was a general cargo ship. The

RESPONDENT should have taken due care to ensure that the goods were shipped on a vessel

especially meant for the purpose. Thus, the lack of proper care in delivering the goods upto the

rails of the ship can be hold the RESPONDENT in breach of his obligation.

4. RESPONDENT liable for not dispatching the goods in suitable packages for the

long transit period.

The fact that the goods were not properly packed and stored on the ship even before passing of

the goods across the rail of the ship makes it easy to establish, that the risk had never passed onto

the buyer in the first place.

If the defect in a good occurs due to improper canning and packing, when the goods are at the

seller‟s risk rather than the buyer‟s risk, the seller is held responsible.97

Thus, by establishing on the above mentioned facts and authorities, it can be clearly ascertained

that the RESPONDENT had breached his obligations when he was in charge of the goods,

thereby making him responsible for the non- conforming goods.

96

Crudex Chemicals Oy v. Landmark Chemicals S.A, Finland 31 May 2004 Hovioikeus [Appellate Court] Helsinki,

http://cisgw3.law.pace.edu/cases/040531f5.html 97

Conservas La Costeña v. Lanín, Mexico 29 April 1996 Compromex Arbitration proceeding ,

http://cisgw3.law.pace.edu/cases/960429m1.html

23

B. CLAIMANT can avoid the contract.

1. Non-conformity occurred before passing of risk

As already proved above, the goods were in non-conforming condition when the risk passed on

to the buyer. Art.36 makes the seller liable in such a situation. The seller is to be held responsible

for rotting of food due to non-addition of preservatives before packing, even when the rotting

occurred later.98

Therefore, the fact that the ripening occurred at a later stage, cannot prevent

CLAIMANT from affixing liability on RESPONDENT who did not ensure proper delivery.

2. Goods did not comply with specified quality and description.

a. CLAIMANT wanted „green bananas‟.

The subjects of the mails exchanged between the parties was „Green Bananas‟ showing that they

had agreed on a common intention. The intention of the parties from conversations can become a

part of the contract, if the party is entering into the contract under certain conditions.99

CLAIMANT had even stated the temperature at which the bananas should have been shipped in

order to ensure proper quality of the cargo.

b. CLAIMANT only catered to retail grocery stores of Astoria

It has been mentioned that the CLAIMANT was engaged in catering to the grocery stores.

Therefore, ripened bananas would not serve the ordinary purpose for which it needed the

bananas.

3. The breach is fundamental.

a. Purpose cannot be fulfilled with ripened bananas.

The CLAIMANT entered into the contract with the RESPONDENT with the sole purpose of

purchasing green bananas, the seller did not conform to this requirement thereby committing a

98

Bianca, in Bianca-Bonell Commentary on the International Sales Law, Giuffrè: Milan, 1987, p. 284-289 99

CLOUT case No. 176 [Oberster Gerichtshof, Austria, 6 February 1996]

24

fundamental breach under Art.25. A seller must provide goods of “reasonable quality” according

to the parties‟ normal expectations in the concerned market.100

This expectation of the

CLAIMANT was not fulfilled by the delivery of the ripened bananas.

The fact that the very purpose for which the „Green Bananas‟ had to be purchased cannot be

achieved makes the delivery of no consequence.

It has been held that if the buyer cannot use the goods for its intended purpose it should be

permitted to terminate the contract. 101

If the non-conforming goods cannot be used or resold

with reasonable effort this constitutes a fundamental breach and entitles the buyer to declare the

contract avoided.102

As both these conditions preceding avoidance and termination are satisfied in the present case,

the CLAIMANT can be said to be justified in rejecting the goods soon after inspecting them.

The fact that the bananas did not reach the CLAIMANT in the green condition and made it

impossible for him to sell it to the local grocery stores makes the breach a fundamental. To

determine fundamental breach, many authors focus on whether or not the purpose of the contract

has been frustrated by the breach.103

The purpose of the contract to sell goods to grocery stores is

frustrated hereby causing a fundamental breach.

A breach of contract is fundamental when the purpose of the contract is endangered so seriously

that, for the concerned party to the contract, interest in the fulfillment of the contract ceases to

exist as a consequence of the breach of the contract.104

100

Netherlands Arbitration Institute No. 2319 (15 October 2002). http://cisgw3.law.pace.edu/cases/021015n1.html 101

PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS, Study L – Doc. 98, Rome 2004,

www.unidroit.org/english/documents/2004/study50/s-50-098-e.pd 102

CLOUT case No. 150 [Cour de Cassation, France, 23 January 1996] ; CLOUT case No. 79 [Oberlandesgericht

Frankfurt., Germany, 18 January 1994] 103

http://www.cisg.law.pace.edu/cisg/biblio/koch.html 104

Shoes case, Germany 17 September 1991 Appellate Court Frankfurt

http://cisgw3.law.pace.edu/cases/910917g1.html

25

Even though the bananas can be usable to an extent, but, not in conformity with the original

purpose, the breach can be said to be fundamental. 105

b. Consignment has been rejected

CLAIMANT has rightly rejected the goods in its entirely as they did not conform to the contract.

Art.49(1)(a) entitles the buyer to declare the contract avoided. Such a declaration of avoidance is

effective only if made by notice to the seller in accordance with Art.26 which has been made in a

timely manner in the present case.

C. Alternately, RESPONDENT has committed material breach under UNIDROIT

Principles.

1. Quality of bananas not in accordance with the contract

The conduct of the CLAIMANT by categorically mentioning „Green bananas‟ and the

temperature at which he wants them to be transported manifests his intentions.106

Under the

UNIDROIT principles, the conduct of the parties sufficient to show the agreement can be taken

as intention.107

Thus, it is clear that the intention of the CLAIMANT was only to purchase

unripened bananas.

2. There is fundamental non-performance.

The CLAIMANT had ordered the „Green bananas‟ keeping in mind a purpose. He wanted to sell

the bananas to the retail grocery stores. Had he wanted to sell the bananas to bakery stores, as

advised by the RESPONDENT he would not have categorically specified the temperature at

which he wanted them to be transported. Thus, owing to the action of the RESPONDENT, he

105

CLOUT case No. 107 [Oberlandesgericht Innsbruck, Austria, 1 July 1994]. 106

Compromis, 7 107

Administrative Determination, USA, 08.02.2005, http://www.unilex.info/case.cfm?id=1125

26

has been substantially deprived of what he was entitled to expect under the contract, which

amounts to fundamental non-performance.108

The quality of bananas contracted for differs from the ones which got delivered. The difference

in the quality of the goods contracted for and the quality of the goods received can be a reason

for fundamental non performance.109

3. Consignment has been rejected

The material breach of the contract entitles CLAIMANT to reject the entire consignment. A non-

performance amounting fundamental non- performance can culminate in giving right of

termination of the contract to the other party under Article 7.3.1 of the UNIDROIT principles if

notice under 7.3.2 has been duly served. Art.7.1.1 brings defective performance under the ambit

of non-performance of the contract. Thus, it can be well established that the RESPONDENT was

in breach of his obligations under the contract which amounted to fundamental non-performance

which clearly justifies the action of the CLAIMANT to reject the consignment.

108

30.11.2006, Centro de Arbitraje de México, http://www.unilex.info/case.cfm?id=1149; Case No. 812/2007,

09.07.2007, Tribunal Supremo, Spain, http://www.unilex.info/case.cfm?id=1216; Case No. 383, 26.11.2007,

Audiencia Provincial de Tarragona, http://www.unilex.info/case.cfm?id=1359 109

Case No. 35/201017.02.2010, Tribunal Supremo, Spain, http://www.unilex.info/case.cfm?id=1524

27

VI. CLAIMANT DID NOT HAVE A LEGAL OBLIGATION TO ATTEMPT TO SELL

THE BANANAS.

A. CLAIMANT is under no obligation to sell the bananas under CISG.

1. Duty to mitigate under Art.77 only when damages claimed.

CLAIMANT is only seeking to get refund of the money it paid for the bananas in the first place

and not seeking any damages.110

The mitigation rule is a fundamental principle of the law of

damages.111

Therefore, the question of mitigation does not arise.

1. CLAIMANT not obligated to sell the goods

a. Lack of good faith from RESPONDENT.

RESPONDENT should have applied the principle of good faith in the first instance and should

have reimbursed the purchase price due to the delivery of non- conforming goods.

b. CLAIMANT only required to take reasonable measures.

It is extremely difficult to separate the ripening and ripened bananas from the green ones in the

particular case, and so, the CLAIMANT cannot be held responsible for the dumping of the

shipment of the waste. Had, the warehouse owner‟s attempt to salvage the non – ripening

bananas taken place before hand, the entire shipment would not have been described as waste.

What is 'reasonable' mitigation will depend on the court's evaluation of the concrete case.112

It

was certainly not reasonable to begin to sell the non-conforming bananas to bakery stores, as

suggested by the RESPONDENT, because they did not form a part of the customer base of the

CLAIMANT. It will also not be reasonable on part of the Claimant to sell goods in a condition

110

Compromis, 3 111

Michael G. Bridge (2 Sale of Goods, 2nd

ed. 1997) [„Michael Bridge‟] p. 546. 112

Amtsgericht München (Germany), 23 June 1995, <http://cisgw3.law.pace.edu/cases/950623g1.html>

28

which would culminate in loss of its reputation as an obligation to mitigate did not require seller

to put at risk its commercial reputation.113

c. No inaction by CLAIMANT

The CLAIMANT has fulfilled its reasonable duties by sending notice to the RESPONDENT and

informing him to take care of the rejected shipment.114

The Claimant has categorically stated in

the notice tendered to the Respondent that requisite advice should be given to the Captain of

Pinafore to dispose of the goods which shows that the buyer took certain steps to prevent

spoilage. If the seller did not offer any evidence which would suffice to hold that the buyer did

not take necessary measures to mitigate damages, the buyer cannot be held responsible.115

The fact that the contract is being avoided by the CLAIMANT gives it the right under Art.81(2)

to force the seller to take back his goods.116

The buyer has no duty to mitigate, and mitigating of

damages by re-selling of goods can deprive the buyer of his right to avoid. 117

d. Non-Applicability of Art.86

The Claimant has not received the goods in the present case as they are still in custody of the

Captain of the ship. Therefore, the legal obligation cast on a person „receiving the goods‟ fails to

be applicable on him.

113

Downs Investments Pvt Ltd v. Perwaja Steel, SDN BHD [2000] QSC 421, 17 Nov. 2000 (Supreme Court of

Queensland) 114

Compromis, 3 115

I.C.C. International Court of Arbitration, Case No. 8786 of January 1995 116

Landgericht Krefeld, Germany, 24 November 1992, http://cisgw3.law.pace.edu/cases/921124g1.html 117

CLOUT case No. 82 [Oberlandesgericht Düsseldorf, Germany, 10 February 1994].

29

B. Alternately, if UNIDROIT Principles applied, CLAIMANT had no duty to sell the

bananas.

1. There cannot be obligation when there is no right to sell.

While interpreting, Art.7.4.8, it has been said, that „It does not give a right to the aggrieved party

to go beyond it and sell or otherwise dispose of such goods.‟118

When there is no right, it shall

follow that there will be no obligation as well to dispose of the goods. The Court has rejected the

merchant buyer‟s duty to "make reasonable efforts to sell [the goods] for seller‟s account if they

are perishable or threaten to decline in value speedily. 119

2. No fixed responsibility.

Mitigation not required while the parties were, subsequent to termination, in negotiation to find

an alternative arrangement.120

In the present case, both parties to the dispute were attributing the

responsibility of mitigating the loss caused to each other. This can be termed as the negotiation

stage, so, the question of affixing liability of the loss caused to one party cannot be held to be

reasonable.

118

Case No. 7110, 00.04.1998, http://www.unilex.info/case.cfm?id=650, ICC International Court of Arbitration 119

§ 2-603(1) (1978) , http://www.cisg.law.pace.edu/cisg/text/flecht81,85,88.html 120

Case No. 2103 in 1972, ICC International Court of Arbitration

30

PRAYER

In light of the above submissions, CLAIMANT requests this Tribunal to find that:

I. The arbitration agreement is valid.

II. The Tribunal has been properly constituted.

III. The Tribunal has the authority to impose sanctions on the RESPONDENT.

IV. CISG should govern the contract.

V. RESPONDENT is in breach of its contractual obligations.

VI. CLAIMANT has not failed in performing its legal obligation of attempting to sell the

bananas.

s/d-

Counsel for CLAIMANT