memorandum for claimant - institute of international ... · memorandum for claimant ... co. company...

TENTH ANNUAL WILLEM C. VIS

INTERNATIONAL COMMERCIAL ARBITRATION MOOT

MEMORANDUM FOR CLAIMANT

Rheinische Friedrich-Wilhelms-Universität Bonn

On Behalf of

Against

Equafilm Co. 214 Commercial Ave. Oceanside Equatoriana CLAIMANT

Medipack S.A. 395 Industrial Place

Capital City Mediterraneo

RESPONDENT

Counsel

Nadine Bläser • Dirk Langner • Sabrina Mlynek

Mathias Neumann • Katrin Ommer • Dimce Sikoski


II

Table of Contents

List of Abbreviations VI

Index of Authorities VIII

Cases XVII

Statement of Facts 1

Arguments 3

I. The challenge to Dr. Arbitrator is to be rejected 3

A. Dr. Arbitrator participates in the decision on his challenge 3

B. The challenge is governed by §§ 15, 18 DIS Rules 3

C. There are no reasons to doubt Dr. Arbitrator’s impartiality or his independence

3

a. Dr. Arbitrator’s expectation to become a partner of a law firm that has represented CLAIMANT is not sufficient to raise doubts as to his impartiality or independence

3

b. Dr. Arbitrator has no financial interest in the outcome of the arbitration 6

c. Dr. Arbitrator’ disclosure underlines his impartiality and independence 6


III

II. The challenge to the jurisdiction of the Tribunal is to be rejected

7

A. The Tribunal has authority to decide on its own jurisdiction pursuant to Art. 16(1) Model Law

7

B. CLAIMANT and RESPONDENT concluded a valid arbitration agreement

8

a. The parties agreed to refer any dispute arising out of the contract to arbitration

8

b. This arbitration agreement meets the writing requirement according to Art. 7(2) Model Law

8

C. The parties chose validly the “German Institution of Arbitration” 9

a. CLAIMANT’s reference to an erroneously designated institution leaves the validity of the arbitration clause unaffected

10

b. The parties intended to choose the “German Institution of Arbitration” 10

c. CLAIMANT can rely on the doctrine of ‘effet utile’ 11

d. Courts incline to give effect even to highly ambiguous arbitration clauses 12

e. The reference to the „German Arbitration Association“ belongs to the category „erroneously designated institutions“

13

D. CLAIMANT and RESPONDENT concluded a valid arbitration agreement, irrespective of the validity of the commercial contract

13

a. According to the doctrine of separability, the arbitration agreement is not affected by the alleged invalidity of the commercial contract

13

b. The application of the doctrine of separability is not excluded since the commercial contract is not void ab initio

14

c. The arbitration agreement itself does not suffer from any defects 15


IV

III. The CISG is the law applicable to the contract and its formation

15

A. The parties have chosen the commercial law of Equatoriana 16

B. The CISG is the pertinent part of the commercial law of Equatoriana for the contract at issue

16

C. Reference to the “commercial law of Equatoriana” does not amount to an implied exclusion of the CISG

16

IV. A contract of sale was concluded between CLAIMANT and RESPONDENT

19

A. A contract containing all elements of Art. 14 CISG has been concluded during the telephone conversation between Mr. Storck and Mr. Black

19

a. Mr. Storck and Mr. Black concluded a contract during their conversation 19

b. The agreement contained all elements of Art. 14 CISG 20

B. Irrespective of the fact whether there was an agreement on the discount, a contract would still have been validly concluded even if the parties had not fixed the discount

20

a. Since CLAIMANT and RESPONDENT did not conclude the contract by virtue of offer and acceptance, the requirements of Art. 14 CISG were not mandatory for the formation of the contract at issue

21

b. An agreement on the discount was not necessary in order to conclude a valid contract

21

c. The domestic law of Equatoriana has no impact on the validity of the contract

23


V

V. The contract was concluded including a 4% discount 23

A. The agreement the parties reached during their telephone conversation can only be interpreted as including a discount of 4% from CLAIMANT's list price

24

a. The agreement has to be interpreted according to Article 8 CISG 24

b. RESPONDENT could not have been unaware of CLAIMANT's intent to grant only a 4% discount

24

c. Neither Mr. Storck nor any other reasonable person could have been aware of Mr. Black's intent to contract with a discount of 8% from the list price

25

B. If the Tribunal finds that the parties' agreement did not fix the price, a contract has nevertheless been concluded including a 4% discount

26

VI. RESPONDENT was in breach of its obligations under the contract

27

A. RESPONDENT’s fax of 2 May 2001 was an anticipatory breach of contract

27

B. RESPONDENT’s fax was an anticipatory repudiation of the contract concluded on 3 April 2001

27

C. RESPONDENT was not entitled to refuse performance 28


VI

VII. EQUAFILM is entitled to claim damages for lost profit in the amount of $ 575,477.98

28

A. RESPONDENT’s breach of contract entitles CLAIMANT to claim damages

29

B. CLAIMANT suffered lost volume damages in the amount of $ 575,477.98 as a consequence of RESPONDENT’s breach

29

a. CLAIMANT is entitled to recover its loss of profit 29

b. CLAIMANT was in a lost volume situation 30

c. CLAIMANT’s loss of profit was a consequence of RESPONDENT’s breach

30

d. CLAIMANT lost profit in the amount of $ 575,477.98 31

C. The damages were foreseeable to RESPONDENT 31

D. CLAIMANT did not fail to take measures to mitigate its loss according to Art. 77 CISG

32

VIII. CLAIMANT is entitled to interest on the damages 32

A. Art. 78 CISG grants the right to claim interest on damages 32

B. CLAIMANT is entitled to interest from the date payment was due 33

Request for relief 34


VII

List of Abbreviations

§ / §§ Section / Sections

1st Cir. United States Court of Appeal First Circuit

2d Cir. United States Court of Appeal Second Circuit

3d Cir. United States Court of Appeal Third Circuit

7th Cir. United States Court of Appeal Seventh Circuit

9th Cir. United States Court of Appeal Ninth Circuit

11th Cir. United States Court of Appeal Eleventh Circuit

Arb. Int. Arbitration International (Periodical, England) Art. / Artt. article / articles

BG Bezirksgericht (District Court)

BGH Bundesgerichtshof (supreme court, Germany)

Ch Switzerland

CISG United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980

cl. clause

Co. Company

Corp. Corporation

DIS Rules Deutsche Institution für Schiedsgerichtbarkeit e.V. Arbitration Rules

e.g. exempli gratia (for example)

ed. edition

et al Et alii / et alia (and other persons)

F.2d Federal Reporter, Second Series

F.3d Federal Reporter, Third Series

F.Supp. Federal Supplement

Fr France

FS Festschrift

GB Great Britain

HG Handelsgericht (= Commercial Court)

i.e. id est (that is)

ICC International Chamber of Commerce


VIII

Inc. Incorporated

IPrax Praxis des Internationalen Privat- und Verfahrensrechts

J. Int’l Arb. Journal of International Arbitration

J. L. & Comm Journal of Law and Commerce

J.D.I. Journal du droit international

J. of Int. Com. Law and Arb.

Journal of International Commercial Law and Arbitration

LG Landgericht (trial court, Germany) Lloyd´s Rep. Lloyd´s Reporter

Ltd. Limited

Model Law UNCITRAL Model Law on International Commercial Arbitration

New York Convention United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1985

No. number

OGH Oberster Gerichtshof (Austria)

OLG Oberlandesgericht (Regional Court of Appeal, Germany)

p. / pp. page / pages

Para. / paras. paragraph / paragraphs

Q.B. High Court of Justice (Queen´s Bench, England)

RabelsZ Rabels Zeitschrift für ausländisches und internationales Privatrecht (Periodical, Germany)

Rev.Arb. Revue de l´arbitrage

RIW Recht der Internationalen Wirtschaft

S.D.N.Y. United States District Court, Southern District of New York

U.S. United States

UK United Kingdom

ULR Uniform Law Review

v. versus (against)

Y.B. Yearbook Commercial Arbitration


IX

Index of Authorities

Adami, Francesco Les contrats “open price” dans la Convention des

Nations Unies sur les Contrats de vente internationale de Marchandises Revue de droit des affaires internationales 1989,

cited as: Adami, Revue de droit des affaires internationales 1989,

Amato, Paul U.N. Convention on Contracts for the International Sale

of Goods -- The Open Price Term and Uniform Application: An Early Interpretation by the Hungarian Courts 13 Journal of Law and Commerce (1993)

cited as: Amato, J. L. & Comm 1993,

Audit, Bernard La vente internationale de Marchandises, Convention des Nations-Unies du 11. Avril 1980

Paris 1990

cited as: Audit

Barker, Steward Abercrombie / Davis, Mark David

The UNCITRAL Arbitration Rules in Practise • The experience of the Iran-United States Tribunal

Deventer/Bosten 1992

cited as: Barker/Davis

Bernstein, Ronald / Tackaberry, John / Marriott, Arthur L. / Wood, Derek

Handbook of arbitration practise, 3rd ed.

London 1998

cited as: Bernstein et al

Bianca, Cesare Massimo / Bonell, Michael Joachim

Commentary on the International Sales Law, The 1980 Vienna Sales Convention

Milano 1987

cited as: Bianca/Bonell/author


X

Bishop, Doak / Reed, Lucy

Practical Guide for Interviewing, Selecting and Challenging Party-Appointed Arbitrators in International Commercial Arbitration

Arbitration International Volume 14, No. 4 (1998)

cited as: Bishop/Reed, Arb.Int. 1998,

Böckstiegel, Karl-Heiz DIS-Materialien

The New German Arbitration Act 1998, Preface and Introduction

cited as: Böckstiegel, DIS-Mat III, 1998

Boisséson, Matthieu de

Le droit français de l’arbitrage interne et international, GLN-éditions

Paris 1990

cited as: Boisséson

Bonell, Michael Joachim / Liguori, Fabio

The U.N. Convention on the International Sale of Goods: a Critical Analyses of Current International Case Law Uniform Law Review 1997

cited as: Bonell/Liguori, ULR 1997,

Born, Gary B. International Commercial Arbitration in the United

States, Commentary and Materials, 2nd ed.

The Hague 2001

cited as: Born

Born, Gary B. International Commercial Arbitration in the United

States, Commentary and Materials, 1st ed.

Deventer, Boston 1994

cited as: Born (1st ed.)

Broches, Aron Commentary on the UNCITRAL Model Law on

International Commercial Arbitration

The Hague, Deventer, Boston 1990

cited as: Broches

Bucher, Eugen Wiener Kaufrecht

Bern 1991

cited as: Bucher


XI

Derains, Yves / Schwartz, Eric A.

A guide to the new ICC rules of arbitration,

The Hague 1998

cited as: Derains/Schwartz

Drago, Thomas J. / Zoccolillo, Alan F.

Be Explicit: Drafting Choice of Law Clauses in International Sale of Goods Contracts The Metropolitan Corporate Counsel (May 2002) http://www.cisg.law.pace.edu/cisg/biblio/zoccolillo1.html

cited as: Drago/Zoccolillo, The Metropolitan Corporate Counsel 2002,

Enderlein, Fritz / Maskow, Dietrich

International Sales Law

New York, London, Rome 1992

cited as: Enderlein/Maskow

Fouchard, Philippe / Gaillard, Emmanuel / Goldmann, Berthold

Traité de l’arbitrage commercial international, Litec libraire de la Cour de cassation

Paris 1996

cited as: Fouchard et al

Granzow, Joachim H. Das UNCITRAL Model Gesetz über die internationale

Handelsgerichtsbarkeit von 1985

Munich 1988

cited as: Granzow

Hof van, Joachim J. Commentray on the UNCITRAL Arbitration Rules

The Application by the Iran-U.S. Claims Tribunal

Deventer, Boston 1991

cited as: van Hof

Holtzmann, Howard M. / Neuhaus, Joseph E.

A guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary

Deventer 1991

cited as: Holtzmann/Neuhaus


XII

Honnold, John O Uniform Law for International Sales under the 1980 United Nations Convention, 3rd ed.

The Hague 1999

cited as: Honnold et al

Honnold, John O. Uniform Law for International Sales under the 1980

United Nations Convention, 1st ed.

Deventer et al 1982

cited as: Honnold et al (1st ed.)

Honsell, Heinrich Kommentar zum UN-Kaufrecht

Berlin, Heidelberg, New York 1997

cited as: Honsell

Houtte, Vera van Consent to Arbitration Through Agreement to Printed

Contracts: The Continental Experience

Arbitration International Volume 16, No. 1 (2000)

cited as: Houtte, Arb.Int. 2000,

Koch, Robert The Concept of Fundamental Breach of Contract under

the United Nations Convention on Contracts for the International Sale of Goods Review of the Convention on Contracts for the International Sale of Goods (CISG) 1998, <http://www.cisg.law.pace.edu/cisg/biblio/koch-72.html>

cited as: Koch

Lookofsky, Joseph

Understanding the CISG in Europe: A Compact Guide to the 1980 United Nations Convention on Contracts for the International Sale of Goods

The Hague, London, Boston 1995

cited as: Lookofsky, (CISG in Europe)

Lookofsky, Joseph

Understanding the CISG in the USA: A Compact Guide to the 1980 United Nations Convention on Contracts for the International Sale of Goods

The Hague 1995

cited as: Lookofsky, (CISG in USA)


XIII

Ludwig, Katharina S. Der Vertragsschluss nach UN-Kaufrecht im Spannungs-verhältnis von Common Law und Civil Law

Frankfurt am Main Berlin New York 1994

cited as: Ludwig

Magnus, Ulrich Unbestimmter Preis und UN-Kaufrecht

IPRax 1996

cited as: Magnus, IPRax1996,

Neumayer, Karl H. Der Vertragsschluss nach dem Recht des internationalen

Warenkaufs (Wiener Übereinkommen von 1980) – Anwendungsprobleme Festschrift für Werner Lorenz zum 70. Geburtstag,

Tübingen 1991

cited as: Neumayer, Lorenz-FS 1991,

Neumayer, Karl Heinz / Ming, Catherine

Convention de Vienne sur les contrats de vente internationale de marchandises, Commentaire

Lausanne 1993

cited as: Neumayer/Ming

Nicholas, Barry Certainty of Price

Comparative and Private International Law, Essays in Honor of John Henry Merryman on his Seventieth Birthday

Berlin 1990

cited as: Nicholas

Pellonpää, Matti / Caron, David D.

The UNCITRAL arbitration rules as interpreted and applied

Helsinki 1994

cited as: Pellonpää/Caron

Rabel, Ernst

Das Recht des Warenkaufs

Berlin Tübingen 1958

cited as: Rabel


XIV

Redfern, Alan / Hunter, Martin

Law and Practice of International Commercial Arbitration, 3rd ed.

London 1999

cited as: Redfern/Hunter

Roth, Wulf-Henning Kunz, Christian

Zur Bestimmbarkeit des Preises im UN-Kaufrecht

RIW 1997

cited as: Roth/Kunz, RIW 1997,

Saidov, Djakhongir Methods of Limiting Damages under the Vienna

Convention on Contracts for the International Sales of Goods (2001) http://cisg.law.pace.edu/cisg/biblio/saidov.html

cited as: Saidov

Scalbert, Hugues / Marville, Laurent

Les clauses compromissoires pathologiques,

Revue de l’arbitrage 1988

cited as: Scalbert/Marville, Rev.arb 1988,

Schlechtriem, Peter

Commentary on the United Nation Convention on International Sales of Goods (CISG), 2nd ed

Munich 1998

cited as: Schlechtriem (2nd ed.) et al

Schlechtriem, Peter Einheitliches Kaufrecht und nationales

Obligationenrecht

Baden-Baden 1987

cited as: Schlechtriem/author, Einheitliches Kaufrecht,

Schlechtriem, Peter Internationales UN-Kaufrecht

Tübingen 1996

cited as: Schlechtriem

Schlechtriem, Peter

Kommentar zum Einheitlichen UN – Kaufrecht, 3rd ed.

Munich 2000

cited as: Schlechtriem et al


XV

Semler, Franz-Jörg German Arbitration Law

The 1998 Reform and Recent Case Law

Journal of International Arbitration 18(5) 2001

cited as: Semler, J.Arb.Int. 2001,

Soergel, Hans Theodor Kommentar zum Bürgerlichen Gesetzbuch

Band 13, Übereinkommen der Vereinten Nationen über Verträge über den internationalen Warenkauf (CISG)

Stuttgart, Berlin, Köln, Mainz 2000

cited as: Soergel et al/author

Sono, Kazuaki Formation of International Contracts under the Vienna

Convention: A shift above the Comparative Law

New York, London, Rome 1986

cited as: Sono, Dubrovnik Lectures 1986,

Staudinger, Julius von Kommentar zum Bürgerlichen Gesetzbuch mit

Einführungsgesetz und Nebengesetzen Wiener UN-Kaufrecht (CISG), 14th ed.

Berlin 1999

cited as: Staudinger et al/author

Stoll, Hans Zur Haftung bei Erfüllungsverweigerung im

Einheitlichen Kaufrecht

RabelsZ 1998,

cited as: Stoll, RabelsZ 1998,

Sutton, Jeffrey S. Measuring Damages Under the United Nations

Convention on the International Sale of Goods Ohio State Law Journal (1989) http://www.cisg.law.pace.edu/cisg/biblio/sutton.html

cited as: Sutton, Ohio State Journal 1989,

Tampirie, Tiziana

International Arbitration and Impartiality of Arbitrators The Italian Perspective Journal of International Arbitration 18(5) 2001

cited as: Tampirie, J.Arb.Int. 2001,


XVI

Thiele, Christian Interest on Damages and Rate of Interest Under Art. 78

of the U.N. Convention for the International Sale of Goods, Vindobona Journal of International Commercial Law and Arbitration (1998) http://www.cisg.law.pace.edu/cisg/biblio/thiele.html

cited as: Thiele, J. of Int. Com. Law and Arb., 1998

UNCITRAL Fifth Working Group Report, A/CN.9/264

cited as: Fifth Working Group Report, A/CN.9/264

UNCITRAL Official Records of the United Nations Conference on

Contracts for the International Sale of Goods, Vienna, 10 March-11 April 1980

cited as: Official Records

UNCITRAL Proposal by Belgium [A/CONF.97/C.1/L.45]

cited as: A/CONF.97/C.1/L.45

UNCITRAL Secretariat Commentary

cited as: Secretariat Commentary

UNCITRAL Secretariat Study on the N.Y. Convention, A/CN.9/168

cited as: Secretariat Study on the N.Y. Convention, A/CN.9/168

UNCITRAL Seventh Secretariat Note, A/CN.9/264

cited as: Seventh Secretariat Note, A/CN.9/264

UNCITRAL Seventh Secretariat Note, Analytical Commentary on

Draft Text A/CN.9/264

cited as: Seventh Secretariat Note, Analytical Commentary on Draft Text A/CN.9/264

UNCITRAL

UNCITRAL digest of CISG article 6 case law <http://www.cisg.law.pace.edu/cisg/digest/art06.html>

cited as: UNCITRAL digest of CISG article 6 case law, para.


XVII

Witz, Wolfgang / Salger, Hanns Christian / Lorenz, Manuel

Internationales Einheitliches Kaufrecht, Kommentar Recht und Wirtschaft

Heidelberg 2000

cited as: Witz et al

Ziegel, Jacob S. / Samson, Claude

Report to the Uniform Law Conference of Canada on Convention on Contracts for the International Sale of Goods, July 1981 http://www.cisg.law.pace.edu/cisg/wais/db/articles/english2.html

cited as: Ziegel/Samson


XVIII

Cases

Argentina Enrique C. Wellbers S.A.I.C. A.G. v. Extraktionstechnik Gesellschaft für Anlagenbau M.B.M.: S/Ordinario, Y.B. XIX (1994), 254

cited as: Enrique C. Wellbers S.A.I.C. A.G. v. Extraktionstechnik Gesellschaft für Anlagenbau (Argentina)

Australia Downs Investments v. Perwaja Steel, Australia, 17 November 2000, Supreme Court of Queensland <http://cisgw3.law.pace.edu/cases/001117a2.html>

cited as: Downs Investments v. Perwaja Steel (Australia)

Austria Arbitral Award 52/97, Schiedsgericht der Börse für landwirtschaftliche Produkte, 10 December 1997 Published in „Österreichische Zeitschrift für Rechtsvergleichung“ 1998, p. 211 – 220

cited as: Arbitral Award 52/97, 10 December1997 (Austria)

Internationales Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft (SCH-4366; arbitration proceeding), Vienna, 15 June 1994 CLOUT case No. 93

cited as: Int. Schiedsgericht der Bundeskammer der gewerblichen Wirtschaft – Vienna, 15 June 1994 (Austria)

Oberster Gerichtshof = Supreme Court (Austria): 2 Ob 547/93 of 10 November 1994 CLOUT-Case No. 106, Published in „Praxis des Internationalen Privat- und Verfahrensrechts“ 1996 p. 137 – 139

cited as: OGH, 10 November 1994 (Austria)

Oberster Gerichtshof, 1 OB 292/99 of 28 April 2000 http://cisgw3.law.pace.edu/cases/000428a3.html

cited as: OGH, 28 April 2000 (Austria)


XIX

Belgium Margon Srl v. NV Sadeco, Rechtbank (District Court) von Koophandel, Hasselt, A.R.2012/96, 9 octobre 1996 http://cisgw3.law.pace.edu/cases/961009b1.html

cited as: Margon Srl v. VN Sadelco (Belgium)

Société Van Hopplynus c/ société Coherent Inc., Tribunal de Commerce de Bruxelles 5 octobre 1994, Revue de l’arbitrage 1995, 311-326 avec note de Bernard Hanotiau

cited as: Société Van Hopplynus c/ société Coherent Inc. (Belgium)

Bulgaria Court of Arbitration at the Bulgarian Chamber of Commerce and Industry, award of 3 December 1984, case No. 151/1984, Y.B. XV (1990), 63

cited as: Bulgaria Court of Arbitration case No. 151/1984 (Bulgaria)

Canada Globe Union Industrial Corp. v. G.A.P. Marketing Corp., 2 Western Weekly Reports (1995), 696

cited as: Globe Union Industrial Corp. v. G.A.P. Marketing Corp. (Canada) France Comité populaire de la Municipalité d’el Mergeb c/ société Dalico contractors, Court d’Appel de Paris (1re Ch.suppl.) 26 March 1991, Revue de l’arbitrage 1991, 456-469 avec note d’Hélène Gaudamet-Tallon

cited as: Comité populaire de la Municipalité d’El Mergeb c/ société Dalico contractors (Fr)

Cour de Cassation (Supreme Court), Sté Ceramique Culinaire de France v. Sté Musgrave Ltd., 17 December 1996 CLOUT case No. 206

cited as: Sté Ceramique Culinaire de France v. Sté Musgrave Ltd. (Fr)

Epoux Convert c/ société Droga, Court de cassation (1re Ch.civ.) 14 December 1983, Revue de l’arbitrage 1984, 483-491 avec note de M. C. Rondeau-Rivier

cited as: Epoux Convert c/ société Droga (Fr)


XX

Gosset C. Soc. Carapelli, Cour de cassation (1re Ch.civ.) 7 May 1963, Recueil Dalloz Chroniques Jurisprudence 1963, 545

cited as: Gosset C. Soc. Carapelli (Fr)

Hecht c/ Société Buisman’s, Court de cassation (1re Ch.civ.) 4 July 1972, Journal du droit international 1972, 843 avec note de Bruno Oppetit

cited as: Hecht c/ Société Buisman’s (Fr)

ICC Court of Arbitration, award No. 1434 (1975)

cited as: ICC Court of Arbitration, 1434/1975 (Fr)















ICC Court of Arbitration, award No. 6653 (1993) http://www.cisg.law.pace.edu/cisg/wais/db/cases2/936653i1.html





XXI









Société Asland c/ société European Energy Corporation, Tribunal de grande instance de Paris, Revue de l’arbitrage 1990, 521-522

cited as: Société Asland c/ société European Energy Corp. (Fr)

Société Bomar Oil NV c/ ETAP, Cour de cassation (1re Ch.civ.) 9 November 1993, Revue de l’arbitrage 1994, 108 avec note de Catherine Kessedijan

cited as: Société Bomar Oil NV c/ ETAP (Fr)

Société Deko c/ G. Dingler et société Meva, Cour d’Appel de Paris (1re Ch.C), 24 March 1994, Revue de l’arbitrage 1994, 515-524 avec note de Charles Jarrosson

cited as: Société Deko c/ G. Dingler et société Meva (Fr)

Société Tuvomon c/ société Amaltex, Cour d’Appel de Paris, 14 February 1985, Revue de l’arbitrage 1987, 325 avec note de P.Level

cited as: Société Tuvomon c/ société Amaltex (Fr)

Germany BGH, VIII ZR 134/96 of 23 July 1997 CLOUT case No. 236

cited as: BGH, 23 July 1997 (Germany)


XXII

BGH, VIII ZR 259/97 of 25 November 1998 CLOUT case No. 270

cited as: BGH, 25 November 1998 (Germany)

German Coffee Association, final award of 28 September 1992, Y.B. XIX (1994), 48

cited as: German Coffee Association, 28 September 1992 (Germany) Hamburg Commodity Exchange Grain Merchants’ Association, Award of 18 March 1994, Y.B. XXII (1997), 53

cited as: Hamburg Award, 18 March 1994 (Germany)

Landgericht Hamburg (Germany), 5 O 543/88 of 26 September 1990 CLOUT-Case No. 5, Published in „Praxis des Internationalen Privat- und Verfahrensrechts“ 1991 p. 400 - 403

cited as: LG Hamburg, 26 September 1990 (Germany)

Landgericht Heidelberg, O 42/91, 3 July 1992, Unilex

cited as: LG Heidelberg, 3 July 1992 (Germany)

Landgericht Landshut, 54 O 644/94 of 5 April 1995 < http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/193.htm>

cited as: LG Landshut, 5 Apri1 995 (Germany)

OLG Düsseldorf, 17 U 146/93 of 10 February 1994 <http://cisgw3.law.pace.edu/cases/940114g1.html>

cited as: OLG Düsseldorf, 10 February 1994 (Germany)

OLG Naumburg: 10 Sch 03/01 of 19 December 2001

cited as: OLG Naumburg, 19 December 2001 (Germany)

Schiedsgericht der Handelskammer Hamburg, 21 March 1996 CLOUT case No. 166

cited as: Schiedsgericht der Handelskammer Hamburg, 21 March 1996 (Germany)

Great Britain Central Meat Products Company, Ltd. V. J.V. McDaniel, Q.B.D. [1952] 1 Lloyd’s Rep. 562

cited as: Central Meat Products Company, Ltd. V. J.V. McDaniel, Ltd. (GB)


XXIII

Harbour Assurance Co. (U.K.) Ltd. V. Kansa General International Insurance Co., Ltd., Q.B.D. (Com.Ct.) 1992, 1 Lloyd’s Rep., 81

cited as: Harbour Assurance Co. v. Kansa Gen. Int’l Ins. Co., (GB)

Mangistaumunaigaz Oil Production Association v. United World Trade Inc., Q.B.D. (1995) 1 Lloyd’s Law Reports 617

cited as: Mangistaumunaigaz Oil Production Assoc. v. United World Trade Inc. (GB)

Star Shipping A.S. v. China National Foreign Trade Transportation Corporation, Court of Appeal (1993), 2 Lloyd’s Law Reports, 445

cited as: Star Shipping A.S. v. China Nat. Foreign Trade Transp. Corp. (GB)

Hong Kong Fung Sang Trading Limited v. Kai Sun Sea Products and Food Company Limited, Y.B. XIX (1994), 269

cited as: Fung Sang Trading, Ltd. V. Kai Sun Sea Products and Food Co., Ltd. (Hongkong) Lucky-Goldstar International (H.K.) Limited v. Ng Moo Kee Engineering Limited, 2 Hong Kong Law Reports (HKLR), 73 = Y.B. XX (1995), 280

cited as: Lucky-Goldstar Intern., Ltd. V. Ng Moo Kee Engineering, Ltd. (Hongkong)

USSR All-Union Foreign Trade Association Sojuznefteexport v. JOC OIL Limited, Y.B. XVIII (1993), 92

cited as: All-Union Export-Import Assoc. Sojuznefteexport (Moscow) v. JOC OIL (USSR) Switzerland Bezirksgericht St. Gallen (District Court Switzerland) 3PZ 97/18: 3 July 1997 CLOUT case No. 215

cited as: BG St. Gallen, 3 July 1997(Ch)

Zürich Chamber of Commerce (arbitration proceeding), Switzerland, 31 May 1996, <http://cisgw3.law.pace.edu/cases/960531s1.html>

cited as: Zürich Chamber of Commerce, 31 May 1996 (Ch)


XXIV

Kantonsgericht (District Court) Nidwalden, 3 December 1997 CLOUT case No. 220

cited as: Kantonsgericht Nidwalden, 3 December 1997 (Ch)

HG950347, 5 February 1997, Commercial Court = Handelsgericht Zürich http://cisgw3.law.pace.edu/cases/970205s1.html

cited as: Commercial Court Zürich, 5 February 1997 (Ch)

United States of America

Assante Technologies, Inc. v. PMC-Sierra, Inc., 164 F.Supp. 2d 1142 (2001)

cited as: Assante Technologies, Inc. v. PMC-Sierra, Inc. (U.S.)

Astra Footwear Industry v. Harwyn Intern., Inc., 442 F.Supp. 907 (S.D.N.Y. 1978)

cited as: Astra Footwear Industry v. Harwyn Intern., Inc. (U.S.)

Becker Autoradio USA, Inc. v. Becker Autoradiowerk GmbH, 585 F.2d 39 (3rd Cir. 1978)

cited as: Becker Autoradio USA, Inc. v. Becker Autoradiowerk GmbH (U.S.)

Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145 (1968)

cited as: Commonwealth Coatings Corp. v. Continental Casualty (U.S.)

Delchi Carrier, S.p.A. v. Rotorex Corp., 6 December 1995, 10 F. 3d. 1024 (2nd Cir. 1995)

cited as: Delchi Carrier SpA v. Rotorex Corporation (U.S.)

Erving v. Virginia Squires Basketball Club, 468 F.2d 1064 (2d Cir. 1972)

cited as: Erving v. Virginia Squires Basketball Club (U.S.)

Euro-Mec Import, Inc. v. Pantrem & C., S.p.A., 1992 WL 350211, (E.D.Pa.)

cited as: Euro-Mec Import, Inc. v. Pantrem & C., S.p.A. (U.S.)

Florasynth, Inc. v. Pickholz, 750 F.2d 171(2d Cir. 1984)

cited as: Florasynth, Inc. v. Pickholz (U.S.)

Garfield & Co. v. Wiest, 432 F.2d 849 (2d Cir. 1970)

cited as: Garfield & Co. v. Wies (U.S.)

Giddens v. Board of education of the city of Chicago 75 NE 2d 286 (1947)

cited as: Giddens v. Board of education of the city of Chicago (U.S.)


XXV

Hunt v. Mobil Oil Corp. 654 F.Supp. 1487 (S.D.N.Y.,1987)

cited as: Hunt v. Mobil Oil Corp. (U.S.)

HZI Research Center v. Sun Instruments Japan Co., Inc., 1995 WL 562181, (S.D.N.Y.)

cited as: HZI Research Center v. Sun Instruments Japan Co., Inc. (U.S.)

Ilios Shipping & Trading Corp. v. American Anthracite & Bitumius Coal Corp,148 F.Supp. 698 (S.D.N.Y. 1957)

cited as: Ilios S. & T. Corp. and American (U.S.)

Laboratorios Grossman, S.A. v. Forest Laboratories, Inc., 295 N.Y.S.2d 756, (1968)

cited as: Laboratorios Grossman, S.A. v. Forest Laboratories, Inc. (U.S.)

Local 814, Intern. Brotherhood of Teamsters, Chauffeurs, Warehousemen & Helpers of America v. J & B Systems Installers & Moving, Inc. 878 F.2d 38, (1989)

cited as: Local 814, Int'l Bhd. of Teamsters v. J & B Installers & Moving, Inc. (U.S.)

MCC-Marble Ceramic Center, Inc., v. Ceramica Nuova d'Agostino, S.p.A. 144 F.3d 1384 (11th Circuit Florida) of 29 June 1998.

cited as: MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova d'Agostino, S.p.A (U.S.)

Merit Insurance Company v. Leatherby Insurance Company, 714 F.2d 673 (7th Cir. 1983)

cited as: Merit Insurance Company v. Leatherby Insurance Company (U.S.)

Middlesex Mutual Ins. Co. v. Levine, 675 F.2d 1197 (11th Cir. 1982)

cited as: Middlesex Mutual Ins. Co. v. Levine (U.S.)

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Corp., 473 U.S. 614 (1985)

cited as: Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Corp. (U.S.)

Morelite Constr. Corp. v. New York City Dist. Council Carpenters’ Benefit Funds, 748 F.2d 79 (2d Cir. 1984)

cited as: Morelite Constr. Corp. v. New York City Dist. Council Carpenters Benefit Funds (U.S.)

Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)

cited as: Moses H. Cone Memorial Hospital v. Mercury Constr. Corp. (U.S.)


XXVI

National Shipping Co. of Saudi Arabi v. Transamerican Steamship Corp. 1992 U.S. Dist. Lexis 18725 (S.D.N.Y. 1992)

cited as: National Shipping Company of Saudi Arabia, Transamerican Steamship Corp. (U.S.)

Neri v. Retail Marine Corporation, 285 NE 2d 311 (N.Y. 1972)

cited as: Neri v. Retail Marine Corp., 1972 (U.S.)

Nicaragua Interocean Shipping Co. v. National Shipping & Trad. Corp., 462 F.2d 673, 1972 A.M.C. 1687

cited as: Nicaragua Interocean Shipping Co. v. National Shipping & Trad. Corp. (U.S.)

Orbisphere Corp. v. United States, 726 F. Supp. 1344 (1989)

cited as: Orbisphere Corp. v. United States (U.S.)

Pitta v. Hotel Ass'n of New York City, Inc., 806 F.2d 419 (2d Cir. 1986)

cited as: Pitta v. Hotel Ass'n, Inc. (U.S.)

Prima Paint v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967)

cited as: Prima Paint v. Flood & Conklin Mfg. Co. (U.S.)

Reed & Martin, Inc. v. Westinghouse Electronic Corp., 439 F.2d 1268, (2d Cir. 1971)

cited as: Reed & Martin, Inc. v. Westinghouse Elec. Corp. (U.S.)

Republic of Nicaragua v. Standard Fruit Company, 937 F.2d 469 (9th Cir. 1991)

cited as: Republic of Nicaragua v. Standard Fruit Co. (U.S.)

Rosgoscirc on Behalf of SOY/CPI v. Circus Show, Corp., 1993 WL 277333, (S.D.N.Y.)

cited as: Rosgoscirc, Co. v. Circus Show, Corp. (U.S.)

Sanford Home for Adults v. Local 6, IFHP, 665 F.Supp. 312 (S.D.N.Y. 1987)

cited as: Sanford Home for Adults v. Local (U.S.)

Standard Tankers (Bahamas) Co. v. Motor Tank Vessel, Akti, 438 F2d 153 (E.D.N.C. 1977)

cited as: Standard Tankers (Bahamas) Co., Ltd. V. Motor Tank Vessel (U.S.)


XXVII

Sun Refining & Marketing Co. v. Statheros Shipping Corp. of Monrovia, Liberia 761 F.Supp. 293, (1991)

cited as: Sun Refining & Marketing Co. v. Statheros Shipping Corp. of Monrovia, Liberia (U.S.)

Tennessee Imports, Inc. v. Pier Paulo Filippi and Prix Italia, 745 F.Supp. (1990), 1314-1331

cited as: Tennessee Imports, Inc. v. Pier Paulo Filippi and Prix Italia (U.S.)

Transmarine Seaways Corp. of Monrovia v. Marc Rich & Co. A.G. 480 F.Supp. 352, (S.D.N.Y 1979)

cited as: Transmarine Seaways Corp. of Monrovia v. Marc Rich & Co. A. G. (U.S.)

U. S. Wrestling Federation v. Wrestling Division of AAU, Inc. 605 F.2d 313 (7th Cir. 1979)

cited as: U. S. Wrestling Federation v. Wrestling Division of AAU, Inc. (U.S.)

Rheinische Friedrich-Wilhelms-Universität Bonn Page 1

1

Statements of Facts

On 3 April 2001, CLAIMANT, Equafilm Co. (hereafter referred to as CLAIMANT),

concluded a contract with Medipack SA (hereafter referred to as RESPONDENT) during a

telephone conversation.

After this telephone conversation, Mr. Black, Purchasing Manager of RESPONDENT, faxed

Mr. Storck, Sales Manager of CLAIMANT a confirmation of this contract. In this fax, he

confirmed the order of 1350 tons of polypropylene film, to be delivered over a nine-month

period of time. The conditions of sale were to be the same as in the previous contract

CLAIMANT and RESPONDENT had concluded on 15 December 2000, with adjustments for

the dates of shipment and the fact that CLAIMANT’s list prise had risen to $ 1,900 per ton.

The same day, Mr. Storck also sent a confirmation of RESPONDENT’s order to Mr. Black in

which the price set forth was $ 2,615,809, i.e. CLAIMANT’s current list price of $ 1,900 per

ton less 4% discount. All other provisions of the previous contract dated 15 December 2000

should apply.

The contract of 15 December 2000 to which both parties referred in their letters of

confirmation contained an arbitration clause and a choice of law clause. According to this

arbitration clause, “any dispute arising out of or relating to the contract concluded between

CLAIMANT and RESPONDENT should be determined by arbitration in accordance with the

rules of the German Arbitration Association”. The choice of law clause determined that the

contract was subject to the commercial law of Equatoriana. Equatoriana is a party to the

CISG.

In response to Mr. Storck’s letter of confirmation, Mr. Black contested the price indicated by

Mr. Storck claiming that RESPONDENT was to receive an 8% discount.

In his letter dated 9 April 2001, Mr. Storck regretted the confusion about the discount rate

which had arisen although Mr. Storck stated explicitly in his fax of 7 December 2000 that the

8% discount was only granted as in incentive for the first order. He affirmed that

RESPONDENT would receive their best price which includes a 4% discount.

In response, Mr. Black intimated that RESPONDENT would have to consider seriously


2

returning to Polyfilm GmbH, its former supplier, if CLAIMANT did not offer an 8% discount

to RESPONDENT.

On 2 May 2001, RESPONDENT refused definitely to comply with its obligations under the

contract concluded with CLAIMANT, since RESPONDENT had already placed the order

with Polyfilm GmbH.

As a result of this refusal, CLAIMANT suffered a loss of $ 575.477,98 which is the lost profit

it would have earned on the contract.

Counsel, prepared this Memorandum for CLAIMANT in compliance with the Arbitral

Tribunal’s Procedural Order No. 1.

It is argued that:

• There is no reason to challenge Dr. Arbitrator

• The Tribunal has authority to rule the case at issue

• The CISG is the law applicable to the contract

• A contract was concluded between CLAIMANT and RESPONDENT during their

telephone conversation dated 3 April 2001

• The price included a 4% discount

• RESPONDENT was in breach of its obligations under the contract

• CLAIMANT is entitled to claim damages in the amount of $ 575,477.98 caused by

RESPONDENT’s breach of its obligations

• CLAIMANT is entitled to claim interest on the damages

In arguing these propositions, CLAIMANT will demonstrate the legal and factual basis for its

claim.


3

Arguments

I. The challenge to Dr. Arbitrator is to be rejected

1. Arbitrator will participate in the decision on his own challenge (A.), which is governed by

§§ 15, 18 DIS Rules (B.). The challenge is to be rejected because there are no reasonable doubts

as to his impartiality or his independence (C.).

A. Dr. Arbitrator participates in the decision on his challenge

2. In accordance with § 18.2 DIS Rules, the arbitral Tribunal itself decides on the challenge.

Dr. Arbitrator participates in the decision on the challenge as a member of the Tribunal

[Procedural Order No. 1, para No. 4].

B. The challenge is governed by §§ 15, 18 DIS Rules

3. § 15 DIS Rules calls for „impartial and independent“ arbitrators. § 18.1 DIS Rules provides

for the challenge of an arbitrator if “circumstances exist that give rise to justifiable doubts as

to his impartiality or independence“. The terms “impartiality and independence” are not

defined in the DIS Rules. As the DIS Rules are based upon the Model Law [Böckstiegel, DIS-

Mat III 1998, p. 5; Semler, J.Arb.Int. 2001, p. 579], case law relating to the Model Law may

be used as persuasive authority.

C. There are no reasons to doubt Dr. Arbitrator’s impartiality or his independence

a. Dr. Arbitrator’s expectation to become a partner of a law firm that has represented

CLAIMANT is not sufficient to raise doubts as to his impartiality or independence

4. Dr. Arbitrator’s expectation of becoming a member of the law firm during a period when

he is acting as an arbitrator in a matter involving a former client of the firm is not sufficient to

raise justifiable doubts as to his impartiality or independence

5. Such justifiable doubts would have to be direct, definite, and capable of demonstration

rather than remote, uncertain, or speculative [Giddens v. Board of education of the city of

Chicago (U.S.); Pitta v. Hotel Ass'n, Inc. (U.S.); Florasynth, Inc. v. Pickholz (U.S.); Morelite


4

Constr. Corp. v. New York City Dist. Council Carpenters Benefit Funds (U.S.); Barker/Davis,

p. 49]. Personal or business relationships between an arbitrator and one of the parties are

possible grounds for justifiable doubts as to the impartiality or independence [Middlesex

Mutual Ins. Co. v. Levine (U.S.); National Shipping Company of Saudi Arabia,

Transamerican Steamship Corp. (U.S.); Ilios S. & T. Corp. and American (U.S.);

Bishop/Reed, Arb.Int. 1998, p. 398]. However, just being one out of 75 partners and 216

associates [Procedural Order No. 2, Clarification No. 22] of a law firm which has represented

a party to the arbitration before [cf. Standard Tankers (Bahamas) Co., Ltd. v. Motor Tank

Vessel (U.S.); Erving v. Virginia Squires Basketball Club (U.S.)] cannot be sufficient to raise

such doubts. Like Dr. Arbitrator, most persons who are qualified to appear as arbitrators in

international disputes work in international law firms with hundreds of clients. If all these

arbitrators were deemed to be partial or dependent, merely because another partner or

associate of the same firm has represented a party to the arbitration before, after a short time

the pool of skilled arbitrators eligible to be appointed to serve on Tribunals in international

disputes would be empty. Arbitration without arbitrators willing and able to serve, however,

cannot work.

6. In the case at hand, the only circumstance that might effect Dr. Arbitrator’s impartiality or

independence is his capacity as a partner of Multiland Associates. Dr. Arbitrator expects to

become one partner of a law firm which has represented a party to the arbitration before. He

had no business or personal relationship to CLAIMANT himself. The law firm he is

associated with entered into an agreement to merge with the well-known international law

firm Multiland Associates effective 1 January 2003 [Dr. Arbitrator in his letter to Mr. Bredow

dated 22 August 2002]. Only one office of Multiland Associates, located in Faraway City,

Oceania has represented CLAIMANT in two matters. These matters ended before the

arbitration started and they were unrelated to the dispute in this arbitration [Dr. Arbitrator in

his letter to Mr. Bredow dated 22 August 2002; Procedural Order No. 2, Clarification

No. 18]. Dr. Arbitrator himself has had no contact to CLAIMANT. In addition, there is no

continuing representation of CLAIMANT by Multiland Associates, and the new office of

Dr. Arbitrator has no expectation of representing CLAIMANT in the future [Procedural

Order No. 2, Clarification No. 18; importance of that issue: National Shipping Co. of Saudi

Arabia, Transamerican Steamship Corp. (U.S.); Hunt v. Mobil Oil Corp. (U.S.); Morelite

Constr. Corp. v. New York City Dist. Council Carpenters Benefit Funds (U.S.); Sanford Home

for Adults v. Local (U.S.); Holtzmann/Neuhaus, p. 389; Pellonpää/Caron, p. 162; Tampirie,


5

J.Arb.Int. 2001, p. 563]. Apart from the arbitration proceedings, Dr. Arbitrator will not have

any business relationship to CLAIMANT.

7. Even if he had some kind of business relationship to CLAIMANT, this would not be

sufficient to consider him partial or dependent. The mere fact that there is some business

relationship between an arbitrator and one of the parties to the arbitration is not in and of itself

sufficient to disqualify the arbitrator [Commonwealth Coatings Corp. v. Continental Casualty

(U.S.); Reed & Martin, Inc. v. Westinghouse Elec. Corp. (U.S.); Ilios S. & T. Corp. and

American (U.S.); Granzow, p. 110; Bernstein et al, No. 2-179] because arbitration

proceedings are not in all circumstances comparable to dispute resolution by public courts.

8. The major advantage of arbitration as a means of dispute resolution is the opportunity to

have a Tribunal that is more aware of the subject matter of the dispute than a court skilled in

legal argument but with only limited knowledge of the subject matter [Merit Insurance

Company v. Leatherby Insurance Company (U.S.); Commonwealth Coatings Corp. v.

Continental Casualty Co. (U.S.); Garfield & Co. v. Wiest. (U.S.); Born (1st ed.), p. 600].

Arbitration is the resolution of international commercial disputes by experts who have great

knowledge of international trade law. Being an expert is the result of being engaged in

occupations in the commercial world before, during and after the arbitral proceedings.

Working in an international law firm, which has hundreds of clients, offers the best

opportunity to become such an expert. Dr. Arbitrator is one of those experts with a great

reputation in his field of business [Procedural Order No. 2, Clarification No. 26], meaning he

has accumulated considerable knowledge of international trade law, based on previous

professional experience. The number of such experts is limited and in addition there is a

growing demand for qualified arbitrators because the popularity of arbitration as a means for

resolving international commercial disputes has increased significantly over the past decades

[for example, the world’s leading international arbitration institution – the ICC – handled

request for 32 arbitrations in 1956, 210 arbitrations in 1976, 337 arbitrations in 1992, 452

arbitrations in 1997, and 529 arbitrations in 1999].

9. As a result, the mere fact that someone is acting as an arbitrator in a matter involving a

former client of the law firm cannot raise justifiable doubts as to his impartiality or

independence.


6

b. Dr. Arbitrator has no financial interest in the outcome of the arbitration

10. Since the relationship between Dr. Arbitrator and CLAIMANT is not sufficiently close to

make any reasonable person doubt his impartiality or independence [Commonwealth Coatings

Corp. v. Continental Casualty Co. (U.S.); Hunt v. Mobil Oil Corp. (U.S.); Local 814, Int'l

Bhd. of Teamsters v. J & B Installers & Moving, Inc. (U.S.); National Shipping Company of

Saudi Arabia v. Transamerican Steamship Corp. (U.S.); OLG Naumburg, 19 December 2001

(Germany); von Hof, p. 80; Y.B. XXII (1997) p. 234], there have to be additional matters to

justify his challenge. An indication for bias would be given if Dr. Arbitrator had any financial

interest in the outcome of the arbitration [cf. Middlesex Mutual Ins. Co. v. Levine (U.S.);

Transmarine Seaways Corp. of Monrovia v. Marc Rich & Co. A.G. (U.S.); Reed & Martin,

Inc. v. Westinghouse Elec. Corp. (U.S.); National Shipping Company of Saudi Arabia,

Transamerican Steamship Corp. (U.S.); Sun Refining & Marketing Co. v. Statheros Shipping

Corp. of Monrovia, Liberia (U.S.); U.S. Wrestling Federation v. Wrestling Division of AAU,

Inc. (U.S.); Born (1st ed.), p. 601; Pellonpää/Caron, p. 160]. This would be the case if he had

a reasonable expectation of increasing his own income unduly favoring CLAIMANT during

the arbitration proceedings, in order to procure additional business for Multiland Associates.

11. However, his participation in this law firm is far too unimportant to suggest any direct

financial interest in the outcome of the arbitration. After the merger of 1 January 2003 there

will be 75 partners in 15 offices at different locations [Procedural Order No. 2, Clarification

No. 18]. The income earned by each partner is in large part determined by the profits of the

particular individual office and only in small part the profits of the entire firm [Procedural

Order No. 2, Clarification No. 19]. Dr. Arbitrator’s participation in hypothetical fees earned

in future cases is so negligible that a financial interest in the outcome of the arbitration cannot

be assumed.

c. Dr. Arbitrator’s disclosure underlines his impartiality and independence

12. In addition, Dr. Arbitrator disclosed the merger of the law firms and therefore complied

exactly with his obligations under § 16.3 DIS Rules. He even met the high requirements set

by the leading U.S. Supreme Court decision in a domestic case, Commonwealth Coatings

Corp. v. Continental Casualty Co. (U.S.) [Y.B. XXII (1997) p. 232; Born (1st ed.), p. 598]. In

this decision, the Supreme Court held that arbitrators have to disclose any circumstances that

might impact their impartiality, since the same ethical standards apply to both judges and


7

arbitrators. This ambition standard was criticized by several other courts finding that

arbitrators should be held to a lower ethical standard than judges [Pitta v. Hotel Ass'n, Inc.

(U.S.); Morelite Constr. Corp. v. New York City Dist. Council Carpenters Benefit Funds

(U.S.); Hunt v. Mobil Oil Corp. (U.S.)]. Nevertheless, Dr. Arbitrator disclosed the relationship

on 22 August 2002, [Dr. Arbitrator in his letter to Mr. Bredow dated 22 August 2002] merely

two days after he had received the information about the nature of the representation

[Procedural Order No. 2, Clarification No. 18]. He behaved in a truly honourable way.

13. As there is no further indication of circumstances that could justify the challenge of

Dr. Arbitrator, he cannot reasonably be considered partial or dependent. Therefore,

CLAIMANT respectfully requests the Arbitral Tribunal to reject the challenge to

Dr. Arbitrator.

II. The challenge to the jurisdiction of the Tribunal is to

be rejected

14. The Tribunal can rely on the Competence-Competence doctrine embodied in Art. 16(1)

Model Law and find that it has jurisdiction to decide on the merits of the case at hand (A.).

CLAIMANT and RESPONDENT concluded a valid arbitration agreement (B.). This

arbitration agreement is neither invalid because it refers to the arbitration rules of the

“German Arbitration Association” (C.) nor does the alleged invalidity of the commercial

contract have any effect on the arbitration agreement (D.).

A. The Tribunal has authority to decide on its own jurisdiction pursuant to Art. 16(1)

Model Law

15. CLAIMANT and RESPONDENT agreed that arbitration proceedings, if necessary,

should take place in Vindobona, Danubia. Danubia has enacted the UNCITRAL Model Law

[Rules p. 3]. Therefore, the Model Law applies to the case at issue since the Model Law is the

lex fori of Danubia. Art. 16(1) Model Law provides that “the arbitral Tribunal may rule on its

own jurisdiction, including any objections with respect to the existence or validity of the

arbitration agreement”. Since Art. 16(1) Model Law is mandatory [Holtzmann/Neuhaus,

p. 480], the DIS Rules cannot deviate from this provision, irrespective of whether they apply


8

to the instant dispute or not. This is confirmed by Section 24.1 DIS Rules. Therefore, the

Tribunal has authority to rule on its own jurisdiction.

B. CLAIMANT and RESPONDENT concluded a valid arbitration agreement

a. The parties agreed to refer any dispute arising out of the contract to arbitration

16. During their telephone conversation on 3 April 2001 CLAIMANT and RESPONDENT

concluded a sales contract in which they referred to the sales conditions they had agreed upon

in their previous contract dated 15 December 2000 [CLAIMANT’s Exhibit No. 1, 3, 4]. In the

subsequent correspondence, neither CLAIMANT nor RESPONDENT doubted the validity of

the arbitration agreement; only the amount of the discount rate was in dispute.

b. This arbitration agreement meets the writing requirement according to Art. 7(2) Model

Law

17. Pursuant to Art. 7(2) Model Law, the arbitration agreement of 3 April 2001 has to be in

writing in order to be effective. Art. 7(2) Model Law provides that “the writing requirement is

met by reference in the contract to a document containing an arbitration clause if the contract is

in writing and the reference is such to make that clause part of the contract”. Although the

contract dated 3 April 2001 was concluded orally, the formal requirements are satisfied, since

both CLAIMANT and RESPONDENT agreed in their confirmations of the telephone

conversation that the provisions of the contract dated 15 December 2000 should apply. This

contract contained an arbitration clause and both parties signed the contract [CLAIMANT’s

Exhibit No. 2]. These letters of confirmation constitute a record of the orally concluded contract.

Since those letters of confirmation represent an exchange of letters pursuant to Art. 7(2)(2)

Model Law, the contract containing the reference to the arbitration clause is in writing pursuant

to Art. 7(2)(3) Model Law [Holtzmann/Neuhaus, p. 264; Seventh Secretariat Note, A/CN.9/264,

Art. 7, para. 8].

18. The contract of 3 April 2001 need not reproduce the arbitration clause or make explicit

reference to it [Holtzmann/Neuhaus, pp. 263-264; Fifth Working Group Report, A/CN.9/264,

Art. 7, para. 19; Seventh Secretariat Note, A/CN.9/264, Art. 7, para. 8; Houtte, Arb.Int. 2000,

p. 10; Société Van Hopplynus c/ société Coherent Inc. (Belgium); Becker Autoradio USA, Inc.


9

v. Becker Autoradiowerk GmbH (U.S.); Central Meat Products Company, Ltd. v. J.V.

McDaniel, Ltd. (GB); Interocean Shipping Co. v. National Shipping & Trad. Corp. (U.S.);

Comité populaire de la Municipalité d’El Mergeb c/ société Dalico contractors (Fr)]. What is

only sought is a written form of assent to arbitration from each party [Holtzmann/Neuhaus,

p. 263; Secretariat Study on the N.Y. Convention, A/CN.9/168, para. 21].

19. Mr. Storck stated in his letter of 7 December 2000 that, since this had been

RESPONDENT’s first order, he would send them a formal contract [CLAIMANT’s Exhibit

No. 1]. Both CLAIMANT and RESPONDENT were convinced that they entered into a long

time contractual relationship, so that RESPONDENT would place all future orders with

CLAIMANT. For the first order, the parties drafted a formal contract in order to facilitate

further transactions. The purpose of this formal contract was to enable the parties to refer to it

and thereby incorporate its terms in subsequent agreements. The reference is perfectly

sufficient, since the parties agreed to this procedure. This is affirmed by RESPONDENT’s

statement of defence [statement of defence para. 12]. Since Mr. Black knew that the contract

dated 15 December 2000 contained an arbitration clause, he accepted the renewal of the

arbitration clause by referring himself to the sales conditions of the previous contract [cf.

Fouchard et al, pp. 294-295; Société Bomar Oil NV c/ ETAP (Fr); Houtte, Arb.Int. 2000,

p. 10].

20. Thus, the general reference to the conditions of the contract dated 15 December 2000

which contained an arbitration agreement in section 13 [CLAIMANT’s Exhibit No. 2] is

sufficient in order to incorporate this clause in the contract concluded on 3 April 2001 [cf.

Republic of Nicaragua v. Standard Fruit Company (U.S.); Becker Autoradio USA Inc. v.

Becker Autoradiowerk GmbH (U.S.); Hamburg Award, 18 March 1994 (Germany)].

21. An arbitration agreement between CLAIMANT and RESPONDENT has been concluded

and the writing requirement pursuant to Art. 7(2) Model Law is met.

C. The parties chose validly the “German Institution of Arbitration”

22. The arbitration agreement is effective even though it refers to the arbitration rules of the

“German Arbitration Association” instead of the “German Institution of Arbitration”.


10

a. CLAIMANT’s reference to an erroneously designated institution leaves the validity of

the arbitration clause unaffected

23. In cases in which the arbitration clause does not refer in an unambiguous way to an

existing arbitration institution, it is essential to differentiate between the reference to a non-

existent and to an erroneously designated institution [Boisséson, p. 480; Derains/Schwartz,

p. 91]. If CLAIMANT and RESPONDENT had chosen a non-existent institution, the

arbitration clause might be invalid [Fouchard et al, pp. 283-286; Scalbert/Marville, Rev.arb.

1988, p. 119; Born, p. 189], whereas the designation of an arbitral institution existing in

reality, but referred to under a false name will leave the validity of the arbitration clause

unaffected if the actually meant institution can be clearly determined by interpreting the

parties’ agreement [Fouchard et al, p. 284; Boisséson, p. 481].

24. In fact, the designation “German Arbitration Association” is simply an erroneous

translation of the official German name “Deutsche Institution für Schiedsgerichtsbarkeit

e.V.”. CLAIMANT and RESPONDENT both meant the “German Institution of Arbitration”,

as is evidenced by the interpretation of the arbitration agreement contained in the contract

dated 15 December 2000.

b. The parties intended to choose the “German Institution of Arbitration”

25. In first instance, full respect has to be given to the real intent of the parties rather than the

wording of the agreement [Laboratorios Grossman, S.A. v. Forest Laboratories, Inc. (U.S.);

Mangistaumunaigaz Oil Production Assoc. v. United World Trade Inc. (GB); ICC Court of

Arbitration, 6709/1991 (Fr); 1434/1975 (Fr)].

26. The arbitration clause contained in the contract dated 15 December 2000 clearly indicates

that CLAIMANT chose the German Institution of Arbitration for conducting any dispute

arising out of the contractual relationship with RESPONDENT. RESPONDENT accepted this

arbitration clause by signing the contract. Since there is no other arbitration institution in

Germany that conducts international commercial arbitrations [Procedural Order No. 2,

Clarification No. 32], it is obvious that only the “German Institution of Arbitration” could be

meant. The designation “German Arbitration Association” does not deviate so much from the

correct name “German Institution of Arbitration” that RESPONDENT could have been

mistaken as to which arbitration institution the arbitration clause refers [cf. ICC Court of


11

Arbitration, 2626/1977 (Fr)]. This being so, there is no danger that the objectively chosen

arbitration institution would be confounded with an institution not covered by the will of the

parties [société Tuvomon c/ société Amaltex (Fr); cf. ICC Court of Arbitration, 5103/1988

(Fr)].

27. Furthermore, if the parties involved come from different countries with no connection to

the place specified in the arbitration clause or to the arbitration rules of an institution, it can be

assumed that it must have been their wish to refer their dispute to an institution primarily used

for international rather than for domestic arbitration [Derains/Schwartz, p. 90; ICC Court of

Arbitration, 3460/1980 (Fr); 6709/1991 (Fr); Rosgoscirc v. Circus Show, Corp. (U.S.)].

CLAIMANT has its seat in Equatoriana, RESPONDENT in Mediterraneo. There is no

indication that either party had any connections to Germany or Danubia [Procedural Order

No. 2, Clarification No. 31]. Accordingly, it can be assumed that they chose Danubia and the

“German Institution of Arbitration” as a neutral basis for any disputes.

c. CLAIMANT can rely on the doctrine of ‘effet utile’

28. Furthermore, CLAIMANT can also rely on the doctrine of ‘effet utile’, generally applied

in arbitration proceedings. According to this doctrine, arbitration clauses which are not

exactly clear have to be interpreted in a way that gives reasonable sense to them, rather than

rendering those clauses ineffective [Fouchard et al, pp. 279-280; ICC Court of Arbitration,

1434/1975 (Fr); 3380/1980 (Fr); 4145/1984 (Fr); 5103/1988 (Fr); Star Shipping A.S. v.

China Nat. Foreign Trade Transp. Corp. (GB)]. Arbitration agreements in which the chosen

arbitration institution is named wrongly [ICC Court of Arbitration, 6709/1991 (Fr);

5103/1988 (Fr); 3460/1980 (Fr); 4472/1984 (Fr); Société Asland c/ société European Energy

Corp. (Fr); société Tuvomon c/ société Amaltex (Fr); Epoux Convert c/ société Droga,

14 December 1983 (Fr); Republic Nicaragua v. Standard Fruit Co. (U.S.); Lucky-Goldstar

Intern., Ltd. V. Ng Moo Kee Engineering, Ltd (Hongkong); Laboratorios Grossman, S.A. v.

Forest Laboratories, Inc. (U.S.); Astra Footwear Industry v. Harwyn Intern., Inc. (U.S.); HZI

Research Center v. Sun Instruments Japan Co, Inc. (U.S.)] or that are ambiguous in any other

way appear quite often in arbitral proceedings [Star Shipping A.S. v. China Nat. Foreign

Trade Transp. Corp. (GB); Mangistaumunaigaz Oil Production Assoc. v. United World Trade

Inc. (GB); Tennessee Imports, Inc. v. Pier Paulo Filippi and Prix Italia (U.S.); Bulgaria

Court of Arbitration case No. 151/1984 (Bulgaria); German Coffee Association,


12

28 September 1992 (Germany)]. Nevertheless, both arbitral Tribunals and courts give full

effect to the arbitration clause if the parties intended to choose a particular organization and if

no other arbitration institution exists which could have been alternatively meant [ICC Court

of Arbitration, 2626/1977 (Fr); 5103/1988 (Fr); observation de la ICC Court of Arbitration,

6709/1991 (Fr); note de la sentence Epoux Convert c/ société Droga (Fr); Laboratorios

Grossman, S.A. v. Forest Laboratories, Inc. (U.S.)]. In the case at hand, the interpretation of

the arbitration clause according to the parties’ intent clearly leads to the conclusion that they

intended to choose the “German Institution of Arbitration”

29. Thus, pursuant to the doctrine of ‘effet utile’, full effect has to be given to the arbitration

clause including the choice of the “German Institution of Arbitration”, especially since the

parties’ decision in favor of arbitration has to be respected in any circumstances [Moses H.

Cone Memorial Hospital v. Mercury Constr. Corp. (U.S.); Mitsubishi Motors Corp. v. Soler

Chrysler-Plymouth Corp. (U.S.); Republic of Nicaragua v. Standard Fruit Co. (U.S.);

Laboratorios Grossman, S.A. v. Forest Laboratories, Inc. (U.S.)].

d. Courts are inclined to give effect even to highly ambiguous arbitration clauses

30. Even if the interpretation of the arbitration agreement did not lead to an unequivocal

conclusion with regard to the meaning of the agreement, that would not necessarily render the

arbitration clause invalid. [Lucky-Goldstar Intern., Ltd v. Ng Moo Kee Engineering. Ltd

(Hongkong); Astra Footwear Industry v. Harwyn Intern., Inc. (U.S.); Euro-Mec Import, Inc.

v. Pantrem & C., S.p.A (U.S.); HZI Research Center v. Sun Instruments Japan Co., Inc.

(U.S.)]. In Astra Footwear Industry v. Harwyn International, Inc. (U.S.), the parties agreed to

arbitrate any disputes before the New York Chamber of Commerce, but this institution had

ceased to arbitrate disputes when it merged to become the New York Chamber of Commerce

& Industry. Nevertheless, the United States District Court of New York referred the case to

arbitration, although the parties had chosen an arbitration institution which did not exist any

more. In Laboratorios Grossman, S.A. v. Forest Laboratories, Inc. (U.S.), the parties chose

the rules and procedures of the “Pan-American Arbitration Association”, an organization

which had never existed. The Court decided that “if it should be found that the parties really

intended to arbitrate pursuant to the rules of the Inter-American Commercial Arbitration

Commission, an organization created by the Pan American Union, then arbitration before that

Tribunal should be directed, and nothing further need be determined”. Those examples


13

illustrate the courts’ attitude towards arbitration: they are inclined to give effect even to highly

ambiguous arbitration clauses to respect the parties’ intent to refer a dispute to arbitration [cf.

Redfern/Hunter, p. 172 including further references].

e. The reference to the „German Arbitration Association“ belongs to the category

„erroneously designated institutions“

31. Since the interpretation of the arbitration agreement between CLAIMANT and RESPON-

DENT clearly leads to the conclusion that the “German Institution of Arbitration” was meant,

there can be no doubt that the case at hand belongs to the category “erroneously designated

institutions” and not to the category “non-existent institutions”. Consequently, the choice of

the “German Institution of Arbitration”, including its procedural rules, is valid.

D. CLAIMANT and RESPONDENT concluded a valid arbitration agreement, irrespec-

tive of the validity of the commercial contract

32. The validity of the arbitration agreement between CLAIMANT and RESPONDENT is not

affected by the fate of the commercial contract dated 3 April 2001. RESPONDENT claims

that the arbitration agreement did not come into existence because no sales contract was

concluded between the parties. That is not correct for several reasons. In first instance,

CLAIMANT and RESPONDENT concluded a valid sales contract [cf. paras. 51 et seq.]

a. According to the doctrine of separability, the arbitration agreement is not affected by

the alleged invalidity of the commercial contract

33. Assuming, but not conceding, that no sales contract was concluded between CLAIMANT

and RESPONDENT, the validity of the arbitration agreement stands unimpaired.

34. The arbitration agreement constitutes a contract separate from the commercial contract

[Prima Paint v. Flood & Conklin Mfg. Co. (U.S.); observations de la cited as: ICC Court of

Arbitration, 2694/1977 (Fr); note de la sentence Epoux Convert c/ société Droga (Fr);

Comité populaire de la Municipalité d’el Mergeb c/ société Dalico contractors (Fr)]. In this

regard, it is of no relevance whether the arbitration clause is included in the principal contract

or whether it physically constitutes a separate agreement; in either case the arbitration agree-

ment is independent from the principal contract [Gosset C. Soc. Carapelli (Fr); Born, p. 56].


14

35. According to the separability-doctrine, which the rules of procedure in Danubia [Art.

16(2) Model Law] and also Art. II(3) New York Convention have adopted, the arbitral

agreement “survives any birth defect or acquired disability of the principal agreement”

[Varady/Barcelor/Mehren, p. 125; Holtzmann/Neuhaus, p. 480; Redfern/Hunter, p. 175,

Prima Paint v. Flood & Conklin Mfg. Co. (U.S.); Republic of Nicaragua v. Standard Fruit

Co. (U.S.); Interocean Shipping Co. v. National Shipping & Trad. Corp. (U.S.); Globe Union

Industrial Corp. v. G.A.P. Marketing Corp. (U.S.); Enrique C. Wellbers S.A.I.C. A.G. v.

Extraktionstechnik Gesellschaft für Anlagenbau (Argentina); Fung Sang Trading, Ltd. V. Kai

Sun Sea Products and Food Co., Ltd. (Hongkong); Gosset C. Soc. Carapelli (Fr); Hecht c/

Société Buisman’s (Fr); société Deko c/ G. Dingler et société Meva (Fr); Epoux Convert c/

société Droga (Fr)].

36. The main purpose of the separability doctrine is to maintain the competence of a validly

appointed arbitral Tribunal, irrespective of the fate of the principal contract [Broches, p. 75;

Fouchard et al, p. 216; cf. Holtzmann/Neuhaus, p. 259]. With regard to this pursued object, it

would frustrate the intent of an arbitration clause if a party could prevent an arbitration

agreement from coming into force by claiming that the commercial contract had not been

validly concluded or was terminated either by performance or by some intervening event

[Redfern/Hunter, p. 176; Fouchard et al, pp. 226-227; Harbour Assurance Co. v. Kansa Gen.

Int’l Ins. Co., (GB)]. Besides, it often it cannot be decided easily if the objections raised by

RESPONDENT are justified. That is why it is essential that an independent Tribunal decides

on these objections.

b. The application of the doctrine of separability is not excluded since the commercial

contract is not void ab initio

37. The application of the doctrine of separability is not excluded by RESPONDENT’s

allegation that no contract was concluded. Although it is true that some authorities exclude

the application of the doctrine of separability in cases in which the principal contract is void

ab initio [Varady/Barcelo/Mehren, pp. 126, 138; Broches, p. 78], however, this exception

does not apply to this case. Those authorities only refer to situations in which there had never

been a contract between the parties. In the case at hand, both parties were convinced that they

had concluded a contract during the telephone conversation, which is proved by their letters

of confirmation dated 3 April 2001 [CLAIMANT’ s Exhibit No. 3,4]. This is sufficient prima


15

facie evidence that a contract between CLAIMANT and RESPONDENT has been concluded

[Varady/Barcelo/Mehren, p. 126; Interocean Shipping Co. v. National Shipping & Trad.

Corp. (U.S.)]. Special regard has to be paid to the Legislative History of Art. 16 Model Law

which explicitly states that Art. 16(1) Model Law (as part of the procedural law of Danubia)

applies regardless of whether there are initial defects or later grounds for nullity of the

arbitration agreement [Seventh Secretariat Note, Analytical Commentary on Draft Text

A/CN.9./264, Art. 16, para. 2]. Therefore the doctrine of separability governs the case at issue.

c. The arbitration agreement itself does not suffer from any defects

38. Since the arbitration agreement constitutes a contract independent from the commercial

contract pursuant to the doctrine of separability, the arbitration clause can only be recognized

as invalid if it itself suffers from any defects in will (e.g. mistake, fraud) [All-Union Export-

Import Assoc. Sojuznefteexport (Moscow) v. JOC OIL (USSR); Euro-Mec Import, Inc. v.

Pantrem & C., S.p.A. (U.S.); Tennessee Imports, Inc. v. Pier Paulo Filippi and Prix Italia

(U.S.)]. Neither of these defects is alleged with regard to the arbitration agreement concluded

between CLAIMANT and RESPONDENT.

39. The parties have agreed upon the arbitration clause including the choice of the “German

Institution of Arbitration”. CLAIMANT and RESPONDENT concluded a valid and binding

arbitration agreement, notwithstanding the validity or invalidity of the commercial contract.

III. The CISG is the law applicable to the contract and its

formation

40. Since the provisions concerning the formation of contracts under the domestic law of

Equatoriana significantly differ from those of the CISG, it is essential to identify the CISG as

the law applicable to the contract [cf. Procedural Order No. 1, para. No. 8; Procedural Order

No. 2, Clarification No. 35]. CLAIMANT and RESPONDENT have subjected their

contracted to the commercial law of Equatoriana (A.). The choice of law clause at issue

cannot be interpreted as implied exclusion of the CISG (C.). It rather means that the CISG as

the pertinent part of the Equatorian law (B.) is applicable to the contract.


16

A. The parties have chosen the commercial law of Equatoriana

41. CLAIMANT and RESPONDENT agree that by virtue of reference to their contract of

15 December 2000 [CLAIMANT’s Exhibit No. 2] the choice of law clause contained therein

also applies to the contract at issue [Statement of Claim, paras. 5, 12; Statement of Defence,

para. 14, 15]. According to this clause, the contract is to be “subject to the commercial law of

Equatoriana” [CLAIMANT’s Exhibit No. 2]. Both Section 23.1 DIS Rules and Art. 28(1)

Model Law provide that “the arbitral Tribunal shall decide the dispute in accordance with

such rules of law as are chosen by the parties as applicable to the substance of the dispute”.

B. The CISG is the pertinent part of the commercial law of Equatoriana for the contract

at issue

42. Equatoriana is a party to the CISG [Statement of Claim, para. 13]. Thus, the CISG has

become part of the commercial law of Equatoriana and confers rights and obligations upon

the parties [Procedural Order No. 2, Clarification No. 5]. CLAIMANT and RESPONDENT

have their places of business in different states, and the contract at issue is one for the sale of

goods for the purposes of the CISG, Art. 1(1). Accordingly, the transaction falls within the

scope of the CISG. Since the CISG covers only the international sale of goods whereas the

domestic law of Equatoriana applies to all (other) contracts of sale, the CISG is the lex

specialis and excludes application of the law governing domestic transactions [cf. Procedural

Order No. 2, Clarification No. 5]. Thus, under the commercial law of Equatoriana the CISG is

the law governing contracts like the one between CLAIMANT and RESPONDENT.

C. Reference to the “commercial law of Equatoriana” does not amount to an implied

exclusion of the CISG

43. The choice of law clause making the contract subject to the commercial law of

Equatoriana does not amount to an implied exclusion of the CISG because the clause does not

indicate the parties’ actual intent to exclude the CISG. While a few decisions even deny the

possibility of an implied exclusion [Orbisphere Corp. v. United States (U.S.); LG Landshut,

5 May 1995 (Germany)], the majority opinion accepts it as possible to exclude the CISG

according to Art. 6 CISG implicitly as long as there is an adequate indication of the parties’

actual intent to do so [Assante Technologies, Inc. v. PMC-Sierra, Inc. (U.S.); Staudinger et


17

al/Magnus, Art. 6, note 20; Schlechtriem et al, Art. 6 note 13]. The parties have to indicate

their intention in an objectively recognizable way [Schlechtriem et al, Art. 6 note 16]. A

choice of law clause in an international sale of goods contract that selects the law of a

Contracting State means that the CISG applies to the contract and not the domestic law of the

Contracting State unless the domestic law is referred to in particular in the clause. This is the

rule supported and applied by the overwhelming majority of national courts, arbitral Tribunals

and scholars around the world [BGH, 25 November 1998 (Germany); BGH, 23 July 1997

(Germany); Kantonsgericht Nidwalden, 3 December 1997 (Ch); Assante Technologies, Inc. v.

PMC-Sierra, Inc. (U.S.); Sté Ceramique Culinaire de France v. Sté Musgrave Ltd. (Fr); ICC

Court of Arbitration, 8324/1995; 7844/1994; 7656/1994; 6653/1993 (Fr); Schiedsgericht der

Handelskammer Hamburg, 21 March 1996 (Germany); Int. Schiedsgericht der

Bundeskammer der gewerblichen Wirtschaft – Vienna, 15 June 1994 (Austria); for further

reference cf. UNCITRAL digest of CISG article 6 case law, para. 8; Honnold et al, Art. 77

note 1; Staudinger et al/Magnus, Art. 6, note 24 et seq.; Schlechtriem et al, Art. 6 note 16;

Bonell/Liguori, ULR 1997, p. 392; Drago/Zoccolillo, The Metropolitan Corporate Counsel

2002, p. 9].

44. The rule is also supported by legislative history. It corresponds to the intention of the

majority of delegations at the Vienna Conference. During the Conference, a large number of

delegations rejected proposals by Canada and Belgium [A/CONF.97/C.1/L.45] suggesting that

the domestic sales law, and not the Convention, would have to be applied whenever the

parties chose the law of a Contracting State for their contract [Official Records, p. 250].

Therefore, it is generally agreed that the CISG applies if the parties simply chose the law of a

Contracting State.

45. According to these requirements, reference to the “commercial law of Equatoriana” in

general was not sufficient to exclude the application of the CISG. One generally accepted way

of an implied exclusion of the CISG is making reference to a certain (domestic) codification,

such as the U.C.C. or any other national commercial code [Assante Technologies, Inc. v.

PMC-Sierra, Inc. (U.S.); Staudinger et al/Magnus, Art. 6, note 30; Schlechtriem (2nd ed.) et

al, Art. 6 note 14]. However, since there is no formal field of commercial law in Equatoriana

[Procedural Order No. 2, Clarification No. 35] reference simply to the “commercial law of

Equatoriana” is by no means comparable to cases where the parties refer to a certain

commercial code.


18

46. Furthermore, interpretation of the choice of law clause pursuant to Art. 8 CISG shows that

it cannot reasonably be understood as an exclusion of the CISG. The “commercial law” of

Equatoriana covers various kinds of transactions [Procedural Order No. 2, Clarification

No. 35; cf. Art. 1 Model Law, note 2: “the term ‘commercial’ should be given a wide

interpretation so as to cover matters arising from all relationships of a commercial nature”].

Accordingly, applying the standards for interpretation as set forth in Art. 8(2) CISG, one has

to consider that a reasonable person would understand “commercial law of Equatoriana” in a

very broad sense. This understanding of the term “commercial law” in Equatoriana is

significant as well as the fact that the CISG is the part of the commercial law of Equatoriana

governing international sale of goods [cf. para. 42]. Especially in the context of an

international sale of goods contract, a reasonable person could only understand the reference

to the “commercial law of Equatoriana” as including the CISG. Since the choice of law clause

was not a negotiated term [Procedural Order No. 2, Clarification No. 30], there is no

indication of a different understanding of the clause by either of the parties. Thus,

interpretation according to Art. 8 CISG confirms that the choice of law clause does not

amount to an implied exclusion of the CISG.

47. Further supporting this conclusion, recent case law shows that strong requirements have to

be met with respect to a clear indication in the choice of law clause that the parties intended to

opt out of the CISG. In Assante Technologies, Inc. v. PMC-Sierra, Inc. [U.S.], the court held

that even the choice of the law of one region of a Contracting State (“the laws of the State of

California”) does not suffice to presume the exclusion of the CISG. It stated that in the

absence of clear language indicating that both contracting parties intended to opt out of the

CISG the contention that the choice of law of a Contracting State precludes the applicability

of the CISG has to be rejected. This decision manifests the tendency to resolve any doubts in

favor of the applicability of the CISG. This tendency corresponds to the ratio of Art. 6 CISG,

which was intended to discourage exclusion of the CISG by implication [Secretariat

Commentary, p. 44; Ziegel/Samson, Art. 6].

48. Finally, one cannot draw a different conclusion from the fact that the law of Equatoriana

(and thus the CISG) would have to be applied even without the choice of law clause. In

practice, contracts often contain clauses of pure declaratory nature. Especially if there is a

constellation that could give rise to doubts as to the applicable law, parties may wish to clarify

which law applies. In the case at hand where buyer and seller have their places of business in


19

two different states and even choose a third state as the place of arbitration, determining the

applicable law appears to be a complex issue. It cannot be assumed that the parties had

knowledge of the relevant rules of conflict of laws, and thus it made perfect sense for them to

choose the law of Equatoriana.

49. Furthermore, the application of the CISG does not render the choice of law clause

meaningless. It still has the important effect of determining the law applicable to all those

issues that are not governed by the CISG [cf. Art. 4 CISG], thus avoiding the necessity to

invoke conflict of laws rules to solve such issues.

50. After all, the requirements for an implied exclusion of the CISG have not been met.

Reference merely to the “commercial law” is not sufficiently particular reference to the

domestic law of Equatoriana to indicate clearly the intention of the parties to exclude the

application of the CISG. Thus, CLAIMANT and RESPONDENT have not excluded the CISG

by virtue of the choice of law clause. The CISG is the law applicable to the contract.

IV. A contract of sale was concluded between CLAIMANT

and RESPONDENT

51. The parties reached an agreement that was sufficiently definite (A.). If the Tribunal finds

that the parties did not agree on the discount, a valid contract of sale has still been concluded

(B.).

A. A contract containing all elements of Art. 14 CISG has been concluded during the

telephone conversation between Mr. Storck and Mr. Black

a. Mr. Storck and Mr. Black concluded a contract during their conversation

52. According to Art. 11 CISG, a contract can be concluded orally. Mr. Storck explicitly

declared that the written form of the contract dated 15 December 2000 was necessary only

because it was the first order RESPONDENT was placing with CLAIMANT [CLAIMANT’s

Exhibit No. 1]. Neither Mr. Storck nor Mr. Black showed any intention for a requirement as to

a written form for future contracts.


20

53. In the fax of 3 April 2001, Mr. Black, purchasing manager of RESPONDENT, declared

that he considered himself to have concluded a contract of sale during the telephone

conversation he and Mr. Storck had held the same day [CLAIMANT’s Exhibit No. 3]. The

responding fax shows the same was true for Mr. Storck [CLAIMANT’s Exhibit No. 4].

Therefore, there is no doubt that both parties were in agreement that they had concluded a

contract and intended to be bound. A contract has thus been concluded.

b. The agreement contained all elements of Art. 14 CISG

54. As the agreement indicates the goods, fixes the quantity and determines the price, it is

sufficiently definite to culminate in the formation of a contract according to Art. 14 CISG.

During their conversation, Mr. Storck and Mr. Black agreed that RESPONDENT would

purchase 1350 tons of polypropylene film. Payment, shipping and similar terms were to be the

same as in the written contract of 15 December 2000 [CLAIMANT’s Exhibit No. 3, No. 4].

Several adjustments were made for the dates of shipment and the price RESPONDENT had to

pay, since the list price had risen to $ 1,900 per ton [CLAIMANT’s Exhibit No. 3]. According

to the commitments Mr. Storck made in his letter of 7 December 2000, he agreed that

RESPONDENT would receive a discounted price [CLAIMANT’s Exhibit No.4]. They hereby

fixed the exact price for the goods, although they did not expressly mention the percentage of

the discount RESPONDENT was to receive [cf. paras. 64 et seq.]. Therefore, a valid contract

of sale was concluded during the telephone conversation between Mr. Storck and Mr. Black

on 3 April 2001, containing all elements of an offer set by Art. 14 CISG.

B. Irrespective of the fact whether there was an agreement on the discount, a contract

would still have been validly concluded even if the parties had not fixed the discount

55. The requirements Art. 14 CISG stipulates for an offer need not be met as to the formation

of the contract between CLAIMANT and RESPONDENT, since they did not follow the offer-

acceptance pattern of Part II of the CISG (a.). An agreement on the discount was not

necessary on order to conclude a valid contract of sale (b.). The domestic law of Equatoriana

has no impact on the present contract (c.).


21

a. Since CLAIMANT and RESPONDENT did not conclude the contract by virtue of

offer and acceptance, the requirements of Art. 14 CISG were not mandatory for the

formation of the contract at issue

56. If a contract is not concluded by means of an exchange of “offer” and “acceptance”, the

requirements of Art. 14 CISG are not mandatory. Although most of the provisions of Part II

of the CISG are only concerned with the formation of a contract by the exchange of two

corresponding declarations, the CISG does by no means contain a mandatory requirement that

a contract must be concluded by exchanging an identifiable “offer” and “acceptance”

[Schlechtriem/Lüderitz, Einheitliches Kaufrecht, p. 188; Honnold et al, before Art. 14 note

132.1]. This point of view is confirmed by Artt. 18(3) and 29(2) CISG. According to these

rules, a contract may be concluded simply by “performing an act” (Art. 18(3) CISG) or with

an agreement that did not arise out of an exchange of declarations, but out of a document

which is signed by both parties (Art. 29(2) CISG) [Honnold et al, Art. 14 note 137.5;

Roth/Kunz, RIW 1997, p. 19]. Art. 14 CISG only applies if there is nothing else than a

proposal that may (or may not) constitute an “offer” or an “invitation to make offers”

[Neumayer/Ming, Art. 14 note 11; Honnold et al, before Art. 14 note 132.1; Neumayer, FS-

Lorenz, p. 751]. CLAIMANT and RESPONDENT did not agree upon the purchase by

exchanging isolated declarations of “offer” and “acceptance”. Instead, they had a telephone

conversation that matured into the present contract of sale. Since they did not follow the offer-

acceptance pattern of Part II of the CISG, the requirements of Art. 14 CISG were not

mandatory for the present contract [Honnold et al, Art. 14 note 137.5; Neumayer, FS-Lorenz,

p. 751; Enderlein/Maskow, Art. 55 note 2; Staudinger et al/Magnus, Art. 55 note 5].

b. An agreement on the discount was not necessary in order to conclude a valid contract

57. It was not necessary to determine the discount RESPONDENT was to receive during the

telephone conversation. RESPONDENT claims that the price was not determined and

therefore no contract of sale could have been concluded under Article 14 CISG [Statement of

Defence No. 18]. Assuming that there was no agreement on the discount, due regard has to be

paid to the wording of Art. 14 CISG. This provision states that the issue is whether a proposal

is sufficiently definite to constitute an offer [cf. Neumayer/Ming, Art. 14 note 11; Honnold et

al, Art. 14 note 137.5]. It does not, however, constitute minimum requirements for contracts

[Staudinger et al/Magnus, Art. 55 note 5; Bucher, p. 66].


22

58. Art. 14 CISG provides that an offer is sufficiently definite if it determines the price or

makes provision to do so. According to this rule, such an offer is always deemed to be

effective. The offeree of such a declaration is free to conclude a contract by way of an

acceptance according to Art. 18 CISG. However, it may not be argued e contrario that a CISG

contract which does not fix or make provision for determining the price is not sufficiently

definite and thus not binding, as the CISG itself proves the contrary: According to Art. 55

CISG there can be a “validly concluded” contract without a predetermined price

[Bianca/Bonell/Eörsi, Art. 55 note 2.2; Lookofsky, (CISG in USA) p. 28; Schlechtriem, note

212].

59. With regard to Artt. 6 and 8(1) CISG it becomes evident that under CISG rules the most

important element of a contract is the intention of the parties to be bound by their agreement

[Honnold et al, (1st edition) Art. 14 note 134 “The Ultimate Criterion: Indication of Intent to

be Bound”; Sono, p. 121; Enderlein/Maskow, Art. 14 note 5, 11; Soergel et

al/Lüderitz/Fenge, before Art. 14 note 1; Karollus, p. 62; Roth/Kunz, RIW 1997, p. 19]. A

contract that the parties intended to conclude must be respected [Adami, Revue de droit des

affaires internationales 1989, p. 107; Honnold et al, Art. 14 note 137.8; Ludwig, p. 297]. A

missing provision for the determination of the price cannot hinder the conclusion of the

contract, since it would run contrary to this general principle of the CISG [cf. Adami, Revue

de droit des affaires internationales 1989, p. 110; Karollus, p. 62]. The result would be that

the parties’ willingness to be bound would be disregarded.

60. Additionally, the necessity for contracts without a predetermined price must not be

ignored. These contracts facilitate international commercial relationships and have already

been very common in the life of commerce for a long time [cf. Rabel, p. 7]. The mechanism

for the determination of the price provided by the CISG in Art. 55 CISG responds to this need

of trade and corresponds to the purpose of the CISG to facilitate and promote trade [Adami,

Revue de droit des affaires internationales 1989, p. 120]. If a predetermined price was a

mandatory requirement of a contract, this mechanism would be useless. [Bianca/Bonell/Eörsi,

Art. 55 note 2.2.4].

61. Furthermore, it has to be considered that Art. 14 CISG is only concerned with problems

regarding offers, while Art. 55 CISG deals with the issue of contracts [Bianca/Bonell/Eörsi,

Art. 55 note 2.2.4; Neumayer, FS-Lorenz, p. 750]. Therefore, it is no longer appropriate to

concentrate on the issue whether there was a determined discount in the offer after it became


23

evident that CLAIMANT and RESPONDENT intended to be bound by contract

[Bianca/Bonell/Eörsi, Art. 55 note 2.2.4; Bucher, p. 58]. Instead, the offer becomes irrelevant

and the contract in itself proves that it is sufficiently definite, irrespective of whether the offer

contained a provision for the determination of the exact rate of the discount [cf. Ludwig,

p. 297; Bianca/Bonell/Eörsi, Art. 55 note 2.2.4]. As Art. 55 CISG provides, the question is

not “Was there a contract?” but rather “What were its terms?” [cf. Honnold et al, Art. 55 note

325.1]. The answer under CISG rules is that the parties are considered to have impliedly made

reference to the price generally charged at the time of the conclusion of the contract for such

goods sold under comparable circumstances in the trade concerned [Art. 55 CISG]. For this

reason, it was not necessary for CLAIMANT and RESPONDENT to determine the discount

RESPONDENT was to receive during their conversation.

62. In conclusion, even if the Tribunal finds that there was no agreement on the discount, the

parties have nevertheless concluded a valid contract. The discount is then to be determined

according to Art. 55 CISG.

c. The domestic law of Equatoriana has no impact on the validity of the contract

63. The domestic law of Equatoriana does not affect the validity of the contract between

CLAIMANT and RESPONDENT. Art. 4 CISG states that the Convention is not concerned

with the validity of a contract “except as otherwise expressly provided” in the CISG. As Artt.

55 and 14 CISG explicitly deal with price determination, the “validly concluded” contract in

Art. 55 CISG refers to reasons for invalidity under national laws other than invalidity for an

open price [Nicholas, p. 255; Staudinger et al/Magnus, Art. 14 note 34]. Therefore, these

rules prevail over the Equatorian law [Schlechtriem/Lüderitz, Einheitliches Kaufrecht, p. 189;

Magnus, IPRax 1996, p. 146].

V. The contract was concluded including a 4% discount

64. The parties agreed on a discount of 4% (A.). Even if the Tribunal finds that the parties did

not agree on a discount, the contract has been concluded including a 4% discount (B.).


24

A. The agreement the parties reached during their telephone conversation can only be

interpreted as including a discount of 4% from CLAIMANT's list price

a. The agreement has to be interpreted according to Article 8 CISG

65. During their telephone conversation Mr. Black and Mr. Storck agreed to apply

CLAIMANT's conditions of sale as stated in the contract dated 15 December 2000

[cf. CLAIMANT’s Exhibits No. 3 and No. 4]. RESPONDENT claims that this agreement leads

to an 8% discount, similar to the discount given for the last order. However, it can be clearly

shown that a 4% discount was agreed upon and that the 8% discount was an incentive offer

only applying to the previous order. To determine the meaning of the agreement, it has to be

interpreted according to Art. 8 CISG. This article applies to any kind of declaration and also

to statements about the price made during a telephone conversation. [cf. OGH, 10 November

1994 (Austria); MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova d'Agostino, S.p.A

(U.S.); Honnold et al, Art. 8 p. 116; Amato, J. L. & Comm 1993, p. 6; Secretariat

Commentary to Art. 12, para. 7]

66. Pursuant to Art. 8(1) CISG, the agreement reached is to be interpreted according to the

intent of each party "where the other party … could not have been unaware what that intent

was". Due consideration has to be given to all relevant circumstances of the case

[Art. 8(3) CISG].

b. RESPONDENT could not have been unaware of CLAIMANT's intent to grant only a

4% discount

67. When Mr. Storck agreed on 3 April 2001 to sell polypropylene film to RESPONDENT,

he intended to grant a discount of 4%. The 8% discount granted in the previous contract was

an incentive one time offer applying to the previous contract only.

68. CLAIMANT drafted the written contract of 15 December 2000 because RESPONDENT

placed an order with CLAIMANT for the first time [cf. CLAIMANT’s Exhibit No. 1]. By

stating to draft a formal contract only for this first time order, CLAIMANT expressed the

intention of being able to refer to that contract in future agreements. When Mr. Storck did so

during the telephone conversation, Mr. Black could not have been unaware that only those

explicit provisions or implicit arrangements are referred to, that were drafted to serve as


25

samples for future contracts. The letter sent to Mr. Black on 7 December 2000 announcing the

first agreement between CLAIMANT and RESPONDENT points out that the discount of 8%

is the highest discount ever given by CLAIMANT to any customer for any purchase. It is

dealt with in a section separated from the announcement of the prospect of a long term

relationship [cf. CLAIMANT’s Exhibit No. 1]. Therefore, Mr. Black could not have been

unaware that the price stated in the written contract reflecting the 8% discount was an

incentive offer only and not meant to govern all subsequent contracts to be concluded by the

parties.

69. Since RESPONDENT knew that the 8% discount was unusually high and the list price

already low [cf. CLAIMANT’s Exhibit No. 1], RESPONDENT could not have been unaware

of its incentive nature. Also, as sales manager of a large international company, Mr. Black

could not have been unaware that special discounts are given in the polypropylene market for

special reasons such as first time orders [cf. Procedural Order No. 2, Clarification No. 40].

70. In his letter of 7 December 2000 Mr. Storck pointed out that CLAIMANT’s discount to

favored customers is 4%. In the same letter he promised that RESPONDENT would always

receive CLAIMANT's best price, since a long term business relationship was expected

[CLAIMANT’s Exhibit No. 1]. When Mr. Black subsequently called Mr. Storck to place an

order with CLAIMANT, they moved along the expected line of a long term

relationship. Thus, Mr. Black could expect Mr. Storck to keep his promise and receive the

best price. A best price is received as long as no other customer is given a better price.

CLAIMANT never granted a discount higher than 4% to any customer except on first orders

as incentive offers [cf. Procedural Order No. 2, Clarification No. 38, Procedural Order

No. 3, Clarification No. 5]. Therefore, a 4% discount was CLAIMANT’s best price and by

granting 4% to RESPONDENT Mr. Storck kept his promise. Since RESPONDENT knew that

CLAIMANT grants a 4% discount to favored customers, RESPONDENT could not have

been unaware that a 4% discount reflected CLAIMANT’s best price. Consequently,

Mr. Black could not have been unaware of Mr. Storck's intent to grant a 4% discount.

c. Neither Mr. Storck nor any other reasonable person could have been aware of

Mr. Black's intent to contract with a discount of 8% from the list price

71. Mr. Storck had no reason to believe that Mr. Black was only willing to contract with

CLAIMANT in the event that an 8% discount was accepted. Mr. Black first revealed his


26

intention as late as in his letter of 10 April 2001 [cf. CLAIMANT’s Exhibit No. 7].

72. Furthermore, the written contract of 15 December 2000 does not mention the discount

given. When Mr. Black referred to that written contract during their telephone conversation,

Mr. Storck could not know that this reference meant to introduce an 8% discount as a

requirement to contract [cf. CLAIMANT’s Exhibit No. 3].

73. Consequently, Mr. Storck could not have been aware of Mr. Black's intent to conclude a

contract with a discount of 8% while on the other hand Mr. Black could not have been

unaware of Mr. Storck's intent to sell with an 4% discount. Thus, the agreement of the parties

must be understood as including a 4% discount.

74. For the reasons given above [paras. 67 - 72], the agreement also includes a 4% discount if

interpreted according to the understanding of a reasonable person of the same kind as

RESPONDENT [Art. 8(2) CISG; cf. LG Hamburg, 26 September 1990 (Germany)]

B. If the Tribunal finds that the parties' agreement did not fix the price, a contract has

nevertheless been concluded including a 4% discount

75. In this event the price has to be determined according to Art. 55 CISG [cf. paras. 55 et

seq.]. Pursuant to this provision, the parties are considered to have made reference to the price

generally charged for such goods sold under comparable circumstances in the trade concerned

[Art. 55 CISG]. The dispute between CLAIMANT and RESPONDENT did not arise with

regard to the list price of the polypropylene film but with regard to the discount on that price.

Nevertheless, there is no doubt that Art. 55 CISG is applicable not only to list prices but also

to discounts as the award of discounts is a "comparable circumstance" for the purpose of

Art. 55 [cf. Schlechtriem/Hager, Art. 55 note 8; Enderlein/Maskow, Art. 55 note 10]. Since

CLAIMANT’s discount practice of granting a 4% discount to favored customers is much like

the practice in the industry [cf. Procedural Order No. 2 Clarification No. 40], it is the practice

"under comparable circumstances in the trade concerned" [cf. ICC Court of Arbitration,

8324/1995 (Fr); BG St. Gallen, 3 July 1997 (Ch); Witz et al, Art. 55 note 3]. Therefore, even

if assuming the parties had not reached an agreement that includes a 4% discount, the contract

between CLAIMANT and RESPONDENT would have been concluded including a 4%

discount.


27

VI. RESPONDENT was in breach of its obligations under

the contract

76. As shown above, on 3 April 2001 CLAIMANT and RESPONDENT concluded a contract

of sale for 1350 tons of polypropylene film, the price being $ 1,900 per ton with a 4%

discount. RESPONDENT’s obligations under this contract were to pay the price and to take

delivery of the goods, Artt. 53 et seq. CISG. RESPONDENTS’s fax of 2 May 2001 was an

anticipatory breach according to Art. 72(1) CISG (A.) This fax was a repudiation of the

contract (B.), and RESPONDENT was not entitled to refuse performance (C.).

A. RESPONDENT’s fax of 2 May 2001 was an anticipatory breach of contract

77. With its fax of 2 May 2001 RESPONDENT repudiated and thereby breached the contract

between the parties according to Art. 72(1) CISG. This article refers to a situation where “it is

clear that one of the parties will commit a fundamental breach”. Such a future fundamental

breach may be clear because of the words or actions of the party which constitute a

repudiation of the contract [Secretariat Commentary on 1978 Draft Con. Art. 63, para. 2].

Accordingly, one party’s express and definite refusal to perform its obligations constitutes a

fundamental breach of contract, except where the party is entitled to refuse performance

[Zürich Chamber of Commerce, 31 May 1996 (Ch); OLG Düsseldorf, 10 February 1994

(Germany); Schlechtriem et al, Art. 25, note 17, 22; Stoll, RabelsZ 1998, pp. 624 et seq.;

Koch, p. 256].

B. RESPONDENT’s fax was an anticipatory repudiation of the contract concluded on

3 April 2001

78. Like every statement or conduct of the parties relevant under the CISG, the fax has to be

interpreted with regard to the guidelines of Art. 8 CISG. RESPONDENT stated in the fax that

it had “. . . placed an order with Polyfilm GmbH for the polypropylene film that (it) had

expected to purchase from (CLAIMANT)” [CLAIMANT’s Exhibit No. 10]. This statement

unequivocally proves RESPONDENT’s intent not to perform any obligations under its

contract with CLAIMANT. Moreover, the fact that RESPONDENT had entered into another

contract for the supply of the same goods it was to receive from CLAIMANT makes clear that


28

the refusal was meant to be definite. Thus, the statement RESPONDENT made in its fax of

2 May 2001 can reasonably be interpreted only as an express and definite refusal to perform

any obligation under the contract.

C. RESPONDENT was not entitled to refuse performance

79. Since the contract concluded on 3 April 2001 contained a 4% discount, RESPONDENT

had no right to make its performance dependent on an 8% discount. Furthermore,

CLAIMANT had complied with all of its own obligations under the contract until receiving

RESPONDENT’s fax of 2 May 2001. There can be no doubt that CLAIMANT was ready,

willing and able to perform its obligations, and that it would have done so absent

RESPONDENT’s anticipatory repudiation. CLAIMANT had already booked space for

shipment of the first installment [CLAIMANT’s Exhibits No. 6, No. 9]. Thus, there was neither

breach of contract nor any other misconduct on behalf of CLAIMANT that could have given

RESPONDENT a right to avoid the contract according to Art. 49 CISG. Likewise,

RESPONDENT had no right to claim that the contract was invalid for any reason under the

domestic law of Equatoriana, which applies to the contract as far as its validity is concerned,

Art. 4(a) CISG. In particular, the domestic law of Equatoriana does not provide for invalidity

of the contract under theories of mistake or otherwise [Procedural Order No. 2, Clarification

No. 36]. Consequently, RESPONDENT had no right to repudiate the contract or to refuse

performance of its obligations respectively. Thus, its fax of 2 May 2001 constituted a breach

of contract.

VII. EQUAFILM is entitled to claim damages for lost

profit in the amount of $ 575,477.98

80. As a consequence of RESPONDENT’s breach, CLAIMANT is entitled to claim damages

(A.). Since the damages have to be calculated according to Art. 74 CISG, CLAIMANT has

the right to recover its loss of profit, i.e. $ 575,477.98 (B.). RESPONDENT could foresee that

it would cause such damages by its repudiation of the contract (C.). Since CLAIMANT was

in a lost volume situation, it did not fail to take measures to mitigate its loss (D.). Thus,

CLAIMANT is entitled to claim damages in the amount of $ 575,477.98.


29

A. RESPONDENT’s breach of contract entitles CLAIMANT to claim damages

81. RESPONDENT repudiated and thereby breached the contract pursuant to Art. 72 CISG

and subsequently failed to perform its obligations as set forth in Artt. 53 et seq. CISG. Both

the repudiation [Art. 72 CISG] and the subsequent failure to perform any obligations

[Art. 61(1)(b)] give CLAIMANT the right to claim damages. Though Art. 72 CISG does not

explicitly provide a right to claim damages, it is clear that in case of an anticipatory

repudiation the aggrieved party is entitled to recover against the other party damages it

suffered as a consequence of the other party’s repudiation [Downs Investments v. Perwaja

Steel (Australia)]. Since it is a basic principle of the CISG that damages are payable in respect

of any breach of contract, it was decided at an early stage of the drafting of the CISG that no

express provision would be necessary [Schlechtriem et al, Art. 72 note 25, 35 with reference

to the legislative history].

82. In any event, CLAIMANT is entitled to claim damages as a consequence of

RESPONDENT’s anticipatory breach.

B. CLAIMANT suffered lost volume damages in the amount of $ 575,477.98 as a

consequence of RESPONDENT’s breach

83. As provided in Art. 74 CISG, CLAIMANT is entitled to recover its lost profit (a.).

CLAIMANT has to be given this loss of profit as compensation for its lost volume damages

(b.). These damages were a consequence of RESPONDENT’s breach (c.). The profit

CLAIMANT lost is 22% of the contract price, i.e. $ 575,477.98 (d.).

a. CLAIMANT is entitled to recover its loss of profit

84. CLAIMANT’s damages have to be calculated according to Art. 74 CISG. This article

provides the basic rule for the calculation of damages for losses suffered by one party as a

result of the other party’s breach [Schlechtriem et al, Art. 74 note 2]. The rule seeks to place

the injured party in the same economic position it would have been in had the other party

properly performed its contractual obligations [Secretariat Commentary on Art. 70 of the

1978 Draft Convention; Delchi Carrier SpA v. Rotorex Corporation (U.S.); Honnold et al,

Art. 74 note 503]. In other words, CLAIMANT has to be given the benefit of its bargain,


30

which consists inter alia of the expectation interest [cf. Sutton, Ohio State Journal 1989,

III.B.1.]. As explicitly stated in Art. 74 CISG, this includes CLAIMANT’s loss of profit.

b. CLAIMANT was in a lost volume situation

85. RESPONDENT’s breach of contract diminished the total volume of sales CLAIMANT

could have carried out by one, namely the sale to RESPONDENT. Therefore, it put

CLAIMANT in a lost volume situation [cf. OGH, 28 April 2000 (Austria); Honnold et al,

Art. 74 note 503, Saidov, I.2.(c)]. Due to RESPONDENT’s breach, CLAIMANT suffered lost

volume damages because it lost the (additional) profit it would have earned from the contract

with RESPONDENT.

86. CLAIMANT has to be compensated for its lost volume damages since any subsequent

sale of polypropylene film to other customers cannot be regarded as a replacement for the

contract between CLAIMANT and RESPONDENT [cf. OGH, 28 April 2000 (Austria); Neri

v. Retail Marine Corp. (U.S.); Saidov, I 2. (c)]. The polypropylene film is a standard product

that CLAIMANT would not have manufactured specifically for RESPONDENT [Procedural

Order 2, Clarification No. 53]. CLAIMANT had the manufacturing capacity to produce the

1350 tons for RESPONDENT in addition to any quantity to be produced for other customers

[Procedural Order 2, Clarification No. 54]. Thus, CLAIMANT had the capacity to supply

any quantity to other customers independently from its contract with RESPONDENT. For this

reason, there is no causal connection between RESPONDENT’s breach and any subsequent

transaction. CLAIMANT would have made other sales in any event. Accordingly, in order to

put CLAIMANT in the position it would have been in had the contract with RESPONDENT

been performed, it has to be awarded the additional profit it would have earned from the

contract with RESPONDENT.

c. CLAIMANT’s loss of profit was a consequence of RESPONDENT’s breach

87. RESPONDENT’s breach directly caused CLAIMANT’s lost volume damages.

CLAIMANT would not have suffered a loss of profit but for RESPONDENT’s repudiation of

the contract.


31

d. CLAIMANT lost profit in the amount of $ 575,477.98

88. The amount of CLAIMANT’s lost profit can be determined according to CLAIMANT’s

profit margin and the contract price. If RESPONDENT had performed its obligations under

the contract, CLAIMANT would have received $ 2,615,809, the price RESPONDENT was to

pay [cf. CLAIMANT’s Exhibit No. 4]. This price reflected the 4% discount CLAIMANT

granted [cf. paras. 51 et seq.]. CLAIMANT’s profit margin would have been 22% of this sum

[cf. Statement of Claim, para. 11]. The CISG does not explicitly present a method for

calculating the lost profit. However, it is generally agreed that the loss can be calculated using

the seller`s profit margin [OGH, 28 April 2000 (Austria); Delchi Carrier SpA v. Rotorex

Corporation (U.S.); Schlechtriem et al, Art. 74 note 23]. Thus, CLAIMANT’s lost profit was

22% of the contract price, i.e. $ 575,477.98.

89. After all, CLAIMANT suffered lost volume damages as a consequence of

RESPONDENT’s breach. These damages can be measured by CLAIMANT’s loss of profit,

which amounts to $ 575,477.98.

C. The damages were foreseeable to RESPONDENT

90. CLAIMANT’s lost volume damages in the amount of $ 575,477.98 were foreseeable loss

for the purposes of Art. 74 CISG. The pertinent standard for the foreseeability of loss is what

a reasonable person ought to have foreseen at the time of the conclusion of the contract [ICC

Court of Arbitration, 8324/1995 (Fr); Downs Investment v. Perjawa Steel (Australia);

Schlechtriem et al, Art. 74 note 12; Audit, note 172; Bianca/Bonell/Knapp, Art. 74, note 26].

Since CLAIMANT is a merchant and not a non-profit organization, it is obvious to any

reasonable person entering into a contract with CLAIMANT that the latter intends to make

profit from this contract.

91. The actual amount of the damages need not be foreseen [Schlechtriem et al, Art. 74 note

37; Staudinger et al/Magnus, Art. 74 note 31]. However, CLAIMANT’s gross margin of 22%

was foreseeable since it is a percentage that is in line with what can be expected in the

industry [Procedural Order 2, Clarification No. 55].


32

D. CLAIMANT did not fail to take measures to mitigate its loss according to Art. 77

CISG

92. Since RESPONDENT bears the burden of proof if it wants to invoke Art. 77 CISG

[Schlechtriem et al, Art. 77 note 12], unless RESPONDENT raises this issue, it need not be

discussed in detail. However, it is obvious that due to the lost volume situation CLAIMANT

did not fail to mitigate its loss as stipulated in Art. 77 CISG. There were no mitigation

measures that were “reasonable in the circumstances to mitigate the loss", Art. 77 CISG [cf.

Saidov, II.4.(d)]. The only mitigation measure one could think of would have been finding a

substitute buyer and reselling the polypropylene film originally reserved for RESPONDENT.

However, as shown above [cf. paras. 85, 86], no sale following RESPONDENT’s breach can

be regarded as a resale because each and every subsequent sale would have been made even if

RESPONDENT had not breached the contract with CLAIMANT. Accordingly, no subsequent

transaction could help to avoid CLAIMANT’s loss. Accordingly, CLAIMANT did not fail to

mitigate the damages. Thus, it is entitled to recover the entire lost profit.

93. After all, CLAIMANT is entitled to claim damages in the amount of $ 575,477.98.

VIII. CLAIMANT is entitled to interest on the damages

94. Art. 78 CISG grants the right to claim interest on damages (A.). The period of time during

which interest has to be charged begins with the date when the damages occurred and ends

with payment (B.).

A. Art. 78 CISG grants the right to claim interest on damages

95. Art. 78 CISG grants the right to interest on any “sum that is in arrears”. This wording

includes damages that are due even though such damages are not explicitly mentioned in Art.

78 CISG [Schlechtriem et al, Art. 78 note 15]. Accordingly, it is not a requirement for the

right to claim interest that there is a claim liquidated or established by judgment [Delchi

Carrier SpA v. Rotorex Corporation (U.S.); Margon Srl v. VN Sadelco (Belgium);

Commercial Court Zürich, 5 February 1997 (Ch); Arbitral Award 52/97, 10 December 1997

(Austria)].


33

96. Art. 7 CISG supports this conclusion. Since there is no explicit reference to interest on

damages in Art. 78 CISG, it has to be interpreted according to Art. 7(1) CISG. In doing so,

particular regard is to be had to the purpose of the provision. The intended purpose is to

prevent the debtor’s unjust enrichment and to protect the creditor [Thiele, J. of Int. Com. Law

and Arb. 1998, III.B.5.]. To serve this purpose in cases of breach of contract, the party that

has suffered a loss has to be granted interest on this loss from the time of the breach.

Likewise, gap-filling according to Art. 7(2) CISG would lead to the application of the general

principle of full compensation as expressed in Art. 74 CISG and, thus, to the same conclusion

[Lookofsky, (CISG in Europe) p. 106, note 165]. After all, CLAIMANT is entitled to interest

on its loss of profit.

B. CLAIMANT is entitled to interest from the date payment was due

97. The duty to pay pre-award interest begins when the payment of the sum becomes due

[Honsell, Art. 78 note 8; Staudinger et al/Magnus, Art. 78 note 9]. Payment of damages

becomes due when the damage occurs [Schlechtriem et al, Art. 78 note 15; Staudinger et

al/Magnus, Art. 78 note 10; LG Heidelberg, 3 July 1992 (Germany)]. In the case at hand, the

damages occurred when RESPONDENT failed to pay the price for the goods though payment

was due.

98. The time payment was due has to be determined separately for each of the nine

installments. Each payment was due 30 days after the date CLAIMANT had to deliver an

installment under the contract with RESPONDENT [CLAIMANT’s Exhibit No. 2]. The dates

agreed on for CLAIMANT’s deliveries were the 10th of each month from May 2001 through

January 2002 [CLAIMANT’s Exhibit No. 3].

99. Every time a certain amount was to pay and RESPONDENT failed to do so, the damages

CLAIMANT has suffered increased by the loss of the profit CLAIMANT would have

generated from the pertinent installment. Consequently, CLAIMANT is entitled to interest on

each fraction amount of damages from the time each installment was due, i.e. 30 days from

the 10th day of each month from May 2001 through January 2002.

100. If the Tribunal considers it not appropriate to award interest corresponding to the dates

specified above, interest should be awarded from the beginning of the arbitration proceedings.

With commencement of the arbitration against RESPONDENT, CLAIMANT has taken an


34

appropriate measure to secure payment of the damages. In any case, interest should be

awarded from the date of the award.

101. The period of time during which interest should be awarded ends with RESPONDENT’s

payment of the entire amount of damages towards CLAIMANT.

102. As a result, CLAIMANT is entitled to interest on each fraction amount of its loss of

profit from the time each installment by RESPONDENT was due, i.e. 30 days from the 10th

day of each month from May 2001 through January 2002, until payment of the damages.

Request for relief

In the light of the submissions above, Counsel respectfully requests the Tribunal

• to reject the challenge to Dr. Arbitrator

• to find that the Tribunal has jurisdiction to decide on the case at issue

• to declare that the CISG is the law applicable to the contract

• to find that CLAIMANT and RESPONDENT concluded a contract including a 4%

discount

• to declare that RESPONDENT breached the contract by refusing to comply with its

contractual obligations

• to award damages for breach of contract in the amount of $ 575,477.98

• to award interest on the said sum from the day payment was due, i.e. 30 days from the

10th of each named month, up to payment of the damages

(signed)_____________________________________________________________________

12 December 2002

memorandum for claimant - institute of international ... · memorandum for claimant ... co. company...

Documents