memorandum for claimantfd.unl.pt/docentes_docs/ma/fpc_ma_28153.pdf · nova faculty of law...

XXIII Annual Willem C. Vis International

XXIII Annual Willem C. Vis International Commercial Arbitration Moot

Under the Vienna International Arbitration Center of the

Austrian Federal Economic Chamber

Case SCH - 1975/VM

MEMORANDUM FOR CLAIMANT

KAIHARI WAINA, CLAIMANT

v.

VINO VERITAS, RESPONDENT

Counsel for CLAIMANT

António Biason • Catarina Morão • Mariana Sampaio • Ricardo Pinto Lobato

NOVA FACULTY OF LAW

Lisbon 2016

NOVA Faculty of Law Memorandum for CLAIMANT

2

TABLE OF CONTENTS

ABBREVIATIONS …………………………………………………………………………… 7

INDEX OF RULES AND LEGAL SOURCES ……………………………………………… 9

INDEX OF AUTHORITIES ……………………………………………….............................. 10

INDEX OF COURT CASES AND ARBITRAL AWARDS ………………………………… 14

STATEMENT OF FACTS ……………………………………………………………………. 17

SUMMARY OF ARGUMENT ………………………………………………………….……. 21

ARGUMENT ………………………………………………………………………………...… 23

I. BREACH OF THE ARBITRATION AGREEMENT …………………………...…….

1. THE ARBITRATION AGREEMENT OUTLINES THE JURISDICTION OF THE

ARBITRAL TRIBUNAL

A. The Arbitration Agreement is not Pathological but Valid, Enforceable and

Binding

B. The Arbitration Agreement is not Void and Respondent could not Discuss the

Merits of the Dispute before the Courts of Mediterraneo

C. Respondent Breached the Duty to Cooperate in the Resolution of the Dispute

from the Moment It Started Court Proceedings, since the Arbitral Tribunal has

Jurisdiction to decide on its own Jurisdiction

D. Claimant Did Not Waive Its Right to Solve Disputes Through Arbitration by

Not Answering Respondent’s Letter

E. By Breaching the Arbitration Agreement Respondent Also Breached the

Framework Contract

23


3

II. ORDER FOR DOCUMENT PRODUCTION ……………………………….

1. THE TRIBUNAL HAS AUTHORITY AND SHOULD EXERCISE ITS POWER TO

ORDER RESPONDENT TO PRODUCE THE REQUESTED DOCUMENTS

A. THE TRIBUNAL HAS THE POWER TO DETERMINE DOCUMENT

PRODUCTION

A.1. The Parties Cannot Exclude Document Production

A.1.1. The Parties’ autonomy is not unrestricted: a violation of due

process, applicable law and institutional rules

A.2. The Arbitration Agreement Does Not Preclude in Absolute Document

Production

A.2.1. The wording adopted in the arbitration agreement does not

exclude document production

i) Document production differs from ‘discovery’, especially

in International Arbitration

ii) The intention of the Parties by using the word ‘discovery’

was never to exclude document production

A.2.2. RESPONDENT cannot raise ‘contra proferentem principle’

against CLAIMANT

A.3. Document Production Is Allowed by The Elements Contained in The

Arbitration Agreement

i) Danubian Arbitration Law: allows document production

ii) Vienna Rules: establishes the basis for the Tribunal to determine

document production

iii) IBA Rules on the Taking of Evidence: contains specific

provisions regarding document production

iv) Document production does not interfere on the fast and cost

efficient way this proceeding shall be conducted

A.4. Alternatively, The Tribunal Has the Ex officio Power to Order the

Production of the Requested Documents

29


4

B. THE TRIBUNAL SHOULD EXERCISE ITS POWER TO DETERMINE

DOCUMENT PRODUCTION

B.1. The Request Does Not Disrupt the CISG Principles On the Burden of

Proof

B.1.1. The documents requested are not in CLAIMANT’s

possession, custody or control

B.2. Even if the documents were confidential they could still be produced

B.3. The documents requested are sufficiently specified and essential for

the case

i) The documents are sufficiently specified

ii) The documents are essential for the case and indisputably

material to its just outcome

B.4. None of other exceptions to document production in Article 9 IBA

Rules apply to the case

B.5. Denial of this request will impair CLAIMANT’s opportunity to be

heard in violation to its right to fair hearing and procedural equality

CONCLUSION: THE TRIBUNAL MUST ORDER RESPONDENT TO PRODUCE

THE DOCUMENTS REQUESTED BY CLAIMANT

III. COMPENSATION OF LITIGATION COSTS …………………………….

1. CLAIMANT SHOULD BE AWARDED WITH REIMBURSEMENT OF

INCURRED LITIGATION COSTS

A. Claimant Should Be Compensated of Damages Under Article 74 CISG,

Including Legal Costs Incurred in Its Application for Interim Relief

A.1. CLAIMANT’s attorney’s fees are ‘losses’ recoverable under Article

74 CISG

A.2. All requirements under CISG Art. 74 for CLAIMANT’s recovery of

damages are met

A.2.1 The legal costs incurred by CLAIMANT’s interim injunction

were both foreseeable and reasonable

41


5

A.2.2 CLAIMANT took the suitable steps in order to mitigate

damages under Art. 77 CISG

A.2.3 RESPONDENT’s justification of ‘bad weather conditions’

for breaching the Contract is unlawful

A.3. Recovery of attorney’s fees as damages is plausible in light of the

general Principles of CISG Art. 74, and consequent Principle of Full

Compensation

B. Claimant Is Entitled to Reparations Due to Respondent’s Breach of the

Arbitration Agreement and of The Contract When Applying for The Declaration

of Non-Liability

B.1. RESPONDENT’s declaration of non-liability represents a breach of

the Arbitral Agreement and of the Contract, both which were still valid

and binding

B.2. It is within the Tribunal’s scope to award litigation expenses as

remedy

B.3. Damages incurred in defense of the declaration of non-liability are

recoverable

CONCLUSION: CLAIMANT IS ENTITLED TO RECEIVE FULL COMPENSATION

FOR DAMAGES THAT RESULTED FROM RESPONDENT’S UNLAWFUL

ACTIONS

IV. CALCULATION OF DAMAGES – DISGORGEMENT OF PROFITS..................

1. CLAIMANT IS ENTITLED TO COMPENSATION IN ACCORDANCE WITH

ARTICLES 45 AND 74 CISG FOR RESPONDENT’S BREACH OF THE

CONTRACT

A. Disgorgement of Profits Is Permitted to Remedy the Breach of Contract

A.1. Conditions for applying Disgorgement are satisfied

i) RESPONDENT adopted an opportunistic conduct by breaching

the Contract

ii) CLAIMANT will not be receiving unjust gains

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6

A.2. Additionally, CLAIMANT is entitled to disgorgement as an

alternate of the Right to Specific Performance

B. Claimant’s Substitute Transaction Loss Is Compensable

C. Claimant’s Loss of Market Position Is Compensable Accordingly with The

General Principle of Full Compensation

CONCLUSION: THE ‘DISGORGEMENT OF PROFITS’ AS A REMEDY UNDER

ARTICLE 74 CISG IS IN CONSONANCE WITH THE INTERNATIONAL

CHARACTER OF CISG

REQUEST FOR RELIEF ………………………………………………………………. 59


7

ABBREVIATIONS

% - Percent

& - And

€ - Euro

¶/¶¶ - Paragraph/Paragraphs

Answer to SoC – Answer to the Statement of Claim

Art. – Article

Arts. – Articles

C - CLAIMANT

CISG - United Nations Convention on Contracts for the International Sale

of Goods (Vienna, 1980)

CISG-AC Opinion No – CISG Advisory Council Opinion Number

CLAIMANT – Kaihari Waina Ltd.

Cl. Ex. – Claimant’s Exhibit

Geneva Protocol - The 1923 Geneva Protocol on Arbitration Clauses in

Commercial Matters

IBA – International Bar Association

ICC – International Chamber of Commerce

NY Convention - The 1958 New York Convention on the Recognition and

Enforcement of Foreign Arbitral Awards

p. – Page number

PO1 – Procedural Order 1

PO2 – Procedural Order 2


8

pp. – Page numbers

R – RESPONDENT

RESPONDENT – Vino Veritas Ltd

Res. Ex. – Respondent’s Exhibit

SoC - Statement of Claim

SDNY – Southern District of New York

Swiss – Switzerland

UNCITRAL – United Nations Commission on International Trade Law

UNIDROIT – International Institute for the Unification of Private Law

UPICC – UNIDROIT Principles of International Commercial Contracts

(2010)

US – United States of America

USD - U.S. Dollar

v. – Versus

VIAC – Vienna International Arbitral Centre


9

INDEX OF RULES AND LEGAL SOURCES

CISG United Nations Convention on the International Sales of Goods (1980)

CPR Protocol CPR Protocol on Disclosure of Documents and Presentation of Witnesses

in Commercial Arbitration (2009)

DAL Danubian Arbitration Law

FRCP US Federal Rules of Civil Procedure

IBA Rules IBA Rules on the Taking of Evidence in International Arbitration (2010)

ICC Rules International Chamber of Commerce Rules of Arbitration

Model Law UNCITRAL Model Law on International Commercial Arbitration (1985

with amendments adopted in 2006)

UPICC UNIDROIT Principles of International Commercial Contracts (2010)

Vienna Rules of Arbitration (2013)

Vienna Rules The Rules of Arbitration and Conciliation of VIAC (Vienna Rules) (2013)


10

INDEX OF AUTHORITIES

BEATSON BEATSON, J.

The Use and Abuse of Unjust Enrichment

Oxford University Press 1991

BIANCHI BIANCHI, Carlos.

The Changing Face of International Arbitration

Journal of International Arbitration Volume 17 Issue 4

Kluwer Law International

BORN

BORN, Gary B.

International Commercial Arbitration, 1st ed. (2009)

CISG-AC OP.6 CISG Advisory Council, CISG Advisory Opinion No.

6, Calculation of Damages Under CISG Article 74

FELEMEGAS FELEMEGAS, John.

The award of counsel's fees under Article 74 CISG in

Zapata Hermanos Sucesores v. Hearthside Baking Co.

(2001) in Vindobona Journal of International

Commercial Law and Arbitration n. 6, 2002

FIERENS/

VOLDERS

FIERENS, Jean-Pierre.

BART, Volders.

Monetary Relief in Lieu of Anti-Suit Injunctions for

Breach of Arbitration Agreements in RBA N° 34 –

Arb-Jun/2012 – Doutrina Internacional

FOUCHARD,

GAILLARD,

GOLDMAN

GAILLARD, Emannuel.

SAVAGE, John.

Fouchard Gaillard Goldman on International

Commercial Arbitration,

Kluwer Law International 1999

FRIEDMAN FRIEDMAN, Wolfgang.

The Uses of ‘General Principles’ in the Development

of International Law


11

FRIEDMANN FRIEDMANN, Daniel.

Restitution of Profits Gained by Party in Breach of

Contract

Law Quarterly Review, 104. 1988

GABRIEL GABRIEL, Simon.

Chapter 13, Part XII: Damages for Breach of

Arbitration Agreements in Manuel Arroyo (ed),

Arbitration in Switzerland: The Practitioner’s Guide


GOTHANDA GOTHANDA, John.

Awarding Damages under the United Nations

Convention on the International Sale of Goods:

A Matter of Interpretation

Georgetown Journal of International Law n. 37, 2005

KING/

BOSMAN

KING, Brian.

BOSMAN, Lise.

Rethinking Discovery in International Arbitration:

Beyond the Common Law/Civil Law Divide

In: ICC International Court of Arbitration Bulletin

Vol. 12 No. 1 2001

LOOKOFSKY LOOKOFSKY, Joseph.

International Encyclopedia of Laws - Contracts,

J. Herbots editor/R. Blanpain general editor, Suppl. 29

(December 2000)

MARGHITOLA MARGHITOLA, Reto.

Document Production in International Arbitration


REDFERN/

HUNTER

BLACKABY, Nigel.

HUNTER, Martin.

PARTASIDES, Constantine.

REDFERN, Alan.

Redfern and Hunter on International Arbitration

Oxford Universityy Press 2015

SAMUEL SAMUEL, Adam.


12

The 1979 Arbitration Act - Judicial Review of

Arbitration Awards on the Merits in England

Journal of International Arbitration

SCHLECHTRIEM SCHLECHTRIEM, Peter.

Case Comment - Attorneys' Fees as Part of

Recoverable Damages

SCHNEIDER SCHNEIDER, Eric.

Measuring Damages under the CISG - Article 74 of

the United Nations Convention on Contracts for the

International Sale of Goods

9 Pace Int'l L. Rev. 223 (1997)

SCHWENZER/

HACHEM

SCHWENZER, Ingeborg. HACHEM, Pascal.

The Scope of the CISG Provision on Damages, in

Contract damages: domestic and international

perspectives,

Djakhongir Saidov and Ralph Cunnington (eds.), 2008

SECRETARIAT

COMMENT ON

ART. 74

Guide to CISG Article 74 Secretariat Commentary

(closest counterpart to an official Commentary)

SUTTON SUTTON, Jeffrey.

Measuring Damages Under the United Nations

Convention on the International Sale of Goods

50 OHIO ST. L.J. 737, 742 (1989).

TAKAHASHI I TAKAHASHI, Koji.

Damages for Breach of a Choice-of-Court Agreement

(2008) Yearbook of Private International law, Vol. 10

TAKAHASHI II TAKAHASHI, Koji.

Damages for Breach of a Choice-of-Court Agreement:

Remaining Issues

(2009) Yearbook of Private International law, Vol. 11


13

TAN TAN, Dan.

Enforcing International Arbitration Agreements in

Federal Courts: Rethinking the Court's Remedial

Powers

Virginia J of IL, 2007, Vol.74

TEMPLE TEMPLE, Adam.

Disgorgement Damages For Breach of Contract

The Denning Law Journal, Vol 20, No 1 (2008)

VIAC HANDBOOK Handbook Vienna Rules – A Practitioner’s Guide

Vienna, Verlag WKÖ Service GmbH 2014

VISHNEVSKAVA VISHNEVSKAVA, Olga.

Anti-suit Injunctions from Arbitral Tribunals in

International Commercial Arbitration: A Necessary

Evil?

In Journal of International Arbitration, 2015, Volume

32, Issue 2

WAINCYMER WAINCYMER, Jeff.

Procedure and Evidence in International Arbitration

Kluwer Law International

ZELLER ZELLER, Bruno.

Interpretation of Article 74 – Zapata Hermanos V

Hearthside Baking – Where Next?

Nordic Journal of Commercial Law, issue 2004 #1


14

INDEX OF COURT CASES AND

ARBITRAL AWARDS

AUSTRIA Rolled metal sheets case, Internationales

Schiedsgericht der Bundeskammer der gewerblichen

Wirtschaft (Arbitral Tribunal – Vienna) 15 June 1994

Cooling system case, Supreme Court of Justice 14

January 2002

BELGIUM Vital Berry Marketing v. Dira-Fros, Rechtbank

[District Court] van Koophandel Hasselt 02 May 1995

CANADA Nova Tool & Mold Inc. v. London Industries Inc.,

Ontario Court of Appeal 26 January 2000

Canadian Imperial Bank of Commerce v. Bonnell,

Province of Prince Edward Island in the Supreme

Court – Trial Division 1998

CHINA

Down Coat Case, China International Economic and

Trade Arbitration Commission 14 May 1996

ENGLAND Wrotham Park Estate Co. v. Parkside Homes Ltd,

High Court of Justice Chancery Division 19 October

1973

Lake v. Bayliss, Chancery Court 18 March 1974

Jaggard v. Sawyer, England and Wales Court of

Appeal 18 July 1994


15

Attorney General v. Blake, House of Lords 27 July

2000

CMA CGM SA v. Hyundai Mipo Dockyard Co Ltd.,

High Court of England and Wales 14 November 2008

West Tankers, High Court of England and Wales 4

April 2012

FINLAND Plastic carpets case, Helsinki Court of Appeals

Finland 26 October 2000

GERMANY Shoes case, Appellate Court Düsseldorf 14 January

1994

Chinese goods case, Hamburg Arbitration Proceeding

Ger. 21 June 1996

Tannery machines case, OLG Köln 8 January 1997

Pallets case., AG Viechtach 11 April 2002

Milk case, Federal Supreme Court 9 January 2002

GREECE Sunflower seeds case, Court of Appeals of Lamia

2006

ITALY Tribunale di Vigevano (Italy), District Court 12 July

2000

PAKISTAN Fal Oil v. Pakistan Oil Company, High Court at

Karachi 04 June 2014


16

SINGAPORE Tjong Very Sumito and Others v. Antig Investments

Pte Ltd., Supreme Court of Singapore, Court of

Appeal 26 August 2009

SPAIN Bermuda shorts case, District Court 22 May 2006

SWEDEN Pressure sensors case, Stockholm Chamber of

Commerce Arbitration Award of 5 April 2007

SWITZERLAND Garments case, Switzerland Commercial Court

Aargau 19 December 1997

Case 4A_376/2008, Swiss Federal Tribunal




USA Cotter case, S.D.N.Y 1989

EarthInfo v. Hydrosphere, Supreme Court of

Colorado 30 June 1995

Zapata Hermanos v. Hearthside Baking, U.S. Court of

Appeals – 7th Circuit 19 November 2002

Howsam v. Dean Witter Reynolds, Inc., Supreme

Court of the USA 10 December 2002


17

STATEMENT OF FACTS

CLAIMANT Kaihari Waina Ltd. is a wine supplier specialized in highly

qualified wines for collectors and top gastronomy markets

(‘diamond quality’) [SoC, ¶1, p. 3]. CLAIMANT has a distinct

expertise in Mediterranean Mata Weltin wines.

RESPONDENT Vino Veritas Ltd. is one of the top vineyards in Mediterraneo

and it is also the single vineyard in the Vuachoua domain that

has won the Mediterranean award for its diamond Mata Weltin

for the last five years [SoC, ¶2, p. 4].

22 April 2009 CLAIMANT and RESPONDENT celebrated a Framework

Contract [Cl. Ex. 1, p. 9], which established that, every year,

CLAIMANT would buy a minimum amount of 7.500 bottles of

Mata Weltin wine from RESPONDENT, which in return

committed to deliver up to a maximum amount of 10.000 bottles.

The precise amount and price of bottles would be determined

every year by orders placed by CLAIMANT prior to other

customers, which gradually became an established practice

between the two Parties. [Cl. Ex. 1, p. 9]. There is an Arbitration

Agreement on Art. 20 of the Framework Contract, governed by

the Danubian Law and the CISG.

January 2014 RESPONDENT’s Mata Weltin wines of earlier vintages won a

number of prizes.

August 2014 Extraordinary weather conditions led to a particularly bad

harvest, resulting in one of RESPONDENT’s lowest number of

bottles ever produced.


18

03 November 2014 RESPONDENT informed all its customers by fax that, in

comparison to previous years, it would have to reduce the

number of bottles it could deliver to each customer considerably.

Due to an organizational oversight CLAIMANT did not read the

fax.

04 November 2014 Acting in accordance with the Contract, CLAIMANT ordered

the maximum amount of guaranteed bottles under the contract–

10.000 bottles [Cl. Ex. 2, p. 10], and stated it would be willing

to buy more and enlarge the co-operation with RESPONDENT

further.

25 November 2014 CLAIMANT’s development manager, Ms. Isme Buharit, had a

meeting with RESPONDENT to discuss the order

aforementioned, future possibilities for cooperation and market

strategy. RESPONDENT committed to give CLAIMANT’s

purchase order a ‘favorable consideration’ [Cl. Ex. 5, p. 13].

However, at the end of the visit CLAIMANT supposedly

recognized Mr. Barolo, SuperWines’ CEO and CLAIMANT’s

main competitor, arriving at RESPONDENT’s parking lot.

01 December 2014 RESPONDENT informed CLAIMANT that it would be willing

to deliver between 4.500 and 5.000 bottles of wine at a price of

EUR 41,50 per bottle [Cl. Ex. 3, p. 11]. Furthermore,

RESPONDENT announced that it wouldn’t no longer be able to

guarantee the delivery of more than 8.000 bottles due to a new

strategy. RESPONDENT was aware of the fact that any delivery

to SuperWines would entail less bottles available for supply of

other customers [P.O. 2, ¶24, p. 56].

02 December 2014 CLAIMANT’s COO, Mr. Friedensreich, accepted the price but

rejected the proposal concerning the quantities. He insisted on

the delivery of 10.000 bottles as established by the Contract [Cl.

Ex. 6, p. 14].

04 December 2014 RESPONDENT reacted very strongly to CLAIMANT’s

insistence on full delivery. It unilaterally and unlawfully

declared the Framework Agreement to be terminated and refused

to not make any delivery at all [Cl. Ex. 7, p. 15].


19

08 December 2014 CLAIMANT requested an interim injunction through LawFix, a

Mediterranean law firm on a contingency basis, before the High

Court of Capital City, Mediterraneo, restraining RESPONDENT

from selling 10.000 bottles of Mata Weltin 2014 that were

entitled to be delivered to CLAIMANT due to RESPONDENT’s

contractual obligations.

12 December 2014 The interim injunction was granted by the High Court of Capital

City, Mediterraneo [Cl. Ex. 8, p. 16]. At the same time, in order

to mitigate and avoid any further damages, CLAIMANT started

negotiations with other high quality vineyards. CLAIMANT was

able to buy 5.500 bottles from Vignobilia Ltd at EUR 42.20 per

bottle [P.O. 2, ¶11, p. 54].

01 January 2015 Mr. Weinbauer was substituted by his son in law as

RESPONDENT’s new managing director.

14 January 2015 RESPONDENT informed CLAIMANT through its lawyer Mr.

Langweiler that it would not appeal the interim injunction for the

time being to avoid additional costs. Mr. Langweiler reiterated

RESPONDENT’s interest in an amicable solution but made

clear that the lack of certainty required a solution within the next

two weeks and stated that the existing arbitration clause in the

Framework Agreement was void for uncertainty.

30 January 2015 As CLAIMANT did not react to Mr. Langweiler’s letter due to

its efforts in finding alternative solutions for the issue,

RESPONDENT filed a motion in the Courts of Mediterraneo

applying a declaration of non-liability [Cl. Ex. 9, p. 17].

23 April 2015 The Court of Mediterraneo declared that it lacked jurisdiction to

settle the motion for non-liability, since there was an enforceable

arbitration clause present in the Contract. However, it was also

mentioned that the Court found that RESPONDENT had

breached the Contract [Cl. Ex. 11, p. 19]. CLAIMANT incurred

a considerable sum of USD 50.280 from both these legal

proceedings.

11 July 2015 Mr. Fasttrack initiated arbitral proceedings with the Secretariat

of the Vienna International Arbitral Centre of the Austrian

Federal Economic Chamber (VIAC) on behalf of his client,


20

Kaihari Waina Ltd (CLAIMANT) against Vino Veritas Ltd

(RESPONDENT).

CLAIMANT started arbitration proceedings to refund legal costs

incurred in both court proceedings as well as for the recovery of

other damages incurred due to the non-delivery of 5.500 bottles,

as agreed upon by the Parties. CLAIMANT would not pursue

specific performance of the Contract but solely claims for

damages and lost profits [SoC, ¶15, p. 5].

Nevertheless, Mr. Fasttrack requested RESPONDENT to

provide all documents from the period of 01 January 2014 – 14

July 2015 pertaining to the communication with SuperWines.

RESPONDENT asked the arbitral tribunal to reject the claim for

a disclosure of documents as well as all claims for damages.

Any detailed discussion will then occur subsequently once the

Arbitral Tribunal has taken a decision on whether or not to grant

the request for document production.

01 August 2015 Telephone conversation between the Parties where the idea of

fast-track proceedings was abandoned due to not reaching an

agreement relation its conditions.

16 August 2015 Mr. Langweiler, on behalf of his client, RESPONDENT,

answered to CLAIMANT’s statement of claim [Answer to SoC,

p. 24].

15 September 2015 Appointment of Falco Amadeus as Chairman of the Arbitral

Tribunal and commencement of the arbitral proceedings [p. 45].


21

SUMMARY OF ARGUMENT

I. The Arbitration Agreement is not pathological but valid, enforceable and binding.

CLAIMANT did not waive its right to solve disputes through arbitration by merely not

answering RESPONDENT’s letter of 14th January 2015. Since the Agreement was not void,

RESPONDENT could not discuss the merits of the dispute as it did before de courts of

Mediterraneo, breaching the duty to cooperate in the resolution of the dispute from the

moment it started court proceedings for a declaration of non-liability, since the arbitral

tribunal has jurisdiction to decide on its own jurisdiction. By breaching the arbitration

agreement RESPONDENT also breached the Framework Contract since it failed to fulfil

with one of its fundamental provisions. Therefore, CLAIMANT must be compensated for

the losses suffered by taking part and successfully defending against REPONDENT’s

wrongful action before the Courts of Mediterraneo.

II. The Tribunal can and should exercise its power to order RESPONDENT to produce the

requested documents since the Parties do not have the autonomy to completely exclude

document production in violation of mandatory rules, nor does the Arbitration Agreement

do so by adopting the wording ‘no discovery shall be allowed’ – which differs from standard

document production – in line with the intention of the Parties. Also, document production

is permitted by all the elements contained in the Arbitration Agreement, including Danubian

Arbitration Law, Vienna Rules and according to international practice. The Tribunal shall

grant CLAIMANT’s request for sufficiently specific and highly material narrow categories

of documents, which are not in its possession, custody or control, in order for it to accurately

calculate its claim, in pursue of the truth of the matter. Denial of such request will impair

CLAIMANT’s opportunity to be heard in violation to its right to fair hearing and procedural

equality.

III. CLAIMANT is entitled to reimbursement of incurred litigation costs, recoverable under

Article 74 CISG. RESPONDENT performed several breaches on the Contract, which led

CLAIMANT to run into litigation costs, since it had no option but to file a request for

interim relief and to apply for its defense against RESPONDENT in the Courts of

Mediterraneo. As a consequence of RESPONDENT’s breach of the Arbitration Agreement,

CLAIMANT suffered losses in the form of legal cost in order to prevent RESPONDENT

from winning a default judgement. The attorney’s fees CLAIMANT incurred in seeking


22

the injunction are also recoverable as these were incurred in a reasonable and foreseeable

attempt to mitigate further loses. This reasoning is featured under the Principle of Full

Compensation of the CISG.

IV. CLAIMANT is entitled to damages under Articles 45 and 74 CISG in result of the breach

of the Framework Agreement by the non-delivery of the wine by RESPONDENT. The

losses suffered by CLAIMANT were considerable and can be listed as the inability to fulfill

its obligations regarding the costumers’ orders and to sell 5.500 bottles of Diamond Mata

Weltin wine of particularly high quality. As these are difficult to calculate precisely, since

there’s not a fixed method for calculating loss of profits under the CISG, it is still very

likely higher than RESPONDENT’s profits from its sale to SuperWines at a premium. Thus,

CLAIMANT should be granted those profits as a measure of its loss or in a way that

prevents RESPONDENT from benefitting from its willful breach of contract. In this case,

the loss of profits should be calculated according to the delta between the price

CLAIMANT would have paid for the bottles RESPONDENT refused to deliver and the

price actually paid by SuperWines, as it is the most qualified method and will assist in

clarifying the proceedings. In light of the principle of good faith underlying the CISG,

RESPONDENT should not be allowed to profit from breaching the Contract with

CLAIMANT.


23

ARGUMENT

I. BREACH OF THE ARBITRATION AGREEMENT:

The existence and extent of substantive obligations or duties arising from an arbitration

agreement, in particular of a duty to refrain from initiating court proceedings and to

cooperate in the resolution of the dispute.

1. THE ARBITRATION AGREEMENT OUTLINES THE JURISDICTION OF THE

ARBITRAL TRIBUNAL

1. An arbitration agreement is a contract in which Parties agree to submit their existing or future

disputes through arbitration instead of judicial courts, which may have lack of jurisdiction.

2. From the moment an arbitration agreement is concluded, the Parties are obliged to honor their

commitment and therefore to seek dispute resolution in arbitral tribunals. Consequently, the

arbitration agreement forbids Parties to seek dispute resolution in courts as they lack

jurisdiction to solve those disputes.

3. The obligation to submit disputes covered by an arbitration agreement to arbitration results

from the principle of Parties’ autonomy, according to which Parties are bound by what they

agree. In international contract law, Parties have to respect what they have contracted,

according to the maxim of ‘pacta sunt servanda’.

4. If Parties agreed on solving their disputes through arbitration, then the arbitration agreement is

binding and Parties cannot shirk their commitments and start a dispute resolution in courts. This

is a fundamental principle in International Commercial Arbitration and regularly accepted as a

substantive rule worldwide.

A. THE ARBITRATION AGREEMENT IS NOT PATHOLOGICAL BUT VALID,

ENFORCEABLE AND BINDING

5. If following arbitration was the Parties’ predominant intention, then uncertainties,

inconsistencies or errors in specifying certain aspects of the arbitral procedure must be


24

disregarded. Moreover, if the institution can be identified with a significant degree of certainty,

such clause will remain effective [FOUCHARD/GAILLARD/GOLDMAN].

6. It is nowadays clear that arbitrators and judges give effect on Parties’ will to solve their disputes

through arbitration even when such agreement contains a pathological arbitration clause.

Therefore, both national courts decisions and arbitral awards have been rejecting claims that

international arbitration agreements are not valid, enforceable or binding whenever they are

uncertain or indefinite.

7. In light of the above, the Swiss Federal Tribunal case 4A_376/2008 upholds that “an arbitration

clause containing imprecise, incomplete, contradictory or erroneous indications as to the

arbitral tribunal – a so called pathological clause – does not cause the arbitration agreement to

be invalid to the extent that interpretation makes it possible to determine which was the arbitral

the Parties intended”.

8. Among other things, the lack of any agreement regarding the number or means of selection of

the arbitrators, arbitral seat, institutional rules, applicable law, the scope of arbitral disputes or

other details regarding the arbitral process is insufficient to invalidate an international

arbitration agreement [BORN].

9. Nevertheless, the framework contract includes a non-pathological Arbitration Agreement

which binds the signing Parties to arbitration since that was the alternative dispute resolution

method chosen by both contracting Parties.

10. Moreover, there were considerable pre-contractual negotiations between the Parties,

underlining their will to submit any future dispute to arbitration because it is well-known as a

fast informal means of dispute resolution when compared to state courts. Thus, the negotiations

are a strong and clear proof of the intention of the Parties confirming their interest in arbitration.

11. According to the Swiss Federal Tribunal case 4A_246/2011, “when interpretation shows that

Parties intended to submit the dispute to an arbitral tribunal and to exclude state jurisdiction,

but with differences as to how the arbitral proceedings should be carried out, the rule that a

contract should be given effect applies and an understanding of the contract must be sought

which will uphold the arbitration clause”.

12. Besides, the arbitral tribunal has jurisdiction to decide on all disputes that might arise from the

contract in which an arbitration agreement is included, as well as to decide upon its own

jurisdiction, going in accordance with the principle of ‘Kompetenz-Kompetenz’

[FOUCHARD/GAILLARD/GOLDMAN].

13. That being said, RESPONDENT should have started arbitral proceedings instead of applying

for the declaration of non-liability before the Courts of Mediterraneo. If Parties decided that


25

their intention is to solve their disputes by arbitration and not by other means, that intention

should be given effect.

B. THE ARBITRATION AGREEMENT IS NOT VOID AND RESPONDENT COULD

NOT DISCUSS THE MERITS OF THE DISPUTE BEFORE THE COURTS OF

MEDITERRANEO

14. An arbitration agreement on a non-existent arbitration forum is the equivalent of an agreement

to arbitrate which does not specify a forum [BORN]. Still, it is an arbitration agreement.

15. In the Answer to Statement of Claim, RESPONDENT alleged that it started proceedings before

the Courts of Mediterraneo because it considered that the Arbitration Agreement was void for

uncertainty due to imprecise definition of the arbitral institution. However, as aforementioned,

this minor issue in itself is not enough to imply such nullity.

16. In accordance with Article II of the NY Convention, voidance is one of the major causes for

invalidity of the arbitration agreement since it outlines situations in which the arbitration

agreement is invalid from the very beginning, including when an uncertain or non-existent

arbitration institution is referred. Nonetheless, that definition does not fall within the present

case since the problem here is a simple confusion regarding the arbitral institution and not an

uncertain or non-existent arbitral institution.

17. A relatively common mistake while drafting arbitration clauses is to misspell or not to refer

properly the arbitral institution, yet a significant number of arbitral awards have decided that

Arbitration Agreements containing such error are valid[FOUCHARD/GAILLARD/GOLDMAN].

18. In International Commercial Arbitration great relevance is given to the real intent of the Parties

at the time they contracted. In this particular case, as demonstrated, the intent was to submit

every future dispute to arbitration and, therefore, the intent of the Parties must prevail over an

insignificant clerical error or a simple manner of expression [BORN].

19. Thus, RESPONDENT cannot argue that the Arbitration Agreement was void due to a minor

and insignificant error while defining the arbitral institution.

20. RESPONDENT also alleges that if there was any reason it went to the Courts of Mediterraneo

it was because the arbitral institution was not clear. But the harsh truth was that

RESPONDENT was never, at any time, concerned about defining the arbitral tribunal. Instead,

RESPONDENT went to the Courts of Mediterraneo so that it could discuss the merits of the

dispute between the Parties, applying for a declaration on non-liability.


26

21. Although national courts are a key mechanism to support arbitration, they are not allowed to

interfere nor to prevent the power granted to arbitrators by the Parties on the arbitration

agreement by analyzing substantive issues that should rather be analyzed by arbitrators.

C. RESPONDENT BREACHED THE DUTY TO COOPERATE IN THE

RESOLUTION OF THE DISPUTE FROM THE MOMENT IT STARTED COURT

PROCEEDINGS, SINCE THE ARBITRAL TRIBUNAL HAS JURISDICTION TO

DECIDE ON ITS OWN JURISDICTION

22. Even so, if for any reason not mentioned above, the nomination of VIAC as an Arbitral

institution was not what Parties intended, it is not up to National Courts to decide such matter

but to the Arbitral Tribunal instead.

23. The Arbitral Tribunal has jurisdiction to decide on the merits of the Arbitration Agreement,

according to Article 16 UNCITRAL Model Law, and not the Courts of Mediterraneo.

Therefore, RESPONDENT could never have started court proceedings to discuss substantive

issues even if the Arbitration Agreement was void for uncertainty.

24. The fact that arbitrators have jurisdiction to determine their own jurisdiction, known as the

‘competence-competence principle’, is among the most important rules of International

Commercial Arbitration. This fundamental principle confers jurisdiction to the arbitral tribunal

pronunciation on all disputes covered by the arbitration agreement.

25. Thus, the ‘competence-competence principle’ enables the arbitral tribunal to continue with the

arbitral proceedings even though the existence or validity of the arbitration agreement is being

challenged by one of the Parties [FOUCHARD/GAILLARD/GOLDMAN].

26. In light of the above, it is important to underline that several court decisions have boosted the

‘competence-competence principle’. As an example, in the Howsam v. Dean Witter Reynolds,

Inc. case, US Courts have decided that “procedure questions which grow out of the dispute

and bear on its final disposition are presumptively not for the judge, but for an arbitrator, to

decide”.

27. Besides, RESPONDENT breached the duty to cooperate in the resolution of the dispute from

the moment it started a national court proceeding. The essential cornerstone of the

‘competence-competence principle’ is to ensure that a party cannot succeed in delaying the

arbitral proceedings by alleging that the arbitration agreement is invalid or non-existent. If

RESPONDENT has doubts on the Arbitral institution chosen by the Parties, it should have

started an arbitral proceeding allowing arbitrators to rule on this issue themselves.


27

28. Taking this into account, the ‘competence-competence principle’ can be defined as the rule

whereby arbitrators must first have the opportunity to hear about the challenges relating to

their jurisdiction instead of national courts. RESPONDENT should, therefore, have started an

arbitral proceeding if the nomination of VIAC as an Arbitral institution was not what the

Parties intended.

D. CLAIMANT DID NOT WAIVE ITS RIGHT TO SOLVE DISPUTES THROUGH

ARBITRATION BY NOT ANSWERING RESPONDENT’s LETTER

29. On the 14th of January 2015, RESPONDENT sent a letter to CLAIMANT explaining that, in

its point of view, the Arbitration Agreement was void for uncertainty, and requesting some

explanations concerning the Arbitral institution. In the same letter, RESPONDENT made clear

that if no answer was given by CLAIMANT until the 28th of January, it would start national

court proceedings applying for a declaration of non-liability of the arbitration agreement before

the Courts of Mediterraneo [Res. Ex. 2, p.33].

30. Unfortunately, CLAIMANT did not answer in time because it was very busy negotiating with

other suppliers and its customers in order to find potential solutions created by the bad harvest

as well as RESPONDENT’s threat to cease delivery and breach the Framework Contract. The

truth is, by the time CLAIMANT received the RESPONDENT’s letter it was not yet sure about

how to manage the request and decided to do nothing in order not to drop any possible solutions

and to get some legal advice on the matter. But as time went by CLAIMANT merely forgot to

answer the letter sent by RESPONDENT [P.O. 2, ¶57, p. 61].

31. Nevertheless, the fact that CLAIMANT did not answer RESPONDENT’s letter must never be

considered as a waiver of its right to solve disputes through arbitration.

32. In fact, Parties can waive the arbitration agreement, whether expressly or implicitly, without

necessarily waiving the main contract [FOUCHARD/GAILLARD/GOLDMAN].

33. However, lack of replying a letter requesting for clarifications concerning an Arbitral

institution does not implicitly mean waiving an arbitration agreement. It is true that Parties can

implicitly waive the arbitration agreement in case, for instance, one of the Parties submits a

dispute to judicial courts and the other files a defense on the merits of the dispute without

challenging the its jurisdiction. Besides, in most cases a waiver of the right to arbitrate must

be expressed, and in case of any doubts, a decision must always be in favor arbitrandi [Kramer

v. Hammond].

34. That being said, CLAIMANT did not wave, not even implicitly, its right to solve disputes

throughout arbitration. Therefore, RESPONDENT cannot allege the Arbitration Agreement

was waived by the Parties when CLAIMANT did not respond to the letter.


28

35. To conclude, from the moment RESPONDENT applied for a declaration of non-liability

before the Courts of Mediterraneo it breached the Arbitration Agreement as well as the

Framework Contract and, for that reason, CLAIMANT should be compensated for the

litigation costs incurred from its defense in those judicial courts, as it will further be

demonstrated.

E. BY BREACHING THE ARBITRATION AGREEMENT RESPONDENT ALSO

BREACHED THE FRAMEWORK CONTRACT

36. From the moment RESPONDENT applied for a declaration of non-liability before the Courts

of Mediterraneo, it failed to fulfil one of the fundamental provisions of the Framework

Contract, by breaching the Arbitration Agreement. Such behavior jeopardized the whole

purpose of the contract as well as the will of both Parties.

37. Therefore, RESPONDENT’s behavior must be considered as not only a breach of the

Arbitration Agreement but also as a breach of the Framework Contract in which the first is

provided, for purposes of recovery of damages under Article 74 of the CISG.

38. First and foremost, bearing in mind that no procedural rule applicable to the Arbitration

Agreement was detailed besides the International Arbitration Rules in accordance with the

international practice, the CISG will unambiguously rule the recovery of damages for

breaches in the Contract. Therefore, under Article 74 of the CISG, RESPONDENT should

compensate CLAIMANT for the legal fees incurred due to the breach of the Arbitration

Agreement.

39. One of the major principles in International Commercial Arbitration is the principle of

separability, established in the Article 16 UNCITRAL Model Law. The principle provides that

an Arbitration Agreement could be considered as an autonomous contract and, therefore, it

remains independent of the main contract it is inserted in [REDFERN/HUNTER].

40. However, in the hypothesis that the Arbitration Agreement is considered as an integral part of

the Parties’ agreement, the refusal of the Arbitration Agreement might lead to the repudiation

of the main Contract [BORN].

41. The aforementioned situation is precisely the case in this specific situation, where the principle

of separability should be bordered in order to allow both the Arbitration Agreement and the

Framework Contract to be interpreted jointly as a single document. As with the Fal Oil v.

Pakistan Oil Company case, the breach of the Arbitration Agreement must be assumed as a

breach of the Framework Contract and, therefore, CLAIMANT must be compensated under

Article 74 of the CISG due to the losses suffered by taking part and submitting a defense

against RESPONDENT’s wrongful action before the Courts of Mediterraneo.


29

II. ORDER FOR DOCUMENT PRODUCTION:

Parties’ agreement on the taking of evidence and possible limits relating to document

production.

1. THE TRIBUNAL HAS AUTHORITY AND SHOULD EXERCISE ITS POWER TO

ORDER RESPONDENT TO PRODUCE THE REQUESTED DOCUMENTS

A. THE TRIBUNAL HAS THE POWER TO DETERMINE DOCUMENT

PRODUCTION

42. CLAIMANT shall demonstrate that this Tribunal has the power to order document production since

the Parties cannot exclude document production nor the Arbitration Agreement, when stipulating

that ‘no discovery shall be allowed’, precludes in absolute Parties’ right to document production

within the meaning of the expression, whose request should be granted due to the documents’ nature.

A.1. The Parties cannot exclude document production

A.1.1. The Parties’ autonomy is not unrestricted: a violation of due process, applicable law

and institutional rules

43. According to RESPONDENT, the Parties have chosen to exclude document production – which in

its view is the same as ‘discovery’ – in this proceedings by the wording adopted in the Arbitration

Agreement [Cl. Ex. 1, p. 9, art. 30].

44. Although document production and ‘discovery’ are considerably different from each other, as will

be further demonstrated, the Tribunal shall not rely on RESPONDENT’s interpretation on the clause

because the autonomy of the Parties to determine the conduct of the proceedings is not completely

unlimited.

45. Even though it is one of the main principles in international arbitration and in determining the

procedure to be followed, party autonomy is not absolute, but rather only limited by general elements

such as due process of law principle, mandatory provisions of applicable law and institutional rules.

46. In this case, the autonomy of the Parties to ‘exclude’ evidence production shall be interpreted in a

restricted way according to this limits, under penalty of failing to comply with those.

47. Due process is a fundamental principle in international arbitration [FRIEDMAN] and consequently

to these proceedings, in the sense that no one should be deprived from exercising its rights including

equal fair hearing treatment and proper opportunity to present its case [Model Law, art. 18; Vienna

Rules, art. 28(1); VIAC HANDBOOK].


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48. RESPONDENT’s interpretation on the said exclusion does not allow CLAIMANT to construct its

case, since CLAIMANT’s procedural request is directly related to the calculation of the damages it

suffered [SoC, pp. 7-8, ¶¶27-29].

49. Therefore, not granting such request is denying CLAIMANT’s right to be heard and to properly

present its case when not allowed to produce the evidence needed to support its allegations,

culminating in grounds not only for setting aside the future award rendered by this Tribunal [Model

Law, arts. 18 and 34(2,a,ii)] – but also for refusal of the recognition or enforcement of said award

[NY Convention, art. V(1,b); Model Law, art. 36(1,a,ii)].

50. Secondly, the exclusion of document production is a clear violation of Danubian Arbitration Law

due to the fact that this allows the Tribunal to require a party to produce evidence, enclosing the

power to order document production [Model Law, art. 19] and adopting the necessary measures

regarding the subject matter of the dispute [BORN].

51. Moreover, Article 28(1) of the Vienna Rules explicitly recognizes due process principle when

referring to the Parties’ right to be heard and according to Article 29(1) the arbitral tribunal may

collect and request the Parties to submit evidence, permitting both document production and entitling

it with the power to order such [VIAC HANDBOOK]. The exclusion of any kind of document

production, as suggested by RESPONDENT, clearly violates said institutional rules.

52. Besides, this Tribunal may deviate from any agreement between the Parties when such would render

the conduct of the arbitration impossible [VIAC HANDBOOK], which is the exact hypothesis of the

present case, considering that if this Tribunal fails to order the document production requested these

proceedings will no longer be necessary.

53. For the reasons above mentioned, the Tribunal shall not commit to RESPONDENT’s allegations

that the Parties freely decided to exclude all kinds of document production; otherwise due process

principle, applicable law and institutional rules will all be violated.

A.2. The Arbitration Agreement does not preclude document production in absolute.

54. Even if this Tribunal comes to the conclusion that the Parties have the power to exclude document

production, it is important to clarify that the Arbitration Agreement, source of the power of the

Tribunal, does not itself exclude document production by using the word ‘discovery’. In addition,

all elements contained in Article 20 of the Framework Contract allow for document production.

55. The arbitration clause is the first and most important component of the arbitral tribunal power to be

considered when determining the extension of such power [FOUCHARD/GAILLARD/GOLDMAN].

Thus, to determine if the Tribunal has the power to grant the request for documents, the Arbitration

Agreement in case must be analyzed.

56. The Parties’ autonomy to determine the rules of procedure in International Commercial Arbitration

is of special importance since it allows Parties from different legal traditions with different

expectations to select or tailor the rules according to their specific wishes, needs or concerns, and to

reach an acceptable compromise for both. In the present case, such agreement clearly shows that the


31

Parties intended to limit the Tribunal’s power to order ‘discovery’, but not to deprive it of the power

to order document production altogether.

A.2.1. The wording adopted in the arbitration agreement does not exclude

document production

57. Contrarily to RESPONDENT’s assertion [SoC, p. 28, ¶27], the Arbitration Agreement does not

exclude document production by using the word ‘discovery’ once this completely differs from the

other, nor was such the Parties’ intent when adopting the wording they did.

i) Document production differs from ‘discovery’, especially in International

Arbitration

58. ‘Document production’ for itself is a procedural device to acquire documents – written

communications, pictures, drawings, programs or data of any kind – ordered by the arbitral tribunal

when motivated by Parties’ request or on its own initiative [MARGHITOLA].

59. The request for document production shall follow the provisions of the IBA Rules on the Taking of

Evidence in International Arbitration [art. 3], containing precise information on the requested

documents – very specific ones in very specific situations.

60. ‘Discovery’, on the other hand, is usually a pre-trial legal procedure to inform both Parties of the

dispute, saving time and cost by narrowing issues. It is not limited to document production as Parties

shall produce all kinds of evidence related to the case [BORN], including every document in their

possession, custody or control – clearly exceeding specific request for document production.

61. So, in the international arbitration context, this refers to a typical feature of common law process,

whereby a party is legally obliged to produce all documents requested by the opposite, more

commonly used in connection with US arbitrations rather than international ones, and in contrast to

terms like ‘disclosure’, ‘document production’ or ‘evidence taking’.

62. In the USA, the scope of ‘discovery’ includes the right to inspect and copy any documents which are

relevant or may lead to relevant evidence [US FRCP, Rule 61]. These are very broad categories

generally labelled as ‘fishing expeditions’, bearing the risk for abuses and excessively high costs – the

main reason why the Parties intended to exclude such provision.

63. In this proceeding, the Parties never excluded document production, even when stated that ‘no

discovery shall be allowed’. By excluding ‘discovery’, the Parties were confirming that the arbitration

would proceed with reference to international procedures and not US ones.

64. Hence, CLAIMANT’s request for narrow categories of indisputably relevant documents, since it

regards to standard document production and not ‘discovery’, should be granted.

ii) The intention of the Parties by using the word ‘discovery’ was never to exclude

document production

65. Whereas DAL does not provide interpretation, the Arbitration Agreement is governed by the CISG

[PO1, ¶5(3); PO2, ¶63] when determining the Parties’ intention when drafting it [PO1, p. 51, ¶3], in


32

preference to the subjective intent rather than the literal one. For such purposes, Article 8(1) CISG

provides that “statements made by and other conduct of a party are to be interpreted according to his

intent where the other party knew or could not have been unaware what that intent was.”

66. Therefore, either CLAIMANT’s intent was easy to discern, or the circumstances practically

compelled an inquiry from RESPONDENT where and if there had been comprehension difficulties,

if it did not find the meaning of ‘discovery’ clearly obvious.

67. Hereupon note that, during a meeting for finalizing the Framework Contract, RESPONDENT’s

former Managing Director, Mr. Weinbauer, explicitly mentioned that: ‘I understood the clause to

exclude all types of requests for documents which go beyond requests for particular documents in

very specific circumstances.’ RESPONDENT’s own interpretation of the Arbitration Agreement

shows that the Parties were not willing to completely exclude document production. Therefore,

RESPONDENT knew, or could not have been unware, the meaning of the chosen word.

68. In addition, in line with public opinion, as an Equatoriana company concerned with US discovery

proceedings costs, RESPONDENT would want to prevent similar situations in an eventual arbitral

process.

69. When excluding ‘discovery’, Parties really intended to avoid broad US-style traditional procedure

[SoC, p. 8, ¶29] in an effort to conduct these proceedings in a cost and efficient way [PO2, p. 60,

¶53], complying with the idea that US ‘discovery’ includes extensive hearings, expert witness,

delivery of great amounts of documents [KING/BOSMAN].

70. Alternatively, if this Tribunal finds that there was not a meeting of minds underlining such meaning

nor a common subjective intention, then it should interpret the term objectively under Article 8(2)

CISG and find that no reasonable person under the same circumstances as RESPONDENT would

have understood the exclusion of ‘discovery’ as the exclusion of document production entirely, but

only extensive US-style ‘discovery’.

71. The CISG [art. 8(3)] provides that, when determining the hypothetical understanding of a reasonable

person of the same kind, due consideration must be given to all relevant circumstances of the case,

including negotiations, usages and any subsequent conduct.

72. In pre-contractual negotiations, Mr. Weinbauer agreed to the arbitration clause, saying

RESPONDENT was interested in arbitration as a fast, informal and economic dispute resolution

means. A reasonable person would have understood this to only exclude costly and burdensome

discovery of large categories of documents, not the easy inexpensive production of a small number of

specific documents.

73. CLAIMANT suggested the inclusion of the Arbitration Agreement based in a multinational contract

[Cl. Ex. 12, p. 20; PO2, p. 60, ¶53]. Considering that RESPONDENT was aware of the origin of the

clause [PO2, p. 60, ¶53], it’s clear that the intention of the Parties was to observe international practice

and avoid extensive ‘discovery’ interpreted as the US proceedings, not only the most common

understanding of the word [KING/BOSMAN] but the most reasonable and efficient one, for its

exclusion would not violate due process.


33

74. If RESPONDENT was not familiar with the legal term, at least a reasonable advising lawyer would

have understood ‘discovery’ and document production to mean different proceedings. Only to an US

lawyer could the term ‘discovery’ possibly be synonymous with standard document production.

RESPONDENT’s local lawyer was not one who might have erroneously equated ‘discovery’ to

document production.

75. As the Parties chose to arbitrate under the law of Danubia including the CISG, the law of Mediterraneo

and the importance RESPONDENT internally placed on it is irrelevant, for it cannot rely on its

Procedural Code to justify the alleged understanding of the clause [Answer to SoC, ¶¶29-30; Res.

Ex.1, ¶5], since the tribunal is not bound to it but rather to the lex arbitri and the applicable procedural

rules.

76. Therefore, a reasonable person with RESPONDENT’s international commerce experience and with a

reasonable lawyer’s advice would have understood ‘discovery’ to mean US-style discovery and not

in the same sense as its domestic procedural rules.

77. Besides, the Parties agreed that these proceedings shall be conducted in accordance with international

practice, so it would be at least contradictory that the same Parties would have tried to exclude

document production, internationally considered as a cost efficient mechanism to produce evidence,

regulated by the IBA Rules on the Taking of Evidence.

78. Further and as a general rule, an Arbitration Agreement must be interpreted as a whole, according to

its language and surrounding circumstances under which it is signed. In the case at hand, both Parties

had an aversion towards traditional ‘discovery’, but not any other evidential procedures such as

document production [Cl. Ex. 12 ¶¶3, 5 & Res. Ex. 1 ¶¶5, 6].

79. In light of the above, CLAIMANT contends that the Parties never intended to exclude document

production by using the word ‘discovery’, only to outlaw US extensive discovery proceedings, as

interpreted in international arbitration – otherwise clearer and more unambiguous words would have

been used if they pretended to exclude document exchange altogether.

A.2.2. RESPONDENT cannot raise ‘contra proferentem principle’ against CLAIMANT

80. ‘Contra proferentem’ also known as ‘interpretation against the draftsman’ consists in a contractual

interpretation doctrine providing that, when a term is ambiguous, the preferred meaning should be the

one that works against the interests of the party who provided the wording. It represents a general

principle underlying the CISG.

81. CLAIMANT was the primary drafter of the Framework Contract. However, it is contended that the

meaning of ‘discovery’ is clear and so the application of such principle is ruled out.

82. Even if the Tribunal finds the term to be ambiguous, ‘contra proferentem’ is a last resort doctrine, not

an absolute rule against the drafter [BORN]. Whether it applies depends on whether the term at issue

was imposed by one party, or instead subject to negotiation. Here, Mr. Weinbauer was told about the

background of the term [PO2, ¶53] and RESPONDENT had the opportunity to go through

CLAIMANT’s draft with its lawyer before concluding the Framework Contract [Res. Ex. 1, ¶4]. The

term was not unilaterally dictated by CLAIMANT, so ‘contra proferentem’ once again is inapplicable.


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A.3. Document production is allowed by the elements contained in the Arbitration

Agreement

83. The Parties’ express selection of the DAL as the substantive law governing the Arbitration Agreement

and their explicit incorporation of the Vienna Rules and international practice regarding procedure,

which authorizes request for document production and contains specific provisions regarding

procedure in international arbitration, confirms that the Parties intended to limit ‘discovery’, not to

entirely exclude document production.

i) Danubian Arbitration Law: allows document production

84. Since the seat of this arbitration is Danubia, the lex arbitri is the Danubian Arbitration Law which is

an adoption of the UNICTRAL Model Law [PO1, ¶5(3), p. 51]. Despite the fact that it does not

specifically provides for document production, Articles 19 and 27 grant the Tribunal broad powers

and discretion on the taking of evidence. Although said articles do not expressly address document

production, certainly the term ‘taking evidence’ is broad enough to covers all kinds of proof, including

document production.

85. According to Article 19(1) Model Law, ‘Parties are free to agree on the procedure to be followed by

the arbitral tribunal in conducting the proceedings’.

86. As document production and ‘discovery’ are procedural matters, the Parties exercised this right by

electing to arbitrate ‘all disputes’ under the Vienna Rules and ‘in accordance with international

practice’ [Cl. Ex. 1, Art. 20].

87. RESPONDENT may allege that according to Article 19(1), such provisions only have effect when

there is no previous agreement between the Parties, and in the present case the Arbitration Agreement

excludes document production. However, as it has been previously demonstrated, the Parties only

agreed on the exclusion of ‘discovery’. That being said, there are no specific provisions from the

Parties regarding document production, thus ratifying the applicability of Articles 19(2) and 27 Model

Law.

ii) Vienna Rules: establishes the basis for the Tribunal to determine document

production

88. Vienna Rules provide general grounds for the arbitral tribunal to conduct arbitration in a manner it

deems appropriate, and, more specifically, to collect evidence ‘on its own initiative’ [art. 28(1) &

29(1)]. When the Parties agreed to arbitrate under the Vienna Rules, they incorporated those into their

agreement by reference and are therefore bound to them.

89. Article 29(1) endows the Tribunal with the power to request the Parties to submit evidence if

considered necessary, allowing arbitrators to, at their own discretion, determine the applicable

procedure to the taking of evidence in order to establish the relevant facts of the case – including

document production [VIAC HANDBOOK], which applies to the case.


35

iii) IBA Rules on the Taking of Evidence: contains specific provisions regarding

document production

90. Alternatively, the IBA Rules on the Taking of Evidence in International Arbitration explicitly address

the issue concerning document production, establishing the power of the arbitral tribunal to determine

the production of documents [arts. 3 & 9], also providing that a party may ask the tribunal to take any

legally available steps to obtain requested documents that are specific, relevant and material, not

subject to objection nor in the possession, custody or control of the requesting party [BIANCHI].

91. In order to facilitate document production in an international process, practice is to refer to the IBA

Rules – an instrument of soft law that reflects international practice – even in absence of an express

remission by the Parties. Thus, where Parties have not expressly adopted such rules, it is generally

accepted that in international arbitration these provide a useful point of reference for tribunals

expected to develop their own sui generis procedure in accordance with international practice,

considered as an effective compromise for the dispute when, as in the present case, the Parties’

jurisdictions differ from Common law (CLAIMANT’s) to Civil law (RESPONDENT’s), which have

stark differences regarding to procedure and evidence [BORN]. In such scenario, recourse to the IBA

Rules is the most appropriate and amiable compromise in order to set some balance.

92. Moreover, as the main function of this Tribunal is to establish the truth of the matter, accepting

evidence it deems relevant and necessary by ordering document production is possible due to the fact

that an express clause does not need to be present in the Arbitration Agreement for the IBA Rules to

apply. When the Parties expressed their intention to arbitrate under the Vienna Rules ‘in accordance

with international practice’, they envisioned that the Vienna Rules would be supplemented by the

kind of mainstream best practices presented by the IBA Rules.

93. Accordingly, the requested documents pertaining to communications between RESPONDENT and

SuperWines fulfil the requirements set above and can be subject to document production, being

permissible and viable for settlement of the dispute.

iv) Document production does not interfere on the fast and cost efficient way these

proceedings shall be conducted

94. RESPONDENT may allege that document production would interfere with the established criteria of

a fast and efficient proceeding. However, granting CLAIMANT’s request the Tribunal does not place

these criteria under threat, but would rather augment it.

95. Document production requires specific and identified documents or categories of documents directly

relevant to the case [WAINCYMER; Canadian Imperial Bank of Commerce v. Bonnell], minimizing

costs of production and allowing the Tribunal to reach a grounded decision.

96. In order to promote efficiency, the IBA Rules foresee the possibility to refuse document production

in name of procedural economy [art. 9.2(g)]. On the other hand, it is Parties’ general duty to cooperate

in order to preserve efficiency concerning time and cost [WAINCYMER], through specification of

documents, for instance.


36

97. As it has already been stated, not granting the request at all is a violation of due process of law and

constitutes grounds to a possible annulment of the award, only leading to spending more time and

elevated costs, which is directly going against the original intent of the Parties.

98. In the present case, CLAIMANT requested the Tribunal to order RESPONDENT to produce very

specific and delimitated documents, including e-mails, internal memoranda and minutes [SoC, p. 7,

¶27], which complies with the notions set above.

A.3. Nevertheless, the Tribunal has the ex officio power to order the production of the

requested documents

99. Even if the Tribunal understands that CLAIMANT requested ‘discovery’, it can still allow for

document production, since according specifically to Articles 19(2) and 27 DAL and Articles 28

and 29 Vienna Rules it may determine evidence production based on its own initiative.

100. Therefore, even if the Parties had agreed that no ‘discovery’ or document production would be

allowed, the Tribunal could and may determine it if necessary.

B. THE TRIBUNAL SHOULD EXERCISE ITS POWER TO DETERMINE

DOCUMENT PRODUCTION

101. In order to respect the procedural fairness and give effect to the Parties’ agreement, the Tribunal

should grant CLAIMANT’s request complying with all the requirements set by the IBA Rules: (i)

the documents requested are not in CLAIMANT’s possession, custody or control; (ii) nor

confidential and even if they were can still be subject to document production; (iii) (a) sufficiently

specified and (b) essential for the case; (iv) none of other exceptions to document production in

Article 9 IBA Rules apply.

102. In addition, a refusal will jeopardize CLAIMANT’s opportunity to be heard (v). Further, granting

such request does not disrupt the CISG Principles on the Burden of Proof.

B.1. The Request does not disrupt the CISG Principles on the Burden of Proof

103. RESPONDENT wrongfully contends that by permitting such request, the balance under CISG

Principles on the Burden of Proof would be lost [Answer to SoC, pp. 28-29, ¶31].

104. The implicit allocation of burden under the CISG was based on the principle ‘ei incumbit probatio,

qui dicit, non qui negat’ (upon the one who affirms, not the one who denies). So the burden generally

lies upon the party that asserts a fact to employ it to its own advantage.

105. However, in the modern view on Burden of Proof, the Tribunal can request the Parties to produce

additional evidence on its own accord. So, in exceptional circumstances, the Burden of Proof may

be shifted in light of one party’s closeness to evidence or the other party’s difficulty in providing it,

in a dynamic distribution depending on evidence facility and availability, control and access to the


37

facts – whenever that is an imbalance between the Parties regarding this matter. This in the name of

procedural economy and of course getting to the truth.

106. RESPONDENT has the responsibility to produce the documents as it has knowledge and can

effectively exercise control over those [Tribunale di Vigevano (Italy), 12 July 2000]. Its assertion

that one must prove their case on the basis of materials already in their possession is misconstrued.

RESPONDENT is bound to cooperate and bears the Burden to produce the evidence for effective

adjudication of this dispute.

B.1.1. The documents requested are not in CLAIMANT’s possession, custody or control

107. As said, CLAIMANT requested the payment of damages to be determined by the profits of

RESPONDENT transactions with SuperWines [SoC, p. 8]. In order to determine those profits and

then calculate damages and lost profits, CLAIMANT is entitled to access the information exchanged

between those Parties concerning their negotiations.

108. The request for document production is usually made against a party. In this way, it is reasonable to

understand that the requested party has either possession, custody or control over the document [art.

3.3 IBA Rules; WAINCYMER; MARGHITOLA].

109. Even if RESPONDENT alleges that the documents are in possession of SuperWines, Article 3.9

IBA Rules states that Parties may request documents in possession of third Parties.

110. CLAIMANT has no means to possess or obtain copies of the documents from any other source

rather than from RESPONDENT or SuperWines, since the bottles exact price was kept confidential

and RESPONDENT is a family-owned business whose accounts are not publicly available. Also, it

would not be reasonable to base the claim for damages on market rumors.

111. Therefore, since the documents are in possession of either RESPONDENT or SuperWines, this

Tribunal shall order the production of such documents, since they are essential to the resolution of

the case, as it will be further demonstrated.

B.2. Even if the documents were confidential they could still be produced

112. Even if the Tribunal declares the documents as confidential, they still may be produced, since they

are not privileged. Privilege occurs when the information is transmitted during client-attorney

relation and not between Parties in a non-confidential relationship.

113. One may raise the issue that that decisions on document production are particularly delicate if a

party claims that it cannot produce documents due to a confidentiality agreement with a third party.

114. However, since there was no official written or express confidentiality agreement between

RESPONDENT and SuperWines [PO2, p. 56, ¶25], nor are the documents privileged, the Tribunal

should not encounter any difficulties in ordering the documents to be produced.


38

115. Even if the Tribunal concludes that the documents were confidential, if these were not privileged

they still could be produced due to relevance. In this context the Tribunal can adopt some

precautionary measures in order to protect confidentiality expectations such as inspecting the

documents itself or appointing an independent expert to review them and rule on the credibility of

RESPONDENT’s objections [IBA Rules, art. 3(8); MARGHITOLA].

116. Furthermore, the confidentiality claimed by RESPONDENT is not breached by this Request.

Contrary to RESPONDENT’s allegation that it will reveal business secrets [Answer to SoC, p. 28,

¶30], it is contended that such claim is not compelling in nature, since without the documents

requested CLAIMANT would be unable to fulfil its obligations relating to evidence.

117. Besides, a mere individual pricing and supply to selected customer [PO2, p. 61, ¶61] cannot be

considered as a compelling business secret in contrast to the necessary requirement of the document

for fair disposal of the case. The documents do not enclose business secrets as RESPONDENT’s

business model does not rely on the number and price bottles bought by a particular customer

remaining secret. Mere protection of business strategy is not sufficient to constitute compelling

grounds of confidentiality. The IBA Rules do not protect commercial Parties’ profit margin on their

ordinary business.

118. Moreover, RESPONDENT’s confidentiality can be protected by applying the IBA Rules [Art. 3(13)]

and this Tribunal and other Parties associated obligation to keep the documents confidential. So even

in the case that the documents do include business secrets, this Tribunal may order the Parties to

exchange this information subject to an appropriate confidentiality order or undertaking,

ameliorating RESPONDENT’s fears that document production would seriously disrupt its business

or require it to disclose business secrets to the market.

B.3. The documents requested are sufficiently specified and essential for the case

i) The documents are sufficiently specified

119. Specification is a key aspect because it ensures that document production in international arbitration

does not become the broad-ranging US-style ‘discovery’. This is enforced by Article 3.3(a) IBA

Rules which determines that the request shall contain ‘a description of each document sufficient to

identify it, or a description in sufficient detail of a narrow and specific category of documents that

are reasonably believed to exist’.

120. CLAIMANT is not ‘fishing’ into documents in RESPONDENT’s possession since it requests the

Tribunal to produce two narrowly tailored categories of documents regarding transactions between

RESPONDENT and SuperWines, aligning with the identifiably and specification in nature

requirements:

121. ‘(1) All documents from the period of 1 January 2014-14 July 2015 pertaining to communications

between RESPONDENT and SuperWines regarding the purchase of diamond Mata Weltin 2014;

and (2) Any contractual documents, including documents relating to the negotiation of the

agreement between SuperWines and RESPONDENT with regard to the purchase of diamond Mata

Weltin 2014, including documents evidencing discussion of the number of bottles to be purchased

and the purchase price’ [SoC, ¶28, p. 7].


39

122. In general, arbitral tribunals applying the IBA Rules have granted requests for documents describing:

the party or author of the documents, the time frame or the date within which the documents were

created, and the subject-matter of the documents [MARGHITOLA].

123. CLAIMANT has requested two limited categories of documents in REPONDENT’s possession,

created by two identifiable Parties (RESPONDENT and SuperWines), from a brief and clearly

defined time period (1 January 2014 to 14 July 2015), and concerning a single specific subject matter

(the contract between those Parties, in particular the number of bottles purchased and the purchase

price) – within the meaning of Article 3.3(a, ii) IBA Rules.

ii) The documents are essential for the case and indisputably material to its just outcome

124. Also according to Article 3.3 (b) IBA Rules, the documents requested must be relevant to the case

and material to its outcome, meaning that it should tend to prove the factual allegations on which

the party’s legal claims are based and be necessary to determine the accuracy of a party’s factual

allegations. To be material does not mean necessary to win the case, only to optimally present it.

When considering a document request, the Tribunal’s decision should be based on a ‘prima facie’

assessment of relevance and materiality [BORN].

125. This criterion exists in the present case considering that the information exchanged between

RESPONDENT and SuperWines is vital to calculate the damages and loss of profits CLAIMANT

is entitled to from the breach of Contract, since the granting of the request is condition to establish

the purchase, the number of bottles bought and appropriate price.

126. CLAIMANT has suffered losses as a result of RESPONDENT’s non-delivery of the 5,500 bottles.

Not being capable of calculating its full lost profits, and as a sign of good will, CLAIMANT is only

claiming the difference between the price it would have paid for the same bottles and the effective

price paid by SuperWines, for which it is fundamental to know this exact value. The documents are

‘prima facie’ necessary to determine the amount of CLAIMANT’s damages, a core aspect of its

factual allegations.

127. It is not known exactly how much SuperWines payed for the 5.500 bottles bought in November

2014. Confirming the essentiality of the documents requested by CLAIMANT, there were e-mails

summarizing meetings and setting out details of the Parties’ cooperation [Cl. Ex. 4, p. 12; Cl. Ex. 6,

p. 14], and several internal memoranda and minutes discussing cooperation with SuperWines [PO2,

p. 56, ¶23]. These are the only ones that can give an insight on how much was actually paid, since

this information was not disclosed by either one of them publicly [Cl. Ex. 4, p. 12], in order for

CLAIMANT to be able to calculate the referred compensation amount.

128. In the Pressure sensors case (Swed.), the tribunal recognized that in International Commercial

Arbitration some form of document production is necessary to achieve a ‘level playing field’

between the Parties, determining document production as necessary under penalty of impossibility

to quantify losses. This is precisely the situation in the present case.


40

129. The relevance of the requested documents is materially linked with the case as a whole. In order to

expeditiously settle this dispute, as intended, CLAIMANT must be in a position to quantify its claim.

In sum, it requests ‘particular documents in very specific circumstances’ as also in line with

REPONDENT’s understanding [Res. Ex. 1, p. 31]. Since these documents are indisputably relevant

and material, it is clear that CLAIMANT is not on a ‘fishing expedition’. Furthermore, the disclosure

of these documents is in everyone’s best interests because it allows the Tribunal to determine the

damages suffered. Because the documents sought are a narrowly tailored category of specific

documents, allowing this level of document production will neither cost much money nor cause

much delay.

130. Therefore, Tribunal should discretionally order document production in order to obtain a

fundamental insight into a substantial, but alarming fact: that RESPONDENT benefitted from the

breach of Contract.

B.4. None of other exceptions to document production in Article 9 IBA Rules apply to the case

131. Since CLAIMANT’s request satisfies all requirements under Article 3.3 IBA Rules, the Tribunal

should grant it: there is no possible political or institutional sensitivity at stake; the documents are

not subject to any legal impediment or privilege and unrelated to any settlement negotiations; such

does not carries out any violation to equal treatment or impose an unreasonable burden since the

documents are highly material, the degree of burden is commercially acceptable (regarding time,

expense and resources) and RESPONDENT cannot identify an accessible source which is more

convenient, less burdensome or less expensive.

132. There is no reason to believe that the documents have been lost or destroyed or ordering its

production would be inefficient (in terms of procedural economy), disproportionate (combining their

importance to the dispute) or unfair (since CLAIMANT also retains all its documents, if needed for

a period of 5 years).

133. Ultimately, CLAIMANT’s requests were done in good faith, under the sole purpose to calculate the

damages it is entitled to after all.

B.5. Denial of this request will impair CLAIMANT’s opportunity to be heard in violation to

its right to fair hearing and procedural equality

134. If CLAIMANT lacks documents indispensable to establish relevant facts for which it bears the

burden of proof, and such documents are demonstrably at least within RESPONDENT’s control,

such a refusal will deprive CLAIMANT from its opportunity to be heard and be contrary to the

principle of procedural fairness enshrined in Articles 18 Model Law and 28 Vienna Rules, and the

Parties’ explicit agreement regarding international practice.

135. The goal of an arbitral process is to allow the Parties an opportunity to present relevant facts to the

specific dispute in the most reliable, efficient and fair manner possible. Denial of CLAIMANT’S

request would hamper its opportunity for effectively proving its case.


41

136. The right to be heard encompasses the right of the Parties to have access to files required to make

factual allegations. There is a duty on the Tribunal to provide a fair hearing, which necessarily

requires considering such relevant and material evidence.

137. Furthermore, a refusal may also open the possibility for the award not to be recognized, i) under

article 5(1)(d) – when arbitral procedure is not in accordance with the agreement of the Parties – or

ii) article 5(1)(b) of the NY Convention, if a substantial issue is ignored in terms of evidence and

pleadings. A party may only properly exercise its right to be heard if they have access to all relevant

arguments and evidence under the possession of the other. The Tribunal has a duty to render an

enforceable award, and this is not possible if the Tribunal rejects the request, in violation to

CLAIMANT’S right to be heard [Cotter case (S.D.N.Y) 1989].

138. Therefore, and in absence of the documents requested, CLAIMANT will not be able to effectively

argue on the merits in the proceeding issues relating to due damages and lost profits.

CONCLUSION: THE TRIBUNAL MUST ORDER RESPONDENT TO PRODUCE THE

DOCUMENTS REQUESTED BY CLAIMANT

139. As it has been demonstrated, (i) the Tribunal has and is not deprived of the power to determine

document production, and (ii) shall exercise it by ordering RESPONDENT to produce the

documents requested by CLAIMANT once they comply with all the requirements set under the

applicable law and the IBA Rules on the Taking of Evidence.

III. COMPENSATION OF LITIGATION COSTS:

The recoverability of legal costs under Article 74 CISG and the reach of a possible

reimbursement.

1. CLAIMANT SHOULD BE AWARDED WITH REIMBURSEMENT OF INCURRED

LITIGATION COSTS

140. CLAIMANT is entitled to recover the loss of USD 50.280 in attorney’s fees under Article 74 of

the CISG. Following RESPONDENT’s unlawful behavior, threats of non-performance and

breach of contract, CLAIMANT was forced to incur legal costs in the amount of USD 50.280 in

order to protect its business and obligations of supply [Cl. Ex. 11, p. 19]. First, CLAIMANT hired

an attorney to obtain an interim injunction that restrained RESPONDENT from selling wine it

was entitled to [SoC, p. 7, ¶22]. Second, CLAIMANT had to legally defend against

RESPONDENT’s declaration of non-liability, since it constituted a clear breach of Article 20 of

the Framework Agreement, and resulted in an inevitable amassment of legal costs [SoC, p. 7,

¶23]. Consequently, CLAIMANT should, under Article 74 of the CISG, be fully reimbursed of

sustained damages.


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141. Alternatively, CLAIMANT could also raise Article 45 CISG that clearly states that ‘if the seller

fails to perform any of his obligations under the contract or this Convention’, the buyer is entitled

to damages [CISG Art. 45].

142. According to the Tribunal and as agreed by the Parties on the 1st October 2015, it is assumed that

RESPONDENT breached the Contract on the 4th of December, 2014 [PO1, p. 50, ¶4]. Under the

notion of ‘damages’ considered in Article 74 CISG, CLAIMANT is entitled to recover incurred

attorney’s fees through a vital request for interim relief [A]. CLAIMANT is also entitled to

receive reparation for accumulated legal costs due to RESPONDENT’s unlawful declaration of

non-liability and breach of the arbitration clause [B]. Thus, CLAIMANT holds right to full

compensation of USD 50.280 due to incurred legal costs [CONCLUSION].

A. CLAIMANT SHOULD BE COMPENSATED OF DAMAGES UNDER ARTICLE 74

CISG, INCLUDING LEGAL COSTS INCURRED IN ITS APPLICATION FOR

INTERIM RELIEF

143. CLAIMANT is entitled to receive compensation of damages, including attorney’s fees, incurred

in light of the required legal proceedings. As such, due to the fact that RESPONDENT was

assuredly responsible for breaching the contract, the ‘damages’ incurred by CLAIMANT,

attorney’s fees included, are recoverable under Article 74 [1]. In addition, CLAIMANT states that

all fundamental requirements for damages to be awarded under Article 74 CISG were fulfilled

[2]. Alternatively, the recovery of attorney’s Fees as Damages is plausible in light of the General

Principles of Article 74 CISG [3].

A.1. CLAIMANT’s attorney’s fees are ‘losses’ recoverable under Article 74 CISG

144. The issue of whether attorney’s fees is one of the ‘losses’ envisioned under Article 74 CISG has

been followed by considerable debate. However, there should be no doubt that the only

respectable position regarding this matter is one that considers the full scope of CISG, and thus

deems attorney’s fees as recoverable damages under Article 74 CISG.

145. According to the first sentence of Art. 74 CISG, the aggrieved party is entitled to reparation of

damages ‘equal to the loss, including loss of profit, suffered as consequence of the breach’ [Art.

74 CISG]. Although Art. 74 CISG does not expressly mention ‘attorney’s fees’ as one of the

relevant categories of losses recoverable as damages under the CISG, it is also important to note

that there are in fact no references of any category of loss apart from ‘loss of profits’

[FELEMEGAS]. The nature of the provision of CISG is to be inclusive in order to reflect the

international character of the Convention, and not to be exhaustive, going directly in accordance

with the need to promote uniform application of CISG [CISG, Art. 7 (1); Preamble to CISG].


43

146. Furthermore, addressing this issue is not res judicata, considering that what is in question is

whether the issue of the allocation of costs is, in fact, one of damages under Art. 74 of the CISG

and not a procedural issue as argued by the High Court of Mediterraneo and the RESPONDENT

[Answer to SoC, p. 29]. CLAIMANT contests that recovery of attorney’s fees should be primarily

interpreted as a matter of substantive law, since the issue of legal costs cannot be solely subject

to domestic law due to the Convention’s gap-filling procedure. Only as a last resort pursuant to

Art. 7 (2) CISG should domestic law be applied [ZELLER], and even then, as Felemegas pointed

out, ‘any issue that has not been expressly excluded by the CISG and which can be resolved by

applying the general principles of the CISG should be solved accordingly’ [FELEMEGAS].

147. For instance, in the Pallets case, the term ‘loss’ in Article 74 CISG has been portrayed as

encompassing the ‘cost of pursuing one’s rights’. This notion is further clarified in the Shoes case,

where the Appellate Court reiterates that Article 74 ‘encompasses compensation for the cost of a

reasonable pursuit of one’s legal rights’. There is a substantial number of decisions, from arbitral

tribunals and courts alike, where the aggrieved party was awarded damages compensating legal

expenses under Article 74 CISG [Down coat case; Garments case], proving that there is a

growing international standard for the extent and application of this provision.

148. One might raise the case of Zapata Hermanos v. Hearthside Baking, where the US Circuit Court

of Appeals interpreted Art. 74 CISG in a way that deferred to domestic procedural law in order

to restrain the injured party from claiming attorney’s fees as damages. However, this ruling is in

plain detriment of the underlying provisions of Art. 74 and the international principle envisioned

by Art. 7 (2) CISG, as several commentators have argued [ZELLER].

149. Due to the necessity of local representation, CLAIMANT filed both legal proceedings before the

Court of Mediterraneo. Yet, it is clear that these fillings would not have been necessary had

RESPONDENT fulfilled its contractual obligations. As such, and as it will be proven,

CLAIMANT’s legal expenses should be considered foreseeable consequential losses.

150. Thus, there are a number of international case law and arbitral decisions that support the notion

that recovery of losses includes incurred legal fees prior to or during litigation in a contractual

dispute governed by the CISG in accordance with the substantive law provisions of Art. 74 CISG,

sometimes even attributed in combination with domestic procedural rules, to a successful

CLAIMANT [FELEMEGAS]. It seems only reasonable that the injured party receives rightful

payment of incurred legal expenses amassed solely due to the breaching party.

A.2. All requirements under CISG Art. 74 for CLAIMANT’s recovery of damages are met

151. When seeking recovery of damages under Art. 74 of CISG, a number of limitations or

requirements need to be met. The second sentence of Art. 74 CISG states that recovery of claims

for damages, including those subject to Art. 74, is limited by the doctrines of foreseeability and


44

reasonability. In addition, other commentators would suggest ‘mitigation’ according to Art. 77 of

the CISG, confronting the aggrieved party to restrict efforts to what is necessary

[SCHLECHTRIEM]. Nevertheless, CLAIMANT reserves that it fulfilled all its obligations and

that the limitations imposed do not invalidate CLAIMANT’s claim for the request of

compensation for damages incurred. However, although only foreseeable consequential damages

are suggested to be recoverable, commentators have also noted that incidental damages should

also be recoverable as consequential damages if these were to be equally foreseeable

[SCHENIDER].

152. Art. 74 CISG holds two variables that must be addressed in order for damages to be recovered.

First, the loss must be a consequence of the breach and second, the loss must have been foreseen

or ought to have been foreseen [ZELLER]. In the present case, RESPONDENT acknowledges

that it clearly breached the contract when it refused to honor its part of the contract [Cl. Ex. 7, p.

15], which determines the causational relationship between the breach and consequent interim

relief. It is only after the contract was breached, and the 10.000 bottles of diamond quality wine

were refused to be delivered, that CLAIMANT filed for an interim injunction. Thus, CLAIMANT

had full right to file for an interim injunction and enter a contingency fee agreement in order to

obtain legal representation.

A.2.1 The legal costs incurred by CLAIMANT’s interim injunction were both

foreseeable and reasonable

153. The issue of ‘foreseeability’ present in Art. 74 CISG suggests that the total amount of damages

recoverable are limited to what the breaching party could foresee or ought to have foreseen at the

time the contract was settled.

154. RESPONDENT foresaw, or ought to have foreseen, that CLAIMANT would incur legal costs

when RESPONDENT failed to fulfill its contractual obligations and breached Art. 2 of the

Framework Agreement. It is clear that RESPONDENT was aware, or ought to be aware, of

CLAIMANT’s modus operandi. CLAIMANT relied on an elaborate system of pre-ordering of

high end wine, and therefore, when RESPONDENT refused to deliver any bottles, it threatened

CLAIMANT’s interest and business reputation, where ‘reliability of supply is crucial’ [PO2, ¶

35]. Consequently, CLAIMANT’s application for interim relief was nothing but a foreseeable

and reasonable stance for someone to take. Thus, it is beyond doubt that recoverability of

consequential damages must ensue in light of the ‘Principle of Full Compensation’

[SCHENIDER].

155. Additionally, RESPONDENT foresaw, or ought to have foreseen, the scope of the contingency

fee agreement that CLAIMANT formed with LawFix. Obtaining local representation in

Mediterraneo is common practice and legally required since the local applicable procedural rules

deem so [PO2, ¶ 39 & 40]. RESPONDENT is indeed familiar with contingent fee arrangements,


45

since it attempted to agree upon one in a previous litigation [PO2 ¶42]. Thus, CLAIMANT’s

action of obtaining legal representation on a contingency basis is a reasonable scenario that

RESPONDENT foresaw, or ought to have foreseen.

A.2.2 CLAIMANT took the suitable steps in order to mitigate damages under Art. 77

CISG

156. Even though RESPONDENT was responsible for disregarding the Contract, CLAIMANT acted

in good faith and was attentive enough to mitigate consequent damages, fulfilling the required

provision under Art. 77 of the CISG. Under this article, the party in breach may claim a reduction

of damages in the amount that the loss could have been mitigated [Art. 77 CISG].

157. For example, in order to mitigate damages resulting from RESPONDENT’s breach, CLAIMANT

contacted other suppliers to guarantee a minimum delivery and establish business relationships.

Vignobilia Ltd., another high end producer of wine from Mediterraneo, sold 5.500 bottles to

CLAIMANT [SoC, p. 5, ¶11].

158. As Ontario’s Court of Appeals decided in Nova Tool v. London Industries, a reasonable measure

an aggrieved buyer could take to mitigate damages would be ‘contracting with a third-party

supplier because of the inability of the breaching party to deliver molds in time’. The relevance

of such ruling is indeed significant for what the present case deals with.

A.2.3 RESPONDENT’s justification of ‘bad weather conditions’ for breaching the

Contract is unlawful

159. Contrary to RESPONDENT’s claim, the issue of ‘bad weather conditions’ in 2014 does not

provide a lawful justification to breach the Contract as an event of force majeure, excusing

RESPONDENT from payment of damages under Art. 79 CISG.

160. Under the provisions of the Framework Agreement between the two Parties, Art. 2,

RESPONDENT was bound to deliver up to a maximum of 10.000 bottles of diamond Mata Weltin

wine. Furthermore, it was agreed that RESPONDENT would support CLAIMANT ‘in its

marketing activities whenever possible without disruption to its ordinary course of business’ [Cl.

Ex. 1, p. 9]. RESPONDENT refused to deliver any wine to CLAIMANT anyway.

161. However, according to RESPONDENT, due to a ‘particularly difficult’ harvest in 2014 [Cl. Ex.

3, p. 11], the amount of bottles delivered would be less than half of the promised to, and by that

time, requested by, CLAIMANT. This action would inevitably damage CLAIMANT’s business

and clients. As it will be proven, RESPONDENT’s justification for breach of Contract is nothing

but erroneous.


46

162. First, and assuming that, as the case may be, the harvest of 2014 produced a significantly minor

amount of bottles when compared to previous years due to ‘bad weather conditions’,

RESPONDENT would have a sufficient number of bottles for CLAIMANT’s order if

RESPONDENT had not sold 5,500 bottles to SuperWines, one of CLAIMANT’s top competitors,

prior to fulfilling its contractual obligations [PO2, p. 56, ¶24 & 27]. Therefore, it is clear that

RESPONDENT had enough bottles available to deliver.

163. Second, ‘bad weather conditions’ is simply not a category of a force majeure event, and thus does

not constitute a valid reason for breach of contract. Instead, it is considered as predictable and its

damages avoidable and/or mitigated in other similar cases [Milk Case]. Indeed, according to

Lookofsky, ‘virtually all potential impediments to performance are ‘foreseeable’ to some degree’

[LOOKOFSKY], and since ‘bad weather conditions’ is one of the most common events for those

who produce wine, it does not hold much grounds for a reasonable excuse.

164. Furthermore, even if ‘bad weather conditions’ were to be acceptable justification for the Tribunal,

RESPONDENT did not take appropriate measures to avoid the non-performance.

165. In light of this, it seems only reasonable that CLAIMANT would file an interim injunction in

order to prevent RESPONDENT from selling the bottles and to secure its own obligations to its

clients, which reaffirms CLAIMANT’s claim for compensation of legal expenses.

A.3. Recovery of attorney’s fees as damages is plausible in light of the general Principles of

CISG Art. 74, and consequent Principle of Full Compensation

166. In case the Tribunal does not immediately recognize CLAIMANT’s rightful recovery of the

attorney’s fees under Art. 74 of the CISG, it can find further complementarity to such rendering

of the award by addressing the underlying principle that guides Art. 74 - the General Principle of

Full Compensation - that states that legal fees are indeed recoverable under Art. 74 of the CISG

[CISG-AC Op. 6].

167. The Principle of Full Compensation is considered to be the fundamental basis in order to interpret

Art. 74 CISG [Secretariat Commentary] and the generality of the CISG [Plastic carpets case;

Cooling system case; Rolled metal sheets case].

168. Art. 74 provides the injured party with the ‘benefit of the bargain’ [SUTTON], which ultimately

seeks to place the injured party in an economic position equivalent to where he would have been

had the contract not been breached. In principle, Art. 74 entitles the non-breaching party to full

compensation [GOTANDA]. Furthermore, the Principle of Full Compensation is also referred to

in other international regulations, including under Art. 7.4.2 of the UNIDROIT Principles and

Art. 9:502 of the Principles of European Contract Law.


47

169. Under Art. 74, the Tribunal has the authority, independence, and broad room to determine the

extent of ‘loss’ suffered by the aggrieved party, taking into account the circumstances of the

particular case. This includes expected and reliance damages, as intended by the drafters of the

CISG [SCHNEIDER].

170. Indeed, CLAIMANT’s legal expenses were unavoidable following RESPONDENT’s breach of

contract. There are a number of cases where damages sustained by the injured party, including

legal fees, were awarded under Art. 74 of the CISG. The Chinese goods case provides a valuable

comparison. According to the decision, the injured party could claim its attorney’s fees as

damages under Art. 61 and 74 CISG due to the other party’s breach of contract. In other similar

cases, there has been a consistency in attributing recovery of attorney’s fees under Art. 74 to the

injured party, following the principle of Full Compensation.

171. Full Compensation is comprised by all expenses incurred by the CLAIMANT. As such, it seems

only logical that CLAIMANT should be restituted of incurred legal fees that only happened due

to RESPONDENT’s unlawful actions.

B. CLAIMANT IS ENTITLED TO REPARATIONS DUE TO RESPONDENT’S BREACH

OF THE ARBITRATION AGREEMENT AND OF THE CONTRACT WHEN

APPLYING FOR THE DECLARATION OF NON-LIABILITY

172. Following RESPONDENT’s refusal to abide by the Contract and subsequent consequences, an

issue that has been focused on until now, RESPONDENT committed another breach of the

Arbitration Agreement and of the Contract when it filed a declaration of non-liability in the High

Court of Mediterraneo due to an ‘Act of God’ and alleged ‘rightful termination of Contract’ [Cl.

Ex.9, p. 17]. The Court rightfully dismissed such declaration due to the existence of an arbitration

clause in the Contract, acting in accordance with Art. II (3) of the NY Convention, to which

Danubia, Equatoriana and Mediterraneo are Contracting States [PO2 ¶58].

173. Nevertheless, CLAIMANT had once again to necessarily incur legal expenses in order to defend

itself, and so, CLAIMANT requests the Arbitral Tribunal to consider whether CLAIMANT is

entitled to recover litigation costs incurred in defense of the declaration of non-liability.

174. Commentators note that the breaching party may hold an interest in initiating court proceedings

instead of honoring the Arbitral Agreement. For instance, there may be an intent to complicate,

delay or even circumvent the arbitration proceedings, or simply prospect to obtain a more

favorable decision in the jurisdiction of a national court [FIERENS/VOLDERS].

175. It is important to reiterate that the Arbitration Agreement was in fact valid and binding, and that

RESPONDENT’s action represents a breach of the Agreement and of the Contract [1]. In


48

addition, the Arbitral Tribunal has competence to award damages [2]. Finally, such damages are

indeed recoverable [3].

B.1. RESPONDENT’s declaration of non-liability represents a breach of the Arbitral

Agreement and of the Contract, both which were still valid and binding

176. RESPONDENT’s suit in state courts represents a breach of the Arbitration Agreement and of the

Contract, disregarding their validity and CLAIMANT’s own standing.

177. The Arbitration Agreement, signed and bound between the Parties and is governed by Art. 20 of

the Framework Agreement. It determines that in case a dispute is not settled, then it ‘shall be

decided by arbitration’ [Cl. Ex.1, p. 9]. The dispute resolution method was therefore clearly

established. There are two obligations that arise from this: a positive one, that states that the

Parties must resort to arbitration in order to resolve their disputes, and a negative one, that

restrains the Parties from initiating litigation in national courts [BORN]. Considering that

RESPONDENT failed to perform both of these obligations, CLAIMANT is entitled to claim

damages as provided in articles 74 to 77, under the provision of Art. 45(1,b) CISG.

178. However, since the High Court has not awarded any costs despite dismissing the case on

jurisdictional grounds, it is up to the Tribunal to do so. In fact, there have been cases where

compensation for the injured party ensued even if the Tribunal considered that it lacked

jurisdiction [Tjong Very Sumito and others v Antig Investments Pte Ltd].

179. Thus, pursuing a declaration of non-liability in the Courts of Mediterraneo represents an

immediate breach of the Arbitration Agreement, and therefore, of the Contract, demonstrating

RESPONDENT’s bad faith.

B.2. It is within the Tribunal’s scope to award litigation expenses as remedy

180. Contrary to what the Tribunal argues in its dismissal [Cl. Ex.9, p. 17], the Tribunal actually holds

the necessary competence to award CLAIMANT damages for the legal fees incurred in defence

of RESPONDENT’s breach. The Tribunal has jurisdiction over claims for damages due to the

fact this is included in the arbitration agreement.

181. The Tribunal has the appropriate jurisdiction to award damages for breach of contract without

undermining the state court’s exclusive jurisdiction to award costs, unlike some commentators

would argue [VISHNEVSKAYA]. As it was ruled by the Swiss Supreme Court, awarding damages

by a Tribunal does not constitute a violation of the public policy of Mediterraneo [Swiss Case

4A_444/2009]. The awarding of damages is not to challenge the Court’s decision or to submit a

review, but to focus on RESPONDENT’s wrongful actions and to prove that CLAIMANT’s

losses were a direct result of the breach.


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182. In light of the Kompetenz-Kompetenz principle, the Tribunal is ‘competent to determine its own

competence’ [BORN], which means that the Tribunal decides all disputes arising out of the

contract, even those that concern its own jurisdiction. Therefore, before filing the declaration of

non-liability, RESPONDENT could and should have addressed a VIAC tribunal to rule on the

matter of its jurisdiction, just as the Framework Agreement predicts. The notion that the Tribunal

has jurisdiction to decide ‘with respect to the existence or validity of the arbitration agreement’

is further reinforced under Art. 16. UNCITRAL Model Law.

183. Taking into account the broad scope of the Arbitration Agreement, should it encompass

sufficiently broad wording, the Tribunal would be competent to award damages for breach of the

arbitration agreement despite the principle of separability, which mainly states that should the

underlying agreement be deemed invalid or void, the arbitration clause will remain valid, and

vice-versa. In Swiss Case Court 4A_232/2013, the Supreme Court noted that the wording of the

relevant arbitration clause, ‘Any dispute arising from or in connection with this Agreement’, was

the key factor to grasp the Tribunal’s jurisdiction [SSC 4A_232/2013]. In the present case, the

wording of the arbitration clause suggests an even broader scope due to encompassing ‘all

disputes’, and demonstrates a willful attribution of power by the Parties to the Arbitral Tribunal.

184. Thus, since in the present case ‘all disputes shall be decided by arbitration’, it could be assumed

that the Tribunal holds de facto jurisdiction over the Contract, including the breach of the

arbitration agreement.

B.3. Damages incurred in defense of the declaration of non-liability are recoverable

185. CLAIMANT reserves that the incurred damages due to RESPONDENT’s breach of the

agreement can be remedied under the CISG.

186. RESPONDENT should not have initiated court proceedings as this was wrongful and went

directly against the arbitration agreement established between the Parties. In order for

CLAIMANT to be allocated to an equivalent position as to where it was had the agreement not

been breached, in view of the objective of contractual damages, CLAIMANT should be awarded

monetary relief for the damages incurred.

187. In addition, all unlawful breaches of contract entail liability. As such, as arbitration agreements

are contractual in nature, any breach arising out of them should have the same remedial response

as any other contractual breach [Tan, p. 551]. Commentators also recognize that awarding

damages in view of unlawful breaches could restrain Parties from ‘forum shopping’.

188. Furthermore, the present case is not unique in its claim. There is a substantial number of

international courts that advocate that ‘reasonable’ legal expenses can be recoverable by way of

damages [West Tankers Inc. v. Allianz SpA and another; SSC 4A_444/2009].


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189. For instance, in Tjong Very Sumito and others v Antig Investments Pte Ltd, the Singapore Court

of Appeal, applying SIAC rules and Indonesian law, awarded the injured party incurred legal

costs on an indemnity basis due to the fact that the breach of contract caused a reasonable incur

of legal expenses. Moreover, the Swiss Supreme Court 4A_232/2013 awarded attorney’s fees as

damages to the injured party due to legal proceedings initiated in view of a breach of the

Arbitration Agreement, and went further when it ordered payment for costs of any other

proceedings that could be initiated because of the breach of the arbitration agreement in the future.

190. Even if the Tribunal does not award damages under CISG due to separation of the Arbitration

Agreement, one could look into Danubia’s laws, being the law with the closest connection with

the claims for breach of the arbitration agreement [GABRIEL] since it is where the seat of

Arbitration is located (lex arbitri). Being a civil law system, in order for contractual liability for

breach of arbitration agreements to be awarded, the breach must have been either intentional or

negligent [TAKAHASHI II].

191. This has been extensively looked into. Since the proper way to determine whether an arbitration

agreement is valid or not is to address an arbitral tribunal or court, and since the High Court of

the Mediterraneo deemed that the arbitration agreement was still enforceable, this proves that

RESPONDENT was, at least, negligent, and CLAIMANT is entitled to compensation for

damages.

192. Thus, CLAIMANT can and should receive the legal costs incurred in defence of

RESPONDENT’s unlawful declaration of non-liability.

CONCLUSION: CLAIMANT is entitled to receive full compensation for damages that

resulted from RESPONDENT’s unlawful actions

193. First, CLAIMANT can and should receive compensation of USD 33.750 for the application of

the interim injunction. Second, CLAIMANT is also entitled to the reimbursement of USD 16.530

in its successful defence against RESPONDENT’s unlawful declaration of non-liability. This is

due to the fact that RESPONDENT foresaw, or ought to have foreseen, to a reasonable extent,

the type and cost of legal expenses that CLAIMANT would have to incur once RESPONDENT

initiated the various breaches of the Arbitration Agreement and of the Contract. These damages

may be awarded under Art. 74 of CISG as it represents a ‘loss’. Therefore, CLAIMANT is entitled

to receive a total of USD 50.280 due to incurred legal damages.


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IV. CALCULATION OF DAMAGES – DISGORGEMENT OF PROFITS:

The extent by which profits made by a breaching party should be taken into account in the

context of Article 74 CISG.

1. CLAIMANT IS ENTITLED TO COMPENSATION IN ACCORDANCE WITH

ARTICLES 45 AND 74 CISG FOR RESPONDENT’S BREACH OF THE CONTRACT

194. The Tribunal stated that there was a breach of contract by the RESPONDENT [CISG, Arts. 28,

44] concerning the number of bottles of wine to which the CLAIMANT was entitled to by the

Framework Agreement [Cl. Ex. 1, p.9]. CLAIMANT is not seeking, as a gesture of good faith,

the Specific Performance of the contract due to the fact that CLAIMANT wants to maintain a

business relationship with RESPONDENT. CLAIMANT is seeking for these damages to be

properly calculated.

195. The Tribunal should award CLAIMANT damages calculated according to the profit earned by

RESPONDENT by selling the bottles to SuperWines, by deliberately breaching the Contract with

CLAIMANT [P.O. 2, p.56, ¶12].

196. The losses suffered by the CLAIMANT were considerable and can be listed in the following

categories: primarily, there is a need to attend to the loss of profit itself, concerning the inability

to fulfill its obligations regarding the costumers’ orders, which had already been guaranteed by

the CLAIMANT. The losses translate directly in the inability to sell 5.500 bottles of Diamond

Mata Weltin wine, of particular high quality. In second place, the breach of the contract resulted

in the substitute transaction with Vignobilia Pty, Ltd. to mitigate the loss, forcing the CLAIMANT

to pay a higher price for the 5.500 bottles of wine. And lastly, there is a need to address the loss

of market position as a significant damage, due to the fact that had the contract been performed,

CLAIMANT would not have lost its advantageous market position.

197. CLAIMANT is entitled to damages under Article 45 CISG in result of the breach of Article 2 of

the Framework Agreement. Article 45 states that when the seller fails to perform any of the

obligations under the contract, the aggrieved party is entitled to damages. CLAIMANT is,

therefore, entitled to damages in result of the refusal from the RESPONDENT to deliver the wine,

resulting in the breach of the Framework Agreement [P.O. 1, ¶4].

198. The failure to perform, which article 45 CISG refers to, is not dependent on fault or circumstances.

The entitlement to damages under the CISG is based on no-fault liability and any breach renders

the seller liable [LOOKOFSKY; GOTANDA]. In accordance, the proportion of fault that can be

attributed to RESPONDENT does not affect its liability under Article 45 CISG.


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199. According to Article 75 CLAIMANT is entitled to the difference between the Contract price and

the price in the substitute transaction made as a result of breach to cover the purchase in alternative

to the existing Contract. Although the transaction was reasonable according to one of the

requirements stated in Article 75, the CLAIMANT did not avoid the contract. Furthermore, the

article supra mentioned is inadequate to shield CLAIMANT’s ‘Non-Economic Interest’.

Therefore, the simple calculation of damages as foreseen in Article 75 is insufficient and

unrighteous to the CLAIMANT, meaning it would not adequately compensate the damages.

200. CLAIMANT is entitled to damages under Article 74 CISG by the principle of full compensation.

The principle of full compensation is not expressly enshrined in article 74, neither are the

compensable losses listed, but nevertheless the underlying principle governing this article

requires the aggrieved party to be put in the same position as he would have been had the contract

been performed. Article 74 provides the basis for the assessment of damages [UNCITRAL Case

Digest] and under this provision recovery is allowed for a sum ‘equal to the loss’ [CISG, Art.74].

The reference to the aggrieved party to be awarded a sum ‘equal to the loss’ embodies the

principle of full compensation. Considering all that has been stated, the full compensation

principle is a general principle upon which the CISG is based for the purpose of Art.7 (2) CISG.

201. Article 74 CISG expressly foresees the recovery of any lost profit, although it does not distinguish

or draw a limit between future loss of profits and past loss of profits. The principle of full

compensation requires that both are, indeed, compensable [SCHWARTZ]. Moreover, contractual

damages must not be the only damages contemplated in the compensation as they are insubstantial

compared to the Non-economic damage suffered. Since loss of reputation constitutes a decrease

in the value of future cash flows, any loss to CLAIMANT’s reputation will be subsumed within

its lost profit.

202. The profit CLAIMANT has lost in consequence of being unable to sell the 5.500 bottles derives

directly from RESPONDENT’s breach of contract, by selling the Mata Weltin 2014 wine bottles

to SuperWines. This loss of profit is compensable. The right to damages under the CISG implies

that the loss has to be a consequence of the breach [CISG, Art.74]. In casu, the breach was a

necessary precondition to the occurrence of the loss, due to the fact that if the RESPONDENT

had fulfilled its obligations under the Contract, CLAIMANT would not have been forced to sell

5.500 bottles from another winery to its customers. RESPONDENT sold to SuperWines the 5.500

bottles that CLAIMANT was entitled to. This breach also constitutes another precondition for

CLAIMANT’s incurrence of a higher prince under the substitute contract.

203. According to rumors in the industry, SuperWines paid a premium, estimated to be between EUR

15-20 per bottle, to RESPONDENT for the prompt delivery of 5.500 bottles, which most likely

resulted in considerable profit for RESPONDENT in virtue of breaching the Contract [P.O. 2 ¶24,

p. 56]. However, Article 74 expressly allows for the recovery of any lost profit. Thus, the Tribunal


53

must be unhesitant in awarding profits made by the RESPONDENT as a result of breach of

Contract with the CLAIMANT [Lake v. Bayliss].

204. CLAIMANT requests the Tribunal to award damages as profit which RESPONDENT received

from the wrongful disposal of contractually obligated bottles to SuperWines in beach of the

contract [Attorney General v. Blake].

205. Furthermore, CLAIMANT’s loss of market position is a direct consequence of RESPONDENT’s

breach. Even if there was no exclusivity agreement, the Framework Agreement assured

CLAIMANT a significant share in the market for RESPONDENT’s wine, approximately 10% of

RESPONDENT’s average yearly yield. Had there not been a contract from the RESPONDENT

with SuperWines, CLAIMANT’s supply of 10.000 bottles would have been possible, fulfilling

all its obligations towards CLAIMANT’s longstanding customers. However, if RESPONDENT

had complied strictly, as it would have been expected due to the Framework Agreement, and had

RESPONDENT distributed its bottles by pro-rata allocation, CLAIMANT would still maintain a

higher market share than its direct competitors SuperWines. Therefore, RESPONDENT’s breach

was a necessary precondition in order for SuperWines to obtain the highest market share, causing

CLAIMANT to lose its advantageous market position, which had been intact had the Framework

Agreement been observed.

206. CLAIMANT seeks ‘Disgorgement of profits’ made by RESPONDENT: it is an effective remedy

for breach of Contract under art. 74 CISG interpreted regarding Article 7 CISG, which can be

applied since the general conditions have been satisfied. Moreover, CLAIMANT is entitled to

disgorgement as an alternate remedy to Specific Performance under Art.28 of CISG.

A. DISGORGEMENT OF PROFITS IS PERMITTED TO REMEDY THE BREACH OF

CONTRACT

207. CLAIMANT is entitled to disgorgement of RESPONDENT’s profits made by selling goods to

SuperWines at a premium price after breaching the contract with CLAIMANT, as disgorgement

of profits is allowed to be claimed under Article 74 and is consonant with International Character

in the light of Article 7 CISG. It should be applied in order to make a determination on the

applicability of disgorgement of profits as a method of calculating quantum.

208. CLAIMANT cannot be restricted to Contractual damages as measure in form of compensation for

the loss sustained, which are almost insignificant when compared to the Non-economic damage

suffered. RESPONDENT would be left in an ‘undisturbed possession of the fruits of its

wrongdoing’ [Wrotham Park Estate Co. v. Parkside Homes Ltd.]. This Principle of Disgorgement

for breach of Contract was upheld by many courts [Jaggard v. Sawyer].


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209. Disgorgement of profits is provided when the RESPONDENT’s termination of Contract affects

CLAIMANT’s performance of its sub-sale contracts. In the present case, CLAIMANT entered into

sub-sale promises with its customers at the ‘Collector’s Club’ which were in turn directly affected

by the breach of Contract [PO2, p.53, ¶7].

210. Under the CISG [Art.74], RESPONDENT’s gains can be viewed as an indication of loss suffered

by CLAIMANT. Were it not for the breach of the Contract, these profits made by RESPONDENT

would not have occurred. Hence, it is safe to submit that these profits amount to ‘loss’ suffered by

CLAIMANT under Article 74 CISG. Thus, RESPONDENT is liable to disgorge the profits it

accrued as a result of the Contractual breach, which was undoubtedly conscious and substantial

[EarthInfo v. Hydrosphere].

A.1. Conditions for applying Disgorgement are satisfied

211. The Tribunal should award disgorgement considering that CLAIMANT is able to prove the

existence of its losses with reasonable certainty. CLAIMANT contends that the general conditions

to apply the Principle of Disgorgement have been satisfied in the present case as (i) RESPONDENT

took advantage of the breach of Contract. Furthermore, by applying of this Principle, (ii)

CLAIMANT will not be receiving unjust gains.

i) RESPONDENT adopted an opportunistic conduct by breaching the Contract

212. The principle of full compensation has to be applied in accordance with the performance principle,

as Article 7 CISG requires the need to promote uniformity in the application of the CISG. Failure

to protect the performance interest of the promise will prevent the court from fully compensating

other injured parties in a number of scenarios, which may or will encourage domestic courts and

tribunals to supplement the CISG with domestic contract law. The Tribunal ought to recognize the

performance interest as key to the assessment of damages and to award disgorgement to protect

CLAIMANT’s performance interest.

213. Efficient breach is explained by a scenario where a contracting party opportunistically abandons

performance in favor of a more profitable opportunity elsewhere, paying compensatory damages

as the price for doing so [FRIEDMANN]. This undermines the performance principle by allowing

the breaching party to pay their way out of the promise, leaving the Parties unsure of whether they

can rely on performance as promised, or simply on payment of compensatory damages. This issue

is particularly pronounced in circumstances where the aggrieved party’s interest in performance is

peculiar or unique, but specific performance is, for several reasons, unavailable or not suitable, as

is the case with CLAIMANT. Disgorgement of profits provides a disincentive for the commission

of efficient breach by removing the potential to profit from the transaction [FRIEDMANN].


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214. RESPONDENT has adopted an opportunistic conduct by breaching the Contract on the pretext of

‘Bad Harvest’, attempting to justify the breach as a circumstance of ‘force majeure’ to receive a

tactical advantage over CLAIMANT by contracting with SuperWines in exchange of a premium

on each bottle sold [TEMPLE]. Therefore, the Tribunal is requested not to let the RESPONDENT

retain the profits earned by breaching the Contract with the CLAIMANT. Moreover,

RESPONDENT took advantage of the vulnerability of the promise in a Contract which is based on

sequential performance, resulting inevitably in the breaching party attempting to get more than the

accorded under the Contract, at the expense of the non-breaching party [GOTANDA].

215. CLAIMANT has legitimate interest in preventing the profit making activity of RESPONDENT due

to the fact that SuperWines is in fact its biggest competitor in the high-end wine market [P.O. 2,

p.56, ¶26]. Disgorgement of RESPONDENT’s profits is the only appropriate solution to ensure

that the deliberate breach of Contract and opportunistic disregard of CLAIMANT’s entitlement to

the bottles does not result in gain for the RESPONDENT.

ii) CLAIMANT will not be receiving unjust gains

216. Disgorgement shall only be disallowed if it results in inappropriate windfall of gains to the

aggrieved party. In the present case, CLAIMANT’s profits from sales to its costumers very likely

would have been higher than the premium paid by SuperWines to RESPONDENT [PO2, p.55,

¶17]. Furthermore, on the 8th of December 2014, CLAIMANT not only had pre-orders for 6.500

RESPONDENT’s bottles, but also it had already accepted orders of 800 bottles, for which

customers were to pay a price up to 50% higher than the price of 2013 [PO2, p.53, ¶7]. In addition,

there had also been an increase by nearly 20% of the overall demand number of pre-orders since

2013.

217. The facts stated strongly suggest that CLAIMANT’s profits from sales are likely to have been

higher than the premium paid by SuperWines to RESPONDENT. Thereby, granting damages by

disgorging the profits made by RESPONDENT would not result in any unjust gain to CLAIMANT.

A.2. Additionally, CLAIMANT is entitled to disgorgement as an alternate of the Right to

Specific Performance

218. RESPONDENT’s wine is not replaceable in a reasonable period of time and is unique in character

for being the award winning wine of the year 2014, the Diamond Mata Weltin [PO2, p.54, ¶8].

CLAIMANT, as there was a wrongful termination of the Contract, sustains that it is entitled to

Specific Performance of the Contract under Article 28 CISG. Instead of compensating

CLAIMANT for an amount equivalent to RESPONDENT’s profit made as a result of breach of

Contract, mere compensatory ‘loss based’ damages [CISG, Art.75] are inadequate.


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219. In order to preserve the business relationship, CLAIMANT has opted to forfeit its Right to Specific

Performance. CLAIMANT is entitled to ‘gain-based’ damages which can be awarded as a

substitute for specific relief, or even as a surrogate in form of monetized ‘Specific Performance’.

220. As it is impossible at the present moment to provide an exact amount of profits in the case of second

sales, in casu the contract between RESPONDENT and SuperWines, disgorgement profits are no

less accurate than financial valuation, as in this case the lack of available data would make this

calculation very difficult [PO2, ¶13]. RESPONDENT’s profit from its transaction with

SuperWines is an appropriate estimation of CLAIMANT’s aggregate loss for two reasons, being:

firstly, disgorgement provides an actual indication of the market’s reaction to RESPONDENT’s

wine, reflecting the potential profit CLAIMANT could have obtained considering the wine’s

unique and extraordinary quality; secondly, disgorgement reflects the price that another company

would be willing to pay in order to occupy CLAIMANT’s market position. In conclusion,

disgorgement proves to be the appropriate tool for the calculation since CLAIMANT is only

required to ‘provide a basis upon which a tribunal can reasonably estimate the extent of damages’

[CISG-AC Op.6]. By all that has been described it is clear that CLAIMANT has discharged this

low onus by demonstrating the suitability of disgorgement of profits.

221. The aim of awarding damages is not only to compensate mathematical economic benefits, since it

would be unfair and manifestly insufficient, but also to address the interest of a party in

performance as required by the Contract, which is commonly known as the ‘Performance Principle’

and, additionally, this principle can be monetized by the Tribunal by awarding damages to

CLAIMANT as surrogate of Specific Performance.

222. Under Article 28 of CISG, disgorgement of profits can be enforced as an alternative remedy to the

Right of Specific Performance. The law of damages is increasingly accepting the notion that its

aim is to protect the interest in the performance of the Contractual obligation owed, as opposed to

being merely limited to the economic balance sheet to recover the loss suffered.

B. CLAIMANT’S SUBSTITUTE TRANSACTION LOSS IS COMPENSABLE

223. Article 77 CISG states an obligation to take reasonable measures to mitigate losses resulting from

breach of Contract by the other party. A claim for damages is, therefore, tested on the restriction

established in article 77 CISG.

224. The loss suffered by CLAIMAINT is compensable. To mitigate the loss CLAIMAINT established

contact with Vignobilia Pty Ltd, another top vineyard, immediately after receiving the letter dated

1 December 2014 by which RESPONDENT wrongfully terminated the Contract. The contact and

following agreement between the CLAIMANT and Vignobilia were done in order to secure the

pre-orders of the 5.500 bottles that RESPONDENT voluntarily and opportunistically did not fulfill.

Although the price of the bottles was similar, CLAIMAINT payed a higher price for 5.500 bottles.


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This translates into a loss of EUR 0,70 per bottle. According to the stated in Article 74 CISG, this

substitute transaction loss is compensable, otherwise there would be a clear violation of the

principle of full compensation.

225. As long as the substitute transaction is made in good faith, within a reasonable time and manner,

the duty to mitigate under Article 77 is deemed to be satisfied. In addition, as already stated, the

price of the substitute agreement is almost equal to the one of the Contract price with the

RESPONDENT, being considered as a ‘reasonable price’ [Sunflower seed case].

226. Accordingly, CLAIMAINT took reasonable measures to mitigate the loss. The reasonability can

be assessed by the fact that the bottles had a similar price and quality. Therefore, the requirements

listed in Article 77 CISG are fulfilled since CLAIMANT’s decision to enter into an alternative

transaction manifests an acceptable and reasonable bona fide attempt to mitigate the loss suffered

when the RESPONDENT failed to deliver the 5.500 bottles of Mata Weltin wine or an alternative

high-end wine, minimizing the amount of profit loss.

227. Nevertheless, CLAIMAINT accepted the pre-orders and guaranteed the fulfillment of the orders.

Costumers had pre-ordered Mata Weltin wine and CLAIMAINT was not able to meet their

expectations. The high-end wine market is largely based on trust. Not being able to sell Mata Weltin

wine bottles damaged the reputation of CLAIMAINT with its customers.

228. If full compensation reveals to be impossible to achieve, partial compensation seems to be preferable

to overcompensation as, in light of the principle of full compensation, damages must not place the

CLAIMAINT in a better position than that stipulated in contract [CISG-AC Op.6, ¶9]. Awarding

CLAIMANT damages in the amount of RESPONDENT’s extra profits would, in any way,

overcompensate the CLAIMANT, which is consistent with Article 74 CISG.

229. Moreover, RESPONDENT foresaw, or ought to have foreseen, the nature and extent of

CLAIMANT’s losses. Article 74 CISG states that damages shall not exceed the amount of loss that

was foreseeable in light of the facts that were to have been known by the party in breach at the

conclusion of the contract [Lookofsky, 2000]. RESPONDENT foresaw, or ought to have foreseen,

CLAIMANT’s lost profit in a substitute transaction as well as regarding its loss of market position.

230. RESPONDENT was aware that CLAIMANT was purchasing the wine and was not provided with

the quantity of wine requested. Loss of profit is particularly foreseeable due to the high demand for

RESPONDENT’s wine [Cl. Ex. 7], and this fact was known at the conclusion of the Framework

Agreement. In addition, RESPONDENT is well aware of the reasons that upheld the ‘formal’ way

of settling the Contract to maintain certainty in supply of bottles [PO2, p.23, ¶56]. RESPONDENT

was also aware that CLAIMANT specifically tailored its business to provide wine to collectors

[PO2, ¶52], so it ought to have been foreseeable that CLAIMANT would purchase wine of similar

quality, taking the inherent higher price in doing so, in order to supply the wine bottles to its

‘Collector’s Club’ and secure jeopardize its reputation.


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231. Therefore, the Tribunal is requested to award ‘gain-based’ damages in the light of profits made by

RESPONDENT as a result of breach of Contract. Alternatively, the Tribunal can assess the

compensation based on the universal principle of Equity, ‘commodum ex injuria sua non habere

debet’ (a wrongdoer should not be enabled by law to take any advantage from his action).

C. CLAIMANT’S LOSS OF MARKET POSITION IS COMPENSABLE ACCORDING

WITH THE GENERAL PRINCIPLE OF FULL COMPENSATION

232. CLAIMANT’s loss of market position is compensable in accordance with the performance principle.

A Party’s loss of market share may be characterized as a loss of future profit [ICC Rules]. In spite

of this, loss of market position needs to be considered separately since its recoverability will

certainly be more controversial than traditional lost profits. The calculation of this damage will

require abstract methods of loss calculation. The controversy in assessing the compensation

regarding CLAIMAINT’s loss of reputation is the fact that speculation plays a large role in

evaluating this specific loss. However, since the CLAIMANT would have occupied a superior

marked position had the Contract been performed, recovery of losses thereby caused are

compensable under article 74 CISG, in light of the performance principle.

233. RESPONDENT, according to the requested in article 74, foresaw, or ought to have foreseen, that

if it refused to deliver the agreed number of bottles of wine, CLAIMANT would lose market

position. It is known by RESPONDENT that CLAIMANT entered into the Framework Agreement

in order to secure a set number of bottles per year. Therefore, it is foreseeable that if

RESPONDENT failed to comply with its stipulated obligations, CLAIMANT most probably would

suffer losses related to the non-fulfilment of the promise, and its inability to give response to

customers, by not securing supply. This assumption is particularly clear in light of CLAIMANT’s

role in the collector’s market, and CLAIMANT’s business model, which was known to

RESPONDENT at the conclusion of the contact [PO2, ¶52]. A market such as the collector’s

market values primarily the security of having a stable supply of top-end wines, thereby

guaranteeing market position through this advantage. Therefore, RESPONDENT ought to have

foreseen the potential for CLAIMANT to lose market share.

234. The extent of CLAIMANT’s loss of profit, substitute transaction loss, and loss of market position

were all foreseeable. In fact, foreseeability of loss under the CISG extends to foreseeability of

extent of the loss, and damages are only available ‘to the extent that the seller should have foreseen’

[SCHNEIDER]. There are no facts that infer that CLAIMANT’s losses are unusually high.

Accordingly, as the loss was foreseeable and the losses were not particularly high, the extent of the

losses is the foreseeable consequence of the breach of the contract.

235. The Tribunal should award damages to CLAIMANT considering the article 74 CISG, which requires

that damages shall not exceed the amount of loss that was foreseeable. RESPONDENT foresaw,


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or ought to have foreseen, the upcoming damages due to its contract with SuperWines and failure

to fulfill the obligations implied in the Contract with CLAIMANT.

CONCLUSION: THE ‘DISGORGEMENT OF PROFITS’ AS A REMEDY UNDER

ARTICLE 74 CISG IS IN CONSONANCE WITH THE INTERNATIONAL CHARACTER

OF CISG

236. The damages which are recoverable under Article 75 are not adequate to compensate CLAIMANT

for ‘non-economic’ losses suffered in consequence of breach of Contract. The Tribunal is requested

to award ‘gain-based’ damages regarding the profits made by RESPONDENT as a result of breach

of Contract. The ‘disgorgement of profits’ as a remedy under Article 74 CISG is in consonance

with the International Character of CISG, and should be addressed by the Tribunal.

REQUEST FOR RELIEF

In light of the above submissions, CLAIMANT respectfully requests the Tribunal to:

(i) Order RESPONDENT to produce the requested documents;

(ii) Find that CLAIMANT is entitled to the damages for litigation costs of USD 50,280

incurred in the application for interim relief and in the successful defense against the

proceedings initiated by RESPONDENT in the High Court of Capital City, Mediterraneo;

(iii) Find that CLAIMANT is entitled to claim the profits RESPONDENT made by selling

5,500 bottles of Mata Weltin 2014 to SuperWines as part of CLAIMANT’S damages.

Vindobona, Danubia

16 April 2016 Respectfully submitted,

António Biason

Catarina Morão

Mariana Sampaio

Ricardo Pinto Lobato

Counsel for Kaihari Waina Ltd.