the 9th lawasia international moot...

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THE 9TH

LAWASIA INTERNATIONAL MOOT COMPETITION

KUALA LUMPUR REGIONAL CENTRE FOR ARBITRATION

2014

BETWEEN

THE VICTIMS AND THEIR FAMILIES

(CLAIMANT)

AND

SPEAR SHIRTS INC.

(RESPONDENT)

MEMORIAL FOR THE RESPONDENT

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TABLE OF CONTENTS

TABLE OF AUTHORITIES .................................................................................................. 4

STATEMENT OF JURISDICTION ...................................................................................... 7

QUESTIONS PRESENTED ................................................................................................... 8

STATEMENT OF FACTS ...................................................................................................... 9

SUMMARY OF PLEADINGS ............................................................................................. 11

PLEADINGS .......................................................................................................................... 13

I. THE PROCEDURAL LAW OF THIS ARBITRATION IS THE LAW OF THE

KINGDOM OF THAILAND ............................................................................................ 13

A. The Parties have agreed on Thailand as the seat of arbitration ......................... 13

B. In the alternative, Thailand is the appropriate seat of arbitration ..................... 14

II. THE VICTIMS AND THEIR FAMILIES MAY NOT BE JOINED IN THE

PRESENT ARBITRAL PROCEEDINGS ....................................................................... 15

A. The victims and their families are not Parties to the agreement as they are non-

signatories........................................................................................................................ 15

B. The Tribunal should not permit joinder as it would be prejudicial to the

Respondents ..................................................................................................................... 16

C. ICSTW may enter arbitration only on behalf of the 13 claimants ..................... 17

III. THE TRIBUNAL MAY NOT INCORPORATE THE VICTIMS’ CLAIMS IN

THE CURRENT PROCEEDING THROUGH A CLASS ARBITRATION ............... 18

A. Thai law does not provide for class action arbitration ........................................ 19

B. The Parties did not agree to a class arbitration ................................................... 19

IV. THE SUBSTANTIVE LAWS OF THE KINGDOM OF THAILAND APPLY

TO THIS DISPUTE ........................................................................................................... 20

A. The tribunal should apply the conflict of laws rules of Thailand....................... 21

V. THE RESPONDENT IS NOT LIABLE FOR THE INJURIES AND DEATHS

OF MAE SOT’S EMPLOYEES AS IT IS NOT A JOINT ACTOR PURSUANT TO

SECTION 432 OF THE TCCC ........................................................................................ 23

A. The Respondent is not a principal of Mae Sot..................................................... 24

(1) The buyer-seller relationship between Mae Sot and the Respondent cannot be

characterized as a principal-agent relationship .......................................................... 24

(2) There was no contract in existence at the time of the offence ........................... 26

B. Even if the Tribunal finds that a principal-agent relationship exists, Mae Sot

remains solely liable for its negligence .......................................................................... 27

VI. THE TRIBUNAL SHOULD NOT GRANT THE CLAIMANTS THE FULL

EXTENT OF DAMAGES FOR PECUNIARY AND NON-PECUNIARY LOSS, AND

DOES NOT HAVE THE POWER TO AWARD PUNITIVE DAMAGES.................. 28

A. The Tribunal may not award lifetime damages for pecuniary loss if, at the time

of the incident, the injured worker had a chance of recovery. ...................................... 28

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B. The victims’ families may not claim for loss of care, comfort, and

companionship ................................................................................................................ 29

C. The Tribunal should not allow the award of punitive damages to the victims and

their families .................................................................................................................... 30

(1) Under Thai law, the doctrine of punitive damages does not apply to wrongful

acts ............................................................................................................................ 30

(2) The aim of the doctrine of punitive damages to punish is inconsistent with the

compensatory principle of Thailand civil law ............................................................. 31

PRAYER FOR RELIEF........................................................................................................ 32

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TABLE OF AUTHORITIES

Rules

Act on Conflict of Laws, B.E. 2481......................................................................................... 20

Arbitration Act, B.E. 2545 ........................................................................................... 12, 18, 19

Civil and Commercial Code ................................................................................... 21, 22, 25, 28

Federal Arbitration Act ............................................................................................................ 18

Kuala Lumpur Regional Centre for Arbitration Rules .......................................... 11, 12, 13, 19

Liability for Damages Arising from Unsafe Products Act,B.E. 2551 ..................................... 28

Restatement (Second) of Torts................................................................................................. 26

Books and Authoritative Texts

Bernard Hanotiau, Complex Arbitrations: Multiparty, Multicontract, Multi-Issue and Class

Actions (Kluwer Law International 2006) ........................................................................... 15

Dicey, Morris and Collins, The Conflict of Laws (Sweet and Maxwell, 15th

Ed, Vol 1, 2012)

.............................................................................................................................................. 19

Gary B. Born, International Arbitration: Cases and Materials (Kluwer Law International,

2011) .................................................................................................................................... 12

Gary B. Born, International Arbitration: Law and Practice (Kluwer Law International, 2012)

.............................................................................................................................................. 17

Gary B. Born, International Commercial Arbitration (Kluwer Law International, 2014, 2nd

Ed) ........................................................................................................................................ 12

Gary B. Born, International Commercial Arbitration, (Kluwer Law International, 2009) .... 19,

20

Paijit Boonyapan, Explanation Civil and Commercial Code: Tort (Nitibunnakarn Publisher,

Bangkok, 12th

Ed, 2005) ...................................................................................................... 29

Articles

Alongkorn Tongmee, “Legal Liability of Riot Leaders” (Tilleke & Gibbins) (10 September

2010). ................................................................................................................................... 21

Chukiert Ratanachaichan, “A Primer On The Thai Draft Law On Class Action” (ASEAN

Law Association) (2001)...................................................................................................... 17

Dominique T. Hascher, “Consolidation of Arbitration by American Courts: Fostering or

Hampering International Commercial Arbitration?” Journal of International Arbitration

(Kluwer Law International 1984, Volume 1 Issue 2) .......................................................... 15

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Eric Rasmussen,”Agency Law and Contract Formation” 6 Am. L. & Econ. Rev. 382 (2004).

.............................................................................................................................................. 23

Isara Lovanich, “Personal Injury and Damages for Non-pecuniary Loss in the Law of Torts

and Product Liability Law,” [2013] Thailand Law Journal Fall Issue 1 Volume 16 ........... 27

Omar Abel Morales Lurssen, “Comparative Study on Agency”, Thesis for the Master of

Laws in International Trade Law, The University of Arizona, 2008 ................................... 24

Russell J. Weintraub, “Choice of Law for Quantification of Damages: A Judgment of the

House of Lords Makes a Bad Rule Worse”......................................................................... 26

Sommanat Juaseekoon, “Recent Developments of Legal System in Thailand, ASEAN Law

Association 10th

General Assembly" (2009). ....................................................................... 17

Worrawong Atcharawongchai, “The Non-Pecuniary Damages in Wrongful Acts Causing

Bodily Harm and Death: The Comparative Study on U.S. and Thailand Laws” (2013)

Thailand Law Journal Spring Issue 1 Vol 16....................................................................... 21

Arbitral Decisions

Award in ICC Case No. 8619 (1997)....................................................................................... 19

Banque Arab et Internationale d’Investissement v Inter-Arab Investment Guarantee Corp,

award of 17 November 1994................................................................................................ 14

ICC Arbitral Award Case No. 8113 of 1995 ........................................................................... 20

ICC Case No. 5505, Preliminary Award, 1987 ....................................................................... 11

Interim Award in ICC Case No. 6149 ..................................................................................... 20

National Court Decisions

Stolt-Nielsen SA v AnimalFeeds International Corporation ( No. 08-1198 ) 548 F. 3d 85. ... 18

Thailand Supreme Court Decision No. 1550/2518 .................................................................. 28

Thailand Supreme Court Decision No. 292/2502 .................................................................... 28





Other Authorities

Chirachai Okanurak, Kanit Vallayapet, Wynn Pakdeejit & Manu Rakwattanakul, “Dispute

Resolution Around The World: Thailand” (Baker & Mckenzie) (2011) ............................. 16

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Herbert Smith Freehills LLP, Hong Kong, “Class Action Reform in Asia” (2007) ............... 17

UNCITRAL Notes on Organizing Arbitral Proceedings, U.N. Doc. V.96-84935, U.N. Sales

No. E.97.V.11 (1996). .......................................................................................................... 12

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STATEMENT OF JURISDICTION

The victims and their families (“Claimants”) and Spear Shirts Inc. (“Respondent”) have

agreed to submit the present dispute to arbitration in accordance with the Kuala Lumpur

Regional Centre for Arbitration Rules (“KLRCA Rules”).

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QUESTIONS PRESENTED

1. Whether the parties agreed on a seat of arbitration.

2. Whether a large number of claimants can be joined in a single arbitration:

a. whether the victims and their families are parties to the arbitration agreement.

3. Whether a large number of claimants can be incorporated in the present proceedings

through a class action arbitration.

4. Whether the dispute is to be governed by the substantive laws of the Kingdom of

Thailand:

a. whether the Tribunal should apply the conflict of laws rules of Thailand.

5. Whether the Respondent is liable for the injuries and deaths of Mae Sot’s employees:

a. whether the Respondent and Mae Sot were joint actors pursuant to Section 432 of

the Thai Civil and Commercial Code; and

b. whether the Respondent is Mae Sot’s principal.

6. Whether the victims and their families may recover specific forms of monetary damages:

a. whether damages for pecuniary loss is recoverable;

b. whether damages for non-pecuniary loss is recoverable; and

c. whether punitive damages are recoverable.

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STATEMENT OF FACTS

1. The victims and their families (“the Claimants”) are the employees, or the family of

employees, of Mae Sot Clothing Ltd, the largest of the more than 100 clothing factories

in and around Mae Sot, a town in Thailand. Mae Sot produced clothes for a number of

world famous clothing companies.

2. The Respondent is Spear Shirts Inc., a well-known clothing wholesaler and retailer

based in Los Angeles, California. Mae Sot Clothing Ltd was one of the Respondent’s

suppliers and had been dealing with the Respondent for about 10 years. The

Respondent’s relationship with Mae Sot Clothing Ltd is governed by a series of

Standard Purchase Orders, used by the Respondent for all of its suppliers. Such orders

are usually filled within 60 days of receipt. The most recent Standard Purchase Order

was sent by fax from the Respondents to Mae Sot Clothing Ltd on 1 April, 2013.

3. On 15 October 2013, a fire broke out at the Mae Sot factory. Fifty employees lost their

lives in the fire, while a hundred more were injured. The Parties have accepted an

independent auditor’s determination that the condition of the factory at the relevant

time was the major factor behind the many injuries and deaths.

4. Several months before the fire, Theodore Snowden, an assistant to Joe Baydon, Vice

President in charge of purchasing at Spear Shirts, made an informal trip to the Mae Sot

factory while on vacation. Mr Snowden made several off-hand observations pertaining

to the condition of the factory, including remarks about its cluttered state and the

youthful appearances of some of the workers. He also conveyed Mae Sot Clothing

Ltd’s GM’s assurance that the women were all above the legal age. These are

documented in a text message to Mr Baydon.

5. Having determined that Mae Sot Clothing Ltd is impecunious, the Claimants now assert

that the Respondent, as a mere customer of Mae Sot, is in some way responsible for the

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grievous hurt suffered by the victims of the fire. However, there exists no contractual

relationship between the Claimants and the Respondent. Additionally, at the time of the

fire, there was no contract in existence between Mae Sot and the Respondent. Taking

into account the usual time of 45 to 60 days taken to fulfill an order, and the fact that

the last order was placed on 1 April 2013, the contractual relationship between Mae Sot

Clothing Ltd and the Respondent had already come to an end by the time the fire

occurred on 15 October 2013. Further, Mae Sot Clothing Ltd was making shirts for at

least five companies at the time of the fire.

6. The Parties have agreed to submit the dispute to binding arbitration in Bangkok in

accordance with the KLRCA Arbitration Rules under the supervision of the Thai

Arbitration Institute.

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SUMMARY OF PLEADINGS

A. The procedural law of this arbitration is law of the Kingdom of Thailand

The procedural law governing this arbitration is the law of the Kingdom of Thailand

(“Thai procedural law”). The Parties, in choosing the venue of the arbitration to be

Thailand, have agreed on Thailand as the seat of arbitration. This dispute is arbitrable

under Thai procedural law and gives effect to Parties’ intention. Even if the Tribunal

does not find that the Parties so agreed, Thailand is nevertheless the appropriate seat

of arbitration. As the procedural law governing an arbitration follows the seat of

arbitration, Thai procedural law applies.

B. The Tribunal may not allow joinder of the victims and their families to the

arbitration

The Tribunal may not permit joinder as the victims and their families are non-

signatories to the arbitration agreement and accordingly, are not Parties to it. The

Tribunal should not permit joinder as it would be prejudicial to the Respondent. It

follows that the International Collective in Support of Textile Workers (“ICSTW”)

may only enter arbitration proceedings on behalf of the 13 claimants.

C. The Tribunal may not incorporate the claims of the victims and their families

through a class action arbitration

The Tribunal may not allow the 13 claimants to pursue class arbitration to claim on

behalf of all the victims and their families. This is because Thai law does not provide

for class arbitration. Further, the Tribunal may not permit class arbitration as the

Parties did not agree to one.

D. The substantive laws of the Kingdom of Thailand apply to this dispute

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The Tribunal may apply the conflict of laws rules it deems appropriate to determine the

law applicable to the dispute. The Tribunal should apply the conflict of laws rules of

Thailand, the arbitral seat, as this is internationally accepted practice. Thailand is also

the country most closely connected with the dispute. The application of Thai conflict of

laws rules determines that Thai substantive law governs this dispute.

E. The Respondent is not liable for the injuries and deaths of Mae Sot’s employees

The Respondent is not a joint actor in Mae Sot’s wrongful act pursuant to Section 432

of the Thai Civil and Commercial Code B.E. 2551 (“the TCCC”). The Respondent has

no duty to take action to remedy the conditions of the factory as it is not a principal of

Mae Sot. Even if the Tribunal finds that a principal-agent relationship exists between

the Respondent and Mae Sot, Mae Sot remains solely liable pursuant to Section 812 of

the TCCC.

F. The Tribunal should not grant the Claimants the full extent of damages for

pecuniary and non-pecuniary loss, and may not award punitive damages

The Tribunal should not grant lifetime damages for loss of income where claimants

have a chance of recovery. Under Thai law, the Tribunal may not award damages for

loss of care, comfort, or companionship to the victims’ families. The Tribunal also may

not award punitive damages.

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PLEADINGS

I. THE PROCEDURAL LAW OF THIS ARBITRATION IS THE LAW OF THE

KINGDOM OF THAILAND

1. The procedural law that governs arbitration proceedings is the law of the seat of

arbitration. The Respondent and the victims and their families (each a “Party” and

collectively, “the Parties”) have agreed on Thailand as the seat of arbitration (A). Even

if this tribunal (“the Tribunal”) does not find that the Parties so agreed, Thailand is

nevertheless the appropriate seat of arbitration (B).

A. The Parties have agreed on Thailand as the seat of arbitration

2. Rule 6(1) of the Kuala Lumpur Regional Centre for Arbitration Rules (“the KLRCA

Rules”) states that parties may agree on the seat of arbitration. Failing such agreement,

the seat shall be Kuala Lumpur, Malaysia, unless the tribunal determines that another

seat is appropriate.

3. It is trite that where the parties specify a location for arbitration in their arbitration

agreement, that location is taken to be the seat of arbitration. In ICC Case No. 5505 of

1987,1 the arbitration agreement between the parties stated that “[t]he arbitration will

take place in Switzerland, the law applicable is that known in England.” The tribunal

found that “[t]he choice of Switzerland as the place of arbitration implied in any case

the application of the Swiss mandatory provisions”.

4. In the present case, the Parties have agreed “to submit this dispute to binding arbitration

in Bangkok”.2 Following ICC Case No. 5505 of 1987, the location specified in the

Parties’ arbitration – Bangkok, Thailand – is taken to be the seat of arbitration.

1 ICC Case No. 5505, Preliminary Award, 1987, 13 Y.B. Com.Arb. 110.

2 Clarifications to Moot Problem (“Clarifications”) “The Arbitration”, C-1.

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5. Accordingly, the choice of Bangkok as the seat of arbitration implies the application of

the procedural law of the Kingdom of Thailand (“Thai procedural law”).

B. In the alternative, Thailand is the appropriate seat of arbitration

6. Thailand is the Parties’ chosen lex arbitri and the most appropriate seat of arbitration.

7. Neither the Thai Arbitration Act, B.E. 2545 (“the Thai Arbitration Act”) nor the

KLRCA Rules provide guidance on determining the appropriate seat of arbitration.

However, the internationally accepted3 UNCITRAL Notes on Organizing Arbitral

Proceedings (“the Notes”)4 lay out the following relevant considerations:

(a) the convenience of the parties and the arbitrators, including the travel distances;

and

(b) the location of the subject-matter in dispute and any relevant evidence.

8. These two factors point towards Thailand as the appropriate seat of arbitration.

9. First, the victims and their families are located in Thailand and in neighbouring

Myanmar.5 It follows that Thailand is the most convenient location considering the

number of claimants to the present arbitration. Proceedings conducted outside Thailand

would be cost-prohibitive to the Parties, and could bear heavily on the smooth progress

of the arbitration.6

3 Gary B. Born, International Commercial Arbitration (Kluwer Law International, 2014, 2

nd Ed) at p. 2100.

4 UNCITRAL Notes on Organizing Arbitral Proceedings, U.N. Doc. V.96-84935, U.N. Sales No. E.97.V.11

(1996). 5 Moot Problem, para 1.

6 Gary B. Born, International Arbitration: Cases and Materials (Kluwer Law International, 2011) at Chapter 7:

Selection of Arbitral Seat in International Arbitration at p. 535.

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10. Second, the subject-matter of the dispute, the Mae Sot factory, is located in Thailand.7

The overwhelming majority of witnesses and most of the evidence will be located in

Thailand.

11. Thus, Thailand is the appropriate seat of arbitration. Accordingly, Thai procedural law

applies to the present dispute.

II. THE VICTIMS AND THEIR FAMILIES MAY NOT BE JOINED IN THE

PRESENT ARBITRAL PROCEEDINGS

12. The Tribunal may not permit joinder of all the victims and their families to the present

arbitration. Joinder may not be allowed because the victims and their families are not

Parties to the arbitration agreement as they are non-signatories (A). The International

Collective in Support of Textile Workers (“ICSTW”) may only enter arbitration

proceedings on behalf of the 13 claimants (B).

A. The victims and their families are not Parties to the agreement as they are non-

signatories

13. Joinder is provided for in Article 17(5) of the UNCITRAL Rules of Arbitration, which

is included in Part II of the KLRCA Rules. Article 17(5) states:

The arbitral tribunal may, at the request of any party, allow one or more

third persons to be joined in the arbitration as a party provided such

person is a party to the arbitration agreement unless the arbitral

tribunal finds … that joinder should not be permitted because of

prejudice to any of those parties. [emphasis added]

14. In an Ad Hoc (UNCITRAL) Award of 17 November 1994,8 the arbitral tribunal pointed

out that arbitration is consensual and that only those who are parties to the arbitration

7 Moot Problem, para 1.

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agreement expressed in writing may appear in the arbitral proceedings. The arbitral

tribunal concluded that parties who did not sign the arbitration agreement – either

directly or through a written power of attorney entitling a signatory to sign the

arbitration agreement on their behalf – could not participate in the arbitration. This is

consistent with Section 11 of the Thai Arbitration Act, which states that the arbitration

agreement must be in writing, and signed by the parties.

15. In the present case, the victims and their families that the ICSTW now seek to join to

the present proceedings have not signed the arbitration agreement. Accordingly, they

are precluded from participating in the arbitration.

16. Further, the Respondent has not consented to arbitration with this indeterminate and

unstipulated number of claimants. The Tribunal should not subvert the concept of

arbitration – a consensual means of finally resolving a dispute – by allowing these

victims and families to be joined in the present proceedings.

B. The Tribunal should not permit joinder as it would be prejudicial to the Respondents

17. Article 17(5) of the UNCITRAL Rules states that the Tribunal should not permit

joinder where it finds that it would be prejudicial to one of the parties. Joinder would be

prejudicial to the Respondent.

18. Firstly, joinder in the present case would essentially mean that an indeterminate number

of claimants would be joined as party to the proceedings. As established above, the

Respondent did not, and could not have, agreed to arbitrate with an indeterminate

number of claimants. Secondly, joinder would also invariably increase the

8 Banque Arab et Internationale d’Investissement v Inter-Arab Investment Guarantee Corp, award of 17

November 1994, 21 Y.B. Com. Arb. 13 (1996).

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Respondent’s legal cost due to invariably extended and complicated arbitral

proceedings.9

19. Thirdly, if joinder were permitted the Respondent would be faced with an indeterminate

and possibly massive liability. It could not have contemplated the scope of this liability

when it entered into the arbitration agreement with ICSTW as ICSTW did not specify

that it was acting on behalf of all the victims and their families.

20. In conclusion, the Tribunal should not permit joinder as it would be prejudicial to the

Respondents.

C. ICSTW may enter arbitration only on behalf of the 13 claimants

21. Non-signatories have been found to be parties to an arbitration agreement where such

arbitration agreement was signed by their agent.10

ICSTW is acting as an agent for the

13 claimants who signed a statement giving it “full authority” to represent them (“the

13 claimants”).

22. Section 797 of the Thai Civil and Commercial Code (“the TCCC”) defines agency as “a

contract whereby a person, called the agent, has authority to act for another person,

called the principal, and agrees so to act.”

23. Section 798 of the TCCC stipulates that where any agreement is required to be

evidenced by writing, the appointment of an agent for entering such an agreement must

also be evidenced by writing. Section 11 of the Thai Arbitration Act requires arbitration

agreements to be in writing. However, Section 801 of the TCCC states that an agent

who has general authority may not enter arbitration proceedings on behalf of his

9 Dominique T. Hascher, “Consolidation of Arbitration by American Courts: Fostering or Hampering

International Commercial Arbitration?” Journal of International Arbitration (Kluwer Law International 1984,

Volume 1 Issue 2) at p. 135. 10

Bernard Hanotiau, Complex Arbitrations: Multiparty, Multicontract, Multi-Issue and Class Actions (Kluwer

Law International 2006) at Chapter I: Who are the Parties to the Contract(s) or to the Arbitration Clause(s)

Contained Therein? The Theories Applied by Courts and Arbitral Tribunals at p. 10.

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principal. A person who wishes to enter proceedings on another person’s behalf would

require “special authority” under Section 800 of the TCCC. “Special authority” requires

a power of attorney signed by the principal and notarized, authorizing the agent to act

on his behalf.11

24. On the facts, only the 13 claimants had “signed a statement (under oath) giving

[ICSTW] “full authority” to represent [them] in their dispute with [the Respondent]”.12

The Respondent agreed to submit this dispute to arbitration with ICSTW on the premise

that it had been vested the authority to enter into arbitration proceedings by these 13

claimants. This gives the Respondent assurance that the claimants have locus standi in

the arbitration.

25. Where the identities of the victims and their families who now wish to be incorporated

in the present proceedings are not revealed, as in this case, the Respondent cannot test

the veracity of their claims. The Respondent thus relies on ICSTW to properly vet these

alleged claims. This ensures that only proper claimants with locus standi are joined to

the arbitration.

26. Thus, ICSTW may not enter proceedings on behalf of the 13 claimants, but not the

indeterminate and unidentified number of victims and their families.

III. THE TRIBUNAL MAY NOT INCORPORATE THE VICTIMS’ CLAIMS IN

THE CURRENT PROCEEDING THROUGH A CLASS ARBITRATION

27. The 13 claimants may not pursue a class arbitration to claim on the behalf of all the

victims and their families. This is because Thai law does not provide for any form of

class arbitration (A). Additionally, the Tribunal may not permit class arbitration as the

Parties did not agree to one (B).

11

Chirachai Okanurak, Kanit Vallayapet, Wynn Pakdeejit & Manu Rakwattanakul, “Dispute Resolution Around

The World: Thailand” (Baker & Mckenzie) (2011) at p. 6. 12

Further Clarifications, D-1.

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A. Thai law does not provide for class action arbitration

28. Class action arbitrations are not allowed under Thai law. In 2001, a class action bill was

drafted by the Committee for Revision of the Civil Procedure Code.13 In 2004, the Council

of Ministers of Thailand approved in principle a draft legislation on class action lawsuits

later on, but to date, legislative reform has yet to come into force.14 . There are currently no

specific class action provisions existing in Thai law, and thus, class actions are not

recognized.15

29. As Thailand is a civil law jurisdiction, statutory law is the only legitimate source of

power for legal proceedings.16

As this Tribunal is bound to follow Thai procedural law,

it does not have the power to permit class arbitration.

B. The Parties did not agree to a class arbitration

30. The power of an arbitral tribunal derives from the agreement of the parties to submit a

particular dispute to arbitration.17

The jurisdiction of the Tribunal is thus confined to

the boundaries set by the Parties. The arbitration agreement does not expressly provide

for class arbitration and the terms of the arbitration agreement do not suggest that the

Parties intended for one to be conducted.

31. The present case mirrors the US Supreme Court decision of Stolt-Nielsen SA v.

AnimalFeeds (“Stolt-Nielsen”).18

Stolt-Nielsen involved an application for a certiorari

of an arbitral award allowing class arbitration where the arbitration agreement was

13

Chukiert Ratanachaichan, “A Primer On The Thai Draft Law On Class Action” (ASEAN Law Association)

(2001). 14

Ibid. 15

Herbert Smith Freehills LLP, Hong Kong, “Class Action Reform in Asia” (2007). 16

Sommanat Juaseekoon, “Recent Developments of Legal System in Thailand, ASEAN Law Association 10th

General Assembly" (2009). 17

Gary B. Born, International Arbitration: Law and Practice (Kluwer Law International, 2012) at Chapter 1:

Introduction to International Arbitration at pp. 3-42. 18

Stolt-Nielsen SA v AnimalFeeds International Corporation (No. 08-1198 ) 548 F. 3d 85.

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silent on the issue of class arbitration. The Supreme Court found that the arbitral

tribunal’s decision to allow class arbitration despite the lack of an express provision

went against the consensual nature of arbitration as stated under the American Federal

Arbitration Act.19

The tribunal could not, from the words of the arbitration agreement

alone, imply consent to class arbitration.

32. The argument in Stolt-Nielsen applies to the present case. Section 34 of the Thai

Arbitration Act similarly preserves the consensual nature of arbitration, and states that

the tribunal must decide the dispute “in accordance with the terms of the contract”.20

33. Here, the Parties’ arbitration agreement here is silent as to whether class arbitration is

allowed. In the absence of such agreement, following Stolt-Nielsen, the Tribunal may

not incorporate the victims and their families in the present proceedings though a class

action arbitration.

IV. THE SUBSTANTIVE LAWS OF THE KINGDOM OF THAILAND APPLY TO

THIS DISPUTE

34. The laws of the Kingdom of Thailand (“Thai substantive law”) apply to this dispute.

Article 35 of the KLRCA Rules state that, in the absence of Parties’ agreement, the

tribunal must use conflict of laws rules to determine the applicable substantive law.

35. The Tribunal should apply the conflict of laws rules of Thailand, the arbitral seat, to

determine the substantive law applicable in the present case (A). Thai conflict of laws

rules determine that Thai substantive law governs this dispute (B).

19

Federal Arbitration Act, 9 U.S.C. §§ 1-16 (“FAA”), “[A] party may not be compelled … to submit to class

arbitration unless there is a contractual basis for concluding that the party agreed to do so”. 20

Arbitration Act B.E. 2545 (2002) (Thailand) (“TAA”), Section 34, para 4.

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A. The tribunal should apply the conflict of laws rules of Thailand

36. Article 35 of the KLRCA Rules states that where Parties have not expressed their

choice of substantive law, the arbitral tribunal shall apply the law it determines to be

appropriate. Section 34 of the Thai Arbitration Act further specifies that where parties

fail to designate the substantive law, the arbitral tribunal “shall apply the law

determined by the conflict of laws rules which it considers applicable”.21

This invites a

preliminary step in the choice of law process wherein the tribunal must first determine

the applicable conflicts of laws rules, before applying those rules to determine the

applicable substantive law.22

In the present case, the conflict of law rules of Thailand,

the arbitral seat, should be applied. This is because, in the absence of more, the Parties’

choice of arbitral seat may reasonably imply the intention to apply the seat’s conflict of

law rules.23

37. Here, the parties have expressly chosen Thailand as the arbitral seat in their arbitration

agreement.24

Accordingly, the Tribunal should apply the Thai conflict of laws rules.

(1) The close connection test supports the application of Thai conflict of laws rules

38. Professor Gary Born proposes the close connection test to determine the applicable

conflicts of laws rule.25

This test has been adopted by arbitral tribunals

internationally.26

39. In ICC Arbitral Award Case No. 8113 of 1995, the arbitration, though seated in

Switzerland, concerned a dispute arising from an agreement to open a plant in Syria.

21

Id, at Section 34. 22

Dicey, Morris and Collins, The Conflict of Laws (Sweet and Maxwell, 15th

Ed, Vol 1, 2012) at p. 853. 23

Gary B. Born, International Commercial Arbitration (Kluwer Law International, 2009) at p. 2646. See also

Award in ICC Case No. 8619 (1997).

24 Clarifications, C-1.

25 Gary B. Born, International Commercial Arbitration (Kluwer Law International, 2009) (“International

Commercial Arbitration”) at p. 2132. 26

Interim Award in ICC Case No. 6149, XX Y.B Comm.Arb. 41 (1995).

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The tribunal then concluded that Syrian conflict of laws rules applied to determine the

law applicable to the dispute, as Syria was the country most closely connected to the

dispute. This method is consistent with international practice, and the Tribunal should

adopt this approach.

40. In the present case, Thailand is the jurisdiction that is most closely connected with the

dispute. The subject matter of the dispute, the Mae Sot factory fire, and any relevant

evidence is located in Thailand. The victims and their families are located in Thailand.

Accordingly, the Tribunal should apply the Thai conflict of laws rules.

B. Thai conflict of laws rules determine that Thai substantive law governs the dispute

41. Section 15 of the Thai Act on Conflict of Laws, B.E. 2481 (“the Thai Conflict of Laws

Act”) states that “an obligation arising from a wrongful act committed by a person is

governed by the law of the place where the essential elements constituting the wrongful

act were committed”.27

42. A wrongful act is defined in Section 420 of the TCCC, which states that “a person who,

wilfully or negligently, unlawfully injures the life, body, health, liberty, property or any

right of another person, is said to commit a wrongful act and is bound to make

compensation therefore”.28

It is common ground that the negligent or possibly grossly

negligent29

manner in which the Mae Sot factory was operated was a major factor that

“caused or contributed to the injuries and fatalities caused by the fire”.30

This

27

Conflict of Laws Act B.E. 2481 (1938) (Thailand), Section 15. 28

Thailand Civil and Commercial Code (“TCCC”), Section 420. 29

Moot Problem, p. 5. 30

Moot Problem, para 5(1).

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establishes the elements of negligence, causation, and damage in Section 420 of the

TCCC.31

43. Hence, the application of Thai conflict of laws rules determines that Thai substantive

law governs this dispute.

V. THE RESPONDENT IS NOT LIABLE FOR THE INJURIES AND DEATHS OF

MAE SOT’S EMPLOYEES AS IT IS NOT A JOINT ACTOR PURSUANT TO

SECTION 432 OF THE TCCC

44. Section 420 of the TCCC states that “a person who, wilfully or negligently, unlawfully

injures the life, body, health, liberty, property or any right of another person, is said to

commit a wrongful act and is bound to make compensation therefore”.32

45. Section 432 of the TCCC states that persons who jointly commit a wrongful act are

jointly bound to make compensation for any damage caused. Persons who instigate or

assist in a wrongful act are deemed to be joint actors. Assistance comprises actions or

omissions.33

46. The 13 claimants may allege that the Respondent is a joint actor in Mae Sot’s wrongful

act by virtue of its omission to act despite knowledge of the negligent manner in which

the Mae Sot factory was run. However, whether the Respondent owes Mae Sot a duty

to act depends on the relationship existing between them.

47. The Respondent has no duty to take action as it is not a principal of Mae Sot (A). Even

if the Tribunal finds that a principal-agent relationship exists, Mae Sot remains solely

liable pursuant to Section 812 of the TCCC (B).

31

Worrawong Atcharawongchai, “The Non-Pecuniary Damages in Wrongful Acts Causing Bodily Harm and

Death: The Comparative Study on U.S. and Thailand Laws” (2013) Thailand Law Journal Spring Issue 1 Vol

16. 32

TCCC, Section 420. 33

Alongkorn Tongmee, “Legal Liability of Riot Leaders” (Tilleke & Gibbins) (10 September 2010).

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A. The Respondent is not a principal of Mae Sot

48. Section 425 of the TCCC states that “an employer is jointly liable with his employee

for the consequences of a wrongful act committed by such an employee in the course of

his employment”.34

Section 427 states that Section 425 “shall apply mutatis mutandis to

principal and agent”. Read together, these sections establish joint liability on a principal

for the consequences of a wrongful act committed by his agent acting within his

authority.35

49. However, the relationship between Mae Sot and the Respondent is not one of agency.

The buyer-seller relationship between Mae Sot and the Respondent cannot be

characterized as a principal-agent relationship (1). A prerequisite of agency under

Section 797 is a contractual relationship, which did not exist at the time of the offence

(2).

(1) The buyer-seller relationship between Mae Sot and the Respondent cannot be

characterized as a principal-agent relationship

50. Section 797 of the TCCC specifies that agency is “a contract whereby a person, called

the agent, has authority to act for another person, called the principal, and agrees so to

act”.36

Consent of both the agent and the principal is thus a key element of an agency

relationship under Thai law.

51. Further, a basic feature of an agency relationship is the control that the principal has

over the agent’s actions.37

There is neither consent nor control in the present case.

34


TCCC, Title V, Chapter I, Sections 425 and 427. 36

TCCC, Sections 797. 37

Eric Rasmussen,”Agency Law and Contract Formation” 6 Am. L. & Econ. Rev. 382 (2004).

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(a) Neither Mae Sot nor the Respondent had consented to an agency relationship

52. As established above, consent of the parties is a key element in establishing an agency

relationship. Neither Mae Sot nor the Respondent had consented to anything more than

a buyer-seller relationship.

53. The Standard Purchase Order refers to the Respondents as “Buyer”, and Mae Sot as the

“Seller”.38

This is indicative of the relationship between the Parties. Mae Sot and the

Respondent entered into this contract as independent contracting parties, and there are

no provisions in the Standard Purchase Order that render either party the agent or legal

representative of the other for any purpose whatsoever. Additionally, the contract does

not grant either party any authority to assume or to create any obligation on behalf of or

in the name of the other.

54. These factors indicate that the parties had fully intended for the relationship to be of

buyer and seller. They did not consent to any form of agency relationship.

(b) The Respondent had no control over Mae Sot

55. The relationship between Mae Sot and the Respondent is governed by a series of

Standard Purchase Orders sent by fax between California and Thailand.39

This Standard

Purchase Order is commonly used by the Respondent in its purchases of garments from

all its suppliers, including Mae Sot.40

The obligations of the Respondent and Mae Sot

as buyer and seller respectively are clearly set out in the Standard Purchase Order, and

there are no other documents regulating their relationship.

38

Clarifications, Attachment 1. 39

Clarifications, B-1 and B-5. 40

Clarifications, B-7.

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56. It may be contended by the 13 claimants that the Respondent has control over Mae Sot

as the Respondent has made suggestions pertaining to production deadlines and quality

control.41

However, Mae Sot was not bound, contractually or otherwise,42

to take these

suggestions as they pertained to terms specifically rejected by Mae Sot in the Standard

Purchase Order. The relevant provision in the Standard Purchase Order reads that

“[Mae Sot] specifically rejects any terms or provisions which set any standards,

specifications or damages related to quality and time of delivery”.43

57. It is thus clear that the Respondent did not have control over Mae Sot.

58. As the Respondent did not have control over Mae Sot and had not consented to an

agency relationship, there can be no agency relationship under Thai law. The

Respondent is not liable as a principal.

(2) There was no contract in existence at the time of the offence

59. Section 797 of the TCCC states that an agency relationship is created through, and

dictated by, a contract.44

60. In the present case, however, Mae Sot and the Respondent were not in any contractual

relationship at the time of the offence. As mentioned, the Standard Purchase Order is

commonly used by the Respondent in all its purchases of garments from suppliers.45

A

typical order by the Respondent can be completed and shipped within 45 to 60 days

while an “Expedited Order" can be completed and shipped within 14 days of Mae Sot’s

receipt of the Standard Purchase Order.46

The most recent Standard Purchase Order was

41

Clarifications, B-3. 42

Ibid. 43

Clarifications, Attachment #1, para 1. 44

Omar Abel Morales Lurssen, “Comparative Study on Agency”, Thesis for the Master of Laws in International

Trade Law, The University of Arizona, 2008 at p. 18. 45

Clarifications, B-7. 46

Further Clarifications, B-4.

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27

sent by fax from California to Thailand on 1 April 2013. In the ordinary course of

business, this order would have been fulfilled by 1 June 2013. The factory fire broke

out on 15 October 2013,47

well over four months after the most recent order.

61. At the point when the garments were delivered and payment was made, the contractual

relationship between Mae Sot and the Respondent had come to an end as the contract

was completed. Thus, there could not have been an ongoing contract between Mae Sot

and the Respondent on the date upon which the fire broke out. As agency in the TCCC

is premised upon a contractual relationship, a principal-agent relationship cannot have

existed between Mae Sot and the Respondent.

B. Even if the Tribunal finds that a principal-agent relationship exists, Mae Sot remains

solely liable for its negligence

62. Chapter II to Title XV of the TCCC sets out the duties and liabilities of the agent to his

principal. Section 812 states that “the agent is liable for any injury resulting from his

negligence”.48

63. It is common ground that the negligent manner in which Mae Sot operated the factory

resulted in the injuries and fatalities caused by the fire. Accordingly, even if the

Tribunal finds that a principal-agent relationship exists between Mae Sot and the

Respondent, Mae Sot remains solely liable for the injuries and fatalities of its

employees. The proper remedy for the claimants is to bring an action against Mae Sot

and not the Respondent.

47

Moot Problem, para 4. 48

TCCC, Section 812.

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VI. THE TRIBUNAL SHOULD NOT GRANT THE CLAIMANTS THE FULL

EXTENT OF DAMAGES FOR PECUNIARY AND NON-PECUNIARY LOSS,

AND DOES NOT HAVE THE POWER TO AWARD PUNITIVE DAMAGES

64. Even if liability were established, the Tribunal should not grant the claimants the full

extent of damages for pecuniary and non-pecuniary loss. The types of damages

available to the victims and their families must be determined in accordance with Thai

law.49

65. The Tribunal should not grant lifetime damages for loss of income where claimants

have a chance of recovery (A). Under Thai law, the Tribunal may not award damages

for loss of care, comfort, or companionship to the victims’ families (B). The Tribunal

also may not award punitive damages (C).

A. The Tribunal may not award lifetime damages for pecuniary loss if, at the time of the

incident, the injured worker had a chance of recovery.

66. The Tribunal may not award lifetime damages for pecuniary loss if there was only a

possibility of the worker being impaired for life at the time of the incident.

67. The internationally accepted method of calculating damages in the case of permanent

injuries is to determine the expectancy of the injured person’s life at the time of the

tort.50

68. The claimants may contend that the injured workers may be allowed lifetime

compensation for loss of income. The Respondent acknowledges that the full extent of

49

Russell J. Weintraub, “Choice of Law for Quantification of Damages: A Judgment of the House of Lords

Makes a Bad Rule Worse” at p. 312. See US Restatement (Second) of Conflict of Laws (1971), 171 cmt. a. 50

United States Restatement (Second) of Torts § 924 (1977) at 525.

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29

damages for pecuniary loss should be granted if the worker was permanently impaired

at the time of the incident.51

69. However, following the method of calculation for damages, the Tribunal should be

slow to award lifetime compensation to all the injured workers if it was indeterminable

whether the worker would be permanently impaired.

70. Therefore, the Tribunal should not award lifetime compensation for pecuniary loss to

all workers unless the worker had no chance of recovery at the time of the incident.

B. The victims’ families may not claim for loss of care, comfort, and companionship

71. The Tribunal may not grant the victims’ families damages for non-pecuniary loss

arising from psychological injury or loss of care, comfort, and companionship due to

the death of the victims. This is because such forms of loss are not claimable under

Thai law.

72. Under Section 420 of the TCCC, only injuries to “life, body and health, liberty,

property, and any right of another person” are claimable. Thai courts have restrictively

defined these categories as “loss of ability, loss of beauty, loss of good health, loss of

good personality, [and] loss of organ.”52

Pain and suffering, and other emotional

conditions are not claimable.53

73. For damages claimed outside of these categories, the Thai court has, following Section

446 of the TCCC, generally awarded damages for non-pecuniary loss only when

51

In Thailand Supreme Court Decision No.6303/2547, the plaintiff was awarded lifetime compensation for his

disability because the impact of the bus accident had left the plaintiff disabled on the spot with no chance of

recovery. 52

Isara Lovanich, “Personal Injury and Damages for Non-pecuniary Loss in the Law of Torts and Product

Liability Law,” [2013] Thailand Law Journal Fall Issue 1 Volume 16. 53

Ibid.

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30

accompanied with injury to body, health or liberty.54

Emotional loss is also not

claimable under Section 446.55

74. Accordingly, the victims’ families may not claim for damages arising from emotional

loss.

C. The Tribunal should not allow the award of punitive damages to the victims and their

families

75. Punitive damages may only be awarded in cases that fall under the ambit of the 2009

Product Liability Act. Apart from the 2009 Product Liability Act, punitive damages

have not been awarded in Thailand (1). This is because punitive damages are contrary

to the compensatory principle of damages under Thai law (2).

(1) Under Thai law, the doctrine of punitive damages does not apply to wrongful acts

76. Under the 2009 Product Liability Act, the context in which punitive damages may be

awarded is highly specific. It can only be awarded in the context of a business operator-

consumer relationship, in respect of deliberate or grossly negligent conduct in

importing dangerous goods.56

As such, it has been described as an exception to the

general absence of punitive damages rather than a step towards adopting it in Thailand

law.

77. Thus, the doctrine of punitive damages is confined in its application and cannot be

extended to wrongful acts under the TCCC.

54

See Thailand Supreme Court Decision No.7611/2542, 1550/2518, 477/2514, 292/2502 and 789/2502. 55


Product Liability Act (Liability for Damages Arising from Unsafe Products Act,B.E. 2551) (2009) (Thailand),

Section 11.

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31

(2) The aim of the doctrine of punitive damages to punish is inconsistent with the

compensatory principle of Thailand civil law

78. Under Thai civil law, an award of damages is premised on the compensatory principle

of tort law – to place the plaintiff in the same position as if the wrongful act had never

occurred.57

Awarding punitive damages would be contrary to this principle because the

doctrine of punitive damages does not aim to compensate, but aims to punish the party

at fault. The doctrine of punitive damages should not be extended beyond what is

prescribed in the 2009 Product Liability Act as it would be inconsistent with the aim of

compensation in Thailand civil law.

79. The Tribunal therefore has no power to award punitive damages to the claimants.

57

Paijit Boonyapan, Explanation Civil and Commercial Code: Tort (Nitibunnakarn Publisher, Bangkok, 12th

Ed,

2005) at p. 47.

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PRAYER FOR RELIEF

For the foregoing reasons, the Respondent respectfully requests this Tribunal to declare that:

1. Thailand law is the applicable procedural law;

2. All the victims and their families may not be joined in the present proceedings;

3. Thailand law is the applicable substantive law;

4. The Respondent is not liable in tort;

5. The Respondent need not compensate the victims and their families for their

economic and non-economic loss; and

6. The Tribunal may not award punitive damages.

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