claimant v respondent...twenty-fifth annual willem c. vis international commercial arbitration moot...

Twenty-Fifth Annual

Willem C. Vis International Commercial Arbitration Moot

MEMORANDUM FOR RESPONDENT

CLAIMANT v RESPONDENT

Delicatesy Whole Foods Sp Comestibles Finos Ltd.

39 Marie-Antoine Carême Avenue 75 Martha Stewart Drive

Oceanside Capital City

Equatoriana Mediterraneo

COUNSEL

BURAKHAN ADAR ♦ EMRE İLKER KARATAŞ ♦ EMREHAN MERMER

ORCAN OK ♦ GÖKÇE GÜL ÖNDER ♦ PINAR ÖZCEYLAN

Memorandum for Respondent

I

TABLE OF CONTENTS

TABLE OF CONTENTS .......................................................................................................... I

INDEX OF AUTHORITIES ................................................................................................... IV

INDEX OF CASES ............................................................................................................... XVI

INDEX OF ARBITRAL AWARDS .................................................................................... XXIII

INDEX OF LEGAL RESOURCES ................................................................................... XXVI

LIST OF ABBREVIATIONS ............................................................................................ XXVII

STATEMENT OF FACTS......................................................................................................... 1

SUMMARY OF ARGUMENTS................................................................................................. 2

ISSUE I: THE TRIBUNAL HAS THE EXCLUSIVE AUTHORITY TO DECIDE ON THE

CHALLENGE OF MR. PRASAD, WITHOUT HIS PARTICIPATION. ................................ 3

A. CLAUSE 20 OF THE CONTRACT EXCLUDES THE APPLICATION OF ART. 13(4) OF UAR. ................. 3

1. Parties have intended and agreed to avoid the involvement of any arbitral institution due to

confidentiality concerns. ................................................................................................................... 4

2. Deviations from the UAR may be made implicitly. .................................................................. 5

3. Art. 13(4) of the UAR clearly involves arbitral institutions. ....................................................... 5

B. THE ARBITRAL TRIBUNAL HAS THE EXCLUSIVE AUTHORITY TO DECIDE ON THE CHALLENGE OF

MR. PRASAD AS PER ART. 13(2) OF THE DAL, WITHOUT HIS PARTICIPATION.......................................... 6

1. The Arbitral Tribunal has the exclusive authority to decide on the challenge and such recourse

to the Arbitral Tribunal is not a dilatory tactic. .................................................................................. 6

2. The Arbitral Tribunal must decide on the challenge without Mr. Prasad’s participation. ........... 7

ISSUE II: MR. PRASAD SHOULD BE REMOVED FROM THE ARBITRAL TRIBUNAL. 8

A. NEITHER DID MR. PRASAD NOR CLAIMANT FULFILL ITS DISCLOSURE OBLIGATION IN

ACCORDANCE WITH ART. 11 OF UAR AND IBA GUIDELINES. .............................................................. 8

B. CHALLENGE OF MR. PRASAD WAS SENT IN TIMELY MANNER IN ACCORDANCE WITH ARTICLE

13(1) OF THE UAR. ............................................................................................................................. 10

C. THERE ARE VARIOUS GROUNDS THAT SHOULD LEAD TO JUSTIFIABLE DOUBTS REGARDING MR.

PRASAD’S IMPARTIALITY AND INDEPENDENCE IN THE CURRENT CIRCUMSTANCES AS PER ARTICLE 11-

13 OF THE UAR. ................................................................................................................................. 11

1. Failure of disclosure obligations by Mr. Prasad and CLAIMANT leads to justifiable doubts

regarding Mr. Prasad’s impartiality and independence. .................................................................... 12

2. Repeated Appointments by Fasttrack & Partners affects impartiality and independence of Mr.

Prasad. ............................................................................................................................................ 13


II

3. Repeated Appointments by Third Party Funders creates a material link between Mr. Prasad

and Findfunds LP leading to justifiable doubts................................................................................ 14

4. VJICASL Article constitutes justifiable doubts as it presents a pre-judgment of the case. ....... 16

5. Slowfood Arbitration constitutes a valid ground for establishing partiality. ............................. 17

D. CUMULATIVE CONSIDERATION OF ALL FACTORS SHOULD LEAD TO THE REMOVAL OF MR.

PRASAD. .............................................................................................................................................. 18

ISSUE III: CLAIMANT’S STANDARD TERMS IN NO WAY GOVERN THE CONTRACT.

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

A. CLAIMANT’S STANDARD TERMS WERE NOT INCORPORATED. ................................................ 19

B. STANDARD TERMS OF CLAIMANT DO NOT GOVERN THE CONTRACT, EVEN IF THEY WERE

INCORPORATED. ................................................................................................................................. 21

1. Tender process guarantees the application of RESPONDENT’s Standard Terms. A “battle of

the forms” does not exist. ............................................................................................................... 21

a. Tender documents expressly refer to application of RESPONDENT’s Standard Terms. . 22

b. CLAIMANT accepted to be bound by the Letter of Acknowledgement which secures

compliance of the offer with RESPONDENT’s Standard Terms. ............................................. 22

c. RESPONDENT’s acceptance cannot be deemed as an assent to CLAIMANT’s Standard

Terms due to reliance promoted by CLAIMANT. ..................................................................... 23

2. Even if a battle of the forms problem exists, the solution of the problem leads to a duty of

result. CLAIMANT’s Standard Terms do not govern the Contract. ............................................... 24

a. Battle of the forms does not fall under the scope of CISG. The battle of the forms analysis

is governed by the UNIDROIT Principles. ................................................................................ 25

b. In case CISG determined as governing law to the battle of the forms problem, the knock

out rule should be applied. .......................................................................................................... 25

c. The application of the knock out rule determines the nature of the obligation as a duty of

result........................................................................................................................................... 26

ISSUE IV: IN CASE RESPONDENT’S STANDARD TERMS ARE APPLICABLE,

CLAIMANT DELIVERED NON-CONFORMING GOODS PURSUANT TO ART. 35 OF

CISG. ........................................................................................................................................ 27

A. RESPONDENT’S STANDARD TERMS INCLUDE A DUTY OF RESULT UNDER ART. 8 OF CISG. .. 28

1. All relevant circumstances must be taken into account in interpretation of RESPONDENT’s

Standard Terms. ............................................................................................................................. 28


III

a. The wording of RESPONDENT’s Standard Terms clearly shows that CLAIMANT was

under a duty of result. ................................................................................................................. 28

b. The price agreed by the Parties justifies a duty of result. ..................................................... 30

c. In the course of negotiations, and also subsequently, RESPONDENT clearly emphasized

the importance of a strict adherence to environmentally friendly and sustainable production. ..... 30

2. The contra proferentem rule is not applicable. ....................................................................... 32

B. CLAIMANT HAVING THE BURDEN OF PROOF FAILED TO PROVE THE CONFORMITY OF THE

CAKES DELIVERED. ............................................................................................................................. 32

C. EVEN IF TRIBUNAL WERE TO CONCLUDE THAT CLAIMANT HAD A DUTY OF BEST EFFORT, IT

STILL FAILED TO FULFILL ITS OBLIGATION. ......................................................................................... 34

REQUEST FOR RELIEF ....................................................................................................... 35


IV

INDEX OF AUTHORITIES

BERGENTHAL, Sebastian K.

EISELEN, Sieg

The Battle of Forms: A Comparative Analysis

Comperative and International Law Journal of Southern Africa

Volume 39 (2006) pp. 214-240

Cited as: BERGENTHAL/EISELEN

In §§ 100, 104

BERGER, Klaus Peter 'Part III, 23rd Scenario: Challenge of Arbitrator', in Private Dispute

Resolution in International Business: Negotiation, Mediation,

Arbitration (Third Edition)

Kluwer Law International (2015) pp. 481 – 508

Cited as: BERGER

In § 53

BOGART, Christopher P. Chapter 4. Overview of Arbitration Finance

Bernardo M. Cremades Sanz-Pastor and Antonias Dimolitsa

(eds), Third-Party Funding in International Arbitration (ICC Dossier),

Dossiers of the ICC Institute of World Business Law, Volume 10

(2013) pp. 50 - 56

Cited as: BOGART

In § 29

BORN, Gary B. International Commercial Arbitration (Second Edition)

Kluwer Law International (2014)

Cited as: BORN

In §§ 12, 13, 29, 42, 52, 55

CARON, David D.

CAPLAN, Lee M.

The UNCITRAL Arbitration Rules: A Commentary

Oxford University Press (2013)

Cited as: CARON ET AL.

In §§ 8, 28, 42


V

CRISTANI, Federica Challenge and Disqualification of Arbitrators in International

Investment Arbitration: An Overview

Law and Practice of International Courts and Tribunals Volume 13

(2014) pp. 153-177

Cited as: CRISTANI

In § 28

CROFT, Clyde

KEE, Christopher

WAINCYMER, Jeff

A Guide to UNCITRAL Arbitration Rules

Cambridge University Press (2013)

Cited as: CROFT ET AL.

In §§ 28, 42

DAELE, Karel Challenge and Disqualification of Arbitrators in International

Arbitration

Kluwer Law International 2012

Cited as: DAELE

In §§ 12, 28

Danone Danone’s Code of Conduct for Business Partners

Danone, 2016

Cited as: Danone’s Code of Conduct for Business Partners

In § 117

DÍAZ - CANDIA, Hernando “Issue Conflict” in Arbitration as Apparently [un]seen in 2011 by a

U.S. Court in STMicroelectronics vs. Credit Suisse Securities

Arbitraje: Revista de Arbitraje Comercial y de Inversiones Volume 5

Issue 1 (2012)

Cited as: DÍAZ-CANDIA

In § 58


VI

EISELEN, Sieg The Requirements for the Inclusion of Standard

Terms in International Sales Contracts

PER vol.14 n.1 Potchefstroom 2011

Cited as: EISELEN

In § 73

FERRARI, Franco Burden of Proof under the CISG

Review of the Convention on Contracts for the International Sale of

Goods (CISG), Kluwer Law International (2000-2001)

Cited as: FERRARI

In § 124

FOUCHARD, Philippe

GAILLARD, Emmanuel

GOLDMAN, Berthold

SAVAGE, John

Fouchard Gaillard Goldman on International Commercial

Arbitration


Cited as: FOUCHARD ET AL.

In § 12, 20

FRY, Jason;

GREENBERG, Simon

The Arbitral Tribunal: Applications of Articles 7-12 of the ICC Rules

in Recent Cases

ICC Court Bulletin Volume 12 (2009)

Cited as: FRY/GREENBERG

In § 61

GARRO, Alejandro M. The Buyer's "Safety Valve" Under Article 40: What is the Seller

Supposed to Know and When?

Journal of Law and Commerce (2005-06)

Cited as: GARRO

In § 125


VII

Global Compact LEAD Global Compact LEAD: Advancing Sustainability Leadership

through Innovation and Action

UN Global Compact, 2015

Cited as: Global Compact LEAD Brochure, 2015

In § 118

GRIMMER, Sarah The Expanded Role of the Appointing Authority under the

UNCITRAL Arbitration Rules 2010

Journal of International Arbitration, (Kluwer Law International 2011,

Volume 28 Issue 5) pp. 501 – 517, 2011

Cited as: GRIMMER

In § 12

HUBER, Peter

MULLIS, Alastair

The CISG, A New Textbook for Students and Practitioners

Sellier. European Law Publishers, Munich 2007

Cited as: AUTHOR in: Huber/Mullis

In §§ 83, 98, 100, 121

HWANG, Michael

LEE, Shaun

Survey of South East Asian Nations on the Application of the New

York Convention

Journal of International Arbitration, (Kluwer Law International 2008,

Volume 25 Issue 6) pp. 873 - 892

Cited as: HWANG/LEE

In § 42

INDLEKOFER, Manuel Chapter 3: Today's Activities of the Permanent Court of Arbitration,

International Arbitration and the Permanent Court of Arbitration

International Arbitration Law Library, Volume 27 (Kluwer Law

International 2013) pp. 233 - 298

Cited as: INDLEKOFER

In § 13


VIII

KHAMBATA, Darius J. Tensions Between Party Autonomy and Diversity

Albert Jan van den Berg (ed), Legitimacy: Myths, Realities,

Challenges, ICCA Congress Series, Volume 18 (Kluwer Law

International 2015) pp. 612 – 637

Cited as: KHAMBATA

In § 56

KONERU, Phanesh The International Interpretation of the UN Convention on Contracts

for the International Sale of Goods: An Approach Based on General

Principles

Minnesota Journal of Global Trade, Volume 6, (1997)

Cited as: KONERU

In § 91

KRÖLL, Stefan The Burden of Proof for The Non-Conformity of Goods Under Art.

35 CISG

Annals of the Faculty of Law in Belgrade International Edition (2011)

Cited as: KRÖLL

In § 122

KRÖLL, Stefan Selected Problems Concerning the CISG’s Scope of Application

Journal of Law and Commerce [Vol. 25:39]

Cited as: KRÖLL II

In § 124

KRÖLL, Stefan

MISTELIS, Loukas

VISCASILLAS, Pilar P

UN Convention on Contracts for the International Sale of Goods

(CISG)

C. H. Beck, Munich 2011

Cited as: AUTHOR in: Kröll et al.

In §§ 114, 117, 120, 121, 123


IX

LALIVE, Pierre Transnational (or Truly International) Public Policy and International

Arbitration

Revista Brasileira de Arbitragem, (Comitê Brasileiro de Arbitragem

CBAr & IOB; Comitê Brasileiro de Arbitragem CBAr & IOB 2014,

Volume XI Issue 41) pp. 173 – 230

Cited as: LALIVE

In § 23

LEISINGER, Klaus M. On Corporate Responsibility for Human Rights

Cambridge University Press, United Kingdom 2009

Cited as: LEISINGER

In § 118

LEW, Julian D. M.

MISTELIS, Loukas A.

KRÖLL, Stefan Micheal

Comparative International Commercial Arbitration


Cited as: LEW/MISTELIS/KRÖLL

In §§ 42, 44

LINNE, Anna L. Burden of Proof Under Article 35 CISG

Pace International Law Review (Spring 2008)

Cited as: LINNE

In §§ 123, 124, 126

MAGNUS, Ulrich General Principles of UN-Sales Law

Max-Planck-Institute for foreign and international Private Law Rabels

Zeitschrift for foreign and international Private Law Hein Kötz in

honor of his 60th Birthday Part I, Volume 59 (1995)

Cited as: MAGNUS

In § 91


X

MAZZONI, Alberto

AONDOAKKA, Chief M.K.

UNIDROIT Principles of International Commercial Contracts 2010

International Institute for the Unification of Private Law

(UNIDROIT), Rome 2010

Cited as: UNIDROIT Official Commentary

In §§ 107, 127

Nestlé S.A The Nestlé Supplier Code

Nestlé, 2013

Cited as: The Nestlé Supplier Code

In § 118

NEUMANN, Thomas Features of Article 35 in the Vienna Convention;

Equivalence, Burden of Proof and Awareness

Vindobona Journal of International Commercial Law and

Arbitration,2007

Cited as: NEUMANN

In § 122

Norton Rose Fulbright In the Know

Norton Rose Fulbright, United Kingdom 2014

Cited as: NORTON ROSE FULBRIGHT

In § 114

Oxford Dictionaries Oxford English Dictionary

Oxford University Press, June 2017

Cited as: Oxford Dictionary

In § 114


XI

PARK, Willaim W.

ROGERS, Catherine

Chapter I: The Arbitration Agreement and Arbitrability, Third-Party

Funding in International Arbitration: The ICCA Queen- Mary Task

Force

Christian Klausegger, Peter Klein, et al. (eds), Austrian Yearbook on

International Arbitration 2015, Austrian Yearbook on International

Arbitration, Volume 2015 pp. 113 – 123

Cited as: PARK/ROGERS

In § 55

PAULSSON, Jan UNCITRAL Arbitration Rules, Section I, Article 6 [Designating and

appointing authorities], in Jan Paulsson and Georgios Petrochilos,

UNCITRAL Arbitration

Kluwer Law International, 2017

Cited as: PAULSSON

In §§ 12, 14

PERILLO, Joseph M. Editorial remarks on the manner in which the UNIDROIT

Principles may be used to interpret or supplement CISG Article 8

http://www.cisg.law.pace.edu/cisg/principles/uni8.html#edrem

Cited as: PERILLO

In § 107

Permanent Court of

Arbitration

Designation of Appointing Authorities, Dispute Resolution Services

Official Website of the Permanent Court of Arbitration, 2018

https://pca-cpa.org/en/services/appointing-authority/designation-

of-appointing-authority/

Cited as: PCA Website

In § 14

POSNER, Eric A. Fault in Contract Law

Michigan Law Review, Volume 107, Issue 8, 2009

Cited as: POSNER

In § 127


XII

REDFERN, Alan

HUNTER, J. Martin

BLACKABY, Nigel

PARTASIDES, Constantine

Redfern Hunter on International Arbitration

Oxford University Press (2015)

Cited as: REDFERN/HUNTER

In § 45

SCHERER, Maxi

RICHMAN, Lisa

GERBAY, Rémy

'Chapter 11 Challenges, Removal and Replacement of Arbitrators', in

Arbitrating under the 2014 LCIA Rules: A User's Guide

Kluwer Law International (2015) pp. 167 – 184

Cited as: SCHERER ET AL.

In §§ 45, 56

SCHLECHTRIEM, Peter

BUTLER, Petra

UN Law on International Sales

Springer-Verlag, Berlin 2009

Cited as: SCHLECHTRIEM/BUTLER

In § 83, 98

SCHLECHTRIEM, Peter

SCHWENZER, Ingeborg

Schlechtriem & Schwenzer, Commentary on the UN Convention on

the International Sale of Goods (CISG) Oxford University Press, 3rd

ed., Oxford 2010

Cited as: AUTHOR in: Schlechtriem/Schwenzer

In §§ 73, 91, 107, 113, 114, 115, 118, 121, 123, 124

SCHMIDT-KESSEL, Martin On the Treatment of General Terms and Conditions of Business

under the UN Convention on Contracts for the International Sale of

Goods (CISG)

Commentary on decision of German Federal Supreme Court of 31

October 2001

Cited as: SCHMIDT-KESSEL

In § 73

SCHWENZER, Ingeborg CISG-AC Opinion No. 13

USA 2013

Cited as: CISG-AC Opinion No. 13

In § 77


XIII

SCHWENZER, Ingeborg Ethical Standards in CISG Contracts

Uniform Law Review – Oxford University Press, United Kingdom

2017

Cited as: SCHWENZER

In § 118

SCHWENZER, Ingeborg

MOHS, Florian

Old Habits Die Hard: Traditional Contract Formation in a Modern

World

Internationales Handelsrecht, 2006

Cited as: SCHWENZER/MOHS

In § 73

TUPMAN, W. Michael

Challenge and Disqualification of Arbitrators in International

Commercial Arbitration

International and Comparative Law Quarterly (1989)

Cited as: TUPMAN

In § 23

VERBRUGGEN, P. W. J. Regulatory governance by contract: The rise of regulatory standards

in commercial contracts in 'Regulatory Governance'

Recht der werkelijkheid, Netherlands 2014

Cited as: VERBRUGGEN

In § 114

VERGNE, François The "Battle of the Forms" Under the 1980 United Nations

Convention on Contracts for the International Sale of Goods

33 American Journal of Comparative Law (1985) 233-258

Cited as: VERGNE

In § 98


XIV

VIETRI, Raphaël de

DHARMANANDA, Kanaga

Impartiality and Issue of Repeat Arbitrators

Journal of International Arbitration (Kluwer Law International 2011,

Volume 28 Issue 3) pp. 187-200

Cited as: VIETRI/DHARMANANDA

In § 42

VISCASILLAS, Maria del Pilar

Perales

"Battle of the Forms" under the 1980 United Nations Convention on

Contracts for the International Sale of Goods: A Comparison with

Section 2-207 UCC and the UNIDROIT Principles

Pace International Law Review (1998)

Cited as: VISCASILLAS

In §§ 100

VOGENAUER, Stefan

KLEINHEISTERKAMP, Jan

Commentary on the UNIDROIT Principles of International

Commercial Contracts (PICC)

Oxford University Press, Oxford 2009

Cited as: AUTHOR in: Vogenauer/Kleinheisterkamp

In §§ 112, 127

VON GOELER, Jonas Third-Party Funding in International Arbitration and its Impact on

Procedure

International Arbitration Law Library, Volume 35 (Kluwer Law

International 2016)

Cited as: VON GOELER

In §§ 29, 39, 52

WAINCYMER, Jeffrey Procedure and Evidence in International Arbitration


Cited as: WAINCYMER

In §§ 29, 45, 58


XV

WALSH, Thomas W.

TEITELBAUM, Ruth

The LCIA Court Decisions on Challenges to Arbitrators: An

Introduction

Arbitration International Special Edition on Arbitrator Challenges

(2011), pp. 283-313

Cited as: WALSH/TEITELBAUM

In §§ 28, 29, 55, 67

WILDNER, Kaia Art. 19 CISG: The German Approach to the Battle of the Forms in

International Contract Law: The Decision of the Federal Supreme

Court of Germany of 9 January 2002

Pace International Law Review Volume 20 Issue 1 (2008)

Cited as: WILDNER

In § 104

WILSON, Simon Ethical Standards in International Sales Contracts: Can the CISG Be

Used to Prevent Child Labour?

LLB thesis, Victoria University of Wellington (2015)

Cited as: WILSON

In § 114

WORKING GROUP II OF

UNCITRAL

Report of the 45th Session of the Working Group II of UN

Commission on International Trade Law

www.uncitral.org (2012)

Cited as: Report WG45

In § 28

ZAHRADNÍKOVÁ, Radka Challenge Procedure in Institutional and Ad Hoc Arbitration under

the New Regulations in the Revised UNCITRAL Arbitration Rules

Czech (& Central European) Yearbook of Arbitration, USA, 2014

Cited as: ZAHRADNÍKOVÁ

In § 2


XVI

INDEX OF CASES

Austria

Oberster Gerichtshof, 12 September 2006

No. 10 Ob 122/05x, Clout no: 753

Cited as: OGH, 12 Sept. 2006 (Austria)

In § 124

Belgium

Cour d’Appel Bruxelles, 29 October 2007

No. Palais200889GP20080329047

Cited as: CoA Brussels, 29 Oct. 2007 (Belgium)

In § 45

France

Cour d' appel de Grenoble, 26 April 1995

No. 93/4879, CLOUT No. 152

Cited as: CoA Grenoble, 26 Apr. 1995 (France)

In § 120

Court of Cassation of France, 16 July 1998

No. Arrêt n° 1309 P; Pourvoi n° J 96-11.984, CISG-online No. 344

Cited as: Cour de Cassation, 16 Jul. 1998 (France)

In § 104

Court of Cassation of France, First Civil Law Chamber, 20 October 2010

No. 09-68997

Cited as: Cour de Cassation, 20 Oct. 2010 (France)

In § 52

Court of Appeal of Paris, 8 Feb. 2001 (France)

No. Not Indicated

Cited as: CoA de Paris, 8 Feb. 2001 (France)

In § 39


XVII

Court of Appeal of Reims, 2 November 2011

No. 10/02888

Cited as: CoA Reims, Nov. 2, 2011(France)

In § 61

Germany

Bundesgerichtshof, 31 October 2001

No. VIII ZR 60/01, CISG-online No. 617

Cited as: BGH, 31 Oct. 2001 (Germany)

In §§ 101, 102

Bundesgerichtshof, 9 January 2002

No. VIII ZR 304/00, CISG-online No. 651

Cited as: BGH, 9 Jan. 2002 (Germany)

In §§ 104, 106

Bundesgerichtshof, 30 June 2004

No. VIII ZR 321/03, CLOUT No.773

Cited as: BGH, 30 June 2004 (Germany)

In §§ 124, 125

Bundesgerichtshof, 31 October 2011

No. VIII ZR 60/01, CISG-online No.445

Cited as: BGH, 31 Oct. 2011 (Germany)

In §§ 73, 74

Oberlandesgericht Dresden, 27 December 1999

No. 2 U 2723/99, CISG-Online No. 511

Cited as: OLG Dresden, 27 Dec. 1999 (Germany)

In § 113


XVIII

Oberlandesgericht Köln, 24 May 2006

No. 16 W 25/06, CISG-online No. 1232

Cited as: OLG, 24 May 2006 (Germany)

In § 104

Oberlandesgericht Frankfurt am Main, 26 June 2006

No. 26 Sch 28/05, CISG-online No. 1385

Cited as: OLG, 26 Jun. 2006 (Germany)

In § 104

Landgericht Landshut, 12 June 2008

No. 43 O 1748/07

Cited as: LG Landshut, 12 Jun. 2011 (Germany)

In § 73

India

High Court of Delhi at New Delhi, 11 February 2010

No. WP(C) 8904/2009

Cited as: High Court of Delhi, 11 Feb. 2010 (India)

In § 55

The Netherlands

Arrondissementsrechtbank Utrecht, 21 January 2009

No. LJN BH0723; 253099 / HA ZA 08-1624, CISG-online No.1202

Cited as: RB Utrecht, 21 Jan. 2009 (Netherlands)

In § 73

District Court of The Hague – Civil Law Section, Provisional Measure Judge, 5 November 2004

Decision on the Challenge of Prof. Emmanuel Gaillard

Cited as: DC The Hague, 5 Nov. 2004 (Netherlands)

In § 44


XIX

Poland

Court of Appeals of Katowice, 5 September 2012

No. I ACa 410/12, CLOUT No: 1599

Cited as: CoA Katowice, 5 September 2012 (Poland)

In § 74

Spain

Provincial Court of Barcelona, 16th Division, 28 April 2004

No. 862/2003, CLOUT No. 553

Cited as: Provincial Court of Barcelona, 28 Apr. 2004 (Spain)

In § 118

Provincial High Court of Madrid, Section 14, 20 February 2007

No. 92/2007, CLOUT No. 850

Cited as: Provincial High Court of Madrid, 20 Feb. 2007 (Spain)

In § 118

Navarra Provincial High Court, Section 3, 27 December 2007

No. 229/2007, CLOUT No. 1039

Cited as: Navarra Provincial High Court, 27 Dec. 2007 (Spain)

In § 114

Cáceres Provincial High Court, 14 July 2010

No. 00296/2010, CLOUT No: 1034

Cited as: Cáceres Provincial High Court, 14 July 2010 (Spain)

In § 72

Audencia Provincial Madrid, Section 14, 21 June 2011

No. ECLI:ES:APM:2011:10062, CLOUT No. 1420

Cited as: AP Madrid, 21 Jun. 2011 (Spain)

In § 114


XX

Audencia Provincial Madrid, Section 12, 30 June 2011

No. ECLI:ES:APM:2011:11690, CLOUT No. 1419

Cited as: AP Madrid, 30 Jun. 2011 (Spain)

In § 67

Switzerland

Bundesgericht, 20 March 2008

No. Case 4A_506/2007

Cited as: Bundesgericht, 20 Mar. 2008 (Switzerland)

In § 29

Bundesgericht, 5 April 2005

No. 4C.474/2004, CISG-Online No. 1012

Cited as: BGer, 5 Apr. 2008 (Switzerland)

In §§ 114, 120

Bundesgericht 7 July 2004

No. 4C.144/2004/lma, CLOUT No: 894

Cited as: BGer, 7 July 2004 (Switzerland)

In § 124

Bundesgericht, 13 November 2003

No. 4C.198/2003/grl, CLOUT No. 885

Cited as: BGer, 13 November 2003 (Switzerland)

In § 124

Bundesgericht, 22 December 2000

No. 4C.296/2000, CISG-online No. 628

Cited as: BGer, 22 Dec. 2000 (Switzerland)

In §§ 83, 118


XXI

Kantonsgericht Freiburg, 11 October 2004

No. A1 2003-70, CISG-online No. 964

Cited as: KGer Fribourg, 11 Oct. 2004 (Switzerland)

In §§ 83-91

Handelsgericht des Kantons Zürich, 24 October 2002

No. HG 010395/U/zs, CISG-Online No. 857

Cited as: HG Zurich, 24 Oct. 2002 (Switzerland)

In § 113

Tribunale d'appello Ticino, 29 October 2003

No. 12.2002.181, CISG-online No. 912

Cited as: Trib app Ticino, 29 Oct. 2003 (Switzerland)

In § 91

United States

Properties Corporation v Falstaff Brewing Corporation

United States District Court, New York, 06 July 1978

No. 76 Civ. 3231 (CLB)

Cited as: DC New York, 6 Jul. 1978 (US)

In § 127

Filanto, S.p.A. v. Chilewich International Corp.

U.S. [Federal] District Court for the Southern District of New York, 14 April 1992

No. 91 Civ. 3253 (CLB), CLOUT No. 23

Cited as: DC New York, 14 Apr. 1992 (US)

In § 120

Joseph N. Kroboth et al. v. Shirley Brent

Appellate Division of the Supreme Court of the State of New York, Third Department. 04 May 1995

Cited as: SC New York, 17 Jun. 1999 (US)

In § 127


XXII

Jean SCHMITZ; Leonard Schmitz, v. Carlos J. ZILVETI, III; Nicholas S. Meris; Prudential-Bache Securities Inc., aka

Prudential Securities, Inc.

United States Court of Appeals, Ninth Circuit, 05 April 1994

No. 92-16853

Cited as: CoA Ninth Circuit, Apr. 5, 1994 (US)

In § 61

Sphere Drake Insurance Limited v. All American Life Insurance Company

United States Court of Appeals, Seventh Circuit, 09 October 2002

No. 02-2458

Cited as: CoA Seventh Circuit, Oct. 9, 2002 (US)

In § 61

Scandinavian Reinsurance Co Ltd v Saint Paul Fire and Marine Insurance Company and Ors

United States Court of Appeals, Second Circuit. 3 February 2012

Cited as: CoA Second Circuit, 3 Feb. 2012 (US)

In § 45


XXIII

INDEX OF ARBITRAL AWARDS

Ad Hoc Arbitrations

Country X v Company Q of 1995

Challenge Decision of 11 January 1995

Cited as: Country X v Company Q, 11 Jan. 1995 (Ad Hoc)

In § 42

AWG Group Ltd. v the Argentine Republic of 2006-2016

Decision on the Proposal for the Disqualification of a Member of the Arbitral Tribunal (2007) and

Decision on a Second Proposal for the Disqualification of a Member of the Arbitral Tribunal (2008)

Cited as: AWG Group v Argentine Republic, 22 Oct 2007 (Ad Hoc)

In §§ 52, 55, 56

ICS Inspection and Control Services Limited v the Republic of Argentina of 2009

Decision on Challenge to Mr. Stanimir A. Alexandrov

Cited as: ICS Inspection v Argentina, 17 Dec. 2009 (Ad Hoc)

In § 29

China International Economic & Trade Arbitration Commission [CIETAC]

CIETAC of 2000

CISG-online No. CISG/2000/06

Cited as: CIETAC, 7 Jan. 2000 (China)

In § 121

CIETAC of 2002

CLOUT No. 984

Cited as: CIETAC, 4 Nov. 2002 (China)

In § 114

International Chamber of Commerce [ICC]

ICC Case No. 11849 of 2003

Cited as: ICC Case No. 11849 (2003)

In § 117


XXIV

International Centre for Settlement of Investment Disputes [ICSID]

ICSID Case No. ARB/81/2 of 1983

Cited as: ICSID Case No. ARB/81/2

In § 127


Decision on the Proposal for the Disqualification of a Member of the Arbitral Tribunal

Cited as: ICSID Case No. ARB/03/17 (2007)

In § 58


Decision on Respondent’s Proposal to Disqualify Arbitrator Dr. Yoram Turbowicz


In § 45


Decision on Claimant’s Proposal to Disqualify Professor Campbell McLachlan, Arbitrator


In § 58


Cited as: ICSID Case No. ARB/06/18

In § 127


Decision on Proposal to Disqualify Professor Philippe Sands, Arbitrator


In §§ 46, 63


Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd. Sti. v Turkmenistan


In § 29


XXV

London Court of International Arbitration [LCIA]

LCIA Ref. No. UN96/X15 of 1996

LCIA Court Decision on Challenge to Arbitrator, 29 May 1996

Cited as: LCIA Ref. No. UN96/X15 (1996)

In § 64

LCIA Ref. No. 81160 of 2009

LCIA Court Decision on Challenge to Arbitrator, 28 August 2009

Cited as: LCIA Ref. No. 81160 (2009)

In § 56

LCIA Ref. No. 81224 of 2010

LCIA Court Decision on Challenge to Arbitrator, 15 March 2010

Cited as: LCIA Ref. No. 81224 (2010)

In § 46

Tribunal of International Commercial Arbitration at the Russian Federation Chamber of

Commerce and Industry [ICAC at the RF CCI]

The ICAC at the RF CCI Case No. 238/1998 of 1999

CLOUT No. 473

Cited as: The ICAC at the RF CCI, 7 Jun. 1999 (Russia)

In § 115

The ICAC at the RF CCI Case No. 95/2004 of 2005

CISG-Online No. 1456

Cited as: The ICAC at the RF CCI, 27 May 2005 (Russia)

In § 115


XXVI

INDEX OF LEGAL RESOURCES

• Explanatory Note by the UNCITRAL Secretariat on the 1985 Model Law on International

Commercial Arbitration as amended in 2006

• ICC Rules of Arbitration 2017 (with Standard Clauses) (ICC Rules)

• International Bar Arbitration Guidelines on Conflicts of Interest (IBA Guidelines)

• International Centre for Dispute Resolution

• London Court of International Arbitration Rules (LCIA Rules)

• Rio Declaration on Environment and Development for States

• Stockholm Chamber of Commerce Rules (SCC Rules)

• Switzerland’s Federal Code on Private International Law

• UN Convention on International Sales of Goods (CISG)

• UN Convention on the Law of the Sea (UNCLOS)

• UN Model Law on International Commercial Arbitration (UML)

• UNCITRAL Arbitration Rules 2010 (UAR)

• UNIDROIT Principles of International Commercial Contract (UPICC)

• Zivilprozessordnung (ZPO) (Austria)


XXVII

LIST OF ABBREVIATIONS

§(§) paragraph(s)

% per cent

Answ. Answer

AP Audencia Provincial

Arb. Arbitration

Art. Article

BGer Bundesgericht

BGH Bundesgerichtshof

CEO Chief Executive Officer

cf. confer

Chal. Challenge

Cl. Claimant

CoA Court of Appeal / Cour d’Appel

Corp. Corporation

DAL Danubian Arbitration Law

DC District Court

DIIA Declaration of Impartiality and Independence and Availability

et al. et alia/et aliae/et alii

et seq. et sequential

et seqq. et sequentes

Exh. Exhibit

GCP Global Compact Principles

GmbH Gesellschaft mit beschränkter Haftung


XXVIII

IBA International Bar Association

ibid. ibidem

ICAC International Commercial Arbitration Court

ICC International Chamber of Commerce

ICDR International Centre for Dispute Resolution

ICJ International Court of Justice

ICSID International Centre for Settlement of Investment Disputes

i.e. id est

ITLOS International Tribunal for the Law of the Sea

LCIA London Court of International Arbitration

LG Landgericht

LP Limited Partnership

Ltd. Limited

Memo. Memorandum

No. Number

Not. Notice

OG Obergericht

OLG Oberlandesgericht

p(p). Page(s)

PCA Permanent Court of Arbitration

Ref. Reference

Req. Request

Resp. Response

PO Procedural Order


XXIX

Prob. Problem

Rsp. Respondent

SA Sociedad Anónima

SCAI Swiss Chamber’ Arbitration Institution

SC Supreme Court

SCC Stockholm Chamber of Commerce

SIAC Singapore International Arbitration Centre

Sp Sociedad Participada

Swiss PIL Switzerland’s Federal Code on Private International Law

UAR UNCITRAL Arbitration Rules

UK United Kingdom of Great Britain and Northern Ireland

UML UNCITRAL Model Law on International Commercial Arbitration

UN United Nations

UNCITRAL United Nations Commission on International Trade Law

UNCLOS United Nations Convention on the Law of the Sea

UNIDROIT International Institute for the Unification of Private Law

US United States

USD US Dollar(s)

v versus

Vol. Volume

VJICASL Vindobona Journal of International Commercial Arbitration and

Sales Law

ZG Zivilgericht

ZPO Zivilprozessordnung (Austria)


1

STATEMENT OF FACTS

The parties to this arbitration are Delicatesy Whole Foods Sp (hereinafter “CLAIMANT”) and

Comestibles Finos Ltd (hereinafter “RESPONDENT”, collectively “the Parties”).

CLAIMANT is a medium sized manufacturer of fine bakery products registered in Equatoriana.

RESPONDENT is a gourmet supermarket chain in Mediterraneo.

Mar. 3-6,

2014

Parties met at Danubian food

fair.

Mar. 10,

2014

RESPONDENT sent

invitation to tender to

CLAIMANT.

Mar. 17,

2014

CLAIMANT submitted Letter

of Acknowledgement.

Mar. 27,

2014

CLAIMANT sent its tender.

Apr. 7, 2014 RESPONDENT accepted the

tender by letter.

May 1, 2014 First delivery was made by

CLAIMANT.

2016 Mr. Prasad’s Article was

published on VJICASL.

Jan. 6, 2017 UNEP Report was released.

Jan. 19, 2017 Equatorian State Channel

showed a documentary

criticizing certification

process.

Jan. 23, 2017 Michelgault Business News

published the UNEP Report.

Jan. 27, 2017 RESPONDENT demanded

CLAIMANT to confirm

adherence to GCP.

CLAIMANT replied with a

promise to investigate.

Feb. 10, 2017 CLAIMANT informed

RESPONDENT about its

Suppliers involvement in

corruption.

Feb. 12, 2017 RESPONDENT terminated

the Contract.

May 4, 2017 Metadata was created by

CLAIMANT’s counsel Mr.

Fasttrack.

Jun. 30, 2017 Notice of Arbitration was

submitted. Mr. Prasad

appointed as arbitrator.

Jul. 31, 2017 Response to Notice of

Arbitration was submitted.

Aug. 29,

2017

RESPONDENT’s counsel

sent an e-mail about

CLAIMANT’s financing by a

third party funder.

Sep. 1, 2017 Order of President Rizzo for

disclosure of third party

funding.

Sep. 1, 2017 Prasad&Partner’s merger

with Slowfood is finalized.

Sep. 7, 2017 CLAIMANT informed the

Tribunal about Findfunds LP.

Sep. 11, 2017 Mr. Prasad’s disclosure

regarding connections with

Findfunds LP.

Sep. 14, 2017 Notice of Challenge of Mr.

Prasad was submitted.


2

SUMMARY OF ARGUMENTS

Negotiations between the Parties got off to a start when they met in Danubian food fair in March 2014.

RESPONDENT, parallel with its tender process, sent an invitation to tender to CLAIMANT on March 10,

2014. At the end of the tender process, CLAIMANT was awarded the Contract (hereinafter “the

Contract”) on April 7, 2014. To produce the cakes, CLAIMANT bought cocoa beans from Ruritania

Peoples Cocoa GmbH. Unfortunately, a fraudulent scheme in Ruritania was discovered, which indicated

that the cocoa beans used in the cakes produced by CLAIMANT were not produced sustainably. Hence,

the cakes delivered were not in conformity with the Contract. RESPONDENT used its right to terminate

the Contract and refuse to pay for the non-conforming cakes. CLAIMANT refusing its liability, brought

the case before the Arbitral Tribunal (hereinafter “the Tribunal”).

In an attempt to gain unjust advantage in the arbitral proceedings, CLAIMANT appointed Mr. Prasad, a

biased arbitrator. RESPONDENT rightfully followed the necessary steps to initiate the challenge of Mr.

Prasad with the intention of his removal before the Tribunal. However, in order to hinder the process

agreed upon by the Parties within the arbitration clause, CLAIMANT now tries to divert the ongoing

proceedings from the Tribunal’s authority. Unfortunately, CLAIMANT’s incomprehensible, inconsistent

and groundless attempts to follow the challenge proceedings before ICC and PCA is no more than

ultimate disrespect to the Parties’ agreement and the Tribunal’s authority. Consequently, considering all

circumstances and applicable rules of law, the challenge proceedings shall take place before the Tribunal

without the participation of Mr. Prasad (ISSUE I).

Additionally, despite existence of many connections between Mr. Prasad and CLAIMANT or its third

party funder, CLAIMANT still tries to disregard such connections on grounds that have no actual basis.

By partially taking legal sources and placing them out of context, CLAIMANT tries to divert the Tribunal’s

attention from the important issue: RESPONDENT’s right to be heard by an open-minded arbitrator,

independent from and impartial to the Parties. RESPONDENT, here, proves Mr. Prasad’s partiality and

dependence upon CLAIMANT, its counsel, i.e. Mr. Fasttrack, and Findfunds LP. Hence, Mr. Prasad

should be removed from the Tribunal in order to ensure that no risk of bias exists during the arbitral

proceedings (ISSUE II).

CLAIMANT trying to evade its liability, asserts that its Standard Terms govern the Contract. However,

more fundamentally, CLAIMANT fails to identify what constituted an offer and acceptance and when the

Contract was concluded (Cl. Memo., lines 275-310, as used by CLAIMANT). Unfortunately, CLAIMANT

lacks the necessary knowledge regarding battle of forms doctrines, as it tries to apply last shot rule and


3

knock out rule interchangeably (Cl. Memo., lines 326-351) and as it wrongfully claims UNIDROIT

Principles endorse the last shot rule (Cl. Memo., lines 355-359). These arguments are convoluted and

groundless. The correct application of legal theory in no case results in the application of CLAIMANT’s

Standard Terms (ISSUE III).

CLAIMANT, as a result of its vain attempt of evading its liability, unsuccessfully tries to argue that it was

not under a duty of result. However, it was more than obvious under RESPONDENT’s Standard Terms

that CLAIMANT guaranteed the result of the cakes being in conformity with the environmental

sustainability standards. Since it cannot prove that it fulfilled its obligation, CLAIMANT must be held

responsible under Art. 35 of CISG (ISSUE IV). Quite interestingly, CLAIMANT discusses whether its

breach was fundamental and it can be held immune from liability under Art. 79 of CISG (Cl. Memo, line

505 et seqq.) although Procedural Order No. 1 and No.2 clearly state that these issues are not to be

discussed at this stage of proceedings. This issue will not be addressed by RESPONDENT as required by

Procedural Order No. 1 and No.2.

ISSUE I: The Tribunal has the exclusive authority to decide on the challenge of

Mr. Prasad, without his participation.

1 Clause 20 of the Contract excludes the application of Art. 13(4) of UAR, as the parties have intended to

reflect the confidentiality concerns in Clause 20, deviations from the UAR may be made implicitly, and

Art. 13(4) of the UAR clearly involves arbitral institutions (A.). The Tribunal has the exclusive authority to

decide on the challenge of Mr. Prasad as per Art. 13(2) of the DAL and such recourse to the Tribunal by

no means can be a dilatory tactic, moreover Mr. Prasad must not participate in the challenge decision as

requested also by CLAIMANT (B.)

A. Clause 20 of the Contract excludes the application of Art. 13(4) of UAR.

2 Parties, under Clause 20 of the Contract, have agreed to settle their dispute through ad hoc arbitration. They

posited their intent to do so as “any dispute…shall be settled by arbitration in accordance with the

UNCITRAL Arbitration Rules without the involvement of any arbitral institution” (Not. of Arb., § 6).

Parties in resolving their disputes chose UAR, a set of rules considered tailor-made for the purposes of ad

hoc arbitration, and thus used very frequently in ad hoc arbitration (ZAHRADNÍKOVÁ, § 14.08). However,

in order to reflect their intention fully, the parties have also specifically incorporated an addition to the

arbitration clause, which reads “without the involvement of any arbitral institution” (Not. of Arb., § 6). This

custom-made and explicit addition illustrates the ultimate intention to deviate from any regime or rules

UAR may include relating to the involvement of any arbitral institution.


4

3 The application of Art. 13(4) of the UAR has been excluded vis-à-vis the explicit wording of Clause 20

regarding the non-involvement of any arbitral institution. Such exclusion stems from the fact that (1.) the

parties have intended to reflect the confidentiality concerns in Clause 20, (2.) deviations from the UAR

may be made implicitly, and (3.) Art. 13(4) of the UAR clearly involves arbitral institutions.

1. Parties have intended and agreed to avoid the involvement of any arbitral institution

due to confidentiality concerns.

4 RESPONDENT operates its business in a very much reputation-sensitive manner and any potential threat

thereto results in RESPONDENT’s suffering great losses (Rsp. Exh. R 5). RESPONDENT, for this very

reason, made CLAIMANT aware of its confidentiality concerns stemming from a leak during previous

arbitration proceedings and that RESPONDENT switched to ad hoc arbitration as a consequence, as

specified by Annabelle Ming (Head of Purchasing of RESPONDENT) (Rsp. Exh. R 5). Such

confidentiality concerns naturally lead to RESPONDENT’s desire to refrain from any arbitral institution

for any purpose during the entire proceedings and let “as few persons as possible to know about the arbitration”

other than the parties and the Tribunal (Not. of Chal., § 8; Rsp. Exh. R 5).

5 CLAIMANT, in return to confidentiality concerns of RESPONDENT, voiced its concern as to the

composition of arbitral tribunal in ad hoc arbitration (Rsp. Exh. R 5). The e-mail dated Mar. 10, 2014 has

been sent in light of these previous communications and the concern voiced by CLAIMANT, and thus

constitutes the Parties’ final understanding of Clause 20 (Cl. Exh. C 1; Prob., p. 52). In this e-mail,

RESPONDENT has made its position very clear as to the concerns regarding composition of tribunal

giving way to the concerns regarding confidentiality (Rsp. Exh. R 5). CLAIMANT, having received such e-

mail yielding precedence to confidentiality, agreed to Clause 20 and to the non-involvement of any arbitral

institution.

6 CLAIMANT acknowledges the fact that it understood the addition as a deviation from the regime of

appointment of arbitrators foreseen in the UAR (Resp. to Not. of Chal). However, ironically, now

CLAIMANT asserts that such deviation does not apply to the regime of challenge of arbitrators. Art.

9(1)(2) of the UAR pointing out to the appointing authority for the appointment of arbitrators, and Art.

13(4) of the UAR pointing out to the appointing authority for the challenge of arbitrators are parallel in

their procedure and ratio legis. Moreover, in the e-mail dated Mar. 10, 2014, in defining what gives way to

confidentiality concerns, the term “composition of tribunal” has been used (Rsp. Exh. R 5). This term

refers both to the appointment and challenge of arbitrators as regulated under the UAR, and makes no

distinction between the two. Therefore, CLAIMANT in acknowledging the deviation from the regime of

appointment of arbitrators, also acknowledges the deviation from Art. 13(4) of the UAR.

7 The parties have intended and agreed to avoid the involvement of any arbitral institution due to

confidentiality concerns. Moreover, CLAIMANT has acknowledged that it has agreed to accrue the


5

confidentiality concerns primarily over any concern it had raised relating to the composition of tribunal,

including also challenge of arbitrators. Therefore, the parties’ intention was no different than what the

explicit wording of Clause 20 mandates and it is the non-involvement of any arbitral institution.

2. Deviations from the UAR may be made implicitly.

8 CLAIMANT argues, “a clearer wording would have been required for a deviation from the standard procedure” of the

UAR (Resp. to Not. of Chal; Cl. Memo., lines 91, 92). Deviation from Art. 13(4) of the UAR qualifies as a

modification, in the meaning of Art. 1(1) of the UAR. Any such modification may be made through an

express or implicit agreement of the parties (CARON ET AL., p. 19). Travaux préparatoires illustrate that no

explicit reference to rule from which the parties intend to deviate has to be made (CARON ET AL., p. 20).

As illustrated above (see supra § 4 et seq.), the parties have intended and agreed to a deviation, for

confidentiality purposes, and moreover CLAIMANT has acknowledged and agreed to this deviation.

Therefore, the existence of Clause 20 with the addition qualifies easily as an implicit agreement to deviate

from Art. 13(4) of the UAR, and no clearer wording is required for that purpose.

9 CLAIMANT also argues that RESPONDENT’s invoking of Art. 13(1) of the UAR to trigger challenge is

contradictory, as RESPONDENT illustrates Art. 13(4) of the UAR is modified and excluded (Cl. Memo.,

line 85). However, by no means it is contradictory, as these sub-paragraphs of Art. 13 of the UAR are

completely different provisions and they can be modified separately.

3. Art. 13(4) of the UAR clearly involves arbitral institutions.

10 Parties have not agreed upon a separate procedure for challenge of arbitrators based on their autonomy.

Having acknowledged it, CLAIMANT requests ICC as the authority that must decide on the challenge of

Mr. Prasad (Cl. Memo., lines 35, 633). However, nowhere in Clause 20 of the Contract, or in the UAR and

the DAL, ICC has been authorized to make such decision. Moreover, any recourse to ICC would by all

means be in contradiction with the parties’ explicit agreement in Clause 20. Therefore, CLAIMANT’s

request must be dismissed.

11 Even in the unlikely event that the Tribunal should deem the references to ICC as an unfortunate clerical

error on part of CLAIMANT and should consider them references to the PCA, any such request must be

dismissed. CLAIMANT also argues that “the parties should refer the case to the Permanent Court of

Arbitration in The Hague” for it to function as the appointing authority (Cl. Memo., line 120). CLAIMANT in

asserting such, resorts to Art. 13(4) of the UAR (Cl. Memo., line 119).

12 According to Clause 20 of the Contract the UAR has been referred to specifically. However, by the virtue

of the abovementioned addition, the parties have intended and agreed to avoid the involvement of any

arbitral institution due to confidentiality concerns, and thus deviated from the provisions of the UAR

requiring a resort to arbitral institutions. Permanent Court of Arbitration in The Hague is also an arbitral

institution (FOUCHARD ET AL., § 969; BORN, p. 29; DAELE, p. 17; PAULSSON, p. 2.; GRIMMER, p. 1.)


6

and therefore it cannot be empowered to undertake the task of acting as the appointing authority contrary

to the Parties’ explicit agreement.

13 Although CLAIMANT has not argued, one might argue that the Secretary-General of the PCA may

perform as the designating authority to determine a separate appointing authority, which would eventually

decide on the challenge of Mr. Prasad. However, any such involvement of the PCA would also constitute

involvement of an arbitral institution. “The integration of the PCA within an arbitral proceeding adds a permanent

institutional structure to the arbitral process. Such involvement within an arbitral proceeding can be named institutionalized

arbitration under the auspices of the PCA.” (INDLEKOFER, p. 2). Institutionalized arbitration under the

auspices of the PCA covers also appointing authority services for the appointment of arbitrators through

the Secretary General (ibid.; BORN, p. 33).

14 In acting as the designating authority, the Secretary-General does not act in his personal capacity, but he

acts as a position holder in the PCA. This is because (i) the Secretary-General uses his Secretariat

consisting of specialized lawyers in performing suck task (PAULSSON, p. 13) and (ii) the beneficiary of any

money transfer for benefitting from the designating authority services is the PCA (PCA Website). The use

of such secretariat and direct involvement of the PCA as the beneficiary would result in the exposure of

these arbitration proceedings, and would highly fuel the confidentiality concerns of the Parties.

15 The stance as to the RESPONDENT excluding all sorts of institutional involvement, including any

institutional support, has also been confirmed in paragraph 21 of PO2 (PO 2, § 21). Therefore, not only

direct recourse to institutions, but also any support or auspices they may provide has also been excluded.

16 Resorting either directly to the PCA as the appointing authority or to the Secretary-General of the PCA as

the designating authority would be in contradiction with Clause 20, as they would constitute either

institutional arbitration or institutionalized arbitration under the auspices of the PCA.

B. The Arbitral Tribunal has the exclusive authority to decide on the challenge of Mr. Prasad as

per Art. 13(2) of the DAL, without his participation.

17 The Tribunal has the exclusive authority to decide on the challenge of Mr. Prasad as per Art. 13(2) of the

DAL, and such recourse to the Tribunal can, by no means, considered a dilatory tactic, as this provision

provides procedural effectiveness (1.). The Tribunal must decide on the challenge without Mr. Prasad’s

participation, as also requested by CLAIMANT and as per the principle of nemo iudex in causa sua (2.).

1. The Arbitral Tribunal has the exclusive authority to decide on the challenge and such

recourse to the Arbitral Tribunal is not a dilatory tactic.

18 As the application of Art. 13(4) of the UAR has been excluded for the abovementioned reasons, “the

arbitral tribunal shall decide on the challenge” as per Art. 13(2) of the UML, which is lex arbitri and thus is

DAL.


7

19 CLAIMANT argues that the challenge “… is an obvious attempt by RESPONDENT to derail these

arbitral proceedings and to postpone the date when it will be ordered to pay the amount long overdue”

(Resp. to Not. of Chal). However, CLAIMANT, through arguing that the authority to make a challenge

decision is vested on the Tribunal, actually makes a reference to the more rapid forum to resolve the

challenge. Moreover, any such alleged amount based on frivolous claims will not be ordered, as explained

below (see below § 71 et seqq.).

20 The system through the Secretary-General of the PCA requiring the designation of a separate appointing

authority is truly “cumbersome, onerous” and long as it involves a number of different stages, such as applying

to the Secretary-General of the PCA, his designating a separate appointing authority, and such authority’s

making a decision on challenge (FOUCHARD ET AL., § 970, 971). On the contrary however, recourse to

the Tribunal to resolve the challenge “ensures that the arbitration may commence and proceed effectively”

(UML Explanatory Notes, § 23). Therefore, ironically enough, CLAIMANT is willing to pursue the system,

which would cause considerable delays, contrary to its allegations towards RESPONDENT.

21 In accordance with Clause 20 and Art. 13(2) of DAL, the Tribunal shall decide on the challenge and the

Tribunal is the forum through which the challenge would be decided on most rapidly and efficiently.

2. The Arbitral Tribunal must decide on the challenge without Mr. Prasad’s

participation.

22 The Tribunal must decide on the challenge without Mr. Prasad. CLAIMANT also asserts that Mr. Prasad

must not decide on its own case as per the principle of nemo iudex in causa sua (Cl. Memo., line 125). As a

matter of fact, CLAIMANT asserts the same level of importance to “the problem of Mr. Prasad deciding on its

own challenge.” (Cl. Memo., line 125) as RESPONDENT does, and even in its headline it states, “the decision must

be made without Mr. Prasad’s participation” (Cl. Memo., line 36).

23 Although CLAIMANT has not argued, one might argue that the Tribunal must decide on the challenge

with its full composure, including Mr. Prasad. However, such an argument would be unmeritorious as the

legal nature of the principle of nemo iudex in causa sua must be given full effect in this case as Mr. Prasad is

obviously dependent and partial. “The very first fundamental principle of arbitration, and in particular of

arbitral procedure, is undoubtedly that of the impartiality of the arbitrator, a principle which overlaps with

the general principle of law nemo iudex in causa sua” (LALIVE, § 145). The prohibition to decide in one's

own cause is a guarantee of the impartiality of the judge and arbitrator and the respect of this principle

belongs to those rules of procedure, which are absolutely mandatory (ibid.).Under UML, an approach

similar to ICSID Convention has been adopted, and the two “other unchallenged arbitrators shall decide

on the challenge” (TUPMAN, pp. 31, 32).

24 In line with the principle of nemo iudex in causa sua, the other two members of the Tribunal must decide on

the challenge of Mr. Prasad.


8

Conclusion to the First Issue

The parties have successfully agreed to exclude the application of Art. 13(4) of the UAR, as they intend to

avoid the involvement of arbitral institutions, including the ICC or PCA, in the arbitration proceedings.

Therefore, the Tribunal, the most rapid forum, must decide on the challenge of Mr. Prasad, without his

participation as also requested by CLAIMANT and as per the principle of nemo iudex in causa sua.

ISSUE II: Mr. Prasad should be removed from the Arbitral Tribunal.

25 RESPONDENT, in its Notice of Challenge has brought up four alleged grounds of challenge for declaring

absence of impartiality and independence of Mr. Prasad (Not. of Chal., §§ 8-11). First ground is the

appointment of Mr. Prasad as arbitrator in two different proceedings by the counsel of CLAIMANT’s law

firm, i.e. Fasttrack & Partners (“Appointment by Fasttrack & Partners”) (Cl. Exh. C 11). Second

ground is the previous appointments of Mr. Prasad by third party funder, i.e. Findfunds LP

(“Appointments by Third Party Funders”) (Prob., p. 36). Third ground is Mr. Prasad’s article on CSR

principles and conformity of goods (Rsp. Exh. R 4) (“VJICASL Article”). Last ground is the ongoing

arbitration counseled by Prasad & Slowfood, on whose side Findfunds LP also acts as a third party funder

(“Slowfood Arbitration”) (Prob., p. 36).

26 CLAIMANT tries to prevent RESPONDENT’s access to justice with the appointment of a partial and

dependent arbitrator and also with trying to conceal facts relevant to partiality and dependence of Mr.

Prasad. Although CLAIMANT may recourse to funding for this arbitration, the Tribunal should prevent

CLAIMANT’s intention to do so at the cost of impartiality and independence of the Tribunal.

27 RESPONDENT, in line with Art. 13(1) of the UAR, filed the Notice of Challenge for Mr. Prasad’s

removal from the Tribunal within the required time limit (B). Reasons why Mr. Prasad shall be removed

from the Tribunal are as follows: Mr. Prasad and CLAIMANT did not fulfill their disclosure obligations

(A), five grounds described below independently lead to justifiable doubts regarding impartiality and

independence of Mr. Prasad (C), and at the very least, cumulative consideration of these grounds lead to

justifiable doubts regarding impartiality and independence of Mr. Prasad (D).

A. Neither did Mr. Prasad nor CLAIMANT fulfill its disclosure obligation in accordance with

Art. 11 of UAR and IBA Guidelines.

28 Art. 11 of UAR and IBA Guidelines General Standard 3 prescribe that an arbitrator has the duty to

disclose all circumstances, which are “likely to give rise to justifiable doubts” for his impartiality and

independence “without delay” similar to established arbitral institution rules (CRISTANI, p. 157; cf. SCC

Rules Art. 14(3); cf. LCIA Rules Art. 5(5)). Furthermore, in line with Art. 11 of UAR, travaux préparatoires

determines the time frame of this obligation from the discussions for appointment until the publication of


9

the award (Report WG45, § 64; cf. CROFT ET AL., § 117; cf. CARON ET AL., pp. 195-196; cf. DAELE, § 1-

086; cf. WALSH/TEITELBAUM, p. 289).

29 Furthermore, IBA Guidelines General Standard 7 imposes a disclosure obligation for parties “of any

relationship, direct or indirect, between …. the arbitrator and any person or entity with a direct economic

interest” and it is emphasized in the same standard to fulfill this obligation “at its own initiative at the

earliest opportunity” (Gen. Std. 7). Therefore, the Parties also have an ongoing disclosure obligation

throughout the arbitral proceedings. Although CLAIMANT argues that IBA Guidelines are inapplicable as

the Parties did not agree upon their application (Cl. Memo., lines 198-199), UAR does not establish set of

rules and conditions leading to the removal of the arbitrator from the Tribunal. In such cases, it is the

norm in international arbitration practice to refer to the case-law on the subject matter of the challenge

(WALSH/TEITELBAUM, p. 288; cf. BORN, p. 1841; cf. WAINCYMER, p. 296). As IBA Guidelines are set

of norms stemming from the international arbitration practice, the Tribunal, like many arbitral tribunals

(ICS Inspection v Argentina, 17 Dec. 2009 (Ad Hoc)), should regard them as set of rules governing disclosure

obligation and a spectrum of circumstances for the removal of the arbitrator from the Tribunal (ibid.;

BOGART, pp. 53-54; VON GOELER, p. 126; cf. ICSID Case No. ARB/12/6 (2015)). CLAIMANT,

unfortunately, partially quotes a court decision (Cl. Memo., line 202; Cl. Memo., footnote 11, as used by

CLAIMANT) stating non-binding nature of IBA Guidelines by being general principles of international

arbitration. The court decision states “yet [IBA Guidelines] are a precious instrument, capable of

contributing to harmonization and unification of the standards applied in the field of international

arbitration to dispose of conflict of interests (…) and such an instrument should not fail to influence the

practice of arbitral institutions and tribunals” (Bundesgericht, 20 Mar. 2008 (Switzerland)), parallel with the

scholars’ opinions and court decisions referenced above.

30 Thus, it is important to analyze all of the conflict of interest grounds with respect to both Mr. Prasad and

CLAIMANT for the fulfillment of disclosure obligation. As will be explained below, such failures shall lead

to removal of Mr. Prasad individually, even if not under cumulative consideration of conflict of interest

grounds (see below § 44 et seqq.).

31 With respect to Appointment by Fasttrack & Partners ground, RESPONDENT concedes to the fact that

Mr. Prasad partially fulfilled this obligation by his DIIA (Cl. Exh. C 11). However, Mr. Prasad had also the

duty to disclose the fact that he was specifically recommended by Mr. Fasttrack in one of these arbitrations

and in the ongoing arbitration (PO 2, § 10), thereby, creating a direct link between the counsel of

CLAIMANT and Mr. Prasad. Furthermore, with the knowledge of previous dealings between Mr.

Fasttrack and Mr. Prasad, CLAIMANT also had a duty to disclose that Mr. Fasttrack recommended

appointment Mr. Prasad in the current case (ibid.).


10

32 Disclosure for the Appointments by Third Party Funders grounds was an obligation for both Mr. Prasad

and CLAIMANT due to significant material connection amounting to a commercial relationship between

Mr. Prasad and Findfunds LP as per IBA Guidelines Waivable Red List 2.3.6. Although Mr. Prasad

discloses such connections on September 11, 2017; material nature of these connections were not

disclosed in this letter (Prob., p. 36). Furthermore, CLAIMANT partially completes the disclosure obligation

pursuant to the order of the Tribunal (Prob., p. 34), as only the identity of the funder is released, despite the

need to release conditions and material aspects of the Funding Agreement (Prob., p. 35). Not only did

CLAIMANT failed to complete this disclosure on its own initiative, but also CLAIMANT failed to do so at

the earliest opportunity since the information was available on May 4, 2017 (Not. of Chal., § 3).

33 For the VJICASL Article, both Mr. Prasad and the CLAIMANT have failed to disclose this article

presenting an established opinion regarding the case as explained below (see below § 58 et seqq.). Only after

the Notice of Challenge, Mr. Prasad mentions the article, which does not fall in line with the requirements

of disclosure obligation to be at its own initiative and timely (Prob., p. 44). Metadata collected by

RESPONDENT also points out to the fact that CLAIMANT was made aware of this article latest on May

4, 2017 and therefore, it failed to fulfill its disclosure obligation as well in a joint attempt of CLAIMANT

and Mr. Fasttrack to conceal lack of impartiality and independence of Mr. Prasad (Not. of Chal., § 3).

34 Regarding the Slowfood Arbitration ground, RESPONDENT concedes to the fact that Mr. Prasad fulfilled

its disclosure obligation, as CLAIMANT’s connection with Findfunds LP was notified to him on

September 7, 2017. (Problem p. 35) However, CLAIMANT’s lack of cooperation for disclosing its

connections with Findfunds LP lead to the disclosure by Mr. Prasad on September 11, 2017 (Prob., p. 36).

As the CLAIMANT did not disclose the information regarding the third party funder, Mr. Prasad could

not disclose this fact on a timely manner under Art. 11 of UAR. Should CLAIMANT have abided its

disclosure obligation, Mr. Prasad could have disclosed the fact during the merger process, by being able to

detect such connection in the due diligence process (PO 2, § 7).

35 Consequently, on various occasions, Mr. Prasad and CLAIMANT failed to fulfill their disclosure

obligations and therefore, such failures should be considered by the Tribunal in favor of removal of Mr.

Prasad as these issues lead to justifiable doubts regarding impartiality and independence of Mr. Prasad (see

below §§ 44 et seqq.).

B. Challenge of Mr. Prasad was sent in timely manner in accordance with Article 13(1) of the

UAR.

36 Although CLAIMANT did not dispute the timeliness of challenge procedure and thereby waived its right

to pursue inadmissibility of the challenge, RESPONDENT shall in anyway prove that Notice of Challenge

was submitted in a timely manner. For Appointments by Third Party Funders and Slowfood Arbitration,

the time period to pursue a challenge starts from September 11, 2017 with Mr. Prasad’s disclosure of such


11

connections. Whereas, challenge period for Appointment by Fasttrack & Partners start from November 3,

2017 with Procedural Order 2. Therefore, the Challenge of Mr. Prasad filed on September 14, 2017 falls

within the time period determined by Art. 13(1) of the UAR for all grounds.

37 For the Appointment by Fasttrack & Partners, although Mr. Prasad disclosed this connection with his

DIIA on June 30, 2017, it should be emphasized that this disclosure was made partially. Therefore, when

new facts were brought before RESPONDENT by the Procedural Order 2 on November 3, 2017, time

period to file the Notice of Challenge was renewed. In a clear contrast with his DIIA, Mr. Fasttrack gave

advise to his colleagues during the course of these arbitrations and additionally, Mr. Fasttrack

recommended Mr. Prasad in one of those arbitrations (PO 2, § 5). As these new facts concern Mr.

Fasttrack’s connection with Mr. Prasad, such facts lead to the conclusion that the time limit for filing of

challenge starts from November 3, 2017.

38 Even if one might argue that the time limit for filing the Notice of Challenge for Appointments by Third

Party Funders starts from the RESPONDENT’s discovery of the metadata, this is not the case in the

current arbitration. Firstly, the metadata only states that there exists a Third Party Funder and an Article by

Mr. Prasad (Not. of Chal., § 3). However, only on Mr. Prasad’s disclosure does RESPONDENT find out the

exact nature of the connections between Mr. Prasad and Findfunds LP. Especially, in the metadata it is

not stated that CLAIMANT is funded by a subsidiary of Findfunds LP or the nature of the Funding

Agreement. Thus, the circumstances mentioned in Art. 11 and 12 of UAR became known to

RESPONDENT on September 11, 2017, with partial explanation of the circumstances by Mr. Prasad

(Prob., p. 36).

39 Furthermore, the metadata points out to the intention of CLAIMANT to hide the funding from the

RESPONDENT and it fails to fulfill its disclosure obligation because of this action. Therefore, even if

CLAIMANT did not put forward an objection, any possible attempts to pursue the time limit to nullify the

challenge is in contradiction with the well-known legal principle “procedural good faith” (VON GOELER, pp.

399-400, CoA de Paris, 8 Feb. 2001 (France)).

40 For Slowfood Arbitration, it is apparent that RESPONDENT had no information regarding the merger

before Mr. Prasad’s disclosure of relevant circumstances (Prob., p. 36). Therefore, the designated time

period for Slowfood Arbitration ground also starts from September 11, 2017.

41 Consequently, RESPONDENT was in line with the time limits designated by Art. 13(1) of the UAR, when

filing the Notice of Challenge on September 14, 2017 (Not. of Chal., § 1).

C. There are various grounds that should lead to justifiable doubts regarding Mr. Prasad’s

impartiality and independence in the current circumstances as per Article 11-13 of the UAR.

42 In accordance with Art. 12 of UAR, the required basis for the removal of an arbitrator from the tribunal is

determined by the assessment of justifiable doubt (CROFT ET AL., § 11.4; CARON ET AL., p. 211),


12

which requires the existence of a certain level doubt for risk of bias of the arbitrator in the decision process

(BORN, p. 1476; LEW/MISTELIS/KRÖLL, § 13-14; cf. VIETRI/DHARMANANDA, p. 193; cf. Country X

v Company Q, 11 Jan. 1995 (Ad Hoc); LCIA Case No. UN7949 (2007)). An objective assessment through the

perspective of a reasonable person is more compatible with Art. 12(2) of DAL and other rules in

international practice (BORN, p. 1476; UML Digest, § Art. 12-8; HWANG/LEE, p. 173; cf. Swiss PIL, Art.

180 (1); cf. LCIA Rules, Art. 10 (3); cf. ICDR Arbitration Rules, Art. 14(1)). This assessment should be made

from the perspective of the party filing the challenge, i.e. RESPONDENT in the current arbitration, for the

existence of doubt of opposing party “justifiable on some objective basis” for partiality and dependence of the

arbitrator (LEW/MISTELIS/KRÖLL, § 13-14).

43 It will be shown below that each ground defined above individually should lead to the removal of Mr.

Prasad from the Tribunal: Mr. Prasad and CLAIMANT’s non-fulfillment of disclosure obligation (1.),

Appointment by Fasttrack & Partners (2.), Appointments by Third Party Funders (3.), VJICASL Article

(4.) and Slowfood Arbitration (5.).

1. Failure of disclosure obligations by Mr. Prasad and CLAIMANT leads to justifiable

doubts regarding Mr. Prasad’s impartiality and independence.

44 Art. 11 of the UAR and IBA Guidelines General Standard 3 and 7 prescribe a disclosure obligation for

arbitrators and parties. In case of failure to fulfill such obligations, scholars and international practice state

that these failures create justifiable doubts regarding impartiality and independence of arbitrator

(LEW/MISTELIS/KRÖLL, § 11-36; DC The Hague, 5 Nov. 2004 (Netherlands)). Therefore, in line with Art.

12 of the UAR, existence of such doubts regarding impartiality and independence of an arbitrator shall

lead to the removal of the arbitrator (ibid.; SC United States, Nov. 18, 1968 (US)). As stated above, both Mr.

Prasad and CLAIMANT failed to fulfill their disclosure obligations to the extent required by both Art. 11

of the UAR and IBA Guidelines General Standard 3 and 7 (see supra § 28 et seqq.). Therefore, such failures,

in addition to attempts of CLAIMANT to hide the circumstances (Not. of Chal., § 3), leads RESPONDENT

to have justifiable doubts regarding Mr. Prasad’s impartiality and independence. Consequently, Mr. Prasad

should be removed from the Tribunal.

45 Although CLAIMANT did not argue regarding consequences for the failure of disclosure obligation, one

might argue that such failures do not lead to direct removal of the arbitrator without conduct of the

objective test for impartiality and independence. Even in that case, scholars and arbitration practice concur

on the idea that such failures should be considered as a contributing factor in the consideration of grounds

leading to justifiable doubts (REDFERN/HUNTER, §4.94; cf. WAINCYMER, p. 311; SCHERER ET AL.,

§ 178; cf. EWCH, 15 Sep. 2011 (UK); cf. ICSID Case No. ARB/07/16 (2010); cf. CoA Second Circuit, 3 Feb.

2012 (US); CoA Brussels, 29 Oct. 2007 (Belgium)). Therefore, RESPONDENT kindly requests the Tribunal to


13

consider the failure of the disclosure obligation as an aggravating factor in the determination of existence

of justifiable doubt.

2. Repeated Appointments by Fasttrack & Partners affects impartiality and

independence of Mr. Prasad.

46 Appointment by Fasttrack & Partners creates a substantial relationship between the counsel of

CLAIMANT and Mr. Prasad. It is common in international practice that repeated appointments of

arbitrators by the same counsel lead to removal of the arbitrator from the Tribunal (LCIA Ref. No. 81224

(2010); ICSID Case No. ARB/10/14 (2011)). In the current case, Mr. Prasad was especially recommended

by Mr. Fasttrack in the current arbitration as understood from the metadata retrieved by RESPONDENT

(Not. of Chal., § 3). Furthermore, Mr. Fasttrack, as the managing partner of the law firm, had direct

involvement and direct economic relationship with the arbitrations, in which Mr. Prasad was acting as an

arbitrator (PO 2, § 9). In both of the arbitrations mentioned Mr. Prasad voted in favor of the party, of

which Fasttrack & Partner was the counsel, thereby, Fasttrack & Partners gained financial benefits from

these arbitratios as a consequence of Mr. Prasad’s vote (PO 2, § 15). Consequently, such level of

connection should enable the Tribunal to remove Mr. Prasad based on the existence of justifiable doubts

regarding his impartiality and independence.

47 Contrary to any possible arguments for RESPONDENT’s acceptance of such conflicts arising from

Appointments by Fasttrack & Partners, such acceptance in Response to the Notice of Arbitration was

restricted the issues stated in his DIIA (Resp. Not. of Arb., § 22). Not only did RESPONDENT find out that

the DIIA was partially incorrect, but also relevant additional facts not disclosed to RESPONDENT were

available to Mr. Prasad at the time of the disclosure. In his declaration (DIIA), Mr. Prasad has stated that

Mr. Fasttrack himself was not involved in the cases (Cl. Exh. C 11), however, in fact Mr. Fasttrack gave

advise to his colleague running the cases (PO 2, § 9). Furthermore, Mr. Fasttrack recommended Mr.

Prasad for the second arbitration, also proving his extensive involvement in the cases concerning Mr.

Prasad (ibid.) In overall consideration of additional circumstances revealed later on, the Tribunal should

consider RESPONDENT’s statement as to acceptance of restrictions in Mr. Prasad’s DIIA has been

nullified.

48 Therefore, such statement shall not prevent the Tribunal to consider this ground either independently or

under the cumulative consideration of the grounds (see below § 67 et seqq.).


14

3. Repeated Appointments by Third Party Funders creates a material link between Mr.

Prasad and Findfunds LP leading to justifiable doubts.

Figure 1: Connections between Findfunds LP and Mr. Prasad

49 Mr. Prasad has been appointed four times by a party funded by Findfunds LP, which make up 20% of his

appointments overall, over the course of last three years (PO 2, § 10). This action of Findfunds LP created

a direct connection between Findfunds LP and Mr. Prasad. Such connection is considered as a “significant

commercial relationship” under IBA Guidelines Waivable Red List 2.3.6. Although one might argue that third

party funders are not one of the parties or its affiliates within the meaning of IBA Guidelines Waivable

Red List, these Guidelines themselves put the third party funders in an equivalent position with a party

(Exp. to Gen. Std. 6, § b). Findfunds LP has the direct and significant economic interest in the outcome of

this case, as it funds all costs associated to the arbitral proceedings (PO 2, § 6) and as it will gain “25% of all

amount awarded in the arbitration” (PO 2, § 1). Therefore, Findfunds LP should be considered together

with CLAIMANT for the purposes of conflict of interest catalog under the Waivable Red List.

50 Additionally, one might also argue that Mr. Prasad and Findfunds LP do not have a significant commercial

relationship, however, RESPONDENT believes the contrary even just by reviewing connections of Mr.

Prasad and Findfunds LP from Figure 1. Over the course of last three years, Findfunds LP has paid Mr.

Prasad significant amount of money for four proceedings it funded (PO 2, §§ 6, 10). From the six ongoing

arbitrations funded by Findfunds LP, two of them is conducted with the involvement of Mr. Prasad (PO

2, § 2). Considering all facts together, it is highly likely that Findfunds LP has started an unwritten and

established commercial relationship with Mr. Prasad in order to increase its possibility of success in the

current arbitration. Therefore, connections between Mr. Prasad and Findfunds LP amount to a significant

commercial relationship and thereby, requires explicit waiver of RESPONDENT in order for him not to

be removed from the Tribunal (App. of Gen. Std., § 2). RESPONDENT has made its rejection to grant such

waiver apparent from the moment it learned about the exact nature of the funding (Not. of Chal.).


15

51 Even if the Tribunal does not consider such condition to be under IBA Guidelines Waivable Red List

2.3.6, the Funding Agreement between CLAIMANT and Findfunds LP grant an extensive authority to the

funder to intervene to the arbitral proceedings, thereby creating justifiable doubts regarding Mr. Prasad’s

impartiality and independence as per Art. 11 of the UAR. Funding Agreement, still concealed by

CLAIMANT, is said to grant extensive authority to Findfunds LP to take part in the arbitral proceedings

(PO 2, § 4). Considering previous connections of Mr. Prasad and Findfunds LP, during the course of the

arbitration, any intervention by Findfunds LP enabled by the Funding Agreement has a significant

potential to alter the outcome of the arbitration. In order words, as long as Mr. Prasad is an arbitrator in

the current case, there exists risk of bias to the level required by Art. 11 of the UAR.

52 Secondly, it is necessary to state that the Funding Agreement precedes Notice of Arbitration together with

Appointment of Mr. Prasad (PO 2, § 5). Even before that, metadata reveals Findfunds LP had been a

factor in the appointment of Mr. Prasad (Not. of Chal., § 3). Therefore, due to its previous gains from

previous arbitrations, Findfunds LP could have taken role in the appointment of Mr. Prasad in the current

arbitration. As a consequence, such issues regarding repeated appointments (Cour de Cassation, 20 Oct. 2010

(France)) should be examined under the principles established in AWG Group v Argentine Republic

(AWG Group v Argentine Republic, 22 Oct 2007 (Ad Hoc)) parallel to international practice. For such repeated

appointments, the four criteria set forth in this case evaluate if justifiable doubt exists: proximity, intensity,

dependence and materiality (BORN, p. 1865; VON GOELER, p. 266).

53 Firstly, the proximity criterion is satisfied, when the connection between an arbitrator and a party is direct

(ibid.; BERGER, pp. 491-492). Findfunds LP has a corporate structure that establishes a subsidiary for every

arbitration to be funded and no arbitration is funded by Findfunds LP directly (PO 2, § 3). As these

subsidiaries are established with an aim to conceal its conflicts of interests and to abide by the applicable

legal regulations (PO 2, § 2), it is not possible to consider its subsidiaries different legal entities than

Findfunds LP, since it has de facto control over these subsidiaries. As the majority shareholder of Funding

12 Ltd., i.e. the subsidiary established to fund the current arbitration, Findfunds LP and Mr. Prasad has a

direct connection.

54 Although CLAIMANT has argued that Findfunds LP may not have voting rights to be in control of

Funding 12 Ltd. (Cl. Memo., lines 160 – 190), CLAIMANT is the party in the position to obtain the

shareholding structure of Funding 12 Ltd. As CLAIMANT can point to no evidence supporting this claim,

the Tribunal should disregard CLAIMANT’s such argument that has no factual and legal basis, and should

assume that being majority shareholder grants Findfunds LP control over Funding 12 Ltd.

55 Secondly, the intensity of the connection to some level is needed to prove the bias of an arbitrator (AWG

Group v Argentine Republic, 22 Oct 2007 (Ad Hoc)). As mentioned before (see supra § XX), Findfunds LP has

repeatedly appointed Mr. Prasad as arbitrator or his law firm as legal counsel, to be exact Findfunds LP


16

has funded four arbitrations with the inclusion of Mr. Prasad over the course of last three years, including

three arbitrations as party-appointed arbitrator (PO 2, §§ 6, 10). Currently, one-third of the arbitrations

funded by Findfunds LP are directly connected to Mr. Prasad (PO 2, § 2). Therefore, the intensity level to

such an amount should satisfy the necessary level for this criterion (BORN, pp. 1882-1883;

WALSH/TEITELBAUM, p. 300; PARK/ROGERS, pp. 119-120; High Court of Delhi, 11 Feb. 2010 (India);

OLG Hamburg, 22 Jul. 2002 (Germany)).

56 Lastly, material aspect of the connection should be considered for materiality and dependence conditions

for establishing the bias of the arbitrator (AWG Group v Argentine Republic, 22 Oct 2007 (Ad Hoc); cf. LCIA

Ref. No. 81224 (2011); KHAMBATA, p. 630). As these two conditions are highly interrelated, both of

these will be assessed at once. In order to uphold the challenge, arbitration practice expects arbitrator to be

dependent on third party funders by gaining monetary compensation (LCIA Ref. No. 81160 (2009);

SCHERER ET AL., p. 182). Mr. Prasad gained 20% of his arbitrator fees over the course of last three

years from Findfunds LP (PO 2, § 10), this is a considerable part of his earnings that constitutes material

aspect of the relationship. Furthermore, an additional benefit received from Findfunds LP is from

Slowfood Arbitration in the amount of 1.8 million US$ (see below § 63).

57 Considering these factors together, the connection between Mr. Prasad and Findfunds LP, satisfies all

criteria determined by AWG Group v Argentine Republic supported by international practice and

therefore, should lead to the removal of Mr. Prasad from the Tribunal.

4. VJICASL Article constitutes justifiable doubts as it presents a pre-judgment of the

case.

58 VJICASL Article leads to justifiable doubts as to the impartiality of the arbitrator as this article renders a

decision towards CLAIMANT at the current case. Mr. Prasad actually discusses the very subject matter of

the dispute in his article. In this article Mr. Prasad implies that there is no obligation to ensure that the

goods are in conformity with the CSR standards (Rsp. Exh. R4), reiterating CLAIMANT’s arguments on

the subject-matter of the case. Even though international practice and scholars concur on the fact that

independent articles on abstract matters should not lead to removal, specific articles written on the content

of the dispute leads to removal of the arbitrator even at the later stages of arbitral proceedings (ICSID Case

No. ARB/07/26 (2010); ICSID Case No. ARB/03/17 (2007); ICSID Case No. 05/07 (2009)). VJICASL

Article presents Mr. Prasad’s opinions regarding subject-matter of the case, on which CLAIMANT concurs

as well (Cl. Memo., lines 217 – 220). Furthermore, CLAIMANT argues that Mr. Prasad’s opinions may not

be determinative in this case (ibid.), however, it is apparent that Mr. Prasad’s established view regarding

conformity with the CSR standards cause a substantial risk regarding RESPONDENT’s right to have

open-minded arbitrators within the Tribunal (PCA Case No. 2013-09 (2013)). Mr. Prasad’s connections

and views is certain to prevent him from having an open mind to hear arguments of RESPONDENT,


17

without any prejudgment or inclination towards one of the Parties, thereby, prevent RESPONDENT’s

access to right to be heard (ibid.; DÍAZ-CANDIA; WAINCYMER, pp. 307-308). Such substantial risk meets

the standards necessary for existence of justifiable doubts or existence of risk of bias leading to Mr. Prasad’s

removal from the Tribunal in line with Art. 11 of the UAR (emphasis added).

59 Additionally, CLAIMANT states that Mr. Prasad is the “perfect arbitrator” for this case due to VJICASL

Article and also tries to hide this fact (Not. of Chal., § 3). These actions of CLAIMANT aggravate

RESPONDENT’s understanding as to how much opinionated Mr. Prasad is and thereby, increasing the

level of risk of bias.

60 Consequently, the Tribunal should remove Mr. Prasad with such level of risk of bias and should not

endanger RESPONDENT’s access to fair trial in the unlikely chance that Mr. Prasad may “not decide based on

this opinion” (Cl. Memo., line 220).

5. Slowfood Arbitration constitutes a valid ground for establishing partiality.

61 Connection between Mr. Prasad and Findfunds LP for Slowfood Arbitration is a material one that could

impact the decision-making process of the current arbitration (cf. FRY/GREENBERG, § 20(2); CoA

Seventh Circuit, Oct. 9, 2002 (US); CoA Ninth Circuit, Apr. 5, 1994 (US)), which should be considered under

IBA Guidelines Waivable Red List 2.3.6 (CoA Reims, Nov. 2, 2011(France)).

62 Currently, the arbitration proceedings for Slowfood Arbitration is ongoing. Furthermore, in the merger

process of Prasad & Partners and Slowfood, a due diligence was conducted on Slowfood (PO 2, § 7).

Therefore, Mr. Prasad, by way of the findings of this due diligence, could be aware of the circumstances of

the Slowfood Arbitration (ibid.) and even may be informed of the circumstances as an equity partner of

Prasad & Slowfood (PO 2, § 8). This may lead Mr. Prasad to consider such circumstances in the decision-

making process.

63 Moreover, all costs associated with the arbitration is partially paid by Findfunds LP due to its shareholding

structure (PO 2, § 6). Considering the agreement between Prasad & Slowfood and CLAIMANT for legal

services, jointly with the Funding Agreement between CLAIMANT and a subsidiary of Findfunds LP

guaranteeing the payment of legal costs, Findfunds LP has a direct material connection with Prasad &

Slowfood in the amount of 1.8 million US$, with 1.5 million US$ already paid and the rest is due soon (PO

2, § 6). Thus, such amount of fees leads to a commercial relationship between law firm of Mr. Prasad and

Findfunds LP within the meaning of IBA Guidelines Waivable Red List 2.3.6 (ICSID Case No.

ARB/10/14 (2011)).

64 In conditions falling under Waivable Red List, IBA Guidelines require an express waiver by the opposing

party (App. of the Gen. Std., §§ 2, 4; cf. LCIA Ref. No. UN96/X15 (1996)) and in the absence of such waiver,

the arbitrator shall be removed from the Tribunal due to existence of “objective conflict of interest” (ibid.).

RESPONDENT, in the current case, explicitly stated its objections in the Notice of Challenge in a timely


18

manner for Mr. Prasad to have such level of significant commercial relationship with Findfunds LP (Not.

of Chal., § 11).

65 Consequently, the Tribunal should remove Mr. Prasad due to his significant commercial relationship with

Findfunds LP as this leads to justifiable doubts regarding his independence and impartiality.

66 Even if one might argue that RESPONDENT’s acceptance of Mr. Prasad’s appointment includes

Slowfood Arbitration as well, that is not the case in the current arbitration since RESPONDENT was not

even made aware of the ongoing merger process and identity of third party funder, i.e. Findfunds LP, until

September 11, 2017 (Prob., p. 36). Thus, RESPONDENT’s acceptance, if not nullified (see supra XX), only

included Mr. Prasad’s colleagues at the former Prasad & Partners (Resp. Not. of Arb., § 22).

D. Cumulative consideration of all factors should lead to the removal of Mr. Prasad.

67 Tribunals and scholars have deliberated that although grounds for conflict cannot lead to disqualification

individually, cumulatively these could lead to removal of the arbitrator from the Tribunal

(PHILBLAD/KRISTENSEN, pp. 588-589; WALSH/TEITELBAUM, p. 288; LCIA Ref. No. UN3490

(2005); AP Madrid, 30 Jun. 2011 (Spain)).

68 Firstly, even if the Tribunal does not consider RESPONDENT’s acceptance for Appointments by

Fasttrack & Partners nullified, this ground should be reviewed under cumulative consideration of

circumstances together with other factors (see supra XX). This is because, various new issues pertaining to

statements made in the DIIA were revealed during the proceedings (see supra § 37) and therefore,

RESPONDENT can firmly say that if it knew such factors then, RESPONDENT would never have

accepted Mr. Prasad’s appointment.

69 Secondly, Findfunds LP has been granted a significant amount of control over the decision making

process of Mr. Prasad by way of the authorities granted under the Funding Agreement (see supra § 51) and

of becoming a counsel for the party funded by Findfunds LP in the Slowfood Arbitration (see supra § 61 et

seqq.). Furthermore, CLAIMANT’s action to conceal existence of such conflict grounds for such a long

period, between May 4, 2017 and September 7, 2017 (Not. of Chal., § 3; Prob., p. 36), leads RESPONDENT

to think that CLAIMANT has the idea that it might be able to impact Mr. Prasad regarding the outcome of

current arbitration through extensive connections he has with Findfunds LP.

70 RESPONDENT may agree with CLAIMANT that litigation funding should be available to it. However,

this should not intervene with RESPONDENT’s right to be heard by an impartial and independent

tribunal. Thus, Mr. Prasad has to be removed from the Tribunal as a consequence of conflict of interest

grounds individually and cumulatively.


19

Conclusion to the Second Issue

Due to Mr. Prasad’s connections with Findfunds LP, CLAIMANT, CLAIMANT’s counsel Mr. Fasttrack

and Mr. Prasad’s established opinion in his article, it is apparent that there is justifiable doubts regarding

Mr. Prasad’s impartiality and independence. In order to ensure that RESPONDENT’s arguments will be

heard by an open minded, impartial and independent arbitrator, Mr. Prasad should be removed from the

Tribunal and be replaced.

ISSUE III: CLAIMANT’s Standard Terms in no way govern the contract.

71 CLAIMANT alleges that its Standard Terms govern the Contract. However, this allegation is groundless

because CLAIMANT's Standard Terms were not incorporated (A.), and even if they were incorporated,

CLAIMANT’s Standard Terms do not govern the Contract (B.).

A. CLAIMANT’s Standard Terms were not incorporated.

72 CLAIMANT seems to be confused about what constituted an offer and an acceptance in the case at hand

and consequently, when the Contract was concluded (Cl. Memo., lines 275-310). Hence, it is important to

eliminate this confusion before analyzing incorporation of CLAIMANT’s Standard Terms.

RESPONDENT sent its Tender Documents to CLAIMANT on March 10, 2014 (Cl. Exh. C 1). Those

documents included neither the price nor a detailed description of the product (Cl. Exh. C 2) and thus, it

was not sufficiently definite to constitute an offer pursuant to Art. 14 of CISG which requires proposals to

indicate the goods and fix the price. RESPONDENT also stated “I look forward to the submission of your

offer” in its letter (Cl. Exh. C 1) which clearly indicates that sending tender documents was solely an

invitation to offer. The offer, on the other hand, submitted by CLAIMANT on March 27, 2014 (Cl. Exh. C

3) fixed the price, described the goods as “Chocolate Cake - Queens’ Delight” and deviated from Tender

Documents regarding the payment process and the form of cakes (Cl. Exh. C 4). These points were

acceptable to RESPONDENT and therefore, it sent its acceptance on April 7, 2014 (Cl. Exh. C 5). Arrival

of the acceptance concluded the Contract which was performed for three years. Accordingly, there must

be no dispute whether or not the Contract was concluded.

73 RESPONDENT’s acceptance was for the price determined by CLAIMANT, payment process and shape

of cakes which deviated from provisions of Tender Documents. This acceptance clearly did not comprise

accepting CLAIMANT’s Standard Terms because those terms were not incorporated in the offer. Both

scholarly view and case law hold that the requirements for incorporation of standard terms in a contract

are apparent indication of the party’s intent to include these standard terms and availability of these

standard terms to the opposite party (FERRARI in: Kroll et al. § 39-40; SCHROETER in:

Schlechtriem/Schwenzer, p. 277; SCHMIDT-KESSEL; EISELEN; SCHWENZER/MOHS, p.241; BGH, 31 Oct.


20

2011 (Germany); RB Utrecht, 21 Jan. 2009 (Netherlands); LG Landshut, 12 Jun. 2011 (Germany)). It is crucial to

analyze the first requirement in this case since RESPONDENT acknowledges that a reference was added

to the bottom of the offer (Cl. Exh. C 4) which could be sufficient to make the Standard Terms available.

74 Regarding the first requirement, “An effective inclusion of general terms and conditions thus first requires

that the intention of the offeror that he wants to include his terms and conditions into the contract be

apparent to the recipient of the offer.” (BGH, 31 Oct. 2011 (Germany); cf. CoA Katowice, 5 September 2012

(Poland)). In the case at hand, CLAIMANT’s intention to incorporate its Standard Terms- even if present-

was not reasonably apparent to RESPONDENT. Unfortunately, CLAIMANT now tries to get around its

liability arising from the delivery of non-conforming cakes by alleging the incorporation of these terms.

75 In order to determine if CLAIMANT had an intention to incorporate its Standard Terms that was

reasonably apparent to RESPONDENT, the offer should be interpreted based on Art. 8 of CISG.

Accordingly, it is necessary to go beyond the apparent meaning of the words by giving due consideration

to all relevant circumstances of the case including the negotiations (Secretariat Commentary Art.8 §§ 5-6).

76 First of all, the Contract was formed following a tender process initiated by RESPONDENT whose aim

was to receive offers in conformity with Tender Documents. This aim was ensured by requiring letters of

acknowledgement from offerors. CLAIMANT as well sent the Letter of Acknowledgement which clearly

stated “We have read the Invitation to Tender and will tender in accordance with the specified requirements.” (Resp.

Exh. R 1; emphasis added). Therefore, RESPONDENT had and a reasonable party in its position would have

an honest expectation that the offers would be in conformity with its Standard Terms. One of the

offerors, knowing the main aim of tender process, informed RESPONDENT about the changes it

requested in its letter of acknowledgement. Other four offerors sending letters of acknowledgement

indeed made offers fully conforming to Tender Documents (PO 2, § 23). CLAIMANT, however, claims to

have wanted to deviate from existing provisions despite its clear undertaking to offer in accordance with

Tender Documents in its Letter of Acknowledgement (Resp. Exh. R 1). Those deviations could of course

be possible, but there must have been specific notification and a following acceptance. CLAIMANT clearly

pointed out the deviation in the form of cakes and the payment process which were accepted by

RESPONDENT. However, it never mentioned its wish to change the set of standard terms the Contract

was subject to and therefore, it was never accepted by RESPONDENT.

77 Despite CLAIMANT’s allegations (Cl. Memo., line 260), the inclusion of Standard Terms was also a material

modification. “[E]xtent of one party's liability to the other” is counted as material change under Art.19 of

CISG and since these terms determined the nature of CLAIMANT’s obligation, i.e. whether it is a duty of

result or a duty of best efforts, inclusion of them constituted a material change. Like the other material

changes suggested by CLAIMANT, inclusion of its Standard Terms must have been clearly stated for such

intention to be reasonably apparent to RESPONDENT. Mere reference under the offer was not sufficient


21

since the form was a template ordinarily used by CLAIMANT. Regarding their negotiation process,

CLAIMANT could not rely on such an automatic inclusion of reference since “[t]he obligation should be

on the party relying on [standard terms] to ensure that they are set out in a manner […]” (CISG-AC Opinion No.

13; emphasis added) where a reasonable party could understand their inclusion. Concerning the tender

process, CLAIMANT’s alleged intention to incorporate its own Standard Terms just by using a fixed form

clearly “differs from the expectation of the contractual partner to such an extent that the latter cannot

reasonably be expected to have anticipated that such a clause might be included” (LG Landshut, 12 June

2008 (Germany)).

78 Moreover, RESPONDENT made clear in its acceptance letter that it was not aware of any intention to

incorporate CLAIMANT’s Standard Terms by accepting only “the different payment terms and form of

the cake” and by clearly stating that it read CLAIMANT’s Standard Terms “out of curiosity” (Cl. Exh. C 5).

B. Standard Terms of CLAIMANT do not govern the Contract, even if they were incorporated.

79 CLAIMANT tries to equate the dispute with an ordinary battle of the forms situation while deciding on

which set of standard terms govern the Contract. As a consequence of this redundant attempt,

CLAIMANT presents an incomplete analysis of the facts both in its submission to arbitration and in its

memorandum. For instance, the Letter of Acknowledgement (Rsp. Exh. R1) was ignored by CLAIMANT

even though its importance was emphasized by RESPONDENT (Resp. to Not. of Arb., §§ 8,10, 25).

Additionally, CLAIMANT did not refer to the negotiations at the food fair in its memorandum. This lack

of the analysis of these facts causes CLAIMANT’s wrong conclusion about the governing standard terms

of the Contract.

80 The dispute regarding the nature of the obligation should be resolved by the application of

RESPONDENT’s Standard Terms. According to the facts of the case, a “battle of the forms” does not

exist (1.). Even if the Tribunal were to find otherwise, CLAIMANT’s Standard Terms do not govern the

Contract and it is either governed by RESPONDENT’s Standard Terms or should be interpreted in line

with RESPONDENT’S aim to become Global Compact LEAD Company (2.).

1. Tender process guarantees the application of RESPONDENT’s Standard Terms. A

“battle of the forms” does not exist.

81 CLAIMANT’s allegations regarding the battle of the forms problem are groundless. The Tender

Documents determine RESPONDENT’s Standard Terms as the set of rules governing the Contract (a.).

CLAIMANT accepted this fact by signing the Letter of Acknowledgement (b.). Furthermore,

RESPONDENT’s acceptance cannot be deemed as an assent to CLAIMANT’s Standard Terms due to

reliance promoted by CLAIMANT (c.).


22

a. Tender documents expressly refer to application of RESPONDENT’s Standard

Terms.

82 RESPONDENT, as a super market chain known for its compliance with the fair-trade standards, decided

to procure sustainably produced chocolate cakes in 2014. RESPONDENT put out a tender for satisfying

its very specific need, namely buying high quality cakes and finding a supplier who adheres to the same

sustainability standards as RESPONDENT.

83 Art. 8 of CISG is used for interpretation of declarations of intent alongside with interpretation of contract

terms (SCHLECHTRIEM/BUTLER, p.56; BGer, 22 Dec. 2000 (Switzerland)). Art. 8(1) of CISG proposes a

subjective approach and Art. 8(2) of CISG introduces an objective one i.e. reasonable person theory

(HUBER in Huber/Mullis, p.12; KGer Fribourg, 11 Oct. 2004 (Switzerland)). RESPONDENT made clear its

intent concerning the application of its Standard Terms in the Tender Documents.

84 RESPONDENT prepared very detailed Tender Documents which consist of twenty-six sections (Cl. Exh.

C2). The aim of creating such a detailed document was to ensure the uniformity of the offers with regard

to these terms and conclude the Contract in a short period of time. This intent was made clear by the fact

that RESPONDENT requested letter of acknowledgements from the tenderers (Cl. Exh. C2; Rsp. Exh. R1)

85 General Conditions of Contract (Cl. Exh. C2) and Comestibles Finos’ Code of Conduct for Suppliers (Cl.

Exh. C2) state that the Contract is subject to RESPONDENT’s Standard Terms. RESPONDENT sent the

Tender Documents attached to Invitation to Tender on March 10, 2014 (Cl. Exh. C1). Thus,

RESPONDENT’s intent was known by CLAIMANT and this resulted in the inclusion of

RESPONDENT’s Standard Terms to the Contract.

b. CLAIMANT accepted to be bound by the Letter of Acknowledgement which

secures compliance of the offer with RESPONDENT’s Standard Terms.

86 The Letter of Acknowledgement was provided among the Tender Documents (Cl. Exh. C2). The Letter

of Acknowledgement was designed in a way to ensure the compliance of the offer with the Tender

Documents. The offerors confirmed that they got, read and were going to comply with the Tender

Documents. (Rsp. Exh. R1).

87 CLAIMANT submitted its Letter of Acknowledgement on March 17, 2014 which contained the following

statement: “We have read the Invitation to Tender and will tender in accordance with the specified

requirements.”, thereby CLAIMANT accepted to be bound by the Letter of Acknowledgement and to

make its offer accordingly (Rsp. Exh. R1).

88 RESPONDENT made the Letter of Acknowledgement a prerequisite for submitting an offer in the

Tender by asking CLAIMANT to return the Letter of Acknowledgment in case it decides to tender for the

Contract (Cl. Exh. C2). Thus, RESPONDENT gave possible offerors only a choice between making an

offer that complies with its Standard Terms or not to offer at all. Such intent on RESPONDENT’s part


23

was made clear to the tenderers and unsurprisingly four of the tenderers out of six made no changes in

their offers. The only offeror who made changes in the Tender Documents other than CLAIMANT,

clearly notified RESPONDENT in its Letter of Acknowledgement of the changes it proposed (PO 2, § 23).

This shows that the tenderers were aware that RESPONDENT “would only accept offers which complied

with the Tender Documents” (Resp. to Not. of Arb. § 8). CLAIMANT was also aware that its offer should

comply with the Tender Documents. When it proposed the changes about the size of the cakes and the

payment, CLAIMANT notified RESPONDENT. However, CLAIMANT somehow refrained from making

a clear notification of the changes concerning its Standard Terms (Cl. Exh. C3).

89 Even though there exists “no common trade usage in Mediterraneo or Equatoriana stating that the

initiator of a tender process can bindingly dictate its General Conditions” (PO 2, § 44), CLAIMANT bound

itself to make an offer in line with the Tender Documents by signing the Letter of Acknowledgement. As

will be explained below, it was only natural for RESPONDENT to assume that CLAIMANT’s offer

pertained to a contract which would be governed by RESPONDENT’s Standard Terms.

c. RESPONDENT’s acceptance cannot be deemed as an assent to CLAIMANT’s

Standard Terms due to reliance promoted by CLAIMANT.

90 CLAIMANT based its allegations concerning the applicable standard terms on the acceptance of

RESPONDENT (Cl. Exh. C5). CLAIMANT misleadingly claims that by awarding the Contract,

RESPONDENT accepted to be bound by CLAIMANT’s Standard Terms (Cl. Memo., line 270). However,

this conclusion contradicts with the reliance promoted by CLAIMANT and disregards the basis that the

Contract was formed.

91 The protection of reliance is one of the general principles that CISG is based on and closely related to the

good faith principle. The principle relies on the idea that “a party who has created a situation of reliance,

upon which the other party has acted, has to bear the consequences of such situation.” (MAGNUS).

Article 8(2) of CISG accepts the reliance principle by the objective criterion for interpretation (KONERU,

p.118; SCHMIDT-KESSEL in Schlechtriem/Schwenzer, Art. 8 §20; KGer Fribourg, 11 Oct. 2004 (Switzerland); Trib

app Ticino, 29 Oct. 2003 (Switzerland)). Thus, the acceptance of RESPONDENT has to be evaluated in light

of the reliance promoted by CLAIMANT.

92 RESPONDENT accepted the offer because it was sure that the Contract will be governed by its Standard

Terms due to the reliance promoted by CLAIMANT. First of all, CLAIMANT committed to offer in

accordance with the Tender Documents by submitting the Letter of Acknowledgement (Rsp. Exh. R1).

The Letter of Acknowledgement is among one of the inseparable parts of the Tender Documents so the

offer has to be interpreted in light of the Letter of Acknowledgement. Therefore, RESPONDENT was

right to assume that the offer was complying with the Tender Documents.


24

93 RESPONDENT received the sales offer attached to the Tender Documents (Cl. Exh C4). CLAIMANT

stated that “[to] be completely transparent, we have decided to submit a proper offer containing the

changes and have left the relevant sections in the Tender Documents open or refrained from including the

changes in the documentation” (Cl. Exh. C3). Namely, RESPONDENT received its Standard Terms as a

hard copy while CLAIMANT’s Standard Terms were only referred to in the footer (Cl. Exh. C4).

CLAIMANT notified RESPONDENT expressly about changing the size and payment terms and they were

expressed in the sales offer (Cl. Exh. C4). Other changes were presented as “minor amendments” (Cl.

Exh. C3). Thus, CLAIMANT directed RESPONDENT to focus on the changes made in size and payment

conditions. This explains why Ms. Ming read CLAIMANT’s Standard Terms merely “out of curiosity” and

did not feel the need to make a thorough inspection (Cl. Exh. C5).

94 Given the fact that the Parties’ Standard Terms share the same values and are both influenced by the GCP

(Cl. Exh. C5), it cannot be expected from RESPONDENT to notice the change in the nature of obligation

when Annabelle Ming read the boilerplate “out of curiosity”. Both Parties’ Standard Terms include similar

wording. Both of them include anti-bribery-corruption, environment protection, ethical business, human

rights, labour standards and health-safety provisions (Rsp. Exh. R 3; Cl. Exh. C 2).

95 CLAIMANT purports that the so-called inclusion of its Standard Terms is in fact a minor amendment (Cl.

Memo., line 255). However, it amounts to a change in the nature of the obligation and drastically affects the

liabilities of CLAIMANT. Hence, CLAIMANT’s Standard Terms cannot be accepted as a minor

amendment under Art. 19 of CISG (see supra § 77).

96 CLAIMANT’s attempt to change the nature of obligation by inserting its Standard Terms is fruitless. This

change does not constitute a minor amendment. Furthermore, CLAIMANT did not notify

RESPONDENT about this change as it did about other major amendments. Therefore, under Art. 8(2) of

CISG, RESPONDENT’s acceptance does not amount to a change in the nature of obligation. The

Contract was made subject to RESPONDENT’s Standard Terms and CLAIMANT has to bear this fact

due to reliance principle.

2. Even if a battle of the forms problem exists, the solution of the problem leads to a

duty of result. CLAIMANT’s Standard Terms do not govern the Contract.

97 If the Tribunal were to conclude that a battle of the forms problem exists, the knock-out rule would apply

through the application of the UNIDROIT Principles (a.). Even if the Tribunal were to rule that CISG

governs the battle of the forms problem, the knock out rule should nonetheless be applied to the dispute

(b.). Finally, the application of the knock out rule determines the nature of the obligation as a duty of result

(c.).


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a. Battle of the forms does not fall under the scope of CISG. The battle of the forms

analysis is governed by the UNIDROIT Principles.

98 During the drafting process of CISG several attempts were made for regulating the battle of the forms

problem (SCHLECHTRIEM/BUTLER, p.81). However, the proposal of the working group was rejected

and no provision regarding the battle of the forms was regulated in CISG (MULLIS in: Huber/Mullis, p.92;

VERGNE).

99 For the issues not dealt by CISG, the UNIDROIT Principles are applicable (PO 1, § 4). Article 2.1.22

deals with the battle of the forms. Unfortunately, CLAIMANT is unaware of the fact that Art. 2.1.22

regulates the knock out rule and erroneously stated that the article regulates the last shot rule (Cl. Memo. line

355). The last shot rule is not applicable under UNIDROIT Principles.

b. In case CISG determined as governing law to the battle of the forms problem, the

knock out rule should be applied.

100 Unlike the UNIDROIT Principles, CISG does not contain an express provision on the battle of the

forms problem. The last shot rule is criticized by many specialists. It is found to be mechanic and arbitrary

(VISCASILLAS, p.116 et seq.) and not to reflect the realities of the trade (BERGENTHAL/EISELEN,

p.221; MULLIS in: Huber/Mullis, p.94). It is disputed that whether the solutions reached by the last shot

rule accord with “the parties’ true intentions” (MULLIS in: Huber/Mullis, p.94).

101 The last shot rule contradicts with the observance of the good faith in international trade under Art. 7(1)

of CISG. In a decision by the German Supreme Court, the drawback of the last shot rule is emphasized as

follows: “(For) the user of the clauses, however, it is easily possible to attach to his offer the general terms

and conditions, which generally favor him. It would, therefore, contradict the principle of good faith in

international trade (Art. 7(1) CISG) as well as the general obligations of cooperation and information of

the parties to impose on the other party an obligation to inquire concerning the clauses that have not been

transmitted and to burden him with the risks and disadvantages of the unknown general terms and

conditions of the other party.” (BGH, 31 Oct. 2001 (Germany)). The behavior described by the court

corresponds with what CLAIMANT has done during the negotiations of the Contract.

102 As the initiator of the tender process, RESPONDENT does not have the chance to avoid the offers

provide the last shots. It leads to an unfair situation that can be taken advantage of like CLAIMANT tries

to do (Cl. Memo., line 295). If the Tribunal were to conclude that the last shot rule is applicable, the offerors

are given the option of determining the content of the Contract by only giving a reference to their

boilerplates in their offers despite the former negotiations with RESPONDENT. In case the last shot rule

was applied, RESPONDENT would be forced to burden with unbearable “risks and disadvantages of the

unknown general terms and conditions of the other party” and “obligation to inquire” (BGH, 31 Oct.


26

2001, (Germany)). These negative aspects of the last shot rule are even more significant for

RESPONDENT, because as the initiator of the tender process it acquired six offers.

103 For the reasons explained above application of the last shot rule to the case at hand brings unfair result

which disregards the intention of RESPONDENT for putting out the Tender. Hence, the knock out rule

shall be preferred over the last shot rule even if CISG is applied to the battle of the forms problem.

c. The application of the knock out rule determines the nature of the obligation as a

duty of result.

104 The knock out rule separates contract formation from identification of the contract terms (BGH, 9 Jan.

2002 (Germany); OLG, 26 Jun. 2006 (Germany)). According to the knock out rule, contract is formed on the

essentialia negotii i.e. dickered terms of the parties (BERGENTHAL/EISELEN, p.224; OLG, 24 May 2006

(Germany)). Conflicting standard terms however are knocked-out and to be filled later (Cour de Cassation, 16

Jul. 1998 (France)). In other words, the battle of the forms leads to a gap filling problem (WILDNER, p.7).

105 There is no dispute about the Parties’ intent to be bound by the Contract. The relationship between the

Parties between 2014 and 2017 proves their intention to be bound (Not. of Arb., § 6).

106 The standard terms of the Parties diverge as regards the nature of CLAIMANT’s obligation. It is disputed

whether the Contract imposes a duty of best efforts or a duty of result. Therefore, these parts of the

standard terms should be knocked-out. At this point, there is no need for a one by one provision analysis

to knock the conflicting terms out. All of the conflicting content should be excluded and the gap should

be filled later (BGH, 9 Jan. 2002 (Germany)).

107 Art. 4.8 of UPICC provides the way of filling the gap concerning the nature of the obligation in the

Contract. The supplementation issue is not an “interpretation of the parties’ agreement” under Art. 4.8 of

UPICC. Therefore, while determining the nature of the obligation, the Tribunal “must create rather than

interpret” the terms that refer to a duty of result or a duty of best efforts (PERILLO). The supplied terms

should be derived from “the intention of the parties as inferred from, among other factors, the terms

expressly stated in the contract, prior negotiations or any conduct subsequent to the conclusion of the

contract” (UNIDROIT Official Commentary, Art 4.8, p.147). These criteria are analogous with the ones

regulated in Art. 8 of CISG (cf. SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 13).

108 The Parties repeatedly referred to the Global Compact Principles during their negotiations and also in

their further relations (Cl. Exh. C 6; Cl. Exh. C 8; Resp. to Not. of Arb., §§4-5; Rsp. Exh. R5; PO 2, §31).

RESPONDENT’s request to produce the cakes sustainably stems from the desire to become a Global

Compact LEAD Company (Cl. Exh. C 1). CLAIMANT’s commitment to the GCP was essential to

RESPONDENT in becoming a business partner with CLAIMANT (PO 2, § 23). RESPONDENT’s

General Business Philosophy is “largely identical” to GCP (PO 2, § 31). RESPONDENT admits that it

shares the same values as those of CLAIMANT on standards of sustainability under CLAIMANT’s Codes


27

of Conduct (Cl. Exh. C 5). Hence, the Standard Terms of the Parties are the documents that

operationalize the maxims suggested by GCP. In other words, the intention of the Parties determines the

purpose of the Contract as practicing the GCP.

109 The GCP are general principles that designating the sustainability goals. To determine whether

CLAIMANT’s obligation is a duty of result or a duty of best efforts, one has to identify the level of

adherence to the GCP. At his point being a Global Compact LEAD Company provides a guideline for

determining the nature of the obligation of CLAIMANT. RESPONDENT made clear its aim to become

Global Compact LEAD Company to CLAIMANT Cl. Exh. C1). Accordingly, RESPONDENT expressed

the importance of its reputation to be invited to Global Compact LEAD and the detrimental effects of

the bad press campaigns on its reputation in the past. The aim of including confidentiality clauses and

preferring ad hoc arbitration were also provided as protecting the reputation of RESPONDENT and

hence for becoming a Global Compact LEAD Company (Resp. Exh. R5). RESPONDENT’s intention to

become a LEAD Company has also a reflection in the Contract, i.e. inclusion of a confidentiality clause

and the selection of ad hoc arbitration as the dispute resolution mechanism (Cl. Exh. C2) Therefore,

RESPONDENT’s aim to become a Global Compact LEAD Company implied as the common intention

of the Parties under Art. 4.8 of UPICC/ CISG Art. 8. Therefore, while supplementing the terms regarding

the nature of the obligation, the focus should be on the requirements of the LEAD system concerning the

adherence level to the GCP. The Global Compact LEAD system expects strict adherence to the GCP

from candidates. Therefore, the supplied terms should refer to a duty of result to satisfy the conditions for

becoming a Global Compact LEAD Company (see below §§ 118-119).

Conclusion to the Third Issue

CLAIMANT’s Standard Terms are unable to govern the Contract because they were not incorporated.

Even if they were incorporated, CLAIMANT’s Standard Terms do not govern the contract and the

dispute resolved by either RESPONDENT’s Standard Terms or the terms supplied in light of the aim to

become Global Compact LEAD Company.

ISSUE IV: In case RESPONDENT’s Standard Terms are applicable, CLAIMANT

delivered non-conforming goods pursuant to Art. 35 of CISG.

110 CLAIMANT alleges that conforming goods were delivered; however, RESPONDENT respectfully

requests the Tribunal to find that CLAIMANT is responsible under Art. 35 of CISG, because CLAIMANT

was under a duty of result (A.), and it fails to prove the conformity of the cakes (B.). Even if the Tribunal

were to conclude that CLAIMANT was under a duty of best efforts, it still did not fulfill this obligation

(C.). Furthermore, CLAIMANT asserts that RESPONDENT was not entitled to terminate the Contract


28

arguing that the breach was not fundamental and in any case CLAIMANT cannot be held liable as the

failure was due to an impediment beyond its control under Art. 79 of CISG. However, RESPONDENT is

not going to discuss these issues as it is clearly stated in both Procedural Order No 1 (PO 1, § 3) and No 2

that “(…) at this stage of the proceedings no need to discuss whether a breach, should it exist, was it

fundamental or whether damages are due and if so in which amount” (PO 2, § 48).

A. RESPONDENT’s Standard Terms include a duty of result under Art. 8 of CISG.

111 CLAIMANT, without giving any concrete reason, argues that its obligation under Parts C and E of

RESPONDENT’s Code of Conduct for Suppliers was not a duty of result (Cl. Memo, lines 477 et seqq.).

CLAIMANT specifies neither the nature of the obligation nor the level of care that should be expected by

CLAIMANT (ibid). All relevant circumstances definitely demonstrate that RESPONDENT’s intent was a

duty of result which CLAIMANT could not have been unaware of, under Article 8 of CISG (1.).

CLAIMANT could have asserted that RESPONDENT’s Standard Terms should be interpreted contra

proferentem. However, the contra proferentem rule cannot be applied (2.).

1. All relevant circumstances must be taken into account in interpretation of

RESPONDENT’s Standard Terms.

112 To determine the intent of the parties or the understanding of a reasonable person of the same kind,

Article 8(3) of CISG refers to all relevant circumstances. The relevant circumstances that must be taken

into account in the case at hand are, firstly, the wording of RESPONDENT’s Standard Terms (a.),

secondly, the contractual price agreed by the Parties (b.), and thirdly, the conduct of the Parties during the

negotiations and after the Contract was concluded (c.).

a. The wording of RESPONDENT’s Standard Terms clearly shows that

CLAIMANT was under a duty of result.

113 CLAIMANT only refers to the wording of the clauses in the Contract, and it tries to come to a conclusion

without any kind of interpretation under Art. 8 of CISG. Therefore, CLAIMANT would have agreed that

while determining the intent of parties, “[t]he primary starting-point, which is not expressly mentioned in

Article 8(3), must nevertheless be the wording of the statement” (SCHMIDT-KESSEL in: Schlechtriem/Schwenzer,

Art. 8 § 13; emphasis added) (See also: OLG Dresden, 27 Dec. 1999 (Germany)). Art 5.1.5 of UPICC also refers to

“the way in which the obligation is expressed in the contract”, which more specifically regulates how the

relevant circumstances can be used in order to determine whether the contract includes a duty of best

efforts or a duty of result (VOGENAUER in: Vogenauer/Kleinheisterkamp, Art. 5.1.5 § 1). In Section III of

Tender Documents, Clause 1 expressly states that “Ingredients have to be sourced in accordance with the

stipulations under Section IV” (Cl. Exh. C2, emphasis added). In addition, this requirement is referred to as

one of the “paramount specifications” under the same clause (ibid). In Section IV, Special Conditions of

Contract, the preamble emphasizes that RESPONDENT has “zero tolerance” against unethical business


29

behaviour (ibid), which undoubtedly includes the actions of Ruritania Peoples Cocoa GmbH. Moreover,

Article 2 of Section IV includes a reference to “all obligations” arising from the Contract, which comprises

all Tender Documents as stated under Article 5 of Special Conditions of Contract (ibid). Code of Conduct

for Supplier is among Tender Documents (ibid). Therefore, RESPONDENT’s intent was obviously a strict

adherence to its Supplier Code of Conduct.

114 CLAIMANT, referring to the obligations under Parts C and E of RESPONDENT’s Code of Conduct for

Suppliers, argues that “CLAIMANT is only forced to comply with [these] requirements, but that does not

necessarily mean that CLAIMAN[T] guarantees that the ingredients of the goods come from sustainable

sources” (Cl. Memo, lines 479 et seqq.). However, as will be shown, CLAIMANT contradicts itself in the sense

that complying with the requirements under these parts clearly means guaranteeing the result. “The usual

meaning of the words used by the parties” must be given particular importance under Article 8 of CISG

(SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 41; CIETAC, 4 Nov. 2002 (China)). In

RESPONDENT’s Code of Conduct for Suppliers Part C, the requirement related to sub-suppliers reads as

follows: “ensure that your own suppliers comply with the above requirements” (Cl. Exh. C2, emphasis added).

The word “ensure” is defined as “make certain that (something) will occur or be the case” (Oxford Dictionary;

emphasis added). Moreover, in Part E, it is stipulated that CLAIMANT will “make sure” that its sub-suppliers

adhere to standards agreed upon which are comparable to the ones in Code of Conduct for Suppliers (Cl.

Exh. C2; emphasis added). The meaning of “make sure” is very similar to “ensure”: “Establish that

something is definitely so; confirm” (Oxford Dictionary, emphasis added). It is clearly seen that these words refer

to guaranteeing the result (NORTON ROSE FULBRIGHT, p. 9; cf. VERBRUGGEN, p. 95). “The

consideration of the clear wording (…) must be given priority over all other criteria of interpretation

according to Art. 8(3) of CISG” (HG Zurich, 24 Oct. 2002 (Switzerland)) (See also: Navarra Provincial High

Court, 27 Dec. 2007 (Spain)). Even if CLAIMANT argues that its intention was different, RESPONDENT is

justified to rely on the fact that its “unequivocal intent” is shared by the other party (SCHMIDT-KESSEL

in: Schlechtriem/Schwenzer, Art.8 § 24). In the case at hand, “the actual will of one party was so easily

recognizable by the other party that it could not have been unaware of it” (BGer, 5 Apr. 2008 (Switzerland))

(See also: ZUPPI in: Kröll et al., Art. 8 § 15; SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 24; Cáceres

Provincial High Court, 14 July 2010 (Spain)). As a result, it is quite certain under Art. 8 of CISG that

CLAIMANT was under a duty of result (cf. WILSON, p. 42).

115 A contract must be interpreted as a whole (SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 30),

even if CLAIMANT is apparently unaware of this as it only refers to the wording of Part C and E (Cl.

Memo, lines 467 et seqq.). Therefore, the comparison of the content of one contract term with the other may

give clues about the meaning of the former (The ICAC at the RF CCI, 27 May 2005 (Russia); The ICAC at

the RF CCI, 7 Jun. 1999 (Russia)). In General Conditions of Contract, Clause 21, it is stipulated that both


30

parties undertake “to exercise their best endeavours to procure that such persons as may be under their

control keep confidential, the Information (…)” (Cl. Exh. C2, emphasis added). This clause clearly shows

that RESPONDENT was aware of the distinction between a duty of best efforts and a duty of result while

drafting the Contract. The nature of the obligations with regard to adherence of sub-suppliers to

environmentally friendly production and employees’ compliance with confidentiality is very similar in

essence: responsibility of one party from the actions or inactions of a third party. However,

RESPONDENT preferred to subject the other party to a stricter criterion when it comes to sub-suppliers’

adherence to Code of Conduct for Suppliers, which makes sense for a party who aims to be a Global

Compact LEAD company. Therefore, CLAIMANT was under a duty of result to guarantee the

compliance of its suppliers.

b. The price agreed by the Parties justifies a duty of result.

116 The contractual price is a relevant circumstance under Art. 8(3) of CISG which may hint about the nature

of obligation, i.e. whether it is a duty of result or duty of best efforts (See also: Art. 5.1.5(b) of UPICC).

Although CLAIMANT could have argued that the quality of the cakes was quite high, “[t]he price paid was

towards the upper end of the price paid for a premium product in the relevant market segment (…)” (PO 2, § 40;

emphasis added). This shows that, even if the price was not extraordinary, CLAIMANT is entitled to expect

the guarantee of sustainable production from RESPONDENT given the fact that other premium products

in the market have considerably lower prices.

c. In the course of negotiations, and also subsequently, RESPONDENT clearly

emphasized the importance of strict adherence to environmentally friendly and

sustainable production.

117 Although there is neither any reference nor any discussion by CLAIMANT, the negotiations prior to the

conclusion of contract between the Parties is one of the most important “relevant circumstances” under

Article 8(3) of CISG to determine the real common intent of the parties (ICC Case No. 11849 (2003);

ZUPPI in: Kröll et al., Art. 8 § 26; SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 32). During the

course of negotiations, both parties consistently referred to the importance of GCP. Moreover, the reason

why RESPONDENT invited CLAIMANT to submit an offer in the first place was its “its strict adherence to

the principle of ethical and sustainable production” (Cl. Exh. C1, emphasis added). Eventually, CLAIMANT

was awarded the Contract because it was the only offeror which is a Global Compact company (PO 2, §

23). Therefore, we can conclude there is no disagreement on the adherence to GCP, as also admitted by

CLAIMANT (Cl. Memo, line 491).

118 CLAIMANT could have argued that Principle 7 of GCP requires only a duty of best efforts, as it refers to

the precautionary principle. Even if this is assumed to be correct, it does not mean that parties cannot

agree on a stricter level of obligation. The level of efforts which is stipulated under GCP can be seen as a


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minimum standard expected by Global Compact companies (SCHWENZER, p. 125; cf. LEISINGER, p. 7).

However, RESPONDENT emphasized its goal to become a Global Compact LEAD company repeatedly

during the negotiations since the parties met in Cucina Food Fair. “LEAD is an exclusive group of sustainability

leaders from across all regions and sectors that represent the cutting edge of the UN Global Compact” (Global

Compact LEAD Brochure, 2015; emphasis added). Moreover, LEAD is an invitation based initiative and only

companies with “strong history of engagement with the UN Global Compact” are invited (ibid.). There are

three Global Compact LEAD companies in the field of food production, namely Danone, Nestlé and

Unilever. Their supplier codes of conduct include similar wording to RESPONDENT’s with regard to

environmental protection. For example, The Nestlé Supplier Code and Danone’s Code of Conduct for

Business Partners use the word “ensure” for compliance with sustainable production (The Nestlé Supplier

Code, pp. 3-4; Danone’s Code of Conduct for Business Partners, p. 5). Besides these facts, RESPONDENT referred

to the importance of avoiding bad press (Rsp. Exh. R5), as it could make it impossible to be invited to

LEAD. The purpose of the Contract and specific terms must be given particular weight in interpretation

(SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 29; cf. Provincial High Court of Madrid, 20 Feb. 2007

(Spain)). Therefore, to avoid any possible bad press, the only possible way was that both CLAIMANT and

its suppliers strictly adhere to GCP, which justifies a duty of result. As a Global Compact company,

CLAIMANT could not have been unaware of all these circumstances (cf. BGer, 22 Dec. 2000 (Switzerland), cf.

Provincial Court of Barcelona, 28 Apr. 2004 (Spain)).

119 In addition to the foregoing, the code of conduct which CLAIMANT makes its suppliers sign, and made

Ruritania Peoples Cocoa GmbH sign as well (Cl. Exh. C8), states that CLAIMANT expects its suppliers to

“ensure that their suppliers and sub-contractors to comply with the principles of this Supplier Code of

Conduct” (Rsp. Exh. R3). This is similar to what RESPONDENT expected from CLAIMANT (Cl. Exh.

C2). Under this clause, CLAIMANT immediately terminated its contract with Ruritania Peoples Cocoa

GmbH, even though it was not 100% certain that Supplier Code of Conduct was breached (Cl. Exh. C9).

Therefore, the possibility of non-compliance with environmental standards which cannot be excluded

(ibid.) was enough for CLAIMANT to conclude that the obligation was breached. As both Parties’ codes of

conduct have similar wording, CLAIMANT must be under a duty of result given the likelihood of the

breach being public and its negative consequences over RESPONDENT’s reputation, which is very

important for RESPONDENT to reach its goal of becoming a Global Compact LEAD company as

explained above (see supra § 118).

120 CLAIMANT could have argued that it stated in its e-mail, to which its offer was attached, that it will use its

best efforts to comply with the obligations related to environmental protection (Cl. Exh. C3). However,

what CLAIMANT would have missed here is that it made an offer in a publicized tender. CLAIMANT

signed the Letter of Acknowledgement before making its offer, in which CLAIMANT explicitly stated that


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“[it has] read the Invitation to Tender and will tender in accordance with the specified requirements” (Rsp.

Exh. R1). Thus, it was absolutely reasonable for RESPONDENT to expect that the offers will be in

accordance with the specifications stipulated in tender documents (see supra § 92). Moreover,

RESPONDENT repeated its understanding of the nature of obligation one more time when the Contract

was awarded: “Your Codes show that Delicatesy Whole Foods and Comestibles Finos share the same

values and are both committed to ensure that the goods produced and sold fulfill the highest standard of

sustainability” (Cl. Exh. C5; emphasis added). If a duty of result was not acceptable for CLAIMANT, it must

have clearly indicated this to RESPONDENT, as one of the companies did with regard to another contract

term in its letter of acknowledgement (PO2, § 23). However, there was neither any specific inquiry nor a

question as regards the nature of the obligation by CLAIMANT since it signed the Letter of

Acknowledgement and agreed to tender in accordance with the specified requirements (PO2 26, Rsp. Exh.

R1). As CLAIMANT did not inquire in any way, its Letter of Acknowledgement must be held against it

(BGer, 5 Apr. 2008 (Switzerland); cf. CoA Grenoble, 26 Apr. 1995 (France); cf. DC New York, 14 Apr. 1992 (US);

cf. SCHMIDT-KESSEL in: Schlechtriem/Schwenzer; cf. ZUPPI in: Kröll et al., Art. 8 § 28).

2. The contra proferentem rule is not applicable.

121 CLAIMANT could have argued that RESPONDENT’s standard terms must be interpreted in favor of

CLAIMANT as they are drafted solely by one party, which is known as the contra proferentem rule. The contra

proferentem rule is derived from Article 8 of CISG and is only applicable when the meaning of standard

terms is ambiguous (SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 49; cf. HUBER in: Huber/Mullis

p. 15, ZUPPI in: Kröll et al., Art. 8 § 24; CISG-AC Opinion No: 13; CIETAC, 7 Jan. 2000 (China)). However,

as shown above, all relevant circumstances unambiguously show that CLAIMANT was under a duty of

result. Therefore, the contra proferentem rule cannot be applied in the case at hand.

B. CLAIMANT having the burden of proof failed to prove the conformity of the cakes delivered.

122 RESPONDENT acknowledges that the main principle underlying CISG regarding burden of proof is

the actori incumbit probatio principle, thus who invokes Art. 35 in its favor bears the burden of proof (KRÖLL,

p.172; NEUMANN). Therefore, CLAIMANT could have argued that RESPONDENT, as the buyer, has

the burden to prove that the cakes delivered were non-conforming at the time risk passed. However,

many scholars and courts refrain from implementing this principle strictly and adopt further exceptions in

order to avoid possible unfair results.

123 The first exception is regarding the standard of proof. Although the standard is one of reasonable certainty

under CISG (DJORDJEVIC in: Kröll et al., Art. 4 §37), it must be adjusted in order to achieve the purpose

of relevant provisions. When the provisions have the purpose of prevention, the standard of proof should

be reduced to achieve this purpose (SCHWENZER/HACHEM in: Schlechtriem/Schwenzer, Art. 4 § 26).

Since the purpose of Art. 35 of CISG is to prevent the delivery of non-conforming goods (KRÖLL in: Kröll


33

et al., Art. 35 §1), the standard of proof to be met by buyers must be reduced following this principle.

Otherwise sellers could abuse the high standard of proof in cases when some, but not all of their goods

are defective. In such cases, sellers could evade liability if it is expected from buyers to prove that the

goods delivered to them belong to the defective proportion. Accordingly, the buyer is only required to

“sufficiently demonstrate non-conformity of goods and that it did not do anything to contribute to the non-

conformity” (LINNE, p.40; emphasis added). In the case at hand, RESPONDENT can provide evidence

about the corruption in Ruritania which resulted in unsustainable production of up to %50 of the beans

used by CLAIMANT. Regarding the low standard of proof, this must be sufficient enough to decide that

RESPONDENT fulfilled its burden of proof.

124 Another exception which complements and advances the first one is derived from the principle of proximity

which requires “facts relating to a sphere clearly better known to one party than to the other party […] to

be proven by the party exercising control over that sphere.” (BGer, 7 July 2004 (Switzerland); cf. BGer, 13

November 2003 (Switzerland); BGH, 30 June 2004 (Germany); OGH, 12 Sept. 2006 (Austria); SCHWENZER in:

Schlechtriem/Schwenzer, Art.35 §53; KRÖLL II, p.49; FERRARI). The need for such an exception can be

emphasized by the following question: “If a party is injured by no fault of its own, and the other party had

exclusive control of the circumstances, should the injured party be required to establish proof that it was

the other party that caused the injury even though it would be impractical for the injured party to obtain

the proof?” (LINNE p.37).

125 The matter that must be proven in this case is whether the cakes sold to RESPONDENT were composed

of sustainably produced cocoa beans or not. This fact clearly falls in a sphere over which RESPONDENT

has no control. It is known that up to 50% of the beans came from farms illegally set up in protected areas

(PO 2, § 41), but it is almost impossible for RESPONDENT to prove that the cocoa beans used in the

cakes were in this portion. CLAIMANT, on the other hand, as the producer of the cakes, has control over

the ingredients it used which was provided to it by Ruritania Peoples Cocoa GmbH. As German Supreme

Court ruled, “the buyer’s burden could be alleviated by factors such as the seller’s proximity to the

production process into which the buyer has no insight” (BGH, 30 June 2004 (Germany)). Since the facts

suggesting non-conformity were within the domain of knowledge and expertise of the seller, the burden

of proof shifts to the seller (GARRO, p. 254).

126 Since the main principle is interpreted in a flexible way by a low standard of proof and the principle of

proximity (LINNE, p.40), RESPONDENT fulfilled its burden of proof by showing the corruption in

Ruritania and unsustainable production of some portion of cocoa beans. The burden of proof shifted to

CLAIMANT as the one who has exclusive control over the relevant circumstances. In order to evade from

liability, it has to prove that the cocoa beans used in cakes were in the sustainably produced portion and


34

hence, it delivered conforming goods. Since in the case at hand it did not prove conformity of the cakes

delivered, CLAIMANT can be held liable under Art. 35 of CISG.

C. Even if Tribunal were to conclude that CLAIMANT had a duty of best effort, it still failed to

fulfill its obligation.

127 Duty of best efforts obliges a party to take all the steps that “a reasonable person, placed in similar

circumstances (nature of the product, characteristics of the market, importance and experience of the firm,

presence of competitors, etc.) would take” (UNIDROIT Official Commentary, Art 5.1.4). The duty of best

efforts is deemed to be fulfilled only when all the efforts that can be reasonably expected from a party is

made (VOGENAUER/KLEINHEISTERKAMP, p.551; POSNER, p.1431; ICSID Case No. ARB/81/2;

ICSID Case No. ARB/06/18; DC New York, 6 Jul. 1978 (US); SC New York, 17 Jun. 1999 (US)). Given the

circumstances of the case, further steps could have been reasonably expected from CLAIMANT which

results in its failure to fulfill its obligation.

128 First of all, CLAIMANT chose its supplier from Ruritania although the production and certification

structure in Ruritania was “poorly conceived from the start and had some real flaws” (Cl. Exh. C 7).

Regarding the importance of sustainable production for RESPONDENT and the delicacy of the cocoa

market in general, a reasonable party would make further research before choosing its supplier country. A

simple market search could make it apparent to CLAIMANT that Ruritania was risky regarding sustainable

production. Furthermore, CLAIMANT chose Ruritania Peoples Cocoa GmbH after an initial audit

conducted by Egimus AG (PO 2, §32), however, Egimus AG did not have the necessary expertise to spot

the fraudulent scheme. It only provided impact-focused reports which clearly was not enough to ensure

the sustainable production of cocoa beans (PO 2, §33). CLAIMANT could have conducted more

extensive audits, by a different auditing company before choosing its supplier. Moreover, CLAIMANT was

content with only one audit in such a risky market and decided to rely on the questionnaires filled by

Ruritania Peoples Cocoa GmbH itself for following years (PO 2, §32). This fact clearly shows how

negligent CLAIMANT acted during production. A reasonable party could have been expected to conduct

regular audits in such a delicate market and a risky country, by which unsustainable production could have

been easily detected. Instead of that, CLAIMANT incautiously chose to rely on the documentation sent by

the supplier itself (Cl. Exh. C 8). Those documentations could not of course substitute third party audits

especially in such a corrupt market.

129 CLAIMANT’s inadvertency can also be detected from the fact that it investigated the certification scandal

only after RESPONDENT’s e-mail (Cl. Exh. C 6; Cl. Exh. C 8). CLAIMANT clearly was not aware of the

documentary showed in Equatorian state news channel on January 19, 2017, which talked about

irregularities in Ruritanian certification practice and UNEP rapporteur’s report, or of the article published

in the leading business newspaper in Equatorina on January 23,2017, which disclosed details of fraud


35

(Resp. to Not. of Arb., §§ 14-15; Cl. Exh. C 7). CLAIMANT had no knowledge of these news which were

severe enough to be reported in its own country’s state channel and leading business newspaper and were

solely about sustainable production in its supplier country, while RESPONDENT could follow them from

Mediterraneo. It can be reasonably expected from a prudent business person to follow the developments

that can have impact on its business. CLAIMANT’s failure to learn and investigate the irregularities in

Ruritanian certification practice proves its negligence and failure to employ its best efforts to ensure

sustainable production.

Conclusion to the Fourth Issue

In case RESPONDENT’s Standard Terms are applicable, CLAIMANT was under a duty of result, the

fulfillment of which cannot be proven. Even in the unlikely case that CLAIMANT had a duty of best

efforts, it still did not fulfil this obligation. Therefore, CLAIMANT must be held responsible for non-

conforming goods under Art. 35 of CISG.

REQUEST FOR RELIEF

In light of the submissions made above, RESPONDENT respectfully requests the Tribunal to find that:

I. Challenge of Mr. Prasad should be decided by the Tribunal, without the participation of Mr.

Prasad.

II. Mr. Prasad should be removed from the Tribunal due to the fact that his extensive connections

with CLAIMANT and its counsel create justifiable doubts regarding his impartiality and

independence.

III. Any possible content of the Contract results in a duty of result for CLAIMANT.

IV. In case RESPONDENT’s Standard Terms are applicable, CLAIMANT must be held responsible

from non-conforming cakes as per Art. 35 of CISG.

As a result, we reiterate our requests in Notice of Arbitration and respectfully ask the Tribunal:

I. to reject all claims for payment raised by CLAIMANT;

II. to order CLAIMANT to bear the costs of the arbitration.

Respectfully submitted,

Istanbul, January 18, 2018.


We hereby confirm that this Memorandum was written only by the persons who signed below.

We also confirm that we did not receive any assistance during the writing process from any person who is

not a member of this team.

BURAKHAN ADAR

EMRE İLKER KARATAŞ

EMREHAN MERMER

ORCAN OK

GÖKÇE GÜL ÖNDER

PINAR ÖZCEYLAN