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Twenty-fourth Annual
Willem C. Vis International Commercial Arbitration Moot
7 - 13 April 2017
Vienna, Austria
Memorandum for Claimant
Timo Fischer Christoph Ludwig Anna Nyfeler Laura Vogt
on behalf of
Wright Ltd
232 Garrincha Street
Oceanside
Equatoriana
-CLAIMANT-
against
SantosD KG
77 Avenida O Rei
Cafucopa
Mediterraneo
-RESPONDENT-
individually addressed as Party
or mutually as the Parties.
Bucerius Law School - Memorandum for Claimant
II
Outline of Contents
Statement of Facts .................................................................................................................... 1
Summary of Arguments ........................................................................................................... 2
Request for Security for Costs .................................................................................. 3
I. The TRIBUNAL has no power to order CLAIMANT to provide security for
costs .................................................................................................................................. 3
1. The Parties exercised their party autonomy in not giving the TRIBUNAL
power to order security for costs ............................................................................. 3
2. Power to order security is not conferred by the CAM/CCBC Rules ......................... 4
II. Alternatively, the TRIBUNAL should not order CLAIMANT to provide
security .............................................................................................................................. 7
1. The newspaper article constitutes mere hearsay evidence and is
inadmissible ............................................................................................................. 7
2. The alleged facts do not suffice to satisfy the grounds for security for costs ............ 8
Admissibility of claims ............................................................................................. 12
I. CLAIMANTS’s claims were submitted in time ............................................................. 12
1. The notice of arbitration is sufficient for initiation by the PARTIES’
agreement .............................................................................................................. 13
2. Alternatively, the requirements for commencement according to Art. 4
were satisfied in a timely manner .......................................................................... 14
II. Alternatively, RESPONDENT is prevented from relying on the time limit .................. 18
Outstanding payments ............................................................................................. 19
I. CLAIMANT is entitled to additional payment from RESPONDENT in the
amount of US$ 2,285,240.00 for the fan blades ............................................................. 19
1. The current exchange rate applies by contractual interpretation according
to Art. 8 and 9 CISG .............................................................................................. 20
2. Alternatively, the current exchange rate applies under the applicable law ............. 24
3. The Addendum did not change the applicable exchange rate ................................. 26
II. CLAIMANT is entitled to additional payment in the amount of US$
102,192.80 for the levy deduced by the Equatoriana ECB ............................................. 28
Bucerius Law School - Memorandum for Claimant
III
1. CLAIMANT is entitled to additional payment under Section 4.3 DSA and
Art. 54, 57 CISG .................................................................................................... 29
2. Art. 35 CISG does not exempt RESPONDENT from its obligation to pay
bank levy ............................................................................................................... 32
Bucerius Law School - Memorandum for Claimant
IV
Table of Contents
Outline of Contents ................................................................................................................. II
Table of Contents ................................................................................................................... IV
Index of Abbreviations........................................................................................................ VIII
Index of Authorities ................................................................................................................ X
Index of Cases ...................................................................................................................... XIX
Index of Arbitral Awards .............................................................................................. XXVII
Index of Rules ................................................................................................................... XXXI
Statement of Facts .................................................................................................................... 1
Summary of Arguments ........................................................................................................... 2
Request for Security for Costs .................................................................................. 3
I. The TRIBUNAL has no power to order CLAIMANT to provide security for
costs .................................................................................................................................. 3
1. The Parties exercised their party autonomy in not giving the TRIBUNAL
power to order security for costs ............................................................................. 3
2. Power to order security is not conferred by the CAM/CCBC Rules ......................... 4
a. Interpreted by its wording, Art. 8.1 does include security for costs .............. 4
b. Interpreted by its systematical context, Art. 8.1 does not include
security for costs ............................................................................................ 4
c. Interpreted by its rationale, Art. 8.1 does not include security for
costs................................................................................................................ 6
II. Alternatively, the TRIBUNAL should not order CLAIMANT to provide
security .............................................................................................................................. 7
1. The newspaper article constitutes mere hearsay evidence and is
inadmissible ............................................................................................................. 7
2. The alleged facts do not suffice to satisfy the grounds for security for costs ............ 8
a. There must be a serious probability that CLAIMANT will not
comply with the award ................................................................................... 8
b. The facts submitted by RESPONDENT do not establish such a
serious probability .......................................................................................... 9
Bucerius Law School - Memorandum for Claimant
V
CLAIMANTS’s financial shape does not necessitate security
for costs ................................................................................................ 9
i.CLAIMANT is in good financial shape ............................................. 9
ii.CLAIMANT willingly took the risk in regard to
CLAIMANTS’S financial situation .......................................... 10
CLAIMANT is willing to comply with possible awards ................... 10
c. Security for costs would be unjust in the present case................................. 11
Admissibility of claims ............................................................................................. 12
I. CLAIMANTS’s claims were submitted in time ............................................................. 12
1. The notice of arbitration is sufficient for initiation by the PARTIES’
agreement .............................................................................................................. 13
2. Alternatively, the requirements for commencement according to Art. 4
were satisfied in a timely manner .......................................................................... 14
a. The notice of arbitration in itself is sufficient for commencement .............. 14
The systematical context shows that the notice is the
centrepiece of the RfA ........................................................................ 14
The purpose of the RfA was served by CLAIMANTS’s
notice in itself ..................................................................................... 15
The principle of efficiency demands a substance over form
approach ............................................................................................. 15
Conclusion .......................................................................................... 15
b. Alternatively, the PoA submitted and the amount of the fee paid on
31 May 2016 satisfy the requirements of Art. 4 .......................................... 16
The PoA sufficiently provided for adequate representation ............... 16
Partial payment is sufficient for commencement ............................... 16
c. Alternatively, the amendments of 7 June 2016 unfold retroactive
effect ............................................................................................................ 17
II. Alternatively, RESPONDENT is prevented from relying on the time limit .................. 18
Outstanding payments ............................................................................................. 19
I. CLAIMANT is entitled to additional payment from RESPONDENT in the
amount of US$ 2,285,240.00 for the fan blades ............................................................. 19
Bucerius Law School - Memorandum for Claimant
VI
1. The current exchange rate applies by contractual interpretation according
to Art. 8 and 9 CISG .............................................................................................. 20
a. Considering the relevant circumstances ....................................................... 20
On the structure and the rationale of the contract ............................... 21
i.Fair risk allocation requires the application of the current
exchange rate ............................................................................. 21
ii.The unusual circumstances require the application of the
current exchange rate ................................................................ 22
On the usage of risk sharing in the aircraft industry .......................... 23
The de-risking guideline of EI is not applicable ................................ 23
Conclusion .......................................................................................... 23
b. No principle in terms of Art. 9. (1) CISG refutes this result ....................... 24
There is no practice established between the parties .......................... 24
The parties conduct indicates that there is no such practice ............... 24
Alternatively, a possibly established practice would not be
applicable to the current setting of the parties .................................... 24
2. Alternatively, the current exchange rate applies under the applicable law ............. 24
a. Art. 55 CISG does not provide any suitable mechanism to
determine the price of the fan blades ........................................................... 25
b. The current exchange rate applies according to Art. 6.1.9 (3) PICC ........... 25
3. The Addendum did not change the applicable exchange rate ................................. 26
a. No modification according to Art. 29 (1) CISG .......................................... 27
b. Alternatively, RESPONDENT has to bear the risk of unclear
wording ........................................................................................................ 28
II. CLAIMANT is entitled to additional payment in the amount of US$
102,192.80 for the levy deduced by the Equatoriana ECB ............................................. 28
1. CLAIMANT is entitled to additional payment under Section 4.3 DSA and
Art. 54, 57 CISG .................................................................................................... 29
a. In Section 4.3 DSA the parties agreed that the bank charges are to
be borne by BUYER .................................................................................... 29
The wording of DSA imposes the coverage of the levy on
RESPONDENT .................................................................................. 29
Section 4.3 DSA was meant to regulate bank charges as
occurred with the levy ........................................................................ 30
Bucerius Law School - Memorandum for Claimant
VII
There are no usages or practices between the parties which
could refute this .................................................................................. 30
b. CLAIMANT is entitled to additional payment under Art. 54, 57
CISG ............................................................................................................ 31
RESPONDENTS’s obligation to pay is only performed when
the full price is credited to CLAIMANTS’s account ......................... 31
To effect full payment levy needs to be borne by
RESPONDENT as a formality under ML/2010C as a
statutory provision .............................................................................. 32
2. Art. 35 CISG does not exempt RESPONDENT from its obligation to pay
bank levy ............................................................................................................... 32
a. Art. 35 CISG is not applicable to RESPONDENTS’s duty to make
payment of the purchase price ..................................................................... 33
b. Also if the Trribunal applies the principles of Art. 35 CISG,
RESPONDENT would need to bear the bank levy ..................................... 33
RESPONDENT was required to bear the bank levy by the
DSA .................................................................................................... 33
Payment would not fulfil its purpose if RESPONDENT does
not bear the bank levy......................................................................... 34
i.RESPONDENT needs to make payment which complies
with the existing regulations ..................................................... 34
ii.RESPONDENT should have been informed about the
regulation ML/2010C and the occurrence of the levy .............. 34
Prayer for Relief ..................................................................................................................... 35
Bucerius Law School - Memorandum for Claimant
VIII
Index of Abbreviations
% percent
AG Aktiengesellschaft (German stock corporation)
Art. Article(s)
ASA Association Suisse de l’Arbitrage (Swiss Arbitration Association)
ASC Answer to Statement of Claim
CAM/CCBC Center for Arbitration and Mediation of the Chamber of Commerce
Brazil- Canada
CE CLAIMANTS’s exhibit
Cf. Confer
CISG United Nations Convention on Contracts for the International Sale of
Goods
Current exchange
rate
Exchange rate of US$ 1=1.79 EQD
DIS Deutsche Institution für Schiedsgerichtsbarkeit (German Arbitration
Institute)
DSA Development and Sales Agreement
e.g. exempli gratia (for example)
ECB Equatoriana Central Bank
ENB Equatoriana National Bank
Et seq. Et sequens
Fn. Footnote
HKIAC Hong Kong International Arbitration Centre
i.e. Id est (that is)
ICC International Chamber of Commerce
ICJ International Court of Justice
ICSID International Centre for Settlement of Investment Disputes
LCIA London Court of International Arbitration
LCIA India London Court of International Arbitration India branch
NAI Netherlands Arbitration Institute
No. Number
OtR Objection to request for security
p(p). page(s)
para(s). paragraph(s)
PCA Permanent Court of Arbitration
Bucerius Law School - Memorandum for Claimant
IX
PO Procedural order
PoA Power of Attorney
RE RESPONDENTS’s exhibit
RfA Request for arbitration
RfS Request for security
S.p.A. Società per Azioni (Italian stock corporation)
ToR Terms of Reference
UNIDROIT UNIDROIT Principles of International Commercial Contracts
v versus (against)
ZHK Zürcher Handelskammer (Zurich Chamber of Commerce)
Bucerius Law School - Memorandum for Claimant
X
Index of Authorities
Author Title Cited at
para.
Aldrich, George H. The Jurisprudence of the Iran–United States Claims
Tribunal, Oxford (1996)
cited as: Aldrich.
38
American Arbitration
Association
Handbook on Commercial Arbitration, 2nd Edition,
Huntington (2010)
cited as: AAA Handbook on Commercial
Arbitration.
11
Ashford, Peter Handbook on International Commercial Arbitration,
Huntington (2009)
cited as: Ashford.
46
Beraudo, John-Paul Recognition and Enforcement of Interim Measures
of Protection Ordered by Arbitral Tribunals, in:
Journal of International Arbitration, Volume 22,
Issue 3, pp. 245 – 254
cited as: Beraudo.
18
Berger, Bernhard
Kellerhals, Franz
International and domestic arbitration in
Switzerland, 2nd Edition, Bern (2010).
cited as: Berger/Kellerhals.
11
Bianca, Cesare Massimo Commentary on the International Sales Law,
Giuffre, Milan 1987
cited as: Bianca.
177
Blessing, Marc Introduction to arbitration: Swiss and international
perspectives, Basel (1999)
cited as: Blessing.
33
Bucerius Law School - Memorandum for Claimant
XI
Blessing, Marc The Conduct of Arbitral Proceedings Under the
Rules of Arbitration Institutions; The WIPO
Arbitration Rules in a Comparative Perspective,
submitted for the Conference on Rules for
Institutional Arbitration and Mediation on 20
January 1995 in Geneva
cited as: Blessing (1995).
33
Born, Gary B. International Commercial Arbitration, 2nd Edition,
the Hague (2014)
cited as: Born.
14, 46
Bösch, Axel Provisional remedies in international commercial
arbitration: a practitioner’s handbook, Berlin (1994)
cited as: Bösch.
13
Bühler, Michael
Webster, Thomas
Handbook of ICC Arbitration: Commentary,
Precedents, Materials, 1st Edition, London (2005)
cited as: Bühler/Webster.
96
Chartered Institute of
Arbitrators
International Arbitration Practice Guidelines:
Applications for Security for Costs
cited as: CIARB.
29, 32,
42, 60
Commentary on the Draft
Convention on Contracts
for the International Sale
of Goods, Prepared by
the Secretariat
Commentary on the Draft Convention on Contracts
for the International Sale of Goods
Prepared by the Secretariat, A/Conf. 97/5 (14 March
1979), reprinted in O.R., 14-66
cited as: Secretariat's Commentary.
115, 169
Bucerius Law School - Memorandum for Claimant
XII
Darwazeh, Nadia
Leleu, Adrien
Disclosure and Security for Costs or How to
Address Imbalances Created by Third-Party
Funding, in: Journal of International Arbitration,
Volume 33, Issue 2, pp. 125 – 150.
cited as: Darwazeh/Leleu.
29
Derains, Yves
Schwartz, Eric A
A guide to the ICC Rules of Arbitration, 2nd Edition,
The Hague (2005)
cited as: Derains/Schwartz.
22, 85,
99
Enderlein, Fritz
Maskow, Dietrich
International Sales Law, Oceana Publications 1992
cited as: Enderlein/Maskow.
115
Ferrari, Franco Auslegung von Parteierklärungen und -verhalten
nach UN-Kaufrecht, IHR 2003, 10
cited as: Ferrari, IHR 2003.
115
Ferrari, Franco
Kieninger, Eva-Maria
Mankowski, Peter
Internationales Vertragsrecht, 2nd edition, 2011
cited as: Ferrari-Author.
129, 167
Flechtner, Harry M. Conformity of Goods, Third Party Claims, and
Buyer’s Notice of Breach under the United Nations
Sales Convention (“CISG”), with Comments on the
“Mussels Case”, the “Stolen Automobile Case”, and
the “Ugandan Used Shoes Case”, University of
Pittsburgh School of Law Working Paper Series,
paper 64, 2007
cited as: Flechtner.
177
Fortier, Yves International Arbitration and National Courts: Who
Has The Last Word?, in International Arbitration
and National Courts: The Never Ending Story,
Albert Jan van den Berg (ed), the Hague (2001), pp.
69 - 70
cited as: Fortier.
85
Bucerius Law School - Memorandum for Claimant
XIII
Gaillard, Emmanual
Savage, John
Fouchard, Gaillard, Goldman on International
Commercial Arbitration, The Hague (1999)
cited as: Fouchard/Gaillard/Goldman.
85, 99
Garner, Bryan A. Black’s law dictionary, 8th edition, 2004
cited as: Black’s law dictionary.
159
Gu, Weixia Security for Costs in International Arbitration, in:
Journal of International Arbitral, Volume 22, Issue
3, pp. 167 – 205
cited as: Gu.
61
Henderson, Alastair Security for Costs in Arbitration in Singapore, in:
Asian International Arbitration Journal, Volume 7,
Issue 1, pp. 54 – 75.
cited as: Henderson.
42, 43,
60, 61
Henschel, René Franz The Conformity of Goods in International Sales An
analysis of Article 35 in the United Nations
Convention of Contracts for the International Sales
of Goods (CISG), Copenhagen 2005
cited as: Henschel.
174, 177
Huber, Peter Münchner Kommentar zum BGB, 3. Band, 7th
edition, 2016
cited as: MüKo-Author.
169
ICC Security for Costs, in: ICC Bulletin, Volume 25,
Supplement, pp. 61 et seq.
cited as: ICC, Security for Costs.
46
Bucerius Law School - Memorandum for Claimant
XIV
Kerr, Sir Michael Concord and Conflict in International Arbitration,
in: Arbitration International, Volume 13, Issue 2,
pp. 121 – 143.
cited as: Kerr.
44
Kirtley, William
Wietrzykowski, Koralie
Should an Arbitral Tribunal Order Security for
Costs When an Impecunious Claimant Is Relying
upon Third-Party Funding?, in: Journal of
International Arbitration, Volume 30, Issue 1,
pp. 17 – 30.
cited as: Kirtley/Wietrzykowski.
34
Konrad, Christian
Schwarz, Franz T.
The Vienna rules: a commentary on international
arbitration in Austria, Alphen aan den Rijn (2009)
cited as: Konrad/Schwarz.
44
Kröll, Stefan M.
Lew, Julian D.M.
Mistelis, Loukas A.
Comparative International Commercial Arbitration,
The Hague (2003)
cited as: Lew/Mistelis/Kröll.
18, 32,
73, 75,
100
Kröll, Stephan
Mistelis, Loukas
Pirales Viscasillas, Pelar
UN-Convention on the International Sales of Goods,
1st edition, 2010
cited as: Kröll-Author.
136,
140,
142, 165
Kruisinga, Sonia (Non-)conformity in the 1980 UN Convention on
Contracts for the International Sale of Goods: A
Uniform Concept?, Intersentia, Antwerp-Oxford-
New York, 2004
cited as: Kruisinga.
174, 177
Bucerius Law School - Memorandum for Claimant
XV
Lew, Julian M.D. Document Disclosure, Evidentiary Value of
Documents and Burden of Evidence, in: Written
Evidence and Discovery in International
Arbitration: New Issues and Tendencies, Giovannini
and Mourre (eds.), Paris (2009)
cited as: Lew.
39
Livingstone, Mia Louise Party Autonomy in International Commercial
Arbitration: Popular Fallacy or Proven Fact? In:
Journal of International Arbitration, Volume 25,
Issue 5, pp. 529 – 536
cited as: Livingstone.
14
Lookofsky, Joseph Understanding the CISG: A Compact Guide to the
1980 United Nations Convention on Contract for the
international sales of goods, Kluwer Law,
International The Hague 2008
cited as: Lookofsky.
177
Lynch, Katherine Security for costs in domestic and international
arbitration in Hong Kong and England, Hong Kong
(1996)
cited as: Lynch.
11
Moses, Margaret L. The Principles and Practice of International
Commercial Arbitration, Cambridge (2008)
cited as: Moses.
18
Mullis, Alastair “Conformity of Goods” in Peter Huber, Alastair
Mullis (eds.), The CISG: A New Textbook For
Students and Practitioners, Sellier, European Law
Publisher, Munich, 2007
cited as: Mullis.
174
Bucerius Law School - Memorandum for Claimant
XVI
Mustill, Sir Michael J.
Boyd, Stewart C.
Commercial Arbitration, The Law and Practice,
Butterworths, 2nd Edition, London (1989), with the
Compendium Volume to the Second Edition,
London (2001)
cited as: Mustill/Boyd.
75
Neumann, Thomas “Features of Article 35 in the Vienna Convention;
Equivalence, Burden of Proof and Awareness”, in 11 Vindobona Journal of International Commercial
Law and Arbitration, 2007/1, 81-97
available at:
http://www.cisg.law.pace.edu/cisg/biblio/neumann.h
tml
cited as: Neumann.
174
Newman, Lawrence W.
Hill, Richard D
The Leading Arbitrators’ Guide to International
Arbitration, 2nd Edition, Huntington (2008)
cited as: Newman/Hill.
18
Poikela, Teija Conformity of Goods in the 1980 United Nations
Convention on Contracts for the International Sale
of Goods, Nordic Journal of Commercial Law of the
University of Turku, Finland, Issue 2003 No. 1
cited as: Poikela.
177
Redfern, Alan
Hunter, Martin (found.)
Blackaby, Nigel
Partasides, Constantine
Redfern and Hunter on International Arbitration, 6th
Edition, Oxford (2015)
cited as: Redfern/Hunter.
30, 34,
46
Reith, Claudia The new UNCITRAL Rules on Transparency 2014
– significant breakthrough or a regime full of empty
formula? In: Yearbook on international arbitration,
Volume 4, pp. 121 – 148
cited as: Reith.
54
Bucerius Law School - Memorandum for Claimant
XVII
Rosenne, Shabtai The Law and Practice of the International Court,
1920–2004, 4th Edition, Leiden (2006)
cited as: Rosenne.
38
Rubins, Noah In God We Trust, All Others Pay Cash: Security for
Costs in International Commercial Arbitration, in:
11 American Review of International Arbitration
307, Juris Publishing, Inc., 2000
cited as: Rubins.
13
Schlechtriem, Peter
Butler, Petra
UN Law on International Sales – the UN
Convention on the International Sale of Goods,
Springer Verlag, Berlin Heidelberg, 2008
cited as: Schlechtriem/Butler.
174
Schlechtriem, Peter
Schwenzer, Ingeborg
Commentary on the UN Convention on the
International Sale of Goods (CISG), 6th edition,
2013
cited as: Schlechtriem/Schwenzer-Author.
129,
144,
146,
153,
164, 170
Schreuer, Christoph H. The ICSID Convention: A Commentary, 2nd
Edition, Cambridge (2009)
cited as: Schreuer.
27
Schwenzer, Ingeborg CISG-AC Opinion No. 13, Inclusion of Standard
Terms under the CISG. Adopted by the CISG
Advisory Council following its 17th meeting, in
Villanova, Pennsylvania, USA, on 20 January 2013
cited as: CISG Advisory Council Opinion No. 13.
153
Staudinger, Julius von
Kommentar zum Bürgerlichen Gesetzbuch mit
Einführungsgesetz und Nebengesetzen, Wiener UN-
Kaufrecht (CISG), Berlin (2013)
cited as: Staudinger-Author.
115, 153
Bucerius Law School - Memorandum for Claimant
XVIII
Turner, Peter
Mohtashami, Reza
A Guide to the LCIA Arbitration Rules, Oxford
(2009)
cited as: Turner/Mohtashami.
82
United Nations
Commision on
International Trade Law
UNCITRAL Digest of Case Law on the United
Nations Convention on Contracts for the
International Sale of Goods, 2012 edition, New
York
cited as: UNICITRAL Digest.
115
Veit, Marc D. Procedural Order No. 14 of 27 November 2002 –
Security for Costs in International Arbitration –
Some Comments to Procedural Order No. 14 of 27
November 2002, in: ASA Bulletin, Volume 23,
Issue 1, pp. 116 – 118.
cited as: Veit.
30
Verbist, Herman
Schäfer, Erik
Imhoos, Christophe
ICC Arbitration in Practice, 2nd Edition, the Hague
(2015)
cited as: Verbist/Schäfer/Imhoos.
11
Von Goeler, Jonas Third-party funding in international arbitration and
its impact on procedure, the Hague (2015)
cited as: Von Goeler.
11
Waincymer, Jeffrey Procedure and Evidence in International Arbitration,
Alphen aan den Rijn (2012)
cited as: Waincymer.
11, 26,
29, 38,
42, 43,
60, 82,
86, 104
Yeşilirmak, Ali Provisional Measures in International Commercial
Arbitration, The Hague (2005)
cited as: Yeşilirmak.
44
Bucerius Law School - Memorandum for Claimant
XIX
Index of Cases
Country Date Court Case Cited at
para.
Australia 11/05/1983 Supreme Court
of Victoria
7 ACLR 937 (Aspendale
Pastoral Co v W J Drever)
cited as: SC (AU 1983).
61
Austria 25/01/2006 Oberster
Gerichtshof
(Supreme Court)
7 Ob 302/05w (Frozen pork
liver)
available at:
http://cisgw3.law.pace.edu/ca
ses/060125a3.html
cited as: OGH (AT 2006).
176
31/08/2005 Oberster
Gerichtshof
(Supreme Court
7 Ob 175/05v
available at:
http://cisgw3.law.pace.edu/ca
ses/050831a3.html
cited as: OGH (AT 2005).
136
Canada 20/12/1999 Vancouver Trial
Division
Frontier International
Shipping Corp v The Owners
and All Others Interested in
the Ship Tavors & Passport
Maritime
cited as: TD (CA 1999).
18
England 10/02/1995 Queen’s Bench
Division
(High Court)
Regia Autonoma de
Electricitate Renel v Gulf
Petroleum International Ltd,
in: [1996] ALL ER, Volume
2, pp. 319 et seq.
cited as: QB (EN 1995).
15
Bucerius Law School - Memorandum for Claimant
XX
13/04/1994 Court of Appeal Keary Developments Ltd v
Tarmac Construction Ltd and
another, in: [1995] All ER,
Volume 3, pp. 534 et seq.
cited as: CA (EN 1994).
61
11/01/1994 House of Lords
(former
Supreme Court)
Coppée-Lavalin S.A./N.V. v
Ken-Ren Chemicals and
Fertilizers Ltd., in: [1994]
Lloyd’s Law Reports,
Volume 2, pp. 109 et seq.
cited as: HL (EN 1994).
31
01/11/1988 Court of Appeal De Bry v Fitzgerald and
Another, [1990] W.L.R.,
Volume 1, pp. 552 et seq.
cited as: CA (EN 1988).
46
01/12/1987 Queen’s Bench
Division
(High Court)
First Steamship Co Ltd v
CTS Commodity Transport
Shipping, in: [1988] Lloyd’s
Law Reports, Volume 1, pp.
245 et seq.
cited as: QB (EN 1987).
107
08/06/1983 Court of Appeal 1983 H. No. 730 (Bank
Mellat v Helliniki Techniki
S.A.), in: [1984] Q.B., pp. 291
et seq.
cited as: CA (EN 1983).
15, 29
18/01/1973 Court of Appeal Sir Lindsay Parkinson & Co
Ltd v Triplan Ltd, in: [1973]
All E.R., Volume 2, pp. 273
et seq.
cited as: CA (EN 1973).
60
Bucerius Law School - Memorandum for Claimant
XXI
18/01/1967 Court of Appeal Liberian Shipping
Corporation v A. King &
Sons, Ltd, in: [1967] Lloyd’s
List Law Reports, Volume 1,
pp. 302 et seq.
cited as: CA (EN 1967).
104
European
Union
19/07/2012 European Court
of Justice
Case No. C-628-10 (Alliance
One International Inc. and
Standard Commercial
Tobacco Co. v European
Commission)
cited as: ECJ (2012).
91
10/09/2009 European
General Court
Case No. C-97/08 P (Akzo
Nobel and others v European
Commission)
cited as: EGC (2009).
91
Finland 31/05/2004 HO Helsinki
Appellate Court
S 01/269 (Crudex Chemicals
Oy v. Landmark Chemicals
S.A)
available at:
http://cisgw3.law.pace.edu/ca
ses/040531f5.html
cited as: HO Helsinki (FI
2004).
115
France 13/09/1995 Court d’appel
Grenoble
(Appeal court)
93/4126 (Caito Roger v.
Société française de
factoring)
available at:
http://cisgw3.law.pace.edu/ca
ses/950913f1.html
cited as: CA Grenoble (FR
1995).
176
Bucerius Law School - Memorandum for Claimant
XXII
Germany 11/04/2014 Oberlandesgeric
ht Frankfurt
(Higher regional
court)
26 Sch 13/13, in: SchiedsVZ
2014, pp. 154 et seq.
cited as: OLG Frankfurt (DE
2014).
60
14/01/2009 Oberlandesgeric
ht München
(Appellate
Court)
20 U 3863/08
available at:
http://cisgw3.law.pace.edu/ca
ses/090114g1.html
cited as: OLG (DE 2009).
129
31/03/2008 Oberlandesgeric
ht Stuttgart
(Appellate
Court)
6 U 220/07 (Automobile case)
available at:
http://cisgw3.law.pace.edu/ca
ses/080331g1.html
cited as: OLG (DE 2008).
153
03/08/2005 Landgericht
Neubrandenburg
(District Court)
10 O 74/04 (Pitted sour
cherries case)
available at:
http://cisgw3.law.pace.edu/ca
ses/050803g1.html
cited as: LG (DE 2005).
140
13/04/2000 Amtsgericht
Duisburg
(Petty Court)
49 C 502/00 (pizza cartons)
available at:
http://cisgw3.law.pace.edu/ca
ses/000413g1.html
cited as: AG Duisburg (DE
2000).
136, 164
Bucerius Law School - Memorandum for Claimant
XXIII
03/04/1996 Bundesgerichtsh
of
(Supreme Court)
VIII ZR 51/95 (Cobalt
sulphate case)
available at:
http://cisgw3.law.pace.edu/ca
ses/960403g1.html
cited as: BGH ( DE 1996).
174
08/03/1995 Bundesgerichtsh
of
(Supreme Court)
VIII ZR 159/94 (New
Zealand mussels case)
available at:
http://cisgw3.law.pace.edu/ca
ses/950308g3.html
cited as: BGH (DE 1995).
177, 178
10/10/1951 Bundesgerichtsh
of (Supreme
Court)
II ZR 99/51, in: BGHZ 3,
pp. 215 et seq.
cited as: BGH (DE 1951).
60
Hungary 25/09/1992 Supreme Court Gf.I. 31 349/1992/9 (Pratt &
Whitney v. Malev)
available at:
http://cisgw3.law.pace.edu/ca
ses/920925h1.html
cited as: Supreme Court (HU
1992).
142
International 1986 International
Court of Justice
Military and Paramilitary
Activities in and Against
Nicaragua (Nicaragua v
USA), in: ICJ Reports,
Volume 14, Issue 42
cited as: ICJ (1986).
38
Bucerius Law School - Memorandum for Claimant
XXIV
New Zealand 30/07/2010 High Court of
New Zealand
CIV-2009-409-000363 (RJ &
AM Smallmon v. Transport
Sales Limited and Grant Alan
Miller)
available at:
http://www.unilex.info/case.c
fm?pid=1&do=case&id=1595
&step=Abstract
cited as: High Court (NZ
2010).
178
Singapore 02/06/2009 Court of Appeal
of Singapore
(Upper division
of the Supreme
Court)
CA 155/2008 (Insigma
Technology Co Ltd v Alstom
Technology Ltd), in: [2009]
SLR, Volume 3, pp. 936 et
seq.
cited as: CA (SG 2009).
28
Switzerland 27/04/2007 Tribunal
cantonal Valais
(Appellate
Court)
C1 06 95 (Oven case)
available at:
http://cisgw3.law.pace.edu/ca
ses/070427s1.html
cited as: KG (CH 2007).
142
22/12/2000 Bundesgericht
(Federal
Supreme Court)
4C.296/2000/rnd (Roland
Schmidt GmbH v. Textil-
Werke Blumenegg AG)
available at:
http://www.cisg.law.pace.edu
/cisg/wais/db/cases2/001222s
1.html
cited as: BG (CH 2000).
174
Bucerius Law School - Memorandum for Claimant
XXV
03/12/1997 Zivilgericht
Basel
(Civil Court)
P4 1996/00448 (White urea
case)
available at:
http://cisgw3.law.pace.edu/ca
ses/971203s2.html
cited as: ZG Basel (CH
1997).
167
10/05/1982 Bundesgericht
(Supreme Court)
BGE 108Ia, 197 (Edok S.A.
and others v.
Hydromechaniki S.à r.l. and
Eupalinos S.A.)
cited as: BGE (CH 1982).
Ukraine 21/06/2010 Dnipropetrovsk
Regional
Administrative
Court
2-a-10084/09/0470
(Dnipropetrovsk company
Dnepryanka v. Inter-state Tax
Administration of
Dnipropetrovsk city and
Department)
available at:
http://www.unilex.info/case.c
fm?pid=2&do=case&id=1706
&step=Abstract
cited as: AC (UA 2010).
145
United States 21/01/2010 U.S. District
Court, Eastern
District of
California
CV F 09-1424 LJO GSA
(Golden Valley Grape Juice
and Wine, LLC v. Centrisys
Corporation et al.)
available at:
http://cisgw3.law.pace.edu/ca
ses/100121u1.html
cited as: District Court
California (US 2010).
144
Bucerius Law School - Memorandum for Claimant
XXVI
20/01/2010 U.S. District
Court, Eastern
District of
Pennsylvania
Civil Action 05-3078 (ECEM
European Chemical
Marketing B.V. v. The
Purolite Company)
available at:
http://cisgw3.law.pace.edu/ca
ses/100129u1.html#ii
cited as: District Court
Pennsylvania (US 2010).
129
17/05/1999 U.S. District
Court, Eastern
District of
Louisiana
(A federal court
of 1st instance)
99-0380 Section "K" (1)
(Medical Marketing v.
Internazionale Medico
Scientifica)
available at:
http://cisgw3.law.pace.edu/ca
ses/990517u1.html
cited as: District Court
Louisiana (US 1999).
178
Bucerius Law School - Memorandum for Claimant
XXVII
Index of Arbitral Awards
Institution Date Case Cited at
para.
ASA 25/09/1997 A S.p.A. (Italy) v B AG (Germany), in: ASA
Bulletin, Volume 19, Issue 4, pp. 745 – 750
cited as: A S.p.A. v B AG.
33
1995 X Panama v Une personne physique domiciliée à
Genève, in: ASA Bulletin, Volume 13, Issue 3, pp.
529 – 534
cited as: X Panama v Une personne physique.
13, 33
CIETAC 07/01/2000 Arbitral Award No. CISG/2000/06 (Cysteine case)
available at:
http://cisgw3.law.pace.edu/cases/000107c1.html
cited as: CIETAC (2000).
153
Economic
Court of the
Common-
wealth of
Independent
States (CIS)
23/06/1998 Request No. 01-1/6/97
available at:
http://www.unilex.info/case.cfm?pid=1&do=case&i
d=1385&step=Abstract
cited as: Economic Court CIS (1998).
145
ICC 25/05/2009 Case No. 15951/FM (XXX Inc., incorporée dans une
île des Caraïbes v YYY S.A., incorporée dans un
pays d’Amérique latine), Procedural Order 2, in:
ASA Bulletin, Volume 28, Issue 1, pp. 71 - 77
cited as: ICC Case No. 15952/FM.
43
Bucerius Law School - Memorandum for Claimant
XXVIII
07/2008 Case No. 15218, Procedural Order, in: ICC Bulletin,
Volume 25, Supplement, pp. 79 et seq.
Cited as: ICC Case No. 15218.
21
12/2007 Case No. 14993, in: ICC Bulletin, Volume 25,
Supplement, pp. 77 et seq.
cited as: ICC Case No. 14993.
46
05/2006 Case No. 13620, in: ICC Bulletin, Volume 25,
Supplement, pp. 65 et seq.
cited as: ICC Case No. 13620.
46
09/09/1999 ICC Case No. 10032, Procedural Order, cited by
Karrer & Desax, in: Liber Amicorum Böckstiegel,
pp. 339 et seq., p. 348 para. 42
cited as: ICC Case No. 10032.
43
01/07/1995 Arbitral Award No. 8240
available at:
http://www.unilex.info/case.cfm?pid=1&do=case&i
d=629&step=Keywords
cited as: ICC Brussels (2000).
145
1995 Case No. 8324 (Magnesium case)
cited as: ICC France (1995).
140
1990 Case No. 6784, in: ICC Bulletin, Volume 8, Issue 1,
pp. 54 et seq.
cited as: ICC Case No. 6784.
85
1990 Case No. 6228, in: ICC Bulletin, Volume 8, Issue 1,
p. 54
cited as: ICC Case No. 6228.
99
Bucerius Law School - Memorandum for Claimant
XXIX
20/09/2012 Case No. ARB/09/17 (Commerce Group Corp &
San Sebastian Gold Mines Inc v Republic of El
Salvafor
cited as: Commerce Group v El Salvador.
46
14/10/2010 Case No. ARB/10/6 (Rachel, Stephen, Miriam
Grynberg & RSM Production Corp v Government of
Grenada
cited as: RSM v Grenada.
34, 45
18/06/2010 Case No. ARB/07/24 (Gustav Hamester GmbH &
Co KG v Republic of Ghana)
cited as: Hamester v Ghana.
34
03/03/2010 Case No. ARB/05/18 (Ioannis Karassopoulos and
Ron Fuchs v The Republic of Georgia)
cited as: Fuchs v Republic of Georgia.
51
29/06/2009 Case No. ARB/08/5 (Burlington Resources Inc. and
others v Republic of Ecuador and Empresa Estatal
Petróleos del Ecuador (PetroEcuador
cited as: Burlington v Ecuador.
11
23/06/2008 Case No. ARB 06/8 (Libananco v Turkey
cited as: Libananco v Turkey.
46
17/08/2007 Case No. ARB/12/10 (RSM Production Corporation
v Saint Lucia)
cited as: RSM v St. Lucia.
42
28/10/1999 Case No. ARB/97/7 (Maffezini v Kingdom of Spain),
in: ICSID Review for Investment Law Journal,
Volume 16, Issue 207
cited as: Maffezini v Spain.
26, 27
Bucerius Law School - Memorandum for Claimant
XXX
ICSID 23/06/2015 Case No. ARB/14/14 (EuroGas and Belmont
Resources v Slovak Republic)
cited as: EuroGas v Slovak Republic.
26, 51
05/10/2012 Case No. ARB/06/11 (Occidental Petroleum
Corporation v Republic of Ecuador
cited as: Occidental Petroleum v Ecuador.
46
NAI 12/12/1996 Case No. 1694 (Producer v Construction Company),
Interim Award, in: Yearbook of Commercial
Arbitration 1998, Albert Jan van den Berg (ed),
Volume 23, pp. 97 – 112
cited as: NAI Case No. 1694.
29
12/07/1985 1st Claimant, 2nd Claimant, and others, v Dutch
Company, Interim Award, in: Yearbook:
Commercial Arbitration 1986, Albert Jan van den
Berg (ed.), Volume 11, pp. 189 et seq.
cited as: Cl. v Dutch Company.
33
PCA 11/01/2016 Case No. 2013-15 (South American Silver Limited v
Plurinational State of Bolivia)
cited as: SAS v Bolivia.
11, 27,
46, 51
31/01/2014 Case No. 2011-17 (Guaracachi America and
Rurelec v the Plurinational State of Bolivia)
cited as: Guaracachi v Bolivia.
27, 51
Bucerius Law School - Memorandum for Claimant
XXXI
Index of Rules
CAM-CCBC Rules Rules of the Center for Arbitration and Mediation of the Chamber of
Commerce Brazil-Canada
CISG United Nations Convention on Contracts for the International Sale of
Goods
DIS Rules DIS-Arbitration Rules 98
HKIAC HKIAC Administered Arbitration Rules (2013)
ICC Rules ICC Rules of Arbitration (2012)
LCIA Rules LCIA Arbitration Rules (2014)
NYC United Nations Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (New York, 10 June 1958)
PICC UNIDROIT Principles of International Commercial Contracts (2010)
SCC SCC Arbitration Rules (2010)
Swiss Rules Swiss Rules of International Arbitration 2012
UNCITRAL Model
Law
UNCITRAL Model Law on International Commercial Arbitration
(1985), with amendments as adopted in 2006
Bucerius Law School - Memorandum for Claimant
1
Statement of Facts
CLAIMANT is a highly specialized manufacturer of fan‐blades for jet engines,
incorporated in Equatoriana.
RESPONDENT is a manufacturer of jet engines, incorporated in Mediterraneo.
Engineering
International SA
was the parent company of CLAIMANT and RESPONDENT until
2010.
Wright Holding
PLC
- addressed as HOLDING - bought CLAIMANT on 30 June 2010 and
is the current parent company of CLAIMANT.
SpeedRun is a Private Equity Fund, which bought RESPONDENT on
3 August 2010.
Earhart SP is a world-wide operating aircraft manufacturer for business jets.
1 August 2010 The PARTIES agree on the development and sale of a minimum of
2,000 fan blades for RESPONDENTS’s next generation of jet
engines.
26 October 2010 RESPONDENT additionally orders 2,000 clamps.
14 January 2015 RESPONDENT accepts the fan blades and clamps delivered by
CLAIMANT. The two attached invoices provide for a price in the
amount of US$ 20,438,560 (fan blades) and US$ 183,343.28 (clamps).
15 January 2015 RESPONDENT informs CLAIMANT about payment of the invoiced
amounts. CLAIMANT discloses a mistake in the fan blade invoice to
RESPONDENT by e-mail and attaches a corrected invoice providing
for a price US $22,723,800.
29 January 2015 US$ 20,336,367.20 are credited to the CLAIMANTS’s bank account.
9 February 2015 RESPONDENT refuses CLAIMANTS’s demand for payment of
outstanding US$ 2,387,432.80.
10 February 2015 An inquiry at the ENB reveals that the ECB deducted an 0.5 % levy
from RESPONDENTS’s payment for money laundering
investigations.
April 2016 CLAIMANTS’s audited accounts for the year 2015 are released.
1 April 2016 CLAIMANT informs RESPONDENT about its intent to initiate
arbitration proceedings.
Bucerius Law School - Memorandum for Claimant
2
Summary of Arguments
1 CLAIMANT was forced to initiate this arbitration, since RESPONDENT infringes its
contractual obligations in many respects and makes every attempt to deprive CLAIMANT of
its lawful rights. CLAIMANT fulfilled its part of the development and sales agreement free of
any faults. Still, it has not yet received the full purchase price.
2 First, RESPONDENT tries to take advantage of an obvious mistake in the fan blade invoice,
which had been immediately corrected, and alleges that CLAIMANT burdened the full
exchange rate risk for the full contract. However, this contradicts with every principle of the
Parties’ cooperation. In addition, RESPONDENT tries to avoid bank charges deducted from
its payment by the Central Bank. This constitutes an infringement of both, the clear agreement
of the Parties on this matter and the applicable law [Issue 3].
3 After CLAIMANT submitted its Request for Arbitration, RESPONDENT challenged the
admissibility of the claim and requested a security for costs order by the TRIBUNAL.
4 The TRIBUNAL has no power to order security for costs. Generally, it is the Parties’ decision
to either confer such power to the TRIBUNAL or not. Here, the choice of the CAM/CBCC
Rules illustrates the PARTIES’ intention to exclude any potential right for security. No
provision of these Rules addresses the question of security at all – different from other arbitral
rules. Further, Art. 8 CAM/CBCC serves a completely different purpose.
5 Moreover, ordering Claimant to provide security requires an indication that CLAIMANT
would or could not abide by the award. To the contrary, CLAIMANT is in an excellent
financial shape and willing to adhere to any judgement. RESPONDENT attempts to proof that
this notion lacks any substance. However, the submitted evidence is mere hearsay comprising
visibly confused facts – and it is thus inadmissible and inconsiderable [Issue 1].
6 The claim is also admissible. CLAIMANT submitted its Request for Arbitration within the
contractual 60-day time limit. This document sufficiently demonstrates CLAIMANT’s
intention to initiate arbitration proceedings. Also, CLAIMANT had informed RESPONDENT
about its intentions by email three months in advance. Thus, RESPONDENT was informed
and had plenty of time to prepare for the arbitration proceedings.
7 Now, RESPONDENT tries to avoid these proceedings by relying on minor formal mistakes.
The incorrect Power of Attorney and the incomplete fee payment do not compromise
RESPONDENT rights. They are meant to serve the administrative purposes of the CAM
secretariat. But those mistakes – immediately corrected by CLAIMANT a few days later –
must not be misused by RESPONDENT to obstruct the legal proceedings [Issue 2].
Bucerius Law School - Memorandum for Claimant
3
Request for Security for Costs
8 In its Request for Security for Costs from 6 September 2016, RESPONDENT requests the
TRIBUNAL to order CLAIMANT to provide security for RESPONDENTS’S costs in regard
to the arbitrators’ and legal fees as well as expenses regarding witnesses and experts [RfS,
p. 46 para. 1] totalling US$ 200.000. It bases this request on doubts regarding
CLAIMANTS’s financial situation [RfS, p. 46 para. 3], behaviour allegedly evidencing that it
does not intend to comply with awards [RfS, p. 46 para. 2], unsuccessful search for outside
funding [RfS, p. 46 para. 3] and alleged concealment of its true financial situation [RfS, p. 46
para. 4]. All of the allegations were taken from a newspaper article in the Carioca Business
News, written by a “usually well informed author” [RfS, p. 46 para. 3].
9 CLAIMANT first submits that the TRIBUNAL does not have the power to order security for
costs (I.). Alternatively, the grounds for such an order are not satisfied (II.).
I. The TRIBUNAL has no power to order CLAIMANT to provide security for costs
10 The issue at hand is who is to establish the power of the TRIBUNAL in regard to orders for
security for costs and whether this power was conferred upon it.
11 According to the fundamental principle of party autonomy, this is within the Parties’ powers
[Lynch, p. 17; Von Goeler, para. 9.01 A.; Waincymer, p. 51-2 para. 2.2.2, p. 644 para. 8.3.2],
as expressed in their agreement to arbitrate [SAS v Bolivia, PO10 para. 51; AAA Handbook on
Commercial Arbitration, p. 290]. The institutional rules and the lex arbitri, which the Parties
chose, complement and limit the Parties’ agreement [cf. Burlington v Ecuador, para. 47;
Berger/Kellerhals, para. 13; Verbist/Schäfer/Imhoos, p. 10].
12 CLAIMANT will establish that neither the Parties (1.) nor the CAM/CCBC Rules (2.) confer
the power to order security for costs on the TRIBUNAL.
1. The Parties exercised their party autonomy in not giving the TRIBUNAL power to
order security for costs
13 The Parties remained silent on the matter of security for costs. There is no rule on security for
costs in the DSA. This silence can only be interpreted in the way that the Parties did not
intend for the TRIBUNAL to order security for costs [cf. X Panama v Une personne physique,
para. 1.2.2; cf. Bösch, p. 208; Rubins, p. 367].
14 This is further supported by the fact that the Parties expressly and freely chose the
CAM/CCBC Rules [cf. Livingstone, p. 539]. Contrary to most other institutional arbitration
rules [cf. Born, p. 2495 para. 17.02 at G.4.e], these do not provide for an express provision on
Bucerius Law School - Memorandum for Claimant
4
security for costs. If the Parties had wanted the TRIBUNAL to have such power, they would
have chosen one of those institutions providing for it.
15 Lastly, and in regard to Art. 17 UNCITRAL Model Law, it cannot be inferred from the
chosen seat of arbitration that the Parties wanted to resort to the lex arbitri on security for
costs. Rather, it is likely that parties generally choose a given country as a neutral forum “on
pure grounds of convenience” [CA (EN 1983), p. 315; QB (EN 1995), p. 319].
2. Power to order security is not conferred by the CAM/CCBC Rules
16 RESPONDENT seems to be of the opinion that Art 8.1 gives the TRIBUNAL the power to
order security for costs when it submitted its RfS „pursuant to Art. 8“ [RfS, p. 45]. Art. 8.1
gives the TRIBUNAL the power to order „provisional measures, both injunctive and
anticipatory“. Therefore, the question at hand is whether Art. 8.1 includes the power to order
security for costs.
17 CLAIMANT will show that by the wording (a.), systematical context (b.) and its rationale
(c.), Art. 8.1 does not give the TRIBUNAL the power to order security.
a. Interpreted by its wording, Art. 8.1 does include security for costs
18 Provisional measures are defined as those intended to protect the ability of a party to obtain a
final award [cf. Beraudo, p. 246; Moses p. 101]. They pertain to protection, not payment [TD
(CA 1999), para. 7]. Therefore, security for costs does not fit this definition. It is a special
form of provisional measures, to which the criteria applicable for the other measures do not
apply and which should be treated separately [Lew/Mistelis/Kröll, para. 23-4; cf.
Newman/Hill, p. 208].
19 This indicates that Art. 8.1's references to injunctive and anticipatory provisional measures,
were not meant to include security orders.
b. Interpreted by its systematical context, Art. 8.1 does not include security for costs
20 By exercising their party autonomy and following the CAM/CCBC Rules, the Parties have
established a regime of rules that is final regarding the allocation of costs, making security for
costs superfluous and contradictory to those rules.
21 RESPONDENT is of the opinion that the TRIBUNAL will have to render an award on costs
pursuant to Art. 10.4.1 CAM/CCBC Rules. For such an award to order CLAIMANT to fully
reimburse RESPONDENT, the TRIBUNAL would have to follow the principle of “costs
follow the event” [cf. ICC Case No. 15218, para. 13, “Verfügungsanspruch”]. CLAIMANT
will establish that this is not the case.
Bucerius Law School - Memorandum for Claimant
5
22 Art. 10.4.1 in determining the appropriate liability of the Parties in regard to costs and fees
refers to the ToR. The procedural matters regulated in the ToR are binding on the Parties
[Craig/Park/Paulsson, p. 293 para. 15.05; Derains/Schwartz, p. 257]. Section 12.3 thereof
[ToR, p. 43] states that “[d]uring the course of the arbitration […], each party shall bear the
fees of its respective attorneys and […] technical assistants”.
23 Additionally, Art 12.7 CAM/CCBC orders each Party to deposit „its portion of the amount“
of the arbitrators’ fees at an early stage of the proceedings to ensure payment. Even more,
Art. 12.8 CAM/CCBC gives the Secretariat the power to request advance payments „to
establish an expense fund“, which „corresponds to the provision of expenses incurred with
sending documents, copies, prints, and with the contracting of suppliers to provide support
during hearing sessions, such as stenotyping and recording professionals, among others”
[CAM/CCBC Table of Fees, at III].
24 Therefore, ensuring the payment of fees for attorneys and technical assistants [Section 12.3
ToR] as well as arbitrators’ fees [Art 12.7] and expenses incurred with support during hearing
sessions [Art 12.8] is sufficiently provided for under the existing rules. This includes the sums
claimed by RESPONDENT [RfS, p. 46 para. 1]. Consequently, the general rule seems to be
that each party bears its respective portion of the fees and expenses during the proceedings.
25 Regarding the reimbursement, Section 12.4 ToR states that “[t]he Arbitral Award shall
establish the responsibility related to the payment of administrative costs and fees,
Arbitrators’ fees and Tribunal-appointed experts’ fees, attorneys’ fees, as well as the
reasonable expenses incurred by the parties in their defense process. The Arbitral Tribunal
shall also fix the amount or proportion of refund of one party to the other. The Arbitrators
will consider the behaviour of the parties in order to reduce the amount of cost refund”
[emphasis added].
26 This shows that by generally having each party bear its own costs and merely allowing for a
“refund” order, the TRIBUNAL was given a wide discretion in allocating the costs of the
arbitration proceedings, and the Parties did not follow the principle of “costs follow the
event”. Therefore, RESPONDENTS’s right to be (fully) reimbursed is highly hypothetical.
Consequently, it not only contradicts the general principles behind the provisions of cost
under the existing regime, but in its hypothetical nature is also not a legal right that would
require protection from a security for costs order [EuroGas v Slovak Republic, PO3
para. 116; Maffezini v Spain, PO2 para. 16 et seq]. In any event, disregarding the ToR’s
regime on costs would lead to the final award being subject to challenge for having failed to
follow them [cf. Waincymer p. 469].
Bucerius Law School - Memorandum for Claimant
6
27 In addition, the TRIBUNAL cannot specify the hypothetical reimbursement pursuant to
Section 12.3 ToR, as this would mean prejudging the Parties’ behaviour as a necessary part of
the consideration in regard to the refund and therefore violating their right to be heard by
prejudging the merits [cf. Guaracachi v Bolivia, para. 8; cf. Maffezini v Spain, PO2, para. 21;
cf. SAS v Bolivia, PO10 para. 55-6; cf. Schreuer, Art. 47 para. 2].
28 Hence, Art. 8.1 cannot include the power to order security for costs, as this would contradict
the existing regime of rules under the CAM/CCBC Rules and the ToR, which the parties have
themselves chosen by exercising their party autonomy [cf. CA (SG 2009), para. 30].
c. Interpreted by its rationale, Art. 8.1 does not include security for costs
29 The rationale of Art. 8.1 is to ensure equality and fairness. Generally, the purpose of
provisional measures is to establish a due process by ensuring equal treatment and fire power
[CA (EN 1983), p. 314; cf. Waincymer, p. 643 para. 8.3.1]. This is reached by balancing the
conflicting legal interests of the parties [NAI Case No. 1694, at II.4; CIARB, p. 4, Art. 1 at b].
Hence, in order to be justified, a provisional measure must contribute to this balance.
[Darwazeh/Leleu, para. 3.2 at a].
30 Security for costs can, in some cases, be justified in order to protect parties from situations
where an unforeseeable number of proceedings are initiated against them without legitimate
claims and assets. In such situations, and without security, a decision between defending and
subsequently not being able to recover their losses or forfeiting them would have to be made
[cf. ICC Case No. 14661, para. 4; Redfern/Hunter, para. 5.35 – 6; cf. Veit, p. 116]. However,
this is not the case in this instance.
31 First, the number of such situations is limited, since arbitration requires the parties to mutually
agree to enter into an arbitration [cf. HL (EN 1994), p. 123].
32 Second, the burden placed on the requesting party by the obligation to pay an advance on
costs under the institutional rules is considered to be a sufficient safeguard to exclude any
abusive and extravagant claims [CIARB, p. 11, Art. 4; Lew/Mistelis/Kröll, p. 600-1 para. 23-
54]. As shown above [para. 23], the CAM/CCBC Rules under Art. 12 and 4 serve this
purpose.
33 Third, any contracting party generally bears the risk of a dispute. Such a risk is a general
commercial risk [A S.p.A. v B AG, para. 8; Blessing, para. 886]. Similarly, not being able to
enforce an award is a general risk in international business [Blessing (1995), para. 46.14]. In
addition, such risk of not being able to enforce an award is substantially lower where the
eventual award is enforceable under the NYC [cf. Cl. v Dutch Company, para. 4; X Panama v
Bucerius Law School - Memorandum for Claimant
7
Une personne physique para. 1.2.2 et seq]. Both Parties have their seat in contracting states of
the NYC [PO2 para. 35].
34 Furthermore, the burden imposed on a party by a security for costs order may interfere unduly
with the right to be heard by stifling a genuine claim [Hamester v Ghana, p. 5 para. 17;
Redfern/Hunter, para. 5.35]. It is not part of the arbitral process and principles that a claim is
heard only if the claimant proves sufficient financial standing [RSM v Grenada, para. 5.19].
Furthermore, parties can use measures such as security for costs as a weapon to effectively
prevent the opposing party’s access to the courts [Kirtley/Wietrzykowski, para. 5].
35 In conclusion, security for costs under the given set of rules would unilaterally disadvantage
the requesting party by unduly interfering with their rights. The opposing parties are
sufficiently protected by the existing provisions. Therefore, security for costs would always
fail to strike a balance between the parties’ respective interests, directly contradicting
Art. 8.1’s rationale of establishing this.
II. Alternatively, the TRIBUNAL should not order CLAIMANT to provide security
36 Alternatively, the grounds for an order for security for costs are not satisfied. As stated above
[para. 8], RESPONDENT relies its request for security for costs on a newspaper article and
alleged non-compliance of CLAIMANT with an award [cf. RfS, p. 46 para. 2 - 4].
37 However, as CLAIMANT will show, the newspaper article as mere hearsay evidence is not
admissible (1.) and the alleged facts do not satisfy the grounds for security for costs (2.).
1. The newspaper article constitutes mere hearsay evidence and is inadmissible
38 The rule is that only evidence satisfying the requirement of providing credible testimony from
sources having knowledge of a party’s financial affairs should be sufficient. In particular,
press reports as a form of hearsay evidence [Waincymer, para. 10.16.3] should not be treated
in itself as evidence for judicial purposes, even if they seem to meet high standards of
objectivity [ICJ (1986), para. 62; cf. Aldrich, p. 352; Rosenne, p. 1046]. In the present case,
the journalist mixed up two investment arbitrations brought against the government of
Xanadu [PO2 para. 39(d)]. This demonstrates the flaws of hearsay evidence, particularly
regarding the evidence at hand, as it is very prone to errors.
39 Additionally, one should only have to defend what can be proven first [cf. Lew, para. 6].
However, if submitting hearsay evidence like a newspaper article speculating about
CLAIMANTS’s financial status would be sufficient to satisfy the standard of proof, it would
undermine this concept. CLAIMANT would now have to defend by enclosing financial
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8
statements and other internal confidential information. Admitting hearsay evidence like the
newspaper would therefore lead to a practical shift of the burden of proof.
40 For these reasons, the TRIBUNAL should render it inadmissible.
2. The alleged facts do not suffice to satisfy the grounds for security for costs
41 The issue at hand is what the grounds for security for costs are in general (a.) and whether
they are satisfied in the present case (b. and c.).
a. There must be a serious probability that CLAIMANT will not comply with the award
42 For an order for security for costs to be justified, first, there must be a serious probability that
a party will not perform a future payment obligation [Henderson, p. 72 at F; Waincymer,
p. 647 para. 8.3.5]. This probability can be determined by the party’s ability and willingness
to pay [RSM v St. Lucia, para. 81; CIARB, p. 6, Art. 3]. Second, security for costs must be fair
in the circumstances of the given case [Waincymer, p. 647 para. 8.3.5].
43 In examining the ability to pay, the TRIBUNAL should concentrate on whether
CLAIMANTS’s financial situation has materially and substantially deteriorated between the
present situation and the time of entering into the DSA [cf. ICC Case No. 10032, para. 45;
ICC Case No. 15952/FM para. 2.1 et seq.]. It must be considered that RESPONDENT took
the risk of both doing business and having disputes with CLAIMANT in the financial
situation of the time of contracting, including the risk of not being able to recover losses in
disputes with it [Henderson, p. 72 at F.2; Waincymer, p. 650 para. 8.3.5].
44 Even more, where a respondent has access to assets to enforce an award under the NYC, the
risk of not being able to recover expenses is relatively low [cf. Kerr, p. 129 fn. 24;
Konrad/Schwarz para. 22-105; cf. Yeşilirmak, p. 218 para. 5-85].
45 Regarding the willingness to comply with an award, behaviour suggesting an intention to
avoid or delay payment of a cost award can only be assumed where there is a consistent
procedural history of not complying with awards or paying fees [RSM v Grenada, para. 63;
RSM v St Lucia, para. 82].
46 Lastly, tribunals have to be careful not to stifle a genuine claim, as security for costs orders
can interfere unduly with a party’s rights. This is particularly true where the one party is very
likely part of the reason for financial constraints of the other party [Born, para 17.02 G.4.e;
Redfern/Hunter, para. 5.35]. In those instances, granting security for costs would allow such
parties to “benefit from their improper conduct” [SAS v Bolivia, PO10 para. 40]. Therefore,
security for costs must only be ordered on the grounds of exceptional circumstances [ICC
Case No. 13620, para. 2.5; Libananco v Turkey, para. 57; Occidental Petroleum v Ecuador,
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9
para. 59; Ashford, p. 223], for example where a degree of impecuniousness beyond mere
financial weakness is examined [Commerce Group v El Salvador, para. 45; CA (EN 1988), cf.
ICC Case No. 14993, para. 8; p. 559; ICC, Security for Costs, p. 61].
b. The facts submitted by RESPONDENT do not establish such a serious probability
47 In applying the facts to the rules established above, and contrary to RESPONDENTS’s
allegations, CLAIMANT will establish that it is able (aa.) and willing (bb.) to comply with
possible awards. There is no serious probability of RESPONDENT not being able to enforce
a hypothetical cost award.
CLAIMANTS’s financial shape does not necessitate security for costs
48 CLAIMANT is in sufficient financial shape to comply with any award (i.). Furthermore,
RESPONDENT deliberately took the risk of contracting with CLAIMANT and was aware of
potential intermittent and customary financial constraints (ii.).
i. CLAIMANT is in good financial shape
49 CLAIMANT submits that it possesses assets in the amount of $ 42.757.950. It possesses
property, plants and equipment valuing $ 37.580.000. Furthermore, the amount of bank loans
and other liabilities decreased since 2010 [PO2, p. 59, para. 28]. Except for the present case
and the award rendered against CLAIMANT in the case against its supplier, there are no other
enforcement proceedings that CLAIMANT is involved in [PO2, p. 60, para. 33].
Additionally, there are no insolvency or bankruptcy proceedings initiated against it [PO2,
p. 60 para. 31]. Even more, CLAIMANT has just developed a new generation of fan blades,
the sale of which will infuse CLAIMANT with new financial means [cf. CE9, p. 50].
50 This proves that CLAIMANT is in the financial shape to comply with hypothetical awards. In
any event, it proves that under the NYC, RESPONDENT would be able to enforce an award
against CLAIMANTS’s assets. The granting of security would be redundant.
51 Lastly, RESPONDENT seems to be of the opinion that CLAIMANTS’s search for outside
funding proves its inability to comply with awards [cf. RfS, p. 46, para. 3 - 4]. However, it is
merely a financial decision to look for outside funding as opposed to spending liquid means
[cf, SAS v Bolivia, PO10 para. 76]. RESPONDENT has to show a sufficient causal link
between the mere existence of outside funding and the danger of CLAIMANT not performing
on an award [EuroGas v Slovak Republic, PO3 para. 122-3; Fuchs v Republic of Georgia,
para. 691; Guaracachi v Bolivia, PO14 para. 7; SAS v Bolivia, PO10 para 61, 76]. It has
failed to do so.
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10
ii. CLAIMANT willingly took the risk in regard to CLAIMANTS’S financial situation
52 Second, CLAIMANTS’s financial situation has not substantially or unexpectedly deteriorated
between the conclusion of the DSA and the present proceedings [CE9, p. 50; PO2, p. 59
para. 28]. Therefore, RESPONDENT willingly took the risk of making business and having
disputes with CLAIMANT in this very financial shape.
53 RESPONDENT is largely in the same business as CLAIMANT or is at last familiar with
CLAIMANTS’s business from their two prior contracts [cf. AtR, p. 25 para. 8]. Therefore, it
knows that the development of a new fan blade is normally associated with a considerable
financial effort largely depleting the freely available financial means [CE9, p. 50]. It is very
likely that all disputes that would be initiated by CLAIMANT will only arise during such a
time. Additionally, RESPONDENT knew that CLAIMANT was developing a new fan
generation [PO2, p. 58 para. 27]. This emphasises its awareness of the risk of having disputes
with a party that may be short on funds during certain time periods.
54 However, RESPONDENT claims that it was led to believe CLAIMANT had a claim against
the Xanadu government totalling $ 100 million [RfS, p. 46 para. 4; PO2, p. 60 para. 34],
influencing RESPONDENTS’s view on the risk it was taking. This impression was allegedly
given by the negotiators on CLAIMANTS’s behalf and not corrected when the award
totalling $ 12 million was rendered before the completion of the negotiations. However,
comments referring to an amount of $ 100 million were only made when both Parties were
still subsidiaries of the same parent company in November 2009 [PO2, p. 60 para. 34].
Comments on that occasion cannot be taken as statements influencing official contractual
negotiations. Furthermore, if RESPONDENT had a real interest as to the claim against
Xanadu, it could have always looked at the audited accounts that were publicly available.
These showed the claim with $ 15 million, which is not substantially more than the
$ 12 million eventually recovered [PO2, p. 59 para. 28; CE9, p. 50]. Even more,
CLAIMANT was under no obligation to disclose awards to RESPONDENT [cf. RfS, p. 46
para. 4]. Such obligations only pertains states, if any [cf. Reith, p. 124 at B]. These two facts
prove that CLAIMANT is not concealing its true financial situation [cf. RfS, p. 46 para. 4].
55 Therefore, RESPONDENT must be assumed to have willingly taken the risk of having
disputes with CLAIMANT in its financial situation.
CLAIMANT is willing to comply with possible awards
56 Contrary to what RESPONDENT submits, CLAIMANT has not shown behaviour evidencing
that it is not intending to comply with hypothetical awards [cf. RfS, p. 46 para. 2].
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11
57 A general assumption must always be in favour of an intent to comply. The circumstances of
CLAIMANTS’s case against one of its suppliers as cited by RESPONDENT [RfS, p. 46
para. 2] do not refute this assumption.
58 CLAIMANT has not complied with the respective award as the supplier owes an even larger
amount to CLAIMANTS’s parent company due to a claim that is presently being litigated.
Any awarded sum will be set off against the award [OtS, p. 49; cf. PO2, p. 59 para. 30].
Setting off claims against each other financially makes more sense than having large amounts
of money being transferred back and forth, where one might incur bank charges. Therefore,
setting off claims is economically rational behaviour. Apart from that, one case does not
establish a procedural history of not complying with orders [cf. para. 45].
c. Security for costs would be unjust in the present case
59 Additionally, under the circumstances of the instant case security for costs would be unfair
[cf. para. 42, 46]. The RfS by RESPONDENT is aimed at stifling a legitimate and material
claim and not submitted in a timely manner.
60 The TRIBUNAL should consider the surrounding circumstances of RESPONDENTS’s RfS
to determine whether such a measure would be justified [CA (EN 1973), p. 273; CIARB, p. 10,
Art. 4 para. 1 at a]. Such circumstances can be whether RESPONDENT has contributed to
CLAIMANTS’s financial restraints [CIARB, p. 10, Art. 4 at b; Waincymer, p. 650 para. 8.3.5
at “Financial circumstances”] or unfair use of security for costs as an offensive weapon
blocking CLAIMANTS’s access to justice [Henderson, p. 74]. Access to justice is a major
pillar of arbitration [cf. BGH (DE 1951), para. 4] and must be complied with in arbitration the
same way as in national courts [OLG Frankfurt (DE 2014), p. 157].
61 Additionally, if the request is not made at the earliest opportunity, this constitutes a waiver of
rights [ICC Case No. 15951/FM para. 1.6; cf. SC (AU 1983), p. 942, Gu, at D.1.b]. Indeed,
there may be a good reason for the request to be made at a late stage of the proceedings, for
example where knowledge about the circumstances only occurs at a late stage of the process
[cf. CA (EN 1994), p. 542 at. F; Henderson, p. 74 at F].
62 RESPONDENT claims that it was only made aware of the financial circumstances by the
newspaper article of 5 September 2016 [RfS, p. 46 para. 4]. However, the main source in
regard to CLAIMANTS’S financial situation should be its publicly available audited
accounts. CLAIMANTS’S newest financial statement was publicly available in April 2016
[PO2 para. 28], and therefore far ahead of the initiation of the proceedings and the RfS.
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12
63 Therefore, RESPONDENT ought to have known about CLAIMANTS’S financial situation
and simply failed to submit the RfS sooner, in which case it is submitted late.
64 Additionally, it clearly looked at CLAIMANTS’S audited accounts after reading the
newspaper article but before preparing the request for security for costs. It is asking for
$ 200.000, which is just slightly higher than the $ 199.950 CLAIMANT has shown as “Cash
and Cash Equivalents” in the audited account [p. 46 para. 1; PO2 para. 28]. Therefore, it is
clearly using security for costs as a weapon to interfere with CLAIMANTS’s access to
justice.
65 Therefore, it would not be fair to grant security for costs in the present case.
66 CONCLUSION: Neither the Parties nor the CAM/CCBC Rules confer the power to order
security for costs on the TRIBUNAL. In any case, RESPONDENT has failed to provide
sufficient evidence for an order for security for costs. Rather, security for costs would unduly
restrict CLAIMANTS’s access to justice. Therefore, the TRIBUNAL should not grant the
RfS.
Admissibility of claims
67 Section 21 of the DSA states that “each party has the right to initiate arbitration proceedings
within 60 days after the failure of the negotiation” [CE2, p. 11; emphasis added]. The
negotiations were declared to be failed on 1 April 2016 [RE3, p. 29]. According to
Art 6.6 CAM/CCBC Rules, CLAIMANT timely submitted its RfA enclosing a notice of
arbitration on 31 May 2016. It attached a PoA as well as proof of payment of the Registration
Fee. However, the PoA was signed by and on behalf of CLAIMANTS’s parent company and
the Registration Fee was only paid partially due to a mistake in the Secretariat. Notified of
this by the CAM/CCBC, CLAIMANT immediately amended its RfA on 7 June 2016.
68 The TRIBUNAL should admit CLAIMANTS’s claims. They were submitted within the
contractual 60 days time limit (I.). Alternatively, RESPONDENT is prevented from relying
on CLAIMANTS’S mistakes (II.).
I. CLAIMANTS’s claims were submitted in time
69 The Parties agreed that a party must “initiate” arbitration proceedings to comply with the time
limit. However, they did not expressly determine what is required for successful initiation.
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70 RESPONDENT seems to be of the opinion that the Parties referred to the rules on
“commencement” according to Art. 4 CAM/CCBC Rules and that CLAIMANT failed to
commence the proceedings under these rules [cf. AtR, p. 25 para. 12].
71 To the contrary, CLAIMANT will establish that the Parties exercised their autonomy to
determine that a notice of arbitration is sufficient to initiate proceedings (1.). Alternatively,
the rules on commencement under Art. 4 were satisfied (2.).
1. The notice of arbitration is sufficient for initiation by the PARTIES’ agreement
72 Notwithstanding the rules on commencement under Art. 4 CAM/CCBC, the Parties were free
to establish differing rules on “initiation” in regard to complying with the time limit.
73 In general, where parties agree on contractual time limits as part of their autonomy, they must
also be able to determine what is sufficient to fulfil them [cf. Lew/Mistelis/Kröll para. 20 -
26]. This is also supported by Art. 1.2 CAM/CCBC, allowing parties to deviate from the
CAM/CCBC Rules.
74 The DSA is a commercial contract. Therefore, the general assumption must be that the Parties
intentionally and carefully chose their wording, Thus, the use of two different words speaks
against an interpretation in which Section 21 simply refers to Art. 4. According to the Oxford
Dictionary, the meaning of “initiate” is “to cause s.th. to begin”. On the other hand, the
meaning of “commence” is “to begin s.th.”. Initiation is therefore before commencement; the
Parties only required the initiating party to take the first step to commencing the arbitration.
75 The purpose of a time limit is to promote legal certainty [Lew/Mistelis/Kröll, p. 506 para. 20-
10; Mustill/Boyd, p. 201]. According to the principle of equality, both Parties must benefit
from this legal certainty. CLAIMANT must therefore be in a position to know whether it has
complied with the time limit. Furthermore, the time limit must not be practically shortened to
less than the 60 days agreed on by high barriers of complying with it. Therefore, and for
fairness reasons, the requirements for complying with the time limit must be low. Because
legal certainty is already provided by an unequivocal intent expressed by the initiating party
that it wants the CAM/CCBC to commence arbitration proceedings, such expression of intent
is sufficient.
76 CLAIMANT expressed its intent to request the CAM/CCBC to commence proceedings twice,
when it informed RESPONDENT about the initiation of proceedings on 1 April as well as
submitted the very detailed RfA on 31 May, both within the time limit [cf. p. 2 et seq, 29].
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2. Alternatively, the requirements for commencement according to Art. 4 were
satisfied in a timely manner
77 Even if the TRIBUNAL should find that “initiate arbitration proceedings”, means initiation
in terms of Art. 4, CLAIMANTS’s RfA was sufficient to effect commencement and therefore
complies with the time limit.
78 The question is whether the requirements for commencement under Art. 4 were satisfied in a
timely manner. RESPONDENT objects, claiming that the RfA submitted on 31 May 2016 did
not comply with the requirements of Art. 4.1 and 4.2 because “neither had CLAIMANT paid
the Registration Fee in full nor had it submitted a power of attorney for the arbitration.”
Instead, they were allegedly only satisfied on 7 June 2016, when the amendments to the RfA
were made [AtR, p. 25 para. 12]. However, as CLAIMANT will show, the PoA and
Registration Fee need not be submitted to effect commencement under Art. 4. Instead, the
notice of arbitration is sufficient (a.). Alternatively, the PoA submitted by CLAIMANT and
the amount of the fee paid satisfy the requirements of Art. 4 (b.). Alternatively, the
amendments to the RfA on 7 June 2016 do not lead to commencement on that date, but rather
unfold retroactive effect. Therefore, they suffice for in time commencement (c.).
a. The notice of arbitration in itself is sufficient for commencement
79 Article 4 does not establish consequences of a failure to attach the correct PoA and proof of
payment of the full fee. Therefore, the issue at hand is whether failure to submit these
documents leads to suspension of commencement. By the systematical context , which shows
that the notice is at the core of commencement, (aa.), by the purpose of the relevant
documents (bb.) and the principle of efficiency, (cc.), the provisions on these documents are
mere directory ones, not leading to suspension of commencement.
The systematical context shows that the notice is the centrepiece of the RfA
80 The Rules clearly distinguish between the notice for commencement of arbitration itself and
the attachments to it, such as the Power of Attorney (cf. Art. 4.1) or proof of payment (cf. Art.
4.2.). When further considering the systematical context of the CAM/CCBC Rules it becomes
apparent that only the notice for commencement of arbitration has substantial legal relevance,
but not the attachments. This applies in particular with regard to matters of time: For instance,
Art. 12.5 refers to the “time of presentation of the notice for commencement of arbitration”
[emphasis added]. The same holds true for the Administrative Fee under Art 12.2, which is
“required from the date the notice” is filed.
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15
81 In conclusion, the same must apply matter of time of commencement. Taking the
explanations above into account, the attached PoA and the proof of payment are irrelevant for
the subject-matter of commencement of arbitration proceedings.
The purpose of the RfA was served by CLAIMANTS’s notice in itself
82 Any legal proceedings should be commenced through a written notice identifying the party
against which the claim is directed, the basis of claim, and the relief sought
[Turner/Mohtashami, p. 28 para. 3.02; Waincymer, p. 217 para. 4.1.1].
83 The detailed notice submitted by CLAIMANT on 31 May 2016 [pp. 2 – 7] identified the DSA
as the basis for the claims and the relief sought [RfA, p. 7] and provided the facts to the case.
The principle of efficiency demands a substance over form approach
84 In interpreting the rules on commencement pursuing to the CAM/CCBC Rules, it is sensible
to analyse other arbitration rules. For instance, in a comparison to the LCIA Rules, it becomes
clear that failure to pay the Registration Fee does not lead to a stay of commencement under
the CAM/CCBC Rules. Art 1.1(vi) LCIA Rules explicitly deals with the consequences of
such a failure and provides that it leads to suspension of commencement. In contrast, the
CAM/CCBC Rules do not provide for such an effect of failure to comply with Art 4.2.
Therefore, it must be assumed that such a consequence of failure to submit certain documents
was not intended under the CAM/CCBC Rules.
85 Furthermore, Art. 4(4) ICC Rules has been deliberately drafted so as to make it clear that the
copies and payment required are not part of the request [ICC Case No. 6784, pp. 54-55;
Derains/Schwartz, p. 55]. The general practice is that as long as the other side has been
informed about the initiation of a claim, non-fulfilment of additional requirements will not
prevent the valid commencement of an arbitration [Fouchard/Gaillard/Goldman, para. 1215].
This is consistent with the wish to “save” the request and the arbitration whenever reasonably
possible [Derains/Schwartz, p. 52] to promote efficiency as a fundamental principle of
arbitration [cf. BGE (CH 1982), p. 201; Fortier, p. 69].
86 The general principle of promoting an efficient arbitration process can be drawn from these
comparisons. In exercising it, “technical” failures shall not hinder commencement of the
proceedings. Rather, a “substance over form approach” [Waincymer, p. 2204 para. 4.2.7] is
necessary, because an arbitration should not be caught up in technical debates.
Conclusion
87 In conclusion, Art. 4 must be interpreted in a way that promotes the efficiency of the process.
Therefore and in having regard to the systematical context of the rules on commencement, the
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notice in itself as submitted on 31 May 2016 is sufficient for commencement, and therefore
initiation under Section 21 DSA.
b. Alternatively, the PoA submitted and the amount of the fee paid on 31 May 2016 satisfy
the requirements of Art. 4
88 Alternatively, CLAIMANT will establish that Art. 4’s requirements in regard to both the PoA
(aa.) as well as the Registration Fee (bb.) were satisfied by the submissions on 31 May 2016.
The PoA sufficiently provided for adequate representation
89 The authorization for Mr Fasttrack to act on behalf of the HOLDING shown in the PoA is
also sufficient to show adequate representation in regard to CLAIMANT.
90 Art 4.1(b) CAM/CCBC states that the initiating party shall submit a PoA providing for
adequate representation. Therefore, the question at hand is what “adequate” representation
requires and whether those requirements were satisfied by CLAIMANTS’s submission on
31 May 2016.
91 It is sensible to assume that multiple entities form a single economic unit, even if in law that
economic unit consists of several legal persons [cf. EGC (2009), para. 55]. This may be
assumed where the parent company holds a large portion of the shares of the subsidiary and
the subsidiary does not decide independently upon its own conduct on the market [ECJ
(2012), para. 43 et seq.]. Such an approach acknowledges the economic reality.
92 The HOLDING’s purpose is to control CLAIMANT. It is an 88 % owner of CLAIMANT. All
important decisions, i.e. those that go beyond the day to day business, are taken at the level of
the HOLDING [p. 20; PO2 para. 2]. Its name further evidences its sole purpose of controlling
CLAIMANT. They are one designated economic unit. Therefore, a maiore ad minus, the
power to speak on behalf of the parent company includes the power to speak on behalf of the
subsidiary.
93 Additionally, RESPONDENT, the Arbitrators and the CAM/CCBC knew about the internal
structure of CLAIMANT and the HOLDING from the notice of arbitration [p. 3 para. 2].
94 Therefore, the PoA provided for adequate representation.
Partial payment is sufficient for commencement
95 Even though the Registration Fee was only paid partially, CLAIMANT satisfied the purpose
of it.
96 This purpose is to prove a willingness to pay for the procedure, both preventing claims that
lack any factual or legal basis [see above, para. 32] and ensuring that the CAM/CCBC’s
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expenses will be reimbursed [cf. Bühler/Webster, para. 4-55, 30-7]. Thereby, it makes sure
that the arbitral system is not abused.
97 CLAIMANT proved its willingness to pay. The partial payment was an obvious mistake.
Therefore, it satisfied the underlying goal of Art. 4.2 CAM/CCBC Rules.
c. Alternatively, the amendments of 7 June 2016 unfold retroactive effect
98 The President of the CAM/CCBC indicated the mistakes to CLAIMANT, setting a time limit
for CLAIMANT to amend the RfA within 10 days [p. 19 para. 3]. CLAIMANT immediately
corrected them on 7 June 2016. Following the fundamental principle of efficiency of the
arbitration process, this correction unfolds retroactive effect and therefore suffices for in time
commencement of the proceedings.
99 An arbitration should not be caught up in technical debates about sufficiency. In considering
the effect of partial non-compliance of requirements for commencement, the policy test
should be whether the respondent is prejudiced “other than through losing the right to
succeed on technical arguments” [cf. ICC Case No. 6228, p. 54;
Fouchard/Gaillard/Goldman, p. 656]. This is consistent with the wish to “save” the request
and the arbitration whenever reasonably possible [Derains/Schwartz, p. 52] to promote
efficiency of the arbitration process.
100 Under the ICC Rules the general practice is that missing parts can be remedied at a later stage
[Lew/Mistelis/Kröll, para. 20-48]. Additionally, the DIS Rules in Section 7.2 and 6.4, the
Swiss Rules in Art 3.5, the SCC in Art 3(2), and the HKIAC in Art 4.7 all allow amendments
and supplementation by means of a time limit set by the institution. If the claimant complies
with such directions within the applicable time limit, the amendments unfold retroactive
effect [see, e.g., Swiss Rules 2012 Art 3.5].
101 Article 6.4 CAM/CCBC Rules shows the wide discretion given to the TRIBUNAL in
extending time limits. While Art 6.4 only refers to such time limits “provided in these rules”,
a basic principle can be drawn from it. Furthermore, Art 4.5 gives the President of the
CAM/CCBC considerable power in matters regarding the arbitration agreement before the
arbitral tribunal is constituted. Consequently, Art 6.4 and 4.5 must be interpreted in a way
similar to the provisions of those arbitration rules quoted above. This view is apparently also
that of the CAM/CCBC itself, when it gave CLAIMANT an opportunity to amend its original
request on 1 June 2016 [p. 19] referring to CLAIMANTS’s submissions from 31 May 2016 as
the “original” request, which was merely “amended” [pp. 19, 40] or “supplemented” [p. 22]
on 7 June 2016.
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102 In conclusion, the correction of the mistakes on 7 June 2016 unfolds retroactive effect.
Therefore, the in time commencement suffices to comply with the time limit of s21 DSA.
II. Alternatively, RESPONDENT is prevented from relying on the time limit
103 Pursuant to the DSA, which stresses the importance of “good faith” in conducting
negotiations if disputes arise [cf. CE2 p. 10 s4(3), p. 11 s21], the circumstances of the present
case prevent RESPONDENT from relying on CLAIMANTS’s mistakes. RESPONDENT is
using CLAIMANTS’s mistakes as a technical argument to stifle legitimate claims. Thereby, it
deprives CLAIMANT of its fundamental rights to be heard and access to justice [see above,
para. 60]. CLAIMANT sufficiently expressed its unequivocal intent to initiate arbitration by
informing RESPONDENT of this intent on 1 April 2016. Lastly, RESPONDENT has not
suffered any disadvantages from the formal mistakes made by CLAIMANT.
104 Even where the applicant is at fault, when considering the consequences of a failure to meet
time limits, a tribunal should accept certain breaches as there will be little adverse
consequences for the other party or for the sanctity of the proceedings as a whole
[cf. CA (EN 1967), p. 307]. Examples would be very short delays in filing of submissions
[Waincymer p. 420 para. 6.3.2].
105 RESPONDENT is merely using the time limit as a technical argument. It never substantially
relied on the legal certainty provided by it. Not CLAIMANT, but the CAM/CCBC is
responsible for forwarding the RfA to RESPONDENT. However, there is no stipulated time
period in which the CAM/CCBC is obliged to forward the RfA. Therefore, even if
CLAIMANT had submitted all documents on 31 May 2016, RESPONDENT could not have
been sure whether it was now able to rely on a belief that it will not be subject of proceedings
because of the effect of the time limit. Rather, it was equally likely that proceedings were
timely initiated and the CAM/CCBC merely had not forwarded the RfA yet. Thus,
RESPONDENT until 8 June 2016 did not have a legally safeguarded belief in not being the
subject of proceedings. This is in particular true because RESPONDENT was informed by
CLAIMANT about its intent to initiate proceedings [RE3, p. 29] on 1 April 2016.
106 Likewise, the Registration Fee protects the interests of the CAM/CCBC, not those of
RESPONDENT.
107 Lastly, it has been held that a deliberate disregard of a limitation provision constitutes a more
serious fault than a negligent failure to observe such a provision. The facts of the case might
mitigate the fault in permitting the limitation period to expire [QB (EN 1987), p. 252].
CLAIMANTS’s failure consists of a misunderstanding and an obvious mistake and was
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19
therefore only negligent: It’s fault was not that if failed to acknowledge the time limit or that
it failed to comply with the requirements in general. Rather, its submission of the documents
merely contained formal mistakes. Additionally, this only led to a very short delay, if any.
CLAIMANT has shown that it was willing to satisfy all requirements. Even more so, it fixed
its possible mistakes as soon as possible.
108 For these reasons, RESPONDENT must be prevented from relying on CLAIMANTS’s
failure.
CONCLUSION: The TRIBUNAL should admit CLAIMANTS’s claims. They were
submitted within the contractual 60 day time limit and RESPONDENT is prevented from
relying on CLAIMANTS’s mistakes in any case.
Outstanding payments
109 For producing and delivering the fan blades, CLAIMANT is entitled to the purchase price of
US$ 22,723,800 pursuant to Section 4.1 DSA in connection with Art. 62, 53, 54 CISG.
However, CLAIMANT so far only received US$ 20,336,367,20 since RESPONDENT
unlawfully transferred a lower amount and tries to avoid its liability for the bank charges in
terms of Section 4.3 DSA.
110 Therefore CLAIMANT is entitled to additional payment from RESPONDENT in the amount
of US$ 2,285,240.00 for the fan blades (I.) and US$ 102,192.80 for the bank charges (II.).
I. CLAIMANT is entitled to additional payment from RESPONDENT in the amount
of US$ 2,285,240.00 for the fan blades
111 RESPONDENT is obliged to additionally pay US$ 2,285,240.00 to CLAIMANT under
Section 4.1 DSA in connection with Art. 62, 53, 54 CISG.
112 The parties did not agree on a fixed purchase price for the fan blades, but on a production cost
based price formula [CE 2, p. 10; CE 1, p. 8], i.e. the purchase price calculation in a first step
requires the calculation of the production costs. In this respect the problem of this case arises.
Due to RESPONDENT’s insistence, the purchase price is in US$, however, since
CLAIMANT produces in Equatoriana, its production costs are in EQD [RfA, p. 4 para. 5].
Due to this difference in currencies – which is solely caused by RESPONDENT – the
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production costs need to be converted from EQD into US$, which eventually led to the
current dispute about the applicable exchange rate.
113 RESPONDENT tries to take advantage of these circumstances. After the price in the fan
blade invoice had been mistakenly based on the fixed exchange rate for the clamps [RfA, p. 5
para(s). 10,13; CE 4, p. 13], RESPONDENT refused to pay the outstanding amount as
requested by CLAIMANT only one day later and alleged that the fixed exchange rate also
applies to the fan blades [CE7, p 17].
114 However, this allegation lacks any substance. The interpretation of the DSA clearly leads to
the conclusion that the current exchange rate applies (1.). The same pertains under the
applicable law (2.). Furthermore, Art. 4.1 DSA is not subject to the fixed exchange rate (3.).
1. The current exchange rate applies by contractual interpretation according to
Art. 8 and 9 CISG
115 The contract does not explicitly state, which exchange rate applies to the conversion of the
production costs from EQD to US$ [cf. CE 2, p. 10]. Therefore the applicable exchange rate
has to be determined by interpretation of the DSA and in particular Sec. 4.1. In this respect
Art. 8 and 8 CISG apply [HO Helsinki (FI 2004); Secretariat's Commentary, Art. 7 para. 2;
UNICITRAL Digest, Art. 8 para. 3; Enderlein/Maskow, Art. 8 para. 2.3; Staudinger-Magnus.,
Art. 8 para. 7; Ferrari, IHR 2003], according to which due consideration has to be given to
all relevant circumstances of the case, including the negotiations, any practices which the
parties have established between themselves, usages and any subsequent conduct of the
parties.
116 As CLAIMANT will show, the consideration of all relevant circumstances leads to the
conclusion that the current exchange rate applies (a). In addition, the parties are not bound by
any practices between them in terms of Art. 9. (1) CISG, which could refute this result (b).
a. Considering the relevant circumstances
117 The structure and the rationale of the DSA require a conversion of the production costs and
the final payment of the purchase price at the same, i.e. the current, exchange rate (aa.). The
parties are also bound by the usage of risk-sharing in the aircraft industry which also implies
the application of the same exchange rate for the conversion of the production costs and the
conversion of the payment of the purchase price (bb.). Furthermore, the agreement between
the parties to eliminate any currency risk for RESPONDENT in contracts between them is no
longer applicable (cc.). Consequently, taking into account the intent of the parties, the
Bucerius Law School - Memorandum for Claimant
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principle of risk-sharing in the aircraft industry and the fact that the agreement of the parties
to de-risk RESPONDENT is no longer applicable, the current exchange rate applies (dd.).
On the structure and the rationale of the contract
118 Since RESPONDENT wanted to make a binding purchase offer for the new fan blades to
Earhart [RfA, p. 4 para. 5], the Parties faced the problem that they had to agree on a purchase
price although the final production costs for the fan blades were not yet known.
119 Considering this uncertainty of development and production costs for the fan blades, the
Parties agreed on a fair allocation of the associated production cost risks, by agreeing on a
minimum and a maximum price, which should ensure that no Party makes losses. The
cooperation was based on respect for the other party’s respective interests and on the
objective to jointly develop the new fan blades.
120 It stands to reason that the same principle applies to the exchange rate risk. However, this
requires that the production costs and the payment of the purchase price are converted at the
same current exchange rate (i.), in particular, when considering the unusual circumstances of
this case (ii.).
i. Fair risk allocation requires the application of the current exchange rate
121 Similar to the production costs, the exchange rate at the time of payment was not known to
the parties at the time of the contract conclusion. With regard
122 The purchase price based on CLAIMANTS’s productions costs occurring in EQD which were
not yet known when negotiating the DSA. With decreasing production costs an increasing
percentage of profit is added to the final purchase price. However, as the final price is stated
and paid by RESPONDENT in US$ CLAIMANT has to convert the costs occurred in EQD
into US$ to be able to indicate the price in US$. Vice versa the paid purchase price in US$
needs to be converted into EQD to reimburse the production costs at their full amount in
CLAIMANTS’s home currency.
123 According to Section 4.1 DSA [CE 2, p. 10] CLAIMANT has the right to cover its production
costs and to realize a certain percentage of profit. This right can only be fulfilled when the
production costs as incurred in EQD are covered by the paid purchase price [RfA, p. 4 para. 5;
RfA, p. 7 para. 21], as illustrated below.
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124 As explained the intended cost coverage and profit realization can only be reassured when the
production costs and the final payment are converted using the same exchange rate.
ii. The unusual circumstances require the application of the current exchange rate
125 In an international sale of goods when a party concedes to set the purchase price in a foreign
currency it agrees to take the full currency risk. Taking the currency risk means to bear the
probability that the exchange rate fluctuates negatively between the time of the conclusion of
the contract and the date of the payment. In the present case the Parties agreed to set the
purchase price in US$, the currency of RESPONDENT [CE 1 p. 8]. In conclusion,
CLAIMANT which accepts the foreign currency bears the currency risk.
126 However, the agreement at hand is not comparable to the usual fixed price agreement, where
the conceding party only has to bear the currency risk of one conversion. However, since the
pParties agreed to a flexible price formula based on variable production costs according to
Section 4.1 DSA [CE 2, p. 10] CLAIMANT has to convert its production costs from EQD
into US$ as well as the final payment of the purchase price made in US$ respectively. Hence,
CLAIMANT theoretically has to bear the currency risk twice.
127 This unfair risk distribution was not contractually intended by the parties in the DSA, as
neither of them should suffer losses [cf. para 119]. Where the maximum price enabled
RESPONDENT to already bindingly sell the new fan blades to Earhart [RfA, p. 4 para. 5] the
minimum price should ensure cost coverage on behalf of the CLAIMANT. However this
objective would not be reached, if CLAIMANT would have to bear two exchange rate risks,
since the exchange rate could fluctuate between the conversion of the production costs and the
conversion of the final payment [see illustration, para. 123].
128 Hence, the contract must be interpreted in the light of the Parties’ intention to share all
existing risks [CE 1. P. 8; RfA, p. 4 para. 5]. Therefore the production costs and the payment
Bucerius Law School - Memorandum for Claimant
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of the purchase price need to be converted at the same exchange rate. i.e. the current exchange
rate.
On the usage of risk sharing in the aircraft industry
129 When interpreting the contract according to Art. 8 and 9 CISG practices established between
the parties and usages need to be considered [District Court Pennsylvania (US 2010); OLG
(DE 2009); Schlechtriem/Schwenzer-Schmidt-Kessel Art. 9 para. 1]. According to Art. 9 (1)
Alt. 1 CISG the parties are bound to any usage they agreed on. A usage is a business custom
which has been established amongst merchants in one specific sector [Ferrari-Sänger Art. 9
para. 2].
130 In the aircraft industry joint development of parts with a certain type of risk sharing are
normal and well established [RfA, p. 6 para .21]. Since their first contract in 2003 the Parties
distribute the risk in their business transactions equally amongst themselves. Also in the
present case they used a price clause which is in its structure largely identical to those used in
the contracts before [PO2, p. 54 para 5]. By using a comparable price structure, the parties
showed that they are willing to adopt and be bound by the usage of risk sharing in the aircraft
industry. Consequently, in order to reassure a fair distribution of risk the exchange rate at the
time when payment was due should be applied.
The de-risking guideline of EI is not applicable
131 RESPONDENT wrongly alleges that it was CLAIMANTS duty to bear all the currency risks
in the DSA based on the guideline of the former parent company of 2009 to de-risk
RESPONDENT [ASC, p. 24 para. 9]. However, this guideline is no longer applicable since
both parties were in completely different settings at the relevant time of contract conclusion.
132 CLAIMANT was sold to the HOLDING in July 2010. This means that CLAIMANT was no
longer a subsidiary of Engineering International SA at the time of conclusion of the contract
[PO 2, p.54 para.1]. Furthermore, the sale of RESPONDENT to SpeedRun was already
apparent and concluded only 2 days later [PO 2, p.54 para.1].
133 As a consequence, both Parties, but at least CLAIMANT was not bound to this guideline at
the time of the contract conclusion, and de-risking RESPONDENT was of no interest at all
for CLAIMANT. Hence, the internal guidelines of Engineering International SA are
irrelevant for the interpretation of the DSA.
Conclusion
134 Taking into account the intent of the Parties and the principle of risk-sharing in the aircraft
industry the production costs and the final payment have to be converted at the same
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exchange rate. The applicable exchange rate of the final payment undoubtedly is the current
exchange rate as of the day when the payment was effected [CE 4 p. 13]. Consequently this
exchange rate must also be applied to the conversion of the production costs. As a result the
exchange rate of US$ 1=1.79 EQD is applicable.
b. No principle in terms of Art. 9. (1) CISG refutes this result
135 RESPONDENT argues that the parties are bound by practices established between them
through earlier contracts according to Art. 9 (1) CISG [ASC, p. 24 para. 8, 9]. Previously the
Parties only contracted in 2003 and 2005 [PO2, , p. 54 para. 5]. Both times the exchange rate
at the time of contracting had been used for the conversion of the cost elements [ASC, p. 24
para. 8]. However this has no relevance for the case at hand. The criteria for establishing a
practice has not been met (aa.). In addition, the Parties’ conduct shows that they did not
intend to rely on any previous agreements (bb.) and the corporation framework changed (cc.).
There is no practice established between the parties
136 A practice is defined as a conduct established between the parties for the fulfilment of their
respective obligations [OGH (AT 2005); Kröll-Viscasillas, Art. 9 para. 8] which was
incorporated at least three to four times [AG Duisburg (DE 2000); Kröll-Viscasillas, Art. 9
para. 11]. So far the Parties only had to convert cost elements twice, so this criteria is not met.
The parties conduct indicates that there is no such practice
137 RESPONDENT argues that according to this allegedly established practice the exchange rate
at the time of contracting should be used. In the instant case this would be US$ 1 = 2 EQD
[PO2, p. 56 para. 12]. However RESPONDENT itself claims that a rate of
US$ 1 = 2.01 EQD applies [CE 7, p. 18]. This contradicting behaviour of RESPONDENT
already shows that itself did not want to rely on this allegedly established practice.
Alternatively, a possibly established practice would not be applicable to the current
setting of the parties
138 Even if the contracts of 2003 and 2005 would have established a practice between
CLAIMANT and RESPONDENT the practice would not be in the instant case since the
parties are now in a completely different corporation setting, as explained in para. 132 above.
2. Alternatively, the current exchange rate applies under the applicable law
139 If the TRIBUNAL should find, however, that the exchange rate cannot be determined by
means of contractual interpretation, the current exchange rate applies under the applicable
law.
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140 When assuming that the contract does not regulate the applicable exchange rate for the
production cost the ascertainment of the intent of the parties according to Art. 8 CISG can
lead to the conclusion that the parties wished to refer to the price formula set out in Art. 55
CISG [ICC France (1995); LG (DE 2005); Kröll-Butler/Harindranath Art. 55 para. 3].
However, CLAIMANT will show that none of the mechanisms stated in Art. 55 can be
applied (a) and that this gap can only be closed by applying the PICC leading to the
conclusion that the current exchange rate applies (b).
a. Art. 55 CISG does not provide any suitable mechanism to determine the price of the fan
blades
141 Art. 55 states that the price generally charged at the time of the conclusion of the contracts for
such goods sold under comparable circumstances in the trade concerned should be applied if
the parties have not expressly or implicitly fixed or made provisions for determining the price.
142 The generally charged price at that time can be determined by analysing the price for the same
goods in a common market under comparable circumstances [KG (CH 2007); Kröll-
Butler/Harindranath Art. 55 para. 7]. The parties agreed to develop a new fan blade for
RESPONDENTS’s next generation of high-spec jet engine which would make the jet engine
quieter than any other available jet engine [RfA, p. 4 para. 3]. Consequently, the produced jet
engines were the first of its type on the market which means that there are no comparable
goods the price could be adapted from. Hence, the criteria set out in Art. 55 CISG cannot be
used to determine a price for the fan blades which are solely produced for RESPONDENT
[Supreme Court (HU 1992); Kröll-Butler/Harindranath Art. 55 para. 8].
143 Furthermore, the issue set out in Art. 55 CISG does not exactly adress the issue at stake. In
the present case the Parties have theoretically agreed on a formula for determining the price.
This formula, however, cannot be applied properly since the Parties disagree on the currency
conversion of the production costs which are the main component of the formula. Hence, the
disagreement of the Parties does not concern the determination of the price but the application
of this determination mechanism. The latter cannot be resolved by Art. 55 CISG.
b. The current exchange rate applies according to Art. 6.1.9 (3) PICC
144 In Section 20 DSA the parties agreed on the application of PICC for issues not dealt with the
CISG [CE 2, p. 10]. Therefore the PICC apply in accordance with Art. 6 CISG and Section 20
DSA [cf. District Court California (US 2010); Schlechtriem/Schwenzer – Ferrari, Art. 6,
para(s). 35-37].
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26
145 Art. 6.1.9 (3) UNIDROIT states that the applicable rate of exchange is that prevailing when
payment is due [ICC Brussels (2000); Economic Court CIS (1998)]. According to Section 4
para. 2 [CE 2, p. 10] payment is due upon the delivery of the fan rate. The exchange rate at
that point of time was the current exchange rate, e.g. US$ 1 = 1.79 EQD [CE 4, p. 13]. Even
though Art. 6.1.9 (3) UNIDROIT does not explicitly deal with the conversion of production
costs it stipulates the general and rational principle that the current exchange rate should apply
in absence of other contractual agreements. The rationale behind this approach is clear: The
seller shall receive an amount of money which approaches the coverage of the occurred cost
the most [AC (UA 2010)].
As a result, the exchange rate of US$ 1 = 1.79 EQD should be applied.
3. The Addendum did not change the applicable exchange rate
146 On 26 October 2010 the parties signed an addendum to the DSA to regulate the purchase of
200 additional clamps at a cost coverage basis and a fixed exchange rate of
US$ 1 = 2.01 EQD [CE 2, p. 11]. In RESPONDENTS’s opinion, the addendum did not only
regulate the purchase of the clamps but also fixed the exchange rate for the whole DSA
according to Art. 29 (1) CISG. As the party relying on the modifying agreement,
RESPONDENT must prove the modification [AG (CH 2008); Schlechtriem/Schwenzer-
Schroeter, Art. 29, para. 33]. However, RESPONDENT is lacking of any proof.
147 No amendment of the DSA itself was intended. The purchase of the clamps constituted a
completely independent business transaction from the purchase of the fan blades. The form of
an addendum was only chosen by the parties for convenience reasons. RESPONDENT did
not plan to buy the clamps from CLAIMANT but from another producer. When it became
clear that those clamps were not suitable and that RESPONDENT would have to buy the
clamps from CLAIMANT, the DSA was already signed [RfA, p. 5 para. 8]. The form of an
addendum contained a convenient opportunity to avoid the efforts of setting up an additional
contract solely to regulate the purchase of the clamps since delivery of fan blades and clamps
should be done together[PO2, p. 57 para. 16].
148 In the light of all relevant circumstances in terms of Art. 8 CISG [cf. para 115], the addendum
did not change the DSA according to Art. 29 (1) CISG (a). If the Tribunal finds that the
meaning of the addendum remains ambiguous despite interpretation in accordance of Art. 8
CISG also according to the applicable contra-preferentum-rule the addendum does not change
the exchange rate (b).
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a. No modification according to Art. 29 (1) CISG
149 RESPONDENT falsely states that the applicable exchange rate was meant to be valid for the
whole DSA. However, this statement is clearly refuted by all relevant circumstances, i.e. the
wording of the addendum, the previous negotiations and the subsequent conduct of the
Parties. The addendum explicitly distinguishes between the agreement and the main
Agreement. The addendum says “The exchange rate for the agreement is fixed to US$ 1 =
2.01 EQD”. Further it states “other term as per main Agreement” [CE 2, p. 11]. The
capitalized “A” of the wording “main Agreement” shows that the two sentences referred to
two different agreements: namely the agreement on the clamps and the agreement on the fan
blades. Hence, the wording objectively states that the application of the fixed exchange rate is
restricted to the addendum.
150 The negotiations of the addendum started on the 22 October 2010 when Paul Romario
contacted Amelia Beinhorn via email suggesting the wording of the addendum. The email
was titled with the subject “Clamps” [RE 2, p. 28]. Amelia Beinhorn replied to this email on
the 24 October 2010 also using the subject “Clamps” and explicitly agreeing on linking the
agreement in form of the addendum in regard to the clamps to the DSA [RE 4, p. 30: CE 9,
p. 51]. The email subject used by RESPONDENT and the choice of words and the subject of
the reply by CLAIMANT show that addendum was only meant to amend the DSA in regard
to the purchase of the clamps. In line with Art. 8 (1) CISG the conduct of both parties prove
that the parties never had the intention to apply the fixed exchange rate to the DSA but that
the sole meaning of the addendum was to regulate the purchase of the clamp.
151 This choice of words and the subject of the email “Clamps” make clear that all the
information stated in the emails and in the addendum was only related to the purchase of the
clamps. Also, CLAIMANT wants to emphasize that the negotiations concerning the
development and production of the fan blade and the purchase of the clamps were held
separately. This fact is also illustrated by the form of the addendum since the addendum was
added in handwriting to the already existing DSA. There is no circumstance which could
effectively link the negotiations of the DSA to the negotiations of the addendum.
152 The independence of the DSA and the addendum is also indicated by the fact that
CLAIMANT issued two separate bills for the fan blades and the purchase of the clamps
[CE 4, p. 13].
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28
b. Alternatively, RESPONDENT has to bear the risk of unclear wording
153 However, if the Tribunal finds that the meaning of the addendum remains ambiguous despite
interpretation in accordance of Art. 8 CISG the contra-preferentum rule is applicable [CISG
Advisory Council Opinion No. 13]. The concept of contra preferentum states that if a contract
term introduced by one party is unclear, an interpretation against that party shall be adopted
[OLG (DE 2008); CIETAC (2000); Schlechtriem/Schwenzer-Schmidt-Kessel, Art. 8 para. 47;
Staudinger-Magnus, Art 8 para. 18].
154 On 22 October 2015 RESPONDENT has suggested the wording of the addendum to
CLAIMANT [RE 2, p. 28]. Taking into account the wording and the negotiation concerning
the agreement it is clear for CLAIMANT that the addendum is only applicable to the purchase
of clamps. Consequently, this interpretation favourable to CLAIMANT should be valid.
CONCLUSION: CLAIMANT is entitled to receive additional payment from
RESPONDENT in the amount of US$ 2,387,432.80 based on the current exchange rate,
which is applicable according to the DSA and the applicable law. This is not refuted by the
additional agreement on the clamps.
II. CLAIMANT is entitled to additional payment in the amount of US$ 102,192.80 for
the levy deduced by the Equatoriana ECB
155 Section 4.3 DSA [CE 2, p. 10] states that RESPONDENT shall deposit the purchase price in
full into CLAIMANTS’s account at the Equatoriana National Bank and that “any bank
charges for the transfer of the amount are to be borne by the BUYER”, hence
RESPONDENT.
156 On 15 January 2015 RESPONDENT contributed to its obligation according to Section 4.3
DSA [CE 2, p. 10] and effected the partial payment of US$ 20,438,560 to CLAIMANTS’s
account [CE 3, p. 12]. However, RESPONDENT did not fulfil its contractual duty to bear the
bank charges as stated in Section 4.3 DSA [CE 2, p. 10]. As with all payments exceeding
US$ 2 million, the Financial Investigation Unit of the Equatoriana ECB investigated the
payment in regard to money laundering (Section 5 Regulation ML/2010C). To compensate
the efforts of the Financial Investigation Unit for the investigation a 0.5% levy was subtracted
as from every investigated sum of money according to Section 12 Regulation ML/2010C
[CE 8 p. 17]. Consequently, only US$ 20,336,367,20 was credited to CLAIMANTS’s account
[RfA, p. 6, para. 15; CE 6, p. 15]. This contradicts the clear wording of Section 4.3 DSA
Bucerius Law School - Memorandum for Claimant
29
which imposes the coverage of any possible bank charges on RESPONDENT. In order to
ensure compensation, CLAIMANT is therefore entitled to additional payment for the levy in
the amount of US$ 102,192.80 under Section 4.3 DSA and Art. 54, 57 CISG (1.). Art. 35
CISG does not exempt CLAIMANT from its contractual and statutory obligations to pay the
occurred bank levy.
1. CLAIMANT is entitled to additional payment under Section 4.3 DSA and
Art. 54, 57 CISG
157 In Section 4.3 DSA [CE 2, p. 10] the parties agreed that the bank charges for the transfer of
the money are to be borne by buyer (a). The same applies according to Art. 54, 57 CISG (b).
a. In Section 4.3 DSA the parties agreed that the bank charges are to be borne by BUYER
158 The wording of this clause clearly imposes the coverage of the levy on RESPONDENT (aa).
Further, when interpreting this clause to the CLAIMANTS’s intent (Art. 8, 9 CISG) it
becomes obvious that Section 4.3 DSA [CE 2, p. 10] also imposes the levy on
RESPONDENT (bb). There are no usages or practices between the parties which could refute
this obvious interpretation according to Art. 9 CISG (cc).
The wording of DSA imposes the coverage of the levy on RESPONDENT
159 According to the Section 4.3 DSA [CE 2, p. 10] the bank charges for the transfer of the
amount are to be borne by the BUYER. A bank charge is defined as “A fee charged by an
institution. It can be for many reasons.” [Black’s law dictionary]. Under the new regime as
part of a package by which the Equatorianian government tries to improve the bad reputation
of Equatoriana as a safe haven for money of dubious origin [PO 2, p. 55, para. 7] all
payments into Equatoriana are routed via the Equatoriana ECB. Whenever the amount
transferred exceeds US$ 2 million the Financial Intelligence Unit as a subdivision of the
Equatoriana ECB will examine and investigate the transfer. Only after clearance of the
Financial Intelligence Unit the amount will be credited to the relevant bank account [PO 2,
p. 56, para. 10], after the investigaton the Financial Investigation Unit subtracts a 0.5% levy
from every sum investigated under Section 12 Regulation ML/2010C [CE 8, p. 17]. There is
no evidence why a charge due to the money laundering investigations deduced by the
transferring ECB [PO 2, p. 56, para. 10], should not be “a fee charged by an institution”.
Therefore, according to the wording of Section 4.3 DSA [CE 2, p. 10] RESPONDENT needs
to pay the levy of US$ 102,192.80.
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30
Section 4.3 DSA was meant to regulate bank charges as occurred with the levy
160 Before ML/2010C entered into force on 1 January 2010 there had been considerable press
coverage in the Equatorianian press in December 2009 that the government was establishing a
Financial Intelligence Unit under the auspices of Equatoriana ECB with considerable
investigation powers. It was further reported about considerable criticism concering the cost
allocation for such examinations noting that private parties had to pay a fee for such types of
investigations and clearances [PO 2, p. 55, para. 7]. When negotiating the Development and
Sales Agreement CLAIMANT was aware of the press reports from December 2009 [PO 2,
p. 55, para. 8] and clearly intended to impose all cost possibly occurring when transferring
the money to RESPONDENT. Also the newspaper in Mediterraneo reported that the
Equatorianian government took actions against money laundering [PO 2, p. 55, para. 7].
161 According to Art. 8 (2) CISG the interpretation of the contract has to be based on the
understanding of a reasonable person of the same kind in the same circumstances would have
had. In the present case this would be a business person from the same industry and in the
same position as RESPONDENT [Slechtriem/Schwenzer-Schmidt-Kessel Art. 8 § 20]. Every
business person would have researched such newspaper articles when contracting with
business partners from the country the news had been reported from. As contracting partner
RESPONDENT ought to have known about the new costs occurring when transferring money
to Mediterraneo and the intent of CLAIMANT to cover these cost by CLAIMANT (Art. 8
CISG). According to the interpretation of Section 4.3 DSA under Art. 8 CISG,
RESPONDENT has to bear the levy of US$ 102,192.80 charged when RESPONDENT
effected payment.
There are no usages or practices between the parties which could refute this
162 So far there have only been two other cases where CLAIMANT was in the situation that the
bank deduced the levy from the money transferred. In one incident mentioned by
RESPONDENT, the levy charged concerned a payment by JumboFly in December 2011
[PO 2, p. 56, para. 9]. Since the DSA was concluded on 1 August 2010 this incident cannot
be of any relevance when interpreting Section 4.3 DSA according to Art. 9 (1) CISG.
163 The only incident which could be relevant when interpreting the DSA according to Art. 9 (1)
CISG is that CLAIMANT paid the levy in May 2010 when contracting with JetPropulse
[ASC, p. 26, para. 19]. The contract with JetPropulse had been concluded in January 2009 and
did not specifically provide of who should bear the cost for payment. The management of
CLAIMANT decided not to claim an additional amount of money from JetPropulse due to
Bucerius Law School - Memorandum for Claimant
31
two reasons: First, JetPropulse was contrary to RESPONDENT a long-standing customer.
And second, the agreement with JetPropulse was concluded before the regulation ML/2010C
entered into force [PO 2, p. 55, para. 8]. Both of these reasons cannot be applied to
RESPONDENTS’s case.
164 Furthermore, one incident is clearly not enough to establish a practice [AG Duisburg (DE
2000); Schlechtriem/Schwenzer-Schmidt-Kessel Art. 9 para. 8]. Also assuming that a practice
had been established this would be of no relevance to RESPONDENT. The parties are only
bound by practices established between them, as laid out in Art. 9 (1) CISG.
Hence, due to absence of any established between the parties CLAIMANT is entitled to
receive US$ 102,192.80 from RESPONDENT as stated in Section 4.3 DSA.
b. CLAIMANT is entitled to additional payment under Art. 54, 57 CISG
165 CLAIMANT is also entitled to additional payment under Art. 54, 57 CISG. To enable
payment and fulfil its contractual obligations RESPONDENT is required to comply with all
formalities under contract or any laws and regulations [Kröll-Butler/Harindranath Art. 54
para. 3]. RESPONDENTS’s obligation to pay is only fulfilled according to Art. 57 (1a) CISG
when the full amount of money is credited to CLAIMANTS’s account [Kröll-
Butler/Harindranath Art. 57 para. 12-13] (aa). Furthermore, the payment can only be
properly effected when RESPONDENT bears the levy as a formality under the ML/2010C as
statutory provision (bb).
RESPONDENTS’s obligation to pay is only performed when the full price is credited to
CLAIMANTS’s account
166 Art. 54 CISG ensures that the seller actually receives the purchase price payment and states
the obligation of the buyer to effect the payment of the purchase price [Kröll-
Butler/Harindranath Art. 54 para. 5]. The question is whether the duty of the buyer to pay the
purchase price is already fulfilled by assigning the payment or only when the seller actually
received the money.
167 In accordance with the DSA where the Parties agreed on the price, the means of payment, the
currency the payment should be made in, the time of the payment and the coverage of bank
charges for the transfer of money, the goods were delivered to RESPONDENT accompanied
by an invoice and RESPONDENT only had to pay the purchase price after the goods were
delivered [CE 2, p. 10]. However, the Parties have not agreed on the place of payment.
According to Art. 57 (1a.) CISG the seller’s place of business is the place for payment if the
parties have not agreed on another place of payment [ZG Basel (CH 1997)]. As a result,
Bucerius Law School - Memorandum for Claimant
32
RESPONDENTS’s obligation to pay is only performed when the full amount of money is
credited to CLAIMANTS’s account [Kröll-Butler/Harindranath Art. 57 para. 10-13].
RESPONDENT is responsible for complying with all the formalities which are required under
any statutory provisions to enable payment and all the necessary costs associated with the
money transfer not only in the country from which the payment is sent, but also in the country
in which the payment is to be made [Ferrari-Mankowski Art. 54 para. 1; Kröll-
Butler/Harindranath Art. 57 para. 10-13].
To effect full payment levy needs to be borne by RESPONDENT as a formality under
ML/2010C as a statutory provision
168 The charge of US$ 102,192.80 was deducted as a 0.5% levy from the payment
RESPONDENT originally effected for the expense of the investigation conducted by the
Financial Intelligence Unit according to Section 12 Regulation ML/2010C (C8 p.17).
169 Since the investigation is necessary for the payment to be passed to CLAIMANTS’s account
ML/2010C is a provision which is relevant to effect a timely and orderly payment of the
purchase price by the buyer [MüKo-Huber Art. 54 para 3; Secretariat's Commentary, Art. 50.
para. 2]. All costs which emerge from formalities of ML/2010C need to be borne by buyer.
As a result, RESPONDENT needs to pay the additional US$ 102,192.80 to fulfil its
obligations under Art. 54, 57 CISG.
2. Art. 35 CISG does not exempt RESPONDENT from its obligation to pay bank levy
170 RESPONDENT persistently tries to avoid the bank charges by referring to case law on
Art. 35 CISG [ASC, p. 26 para. 19]. Art. 35 CISG states that the seller must deliver goods,
which are of quantity, quality and description required by contract or, if no contractual
requirement is available, as required by the public law regulations at seller’s place of
business. The seller is not expected to know all public regulations at the buyer’s place of
business unless the buyer actually informs him about such regulations
[Schlechtriem/Schwenzer-Schwenzer Art. 35 para. 17]. RESPONDENT wants to apply this
consideration to its obligation to pay the price and claims that CLAIMANT had the duty to
inform RESPONDENT about the levy. However, this consideration is not applicable to the
present case. Art. 35 CISG regulates the conformity of goods and is not applicable to
RESPONDENTS’s duty to make payment of the purchase price (a). Even if the principles of
Art. 35 CISG were applicable to RESPONDENTS’s obligation to pay the fee it would lead to
the conclusion that RESPONDENT needs to bear the bank levy (b).
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33
a. Art. 35 CISG is not applicable to RESPONDENTS’s duty to make payment of the
purchase price
171 The CISG applies to contracts of sale of goods between parties whose places of business are
in different States (Art. 1 (1) CISG). It is structured in paragraphs as “Conformity of Goods”
or “Obligations of Buyer” to cover all possibly arising issues during the contracting of
international parties. Issues which are not covered by any regulation within the CISG are to be
settled in conformity with the general principles on which the CISG is based on (Art. 7 (2)
CISG). A gap within the CISG exists when the matter is governed by the CISG but is not
expressly settled by it (internal gap) or when the matter is not governed by the CISG at all but
by the applicable national law (external gap) [Kröll-Pilares Viscasillas Art. 7 para. 47].
172 In the present case, RESPONDENT doubts whether it has to pay the levy accruing with the
payment of the purchase price. Chapter III Section 1 CISG regulates the obligations of the
buyer of paying the purchase price. Art. 54, 57 explicitly state that RESPONDENT needs to
bear all costs arising of the payment in order to ensure that the full amount of the purchase
price is credited to CLAIMANTS’s account. The CISG not only governs the issue but
expressly settles it. There are no existing gaps to fill in accordance with Art. 7 CISG. Hence,
there is no possibility of applying the underlying principles of Art. 35 CISG to the question
whether RESPONDENT has to bear the levy or not.
b. Also if the Trribunal applies the principles of Art. 35 CISG, RESPONDENT would
need to bear the bank levy
173 Even if the Tribunal should find that Art. 35 CISG was applicable to the present case,
RESPONDENT was required to bear the bank levy as described in the DSA (aa.). Also if the
tribunal finds that there is no contractual description concerning the bank levy, payment
would not fulfil its purpose if RESPONDENT does not bear the bank levy (bb.).
RESPONDENT was required to bear the bank levy by the DSA
174 Art. 35 CISG primarily aims to determine the obligations of the seller i.e. RESPONDENT by
the terms of the contract [BG (CH 2000); BGH ( DE 1996); Henschel, 65; Kröll, Art. 35
para. 37; Kruisinga, 28; Mullis, 130; Neumann; Schlechtriem/Butler, 113]. Section 4.3 DSA
explicitly states that the bank charges have to be borne by RESPONDENT. CLAIMANT
could not have made it any clearer to RESPONDENT that there was the chance of bank
charges and that it is the responsibility of RESPONDENT to cover them. RESPONDENT
failed to adhere to the contractual obligation. In order to preserve the quality of the payment it
needs to bear the levy imposed by ECB.
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34
Payment would not fulfil its purpose if RESPONDENT does not bear the bank levy
175 Even if the Tribunal finds that the content of the DSA is unclear or that the CLAIMANTS’s
understanding thereof is incorrect and that there is no contractual description concerning the
bank levy, the purpose of the payment is nevertheless only fulfilled if CLAIMANT is able to
fully reimburse the purchase price agreed upon. To ensure this it is the duty of
RESPONDENT to make payments which comply with the existing regulations (i.). In
Accordance, RESPONDENT should have been informed about the regulation ML/2010C and
the occurrence of the levy (ii.).
i. RESPONDENT needs to make payment which complies with the existing regulations
176 RESPONDENTS’s obligation to pay is only fulfilled when the amount received by
CLAIMANT complies with the amount CLAIMANT is entitled to under the DSA.
RESPONDENT was aware of the fact that the money was transferred to Equatoriana [CE 2,
p. 10]. To ensure compliance, RESPONDENT therefore needs to be aware of the different
regulations in CLAIMANTS’s country [OGH (AT 2006); CA Grenoble (FR 1995)]. It is not
the duty of CLAIMANT to provide RESPONDENT with the knowledge to fulfil its
contractual obligations [Kröll, Art. 35 para 111].
ii. RESPONDENT should have been informed about the regulation ML/2010C and the
occurrence of the levy
177 RESPONDENT claims that it was not aware of the new regulation ML/2010C. However,
RESPONDENTS’s knowledge has to be imputed when the introduced standards are in
accordance with internationally recognized standards [BGH (DE 1995); Bianca, Art. 35;
Flechtner, 6; Henschel, 207,208;Kruisinga, 218; Lookofsky, 80; Poikela, 54] . ML/2010C
implemented legislation based on the UN-Model Provisions in Money Laundering, Terrorist
Financing, Preventive Measures and Proceeds of Crime. Equatoriana therefore implemented
standards which are widely known in the sector and should have been taken in consideration
by every business dealing with huge sums of money.
178 Furthermore, ML/2010C entered into force under considerable coverage in the Equtaorianian
press on the implementation of the new regulation. Also the newspaper in Mediterraneo
reported that the Equatorianian government took actions against money laundering [PO 2,
p. 55, para. 7]. When interpreting the contract in regard to the purpose of the payment the
benchmark of the understanding of a reasonable person of the same kind and in the same
position as RESPONDENT applies under Art. 8 (2) CISG [Slechtriem/Schwenzer-Schmidt-
Kessel Art. 8 para. 20]. In the present case every business person of the same industrs as
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35
RESPONDENT would have researched such newspaper articles when contracting with
business partners from the country the news had been reported from. Under these special
circumstances RESPONDENT should have definitely been aware of the regulation [High
Court (NZ 2010); District Court Louisiana (US 1999); BGH (DE 1995)].
CONCLUSION: CLAIMANT is entitled to receive additional payment in the amount of
US$ 102,192.80 for the levy deduced by the Equatoriana ECB under Section 4.3 DSA and
Art. 54, 57 CISG. Art. 35 CISG does under no circumstances exempt RESPONDENT from
its obligation to pay the outstanding amount of money.
Prayer for Relief
CLAIMANT respectfully requests the TRIBUNAL to
1. dismiss the RESPONDENTS’s request for security for costs,
2. find that CLAIMANTS’s claims are admissible and were submitted in time
3. find that CLAIMANT is entitled to receive additional payment in the amount of
US$ 2,387,432.80, comprising
a) the outstanding payment in the amount of US$ 2,285,240.00, and
b) the fee deducted by the Central Bank in the amount of US$ 102,192.80.
Respectfully submitted,
Hamburg, 8 December 2016
Timo Fischer Christoph Ludwig Anna Nyfeler Laura Vogt