Memorandum for Respondent - ALSA Indonesia

2011 ALSA CONFERENCE INTERNATIONAL COMMERCIAL ARBITRATION MOOT

8 - 9 JANUARY 2011

MEMORANDUM FOR RESPONDENT

ALSA INDONESIA

On Behalf of:

PROMPT PAY INC.

Deeerveer 55-23,

Rotterdam Postbus 63000 Rotterdam,

The Netherlands

(RESPONDENT)

Against:

BEST DEAL EDIBLE OIL

INDUSTRIES PTE LTD

488 Wonder Bridge Road #04-01

Singapore 586721

Singapore

(CLAIMANT)

COUNSELS:

Beatrice Eka Putri Simamora Sarah Eliza Aishah Tiyana Sigi Pertiwi

ALSA INDONESIA

MEMORANDUM FOR RESPONDENT | i

TABLE OF CONTENTS

TABLE OF CONTENTS .............................................................................................................. i

TABLE OF AUTHORITIES ....................................................................................................... ii

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

SUMMARY OF ARGUMENTS .................................................................................................. 3

ARGUMENT ON JURISDICTION ............................................................................................ 4

I. THIS TRIBUNAL HAS NO JURISDICTION TO ENTERTAIN THE

PRESENT CASE ................................................................................................................... 4

A. CLAIMANT and RESPONDENT Are Not Bound by The Arbitration

Agreement ......................................................................................................................... 4

B. Even If CLAIMANT and RESPONDENT Are Bound by The Arbitration

Agreement, Both Parties Had Not Fulfilled The Condition Precedent to

Arbitration ......................................................................................................................... 5

ARGUMENT ON MERITS ......................................................................................................... 9

II. CLAIMANT COULD NOT RELY IN ARTICLE 74 CISG FOR

RESPONDENT COULD NOT HAVE FORESEEN SUCH BREACH AT THE

CONCLUSION OF CONTRACT NO. 03162 ..................................................................... 9

A. The Production Cost of Packaging Bags Was Unforeseeable To RESPONDENT

And To Any Reasonable Person ..................................................................................... 10

B. RESPONDENT is Excused from All Damage Claims Due To Force Majeur .............. 11

III. CLAIMANT HAD BREACHED CONTRACT NO. 03162 BY FAILING TO

DELIVER THE GOODS ON TIME (ART.30 AND ART. 33 CISG) ............................. 12

IV. CLAIMANT HAD BREACHED CONTRACT NO. 03162 BY NON-

CONFORMITY GOODS DELIVERY (ARTICLE 35 CISG)Error! Bookmark not defined.

ALSA INDONESIA

MEMORANDUM FOR RESPONDENT | ii

TABLE OF AUTHORITIES

TREATIES, CONVENTIONS, AND LAWS

CISG United Nations Convention on Contracts for the

International Sale of Goods, Vienna, 1980

passim

Model Law UNCITRAL Model Law on International Commercial

Arbitration 1985

1

Model Law

UNCITRAL Model Law on International Commercial

Conciliation

5

CASES

Him Portland Llc v.

Devito Builders Inc

United States Court

of Appeals

317 F. 3d 41 - Him Portland Llc v. Devito Builders Inc

United States Court of Appeals, First Circuit

5

641 A.2d 1381 641 A.2d 1381, 1387 (Conn. 1994).

See also Handelsmaatschappij Vekoma BV (Netherlands) v.

Maran Coal Corp. (US), Swiss Federal Court

(Bundesgericht), Civil Division I (August 17, 1995)

5

Chateau des

Charmes Wines Ltd.

v. Sabaté USA, Inc.,

328 F.3d 528

328 F.3d 528 (9th Cir. 2003)

(http://ftp.resource.org/courts.gov/c/F3/328/328.F3d.528.02-

15727.html)

3

ALSA INDONESIA

MEMORANDUM FOR RESPONDENT | iii

CLOUT case No.

106

CLOUT case No. 106

Oberster Gerichtshof, Austria, 10 November 1994

4

CLOUT case No.

215

CLOUT case No. 215

Bezirksgericht St. Gallen, Switzerland, 3 July 1997

3

CLOUT case No.

222

CLOUT case No. 222

Federal Court of Appeals for the Eleventh Circuit, United

States, 29 June 1998

3

CLOUT Case No. 23

(CISG-online No.

45)

CLOUT Case No. 23 (CISG-online No. 45) 3

CLOUT case No.

268

CLOUT case No. 268

Bundesgerichtshof, Germany, 11 December 1996

3, 4

CLOUT case No.

313

CLOUT case No. 313

Cour d‟appel Grenoble, France, 21 October 1999

3

CLOUT Case No.

422

CLOUT Case No. 422

Oberster Gerichtshof, Austria, 29 June 1999

2

CLOUT case No.

429

CLOUT case No. 429

Oberlandesgericht Frankfurt, Germany, 30 August

3

Cortem SpA v

Controlmatic Pty Ltd

(2010)

Federal Court of Australia, FCA 852, 13 August 2010

(http://cisgw3.law.pace.edu/cases/100813a2.html)

12

ALSA INDONESIA

MEMORANDUM FOR RESPONDENT | iv

FCF S.A. v. Adriafil

Commerciale S.r.l.,

Switzerland, 15 September 2000. FCF S.A. v. Adriafil

Commerciale S.r.l., Supreme Court

4P.75/2000

(http://cisgw3.law.pace.edu/cases/000915s2.html)

11

Filanto, S.p.A. v.

Chilewich

International Corp,

F. Supp. 1229 (S.D.N.Y. 1992). 984 F.2d 58 (2nd Cir. 1993)

(http://vlex.com/vid/filanto-chilewich-international-corp-

37510659)

3

Raw Materials Inc.

v. Manfred

Forberich GmbH &

Co.

No. 03 C 1154, 2004 U.S. Dist.LEXIS 12510 (N.D. Ill. July

6, 2004)

(http://cisgw3.law.pace.edu/cases/040706u1.html)

1

OTHER AUTHORITIES

D. Jason File United States: Multistep Dispute Resolution Clauses

3 Mediation Committee Newsletter 1

(IBA Legal Practice AUTHOR Division), July 2007.

3

David St John Sutton,

Judith Gill &

Matthew Gearing

Russell On Arbitration (2007) 3

Gary B. Born International Commercial Arbitration

(3d ed., 2009)

4

Jennifer M. Bund Force majeure Clauses: Drafting Advice for the CISG

Practitioner. Reproduced with permission of 17 Journal of

Law and Commerce (1998)

9

ALSA INDONESIA

MEMORANDUM FOR RESPONDENT | v

COMMENTARY

Huber/Mullis The CISG: A new textbook for students and practitioners

(Baker&McKenzie)

7, 10

Larry A Dimateo

et.al.

A Critical Analysis of CISG Jurisprudence 10

Secretariat

Commentary

9

U.Huber/Widmer

U.Huber/Widmer, in: Schlechtriem/Schwenzer 19

AWARDS

Magnesium case ICC Court of Arbitration, award No. 8324/1995

(http://cisgw3.law.pace.edu/cases/958324i1.html)

4

ALSA INDONESIA

MEMORANDUM FOR RESPONDENT | vi

TABLE OF ABBREVIATIONS

ADR Alternative Dispute Resolution

Art. Article

Bger. Bundesgerichtshof (Germany)

Ch. Chapter

Cir. Circuit (U.S. Court of Appeals)

CISG United Nations Convention on Contracts for the International Sales of

Goods, Vienna, 1980

CLOUT Case Law on UNCITRAL Text

Co. Coorporation

Dist. District

Doc. Document

Ed. Edition

et al. and others

FCA Federal Court of Australia

Id., Idem

Inc. Incoorporation

Kg Kilogram

Ltd. Limited

Mt Metric ton

No. Number

p. Page

Para. Paragraph

U.S. United States of America

US$ United State Dollars

ALSA INDONESIA

MEMORANDUM FOR RESPONDENT | vii

UN United Nations

UNCITRAL United Nations Commission on International Trade Law

v. Versus (Against)

E.D.N.Y Eastern District of New York

S.A. Société Anonyme

E.U. European Union

Pte. Private

cf Compare

BV Betriebskostenverordnung

LLC. Limited Liability Company

F.Supp. Federal Supplement (District Court Reports)

ALSA INDONESIA

MEMORANDUM FOR RESPONDENT | 1

STATEMENT OF FACTS

2008

21 March CLAIMANT and RESPONDENT enter Sales Contract No. 03162.

Early-April CLAIMANT delivers 900 mt to RESPONDENT.

Mid-April Choline Chloride Price fell drastically.

25 April RESPONDENT sends a fax to CLAIMANT to inform that RESPONDENT

may want to postpone taking up the balance. CLAIMANT replies

RESPONDENT’s fax with an email to inform that CLAIMANT is currently

working with his suppliers for raw material.

29 April RESPONDENT send an email to CLAIMANT to cease the business due to

the decreasing market price of Choline Chloride. CLAIMANT replies

RESPONDENT’s email to inform that CLAIMANT‟s factory is discussing the

raw material prices with the major suppliers. CLAIMANT is informed about

RESPONDENT‟s wish to cease the business.

8 May RESPONDENT sends an email to CLAIMANT that the remains quantity

will be cancelled due to because CLAIMANT‟s price is no longer workable.

CLAIMANT replies RESPONDENT’s email to offer RESPONDENT a

$5.00/mt discount. RESPONDENT replies CLAIMANT’s email to rejects

CLAIMANT‟s offer of discount.

21 May CLAIMANT sends an email to RESPONDENT to make further offer of

discount to the RESPONDENTS of US$5.00/mt. CLAIMANT has a

telephone conversation with RESPONDENT.

23 May CLAIMANT has a telephone conversation with RESPONDENT. Both

parties agreed to settle the dispute by discussing it and never let them go to

serious fights in court. Thus, RESPONDENT sends an email to

CLAIMANT to rejects CLAIMANT’s offer of discount again as in

RESPONDENT belief notices that Best Deal‟s office had sent were only meant

as formal records and not intended to form basis of legal action.

26 May CLAIMANT sends a fax to RESPONDENT to inform RESPONDENT that

CLAIMANT has been notified about RESPONDENT‟s cancellation of the

ALSA INDONESIA


entire outstanding contract based on sales contract No. 03162. RESPONDENT

has the time to change his mind whether to complete the contract until 26 May

2008, 1700 hours.

29 May CLAIMANT sends a fax to RESPONDENT attached with Debit Note No.

ARD03/05/5030.

30 June Expires date of contract.

2 July CLAIMANTS submit the payment of unutilized printed packing bags.

3 July CLAIMANT sends a fax to RESPONDENT to warned RESPONDENT

about legal process.

2009

13 August CLAIMANT sends a letter to RESPONDENT to demand payment

immediately. CLAIMANT will commence arbitration proceedings, if

RESPONDENT does not reply within 7 days from date hereof.

13 August CLAIMANT sends a letter to Chairman of SIAC to request for Appointment

of Arbitrator.

20 August RESPONDENT replies CLAIMANT’s letter to refuse CLAIMANT‟s

Arbitration Request and will lodge with the arbitration tribunal counterclaim

arising out of an earlier Contract No 03159 dated 16 January 2008.

22 August CLAIMANT replies RESPONDENT’s letter informing RESPONDENT that

CLAIMANT still lodge to arbitration.

30 October SIAC sends letters to CLAIMANT and RESPONDENT to inform that the

Chairman of the SIAC has appointed Mr. Arbitrator as the sole arbitrator.

1 November Preliminary meeting between Parties and Mr. Arbitrator.

2 December RESPONDENT ask Clarification from Mr. Arbitrator regarding Mr.

Arbitrator‟s relationship with Mr. BEST DEAL Counsel and his wife.

ALSA INDONESIA


SUMMARY OF ARGUMENTS

A. THIS TRIBUNAL HAS NO JURISDICTION AS BOTH PARTIES HAD NOT

FULFILLED THE CONDITIONS PRECEDENT TO ARBITRATION

This tribunal has no jurisdiction to entertain the present case. CLAIMANT alleges that both

parties are bound by the Arbitration Agreement, but even so neither had fulfilled the condition

precedent to arbitration. Therefore, this tribunal should be dismissed.

B. CLAIMANT COULD NOT RELY IN ARTICLE 74 CISG FOR RESPONDENT

COULD NOT HAVE FORESEEN SUCH BREACH AT THE CONCLUSION OF

CONTRACT NO. 03162

Without any means of waiving point, the tribunal when commenced, should not grant

CLAIMANT‟s claim which is allegedly based on article 74 CISG. The production cost of the

packing bags was unforeseeable to RESPONDENT and as to any reasonable person. As to the

provision‟s foreseeability requirement remained unfulfilled, RESPONDENT is excused from all

damage claims due to Force Majeur.

C. CLAIMANT HAD BREACHED CONTRACT NO. 03162 BY FAILING TO DELIVER

THE GOODS ON TIME (Art.30 and Art. 33 CISG)

As said in Contract No. 03162, there would be delivery installed each month even without

confirmation by the RESPONDENT. Thus, Claimant had breached Contract No. 03162 by

failing to deliver the goods on time.

D. CLAIMANT HAD BREACHED CONTRACT BY NON-CONFIRMITY GOODS

DELIVERY (Article 35 CISG)

According to article 35 CISG, CLAIMANT‟s obligations must what is what determined in the

contract. However in fact the goods delivered to RESPONDENT were not in same quality

promised in the contract. Therefore, CLAIMANT had breached the contract by delivering non-

conformity goods and thus liable to RESPONDENT in damages.

ALSA INDONESIA


ARGUMENT ON JURISDICTION

I. THIS TRIBUNAL HAS NO JURISDICTION TO ENTERTAIN THE PRESENT

CASE

1. This arbitral tribunal has no jurisdiction in the present case as there is no arbitration

agreement between the parties. CLAIMANT and RESPONDENT have mutually cancelled

The Sales Contract Number 03162 dated 21 March 2008 (hereinafter “Contract No.

03162”) via telephone on 23 May 2008.1 Subsequentely CLAIMANT and RESPONDENT

agreed to form a New Contract2 in which contain no arbitration agreement.

Consequently

CLAIMANT and RESPONDENT have no obligation to submit this case to arbitration since

there is no arbitration agreement [A]. Additionally, the application of separability doctrine

remains in the present case because the New Contract does not contain arbitration clause. In

any event should the separability doctrine be applied, CLAIMANT and RESPONDENT had

not conducted any negotiation which is the condition precedent to arbitration [B].

A. CLAIMANT and RESPONDENT Are Not Bound by The Arbitration Agreement

2. On 23 May 2008, CLAIMANT and RESPONDENT, via telephone conversation, agreed to

cancel Contract No. 03162 and replaced it with a new contract3 (hereinafter “New

Contract”). The New Contract concerns a deal in which RESPONDENT would sort out the

problems regarding the contaminated products of the January in Contract No. 031594 and

CLAIMANT would in turn sort this contract.5 According Art. 29(1), Model Law

UNCITRAL, it is enough for a modification or termination of Contract No. 03162 to have

the mere agreement of the parties,6 either orally, in writing, by acts, or even by silence or

1 Doc. C/11-13.

2 New contract made by CLAIMANT and RESPONDENT on 23 May 2008 concerning a deal in which RESPONDENT would sort

out the problems regarding the contaminated products of the January in Contract No. 031592 and CLAIMANT would in turn sort this

Contract No. 03162. The New Contract then replaced the applications of Contract No. 03162 ad Contract No. 03159. 3 See Doc. C/11-13.

4 Contract No. 03159 is a contract between CLAIMANT and RESPONDENT dated 16 January 2008.

5 Witness Statement of Filip Van Hauten, para. 12.

6 Raw Materials Inc. v. Manfred Forberich GmbH & Co., No. 03 C 1154, 2004 U.S. Dist. LEXIS

12510 (N.D. Ill. July 6, 2004); Tribunale di Padova, Italy, 31 Mar. 2004, available at http://cisgw3.law

.pace.edu/cases/040331i3.html; Bezirksgericht Sissach, supra note 19.

ALSA INDONESIA


inaction.7 This means the agreement between both parties regarding the New Contract, is

enough to replace both Contract No. 03162 and Contract No. 03159.

3. The New Contract does not contain an arbitration clause. The New Contract only

demonstrates the mutual consent of both parties to solve the problems arising out under

Contract No. 03162 and Contract No. 03159. Nothing is stipulated under the New Contract

that both parties agreed to bring any future disputes to arbitration. Therefore CLAIMANT‟s

assertion regarding the obligation to arbitrate is unfounded.

4. Furthermore, the arbitration clause in Contract No. 03162 can neither be applied in the

present case, because the sentence “any dispute in connection with...”8 which is considered

as broad-form arbitration clause9 was limited only to conditions in connection with Contract

No. 03162 or its execution. On the other hand, the dispute between both parties are

regarding to the application of the New Contract. The New Contract has put new obligations

between both parties with the respect to Contract No. 03162 and Contract No. 03159, thus

its scope is different with the scope of arbitration clause in Contract No. 03162. Hence,

arbitration clause in Contract No. 03162 cannot be applied in this case, since New Contract

and arbitration clause in Contract No. 03162 have different concerns which make different

scopes of application between them.

5. Even if the arbitration clause in Contract No. 03162 can be applied in this case, the problems

arising out of Contract No. 03159 shall be solved as well in the same arbitration with the

problems arising from Contract No. 03612. This is because the New Contract has eliminated

the boundaries between those two Contracts, thus the scope of the New Contract will include

any dispute arising under Contract No. 03162 and Contract No. 03159. Therefore, the

settlement for disputes arose under Contract No. 03162 and Contract No. 03159 shall be

held at the same arbitration since those disputes are related to each other.

B. Even If CLAIMANT and RESPONDENT Are Bound by The Arbitration

Agreement, Both Parties Had Not Fulfilled The Condition Precedent to Arbitration

7CLOUT Case No. 422 [Oberster Gerichtshof, Austria, 29 June 1999], available at http://cisgw3.law.pace.edu/cases/990629a3.html.

8 See the arbitration clause in Doc. A/8.

9 CLAIMANT Memorandum, para. 8.

ALSA INDONESIA


6. The arbitration clause in Contract No. 03162 stated that “Any dispute... shall be settled

through friendly negotiations between two parties, if not... shall be referred to an arbitrator

or arbitrators...” RESPONDENT interprets this clause as a multi-step alternative dispute

resolution clause (hereinafter “multi-step ADR clause”)10

where there is a condition

precedent to arbitration which is friendly negotiations. In essence, if a party wishes to start

arbitration proceedings, it must first negotiate with the other party in order to try to reach an

amicable solution to the dispute.11

7. In cases where Contract No. 03162 is governed by the CISG, the relevant provisions of the

CISG also determine whether the arbitration or forum selection clause was validly agreed

upon.12

Article 8 (1) CISG, provides a guideline in which statements and other conduct of a

party shall be interpreted according to his intent, as long as the other party knew or could not

have been unaware of that intent. The plain language of the Convention, therefore, requires

an inquiry into a party‟s subjective intent as long as the other party to Contract No. 03162

was aware of that intent13

or could not have been unaware of it.14

8. In determining a party‟s intent or the understanding a reasonable person would have had,

due consideration is to be given to all relevant circumstances of the case. Such

circumstances specifically include15

the negotiations, any practices which the parties have

10

See D. Jason File, “United States: Multistep Dispute Resolution Clauses”, 3 Mediation Committee Newsletter 1 (IBA Legal

Practice Division), July 2007, at p. 36. 11

David St John Sutton, Judith Gill & Matthew Gearing, Russell On Arbitration (2007), at p. 48. 12

Filanto, S.p.A. v. Chilewich International Corp, 789 F. Supp. 1229 (S.D.N.Y. 1992), CLOUT Case No. 23 (CISG-online No. 45);

for the same approach in relation to a forum selection clause see Chateau des Charmes Wines Ltd. v. Sabaté USA, Inc., 328 F.3d 528 (9th

Cir. 2003); in favour of such an approach see also WOLFGANG DRASCH, EINBEZIEHUNGS- UND INHALTSKONTROLLE

VORFORMULIERTER GESCHÄFTSBEDINGUNGEN IM ANWENDUNGSBEREICH DES UN-KAUFRECHTS 49 (1999);

BURGHARD PILTZ, INTERNATIONALES KAUFRECHT § 2, ¶ 119 (1993). 13

CLOUT case No. 222 [Federal Court of Appeals for the Eleventh Circuit, United States, 29 June 1998] (internal citation in

quoted material omitted) (see full text of the decision); for other cases in which the part of article 8 (1) referred to in the text was cited,

see CLOUT case No. 313 [Cour d’appel Grenoble, France, 21 October 1999] (see full text of the decision); CLOUT case No. 268

[Bundesgerichtshof, Germany, 11 December 1996]. For an express reference to the “subjective” interpretation, see CLOUT case No. 429

[Oberlandesgericht Frankfurt, Germany, 30 August 2000], http://cisgw3.law.pace.edu/cisg/text/000830g1german.html. 14

For references to this part of article 8, paragraph 1, see CLOUT case No. 215 [Bezirksgericht St. Gallen, Switzerland, 3 July

1997] (see full text of the decision). 15

According to the Official Records of the United Nations Conference on Contracts for the International Sale of Goods, Vienna,10

March-11 April 1980 (United Nations publication, Sales No. E.81.IV.3), 18, the list to be found in article 8, paragraph 3 is not an

exhaustive list of elements to be taken into account in interpreting statements or other conduct by the parties.

ALSA INDONESIA


established between themselves, usages, and any subsequent conduct of the parties.16

Several decisions17

have noted that these criteria should be taken into account when

interpreting a statement or other conduct under the standards of article 8 (1) CISG.18

9. RESPONDENT‟s intention when making this arbitration agreement is to oblige both parties

with a condition precedent to arbitration which is friendly negotiations.19

This can be seen in

the telephone conversation on 23 May 200820

, where RESPONDENT was trying to make

sure that both parties agreed to not bring the dispute between them to arbitration tribunal nor

court, meaning that RESPONDENT wanted to solve the dispute as friendly as possible to

keep their long term business development. RESPONDENT‟s intention can also be seen by

his action in informing CLAIMANT about his situation and asking for reduction in price.

This means RESPONDENT always try to solve the problems with friendly ways.

10. Using the Guaspian21

classification scheme, a series of requirements must be met in order to

implement a negotiation clause that can be applied in this case, such as subjective

requirements22

, formal requirements23

, and requirements to prove compliance with the

obligation to negotiate24

. In this case, CLAIMANT considers telephone converstations

16

Id.; CLOUT case No. 106 [Oberster Gerichtshof, Austria, 10 November 1994]. 17

In arbitration, see ICC Court of Arbitration, award No. 8324/1995, published on the Internet at

http://www.unilex.info/case.cfm?pid=1&do=case&id=240&step=FullText. 18

CLOUT case No. 268 [Bundesgerichtshof, Germany, 11 December 1996], expressly stating that the elements referred to in article

8, paragraph 3 have to be taken into account when interpreting a statement or other conduct by a party in the light of article 8,

paragraph 1 (see full text of the decision). 19

See the arbitration clause in Doc. A/8. 20

Doc. C/11-13. 21

Jaime Guasp Delgado, Chaired Professor of Procedural Law, and author of, among other works: Comentarios A La Ley De

Enjuiciamiento Civil [Comments On The Civil Procedure Act] (1943); El Arbitraje En Derecho Español [Arbitration Under Spanish

Law] (1956), And Derecho Procesal Civil [Civil Procedural Law] (1956) (with Alonso P. Aragoneses, 6th ed. 2006). 22

A request to negotiate must be made by the party that has established the existence of the controversy and seeks to commence

the dispute resolution procedure agreed to by the parties. The request must be made by a representative of the company and addressed to

a duly authorized representative of the other party. However, it is normally sufficient for the request to be sent to the bodies or

individuals with whom contact has been maintained during, performance of the agreement. 23

In such a case, it seems logical that the request be made in writing to inform the receiving party of the exact nature of the

dispute (and to be able to prove compliance with the obligation to negotiate). Nothing prevents the request from being oral, but this

would raise significant problems of proof that negotiation was commenced, which could perhaps be resolved through affidavits or written

statements from the individuals who participated in the negotiation process. In any event, in international practice, parties avoid the use

of a verbal request alone and almost always make a written request. 24

As mentioned above, the request to negotiate is generally made in writing. Logically, one must prove not only that the

negotiation was initiated but also that it actually took place. Given that negotiation usually involves the exchange of letters, emails and

proposals, demonstrating this fact should not be difficult.

ALSA INDONESIA


between CLAIMANT and RESPONDENT on 21 May and 23 May, 2008 as negotiations.25

In fact, those telephone conversations can not be considered as negotiations because those

telephone conversations had not fulfilled the requirements to implement a negotiation

clause, as there were neither oral nor written request to negotiate made by both parties and

also there was no confirmation from both parties that they were negotiating at that time.

11. The multi-step ADR clause has similarly been considered to be a pactum de non petendo, a

temporary waiver of the right to commence arbitration until negotiation has ended.26

By

simply failing to initiate the negotiation phase, a party could avoid arbitration and take the

case to court.27

The arbitral tribunal that rendered the award would be lack of jurisdiction,

thus its decision is void from the outset. In the White v. Kampner case, “the parties were

required to participate in the mandatory negotiation sessions prior to arbitration.”28

In this

case, CLAIMANT and RESPONDENT had not conducted any proper negotiations,

therefore, in the best interests of the both parties, the arbitration proceedings should be

suspended, then send the parties to negotiation and to resume the proceedings if the

negotiations fail.29

12. Even if the telephone conversations are considered as negotiations, CLAIMANT has acted

in contrast with the deal agreed on 23 May 2008. CLAIMANT and RESPONDENT made a

deal not to bring the case to arbitration court. By instituting the arbitration proceeding

CLAIMANT had breached the negotiation outcome. Consequently the arbitration shall not

be proceeding since this tribunal does not have the jurisdiction due to the parties‟ waiver

under the negotiation.

25

CLAIMANT Memorandum, para. 8 26

See KLAUS P. BERGER, “Law and Practice of Escalation Clauses,” 22 ARBITRATION INTERNATIONAL 1 (2006), at p. 5; In

HIM Portland LLC v. DeVito Builders Inc.,26

the First Circuit Court of Appeals held that: “... [u]nder the plain language of Contract No.

03162, the arbitration provision is not triggered until one of the parties requests mediation. Consequently, because neither party ever

attempted to mediate this dispute, neither party can be compelled to submit to arbitration.” 27

Gary B. Born, International Commercial Arbitration (3d ed., 2009), at p. 241. 28

641 A.2d 1381, 1387 (Conn. 1994). See also Handelsmaatschappij Vekoma BV (Netherlands) v. Maran Coal Corp. (US), Swiss

Federal Court (Bundesgericht), Civil Division I (August 17, 1995). 29

Cf. UNCITRAL Model Law on International Commercial Conciliation, art. 13, UN Doc. A/57/71, 2002, Annex I, at p. 6:

“Resort to arbitral or judicial proceedings: Where the parties have agreed to conciliate and have expressly undertaken not to initiate

during a specified period of time or until a specified event has occurred arbitral or judicial proceedings with respect to an existing or

future dispute, such an undertaking shall be given effect by the arbitral tribunal or the court until the terms of the undertaking have been

complied with, except to the extent necessary for a party, in its opinion, to preserve its rights. Initiation of such proceedings is not of

itself to be regarded as a waiver of the agreement to conciliate or as a termination of the conciliation proceedings.”

ALSA INDONESIA


ARGUMENT ON MERITS

II. CLAIMANT COULD NOT RELY IN ARTICLE 74 CISG FOR RESPONDENT

COULD NOT HAVE FORESEEN SUCH BREACH AT THE CONCLUSION OF

CONTRACT NO. 03162

13. In 2008, there was a series of bombing in Iraq and occurring SARs numbers in China. EU

health authorities on January 2008 even declared that the earlier Choline Chloride provided

by CLAIMANT (from earlier contract) were contaminated and partly destroyed.30

CLAIMANT‟s first delivery of 900 metric ton of Goods on early April 2008 incurred a huge

loss to RESPONDENT as the goods were quarantined in many ports31

. This inevitable

condition leaded the Chinese manufacturers to drop their Choline Chloride price drastically

making the original price in the Contract much higher compared with the current market

price. When the contractual price was US$ 575 per metric ton and the market price was US$

510 RESPONDENT had asked CLAIMANT to renegotiate the price. However CLAIMANT

only offered a stringent discount. These bargaining processes were fruitless. Ultimately on

28 May 2008 both parties mutually agreed to cancel the Contract. On 28 May 2008 the

market price for the Goods was US$ 545 per metric ton. At that time, RESPONDENT had

already suffered a damage because of CLAIMANT‟s late delivery for the goods were

supposed to be delivered by early May. Eventually on 3rd of July 2008, CLAIMANT charged

a sum of US$ 90,320 on RESPONDENT‟s behalf for the cost of the printed packaging bags,

which was not said in Contract 03162.

14. If all of the requirements are met article 74 CISG will grant a full compensation to the party

in damaged. In the present case, CLAIMANT is not entitled to full compensation because

the foreseeablity rule under Article 74 CISG is not met32

. For RESPONDENT could not

have foreseen the incidents leading to the occurrence of the breach [A]. Furthermore,

RESPONDENT shall be excused from all damage claims due to force majeur [B].

30

This fact was already known by Claimant according to Thomas Song’s 31

Witness Statetement of Filip van Hauten (Prompt Pay), 3 Ovtober 2010. [Doc C, p. 6] 32

See P. Huber and A. Muis, The CISG, p. 268, para 4.

ALSA INDONESIA


A. The Production Cost of Packaging Bags Was Unforeseeable To RESPONDENT

And To Any Reasonable Person

15. CLAIMANT filed a claim of US$ 90,320 for the cost of packaging bags printed under the

name of Bollyboots B.V., a related company of RESPONDENT.33

CLAIMANT purported

that the RESPONDENT is under obligation to make payment for this cost. As will be

demonstrated below, this claim is unfounded.

16. Contract No. 03162 number 03162 dated on 21 May 2008 addressed that in times of a non

performance of Contract No. 03162, the aggrieved party is entitled to receive the washout

price, which is of 10% of the total contract value.34

This means the total contract value is the

sole factor to determine the washout price is. Consequently CLAIMANT cannot claim for

other expenses such as the packaging cost.

17. Furthermore it is impossible for RESPONDENT to have foreseen the occurrence of the sum

of damage that has been claimed by CLAIMANT. RESPONDENT and CLAIMANT had

never contracted for CLAIMANT to print custom designed packaging bags made purposely

for the purchase under Contract No. 03162, let alone to print it under the name of

RESPONDENT‟s subsidiary. In addition, Contract No 03162 also did not require for

RESPONDENT to pay for the packaging costs. Although there is a notice that a packing list

in two copies will be provided in following35

, Contract No. 03162 never said anything about

printed name on the packing bags. Contract No. 03162 only mentioned that the Goods will

be packed in 25 kg bags. Several Chinese Choline Chloride suppliers such as Cangzhou

Pangoo International Trade Co., Ltd36

; Shandong Levoda Chemical Co., Ltd.37

; and NB

Group Co. Ltd.38

are using the same amount per bags which are 25 kg of PEPA bags with

PE liners. PEPA bags or kraft paper bags is assumed to be the common bags used for

33

Fax from Thomas Song (Claimant) to Mr. Filip van Hauten (Respondent), 3rd of July 2008. [Doc B, p. 24] 34

See Contract No. 03162 between Best Deal Edible Oil Pte Ltd (Claimant) and Prompt Pay Inc (Respondent), dated 21/3/2008,

page 2. Other Terms of Trade, para. 5 35

See Contract No. 03162 between Best Deal Edible Oil Pte Ltd (Claimant) and Prompt Pay Inc (Respondent), dated 21/3/2008,

page 2. Other Terms of Trade, page 1, Unit Price. 36

Website: http://pangoo.en.made-in-china.com/product/roamBSYcgKhA/China-Choline-Chloride.html 37

Their product specifications of Choline Chloride on Corn Cob 60% available at: http://www.alibaba.com/product-

gs/331391531/Choline_chloride_60_corn_cob_feed.html 38

See http://biz.efeedlink.com/Products/110/c02b05cd-d074-4aad-aab0-40806bb62ff7.html

ALSA INDONESIA


shipping Choline Chloride by these Chinese suppliers. However, none of these suppliers

require their buyers to pay for the cost caused by printing a logo on the bags itself.

18. The amount asked by CLAIMANT for these bags are US$ 90,320, which would have been

covered by Contract No. 03162ual washout value. Therefore, RESPONDENT had not

foreseen that these bags would be also classified as damages. This condition is also

unforeseeable to any reasonable person under the same circumstances as RESPONDENT.

19. CLAIMANT shall not claim the costs of the packing bags because first, it is against the

agreed term of Contract No. 03162; And second, in any event, it was unforeseeable for

RESPONDENT know that CLAIMANT had provided the custom-printed packing.

Consequently based on the abovementioned reasons, the packaging cost shall not be

included in the reimbursement.

B. RESPONDENT is Excused from All Damage Claims Due To Force Majeur

20. Under certain circumstances, a party may be excused from performing its obligations in the

occurrence of impediment which is beyond the non-performing party's control.39

This CISG

„Doctrine of Excuse‟ is well recognized.40

This doctrine is contained in article 79 (1) CISG,

whereas it requires the party in breach to prove the unforeseeablility nature of the

consequences of the breach as a result of the impediment.

21. The sudden SARs outbreak leading EU health authorities to destroy a portion of Goods and

the decreasing price of Choline Chloride were unforeseeable by RESPONDENT.

RESPONDENT, as a regular customer to CLAIMANT, would not have expected to

purchase Goods that are said to be contaminated. In addition, RESPONDENT, like any

normal buyer, would not agree to a contract that would eventually cause more loss because

of the existence of huge price discrepancies. All these events were unenforceable.

22. Thus, CLAIMANT could not rely on article 74 CISG for claiming such damages for it does

not fulfill its prerequisites of foresee ability in accordance with article 79(1) CISG,

RESPONDENT shall be excused for not performing its obligations, and RESPONDENT

need not to reimburse all damages claimed by CLAIMANT.

39

Article 79(1) CISG. 40

Jennifer M. Bund, Force majeure Clauses: Drafting Advice for the CISG Practitioner. Reproduced with permission of 17 Journal of Law and Commerce (1998) 381-413. Available online at http://www.cisg.law.pace.edu/cisg/biblio/bund.html

ALSA INDONESIA


III. CLAIMANT HAD BREACHED CONTRACT NO. 03162 BY FAILING TO

DELIVER THE GOODS ON TIME (ART.30 AND ART. 33 CISG)

13. The obligation of CLAIMANT as a seller is governed by article 30 CISG. The “seller‟s

primary obligation is to deliver the goods”.41

As general rules, the delivery obligation can be

performed unilaterally by the seller without the need for the buyer‟s cooperation.42

CLAIMANT might argue that their failure to in making delivery on time was caused by the

absence of fixed schedule provided by RESPONDENT.43

However, CLAIMANT should

have delivered the goods, even though there was no confirmation from RESPONDENT in

accordance with general rule. Moreover, based on the “Contract”, CLAIMANT agreed the

delivery should be installed in each month (April, May, June 2008).44

Delivery terms had

agreed by both parties with the fix period, thus CLAIMANT should automatically delivered

the goods without waiting for a specific order from RESPONDENT. The time of delivery, it

is governed by the article 33 CISG. Under Contract No. 0316245

, there is only the period of

time which was April, May, and June 2008 of which CLAIMANT can deliver at any time

within that period.46

In principle therefore, it is for CLAIMANT to choose when during the

period he wishes to deliver.47

As delivery terms stated clearly, there would be delivery each

month even without confirmation by the RESPONDENT. For the second delivery was May,

thus within May 1th

to May 31th

2008, CLAIMANT should delivered the goods.

14. In any event the absent of fixed schedule from the RESPONDENT was caused by

CLAIMANT. Based on Contract No. 0316248

, the delivery terms do not require the seller to

obtain insurance of the goods during carriage, and then he must nonetheless provide the

buyer with “all available information necessary to enable him to effect such

insurance”.49

When the market price was falling suddenly, RESPONDENT requested

41

Secretariat Commentary, Art.. 29 para.1 42

U. Huber/Widmer, in : Schlechtriem/Schwenzer, Commentary, Art. 31 para.4 43

[Doc C 2/8] 44

[Doc A/7] 45

[Doc A/7] 46

Alastair Mullis, Commentary, Art. 33 (b), page 123, para. 2 47

U.Huber/Widmer, in: Schlechtriem/Schwenzer, Commentary, Art. 33 para. 9. 48

Id., 49

Larry A Dimateo et. all, A Critical Analysis of CISG Jurisprudence, page 103, art. 32 (3) CISG.

ALSA INDONESIA


CLAIMANT regarding price situation by fax on April 25th 2008.50

However CLAIMANT

did not give the information until May 2th 2008.51

Without the information of price

situation, RESPONDENT was not able to order the goods. Thus, at the time RESPONDENT

had insufficient information to provide shipment schedule or take delivery of goods.

15. In the case of FCF S.A. v. Adriafil Commerciale S.r.l.,52 the cantonal Appellate Court

considered that, on 8 July 1994, buyer had noted without protest that the goods would be

deliverable during the month of August 1994. Many tons of cotton Ne 16/1 and 8/1 had been

unloaded in Genoa on 7 August 1994 by the seller; nonetheless, these goods corresponded

only partly to the subject matter of Contract No. 03162, which required the delivery of

cotton Ne 8/1, 12/1, 16/1, 20/1 and 30/1. Seller did not succeed in establishing an offer to

buyer for the cotton that arrived at Genoa, nor did it ask the buyer to take delivery. If this

ruling is to be applied in the present case, CLAIMANT should delivered the next period by

May 1th 2008. In fact, CLAIMANT failed to deliver the goods at that time.

IV. CLAIMANT had breached the contract by non-conformity goods delivery in

accordance with Article 35 CISG (2)(b)

16. The goods that RESPONDENT received from CLAIMANT on the January product 2008 of

shipment did not fit with RESPONDENT‟s particular purpose (A). Therefore CLAIMANT

is liable to pay damages arising out form nonconforming goods (B).

A. The choline silica delivered did not conform with the RESPONDENT’s particular

purposes.

17. Article 35(2)(b) addresses the sale of goods in which the seller is aware of the particular

purpose for which the buyer will use the goods and the buyer is relying upon the seller to use

skill and judgment to provide the goods. In the present case RESPONDENT had made

known its particular purpose to the CLAIMANT upon the conclusion of the contract (1).

Therefore CLAIMANT could not have been unaware of such particular purpose (2). In

50

[Doc B/9] 51

[Doc B/14] 52

See BGer, 15 September 2000, CISG Online No. 4P.75/2000.

ALSA INDONESIA


fulfilling such particular purpose, RESPONDENT relies on CLAIMANT‟s skill and

judgment. (3)

1. RESPONDENT had made known

RESPONDENT‟s particular purpose is to have Choline Silica which can be sold in US

and EU Market. The European Union Health Authorities imposed a regulation which

limit the content of sodium salt for animal consumption. (BERAPA PERSEN??) The

unwanted transformation of Choline Silica into salt showed that the goods delivered were

not fit with the particular purpose as requireed under the contract.53

The nonconforming

products could not be sold to the market. Consequently even until mid April 2008,

RESPONDENT still had some of the January 2008 products unsold.54

Moreover, As at

mid-April 2008, Part of it was destroyed by EU health authorities for contamination and

the balance was sold as salt (for animal consumption) in Africa and Latin American

countries.55

Since some of the goods had been destroyed by EU due to contamination,

then the RESPONDENT could not sell it to Europe nor US as their market target.

2. The CLAIMANT is aware of the particular purpose for which the buyer will use

the goods

In this present case, CLAIMANT is aware or at least could not have been unaware of the

particular purpose for which the RESPONDENT will use the good.. For this trade was a

part of a routine contract.56

Moreover, the contract expressed clearly as to the quality of

the choline and the methode to assay the Choline57

.

3. RESPONDENT relied on CLAIMANT’s skill and judgment

On the contract, it is stated that they agreed to assay the Choline with Gravimetric

Methods which is one of the techniques that only the expert can do. Thus,

RESPONDENT trust that the CLAIMANT knows and is able to supply the qualities

necessary for this particular purpose.

53

[Doc C/12] 54

[Doc C/6 para.9] 55

Idem., 56

Statement of Thomas Song [Doc C/2] 57

[Doc A/7]

ALSA INDONESIA


B. CLAIMANT is liable to pay damages

18. In the case of Cortem SpA v Controlmatic Pty Ltd,58

Mr Venuti (Buyer) had made

known to Cortem (Seller) that his purpose was to sell the products into the Australian

market by way of wholesale trade. It seems clear that the goods were not fit for that

purpose, because they had not achieved TestSafe certification and, as Buyer later

discovered, they were incapable of certification in their then condition. The judge

decided, therefore, that, by the operation of Art 35(2)(b) of the Vienna Convention, these

products did not conform with the contract pursuant to which they were sold by Seller to

Buyer.

19. In Roland Schmidt GmbH v. Textil-Werke Blumenegg AG case,59

the issue of whether

a Spanish paprika seller had to certify that its product complied with the German Food

Safety Laws demonstrates this nuance. The court found that the seller had prior

knowledge of the laws and, therefore, could not argue that it was ignorant of the

requirement that the goods comply with the German laws. The court held that because

the paprika contained more ethylene oxide than permitted under German law, the goods

failed to conform to the contract and specifically failed to meet the buyer‟s purpose

known to the seller

20. Similiarly with this case, RESPONDENT suffered from the same non-conformity goods

problem. RESPONDENT expected to sell the goods in the EU member‟s countries and

US, while the goods did not pass the test by the EU health authorities. Then

RESPONDENT discovered later that the goods were turn out to be Salt. Thus, it can be

concluded that CLAIMANT had delivered the non-conformity goods in accordance to

Art. 35 (2)(b) Vienna Convention Act (CISG).

21. For the foregoing reasons,CLAIMANT is liable to RESPONDENT in damages

quantified for US$300.000 being the estimated amount RESPONDENT had suffered due

to the contamination in the previous shipment under Contract 03159.

58

CORTEM SPA V CONTROLMATIC PTY LTD [2010] FCA 852 (13 AUGUST 2010) ON HTTP://WWW.AUSTLII.EDU.AU/CGI-

BIN/SINODISP/AU/CASES/CTH/FCA/2010/852.HTML

59 LG Elwangen, 1 KfH O 32/95, available at http://cisgw3.law.pace.edu/cases/950821 g2.html

http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCA/2010/852.html

http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCA/2010/852.html

http://cisgw3.law.pace.edu/cases/950821%20g2.html

Documents

Memorandum for Respondent - ALSA Indonesia