TEAM NO- M2070-R

TEAM NO- M2070-R

6TH ANNUAL

LAWASIA

INTERNATION COMMERCIAL ARBITRATION MOOT

SEOUL, SOUTH KOREA

8-12 OCTOBER 2011

IN THE

KUALA LAMPUR REGIONAL CENTRE FOR ARBITRATION

ASTORIA PRODUCE COMPANY

(CLAIMANT)

Vs

ROLGA FARMER’S EXCHANGE

(RESPONDENT)

MEMORANDUM ON BEHALF OF THE RESPONDENT

(ROLGA FARMER’S EXCHANGE)

-i- MEMORIAL ON BEHALF OF THE RESPONDENT

TABLE OF CONTENTS

LIST OF ABBREVIATIONS ............................................................................................. v

INDEX OF AUTHORITIES ................................................................................ VIII

BOOKS AND SCHOLARLY WORKS ............................................................................ viii

TABLE OF CASES

BELGIUM .............................................................................................................. xii

BERMUDA ............................................................................................................. xii

FINLAND ............................................................................................................... xii

FRANCE ................................................................................................................. xii

GERMANY ............................................................................................................ xii

ICC ARBITRATION CASES.................................................................................. xii

IRAN-US CLAIMS TRIBUNAL ........................................................................... xiii

MEXICO ................................................................................................................ xiii

THE NETHERLANDS........................................................................................... xiii

NEW ZEALAND ................................................................................................... xiii

SWEDEN ............................................................................................................... xiii

SWITZERLAND .................................................................................................... xiii

UNITED STATES.................................................................................................. xiv

UNITED KINGDOM ............................................................................................. xiv

STATEMENT OF JURISDICTION ................................................................................ xv

QUESTIONS PRESENTED ............................................................................................ xvi

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

-ii- MEMORIAL ON BEHALF OF THE RESPONDENT

SUMMARY OF ARGUMENTS ......................................................................................... 4

PLEADINGS ....................................................................................................................... 6

I. KLRCA DOES NOT HAVE THE AUTHORITY TO ADDRESS THIS DISPUTE ................. 6

I.1 DOCTRINE OF SEPARABILITY ....................................................................... 6

I.2. THE RESPONDENTS NEVER AGREED TO THE REVISED FORUM SELECTION

CLAUSE .......................................................................................................... 7

II. THE ARBITRAL TRIBUNAL HAS BEEN IMPROPERLY CONSTITUTED ....................... 9

II.1.THE DIRECTOR UNJUSTIFIABLY DENIED THE RESPONDENT THE

OPPORTUNITY TO SELECT ITS PARTY APPOINTED ARBITRATOR ..................... 9

II.2. ERRONEOUS APPOINTMENT OF THE PRESIDING ARBITRATOR. .................. 10

III. INTERIM MEASURE SHALL NOT BE GRANTED. .................................................. 12

III. 1. IRREPARABLE HARM/SERIOUS INJURY IS ABSENT .................................. 13

III. 2. URGENCY ................................................................................................. 14

IV. THE LAW APPLICABLE IN THE PRESENT CASE IS UNIDROIT ........................... 16

IV. 1. THE UNIDROIT PRINCIPLES ARE APPLICABLE TO THE CONTRACT ..... 16

IV. 1.A. ROLGAN LAW IS APPLICABLE AS PER HAGUE CONVENTION, 1955

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

IV. 1.B. UNIDROIT PRINCIPLES ARE APPLICABLE AS PER ARTICLE 4(1)

OF EU REGULATION NO. 593/2008. .................................................. 17

IV.2. THE ‘CHARACTERISTIC PERFORMANCE’ IS CARRIED OUT BY THE

RESPONDENT......................................................................................... 18

IV. 2.A. THE SHIPMENT OF BANANAS IS DONE FROM ROLGA .............. 19

-iii- MEMORIAL ON BEHALF OF THE RESPONDENT

V. THE RESPONDENT IS NOT IN BREACH OF ITS CONTRACTUAL OBLIGATIONS ...... 19

V.1. THE RESPONDENT’S DUTY ENDED AS SOON AS THE BANANAS WERE LOADED

ONTO M/S PINAFORE ............................................................................ 19

V.2. THE RESPONDENT ENTERED INTO A FOB CONTRACT .............................. 20

V.3. THE RISK PASSED AS SOON AS THE BANANAS WERE LOADED ONTO THE

RAIL OF THE SHIP..................................................................................... 20

V.4. THE BANANAS WERE IN APPARENT GOOD ORDER AND CONDITION AT THE

TIME OF LOADING. ..................................................................................... 21

V.5. MR. SPARROW’S REPORT SHOWS THAT THE BANANAS WERE PROPERLY

PACKED ...................................................................................................... 21

V.6.THE RESPONDENT PERFORMED ITS CONTRACTUAL OBLIGATION BY

RENDERING SPECIAL INSTRUCTIONS TO THE CARRIER ............................... 22

V.7. THE RESPONDENT COMPLIED WITH ARTICLE 5.1.6 OF UNIDROIT BY

SUPPLYING BANANAS OF REASONABLE QUALITY ....................................... 22

V. 7.A. THE BANANAS DELIVERED WERE OF REASONABLE QUALITY .. 23

V.8. CLAIMANT HAS WRONGLY TERMINATED THE CONTRACT ........................ 24

V. 8.A. ARTICLE 7.3.1 (1)-TERMINATION CAN ONLY BE DONE IF

THERE’S FUNDAMENTAL NON-PERFORMANCE ........................ 24

V.8.A.i. THE CLAIMANT WAS NOT SUBSTANTIALLY DEPRIVED OF

HIS CONTRACTUAL EXPECTATIONS ................................ 25

V. 8.A.ii. CLAIMANT COULD HAVE SOLD THE REMAINING 70% OF

THE BANANAS AT A LOWER PRICE ............................... 26

V. 8.A.iii. THE CLAIMANT HAD COULD HAVE CONTINUED WITH THE

CONTRACT.................................................................... 26

V.8.A.iv. THE RESPONDENT COULD NOT HAVE FORESEEN THE

EXCESSIVE RIPENING ................................................... 27

-iv- MEMORIAL ON BEHALF OF THE RESPONDENT

V.8.A.v. M/S PINAFORE IS LIABLE FOR THE RIPENING OF

BANANAS DUE TO IMPROPER STORAGE ......................... 28

VI. THE RESPONDENT DID NOT HAVE THE OBLIGATION TO PROTECT THE BANANAS 28

VI.1. THE CLAIMANT HAD THE OBLIGATION TO PROTECT THE BANANAS

FROM FURTHER SPOILAGE ................................................................ 28

VI.1.A. THE CLAIMANT HAD THE OBLIGATION TO PRESERVE THE

BANANAS .................................................................................. 29

VI. 2. THE CLAIMANT COULD HAVE SOLD THE UNRIPENED BANANAS ........ 30

PRAYER FOR RELIEF ................................................................................................... 31

-v- MEMORIAL ON BEHALF OF THE RESPONDENT

LIST OF ABBREVIATIONS

% Percentage

& And

¶ paragraph

Ad & El Adolphus & Ellis Reports

A.P Astoria Produce Company

A.S. Aksjeselskap (Limited)

BGH Bundesgerichtschoff (German Supreme Court )

CA Cour d‟Appeal (French Court of Appeal)

Cf Confer

CIETAC China International Economic and Trade Arbitration

Commission

CISG United Nations Convention on Contracts for the

International Sale of Goods

CLOUT Case Laws on UNCITRAL Texts

CLR Commonwealth Law Review

Corp Corporation

Ed. Edition

Eg exemplum gratia (for example)

et al. and others

et seq. et sequentia (and the following one)

i.e. id est (that is)

ICC International Chamber of Commerce

ICSID International Centre for Settlement of Investment

Disputes

-vi- MEMORIAL ON BEHALF OF THE RESPONDENT

Inc. Incorporated

Iran-US C.T.R Iran-US Claims Tribunal

J Int‟l Arb Journal on International Arbitration

LG LANDGERICHT

Lloyd‟s Rep Lloyd‟s Law Report

Ltd. Limited

No. Number

NY New York

OGH Oberster Gerichtshoff (Austrian Supreme Court)

OLG Oberlandesgericht (German Upper Regional

Court)

p. page

PO Procedural Order

Q.B. Queen‟s Bench

Re. Ex Respondent‟s Exhibit

Rep reprinted edition

RFA Request for Arbitration

RFE Rolga Farmer‟s Exchange

SA Société Anonyme

SDNY Southern District of New York

St. Def. Statement of Defense

Suppl. Supplement

UN United Nations

UNCITRAL United Nations Commission on International

Trade Law

-vii- MEMORIAL ON BEHALF OF THE RESPONDENT

UNCITRAL EC UNCITRAL Model Law on Electronic

Commerce

UNIDROIT International Institute for the Unification of

Private Law

Univ. University

v. Versus

vol Volume

Y.B. Comm. Arb YearBook of Commercial Arbitration

-viii- MEMORIAL ON BEHALF OF THE RESPONDENT

INDEX OF AUTHORITIES

BOOKS AND SCHOLARLY WORKS

ALAN REDFERN & MARTIN HUNTER, LAW AND PRACTICE OF

INTERNATIONAL COMMERCIAL ARBITRATION (4th ed. 2004) ..................6,11

ALISON E. WILLIAMS, FORECASTING THE POTENTIAL IMPACT OF THE

VIENNA SALES CONVENTION ON INTERNATIONAL SALES LAW IN THE

UNITED KINGDOM": PACE REVIEW OF THE CONVENTION ON CONTRACTS

FOR THE INTERNATIONAL SALE OF GOODS (CISG), ( MAY, 3, 2011),

http://www.cisg.law.pace.edu/cisg/biblio/williams.html........................................... 28

BEATE HERBER & ROLF CZERWENKA, KOMMENTAR ZU DEM

ÜBEREINKOMMEN DER VEREINTEN NATIONEN VOM, 11 APRIL 1980

ÜBER VERTRÄGE ÜBER DEN INTERNATIONALEN WARENKAUF (1991) 31,

DAVID M.SASSOON, CIF & FOB CONTRACTS, BRITISH SHIPPING LAWS,

(4th

ed., 1995) ..................................................................................................... 21,23

DAVID D. CARON, LEE M. CAPLAN, MATTI PELLONPAA, THE UNCITRAL

ARBITRATION RULES, 179( 1st ed. 2006) ....................................................... 10,12

EDWIN PEEL, THE LAW OF CONTRACTS , (12th

ed. 2007) ................................ 8

M. WILL IN COMMENTARY ON THE INTERNATIONAL SALES LAW: THE

1980 VIENNA SALES CONVENTION, CESARE MASSIMO BIANCA AND

MICHAEL JOACHIM BONELL EDS. (1987) ....................................................... 26

-ix- MEMORIAL ON BEHALF OF THE RESPONDENT

GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION, 597(1st

Indian Reprint, 2010) ................................................................. 6,8,11,12,13,14,15,16

HEILMANN, JAN 1994. MÄNGELGEWÄHRLEISTUNG IM UN-KAUFRECHT -

VORAUSSETZUNGEN UND RECHTSFOLGEN IM VERGLEICH ZUM

DEUTSCHEN INTERNEN KAUFRECHT UND ZU DEN HAAGER

EINHEITLICHEN KAUFGESETZEN DUNCKER & HUMBLOT, SCHRIFTEN

ZUM INTERNATIONALEN RECHT, VOL. 67 (1994) .......................................... 22

JAMES FAWCETT, JOHNATHAN HARRIS & MICHAEL BRIDGE,

INTERNATIONAL SALE OF GOODS IN THE CONFLICT OF LAWS, ( 1st ed.

2005) ...................................................................................................................... 19

JEAN-FRANCOIS POUDRET, SEBASTION BESSON, COMPARATIVE LAW OF

INTERNATIONAL ARBITRATION, 332( 2nd

ed. 2007) ....................................... 11

JOHN FELEMEGAS, AN INTERNATIONAL APPROACH TO

INTERPRETATION OF UNITED NATIONS CONVENTION ON CONTRACTS

FOR THE INTERNATIONAL SALES OF GOODS (1980) AS UNIFORM SALES

LAW, 170 (2007) ................................................................................................... 24

JOHN HONNOLD, UNIFORM LAW FOR INTERNATIONAL SALES UNDER

THE 1980 UNITED NATIONS CONVENTION, 4th edition ................................... 24

-x- MEMORIAL ON BEHALF OF THE RESPONDENT

JULIUS VON STAUDINGER , KOMMENTAR ZUM BÜRGERLICHEN

GESETZBUCH MIT EINFÜHRUNGSGESETZ UND ..., VOLUME 8 .................. 25

JULIAN D M LEW, LOUKAS A.MISTELIS & STEFAN M KROLL,

COMPARATIVE INTERNATIONAL COMMERCIAL ARBITRATION, 168 (1st

Indian Reprint, 2007) .................................................................... 6,7,8,9,11,13,14,16

JULIAN D M LEW, COMMENTARY ON INTERIM AND CONSERVATORY

MEASURES IN ICC ARBITRATION CASES ....................................................... 15

JUSTICE CLYDECROFT, THE REVISED UNCITRAL ARBITRATION RULES

OF 2010: A COMMENTARY ................................................................................. 14

LIU CHENGWEI, REMEDIES FOR NON-PERFORMANCE - PERSPECTIVES

FROM CISG, UNIDROIT PRINCIPLES AND PECL, ( JUNE, 23, 2011),

http://www.jus.uio.no/sisu ....................................................................................... 30

MIRGHASEM JAFARZADEH BUYER'S RIGHT TO WITHHOLD PERFORMANCE

AND TERMINATION OF CONTRACT: A COMPARATIVE STUDY UNDER

ENGLISH LAW, VIENNA CONVENTION ON CONTRACTS FOR THE

INTERNATIONAL SALE OF GOODS 1980, IRANIAN AND SHI'AH LAW" (2001).

(AUGUST 1 2011) http://www.cisg.law.pace.edu/cisg/biblio/jafarzadeh1.html ....... 26

MAURO RUBINO-SAMMARTANO, INTERNATIONAL ARBITRATION LAW

AND PRACTICE, 608 (1st Indian Reprint, 2007) ..................................................... 9

PETER HUBER & ALASTAIR MULLIS, THE CISG: A NEW TEXTBOOK FOR

STUDENTS AND PRACTITIONERS, EUROPEAN LAW PUBLISHERS, 2007 .. 28

PETER SCHLECHTRIEM & INGEBORG SCHWENZER, COMMENTARY ON

THE UN CONVENTION ON THE INTERNATIONAL SALE OF GOODS, 2nd

English Edition, 2005 ............................................................................................. 24,

http://www.cisg.law.pace.edu/cisg/biblio/jafarzadeh1.html

-xi- MEMORIAL ON BEHALF OF THE RESPONDENT

PLITZ, INTERNATIONALES KAUFRECHT: DAS UN-KAUFRECHT IN

PRAXISORIENTIERTER DARSTELLUNG 2ND

EDITION ................................... 22

RICHARD AIKENS, RICHARD LORD & MICHAEL BOOLS, BILLS OF

LADING, 28 (2006) ............................................................................................... 22

TABLE OF CASES

BELGIUM

-xii- MEMORIAL ON BEHALF OF THE RESPONDENT

Hof van Beroep [Court of Appeals] Antwerp, M.M. v S.A.P. 18 June 1996 [1993/AR/2935],

(June 18, 2011), http://cisgw3.law.pace.edu/cases/960618b1.html ....................................... 18

BERMUDA

Sojuznefteexport (SNE) v. Joc Oil Ltd, (1990) XV YBCA 384 ............................................. 6

FINLAND

Finnish Decision of Court of Appeal of Helsinki, 3 February 1982/997 .............................. 18

FRANCE

Societe Nouvelle des Papetries de l‟Aa v. BV Machinenfabriek BOA, [1992] NJ 750. ....... 19

GERMANY

24 April 1997 Appellate Court Düsseldorf (Shoes case)

http://cisgw3.law.pace.edu/cases/970424g1.html ............................................................. 28,32

3 April 1996 Supreme Court (Cobalt sulphate case)

http://cisgw3.law.pace.edu/cases/960403g1.html ............................................................. 27,32

ICC ARBITRATION CASES

ICC International Court of Arbitration, Paris, Arbitral Award No. 7375, Dated 5/06/1996, , (

July 26, 2011) http://www.unilex.info/case.cfm?id=625 ...................................................... 17

ICC Case no 8786, 11(1) ICC Bulletin 81 (2000) 83 ........................................................... 16

Interim Award in ICC Case No. 8786, 11(1) ICC Ct. Bull. 81, 83-84 (2000) ....................... 14

Interim Award in ICC Case No. 8894, 11(1) ICC Ct. Bull. 94, 97(2000) ............................ 14

IRAN-US CLAIMS TRIBUNAL

Avco Corp. v. Iran Aircraft Indus., Order in Case No. 261 .................................................. 15

http://cisgw3.law.pace.edu/cases/960618b1.html

http://www.unilex.info/case.cfm?id=625

-xiii- MEMORIAL ON BEHALF OF THE RESPONDENT

Islamic Republic of Iran v. United States of America, Decision No. DEC 116-A15(IV) &

A24-FT, 29 Iran-US C.T.R. 214 (1993). ............................................................................. 14

MEXICO

Arbitral Award dated 30.11.2006, Centro de Arbitraje de México (CAM), ( June 12 2011)

http://www.unilex.info/case.cfm?id=1149 ........................................................................... 26

THE NETHERLANDS

Netherlands Arbitration Institute, 15th October 2002, (26 July 2011)

http://cisgw3.law.pace.edu/cases/021015n1.html ................................................................. 25

Compagnie Europeene Des Petroles SA v. Sensor Nederland (Arrondissementsrechtbank‟s

Gravenhage) (1983) 22 I.L.M. 66 .................................................................................... 19,20

Dutch Decisions of the Courts of Arnhem of 7 February 1980 ............................................. 18

CME Czech Republic BV (The Netherlands) and The Czech Republic, (2003) 15(4) WTAM

83, 89. ............................................................................................................................ 10

NEW ZEALAND

International Housewares Limited v. SEB SA, High Court (Auckland, New Zealand), 31st

March 2003, CISG Online 833 ............................................................................................ 24

SWITZERLAND

Meat Case [Schweizerisches Bundesgericht, Switzerland, 28 October 1998] ( June 25 2011)

http://cisgw3.law.pace.edu/cases/981028s1.html. ............................................................... 27

SWEDEN

Beijing Light Automobile Company Ltd v. Conell Limited Partnership, Stockholm Centre of

Commerce, 5th June 1998, ( 15 July 2011) http://cisgw3.law.pace.edu/cases/980605s5.html ...

25

UNITED STATES

Para-Type Stationery Corp. v. Brandtjen & Kluge, 108 NYS 2d 377 (1951) ....................... 30

J.S Hatcher v. Barlow Ferguson, 33 Idaho 639, 198 Pac. 680 (1921) .................................. 21


http://cisgw3.law.pace.edu/cases/021015n1.html

http://cisgw3.law.pace.edu/cases/981028s1.html


-xiv- MEMORIAL ON BEHALF OF THE RESPONDENT

Prima Paint Corp v. Flood & Conklin Mfg Co 388 US 395 (1967) ....................................... 6

UNITED KINGDOM

British Imex Industries v. Midland Bank Ltd, [1958] 1 Q.B. 542 ......................................... 22

Stock v. Inglis, (1884) 12 QBD 564 .................................................................................... 22

Williams Grant & Sons International Ltd. v. Marine Brizard Espana SA, 1998 SC 536 ....... 19

Beta Computers (Europe) v. Adobe Systems (Europe) 1996 S.L.T. 604. ............................... 8

Jones v. Daniel [1894] 2 Ch. 332. .......................................................................................... 8

Jackson v. Turquand (1869) L.R. 4 H.L. 305. ........................................................................ 8

Northland Aircraft ltd. v. Dennis Ferranti Meters Ltd. (1970) 114 S.J. 845 ............................ 8

North West Leicestershire DC v. East Midlands Housing Association [1981] 1 W.L.R. 1396.

............................................................................................................................................. 8

-xv- MEMORIAL ON BEHALF OF THE RESPONDENT

STATEMENT OF JURISDICTION

The Respondent has approached this Tribunal under Art.16 of the UNCITRAL Model Law

(2006) Revised which recognizes the Kompetenz-Kompetenz doctrine.

-xvi- MEMORIAL ON BEHALF OF THE RESPONDENT

QUESTIONS PRESENTED

1. Does the KLRCA have the authority to resolve the dispute between the parties,

specifically, was there an agreement between the parties to submit this dispute to it?

2. Were the three arbitrators properly appointed, specifically, was RFE improperly

denied the opportunity to select its “party appointed arbitrator and was the Presiding

Arbitrator or Chairman improperly appointed?

3. Does the arbitration panel have the authority to impose sanctions in the Form of a fine

on RFE for failing to appear at the initial hearing and/or for not providing adequate

Notice that it would not appear and?

4. What law or legal principles apply to this dispute?

5. Did the shipment of bananas arrive at its destination in an unsatisfactory condition

due to improper storage during the voyage from Rolga to Astoria and, if so, does this

constitute a breach of the seller‟s obligation under the contract between the parties?

6. . Did either party have a legal obligation to attempt to sell the bananas–or a portion of

them soon after the Pinafore docked at the Port of Astoria?

-1- MEMORIAL ON BEHALF OF THE RESPONDENT

STATEMENT OF FACTS

BACKGROUND

Respondent, The Rolga Farmer‟s Exchange [RFE] is an agricultural cooperative organized

under the laws of Rolga, a large tropical island in the Western Pacific.

Claimant, Astoria Produce Company [AP] is a major distributor of produce to retail grocery

stores throughout Astoria – a large industrialized country approximately 6,000 nautical miles

from Rolga.

15 JULY 2010

The Claimant ordered a large quantity of bananas. Ms. Rocco (on behalf of Respondent) sent

a confirming Bill of Sale (as an email attachment) to Mr. Vogel (for Claimant) indicating the

shipment to be made “FOB Rolga City”. A forum selection clause was also included

designating Western Pacific Rules of Arbitration as the law governing arbitration. The

tribunal was to consist of sole arbitrator and the place of arbitration was designated as Rolga

City.

1 AUGUST 2010 AND 2ND

AUGUST 2010

After the Respondent appointed M/S PINAFORE to carry on the bananas, the Claimant

contacted the respondent specifying the demand of receiving unripened (still green) bananas

which were to be resold to local retail stores in Astoria. The Claimant demanded the bananas

to arrive in excellent condition. The Respondent replied by assuring that the bananas would

arrive in pristine condition.


4 AUGUST 2010

Mr. Vogel on behalf of the Claimant signed the bill of sale and amended the forum selection

clause and designated the venue as Kuala Lampur by designating KLRCA rules to be

applicable to the arbitral tribunal which would comprise of three arbitrators.

20 SEPTEMBER -1 OCTOBER 2010

M/S PINAFORE arrived in Rolga City on September 20, 2010. Loading of the bananas began

the very next day i.e. September 21 2010. On September 23 2010, the captain of the Pinafore,

Renas Vermelho, signed a clean bill of lading prepared by RFE instructing that “This cargo

of bananas must be stored in a cool, dry location with good circulation to prevent spoilage.”

On September 30 2010, the Respondent was paid USD 750,000 for the bananas by the

Farmer‟s Bank of Rolga when it presented a previously furnished Letter of Credit by the

Claimant. On October 1 2010, M/S PINAFORE departed for Astoria.

24 NOVEMBER – 26 NOVEMBER 2010

The bananas arrived at Astoria City on the night of November 24, 2010. Before unloading,

the Claimant inspected the shipment wherein some of the bananas were found to be ripe or

ripening. The most ripening occurred to the bananas stored in the number #2 hold where the

bananas had been packed in boxes. Ripening was less prevalent in the number #1hold, where

the bananas had been stowed [hung] by the stem.

On November 25 2010, Claimant on its inspection found that approximately 30% of the

bananas were ripe or. The ripened state of the bananas was due to the high temperatures at

which they had been transported.


On November 26 2010, based upon the inspection report, the Claimant avoided the contract

by rejecting the entire shipment and notified the same to the Respondent demanding full

refund of purchase price. The Respondent immediately replied admitting the bananas to have

not arrived in pristine condition. However, the respondent rejected its responsibility over the

goods. The bananas were stored in a warehouse as PINAFORE had other ports of call.

1 JUNE 2011-31 JULY 2011

The Claimant commenced arbitration by filing a request for arbitration with the Center

pursuant to Rule 3 of the UNCITRAL Arbitration Rules (2010). It designated Bernard Bodd

as its party appointed arbitrator. The Respondent was notified about the same on June 15,

2011 and along with an enclosed copy of the KLRCA 2010 Rules. After 45 days had elapsed

without RFE making an appointment, the Director appointed Riska Benti, a prominent

Rolgan attorney as the second arbitrator and Judge John Chong, the former Chief Justice of

Malaysia as the presiding arbitrator.

15 AUGUST 2011

An initial hearing was scheduled by the center to hear the disputes. The Director received an

e‐mail from the Respondent stated its inability to appear as it intended to challenge the

authority of the tribunal to hear the dispute and its appearance would be viewed as a waiver

of its right to do so. Another hearing was scheduled on 10 October 2011 by the director to

hear issues on jurisdiction and merits of the dispute. Shortly thereafter, the respondent

notified its party appointed arbitrator Ms Riska Benti, whose appointment was rejected by the

director.


SUMMARY OF ARGUMENTS

I. KLRCA DOES NOT HAVE THE AUTHORITY TO ADDRESS THE DISPUTE

There is no agreement between the Claimant and the Respondent to refer the dispute to

KLRCA. The Respondent never accepted the counter-offer made by the claimant. The

Respondent‟s conduct showed their intention to reject the offer.

II. THE ARBITRAL TRIBUNAL HAS BEEN IMPROPERLY CONSTITUTED

The appointing authority i.e. the director of the KLRCA has improperly appointed the second

arbitrator and the presiding arbitrator. The appointment has been made in violation of the

KLRCA Rules and the UNCITRAL Rules. The Respondent was erroneously denied the

opportunity to appoint its party appointed arbitrator. The presiding arbitrator was also

improperly appointed.

III. INTERIM RELIEF SHALL NOT BE GRANTED

The arbitral tribunal does not have the authority to grant interim measures under the

UNCITRAL Model Law and the UNCITRAL Rules. In the instant matter the claimant has

not suffered any substantial harm, which is a requisite for granting interim relief.

IV. THE LAW APPLICABLE IN THE PRESENT CASE IS UNIDROIT.

The parties did not choose the law applicable to the substantive portion of the contract. In the

absence of such choice the Respondent argues that UNIDROIT shall be applied by the

tribunal as the appropriate law. Art. (3) (a) of The Hague Convention of 1955 being the

Malaysian Private International Law provides for the law of the seller‟s state to be applicable

in such cases.


V. THE RESPONDENT IS NOT IN BREACH OF ITS OBLIGATION UNDER THE CONTRACT.

The Respondent is not in breach of its obligation under Art. 7.1.1 of UNIDROIT Principles,

The claimant required the bananas in excellent condition and the respondent delivered the

bananas in such a condition. Moreover, the claimant has wrongly terminated the contract as

the ripening to the extent of 30% does not amount to fundamental non-conformity.

Furthermore, such a non-conformity did not substantially deprieve the claimant of its

contractual obligation and the claimant could have sold the 70% unripened bananas to its

customers.

VI. THE CLAIMANT WAS NOT OBLIGATED TO SELL THE BANANAS

The respondent entered into a FOB contract with M/S PINAFORE and hence its liability

ended as soon as the bananas were loaded into the ship‟s rail. Furthermore, as per Article

7.1.4 and Article 77 of CISG, the claimant is precluded to claim damages for non-conformity

as the claimant could have taken the delivery of the shipment and preserved the bananas.

Furthermore, the claimant could have sold the ripened bananas to the commercial bakers in

Astoria and the unripened bananas to the retail stores and thereby performed its own part of

the contract.


PLEADINGS

I. KLRCA DOES NOT HAVE THE AUTHORITY TO ADDRESS THIS DISPUTE.

The jurisdiction of the Arbitral Tribunal arises out of a valid arbitration agreement between

Claimant and Respondent.1 In the present matter there is an absence of a valid arbitration

agreement. This can be corroborated since the two are separate and secondly that there was

no consent.

I. 1. DOCTRINE OF SEPARABILITY.

The concept of separability means that the arbitration clause in a contract is considered to be

separate from the main contract of which it forms part and, as such, survives the termination

of that contract.2 The term separability more accurately directs attention to the central role of

the parties‟ intention, as a contractual matter, in forming a separate arbitration agreement.3

Except where the parties otherwise intend, arbitration clauses as a matter of law are

„separable‟ from the contract in which they are embedded.4 The Essence of the Doctrine is

that the validity of the Arbitration Clause is not bound to that of the main contract and Vice-

versa.5

Both Article II(1) and II(2) of New York convention, 1958 rest on the assumption that an

arbitral clause in a contract is itself an agreement dealing with the subject of arbitration.6

Both provisions are most naturally understood as assuming that arbitration clauses will

presumptively be separate agreements.

1ALAN REDFERN & MARTIN HUNTER, LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL

ARBITRATION (4th ed. 2004). 2 Sojuznefteexport (SNE) v. Joc Oil Ltd, (1990) XV YBCA 384, 407. 3 GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION, 315 (1st Indian Reprint, 2010). 4 Prima Paint Corp v. Flood & Conklin Mfg Co 388 US 395 (1967). 5 JULIAM D M LEW, LOUKAS A MISTELIS & STEFAN M KROLL, COMPARATIVE INTERNATIONAL

COMMERCIAL ARBITRATION, 102 (1st Indian Reprint, 2007). 6 Id. at 318.


Also, where the parties agreement to arbitrate is invalid or repudiated, there is at least a

theoretical possibility that the parties underlying contract is thereby also invalidated.7 In

practice, however, there are very few circumstances in which the invalidity of the parties‟

arbitration agreement results in the invalidity of their underlying contract.8

The UNCITRAL Arbitration Rules also recognise this principle as it considers the arbitration

clause to be an agreement independent of the other terms of the contract.9

Similarly in the present matter when we discuss consent to the contract/bill of sale, then such

consent does not carry forward to the arbitration agreement as well.

I. 2. THE RESPONDENTS NEVER AGREED TO THE REVISED FORUM SELECTION

CLAUSE.

It is clear from the above stated that the arbitration clause is a separate agreement in itself

and thus is subject to general principles of law of contract. The Doctrine of separability

requires that the question whether the party consented to the arbitration agreement has to be

determined separately from whether they agreed on the main contract.10

As per the facts at hand the confirmed bill of sale was sent on July 15 2010 to the claimant

and it included a detailed forum selection clause as well.11

After 18 days had elapsed the

claimant signed the contract and revised the forum selection clause, changing the terms

materially.12

An offer accepted by a reply which varies one of its other terms13

or which is

intended to introduce an entirely new term14

is a counter-offer15

which has to be accepted by

7 Id. at 406. 8 Id. 9 UNCITRAL Rules of Arbitration (Revised) 2010, Art.21(2). 10Supra note 5 at 104. 11Moot proposition ¶ 4, pg. 2. 12Further clarification No. 5. 13North west Leicestershire DC v. East Midlands Housing Association [1981] 1 W.L.R. 1396. 14Jackson v. Turquand (1869) L.R. 4 H.L. 305; Northland Aircraft ltd. v. Dennis Ferranti Meters Ltd. (1970) 114

S.J. 845.


the offeror in order for it to be enforceable. Thus the revised forum selection clause sent by

the claimant was a counter offer.

It is fundamental that a party‟s consent to an arbitration agreement is required for that

agreements existence.16

An agreement is made when one party accepts an offer made by the

other.17

In the present matter after the counter offer was made by the claimant, there was no

communication between the respondent and the claimant regarding the acceptance of the

same neither the Respondents have shown any conduct purporting towards an acceptance.

Instead, from the inception of arbitration the respondent‟s behaviour was not in consonance

with the revised forum selection clause.

A Fortiori, there is no acceptance where the offeree‟s conduct clearly indicates an intention to

reject the offer.18

As per the various instances in the present matter, the Respondent party

never responded to the counter offer made by the claimant, on the contrary it can be easily

corroborated from the respondent‟s behaviour in the arbitral process that they did not accept

the terms prescribed in the Counter-Offer.19

The respondents conduct clearly showed their

intention to reject the revised forum selection clause. Hence there was no acceptance on the

part of the respondents for the revised forum selection clause.

As the respondent did not accept the revised clause, there was no agreement between the

parties to submit the dispute to KLRCA. Therefore in the instant matter the KLRCA has no

authority to resolve the dispute between the parties.

II. THE ARBITRAL TRIBUNAL HAS BEEN IMPROPERLY CONSTITUTED

15Jones v. Daniel [1894] 2 Ch. 332. 16Supra note 3 at 655. 17EDWIN PEEL, THE LAW OF CONTRACTS , 9(12th ed. 2007) 18Beta Computers (Europe) v. Adobe Systems (Europe) 1996 S.L.T. 604. 19Moot proposition ¶ 4, pg. 4.


Appointment of arbitrators by the parties is invariably the best method of appointment it

insures that the tribunal will be composed of persons who have the confidence of the

parties.20

More importantly, as the parties are familiar with their case they are more likely to

select appropriate arbitrators than any appointing authority.21

In addition to the nomination of

the party appointed arbitrators in a three member tribunal, often also the appointment of the

chairman or the presiding arbitrator is, in the first instance, submitted to the agreement of the

parties.22

Similarly in the present matter the respondents have been improperly denied the opportunity

to select their own arbitrators as proper procedure prescribed under the UNCITRAL Rules of

Arbitration (2010) has not been followed. This in turn affected the respondent‟s right to

participate in the appointment of the Presiding Arbitrator, thereby constituting an improper

arbitral tribunal.

II. 1.THE DIRECTOR UNJUSTIFIABLY DENIED THE RESPONDENT THE

OPPORTUNITY TO SELECT ITS PARTY APPOINTED ARBITRATOR

Article 9(2) of the UNCITRL Rules of Arbitration (2010) provides that when a three person

panel is to be appointed “each party shall appoint one arbitrator”.23

As per the Provision, 30

Days after a party receives notice of the other parties appointment of an arbitrator, the

notified parties right to appoint its arbitrator continues till the time the parties who has

appointed its arbitrator has requested the appointing authority to appoint the opposing parties

20Supra note 5 at 237. 21MAURO RUBINO-SAMMARTANO, INTERNATIONAL ARBITRATION LAW AND PRACTICE, 608

(1st Indian Reprint, 2007) 22Supra note 20. 23CME Czech Republic BV (The Netherlands) and The Czech Republic, (2003) 15(4) WTAM 83, 89.


arbitrator.24

And even after such a request the appointing authority “may exercise its

discretion its discretion”.25

As per the facts at hand, after 45 days had elapsed without the respondent making an

appointment, the Director Suo Moto, without any request being made by the claimant,

appointed Riska Benti as an arbitrator for the Respondent.26

As per the bare provision under

the UNCITRAL Rules, in case of absence of compliance with the Rules the Appointing

Authority shall take charge only if a request is made by the complying party.27

Since no

request was made in the instant matter,28

it thus amounts to a clear violation of the rules, and

the Respondent has been improperly denied of their right to appoint their arbitrator.

II. 2. ERRONEOUS APPOINTMENT OF THE PRESIDING ARBITRATOR.

In any three-person Tribunal one of the arbitrators is designated as the presiding arbitrator

also referred to as the president or chairman of the tribunal.29

The presiding arbitrator plays a

significant role in establishing and administering the arbitral process, in overseeing

deliberations, in holding the decisive vote and in drafting the award.30

The presiding

arbitrator has a certain weight of office that often means that his or her opinions will be more

influential in principal then that of Co-Arbitrators; where the Presiding Arbitrator is

empowered to issue an award, even without the concurrence of one co-arbitrator, in cases

where no majority exists, his or her authority is further enhanced.31

24DAVID D. CARON, LEE M. CAPLAN, MATTI PELLONPAA, THE UNCITRAL ARBITRATION RULES,

179( 1st ed. 2006) 25UNCITRAL Rules of Arbitration (Revised) 2010, Art.9(2). 26Moot proposition ¶ 4, pg. 4. 27Supra note 25. 28Further clarifications No. 18. 29UNCITRAL Model Law, Art. 11(3)(a); English Arbitration Act, 1996, §15; German ZPO, §1035(3); Japanese

Arbitration Law, Art. 37(3). 30Supra note 3 at 1663. 31Id. at 1666.


Appointment of the presiding arbitrator by the parties has the advantage of ensuring the

greatest possible influence of the parties on the composition of the tribunal.32

Most of the

institutional rules submit the appointment of the presiding arbitrator to the agreement of the

party appointed arbitrators.33

This has the advantage of increasing the probability of a good

working relationship within the tribunal and gives the parties an indirect influence on the

appointment of the presiding arbitrator.34

It is generally accepted that the two party appointed

arbitrators should consult with the parties who appointed them35

. Though they are not bound

by the suggestions of the parties they should avoid appointing a presiding arbitrator

unacceptable to one of the parties.36

Since the constitution of the tribunal is indispensable for any arbitration, all arbitration rules

and national laws, contain detailed provisions dealing with the appointment of arbitrators.37

If

we consider the facts of the matter at hand, after the second arbitrator or the arbitrator for the

respondent was appointed by the director of the KLRCA, no opportunity was given to the two

arbitrators to decide on the presiding arbitrator.38

Instead the director himself went ahead and

appointed the Presiding arbitrator overlapping UNCITRAL Rules for Arbitration, the

UNCITRAL Model Law and the Interest of the Parties involved in this Arbitration.39

The

time limit of 30 days has to be given after the second arbitrator has been appointed in order to

ensure the parties‟ best interest is protected.40

32Supra note 5 at 251. 33Id. 34Supra note 1 at 187. 35JEAN-FRANCOIS POUDRET, SEBASTION BESSON, COMPARATIVE LAW OF INTERNATIONAL

ARBITRATION, 332( 2nd ed. 2007) 36Id. at 333. 37Supra note 3 at 1365. 38Moot proposition ¶ 4, pg. 4. 39Id. 40Supra note 25.


The two party arbitrators, whether appointed by a party or by the appointing authority, “shall

choose the third arbitrator who will act as presiding arbitrator of the tribunal.”41

Thirty days

after the appointment of the second party appointed arbitrator, whether such appointment is

made by a party or by the appointing authority, if the two arbitrators have not been agreed

upon a presiding arbitrator, then only the appointing authority shall appoint the presding

arbitrator in the same way it would appoint a sole arbitrator.42

The aforementioned clearly proves the violation of Art. 9(3) of UNCITRAL Rules of

Arbitration 2010 and Art. 11(3) (a) of UNCITRAL Model Law, as both the arbitrators did not

receive any opportunity to participate in the selection of the presiding arbitrator. From the

facts of the matter it seems that the director of the KLRCA took away the right to select from

the arbitrators and thereby sabotaged the very essence of arbitration.

Therefore, according to the facts and the provisions of UNCITRAL Rules of Arbitration and

UNCITRAL Model Law,43

it can be clearly ascertained that the arbitral tribunal has been

composed in a very unjustifiable manner, without giving due regard to any of the mandatory

provisions. The Director through his decisions has infringed the right of the respondent party

to willingly participate in the arbitral process. Thus it can be concluded that the second

arbitrator and the presiding arbitrator has been improperly appointed.

III. INTERIM MEASURE SHALL NOT BE GRANTED.

As per Art. 26 of the UNCITRAL Arbitration Rules 2010 (Revised) the Arbitral Tribunal do

posses the authority to issue an interim award. The question raised is not with regard to the

41Supra note 24 at 180. 42UNCITRAL Model Law, Art. 11(3); UNCITRAL Rules of Arbitration (Revised) 2010, Art.9(3). 43Id.


authority but whether or not such an authority can be exercised by the tribunal as per the

circumstances at hand.

Interim Measures take various forms, are understood and applied differently and may

encompass different concept and different legal system.44

What interim measures are

appropriate in International Commercial Arbitration is determined according to the specific

facts of each dispute and the arbitrators subjective perception of the risk involved.45

Interim

measures are granted only in limited circumstances, as they can be determinative of the

dispute and may be hard or even impossible to repair.46

They can also be abused as an

offensive weapon to exert pressure on the other side. Hence, what matters are the criteria

according to which interim measures may be granted.47

In order to prove that no interim award shall be issued under the present circumstances,

requisites prescribed under Art. 26(3) of the UNCITRAL Rules of Arbitration 2010 (Revised)

have to be negated. Firstly, it will be shown that there was no irreparable harm caused and

secondly, there is no reasonable possibility that the Claimant will succeed on the merits of the

claim.

III. 1. IRREPARABLE HARM/SERIOUS INJURY IS ABSENT

In practice, arbitral tribunals apply relatively straight forward standards to request for

provisional relief.48

Stated generally, most International Arbitral Tribunals require showings

of (a) Serious or irreparable harm to the claimant; and (b) urgency.49

In particular, some

provisional measures, as prescribed under Art. 26 (2) of UNCIRAL Rules for Arbitration

44Supra note 5 at 586. 45Supra note 3 at 1943. 46Id. at 1981. 47Supra note 5 at 586. 48Supra note 3 at 1980. 49Id. at 1981.


2010 (Revised), will typically require strong showings of serious injury, urgency and a prima

facie case.50

The first requirement which has to be corroborated by the requesting party is that they have

suffered harm which is irreparable or serious in nature. This is prescribed under Art. 26(3)(a)

of UNCITRAL Rules of Arbitration. The arbitral tribunal may only order provisional

measures, if the requesting parties have substantiated the threat of a not easily repairable

prejudice.51

Irreparable harm has to be understood in the sense that it may be caused if an interim award is

not given.52

The Respondent in the present matter responded to the notice less than an hour

before the hearing.53

The reason behind such behaviour can be simply understood as the

respondent party intended to challenge the authority of the tribunal and was concerned that an

appearance would be viewed as the waiver of its right to do so, hence in order to come to

such a conclusion legal advice was inevitable. The point to be taken into consideration here is

that such behaviour can not cause irreparable harm or serious injury to the claimant, or if an

interim award in the form of a sanction is not awarded then an irreparable or serious injury

would be caused to the claimant party.

III. 2. URGENCY

The tribunal must be persuaded that immediate or at least prompt action is necessary to

prevent serious or irreparable damage to the claimant.54

Provisional measures will only be

50Id. 51Interim Award in ICC Case No. 8786, 11(1) ICC Ct. Bull. 81, 83-84 (2000); Interim Award in ICC Case No.

8894, 11(1) ICC Ct. Bull. 94, 97(2000); Islamic Republic of Iran v. United States of America, Decision No.

DEC 116-A15(IV) & A24-FT, 29 Iran-US C.T.R. 214 (1993). 52Julian D M Lew, Commentary on Interim and Conservatory Measures in ICC Arbitration Cases, 11(1) ICC

Ct. Bull. 23, 28 (2000). 53Moot proposition ¶ 5, pg. 4. 54Supra note 3 at 1986.


appropriate where a question cannot await the outcome of the award on the merits.55

When

the facts are considered in the instant matter, it can be inferred that there is no urgency to

issue an interim award for the claim, as the compensation (if any) could be accommodated

along with the final award. If the possibility of the damage remains contingent, or capable of

being avoided or mitigated in other ways, tribunals should generally not intrude into the

parties‟ relations.56

What degree of urgency is required depends on the impact the provisional measures sought

would have on the other party.57

The tribunal in every case must seek to balance the

conflicting interests involved.58

The urgency requirement is closely related to the “serious

harm”59

requirement: just as relief prior to a final award is generally not ordered, save to

prevent serious damage from occurring during the course of proceeding, so pre-award relief

is generally not ordered until such time as it is necessary to prevent such serious damage from

taking place.60

Since both the requirements are considered together by the tribunal, and both are not met in

the present circumstances, it would be wise to conclude that even though the tribunal

possesses the authority to issue interim relief yet it can‟t as the grounds enshrined under Art.

26(3) of UNCITRAL Rules of Arbitration 2010 (Revised) have not been met.

IV. THE LAW APPLICABLE IN THE PRESENT CASE IS UNIDROIT

55Id. 56Avco Corp. v. Iran Aircraft Indus., Order in Case No. 261; Supra note 24 at 548. 57Supra note 5 at 605. 58ICC Case no 8786, 11(1) ICC Bulletin 81 (2000) 83. 59UNCITRAL Rules of Arbitration (Revised) 2010, Art. 26(3)(a). 60Supra note 3 at 1987.


In the present matter the parties have failed to chose the applicable law to govern the

contract. The Respondent argues that it is the UNIDROT principles of International

Commercial Contracts which should be applicable. It is submitted that it is RFEs position to

apply general principles of law as enunciated under the UNIDROIT principles.

IV. 1. THE UNIDROIT PRINCIPLES ARE APPLICABLE TO THE CONTRACT

It is submitted that the in the present case, the parties have failed to choose to a law

governing the substantive part of their contract. Hence, in such a case of absence of choice of

substantive law, the respondent argues that UNIDROIT Principles are applicable to govern

the contract. If the parties have not chosen the law governing their contract, it has to be

determined on the basis of the relevant rules of private international law. In the context of

international commercial arbitration such rules are very flexible, permitting arbitral tribunals

to apply “the rules of law which they determine to be appropriate.”61

Hence, in the present

case, the respondent argues that as per the Hague Convention on International Sales of

Goods, 1955 which governs the Private International Law Rules of the Forum State, it is the

law of the Respondent‟s country i.e. Rolga, which is applicable to govern the contract.

It has been held that when a contract is silent as to applicable law, the Arbitral Tribunal made

a reference to the UNIDROIT Principles as General Principles and Rules of Law applicable

to international contractual obligations which qualify as rules of law and which have earned a

wide acceptance and international consensus in the international business community.62

It is

submitted in the present case, that both the parties admit that it is RFEs position to apply

General Principles of International Law to the merits of the dispute. Hence, in such a

situation, UNIDROIT Principles become the law applicable to the contract.

61UNIDROIT Official Comments (July 7, 2011) http://www.unilex.info/dynasite.cfm? Dssid =2377 &dsmid =

13637 62ICC International Court of Arbitration, Paris, Arbitral Award No. 7375, Dated 5/06/1996, , ( July 26, 2011)


http://www.unilex.info/dynasite.cfm?%20Dssid%20=2377%20&dsmid%20=%2013637

http://www.unilex.info/dynasite.cfm?%20Dssid%20=2377%20&dsmid%20=%2013637



IV. 1.A. ROLGAN LAW IS APPLICABLE AS PER HAGUE CONVENTION,

1955.

It is submitted that Hague Sales Convention, 1955 will be applicable to determine the choice

of law rules applicable to a contract of sale falling within the scope of that convention.63

Article 3(1) of the Hague Convention, 1955 provides that in default of a law declared

applicable by the parties, a sale of goods shall be governed by the domestic law of the

country in which the vendor has his habitual residence at the time when he receives the

order.64

Hence, it makes it clear beyond any reasonable doubt that in the absence of a choice

of law between the parties, it is the Domestic Law of Rolga which will be applicable to

govern the contract. As per The Hague Convention, if the parties did not choose the

applicable law, then the sale is governed by the internal law of the country where the seller

has his habitual residence at the moment he receives the order.65

IV. 1.B. UNIDROIT PRINCIPLES ARE APPLICABLE AS PER ARTICLE

4(1) OF EU REGULATION NO. 593/2008.

Rolga has enacted a law governing choice of law which is identical to Articles 3 and 4 of the

European Community Regulation No 593/2008 on the law applicable to contractual

obligations. As per Article 4(1) of European Community Regulation No. 593/2008, the law

governing the contract for the sale of goods shall be governed by the law of the country

where the seller has his habitual residence. Hence, a contract for sale of goods shall be

governed by the law of the country where the seller has his habitual residence.

63C Saf,, A Study of interplay between the Conventions Governing International Contracts of Sale, ( June 25

2011), www.cisg.law.pace.edu/csig/text/saf90.html. 64Finnish Decision of Court of Appeal of Helsinki, 3 February 1982/997 and the Dutch Decisions of the Courts

of Arnhem of 7 February 1980. 65Hof van Beroep [Court of Appeals] Antwerp, M.M. v S.A.P. 18 June 1996 [1993/AR/2935], ( June 18, 2011),


http://www.cisg.law.pace.edu/csig/text/saf90.html



IV. 2. THE ‘CHARACTERISTIC PERFORMANCE’ IS CARRIED OUT BY THE

RESPONDENT.

It is submitted that the characteristic performance in the present case is carried out by the

Respondent. „Characteristic performance‟ is explained to mean the main obligation for which

the money is due.66

It has been held that in a contract for sale of goods, the characteristic

performance is that of the seller.67

It has been held that in this respect, it matters not whether

the contract is FOB, CIF or other sale terms.68

In a dispute between a French Purchaser and a

Dutch Seller concerning the supply of the parts of an oil-pipeline, the Court applied Dutch

Law stating that the characteristic performance was the supply of goods and therefore the

applicable law is the law of the country of principal place of business of the seller.

In the present case as well, the characteristic performance is the sale of bananas, been

performed by the Respondent, hence it is the Rolgan Domestic law i.e. UNIDROIT Principle

which is applicable to the case.69

It is further submitted that UNIDROIT Principles are applied

to contracts in Rolga as part of their domestic law. The Respondent is an agricultural co-

operative society organised under the Laws of Rolga.70

Furthermore, the shipment of bananas

was done from Rolga City. Therefore, the law applicable is UNIDROIT which is applied to

contracts in Rolga as a part of their domestic law.

VI. 2.A. THE SHIPMENT OF BANANAS IS DONE FROM ROLGA

66 JAMES FAWCETT, JOHNATHAN HARRIS & MICHAEL BRIDGE, INTERNATIONAL SALE OF

GOODS IN THE CONFLICT OF LAWS, 698 ( 1st ed. 2005). 67Williams Grant & Sons International Ltd. v. Marine Brizard Espana SA, 1998 SC 536 68Societe Nouvelle des Papetries de l‟Aa v. BV Machinenfabriek BOA, [1992] NJ 750. 69 Compagnie Europeene Des Petroles SA v. Sensor Nederland (Arrondissementsrechtbank‟s Gravenhage)

(1983) 22 I.L.M. 66 70Moot Proposition, ¶1 p.2


The bill of sale sent by the Respondent to the Claimant indicated that the shipment was to be

made „FOB Rolga City‟.71

It has been held that the country of shipment is treated as the place

of performance of the contract by delivery of on board the ship.72

It was further held that the

idea of shipment at the stipulated port was the most important act of performance of an FOB

contract.73

It is submitted that in the present case it is the Respondent who has performed the

characteristic obligations of the contract by delivering the bananas to the claimant through an

FOB contract with M/S PINAFORE. Hence, it makes it clear without any doubt that it is

Rolga wherein characteristic performance has taken place and hence it is the Rolgan Law i.e.

UNIDROIT that is applicable.

V. THE RESPONDENT IS NOT IN BREACH OF ITS CONTRACTUAL OBLIGATIONS

Article 7.1.1 of UNIDROIT Principles provides that non-performance is failure by a party to

perform any of its obligations under the contract, including defective performance or late

performance. It is submitted that the respondent confirmed to its contractual obligation by

delivering the bananas in unripened condition in the requisite quantity. Furthermore, the

claimant mentioned that the bananas that were needed had to be in excellent condition. It is

submitted that bananas delivered conformed to this requirement as approximately 70% of the

bananas were in unripened condition as demanded by the claimant.

VII. 1. THE RESPONDENT’S DUTY ENDED AS SOON AS THE BANANAS WERE

LOADED ONTO M/S PINAFORE.

71Moot Proposition ¶ 3, p. 2. 72 Compagnie Europeene Des Petroles SA v. Sensor Nederland (Arrondissementsrechtbank‟s Gravenhage)

(1983) 22 I.L.M. 66; 73Id.


The Respondent arranged M/S PINAFORE for the shipment of bananas and duly informed

the Claimant.74

It is submitted that as to the duty of loading, under strict interpretation

pertains to the fact that the seller‟s responsibility for the goods terminates at the time of their

passing the ship‟s rail.75

Hence, as soon as the bananas were loaded onto M/S PINAFORE,

the respondent was absolved of any liability for the damage that the bananas incur due to

improper storage in the ship.

V. 2. THE RESPONDENT ENTERED INTO A FOB CONTRACT

It is submitted that the Respondent shipped the bananas FOB Rolga City. It has been held

that,76

where the goods sold FOB railroad cars could not be carried to their contemplated

destination because of an embargo placed by the railway company prior to delivery, the risk

was held to fall on the buyer. The fact that the seller was to secure the carriage was held to be

immaterial.77

For it was said that when the FOB seller enters into a contract with the carrier

for shipment to a particular destination he acts as an agent for the buyer and any risk thereon

has to be borne by the buyer.78

V. 3. THE RISK PASSED AS SOON AS THE BANANAS WERE LOADED ONTO THE

RAIL OF THE SHIP.

It is submitted that since the seller has shipped the goods FOB as required by the agreement;

it is the buyer who insures them; upon payment in the stipulated manner the buyer acquires

and the seller loses, all interests in the goods.79

Furthermore, it has been held that

notwithstanding the fact that no property in sugar had passed prior to the loss, the term FOB

74Moot Proposition ¶ 8, p. 2. 75S. 442, Institute of Export-definition of seller‟s obligation S.4 76J.S Hatcher v. Barlow Ferguson, 33 Idaho 639, 198 Pac. 680 (1921) 77Id. 78Id. 79DAVID M. SASSOON, CIF AND FOB CONTRACTS, 452 (4th ed., 1995).


in a contract made in the circumstances described meant that the sugar was shipped at the risk

of the buyer who was liable to pay the price irrespective of whether the sugar arrived or not.80

V. 4. THE BANANAS WERE IN APPARENT GOOD ORDER AND CONDITION AT THE

TIME OF LOADING.

Captain Vermelho of the M/S PINAFORE, signed a clean bill of lading prepared by the

respondent, on September 23, 2010.81

A clean bill of lading is the one which bears no claise

ot notation which expressly declares a defective condition of the goods and/or the

packaging.82

It is further submitted that clean means „a bill that does not contain any

reservation as to the apparent good order and condition of the goods or the packing.‟83

V. 5. MR. SPARROW’S REPORT SHOWS THAT THE BANANAS WERE PROPERLY

PACKED

It is submitted that as per the inspection conducted by Mr. John Sparrow, „the bananas were

properly packed in boxes or cardboard cartons especially designed for and used in the

transporting of bananas and that they were well ventilated and their construction in no way

damaged the bananas.84

Hence, the problem was not with the cartons in which the bananas

were packed but the way in which they were stored in the holds of the ship. It is further

submitted that if the goods have crossed the rail and the damage occurs before they are safely

on board, say as a result of an accident while still in mid-air, that damage would probably be

held to be for the account of the buyer and not the seller.85

80Stock v. Inglis, (1884) 12 QBD 564 81Moot Proposition ¶ 8, p. 2. 82RICHARD AIKENS, RICHARD LORD & MICHAEL BOOLS, BILLS OF LADING, 28 (2006). 83British Imex Industries v. Midland Bank Ltd, [1958] 1 Q.B. 542 84Moot Proposition, ¶ 6, p. 3. 85Supra note 79 at 463.


It is further submitted that as per Mr. Sparrow‟s inspection report, the bananas were damaged

due to high temperatures at which they were transported.86

Hence, it is clear beyond any

doubt that the excessive ripening the bananas suffered was due to the improper storage in the

ship for which the respondent bears no liability.

V. 6. THE RESPONDENT PERFORMED ITS CONTRACTUAL OBLIGATION BY

RENDERING SPECIAL INSTRUCTIONS TO THE CARRIER

The respondent is an experienced firm in ocean shipping and has never encountered a

problem in the past.87

As soon as M/S PINAFORE docked at the port of Rolga, the

respondent made sure that the loading of the bananas is done immediately and adequately.

Furthermore, in pursuance of the communication between the respondent and the claimant,88

the respondent included a special instruction in the bill of lading underlying the importance of

good air circulation required for the proper transport of the cargo of bananas.89

Hence, the

respondent conformed to its contractual obligation by specifically instructing the carrier

about the special care required for the bananas and as such the damage to the bananas which

was due to high temperatures during the transport does not make the respondent liable.

V. 7. THE RESPONDENT COMPLIED WITH ARTICLE 5.1.6 OF UNIDROIT BY

SUPPLYING BANANAS OF REASONABLE QUALITY.

Article 5.1.6 of UNIDROIT Principles states that where the quality of performance is neither

fixed by, nor ascertainable from the contract, a part is bound to render a performance of a

86Moot Proposition, ¶ 4, p. 3. 87Id .at 8. 88Id. 89Moot proposition, ¶ 8, p. 2.


quality that is reasonable and not less than average in the circumstances.90

It is submitted that

Article 5.1.6 refers to reasonable quality rather than average quality and as such the price and

expectation of the parties should to be taken into consideration.91

The shipment received by

the claimant consisted of 70% of bananas which were in unripened condition which were fit

for resale.

V. 7.A. THE BANANAS DELIVERED WERE OF REASONABLE QUALITY.

It is submitted that Article 5.1.6 which is used to supplement Article 35(2) (a) of CISG,92

provides that the goods must be fit for commercial purposes and it must be possible to resell

them.93

Furthermore, the fitness of the goods for other purposes for which they would

ordinarily be used must be decided by reference to the objective view of the person in trade

sector concerned.94

As per Mr. Sparrow‟s inspection report, the 70% unripened bananas were

fit to be resold to the Astorian grocery stores.95

As per the communication between the claimant and the respondent dated 1st August 2010,

96

the claimant demanded that the bananas required to be delivered must be in excellent

condition. It is further submitted that „reasonable quality‟ focuses on the justifiable

expectations of the buyer.97

Hence, it is submitted that the shipment which reached the

claimant consisting of 70% unripened bananas was perfectly resalable to the already

90 Official Commentary on Article 5.1.6 of UNIDROIT Principles, ( 28 June 2011) http:/ /unilex.info

dynasite.cfm?dssid=2377&dsmid=13637&x=1 91 JOHN FELEMEGAS, AN INTERNATIONAL APPROACH TO INTERPRETATION OF UNITED

NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALES OF GOODS (1980)

AS UNIFORM SALES LAW, 170 (2007). 92Id. at 169. 93 International Housewares Limited v. SEB SA, High Court (Auckland, New Zealand), 31st March 2003, CISG

Online 833. 94PETER SCHLECHTRIEM & INGEBORG SCHWENZER, COMMENTARY ON THE UN CONVENTION

ON THE INTERNATIONAL SALE OF GOODS, 417 (2nd English Edition, 2005). 95 Further Corrections and clarifications, ¶ 16. 96 Moot Proposition Exhibit 1, p. 7. 97 Netherlands Arbitration Institute, 15th October 2002, (26 July 2011) http:// cisgw3.law.pace.edu

/cases/021015n1.html; Beijing Light Automobile Company Ltd v. Conell Limited Partnership, Stockholm

Centre of Commerce, 5th June 1998, ( 15 July 2011) http://cisgw3.law.pace.edu/cases/980605s5.html



established customer base of the claimant i.e. the retail stores in Astoria and as such met the

quality requirements.

V. 8. CLAIMANT HAS WRONGLY TERMINATED THE CONTRACT.

The Respondent submits that the claimant has wrongly terminated the contract. Article 7.3.5

(1) of UNIDROIT Principles states that “a party may terminate the contract where the failure

of the other party to perform an obligation under the contract amounts to a fundamental non-

performance.” Although the CISG uses the term "avoidance" of contract,98

whereas the

UNIDROIT Principles of International Commercial Contracts use the term "termination" of

contract,99

both sets of rules deal with the same situation: one party has lost its interest in the

contract due to a fundamental impairment in the performance of the other party and puts an

end to the contract

V. 8.A. ARTICLE 7.3.1 (1)-TERMINATION CAN ONLY BE DONE IF

THERE’S FUNDAMENTAL NON-PERFORMANCE.

Sub-paragraph 2(a) of Article 7.3.1 of UNIDROIT Principles states that in determining

whether a failure to perform an obligation amounts to a fundamental non-performance regard

shall be had in particular to whether the non-performance substantially deprives the aggrieved

party of what he was entitled under the contract unless the other party did not foresee and

could not reasonably have foreseen such result. Criteria for determining whether non-

98Convention on International Sale of Goods, Art. 49, Art. 64 & Arts 81 to 84. 99 UNIDROIT Principles. Arts 7.3.1 to 7.3.6; Ernst v. Caemmerer, Internationale Vereinheitlichung des

Kaufrechts, Schweizerische Juristen-Zeitung, 257, 264 (1981); Christoph Coen, Vertragsscheitern und

Rückabwicklung - Eine rechtsvergleichende Untersuchung zum englischen und deutschen Recht, zum UN-

Kaufrecht sowie zu den Unidroit Principles und den Principles of European Contact Law, 210, 211 and at 225,

226 (2003).


performance is fundamental, it is to be ascertained that such non-performance substantially

deprives the other party of its expectations.100

V. 8.A.i. THE CLAIMANT WAS NOT SUBSTANTIALLY DEPRIVED

OF HIS CONTRACTUAL EXPECTATIONS

It is submitted that as per the communication between the claimant and the respondent, the

claimant demanded the bananas to be in unripenend (still green) condition. As per the

inspection carried out by Mr. Sparrow, approximately 30 % of the bananas were ripe or

ripening.101

However, the rest 70% of the bananas were still obtained by the claimant in an

unripened condition. The substantial detriment itself is characterized by three aspects: in the

end, and that is the decisive element, there has to be a relevant detriment to the aggrieved

party; it has to be fundamental; and proportionate to the expectations justified under the

contract.102

It is submitted that in order to determine the degree of a given detriment, to draw the line

between substantial and insubstantial, regard must be had to the terms of the contract.103

Court decisions on this point have found that a non-conformity concerning quality remains a

mere non-fundamental breach of contract as long as the buyer without unreasonable

inconvenience can use the goods or resell them even at a discount.104

The Claimant ordered

the bananas to resell them to retail grocery stores in Astoria and as such the bananas that were

100 Arbitral Award dated 30.11.2006, Centro de Arbitraje de México (CAM), ( June 12 2011)

http://www.unilex.info/case.cfm?id=1149 101 Moot proposition, ¶ 4, p. 3. 102 Mirghasem Jafarzadeh, Buyer's Right to Withhold Performance and Termination of Contract: A Comparative

Study Under English Law, Vienna Convention on Contracts for the International Sale of Goods 1980, Iranian and Shi'ah Law" (2001). (August 1 2011) http://www.cisg.law.pace.edu/cisg/biblio/jafarzadeh1.html

103 Albert H. Kritzer, General observations on use of the UNIDROIT Principles to help interpret the CISG,(

June 16 2011), http://www.cisg.law.pace.edu/cisg/text/matchup/general-observations.html. 104 Cobalt Sulphate Case. [Bundesgerichtshof, Germany, 3 April 1996], (July 17 2011) http://

cisgw3.law.pace.edu /cases/960403g1.html; Meat Case [Schweizerisches Bundesgericht, Switzerland, 28

October 1998], ( June 25 2011) http://cisgw3.law.pace.edu/cases/981028s1.html.


http://www.cisg.law.pace.edu/cisg/biblio/jafarzadeh1.html

http://www.cisg.law.pace.edu/cisg/text/matchup/general-observations.html



conforming to the contractual description could have easily been resold by the claimant to its

customers without any unreasonable inconvenience whatsoever.

V. 8.A.ii. CLAIMANT COULD HAVE SOLD THE REMAINING 70%

OF THE BANANAS AT A LOWER PRICE

The claimant argues that it would not have been able to net more than $250,000 in the

condition in which it received the bananas, as per opinion of Mr. Sparrow. However, it has

been held that the delivery of frozen meat that was too fat and too moist, and that

consequently was worth 25.5 per cent less than meat of the contracted quality (according to

an expert opinion), was not regarded as a fundamental breach of contract since the buyer had

the opportunity to resell the meat at a lower price or to otherwise process it.105

It is submitted

that, even if the claimant received the bananas which ripened to the extent of 30%, would

have still been able to sell the remaining 70% bananas at a lower price.

V. 8.A.iii. THE CLAIMANT HAD COULD HAVE CONTINUED WITH

THE CONTRACT

It is submitted that there is a fundamental breach of contract, if the injured party has no

further interest in the performance of the contract after the particular breach; and thus

suggests not merely a substantial or material breach of contract, or one which substantially

impairs the value of the contract to the injured party, but a breach which goes to the root of

the contract.106

The respondent submits that the claimant has its principal line of business of

selling agricultural produce to the retail stores in Astoria. The shipment of bananas contained

almost 70% unripened bananas. Hence, the claimant in furtherance of its principal business,

105 Meat Case [Schweizerisches Bundesgericht, Switzerland, 28 October 1998] ( June 25 2011) http://cisgw3.

law.pace.edu/cases/981028s1.html. 106 Alison E. Williams, Forecasting the Potential Impact of the Vienna Sales Convention on

International Sales Law in the United Kingdom": Pace Review of the Convention on Contracts for the

International Sale of Goods (CISG), (May, 3, 2011), http:// www.cisg.law.pace.edu

/cisg/biblio/williams.html.


could have sold the unripened bananas to its customers and thereby put the bananas into their

intended use instead of avoiding the entire shipment.

V. 8.A.iv. THE RESPONDENT COULD NOT HAVE FORESEEN THE

EXCESSIVE RIPENING

The second requirement of fundamental non-performance is „foreseeability‟. It is submitted

that the Respondent could not have foreseen the excessive ripening of the bananas during the

shipment. The element of foreseeability depends on the time of the conclusion of the

contract.107

It is in line with the purpose of the forseeability rule, which is to enable the

promising party to assess its liability risks at the time of conclusion of the contract.108

The non-performing party is liable only for harm which it foresaw or could reasonably have

foreseen at the time of the conclusion of the contract as being likely to result from its non-

performance. It is submitted that the respondent undertook to arrange for the carrier M/S

PINAFORE to carry the bananas to Astoria in conformity with the customary practices of

international trade.109

M/S PINAFORE was a general purpose cargo ship frequently used for

carrying agricultural produce including bananas. Furthermore, even in the past no problems

regarding excessive ripening of produce had ever occurred.110

It is further submitted that the Respondent has used M/S PINAFORE for shipping bananas

and other agricultural produce in the past on numerous occasions without any complaints

regarding damage to the cargo.111

Hence, to ensure proper delivery, the respondent utilised

the services of M/S PINAFORE to make sure that the bananas reach the claimant in pristine

condition keeping in mind the satisfactory service rendered by M/S PINAFORE in the past

107 Shoes Case, German OLG Dusseldorf, 24th April 1997, (June, 18, 2011) http:// cisgw3.law.pace.edu

/cases/970424g1.html. 108 PETER HUBER & ALASTAIR MULLIS, THE CISG: A NEW TEXTBOOK FOR STUDENTS AND

PRACTITIONERS, 216 (2007). 109 Further Corrections and Clarifications, p.1. 110 Corrections and Clarifications, ¶ A 1. 111 Corrections and Clarifications, ¶B.2.


and as such the alleged damage which occurred during the voyage was not foreseeable by the

respondent.

V. 8.A.v. M/S PINAFORE IS LIABLE FOR THE RIPENING OF

BANANAS DUE TO IMPROPER STORAGE

It is submitted that although the bananas were found to be ripening during the inspection

carried out on November 24, 2010, the Respondent is not liable for the ripening. Article 5 of

the Hamburg Rules, 1978 provides that the carrier is liable for the loss resulting from loss of

or damage to the goods if the occurrence which caused the loss, damage or delay took place

while the goods were in his charge.

VI. THE RESPONDENT DID NOT HAVE THE OBLIGATION TO PROTECT THE BANANAS

It is submitted that as soon as the bananas passed on to the ship‟s rail, the obligation of the

respondent ended. In all cases where the seller has in the performance of his contract put the

goods FOB, the risk is immediately transferred to the buyer.112

Thus, as soon as the cargo of

bananas was put onto the ship‟s rail by the respondent in pursuance of the contract, the risk

passed on to the Claimant and as such the bananas were on the claimant‟s sphere of control.

VI. 1. THE CLAIMANT HAD THE OBLIGATION TO PROTECT THE BANANAS FROM

FURTHER SPOILAGE

The bananas arrived at Astoria City on the night of November 24 2010. Subsequently, the

consignment was inspected on the very next day and the claimant rejected the entire shipment

of bananas in furtherance of the inspection report.113

Article 7.4.8 of UNIDROIT Principles

112 Para-Type Stationery Corp. v. Brandtjen & Kluge, 108 NYS 2d 377 (1951) 113 Moot Proposition, ¶ 8, p. 3.


and Article 77 of CISG in general point out the necessity of mitigation of damages by stating

that the non-performing party is not liable for harm suffered by the aggrieved party to the

extent that the harm could have been reduced by the latter party‟s taking reasonable steps.

The purpose of this article is to avoid the aggrieved party passively sitting back and waiting

to be compensated for harm which it could have avoided or reduced.114

Any harm which the

aggrieved party could have avoided by taking reasonable steps will not be compensated.115

It

would be unreasonable from the economic standpoint to permit an increase in harm which

could have been reduced by the taking of reasonable steps.116

VI. 1.A. THE CLAIMANT HAD THE OBLIGATION TO PRESERVE THE

BANANAS

Mr. Sparrow‟s report clearly indicated that 70% of bananas were still in unripened (still

green) condition, which met the contractual requirements of the claimant. It is submitted that

in the case of delivery of goods which are not in conformity with the contract, the buyer may

be obliged to repair the defective goods or to prevent it from worsening and further spoilage

or to avoid consequential losses.117

It is submitted that after the bananas were unloaded and stored in a warehouse, the Claimant

was duly notified to collect the bananas within 48 hours as the warehouse would not have

been responsible for their storage. However, there being no response from the claimant, the

bananas ripened further and had to be ultimately dumped in entirety.118

Hence, it is clear that

the claimant had an obligation to preserve the bananas which were in unripened condition and

114 Liu Chengwei, Remedies for Non-performance - Perspectives from CISG, UNIDROIT Principles and PECL,

244 ( June, 23, 2011), http://www.jus.uio.no/sisu/. 115 Id. 116 Official Comment 1 on Art. 7.4.8 UPICC. 117 BEATE HERBER & ROLF CZERWENKA, KOMMENTAR ZU DEM ÜBEREINKOMMEN DER

VEREINTEN NATIONEN VOM, 11 APRIL 1980 ÜBER VERTRÄGE ÜBER DEN

INTERNATIONALEN WARENKAUF (1991) Art. 77, para 6. 118 Moot proposition, ¶ 3, p. 4.


the claimant‟s act of blatantly refusing to take over the shipment and not preserving them

from further spoilage amounts to non-performance of an obligation.

VI. 2. THE CLAIMANT COULD HAVE SOLD THE UNRIPENED BANANAS

The main purpose for which the claimant purchased unripened bananas was to resell them to

grocery stores in Astoria.119

As per Mr. Bartolo‟s report, those bananas which were still green

could have been sold to the grocery stores.120

It has been held that the buyer does not have a

right to terminate a contract if he can resell the goods in the ordinary course of business,

albeit for a lower price.121

Furthermore, in a contract involving delivery of meat, wherein the

value of the meat was about 25% less than what was agreed, it was held that there was no

fundamental breach as the delivered meat could have been reasonably resold on by the buyer

which might then have been compensated by a claim for damages.122

It is submitted that the

Claimant was clearly in a position to sell the remaining 70% of the unripened bananas to its

customers in Astoria in its normal course of business.

119 Moot proposition, p. 7. 120 Further Corrections and Clarifications, ¶. 16. 121 Supra note 104. 122 Supra note 105.


PRAYER FOR RELIEF

We respectfully make the above submissions on behalf of our client Rolga Farmer‟s

Exchange. The RESPONDENT requests the tribunal to find that:

1. There is no Agreement between Astoria Produce Company and Rolga Farmer

Exchange conferring the authority on the tribunal to resolve the dispute.

2. The Arbitral tribunal has been improperly constituted.

3. The arbitral tribunal does not have the authorty to impose a fine on Rolga Farmer

Exchange.

4. UNIDROIT is the applicable law governing the dispute.

5. There is no breach of obligation on the part of Rolga Farmer‟s Exchange.

6. Astoria Produce Company has illegitimately terminated the Contract.

7. AP was obligated to take the delivery of the bananas.

8. The legal obligation to sell the bananas vested with AP. However, if the tribunal finds

otherwise, it is requested that the tribunal may declare

RFE was not obligated to sell the bananas.

For Rolga Farmer‟s Exchange

(Signed)_______________________

Date:

Documents

TEAM NO- M2070-R