Royal University of Law and Economics

Transcription

THIRTEENTH ANNUAL WILLEM C. VIS (EAST)
INTERNATIONAL COMMERCIAL ARBITRATION MOOT
2015-2016
MEMORANDUM FOR CLAIMANT
Thirteenth Annual Vis
Commercial
Hong Kong, 6 - 13
East International
Arbitration Moot
March 2016
ON BEHALF OF:
KAIHARI WAINA LTD
12 RIESLING STREET
OCEANSIDE
EQUATORIANA
AGAINST:
VINO VERITAS LTD
56 MERLOT RD ST FUNDUS
VUACHOUA
MEDITERRANEO
CLAIMANT
RESPONDENT
ROYAL UNIVERSITY OF LAW AND ECONOMICS
COUNSEL
TONG LIN OUN SOMRACH NON NARITH SIM SORYA VUTH PICH MONIQUE
UNGUY BONICH PAN PONLORK NOM VISOT TIM KHUOCHSOPHEAKTRA
SAO KANIKA KIM DONG GYU DY SOPHALLEAK SAM SOKUNVANTEY
DIN SIDEN KIM SAM OUDUM YEM PECH SOVAN PHENG KANNITHA
PHNOM PENH, CAMBODIA
TABLE OF CONTENTS
ABBREVIATIONS .......................................................................................................................iv
INDEX OF AUTHORITIES ........................................................................................................vi
INDEX OF CASES AND ARBITRATION AWARDS ...........................................................xix
INDEX OF RULES AND LEGAL SOURCES.................................................................... xxviii
STATEMENT OF FACTS ............................................................................................................ 1
SUMMARY OF ARGUMENT ..................................................................................................... 3
ARGUMENT .................................................................................................................................. 4
ISSUE 1 ........................................................................................................................................... 4
I. THE TRIBUNAL HAS THE POWER AND SHOULD ORDER RESPONDENT TO
PRODUCE THE DOCUMENTS REQUESTED BY CLAIMANT .......................................... 4
A. THE TRIBUNAL HAS THE POWER TO ORDER RESPONDENT TO PRODUCE
THE DOCUMENTS .................................................................................................................. 4
1. VIAC Rules and Danubian Arbitration Law Empower the Tribunal to Order Production
of Documents ........................................................................................................................... 4
2. The Parties did not Exclude the Production of Documents in the Agreement .................. 6
3. Alternatively, the Tribunal is not Bound by the Parties’ Intention to Exclude All Types
of Document Production .......................................................................................................... 8
B. THE TRIBUNAL SHOULD EXERCISE THE POWER TO ORDER
RESPONDENT TO PRODUCE THE DOCUMENTS........................................................... 9
1. CLAIMANT’s Request for Document Production is in accordance with International
Best Practice ............................................................................................................................. 9
a. The IBA Rules are recognized as international best practice for the taking of evidence
in international arbitration .................................................................................................... 9
b. CLAIMANT’s request for document production satisfied requirements under Art.
3(3) of IBA Rules ............................................................................................................... 10
i. CLAIMANT’s request is “narrow and specific” ...................................................... 10
ii. The requested documents are relevant to the case and material to its outcome ...... 11
MEMORANDUM FOR CLAIMANT | i
iii. The requested documents are in RESPONDENT’s possession.............................. 12
2. Production of the Requested Documents Does Not Impose Unreasonable Burden on
Respondent ............................................................................................................................. 12
3. Production of the Requested Document does not Infringe RESPONDENT’s
Commercial Confidentiality ................................................................................................... 13
ISSUE 2 ......................................................................................................................................... 14
II. CLAIMANT IS ENTITLED US$50,280 IN DAMAGES CLAIMED FOR THE
LITIGATION COSTS ................................................................................................................. 14
A. CLAIMANT IS ENTITLED TO LITIGATION COST AS DAMAGES UNDER
CISG .......................................................................................................................................... 14
1. The Tribunal Should Not Consider the Distinction Between Substantive Matter and
Procedural Matter of Litigation Cost ..................................................................................... 14
2. Litigation Costs is Recoverable as Part of Damages under Art. 74 of CISG .................. 16
3. The Litigation Costs Incurred to CLAIMANT is a Consequence of RESPONDENT’s
Breach of Agreement ............................................................................................................. 17
4. RESPONDENT Foresaw or Ought to Have Foreseen the Litigation Costs Incurred by
CLAIMANT at the Time of Conclusion of the Agreement ................................................... 17
5. Additionally, CLAIMANT has Taken Actions to Mitigate the Litigation Costs under
Art. 77 of the CISG ................................................................................................................ 18
B. ALTERNATIVELY, IN ACCORDANCE WITH DANUBIAN PROCEDURAL
LAW, CLAIMANT AS A PREVAILING PARTY CAN CLAIM FOR LITIGATION
COSTS ....................................................................................................................................... 19
1. The RESPONDENT as a Losing Party has to Pay the Prevailing Party, CLAIMANT .. 20
2. The CLAIMANT is Entitled to Indemnification by being Awarded the Litigation Costs
21
C. IN ANY EVENT, CLAIMANT CAN RECOVER LITIGATION COSTS AS
RESPONDENT’S ACTION AMOUNTS TO BAD FAITH ................................................. 22
MEMORANDUM FOR CLAIMANT | ii
ISSUE 3 ......................................................................................................................................... 23
III. CLAIMANT IS ENTITLED TO THE PROFITS MADE BY RESPONDENT FROM
SELLING THE BOTTLES TO SUPERWINES AS PART OF ITS DAMAGES EVEN IF
THAT INCLUDES FURTHER PROFITS ................................................................................ 23
A. CLAIMANT IS ENTITLED TO DAMAGES IN A SUM EQUAL TO THE LOSS
SUFFERED AS A CONSEQUENCE OF RESPONDENT’S BREACH UNDER CISG .. 24
1. CLAIMANT will Suffer Losses including Loss of Profit and Reputation as a
Consequence of RESPONDENT’s Breach ............................................................................ 24
2. RESPONDENT Foresaw or ought to have Foreseen Such Loss .................................... 26
3. CLAIMANT has Mitigated such Loss in accordance with Art.77 Of CISG .................. 27
B. ALTERNATIVELY, CLAIMANT IS ENTITLED TO DISGORGE
RESPONDENT’S PROFITS MADE FROM SELLING BOTTLES TO SUPERWINES 27
1. Disgorgement of Profits is Valid in the Context of CISG ............................................... 28
2. Disgorgement of Profits is Applicable in this case ......................................................... 29
a. Efficient breach is not allowed in the context of CISG ............................................... 29
b. RESPONDENT is not allowed to profit from its breach of contract........................... 30
c. Disgorgement of Profits is applicable in this case ....................................................... 32
REQUEST FOR RELIEF ........................................................................................................... 34
CERTIFICATE ............................................................................................................................ 35
MEMORANDUM FOR CLAIMANT | iii
ABBREVIATIONS
&
And
§/§§
Section/sections
¶/¶¶
Paragraph/paragraphs
Agreement
Framework Agreement
Ans. St. Cl.
Answer to Statement of Claim
Arb.
Arbitration
Art.
Article
Aut.
Austria
Can.
Canada
CISG
United Nations Convention on Contracts for the International Sale of
Goods
Cl. Ex.
Claimant Exhibition
CLOUT
Case Law on UNCITRAL Texts
Col.
Colombia
Esp.
Spain
et al.
And others
EUR
Euro
Fin.
Finland
Fr.
France
Ger.
Germany
IBA
International Bar Association
Ibid
Ibidem [the same place]
ICC
International Chamber of Commerce
ICSID
International Center for Settlement of Investment Disputes
LCIA
London Court of International Arbitration
lex arbitri
Law of the seat of where the arbitration is taking place
Ltd
Limited
Mr.
Mister
MEMORANDUM FOR CLAIMANT | iv
Ms.
Miss
Nld.
Netherland
No.
Number(s)
p./pp.
Page/pages
Proc. Ord.
Procedural Order
Res. Ex.
Respondent Exhibition
St. Cl.
Statement of Claim
Switz
Switzerland
U.K.
United Kingdom
U.S.
United States of America
UNCITRAL
United Nations Commmission on International Trade Law
UNCITRAL
Model Law
UNCITRAL Model Law on International Commercial Arbitration of
1985
UNIDROIT
International Institute for the Unification of Private Law
UNIDROIT
Principles
UNIDROIT Principles of International Commercial Contracts of 2010
US$
United States Dollar
v.
Versus
VIAC
Vienna International Arbitration Centre
VIAC Rules
VIAC Rules of Arbitration of 2013
MEMORANDUM FOR CLAIMANT | v
INDEX OF AUTHORITIES
Cited As
Andre/Olaf
Full Citation
Paragraphs
André Janssen and Olaf Meyer,
¶ 83
CISG Methodology
(Sellier European Law Publishers, 2009).
Birks 1985
Peter Birks,
¶¶ 98, 102
An Introduction to the Law of Restitution,
(Clarendon Press, Revised ed, 1985).
Birks 1987
Peter Birks,
¶ 102
Restitutionary Damages for Breach of Contract: Snepp
and Fusion of Law and Equity,
1987 Lloyd’s Mar. & Com. L.Q. 421, 442.
Birmingham
Robert L. Birmingham,
¶ 96
‘Breach of Contract, Damage Measures, and Economic
Efficiency’
(1970) 24 Rutgers Law Review 273.
Born 2012
Gary B Born,
¶ 22
International Arbitration: Law and Practice
(Kluwer Law International, 2012).
Bühler
Micha Bühler,
¶¶ 60, 67
‘Awarding Costs in International Commercial
Arbitration: an Overview’
(2004) 22 ASA Bulletin.
MEMORANDUM FOR CLAIMANT | vi
CISG Digest 2012
UNCITRAL Digest of Case Law on the United Nations
¶¶ 23, 56,
Convention on the International Sale of Goods,
98
UN Doc UNCITRAL DIGEST CASE 2012 (8 June
2004).
CISG-AC Op. 6
CISG-Advisory Council Opinion No. 6,
¶¶ 54, 90
‘Calculation of Damages under CISG Article 74’
http://cisgw3.law.pace.edu/cisg/CISG-AC-op6.html
Commentary of
The UNIDROIT Governing Council, Commentary of
UNIDROIT
UNIDROIT Principle, (2009-2013).
¶¶ 51, 56
Principles
Diener
Keith William Diener,
¶¶ 46, 48,
‘Recovering Attorneys’ Fees under CISG: An
53
Interpretation of Article 74’
(2008) Nordic Journal of Commercial Law.
DiMatteo
Larry A DiMatteo (ed),
¶¶ 46, 48,
International Sales Law – A Global Challenge,
50, 87
(Cambridge University Press, 2014).
Dobbs
Dan B. Dobbs,
¶ 70
‘Awarding Attorney Fees Against Adversaries:
Introducing the Problem’
[1986] Duke Law Journal 536.
Eiselen 2004
Sieg Eliselen,
¶ 78
‘Remarks on the Manner in which the UNIDROIT
MEMORANDUM FOR CLAIMANT | vii
Principles of International Commercial Contracts may be
used to Interpret or Supplement Article 74 of the CISG’
http://www.cisg.law.pace.edu/cisg/principles/uni74.html
Fauvarque-Cosson
Bénédicte Fauvarque-Cosson, Denis Mazeaud (ed),
(ed) et al.
European Contract Law: Materials for a Common Frame
¶ 71
of Reference: Terminology, Guiding Principles, Model
Rules
Felemegas
John Felemegas,
¶ 50
‘An Interpretation of Article 74 CISG by the US Circuit
Court of Appeals’
(2003) 15(1) Pace International Law Review 91
http://digitalcommons.pace.edu/pilr/vol15/iss1/3
Ferrari
Franco Ferrari,
¶ 83
‘Comparative Ruminations on the Foreseeability of
Damages in Contract Law’
(1993) 53(4) Louisiana Law Review 1257.
http://digitalcommons.law.lsu.edu/lalrev/vol53/isse4/8
Ferrari/Torsello
Franco Ferrari and Marco Torsello,
¶ 83
International Sale Law- CISG in a Nutshell
(West Academic Publishing, 1st ed, 2014).
Fletcher
Harry M. Fletcher,
¶ 50
‘Recovering Attorneys’ Fees as Damages under the U.N.
Sales Convention (CISG): The Role of Case Law in the
New International Commercial Practice, with Comments
MEMORANDUM FOR CLAIMANT | viii
on Zapata Hermanos v Hearthside Baking’
(2001-2002) 22(2) Northwestern Journal of International
Law and Business 121.
Forsyth
Bart Forsyth,
¶¶ 61, 64
‘Preliminary Imprimaturs: Prevailing Party Status
Based on Preliminary Injunctions’
(2003) Washington and Lee Law Review 60
Gotanda
John Y. Gotanda,
¶ 59
‘Attorney’s Fees Agonistes: The Implications of
Inconsistency in the Awarding of Fees and Costs in
International Arbitrations’
(2009) 144 Villanova University School of Law.
Gotanda, n.d.
John Y. Gotanda,
¶ 90
‘Using the UNIDROIT Principles to fill gaps in the
CISG.’
(n.d.) Contract Damages: Domestic and International
Perspectives 109.
Hall/Lazear
Robert E. Hall and Victoria A. Lazear,
¶ 79
‘Reference Guide on Estimation of Economic Losses in
Damages Award’
Reference Manual on Scientific Evidence 477-478.
Huber/Mullis
Peter Huber and Alastair Mullis,
¶¶ 54, 55,
The CISG: A New Textbook for Students and
56
Practitioners,
MEMORANDUM FOR CLAIMANT | ix
IBA Rules
Commentary on the revised text of the 2010 IBA Rules
¶¶ 34, 37,
Commentary
on the Taking of Evidence in International Arbitration,
41
1999 IBA Working Party & 2010 IBA Rules of Evidence
Review Subcommittee
Jaffey
Peter Jaffey,
¶ 91
‘Damages and the Protection of Contractual Reliance.’
Perspective 139.
Jäger
Markus Jäger,
¶ 48
‘Reimbursement for Attorney's Fees: A comparative
study of the laws of Switzerland, Germany, France,
England, and the United States of America; International
Arbitration Rules and the United Nations Conventions of
Contracts for the International Sale of Goods (CISG)’
(2010) 4 International Commerce and Arbitration.
Karpoff
Jonathan M. Karpoff,
¶ 81
‘Does Reputation Work to Discipline Corporate
Misconduct?’
The Oxford Handbook of Corporate Reputation 375.
Keily
Troy Keily,
¶ 59
‘How Does the Cookie Crumble? Legal Costs under a
Uniform Interpretation of the United Nations Convention
on Contracts for the International Sale of Goods’
[2003] Nordic Journal of Commercial Law of the
University of Turku
MEMORANDUM FOR CLAIMANT | x
http://www.cisg.law.pace.edu/cisg/biblio/keily2.html
Kirklin/Shwartz
John E. Kirklin, Martin A. Shwartz,
¶ 61
Section 1983 Litigation, Volume 2: Statutory Attorney's
Fees,
(Aspen Publishers Online, 3rd ed, 1999).
Klass
Gregory Klass,
¶ 96
‘Efficient Breach’
[2013] Georgetown University Law Center.
Knapp
Victor Knapp,
¶ 87
‘Bianca-Bonell Commentary on the International Sale
Law’
Giuffré: Milan (1987) 559-567.
http://www.cisg.law.pace.edu/cisg/biblio/knappbb77.html
Kohler/Bartsch
Kaufmann-Kohler, Gabrielle, and Philippe Bartsch,
¶¶ 28, 34
‘Discovery in international arbitration: how much is too
much?’
(2004) German Arbitration Journal 1, 13-21.
Koziol
Helmut Koziol,
¶ 87
‘Reduction in damages according to Article 77 CISG’
(2005) 25 Journal of Law and Commerce 385.
Kritzer
Herbert M. Kritzer,
¶ 57
The Justice Broker: Lawyers & Ordinary Litigation
(Oxford University Press, 1990) 109.
MEMORANDUM FOR CLAIMANT | xi
Lookofsky
Joseph Lookofsky,
¶ 87
‘The 1980 United Nation Convention on Contracts for the
International Sale of Goods.’ (n.d.)
http://www.cisg.law.pace.edu/cisg/biblio/lookofsky.html
Markovits/Schwartz
Daniel Markovits and Alan Schwartz,
¶ 96
‘The Myth of Efficient Breach: New Defenses of
Expectation Interest’
(2011) 97 Virginia Law Review 1939.
Mason/Hamilton
Richard C. Mason and Catherine E. Hamilton,
¶ 70
‘An Arbitration Panel’s Authority to Award Attorney’s
Fees, Interest and Punitive Damages’
(2009) 6 Rutgers Conflict Resolution Law Journal.
Matti/Santlu
Matti S. Kurkela and Santtu Turunen,
¶ 28
Due Process in International Commercial Arbitration
(Oxford University Press, 2nd ed, 2010).
McCamus
John D. McCamus,
¶¶ 98, 102
‘Disgorgement for Breach of Contract: A Comparative
Perspective’
(2003) 36 Loyola of Los Angeles Law Review 943.
Miceli/Segerson
Thomas J. Miceli & Kathleen Segerson,
¶ 57
‘Contingent fee for lawyers: The Impact on Litigation and
Accident prevention’
(1991) 20 The Journal of Legal Studies 381-399, 381.
MEMORANDUM FOR CLAIMANT | xii
Model Law Digest
UNCITRAL Digest of Case Law on the Model Law on
2012
International Commercial Arbitration,
¶ 20
UN Doc UNCITRAL DIGEST CASE 2012
O’Malley
Nathan D. O’Malley,
¶¶ 33, 39
Rules of Evidence in International Arbitration: An
Annotated Guide,
(Informa Law, 1st ed, 2012).
Orlandi
CG Orlandi,
¶ 47
‘Procedural Law Issues and Law Conventions’
(2000) 5 Uniform L Rev 23,
http://www.cisg.law.pace.edu/cisg/biblio/orlandi.html
Powers
Paul J. Powers,
¶ 71
‘Defining the Undefinable: Good Faith and the United
Nations Conventions on Contracts for the International
Sale of Goods’
(1999) 18 Journal of Law and Commerce 333
http://cisgw3.law.pace.edu/cisg/biblio/powers.html
Redfern/Hunter
Nigel Blackaby, Constantine Partasides, Alan Redfern
¶¶ 18, 22,
and Martin Hunter,
34
Redfern and Hunter on International Arbitration,
(Oxford University Press, 5th ed, 2009).
Riznik
Peter Riznik,
¶ 87
‘Article 77 CISG: Reasonableness of the Measures
Undertaken to Mitigate the Loss’ [2009]
http://cisgw3.law.pace.edu/cisg/biblio/riznik.html
MEMORANDUM FOR CLAIMANT | xiii
Rowe
Thomas D. Rowe, Jr,
¶ 67
‘The Legal Theory of Attorney Fee Shifting: A Critical
Overview’
[1982] Duke Law Journal 651.
S.Kroll et al.
S.Kroll, L.A.Mistelis, P. Percales Viscasillas and
¶ 83
V.Rogers (ed),
International Arbitration and International Commercial
Law: Synergy, Convergence and Evolution
(Wolters Kluwer, Law and Business, 2011).
Saidov 2001
Djakhongir Saidov,
¶ 81
‘Methods of Limiting Damages under the Vienna
Convention on Contracts for the International Sale of
Goods’ December 2001
http://www.cisg.law.pace.edu/cisg/biblio/saidov.html#96
Saidov 2008
Djakhongir Saidov,
¶¶ 46, 47,
The Law of Damages in International Sales: The CISG
48
and Other International Instruments,
(Hart Publisher, 2008).
Scherer
Matthias Scherer,
¶ 38
‘The limits of the IBA Rules on the Taking of Evidence
in International Arbitration: document production based
on contractual or statutory rights’
(2010) 13(5) International Law Review, 195-200.
MEMORANDUM FOR CLAIMANT | xiv
Schlechtriem 2005
Peter Schlechtriem,
¶ 46
Arts. 1–6 CISG: Commentary on the
United Nation Convention on the International Sale of
Goods (CISG),
(Oxford University Press, 2nd ed, 2005) 72.
Schlechtriem/
Schlechtriem and Schmidt-Kessel in Kommentar zum
Schmidt
Einheitlichen Un-Kaufrecht – CISG, 5th ed. (ed. P.
¶ 48
Schlechtriem and I. Schwenzer) (Munich: Beck-Verlag,
2008), Article 11, marginal note 12
Schlechtriem/
Ingeborg Schwenzer (ed.),
¶ 83
Schwenzer
Schlechtriem and Schwenzer, Commentary on the United
Nation Convention on the International Sale of Goods,
(Oxford University Press, 3rd ed, 2010).
Schwarz/Konrad
Franz T. Schwarz, and Christian W. Konrad,
2007
‘The New Vienna Rules’
¶ 28
(2007) 23(4) Arbitration International.
Schwarz/Konrad
Franz T. Schwarz and Christian W Konrad,
2009
The Vienna Rules: A Commentary on International
¶ 19
Arbitration in Austria
(Kluwer Law International, 2009).
Schwenzer et al.
Ingeborg Schwenzer, Christiana Fountoulakis and Mariel
¶¶ 45, 49,
Dimsey,
51, 54
International Sales Law: A Guide to CISG,
(Hart Publishing Ltd, 2nd ed, 2012).
MEMORANDUM FOR CLAIMANT | xv
Schwenzer/
Ingeborg Schwenzer and Christana Fountoulakis (ed),
Fountoulakis
International Sale Law
¶ 83
(Routledge-Cavendish, 1st ed, 2007).
Schwenzer/Hachem
Ingeborg Schwenzer and Pascal Hachem,
¶¶ 91, 94,
‘The Scope of the CISG Provisions on Damages.’
102
Perspectives 91.
Secretariat
Secretariat Commentary,
¶ 90
Commentary Art. 74 ‘Guide to Article 74: Secretariat Commentary’ (2006)
CISG
http://cisgw3.law.pace.edu/cisg/text/secomm/secomm74.html
Signh/Zeller
Sharon G. K. Singh and Bruno Zeller,
¶ 78
‘CIETAC’s Calculations on the Lost Profits under Article
74 of the CISG’
(2007) 4 Loyola University of Chicago International Law
Review 211.
Smith
Lionel D. Smith,
¶ 98
‘Disgorgement of the Profits of Breach of Contract:
Property, Contract and Efficient Breach’
(1994-1995) 24 Canadian Business Law Review 121.
Stoll-debell et al.
Kristin Stoll-debell, Nancy E. Dempsey, Bradford E.
¶ 62
Dempsey,
‘Injunctive Relief: Temporary Restraining Orders and
Preliminary Injunctions’ (2009) American Bar Association.
MEMORANDUM FOR CLAIMANT | xvi
Vanto
Jarno Vanto,
¶¶ 50, 54
‘Attorneys’ Fees as Damages in International
Commercial Litigation’
(2003) 15 Pace International Law Review 203.
Vargo
John F. Vargo,
¶ 72
‘The American Rule on Attorney Fee Allocation: The
Injured Person’s Access to Justice’
(1993) 42 The American University Law Review 1568.
VIAC Handbook
Vienna International Arbitration Center,
¶¶ 19, 28,
Handbook Vienna Rules: A Practitioner’s Guide
34, 38
(Vienna International Arbitral Centre of the Austrian
Federal Economic Chamber, 2014).
Waddams 2000
S. M. Waddams,
¶¶ 98, 102
‘Breach of Contract and the Concept of Wrongdoing’
(2000) 12(2) Supreme Court Law Review 1-29.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1146
593
Waddams, n.d.
Stephen Waddams,
¶ 102
‘Gains Derived from Breach of Contract: Historical and
Conceptual Perspectives’
[2008] Contract Damages: Domestic and International
Perspective 187.
Emons
Winand Emons,
¶¶ 56, 57
‘Conditional and Contingent Fees: A Survey of Some
Recent Results’
MEMORANDUM FOR CLAIMANT | xvii
Zeller
Bruno Zeller,
¶ 48
‘Interpretation of Article 74- Zapata Hermanos v.
Hearthside Banking- Where Next?’
2004 (1) Nordic Journal of Commercial law.
MEMORANDUM FOR CLAIMANT | xviii
INDEX OF CASES AND ARBITRATION AWARDS
Cited As
Full Citation
Paragraphs
Austria
Cooling System
Cooling System case,
¶ 83
Case
(Unreported, Supreme Court of Austria, 14 January
2002), Case No. 7 Ob 301/01t.
http://cisgw3.law.pace.edu/cases/020114a3.html
Roofing Material
Roofing Material case,
¶ 78
Case
(Unreported, Supreme Court of Austria, 9 March 2000),
Case No. 6 Ob 311/99z.
http://cisgw3.law.pace.edu/cases/000309a3.html
Canada
Jardine Lloyd
Jardine Lloyd Thompson Canada Inc. v. Western Oil
¶ 42
Thompson Canada Sands Inc.,
Case
(Alberta Court of Queen’s Bench Judicial of District
Calgary, 19 July 2005), Case No. 943.
Lee Case
Michael Allan Lee v. Mark Horne et al.,
¶ 60
(Supreme Court of British Columbia, 16 September 1993),
Case No. 10377.
Jardine Lloyd
Jardine Lloyd Thompson Canada Inc. v. SJO Catlin,
¶ 20
Thompson Canada (Albert Court of Appeal, Canada, 18 January 2006), Case
Inc. v. SJO Catlin
No. ABCA 18 (CanLII).
France
BRI Production
BRI Production “Bonaventure” v. Pan African Export,
¶ 93
MEMORANDUM FOR CLAIMANT | xix
Case
(Unreported, Appellate Court Grenoble, 22 February
1995), Case No. 93/3275.
http://cisgw3.law.pace.edu/cases/950222f1.html
Footwear Case
Calzados Magnanni v. Shoes General International,
¶ 81
Footwear case,
(Appeal Court Grenoble, France, 21 October 1999), Case
No. 97/03974.
Finland
Plastic Carpets
Plastic Carpets case,
¶ 81
Case
(Helsinki Court of Appeals, Finland, 26 October 2000),
Case No. S 00/82.
Germany
Broadcasters Case
Broadcasters Case Oberlandesgericht Celle,
¶ 98
(Appellate Court Celle of Germany, 24 July 2009), Case
No. 13 W 48/09.
http://cisgw3.law.pace.edu/cases/090724g1.html
Iron Molybdenum
Hamburg Oberlandesgericht (Germany, CLOUT Case
Case
No. 277, 28 February 1997).
¶ 87
Netherland
Fresh-Life
Fresh-Life International B.V. v. Cobana Fruchtring
International Case
GmbH & Co., KG. Arrondissementscrechtbank Rotterdam
¶ 98
(District Court Rotterdam of Netherlands, 25 February
MEMORANDUM FOR CLAIMANT | xx
2009), Case No. LJN BH6416; 279354 / HA ZA 07-576.
http://cisgw3.law.pace.edu/cases/090225n1.html
New Zealand
CLOUT Case No.
Trustees of Rotoaira Forest Trust v. Attorney-General,
658
(High Court (Commercial List), 30 November 1998), Case
¶ 28
No. 2 NZLR 452.
CLOUT Case No. 658.
Singapore
CLOUT Case No.
Soh Beng Tee & Co. Pte. Ltd. v. Fairmount Development
743
Pte. Ltd.,
¶ 28
(Court of Appeal, Singapore, 9 May 2007), Case No. 3
SLR (4) 86.
CLOUT Case No. 743.
Spain
Dye for Clothes
Dye for clothes case,
¶ 81
Case
(Audiencia Provincial de Barcelona, sección 16ª, Spain,
20 June 1997), Case No. 755/95-C.
http://cisgw3.law.pace.edu/cases/970620s4.html
Switzerland
Art Books Case
Art books case,
¶ 81
(Commercial Court, Switzerland, 10 February 1999), Case
No. HG 970238.1.
Watches Case
Watches case,
¶ 87
(Unreported, Supreme Court, Switzerland, 17 December
MEMORANDUM FOR CLAIMANT | xxi
2009), Case No. 4A_440/2009.
United Kingdom
Attorney General
Attorney-General v. Guardian Newspapers Ltd (No. 2)
v Guardian
(‘SPYCATCHER’),
Newspapers
(U.K. House of Lords No. 6, 13 Oct 1988), Case No. 3 All
¶ 98
545. http://swarb.co.uk/attorney-general-v-guardiannewspapers-ltd-no-2-spycatcher-hl-13-oct-1988-2/
Blake Case
Attorney General v. Blake,
¶ 105
(U.K. House of Lords No. 45, 27 July 2000), Case No. 3
WHL 625.
http://www.bailii.org/uk/cases/UKHL/2000/45.html
Elektrim Case
Elektrim SA v. Vivendi Universal SA & Others,
¶ 37
(Queen’s Bench Division Commercial Court, 19 January
2007), Case No. 2006/695.
http://www.bailii.org/ew/cases/EWHC/Comm/2007/11.ht
ml
Groom Case
Groom v Crocker,
¶ 81
(Court of Appeal, 1939), Case No. 1 KB 194.
http://swarb.co.uk/groom-v-crocker-1939/
Halifax Building
Halifax Building Society v. Thomas,
¶¶ 98, 100,
Society Case
(1995) 4 All England Law Report 673
102, 104
MEMORANDUM FOR CLAIMANT | xxii
Proforce Recruit
Proforce Recruit Limited v. The Rugby Group Limited,
Case
(Court of Appeal (Civil Division), 17 February 2006),
¶ 24
Case No. 2006 EWCA Civ 69.
http://www.unilex.info/case.cfm?id=1119
United States
Bowers Case
Jack L. Bowers, et al v. Transamerica Title Insurance
¶ 48
Company,
(The Supreme Court of Washington, 15 December 1983),
Case No. 48036-2.
British Motor
British Motor Trade Association v. Gilbert,
Trade Association
(1951) 2 All E.R. 641
Case
John D. McCamus, Disgorgement for Breach of Contract:
¶ 103
A Comparative Perspective (2003) 36 Loyola of Los
Angeles Law Review 943
Burlington Case
City of Burlington v. Dague et. al.,
¶ 58
(U.S. Supreme Court, 24 June 1992), 91-810.
https://scholar.google.com/scholar_case?case=255709455
6311036785&q=contingency+fee&hl=en&as_sdt=2006
County of Essex
Country of Essex v. First Union National Bank,
Case
(Supreme Court of New Jersey, 26 January 2006)
¶ 105
http://caselaw.findlaw.com/nj-supremecourt/1364015.html
Hooper Case
Hooper Associates, Ltd. v. AGS Computers, Inc.,
¶ 67
(Court of Appeals of the State of New York, 21 November
1989), Case No. 74 N.Y.2d 487.
MEMORANDUM FOR CLAIMANT | xxiii
Jacob Case
Jacob’s Meadow Owners Association v. Plateau, Gottlieb
¶ 50
Plateau, MMR Holding Company, Uponor Canada,
(Court of Appeals of Washington, Divison 1, 23 July
2007), Case No. 57543-1-I, 57649-6-I.
http://caselaw.findlaw.com/wa-court-ofappeals/1145577.html
Reliastar Case
ReliaStar Life Insurance Co. of N.Y. v. EMC National
¶ 70
Life Co.,
(U.S. Court of Appeal 2nd Circuit, 9 April 2009), Case No.
07-0828-cv.
Stanton Case
Janet G. Staton et al. v. Southern Berkshire Regional
¶ 64
School District et al.,
(U.S. Court of Appeals 1st Circuit, 14 December 1999),
Case No. 99-1050.
http://caselaw.findlaw.com/us-1st-circuit/1136637.html
Time Insurance
Time Insurance Co. Inc. v. Harvey Burger et al.,
Case
(Supreme Court of Florida, 12 June 1998), Case No.
¶ 72
90869.
Treibacher
Treibacher Industrie, A.G. v. Allegheny Technologies,
Industrie Case
Inc.,
¶ 24
(U.S Federal Appellate Court 11th Circuit, 12 September
2006), Case No. 05-13995.
http://cisgw3.law.pace.edu/cases/060912u1.html
Vaughan Case
Vaughan v. Atkinson,
¶ 72
MEMORANDUM FOR CLAIMANT | xxiv
(U.S. Supreme Court, 14 May 1962), Case No. 323.
https://supreme.justia.com/cases/federal/us/369/527/case.h
tml
Water Agencies
Association of California Water Agencies v. Donald L.
Case
Evans,
¶ 65
(U.S. Court of Appeals 9th Circuit, 24 September 2004),
Case No. 03-15380.
http://caselaw.findlaw.com/us-9th-circuit/1033138.html
Wayne Case
Wayne Paint Co. v. Gulfview Apartments of Marco Island
¶ 60
Inc.,
(District Court of Appeal of Florida 2nd Circuit, 20 August
1999), Case No. 98-00665.
http://caselaw.findlaw.com/fl-district-court-ofappeal/1285158.html
Zapata Case
Zapata Hermanos Sucesores S.A. v. Hearthside Baking
¶ 48
Co. d/b/a Maurice Lenell Cooky Co.,
(Supreme Court of the United States), Case No. 02-1318.
http://www.cisg.law.pace.edu/cisg/biblio/zamicus.html
Arbitral Awards
ADF Group Case
ADF Group Inc v. United States of America,
¶¶ 38, 39
International Center for Settlement of Investment
Disputes, 4 October 2001), Case No. ARB(AF)/00/1.
Biwater Gauff
Biwater Gauff Ltd. v. United Republic of Tanzania,
Case
(International Center for Settlement of Investment
¶ 33
Disputes, May 2006), Case No. ARB/05/22.
MEMORANDUM FOR CLAIMANT | xxv
Chinese Goods
Chineses Goods case,
¶¶ 50, 55, 83
Case
(Unreported, Hamburg Arbitration proceeding, 21 June
1996)
CME Czech
CME Czech Republic BV v. The Czech Republic,
Republic Case
UNCITRAL (Partial Award), pp. 16-17 (13 September
¶ 37
2001)
Glamis Gold Case
Glamis Gold Ltd v. United States of America,
¶ 33
(International, 20 July 2005), Decision on Objections to
Document Production.
ICC Case No.
ICC Case No. 13133 (Final Award),
¶ 42
13133
(ICC-International Chamber of Commerce, 2010), in AJ
van den Berg (ed), Yearbook Commercial Arbitration,
(Kluwer Law International, 36th (vol), 2011).
ICC Case No.
ICC Case No 13504 (Final Award)
¶ 19
13504
(ICC-International Court of Arbitration, 2009), in 20 ICC
Bulletin 2.
ICC Case No.
ICC Case No 14403 (Final Award)
¶ 19
14403
(ICC-International Court of Arbitration, 2008),
unpublished, cited by Nathan D O’Malley, Rules of
Evidence in International Arbitration: An Annotated
Guide, (Infoma Law, 2012), §3.114.
MEMORANDUM FOR CLAIMANT | xxvi
ICC Case No. 5542 ICC Case No. 5542 (Order)
¶ 19
(ICC-International Court of Arbitration, 1988),
Dominique Hascher, Collection of Procedural Decisions
in ICC Arbitration 1993-1996,
(Kluwer Law International, 2nd ed, 1998) 62, 64-65
(1997).
INA Corp Case
INA Corp v. Iran,
¶ 41
(Iran-United States Claims Tribunal, Case No. 184-161-1,
13 August 1985), Case No. 8 Iran-US.C.T.R. 373.
Noble Ventures
Noble Ventures Inc v. Romania,
¶ 33
Case
Disputes, 12 October 2005), Case No. ARB/01/11.
Railroad
Railroad Development Corp (United States of America) v
Development Case
Republic of Guatemala,
¶ 33
Disputes, October 2008), Case No. ARB/07/23, Decision
on Provisional Measures.
SPP v. Egypt Case
Southern Pacific Properties (Middle East) Ltd v. Arab
¶ 52
Republic of Egypt,
Disputes, 20 May 1992), Case No. ARB/84/3.
Triumph Tankers
Triumph Tankers Ltd v. Kerr-Mcgee Refining Corp. (Final ¶¶ 48, 50
Case
Award),
(Maritime Arbitration, 287 March 1990), No. 2642.
MEMORANDUM FOR CLAIMANT | xxvii
INDEX OF RULES AND LEGAL SOURCES
Cited As
CISG
Full Citation
United Nations Convention on Contracts for International Sale of
Goods (1980)
IBA Rules
IBA Rules on the Taking of Evidence in International Arbitration
(2010)
ICC Rules
Rules of Arbitration of International Chamber of Commerce
(2012)
Danubian Arbitration
UNCITRAL Model Law on International Commercial Arbitration
Law
(1985 with Amendment as adopted in 2006)
UNIDROIT Principles
UNIDROIT Principles of International Commercial Contracts
(2010)
VIAC Rules
Vienna Rules of Arbitration (2013)
MEMORANDUM FOR CLAIMANT | xxviii
STATEMENT OF FACTS
Placed a maximum order
of 10,000 bottles of wine
Kaihari Waina Ltd
“CLAIMANT”
Vino Veritas Ltd
“RESPONDENT”
Breached the Agreement by
offering to deliver only 4,500
bottles of wine
Sold 5,500 bottles of
wine for premium
price
SuperWines
“Third Party”
1. Kaihari Waina Ltd, (hereinafter “CLAIMANT”), is a distributor of top quality wines in
Equatoriana. CLAIMANT sells only diamond quality of Mata Weltin wines due to its highend customer base [St. Cl., p. 3, ¶ 1].
2. Vino Veritas Ltd, (hereinafter “RESPONDENT”), is one of the top vineyards in
Mediterraneo [St. Cl., p. 4, ¶ 2]. RESPONDENT produces around 100,000 bottles per year
[Ans. St. Cl., p. 25, ¶ 5].
3. 22 Apr 2009
CLAIMANT and RESPONDENT concluded a Framework Agreement
(the “Agreement”) [St. Cl., p. 4, ¶ 3]. In the Agreement, RESPONDENT
agreed to supply up to 10,000 bottles of diamond quality wine to
CLAIMANT and in return, CLAIMANT agreed to buy a minimum of
7,500 bottles each year [Cl. Ex. 1, p. 9].
CLAIMANT ordered between 7,500 and 8,500 bottles over the years [St.
Cl., p.4, ¶ 4]. The established practice is that CLAIMANT is the first to
order before RESPONDENT negotiates with other customers [Proc. Ord.
2, p. 55, ¶ 15].
4. 4 Nov 2014
CLAIMANT
placed
a
maximum
order
of
10,000
bottles
to
RESPONDENT [Cl. Ex. 2, p. 10].
5. 25 Nov 2014
RESPONDENT created the impression that it would honor its contractual
MEMORANDUM FOR CLAIMANT | 1
delivery
commitments
when
Ms.
Isme
Buharit,
CLAIMANT’s
development manager, visited RESPONDENT [Cl. Ex. 5, p. 13].
6. 1 Dec 2014
CLAIMANT received an email from RESPONDENT stating that it would
only deliver 4,500 to 5,000 bottles due to a shortfall yield in 2014 [Cl. Ex.
3, p. 11].
With
no
binding
contracts
with
other
customers,
RESPONDENT offered SuperWines 4,500 bottles [Proc. Ord. 2, p. 56,
¶¶ 22, 27]. RESPONDENT finally sold 5,500 bottles to SuperWines
[Proc. Ord. 2, p. 56, ¶ 24].
7. 2 Dec 2014
CLAIMANT emailed RESPONDENT rejecting the offer and demanding
a full supply of 10,000 bottles of wine as agreed in the Agreement [Cl. Ex.
6, p. 14].
8. 4 Dec 2014
CLAIMANT received an email from RESPONDENT declaring the
Agreement terminated and refusing to deliver any bottles of wine to
CLAIMANT [Cl. Ex. 7, p. 15].
9. 5 Dec 2014
CLAIMANT hired LawFix, a Mediterranean law firm, to be its legal
representative for the legal affairs in the High Court of Mediterraneo on
the basis of a contingency fee [Cl. Ex. 10, p. 18]. CLAIMANT incurred a
total litigation cost of US$50,280 [Cl. Ex. 11 p. 19]. That includes the
consultation, court fees and other attorney’s expenses [Cl. Ex. 10, p. 18].
10. 8 Dec 2014
CLAIMANT filed for an interim injunction in the High Court of
Mediterraneo in order to secure 10,000 bottles of wine ordered [Cl. Ex. 8,
p. 16]. Four days later, the High Court granted the interim injunction and
each party had to bear its own costs [Cl. Ex. 8, p. 16].
11. 30 Jan 2015
RESPONDENT filed a motion to the High Court of Mediterraneo seeking
non-liability to the breach of contract but was dismissed due to the lack of
jurisdiction by the existence of the arbitration clause [Cl. Ex. 9, p. 7].
Later, RESPONDENT offered to deliver 4,500 bottles but refused to
reimburse the costs incurred to CLAIMANT [St. Cl., p. 5, ¶ 14].
SUMMARY OF ARGUMENT
12.
CLAIMANT, a top quality wine merchant, and RESPONDENT, one of the top vineyards,
concluded the Agreement for their business relationship. RESPONDENT breached the
Agreement by not delivering the ordered amount of wines and instead sold those bottles
to SuperWines for premium price. Subsequently, CLAIMANT incurred US$50,280 by
sought interim injunction and successfully defended at the High Court of Mediterraneo
against RESPONDENT.
13.
CLAIMANT is entitled to damages claimed for the litigation costs of US$50,280 as
litigation costs is recoverable under Art. 74 of CISG. Alternatively, Danubian Procedural
Law allows CLAIMANT as a prevailing party to claim for litigation costs from the losing
party. CLAIMANT is a prevailing party as the interim injunction granted provided a
desirable outcome. Moreover, the declaration of non-liability lawsuit acted as a catalyst in
causing the RESPONDENT to voluntarily change by offering to deliver 4,500 bottles of
wine. In any event, CLAIMANT can recover litigation costs as RESPONDENT’s action
amounted to bad faith [II].
14.
CLAIMANT will suffer loss of profits and loss of reputation, which is equal to or more
than RESPONDENT’s profits from SuperWines, resulting from RESPONDENT’s
breach. Since it is extremely difficult to calculate CLAIMANT’s loss and both Parties
want to settle the dispute in a fast and cost efficient way, it is appropriate for CLAIMANT
to claim damages to be determined by RESPONDENT’s profits. Alternatively,
RESPONDENT’s breach violated the principle of good faith; therefore, CLAIMANT can
disgorge the profits RESPONDENT had made under the principle of disgorgement which
is valid under CISG and applicable in this case [III].
15.
However, to calculate RESPONDENT’s profits, CLAIMANT requested the Tribunal to
order document production from RESPONDENT. This Tribunal has the power to issue
such order under VIAC Rules and Danubian Arbitration Law and both Parties had never
intended to exclude document production from the Agreement. Furthermore, this Tribunal
should order the document production as such order is in line with the international
practice and domestic law. It will not impose unreasonable burden on RESPONDENT nor
will it infringe RESPONDENT’s commercial confidentiality [I].
ARGUMENT
ISSUE 1
I.
THE TRIBUNAL HAS THE POWER AND SHOULD ORDER
RESPONDENT TO PRODUCE THE DOCUMENTS REQUESTED BY
CLAIMANT
16.
CLAIMANT respectfully requests the Tribunal to order RESPONDENT to produce all
documents from the period of 1 January 2014 to 14 July 2015 relating to the contract and
communications between SuperWines and RESPONDENT [St. Cl., p .7, ¶ 27].
CLAIMANT submits that the Tribunal has the power to order RESPONDENT to produce
the documents [A] and the Tribunal should order RESPONDENT to produce documents
requested by CLAIMANT [B].
A. THE TRIBUNAL HAS THE POWER TO ORDER RESPONDENT TO
PRODUCE THE DOCUMENTS
17.
CLAIMANT asserts that the Tribunal has the power to order RESPONDENT to produce
documents as the Tribunal is empowered to order document production under VIAC
Rules and Danubian Arbitration Law [1]. Additionally, the Parties intended to exclude
only broad discovery [2]. Alternatively, the Tribunal is not bound by the Parties’ intention
to exclude all types of document production [3].
1. VIAC Rules and Danubian Arbitration Law Empower the Tribunal to Order
Production of Documents
18.
The power of a tribunal derives from the parties’ agreement subject to applicable laws and
rules [Redfern/Hunter, p. 314]. According to Art. 20 of the Agreement, the Parties agreed
to settle the dispute in Vienna International Arbitral Centre (“VIAC”) under VIAC
Arbitration Rules (“VIAC Rules” or “Vienna Rules”) [Cl. Ex. 1, p. 9]. Since Danubia,
the seat of arbitration, has adopted the UNCITRAL Model Law with the 2006
amendments (“Danubian Arbitration Law”) [Cl. Ex. 1, p. 9; Proc. Ord. 1, p. 51, ¶ 5],
Danubian Arbitration Law is also applicable to this arbitration [Redfern/Hunter, p. 179].
19.
According to Art. 28(1) of VIAC Rules, the tribunal shall conduct the arbitration in
accordance with Vienna Rules, the agreement of the parties, or in a way that the tribunal
deems appropriate. In addition, Art. 29(1) of VIAC Rules empowers the tribunal to order
the request for taking of evidence by the parties if the tribunal considers it is necessary to
establish facts of the case. Subject to these provisions, the tribunal is entitled to conduct
the evidentiary proceeding it considers appropriate to establish all relevant facts of the
case [VIAC Handbook, p. 172]. Despite the fact that VIAC Rules have no precise
meaning to determine the procedure applicable to the taking of evidence, it leaves to the
tribunal to determine the procedure applicable to the taking of evidence [Schwarz/Konrad
2009, p. 482]. To establish the facts in an ICC case, the tribunal ordered the defendant to
produce documents requested by Claimant when tribunal believes as appropriately narrow
those documents passing between defendant and the [Bank] as well as necessarily the
defendant to do so as the documents are in the possession or control of the defendant [ICC
Case No. 5542, pp. 62, 64-65]. Part of this inherent power includes the power to order
document production [ICC Case No. 5542, p. 62; ICC Case No. 13504, p. 107; ICC Case
No. 14403, ¶ 9].
20.
In addition to VIAC Rules, Danubian Arbitration Law also grants the tribunal broad
evidentiary authority [Danubian Arbitration Law Art. 19(2)]. Subject to Art. 19(2) of
Danubian Arbitration Law, if the parties failed to agree on the proceedings, the tribunal
has the power to conduct the arbitration in an appropriate manner and determine the
relevance and materiality of evidence. Even though this provision makes no specific
reference to production of documents, its drafting history clarifies that the tribunal
evidentiary power includes the power to order document production by the parties [Model
Law Digest 2012, pp. 97, ¶¶ 5-6, 101, ¶ 7]. An arbitral tribunal ordered a discovery and
was challenged but Canadian appeal court affirmed the tribunal power pursuant to Art. 19
and its Travaux Preparatoires [Jardine Lloyd Thompson Canada Inc. v. SJO Catlin;
Model Law Digest 2012, p. 97, ¶¶ 5-6]. Because discovery is broad and is allowed,
document production is clearly permitted as it is much more specific. Therefore, the
Tribunal is granted the power to order production of relevant documents in this
arbitration.
2. The Parties did not Exclude the Production of Documents in the Agreement
21.
The Parties have agreed that this proceeding is to be governed in accordance with
international practice and in a fast and cost-efficient manner [Cl. Ex. 1, p. 9]. Further, Art.
20 of the Agreement contains a statement that “no discovery is allowed” [Ibid]. The
Parties are now in dispute over the meaning of the statement in the arbitration clause “no
discovery is allowed” [Ans. St. Cl., p. 28, ¶ 27]. RESPONDENT alleges that the statement
is intended to exclude all types of document production, whereas CLAIMANT asserts
that the statement does not mean to exclude the production of document [St. Cl., p. 8, ¶
29; Ans. St. Cl., p. 28, ¶ 27].
22.
An arbitration clause can be interpreted by the parties’ choice-of-law [Born 2012, p. 56].
The Parties have agreed that Law of Danubia including the CISG is the law governing the
Agreement [Cl. Ex. 1, p. 9] and the arbitration clause where VIAC Rules and Danubian
Arbitration Law are not regulated [Proc. Ord. 2, p. 61, ¶ 63]. Danubia, Equatoriana and
Mediterraneo are contracting states to CISG and have verbatim adopted the UNIDROIT
Principles in its general contract law [Proc. Ord. 1, p. 51, ¶ 4]. The CISG and the
UNIDROIT Principles provides general principles of contract interpretation [Born 2012,
p. 1062; Redfern/Hunter, p. 221]. Accordingly, these laws can be used to interpret the
Parties’ agreement including the arbitration clause.
23.
Art. 8(3) of CISG stipulates the determination of a party’s intent is based on all relevant
circumstances including negotiations, any practices which the parties have established
between themselves, usages as well as subsequent conducts of the parties. Relevant
circumstances also extend to the parties’ interest and the purpose of the contract [CISG
Digest 2012, p. 57, ¶ 23]. The interpretation method of taking all relevant circumstances
into an account is also reflected in the UNIDROIT Principles [UNIDROIT Principles Art.
4(3)].
24.
In Treibacher Industrie Case, the Court of Appeal of the United States of America
employed Art. 8(3) of CISG by taking into consideration the practices which the parties
had established between themselves [Treibacher Industrie Case (U.S.)]. The Court
concluded that the meaning of the term in the contract had to be construed based on the
parties’ course of dealings, and not on the customary usage of the term [Ibid]. Further, in
Proforce Recruit Case, a dispute arose when the meaning of the expression “preferred
supplier status” in the contract was not clearly defined [Proforce Recruit Case (U.K.)].
The Court of Appeal of English and Wales held that the expression could only be
interpreted in the context of the agreement [Ibid].
25.
In this case, the evidence demonstrates that the Parties’ interest in agreeing to the
arbitration clause was mainly due to RESPONDENT’s history in dealing with expensive
litigation [Cl. Ex. 12, p. 20] and CLAIMANT’s 5-year document retention policy in the
company [Proc. Ord. 2, p. 61, ¶ 59]. However, the Parties had no prior experience with
arbitration at the time of drafting [Proc. Ord. 2, p. 60, ¶ 53]. Further, the meaning of “no
discovery” in the arbitration clause is ambiguous as the arbitration clause was not drafted
specifically for the Agreement [Ibid], but was taken from Mr. Friedensreich’s brother [Cl.
Ex. 12, p. 20]. The Parties had neither discussed the wording of the clause nor had a clear
understanding about the meaning or scope of exclusion of discovery [Proc. Ord. 2, p. 60,
¶ 53]. The only common understanding of the Parties was that it would be cost-efficient
to resolve disputes through arbitration [Ibid].
26.
The circumstances of the case also demonstrate that both witnesses were aware of what
the arbitration clause entailed. CLAIMANT’s witness, Mrs. Kim Lee, described that the
arbitration clause was meant to exclude only broad discovery proceedings but not
intended to restrict the Tribunal’s power and the Parties from requesting document
production under international arbitration [Cl. Ex. 12, p. 20]. RESPONDENT’s witness,
Mr. Werner Wienbauer, knew from his lawyer that the document production is very
common in the practice of the common law jurisdictions, and even in the civil law
jurisdiction of Mediterraneo, a party is allowed to request documents in specific
circumstances [Res. Ex. 1, p. 31]. Hence, the arbitration clause could not have been meant
to exclude all types of document production; the Parties’ intention under Art. 20 of the
Agreement was to exclude only extensive discovery, and not any document production.
3. Alternatively, the Tribunal is not Bound by the Parties’ Intention to Exclude
All Types of Document Production
27.
Even if the Tribunal finds that the Parties had intended to exclude discovery, including all
types of document production, the Tribunal is not bound to adhere to the Parties’ intention
to exclude documents production in these proceedings.
28.
Pursuant to Art. 28(1) of VIAC Rules, the Parties shall be treated fairly and shall be
granted the right to be heard at every stage of the proceedings. This principle constitutes a
mandatory rule that the Parties’ agreement cannot derogate from [VIAC Handbook, pp.
172-174]. Subject to this provision, the Parties must be given enough opportunity to
“present their case and to participate in, and comment on the taking of evidence”
[Schwarz/Konrad 2007, p. 630]. The principle of equal treatment and the right of the
Parties to fully present their case are also mirrored in the Danubian Arbitration Law
[Danubian Arbitration Law Art. 8]. This principle has been upheld by courts as
mandatory that is not subject to the Parties’ agreement [CLOUT Case No. 658; CLOUT
Case No. 743]. Document production in particular is part of a Party’s right to present its
case and opportunity to be heard [Matti/Santlu, p. 161]. If a party does not have the
necessary documents to establish the relevant facts for which it bears the burden of proof
of proving, and these documents are in the possession of the other party, the party seeking
documents production may be deprived of its opportunity to be heard [Kohler/Bartsch, p.
17].
29.
CLAIMANT is in need of the requested documents to submit and present its claim for
damages [St. Cl., p. 7, ¶ 27]. RESPONDENT’s interpretation on the arbitration clause as
an absolute exclusion of document production would contravene the mandatory provision
of the VIAC Rules and Danubian Arbitration Law. CLAIMANT would be deprived of the
right and opportunity to submit and participate in the production of relevant evidences for
the proof and calculation of damages incurred by excluding all types of document
production in the arbitration proceedings. Therefore, the Tribunal’s power to order the
document production is guaranteed even if the Parties’ agreement was meant to exclude
all types of document production.
30.
In conclusion, the Tribunal’s power to order the production of documents is embedded in
the Parties’ intention and the applicable laws. Further, even if the arbitration clause was
meant to exclude all document production, this cannot revoke the Tribunal’s power to
order the production of documents.
B. THE TRIBUNAL SHOULD EXERCISE THE POWER TO ORDER
RESPONDENT TO PRODUCE THE DOCUMENTS
31.
The Tribunal should exercise the power to order RESPONDENT to produce the
documents for the reasons that CLAIMANT’s request for document production is in
accordance with international best practice [1]. In addition, production of the requested
documents does not impose an unreasonable burden on RESPONDENT [2] nor does it
infringe upon RESPONDENT’s commercial confidentiality [3].
1. CLAIMANT’s Request for Document Production is in accordance with
International Best Practice
32.
The Parties agreed that this arbitration shall proceed in accordance with international
practice under Art. 20 of the Agreement [Cl. Ex. 1, p. 9]. Accordingly, the Tribunal
should apply IBA Rules for the Taking of Evidence (“IBA Rules”) since the IBA Rules
are recognized as international best practice for the taking of evidence in international
arbitration [a], and CLAIMANT’s request for document production satisfies the
requirements under Art. 3(3) of IBA Rules [b].
a. The IBA Rules are recognized as international best practice for the
taking of evidence in international arbitration
33.
The Tribunal should consider the guidelines on the taking of evidence in the international
arbitration based on IBA Rules as to the necessity to order the document production. The
IBA Rules are widely accepted in the international community [O’Malley, p. 6; IBA
Rules, p. 2]. Even if they are considered “non-binding” in many instances, the IBA Rules
are often used in modern arbitral practice [O’Malley, pp. 9-10]. Widespread acceptances
of the IBA Rules are evident in many tribunals when conducting evidentiary proceedings
[Noble Ventures Case (ICSID); Railroad Development Case (ICSID); Biwater Gauff Case
(ICSID); Glamis Gold Case (ICSID)]. The application of the IBA Rules in this instance
not only satisfy the Parties’ intention to conduct the arbitration in accordance with this
international best practice, but is also in line with the Code of Procedure of Danubia and
Equatoriana [Prod. Ord. 2, p. 61, ¶ 59].
34.
Further, it is particularly appropriate to apply the IBA Rules when the parties come from
different legal systems [IBA Rules Commentary, p. 7]. The IBA Rules are a compromise
between common law and civil law jurisdictions [Kohler/Bartsch, p. 18]. The Rules have
effectively become the standard globally for effective and cost-efficient document
production [Redfern/Hunter, p. 393]. In the present instance, even though VIAC Rules
does not provide particular methods for the taking of evidence, the IBA Rules are referred
as helpful guidance to determine the rules of evidence including document production
[VIAC Handbook, pp. 172-174]. Since CLAIMANT is located in a common law country
whereas RESPONDENT is in a civil law country [Proc. Ord. 2, p. 62, ¶ 68], the
application of IBA Rules would be the most appropriate means to govern evidentiary
proceedings in this instance.
35.
Hence, the Tribunal should apply IBA Rules to evaluate CLAIMANT’s request for
document production since it is widely accepted as the international best practice for the
taking of evidence.
b. CLAIMANT’s request for document production satisfied requirements
under Art. 3(3) of IBA Rules
36.
Art. 3(3) of IBA Rules provides the general requirements for a tribunal to determine a
request for documents production. In this way, the Tribunal in this matter should consider
CLAIMANT’s request is necessary to produce documents productions since
CLAIMANT’s request is “narrow and specific” [i], relevant to the case and material to its
outcome [ii], and the requested documents are in RESPONDENT’s possession [iii].
i.
37.
CLAIMANT’s request is “narrow and specific”
The “narrow and specific standard” in Art. 3(3) (a) of IBA Rules refers to the need for
there to be a narrow and tailored timeframe as well as subject matter in relation to the
documents sought [IBA Rules Commentary, p. 14]. In Elektrim Case, it was decided that
claimant’s request for document production met the narrow and specific standard because
of reference to precise time frames, how the names of individuals associated with the
documents were provided in addition to the fact that the function of the documents are
precisely described [Elektrim Case (U.K.)]. In CME Czech Republic Case, an ICSID
Tribunal reaffirmed the same criteria [CME Czech Republic Case (Sweden)]. In the
present dispute, CLAIMANT’s request for document production submitted to the
arbitration is very similar to the requests in the mentioned cases. CLAIMANT indicates
precisely the timeframe of the requested documents from the period of 1 January 2014 to
14 July 2015, specifies communication and contract documents as clear descriptions of
document categories sought, provides the names of SuperWines and RESPONDENT as
individuals associated with the documents and gives the reasons that the requested
documents are necessary to establish the claim for the damages [St. Cl., p. 7, ¶ 27].
Therefore, CLAIMANT’s request for the document production is in line with the narrow
and specific standard discussed above.
ii.
38.
The requested documents are relevant to the case and material
to its outcome
Art. 3(3)(b) of IBA Rules provides that a party seeking document production has to
demonstrate why the requested documents are relevant to the case and material to its
outcomes. In ADF Group Case, the tribunal considered the relevance of the requested
documents by assessing the likelihood of relevance of evidence to a substantive issue in
the case [ADF Group Case (ICSID)]. With regards to materiality, document production
may be material to the outcome if it is relevant to establish the facts of the case [VIAC
Handbook, p. 174]. In a procedural order in an ICC arbitration, the tribunal ordered a
party to disclose the contractual and payment documents it made with a third party on the
grounds that the requested documents were material to the outcome of the case [Scherer,
p. 199]. The tribunal reasoned that the requested documents were necessary for claimant
to quantify its claim [Ibid]. In this case, CLAIMANT sufficiently informed the Tribunal
that the requested documents are indispensable for CLAIMANT to calculate its claim for
the damages [St. Cl., p. 8, ¶ 28]. Since there was no contract signed by RESPONDENT
and SuperWines, but only exchanges of communication [Proc. Ord. 2, p. 56, ¶ 23], it is
clear that all communication concerning the number of bottles and purchase price in
relation to the disputed wines within the requested timeframe are substantially relevant for
CLAIMANT’s contention for payment of the damages and for the Tribunal to decide on
the claim.
iii.
39.
The requested documents are in RESPONDENT’s possession
Art. 3(3) of IBA Rules also requires that a requesting party must show that the requested
documents are not within in its possession, custody or control. If the requested documents
are available in the public domain where both parties can equally access them, the tribunal
would find the request for document production is inadmissible [ADF Group Case
(ICSID)]. A requesting party also needs to demonstrate why it assumes the documents are
within the possession, custody or control of the other party [O’Malley, p. 45]. This can
practically be proved with the fact that the requested documents are authored by or
addressed to the other party [Ibid]. In this case, CLAIMANT cannot access the
communication and contract documents concerning the transaction of diamond Mata
Weltin between RESPONDENT and SuperWines publicly or through other means. It is
self-evident that these documents are in RESPONDENT’s possession as RESPONDENT
exchanged the details of all cooperation and produced internal memoranda and minutes
discussing such cooperation with SuperWines [Proc. Ord. 2, p. 56, ¶ 23].
40.
Hence, the Tribunal should order RESPONDENT to produce the requested documents
since CLAIMANT has fulfilled the requirements pursuant to Art. 3(3) of IBA Rules.
2. Production of the Requested Documents Does Not Impose Unreasonable
Burden on Respondent
41.
RESPONDENT might allege that CLAIMANT’s request would impose an unreasonable
burden to produce the requested documents [IBA Rules Art. 9(2)(c)]. Generally, a tribunal
determines the reasonableness of the burden based on quantity of the documents, timing
of the request, cost of producing the documents and general ease of access to the
documents [IBA Rules Commentary, p. 26]. Precedents show that a party cannot simply
reject a request for document production where the tribunal finds that large amounts of
the requested documents have necessary use and are relevant to the Parties’ claims [INA
Corp Case]. In this case, the requested documents are necessary for CLAIMANT to
establish its claim for the damages. Further, CLAIMANT’s request for document
production took place at a very early stage of the arbitration proceeding which would
provide RESPONDENT ample time to produce the requested evidence. It is also clear
that RESPONDENT can easily obtain the documents without much cost since the
requested documents are RESPONDENT’s internal communication [Proc. Ord. 2, p. 56,
¶ 23]. Thus, RESPONDENT’s objection to CLAIMANT’s request for document
production based on this reason would be invalid. Ultimately, the production of the
requested document does not amount to an unreasonable burden being imposed on
RESPONDENT.
3. Production of the Requested Document does not Infringe RESPONDENT’s
Commercial Confidentiality
42.
RESPONDENT might object to the disclosure of the requested documents on the grounds
of commercial confidentiality or business secret [IBA Rules Art. 9(2)(e)]. When the
requested documents are subject to confidentiality agreements with a third party, the
tribunal evaluates the risk that the requested party could be liable to the third party
[Jardine Lloyd Thompson Canada Case (Can.)]. In addition, where a party objects to the
disclose of requested documents due to commercial confidentiality with a third party, but
does not have confidentiality agreement, the tribunal finds that the objection is not valid
on commercial confidentiality grounds [ICC Case No. 13133]. Here, there is no risk
involving the production of the requested documents on both RESPONDENT and
SuperWines since RESPONDENT has no problems in selling its wines due to its
reputation [Proc. Ord. 2, p. 61, ¶ 61], and it has already been widely known in the wine
industry that SuperWines paid a premium price of EUR 15-20 per bottle to
RESPONDENT [Proc. Ord. 2, p. 56, ¶ 24]. In addition, there is no confidentiality
agreement between RESPONDENT and SuperWines [Proc. Ord. 2, p. 56, ¶ 25]. In light
of these reasons, the production of the requested documents will not infringe commercial
confidentiality of RESPONDENT.
43.
IN CONCLUSION, the Tribunal has the power to order production of documents
and should order RESPONDENT to produce the documents requested by
CLAIMANT.
ISSUE 2
II.
CLAIMANT IS ENTITLED US$50,280 IN DAMAGES CLAIMED
FOR THE LITIGATION COSTS
44.
CLAIMANT is entitled to damages claimed for the litigation cost amounting to
US$50,280 incurred from the request for interim relief and defense of declaration of nonliability motion in the High Court of Mediterraneo on the grounds that CLAIMANT is
entitled to litigation costs as damages under CISG [A]. If the litigation costs are not
recoverable under CISG and there is an absence of an agreement, alternatively under
Danubian Procedural Law, CLAIMANT as the prevailing party can claim for litigation
costs from the losing party [B]. However, in any event, litigation costs can be claimed as
RESPONDENT’s actions amounted to bad faith [C].
A. CLAIMANT IS ENTITLED TO LITIGATION COST AS DAMAGES
UNDER CISG
45.
According to Art. 20 of the Agreement, the Parties have agreed that CISG is law
governing the contract [Cl. Ex. 1, p. 9]. Under Art. 45 of CISG, if RESPONDENT failed
to perform any obligation under the Agreement, CLAIMANT is entitled to claim for
damages as provided in Art. 74 to 77 of CISG [Schwenzer et al., p. 530]. It is
CLAIMANT’s submission that the Tribunal should not consider the distinction between
substantive matter and procedural matter of litigation cost [1]. Therefore, CLAIMANT is
entitled to litigation cost as damages under Art. 74 of CISG as litigation costs is
recoverable as part of damages under CISG [2], the litigation costs incurred as a
consequence of RESPONDENT’s breach [3], and RESPONDENT foresaw or ought to
have foreseen the litigation costs incurred by CLAIMANT [4]. Furthermore, CLAIMANT
has taken actions to mitigate the litigation costs under Art. 77 of CISG [5].
1. The Tribunal Should Not Consider the Distinction Between Substantive
Matter and Procedural Matter of Litigation Cost
46.
RESPONDENT alleges that litigation cost is a matter of procedural law and therefore
cannot recoverable under CISG [Ans. St. Cl., p. 29, ¶ 32]. However, CISG does not
restrict itself as a substantive law [DiMatteo, p. 290]. Art. 11 of CISG stated on the
permissibility of witnesses may indicate that it contains some provision over procedural
issue as well and it is believed that CISG indirectly govern procedural issue [Saidov 2008,
p. 164; DiMatteo, p. 290; Schlechtriem 2005, p. 72]. In addition, awarding litigation cost
under CISG, the distinction between substantive issue and procedural issue should not be
taken into account [Schlechtriem/Schmidt, Art. 11, Marginal note 12; DiMatteo, p. 291;
Saidov 2008, pp. 162, 168]. This idea has influenced some authors to argue that the legal
costs can be recovered under CISG regardless whether it falls under substantive issue or
procedural issue [Diener, p. 31; DiMatteo, p. 290]. Therefore, as long as the standard
requirements in Art. 74 of CISG are satisfied and can be proved and calculated, the
litigation cost is recoverable [Saidov 2008, p. 164; Schlechtriem 2005, p. 72].
47.
Regarding the case at hand, the Tribunal should not distinct the matter of substantive
issue and procedural issue since there is no clear distinction between substantive issue and
procedural issue [Saidov 2008, p. 164; Orlandi, pp. 23,40]. Moreover, the standard
requirements under Art. 74 of CISG are satisfied and CLAIMANT is able to prove and
calculate a certain amount of loss stated in LawFix’s invoice [Cl. Ex. 11, p. 19].
48.
RESPONDNET may also rely on some legal scholar opinions that the litigation cost is not
covered under Art. 74 of CISG base on the appeal court’s decision in Zapata Case. The
appeal court held that the cost fall under procedural issue and should be governed by
procedural law [Zapata Case]. Nevertheless, the Tribunal should not adopt the reason of
the appeal court as held in the Zapata case since the court did not make a reference to
CISG and had disrespected the international character required under Art. 7 of CISG
[Diener, p. 31; Zeller, p. 3] while the court in Switzerland, Germany, Belgium, and
Netherland awarded legal costs as damages based on Art. 74 of CISG regardless whether
the loss fall under Substantive or Procedure law [DiMatteo, p. 287; Chinese Goods Case;
Jacob Case; Bowers Case; Triumph Tankers Case]. Moreover, the appeal court decided
by distinct the loss between substantive and procedural issue while this distinction “[…]
is not a functional test due to its generality and lack of generally acceptable criteria for
applying the distinction” [DiMatteo, p. 291; Saidov 2008, p. 52; Jäger, p. 160].
49.
Hence, the Tribunal should not make a distinction between substantive issue and
procedural issue on litigation costs.
2. Litigation Costs is Recoverable as Part of Damages under Art. 74 of CISG
50.
Under Art. 74 of CISG, the aggrieved party is entitled to damages in a sum equal to the
loss suffered as a consequence of the breach [CISG Art. 74]. However, CISG does not
specifically define the scope of “loss”. Some tribunals and scholars have interpreted that
attorney’s fee or litigation costs are recoverable as part of damages under Art. 74 of CISG
[Chinese Goods Case (Ger.); Jacob Case (U.S.); Triumph Tankers Case (U.S.); Vanto, p.
10; Fletcher, p. 131; DiMatteo, p. 287; Felemegas, p. 128]. Furthermore, CISG drafters
intentionally left out the term “loss” to be interpretable in recovering litigation costs and
not to strictly mean that such costs cannot be recovered under CISG [Schwenzer et al., p.
520].
51.
The principle of full compensation reflected in Art. 74 of CISG aims to protect an
aggrieved party from having financial impact or the loss was sustained by the aggrieve
party [Schwenzer et al., p. 233; UNIDROIT Principles Art. 7.4.2] and such “notion of loss
suffered must be understood in a wide sense” [Commentary of UNIDROIT Principles,
Art. 7.4.2, p. 267].
52.
In SPP v. Egypt Case, respondent breached the agreement by canceling the project that
claimant had invested in [SPP v. Egypt Case (ICSID)]. To protect its own interest,
claimant asked the tribunal for relief by seeking damages from breaching contract in ICC
arbitration [Ibid]. ICC awarded damages to claimant, however, Paris Court of Appeal
denied the enforcement of the award base on lack of jurisdiction [Ibid]. Claimant further
claim damages again in ICSID and finally was awarded more than US$5,000,000 for outof-pocket expenses including litigation costs in the early litigation proceeding in ICC and
French court with a reasoning of fair compensation [Ibid].
53.
In the present case, CLAIMANT incurred litigation costs from the application for interim
relief and the defense in the state court in Mediterraneo against RESPONDENT motion
for seeking declaration of non-liability [St. Cl., p. 5, ¶ 12]. Consequently, CLAIMANT
had spent US$33,125 on legal costs for interim relief [Cl. Ex. 11, p. 19; Proc. Ord. 2, p.
58, ¶ 41]. The litigation costs sustained by CLAIMANT is recoverable as damages
regardless whether it is either procedural or substantive costs [Diener, p. 31]. In addition
to the loss incurred in the application for interim relief, CLAIMANT also sustained
US$17,155 in the court proceeding against RESPONDENT’s motion for declaration of
non-liability in the High Court of Mediterraneo [Cl. Ex. 11, p. 19]. The court denied
granting such declaration as existence of arbitration clause in the Agreement [Cl. Ex. 9, p.
17]. Therefore, the litigation costs incurred by CLAIMANT in an application for interim
relief and defense for non-liability in the state courts are recoverable under Art. 74 of
CISG.
3. The Litigation Costs Incurred to CLAIMANT is a Consequence of
RESPONDENT’s Breach of Agreement
54.
Art. 74 of CISG require that the loss incurred must result from the consequence of a
breach [Schwenzer et al., pp. 530-531; Huber/Mullis, p. 268]. The term “loss” does not
exclude the legal fee incurred by subsequent breach [Vanto, p. 10]. The aggrieve party has
to put itself in a position that contract would have been performed in order to find that the
loss is caused by the consequence of the breach [CISG-AC Op. 6]. In this case,
RESPONDENT has breached the Agreement by failing to deliver 10,000 bottles of wines
to CLAIMANT. As CLAIMANT has accepted pre-ordered from its customers [Cl. Ex. 2,
p. 10], CLAIMANT needs to obtain 10,000 bottles of wines from RESPONDENT. In
doing so, CLAIMANT has sought interim relief and defense in the declaration of nonliability in the state court of Mediterraneo as well as seek legal assistant from LawFix to
assist in the court proceedings [St. Cl. p. 5, ¶ 12]. If RESPONDENT had not breached the
Agreement, CLAIMANT would not have incurred litigation costs in the amount of
US$50,280 for retaining LawFix and court proceedings. Hence, CLAIMANT has
incurred the litigation cost as result of RESPONDENT’s breach of the Agreement.
Therefore, the litigation costs incurred by CLAIMANT are consequence of
RESPONDENT’s breach of contract.
4. RESPONDENT Foresaw or Ought to Have Foreseen the Litigation Costs
Incurred by CLAIMANT at the Time of Conclusion of the Agreement
55.
Art. 74 of CISG states that the damages may not exceed the loss, which the breaching
party foresaw or ought to have foreseen at the time of concluding the contract as a
possible consequence of the breach of contract [Huber/Mullis, p. 271]. In a sense of
reasonable person that the damages incur may include the legal expense and it is
foreseeable since the “assistance of specialize lawyer was to be expected” where there is a
dispute [CISG Art. 8]. In Chinese Goods Case, the buyer breached the contract by
refusing to pay for the goods [Chinese Goods Case (Ger.)]. The seller sued the buyer for
breaching the contract [Ibid]. The tribunal awarded the extrajudicial cost for the seller
base on Art. 74 of CISG and German law [Ibid]. The tribunal held that both German
contract law and CISG contain the same concept to recover the litigation fee as damages
[Ibid]. It is because of the litigation cost was caused by the buyer’s breach of contract
[Ibid]. The tribunal awarded the extrajudicial cost base on Art. 74 of CISG reasoning that
with the absence of parties’ agreement on legal assistance, the contract should be
interpreted in accordance with Art. 8 of CISG [Ibid]. The tribunal found that “in principle,
a party cannot reasonably be expected to take part in an arbitral procedure without
counsel” [Ibid]. Similarly to the present case, RESPONDENT ought to have known that
CLAIMANT will retain legal assistance to represent itself in the court proceeding. Hence,
RESPONDENT foresaw or ought to have foreseen that CLAIMANT would incur
litigation costs in its application for interim relief and its defense for non-liability in the
state courts.
5. Additionally, CLAIMANT has Taken Actions to Mitigate the Litigation Costs
under Art. 77 of the CISG
56.
According to Danubian Contract Law and CISG, aggrieved party must take reasonable
step to reduce the loss; otherwise the party in breach may claim for a reduction of the
amount of damages sought [CISG Art. 77; UNIDROIT Principles Art. 7.4.8]. This
provision express the principle of good faith and avoid the aggrieved party passively
sitting back and waiting to be compensated for harm [Commentary of UNIDROIT
Principles, Art. 7.4.8, p. 277; CISG Digest 2012, Art. 77, p. 368, ¶ 7; Huber/Mullis, p.
289]. In general understanding based on a survey, if a lawyer fee is expensive, the
plaintiff would prefer using a contingency fee rather than an hourly rate or conditional fee
[Emons, p. 7].
57.
In this case, CLAIMANT has acted in good faith as to positively mitigate the loss from
the breach. CLAIMANT has contacted two laws firms to work on contingency fee for the
purpose of reducing legal costs expenses as CLAIMANT does not have enough liquid
capital to afford legal fees and faced with unfavorable exchange rate in Mediterraneo [St.
Cl., p. 5, ¶ 13]. Subsequently, through the CLAIMANT’s actions, it is proof that
CLAIMANT wanted to lower the cost on attorney fee. Unfortunately, those two law firms
do not work with a contingency fee basis [Proc. Ord. 2, p. 58, ¶ 39]. In principle, the
purpose of using a contingency fee is to put counsel in risk which means lawyer would try
to win the case [Miceli/Segerson; Kritzer; Emons, p. 6]. Therefore, CLAIMANT could
ensure the case is winning as a result of the breach done by RESPONDENT. In this way,
CLAIMANT has no choice but to retain LawFix as it accepted to work on a contingency
fee basis [St. Cl. p. 5, ¶ 13; Proc. Ord. 2, p. 58, ¶ 39].
58.
In Mediterraneo, the average of hourly rate is US$350 for legal fee, which is very high in
comparison with Equatoriana’s legal fees [St. Cl., p. 5, ¶ 13; Proc. Ord. 2, p. 58, ¶ 39].
RESPONDENT had alleged that CLAIMANT had agreed on a higher contingent fee rate
[Ans. St. Cl., p. 29, ¶ 35]. However, CLAIMANT asserts that contingency fee was
recognized as a reasonable cost [Proc. Ord. 2, p. 58, ¶ 39]. In Burlington v Dague, the
court stated that litigation cost may be charged either by hourly rate or contingent fees,
but sometimes uses both [Burlington Case (U.S.)]. In this case, LawFix has charged
contingency fee and hourly rates [Cl. Ex. 10, p. 18; Cl. Ex. 11, p. 19]. In addition,
RESPONDENT has agreed on contingency fee in the previous case and Meditteraneo law
also recognized the charging on contingency fee basis [Proc. Ord. 2, p. 29, ¶ 42; Proc.
Ord. 2, p. 28, ¶ 40]. Subsequently, there would be no challenge over contingency fee,
which CLAIMANT had agreed on. According to LawFix’s invoice on 25 May 2015,
LawFix charged CLAIMANT base on associate fee of US$150 per hour but not partner’s
fee of US$450 per hour [Cl. Ex. 11, p. 19; Proc. Ord. 2, p. 28, ¶ 39]. Therefore,
CLAIMANT has taken all reasonable actions to mitigate litigation costs as required under
Art. 77 of CISG.
B.
ALTERNATIVELY,
IN
ACCORDANCE
WITH
DANUBIAN
PROCEDURAL LAW, CLAIMANT AS A PREVAILING PARTY CAN CLAIM
FOR LITIGATION COSTS
59.
If litigation costs are not recoverable under CISG and the contract agreement does not
specifically mentions on how to treat the costs, the tribunal can look into the relevant law
in order to decide on how to allocate costs [Gotanda, p. 16; Keily, p. 10]. CLAIMANT
should be able to recover the litigation costs in accordance with the cost follow events
rule as adopted by Danubia. Under this rule, RESPONDENT as a losing party has to pay
the prevailing party, CLAIMANT [1] and the CLAIMANT is entitled to indemnification
by being awarded the litigation costs [2].
1. The RESPONDENT as a Losing Party has to Pay the Prevailing Party,
CLAIMANT
60.
Danubia adopts the cost follows event also known as the ‘English Rule’ [Proc. Ord. 2, p.
49, ¶ 43; Bühler, p. 250] and it differs from the practice followed in Meditteraneo. Under
the cost follow events rule, prevailing parties can recover litigation costs from the losing
party [Lee Case (Can.)]. A prevailing party is when the court ruled in favor of a particular
party or has prevailed on an important issue [Wayne Case (U.S.)]. Therefore, through the
application of the means-based approach, the interim injunction granted makes the
CLAIMANT a prevailing party [a] and based on the ‘catalyst theory’, CLAIMANT is the
prevailing party as RESPONDENT decided to deliver 4,500 bottles of wine after court’s
dismissal [b].
a. Through the application of the means-based approach, the interim
injunction granted makes CLAIMANT a prevailing party
61.
In order for a party to claim for status of a ‘prevailing party’ when an interim injunction
has been issued, the injunction cannot be issued just to preserve the status quo but to
secure primary relief [Kirklin/Shwartz, p. 121]. Moreover, the means-based approach
states that a prevailing status can be claimed when the party has obtained the desired
results through the interim injunction and be awarded the litigation costs [Forsyth, p.
957].
62.
CLAIMANT sought for an interim injunction after receiving a letter from the
RESPONDENT terminating the contract and refusing to deliver the 10,000 bottles of
wine [St. Cl., p. 5 ¶ 10]. The aim of the injunction was to stop RESPONDENT from
selling away the bottles of wine as CLAIMANT had already accepted some orders from
its clients [Ibid]. If the CLAIMANT did not ask for the injunction it would lose its
customers and business reputation [Ibid]. This would have amounted to ‘irreparable harm’
[Stoll-debell et al., pp. 98, 100]. This means that the injunction does not just procure the
wine but it also prevents the party from suffering from non-recoupable losses therefore, it
provides relief to the CLAIMANT.
63.
Furthermore, the interim injunction granted by the High Court of Mediterraneo, was not
challenged by RESPONDENT [Cl. Ex. 9, p. 16; St. Cl., p. 5 ¶ 10]. Since RESPONDENT
did not challenge the order, the interim injunction granted has resulted in the desired
outcome and CLAIMANT is the prevailing party.
b. Based on the ‘catalyst theory’, CLAIMANT is the prevailing party as
RESPONDENT decided to deliver 4,500 bottles of wine after court’s dismissal
64.
The catalyst theory states that if the lawsuit had acted as a catalyst in causing a positive
change in a party behavior, then the other party can claim to be the prevailing party
[Forsyth, p. 932; Stanton Case (U.S.)]. By the application of the ‘catalyst theory’, after
the court’s dismissal of the declaration of non-liability [Cl. Ex. 9, p. 17], the
RESPONDENT responded in a favorable way towards the CLAIMANT.
65.
In Water Agencies Case, the court provided that as long as it can prove that there is a
causal between the lawsuit and the final outcome, the catalyst theory applies [Water
Agencies Case (U.S.)]. In the present case, it was the result of the rejection of the
application that caused RESPONDENT to offer delivery of 4,500 bottles of wine and
discontinue all legal proceedings [St. Cl., p. 5]. The High Court of Mediterraneo may not
have decided on the merits or produced a judgment for either party but the lawsuit acted
as a catalyst since it caused a voluntary change in the RESPONDENT’s behavior.
Therefore, CLAIMANT is a prevailing party.
66.
In conclusion for both case of interim injunction and the declaration of non-liability,
CLAIMANT is the prevailing party and CLAIMANT can claim for litigation costs
pursuant to the cost follow events.
2. The CLAIMANT is Entitled to Indemnification by being Awarded the
Litigation Costs
67.
Under the cost follow events rule, the losing party shall bear the costs of litigation as a
means to compensate or indemnify the winning party [Bühler, p. 250]. The ‘English Rule’
seeks to balance out the fairness and compensate the winning party for having ‘to prove
the justice of his position’ [Rowe, p. 654]. In Hooper Case, plaintiff was awarded litigation
costs as it was justified that it was sufficient to reimburse the plaintiff [Hooper Case (U.S.)].
Since CLAIMANT is the prevailing party and in accordance with the principle of the cost
follow events, CLAIMANT should be compensated for the legal costs incurred.
68.
Hence, CLAIMANT is entitled to litigation costs of US$50,280 as Danubia Procedural
Law under the cost follows event and by being awarded the litigation cost it will
indemnify CLAIMANT.
C. IN ANY EVENT, CLAIMANT CAN RECOVER LITIGATION COSTS AS
RESPONDENT’S ACTION AMOUNTS TO BAD FAITH
69.
Even if the Tribunal does not choose to adhere to the cost follow rules, CLAIMANT is
entitled to litigation cost as RESPONDENT’s actions amounted to bad faith. With
reference to the ‘American Rule’ as practiced in Mediterraneo, where parties bear their
own costs, there is an exception when the suit was brought in bad faith [Proc. Ord. 2, p.
59, ¶ 44].
70.
As in conjunction to international practice for the ‘American Rule’, the litigation costs are
born by each party with the exception in cases where the claims are groundless or done in
misconduct [Dobbs, p. 440; Mason/Hamilton, p. 3]. Under these grounds, the discretion
lies on the arbitrator to award litigation costs despite having a decision already saying
‘each party bears its own cost’ [Reliastar Case (U.S.)].
71.
In every business dealings there is always an implied covenant of good faith and fair
dealing [CISG Art. 7(1); Powers, p. 340]; furthermore, it is of utmost importance that
parties cannot simply exclude from practice [UNIDROIT Principles Art. 1.7]. Sometimes,
the term ‘bad faith’ is often used in place of ‘good faith’ in order to address ‘prohibited
behavior’ [Fauvarque-Cosson (ed) et al., p. 161].
72.
In determining bad faith, it depends on the behavior of the opponent prior to or during the
trial period [Vargo, p. 1584]. In Vaughan Case, the court held that he was entitled to
recovery of attorney fees, as he should not have to go to court to claim what is rightfully
his from the start [Vaughan Case (U.S.)]. The defendant’s inaction amounted to bad faith
[Ibid]. In Time Ins. Co. v Burger, Burger file a suit for statutory bad faith, claimed that
because Time did not pay his medical bills, he did not get medical treatment. The court
found that Respondent had violated bad faith statute for failing to settle claims in good
faith, and the court awarded Claimant US$50,000 in compensatory damages [Time
Insurance Case (U.S.)].
73.
In connection to the present case, RESPONDENT firstly, terminated the contract and
refused to send the bottles of wine as per contract agreement, which caused CLAIMANT
to apply for an interim injunction [St. Cl., p. 5, ¶ 10]. Secondly, RESPONDENT sought
for a declaration of non-liability in order to avoid having to pay for damages due to
breach of contract [St. Cl., p. 5, ¶ 12]. Only after these two proceedings RESPONDENT
offers to send over 4,500 bottles of wine [St. Cl., p. 5, ¶ 14]. As a result, the
RESPONDENT actions amounts to bad faith or misconduct since CLAIMANT had to go
to court to procure what is rightfully owed to them by RESPONDENT.
74.
For both these proceedings CLAIMANT had to incur a cost of US$50,280 in order to
make sure they could claim for the bottle of wines as originally entitled to them [Cl. Ex.
11, p. 19]. Pursuant to the ‘American Rule’, RESPONDENT conduct amounted to a
misconduct or bad faith as CLAIMANT was forced to seek for court’s assistance.
Therefore, CLAIMANT is entitled to recover the litigation costs, as RESPONDENT
actions amounted to bad faith.
75.
IN CONCLUSION, CLAIMANT is entitled to damages claimed for litigation costs
of US$ 50,280.
ISSUE 3
III. CLAIMANT IS ENTITLED TO THE PROFITS MADE BY
RESPONDENT FROM SELLING THE BOTTLES TO SUPERWINES AS
PART OF ITS DAMAGES EVEN IF THAT INCLUDES FURTHER
PROFITS
76.
CLAIMANT is entitled to the profit made by RESPONDENT from selling the bottles to
SuperWines as part of its damages even if that includes further profits on the grounds that
CLAIMANT is entitled to damages in a sum equal to the loss suffered as a consequence
of RESPONDENT’s breach under CISG [A]. Alternatively, CLAIMANT is entitled to
disgorge RESPONDENT’s profits made from selling the bottles to SuperWines [B].
A. CLAIMANT IS ENTITLED TO DAMAGES IN A SUM EQUAL TO THE
LOSS SUFFERED AS A CONSEQUENCE OF RESPONDENT’S BREACH
UNDER CISG
77.
CLAIMANT is entitled to damages in a sum equal to the loss suffered as a consequence
of RESPONDENT’s breach under Art. 74 of CISG as CLAIMANT will suffer losses
including loss of profit and reputation as a consequence of RESPONDENT’s breach [1],
RESPONDENT foresaw or ought to have foreseen such losses [2], and CLAIMANT has
mitigated such losses in accordance with Art. 77 of CISG [3].
1. CLAIMANT will Suffer Losses including Loss of Profit and Reputation as a
Consequence of RESPONDENT’s Breach
78.
Under Art. 74 of CISG, CLAIMANT is entitled to claim damages in a sum equal to the
loss including loss of profit suffered as consequence of breach by RESPONDENT. CISG
does not specifically provide a method for calculation of the losses [Eiselen 2004, ¶ 2].
Similarly, according to Art. 7.4.1 and 7.4.2 of UNIDROIT Principles, the breaching party
has to compensate the aggrieved party in amount that the aggrieved party has suffered
including the loss of profit. The damages include loss of profit which results from the
principle of full compensation [Signh/Zeller, p. 216]. Aggrieved party has right to claim
compensation for harm arose from the breach under Art. 7.4.2 of UNIDROIT Principles
[Roofing Material Case (Aut.)].
79.
Loss of profits is the difference between the profit that would have earned with and
without breach of contract [Hall/Lazear, pp. 477, 478]. The aggrieved party is allowed to
claim damages for non-performance by the breaching party, such damages should extend
to non-performance damages, which are normally measured by value of the benefit of
which the aggrieved party has been deprived as a result of the breach [CISG-AC Op. 6,
§3]. Loss of profit includes those arising from lost volume sales, any net gains prevented
as a result of the breach, loss of reputation, and loss of goodwill [CISG-AC Op. 6, §§3,
7.3].
80.
In this case, RESPONDENT refused to deliver entire 10,000 bottles of wines that
CLAIMANT had ordered [Cl. Ex. 3, p. 11]. Instead, RESPONDENT will deliver only
4,500 bottles of wine to CLAIMANT and sold another 5,500 bottles of wine at a higher
price to SuperWines [Cl. Ex. 3, p. 11; Proc. Ord. 2, p. 56, ¶24]. As a result,
RESPONDENT breached the Agreement by refusing to deliver 10,000 bottles of wine to
CLAIMANT. In this way, the profits that RESPONDENT made would be a part of
CLAIMANT’s loss of profits as CLAIMANT will make profit from selling the 5,500
bottles of wines to its customers if RESPONDENT did not breach the contract.
81.
Further, CLAIMANT will suffer loss of reputation as a consequence of RESPONDENT’s
breach. The companies lose their reputation when their business partner reduces its
tendency to do business with them [Karpoff, p. 375]. Reputation damage can be
recoverable under CISG [Plastic Carpets Case (Fin.); Art Books Case (Switz.); Footwear
Case (Fr.); Dye for Clothes Case (Esp.); Saidov 2001]. In Groom Case, the court held
that loss of reputation is proper to compensate the aggrieved party if there is an act of
damaging reputation [Groom Case (U.K.)]. In this case, CLAIMANT is a well-known
wine merchant in Equatoriana which has a good reputation with its customers for being a
reliable source [St. Cl., p. 3, ¶ 1]. CLAIMANT will suffer loss of reputation by failing to
supply the wines to its customers due to RESPONDENT’s breach. The loss of reputation
would cause loss of customers and future profits as CLAIMANT would lose trust and
good relationship with its customers. Such loss of reputation is likely greater than the
profits that CLAIMANT would have made in the current transactions with its customers.
In such case, it is impossible to calculate the accurate amount of loss of reputation. Hence,
CLAIMANT decided to claim only RESPONDENT’s profits made by selling those 5,500
bottles of wine to SuperWines. By only claiming the profits that RESPONDENT made is
easier than calculating of exact amount of damages which CLAIMANT will lose
including loss of profit and loss of reputation. As a sign of goodwill, CLAIMANT
decided to claim only the profits that RESPONDENT made [St. Cl., p. 7, ¶ 26].
82.
Therefore, CLAIMANT is entitled to damages including loss of profit and loss of
reputation in equivalent to RESPONDENT’s profits made from selling the bottles to
SuperWines.
2. RESPONDENT Foresaw or ought to have Foreseen Such Loss
83.
CLAIMANT asserts that RESPONDENT foresaw or ought to have foreseen
CLAIMANT’s loss as a possible consequence of the breach at the time conclusion of
Agreement [CISG Art. 74; Schwenzer/Fountoulakis, p. 531; Ferrari/Torsello, p. 312;
Kroll et al., p.592; Andre/Olaf, p. 190]. The breaching party could have foreseen the
buyer’s loss if they corresponded extensively on supply problem [Chinese Goods Case
(Ger.); Cooling System Case (Aut.)]. Further, at the time both parties had agreed on the
contract, each party knew that if one party breached the contract, the other party would
suffer loss [Ferrari, p. 1266, ¶ 3]. Normally, intentional breach of a contractual obligation
is foreseeable loss resulting from the breach [Schlechtriem/Schwenzer, p.23].
84.
In the Agreement, RESPONDENT has agreed to sell diamond Mata Weltin wines in the
maximum amount of 10,000 bottles to CLAIMANT annually [Cl. Ex. 1, p. 9]. In addition,
RESPONDENT was aware that CLAIMANT is a wine merchant [Cl. Ex. 2, p.10], so
RESPONDENT should know that if it breaches this obligation, CLAIMANT will suffer
loss including loss of profits and reputation in the wines market due to not being able to
sell the wine to its customers.
85.
RESPONDENT might argue that it did not foresee CLAIMANT’s loss because it did not
intend to breach the contract. It will argue that it breached the contract due to bad
weather, decrease in wine quantity and it would not able to sell the maximum number of
bottles to CLAIMANT [Cl. Ex. 3, p. 11]. In contrast, RESPONDENT has made higher
profit by selling those bottles of wine to SuperWines, which is CLAIMANT’s biggest
competitor, [Proc. Ord. 2, p. 56, ¶ 26]. Moreover, RESPONDENT acknowledged that
SuperWines is CLAIMANT’s biggest competitor but RESPONDENT still chose to
breach the contract with CLAIMANT and sold those bottles to SuperWines for higher
profit [Ibid].
86.
Hence, RESPONDENT foresaw or ought to have foreseen that if it breaches the contract,
CLAIMANT will suffer loss including loss of profit and reputation in the wines market
due to not being able to sell those bottles of wines to its customer.
3. CLAIMANT has Mitigated such Loss in accordance with Art.77 Of CISG
87.
CLAIMANT has taken reasonable measures in the circumstance to mitigate loss [CISG
Art. 77; Koziol, p. 388; Knapp, pp. 567-559]. A reasonable time to mitigate the loss not
only after loss has occurred but also before arise [Lookofsky, p. 136]. The requirement to
mitigate the loss is generally interpreting in good faith [Riznik, p. 271]. The buyer was
under duty to enter into a substitute transaction to mitigate the loss caused by the seller’s
breach [DiMatteo, p. 482; Watches Case(Switz.)]. Further, it is reasonable measure to
mitigate damages, when a seller non-perform the obligation as agree in the contract, the
buyer had to purchase a substitute replacement elsewhere in the market [Riznik, p. 273;
Iron Molybdenum Case (Ger.)].
88.
In this case, after receipt of RESPONDENT’s email on 4 December 2014 [Cl. Ex.7, p.15],
CLAIMANT will suffer loss of reputation in the wine collector club, its customer will
loss trust, and not be able to earn the expected profit. In order to minimize losses as
consequence of such breach, CLAIMANT has negotiated with its customers to substitute
the wines from other top three high end wines producer in Mediterraneo [Proc. Ord. 2, p.
54, ¶ 10]. Further, CLAIMANT started to arrange a substitute wines from Vignobilia Ltd
for the amount of 5,500 bottles of top quality Mata Weltine from Mediterraneo in order to
fulfill obligation and maintain reputation with its customers [St. Cl., p. 5, ¶ 11; Proc. Ord.
2, p. 54, ¶ 19]. Therefore, CLAIMANT has taken reasonable measure to mitigate the loss
result from RESPONDENT’s breach of contract.
B. ALTERNATIVELY, CLAIMANT IS ENTITLED TO DISGORGE
RESPONDENT’S PROFITS MADE FROM SELLING BOTTLES TO
SUPERWINES
89.
CLAIMANT will suffer loss of profits and reputation by not being able to sell 5,500
bottles ordered as a consequence of RESPONDENT’s breach of contract [Proc. Ord. 1, p.
50, ¶ 2]. Nevertheless, to maintain the relationship with RESPONDENT by not asking to
deliver the rest of the bottles which RESPONDENT could do [Proc. Ord. 2, p. 54, ¶ 12],
CLAIMANT only claim for the profits RESPONDENT has made by selling those 5,500
bottles to SuperWines [St. Cl., p. 7, ¶ 26]. CLAIMANT can disgorge RESPONDENT’s
profits as this is valid in the context of CISG [1] and applicable in this case [2].
1. Disgorgement of Profits is Valid in the Context of CISG
90.
Although Art. 74 of CISG allows the aggrieved party to claim for damages in a sum equal
to loss, including loss of profits, it had suffered as a consequence of the breach, the
provision itself does not provide any specific guideline on how to calculate such damages
[CISG-AC Op. 6, §§1.1, 3.12; Secretariat Commentary Art. 74 CISG, ¶ 3]. It means that
Art. 74 of CISG do not limit the aggrieved party to claim damages loss of profit alone.
Instead, the Tribunal has discretion to determine the loss suffered by the aggrieved party
based on the circumstance of the particular case [CISG-AC Op. 6, §1.1; Gotanda, n.d., p.
111].
91.
One method of calculating damages that this Tribunal should consider is disgorgement of
profits. Disgorgement of profits refers to the removal of the profits from the wrongdoer
and payment to the aggrieved party on the basis that the wrongdoer should not benefit
from the breach of his contractual obligation [Jaffey, p.149]. According to Schwenzer and
Hachem, CISG allows the aggrieved party to disgorge the profits the breaching party
made as a result of the breach of contract because what the breaching party gains is
viewed as what the aggrieved party has lost [Schwenzer/Hachem, p. 101]. When the
breaching party sells the goods to the third party at a higher price, this price shows the
true market price at the time of the breach of contract; thus, the buyer who has the right to
performance interest, is entitled to the amount that the breaching party had gained [Ibid].
92.
In other words, the aggrieved party is entitled to certain contractual performance by the
breaching party [Ibid]. However, the breaching party breached the contract by getting into
another contractual relationship with the third party and ultimately profited from this
breach [Ibid]. These gain would have belonged to the aggrieved party if the contract had
not been breached [Ibid]. Art. 74 of CISG protects the aggrieved party from such
disadvantages resulting from the breach; it allows the aggrieved party to recover what it
would have received if the contract had not been breached [CISG-AC Op. 6, §§1.1, 3.2].
93.
In this case, as a result of RESPONDENT’s breach of contract [Cl. Ex. 7, p. 15. Proc.
Ord. 1, p. 50, ¶ 2], CLAIMANT will suffer loss of profits by not being able to sell the
5,500 bottles [St. Cl., p. 7, ¶ 26]. RESPONDENT sold those 5,500 bottles to SuperWines
for a premium price [Proc. Ord. 2, p. 56, ¶ 24]. RESPONDENT clearly breached its
contractual obligation under the Agreement. CLAIMANT is entitled to delivery of 5,500
bottles by RESPONDENT. This is CLAIMANT’s performance interest under the
Agreement. In BRI Production Case, the Tribunal awarded 10,000 Francs under CISG to
BRI Production as Pan African Export had breached their contractual obligation by
selling the goods to Europe which had been prohibited in the contract [BRI Production
Case (Fra.)]. Similar to this case, the premium price that RESPONDENT gained from
SuperWines is considered as a new market price at the time of RESPONDENT’s breach,
which CLAIMANT would have gained if RESPONDENT had properly performed its
obligation under the contract.
94.
Hence, the profits that RESPONDENT gained from SuperWines should be considered as
CLAIMANT’s loss suffered from the breach and CLAIMANT is entitled to
RESPONDENT’s profits as a result of the breach of contract. Since disgorgement of
profits is merely just another method of calculating damage in the context of CISG
[Schwenzer/Hachem, p. 101], this method of calculating damages is still within the scope
of the principle of full compensation and is valid under CISG.
2. Disgorgement of Profits is Applicable in this case
95.
RESPONDENT violated the principle of good faith under CISG by breaching the contract
intentionally and selling the 5,500 bottles to SuperWines [St. Cl., p. 7, ¶ 26].
RESPONDENT cannot argue for efficient breach in the context of CISG [a]; therefore,
RESPONDENT should not be allowed to profit from breaching the contract with
CLAIMANT [b] and CLAIMANT is entitled to disgorge the profits which resulted from
RESPONDENT’s breach [c].
a. Efficient breach is not allowed in the context of CISG
96.
In business transactions, when parties enter into contract they have already considered it
is efficient and expected to gain from the contract [Markovits/Schwartz, p. 1970, ¶ 1].
However, the efficient breach theory encourages a party to breach the contract by paying
only damages to the aggrieved party if the breaching party considers he can gain greater
benefits from breaching rather than performing the contract [Birmingham, p. 281; Klass,
p. 8]. From a moral standpoint, this may encourages a moral wrong if the wrongdoer is
the only party who will benefit from the breach [Klass, p. 8, ¶1]. Art.7 of CISG also
provides for the observance of good faith in international trade, which requires both
parties to perform the contract in moral way and fair dealing. Moreover, it has also been
stated that “a contractual promise creates a moral obligation to perform, not an obligation
to perform if the performance is efficient, or an obligation to perform or pay damage”
[Klass, p. 7, ¶ 1].
97.
From the perspective of efficient breach theory, RESPONDENT decided to breach the
contract with CLAIMANT and sold the remaining 5,500 bottles to SuperWines at a
higher price [Cl. Ex. 1, p. 9; Res. Ex. 2, p. 33; Proc. Ord. 2, p. 56, ¶ 24]. In relation to the
principle of good faith, the way RESPONDENT breached the contract and profited from
its wrong is not valid in the present case because it is against moral and the general
provisions of CISG in international trade. RESPONDENT should not choose to breach
the contract by avoidance of its obligation under the contract and only paying damages for
its wrong to CLAIMANT. In addition, RESPONDENT profited from its wrong as the
price that SuperWines paid for its wines is higher than the originally price offered to
CLAIMANT by EUR 15-20 per bottles [Proc. Ord. 2, p. 56, ¶ 24]. This means that
RESPONDENT breach is efficient breach and it is not applicable when it means that there
is a lack of good faith between the breaching party and the aggrieved party. Therefore,
efficient breach is not allowed in the context of CISG.
b. RESPONDENT is not allowed to profit from its breach of contract
98.
The principle of good faith has been viewed as the general principle which is protected
under the CISG [CISG Digest 2012, p. 43. ¶ 13; Broadcasters Case (Ger.); Fresh-Life
International Case (Nld.)]. There has been an existing principle which support this
argument that a person shall not be permitted to profit from his wrongdoing [Halifax
Building Society Case (U.K.); Attorney General v Guardian Newspapers (U.K.);
McCamus, p. 945]. It means that if a party intentionally breaches the contract in order to
enter into another contract with a third party, this party will breach the principle of good
faith of CISG. Therefore, this party shall not entitle to profits from the third party
resulting from its breach of the contract. Furthermore, the profit resulting from the breach
shall be given up because breaching party has no right to that profit at the expense of the
aggrieved party’s right to the contract. [Smith, pp. 129, 132, 140]. Such enrichment from
the breach should be compensated to the aggrieved party if it will suffer loss resulting
from the breach [Waddams 2000, p. 10; Birks 1985, p.21].
99.
RESPONDENT had the binding contractual obligation to deliver 10,000 bottles of wines
to CLAIMANT [St. Cl., p. 6, ¶ 20]. RESPONDENT’s refusal to deliver the 5,500 bottles
and declaration of non-liability at the High Court of Mediterraneo constitutes a breach to
the Agreement between them [St. Cl., p. 6, ¶ 19]. Though RESPONDENT argued that its
refusal was due to the bad harvest [Cl. Ex. 3, p. 11], CLAIMANT has reason to believe
that RESPONDENT had sold those bottles to SuperWines for a premium price [St. Cl., p.
6, ¶ 21]. Despite RESPONDENT’s refusal to deliver 5,500 bottles to CLAIMANT,
RESPONDENT still accepted SuperWines’s offer and agreed to deliver 4,500 bottles to
SuperWines a few days after rejecting CLAIMANT’s offer [Proc. Ord. 2, p. 56, ¶ 22] and
ultimately, sold 5,500 bottles to SuperWines [Proc. Ord. 2, p.56, ¶ 24]. RESPONDENT
had sold those bottles to SuperWines as an opportunity to get high profits and to gain
access to the new market despite knowing that this will affect the delivery to other
customers including CLAIMANT [Proc. Ord. 2, p. 57, ¶ 28]. RESPONDENT clearly
knew that if it did not sell those bottles to SuperWines, it would have been able to deliver
10,000 bottles as requested by CLAIMANT [Proc. Ord. 2, p. 56, ¶ 27]. RESPONDENT
had intentionally breached its contractual obligation in order to gain more profits from
SuperWines which clearly violated the principle of good faith protected under Art. 7 of
CISG.
100.
Furthermore, CLAIMANT will undeniably suffer loss of profits resulting from
RESPONDENT’s unfaithful breach of contract. CLAIMANT is a wine merchant that
buys wines from RESPONDENT to sell it to its customers [St. Cl., p. 3, ¶ 1].
CLAIMANT had accepted pre-orders from their customers [Proc. Ord. 2, p. 53, ¶ 7];
thus, RESPONDENT’s breach of contract will surely cause CLAIMANT to suffer loss of
profits. In Halifax Building Society Case, the tribunal agreed on the proposition that the
wrongdoers should not be allowed to profit from their wrongdoing [Halifax Building
Society Case (U.K.)]. Nonetheless, the appeal dismissed on the ground that the appellant
had suffered no loss at all [Ibid]. However, the courts would have ordered disgorgement
of profits had the appellant proved its loss [Ibid].
101.
Since CLAIMANT had actually suffered loss resulting from RESPONDENT’s breach of
contract, RESPONDENT shall not allow to benefit from its gains and the profits shall be
paid to CLAIMANT’s compensation.
c. Disgorgement of Profits is applicable in this case
102.
Tests for the applicability of the disgorgement of profits have been discussed by different
scholars and applied by diverse jurisdictions under similar circumstances. First, the
aggrieved party is entitled to disgorge the profits of the breaching party were made as a
result of such breach when the breaching party intentionally breached the contract in bad
faith [Schwenzer/Hachem, p. 103]. This test looks at the moral quality of the breaching
party to the applicability of the disgorgement of profits [McCamus, p. 949; Birks 1987,
pp.421, 442]. Namely, the breaching party should not gain from his refusal to perform
which caused the aggrieved party to suffer loss resulting from the breach of the contract
[Waddams 2000, p. 10; Waddams n.d., p. 193; Birks 1985, p. 21; Halifax Building Society
Case (U.K.)].In addition, disgorgement of profits also applies if the aggrieved party could
not ascertain the damage it had suffered resulting from the breach of contract by the
breaching party [Schwenzer/Hachem, p. 95].
103.
In this case, RESPONDENT’s breach of contract was not due to the bad harvest but due
to its motive to gain more profits by selling those bottles to SuperWines at a premium
[Proc. Ord. 2, p. 56, ¶ 24]. If RESPONDENT had not sold those bottles to SuperWines, it
would have been able to deliver the amount ordered by CLAIMANT [Proc. Ord. 2, p. 56,
¶ 27]. RESPONDENT chose to establish business relationship with SuperWines despite
knowing that this will affect the other customers including CLAIMANT [Proc. Ord. 2, p.
57, ¶ 28]. In British Motor Trade Association Case, the contract stated that the defendant
could only sell the vehicles to plaintiff during the first two years of ownership. However,
the defendant breached the contract by selling the vehicles on the black market to make
more profit [British Motor Trade Association Case (U.S.)]. The court awarded the
disgorgement of defendant’s profits to plaintiff because defendant had intentionally
breached the contract in bad faith [Ibid]. RESPONDENT clearly had the intention to
breach the contract for its individual gains, which undeniably breach the principle of good
faith of CISG.
104.
Furthermore, RESPONDENT only agreed to deliver 4,500 bottles [St. Cl., p. 5, ¶ 14] and
refused to deliver the other 5,500 bottles to CLAIMANT [St. Cl., p. 6, ¶ 21; Cl. Ex. 3, p.
11]. RESPONDENT has a binding obligation to deliver the other 5,500 bottles yet it
refused to perform this obligation [St. Cl., p. 6, ¶ 21; Cl. Ex. 7, p. 15]. This refusal had
caused CLAIMANT to suffer loss resulting from RESPONDENT’s breach while
RESPONDENT itself had gained profits from such breach [St. Cl., p. 7, ¶ 26]. In Halifax
Building Society Case, the court stated that the wrongdoers should not be allowed to
benefit from their wrongdoing and the defendant’s profits should be given to the plaintiff
if other requirement were satisfied [Halifax Building Society Case (U.K.)].
105.
Moreover, CLAIMANT will suffer damages, including loss of profits and reputation,
resulting from RESPONDENT’s breach of contract. However, such loss is extremely
difficult to calculate [Proc. Ord. 2, p. 54, ¶ 13]. Even though CLAIMANT had suffered
no loss or could not ascertain the actual loss that it had suffered, RESPONDENT is not
precluded from being liable to the damage resulting from its breach. In Attorney General
v Blake, even though the Crown had not suffered any monetary loss resulting from
Blake’s breach of contract, the court still ordered Blake to disgorge the profits he had
made as a result of his breach to the Crown [Blake Case (U.K.)]. Similarly, in County of
Essex Case, the Supreme Court ordered disgorgement of profits even though the
aggrieved party had not suffered any loss. The court made its judgment on the basis that
the wrongdoer should not retain any of the fruits from its wrongful conducts [County of
Essex Case (U.S.)]. In this case, though CLAIMANT could not ascertain its loss resulting
from RESPONDENT’s breach or CLAIMANT will suffer no loss at all, this test still not
allows RESPONDENT’s to benefit from its wrongdoing and to give up the profits to
CLAIMANT.
106.
Hence, RESPONDENT intentionally breached the contract in bad faith, which violates
the principle of good faith under CISG. CLAIMANT is entitled to the delivery of 5,500
bottles from RESPONDENT but RESPONDENT refused to perform and this refusal will
cause loss to CLAIMANT, which is extremely difficult to calculate. Thus, all the
requirements have been satisfied and CLAIMANT is entitled to disgorgement of the
profits RESPONDENT made from SuperWines as a result of its breach of contract with
CLAIMANT.
107.
IN CONCLUSION, CLAIMANT is entitled to the profits made by RESPONDENT
from selling the bottles to SuperWines as part of its damages even if that includes
further profits.
REQUEST FOR RELIEF
108.
For the above reasons, as counsel for CLAIMANT, we respectfully request the Tribunal
to find that:
(a)
the Tribunal has the power and should so order RESPONDENT to produce
documents requested by CLAIMANT;
(b)
CLAIMANT is entitled to the damages claimed for the litigation costs of US$
50,280 incurred partly in its application for interim relief and in its successful
defense against the proceedings in the High Court of Capital City;
(c)
CLAIMANT shall be entitled to get the profits RESPONDENT made with
SuperWines as part of its damages.
CERTIFICATE
Phnom Penh, Cambodia, 10 December 2015
We hereby confirm that this Memorandum was written only by persons whose names are listed
below and who signed this certificate. We also confirm that we did not receive any assistance
during the writing process from any person who is not the member of this team.
Respectfully submitted,
/Signed/
_________________
TONG LIN
/Signed/
________________
OUN SOMRACH
/Signed/
________________
NON NARITH
/Signed/
_________________
SIM SORYA
/Signed/
________________
VUTH PICH MONIQUE UNGUY BONICH
/Signed/
________________
PAN PONLORK
/Signed/
________________
NOM VISOT
/Signed/
________________
/Signed/
________________
SAO KANIKA
/Signed/
________________
KIM DONG GYU
/Signed/
________________
DY SOPHALLEAK
/Signed/
________________
SAM SOKUNVANTEY
DIN SIDEN
/Signed/
________________
/Signed/
________________
KIM SAM OUDUM
YEM PECH SOVAN
/Signed/
________________
TIM
KHUOCHSOPHEAKTRA /Signed/
________________
/Signed/
________________
PHENG KANNITHA

Royal University of Law and Economics

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