Memorandum for Claimant

Transcription

1 Fourteenth Annual Willem C. Vis International Commercial Arbitration Moot 30 March - 5 April 2007 Memorandum for Claimant Rechtswissenschaftliche Fakultät der Universität Bern Faculty of Law of the University of Berne On Behalf of: Against: Equatoriana Office Space Ltd Mediterraneo Electrodynamics S.A. 415 Central Business Centre 23 Sparkling Lane Oceanside Capitol City Equatoriana Mediterraneo CLAIMANT RESPONDENT Counsel: Ralph Hauri - Silvia Meier - Martina Nüesch Stefanie Pfisterer - Andrea Wigdorovits - Piotr Wojtowicz

2 Contents Abbreviations Authorities IV VI A. Statement of Facts and Summary of Argument 1 I. Statement of Facts II. Summary of Argument B. The Tribunal has jurisdiction 3 I. The arbitration clause found in the Contract meets the formal and substantive requirements of the lex arbitri The UNCITRAL Model Law is the lex arbitri The arbitration agreement meets the formal and substantive requirements of Art. 7 UNCITRAL Model Law II. The arbitration clause found in the Contract refers to the Arbitration Rules of the Court The Parties agreed to submit their dispute to institutional arbitration in Bucharest/Romania a) The Parties made a clear reference to Bucharest/Romania 6 b) The Parties referred to institutional arbitration The Parties referred to the Court a) Since the Court is the only organization of its kind in Bucharest, the arbitration clause can only refer to it.. 7 b) The arbitration clause in the Contract must be interpreted in a way which renders it effective c) The principle of interpretation contra proferentem leads to no other conclusion I

3 3. Since the Parties did not agree on other rules, the Rules of Arbitration of the Court are applicable a) The Parties referred to the Rules of Arbitration of the Court b) Even if the UNCITRAL Arbitration Rules were applicable, the Arbitral Tribunal would still have jurisdiction. 11 C. The fuse boards delivered did not conform with the Contract under Art. 35 CISG 12 I. The fuse boards had to be equipped with JP type fuses The Contract explicitly called for JP type fuses to be used The fuse boards delivered did not conform with the Contract II. The fuse boards had to meet Equalec s standards of connectability Equalec s standards of connectability were established as a particular purpose under Art. 35(2)(b) CISG Respondent was obliged to comply with Equalec s requirements Claimant had reason to rely on Respondent s skill and judgment The fuse boards delivered did not conform with the Contract D. The Contract was not amended 19 I. A change of fuse type calls for an amendment of the Contract II. No agreement was reached during the telephone conversation of 14 July An amendment must be based on a mutual agreement The telephone conversation must be interpreted in the light of the circumstances There was no agreement made during the telephone conversation. 21 III. The written form requirement for a valid amendment was not met There was no written confirmation of the amendment pursuant to Art. 29(2) CISG The written form requirement was not abandoned by the Parties. 22 IV. Respondent could not rely on Claimant s conduct There was no conduct in terms of Art. 29(2) 2nd sentence CISG that can be attributed to Claimant II

4 a) Claimant did not behave in a way that can be called conduct in terms of Art. 29(2) 2nd sentence CISG.. 24 b) In any event, Claimant s behavior was not contradictory Respondent could not assume Claimant s behavior to mean approval of an oral amendment a) Claimant s conduct was not clear enough for Respondent to rely on it as approval of an oral amendment b) As only Respondent was interested in an amendment of the contract, it could not rely on an oral amendment.. 26 c) Since Respondent drafted the writing requirement clause in the Contract, it could not rely on an oral amendment In any event, Respondent could only rely on the agreement to substitute the fuses to the extent JS type fuses could also be used for the intended purpose Consequently, the requirements of Art. 29(2) 2nd sentence CISG are not fulfilled; in any event Respondent bears the burden of proving the contrary E. Claimant s non-complaining to the Commission does not excuse Respondent 28 I. Claimant had no obligation to file a complaint with the Commission Claimant s alleged duty to make a complaint cannot be based on the Contract, a usage, a practice or the principle of good faith Respondent would in any event have been under a greater obligation to act and make a complaint II. The complaint would not have been objectively suited to make Respondent s performance possible There are good reasons for Equalec s policy Due to the time constraints, making a complaint would, in all likelihood, not have been suited to make Respondent s performance possible F. Request for Relief 34 III

5 Abbreviations Abbreviation Full Text ( ) paragraph(s) Arb. Int. Arbitration International (London) Art. Article BGE Entscheidungen des Schweizerischen Bundesgerichts (Decisions of the Swiss Supreme Court) BGH Bundesgerichtshof (German Supreme Court) Bull. ASA Bulletin de l Association Suisse de l Arbitrage CdA Cour d Appel CE Chat Electronics cf. confer CISG United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980 Cl. Ex. Claimant s Exhibit Claimant Equatoriana Office Space Ltd Commission Equatoriana Electrical Regulatory Commission Contract contract of 12 May 2005 Court Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry of Romania e. g. exempli gratia (for example) ERA Equatoriana Electric Service Regulatory Act et al. et alii (and others) etc. et cetera et seq(q). et sequen(te)s (and the following) fuse boards primary distribution fuse boards i. e. id est (that is) ICC International Chamber of Commerce JDI Journal du droit international (Paris) IV

6 Abbreviation Full Text KG Kammergericht No. Number OGH Oberster Gerichtshof (Austrian Supreme Court) p./pp. page(s) PO Procedural Order Q. Question Rev. arb. Revue de l arbitrage (Paris) Rsp. Ex. Respondent s Exhibit Respondent Mediterraneo Electrodynamics S.A. sent. sentence SoC Statement of Claim UN United Nations UNCITRAL United Nations Commission on International Trade Law UNCITRAL ML UNCITRAL Model Law on International Commercial Arbitration as adopted on 21 June 1985 US$ United States Dollar USDC United States District Court v(s). versus (against) V

7 Authorities Books Title Cited as Berger, Klaus Peter, Internationale Wirtschaftsschiedsgerichtsbarkeit, Gruyter: Berlin et al. (1992). Berger, page Bernstein, Herbert/Lookofsky, Joseph, Understanding the CISG in Europe, 2nd edition, Kluwer Law International: Cambridge (2003). Bernstein/Lookofsky, page Bianca, Cesare Massimo/Bonell, Michael Joachim, Commentary on the International Sales Law, Giuffrè: Milan (1987). Bianca/Bonell, Art. Brunner, Christoph, UN-Kaufrecht - CISG. Kommentar zum Übereinkommen der Vereinten Nationen über den internationalen Warenkauf von 1980, Stämpfli: Bern (2004). Brunner, Art. Craig, William Laurence/Park, William W./Paulsson, Jan, International Chamber of Commerce Arbitration, 3rd edition, Oceana: Dobbs Ferry (2000). Craig/Park/Paulsson, VI

8 Title Enderlein, Fritz/Maskow, Dietrich/Strohbach, Heinz, Internationales Kaufrecht: Kaufrechtskonvention, Verjährungskonvention, Vertretungskonvention, Rechtsanwendungskonvention, Rudolf Haufe: Freiburg/Berlin (1991). Cited as Enderlein/Maskow/Strohbach, Art. Fouchard, Philippe/Gaillard, Emmanuel/Goldman, Berthold On international commercial arbitration, Kluwer Law International: The Hague (1999). Fouchard/Gaillard/Goldman, page Honnold, John O., Uniform Law for International Sales under the 1980 United Nations Convention, 3rd edition, Kluwer Law International: The Hague (1999). Honnold, Art. Lionnet, Klaus, Handbuch der internationalen und nationalen Schiedsgerichtsbarkeit, 3rd edition, Boorberg: Stuttgart (2005). Lionnet, page Schlechtriem, Peter/Schwenzer, Ingeborg, Commentary on the UN Convention on the International Sale of Goods (CISG), 2nd (English) edition, Oxford University Press: Oxford/New York (2005). Schlechtriem/Schwenzer (E), Art. Schlechtriem, Peter/Schwenzer, Ingeborg, Kommentar zum Einheitlichen UN- Kaufrecht, 4th edition, Beck: München (2004). Schlechtriem/Schwenzer (G), Art. VII

9 Title von Staudinger, Julius/Magnus, Ulrich, Julius von Staudingers Kommentar zum Bürgerlichen Gesetzbuch; mit Einführungsgesetz und Nebengesetzen, 13th edition, Sellier de Gruyter: Berlin (2005). Cited as Staudinger/Magnus, Art. Witz, Wolfgang/Salger, Hanns- Christian/Lorenz, Manuel, International einheitliches Kaufrecht: Praktiker- Kommentar und Vertragsgestaltung zum CISG, Recht und Wirtschaft: Heidelberg (2000). Witz/Salger/Lorenz, Art. VIII

10 Articles Title Blessing, Marc, Drafting an Arbitration Clause, in: Blessing Marc, The arbitration agreement - its multifold critical aspects, ASA Special Series 1994, p. 32. Cited as Blessing, page Davis, Benjamin G., Pathological Clauses: Frédéric Eisemann s Still Vital Criteria, Arbitration International (Arb. Int.), 1991, No. 4, p Davis, page Eisemann, Frédéric, La clause d arbitrage pathologique, in: Arbitrage Commercial - Essais im memoriam Eugenio Minoli, Unione tipografico - editrice torinese: Torino 1974, p Eisemann, page Karrer, Pierre A., Pathological Arbitration Clauses - Malpractice, Diagnosis and Therapy, in: Vogt, Nedim Peter: The International Practice of Law; Liber Amicorum for Thomas Bär and Robert Karrer, Helbing & Lichtenhahn: Basel et al. 1997, p Karrer, page Scalbert, Hugues/Marville, Laurent, Les clauses compromissoires pathologiques, in: Revue de l arbitrage (Rev.arb.) 1988 No. 1, p Scalbert/Marville, page IX

11 Title Schlechtriem, Peter, Noch einmal: Vertragsgemässe Beschaffenheit der Ware bei divergierenden öffentlich-rechtlichen Qualitätsvorgaben, in: Praxis des Internationalen Privat- und Verfahrensrecht, Gieseking: Bielefeld 2001, pp Cited as Schlechtriem 2001, page Schlechtriem, Peter, Vertragsmässigkeit der Ware als Frage der Beschaffenheitsvereinbarung, Commenting on BGH 8 March 1995, VII ZR 159/94, in: Praxis des Internationalen Privat- und Verfahrensrecht, Gieseking: Bielefeld 1996, pp Schlechtriem 1996, page X

12 Internet Sources Title and Website Commentary on the Draft Convention on Contracts for the International Sale of Goods prepared by the Secretariat; UN DOC. A/CONF. 97/5; available on < Cited as Secretariat Commentary, Art. XI

13 Case Law and Awards Austria Oberster Gerichtshof Österreich, 13 April 2000 Case No.:2Ob100/00w cited as: OGH 2000 Oberster Gerichtshof Österreich of 27 February 2003 Case No.: 2Ob48/02a cited as: OGH 2003 France Cour d appel de Grenoble, 13 September 1995 Case No.: 93/4126 cited as: CdA 1995 Cour d appel de Paris, 7 February 2002 SA Alfac vs. Société Irmac Importacão, comércia e industria Ltda Source: Rev. arb No. 2, p. 413 cited as: CdA 2002 Germany Bundesgerichtshof, 8 March 1995 Case No.: BGH VIII ZR 159/94, Miesmuschelfall cited as: Mussels Case Bundesgerichtshof, 2 March 2005 Case No.: BGH VIII ZR 67/03 cited as: BGH 2005 XII

14 Kammergericht Berlin, 15 October 1999 Source: Bull. ASA 2000, p. 367 Cited as: KG Berlin, 1999 Russia Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry Reference: 55/1998 Source: Cited as: Russian Federation Chamber of Commerce and Industry, 1998 Switzerland Bundesgericht, 21 November 2003 BGE 130 III 66 Source: Bull. ASA 2004, p. 144 Cited as: BGE 130 III 66 ad hoc Award, 30 June 1987 Source: Bull. ASA 1997, p. 122 Cited as: Interlocutory Award on Jurisdiction, 1987 Zurich Chamber of Commerce, 25 November 1994 Europe vs. The Canadian affiliate of a Chinese Group Source: Bull. ASA 1996, p. 303 Cited as: Zurich Chamber of Commerce, 1994 Zurich Chamber of Commerce, 25 March 1996 Case No. 287/95 Source: Bull. ASA 1996, p. 290 Cited as: Zurich Chamber of Commerce, 1996 XIII

15 Chamber of Commerce and Industry of Geneva, 29 November 1996 Case No. 117 Source: Bull ASA 1997, p. 534 Cited as: Chamber of Commerce and Industry of Geneva, 1996 Chambre de commerce internationale siégant à Genève ICC Case No. 3460, 1980 Source : Journal du Droit International (JDI) 1981 No. 1, p. 939 Cited as : ICC Case No United States of America United States District Court, E.D. Louisiana, 17 May 1999 Medical Marketing International, Inc. v. Internazionale Medico Scientifia S.r.L. Case No.: CIV.A cited as: USDC 1999 XIV

16 A. Statement of Facts and Summary of Argument I. Statement of Facts Equatoriana Office Space Ltd (Claimant) is a developer of residential and business properties in Equatoriana. In the years of 2004 and 2005 it constructed Mountain View Office Park (Mountain View) in the city of Mountain View, Equatoriana. The leases began on 1 October 2005 (Rsp. Ex. No. 1 ). To connect the buildings of Office Park to the incoming electrical supply, Claimant needed to purchase five primary distribution fuse boards (fuse boards) designed for a current of less than 400 amperes. The fuse boards were to be connected to the electric current by Equalec, the only electrical supplier in the Mountain View area. On 22 April 2005 Mr. Herbert Konkler, Purchasing Director of Claimant, telephoned Mr. Peter Stiles, Sales Manager of Mediterraneo Electrodynamics S.A. (Respondent) regarding the fabrication of five fuse boards. Respondent is a manufacturer and distributor of electrical equipment to the trade based in Mediterraneo. After having studied the design drawings, Mr. Stiles quoted a total price of US$168,000 for five fuse boards. The contract was signed by both parties on 12 May 2005 (Contract; Cl. Ex. No. 1 ). On 14 July 2005 Mr. Stiles called Claimant. As Mr. Konkler was away on a business trip and therefore not available, Mr. Stiles was referred to Mr. Steven Hart, Staff of Purchasing Department of Claimant. Mr. Stiles stated that Respondent had run out of the JP type fuses from Chat Electronics (CE) as called for in the contract. Respondent would not be able to procure them in time to fabricate the fuse boards for the contractual delivery date of 15 August 2005 (Cl. Ex. No. 1 ). Mr. Hart explained that he did not have a lot of experience in handling electrical equipment for their projects (Rsp. Ex. No. 1 ). According to Mr. Stiles, they had three options: they could wait for CE to resolve its problems; they could use JP type fuses from a different manufacturer; or they could use JS type fuses from CE. A decision had to be made promptly to be able to meet the delivery date since the outside dimensions of JP type and JS type fuses were slightly different and the fuse boards would have to be constructed differently. 1

17 A. Statement of Facts and Summary of Argument As advised by Mr. Stiles, they decided to use JS type fuses from CE as this is the preferred manufacturer of Claimant. Mr. Hart expected to receive a written request for an amendment of the Contract as called for by Art. 32 of the Contract, but he never received it (Cl. Ex. No. 2 ). On 22 August 2005 the fuse boards were shipped directly to the building site of Mountain View. The personnel of General Construction Ltd installed the fuse boards on 1 September On 8 September 2005 the personnel of Equalec refused to connect the fuse boards to the current. Their requirements, adopted in July 2003, called for JP type fuses to be used for currents with 400 amperes or less (Cl. Ex. No. 4 ). Mr. Konkler called Mr. Stiles on 9 September 2005 to tell him about Equalec s refusal and to request new fuse boards that would comply with Equalec s requirements. Mr. Stiles stated that they would not be able to procure JP type fuses from CE for another few months. Mr. Konkler told him that under those circumstances Claimant would buy elsewhere and hold Respondent responsible for the costs (Cl. Ex. No. 3 ). Later on 9 September 2005 Mr. Konkler contacted Equatoriana Switchboard Ltd, and it was able to deliver the correct fuse boards within three weeks for the price of US$180,000. The extra work needed to install the new fuse boards led to additional costs of US$20,000 (Cl. Ex. No. 3 ). On 15 August 2006 Claimant submitted its claim to the Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry of Romania (Court). Claimant requests the payment of US$200,000, calculated on the basis of US$180,000 for the new fuse boards and US$20,000 extra costs. On 4 September 2006 Respondent submitted its Answer challenging the Tribunal s jurisdiction. Should the Tribunal find it does have jurisdiction, Respondent requested the claim to be dismissed as unfounded. 2

18 B. The Tribunal has jurisdiction II. Summary of Argument 10 The following shall demonstrate in law and fact that: the Tribunal has jurisdiction to consider this dispute under the arbitration clause found in the Contract [B.] Respondent did not deliver distribution fuse boards that were in conformity with the contract as originally written [C.] the Contract was not validly amended to provide that JS type fuses should be used in the fuse boards [D.] Respondent cannot be excused for failing to conform with the Contract because Claimant did not complain to the Equatoriana Electrical Regulatory Commission [E.] B. The Tribunal has jurisdiction 11 Respondent contests the jurisdiction of the Court (Answer, 7) which was constituted on the basis of the following arbitration clause (Cl. Ex. No. 1 ): 34. Arbitration. All disputes arising out of or in connection with this Contract, or regarding its conclusion, execution or termination, shall be settled by the International Arbitration Rules used in Bucharest. The arbitral award shall be final and binding. The Arbitral Tribunal shall be composed of three arbitrators. The arbitration shall be in the English language. Vindobona, Danubia. It shall take place in 12 Respondent puts forth the following objections: First, the meaning of the arbitration clause is so unclear that it is a nullity (Answer, 15 ). In particular, it is unclear about which institution the clause refers to (Answer, 15). Second, even if the arbitration 3

19 B. The Tribunal has jurisdiction clause referred to the Court, it would still be unclear which procedure should be followed, and especially unclear under which rules the Tribunal is to be constituted (Answer, 16 ). Claimant will demonstrate that the Tribunal has jurisdiction to consider this dispute under the arbitration clause found in the Contract. Claimant submits as follows: First, the arbitration clause meets the formal and substantive requirements of the lex arbitri [B.I.]. Second, the arbitration clause refers to the Court [B.II.2.]. Third, the Parties referred to the Rules of Arbitration of the Court [B.II.3.]. I. The arbitration clause found in the Contract meets the formal and substantive requirements of the lex arbitri 1. The UNCITRAL Model Law is the lex arbitri 13 The validity of the arbitration clause is determined by the lex arbitri. In the present case this is the UNCITRAL Model Law on International Commercial Arbitration (UNCI- TRAL ML), since it is the law applicable at the seat of the arbitral tribunal, i. e. Danubia (SoC, 21 ). Even if the Contract s choice of law provision referring to the law of Mediterraneo (Cl. Ex. No. 1 ) was intended to also include a choice of law with regard to the lex arbitri (which, given the principle of autonomy of arbitration clauses, is usually not done, cf. Fouchard/Gaillard/Goldman, p. 222 ), the UNCITRAL ML would equally apply (PO No. 2, Q. 1 ). 2. The arbitration agreement meets the formal and substantive requirements of Art. 7 UNCITRAL Model Law First, the formal requirement, i. e. the writing requirement of Art. 7(2) UNCITRAL ML, is clearly met, since the contract containing the arbitration clause is in writing and signed by both parties (cf. e. g. Rsp. Ex. No. 1 ). Second, the substantive requirements of Art. 7(1) UNCITRAL ML are also met. The intention of both parties to submit to arbitration is apparent from two facts. First the wording of the arbitration clause found in the Contract ( Arbitration, arbitral award, Arbitral Tribunal and arbitration shall..., cf. Cl. Ex. No. 1 ) is very clear, and second Respondent first tried to implement its own arbitration clause (Rsp. Ex. No. 1 ). Further, the arbitration clause includes a specification of the legal relationship, which shall be the 4

20 B. The Tribunal has jurisdiction 16 subject of arbitration ( All disputes arising out of or in connection with this Contract..., cf. Cl. Ex. No. 1 ). Conclusion: The arbitration clause found in the Contract meets the formal and substantive validity requirements of the lex arbitri. II. The arbitration clause found in the Contract refers to the Arbitration Rules of the Court 17 The Tribunal has jurisdiction to decide this dispute under the arbitration clause found in the Contract for the following reasons: First, the Parties agreed to submit their dispute to institutional arbitration [B.II.1.b)]. Second, according to a reasonable interpretation, the arbitration clause must be construed to refer to the Court [B.II.2.]. Third, the Parties referred to the Rules of Arbitration of the Court, which are applicable in international commercial arbitration. This means in the absence of any other agreement between the parties, no room is left for the application of the UNCITRAL Arbitration Rules [B.II.3.]. Consequently, Respondent s challenge that the Tribunal has no jurisdiction must be rejected. 1. The Parties agreed to submit their dispute to institutional arbitration in Bucharest/Romania Respondent argues that the reference to International Arbitration Rules of the arbitration clause found in the Contract does not refer to any existing set of rules of any arbitral organization in Bucharest (Answer, 15 ). The simple lack of a verbatim reference to an existing arbitration organization or to existing arbitration rules, however, does not in itself mean that an arbitral procedure cannot take place. Arbitration clauses that are technically deficient can be rescued if it is possible to identify the intended institution (Craig/Park/Paulsson, 9.02 ). Where it is possible to infer an intention which is sufficiently coherent and effective to enable the arbitration to function, the arbitration can take place (Fouchard/Gaillard/Goldman, p. 263 ). Difficulties arising out of technically deficient arbitration clauses can therefore be overcome if the arbitration clause does not frustrate the harmonious exercise of the functions of the arbitration clause (Eisemann, p. 131; Davis, p. 379 ). According to the practice of arbitral tribunals, arbitration clauses must satisfy three 5

21 B. The Tribunal has jurisdiction 21 conditions to be able to be rescued (Zurich Chamber of Commerce, 1994; Zurich Chamber of Commerce, 1996; Chamber of Commerce and Industry of Geneva, 1996; Karrer, p. 119 et seqq.): First, the clause must clearly provide for arbitration as opposed to litigation in ordinary state courts. Second, the arbitration clause must contain a reference to a certain place. And third, the clause must clearly provide for institutional arbitration as opposed to ad hoc arbitration that is not administered by any arbitral institution. As stated above, the Parties clearly agreed to arbitration [cf. 15]. The clause also includes a clear reference to a defined place, i. e. Bucharest/Romania [B.II.1.a)] and to an institutional arbitration [B.II.1.b)]. Consequently, the actual agreement of the Parties rescues the deficient wording of the arbitration clause found in the Contract. a) The Parties made a clear reference to Bucharest/Romania 22 It is clear from the arbitration clause in the Contract that the Parties agreed to arbitration taking place in Bucharest/Romania. Since the Parties chose Vindobona/Danubia as the seat of the arbitration (Cl. Ex. No. 1 ), the reference to Bucharest/Romania must be referring to the place where the arbitration institution is located. b) The Parties referred to institutional arbitration In their Contract the Parties make reference to International Arbitration Rules. Usually, only arbitration institutions have arbitration rules (Rules of Arbitration of the International Chamber of Commerce; Swiss Rules of International Arbitration of the Chambers of Commerce and Industry of Basel, Bern, Geneva, Ticino, Vaud and Zurich; DIS Arbitration Rules of the German Institution of Arbitration; LCIA Arbitration Rules of the London Court of International Arbitration). Only the UNCITRAL Arbitration Rules are designed for ad hoc arbitrations (Preamble to the UNCITRAL Arbitration Rules; Berger, p. 42; Craig/Park/Paulsson, 4.04 ). That is why arbitration clauses providing for arbitration under certain arbitration rules call for institutional arbitration (cf. Lionnet, p. 223 et seqq.). Since the arbitration clause in the present case provides for International Arbitration Rules used in Bucharest, it calls for institutional arbitration. It explicitly does not call for the UNCITRAL Arbitration Rules because of the phrase used in Bucharest. Moreover, arbitration clauses for ad hoc arbitration must contain an agreement on the 6

22 B. The Tribunal has jurisdiction appointing authority if the respondent fails to appoint an arbitrator (Lionnet, p. 159; Blessing, p. 52 et seqq.). Since that is not the case in the arbitration clause of the Contract, there must be an institution administering the appointing mechanism. 2. The Parties referred to the Court Arbitration clauses that fulfill the conditions of a clear reference to institutional arbitration in a certain place, but with no exact and verbatim reference to arbitration rules of an existing arbitration institution, have to be interpreted (Zurich Chamber of Commerce, 1994; Zurich Chamber of Commerce, 1996; KG Berlin, 1999; Interlocutory Award on Jurisdiction, 1987; also Fouchard/Gaillard/Goldman, p. 254 ). Since the arbitration clause found in the Contract refers to institutional arbitration in Bucharest/Romania, the exact meaning must be ascertained by means of interpretation. Arbitration clauses must be interpreted according to well-known international principles (CdA, 2002; Fouchard/Gaillard/Goldman, p. 256; Berger, p. 118 et seqq.). These principles include the principle of interpretation in good faith, the principle of effective interpretation and the principle contra proferentem. These principles are discussed in what follows. Since the Court is the only organization in Bucharest, the arbitration clause must be interpreted in that way [B.II.2.a)]. The arbitration clause in the Contract must be interpreted in a way which renders it effective [B.II.2.b)]. Even the principle of interpretation contra proferentem leads to no other conclusion [B.II.2.c)]. a) Since the Court is the only organization of its kind in Bucharest, the arbitration clause can only refer to it 29 First, the principle of interpretation in good faith, as one of the most accepted and most important principles of interpretation, applies also to arbitration clauses (Zurich Chamber of Commerce, 1994; Fouchard/Gaillard/Goldman, p. 257 ). That principle aims at the common intention of the parties, notwithstanding the contradictory wording of the arbitration clause (Fouchard/Gaillard/Goldman, p. 257 ). The arbitration clause must thus be interpreted in the same manner as an average honest and diligent businessman would interpret it (Zurich Chamber of Commerce, 1994; BGE 130 III 66 ). In addition, the principle of interpretation in good faith requires that the intentions of the parties should be examined, taking into account the consequences which the parties reasonably 7

23 B. The Tribunal has jurisdiction envisaged and the attitude of the parties after the signature of the contract until the time when the dispute arose (Fouchard/Gaillard/Goldman, p. 257 et seq.). The arbitration clause at issue calls for the International Arbitration Rules used in Bucharest. The arbitration shall therefore be administered by an arbitration institution which is located in Bucharest/Romania. Since there is no other organization in Bucharest than the Court that conducts international arbitration (PO No. 2, Q. 10 ), only the Court can be meant. Likewise, an Internet research with the search engine Google (< looking for the words International Arbitration Rules used in Bucharest leads to the homepage of the Court of International Commercial Arbitration (< and to no other arbitration institution. An average honest and diligent businessman in the position of Respondent must therefore interpret the arbitration clause of the Contract as referring to the Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry of Romania. The same conclusion of a reference to the Court results from a consideration of the Parties intentions and their attitudes after the signature of the contract: By referring to the International Arbitration Rules used in Bucharest, the Parties wanted to make sure that disputes would be settled by an arbitration institution that conducts international arbitration and that is located in a place where neither Claimant nor Respondent has its seat. The Court conducts international arbitration (PO No. 2, Q. 10 ); international arbitration make up twenty percent of the arbitration conducted by it (PO No. 2, Q. 11 ). The Court is located in a neutral place, namely Bucharest/Romania, and therefore fulfills the requirements of the Parties. Moreover, Mr. Stiles did not reject the arbitration clause: signing the Contract, he noticed the arbitration clause in paragraph 34, but did not react (Rsp. Ex. No. 1 ). Later he asked Mr. Konkler about the arbitration clause, but did not reject it (Rsp. Ex. No. 1 ). An average honest and diligent businessman must conclude from that behavior that Respondent did not object to the arbitration clause. This can also be deduced from the previous arbitrations of Respondent. They were not all conducted under one precise set of arbitration rules (PO No. 2, Q. 15 ), which implies that Respondent does not rely on just one specific arbitration institution. In summary, the Court is the only institution the Parties can have intended. The Court is therefore competent to administer the settlement of the Parties dispute by arbitration. 8

24 B. The Tribunal has jurisdiction b) The arbitration clause in the Contract must be interpreted in a way which renders it effective The second principle is the principle of effective interpretation. According to this principle, the arbitral tribunal should prefer the interpretation which gives meaning to an arbitration clause, rather than rendering it useless (Fouchard/Gaillard/Goldman, p. 258 et seq.; Karrer, p. 118; Scalbert/Marville, p. 118 ). In other words, the Tribunal must assume that the parties intended to establish an effective machinery for the settlement of their disputes. The arbitration clause must therefore interpreted in a way giving effect to that intention (Fouchard/Gaillard/Goldman, p. 259; ICC Case No. 3460; CdA, 2002 ). The said principle is widely accepted as being a universally recognized rule of interpretation (Fouchard/Gaillard/Goldman, p. 259; ICC Case No. 3460; CdA, 2002 ). In the present case the Parties clearly stated their intention to settle possible disputes by arbitration [cf. 15]. Since the Court is the only organization offering the administration of international arbitration in Bucharest/Romania [cf. 30], the sole possibility to render the arbitration clause of the Contract effective is to interpret it as meaning that it provides for arbitration before the Court. Respondent s objection that the rules of the Court are not specifically labeled International Arbitration Rules is not solid. By using the term international in the Contract, the Parties demonstrated their intention to involve an organization that conducts international arbitration, as the Court does [cf. 32]. It would be overly formalistic if the incorrect labeling of the arbitration rules rendered the arbitration clause ineffective in spite of the clear intention of the parties (Fouchard/Gaillard/Goldman, p. 284 et seqq.; Scalbert/Marville, p. 118; BGE 130 III 66 ). c) The principle of interpretation contra proferentem leads to no other conclusion A third principle which may be used to interpret arbitration clauses is the principle of interpretation contra proferentem (Fouchard/Gaillard/Goldman, p. 259; CdA, 2002 ). Pursuant to this principle, the arbitration clause should be interpreted against the party that drafted the clause in dispute (Fouchard/Gaillard/Goldman, p. 259; CdA, 2002 ). The principle of interpretation contra proferentem, however, is less frequently encountered in arbitral case law (Fouchard/Gaillard/Goldman, p. 259 ). In contract law the principle tends to be only applied if the other principles of interpretation do not lead to a 9

25 B. The Tribunal has jurisdiction 40 clear result (Brunner, Art ). Since the two paramount principles of interpretation in good faith and of effective interpretation are sufficient to lead to the clear conclusion that the Court has jurisdiction [B.II.2.a) and B.II.2.b)], the principle of interpretation contra proferentem is superfluous. Even if the Tribunal finds that the contra proferentem principle applies, it would still have to rule that it has jurisdiction. Because in this case, Respondent drafted the Contract (Answer, 5 ); the arbitration clause though was drafted by Claimant (Answer, 5 ). It is therefore not appropriate to identify only one party as the drafting party. Even if the Tribunal finds that Claimant should be regarded as the drafting party, the principle of interpretation contra proferentem cannot apply: The Tribunal must respect the intention of the Parties to settle their dispute by institutional arbitration in Bucharest/Romania. Since the Court is the only organization that conducts international arbitration in Bucharest/Romania [cf. 30], there is no other possible interpretation of the arbitration clause in the Contract than that it provides for arbitration before the Court. 3. Since the Parties did not agree on other rules, the Rules of Arbitration of the Court are applicable 41 Respondent contests the applicability of the Rules of Arbitration and argues for the application of the UNCITRAL Arbitration Rules (Answer, 16 ). Respondent s argument cannot be followed: The Parties referred to the Rules of Arbitration of the Court [B.II.3.a)]. Even if the UNCITRAL Arbitration Rules were applicable, the Arbitral Tribunal would still have jurisdiction [B.II.3.b)]. a) The Parties referred to the Rules of Arbitration of the Court The Court has adopted its own arbitration rules (Art. 5 J, 11, 13 DECREE-LAW (Romania) No. 139/1990 ), as have other arbitration institutions [cf. 23]. Arbitration before the Court would therefore normally mean arbitration under the Court s Rules of Arbitration. According to Art. 72(2) Arbitration Rules, the parties are free to decide for other rules of arbitral procedure. Other arbitration rules, however, would not be designed especially for arbitration before the Court. The UNCITRAL Arbitration Rules, which Respondent mentions (Answer, 16 ), are designed specifically for ad hoc arbitration (Preamble to 10

26 B. The Tribunal has jurisdiction 44 the UNCITRAL Arbitration Rules; Berger, p. 42; Craig/Park/Paulsson, 4.04 ). Any stipulation that different arbitration rules other than the Arbitration Rules apply must therefore be made in an evident way. This is especially true since the stipulation of different arbitration rules is an exception and rarely made by parties (PO No. 2, Q. 12 ). In the present case there is no factual indication that the Parties had agreed, in the case of a dispute, to apply the UNCITRAL Arbitration Rules. Art. 72(2) Arbitration Rules, however, would require such an agreement: The Parties did not explicitly choose the UNCITRAL Arbitration Rules (Cl. Ex. No. 1 ). There is also no indication that there was an implicit stipulation of the UNCITRAL Arbitration Rules, as the Parties agreed on International Arbitration Rules. Both arbitration rules in question, the Arbitration Rules and the UNCITRAL Arbitration Rules can be applied to international arbitration (Chapter VIII Arbitration Rules; Preamble to the UNCITRAL Arbitration Rules). Moreover the Parties agreed on rules that are used in Bucharest. The UNCITRAL Arbitration Rules, however, are rarely used in Bucharest/Romania, because the Court rarely conducts arbitration according to these rules (PO No. 2, Q. 12 ). Therefore, the arbitration clause in the Contract refers to the Rules of Arbitration of the Court. b) Even if the UNCITRAL Arbitration Rules were applicable, the Arbitral Tribunal would still have jurisdiction 45 Even if the Tribunal finds that the UNCITRAL Arbitration Rules are applicable, the Tribunal still has jurisdiction. The procedure of appointment of arbitrators is the same under the UNCITRAL Arbitration Rules (Art. 7 ) as under the Rules of Arbitration of the Court (Art. 75(1) in connection with Art. 21 et seqq.), according to which the Arbitral Tribunal was appointed (cf. e. g. Arbitrator 1 s letter of 15 September 2006 ): In the case where an arbitral tribunal is made up of three arbitrators, each party appoints one arbitrator (Art. 7(1) UNCITRAL Arbitration Rules; Art. 22(1) Rules of Arbitration of the Court). These two arbitrators select a presiding arbitrator (Art. 7(1) UNCITRAL Arbitration Rules; Art. 23 Rules of Arbitration of the Court). The appointment of the Arbitral Tribunal would therefore also be correct under the UNCITRAL Arbitration Rules. Thus, even if the Tribunal finds that the UNCITRAL Arbitration Rules should apply in this arbitration, the Tribunal still has jurisdiction. 11

27 C. The fuse boards delivered did not conform with the Contract under Art. 35 CISG 46 Answer to Procedural Order No. 1, Question 1: The tribunal has jurisdiction to consider this dispute under the arbitration clause found in the Contract because: the Parties agreed to submit their dispute to institutional arbitration; the arbitration clause found in the Contract refers to the Court; and the Parties referred to the Rules of Arbitration of the Court. C. The fuse boards delivered did not conform with the Contract under Art. 35 CISG First, the following substantive law issues are governed by the CISG. Pursuant to Art. 1(1)(b) CISG, it is applicable if the rules of private international law lead to the application of the law of a contracting state. The Contract provides that Mediterranean law is applicable (Cl. Ex. No. 1 ). Since Mediterraneo has ratified the CISG without any declarations (PO No. 2, Q. 6 ), it is applicable without restriction. This fact is undisputed between the parties. In the following, Claimant will demonstrate that the fuse boards equipped with JS type fuses delivered by Respondent were not in conformity with the Contract. First, the Contract explicitly called for fuse boards equipped with JP type fuses according to Art. 35(1) CISG [C.I.]. Second, pursuant to Art. 35(2)(b) CISG, Respondent was contractually obliged to deliver fuse boards that complied with Equalec s policy, which called for fuse boards equipped with JP type fuses as the circuits were designed for less than 400 amperes [C.II.]. I. The fuse boards had to be equipped with JP type fuses 49 The Contract explicitly called for fuse boards equipped with JP type fuses. According to Art. 35(1) CISG, the seller must deliver goods that meet the description required by the contract. The descriptive notes on the engineering drawings read Fuses to be Chat Electronics JP type in accordance with BS 88 (SoC, 9 ). Below it will be shown that this note was made part of the Contract and constituted a description of the required 12

28 C. The fuse boards delivered did not conform with the Contract under Art. 35 CISG fuse type [C.I.1.].Therefore, the fuse boards delivered did not conform with the Contract under Art. 35(1) CISG [C.I.2.]. 1. The Contract explicitly called for JP type fuses to be used The engineering drawings were explicitly made part of the Contract (Cl. Ex. No. 1 ). The descriptive notes were not only found on the same sheet of paper, but were also meant to explain the engineering drawings, and to prevent any ambiguity regarding the fuse type to be installed. The connection between the notes and the drawings is so strong that the notes constitute a part of the drawings. Thus, as part of the engineering drawings, the descriptive notes necessarily became part of the Contract. Furthermore, the descriptive notes were legally binding, because of the real intentions of both parties according to Art. 8(1) CISG. Claimant would like to make clear that Respondent never questioned whether the descriptive notes were part of the Contract or not. It even called Claimant when it learned that it was not able to procure CE JP type fuses in time and wanted to amend the Contract. This certainly makes it clear that Respondent must have considered the descriptive notes as part of the Contract. In addition, even according to the standard of a reasonable person in application of Art. 8(2) CISG, the descriptive notes would have become part of the Contract. Clearly, such specifications are meant to be complied with or they would not have been made in the first place. Any reasonable person would acknowledge that notes explaining drawings on the same sheet of paper are intended to be descriptions under Art. 35(1) CISG. The text of the descriptive note Fuses to be Chat Electronics JP type in accordance with BS 88 is unambiguous and leaves no scope for either interpretation or misunderstanding. The explicit mention of a certain fuse type on engineering drawings that constitute part of the Contract can only be understood as a specific description of the goods to be delivered. 2. The fuse boards delivered did not conform with the Contract 54 The descriptive note was part of the Contract and was to be understood as a specified description of the fuse type. Only goods that are part of this specified category can be said to conform with the Contract (Brunner, Art ). Consequently, the delivery of any type of fuses other than JP type does not meet the description under Art. 35(1) 13

29 C. The fuse boards delivered did not conform with the Contract under Art. 35 CISG 55 CISG. Therefore, the fuse boards delivered equipped with JS type fuses were not in conformity with the Contract. Conclusion: As the fuse boards delivered were equipped with JS type fuses even though the Contract explicitly called for JP type fuses, they did not comply with the contractual description. Consequently, the goods delivered by Respondent were not in conformity with the Contract pursuant to Art. 35(1) CISG. II. The fuse boards had to meet Equalec s standards of connectability Respondent was obliged to deliver fuse boards equipped with JP type fuses, not only because this was specifically required by the Contract. The non-conformity of the delivered fuse boards also results from Art. 35(2)(b) CISG. Accordingly, Respondent was obliged to deliver goods fit for any particular purpose made known to it at the time of the conclusion of the Contract if Claimant could reasonably rely on Respondent s skill and judgment (Bernstein/Lookofsky, p. 85; Staudinger/Magnus, Art ). Claimant will demonstrate, that pursuant to Art. 35(2)(b) CISG, Equalec s standards of connectability were established as a particular purpose under Art. 35(2)(b) CISG. That purpose was made known to Respondent at the conclusion of the Contract [C.II.1.]. Respondent was obliged to meet any requirements regarding connectability specified by Equalec [C.II.2.] and Claimant was justified to have reasonable confidence in Respondent s skill and judgment fulfilling this requirement [C.II.3.]. Consequently, non-compliance with Equalec s policy constitutes non-conformity with the Contract, because the fuse boards were, in fact, not connectable [C.II.4.]. 1. Equalec s standards of connectability were established as a particular purpose under Art. 35(2)(b) CISG To establish a particular purpose pursuant to Art. 35(2)(b) CISG, it is sufficient that the buyer indicates his or her intention to buy the goods for such a purpose (Bianca/Bonell, Art ). Claimant will show that, at the time of the conclusion of the Contract, Respondent could not have been unaware of the fact that Claimant was expecting to receive fuse boards which would be connected by Equalec. Fuse boards that cannot be connected to the electrical current cannot be used by 14

30 C. The fuse boards delivered did not conform with the Contract under Art. 35 CISG Claimant for anything else, as they were especially designed for the circuits at Mountain View. In addition, as Claimant is a developer of residential and business properties, Respondent, as its business partner, must have known that the fuse boards to be delivered were destined to be connected at this building site and were not for re-sale elsewhere. Thus, Respondent must have been aware of the fact that Claimant expected to receive fuse boards that would be connectable. At the time of the conclusion of the Contract, Respondent knew that the fuse boards were to be connected by Equalec. The engineering drawings made special reference to it in the descriptive note To be lockable to Equalec requirements (SoC, 9 ). Although this phrase only meant that the fuse boards had to be lockable with a padlock (PO No. 2, Q. 21 ), it clearly indicates which electrical company was responsible for connecting the delivered fuse boards to the current. Consequently, Respondent knew, in order to be connected to the current, the fuse boards needed to comply with any requirement Equalec might have. Even without any explicit reference to Equalec in the drawings, Respondent could not have been unaware of the fact that the fuse boards were to be connected by Equalec. The fuse boards were to be delivered to the building site of Mountain View, Equatoriana (Cl. Ex. No. 1 ). As Equalec has a monopoly in the region of Mountain View (PO No. 2, Q. 31 ), compliance with Equalec s policy was the only possible way of connecting the fuse boards. This fact should have been known to Respondent as it has experience in exporting electrical supplies to Equatoriana (Rsp. Ex. No. 1 ). 2. Respondent was obliged to comply with Equalec s requirements 62 As Respondent knew that the fuse boards were destined for connection in a region where Equalec managed the electrical supply, compliance with its standards of connectability was established as a particular purpose under Art. 35(2)(b) CISG. Knowledge of the destination and any purpose of the goods must be considered as sufficient to oblige the seller to deliver goods in accordance with any requirements applying at this location and hindering fitness of the established purpose. This opinion is not only supported by legal commentators (Bernstein/Lookofsky, p. 84; Staudinger/Magnus, Art ; supportive: Schlechtriem/Schwenzer (G), Art a), but also by Case Law (CdA 1995, OGH 2003, BGH 2005 ). Consequently, Respondent was obliged to find out whether any of Equalec s Requirements hindered fulfilling the established purpose (i. e. connectabil- 15

31 C. The fuse boards delivered did not conform with the Contract under Art. 35 CISG ity by Equalec). If Respondent failed to do so, any resulting non-conformity is at its own risk (Schlechtriem 1996, p. 15 ). The Tribunal may disagree with Claimant s argumentation above that connectability to Equalec was established as a particular purpose and be of the opinion that, even if the place of destination has been communicated to the seller, the standard of the seller s country may have to be applied (Mussels Case; Brunner, Art ; Witz/Salger/Lorenz, Art ). Claimant will alternatively demonstrate that, in the present case, Respondent is nonetheless obliged to comply with any requirements Equalec may have due to special circumstances. In the Mussels Case, the BGH elaborated the following rule: The seller is generally not obliged to supply goods that conform to public laws and regulations enforced at the buyer s place of business. However, there are exceptions in three circumstances: first, if the public law and regulations of the buyer s country are identical to those enforced in the seller s country; second, if the buyer informed the seller about any such regulations; or third, if due to special circumstances, such as the existence of a seller s branch office in the buyer s country, long-term business relationships, numerous exports to the country in question, advertisements in buyer s country, etc., the seller knew or should have known about the regulations at issue (Mussels Case; also USDC 1999 ). The rules for public law requirements are also applicable to the policies of private corporations, since only the factual effects of the non-compliance are decisive and not the outer form of any requirements (Schlechtriem 1996, p.13 ). Hence, the general rule of compliance with public law requirements as elaborated by the German Supreme Court (BGH) and followed by parts of the doctrine (Brunner, Art ; Witz/Salger/Lorenz, Art ) is applicable to Equalec s policy as well. The present case is to be subsumed under the third exception special circumstances. As will be explained below [cf. 70], Respondent has great experience in exporting to Equatoriana. This constitutes a special circumstance as required under the exception. Numerous exports are explicitly accepted as special circumstances (Mussels Case; Witz/Salger/Lorenz, Art ). In addition, Respondent s knowledge about the possibility of requirements [cf. 70 and 71] would have obliged it to inquire whether Equalec has any such requirements. The extent of this obligation to inquire does not have to be discussed since the relevant information could be found on Equalec s homepage (PO No. 2, Q. 24 ), and it is reasonable to expect Respondent would have looked there. The facts in the case at hand are clearly distinguishable from those in the Mussels 16