KUALA LUMPUR REGIONAL

Transcription

1 6 TH LAWASIA INTERNATIONAL MOOT M2060-C KUALA LUMPUR REGIONAL CENTER FOR ARBITRATION 2011 MEMORIAL FOR CLAIMANT CLAIMANT ASTORIA PRODUCE COMPANY RESPONDENT ROLGA FARMER S EXCHANGE

2 Table of Contents Table of Contents... i Table of Abbreviations... v Index of Authorities... vi Statement of Jurisdiction... xii Questions Presented... xiv Statement of Facts... xv Summary of Pleadings... xviii Pleadings... 1 I. KLRCA HAS AUTHORITY TO GOVERN THE DISPUTE BETWEEN THE PARTIES SINCE THERE IS VALID ARBITRATION AGREEMENT TO AUTHORIZE KLRCA BETWEEN THE PARTIES... 1 A. There is a Valid Arbitration Agreement between the Parties under CISG or UNIDROIT Arbitration Agreement is Governed by the Law Which Governs the Contract1 2. There is an Arbitration Agreement between the Parties under the CISG Alternatively, There is a Valid Arbitration Agreement between the Parties under UNIDROIT... 3 B. Furthermore, the Agreement is in Writing Required by Arbitration Act of Malaysia An Arbitration Agreement between the Parties is Subjected to Arbitration Act of Malaysia by NY Convention Art. V. 1. (a)... 4 MEMORIAL FOR CLAIMANT -i-

3 2. KLRCA Has the Authority to Govern the Dispute between the Parties Since There is Written Agreement Required by Arbitration Act of Malaysia Art. 9(3)... 5 C. Alternatively, KLRCA Has the Authority to Resolve the Dispute Since the Forum Selection Clause is Complied with the Form Requirement of NY Convention The Forum Selection Clause is in Writing If It Complies with the Form Requirement of NY Convention The Forum Selection Clause is in Writing under Art. II D. KLRCA Has the Authority to Resolve the Dispute... 7 II. ALL THREE OF THE ARBITRATORS WERE PROPERLY APPOINTED... 7 A. The First Arbitrator was Properly Appointed... 7 B. The Second Arbitrator was Properly Appointed RESPONDENT did not Appoint its Arbitrator in Time RESPONDENT s Non-response Constitutes a Forfeiture of its Right to Appoint the Second Arbitrator The Director Properly Appointed the Second Arbitrator... 9 C. The Presiding Arbitrator was Properly Appointed III. ARBITRATION PANEL HAVE THE AUTHORITY TO IMPOSE SANCTIONS IN THE FORM OF A FINE A. Arbitration Panel can Impose Sanctions on RESPONDENT Arbitral Panel Enjoys a Broad Power to Avoid Unnecessary Delay RESPONDENT s Late Response Caused Unnecessary Delay RESPONDENT has Not Shown Sufficient Cause for its Failure to Appear at the Initial Hearing MEMORIAL FOR CLAIMANT -ii-

4 B. Sanction in the Form of a Fine to Avoid Unnecessary Delay is Legitimate IV. CISG SHOULD GOVERN TO THIS DISPUTE A. The Arbitral Tribunal Has Authority to Apply the Law B. UNIDROIT is not Appropriate to this Case C. CISG is Appropriate to This Dispute V. The BANANAS ARRIVED IN AN UNSATISFACTORY CONDITION AND THE GOODS DID NOT CONFORM TO THE CONTRACT DUE TO RESPONDENT S BREACH OF THE CONTRACT A. The Bananas Arrived at Astoria s Port in an Unsatisfactory Condition RESPONDENT Delivered the Goods That Did not Conform to the Contract 17 B. RESPONDENT Breached the Contract by Failing to Perform the Contractual Duty to Insure Proper Handling and Storage of the Bananas CLAIMANT entrusted RESPONDENT to the Actions for Transportation and RESPONDENT was in a Better Condition to Arrange the Shipment RESPONDENT Failed to Nominate the Suitable Ship for Transportation RESPONDENT Failed to Give a Proper Instruction to the Carrier RESPONDENT Should Pay for the Price of Damages after Risk Has Passed Because the Damage was Due to RESPONDENT s Omission The Contract Term FOB Rolga City Does not Exempt RESPONDENT From Duty to Monitor Proper Shipment VI. RESPONDENT IS RESPONSIBLE TO ATTEMPT TO SELL THE BANANAS AFPTER THEPINAFPRE DOCKED AT THE PORT OF ASTORIA A. CLAIMANT Rightfully Rejected the Bananas Because Non-conformity of the Bananas Constituted the Fundamental Breach of the Contract MEMORIAL FOR CLAIMANT -iii-

5 1. Over 25% of Deviation Constitutes the Fundamental Breach of the Contract CLAIMANT Declared Avoidance Due to RESPONDENT s Breach B. CLAIMANT was not Obligated to Place the Bananas at His Disposal RESPONDENT Must Take Reasonable Steps to Preserve Them In Case CLAIMANT is in Delay in Taking Delivery of the Goods At Astoria City the Captain of Pinafore was Present as Authorized Person by RESPONDENT, thus CLAIMANT Did not Have to Place the Bananas at his Disposal The Seller, RESPONDENT Must Take Reasonable Steps to Preserve Them If the Buyer is In Delay in Taking Delivery of the Goods C. RESPONDENT is in More Favorable Condition to Sell the Bananas CONCLUSION AND PRAYER FOR RELIEF MEMORIAL FOR CLAIMANT -iv-

6 Table of Abbreviations / paragraph / paragraphs AG Duisburg Amtsgeright Duisburg Art. / Arts. Article / Articles ACICA Australian Centre for International Commercial Arbitration CISG United Nations Convention on Contracts for the International Sale of Goods Hamburg Rules United Nations Convention on the Carriage of Goods by Sea, 1978 KLRCA Rules Rules for Arbitration of the Kuala Lumpur Regional Centre for Arbitration (as revised in 2010) e.g. For example etc. et cetera (=and so on) ICC International Chamber of Commerce Mr. Mister No. Number UNCITRAL United Nations Commission on International Trade Law UNIDROIT The International Institute for the Unification of Private Law v. Versus AP Astoria Produce Company RFE Rolga Farmer s Exchange Para(s). Paragraph(s) MEMORIAL FOR CLAIMANT -v-

7 Index of Authorities I. Index of Legal Authorities Abbreviations Agency Convention Treaties, Conventions and Laws Convention on Agency in the International Sale of Goods, Geneva, 1983 CISG United Nations Convention on Contracts for the International Sale of Goods, Vienna, 1980 Online: < CISG-e-book.pdf> (Cited: CISG) Found at: 1, 2, 3, 4, 6, 53, 54, 55, 56, 57, 60, 61, 63, 64, 71, 76, 80, 81, 82 Hamburg Rules UN Convention ICC INCOTERMS NY Convention United Nations Convention on the Carriage of Goods by Sea, 1978 Online: < rg/hamburg_rules_e.pdf> (Cited: Hamburg Rules) Found at: 72 United Nations Convention on the Limitation Period in the International Sale of Goods Online: < International Chamber of Commerce rules for the use of domestic and international trade terms Online: < (Cited: ICC INCOTERMS) Found at: 73 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 the "New York" Convention Online: < (Cited: NY Convention) Found at: 1, 13, 14, 14, 16, 19, 20 MEMORIAL FOR CLAIMANT -vi-

8 KLRCA Arbitration Rules Malaysian Arbitration Act of 2005 UNCITRAL Model Law UNCITRAL Arbitration Rules UNIDROIT Principles Rules for Arbitration of the Kuala Lumpur Regional Centre for Arbitration (as revised in 2010) Online: < n_2010.pdf> (Cited: KLRCA Rules) Found at: 23, 24, 30, 32, 33, 34, 35, 36, 37, 38 Laws of Malaysia Act 646, Arbitration Act 2005 Online: < Act_2006_(Act_646).pdf> (Cited: Arbitration Act of Malaysia) Found at: 16, 17, 18, 19, 57 UNCITRAL Model Law on International Commercial Arbitration with Amendments United Nations Commission on International Trade Law 7 July 2006 Online: < Cited as: [Arbitration Model Law] Found at: 23, 35, 37, 38, 45 UNCITRAL Arbitration Rules as revised in 2010 United Nations Commission on International Trade Law 6 December 2010 Online: < Cited as: [Arbitration Rules] Found at: 22, 26, 29, 31, 40, 44 UNIDROIT Principles of International Commercial Contracts 2010 Online: < iples2004/integralversionprinciples2004-e.pdf> Cited as: [UNIDROIT] Found at: 2, 8, 9, 10, 46, 54 MEMORIAL FOR CLAIMANT -vii-

9 II. Index of Cases and Awards Country Cases and Awards Canada Jacob Silverberg, Howard Silverman, v. C. Clarke Hooper PLC, and others Quebec, Court of Appeal CLOUT No.56 Date: 6 February 1990 Cited as: [Jacob case] Found at: 41 Egypt Uganda Iran Germany Cairo Regional Centre for International Commercial Arbitration (CRCICA) No. 51/1994, CLOUT No.75 Date: 25 March 1996 Cited as: [Cairo case] Found at: 46 Centre for Arbitration and Dispute Resolution No. 09/04, CLOUT No.899 Date: 26 November 2004 Cited as: [Uganda case] Found at: 28 Iran-US Claim s Tribunal Amoco International Finance Corporation and National Iranian Oil Company Case No. 56, Chamber Three Date: 22 Feb 1984 Cited as: [Amoco case] Found at: 48 Bayerisches Oberstes Landesgericht 4Z SchH 9/01, CLOUT No.49 Date: 16 January 2002 Cited as: [Germany case] Found at: 37 Bundesgerichtshof VIII ZR 159/94, CLOUT No.9 Date: 3 August 1995 Cited as: [CLOUT case No. 123] Found at: 76 Oberlandesgericht Frankfurt a.m. MEMORIAL FOR CLAIMANT -viii-

10 5 U 15/93, CLOUT No.6 Date: 18 Jannuary 1994 Cited as: [CLOUT case No. 79] Found at: 76 Bundesgerichtshof VIII ZR 300/96, CLOUT No.21 Date: 25 June 1997 Cited as: [CLOUT case No. 235] Found at: 79 Hong Kong High Court of Hong Kong, Pacific International Lines(PTE) LTd. & Another v. Tsinlinen Metals and Minerals Co. Ltd Date : 30 July, 1992, Cited as : [CLOUT case No.40] Found at : 13 MEMORIAL FOR CLAIMANT -ix-

11 III. Index of Secondary Sources Bridge, Michael Schlechtriem & Schwenzer The International Sales of Goods Law and Practice, 2 nd Edition, 2007, Oxford University Press Cited as: [The International Sales of Goods] Found at: 73, 74 Commentary on the UN convention on the Sales of Goods (CISG), 3 rd Edition, Oxford University Press Cited as: [Schwenzer] Found at: 4, 55 Honnold, John Uniform Law for International Sales under the 1980 United Nations Convention, 4th ed. Wolters Kluwer Law & Business, 2009 Cited as: [Honnold] Found at: 82 Bonell, J. Michael The UNIDROIT Principles in Practice, 2 nd Edition, 2006, Transnational Press Cited as: [UNIDROIT] Found at: 64 UNCITRAL Digest Huber & Mullis Lew, D. M. Julian, Mistelis, A Loukas & Kröll, M. Stefan Moses, Margaret L. Suk, KwangHyun Digest of Case Law on the United Nations Convention on the International Sale of Goods, Online: < Cited as: [UNCITRAL DIGEST] Found at: 71, 79, 80 The CISG: A New Textbook for Students and Practitioners, European law publishers, 2007 Comparative international commercial arbitration, KLUWER LAW International 2003 Cited as: [Mitsubishi v. Soler] Found at: 8 The Principles and Practice of International Commercial Arbitration, Cambridge University Press, 2008 Cited as: [Moses] Found at: 12, 50, 52, 53 Law Applicable to the Substance of Disputes in International Commercial Arbitration with Special Reference to the Korean Arbitration Act, 2004 MEMORIAL FOR CLAIMANT -x-

12 Cited as: [KwanHyun Suk] Found at: 53 Case Law on UNCITRAL Texts (CLOUT) Redfern, Alan / Hunter, Martin/ Blackaby, Nigel/ Partasides, Constantine UNCTAD Online: < Law and Practice of International Commercial Arbitration, Bath Press, 2004 Cited as: [Redfern/ Hunter/Blackaby/Partasides] Found at: 1, 13 COURSE ON DISPUTE SETTLEMENT - Module 5.2. International Commercial Arbitration: The Arbitration Agreement (UNCTAD/EDM/Misc.232/Add.39) Online: < > Cited as: [UNCTAD] Found at: 14 MEMORIAL FOR CLAIMANT -xi-

13 Statement of Jurisdiction This tribunal has the jurisdiction on this dispute. First of all, there is an agreement to submit this dispute to KLRCA between parties under CISG or UNIDROIT. Both of the CISG Art.18(1) and the UNIDROIT 2.1.6(1) allow the acceptance could be made by conduct. RESPONDENT received bill of sales having revised forum selection clause, and sent bananas to CLAIMANT without any indication of objection. Sending a bananas is an acceptance of CLAIMANT s counteroffer which made by conduct. Also, RESPONDENT is estopped to argue that there were agreement of main contract based on the Bill of sales and only the arbitral clause in the Bill of sales is not agreed on by the parties. Furthermore, there is a valid agreement between parties, because the revised forum selection clause is in writing under Arbitration act of Malaysia, where the award would presumably be made. The general view is that a signature is not necessary, provided that the arbitration agreement is in writing. In this case, modified forum selection clause provides a record of the agreement of arbitration. Alternatively, KLRCA has the authority to resolve the dispute Since the forum selection clause is complied with the form requirement of NY Convention. An arbitration agreement which fulfills the form requirement of Art. II(2) of the NY Convention must be enforced by the courts of contracting state, regardless of any stricter form requirements of the national arbitration law which existed. Art. II. 2. of NY Convention states that The term agreement in writing shall include an arbitral clause in a contract or an arbitration agreement, and the revised forum selection clause is included in Bill of sales which is part of contract of both parties, and is received by the RESPONDNT therefore it is MEMORIAL FOR CLAIMANT -xii-

14 agreement in writing of arbitration. The RULE 1, Art. 1 a) of the KLRCA Rules states that where parties shave agreed in writing to arbitration their disputes in accordance with the Rule then, The arbitration shall be conducted and administered by the Kuala Lumpur Regional Centre for Arbitration in accordance with the Rules. Since the parties have agreed in writing to arbitration their dispute in accordance with the KLRCA Rules, KLRCA has the authority to resolve this dispute. MEMORIAL FOR CLAIMANT -xiii-

15 Questions Presented 1. Does the KLRCA have the authority to resolve the dispute between the parties, specifically, was there an agreement between parties to submit this dispute to it? 2. Were the three arbitrators properly appointed, specifically, was RESPONDENT improperly denied the opportunity to select its party appointed arbitrator and was the Presiding Arbitrator or Chairman improperly appointed? 3. Does the arbitration panel have the authority to impose sanctions in the form of a fine on RESPONDENT for failing to appear at the initial hearing and/or for not providing adequate notice that it would not appear and, assuming it does, what sanction would be appropriate under the circumstances? 4. What law or legal principles apply to this dispute? {The parties advised the Tribunal that it is RESPONDENT s position that general principles of international law, i.e., UNIDROIT, should govern this dispute while CLAIMANT asserts that the United Nations Convention of the International Sale of Goods should apply.} 5. Did the shipment of bananas arrive at its destination in an unsatisfactory condition due to improper storage during the voyage from Rolga to Astoria and, if so, does this constitute a breach of the seller s obligation under the contract between the parties? 6. Did either party have a legal obligation to attempt to sell the bananas or a portion of them soon after the Pinafore docked at the Port of Astoria? MEMORIAL FOR CLAIMANT -xiv-

16 Statement of Facts CLAIMANT, Astoria Produce Company is a major distributor of produce to retail grocery stores throughout Astoria a large industrialized country approximately 6,000 nautical miles from Rolga. RESPONDENT, Rolga Farmer s Exchange is an agricultural cooperative organized under the laws of Rolga, a large tropical island in the Western Pacific. One of its major export crops is bananas. On July 15, 2010, CLAIMANT contacted RESPONDENT by telephone and ordered a large quantity of bananas. Later that day, July 15, 2010, RESPONDENT sent a confirming Bill of Sale, which contained forum selection clause. CLAIMANT later signed [ Accepted, M. Vogel/Astoria Produce ] and returned the Bill of sales which contains revised forum selection clause which indicates this contract shall be settled by arbitration in accordance with the Rules of the Kuala Lumpur Regional Centre for Arbitration just the same way as RESPONDENT suggested original forum selection clause. There were no objections or challenge of the revised forum selection clause from RESPONDENT even after they sent the bananas. On September 20, 2010, RESPONDENT arranged the shipment and CLAIMANT asked RESPONDENT to insure proper handling and storage of the bananas. Acknowledging CLAIMANT s concern, RESPONDENT guaranteed CLAIMANT to make sure that the carrier would be well aware of the special care under his protection. The ship departed on October 1, 2010 and arrived at Astoria City on November 24, Before unloading, John Sparrow, an independent professional Maritime Surveyor inspected the shipment. Approximately 30% of the bananas were ripe or ripening. The reports also MEMORIAL FOR CLAIMANT -xv-

17 stated that the ripening state of bananas was clearly due to the high temperatures at which they had been transported. The No.2 hold of cartons was problematic because there was so space left for ventilation. Since CLAIMANT s professional surveyor along with Mr. Sparrow found excessive ripening of the goods, on November 26, 2010, CLAIMANT rejected the entire shipment and asked for a full refund of the purchase price within 30 days. CLAIMANT also asked RESPONDENT to advise the captain to dispose the bananas as RESPONDENT would like. RESPONDENT refused to do further performance for ripe bananas and to pay for the damages. The captain of Pinafore stored bananas in a nearby house. In the meantime, CLAIMANT refused to dispose of the bananas and there was no direction from RESPONDENT, the bananas were over-ripe and sorting and repacking of the bananas had become economically feasible. The entire shipment was dumped as waste. On June 1, 2011, CLAIMANT initiated the arbitration by filing a request for arbitration with the KLRCA. CLAIMANT designated its party appointed arbitrator as well. The Center s Director notified RESPONDENT of the filing of the Request for Arbitration on June 15, 2011 and enclosed a copy of the KLRCA rules. The Director requested that RESPONDENT appoint its party appointed arbitrator within 30 days, and RESPONDENT does not deny that it received both notices. After 45 days had elapsed without RESPONDENT making an appointment, the Director appointed the second and the presiding arbitrator. Neither party questions the competence or integrity of any of three arbitrators. An initial hearing was scheduled on August 15, Less than an hour before the hearing was to begin, the Director received an from RESPONDENT stating that it would not MEMORIAL FOR CLAIMANT -xvi-

18 appear as it intends to challenge the authority of the tribunal and was concerned that an appearance would be viewed as a waiver of its right to do so. MEMORIAL FOR CLAIMANT -xvii-

19 Summary of Pleadings [1] KLRCA has the authority to govern the dispute between the parties since there is valid agreement between the parties to submit this dispute to the KLRCA under CISG or UNIDROIT. RESPONDENT accepted the revised forum selection clause by sending bananas. Furthermore, RESPONDENT is estopped to defend them that there were agreement of main contract based on the Bill of sales and only the arbitral clause in the Bill of sales is not consented by the parties. Furthermore, the revised forum selection clause is complied with the form requirement of Arbitration Act of Malaysia and NY Convention. [2] All three of the arbitrators were properly appointed on the grounds of three reasons: 1) There was a clear agreement to solve the disputes by arbitration under the KLRCA Rules (Part 1); 2) CLAIMANT s request to the KLRCA can be properly inferred by its behaviors; 3) Even if there was no agreement, CLAIMANT s appointment was proper under the Arbitration Model Law. [(A), (B), (C)] [3] Arbitration panel can impose sanctions on RESPONDENT in the form of a fine on the grounds of two reasons: 1) There was a clear agreement to solve the disputes by arbitration under the KLRCA Rules (Part 1); 2) Imposing sanctions in the form of a fine, sometimes can be one of the general powers of the Arbitral Tribunal to determine the appropriate procedure to prevent the unnecessary delay. [(A), (B)]. [4] CISG should govern to this dispute since CISG is more appropriate choice of law. Art 35 of the KLRCA Rules deliberately distinguish rules of law and law. UNIDROIT is not the law of Art. 35 of the KLRCA Rules. On the other hand, CISG is uniform substantive law which is applicable to this case. [5] The bananas arrived in an unsatisfactory condition and the 30% of the shipment do not MEMORIAL FOR CLAIMANT -xviii-

20 conform to the contract. [A] The deviation was caused by mishandling of the goods during the transportation. To insure the proper handling and storage of the bananas was RESPONDENT s duty [B] The contract term FOB Rolga City does not exempt RESPONDENT from the contractual obligation. [6] 30% of the bananas did not conform to the contract and it deprived what CLAIMANT was entitled to expect under the contract. Since it constituted RESPONDENT s fundamental breach of the contract, CLAIMANT could legitimately avoid the contract and reject the shipment. [A] Since the captain of Pinafore, authorized person by RESPONDENT was present at the destination, CLAIMANT does not have to place the goods at his disposal. Also CLAIMANT took a proper step to disposal of the bananas whereas RESPONDENT refused to cure the defective goods or to pay for the damages. [B] RESPONDENT is in much favorable condition to sell the bananas because RESPONDENT is an agricultural cooperative organized in a large tropical island whose major export crop is bananas. Thus RESPONDENT is obligated to sell the bananas by the law and equity. MEMORIAL FOR CLAIMANT -xix-

21 Pleadings I. KLRCA HAS AUTHORITY TO GOVERN THE DISPUTE BETWEEN THE PARTIES SINCE THERE IS VALID ARBITRATION AGREEMENT TO AUTHORIZE KLRCA BETWEEN THE PARTIES A. There is a Valid Arbitration Agreement between the Parties under CISG or UNIDROIT 1. Arbitration Agreement is Governed by the Law Which Governs the Contract 1. The autonomy of the arbitration clause and of the principal contract does not mean that they are totally independent one from the other, as evidenced by the fact that acceptance of the contract entails acceptance of the clause. 1 It is generally assumed that the arbitration clause is governed by the same law or set of legal rules as the parties choose to govern the totality of the agreement The application of different criteria at the pre-award stage could entail the danger of divergent decisions. Accordingly, NY Convention is considered at the pre-award stage. 3 The NY Convention Art. V.1.(a) provides that enforcement may be refused where the arbitration agreement is not valid under the law to which the parties have subjected it. In this case, the law that the parties have subjected is CISG. There is a valid arbitration agreement between parties under CISG and alternatively, UNIDROIT. 1 Law and Practice of International Commercial Arbitration, Redfern/Hunter/Blackaby/Partasides, Bath Press, 2004, [hereinafter Redfern/ Hunter/Blackaby/Partasides] 2-87, p125, Derains, The ICC International Court of Arbitration Bulletin Vol.6, No. 1, 10, pp, [Redfern/ Hunter/Blackaby/Partasides] 2-94, p130 3 Comparative international commercial arbitration, Julian D M Lew/Loukas A Mistelis/Stefan M Kröll, KLUWER LAW International, 2003 [hereinafter Lew/Mistelis/Kröll,], 6-55, p119 MEMORIAL FOR CLAIMANT -1-

22 2. There is an Arbitration Agreement between the Parties under the CISG 3. As stated in IV, the dispute including the existence of arbitration agreement should be determined by CISG. a. CLAIMANT s Revised Forum Selection Clause Constitutes Counter-offer by CISG Art. 19(1) 4. CISG 19(1) states that a reply to an offer which purports to be an acceptance but contains modifications is a rejection of the offer and constitutes a counter-offer. Modifying forum selection clause is material alteration of the original offer of CISG Art. 19(3). Even if Mr. Vogel signed Accepted, he revised original forum selection clause. This modification is a rejection of the offer that RFE originally made and constitutes a counter offer. b. RESPONDENT Accepted the Revised Forum Selection Clause 5. CISG Art. 18(1) provides that a conduct of the offeree indicating assent to an offer is an acceptance. The dispatch of the goods or delivery of the goods by the seller is an acceptance by conduct of CISG Art. 18(1). 4 RFE received bill of sales including revised forum selection clause and then, sent bananas to AP without objection of the clause. Sending bananas is an acceptance of AP s counter-offer. It would be negligent for RFE not to acknowledge the revised forum selection clause, since AP counter-offered just as the same way that RFE did. c. RESPONDENT is Estopped from Denying the Obligation to Arbitrate. 6. CISG Art. 7(2) states that questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general 4 Commentary on the UN convention on the Sales of Goods, Schlechtriem & Schwenzer, [hereinafter Schwenzer], Art p321 MEMORIAL FOR CLAIMANT -2-

23 principles on which it is based and the general principle includes estoppel or the prohibition of contradictory behavior 5. RFE rely on the fact that there were valid contract of selling bananas based on the Bill of sales. RFE cannot argue that there were agreement of main contract based on the Bill of sales and there were no consent only on the arbitral clause in the Bill of sales. 3. Alternatively, There is a Valid Arbitration Agreement between the Parties under UNIDROIT 7. Even if, UNIDROIT applies in this case, there is no valid arbitration agreement between the parties under UNIDROIT. a. CLAIMANT s Revised Forum Selection Clause Constitutes Counteroffer by UNIDROIT Art UNIDROIT Art (1) provides that A reply to an offer which purports to be an acceptance but contains modifications is a rejection of the offer and constitutes a counter offer. Additional or different term relating to the settlement of disputes constitute a material modification of the offe of Art (2). 6 Even if Mr. Vogel signed Accepted, he revised original forum selection clause, the modification is a rejection of the offer that RFE originally made and constitutes a counter offer. b. RESPONDENT Accepted the Revised Forum Selection Clause under Art (1) of the UNIDROIT 9. The indication of assent may be inferred from the conduct of the offeree by UNIDROIT Art.2.1.6(1). Acts of performance, such as the shipment of goods, constitutes an 5 Schwenzer, Art The UNIDROIT Principles in Practice, 2 nd, Bonell, 2006, Transnational Press[hereinafter Bonell] Art p127 MEMORIAL FOR CLAIMANT -3-

24 acceptance. 7 RFE received bill of sales having revised forum selection clause, and sent bananas to AP without any indication of objection. Sending bananas constitutes an acceptance by conduct. c. RESPONDENT is Estopped from Denying the Obligation to Arbitrate since They are Received Direct Benefits by Knowingly Exploiting the Agreement which Contained the Arbitration Clauses. 10. UNIDROIT Art. 1.8 states a party cannot act inconsistently with an understanding it has caused the other party to have and upon which that other party reasonably has acted in reliance to its detriment and UNIDROIT Art. 1. 7(1) states that each party must act in accordance with good faith and fair dealing in international trade. 8 US courts ruled that to allow a party to claim the benefit of the contract and simultaneously avoid its burdens would both disregard equity. 9 In this dispute, RFE cannot argue that only the forum selection clause in the Bill of sales is invalid when RFE contend that there was a valid contract based on the Bill of sales and they complied with it. B. Furthermore, the Agreement is in Writing Required by Arbitration Act of Malaysia 1. An Arbitration Agreement between the Parties is Subjected to Arbitration Act of Malaysia by NY Convention Art. V. 1. (a) 11. Art. V. 1.(a) of NY Convention provides that unless the parties have chosen a law applicable to the arbitration agreement, it is the law of the place of arbitration to determine the validity of arbitration agreement. Therefore, if the parties have not agreed 7 Bonell, Art p117 8 Moses, p35, Thomson-CSF v. American Arb. Ass n, 64 F.3d at Moses p36, International Paper Co. v. Schwabedissen Machinene & Anlagen GMbh, 206 F.3d 411, 418(4 th circuit) MEMORIAL FOR CLAIMANT -4-

25 on the governing law, the law of the place of arbitration is applied to determine the validity of the arbitration agreement. 12. In this case, the place of arbitration is Malaysia where KLRCA is located. Therefore, the arbitration agreement between the parties is subjected to Arbitration act of Malaysia. 2. KLRCA Has the Authority to Govern the Dispute between the Parties Since There is Written Agreement Required by Arbitration Act of Malaysia Art. 9(3) 13. Art.9(3) of Arbitration Act of Malaysia states that an arbitration agreement shall be in writing. Art. 9(4)(b) of Arbitration Act of Malaysia provides that an arbitration agreement is in writing where it is contained in an exchange of letters or other means of communication which provide a record of the agreement. The general view is that a signature is not necessary, provided that the arbitration agreement is in writing. 10 Form requirement is understood as having a wide meaning. High Court of Hong Kong held that a written agreement to arbitrate had been complied with where there was an arbitration clause in the charter-party and there was no doubt that one party had charted the vessel of the other party even if the charted-party was not signed by the parties. 11 In this case, AP explicitly object original forum selection clause by modifying it, and modified forum selection clause have been received by RFE without any objection. Furthermore, RFE sent bananas. Therefore, there was communication between the parties and the modified forum selection clause provides a record of the agreement of arbitration. C. Alternatively, KLRCA Has the Authority to Resolve the Dispute Since the Forum 10 Redfern/ Hunter/Blackaby/Partasides 3-08, p High Court of Hong Kong, July 30, 1992, Pacific International Lines(PTE) LTd. & Another v. Tsinlinen Metals and Minerals CO. Ltd., Case40 MEMORIAL FOR CLAIMANT -5-

26 Selection Clause is Complied with the Form Requirement of NY Convention. 1. The Forum Selection Clause is in Writing If It Complies with the Form Requirement of NY Convention. 14. It is now generally accepted that the NY Convention sets a maximum standard, and the arbitration clauses cannot be submitted to stricter requirements under national law. Therefore any arbitration agreement which fulfills the form requirement of Art. II(2) NY Convention must be enforced by the courts of contracting state, regardless of any stricter form requirements of the national arbitration law which existed. 12 The formal requirements for the validity of an arbitration agreement, laid down in Art.II.2, should supersede national law. 13 Therefore, even if the forum selection clause is not within the scope of an Arbitration Act of Malaysia, it is in writing if it complies with the form requirement of NY Convention. 2. The Forum Selection Clause is in Writing under Art. II Art. II. 2. of NY Convention states that the term agreement in writing shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams. US Court of Appeal for the Fifth Circuit held that there was no requirement for signature or exchange of documents if the arbitration clause is part of a contract. 14 The revised forum selection clause is included in Bill of sales which is part of the contract of both parties, and is received by the RESPONDNT. Therefore it is agreement in writing of arbitration. 12 Lew/Mistelis/Kröll, 6-39 p COURSE ON DISPUTE SETTLEMENT - Module 5.2. International Commercial Arbitration: The Arbitration Agreement (UNCTAD/EDM/Misc.232/Add.39), 07/11/05, SANDERS, Pieter, A twenty-year s review of the Convention on the recognition and enforcement of foreign arbitral awards, The International Lawyer, Vol. 13 No 2, Lew/Mistelis/Kröll, 7-24, p137, Sphere Drake Insurance Plc v. Marine Towing, Inc, 16 F 3d (5 th Cir 1994) MEMORIAL FOR CLAIMANT -6-

27 D. KLRCA Has the Authority to Resolve the Dispute 16. Since the parties have agreed in writing to arbitration their dispute in accordance with the KLRCA Rules, KLRCA has the authority to resolve this dispute by KLRCA Rules 1, Art. 1 a). II. ALL THREE OF THE ARBITRATORS WERE PROPERLY APPOINTED A. The First Arbitrator was Properly Appointed 17. According to Art. 9.1 of the Arbitration Rules, AP shall appoint its party appointed arbitrator and can notify it to the other party. Thus, AP legitimately appointed Bernard Bodd as its party appointed arbitrator. This information is properly notified to RFE in the Director s notification of the filing of Request for Arbitration to RFE under Art. 3.4(c) of the Arbitration Rules. 18. Even if there was no agreement to settle the arbitration by KLRCA Rules so that the KLRCA does not have the authority to govern the arbitration procedure, arbitration can be governed by the Arbitration Model Law since both Astoria and Rolga have adopted the Arbitration Model Law as part of their domestic laws, and the arbitration is taking place in Kuala Lumpur for now. Thus, RFE s appointment of its party appointed arbitrator is still legitimate under Art. 11(2) and 11(3)(a) of the Model Law, which deals with the same matter. B. The Second Arbitrator was Properly Appointed 19. The second arbitrator was properly appointed for three reasons. (1) RFE did not appoint its arbitrator in time, which is 30 days after the notification according to the KLRCA Rules; and (2) RFE s non-response constitutes a forfeiture of its right to appoint the second arbitrator; Thus, (3) AP legitimately asked the appointing authority, the KLRCA, MEMORIAL FOR CLAIMANT -7-

28 to appoint one for RFE, and the Director properly appointed one under the Rules. 1. RESPONDENT did not Appoint its Arbitrator in Time 20. RFE did not appoint its party appointed arbitrator within 30 days after the director s notification, which RFE does not deny. Notification of the Director to RFE to appoint the party appointed arbitrator was on June 15, 2011, and 45 days had elapsed before the Director appointed the Second arbitrator for RFE. In fact, RFE responded less than an hour before the initial hearing was scheduled to begin on August 15, 2011, which constitutes 60 days after the notification to select one. 2. RESPONDENT s Non-response Constitutes a Forfeiture of its Right to Appoint the Second Arbitrator 21. RFE s non-response can be interpreted as a forfeiture of its opportunity to appoint an arbitrator for its party. In other words, RFE s opportunity to select its party appointed arbitrator was not improperly denied. According to Art. 4.1 and 4.2 (a), (b) of the Arbitration Rules, RFE should have responded the AP about (a) any plea that this arbitral tribunal lacks jurisdiction; (b) any proposal for designation of an appointing authority within 30 days of the receipt of the Arbitration. 15 However, since RFE failed to do all of these, it can be treated as a forfeiture of its rights under Art. 32 of the Arbitration Rules. Thus, RFE s opportunity to select its party appointed arbitrator was not improperly denied, and as Art. 4.3 of the Arbitration Rules stipulates, the constitution of the arbitral tribunal shall not be hindered by RFE s late response. 22. The concept of waiver is well established in civil law countries as well. For example, a challenge to an arbitrator under the Swiss 1987 Act must be brought without delay, and 15 Art. 6 of the Arbitration Rules MEMORIAL FOR CLAIMANT -8-

29 an unreasonable delay in bringing a challenge amounts to a forfeiture which is a reflection of the bona fides principle in Swiss law 16. RFE is a civil law country, and it is clear that RFE has violated the time-limit of 30 days. Thus, this can be interpreted as a forfeiture of its opportunity to appoint an arbitrator for its party. 23. In a similar arbitration case in Uganda, the Centre for Arbitration and Dispute Resolution (CADER) rejected RFE s deferral of the appointing date and stated that CADER is entitled to appoint the arbitrator since RFE did not reply in a timely manner 17. In this case also, the RFE s right to appoint its party appointed arbitrator has been gone since they did not respond in a timely manner. 24. Moreover, challenges to the arbitrator shall be within 15 days after it had been notified of the appointment of challenged arbitrator, according to Art. 13 of the Arbitration Rules. However, RFE s failed to do this. Specifically, the Director s appointment was on July 30, 2011, and RFE s response was on August 15, In other words, even if RFE s appointment of an attorney as its party appointed arbitrator can be treated as a challenge to the arbitrator, it was too late, i.e., more than 15 days has elapsed after the appointment of the second arbitrator. 3. The Director Properly Appointed the Second Arbitrator 25. KRLCA shall be the appointing authority under Rule 3.1a), i), ii) of the KLRCA Rules, since RFE clearly did not respond within 40 days of the receipt of the notification of the arbitration, and (i) No appointing authority has been designated; or (ii) No appointing authority has been agreed upon by the parties. 16 Redfern and Hunter on International Arbitration, 5th ed. Nigel Blackaby/Constantine Partasides/Alan Redfern/Martin Hunter, 2009 [hereinafter Redfern and Hunter], p CLOUT case No.899 [Centre for Arbitration and Dispute Resolution, Uganda, 26 November 2004] MEMORIAL FOR CLAIMANT -9-

30 a. No Appointing Authority has been Designated 26. It is clear that RFE did not respond within 40 days of the notification of the arbitration nor did RFE proposed one pursuant to Art. 6 of the Arbitration Rules. b. No Appointing Authority has been Agreed upon by the Parties 27. Since, RFE is disagreeing with the agreement on the KLRCA Rules, it is clear that no appointing authority has been agreed upon by the parties. Thus, the KLRCA shall be the appointing authority according to the KLRCA Rules. 28. Thus, according to Art. 9.2 of the Arbitration Rules, AP requested the KLRCA to appoint the second arbitrator. RFE might argue that AP did not request the KLRCA to appoint the second arbitrator. However, it is obvious to infer that AP did request the KLRCA for several reasons. First of all, both of the notifications of AP s filing of the Request for Arbitration and requesting that RFE appoint its party appointed arbitrator were by the Director. Secondly, the Director has enclosed a copy of the KLRCA Rules while notifying RFE the filing of the arbitration by AP. This shows that AP legitimately authorized the Director to handle the work for them. Thus, we can infer that there was a request. 29. According to Rule 3.2 of the KLRCA Rules, in case where the KLRCA is to appoint an arbitrator, the Director shall appoint such arbitrator, and in doing so, he may exercise all the powers and discretions specified in the rules. Thus, the Director s appointment of Riska Benti as the second arbitrator was legitimate under the Rules. 30. Even if there was no such agreement to solve the disputes under the KLRCA Rules, the appointment of the second arbitrator was still proper under Art.11(3)(a) of the Arbitration Model Law. RFE asserts that AP should have requested the court to appoint the second arbitrator. However, RFE first should have proposed an authority since they have agreed MEMORIAL FOR CLAIMANT -10-

31 to solve the disputes by arbitration, and since they are disagreeing with the current authority of the KLRCA, they could have at least proposed another one in advance according to Art. 6 of the Arbitration Model Law. However, since RFE failed to do this, their right to choose one has been forfeited; and KRLCA holds the authority since RFE have got the notice of the arbitration, and no objections were raised in time. Thus, the second arbitrator was properly appointed by the Director of the KLRCA under the Rules. C. The Presiding Arbitrator was Properly Appointed 31. The purpose of arbitration is to solve the disputes fairly but in efficient, fast, and convenience way. However, RFE s act has caused an unnecessary delay and costs. In such case, the Director of the KLRCA shall constitute the arbitral tribunal and in doing so may exercise all the powers and discretions under Rule 3 of the KLRCA Rules. Thus, the Director s appointment of John Chong as the Presiding Arbitrator after 45 days of the notification was legitimate under the Rules. 32. In a similar arbitration case in Germany, upon RFE s failure to comply with the request to appoint its arbitrator, AP sought to have the arbitrator appointed by the Highest Regional Court. Before the Court could decide on the application, RFE nominated an arbitrator. However, the Court held that RFE s designation was late so that the right to appoint the arbitrator had been transferred to the Court under Art. 11(3)(a) of the Arbitration Model Law. 18 However, since the matter at issue is governed by the KLRCA Rules, the Court in Germany case can similarly inferred to be the KLRCA. Thus, the presiding arbitrator was properly appointed by the Director of the KLRCA. 33. Similarly with above 30, even if there was no such agreement to solve the disputes 18 CLOUT case No. 49 [Bayerisches Oberstes Landesgericht, Germany, 16 January 2002] MEMORIAL FOR CLAIMANT -11-

32 under the KLRCA Rules, the appointment of the presiding arbitrator was still legitimate under Art. 11(3)(a) of the Arbitration Model Law. III. ARBITRATION PANEL HAVE THE AUTHORITY TO IMPOSE SANCTIONS IN THE FORM OF A FINE A. Arbitration Panel can Impose Sanctions on RESPONDENT 34. Arbitration panel has limited power on imposing sanctions 19. However, they sometimes can impose sanctions to promote the procedures of the arbitration. The purpose to solve the disputes by arbitration is to settle in faster and convenient way than in the court. However, if one of the parties is trying to abuse the system by deliberately refusing to participate just to delay the procedure, the panel sometimes can impose sanction like the court to protect the system and promote the arbitration process as in the case, for three reasons; (1) Arbitration panel enjoys a broad power to avoid the unnecessary delay; (2) RFE s late response caused an unnecessary delay; and (3) RFE has not shown sufficient cause for its failure to appear at the initial hearing. 1. Arbitral Panel Enjoys a Broad Power to Avoid Unnecessary Delay 35. In general terms, the arbitral tribunal enjoys a very broad power to determine the appropriate procedure 20. Art of the Arbitration Rules provides a general power for the arbitral tribunal to conduct the arbitration in such manner as it considers appropriate, provided that the parties are treated with equality and...each party is given a full opportunity of presenting his case ; and also in exercising its discretion, they shall conduct the proceedings so as to avoid unnecessary delay and expense. 19 The UNCITRAL Arbitration Rules - A commentary, David D. Caron/Lee M. Caplan/Matti Pellonpaa, 2006 [hereinafter Caron/Caplan/Pellonpaa], p Redfern and Hunter, p.317 MEMORIAL FOR CLAIMANT -12-

33 36. In a similar case in Jacob case, the court of appeal viewed that the arbitrator was master of his own procedure and could take whatever steps he deemed appropriate to ascertain the facts RESPONDENT s Late Response Caused Unnecessary Delay 37. RFE s failing to appear at the initial hearing made the Director make another hearing on October, and extra costs such as room costs, traveling costs for the arbitrators, etc., had incurred. Thus, in such case, the arbitral panel can impose some kind of sanctions on RFE to promote the arbitration process. In other words, the sanction is reasonable enough considering that the re-appointing process takes time, and can result in substantial and serious delays to the whole process. 3. RESPONDENT has Not Shown Sufficient Cause for its Failure to Appear at the Initial Hearing 38. The reason for RFE s notification of not appearing was to challenge the authority of the arbitrators, and appearing would be viewed as a waiver of its right to do so. However, it was not a sufficient cause for the hearing to be postponed. RFE is challenging for the appointment procedural issue of the arbitrators, not their qualities. However, the purpose of the procedural rule is to ensure the quality of the arbitrators. In other words, since neither party question the quality of all three of the arbitrators, there is no reason to reelect one. 39. Moreover, RFE s notice was less than an hour ago when the hearing was to begin, i.e., too late. Challenging the authority indeed is one of the parties rights. However, RFE should have done it before under Art. 4 of the Arbitration Rules, in specified time of CLOUT case No. 56 [Jacob Silverberg, Howard Silverman, v. C. Clarke Hooper PLC, and others, Canada, 6 February 1990] MEMORIAL FOR CLAIMANT -13-

34 days after they have had the notification. Thus, RFE s right to challenge is deemed to be forfeited under Art. 32 of the Arbitration Rules, and its late challenge constitutes an improper one. 40. RFE s act also constitutes an improper challenge under Art. 12 of the Model Law. As it states, an arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence, or qualification issues. However, since neither party questions the competence nor integrity of any of the three arbitrators, RFE does not have any ground for challenge. 41. At a similar arbitration hosted in Cairo, the Arbitral Tribunal rejected the challenge filed by RESPONDENT, reasoning that the circumstances raised by RESPONDENT did not cast serious doubts to the chairman s impartiality or independence 22. RFE may challenge with procedural issue. However, since there was no improper procedure in appointing arbitrators, RFE s failing to appear at the initial hearing constitutes an improper challenge. B. Sanction in the Form of a Fine to Avoid Unnecessary Delay is Legitimate 42. As mentioned above, arbitration panel has very limited power on imposing sanctions. However, in such case like this, RFE showing no sufficient cause for failing to appear at a hearing or its late response to deliberately delay the process, causes harm to the party who wants the dispute to be solved quickly. It also causes harm to the system of the arbitration. No party would want to arbitrate if the other party can delay the process with various tactics that has no reason. Thus, in this case, the arbitration panel legitimately can impose sanction in the form of a fine to RFE for causing unnecessary delay. 43. In Amoco case before the Iran-US Claims Tribunal, a dissenting opinion of Howard M 22 CLOUT case No. 75 [Cairo Regional Centre for International Commercial Arbitration, Egypt, 25 March 1996] MEMORIAL FOR CLAIMANT -14-

35 Holtzmann from orders granting further extensions of time to file statements of defense follows that APs have requested that monetary sanctions be imposed upon RFE if the date for the filing of the Statements of Defense and Counterclaims is ignored. This request will be considered when and if such a default occurs Similarly in the case, RFE showed no sufficient cause that it will not appear at the initial hearing which caused unnecessary delay. This is a delaying tactic which will seriously harm the procedure, and further delay is foreseeable since neither party questions the quality of the arbitrators. Thus, in this case, the panel can impose sanction in the form of a fine to avoid such unnecessary delay. IV. CISG SHOULD GOVERN TO THIS DISPUTE A. The Arbitral Tribunal Has Authority to Apply the Law 45. Art. 35(1) of KLRCA Rule stipulates that, falling designation by the parties, the arbitral tribunal shall apply law which it determines to be appropriate. The rule voie Directe permits arbitrators to determine the law based on the law they think is most appropriate, without having to engage in a conflict of laws analysis 24. B. UNIDROIT is not Appropriate to this Case 46. UNIDROIT is not the usual choice for two private parties, it is sometimes chosen in contracts between States or between States and private parties KLRCA Rule Art. 35 states that The arbitral tribunal shall apply the rules of law designated by the parties as applicable to the substance of the dispute. Failing such designation by the parties, the arbitral tribunal shall apply the law which it determines to 23 Caron/Caplan/Pellonpaa, p Moses, p74 25 Moses, p70 MEMORIAL FOR CLAIMANT -15-

36 be appropriate. The rule deliberately distinguishes the language. Both parties can agree on the rules of law include general principles of international law, such as UNIDROIT. 26 The use of the expression rules of law, permits arbitrators to choose non-legal standards, such as lex mercatoria or general principles of law. 27 However, the second sentence of Art.35(1) states that failing designation by the parties the arbitral tribunal should apply the law CISG is uniform substantive law, however UNIDROIT is not the Law of KLRCA Rule Art. 35(1), even if the Principle is within the scope of the Rules of law of first sentence. C. CISG is Appropriate to This Dispute 48. The CISG provides a code for direct application in cases of international sale of goods. The effect will be, with increasing numbers of countries adopting the CISG, that the rules it contains will be accepted in more and more countries. The CISG rules have been applied by many arbitration tribunals in disputes involving international sale of goods The CISG offers solutions specifically tailored to the needs of international commercial sales and rich body of state court decisions, arbitral awards, and academic writings has been developed around it, allowing arbitrators and parties a quick and thus cost efficient application. It may thus also serve as law most appropriate even if tis territorial requirements are not met. 29 V. The BANANAS ARRIVED IN AN UNSATISFACTORY CONDITION AND THE GOODS DID NOT CONFORM TO THE CONTRACT DUE TO RESPONDENT S 26 Law Applicable to the Substance of Disputes in International Commercial Arbitration with Special Reference to the Korean Arbitration Act, KwanHyun Suk, 2004, p11 27 Moses p78 28 Lew/Mistelis/Kröll, 18-69, 70, p Schwenzer, Art.1 14, p24 MEMORIAL FOR CLAIMANT -16-