Twenty-Fifth Annual Willem C. Vis International Commercial Arbitration Moot MEMORANDUM FOR RESPONDENT

Transcription

1 Twenty-Fifth Annual Willem C. Vis International Commercial Arbitration Moot APIIT LAW SCHOOL MEMORANDUM FOR RESPONDENT Delicatesy Whole Foods Sp Comestibles Finos Ltd 39 Marie-Antoine Careme Avenue 75 Martha Stewart Drive Oceanside, Equatoriana Capital City, Mediterraneo CLAIMANT RESPONDENT PUJANEE DE ALWIS NABEELA IQBAL TABITHA ABRAHAM WIMUKTHI WERAGAMA

2 Table of Contents INDEX OF ABBREVIATIONS... i TABLE OF ABBREVIATIONS... ii SUMMARY OF FACTS... 1 SUMMARY OF ARGUMENTS... 3 ISSUE 1: THE ARBITRAL TRIBUNAL MUST DECIDE ON THE CHALLENGE OF MR. PRASAD AND MR. PRASAD MUST NOT PARTICIPATE IN HIS OWN CHALLENGE ) RESPONDENT SUBMITTED THE CHALLENGE IN TIME UNDER UNCITRAL MODEL LAW... 4 A. UNCITRAL MODEL LAW MUST BE APPLIED... 4 B. CHALLENGE WAS SUBMITTED WITHIN TIME ) THE ARBITRAL TRIBUNAL MUST DECIDE ON THE CHALLENGE OF MR. PRASAD WITHOUT HIS PARTICIPATION A. AN APPOINTING AUTHORITY DECIDING ON THIS CHALLENGE WILL VIOLATE THE CONFIDENTIALITY BETWEEN THE TWO PARTIES ) THE CHALLENGED ARBITRATOR SHOULD NOT PARTICIPATE IN THE ARBITRAL TRIBUNAL... 8 A. THE PRINCIPLE OF NATURAL JUSTICE WOULD NOT ALLOW A MAN TO JUDGE HIS OWN CAUSE... 8 B. THE NEW YORK CONVENTION REQUIRES THE PRINCIPLE OF PUBLIC POLICY... 9 C. A POTENTIAL REPLACEMENT ARBITRATOR WILL ENSURE A COMPLETE ARBITRAL TRIBUNAL... 9 ISSUE 2: SIGNIFICANT JUSTIFIABLE DOUBTS EXIST FOR THE IMPARTIALITY OF MR PRASAD ) THE GROUNDS FOR CHALLENGE BASED ON THE APPLICABLE LAW HAVE BEEN MET A. THE CHALLENGE TO MR. PRASAD IS VALID UNDER ARTICLE B. THE CIRCUMSTANCES DISCLOSED GIVES RISE TO JUSTIFIABLE DOUBTS AS TO MR. PRASAD S IMPARTIALITY AND INDEPENDENCE I. The Reasonable Man would believe that the circumstances question Mr. Prasad s Independence and Impartiality II. Mr. Prasad s connection with FindfundsLP questions his impartiality and independence. 13 III. Mr. Prasad was selected by the CLAIMANT based on the views expressed by him... 14

3 2) 2014 IBA GUIDELINES ON CONFLICT OF INTERESTS MUST BE USED AS IT REFLECTS THE BEST PRACTICE STANDARD A. THE USE OF IBA GUIDELINES IS ACCEPTABLE I. As evident in case law, the IBA Guidelines are widely used II. The IBA guidelines have been drafted and formulated by experts in the field III. The fact that the parties have not specifically agreed on the guidelines does not exclude it as a source of reference for the Tribunal B. THE CIRCUMSTANCES DISCLOSED QUESTION MR. PRASAD S INDEPENEDENCE AND IMPARTIALITY UNDER IBA PROVISIONS I. The article published by Mr. Prasad in the Vindobona Journal II. Repeat appointments ) RESPONDENT S CHALLENGE OF MR. PRASAD DOES NOT VIOLATE THE PRINCIPLE OF EQUITABLE ESTOPPEL AND IS VALID ISSUE 3: RESPONDENT S GENERAL CONDITIONS MUST GOVERN THE CONTRACT ) RESPONDENT S TENDER IS AN OFFER THAT SATISFIES ARTICLE 14 OF THE CISG A. THE TENDER WAS SENT TO SPECIFIC PERSONS B. RESPONDENT S OFFER IS SUFFICIENTLY DEFINITE C. RESPONDENT S INTENTION TO BE BOUND IS CLEAR D. CLAIMANT ACCEPTED RESPONDENT S OFFER ) RESPONDENT S GENERAL CONDITIONS ARE APPLICABLE A. RESPONDENT S GENERAL CONDITIONS WERE INCORPORATED IN TO THE TENDER DOCUMENTS I. The RESPONDENT s general conditions were enclosed in the contract with the Tender documents II. The General Conditions of the CLAIMANT were not sufficiently available to the RESPONDENT III. CLAIMANT knew or would have known of the incorporation of the RESPONDENT s general conditions B. RESPONDENT S GENERAL CONDITIONS WERE ACCEPTED

4 C. LAST SHOT PRINCIPLE FAVORS THE APPLICATION OF RESPONDENT S GENERAL CONDITIONS ) THE KNOCK-OUT PRINCIPLE IS INNACPPLICABLE TO THE PRESENT CASE ISSUE 4: THE CLAIMANT HAS NOT DELIVERED COMPLYING GOODS AS PER ARTICLE 35 OF THE CISG ) THE CHOCOLATE CAKES DELIVERED DO NOT CONFORM TO THE REQUIREMENTS OF THE RESPONDENT A. ARTICLE 35(1) OF THE CISG IS BREACHED BY THE CLAIMANT B. THE CHOCOLATE CAKES DO NOT CONFORM IN PURPOSE AS PER ARTICLE 35(2)(B) ) THE CLAIMANT IS COMPELLED TO ENSURE THAT ITS SUPPLIERS ARE COMPLIANT WITH THE RESPONDENTS GENERAL CONDITIONS ) THE CLAIMANT S CLAIM FOR DUE PAYMENT IS NOT JUSTIFIED PRAYER FOR RELIEF CERTIFICATION... 35

5 INDEX OF ABBREVIATIONS Paragraph Art./Arts Arb. CISG Corp. Co. Cl. Ex. Res. ICC IBA No. PECL p PO. Rec. UNCITRAL UNIDROIT USD Article/ Articles Arbitration United Nations Convention on Contracts for the International Sale of Goods Corporation Company Claimant Exhibit Respondent International Chamber of Commerce International Bar Association Number Principal European Contract Law Page Procedural Order Record United Nations Commission on International Trade Law International Institute for the Unification of Private Law United States Dollars

6 INDEX OF AUTHORITIES BOOKS Honnold, J JOHN HONNOLD Uniform Law for International Sales Under the 1980 United Nations Convention 3rd ed. Kluwer Law International (1999), pages ml Redfern REDFERN AND M. HUNTER WITH N. BLACKABY AND C. PARTASIDES, Law and Practice of International Commercial Arbitration, 4th Edition, 2004 at p 265, 279 Magnus Magnus Festschrift Kritzer Schwenzer and Mohs CASES ASM Shipping v TTMI ULRICH MAGNUS Last Shot vs. Knock Out Still Battle over the Battle of Forms Under the CISG Commercial Law Challenges in the 21st Century; Jan Hellner in memorium ULRICH MAGNUS Incorporation of Standard Contract Terms under the CISG Festschrift for Albert H. Kritzer, Wildy, Simmonds & Hill Publishing (2008) p INGEBORG SCHWENZER / FLORIAN MOHS Old Habits Die Hard: Traditional Contract Formation in a Modern World chwenzer-mohs.html ASM SHIPPING V TTMI [2006] EWCA Civ 1341 Aspex Eyewear Inc. v Clariti Eyewear Inc. ASPEX EYEWEAR INC. V CLARITI EYEWEAR INC. United States Court of Appeals, Federal Circuit Nos , th May 2010

7 Austrian Propane Case Chinchilla furs case CLOUT CASE ABSTRACT NO.176 Oberster Gerichtshof [Supreme Court] Austria 10 Ob 518/95 6th February 1996 CLOUT CASE ABSTRACT NO. 106 Oberster Gerichtshof [Supreme Court] - Austria 2 Ob 547/93 10 November 1994 Used car Case CLOUT ABSTRACT NO. 168 Oberlandesgericht KÖln Germany 22 U 4/96 21st May 1996 Dutch Company v German Company Essar v Norscot Gillies v Secretary of State for Work and Pensions CLOUT ABSTRACT NO. 941 Court of Appeal of Arnhem - Netherlands 2005/ th July 2006 ESSAR OILFIELDS SERVICES LIMITED V NORSCOT RIG MANAGEMENT PVT LIMITED [2016] EWHC 2361 (Comm) GILLIES V SECRETARY OF STATE FOR WORK AND PENSIONS [2005] 1 WLR 967 German Machinery Case Granulated Plastic case CLOUT CASE NO. 445 Bundesgerichtschof Germany 31 st October 2001 GRANULATED PLASTIC CASE 7O 147/94 District Court Paderborn - Germany 25th June 1996 French Isea. CLOUT ABSTRACT NO. 203 Paris Court of Appeal -France 13 December 1995 Mono ammonium phosphate case CLOUT CASE ABSTRACT NO. 189 Oberster Gerichtshof [Supreme Court] - Austria 2 Ob 58/97m 20 March 1997

8 Pelliculest v. Morton International CLOUT CASE ABSTRACT NO. 400 Cour d'appel de Colmar - France 24 October 2000 Porter v Magill PORTER V MAGILL [2001] UKHL 67 Skin Care Product Case W Ltd. v M SDN BHD S 96/1215 Helsinki Court of Appeal - Finland 30th June 1998 W LTD. V M SDN BHD [2016] EWHC 422 (Comm) COMMENTARIES AND ARTICLES Eörsi GYULA EÖRSI Published by Dott. A Giuffrè Editore (1987) pages Schlechtriem/Schwe nzer LEGAL TEXTS CISG-AC Opinion No. 13 ONLINE SOURCES Arbitrator Challenges Under the ICC Rules and Practice RULES AND GUIDELINES IBA GUIDLEINES PETER SCHLECHTRIEM AND INGEBORG SCHWENZER, Commentary on the UN Convention on the International Sale of Goods(CISG), Oxford (4th Ed. 2016) CISG-AC OPINION NO. 13, Professor Sieg Eiselen, College of Law, University of South Africa, Pretoria, South Africa. Inclusion of Standard Terms under the CISG, Rapporteur: at Arbitrator Challenges Under the ICC Rules and Practice p.8, ICC DIGITAL LIBRARY IBA GUIDELINES ON CONFLICTS OF INTEREST IN INTERNATIONAL ARBITRATION Adopted by resolution of the IBA Council 2014

9 ICC Rules of Arbitration New York Convention UNCITRAL RULES UNCITRAL MODEL LAW UNIDROIT SURVEYS Mereminskaya INTERNATIONAL CHAMBER OF COMMERCE RULES OF ARBITRATION 2017 CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS New York 1958 THE UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW ARBITRATION RULES (as revised in 2010) THE UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION (1985), WITH AMENDMENTS AS ADOPTED IN 2006 UNIDROIT PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS 2016 ELINA MEREMINSKAYA Results of the Survey on the Use of Soft Law Instruments in International Arbitration

10 SUMMARY OF FACTS 1. The Parties to this arbitration are Delicatesy Whole Foods Sp ( CLAIMANT ) and Comestibles Finos Ltd ( RESPONDENT ). The CLAIMANT, is a medium sized manufacturer of fine bakery products registered in Equatoriana and RESPONDENT is a gourmet supermarket chain in Mediterraneo. 2. In March 2014, CLAIMANT met the RESPONDANT at the yearly Danubian food fair, Cucina. After some discussions, the RESPONDENT expressed a clear interest in establishing a business arrangement due to the CLAIMANT S commitment to produce ethically and sustainably. 3. Shortly after they met the RESPONDENT sent an Invitation to Tender for the delivery of chocolate cakes (CLAIMANT S Exhibit C 1) and the Tender Documents (CLAIMANT S Exhibit C 2) which included the RESPONDENT S Special Conditions of Contract, General Conditions of Contract, General business philosophy and the Code of conduct. The CLAIMANT made an offer subject to certain changes. These changes included that the offer would be subject to its own General conditions and its own Code of Conduct. On 7 April 2014 the CLAIMANT was awarded the contract by letter (CLAIMANT S Exhibit C 5). 4. In accordance with the contract, deliveries were made without a problem in the years 2014, 2015 and However, on 27 January 2017 the CLAIMANT received an (CLAIMANT S Exhibit C 6) from the RESPONDENT requiring a confirmation by the next business day that CLAIMANT S suppliers all strictly adhered to Global Compact principles. The RESPONDENT also stated that it would not be making any further payments and will not be accepting any further deliveries should such a confirmation not be forthcoming. The CLAIMANT responded immediately promising that they will investigate the issue further, but assured there would not be any problems regarding the sourcing of ingredients. 5. Despite Claimant s assurances, the Ruritania Peoples Cocoa mbh, was after all involved in the scandal. The CLAIMANT immediately terminated the contract with the said supplier and informed the RESPONDENT of its discovery on the 10th of February

11 6. The RESPONDENT brought the contract to an end, and sought to bring an action for damages due to the CLAIMANT delivering non-conforming goods (CLAIMANT S Exhibit C 10). On 30 June 2017 the CLAIMANT sent the Notice of Arbitration, appointing Mr. Prasad as their arbitrator. The Notice of Arbitration enclosed Mr. Prasad s Declaration of Impartiality and Independence. 7. On 31 July 2017 in response to the Notice of Arbitration the RESPONDENT rejected all the allegations made by the CLAIMANT. Further whilst accepting the appointment of Mr. Prasad as the CLAIMANT S Arbitrator, the RESPONDENT nominated Ms. Hertha as their Arbitrator. However, it was later discovered that there were serious doubts regarding Mr. Prasad s impartiality, resulting in the RESPONDENT promptly challenging the Arbitrator. 2

12 SUMMARY OF ARGUMENTS 8. Pursuant to Article 13(2) of UNCITRAL Model Law the challenge against Mr. Rodrigo Prasad has been submitted in a timely manner. The Arbitral Tribunal should decide on this challenge without the presence of Mr. Prasad. The use of an appointing authority will violate the confidentiality of the proceedings required by the parties as stipulated in the contract. (ISSUE 1) 9. Circumstances exist which give rise to justifiable doubts as to Mr. Prasad s impartiality and independence under Art 12. UNCITRAL Model Law. Under the reasonable person standard and in reference to the IBA Guidelines, these circumstances require Mr. Prasad to be removed from the Tribunal. (ISSUE 2) 10. The RESPONDENT s Invitation to Tender was an offer which the CLAIMANT replied to with non-material alterations, constituting an acceptance under Art.19(2) of the CISG. RESPONDENT made their General Conditions available to the CLAIMANT, giving them reasonable opportunity to be aware of the incorporation of the General Conditions of the RESPONDENT. Since there is a conflict between the Standard terms of the contracting parties, the last shot principle applies. The knock-out principle is inapplicable in these circumstances, as it leads to an illogical conclusion whereby none of the General Conditions of the parties would apply. The CLAIMANT brought this arbitration using RESPONDENT s arbitration clause, thereby acknowledging that RESPONDENT s General Conditions govern. (ISSUE 3) 11. The CLAIMANT cannot claim further payment for the chocolate cakes as the RESPONDENT did not receive products that fulfill the contractual requirements. The cakes fail in conformity as per article 35(1) as well as article 35(2)(b) of the CISG as they are not ethically and sustainably produced. Additionally, the CLAIMANT is compelled to guarantee results required by the contract. (ISSUE 4) 3

13 ISSUE 1: THE ARBITRAL TRIBUNAL MUST DECIDE ON THE CHALLENGE OF MR. PRASAD AND MR. PRASAD MUST NOT PARTICIPATE IN HIS OWN CHALLENGE 1) RESPONDENT SUBMITTED THE CHALLENGE IN TIME UNDER UNCITRAL MODEL LAW A. UNCITRAL MODEL LAW IS APPLICABLE 12. PO1 (4) clearly states that, It is undisputed between the Parties that Equatoriana, Mediterraneo, Ruritania and Danubia are Contracting States of the CISG. All states have adopted the UNCITRAL Model Law on International Commercial Arbitration with the 2006 amendments [Rec. p49, 3.4]. Therefore, it is clear that all Parties in the dispute have adopted the UNCITRAL Model Law with the 2006 amendments as the lex arbitri. The Model Law takes precedence in practice as it is mandatory law, with the UNCITRAL Rules of Arbitration being applied where Model Law is silent or lacking [Redfern and Hunter, p ]. Comparing Art 13 of the Model Law and the Arbitration Rules, it is evident that there is no deficiency in the Model Law that needs to be filled in by the Rules. 13. The Model Law acts as a framework for any institution to personalize Arbitration legislature under it. However certain provisions are mandatory provisions which the Parties in dispute must apply. The drafting language of the Model Law provides a clear indication of which provisions are mandatory law. 14. The language used in Art. 13 of the Model Law makes it clear that a party shall send a challenge and the Arbitral Tribunal shall decide on the challenge. The reference to shall instead of a passive term as may makes this Article a mandatory provision which cannot be replaced by the Art.13 of the Arbitration Rules. Thus, Art. 13 of the Model Law provides the applicable challenge procedure for this arbitration. 4

14 B. THE CHALLENGE WAS SUBMITTED WITHIN TIME 15. Art of UNICTRAL Model Law clearly states that, a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstance referred to in Art. 12 (2), send a written statement of the reasons for the challenge to the arbitral tribunal 16. When calculating time periods, the time starts to run on the day of becoming aware of the constitution of the Arbitral Tribunal. On the 22nd of August the RESPONDENT and the CLAIMANT both received information of the confirmation of the Arbitral Tribunal by Prof. Caroline Rizzo, the President of the Tribunal. 17. Seven days later, on the 29th of August the RESPONDENT brought the challenge [Rec. p. 33] to the attention of the Arbitral Tribunal and the CLAIMANT by stating that they have discovered information that could have serious repercussions on the conduct of the proceedings i.e. that an undisclosed third-party funder is connected to the CLAIMANT through Mr. Prasad and that suspicious previous appointments have taken place between the CLAIMANT and their appointed arbitrator in this dispute. Based on these justifiable doubts the RESPONDENT sent in the challenge against Mr. Prasad and requested the Arbitral Tribunal to urge the CLAIMANT to provide more information to confirm these doubts as a matter of urgency [Rec. p. 34]. Therefore, since the RESPONDENT sent in the challenge in seven days (under 15 days) after the date of the construction of the Arbitral Tribunal, this challenge is timely. 18. To support this further, the RESPONDENT following Art.13.2 challenged the participation of Mr. Prasad after becoming aware of the circumstances mentioned in Art which states, an arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence 19. The RESPONDENT expressed that CLAIMANT s actions regarding the choice of their Arbitrator were very questionable [Rec. p. 39, 10] and that, at least such conduct should be taken into account in determining whether, in the eyes of RESPONDENT, justifiable doubts exist as to Mr. Prasad s impartiality and 5

15 independence. There can be no doubt about that Thus, the RESPONDENT initiated the challenge under Article 13.2 by drawing attention to the fact that circumstances exist which calls into question Mr. Prasad s independence and impartiality. 20. The three circumstances that fall into the category of justifiable doubts of Mr. Prasad have been identified: the knowledge of repeated performances by Mr. Prasad in arbitration with the CLAIMANTS, the undisclosed information of the third-party funder and the magazine article written by Mr. Prasad expressing a legal opinion on a key issue in this arbitration [Res. Ex. R4]. 21. The note by the CLAIMANT s lawyer Mr. Fasttrack which was dated on May 4, 2017 established that Mr. Prasad has established contact with the relevant Parties in such proximity to raise significant doubt as to his impartiality and independence. The Metadata was inclusive of the information that we should definitely do our best to keep the funding secret and not disclose it to the Respondent, to avoid potential challenges of Mr. Prasad...is the perfect arbitrator for our case given his view expressed in an article on the irrelevance of CSR on the question of the conformity of goods. [Rec.p.38] 22. In addition to establishing the funding by a third-party funder, the CLAIMANT also viewed Mr. Prasad as a suitable arbitrator due to his previously expressed legal opinion and Counsel s familiarity with him due to other arbitrations, thereby raising doubts as to his ability to be impartial and independent in these proceedings. Mr. Prasad had been appointed twice before by Mr. Fasttrack s law firm and twice by Findfunds LP. 23. In addition, according to General Standard 7 of the IBA-Guidelines on Conflict of Interest in International Arbitration, a Party has to disclose that it is funded by a third party. CLAIMANT has deliberately not done so. The RESPONDENT thereby submits that on the grounds that justifiable doubts exist as to Mr. Prasad s independence and impartiality, he should not be allowed to sit in the Tribunal. If allowed, it would result in an influence of bias on the Arbitral Tribunal. 6

16 24. All these events came to the attention of the RESPONDENT within the 15-day time limit from the date of the notice of challenge. The undisclosed information regarding Mr. Prasad s connection to third party funding and his repeat appointments by the CLAIMANT S law firm was retrieved on the 27th of August [PO2(11)] by the RESPONDENTS only 2 days away from the 29th of August and 16 days (including the 7-day extension granted by the Arbitral Tribunal.) 25. The President provided CLAIMANT with an extension till the 7th of September for the CLAIMANT to disclose the presence and identification of their third-party funder which they purposely delayed till the 7 th of September which was the last date. The RESPONDENT also sent in a continuation of the first letter on the 14 th of September [Rec. p. 38] where attention was brought to the circumstances that were brought to light by the CLAIMANT on the 7 th of September. This confirms the RESPONDENT s intention to maintain the formalities of the arbitration proceedings as mandated by the UNCITRAL Model Law. However, they were prevented from doing so due to CLAIMANT s intentional delay. Considering these important facts, the Arbitral Tribunal must consider the RESPONDENT s challenge as timely. 26. Applying the principle of extensions in arbitration [Esser v Norscot] the arbitral tribunal must take into consideration the delay caused due to an extension and stop the calculation of time from the 1st of September, the day the extension was granted. Thus, the new deadline should be the 17 th of September with the addition of 7 new dates to the timeline. 27. Due to the procedural measures adhered to by the RESPONDENT regarding the challenge brought forward against Mr. Prasad; the challenge must be considered timely by the Arbitral Tribunal. 2) THE ARBITRAL TRIBUNAL MUST DECIDE ON THE CHALLENGE OF MR. PRASAD WITHOUT HIS PARTICIPATION A. AN APPOINTING AUTHORITY DECIDING ON THIS CHALLENGE WILL VIOLATE THE CONFIDENTIALITY BETWEEN THE TWO PARTIES 7

17 28. The UNCITRAL Arbitral Rules state that an appointing authority has jurisdiction to decide on challenge of an arbitrator. However, as previously established, Art. 13 of UNCITRAL Model Law is mandatory law, requiring the Arbitral Tribunal to decide this challenge. 29. Clause 21: Confidentiality of the General Conditions of Contract [Rec. p.12] states that signatories to the Contract are bound to keep all information regarding arbitral proceedings confidential. As such, any implementation of procedure that involves the participation of outside Parties, such as the involvement of an appointing authority for instance would breach this clause of the Contract [Rec. p.13]. 30. The CLAIMANT has clearly expressed to the RESPONDENT that should a dispute arise they are certain that [they] will be able to overcome any problems relating to the constitution of the Arbitral Tribunal without institutional support [Cl. Ex. C3]. Even a challenge regarding an arbitrator can therefore not be heard by an outside party without beaching the confidentiality clause in the Contract. 3) THE CHALLENGED ARBITRATOR SHOULD NOT PARTICIPATE IN THE ARBITRAL TRIBUNAL A. THE PRINCIPLE OF NATURAL JUSTICE WOULD NOT ALLOW A MAN TO JUDGE HIS OWN CAUSE 31. The infamous 1998 case regarding the Chilean Dictator Augusto Pinochet, discovered a link between Judge Lord Hoffman and an unpaid Director at the Charity of the appellant, Amnesty International. The judgment found that, the fundamental principle is that a man may not be a judge in his own cause. This caused an automatic disqualification of the Judge because his mere interest in the matter was sufficient to disqualify him unless he had made sufficient disclosure [Re Pinochet]. This case signifies the Principle of Natural Justice and warrants consideration of this concept irrespective of the body that pronounced it. Therefore, applying this to the current case, Mr. Prasad cannot be a judge in his own cause as to do so would violate the fundamental principle of natural justice. 8

18 32. Thus, RESPONDENT sees no justification in Mr. Prasad participating in his own challenge procedure. B. THE NEW YORK CONVENTION REQUIRES THE TRIBUNAL NOT TO VIOLATE PUBLIC POLICY 33. Art. 5 (2)((b)) states that Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: (b)the recognition or enforcement of the award would be contrary to the public policy of that country. [NYC. 5(2)(b)] 34. The seat of the Arbitration, is a Contracting States of the New York Convention [PO2 (47)]. Therefore violating Art. 5(2)((b)) of the Convention by the Parties in the dispute will result in the nullification of the final Award. Accordingly, on the occasion that Mr. Prasad is allowed to participate in his own hearing, the award be nullified on grounds of bias because it is against public policy. 35. Public policy has been defined as any unlawful enrichment [India No. 22 v General Electric]. CLAIMANT s plan to allow Mr. Prasad to be a judge his own case would result in an unlawful enrichment, as he would be biased towards his own cause. The RESPONDENT does not want to violate this Convention and risk having the Award annulled or not enforced. For these reasons public policy must be maintained to ensure the respect of both Parties in this Arbitration. C. A POTENTIAL REPLACEMENT ARBITRATOR WILL ENSURE A COMPLETE ARBITRAL TRIBUNAL 36. As stated in Art. 13 of UNCITRAL Model Law, the arbitral tribunal shall decide on the challenge which means a truncated Tribunal should not decide on the challenge of the Mr. Prasad when he is excluded. To overcome this the RESPONDENT proposes to use the resources of Ms. Ducasse who is already in place as a potential replacement (to Mr. Prasad) appointed by the CLAIMANT themselves. 9

19 37. As per PO1(1), Both Parties agree that to speed up proceedings in case the challenge of Mr. Prasad should be successful, CLAIMANT appoints already now Ms. Chian Ducasse as a potential replacement of Mr. Prasad This replacement that the CLAIMANT has evidently given consent to will ensure that a truncated tribunal will not judge on the challenge. 38. It is made evident by this order that the CLAIMANT has not only consented to, but has actually provided a potential replacement arbitrator, which they are also paying for. Based on this it can be assumed that the CLAIMANT would not oppose the process of replacement on account that Mr. Prasad is incapable to serve on the tribunal and second, the consent to a replacement arbitrator would indicate the CLAIMANT s insecurity in their own arbitrator, thereby consenting to a potential replacement. 10

20 ISSUE 2: SIGNIFICANT JUSTIFIABLE DOUBTS EXIST AS TO THE IMPARTIALITY AND INDEPENDENCE OF MR PRASAD 1) THE GROUNDS OF CHALLENGE BASED ON THE APPLICABLE LAW HAVE BEEN MET A. THE CHALLENGE TO MR. PRASAD IS VALID UNDER ARTICLE Art. 12 of the UNCITRAL Model Law states: (1) When a person is approached about his possible appointment as an arbitrator, he shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence. An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall without delay disclose any such circumstances to the Parties unless they have already been informed of them by him. (2) An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence, or if he does not possess qualifications agreed to by the Parties. A Party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made. [EMPHASIS ADDED] 40. According to Article 12, when circumstances exist that gives rise to justifiable doubts as to the impartiality or independence of an arbitrator, the said arbitrator can be challenged. In the Notice of Challenge [Rec, p 38], the RESPONDENT has clearly expressed many circumstances that gives rise to doubts on the impartiality of Mr. Prasad. B. THE CIRCUMSTANCES DISCLOSED GIVES RISE TO JUSTIFIABLE DOUBTS AS TO MR. PRASAD S IMPARTIALITY AND INDEPENDENCE I. A reasonable person would believe that the circumstances question Mr. Prasad s Independence and Impartiality 11

21 41. To test whether the circumstances that exist rise to justifiable doubts as to Mr. Prasad s independence and impartiality, the test of the Fair minded and Informed Observer must be used. After applying the test it is clear that justifiable doubts do exist as to Mr. Prasad s independence and impartiality. 42. The Fair minded and Informed Observer test, which is a common law remedy for apparent bias, was established by Lord Hope, in the case of Porter v Magill [(1999) EWCA Civ 1317] which is a case concerning the unlawful sale of council houses by the defendant. The defendant accused the auditor who conducted the prosecution of being biased based on the grounds of his appointment. Lord Hope stated that the conclusion of the challenge can be derived by subjecting the facts of the challenge to a fair minded and informed observer, who is "neither complacent nor unduly sensitive or suspicious" [Kirby J, Johnson v Johnson] and assess if such an observer, having considered the facts, would conclude that there was a possibility that the concerned arbitrator was biased or lacked independence or impartiality. 43. The Fair minded and Informed Observer test has been used as a remedy for many cases dealing with arbitral bias, such as W Limited v M SDN BHD [(2016) EWHC 422 (Comm)], which follows Article 12 of the UNCITRAL Model Law catering to the grounds of challenge and Gillies v Secretary of State for Work and Pensions which both concerned the challenge of an arbitrator s impartiality and independence. 44. In W Limited v M SDN BHD [(2016) EWHC 422 (Comm)] Knowles J considered the facts that were presented for the challenge of an arbitrator and held that a fair minded and informed observer would not conclude that there was real possibility that the tribunal was biased, or lacked independence or impartiality. 45. This same test must be used to establish the claims of the RESPONDENT and accordingly it would be concluded that looking at the circumstances disclosed, a fair minded and informed observer would conclude there was a possibility of Mr. Prasad s bias. 12

22 II. Mr. Prasad s connection with Findfunds LP questions his impartiality and independence 46. On the 27th of August 2017, the IT security of RESPONDENT retrieved the following information from the meta data [PO2] (11): HF May 4, 2017 Verify with Findfunds whether there exist any contacts between Mr. Prasad and Findfunds. If contacts exist we should do our best to keep the funding secret and not disclose it to the RESPONDENT, to avoid potential challenges of Mr. Prasad. Prasad, whom I know from two previous arbitrations, is the perfect arbitrator for our case given his view expressed in an article on the irrelevance of CSR on the question of the conformity of goods [Notice of Challenge, Rec. p38]. 47. This information raises justifiable doubts as to Mr. Prasad s impartiality by highlighting Mr. Prasad s connections to Findfunds LP, the main shareholder of the CLAIMANT s Third-Party Funder of the present arbitration, which was disclosed, merely upon the request of the Arbitral Tribunal in the letter sent by Mr. Prasad on the 11th of September 2017 [Rec. p36]. Through [PO2] (4), Findfunds LP has influence over the arbitrations funded by its subsidiaries: Findfunds LP usually make a very thorough examination of the case at the beginning where also possible strategies are discussed. [Rec. p50] 48. Thus, it is clear that the strategies of the cases are discussed. Therefore, Findfunds LP has influence over the strategy used in the arbitration. Thereafter, it leaves the conduct of the arbitration largely to the Parties involved and their lawyers and exercises little influence in the appointment of the arbitrators. The standard funding agreement used by Findfunds LP would allow, however, for a greater influence. [Rec. p50] 49. The fact that Findfunds has little influence but the standard funding agreement would allow for a greater influence provides that in fact, Findfunds does have the ability to exert influence over the case and can exert such influence if they wish. 13

23 50. Therefore, Findfunds has a direct connection to the procedures of the case and in the eyes of a fair minded and reasonable observer, Mr. Prasad s connection to Findfunds would raise justifiable doubts as to his impartiality and independence. III. Mr. Prasad was selected by the CLAIMANT based on the views expressed by him 51. In the article published by Mr. Rodrigo Prasad [Res. Ex. R4], Mr. Prasad positions himself very clearly against the modern trend in the understanding of the conformity concept in Art. 35 CISG [Rec. p38]. 52. The subject matter and focal point of these statements are significantly relevant to the outcome of the present arbitration. 53. In the comment by Mr. Horace Fasttrack found through the IT officer, Mr. Fasttrack states that Mr. Prasad: is the perfect arbitrator for our case given his view expressed in an article on the irrelevance of CSR on the question of the conformity of goods [Notice of Challenge, Rec. p38]. 54. The CLAIMANT s counsel clearly admits that the views expressed by Mr. Prasad is a factor that made him a suitable arbitrator in the eyes of CLAIMANT and was the reason he was selected for the arbitration. Therefore, the statements in the comments which led to Mr. Prasad s consequent selection raises valid concern and justifiable doubts over his impartiality and independence. 2) 2014 IBA GUIDELINES ON CONFLICT OF INTERESTS MUST BE USED AS IT REFLECTS THE BEST PRACTICE STANDARD 55. Alhough the UNCITRAL Model Law sets the basis for challenging an arbitrator, it does not provide detailed explanation of the grounds upon which a challenge can be based. 56. According to the travaux préparatoires of Art. 12, it is shown that though proposals were made to delete the word only, in paragraph (2), it was considered preferable to retain that word to clearly emphasize that possible additional grounds for 14

24 challenge provided for in domestic law should not apply in the context of international commercial arbitrations. Therefore, this acts as an exclusion clause only for domestic law. However, other law and guidelines will apply [UNCITRAL Model Law Case Digest, p64]. 57. Therefore, The IBA Guidelines can be used as it constitutes guidelines which are regularly used in international arbitration. A. THE USE OF IBA GUIDELINES IS ACCEPTABLE I. As evident in case law, the IBA Guidelines are widely used 58. The IBA Guidelines on Conflict of Interests have been widely used as a persuasive tool in case law on arbitral challenges, as it is well-known to encapsulate the best practice standards. Its application thus provides a sense of certainty and consistency in the challenges, withdrawals and removals of arbitrators. 59. The guidelines were successfully relied on by the English courts in the case of ASM Shipping v TTMI Ltd [(2006) EWCA Civ 1341], which dealt with an application to set aside an award on the grounds of serious irregularities and the challenge of an arbitrator on the grounds of bias. 60. A Kluwer Arbitration Blog survey on soft law instruments in 2014 found that the Guidelines, constituted the second most popular soft law instrument in the survey, with 44.4% of RESPONDENTs stating that they use them always or regularly [Elina Mereminskaya, Results of the Survey on the Use of Soft Law Instruments in International Arbitration]. 61. The Guidelines have been referenced to in approximately 57% of the ICC cases, suggesting that they provide an important reference tool in many international commercial arbitration decisions relating to the confirmation and challenge of arbitrators [Arbitrator Challenges Under the ICC Rules and Practice, p.8, ICC DIGITAL LIBRARY]. 15

25 II. The IBA guidelines have been drafted and formulated by experts in the field 62. The introduction to the IBA Guidelines itself states that The 2004 Guidelines were drafted by a Working Group of 19 experts [IBA Guidelines, Pi] and were then evaluated by a sub-committee. The members of both the drafting committee as well as the Subcommittee on Conflicts of Interest, apart from being experts in the field of commercial arbitration, were also from a variety of countries thus establishing that the IBA Guidelines on Conflict of Interest are the best practice standards to be used in a multi-cultural setting such as in the present arbitration. III. The fact that the Parties have not specifically agreed on the guidelines does not exclude it as a source of reference for the Tribunal 63. Even though the Parties to the dispute have not specifically agreed on the application on the IBA Guidelines, and it is not legally binding, this does not mean that the guidelines cannot be referred to by the Tribunal. PO2(18) [Rec. p51] states that Parties and tribunals often refer to the IBA guidelines. The Parties have not excluded the application of the IBA Guidelines, and therefore there is no reason why they cannot be referred to by the Tribunal. B. THE CIRCUMSTANCES DISCLOSED QUESTION MR. PRASAD S INDEPENEDENCE AND IMPARTIALITY UNDER THE IBA GUIDELINES I. The article published by Mr. Prasad in the Vindobona Journal 64. In the article published by Mr. Rodrigo Prasad [Res. Ex. R4], Mr. Prasad expresses his view on the conformity concept in Art. 35 CISG [Rec. p38] which is an issue that is key to the outcome of the present proceedings. 65. Art of the IBA Guidelines on Conflict of Interests states that if The arbitrator has given legal advice, or provided an expert opinion, on the dispute to a Party or an affiliate of one of the Parties [IBA Guidelines on Conflict of Interest]. This will fall under the red list. 66. The Red Lists are Application Lists found within the IBA Guidelines. These lists are non-exhaustive and detail specific situations that, depending on the facts of a given 16

26 case, give rise to justifiable doubts as to the arbitrator s impartiality and independence. [IBA Guidelines, p17] 67. This falls under the Waivable Red List. The Waivable Red List covers situations that are serious but considered waivable, but only if and when the Parties, being aware of the conflict of interest situation, expressly state their willingness to have such a person act as arbitrator, as set forth in General Standard 4(c). 68. The IBA Guidelines state that the application lists provided in the guidelines, are non-exhaustive [IBA Guidelines, p17]. Therefore, through this provision it can be construed that if an arbitrator has previously provided a legal opinion about a subject matter directly relevant to the subject matter of the arbitration, this would similarly fall under the red list. falls under this provision. 69. Since this falls under the waivable red list, these circumstances are considered sufficiently serious and CLAIMANT s failure to disclose such relevant information amounts to warrant the removal of Mr. Prasad. II. Repeat appointments 70. Mr. Prasad had been appointed before by Mr. Fasttrack s lawfirm and twice by Findfunds LP [Rec p38]. Because of this, counsel knew that Mr. Prasad will take a certain view on the issues in dispute in the present arbitration. 71. General Standard 7 of the IBA-Guidelines on Conflict of Interest in International Arbitration provides that a Party has to disclose that it is funded by a third Party, and nondisclosure should be taken into account to determine whether in the eyes of the RESPONDENT justifiable doubts exist as to Mr. Prasad s independence and impartiality. CLAIMANT has deliberately failed to disclose such third-party funding in an effort to not provide facts which would give rise to a challenge to Mr. Prasad [Notice of Challenge p38]. 72. The links between Mr. Prasad and the Claimant and Findfunds LP, are significant enough to raise justifiable doubts as to Mr. Prasad s ability to be independent and impartial in these proceedings. 17

27 3) RESPONDENT S CHALLENGE OF MR. PRASAD DOES NOT VIOLATE THE PRINCIPLE OF EQUITABLE ESTOPPEL AND IS VALID 73. The CLAIMANT has argued that the RESPONDENT s challenge of Mr. Prasad, as it comes after the agreement to the arbitrators violates the principle of equitable estoppel [CLAIMANT MEMORIAL, DALIAN MARITIME UNIVERSITY p11]. 74. However, the RESPONDENT s challenge is, in fact, admissible and does not violate the principle of equitable estoppel, as such a principle is not applicable in this case. 75. Estoppel is a principle of equity that prevents a Party from denying or alleging a certain fact after they have acted in a certain way, to prevent injustice to the other Party. 76. Through equitable estoppel, a Party is estopped from taking an unfair advantage of another, either through false language or conduct. 77. This principle is considered in the case Aspex Eyewear Inc. v Clariti Eyewear Inc [Nos , ] where it was found that the defendants relied on claimant s conduct as permission to go forward with a decision and then suffer significant damage. 78. However, in the present arbitration, CLAIMANT s argument that equitable estoppel should be applied to somehow estop the RESPONDENT from challenging Mr. Prasad, is illogical and misplaced. The CLAIMANT will not suffer considerable damage and has willingly paid for a replacement arbitrator, because the CLAIMANT itself is fearful that Mr. Prasad would have to be removed. Therefore, this principle is not valid in this case and therefore cannot be used and is not violated. 79. Further: A Party may become dissatisfied during arbitral proceedings with the choice of an arbitrator, typically because of real or professed doubts about the arbitrator s impartiality and independence, and will seek to challenge and remove a sitting arbitrator [Born, p 1913]. 18

28 80. Accordingly, if there are any doubts about an arbitrator s impartiality, a Party may seek to challenge and remove said arbitrator, even during arbitral proceedings. Equitable estoppel does not apply to take away this right from RESPONDENT. 81. Hence, under the provisions of the UNCITRAL Model Law, in light of the persuasive IBA guidelines, considering all the facts and circumstances collectively, it is clear that, in the eyes of a reasonable person in the position of the RESPONDENT, these circumstances amount to grounds for a successful challenge to Mr. Rodrigo Prasad and he must therefore be removed as arbitrator from these proceedings. 19

29 ISSUE 3: RESPONDENT S GENERAL CONDITIONS AND CODE OF CONDUCT GOVERN THE CONTRACT 1) RESPONDENT S TENDER IS AN OFFER THAT SATISFIES ARTICLE 14 OF THE CISG A. THE TENDER WAS SENT TO SPECIFIC PERSONS 82. Art. 14 of the CISG requires a Contract to be addressed to one or more specific persons, in order for it to be a valid offer. Proposals for the buying and selling of goods, that are addressed to the public at large are considered to be invitations to make an offer [Gyula Eörsi]. These proposals need to be restricted to certain people and not made to a large unidentified group [John Honnold]. The Tender that was sent by the RESPONDENT was not made to the public at large. It was sent to specific people that the RESPONDENT met at Cucina Food Fair in Danubia and it was only publicized in the pertinent industry newsletter [Rec. p25]. The Tender was not made available to an unidentifiable and indefinite group but was published in a specific newsletter that would only reach specific people. Therefore, the Tender was sent to specific persons in keeping with the requirements of Art. 14, and was thus, a valid offer. B. RESPONDENT S OFFER IS SUFFICIENTLY DEFINITE 83. Art. 14(1) of the CISG requires a valid offer to be sufficiently definite. The second sentence in Art. 14(1) states that if the goods are indicated and if provision has been made either expressly or implicitly to fix the quantity and price of the goods, it is classified as being sufficiently definite. The RESPONDENT s offer meet this criterion as the offer sent by the RESPONDENT clearly indicates that they require the delivery of 20,000 chocolate cakes that comply with the requirements set out under Clause 1 of the specification of the goods and delivery terms [Cl. Ex. C2]. The quantity, price or features of the goods can be left open to be determined by the other party [Schwenzer/Mohs]. The RESPONDENT makes provision for the price of the goods and the features of the goods [Cl. Ex. C2]. While the RESPONDENT 20

30 does not set an exact price, by limiting the amount that the CLAIMANT can charge per cake, the RESPONDENT implicitly fixes the price of the good [Cl. Ex. C2]. Regarding the question of price, the Supreme Court of Austria held, that the indication of a price range is sufficient criteria from which a definite price can be drawn [CLOUT Case No.106]. Therefore, the requirement that the offer be sufficiently definite is satisfied. C. RESPONDENT S INTENTION TO BE BOUND IS CLEAR 84. Art. 14(2) of CISG states that the offeror has to have the intention to be bound on acceptance. This is a subjective element that can be construed from the conduct of the Parties and can be inferred from the other requirements of an offer given under Art. 14 of the CISG [Gyula Eörsi]. The RESPONDENT intended for their Tender to be an offer to the CLAIMANT. The letter sent by the RESPONDENT specifically discussed the inclusion of the arbitration clause and states that the RESPONDENT has inquired into the compatibility of their clause with the CLAIMANT S experiences with ad hoc arbitration [Cl. Ex. C1]: In light of your experiences with ad hoc arbitration, I have Contracted our legal department to ascertain whether our new arbitration clause excluding institutional arbitration is really practicable [Cl. Ex. C1]. 85. The RESPONDENT has looked at the specifications of the CLAIMANT to be compatible with the CLAIMANT, which indicates the RESPONDENT s intention to be bound upon CLAIMANT s acceptance specifically. The RESPONDENT s Tender may be a general Tender to the whole world, but it is not for the CLAIMANT. The Tender is an offer to the CLAIMANT as it was sent to specific persons, it is definite the RESPONDENT s intention to be bound upon acceptance is clear. D. CLAIMANT ACCEPTED RESPONDENT S OFFER 86. Under Art. 19(2), a reply to an offer that contains non-material terms, would constitute an acceptance to the offer and if not objected to, the offer is concluded on 21

31 the terms of the offer including the non-material terms. The list of terms given under Art. 19(3) are rebuttable in an individual case as per UNIDROIT Art The decision in the Mono Ammonium Phosphate case [CLOUT 189] has followed UNIDROIT Art and affirms the argument. Further, the CLAIMANT refers to the amendments that they make to the offer sent by the RESPONDENT as minor, additionally the CLAIMANT indicates that changes are made merely to the time of payment and the size of the cake [ Cl. Ex. C3]. The RESPONDENT explicitly accepts only the changes indicated by the CLAIMANT [Cl. Ex. C5]. As the CLAIMANT accepts that the changes made by them are minor, a reasonable person in the shoes of the offeror can understand that the terms changed by the CLAIMANT were immaterial [Magnus]. Thus, the CLAIMANT accepted the RESPONDENT S offer and the Code of Conduct, with non-material alterations. 2) RESPONDENT S GENERAL CONDITIONS ARE APPLICABLE A. RESPONDENT S GENERAL CONDITIONS WERE INCORPORATED IN TO THE TENDER DOCUMENTS I. The RESPONDENT s General Conditions were enclosed in the Contract with the Tender documents 87. RESPONDENT drew sufficient attention to their General Conditions, which the CLAIMANT failed to do. A number of cases have found that the standard conditions will not be validly incorporated into a Contract if the standard terms were not available to the offeree. These cases have held that the offeree must be given a reasonable opportunity to become aware of the incorporation of standard terms [CISG Advisory Council Opinion No.13]. One of the classic cases which brought the prerequisite of availability of the standard conditions is the German Machinery Case. The majority found that the standard conditions must be available to the other party at the moment the Contract is formed [Magnus, Festschrift, Kritzer p320]. 22

32 88. Further, the reference to where the General Conditions are attached must be clear [CISG Advisory Council Opinion No.13]. The consequences for failing to provide the clear reference of the General Conditions was discussed in the case of the French Isea [CLOUT Case No.203]. The courts held that the incorporation of standard terms can be easily denied because of the lack of an incorporation clause on the front page of the document regarding the standard conditions available in the reverse side of the document. Moreover, the reference to the incorporation of the standard conditions must not be something that the other party has to seek out with effort. The offeror must ensure that the General Conditions are set out in a clear manner and at a place which is easily noticeable to any reasonable person [CISG Advisory Council Opinion No.13]. The offeror must make a reasonable attempt to give the recipient an opportunity to be aware of the incorporation of the General Conditions [Schroeter in Schlechtriem/Schwenzer Commentary Art ]. 89. It is clear that the RESPONDENT has taken necessary steps to make the General Conditions of the Contract along with the other Tender documents available to the CLAIMANT and have provided a reasonable opportunity for CLAIMANT to be aware of the incorporation of the RESPONDENT s General Conditions [Cl. Ex. C2]. Moreover, in the Tender document, the RESPONDENT has referred to their General Conditions and their Code of Conduct for Suppliers [Cl. Ex. C2]. In addition, the Invitation to Tender [Cl. Ex. C2], and Art. 5 of the Special Conditions of the Contract [Cl. Ex. C2] provides clear reference to the document containing the General Conditions of the RESPONDENT. RESPONDENT expressly referenced the incorporation of their General Conditions by stating the Contract is made out of the following [Cl. Ex. C2]. The RESPONDENT s General Conditions were neither hidden away nor printed in a manner that a reasonable person would overlook. The General Conditions were properly set out and easily understandable to a reasonable person. Additionally, from the Letter of Acknowledgement [Res. Ex. R2], the CLAIMANT agreed to the fact that they received all the documents listed in the Invitation to Tender. PO2(30) further states that all required documents were attached to the file sent with the tender. 23

33 90. Hence, the CLAIMANT cannot deny the fact that the RESPONDENT s General Conditions were available to them and that they were given reasonable notice of the incorporation of the General Conditions at the time the Contract was concluded. II. The General Conditions of the CLAIMANT were not sufficiently available to the RESPONDENT 91. The CLAIMANT failed to provide the necessary documents with their General Conditions to the RESPONDENT at the time of the formation of the Contract. Neither, was not capable of providing a clear reference to the CLAIMANT s General Conditions in the reply sent to the RESPONDENT with the changes [Cl. Ex. C4]. 92. Where Parties are negotiating through s or other electronic means, the general terms should be attached in the relevant document or should be made available through a hyperlink that leads directly to the applicable terms [Schroeter in Schlechtriem/Schwenzer Commentary Art.14 50]. However, if the formation of the Contract does not happen via electronic means, then a factual issue occurs regarding whether the terms were reasonably available to the other party [Schroeter in Schlechtriem/Schwenzer Commentary Art.14 50]. 93. However, as per PO2(28), the CLAIMANT s terms can only be accessed from the landing page. This makes it clear that there is no direct link provided to the RESPONDENT for the access of the CLAIMANT s general terms. Further, since the Contracting negotiations does not happen through the internet, providing a hyperlink will not be sufficient to fulfil this requirement. 94. Since the CLAIMANT has not made their General Conditions sufficiently available nor clear reference to the RESPONDENT, CLAIMANT s General Conditions were not incorporated into the Contract. III. CLAIMANT knew or would have known of the incorporation of the RESPONDENT s General Conditions 95. The Austrian Propane Case [CLOUT Case No.176] explains that the General Conditions of the Contract have to be a part of the offer in order to indicate the 24

34 offeror s intention, where the recipient would not have been unware of such incorporation of the General Conditions [Art.8(2) CISG]. Moreover, it is also required that the incorporation of the General Conditions is sufficiently clear and understandable to a reasonable person of the same kind [CISG Advisory Council Opinion No.13]. For instance, if the text on the incorporation of the General Conditions is unreadable, the terms cannot be part of the Contract. [CLOUT Case No. 400]. Moreover, if the incorporation of the General Conditions is drafted in a language which cannot be understood by the other Contracting party, the inclusion of the standard conditions will not be valid [Schroeter in Schlechtriem/Schwenzer Commentary Art ]. 96. The quote by CLAIMANT: Thank you for your information concerning the arbitration clause contained in the Invitation to participate in the Tender process [Cl. Ex. C3] shows that the CLAIMANT was well aware that RESPONDENT s General Conditions applied to the Contract, as the arbitration clause formed part of RESPONDENT s General Conditions. Even if the CLAIMANT did not know RESPONDENT s emphasized on numerous occasions, it is very important for us that we can be sure that also your suppliers adhere to Comestibles Finos Philosophy and our Code of Conduct for Suppliers [Cl. Ex. C1]. Thus, the RESPONDENT expressly indicated on multiple occasions the importance of the CLAIMANT s compliance with RESPONDENT s General Conditions and the Code of Conduct. Hence, the CLAIMANT should have known that the General Conditions were a part of the Contract because the incorporation of the General Conditions was clear and understandable to a reasonable person. 97. Therefore, the RESPONDENT has taken sufficient measures to indicate the incorporation of the RESPONDENT s Standard Conditions to the CLAIMANT, which the Claimant failed to do to ensure the incorporation of their General Conditions. Thus, it is apparent that the CLAIMANT was aware, or could not have been unaware, of the inclusion of RESPONDENT s General Conditions and Code of Conduct in the Contract. 25

35 B. RESPONDENT S GENERAL CONDITIONS WERE ACCEPTED 98. Apart from the minor amendments made to the original offer in respect of size, and payment method, the RESPONDENT s General Conditions were not modified nor rejected by the CLAIMANT at the time of the formation of the Contract. The CLAIMANT took sufficient steps to inform RESPONDENT of the alterations to the size, price, and payment method [Cl. Ex. C3, C4], however, CLAIMANT failed to draw RESPONDENT s attention to the incorporation of CLAIMANT s General Conditions. If CLAIMANT wished to amend RESPONDENT s offer by incorporating their General Conditions, they should have specified this in the acceptance letter, at the same time as notifying RESPONDENT of the changes to the size, price, and payment method. The RESPONDENT relied on the acceptance letter and the agreement in respect of the Arbitration clause in the RESPONDENT s General Conditions; which also implies that the CLAIMANT accepted the General Conditions as a whole. RESPONDENT s General Conditions were not subject to modifications by CLAIMANT and is thus sufficiently apart of the Contract. C. LAST SHOT PRINCIPLE FAVORS THE APPLICATION OF RESPONDENT S GENERAL CONDITIONS 99. There is a conflict between the CLAIMANT and the RESPONDENT in respect of whose General Conditions of Sales govern the Contract. When there is a conflict between the standard conditions of the Parties, firstly, it would mean that there are material discrepancies in the conditions and secondly, if the Parties continue to exchange their standard conditions, the Contract is not concluded even when the Parties have started performance [Magnus]. As per Art.19, the Contract is concluded when one of the Parties by way of their conduct indicates their assent and stops exchanging the standard conditions thereafter. Therefore, according to the last shot principle, the conditions fired last would prevail Mutual agreement in respect of the dispute resolution clause between the CLAIMANT and the RESPONDENT indicates that the CLAIMANT expressly agreed 26

36 to the incorporation of the RESPONDENT s General Conditions. The CLAIMANT in their letter to the RESPONDENT on 27 th March 2014 [Cl. Ex. C4] agreed to the terms mentioned in the arbitration clause. They agreed and accepted the fact that arbitration proceedings will happen without the influence or participation of any institution. These terms are present in the RESPONDENT s General Conditions, and as such the CLAIMANT is clearly accepting and therefore, incorporating the RESPONDENT S General Conditions Further, CLAIMANT has brought this arbitration under RESPONDENT s arbitration clause which indicates that the CLAIMANT accepted RESPONDENT s General Conditions as the terms governing the Contract. Since, the RESPONDENT was successful in getting the last word without any objections from the CLAIMANT, the RESPONDENT s General Conditions must govern the Contract. 3) THE KNOCK-OUT PRINCIPLE IS INAPPLICABLE TO THE PRESENT CASE 102. According to the knock-out principle the terms that are not in conflict will form a part of the agreement. However, terms that are conflicting will be excluded [Schroeter in Schlechtriem/Schwenzer Commentary Art.19 35; Magnus]. If the Arbitral Tribunal applies the knock-out principle the dispute resolution clauses in both the CLAIMANT s and RESPONDENT s General Conditions will be cancelled out as they are contradictory: The General Conditions of Sale furthermore contain in Art.11 the model ICC Arbitration clause fixing the place of arbitration in Equatoriana and declaring Equatorianian law to be applicable [PO2(29)] However, it is impossible as CLAIMANT has brought this arbitration under RESPONDENT s dispute resolution clause and further, knocking out the dispute resolution clauses would violate Party Autonomy as both CLAIMANT and RESPONDENT intended to seek relief through arbitration. Thus, based on the fact that CLAIMANT has relied upon RESPONDENT s General Conditions in bringing 27

37 this arbitration, it is clear that the knock out principle is inapplicable to the present case, as this contradictory provision cannot be knocked out. Therefore, one party s General Conditions must govern the Contract instead of neither Thus, it is clear that the RESPONDENT s General Conditions must govern the Contract concluded between the RESPONDENT and the CLAIMANT as RESPONDENT s General Conditions were enclosed in the Tender documents sent to the CLAIMANT and CLAIMANT accepted the incorporation of the RESPONDENT s General Conditions. Even when the Last Shot rule applies, the RESPONDENT s General Conditions prevail. 28

38 ISSUE 4: THE CLAIMANT HAS NOT DELIVERED COMPLYING GOODS AS PER ARTICLE 35 OF THE CISG 1) THE CHOCOLATE CAKES DELIVERED DO NOT CONFORM TO THE CONTRACTUAL REQUIREMENTS 105. CLAIMANT claims the chocolate cakes delivered conform to the requirements of the RESPONDENT as per Art. 35 of the CISG. However, the RESPONDENT firmly states the requirements mentioned in the contract have not been fulfilled by the CLAIMANT, as the cocoa beans used for the cakes were not ethically sourced. The CLAIMANT s claims for payment and damages are therefore without merit. A. CLAIMANT HAS BREACHED ARTICLE 35(1) OF THE CISG 106. Art. 35(1) of the CISG examines the quality, quantity, description and packaging of goods to determine their conformity to the contract. For goods to be conforming, each of these requirements must be in line with what the buyer requested The RESPONDENT requested chocolate cakes of a specific shape and dimension, which contained ingredients that were sustainably and ethically sourced. These specific requirements should be met for the cakes to be conforming to the needs of the RESPONDENT. While the quantity and packaging of the cakes are not under debate, the CLAIMANT has failed to provide goods that are of the quality requested by the RESPONDENT Quality is not only the physical efficacy of the goods, but also the non-material requirements of the buyer. In the Granulated Plastics case [7O 147/94], the courts decided that the use of the product is part of the quality. If the buyer cannot utilize the goods in the manner required, it does not meet the required quality. Additionally, the Used Car case [CLOUT No. 168] used the value of the goods to determine quality and thereby determine conformity. Finally, in Dutch Company v German Company [CLOUT No. 941] the court found the composition of ingredients is a decisive factor in quality, and therefore, the conformity of goods. 29

39 109. It is acceptable that the chocolate cakes provided were capable of passing physical requirements. However, when considering the fact that quality goes beyond the physical characteristics of the product, the cakes are not of the quality required by the RESPONDENT. The cakes were required to be produced ethically with sustainable sourcing of ingredients. This requirement of the RESPONDENT is part of the quality requirement for conformity. This requirement was made very clear to the CLAIMANT Clause 4(3) of RESPONDENT s General Conditions clearly states that any breach of the RESPONDENT s Code of Conduct by a supplier would result in a fundamental breach [Rec. p12]. Clause 1(5) of the Specifications of the Goods states that the ingredients must be sourced as per the requirements in Section IV Special Conditions of the Contract [Rec. p10]. Section IV clearly states that the RESPONDENT has a zero tolerance policy regarding unethical business behavior such as bribery and corruption [Rec. p11] The RESPONDENT requires goods that cater to their need of being a leading Global Compact Company [Cl. Ex. C1, p8]. The very reason they find the CLAIMANT to be a favored party for business is because of the CLAIMANT s own ethical standards [Cl. Ex. C1, p8]. In the Tender document, Clause 1 Specification of the Goods requires the ingredients to be sourced according to the standards in Section IV [Cl. Ex. C2, p10]. These facts make the RESPONDENT s requirements and their communication clear. Since the ingredients in the cake were not sourced ethically, it is not sufficient for the CLAIMANT to point out the fact that these cakes are physically compliant to the requirements of the RESPONDENT. The cakes were meant to be sustainably produced. As such, the conformity of the cakes is compromised. 30

40 B. THE CHOCOLATE CAKES DO NOT CONFORM TO THE INTENDED PURPOSE AS PER ARTICLE 35(2)(B) 112. CLAIMANT has also breached Art. 35(2)(b) of the CISG, which states: (2) Except where the parties have agreed otherwise, the goods do not conform with the contract unless they: (b)are fit for any particular purpose expressly or impliedly made known to the seller at the time of the conclusion of the contract, except where the circumstances show that the buyer did not rely, or that it was unreasonable for him to rely, on the seller s skill and judgement The cakes do not fulfill the quality requirement of being sustainably and ethically produced. The RESPONDENT therefore cannot use them for their intended purpose which was to sell in a supermarket selling ethically and sustainably produced goods [Rec. p24 4]. The RESPONDENT communicated this requirement of ethical and sustainable production clearly to the CLAIMANT before concluding contracting, as the documents attached to the tender had all the information required [Rec. p10] [Rec. p11]. In the letter dated 10 March 2014, the RESPONDENT clearly communicates their reliance on the CLAIMANT s strict adherence to ethical business practices, when it comes to the decision of inviting the CLAIMANT to the tender procedure [Cl. Ex. C1]. In the Skin Care Products case [S 96/1215], it was made clear that if the requirement was communicated, the only reason the seller is exempt from its duties is if the buyer did not rely on the seller s skill and judgment. According to this case, the buyer will be shown to not rely on such judgement if the seller has informed the buyer of any irregularities and the buyer disregards these instructions. The CLAIMANT in this matter has not provided any information regarding problems in ingredient sourcing at the time the goods were accepted by the buyer. In fact, they assured the very opposite [Cl. Ex. C8]. This means the RESPONDENT accepted the goods relying on the expertise and skill of the CLAIMANT. The burden of proof 31

41 therefore shifts to the CLAIMANT to show that the RESPONDENT did not rely on such judgement [Honnold 1999, p. 258]. 2) THE CLAIMANT IS OBLIGED TO ENSURE THAT ITS SUPPLIERS ARE COMPLIANT WITH THE RESPONDENT S GENERAL CONDITIONS 114. The CLAIMANT is contractually bound to adhere to the RESPONDENT s General Conditions. During the negotiation process RESPONDENT emphasized its intention to become a global Compact LEAD company by 2018 and their implementation of the Global Compact Principle no. 7 Sourcing goods and products from sustainable sources. The RESPONDENT has specifically indicated in their General Conditions that they have a zero-tolerance policy with regard to unethical business behavior. The CLAIMANT guaranteed that they would ensure that the ingredients sourced from their suppliers would comply to the RESPONDENT s Code of Conduct when they clearly stated that they would do everything possible to guarantee that the ingredients sourced from outside comply with our joint commitment to Global Compact Principles [CL. Ex C3]. This means the CLAIMANT s obligations cannot be merely fulfilled by their best efforts, but in contract, CLAIMANT was required to deliver specific results. The CLAIMANT was therefore compelled and bound to provide the RESPONDENT with goods that conformed to all specifications, and fulfilled the specific result [UNIDROIT Art (1)]. 3) THE CLAIMANT S CLAIM FOR DUE PAYMENT IS NOT JUSTIFIED 115. Therefore, payment for the remainder of the contract price would be justified only if the chocolate cakes were conforming to all requirements of the RESPONDENT. However, there is no conformity, and the CLAIMANT has not fulfilled their obligations in guaranteeing ethically sourced ingredients in the product. As such, payment is not justified as the goods create a risk of reputational damage to RESPONDENT. Further, if these goods were sold, the RESPONDENT would be 32

42 defrauding customers expecting sustainably produced goods. Thus, CLAIMANT is not entitled to payment for the non-conforming goods. 33

43 Prayer for Relief Based on the foregoing arguments and RESPONDENT s prior submissions, RESPONDENT respectfully requests the Tribunal find that, 1. The Arbitral Tribunal has jurisdiction to hear the challenge against Mr. Rodrigo Prasad; and 2. Mr. Rodrigo should not take part in the challenge against him and must be replaced by 3. RESPONDENT s General Conditions of Sale govern the contractual relationship between the parties. 4. CLAIMANT has not delivered conforming goods as per Article 35 of the CISG; and 5. CLAIMANT is not entitled to payment for the non-confirming goods or any requested damages; and Finally, the RESPONDENT respectfully requests the Tribunal to order the CLAIMANT to pay all costs incurred by the RESPONDENT. 34

44 CERTIFICATION This is to confirm that this memorial was the creation of the undersigned. Wimukthi Weragama Pujanee De Alwis Tabitha Abraham Nabeela Iqbal 35