Memorandum for Respondent. Qatar University College of Law

Transcription

1 Twenty Fourth Annual Willem C. Vis International Commercial Arbitration Moot Memorandum for Respondent Qatar University College of Law On Behalf Of: SantosD KG 77 Avenida O Rei Cafucopa Mediterraneo Respondent Against: Wright Ltd 232 Garrincha Street Oceanside Equatoriana Claimant Counsel: Bashayer Hassan Al Ahbabi Rana Mohamed Osman Al Bashir Metha Jaber Al Jaber Shaikha Khalid Al Kubaisi Najlaa Hamad Al Naimi Noora Al Naimi Dima Nawar Al Sayed Noor Ibrahim z m Mohd Doha, Qatar

2 TABLE OF CONTENTS TABLE OF CONTENTS... ii STATEMENT OF FACTS... 1 INTRODUCTION... 3 ARGUMENT... 5 ISSUE 1: THIS TRIBUNAL HAS THE POWER TO ORDER CLAIMANT TO PROVIDE SECURITY FOR RESPONDENT S COSTS UNDER: (1) THE CAM CCBC RULES; (2) DANUBIAN ARBITRATION LAW; AND (3) INTERNATIONAL ARBITRATION PRACTICE, AND IT SHOULD DO SO IN THIS CASE... 5 (A) Article 8.1 of the CAM CCBC arbitration rules gives this Tribunal authority to award security for costs as a provisional measure, which is justified in this case... 5 (B) Article 17 A of the Danubian arbitration law also gives this Tribunal authority to grant interim measures, which is appropriate in this case... 7 (C) International arbitration practice is consistent with requiring... 8 (1) Multiple arbitration centers demonstrate that international arbitration practice is consistent with requiring... 8 (2) The CIARB guidelines similarly support awards for security for costs... 9 CONCLUSION OF THE FIRST ISSUE ISSUE 2: CLAIMANT S REQUEST FOR ARBITRATION IS NOT ADMISSIBLE BECAUSE CLAIMANT FAILED TO INITIATE PROCEEDINGS WITHIN THE TIMEFRAME REQUIRED UNDER THE ARBITRATION AGREEMENT (A) CLAIMANT was required to initiate arbitration by 31 May 2106 because the 60 day time period in the DSA began after negotiations failed on 1 April (B) CLAIMANT s initial Request for Arbitration and supporting documents failed to satisfy the requirements for initiating arbitration under Art. 4 of the CAM CCBC rules (C) CLAIMANT successfully initiated arbitration on 7 June 2016, which was beyond the 60 day time period allowed in the DSA ii

3 (D) International practice supports the conclusion that an arbitration proceeding is initiated only when the application meets all requirements of the applicable rules CONCLUSION OF THE SECOND ISSUE ISSUE 3: UNDER CISG ARTS. 53 AND 54, CLAIMANT IS NOT ENTITLED TO AN ADDITIONAL PAYMENT OF USD 2,285,240 FOR THE FAN BLADES (A) RESPONDENT paid the full purchase price in the DSA as required under CISG Art (1) The parties intended the fixed exchange rate in the Addendum to apply to both the fan blades and the clamps (2) CLAIMANT is not entitled to an additional payment of USD 2,285,240 because the parties are bound by their previous practices and past dealings (B) Under CISG Art. 8 and UNIDROIT Principles Art. 4, a reasonable person in similar circumstances would have intended to apply the fixed exchange rate in the Addendum to the price of both the fan blades and the clamps (C) The contra proferentem rule does not apply in this case CONCLUSION OF THE THIRD ISSUE ISSUE 4: CLAIMANT IS NOT ENTITLED TO AN ADDITIONAL PAYMENT FROM RESPONDENT IN THE AMOUNT OF USD 102, FOR THE INSPECTION FEES DEDUCTED BY EQUITORIANA CENTRAL BANK (A) RESPONDENT satisfied its obligations under CISG Arts. 53 and 54 by paying the full purchase price to CLAIMANT (B) Section 4.3 of the DSA only requires RESPONDENT to pay bank charges, which does not include governmental regulations such as the money laundering investigation fee (C) RESPONDENT should not be held responsible for knowledge of ML/2010C under CISG Art. 54 because it is an extraordinary regulation that could not have been reasonably anticipated. 26 (D) Under both CISG Art. 8 and UNIDROIT Art. 4, the parties intended the term bank charges to only include transfer charges associated with depositing the full purchase price into CLAIMANT s bank account (1) Under CISG Art. 8.1 and UNIDROIT Art , CLAIMANT knew or could not have been unaware that RESPONDENT intended to only include charges directly associated with transfer of the full purchase price to CLAIMANT s account iii

4 (2) Under Art. 8.2 of CISG and UNIDROIT Art , a reasonable person in similar circumstances would have intended the language of the DSA to only include transfer charges associated with payment of the full purchase price to CLAIMANT s account CONCLUSION OF THE FOURTH ISSUE REQUEST FOR RELIEF CERTIFICATE... I INDEX OF ABBREVIATIONS... II INDEX OF AUTHORITIES... IV INDEX OF CASES... VIII LEGAL SOURCES AND MATERIALS... X iv

5 STATEMENT OF FACTS CLAIMANT RESPONDENT Wright Ltd. (hereafter CLAIMANT ) is a specialized manufacturer of fan blades for jet engines incorporated in Equatoriana. It is a subsidiary of Wright Holding Plc. SantosD KG (hereafter RESPONDENT ) is a medium sized manufacturer of jet engines incorporated in Mediterraneo CLAIMANT and RESPONDENT negotiated to jointly develop a new fan blade, TRF 192 I. The agreement was that CLAIMANT would develop the fan blade and RESPONDENT would buy 2,000 units. 1 August 2010 Parties signed the Development and Sales Agreement ( DSA ). No exchange rate was fixed. The exchange rate at the time the DSA was signed was USD 1 = EQT October 2010 A handwritten addendum for 2,000 clamps was added to the agreement. The price was to be determined on a cost basis and paid in USD. The price per fan blade was EQD 19,586. At the same time, the parties also established a fixed exchange rate of USD 1 = EQD 2.01 for the DSA. 14 January 2015 CLAIMANT delivered the fan blades and the clamps to RESPONDENT, and issued two invoices (USD 20,438,560 for the fan blades, USD 183, for the clamps). 15 January 2015 RESPONDENT s representative ed CLAIMANT s representative confirming that USD 20,438,560 and USD 183, had been transferred to CLAIMANT s account in the Equatoriana National Bank (for the fan blades and clamps, respectively). 15 January 2015 CLAIMANT responded that due to a mistake by CLAIMANT s accountant, an incorrect invoice had been issued for the fan blades, and requested payment of the outstanding amount of USD 2,387, January 2015 USD 20,336, was credited to CLAIMANT s account at Equatoriana National Bank. 9 February 2015 Ms. Beinhorn notified Mr. Lindbergh that CLAIMANT demanded the outstanding payment of USD 2,387, by 4 March

6 10 February 2015 RESPONDENT inquired as to why the full amount transferred had not been credited to CLAIMANT s account, and denied that any additional payment was due. 12 February 2015 After RESPONDENT s inquiry, CLAIMANT investigated and discovered that USD 102, had been deducted from RESPONDENT s transfer by another bank, Equitoriana Central Bank, as a money laundering investigation fee under Regulation ML/2014C. January 2016 CLAIMANT was ordered by a tribunal acting under CAM CCBC Rules to pay to one of its suppliers related to the DSA the sum of USD 2,500, April 2016 CLAIMANT notified RESPONDENT that it would take the necessary steps to initiate arbitration. 31 May 2016 CLAIMANT submitted a Request for Arbitration to CAM CCBC, pursuant to Section 21 of the Development and Sales Agreement. 1 June 2016 The CAM CCBC sent a Request for Completion notice to CLAIMANT to remedy defects in the initial application. 7 June 2016 CLAIMANT submitted the requested documents and payment to CAM CCBC. 8 June 2016 CAM CCBC issued the Notice for Commencement of Arbitration Proceeding to RESPONDENT. 24 June 2016 RESPONDENT submitted its Answer to Request for Arbitration. 22 August 2016 CAM CCBC issued the Terms of Reference. 6 September 2016 RESPONDENT submitted a Request for Security Costs to the CAM CCBC. 16 September 2016 CLAIMANT submitted its Answer to Request for Security Costs, objecting on the grounds that the request had been made after the Parties and the Tribunal had agreed on the Terms of Reference. 2

7 INTRODUCTION 1 CLAIMANT and RESPONDENT have enjoyed a long and profitable business relationship, first as subsidiaries of the same company and now as equals in the marketplace. However, CLAIMANT has jeopardized that relationship by asking RESPONDENT to pay more than was owed under their contract. CLAIMANT has used the wrong exchange rate to calculate the bulk of the payment due. Moreover, it now also expects RESPONDENT to pay additional, unexpected government fees the parties had never negotiated that were associated with transferring payment to CLAIMANT s account. 2 RESPONDENT has requested CLAIMANT provide security for its costs in the arbitration. An award for security for legal costs is appropriate under the CAM CCBC Rules, Danubian arbitration law, and international practice. As such, this Tribunal has the power to order CLAIMANT to provide security for RESPONDENT s costs, and it should do so. RESPONDENT has demonstrated irreparable harm that outweighs the harm that would be caused to CLAIMANT (Issue 1). 3 The present claim is also barred under the parties arbitration agreement. CLAIMANT failed to submit a timely Request for Arbitration within 60 days of the failure of negotiations. As such, CLAIMANT s request for arbitration is time barred under the Development and Sales Agreement (DSA). CLAIMANT s initial submission was insufficient to meet the requirements of the CAM CCBC Rules. By the time CLAIMANT remedied the defects and submitted a complete application, the time limitation in the DSA had expired. These conclusions are supported by international practice as evidenced in the rules of several respected international arbitration centers (Issue 2). 4 RESPONDENT is not obligated to provide any additional payment to CLAIMANT. The parties intended the fixed exchange rate referenced in the Addendum to the DSA to apply to both the clamps and the fan blades. CLAIMANT knew or could not have been unaware that RESPONDENT intended the fixed exchange rate to apply to the entire agreement. A reasonable person in similar circumstances would have drawn the same conclusion. As such, RESPONDENT has performed its obligations under the contract and paid the full purchase price in the DSA, as required under CISG Art. 53 (Issue 3). 3

8 5 Finally, CLAIMANT is not entitled to an additional payment from RESPONDENT in the amount of USD 102, for the inspection fees deducted by Equitoriana Central Bank because it is not a bank charge as contemplated under Section 4 of the DSA. Neither party was aware of the investigation fee obligations at the time Section 4 was negotiated and agreed to, and even though CLAIMANT learned of the obligations prior to signing the DSA, it chose not to reopen negotiations. Since CLAIMANT suggested the contract language, it was in the best position to clarify its intent. 6 The investigation fee required under ML/2010C is an extraordinary government regulation that RESPONDENT had no knowledge of and no reason to inquire about. Additionally, CLAIMANT s past practices with other engine manufacturers support the conclusion that CLAIMANT perceived the investigation fee to be the seller s responsibility, not the buyer s. As such, RESPONDENT has satisfied its obligations under CISG Arts. 53 and 54 and is not responsible for paying any additional amounts under the contract (Issue 4). 4

9 ARGUMENT ISSUE 1: THIS TRIBUNAL HAS THE POWER TO ORDER CLAIMANT TO PROVIDE SECURITY FOR RESPONDENT S COSTS UNDER: (1) THE CAM CCBC RULES; (2) DANUBIAN ARBITRATION LAW; AND (3) INTERNATIONAL ARBITRATION PRACTICE, AND IT SHOULD DO SO IN THIS CASE. (A) Article 8.1 of the CAM CCBC arbitration rules gives this Tribunal authority to award security for costs as a provisional measure, which is justified in this case. 7 Pursuant to Article 8.1 of the CAM CCBC, [u]nless the parties have otherwise agreed, the Arbitral Tribunal can grant provisional measures, both injunctive and anticipatory, that can, at the discretion of the Arbitral Tribunal, be subject to the provision of guarantees by the requesting party. 8 Provisional measures are intended to prevent irreparable harm to the parties of the arbitration. [Born, p. 2426]. A provisional measure is a remedy or a relief that is aimed at safeguarding the rights of parties to a dispute pending its final resolution. Its main purpose is to protect the rights of parties from damage during the duration of an adjudication. [Reichert v. Dresdner 1992, p. 95]. 9 In order to justify a provisional measure, the requesting party must demonstrate that: (1) it will suffer harm that cannot be repaired by an award of damages; (2) the likely harm substantially outweighs the harm likely to result to the party against whom the measure is granted; and (3) there is a reasonable possibility the requesting party will succeed on the merits of the claim. [UNCITRAL, Art. 17]. 10 In this case, the requirements for granting a provisional measure have been met. First, there would be irreparable harm to RESPONDENT. CLAIMANT has previously failed to comply with awards of damages, and has an outstanding arbitral award ordering it to pay USD 2,500,000 to 5

10 one of its suppliers. [Ex. R 6, p. 47]. RESPONDENT would likely suffer similar irreparable harm without an order for security for costs. 11 Second, the harm to RESPONDENT outweighs that of the potential harm to CLAIMANT. Based on its 2015 financial statements, CLAIMANT had a profit of USD 657,000 and has no significant liabilities. [P.O. No. 2, p. 59, 28]. Furthermore, CLAIMANT has and was able to obtain financing via a parent company loan for USD 3,000,000 for finalizing the production of the TRF 305 fan. [P.O. No. 2, p. 59, 29]. CLAIMANT is also confident that it is expecting an award in its favor of USD 100,000,000 for its ongoing arbitration, providing more evidence that CLAIMANT would not suffer harm in the case of an interim measure to secure RESPONDENT s costs. [P.O. No. 2, p. 60, 34]. This all supports the conclusion that CLAIMANT would not experience significant hardship by providing security for RESPONDENT s costs. 12 Third, as will be discussed is Issues 3 and 4 below, it is reasonable to assume that RESPONDENT will succeed in its case, which is the final element in justifying the provisional measure pursuant to UNCITRAL Art CLAIMANT argues that RESPONDENT s request for costs should not be accepted because it came after the Terms of Reference has been signed. However, this argument is without merit because RESPONDENT had no knowledge of CLAIMANT s financial circumstances when the parties drafted the Terms of Reference. [P.O. No. 2, p. 58, 27]. RESPONDENT only knew that the TRF-305 engine was being developed, and that it was to be completed in [P.O. No. 2, p. 58, 27]. 14 Therefore, this Tribunal should grant RESPONDENT s request for security for costs. This Tribunal has the authority to do so and it is appropriate under these circumstances. 6

11 (B) Article 17 A of the Danubian arbitration law also gives this Tribunal authority to grant interim measures, which is appropriate in this case. 15 Danubian arbitration law similarly supports the conclusion that this Tribunal has the authority to grant security for legal costs. Danubia has adopted the UNCITRAL Model Law with the 2006 amendment as its arbitration law. [P.O. No. 2, p. 61, 37]. 16 Article 17 A of the Danubian arbitration law states that the party requesting an interim measure must establish irreparable harm that would not be properly compensated by an award of damages. Furthermore, the harm must be greater than any harm the other party would suffer by granting the interim measure. 17 As stated in Subsection A above, the elements of establishing justification for issuing a provisional measure under UNCITRAL Art. 17 are: (1) the party requesting the measure will suffer harm that would not be reparable by an award of damages; (2) the harm without the provisional measure would outweigh any harm to the other party where such provisional measure is granted; and (3) there is a reasonable chance the requesting party will succeed in its claim. [UNCITRAL Art. 17]. 18 In this case, RESPONDENT will suffer harm that cannot be compensated by an award of damages for costs. [P.O. No. 2, p. 60, 34]. As discussed in Subsection A above, CLAIMANT has already failed to comply with a previous award against it in the amount of USD 2,500,000. [P.O. No. 2, p. 59, 29]. As such, there is a significant risk that an award in favor of RESPONDENT would receive a similar response. 19 Therefore, due to the likelihood of irreparable harm that would occur to RESPONDENT, this Tribunal should grant RESPONDENT s request for security for costs pursuant to Article 17 A of the Danubian arbitration law. 7

12 (C) International arbitration practice is consistent with requiring CLAIMANT to provide security for RESPONDENT s costs. 20 There is a growing consensus in the international arbitration community favoring awards of security for costs. Security for costs is more common for arbitrations in England or other common law jurisdictions. [Born, p. 2494]. This arises out of the existence of similar forms of relief in the courts of those jurisdictions. [Born, p. 2494]. However, the trend has spread to arbitration proceedings throughout the world. [Born, p. 2494]. Since awarding security for costs is consistent with international arbitration practice, this Tribunal should grant RESPONDENT s request. (1) Multiple arbitration centers demonstrate that international arbitration practice is consistent with requiring CLAIMANT to provide security for costs. 21 Multiple international arbitral bodies allow for interim measures that include security for costs. The Vienna International Arbitration Center (VIAC), the International Chamber of Commerce (ICC), the Qatar International Center for Conciliation and Arbitration (QICCA), and the International Centre for Dispute Resolution (ICDR) are all examples of arbitration centers amenable to ordering security for costs in appropriate circumstances. 22 Article 33 of VIAC Rules states that the arbitral tribunal may at the request of a party grant interim or conservatory measures against another party as well as amend, suspend or revoke any such measures and that the arbitral tribunal may require any party to provide appropriate security in connection with such a measure. This provides for granting of interim measures, and further allows the tribunal to require parties to provide adequate security. 23 Similarly, the ICC Rules of Arbitration state that the arbitral tribunal may, at the request of a party, order any interim or conservatory measure it deems appropriate. [ICC, Article 28]. This provision grants a tribunal wide discretion to issue interim measures, including security for costs. 8

13 24 Article 27 of the QICCA Rules also allows for interim measures. [QICCA Rules, Article 27.1]. The requesting party must establish that (i) irreparable harm would result without such interim measure; and (ii) that there is a reasonable possibility the requesting party would succeed on the merits. [QICCA Rules, Article 27.3]. Furthermore, Article 27 also states that the arbitral tribunal may require the party requesting an interim measure to provide appropriate security in connection with the measure, [QICCA Rules, Article 27.6], and that an interim measure may be placed to provide a means of preserving assets out of which a subsequent award may be satisfied. [QICCA Rules, Article 27.2(c)]. 25 Finally, ICDR Art. 24 provides the tribunal with broad discretion to issue interim measures. It states that at the request of any party, the arbitral tribunal may order or award any interim or conservatory measures it deems necessary, including injunctive relief and measures for the protection or conservation of property. Similar to the ICC Rules, the ICDR Rules grant tribunals substantial discretion to issue provisional measures, including security for costs. 26 RESPONDENT s request is consistent with international practice, as is demonstrated by the rules of multiple major arbitration centers. As such, the Tribunal should grant RESPONDENT s request for security for costs in accordance with international practice. (2) The CIARB guidelines similarly support awards for security for costs. 27 The Chartered Institute of Arbitrators ( CIARB ) is a well respected international arbitration association with more than 14,000 members from 100 countries. [CIARB, p. ii]. In 2015, it published an international arbitration practice guideline entitled Applications for Security for Costs. [CIARB, p. i]. These guidelines similarly provide that security for legal costs are appropriate under certain circumstances and in accordance with international practice. 28 Article 1 of the CIARB guidelines provides an equitable test for determining when awards of security for costs are appropriate. First, there must be an analysis of the prospects of success of the claim(s) and defenses. Second, the tribunal looks at the non-requesting party s ability to satisfy an adverse costs award as well as the availability of assets for enforcement. Third, the 9

14 tribunal considers whether it is fair in all of the circumstances to require one party to provide security for the other party s costs. [CIARB, Art. 1, p. 3]. 29 First, as will be demonstrated below in Issues 3 and 4, RESPONDENT has a reasonable likelihood of prevailing on the merits. Second, given CLAIMANT s prior behavior and current lack of liquidity there is a significant risk that CLAIMANT will be unwilling or unable to satisfy an adverse award. Third, it would be fair in this case due to the risk of harm to RESPONDENT. Given RESPONDENT s reasonable likelihood of prevailing on the merits and the risk of non payment by CLAIMANT, RESPONDENT satisfies the CIARB test. CONCLUSION OF THE FIRST ISSUE 30 This Tribunal should award security for costs for several reasons. An award for security for costs is appropriate under the CAM CCBC rules, Danubian arbitration law, and international practice. First, RESPONDENT will suffer irreparable damage that cannot be remedied by an award of damages. Second, any harm to CLAIMANT in applying such provisional measure is outweighed by the harm to RESPONDENT without such provisional measure. Finally, it is reasonable that RESPONDENT will win on the merits of the case. Therefore, this Tribunal has the authority to award RESPONDENT s request for security for costs and should do so. 10

15 ISSUE 2: CLAIMANT S REQUEST FOR ARBITRATION IS NOT ADMISSIBLE BECAUSE CLAIMANT FAILED TO INITIATE PROCEEDINGS WITHIN THE TIMEFRAME REQUIRED UNDER THE ARBITRATION AGREEMENT. (A) CLAIMANT was required to initiate arbitration by 31 May 2106 because the 60 day time period in the DSA began after negotiations failed on 1 April Under Section 21 of the DSA, either party has the right to initiate an arbitration proceeding within 60 days after the failure of the negotiation. Arbitration proceedings initiated after the 60 days have passed are time barred. 32 In this case, the failure of negotiations occurred on or before 1 April In Ms. Beinhorn s 1 April , she stated that CLAIMANT had instructed [its] lawyer to take the necessary steps to initiate arbitration proceedings. [Ex. R 3, p. 29]. As such, CLAIMANT s intent to initiate arbitration dates back at least to the date of the , and likely before. 33 Additionally, Ms. Beinhorn stated that the outcome of yesterday s meeting shows that it is presently not possible to find an amicable solution. [Ex. R 3, p. 29]. This supports the conclusion that the failure of negotiations actually occurred on 31 March Ms. Beinhorn concluded her by stating that from now on the costs incurred for our lawyer must be part of any settlement reached. [Ex. R 3, p. 29]. These statements all provide evidence that CLAIMANT decided to initiate arbitration on either 31 May 2016 or 1 April Although Ms. Beinhorn also stated in her that [s]hould you reconsider your view I am always at your disposal and we remain open for any meaningful negotiations, [Ex. R 3, p. 29], this does not negate the fact that a failure of the negotiations had been declared. Ms. Beinhorn s statement was at best a courtesy, and does not suggest CLAIMANT intended to re initiate negotiations in the future. 11

16 35 As will be demonstrated in Subsection C below, CLAIMANT successfully initiated arbitration on 7 June 2016, not 31 May As such, the request for arbitration is invalid because it violated the 60 day time limit specified in Section 21 of the DSA. (B) CLAIMANT s initial Request for Arbitration and supporting documents failed to satisfy the requirements for initiating arbitration under Art. 4 of the CAM CCBC rules. 36 Under DSA Section 21, the parties agreed to use the CAM CCBC arbitration rules in the present dispute. CAM CCBC Art. 4 outlines the requirements for a valid request for arbitration. CAM CCBC Art. 4.1 states that the requesting party must provide the following: (a) A document that contains the arbitration agreement, providing for choice of the CAM CCBC to administer the proceedings; (b) A power of attorney for any lawyers providing for adequate representation; (c) A summary statement of the matter that will be the subject of the arbitration; (d) The estimated amount in dispute; (e) The full name and details of the parties involved in the arbitration; and (f) A statement of the seat, language, law or rules of law applicable to the arbitration under the contract (emphasis added). 37 In this case, CLAIMANT failed to satisfy CAM CCBC Art. 4.1(b) because it submitted a power of attorney that did not actually authorize the attorney to represent CLAIMANT. [Request for Completion, p. 19]. Additionally, CLAIMANT failed to fulfill the requirements of CAM CCBC Art. 4.2 because it did not pay the required registration fee. As such, CLAIMANT did not successfully initiate arbitration on 1 May First, the power of attorney that was submitted by CLAIMANT was not sufficient to comply with CAM CCBC Art. 4.1(b) because it was signed by CLAIMANT s parent company (Wright Holding Plc), not CLAIMANT s company (Wright Ltd). [Request for Completion, p. 19]. 39 CLAIMANT alleges that the relationship between the two companies allows Wright Holding Plc to act on behalf of Wright Ltd. However, this argument is without merit. Although Wright Plc does own 88% of the shares in CLAIMANT s company, Wright Ltd is still an independent legal entity with its own management which also takes its own decisions. [P.O. No. 2, p. 54, 2]. As such, 12

17 Wright Holding Plc lacked the authority to initiate arbitration on behalf of CLAIMANT. Only CLAIMANT could authorize such action. 40 Second, CLAIMANT failed to fulfill the requirements of CAM CCBC Art. 4.2 because it did not pay the registration fee. The purpose of the registration fee is more than just monetary; it is required by the CAM CCBC in order to discourage frivolous claims. [CAM CCBC Commentary, Art. 4, p. 67]. CLAIMANT paid BL 400, not the BL 4,000 required under CAM CCBC Art As such, CLAIMANT s 31 May 2016 arbitration request was incomplete. CLAIMANT paid the full amount on 7 June Therefore, the arbitration was initiated on that date, when the CAM CCBC s request for additional materials was satisfied. 41 In conclusion, CLAIMANT failed to initiate arbitration on 31 May 2016 because it did not comply with the requirements of CAM CCBC Art. 4. First, the power of attorney was not sufficient to initiate the arbitration because it was signed by Wright Holding Plc, not by CLAIMANT. Second, CLAIMANT did not pay the registration fee. Therefore, CLAIMANT s initial request for arbitration was incomplete and not sufficient to initiate the arbitration proceedings. (C) CLAIMANT successfully initiated arbitration on 7 June 2016, which was beyond the 60 day time period allowed in the DSA. 42 Since the failure of the negotiations was declared on or before 1 April 2016, CLAIMANT did not initiate a valid Request for Arbitration within the 60 day time limitation specified in the arbitration clause. 43 The 1 June 2016 letter from the CAM CCBC President stated that the Request for Arbitration was received from CLAIMANT on 31 May [Request for Completion, p. 19]. However, the letter also stated that CLAIMANT did not satisfy the requirements of CAM CCBC Art. 4 for the reasons stated above in Subsection B. 13

18 44 As such, CLAIMANT s 31 May 2016 request failed to fully satisfy the requirements of CAM CCBC Art. 4. Although CLAIMANT did eventually satisfy the requirements of CAM CCBC Art. 4 on 7 June 2016, its claim was time barred by the 60 day time limitation set out in the contract. 45 In conclusion, CLAIMANT failed to submit a timely Request for Arbitration because it did not satisfy the requirements of CAM CCBC Art. 4 prior to the expiration of the 60 day time limitation. Therefore, the commencement of arbitration should be deemed to have occurred on 7 June 2016 when the requirements were fully satisfied, which is beyond the 60 days allowed under the contract. (D) International practice supports the conclusion that an arbitration proceeding is initiated only when the application meets all requirements of the applicable rules. 46 In addition to the CAM CCBC Rules, the present arbitration is to be governed in accordance with international arbitration practice. Section 21 of the DSA states that [t]he arbitration shall be conducted under the Rules of the Center for Arbitration and Mediation of the Chamber of Commerce Brazil Canada ( CAM CCBC ) and in line with international arbitration practice. [DSA, p. 11, 21 (emphasis added)]. 47 As discussed above in Subsection C, both the CAM CCBC rules and the subsequent conduct of the CAM CCBC President support the conclusion that the arbitration was initiated when CLAIMANT s request fully satisfied the requirements of Article 4. This interpretation is also consistent with international practice, and is supported by the rules of other well established arbitration centers such as the Dubai International Arbitration Center (DIAC) and the Singapore International Arbitration Centre (SIAC). 48 According to DIAC Art. 4 (Request for Arbitration), [i]n the event that the Claimant fails to comply with this requirement, the Request shall be deemed invalid. [DIAC Rules, Art. 4.4]. As such, an arbitration request shall be considered void when the applicant fails to satisfy the requirements set out in DIAC Art. 4, which is comprised of requirements similar to those of the CAM CCBC. 14

19 49 Similarly, under SIAC Art. 3.3, [t]he date of receipt of the complete Notice of Arbitration by the Registrar shall be deemed to be the date of commencement of the arbitration. For the avoidance of doubt, the Notice of Arbitration is deemed to be complete when all the requirements of Rule 3.1 and Rule 6.1(b) (if applicable) are fulfilled. [SIAC Rules, Art. 3.3]. As such, the date of receipt of the completed request for arbitration is the date of the commencement of arbitration. Any amendments or supplements constitute a new request that invalidates and replaces the initial application for arbitration. 50 In conclusion, the DSA explicitly states that dispute resolution shall be governed by international practice. The rules of respected international arbitration centers such as the DIAC and the SIAC support the same conclusion: that it is international practice to date the initiation of an arbitration from the date the request fully satisfies the requirements of the arbitral center. Subsequent supplements or amendments do not relate back to the date of the initial application. CONCLUSION OF THE SECOND ISSUE 51 In conclusion, CLAIMANT failed to submit a timely Request for Arbitration because its 31 May 2016 application was incomplete. As such, the commencement of arbitration should be deemed to have occurred on 7 June 2016 when the requirements were fully satisfied. Further, the DSA explicitly states that dispute resolution shall be governed by international practice. The rules of respected international arbitration centers such as the DIAC and the SIAC support the conclusion that it is international practice to date the initiation of an arbitration from the date the request fully satisfies the requirements of the arbitral center, and not the date the defective application was first submitted. 15

20 ISSUE 3: UNDER CISG ARTS. 53 AND 54, CLAIMANT IS NOT ENTITLED TO AN ADDITIONAL PAYMENT OF USD 2,285,240 FOR THE FAN BLADES. (A) RESPONDENT paid the full purchase price in the DSA as required under CISG Art Article 53 of the CISG states that [t]he buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention. As such, the primary obligations of the buyer arise from the contract as well as the law that rules the sale of goods. [Gabriel, p. 273]. Also, under Article 54, [t]he buyer s obligation to pay the price includes taking such steps and complying with such formalities as may be required under the contract or any laws and regulations to enable payment to be made. For example, if parties agreed on a contractual term fixing an exchange rate for the contract, the buyer has an obligation to calculate the purchase price on the basis of that term. [Schlechtriem, p. 81]. 53 In this case, the parties agreed to fix the rate of exchange for the entire agreement. The handwritten Addendum states that [1] [t]he Buyer may request the Seller to produce and deliver 2,000 clamps to attach the fan blades to the fan shaft. The Price for the clamps shall be on cost coverage base and be paid in US. // [2] Other terms as per main Agreement. // [3] The exchange rate for the agreement is fixed to USD 1 = EQD [Ex. C 2, p. 9, 21]. On the basis of the agreement and the received invoices, RESPONDENT satisfied its obligations to pay the full purchase price under the contract. [Ex. C 3, p. 12]. 54 CLAIMANT argues that the fixed exchange rate was intended only to cover the price of the clamps because it was included in the Addendum related to the order for the clamps. However, as will be discussed below, the parties intended the exchange rate clause in the Addendum to cover the entire agreement. In the alternative, it was reasonable for RESPONDENT to draw that conclusion based on the surrounding circumstances and the past practices between the parties. As such, RESPONDENT did pay the full price for the clamps and fan blades as required by the contract. 16

21 (1) The parties intended the fixed exchange rate in the Addendum to apply to both the fan blades and the clamps. 55 Unless otherwise specified, an amendment to a contract modifies the entire original agreement. The England and Wales Court of Appeal has held that: [p]arties [make] their own law by contracting, and can in principle un make or re make it. [World Online Telecom Ltd. v. I Way Ltd. 2002]. Such re making occurs when the parties agree to add an amendment to replace a part that is changed, such as the price for goods. [Stark, p ; Stim, para. 2]. 56 In this case, RESPONDENT suggested the Addendum language. [Ex. R. 2, p. 28]. The Addendum was intended to add two terms: first, an agreement related to the purchase of the clamps; and second, a fixed exchange rate that was intended to modify the entire agreement. [Ex. R. 2, p. 28]. 57 Looking at the actual Addendum language and structure, this intent is clear. The order of the provisions demonstrate that the exchange rate was not intended to relate only to the clamps. Notice that the first two sentences of the Addendum state the number of clamps requested as well as the cost basis. [Ex. C 2, 21]. Next, the second provision (third sentence) states that other terms related to the purchase of the clamps shall be consistent with the main agreement (the DSA prior to amendment). [Ex. C 2, 21]. These two provisions relate only to the clamps, and concludes the section relating only to the clamps. Finally, the third provision (fourth sentence) begins a new section, and fixes an exchange rate for the entire agreement. [Ex. C 2, 21]. 58 The first three sentences were intended to create an agreement relating only to the clamps. The agreement relating only to the clamps concludes after the third sentence. The final sentence (the fixed exchange rate provision) was intentionally included after the phrase other terms as per main Agreement because its purpose was to modify the entire DSA. If the parties had intended otherwise, the order of the last two sentences would have been reversed. 17

22 (2) CLAIMANT is not entitled to an additional payment of USD 2,285,240 because the parties are bound by their previous practices and past dealings. 59 Under CISG Article 9.1, [t]he parties are bound by any usage to which they have agreed and by any practices which they have established between themselves. In other words, under the CISG any previous practice between the parties is taken into consideration when determining the intent of the parties. [Honnold, p. 130]. The U.S. Federal District Court of New York has held that if parties want to discard their obligation to obey their previous practices, they should express such intentions in the contract. [Geneva Pharmaceuticals v. Barr Labs 2002]. 60 In this case, RESPONDENT and CLAIMANT were once subsidiaries of the same parent company. In their previous dealings, RESPONDENT and CLAIMANT had always chosen the exchange rate at the time of contract formation in order to favor RESPONDENT. [P.O. No. 2, p. 54, 5]. The parties never fixed a rate of exchange in the contract because it was unnecessary. [P.O. No. 2, p. 54, 5]. This practice arose out of the fact that they shared a parent company, who instructed the parties to choose terms more favorable to RESPONDENT in order to minimize overall tax liability. [P.O. No. 2, p. 54, 5]. 61 Additionally, at the time the DSA was negotiated both parties were aware that RESPONDENT was being prepared for sale. As part of this process, it was agreed that RESPONDENT would be de risked to make it more attractive to potential buyers. [Ex. R 1, p. 27]. One part of the process of de risking RESPONDENT was to fix exchange rates on contracts to which it was a party. [Ex. R 1, p. 27]. As such, RESPONDENT reasonably believed that this priority would similarly be reflected in its agreement with CLAIMANT. 62 At the time of the negotiation, CLAIMANT was aware that de risking RESPONDENT was a priority. The issue was discussed at the 9 November 2009 meeting, which was attended by the CEOs of both parties. [P.O. No. 2, p. 57, 18]. Ms. Beinhorn and Mr. Romerio were each informed of the outcome of this meeting on 10 November [P.O. No. 2, p. 57, 18]. 18

23 63 Significantly, RESPONDENT was never told that CLAIMANT was also going to be sold, at any time during the negotiation process. [P.O. No. 2, p. 54, 1]. RESPONDENT did not become aware of this fact until after the negotiations had concluded. [P.O. No. 2, p. 54, 1]. In fact, RESPONDENT did not learn of this significant development until it was informed that the signing date for the DSA was to be postponed. [P.O. No. 2, p. 54, 1]. 64 As will be discussed below in Subsection B, RESPONDENT reasonably believed that a fixed and favorable exchange rate would be applied under the DSA due to the filial relationship between the parties, as well as their practices in previous transactions. By adding the provision to fix the currency exchange rate in the Addendum, RESPONDENT was simply making explicit a term that had been implied in its previous dealings with CLAIMANT, something that was necessitated due to their changed circumstances. (B) Under CISG Art. 8 and UNIDROIT Principles Art. 4, a reasonable person in similar circumstances would have intended to apply the fixed exchange rate in the Addendum to the price of both the fan blades and the clamps. 65 CISG Art. 8.1 provides that [s]tatements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was. As such, CISG Art. 8.1 requires awareness of the other party s intent in determining whether there was a common intent. [Ferrari, p. 11]. 66 Similarly, UNIDROIT Art states [a] contract shall be interpreted according to the common intention of the parties. To the extent that the two instruments govern the same issues, the rules found in the UNIDROIT Principles are consistent with the provisions of the CISG. [Bonell, 2(a)]. 67 As discussed in above in Subsection A, the intent of the parties was to fix the exchange rate for the entire agreement. A reasonable person in similar circumstances would have come to the same conclusion. 19

24 68 CISG Art. 8.2 states that [s]tatements made by and other conduct of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances (emphasis added). Similarly, UNIDROIT Art states [i]f such an intention [common] cannot be established, the contract shall be interpreted according to the meaning that reasonable persons of the same kind as the parties would give to it in the same circumstances. 69 As such, regard shall be given to all surrounding circumstances laid out in CISG Art. 8.3 to identify the understanding of a reasonable person. [See CISG Art. 8.3; Schlechtriem/Butler, p. 57; Schmidt Kessel, p. 117, 12 ; CISG AC, Op. No. 3, 3.2]. All legally relevant statements or conduct with legal effect must be examined. [Schlechtriem/Butler, p. 56, 54]. 70 In this case, previous practices established between the parties suggest that the parties intended to apply the fixed exchange rate to the entire agreement. The parties had entered into contracts in 2003 and 2005 and performed in 2006 and 2008 respectively. [P.O. No. 2, p. 54, 5]. In both cases, parties did not discuss exchange rates during negotiations. [P.O. No. 2, p. 54, 5]. As stated in above in Subsection A, the contracts did not fix an exchange rate. However, the parties always chose to apply the exchange rate at the time of contract formation. [P.O. No. 2, p. 55, 5]. This is because their mutual parent company, Engineering International SA, always instructed the parties to adopt the exchange rate profitable for RESPONDENT for tax purposes. [P.O. No. 2, p. 55, 5]. 71 When the parties negotiated the DSA, they were both subsidiaries of Engineering International SA. [Ex. C 1, p. 8]. As a result, the two companies shared common interests. At the time of the negotiations, RESPONDENT was not aware of the fact that CLAIMANT was going to be sold. [P.O. No. 2, p. 54, 1]. RESPONDENT was only made aware of CLAIMANT s imminent sale after the date of signing the DSA was postponed for four days. [P.O. No. 2, p. 54, 1]. At that point, negotiations had concluded and the contract was ready to be signed. 72 As such, at the time the contract was negotiated, RESPONDENT had reasonably believed the parties would structure the current deal the same way it had structured their past deals. After 20

25 CLAIMANT was sold, RESPONDENT suggested fixing an exchange rate in the Addendum, in line with their past practices as well as the de risking strategy adopted by Engineering International SA in [Ex. R 1, p. 28]. 73 Because the relationship between the parties had changed and they no longer shared a parent company, RESPONDENT proposed a fixed exchange rate that applied to both the DSA and the Addendum. The additional clause did not functionally add a new term to the agreement; on the contrary, it merely made explicit what had implicitly been agreed to in their previous dealings and what had been assumed during negotiation of the DSA. A reasonable person in CLAIMANT s place would have known or could not have been unaware that RESPONDENT s expectations were grounded in the course of dealing exhibited in their previous agreements. 74 Moreover, as discussed above in Subsection A, the parties are bound by their previous practices. [CISG Art. 9.1]. Consequently, if the fixed exchange rate were to not apply, the exchange rate applicable should be the exchange rate at the time of the DSA was signed, which was USD 1 = EQD Both conclusions result in similar outcomes. 75 Furthermore, the invoices issued by CLAIMANT should be considered evidence of its intent, as well as evidence of how a reasonable person would interpret the Addendum language. At the time of delivery, CLAIMANT issued two separate invoices for the goods. [Request, p. 5, 9]. Both invoices detailed the method of price calculation, and used the fixed exchange rate for the fan blades as well as the clamps. [P.O. No. 2, p. 57, 19]. A reasonable person in RESPONDENT s position would have believed that CLAIMANT had intended to apply the fixed exchange rate to the price of the fans as well. Moreover, RESPONDENT s interpretation of the language of the Addendum was similarly apparent to CLAIMANT s employee who prepared the original invoices. [Ex. C 4, p. 13]. (C) The contra proferentem rule does not apply in this case. 76 The contra proferentem rule provides that if a statement drafted by a party was ambiguous, an interpretation against that party is preferred. [Schmidt Kessel, p. 133, 47]. It is considered a 21

26 last resort, and is appropriate only where an interpretation cannot be identified under CISG Art. 8. [Schmidt Kessel, p. 133, 47]. The policy behind contra proferentem is to protect the weaker party where the parties are in unequal bargaining positions. [Cserne, p. 12]. As such, it only applies where a contract or clause was unilaterally drafted or was non negotiable. [Lando/Beale, p. 293]. Contra proferentem does not apply if the contract was actively negotiated between the parties. [Cserne, p. 9]. 77 In this case, the contra proferentem rule does not apply. First, as discussed above in Subsection B, the reasonable intent of the parties can be successfully identified under CISG Art 8. Evidence of negotiations, previous practices and subsequent conduct exist to provide evidence of the parties intent and expectations, which is that the parties intended to apply the fixed exchange rate to the entire agreement. 78 Second, the Addendum was negotiated. It was a bilaterally reached agreement, and was not imposed by RESPONDENT. The that Mr. Paul Romario had sent to Ms. Beinhorn was a reiteration of what had been discussed in an earlier meeting. [Ex. R 2, p. 28]. 79 Finally, both parties are equally sophisticated in their knowledge and operate within the same industry. [Request, p. 3, 1 2]. In the present dispute, both parties had equal bargaining power. Neither party had the upper hand in negotiations, and neither party was forced to adhere to a term they did not consent to. The final version of the Addendum was added by RESPONDENT at CLAIMANT s request and with its approval. 80 In conclusion, the contra proferentem rule does not apply in this case. First, the intent of the parties can be successfully identified under CISG Art. 8. Second, the Addendum was negotiated between the parties. Finally, the parties were in equal bargaining positions. Thus, this Tribunal has no need to resort to the contra proferentem rule. 22

27 CONCLUSION OF THE THIRD ISSUE 81 In conclusion, RESPONDENT paid the full purchase price in the DSA as required under CISG Art. 53 because the parties intended the fixed exchange rate in the Addendum to apply to both the fan blades and the clamps. Also, under CISG Art. 8 and Art. 4 of the UNIDROIT principles, a reasonable person in similar circumstances would have intended to apply the fixed exchange rate in the Addendum to the price of both the fan blades and the clamps. As such, RESPONDENT is not liable for any extra payment according to the DSA. 23

28 ISSUE 4: CLAIMANT IS NOT ENTITLED TO AN ADDITIONAL PAYMENT FROM RESPONDENT IN THE AMOUNT OF USD 102, FOR THE INSPECTION FEES DEDUCTED BY EQUITORIANA CENTRAL BANK. (A) RESPONDENT satisfied its obligations under CISG Arts. 53 and 54 by paying the full purchase price to CLAIMANT. 82 Under CISG Art. 53, the buyer is responsible for paying the full amount specified in the contract. The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention. CISG Art. 53 specifies that the buyer must adhere to the terms of the contract as agreed between the parties during negotiations. [Butler, p. 2]. 83 RESPONDENT has satisfied its obligation under the DSA and CISG Art. 53 by paying the full amount as required in the contract. Equitoriana Central Bank (which is not CLAIMANT s bank) deducted USD 102, as a money laundering investigation fee. [Request, p. 6, 15; P.O. No. 2, p. 56, 11]. This is not a bank charge as contemplated under Section 4.3 of the DSA, but rather an extraordinary government levy. (B) Section 4.3 of the DSA only requires RESPONDENT to pay bank charges, which does not include governmental regulations such as the money laundering investigation fee. 84 Section 4.3 of the DSA states that the bank charges for the transfer of the amount are to be borne by the buyer. [Ex. C 2, p. 10, 4.3]. 85 A party may be held responsible for the formulation of a particular contract term, either because that party has drafted it or otherwise supplied it. [UNIDROIT Principles, Art. 4.6]. Although contract language is not necessarily dispositive under the CISG, it is compelling evidence of the drafting party s intent. 86 Section 4, including the provision on bank charges, was taken from the agreement between the Parties concerning the TRF 155 II contract executed on March [Ex. C 2, p. 10]. 24

29 RESPONDENT had drafted the provision in the previous contract. However, it was included in the DSA at CLAIMANT s suggestion. [P.O. No. 2, p. 55]. 87 Since CLAIMANT suggested the contract language of Section 4.3, it was in the best position to provide a clear and explicit provision that included the investigation fees. [P.O. No. 2, p. 55]. However, CLAIMANT itself was not aware of the existence of Regulation ML/2010C at the time of the negotiations, nor did it fully become aware of the requirements of the law until after Section 4 had already been negotiated and agreed to. 88 As such, the investigation fee was not contemplated as a bank charge by either party at the time the contract was negotiated. If CLAIMANT later intended to include the investigation fee as a bank charge under Section 4.3 of the DSA, it had a corresponding responsibility to communicate that intention to RESPONDENT, as it would have had a material effect on the negotiation. However, CLAIMANT did not discuss this intent with RESPONDENT at any point during the negotiations or prior to execution of the DSA. [P.O. No. 2, p. 55]. 89 RESPONDENT had no reason to be aware of bank regulation ML/2010C. [Ex. C 8, p. 17]. As such, the amount paid by RESPONDENT satisfied its obligations because CLAIMANT had not informed RESPONDENT of the inspection fee prior to signing the DSA. [Ex. C 6, p. 15]. 90 In conclusion, RESPONDENT is not obligated to pay the investigation fee under the DSA because it is not a bank charge. First, the laundering investigation fee was not levied by CLAIMANT s bank but another bank in Equitoriana functioning on behalf of the government. Second, the money laundering investigation fee is a government regulation that falls outside of the scope of the agreement in the DSA. Finally, CLAIMANT never mentioned the existence of the fee at any time prior to signing the DSA, even after it had learned of the obligation. As such, CLAIMANT should be held responsible for paying it, as it has on two other separate occasions that will be discussed in more detail below. 25