KUALA LUMPUR REGIONAL CENTRE FOR ARBITRATION BETWEEN THE VICTIMS AND THEIR FAMILIES (CLAIMANT) AND SPEAR SHIRTS INC. (RESPONDENT)

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1 THE 9 TH LAWASIA INTERNATIONAL MOOT COMPETITION KUALA LUMPUR REGIONAL CENTRE FOR ARBITRATION 2014 BETWEEN THE VICTIMS AND THEIR FAMILIES (CLAIMANT) AND SPEAR SHIRTS INC. (RESPONDENT) MEMORIAL FOR THE RESPONDENT 1

2 TABLE OF CONTENTS TABLE OF AUTHORITIES... 4 STATEMENT OF JURISDICTION... 7 QUESTIONS PRESENTED... 8 STATEMENT OF FACTS... 9 SUMMARY OF PLEADINGS PLEADINGS I. THE PROCEDURAL LAW OF THIS ARBITRATION IS THE LAW OF THE KINGDOM OF THAILAND A. The Parties have agreed on Thailand as the seat of arbitration B. In the alternative, Thailand is the appropriate seat of arbitration II. THE VICTIMS AND THEIR FAMILIES MAY NOT BE JOINED IN THE PRESENT ARBITRAL PROCEEDINGS A. The victims and their families are not Parties to the agreement as they are nonsignatories B. The Tribunal should not permit joinder as it would be prejudicial to the Respondents C. ICSTW may enter arbitration only on behalf of the 13 claimants III. THE TRIBUNAL MAY NOT INCORPORATE THE VICTIMS CLAIMS IN THE CURRENT PROCEEDING THROUGH A CLASS ARBITRATION A. Thai law does not provide for class action arbitration B. The Parties did not agree to a class arbitration IV. THE SUBSTANTIVE LAWS OF THE KINGDOM OF THAILAND APPLY TO THIS DISPUTE A. The tribunal should apply the conflict of laws rules of Thailand V. THE RESPONDENT IS NOT LIABLE FOR THE INJURIES AND DEATHS OF MAE SOT S EMPLOYEES AS IT IS NOT A JOINT ACTOR PURSUANT TO SECTION 432 OF THE TCCC A. The Respondent is not a principal of Mae Sot (1) The buyer-seller relationship between Mae Sot and the Respondent cannot be characterized as a principal-agent relationship (2) There was no contract in existence at the time of the offence B. Even if the Tribunal finds that a principal-agent relationship exists, Mae Sot remains solely liable for its negligence VI. THE TRIBUNAL SHOULD NOT GRANT THE CLAIMANTS THE FULL EXTENT OF DAMAGES FOR PECUNIARY AND NON-PECUNIARY LOSS, AND DOES NOT HAVE THE POWER TO AWARD PUNITIVE DAMAGES A. The Tribunal may not award lifetime damages for pecuniary loss if, at the time of the incident, the injured worker had a chance of recovery

3 B. The victims families may not claim for loss of care, comfort, and companionship C. The Tribunal should not allow the award of punitive damages to the victims and their families (1) Under Thai law, the doctrine of punitive damages does not apply to wrongful acts (2) The aim of the doctrine of punitive damages to punish is inconsistent with the compensatory principle of Thailand civil law PRAYER FOR RELIEF

4 TABLE OF AUTHORITIES Rules Act on Conflict of Laws, B.E Arbitration Act, B.E , 18, 19 Civil and Commercial Code... 21, 22, 25, 28 Federal Arbitration Act Kuala Lumpur Regional Centre for Arbitration Rules... 11, 12, 13, 19 Liability for Damages Arising from Unsafe Products Act,B.E Restatement (Second) of Torts Books and Authoritative Texts Bernard Hanotiau, Complex Arbitrations: Multiparty, Multicontract, Multi-Issue and Class Actions (Kluwer Law International 2006) Dicey, Morris and Collins, The Conflict of Laws (Sweet and Maxwell, 15 th Ed, Vol 1, 2012) Gary B. Born, International Arbitration: Cases and Materials (Kluwer Law International, 2011) Gary B. Born, International Arbitration: Law and Practice (Kluwer Law International, 2012) Gary B. Born, International Commercial Arbitration (Kluwer Law International, 2014, 2 nd Ed) Gary B. Born, International Commercial Arbitration, (Kluwer Law International, 2009)... 19, 20 Paijit Boonyapan, Explanation Civil and Commercial Code: Tort (Nitibunnakarn Publisher, Bangkok, 12 th Ed, 2005) Articles Alongkorn Tongmee, Legal Liability of Riot Leaders (Tilleke & Gibbins) (10 September 2010) Chukiert Ratanachaichan, A Primer On The Thai Draft Law On Class Action (ASEAN Law Association) (2001) Dominique T. Hascher, Consolidation of Arbitration by American Courts: Fostering or Hampering International Commercial Arbitration? Journal of International Arbitration (Kluwer Law International 1984, Volume 1 Issue 2)

5 Eric Rasmussen, Agency Law and Contract Formation 6 Am. L. & Econ. Rev. 382 (2004) Isara Lovanich, Personal Injury and Damages for Non-pecuniary Loss in the Law of Torts and Product Liability Law, [2013] Thailand Law Journal Fall Issue 1 Volume Omar Abel Morales Lurssen, Comparative Study on Agency, Thesis for the Master of Laws in International Trade Law, The University of Arizona, Russell J. Weintraub, Choice of Law for Quantification of Damages: A Judgment of the House of Lords Makes a Bad Rule Worse Sommanat Juaseekoon, Recent Developments of Legal System in Thailand, ASEAN Law Association 10 th General Assembly" (2009) Worrawong Atcharawongchai, The Non-Pecuniary Damages in Wrongful Acts Causing Bodily Harm and Death: The Comparative Study on U.S. and Thailand Laws (2013) Thailand Law Journal Spring Issue 1 Vol Arbitral Decisions Award in ICC Case No (1997) Banque Arab et Internationale d Investissement v Inter-Arab Investment Guarantee Corp, award of 17 November ICC Arbitral Award Case No of ICC Case No. 5505, Preliminary Award, Interim Award in ICC Case No National Court Decisions Stolt-Nielsen SA v AnimalFeeds International Corporation ( No ) 548 F. 3d Thailand Supreme Court Decision No. 1550/ Thailand Supreme Court Decision No. 292/ Thailand Supreme Court Decision No. 477/ Thailand Supreme Court Decision No. 789/ Thailand Supreme Court Decision No. 6303/ Thailand Supreme Court Decision No. 7611/ Other Authorities Chirachai Okanurak, Kanit Vallayapet, Wynn Pakdeejit & Manu Rakwattanakul, Dispute Resolution Around The World: Thailand (Baker & Mckenzie) (2011)

6 Herbert Smith Freehills LLP, Hong Kong, Class Action Reform in Asia (2007) UNCITRAL Notes on Organizing Arbitral Proceedings, U.N. Doc. V , U.N. Sales No. E.97.V.11 (1996)

7 STATEMENT OF JURISDICTION The victims and their families ( Claimants ) and Spear Shirts Inc. ( Respondent ) have agreed to submit the present dispute to arbitration in accordance with the Kuala Lumpur Regional Centre for Arbitration Rules ( KLRCA Rules ). 7

8 QUESTIONS PRESENTED 1. Whether the parties agreed on a seat of arbitration. 2. Whether a large number of claimants can be joined in a single arbitration: a. whether the victims and their families are parties to the arbitration agreement. 3. Whether a large number of claimants can be incorporated in the present proceedings through a class action arbitration. 4. Whether the dispute is to be governed by the substantive laws of the Kingdom of Thailand: a. whether the Tribunal should apply the conflict of laws rules of Thailand. 5. Whether the Respondent is liable for the injuries and deaths of Mae Sot s employees: a. whether the Respondent and Mae Sot were joint actors pursuant to Section 432 of the Thai Civil and Commercial Code; and b. whether the Respondent is Mae Sot s principal. 6. Whether the victims and their families may recover specific forms of monetary damages: a. whether damages for pecuniary loss is recoverable; b. whether damages for non-pecuniary loss is recoverable; and c. whether punitive damages are recoverable. 8

9 STATEMENT OF FACTS 1. The victims and their families ( the Claimants ) are the employees, or the family of employees, of Mae Sot Clothing Ltd, the largest of the more than 100 clothing factories in and around Mae Sot, a town in Thailand. Mae Sot produced clothes for a number of world famous clothing companies. 2. The Respondent is Spear Shirts Inc., a well-known clothing wholesaler and retailer based in Los Angeles, California. Mae Sot Clothing Ltd was one of the Respondent s suppliers and had been dealing with the Respondent for about 10 years. The Respondent s relationship with Mae Sot Clothing Ltd is governed by a series of Standard Purchase Orders, used by the Respondent for all of its suppliers. Such orders are usually filled within 60 days of receipt. The most recent Standard Purchase Order was sent by fax from the Respondents to Mae Sot Clothing Ltd on 1 April, On 15 October 2013, a fire broke out at the Mae Sot factory. Fifty employees lost their lives in the fire, while a hundred more were injured. The Parties have accepted an independent auditor s determination that the condition of the factory at the relevant time was the major factor behind the many injuries and deaths. 4. Several months before the fire, Theodore Snowden, an assistant to Joe Baydon, Vice President in charge of purchasing at Spear Shirts, made an informal trip to the Mae Sot factory while on vacation. Mr Snowden made several off-hand observations pertaining to the condition of the factory, including remarks about its cluttered state and the youthful appearances of some of the workers. He also conveyed Mae Sot Clothing Ltd s GM s assurance that the women were all above the legal age. These are documented in a text message to Mr Baydon. 5. Having determined that Mae Sot Clothing Ltd is impecunious, the Claimants now assert that the Respondent, as a mere customer of Mae Sot, is in some way responsible for the 9

10 grievous hurt suffered by the victims of the fire. However, there exists no contractual relationship between the Claimants and the Respondent. Additionally, at the time of the fire, there was no contract in existence between Mae Sot and the Respondent. Taking into account the usual time of 45 to 60 days taken to fulfill an order, and the fact that the last order was placed on 1 April 2013, the contractual relationship between Mae Sot Clothing Ltd and the Respondent had already come to an end by the time the fire occurred on 15 October Further, Mae Sot Clothing Ltd was making shirts for at least five companies at the time of the fire. 6. The Parties have agreed to submit the dispute to binding arbitration in Bangkok in accordance with the KLRCA Arbitration Rules under the supervision of the Thai Arbitration Institute. 10

11 SUMMARY OF PLEADINGS A. The procedural law of this arbitration is law of the Kingdom of Thailand The procedural law governing this arbitration is the law of the Kingdom of Thailand ( Thai procedural law ). The Parties, in choosing the venue of the arbitration to be Thailand, have agreed on Thailand as the seat of arbitration. This dispute is arbitrable under Thai procedural law and gives effect to Parties intention. Even if the Tribunal does not find that the Parties so agreed, Thailand is nevertheless the appropriate seat of arbitration. As the procedural law governing an arbitration follows the seat of arbitration, Thai procedural law applies. B. The Tribunal may not allow joinder of the victims and their families to the arbitration The Tribunal may not permit joinder as the victims and their families are nonsignatories to the arbitration agreement and accordingly, are not Parties to it. The Tribunal should not permit joinder as it would be prejudicial to the Respondent. It follows that the International Collective in Support of Textile Workers ( ICSTW ) may only enter arbitration proceedings on behalf of the 13 claimants. C. The Tribunal may not incorporate the claims of the victims and their families through a class action arbitration The Tribunal may not allow the 13 claimants to pursue class arbitration to claim on behalf of all the victims and their families. This is because Thai law does not provide for class arbitration. Further, the Tribunal may not permit class arbitration as the Parties did not agree to one. D. The substantive laws of the Kingdom of Thailand apply to this dispute 11

12 The Tribunal may apply the conflict of laws rules it deems appropriate to determine the law applicable to the dispute. The Tribunal should apply the conflict of laws rules of Thailand, the arbitral seat, as this is internationally accepted practice. Thailand is also the country most closely connected with the dispute. The application of Thai conflict of laws rules determines that Thai substantive law governs this dispute. E. The Respondent is not liable for the injuries and deaths of Mae Sot s employees The Respondent is not a joint actor in Mae Sot s wrongful act pursuant to Section 432 of the Thai Civil and Commercial Code B.E ( the TCCC ). The Respondent has no duty to take action to remedy the conditions of the factory as it is not a principal of Mae Sot. Even if the Tribunal finds that a principal-agent relationship exists between the Respondent and Mae Sot, Mae Sot remains solely liable pursuant to Section 812 of the TCCC. F. The Tribunal should not grant the Claimants the full extent of damages for pecuniary and non-pecuniary loss, and may not award punitive damages The Tribunal should not grant lifetime damages for loss of income where claimants have a chance of recovery. Under Thai law, the Tribunal may not award damages for loss of care, comfort, or companionship to the victims families. The Tribunal also may not award punitive damages. 12

13 PLEADINGS I. THE PROCEDURAL LAW OF THIS ARBITRATION IS THE LAW OF THE KINGDOM OF THAILAND 1. The procedural law that governs arbitration proceedings is the law of the seat of arbitration. The Respondent and the victims and their families (each a Party and collectively, the Parties ) have agreed on Thailand as the seat of arbitration (A). Even if this tribunal ( the Tribunal ) does not find that the Parties so agreed, Thailand is nevertheless the appropriate seat of arbitration (B). A. The Parties have agreed on Thailand as the seat of arbitration 2. Rule 6(1) of the Kuala Lumpur Regional Centre for Arbitration Rules ( the KLRCA Rules ) states that parties may agree on the seat of arbitration. Failing such agreement, the seat shall be Kuala Lumpur, Malaysia, unless the tribunal determines that another seat is appropriate. 3. It is trite that where the parties specify a location for arbitration in their arbitration agreement, that location is taken to be the seat of arbitration. In ICC Case No of 1987, 1 the arbitration agreement between the parties stated that [t]he arbitration will take place in Switzerland, the law applicable is that known in England. The tribunal found that [t]he choice of Switzerland as the place of arbitration implied in any case the application of the Swiss mandatory provisions. 4. In the present case, the Parties have agreed to submit this dispute to binding arbitration in Bangkok. 2 Following ICC Case No of 1987, the location specified in the Parties arbitration Bangkok, Thailand is taken to be the seat of arbitration. 1 ICC Case No. 5505, Preliminary Award, 1987, 13 Y.B. Com.Arb Clarifications to Moot Problem ( Clarifications ) The Arbitration, C-1. 13

14 5. Accordingly, the choice of Bangkok as the seat of arbitration implies the application of the procedural law of the Kingdom of Thailand ( Thai procedural law ). B. In the alternative, Thailand is the appropriate seat of arbitration 6. Thailand is the Parties chosen lex arbitri and the most appropriate seat of arbitration. 7. Neither the Thai Arbitration Act, B.E ( the Thai Arbitration Act ) nor the KLRCA Rules provide guidance on determining the appropriate seat of arbitration. However, the internationally accepted 3 UNCITRAL Notes on Organizing Arbitral Proceedings ( the Notes ) 4 lay out the following relevant considerations: (a) the convenience of the parties and the arbitrators, including the travel distances; and (b) the location of the subject-matter in dispute and any relevant evidence. 8. These two factors point towards Thailand as the appropriate seat of arbitration. 9. First, the victims and their families are located in Thailand and in neighbouring Myanmar. 5 It follows that Thailand is the most convenient location considering the number of claimants to the present arbitration. Proceedings conducted outside Thailand would be cost-prohibitive to the Parties, and could bear heavily on the smooth progress of the arbitration. 6 3 Gary B. Born, International Commercial Arbitration (Kluwer Law International, 2014, 2 nd Ed) at p UNCITRAL Notes on Organizing Arbitral Proceedings, U.N. Doc. V , U.N. Sales No. E.97.V.11 (1996). 5 Moot Problem, para 1. 6 Gary B. Born, International Arbitration: Cases and Materials (Kluwer Law International, 2011) at Chapter 7: Selection of Arbitral Seat in International Arbitration at p

15 10. Second, the subject-matter of the dispute, the Mae Sot factory, is located in Thailand. 7 The overwhelming majority of witnesses and most of the evidence will be located in Thailand. 11. Thus, Thailand is the appropriate seat of arbitration. Accordingly, Thai procedural law applies to the present dispute. II. THE VICTIMS AND THEIR FAMILIES MAY NOT BE JOINED IN THE PRESENT ARBITRAL PROCEEDINGS 12. The Tribunal may not permit joinder of all the victims and their families to the present arbitration. Joinder may not be allowed because the victims and their families are not Parties to the arbitration agreement as they are non-signatories (A). The International Collective in Support of Textile Workers ( ICSTW ) may only enter arbitration proceedings on behalf of the 13 claimants (B). A. The victims and their families are not Parties to the agreement as they are nonsignatories 13. Joinder is provided for in Article 17(5) of the UNCITRAL Rules of Arbitration, which is included in Part II of the KLRCA Rules. Article 17(5) states: The arbitral tribunal may, at the request of any party, allow one or more third persons to be joined in the arbitration as a party provided such person is a party to the arbitration agreement unless the arbitral tribunal finds that joinder should not be permitted because of prejudice to any of those parties. [emphasis added] 14. In an Ad Hoc (UNCITRAL) Award of 17 November 1994, 8 the arbitral tribunal pointed out that arbitration is consensual and that only those who are parties to the arbitration 7 Moot Problem, para 1. 15

16 agreement expressed in writing may appear in the arbitral proceedings. The arbitral tribunal concluded that parties who did not sign the arbitration agreement either directly or through a written power of attorney entitling a signatory to sign the arbitration agreement on their behalf could not participate in the arbitration. This is consistent with Section 11 of the Thai Arbitration Act, which states that the arbitration agreement must be in writing, and signed by the parties. 15. In the present case, the victims and their families that the ICSTW now seek to join to the present proceedings have not signed the arbitration agreement. Accordingly, they are precluded from participating in the arbitration. 16. Further, the Respondent has not consented to arbitration with this indeterminate and unstipulated number of claimants. The Tribunal should not subvert the concept of arbitration a consensual means of finally resolving a dispute by allowing these victims and families to be joined in the present proceedings. B. The Tribunal should not permit joinder as it would be prejudicial to the Respondents 17. Article 17(5) of the UNCITRAL Rules states that the Tribunal should not permit joinder where it finds that it would be prejudicial to one of the parties. Joinder would be prejudicial to the Respondent. 18. Firstly, joinder in the present case would essentially mean that an indeterminate number of claimants would be joined as party to the proceedings. As established above, the Respondent did not, and could not have, agreed to arbitrate with an indeterminate number of claimants. Secondly, joinder would also invariably increase the 8 Banque Arab et Internationale d Investissement v Inter-Arab Investment Guarantee Corp, award of 17 November 1994, 21 Y.B. Com. Arb. 13 (1996). 16

17 Respondent s legal cost due to invariably extended and complicated arbitral proceedings Thirdly, if joinder were permitted the Respondent would be faced with an indeterminate and possibly massive liability. It could not have contemplated the scope of this liability when it entered into the arbitration agreement with ICSTW as ICSTW did not specify that it was acting on behalf of all the victims and their families. 20. In conclusion, the Tribunal should not permit joinder as it would be prejudicial to the Respondents. C. ICSTW may enter arbitration only on behalf of the 13 claimants 21. Non-signatories have been found to be parties to an arbitration agreement where such arbitration agreement was signed by their agent. 10 ICSTW is acting as an agent for the 13 claimants who signed a statement giving it full authority to represent them ( the 13 claimants ). 22. Section 797 of the Thai Civil and Commercial Code ( the TCCC ) defines agency as a contract whereby a person, called the agent, has authority to act for another person, called the principal, and agrees so to act. 23. Section 798 of the TCCC stipulates that where any agreement is required to be evidenced by writing, the appointment of an agent for entering such an agreement must also be evidenced by writing. Section 11 of the Thai Arbitration Act requires arbitration agreements to be in writing. However, Section 801 of the TCCC states that an agent who has general authority may not enter arbitration proceedings on behalf of his 9 Dominique T. Hascher, Consolidation of Arbitration by American Courts: Fostering or Hampering International Commercial Arbitration? Journal of International Arbitration (Kluwer Law International 1984, Volume 1 Issue 2) at p Bernard Hanotiau, Complex Arbitrations: Multiparty, Multicontract, Multi-Issue and Class Actions (Kluwer Law International 2006) at Chapter I: Who are the Parties to the Contract(s) or to the Arbitration Clause(s) Contained Therein? The Theories Applied by Courts and Arbitral Tribunals at p

18 principal. A person who wishes to enter proceedings on another person s behalf would require special authority under Section 800 of the TCCC. Special authority requires a power of attorney signed by the principal and notarized, authorizing the agent to act on his behalf On the facts, only the 13 claimants had signed a statement (under oath) giving [ICSTW] full authority to represent [them] in their dispute with [the Respondent]. 12 The Respondent agreed to submit this dispute to arbitration with ICSTW on the premise that it had been vested the authority to enter into arbitration proceedings by these 13 claimants. This gives the Respondent assurance that the claimants have locus standi in the arbitration. 25. Where the identities of the victims and their families who now wish to be incorporated in the present proceedings are not revealed, as in this case, the Respondent cannot test the veracity of their claims. The Respondent thus relies on ICSTW to properly vet these alleged claims. This ensures that only proper claimants with locus standi are joined to the arbitration. 26. Thus, ICSTW may not enter proceedings on behalf of the 13 claimants, but not the indeterminate and unidentified number of victims and their families. III. THE TRIBUNAL MAY NOT INCORPORATE THE VICTIMS CLAIMS IN THE CURRENT PROCEEDING THROUGH A CLASS ARBITRATION 27. The 13 claimants may not pursue a class arbitration to claim on the behalf of all the victims and their families. This is because Thai law does not provide for any form of class arbitration (A). Additionally, the Tribunal may not permit class arbitration as the Parties did not agree to one (B). 11 Chirachai Okanurak, Kanit Vallayapet, Wynn Pakdeejit & Manu Rakwattanakul, Dispute Resolution Around The World: Thailand (Baker & Mckenzie) (2011) at p Further Clarifications, D-1. 18

19 A. Thai law does not provide for class action arbitration 28. Class action arbitrations are not allowed under Thai law. In 2001, a class action bill was drafted by the Committee for Revision of the Civil Procedure Code. 13 In 2004, the Council of Ministers of Thailand approved in principle a draft legislation on class action lawsuits later on, but to date, legislative reform has yet to come into force. 14. There are currently no specific class action provisions existing in Thai law, and thus, class actions are not recognized As Thailand is a civil law jurisdiction, statutory law is the only legitimate source of power for legal proceedings. 16 As this Tribunal is bound to follow Thai procedural law, it does not have the power to permit class arbitration. B. The Parties did not agree to a class arbitration 30. The power of an arbitral tribunal derives from the agreement of the parties to submit a particular dispute to arbitration. 17 The jurisdiction of the Tribunal is thus confined to the boundaries set by the Parties. The arbitration agreement does not expressly provide for class arbitration and the terms of the arbitration agreement do not suggest that the Parties intended for one to be conducted. 31. The present case mirrors the US Supreme Court decision of Stolt-Nielsen SA v. AnimalFeeds ( Stolt-Nielsen ). 18 Stolt-Nielsen involved an application for a certiorari of an arbitral award allowing class arbitration where the arbitration agreement was 13 Chukiert Ratanachaichan, A Primer On The Thai Draft Law On Class Action (ASEAN Law Association) (2001). 14 Ibid. 15 Herbert Smith Freehills LLP, Hong Kong, Class Action Reform in Asia (2007). 16 Sommanat Juaseekoon, Recent Developments of Legal System in Thailand, ASEAN Law Association 10 th General Assembly" (2009). 17 Gary B. Born, International Arbitration: Law and Practice (Kluwer Law International, 2012) at Chapter 1: Introduction to International Arbitration at pp Stolt-Nielsen SA v AnimalFeeds International Corporation (No ) 548 F. 3d

20 silent on the issue of class arbitration. The Supreme Court found that the arbitral tribunal s decision to allow class arbitration despite the lack of an express provision went against the consensual nature of arbitration as stated under the American Federal Arbitration Act. 19 The tribunal could not, from the words of the arbitration agreement alone, imply consent to class arbitration. 32. The argument in Stolt-Nielsen applies to the present case. Section 34 of the Thai Arbitration Act similarly preserves the consensual nature of arbitration, and states that the tribunal must decide the dispute in accordance with the terms of the contract Here, the Parties arbitration agreement here is silent as to whether class arbitration is allowed. In the absence of such agreement, following Stolt-Nielsen, the Tribunal may not incorporate the victims and their families in the present proceedings though a class action arbitration. IV. THE SUBSTANTIVE LAWS OF THE KINGDOM OF THAILAND APPLY TO THIS DISPUTE 34. The laws of the Kingdom of Thailand ( Thai substantive law ) apply to this dispute. Article 35 of the KLRCA Rules state that, in the absence of Parties agreement, the tribunal must use conflict of laws rules to determine the applicable substantive law. 35. The Tribunal should apply the conflict of laws rules of Thailand, the arbitral seat, to determine the substantive law applicable in the present case (A). Thai conflict of laws rules determine that Thai substantive law governs this dispute (B). 19 Federal Arbitration Act, 9 U.S.C ( FAA ), [A] party may not be compelled to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so. 20 Arbitration Act B.E (2002) (Thailand) ( TAA ), Section 34, para 4. 20

21 A. The tribunal should apply the conflict of laws rules of Thailand 36. Article 35 of the KLRCA Rules states that where Parties have not expressed their choice of substantive law, the arbitral tribunal shall apply the law it determines to be appropriate. Section 34 of the Thai Arbitration Act further specifies that where parties fail to designate the substantive law, the arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers applicable. 21 This invites a preliminary step in the choice of law process wherein the tribunal must first determine the applicable conflicts of laws rules, before applying those rules to determine the applicable substantive law. 22 In the present case, the conflict of law rules of Thailand, the arbitral seat, should be applied. This is because, in the absence of more, the Parties choice of arbitral seat may reasonably imply the intention to apply the seat s conflict of law rules Here, the parties have expressly chosen Thailand as the arbitral seat in their arbitration agreement. 24 Accordingly, the Tribunal should apply the Thai conflict of laws rules. (1) The close connection test supports the application of Thai conflict of laws rules 38. Professor Gary Born proposes the close connection test to determine the applicable conflicts of laws rule. 25 This test has been adopted by arbitral tribunals internationally In ICC Arbitral Award Case No of 1995, the arbitration, though seated in Switzerland, concerned a dispute arising from an agreement to open a plant in Syria. 21 Id, at Section Dicey, Morris and Collins, The Conflict of Laws (Sweet and Maxwell, 15 th Ed, Vol 1, 2012) at p Gary B. Born, International Commercial Arbitration (Kluwer Law International, 2009) at p See also Award in ICC Case No (1997). 24 Clarifications, C Gary B. Born, International Commercial Arbitration (Kluwer Law International, 2009) ( International Commercial Arbitration ) at p Interim Award in ICC Case No. 6149, XX Y.B Comm.Arb. 41 (1995). 21

22 The tribunal then concluded that Syrian conflict of laws rules applied to determine the law applicable to the dispute, as Syria was the country most closely connected to the dispute. This method is consistent with international practice, and the Tribunal should adopt this approach. 40. In the present case, Thailand is the jurisdiction that is most closely connected with the dispute. The subject matter of the dispute, the Mae Sot factory fire, and any relevant evidence is located in Thailand. The victims and their families are located in Thailand. Accordingly, the Tribunal should apply the Thai conflict of laws rules. B. Thai conflict of laws rules determine that Thai substantive law governs the dispute 41. Section 15 of the Thai Act on Conflict of Laws, B.E ( the Thai Conflict of Laws Act ) states that an obligation arising from a wrongful act committed by a person is governed by the law of the place where the essential elements constituting the wrongful act were committed A wrongful act is defined in Section 420 of the TCCC, which states that a person who, wilfully or negligently, unlawfully injures the life, body, health, liberty, property or any right of another person, is said to commit a wrongful act and is bound to make compensation therefore. 28 It is common ground that the negligent or possibly grossly negligent 29 manner in which the Mae Sot factory was operated was a major factor that caused or contributed to the injuries and fatalities caused by the fire. 30 This 27 Conflict of Laws Act B.E (1938) (Thailand), Section Thailand Civil and Commercial Code ( TCCC ), Section Moot Problem, p Moot Problem, para 5(1). 22

23 establishes the elements of negligence, causation, and damage in Section 420 of the TCCC Hence, the application of Thai conflict of laws rules determines that Thai substantive law governs this dispute. V. THE RESPONDENT IS NOT LIABLE FOR THE INJURIES AND DEATHS OF MAE SOT S EMPLOYEES AS IT IS NOT A JOINT ACTOR PURSUANT TO SECTION 432 OF THE TCCC 44. Section 420 of the TCCC states that a person who, wilfully or negligently, unlawfully injures the life, body, health, liberty, property or any right of another person, is said to commit a wrongful act and is bound to make compensation therefore Section 432 of the TCCC states that persons who jointly commit a wrongful act are jointly bound to make compensation for any damage caused. Persons who instigate or assist in a wrongful act are deemed to be joint actors. Assistance comprises actions or omissions The 13 claimants may allege that the Respondent is a joint actor in Mae Sot s wrongful act by virtue of its omission to act despite knowledge of the negligent manner in which the Mae Sot factory was run. However, whether the Respondent owes Mae Sot a duty to act depends on the relationship existing between them. 47. The Respondent has no duty to take action as it is not a principal of Mae Sot (A). Even if the Tribunal finds that a principal-agent relationship exists, Mae Sot remains solely liable pursuant to Section 812 of the TCCC (B). 31 Worrawong Atcharawongchai, The Non-Pecuniary Damages in Wrongful Acts Causing Bodily Harm and Death: The Comparative Study on U.S. and Thailand Laws (2013) Thailand Law Journal Spring Issue 1 Vol TCCC, Section Alongkorn Tongmee, Legal Liability of Riot Leaders (Tilleke & Gibbins) (10 September 2010). 23

24 A. The Respondent is not a principal of Mae Sot 48. Section 425 of the TCCC states that an employer is jointly liable with his employee for the consequences of a wrongful act committed by such an employee in the course of his employment. 34 Section 427 states that Section 425 shall apply mutatis mutandis to principal and agent. Read together, these sections establish joint liability on a principal for the consequences of a wrongful act committed by his agent acting within his authority However, the relationship between Mae Sot and the Respondent is not one of agency. The buyer-seller relationship between Mae Sot and the Respondent cannot be characterized as a principal-agent relationship (1). A prerequisite of agency under Section 797 is a contractual relationship, which did not exist at the time of the offence (2). (1) The buyer-seller relationship between Mae Sot and the Respondent cannot be characterized as a principal-agent relationship 50. Section 797 of the TCCC specifies that agency is a contract whereby a person, called the agent, has authority to act for another person, called the principal, and agrees so to act. 36 Consent of both the agent and the principal is thus a key element of an agency relationship under Thai law. 51. Further, a basic feature of an agency relationship is the control that the principal has over the agent s actions. 37 There is neither consent nor control in the present case. 34 TCCC, Section TCCC, Title V, Chapter I, Sections 425 and TCCC, Sections Eric Rasmussen, Agency Law and Contract Formation 6 Am. L. & Econ. Rev. 382 (2004). 24

25 (a) Neither Mae Sot nor the Respondent had consented to an agency relationship 52. As established above, consent of the parties is a key element in establishing an agency relationship. Neither Mae Sot nor the Respondent had consented to anything more than a buyer-seller relationship. 53. The Standard Purchase Order refers to the Respondents as Buyer, and Mae Sot as the Seller. 38 This is indicative of the relationship between the Parties. Mae Sot and the Respondent entered into this contract as independent contracting parties, and there are no provisions in the Standard Purchase Order that render either party the agent or legal representative of the other for any purpose whatsoever. Additionally, the contract does not grant either party any authority to assume or to create any obligation on behalf of or in the name of the other. 54. These factors indicate that the parties had fully intended for the relationship to be of buyer and seller. They did not consent to any form of agency relationship. (b) The Respondent had no control over Mae Sot 55. The relationship between Mae Sot and the Respondent is governed by a series of Standard Purchase Orders sent by fax between California and Thailand. 39 This Standard Purchase Order is commonly used by the Respondent in its purchases of garments from all its suppliers, including Mae Sot. 40 The obligations of the Respondent and Mae Sot as buyer and seller respectively are clearly set out in the Standard Purchase Order, and there are no other documents regulating their relationship. 38 Clarifications, Attachment Clarifications, B-1 and B Clarifications, B-7. 25

26 56. It may be contended by the 13 claimants that the Respondent has control over Mae Sot as the Respondent has made suggestions pertaining to production deadlines and quality control. 41 However, Mae Sot was not bound, contractually or otherwise, 42 to take these suggestions as they pertained to terms specifically rejected by Mae Sot in the Standard Purchase Order. The relevant provision in the Standard Purchase Order reads that [Mae Sot] specifically rejects any terms or provisions which set any standards, specifications or damages related to quality and time of delivery It is thus clear that the Respondent did not have control over Mae Sot. 58. As the Respondent did not have control over Mae Sot and had not consented to an agency relationship, there can be no agency relationship under Thai law. The Respondent is not liable as a principal. (2) There was no contract in existence at the time of the offence 59. Section 797 of the TCCC states that an agency relationship is created through, and dictated by, a contract In the present case, however, Mae Sot and the Respondent were not in any contractual relationship at the time of the offence. As mentioned, the Standard Purchase Order is commonly used by the Respondent in all its purchases of garments from suppliers. 45 A typical order by the Respondent can be completed and shipped within 45 to 60 days while an Expedited Order" can be completed and shipped within 14 days of Mae Sot s receipt of the Standard Purchase Order. 46 The most recent Standard Purchase Order was 41 Clarifications, B Ibid. 43 Clarifications, Attachment #1, para Omar Abel Morales Lurssen, Comparative Study on Agency, Thesis for the Master of Laws in International Trade Law, The University of Arizona, 2008 at p Clarifications, B Further Clarifications, B-4. 26

27 sent by fax from California to Thailand on 1 April In the ordinary course of business, this order would have been fulfilled by 1 June The factory fire broke out on 15 October 2013, 47 well over four months after the most recent order. 61. At the point when the garments were delivered and payment was made, the contractual relationship between Mae Sot and the Respondent had come to an end as the contract was completed. Thus, there could not have been an ongoing contract between Mae Sot and the Respondent on the date upon which the fire broke out. As agency in the TCCC is premised upon a contractual relationship, a principal-agent relationship cannot have existed between Mae Sot and the Respondent. B. Even if the Tribunal finds that a principal-agent relationship exists, Mae Sot remains solely liable for its negligence 62. Chapter II to Title XV of the TCCC sets out the duties and liabilities of the agent to his principal. Section 812 states that the agent is liable for any injury resulting from his negligence It is common ground that the negligent manner in which Mae Sot operated the factory resulted in the injuries and fatalities caused by the fire. Accordingly, even if the Tribunal finds that a principal-agent relationship exists between Mae Sot and the Respondent, Mae Sot remains solely liable for the injuries and fatalities of its employees. The proper remedy for the claimants is to bring an action against Mae Sot and not the Respondent. 47 Moot Problem, para TCCC, Section

28 VI. THE TRIBUNAL SHOULD NOT GRANT THE CLAIMANTS THE FULL EXTENT OF DAMAGES FOR PECUNIARY AND NON-PECUNIARY LOSS, AND DOES NOT HAVE THE POWER TO AWARD PUNITIVE DAMAGES 64. Even if liability were established, the Tribunal should not grant the claimants the full extent of damages for pecuniary and non-pecuniary loss. The types of damages available to the victims and their families must be determined in accordance with Thai law The Tribunal should not grant lifetime damages for loss of income where claimants have a chance of recovery (A). Under Thai law, the Tribunal may not award damages for loss of care, comfort, or companionship to the victims families (B). The Tribunal also may not award punitive damages (C). A. The Tribunal may not award lifetime damages for pecuniary loss if, at the time of the incident, the injured worker had a chance of recovery. 66. The Tribunal may not award lifetime damages for pecuniary loss if there was only a possibility of the worker being impaired for life at the time of the incident. 67. The internationally accepted method of calculating damages in the case of permanent injuries is to determine the expectancy of the injured person s life at the time of the tort The claimants may contend that the injured workers may be allowed lifetime compensation for loss of income. The Respondent acknowledges that the full extent of 49 Russell J. Weintraub, Choice of Law for Quantification of Damages: A Judgment of the House of Lords Makes a Bad Rule Worse at p See US Restatement (Second) of Conflict of Laws (1971), 171 cmt. a. 50 United States Restatement (Second) of Torts 924 (1977) at

29 damages for pecuniary loss should be granted if the worker was permanently impaired at the time of the incident However, following the method of calculation for damages, the Tribunal should be slow to award lifetime compensation to all the injured workers if it was indeterminable whether the worker would be permanently impaired. 70. Therefore, the Tribunal should not award lifetime compensation for pecuniary loss to all workers unless the worker had no chance of recovery at the time of the incident. B. The victims families may not claim for loss of care, comfort, and companionship 71. The Tribunal may not grant the victims families damages for non-pecuniary loss arising from psychological injury or loss of care, comfort, and companionship due to the death of the victims. This is because such forms of loss are not claimable under Thai law. 72. Under Section 420 of the TCCC, only injuries to life, body and health, liberty, property, and any right of another person are claimable. Thai courts have restrictively defined these categories as loss of ability, loss of beauty, loss of good health, loss of good personality, [and] loss of organ. 52 Pain and suffering, and other emotional conditions are not claimable For damages claimed outside of these categories, the Thai court has, following Section 446 of the TCCC, generally awarded damages for non-pecuniary loss only when 51 In Thailand Supreme Court Decision No.6303/2547, the plaintiff was awarded lifetime compensation for his disability because the impact of the bus accident had left the plaintiff disabled on the spot with no chance of recovery. 52 Isara Lovanich, Personal Injury and Damages for Non-pecuniary Loss in the Law of Torts and Product Liability Law, [2013] Thailand Law Journal Fall Issue 1 Volume Ibid. 29

30 accompanied with injury to body, health or liberty. 54 Emotional loss is also not claimable under Section Accordingly, the victims families may not claim for damages arising from emotional loss. C. The Tribunal should not allow the award of punitive damages to the victims and their families 75. Punitive damages may only be awarded in cases that fall under the ambit of the 2009 Product Liability Act. Apart from the 2009 Product Liability Act, punitive damages have not been awarded in Thailand (1). This is because punitive damages are contrary to the compensatory principle of damages under Thai law (2). (1) Under Thai law, the doctrine of punitive damages does not apply to wrongful acts 76. Under the 2009 Product Liability Act, the context in which punitive damages may be awarded is highly specific. It can only be awarded in the context of a business operatorconsumer relationship, in respect of deliberate or grossly negligent conduct in importing dangerous goods. 56 As such, it has been described as an exception to the general absence of punitive damages rather than a step towards adopting it in Thailand law. 77. Thus, the doctrine of punitive damages is confined in its application and cannot be extended to wrongful acts under the TCCC. 54 See Thailand Supreme Court Decision No.7611/2542, 1550/2518, 477/2514, 292/2502 and 789/ TCCC, Section Product Liability Act (Liability for Damages Arising from Unsafe Products Act,B.E. 2551) (2009) (Thailand), Section

31 (2) The aim of the doctrine of punitive damages to punish is inconsistent with the compensatory principle of Thailand civil law 78. Under Thai civil law, an award of damages is premised on the compensatory principle of tort law to place the plaintiff in the same position as if the wrongful act had never occurred. 57 Awarding punitive damages would be contrary to this principle because the doctrine of punitive damages does not aim to compensate, but aims to punish the party at fault. The doctrine of punitive damages should not be extended beyond what is prescribed in the 2009 Product Liability Act as it would be inconsistent with the aim of compensation in Thailand civil law. 79. The Tribunal therefore has no power to award punitive damages to the claimants. 57 Paijit Boonyapan, Explanation Civil and Commercial Code: Tort (Nitibunnakarn Publisher, Bangkok, 12 th Ed, 2005) at p

32 PRAYER FOR RELIEF For the foregoing reasons, the Respondent respectfully requests this Tribunal to declare that: 1. Thailand law is the applicable procedural law; 2. All the victims and their families may not be joined in the present proceedings; 3. Thailand law is the applicable substantive law; 4. The Respondent is not liable in tort; 5. The Respondent need not compensate the victims and their families for their economic and non-economic loss; and 6. The Tribunal may not award punitive damages. 32