AT KUALA LAMPUR REGIONAL CENTER FOR ARBITRATIONlawasiamoot.org/pdf/competition2012/F2010-C.pdf ·...

LAW ASIA International Moot 2012 F2010-C

AT KUALA LAMPUR REGIONAL CENTER FOR ARBITRATION

IN THE MATTER OF

GREAT WALL NOODLE SHOP LLC (REPRESENTED BY MR. JIANPING JI AND MR.

XEUFANG WANG)…………………………………………………….(CLAIMANT)

VERSUS

DR. ADI BUDIAMMAN……………………………………………….(RESPONDENT)

MEMORIAL FOR CLAIMANT


MEMORIAL FOR THE CLAIMANT | Page ii

TABLE OF CONTENTS

INDEX OF AUTHORITIES .................................................................................................................................................................................................... iivv

STATEMENT OF JURISDICTION .................................................................................................................................................................. vviiiiiiii

QUESTIONS PRESENTED .................................................................................................................................................................................................... iixx

STATEMENT OF FACTS ............................................................................................................................................................................................................ xx

SSUUMMMMAARRYY OOFF PPLLEEAADDIINNGGSS .................................................................................................................................................................................... xxiiiiiiii

PLEADINGS .......................................................................................................................................................................................................................................................... 11

Issue I: The Law applicable in resolving the Dispute is Singaporean Law .................... 1

Issue II: The Arbitration Agreement is Valid and Enforceable ...................................... 7

Issue III: Article 31 of Law 24 of 2004 of the Republic of Indonesia does not render

the Franchisee Agreement invalid .................................................................................... 12

Issue IV: A proper and timely notice of termination was given to the Respondent (Dr.

Budiamman) ....................................................................................................................... 14

Under Singapore Law ...................................................................................................... 14

Under Indonesian Law ..................................................................................................... 16

Issue V: The Franchisor can terminate the Agreement for a material breach of the

Agreement, which is a substantial violation of the Agreement. ..................................... 17



Issue VI: The “inherent warranty of good faith and fair dealing” in interpreting and

applying franchise agreements does apply to this Franchise Agreement, but it is not a

duty to put the interests of the Franchisee over the Franchisor. ................................... 19



Issue VI (A) :The serving of a single Indonesian dish referred to as “The Special of

the Day” justified the termination of the franchise. ....................................................... 21



Issue VI (B): Giving customers the option of substituting lamb for pork for menu

items justified the termination of the franchise. ............................................................. 23



Issue VI (C): The wearing of the “new (white) hijab” by the female Muslim employees

justified the termination of the franchise......................................................................... 25


MEMORIAL FOR THE CLAIMANT | Page iii



Issue VI (D): The above violations of the Franchise Agreement do reflect a continuing

disregard of the franchisee’s obligations under the Franchise Agreement and justify

its termination. ................................................................................................................... 27



Issue VII: An employment regulation prohibiting the wearing of a hijab by female

Muslim employees or restriction (or the colour type of the hijab) does not violate the

constitution and/or laws of Indonesia or any international treaties to which it is a

member. .............................................................................................................................. 29

PPRRAAYYEERR……………………......…………………………………………………………....……………………………………………………………………………………3311


MEMORIAL FOR THE CLAIMANT | Page iv

INDEX OF AUTHORITIES

Cases

AG Securities v. Vaughan [1990] 1 AC 417 ............................................................................ 23

Amerada Hess Corp. v. Quinn, 142 NJ. Super. 237, 252, 362 A.2d 1258, 1266 (NJ.

1976). ................................................................................................................................... 28

Article 18, International Covenant on Civil and Political Rights ............................................ 29

Brogden v. Metropolitan Rly. Co., (1877) 2 App Cas 666 ........................................................ 9

Cecrop Co. v. Kinetic Sciences Inc., [2001] BCSC 532 (CanLII) ............................................. 8

Cecrop Co. v. Kinetic Sciences Inc., 16 B.L.R.3d 15 (B.C S.Ct.. 2001) ................................... 8

Couchman v. Hill, [1947] 1 All ER 103................................................................................... 25

Dalkhia Utilities Services Plc v. Celtech International Ltd., [2004] All ER (D) 197 (Feb) ... 17

Decro - Wall International SA v. Practioners in Marketing Limited, [1971] 1 WLR 361 ...... 14

Ferris v. Plaister, 34 N.S.W.L.R 474( N.S.W. Court of Appeal 1994) .................................... 9

Final Award in ICC Case No. 8938, XXIVa Year Book of Commercial Arbitration 174,

176(1999) ............................................................................................................................... 2

Fisser v. International Bank, 282 F.2d 231, 233 (2d cir. 1960) .............................................. 12

Hamlyn & Co. v. Talisker Distillery [1894] A.C. 202, 209, 214 ............................................... 7

Heyman v. Darwins Ltd1942 AE 356 , at 374 ........................................................................... 8

Jack Niemman’s Schnitzel Baron Foods Ltd. v. Fuest, 9 CPR (3d) 561 ................................. 21

McNeese v. McNeese, (1923) 190 Cal. 402. ............................................................................ 15

Mitsubishi Motors Corp. v. Soler-Chrysler, Plymouth, Inc, 473 U.S. 614, 638-9(1985).......... 4

Mona Jabarin v. Minister of Education, PD 48 (5) 199 .......................................................... 29

Municipalite de Khoms El Mergeb v. Societe Dalico , 1994 Rev. arb. 116-117 ....................... 2


MEMORIAL FOR THE CLAIMANT | Page v

Nat’l Thermal Power Corp. v. The Singer Co., XVIII Yearbook of Commercial Arbitration

403, 406-407 (Indian S.Ct. 1992) (1993) ............................................................................... 3

National Power Plc v. United Gas Co. Ltd., [1998] All ER (D) 321 ...................................... 17

NetSys Technology Group AB v. Open Text Corp., [1999] CanLII 14937(ON SC) ................. 8

Ontario Inc. c/o Harvey’s Restaurant v. Cara Operations Ltd., 2008 54 B.L.R. (4th

) 244 ..... 19

Paper Reclaim Ltd v. Aotearoa International Ltd, [2007] NZSC 26 ...................................... 14

Republic of Nicragua v. Standard Fruit Co., 937 F.2d 469, 478 (9th

Cir. 1991) .................... 12

Sahin v. Turkey [2004] ELR 73 (ECTHR); Karadumman v. Turkey, (1993) 74 DR 93 ......... 29

Smith v. Hughes, [1871] LR 6 QB 597 .................................................................................... 21

United States v. P&D Coal Mining Co. , 358 F.2d 619 (6th

Cir. 1996) ..................................... 7

Vee Networks Ltd. v. Econet Wireless International Ltd [2004] EWHC 2909 (Comm.) .......... 3

Zulla Steel Inc. v. A&M Gregos Inc., 174 N.J. Super. 124 (1980) .......................................... 27

Statutes

Constitution ............................................................................................................................... i

Rules

Article 27, SIAC Rules, SIAC Rules, 2010 ............................................................................. 19

Article 35, KLRCA Arbitration Rules, 2010 ........................................................................... 19

Articles

Ernest Gellhorn, Limitations on Contract Termination Rights: Franchise Cancellations, Duke

Law Journal , Vol. 1967, No. 3 (Jun., 1967), p. 482, 483................................................... 14

Hadfield K. Gillian, Problematic Relations: Franchising and the Law of Incomplete

Contracts, Stanford Law Review, Vol. 42, No. 4 (Apr., 1990), pp. 927-992 ...................... 23

Karrer & Kaelin-Nauer, Is There A Favor Iurisdictionis Arbitri?, 13(3) J. Int’l Arb. 21(1996)

................................................................................................................................................ 7


MEMORIAL FOR THE CLAIMANT | Page vi

Law, Mistelis and Kroll, Comparitive International Commercial Arbitration (Kluwer Law

(Int, 2003) Para 6-66 .............................................................................................................. 5

Pawel Moskwa, Interpretation of Commercial Contracts in the Future European Civil Code–

Objective or Subjective Method?, ELSA SPEL 2004 (1) .................................................... 23

Thomas M. Pitegoff, Franchise Relationship Laws: A Minefield for Claimants, 45 Bus.

LAW. 289 (1989) ................................................................................................................ 27

National Legislation

1965, Civil Code of Indonesia ................................................................................................. 20

Article 1267, Indonesian Civil Code ....................................................................................... 18

Article 1338, Indonesia Civil Code ......................................................................................... 20

Article 1342, Indonesian Civil Code ....................................................................................... 18

Article 29, Constitution of Indonesia ....................................................................................... 29

http://tetley.law.mcgill.ca/comparative/goodfaith.pdf, accessed on 13/9/2012. ...................... 20

International Instruments

Article 9, European Convention on Human Rights ................................................................. 29

UNIDROIT Articles

Article 1.10 (1), UNIDROIT Principles of International Commercial Contracts, 2010.......... 15

Awards

Alan Redfern & Martin Hunter (eds.), Law And Practice of International Commercial

Arbitration, pp. 1-03 et seq (4th

ed. 2004) ............................................................................. 1

Final Award in ICC Case No. 6162, XVII Year Book of Commercial Arbitration 153, 160-62

(1992) ..................................................................................................................................... 9


MEMORIAL FOR THE CLAIMANT | Page vii

CLOUT Cases

A/CN.9/264, Analytical commentary on draft text of a model law on international

commercial arbitration, under article 1, paras. 16-21, available at

http://www.uncitral.org/uncitral/en/commission/sessions/18th.html. ................................... 1

CLOUT case No. 101 [Private Company “Triple V” Inc. Ltd. v. Star (Universal) Co. Ltd.

and Sky Jade Enterprises Group Ltd.,High Court—Court of First Instance, Hong Kong, 27

January 1995] ......................................................................................................................... 1

CLOUT case No. 690 [Mayers v. Dlugash, High Court—Court of First Instance, Hong Kong,

10 June 1994]; CLOUT case No. 627[Sport Maska Inc. v. Zittrer and others, Supreme

Court, Canada, 24 March 1988] ............................................................................................. 1

Websites

Article 178(2) of Swiss Law on Private International Law ....................................................... 2


MEMORIAL FOR THE CLAIMANT | Page viii

STATEMENT OF JURISDICTION

The Claimant has approached the Kuala Lumpur Regional Centre for Arbitration (KLRCA)

pursuant to the arbitration agreement between the Claimant and The Respondent. The

Claimant maintains that the arbitration agreement is valid and the claim is admissible against

the Respondent. The same has been argued further in the pleadings.


MEMORIAL FOR THE CLAIMANT | Page ix

QUESTIONS PRESENTED

I. What is the proper law to apply in resolving this dispute: Singapore Law, Indonesian Law,

or some other law?

II. Is the Arbitration agreement valid and enforceable?

III. Is the Franchise Agreement invalid under Indonesian Law – specifically Article 31 of

Law 24 of 2009?

IV. Was a proper and timely Notice of Termination given to the Franchisee [Dr.

Budiamman]?

V. May the Franchisor terminate the franchise for any violation of the Franchise Agreement

or must it be a substantial violation of the Agreement?

VI. Does the “inherent warranty of good faith and fair dealing” in interpreting and applying

franchise agreements apply to this Franchise Agreement and, if so:

VIA. Did the serving of a single Indonesian dish referred to as “The Special of the

Day” justify the termination of the franchise?

VIB. Did giving customers the option of substituting lamb for pork for menu items justify the

termination of the franchise?

VIC. Did the wearing of the “new (white) hijab” by the female Muslim employees justify the

termination of the franchise?

VID. Do the above violations of the Franchise Agreement reflect a continuing

disregard of the franchisee’s obligations under the Franchise Agreement to justify its

termination?

VII. Does an employment regulation prohibiting the wearing of a hijab by female Muslim

employees or restriction (or the colour type of the hijab) violate the constitution and/or laws

of Indonesia or any international treaties to which it is a member?


MEMORIAL FOR THE CLAIMANT | Page x

STATEMENT OF FACTS

1. The Great Wall Noodle Shop LLC (hereinafter referred to as GWNS), (founded and co-

owned by Mr. Jianping Ji and Mr. Xeufang Wang) the Claimant and Franchisor, started

as a single restaurant, opened in Tianjin, China, on 20th

May, 1983 and expanded its

Franchise to various locations within China itself and to Singapore and Malaysia. The

Respondent is Dr. Budiamman, the Franchisee, is a prominent Jakarta surgeon, who

signed the Franchise Agreement on June 20th

, 2011, which is the subject matter of this

case.

2. Mr. Xeufang Wang came to Singapore in June, 2011 to meet Mr. Bao Shan, the

franchise owner of the Singapore restaurants, to see if he would be interested in

opening several restaurants in Indonesia as well. He was not interested.

3. On 20th

June, 2011, at Changi Airport, Mr. Wang met Dr. Budiamman. After Mr. Wang

explained the purpose of his visit to Singapore, Dr. Budiamman showed interest in

signing the Agreement intended for Mr. Bao Shan.

4. Dr. Budiamman’s name was substituted for Mr. Bao Shan’s name on the Agreement

and Dr. Budiamman signed the Agreement, after a quick review. As Dr. Budiamman

did not want to miss his flight, only the fee details were explained to Dr. Budiamman

by Mr. Wang. However, an English copy and a copy of the Agreement in Bahasa

Indonesia were sent to Dr. Budiamman the next day.

5. The two Franchises as agreed upon were opened in September, 2011. In late October

2011, Mr. Ji, as authorised by the Agreement, made an unannounced visit to both

Indonesian restaurants. He discovered several violations of the Agreement. There was a

second menu also being offered, apart from the authorised, official menu as stipulated

by the Agreement, for the sale of Indonesian food, which had not been sanctioned by


MEMORIAL FOR THE CLAIMANT | Page xi

the Claimant. The menu gave the option of a substitution of pork with lamb, which had

not been authorised by the Claimant.

6. Further, Dr. Budiamman had, on the request of a few of the waitresses, allowed them to

wear a hijab along with their official uniform, and the colour of this hijab was fixed at

red. Mr. Ji’s wife particularly noticed the hijab and commented on how attractive they

were.

7. After Mr. Ji’s returning home, on 4th

November, 2011, an e-mail was sent to Dr.

Budiamman, illustrating the need for discontinuity of these violations. All three of the

issues to which Mr. Ji had already objected during his visit were clearly explained here

as well. Dr. Budiamman was asked to conform his operations to those already of the

other restaurants, as required by the Franchise Agreement.

8. The e-mail clearly informed Dr. Budiamman that the serving of unauthorized menu

items cannot be allowed to continue. The franchise was a Chinese restaurant, and meant

to serve Chinese food only. No other food items could be sold without the express

consent of the Claimant, as required by the Agreement, and no such consent had been

granted by the Claimant in this case.

9. The Claimant has explicitly stated in this e-mail that the need for the correction of these

violations is that the uniformity of the restaurants must be maintained, i.e., the

restaurants must all operate in exactly the same manner, inside and outside.

10. The Claimant clarified that the question of not allowing the wearing of the hijabs with

the official uniform is not due to any religious bias, but rather, maintaining uniformity,

which the Claimant has clearly stressed is the key issue to any successful franchise

operation. If all the employees at all the restaurants did not dress exactly the same, the

factor of “common appearance” would be lost.


MEMORIAL FOR THE CLAIMANT | Page xii

11. The Claimant ended the e-mail with a caveat to Dr. Budiamman that if the violations

mentioned in the Agreement were not discontinued, the Claimant would be left with no

choice but to terminate the Agreement.

12. Two weeks after this, an inspector was hired by the Claimant to visit both restaurants.

He reported to Mr. Ji that Indonesian food, though not listed on the menu, was being

served as a single “Special of the Day”, written on a blackboard. The colour of the hijab

of the waitresses’ had been changed to white.

13. The next day, the Claimant sent a letter to Dr. Budiamman, terminating the Agreement,

ordering him to close both restaurants and remove the signage within fifteen days.

14. On Dr. Budiamman’s refusal to close the two restaurants, the Claimant submitted a

Notice of Arbitration.


MEMORIAL FOR THE CLAIMANT | Page xiii

SUMMARY OF PLEADINGS

I

The Agreement between in question provided for international commercial arbitration. The

principle of Seperability of Arbitration Agreements dictates that different laws may govern

the arbitration agreement and the underlying contract. Further, when the parties have

expressly mentioned such a law, it must be given effect. Further, the principle of neutrality of

laws dictates that the parties to an arbitration agreement should opt for a law other than that

of the law of the countries.

II

The principle of ‘Presumptive Validity of the Arbitration Agreement’ supports the notion that

the parties’ agreement should be interpreted to give effect to them wherever possible.

Further, the principle of Seperability of Arbitration Agreement confers on the parties separate

obligations which cannot be avoided simply on the challenge or even nullification of the

original contract.

III

Article 31 of the Law 24 of 2009 of the Republic of Indonesia does not render the Franchise

Agreement invalid as the signature requirements are not absolute and the most minimal

indication of the parties’ intent must be given full effect. Also, Respondent’s consent to the

contract can be deemed from his conduct.

IV

Reasonable time of notice is time required to make alternate arrangements. Actual notice is a

proper notice. The Claimant has given sufficient time to the Respondent. The Respondent


MEMORIAL FOR THE CLAIMANT | Page xiv

was a prominent surgeon and had continued his practice. The e-mail sent to the Respondent

was an actual notice.

V

For termination, a breach can be material. Claimant had expressed to the Respondent the

damage that would be caused because of the Respondent’s actions. Respondent’s breach was

material and substantial.

VI

Franchisor acts in good faith if he deals honestly and reasonably. The Claimant had followed

proper procedure and given a chance to cure, before terminating.

VIA

The Respondent is expected to follow the Agreement to the letter. Even a single “Special of

the Day” goes against the serving of only the authorised menu.

VIB

A contract is interpreted literally. The unauthorised use of lamb in place of pork is a violation

of the Agreement.

VIC

An express term in a contract must be followed exactly. A hijab is not a part of the official

uniform and is a distraction. Thus, there has been a violation.

VID

If a material breach is not cured, the contract can be terminated. The Respondent had not

made the changes as required. Therefore, termination was justified.


MEMORIAL FOR THE CLAIMANT | Page xv

VII

Islam is not so staunchly observed in Indonesia; there is more liberalism here. Where the

issue is one of uniformity, a rule prohibiting the wearing of headscarves does not violate right

to freedom of religion.


MEMORIAL FOR THE CLAIMANT | Page 1

PLEADINGS

ISSUE I: THE LAW APPLICABLE IN RESOLVING THE DISPUTE IS SINGAPOREAN LAW

1.1. The Contract provides for “International Commercial Arbitration”

1.1.1. Article 2 of the UNCITRAL (United Nations Commission on International Trade

Law) Model law defines arbitration “as the situation where disputes are referred to a

third party”.1Alternatively it can be defined as a situation where “two or more parties,

faced with a dispute which they cannot resolve for themselves, agreeing that some

private individual(s) will resolve it for them.”2

1.1.2. Further, Article 3 (a) of the UNICTRAL Model Law states that arbitration is

international if the parties have, at the time of conclusion of agreement, their places of

business in different States3. Also, the term “place of business” has been considered in

some courts to include any location from which a party participates in economic

activities in an independent manner.4 Additionally, the term “commercial” is given a

broad definition under footnote to Article 1(1) of the UNCITRAL Model Law.5

1.1.3. This provision is mirrored in the Kuala Lumpur Regional Centre for Commercial

Arbitration Rules (KLRCA), under Article 1 (1).

1.1.4. In the present matter, Mr. Wang, one of the partners of the Great Wall Noodle Shop

LLC, met Dr. Budiamman while waiting for his flight at the Changi airport. During

the course of the discussion, Mr. Wang divulged the purpose of his visit to Dr.

Budiamman and told him that he was looking to extend the sphere of his Franchise to

Indonesia.

1 CLOUT case No. 690 [Mayers v. Dlugash, High Court—Court of First Instance, Hong Kong, 10 June 1994];

CLOUT case No. 627[Sport Maska Inc. v. Zittrer and others, Supreme Court, Canada, 24 March 1988] 2 Alan Redfern & Martin Hunter (eds.), Law And Practice of International Commercial Arbitration, pp. 1-03 et

seq (4th

ed. 2004) 3 CLOUT case No. 101 [Private Company “Triple V” Inc. Ltd. v. Star (Universal) Co. Ltd. and Sky Jade

Enterprises Group Ltd.,High Court—Court of First Instance, Hong Kong, 27 January 1995] 4 CLOUT case No. 106 [Supreme Court, Austria, 2 Ob 547/93, 10 November 1994]

5 A/CN.9/264, Analytical commentary on draft text of a model law on international commercial arbitration,

under article 1, paras. 16-21, available at http://www.uncitral.org/uncitral/en/commission/sessions/18th.html.



1.1.5. Dr. Budiamman was visibly interested in the proposal and agreed to sign the

Franchisee Agreement (hereinafter referred to as “Agreement” or “Contract”). Within

the said Franchisee agreement was an Arbitration Clause6 which stipulated that any

disputes arising out of the contract would be referred to The Kuala Lumpur Regional

Centre for Arbitration, which was a third party in accordance with the Agreement.

Further, at the time of signing the Agreement, Mr. Wang was operating in China

whereas Dr. Budiamman was working as a surgeon in Jakarta, Indonesia. Finally, as

the Agreement involved the running of a commercial entity i.e., restaurants, the

Agreement was “commercial” in nature.

1.1.6. As all the aforementioned requirements are fulfilled, the Agreement can be safely said

to mandate “International Commercial Arbitration”.

1.2. Application of the doctrine of Seperability

1.2.1. The law governing the agreement to arbitrate is mentioned in the arbitration clause

and this arises out of the principle of seperability.7

1.2.2. The principle of seperability states that the arbitration agreement mentioned in a

contract is completely separable from the rest of the underlying contract. In other

words, the arbitration clause and the rest of the contract form two separate entities.

Thus, the arbitration clause is autonomous and juridically independent from the main

contract in which it in contained.8

1.2.3. Thus is follows that the validity of the arbitration agreement is not necessarily

affected by the invalidity or avoidance of the main contract. 9

Further, Article V (1) (a) of the New York Convention and correspondingly Articles

6 Chapter XII(A) , Franchisee Agreement

7 Article 178(2) of Swiss Law on Private International Law; Municipalite de Khoms El Mergeb v. Societe

Dalico , 1994 Rev. arb. 116-117 8 Final Award in ICC Case No. 8938, XXIVa Year Book of Commercial Arbitration 174, 176(1999)

9 Vee Networks Ltd. v. Econet Wireless International Ltd [2004] EWHC 2909 (Comm.)



34(2) (a) (I) and 36(1) (a) of the UNCITRAL Model Law provide that an arbitral

award can be refused if the agreement was invalid under the law to which the parties

have subjected it to.

1.2.4. These provisions are based on the basic premise that parties may expressly select a

particular law to govern only the arbitration agreement and expressly establish this to

be different from the law governing the rest of the underlying contract. 10

This derives

its origins from the aforementioned seperability principle.

1.2.5. The dispute in the present matter is the termination of the Agreement by the

Franchisor for breach of the Agreement.

1.2.6. The Agreement drawn between the two parties, namely Mr. Wang and Dr.

Budiamman, clearly mentions the laws to be applied in order to resolve the dispute.

Chapter XII (B) of the Agreement clearly laws down that “The agreement and the

parties' rights under it (The Agreement) and the relationship between the parties shall

be governed by, and will be interpreted in accordance with the laws of Singapore.”

1.2.7. In doing so, the parties have exercised their rights under the aforementioned

provisions to select Singaporean law to be applied to the arbitration agreement, as

removed from the rest of the agreement. As the arbitration clause mentioned in

Chapter XII (B) of the contract between the two parties is independent from the rest of

the contract, the contracting parties can allow different laws to pertain to the two

different entities i.e. Chapter XII (B) and the rest of the contract.

Hence the law to be applied to Substantive matters would be Singaporean Law.

1.3. Application of the doctrine of ‘Will of the Parties’

1.3.1 It is humbly submitted that the principle basis of Arbitration is the maxim of l’

autonomic de la volonte i.e. “will of the parties to be Supreme”, which was also

10

Nat’l Thermal Power Corp. v. The Singer Co., XVIII Yearbook of Commercial Arbitration 403, 406-407

(Indian S.Ct. 1992) (1993)



recognized in Article V (1) (a) of the New York Convention.

The theory of Party Autonomy, also stipulates that any decision of the arbitration

must be based on the will of the parties.11

In other words, if any dispute arises, it has

to be solved by reference to the will of the parties.

1.3.2 Further, as arbitration is based upon the will of the parties, the parties can waive their

right to national judicial remedies through litigation. It is an exercise of their

individual autonomy and choice by which effect is given to their civil liberties. It is

freely and securely selected by parties to acquire the benefits of prompt, neutral and

effective dispute resolution.

1.3.3 It is also submitted that the will of the parties would be evident in the contract that

was drawn up between them. In the present case, the agreement was drawn between

the Great Wall Noodle Shop, LLC and Dr. Adi Budiamman. As the contract was duly

understood and signed by, both the contracting parties, the will of the parties can be

inferred from the terms and provisions mentioned in the said agreement as they have

consented to be bound by the terms of the contract.

Under Chapter XII (B), the said agreement expressly mentioned that the

determination of rights of the parties would be done in accordance to Singaporean

Law. This agreement was duly signed by Dr. Budiamman and Mr. Wang (on behalf of

the Great Wall Noodle Shop, LLC) and the right to select the law to be governing the

dispute in arbitration is an expression of the will of the parties.

1.3.4 As the will of the contracting parties in arbitration is supreme, the applicable law

would be that of Singapore as decided conclusively by the parties in the

aforementioned contract.

11

Mitsubishi Motors Corp. v. Soler-Chrysler, Plymouth, Inc, 473 U.S. 614, 638-9(1985)



1.3.5 Further, the contract in the present matter was duly singed by both parties and the

same stipulated arbitration proceedings by barring national litigation. Since the

contract was based on the parties’ consent, the theory of the “Will of the Parties’”

will dictate that the parties have agreed to waive their right to national judicial

proceedings.

1.3.6 Thus, the contract or the arbitration clause cannot be said to be invalid on grounds

of barring national court proceedings, since the provision pertaining to the same

was based on the will and consent of the contracting parties’.

1.4. Application of the principle of Neutrality of Laws

1.4.1. The principle of Neutrality of Laws12

dictates that the parties to an arbitration

agreement should opt for a law other than that of the law of the countries.

This is done to ensure that the two contracting parties are on a level legal field and

neither of them can claim any advantage by applying a law that they would be well

versed with i.e. their own national law. At the same time this would be severely

disadvantageous to the opposite party, thereby defeating the concept of equality of the

contracting parties.

1.4.2 In the present matter, the two parties are GWNS LLC (represented by Mr. Wang and

Mr. Ji, who are of Chinese origin) and Dr. Budiamman, who is of Indonesian origin.

1.4.3 Chapter XII (B) of the Contract between the parties clearly mentions that Singaporean

law is to be applied to resolve any dispute that may arise between the two parties

during the course of discharge of the said contract. This was meant to distance the

contract between the two parties’ form their respective national laws i.e. Indonesian

and Chinese laws.

12

Law, Mistelis and Kroll, Comparitive International Commercial Arbitration (Kluwer Law (Int, 2003) Para 6-

66



1.4.4 The principle behind selecting this law was to ensure that both Mr. Wang and Dr.

Budiamman are not burdened with the task of facing an opponent who has an

advantage of using his own national law in the present matter.

1.4.5 If the alternative to this situation is taken i.e. if Indonesian law is applied, it would be

unfairly disadvantageous and at the same time it would confer additional benefits to

Dr. Budiamman, which should not be permitted. Hence, the law to be applied should

be a neutral law i.e. Singaporean Law.



ISSUE II: THE ARBITRATION AGREEMENT IS VALID AND ENFORCEABLE

2.1 Application of the Principle of “Presumption of Validity of Arbitration Agreements”

2.1.1 The principle of favour validitatis13

dictates that there must be presumption of validity

in favor of the arbitration agreement. This is supported by the notion that the parties’

agreement should be interpreted to give effect to them wherever possible.14

2.1.2 In the celebrated case of Hamlyn & Co. v. Talisker Distillery,15

it was reasoned that

“it is more reasonable to hold that the parties contracted with the common intention of

giving the entire effect, including the arbitration clause, effect”.

2.1.3 On 20th June, 2011, Mr. Wang who is the part time owner of the Great Wall Noodle

Shop expressed his intention of opening an Indonesian franchisee to Dr. Budiamman.

The latter was extremely interested and agreed to enter into an agreement for the

running of the Indonesian restaurant. The said agreement / contract also contained a

dispute resolution clause, which called upon the parties to refer any subsisting

disputes to arbitration.

2.1.4 Dr. Budiamman’s signature on the said agreement clearly shows that he agreed to all

the terms of the agreement, including the dispute resolution clause.

2.1.5 In the present situation, the contention of Dr. Budiamman regarding the validity of the

arbitration agreement should not be taken into account as there is a presumption of

validity in favor of the arbitration agreement that Dr. Budiamman has voluntarily

entered into. Thus, the arbitration agreement should be presumed to be valid owing to

the free consent given by both the parties.

13

Karrer & Kaelin-Nauer, Is There A Favor Iurisdictionis Arbitri?, 13(3) J. Int’l Arb. 21(1996) 14

United States v. P&D Coal Mining Co. , 358 F.2d 619 (6th

Cir. 1996) 15

Hamlyn & Co. v. Talisker Distillery [1894] A.C. 202, 209, 214



2.2 The Arbitration Agreement is independent of the underlying contract

2.2.1 As enshrined in Article 16(1) and Article 21(2) of The UNCITRAL Model Law, the

principle of Autonomy of the Arbitration Agreement or “pactonomic de la clause

compromission” stipulates that parties cannot unilaterally withdraw from arbitration

agreement even if the contract comes to an end as the said arbitration agreement is a

part which is separate from the rest of the contract.

Thus, it confers on the parties separate obligations which cannot be avoided simply on

the challenge or even nullification of the original contract.

The reasoning behind the same is that the arbitration agreement is a part separate from

the rest of the contract. Therefore, even if the contract comes to an end or its validity

is challenged, the arbitration clause is alive.16

2.2.2 It is established that the agreement to arbitrate is a particular characteristic of the

underlying contract with distinct procedure for dispute resolution and hence is a

separate part of the contract. If this concept did not exist, arbitration would be self-

defeating because if a breach of contract were to render the entire agreement invalid,

then there would be no point in arbitration17

2.2.3 Thus, a party cannot resist arbitration simply by relying on the fact that the main

contract was invalid because a condition precedent to the entry into force of that

contract had not been fulfilled.18

In other cases, the seperability principle was relied

upon by courts to dismiss objections to arbitral jurisdiction asserting that the main

contract was void because the parties were mistaken as to their respective rights and

obligations when they entered into it.19

16

Cecrop Co. v. Kinetic Sciences Inc., 16 B.L.R.3d 15 (B.C S.Ct.. 2001) 17

Heyman v. Darwins Ltd1942 AE 356 , at 374 18

Cecrop Co. v. Kinetic Sciences Inc., [2001] BCSC 532 (CanLII) 19

NetSys Technology Group AB v. Open Text Corp., [1999] CanLII 14937(ON SC)



2.2.4 Further, Chapter XII (A) in the agreement between the parties mandates that “any

dispute, controversy or claim arising out of or relating to this franchise agreement,

the operation of the franchise or its termination contract shall be settled by

arbitration in accordance with the Kuala Lumpur Regional Centre for Arbitration

Fast Track Rules”. In the present matter, if the underlying contract between the

parties is challenged, the arbitration clause still stands valid and thus the parties must

still submit any dispute to the KLRCA as specified in the contract. In the present case,

the dispute resolution clause clearly stipulated Singapore law as the substantive law of

the contract.20

2.2.5 Historically, the validity of international arbitration agreements will be upheld

notwithstanding challenges to those agreements based on the law governing the

parties’ underlying contract.21

2.2.6 Hence, even if the validity of the original, underlying contract is challenged, the

validity of the arbitration agreement stands as, a claim that the underlying contract

was null and void does not impeach the arbitration clause.22

2.3 Dr. Budiamman provided his consent and assent to the Contract

2.3.1 In terms of arbitration, it is settled that a party’s consent to an arbitration agreement or

a written instrument containing arbitration a clause can be expressed as a substantive

matter by means other than a signature on the said agreement.

It is accepted that while entering into a contract, the consent of the contracting party

can be expressed through his/her conduct23

or acquiescence. Most legal systems

recognize consent derived from conduct.

20

Clause B, Chapter XII, Franchise Agreement 21

Final Award in ICC Case No. 6162, XVII Year Book of Commercial Arbitration 153, 160-62 (1992) 22

Ferris v. Plaister, 34 N.S.W.L.R 474( N.S.W. Court of Appeal 1994) 23

Brogden v. Metropolitan Rly. Co., (1877) 2 App Cas 666



2.3.2 Thus, it is humbly submitted that if a party, does not provide his/her signature to the

contract but at the same time fulfills the terms and conditions mentioned in the

contract, it is deemed that he has given his consent for the said contract.

2.3.3 Further, if a contracting party does not expressly object to any provision of the

contract that he/she has entered into, it is to be believed that he has accepted the said

contract.

2.3.4 In the present matter, on 20th

June 2011, a contract was entered into by Dr.

Budiamman and Mr. Wang which included a provision to refer any dispute the two

parties to arbitration. For the benefit of Dr. Budiamman, the contract was drawn up in

both English and Bahasa Indonesian.

2.3.5 It is humbly accepted that Dr. Budiamman signed the English version of the contract

but did not do the same for the Bahasa Indonesian Copy.

2.3.6 However, this cannot be said to negate consent from the side of Dr. Budiamman. This

is because after the contract had been duly drawn up, a photocopy of the English and

Bahasa Indonesian version of the contract was provided to Dr. Budiamman the very

next day to review. Further, since Dr. Budiamman had pursued his studies in the

United States of America, it can be reasonably assumed that he was well-versed in the

English language.

2.3.7 It is further submitted that around four months after signing of the contract, Dr.

Budiamman began the operations for the Indonesian franchisee of the Great Wall

Noodle Shop.

2.3.8 After receiving the contracts for review, Dr. Budiamman never expressed any

objection to the terms and conditions of the contract.

2.3.9 In the present scenario it would be only reasonable to assume that in the span of four

months, Dr. Budiamman would have thoroughly gone over the contract and found out



if he had any reservations to any term of the same. However, since no objection was

raised from his side and he duly began operations of the Indonesian restaurants, it can

be deemed through his conduct that has accepted the provisions of the contract and he

cannot arbitrarily withdraw from the same, when the time for discharge of obligations

has come.



ISSUE III: ARTICLE 31 OF LAW 24 OF 2004 OF THE REPUBLIC OF INDONESIA DOES NOT

RENDER THE FRANCHISEE AGREEMENT INVALID

3.1 Signature requirement is not absolute

3.1.1 Article 31(1) of Law No.24/2009 of Indonesia stipulates that Indonesian must be used

in agreements that involve (inter alia) individuals who are the citizens of the Republic

of Indonesia.

3.1.2 However, it is submitted that it is an accepted principle in international Arbitration

that if an agreement is in writing, it need not be signed.24

The reasoning behind this

well-accepted principle is that the most minimal indication of the parties’ intent to

arbitrate must be given full effect.25

Forcing Indonesian parties to draft all of their

agreements in Indonesian language may cause unnecessary risk due to the ambiguity

arising from translations. In the present matter, the agreement between the Dr.

Budiamman and Mr. Wang was drawn up in both English and Bahasa Indonesian for

the benefit of the former party. It is duly accepted that Dr. Budiamman had failed to

sign the latter and only singed the English version.

3.1.3 However, the application of the aforementioned principle of “minimal indication”

theory completely negates the requirement of a signature on the Bahasa Indonesian

Copy of the Agreement. The fact that Dr. Budiamman provided his signature to the

English version of the contract signifies his intent to enter into the said contract and be

bound by all the terms and conditions of the same.

3.1.4 A perusal of the law requiring the signature of the parties in both English and Bahasa

Indonesia clearly shows that the intention of the legislature was to ensure that the

parties entering into the contract clearly understood the terms. In the present, Dr.

Budiamman was a surgeon who had studied in the US and therefore it can be

presumed that he understood the English language clearly and comprehended the

24

Fisser v. International Bank, 282 F.2d 231, 233 (2d cir. 1960) 25

Republic of Nicragua v. Standard Fruit Co., 937 F.2d 469, 478 (9th

Cir. 1991)



exact terms of the contract drafted in English. Hence, the contract cannot be said to be

invalid due to the lack of signature of one of the contracting parties.



ISSUE IV: A PROPER AND TIMELY NOTICE OF TERMINATION WAS GIVEN TO THE

RESPONDENT (DR. BUDIAMMAN)

Under Singapore Law

4.1 Reasonable Notice of Termination

4.1.1. A reasonable period for notice of termination is decided based on the point of view of

two reasonable businessmen and the nature of the relationship in question26

and what

is sufficient time for the terminated party to find alternate arrangements.27

When the

Agreement has been executed and the franchise has been operating for sometime, the

duration for period of notice can be quite short.28

4.1.2. In the e-mail sent to the Respondent on 4th

November, 2011, the Claimant clearly

notified the Respondent of their disapproval of these violations of the Agreement.

They provided time to the Respondent to correct these errors. Mr. Ji had informed the

Respondent about the violations during his visit, and it was after a period of five days

that the notice of termination was sent.

4.1.3. The Claimant gave clear reasons to the Respondent for their disapproval of these

variations from the Agreement, laying stress on the issue of uniformity. It is important

in a franchise business to ensure that all the restaurants under the franchise name

remain in perfect uniformity.

4.1.4. Another inspection was conducted two weeks later which showed that the Respondent

was aware of the various violations. Yet, steps were not taken by the Respondent to

ensure uniformity of the restaurant with the other restaurants under the same

franchise. This action of the Respondent of not making due amendments in time lead

to the termination of the Agreement by the Claimant.

26

Decro - Wall International SA v. Practioners in Marketing Limited, [1971] 1 WLR 361 27

Paper Reclaim Ltd v. Aotearoa International Ltd, [2007] NZSC 26 28

Ernest Gellhorn, Limitations on Contract Termination Rights: Franchise Cancellations, Duke Law Journal ,

Vol. 1967, No. 3 (Jun., 1967), p. 482, 483



4.1.5. The Claimant has followed proper procedure in the termination of the Agreement. The

notice was sent to the Respondent on 4th

November, 2011. It was two weeks later that

the inspector arrived at the restaurants, and it was after that that the Agreement was

officially terminated by the franchisors. Thus, the termination period of fifteen days

were given to the Respondent. It was fifteen days after that, as per the termination

letter, that the restaurants were supposed to be shut down. The Claimant also provided

the Respondent with enough time to correct the violations, which would stall the

termination process. Therefore, it can be ascertained that the Respondent had been

properly informed of the violations and as the Respondent was still violating the

Agreement, the Claimant decided to follow their right pursuant to Article XIII B and

terminate the Agreement, giving the Respondent a reasonable notice.

4.1.6. In the present case, the Respondent is a prominent surgeon and has kept up his

practice even after signing the Agreement. The termination of the Agreement would

not be such a loss as to completely deprive him of a proper means of income as he

could still revert to his practice and it cannot be claimed that the said termination

deprived him of his livelihood.

4.2 Proper Notice of Termination

4.2.1 It is sufficient if the notice clearly represents the intention to rescind; it need not be

formal and explicit.29

A notice may be given by any means appropriate to the

circumstances.30

4.2.2 The Claimant expressly informed the Respondent via this e-mail that if the

Respondent failed to make the necessary corrections to his operation of the two

restaurants, the Claimant would terminate the Agreement, This clearly proves that the

intention to terminate the Agreement was duly communicated to the respondents

29

McNeese v. McNeese, (1923) 190 Cal. 402. 30

Article 1.10 (1), UNIDROIT Principles of International Commercial Contracts, 2010



fulfilling the requisites of a valid notice. The notice sent to the Respondent was a

proper notice. The notice was duly received by the Respondent and thus, he was

aware of this intention of the Claimant.

4.2.3 Thus, the Claimant has followed proper procedure and served the Respondent with a

proper and timely notice of termination, including reasonable notice of termination

and time to correct the violations as per the Agreement.

Under Indonesian Law

4.3.1 Indonesian Civil Code provides that all contracts can only be terminated by a court of

law.31

However, it is common practice in Indonesia to waive this particular provision.

Had this Agreement been drafted directly under Indonesian Law, keeping in mind all

its legislations and provisions and the common practice prevailing in Indonesia, the

Agreement would have incorporated this waiver.

4.3.2 Upon such a waiver, the Claimant would have followed proper procedure and

terminated the Agreement correctly, as they have already done. Thus, even if such a

waiver has not been made, it can be ascertained that proper procedure to terminate the

Agreement has been followed.

31

Article 1266, Civil Code of Indonesia



ISSUE V: THE FRANCHISOR CAN TERMINATE THE AGREEMENT FOR A MATERIAL BREACH

OF THE AGREEMENT, WHICH IS A SUBSTANTIAL VIOLATION OF THE AGREEMENT.

Under Singapore Law

5.1 Fundamental Breach

5.1.1. A contract does not have to be terminated only for a repudiatory breach; it can be

terminated for a material breach as well.32

A "material breach" is a breach that has a

serious effect on the benefit that the innocent party would have otherwise derived

from the contract.33

5.1.2. Article XIII B of the Agreement allows the franchisor to terminate the Agreement for

any substantial violation of the Franchise Agreement.

5.1.3. The reason for the termination of the Agreement by the Franchisor in this case is

three-fold; firstly, due to the serving of Indonesian food in the restaurant which is

unauthorized. Secondly, due to the substitution of pork with lamb by the Respondent,

this, again, was not authorized by the Claimant. Thirdly, the wearing of the Hijab by

the waitresses of both restaurants.

5.1.4. These clauses are all “express terms” of the Agreement, without which the Claimant

would never have entered into the Agreement in the first place. A literal interpretation

of the Agreement would then make it clear that the violation of these clauses would

be a substantial violation of the Agreement, as a material breach of the Agreement

would have occurred.

5.1.5. Therefore, the Claimant has correctly exercised the right to terminate the Agreement.

The violations of the Agreement on the part of the Respondent were of as substantial

nature as they were a material breach of the terms of the Agreement. Thus, the

Agreement can be validly terminated based on these clauses.

32

Dalkhia Utilities Services Plc v. Celtech International Ltd., [2004] All ER (D) 197 (Feb) 33

National Power Plc v. United Gas Co. Ltd., [1998] All ER (D) 321




5.1.6 The Indonesian Civil Code states that the aggrieved party has the option of

demanding the other party to fulfill the Agreement or to terminate the Agreement,

with or without compensation.34

Further, the Civil Code also demands a literal

interpretation of the Agreement where the words are straightforward, with no

ambiguous meanings.35

5.1.7 A literal interpretation of the Agreement shows that the abovementioned clauses, the

violation of which has lead to termination of the Agreement, are terms that are

essential to the Agreement, and thus, their violation would be a substantial violation

of the Agreement.

5.1.8. Thus, the Claimant has rightly terminated the Agreement for substantial violation of

the Agreement and not just any breach of the Agreement.

34

Article 1267, Indonesian Civil Code 35

Article 1342, Indonesian Civil Code



ISSUE VI: THE “INHERENT WARRANTY OF GOOD FAITH AND FAIR DEALING” IN

INTERPRETING AND APPLYING FRANCHISE AGREEMENTS DOES APPLY TO THIS FRANCHISE

AGREEMENT, BUT IT IS NOT A DUTY TO PUT THE INTERESTS OF THE FRANCHISEE OVER THE

FRANCHISOR.

Under Singapore Law

6.1 Good Faith

6.1.1. As long as the franchisor deals honestly and reasonably with the franchisee, the

franchisee’s interests are not paramount. Principles of good faith do not block use of

terms that actually appear in the contract.36

The KLRCA Rules37

and the Singapore

International Arbitration Centre Rules38

both provide that the Arbitration Agreement

will not be decided ex aequo et bono unless specifically provided for in the

Agreement itself.

6.1.2. The Agreement, as per Article XII A clearly provides that the Agreement will not be

decided ex aequo et bono.

6.1.3. The Claimant has followed the procedure under the Agreement. The Respondent was

given due notice and time for the cure of the breach. A proper and timely notice,

giving reasonable time for termination, was given to him. The Respondent was

explicitly told the Agreement will be terminated in case of a continued breach. The

Respondent did not take adequate steps to remedy the breach which lead to the

termination. Therefore, there has been no mala fide act on the part of the Claimant.


6.1.4 The Civil Code of Indonesia recognises a statutory duty to act in good faith.39

Civil

Law systems as a general rule recognise the principle of inherent good faith and fair

36

Ontario Inc. c/o Harvey’s Restaurant v. Cara Operations Ltd., 2008 54 B.L.R. (4th

) 244 37

Article 35, KLRCA Arbitration Rules, 2010 38

Article 27, SIAC Rules, SIAC Rules, 2010 39

Article 1338, Indonesia Civil Code



dealing in the law of contracts.40

However, the Code states that it is upon the alleging

party to prove good faith; good faith will be presumed.41

6.1.5 It has been proved already that the Claimant took requisite steps to inform the

Respondent of the causes for the termination and so, mala fide intentions on the part

of the Claimant do not exist.

40

http://tetley.law.mcgill.ca/comparative/goodfaith.pdf, accessed on 13/9/2012. 41

1965, Civil Code of Indonesia



ISSUE VI (A) :THE SERVING OF A SINGLE INDONESIAN DISH REFERRED TO AS “THE SPECIAL

OF THE DAY” JUSTIFIED THE TERMINATION OF THE FRANCHISE.

Under Singapore Law

6A.1.1. If a person’s conduct is such as to lead a reasonable man to believe that he has bound

himself to the contract, he must follow the other parties’ terms.42

Signboards and

menus must be operated only as according to the Agreement or directions of the

Franchisors.43

6A.1.2. The Agreement mandates that Respondent should not serve items that are not on the

official menu of the Agreement. The Claimant has even previously directed the

Respondent to stop the serving of all food items within the restaurant that are not of

the official menu. GWNS is a Chinese food restaurant and thus, must serve Chinese

food only.

6A.1.3. Therefore, the serving of a single Indonesian dish called “Special of the Day” goes

directly against the Agreement and the directions of the Claimant. It is imperative for

running of a Chinese food restaurant to sell only Chinese food, wherever it operates.

Therefore, this system of the “Special of the Day” is a continued breach of the

Agreement, giving the Claimant a just and reasonable cause for termination of the

Agreement.

6A.1.4. The Claimant has taken this decision based on their reasonable business judgment and

in good faith, as per Article X. 2. of the Agreement. They have been operating the

GWNS LLC for more than twenty-five years and would have precise judgment in all

matters relating to the functioning of all the GWNS restaurants.

42

Smith v. Hughes, [1871] LR 6 QB 597 43

Jack Niemman’s Schnitzel Baron Foods Ltd. v. Fuest, 9 CPR (3d) 561




6A.1.5. Claimant has followed all needed procedure, and it is for the Respondent to prove that

there has been bad faith.44

6A.1.6. The Claimant took their decision based on their reasonable business judgment and

good faith as mandated by, Article X. 2., The fact that they are running the franchise

for more than twenty-five years elucidates their expertise and commercial acumen

while dealing with similar situations and it can be reasonably assumed that such good

faith and business judgment was relied upon while terminating the Agreement on the

abovementioned grounds.

44

Ibid. at 16



ISSUE VI (B): GIVING CUSTOMERS THE OPTION OF SUBSTITUTING LAMB FOR PORK FOR

MENU ITEMS JUSTIFIED THE TERMINATION OF THE FRANCHISE.

Under Singapore Law

6B.1.1. It is not the intention of the parties, but their assent to the contract that will determine

the interpretation of the contract,45

as Common Law interprets Contracts literally.46

A

formula for a soft drink must be mixed correctly; a method of losing weight must be

taught correctly; a procedure for serving food quickly must be followed correctly.47

6B.1.2. The Respondent has committed a breach of the Franchise Agreement by allowing the

substitution of pork with lamb. The Respondent did not approach the Claimant for the

sanctioning of this substitution as stated in the Agreement.

6B.1.3. A perusal of the official menu reveals that almost 33% of the dishes have pork as an

ingredient to them. Substitution of lamb in place of pork alters 33% of the menu,

which is a substantial part of the menu.

6B.1.4. Such alteration clearly shows that the words of Article III B of the Agreement state

that the franchise will not have any right to use unauthorised ingredients.

6B.1.5. Indonesia is not a country ruled by Islamic Law. The situation would have been

looked at differently had Indonesia been a theocratic state. In absence of any express

law based on religious grounds, it is humbly requested to isolate religious sentiments

from the issue at hand.

6B.1.6. Chinese dishes use pork as a key ingredient; pork is popular in Chinese food and

gives it its distinct flavour. The purpose of the GWNS is to serve purely Chinese food.

It is to enjoy this Chinese food that people come to the GWNS. Substitution of pork

with lamb is a deviation from the literal terms of the Agreement. Serving of

45

AG Securities v. Vaughan [1990] 1 AC 417 46

Pawel Moskwa, Interpretation of Commercial Contracts in the Future European Civil Code– Objective or

Subjective Method?, ELSA SPEL 2004 (1) 47

Hadfield K. Gillian, Problematic Relations: Franchising and the Law of Incomplete Contracts, Stanford Law

Review, Vol. 42, No. 4 (Apr., 1990), pp. 927-992



unauthentic Chinese food in a restaurant claiming to serve purely Chinese food would

deprive the restaurants of considerable business, as the customers would then be

dissatisfied, having expected to eat authentic Chinese food.

6B.1.7. This reason for termination of the Agreement is valid and there are no mala fide

intentions. It is a valid issue that the Claimant, with their reasonable business

judgment, exercised as per Article X. 2. of the Agreement, have rightly judged is a

material breach of the Agreement. In the twenty-five years that they have successfully

run GWNS restaurants in a number of countries, none have been allowed to change or

substitute the ingredients they serve.


6B.1.8. The Indonesian Civil Code puts the onus on the asserting party to prove that there has

been bad faith.48

6B.1.9. Chinese food uses pork as an essential ingredient in its dishes and lamb being

substituted in its place would ruin the authenticity of these dishes. The Claimant has

been operating for more than twenty-five years, with the purpose of serving Chinese

food. The decision of the Claimant in this regard was made in good faith, after

following proper procedure as laid down in the Agreement.

48

Ibid. at 15



ISSUE VI (C): THE WEARING OF THE “NEW (WHITE) HIJAB” BY THE FEMALE MUSLIM

EMPLOYEES JUSTIFIED THE TERMINATION OF THE FRANCHISE.

Under Singapore Law

6C.1.1. Common Law recognises that what has been expressly stated in the contract must be

followed exactly as an “express” term.49

6C.1.2. In the present case, the Agreement, under Article II 1. G (ii) mandates a particular

uniform to be worn by all the waitresses. It also expressly prohibits any adornment

that would cause a distraction from the actual uniform.

6C.1.3. The Respondent is in breach of this clause of the Agreement. The Respondent had

allowed the wearing of the Hijab by the waitresses after a few of them from the

Medan restaurant asked him for permission to do so. Due to the bright red colour of

the Hijab, almost all the waitresses started wearing the hijab as well. However, after

the Respondent changed the colour of the hijab to white, many of the girls no longer

wanted to wear the hijab, including those who had first asked permission from the

Respondent to do so.

6C.1.4. This shows that the waitresses at the restaurants did not consider it a religious

obligation to wear the hijabs, but rather, chose to wear or not wear the hijab,

depending on how they looked.

6C.1.5. Therefore, the Respondent was under no obligation to allow the waitresses to wear the

hijab. The terms of the Agreement clearly mentioned a uniform for the waitresses,

which did not contain an exception on religious grounds or personal grounds. In case

such an exception was sought by the Respondents, the same should have first been

brought to light before the Claimant.

6C.1.6. The fact that the Respondent asked the waitresses to change the colour of the Hijab

after the first inspection, clearly shows that he understood the implications of such a

49

Couchman v. Hill, [1947] 1 All ER 103



change and how it was distracting for the customers, if the waitresses wore such

adornments.

6C.1.7. This ground as a reason for termination of the Agreement is valid and is a substantial

violation of the Agreement, for the same reasons of uniformity.

6C.1.8. This decision of the Claimant is also not influenced by mala fide intentions, as the

Claimant were within their rights to take this decision on the basis of their reasonable

business judgment, as according to Article X 2. of the Agreement, and the Claimant,

having run the GWNS franchise for more than twenty-five years, were well aware of

the standards of customer satisfaction and how they should be maintained. Therefore,

this decision of the Claimant’s is not mala fide.


6C.1.9. It is the prerogative of the Respondent to discharge the burden of proof in case of

allegation of any mala fide intentions.50

This decision on the part of the Claimant is

justified and was made entirely in good faith. The Claimant had stressed even before

on the purpose of having exactly the same uniform in all its restaurants- to maintain

common appearance. It was only when the Respondent failed to incorporate the

necessary changes did the Claimant terminating the Agreement.

50

Ibid. at 15



ISSUE VI (D): THE ABOVE VIOLATIONS OF THE FRANCHISE AGREEMENT DO REFLECT A

CONTINUING DISREGARD OF THE FRANCHISEE’S OBLIGATIONS UNDER THE FRANCHISE

AGREEMENT AND JUSTIFY ITS TERMINATION.

Under Singapore Law

6D.1.1. After the time given to correct the breach, if the party that has breached has not

corrected the breach, then the breach has not been cured and the aggrieved party can

treat the breach as a repudiatory breach and terminate the contract.51

6D.1.2. The Respondent had been given a notice with a reasonable amount of time, in which

to cure the violations of the Agreement by him. During Mr. Ji’s visit, he had informed

the Respondent of the violations of the Agreement as they were, and asked him to

correct them. It was more than five days later that the notice of termination was served

on him, and it was still two weeks after this when the assessment of the cure of breach

was done by the inspector hired by the Claimant to inspect the restaurants clearly

shows that the Respondent had enough time to cure the breach.

6D.1.3. Due to the failure of the Respondent to cure the breach and bring the operation of the

restaurants in conformity with the Agreement, the Claimant felt that they had no

choice but to terminate the Agreement. There was no question of bad faith on the part

of the Claimant. It was the continual disregard of the franchise’s obligations to the

Agreement that caused the Claimant to terminate the Agreement.

6D.1.4. The success of every business format franchise network depends on each franchised

unit presenting an image to the public of being but one of a large chain of identical

units, all offering the same quality goods or services and customer experience.52

The

substantiability of the franchisee’s non-compliance is considered upon its potential to

51

Zulla Steel Inc. v. A&M Gregos Inc., 174 N.J. Super. 124 (1980) 52

Thomas M. Pitegoff, Franchise Relationship Laws: A Minefield for Claimants, 45 Bus. LAW. 289 (1989)



affect the Claimant's trade name, trademark, good will and image which is the heart

and substance of the franchising method of doing business.53

6D.1.5. The Respondent’s continued violations of the Agreement, especially the sale of

unauthorized food items and ingredients, effectively amount to a trademark

infringement. The Respondent is selling, without authorization, different products

from the ones associated with the GWNS name under the GWNS name and logo. The

authorized menu items and specified uniform are what are common to all the GWNS

restaurants everywhere, and any alterations to these affects the uniformity and

reputation of the franchise, which distinguish it from other Chinese restaurants.

Article III B of the Agreement specifically talks about the use of only proprietary

ingredients. Therefore, the Respondent’s continued violation of the Agreement also

amounts to a trademark infringement.


6D.1.6. It is upon the party alleging mala fide intentions to prove that such has been the case;

the other party will be presumed to be acting in good faith.54

6D.1.7. Claimant has given Respondent proper and express objections to the violations of the

Agreement and informed the Respondent of the reasons as well. Claimant also gave

Respondent proper time to cure the violations. It was only after following proper

procedure and failure of the Respondent to incorporate the proper changes that the

Agreement was terminated.

53

Amerada Hess Corp. v. Quinn, 142 NJ. Super. 237, 252, 362 A.2d 1258, 1266 (NJ. 1976). 54

Ibid. at 15



ISSUE VII: AN EMPLOYMENT REGULATION PROHIBITING THE WEARING OF A HIJAB BY

FEMALE MUSLIM EMPLOYEES OR RESTRICTION (OR THE COLOUR TYPE OF THE HIJAB) DOES

NOT VIOLATE THE CONSTITUTION AND/OR LAWS OF INDONESIA OR ANY INTERNATIONAL

TREATIES TO WHICH IT IS A MEMBER.

7.1. The International Convention on Civil and Political Rights55

speaks about Religious

rights of people in language exactly the same as the European Convention on Human

Rights.56

Where the purpose of a rule in a university forbidding the wearing of

headscarves by the students is simply a matter of uniformity amongst the students,

such a rule does not violate any religious rights of such a person being affected,57

even in a private institution.58

7.2. In the present case, the Claimant has made it very clear that the only reason for the

insistence on their part for the restriction of Hijab was not because of any religious

reasons but purely a matter of uniformity.

7.3. Further, only a few waitresses from the Medan restaurant first approached the

Respondent to be allowed to wear the headscarf. The fact sheet implies that the head

scarf was worn more as an adornment than to fulfill any religious obligation. Once the

colour of the scarf was changed, it can be inferred that the religious obligations

seemed to have diminished as the waitresses no longer wished to wear the scarf.

7.4. Indonesia as a country can be differentiated from Saudi Arabia as a country in this

regard. Saudi Arabia is a country with Islam declared as the State religion and the

Qur’an and the Sunnah of Muhammad are its constitution. Here, religious dictates

must be followed as a rule of law. This is a complete contrast to Indonesia, which

does not recognize a state religion.59

Thus, though some of the people may choose to

wear hijab, it is not regarded as a compulsion by the general law and population of

55

Article 18, International Covenant on Civil and Political Rights 56

Article 9, European Convention on Human Rights 57

Sahin v. Turkey [2004] ELR 73 (ECTHR); Karadumman v. Turkey, (1993) 74 DR 93 58

Mona Jabarin v. Minister of Education, PD 48 (5) 199 59

Article 29, Constitution of Indonesia



Indonesia. Therefore, a restriction in matter of uniformity, not due to any religious

bias, is not in violation of any human rights to religious freedom.

7.5. Thus, the waitresses in the present case did not feel religiously obligated to wear the

scarves, but rather, wore them as a matter of choice. Therefore, no rights based on

religious freedom were violated by the Claimant in the present case.



PRAYER FOR RELIEF

In light of the above submissions, the Claimant respectfully requests that the Arbitral

Tribunal declare that:

• The proper law to apply in resolving this dispute is Singapore Law.

• The Arbitration Agreement is valid and enforceable.

• The Franchise Agreement is valid under Article 31, Indonesian Law 24 of 2009.

• Article XII of the Franchise Agreement is valid and enforceable.

• A proper and timely notice of termination was given to the Franchisee.

• The Franchisor can terminate the Agreement when there has been a material breach of

the Agreement, which is a substantial violation of the Agreement

• Though the inherent warranty of good faith and fair dealing does apply to this

Agreement, it is not a duty to put the Franchisee’s interests over the Franchisor’s and

serving a single “Special of the Day”, giving customers the option of substituting

lamb for pork and allowing the wearing of the new white hijab by the waitresses all

justify the termination of the Agreement.

• Prohibiting the wearing of hijab by the female Muslim employees is not a violation of

their right to religion as it was done for the purpose of uniformity.

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