Twenty-Fifth Annual
Willem C. Vis International Commercial Arbitration Moot
MEMORANDUM FOR RESPONDENT
CLAIMANT v RESPONDENT
Delicatesy Whole Foods Sp Comestibles Finos Ltd.
39 Marie-Antoine Carême Avenue 75 Martha Stewart Drive
Oceanside Capital City
Equatoriana Mediterraneo
COUNSEL
BURAKHAN ADAR ♦ EMRE İLKER KARATAŞ ♦ EMREHAN MERMER
ORCAN OK ♦ GÖKÇE GÜL ÖNDER ♦ PINAR ÖZCEYLAN
Memorandum for Respondent
I
TABLE OF CONTENTS
TABLE OF CONTENTS .......................................................................................................... I
INDEX OF AUTHORITIES ................................................................................................... IV
INDEX OF CASES ............................................................................................................... XVI
INDEX OF ARBITRAL AWARDS .................................................................................... XXIII
INDEX OF LEGAL RESOURCES ................................................................................... XXVI
LIST OF ABBREVIATIONS ............................................................................................ XXVII
STATEMENT OF FACTS......................................................................................................... 1
SUMMARY OF ARGUMENTS................................................................................................. 2
ISSUE I: THE TRIBUNAL HAS THE EXCLUSIVE AUTHORITY TO DECIDE ON THE
CHALLENGE OF MR. PRASAD, WITHOUT HIS PARTICIPATION. ................................ 3
A. CLAUSE 20 OF THE CONTRACT EXCLUDES THE APPLICATION OF ART. 13(4) OF UAR. ................. 3
1. Parties have intended and agreed to avoid the involvement of any arbitral institution due to
confidentiality concerns. ................................................................................................................... 4
2. Deviations from the UAR may be made implicitly. .................................................................. 5
3. Art. 13(4) of the UAR clearly involves arbitral institutions. ....................................................... 5
B. THE ARBITRAL TRIBUNAL HAS THE EXCLUSIVE AUTHORITY TO DECIDE ON THE CHALLENGE OF
MR. PRASAD AS PER ART. 13(2) OF THE DAL, WITHOUT HIS PARTICIPATION.......................................... 6
1. The Arbitral Tribunal has the exclusive authority to decide on the challenge and such recourse
to the Arbitral Tribunal is not a dilatory tactic. .................................................................................. 6
2. The Arbitral Tribunal must decide on the challenge without Mr. Prasad’s participation. ........... 7
ISSUE II: MR. PRASAD SHOULD BE REMOVED FROM THE ARBITRAL TRIBUNAL. 8
A. NEITHER DID MR. PRASAD NOR CLAIMANT FULFILL ITS DISCLOSURE OBLIGATION IN
ACCORDANCE WITH ART. 11 OF UAR AND IBA GUIDELINES. .............................................................. 8
B. CHALLENGE OF MR. PRASAD WAS SENT IN TIMELY MANNER IN ACCORDANCE WITH ARTICLE
13(1) OF THE UAR. ............................................................................................................................. 10
C. THERE ARE VARIOUS GROUNDS THAT SHOULD LEAD TO JUSTIFIABLE DOUBTS REGARDING MR.
PRASAD’S IMPARTIALITY AND INDEPENDENCE IN THE CURRENT CIRCUMSTANCES AS PER ARTICLE 11-
13 OF THE UAR. ................................................................................................................................. 11
1. Failure of disclosure obligations by Mr. Prasad and CLAIMANT leads to justifiable doubts
regarding Mr. Prasad’s impartiality and independence. .................................................................... 12
2. Repeated Appointments by Fasttrack & Partners affects impartiality and independence of Mr.
Prasad. ............................................................................................................................................ 13
Memorandum for Respondent
II
3. Repeated Appointments by Third Party Funders creates a material link between Mr. Prasad
and Findfunds LP leading to justifiable doubts................................................................................ 14
4. VJICASL Article constitutes justifiable doubts as it presents a pre-judgment of the case. ....... 16
5. Slowfood Arbitration constitutes a valid ground for establishing partiality. ............................. 17
D. CUMULATIVE CONSIDERATION OF ALL FACTORS SHOULD LEAD TO THE REMOVAL OF MR.
PRASAD. .............................................................................................................................................. 18
ISSUE III: CLAIMANT’S STANDARD TERMS IN NO WAY GOVERN THE CONTRACT.
...................................................................................................................................................19
A. CLAIMANT’S STANDARD TERMS WERE NOT INCORPORATED. ................................................ 19
B. STANDARD TERMS OF CLAIMANT DO NOT GOVERN THE CONTRACT, EVEN IF THEY WERE
INCORPORATED. ................................................................................................................................. 21
1. Tender process guarantees the application of RESPONDENT’s Standard Terms. A “battle of
the forms” does not exist. ............................................................................................................... 21
a. Tender documents expressly refer to application of RESPONDENT’s Standard Terms. . 22
b. CLAIMANT accepted to be bound by the Letter of Acknowledgement which secures
compliance of the offer with RESPONDENT’s Standard Terms. ............................................. 22
c. RESPONDENT’s acceptance cannot be deemed as an assent to CLAIMANT’s Standard
Terms due to reliance promoted by CLAIMANT. ..................................................................... 23
2. Even if a battle of the forms problem exists, the solution of the problem leads to a duty of
result. CLAIMANT’s Standard Terms do not govern the Contract. ............................................... 24
a. Battle of the forms does not fall under the scope of CISG. The battle of the forms analysis
is governed by the UNIDROIT Principles. ................................................................................ 25
b. In case CISG determined as governing law to the battle of the forms problem, the knock
out rule should be applied. .......................................................................................................... 25
c. The application of the knock out rule determines the nature of the obligation as a duty of
result........................................................................................................................................... 26
ISSUE IV: IN CASE RESPONDENT’S STANDARD TERMS ARE APPLICABLE,
CLAIMANT DELIVERED NON-CONFORMING GOODS PURSUANT TO ART. 35 OF
CISG. ........................................................................................................................................ 27
A. RESPONDENT’S STANDARD TERMS INCLUDE A DUTY OF RESULT UNDER ART. 8 OF CISG. .. 28
1. All relevant circumstances must be taken into account in interpretation of RESPONDENT’s
Standard Terms. ............................................................................................................................. 28
Memorandum for Respondent
III
a. The wording of RESPONDENT’s Standard Terms clearly shows that CLAIMANT was
under a duty of result. ................................................................................................................. 28
b. The price agreed by the Parties justifies a duty of result. ..................................................... 30
c. In the course of negotiations, and also subsequently, RESPONDENT clearly emphasized
the importance of a strict adherence to environmentally friendly and sustainable production. ..... 30
2. The contra proferentem rule is not applicable. ....................................................................... 32
B. CLAIMANT HAVING THE BURDEN OF PROOF FAILED TO PROVE THE CONFORMITY OF THE
CAKES DELIVERED. ............................................................................................................................. 32
C. EVEN IF TRIBUNAL WERE TO CONCLUDE THAT CLAIMANT HAD A DUTY OF BEST EFFORT, IT
STILL FAILED TO FULFILL ITS OBLIGATION. ......................................................................................... 34
REQUEST FOR RELIEF ....................................................................................................... 35
Memorandum for Respondent
IV
INDEX OF AUTHORITIES
BERGENTHAL, Sebastian K.
EISELEN, Sieg
The Battle of Forms: A Comparative Analysis
Comperative and International Law Journal of Southern Africa
Volume 39 (2006) pp. 214-240
Cited as: BERGENTHAL/EISELEN
In §§ 100, 104
BERGER, Klaus Peter 'Part III, 23rd Scenario: Challenge of Arbitrator', in Private Dispute
Resolution in International Business: Negotiation, Mediation,
Arbitration (Third Edition)
Kluwer Law International (2015) pp. 481 – 508
Cited as: BERGER
In § 53
BOGART, Christopher P. Chapter 4. Overview of Arbitration Finance
Bernardo M. Cremades Sanz-Pastor and Antonias Dimolitsa
(eds), Third-Party Funding in International Arbitration (ICC Dossier),
Dossiers of the ICC Institute of World Business Law, Volume 10
(2013) pp. 50 - 56
Cited as: BOGART
In § 29
BORN, Gary B. International Commercial Arbitration (Second Edition)
Kluwer Law International (2014)
Cited as: BORN
In §§ 12, 13, 29, 42, 52, 55
CARON, David D.
CAPLAN, Lee M.
The UNCITRAL Arbitration Rules: A Commentary
Oxford University Press (2013)
Cited as: CARON ET AL.
In §§ 8, 28, 42
Memorandum for Respondent
V
CRISTANI, Federica Challenge and Disqualification of Arbitrators in International
Investment Arbitration: An Overview
Law and Practice of International Courts and Tribunals Volume 13
(2014) pp. 153-177
Cited as: CRISTANI
In § 28
CROFT, Clyde
KEE, Christopher
WAINCYMER, Jeff
A Guide to UNCITRAL Arbitration Rules
Cambridge University Press (2013)
Cited as: CROFT ET AL.
In §§ 28, 42
DAELE, Karel Challenge and Disqualification of Arbitrators in International
Arbitration
Kluwer Law International 2012
Cited as: DAELE
In §§ 12, 28
Danone Danone’s Code of Conduct for Business Partners
Danone, 2016
Cited as: Danone’s Code of Conduct for Business Partners
In § 117
DÍAZ - CANDIA, Hernando “Issue Conflict” in Arbitration as Apparently [un]seen in 2011 by a
U.S. Court in STMicroelectronics vs. Credit Suisse Securities
Arbitraje: Revista de Arbitraje Comercial y de Inversiones Volume 5
Issue 1 (2012)
Cited as: DÍAZ-CANDIA
In § 58
Memorandum for Respondent
VI
EISELEN, Sieg The Requirements for the Inclusion of Standard
Terms in International Sales Contracts
PER vol.14 n.1 Potchefstroom 2011
Cited as: EISELEN
In § 73
FERRARI, Franco Burden of Proof under the CISG
Review of the Convention on Contracts for the International Sale of
Goods (CISG), Kluwer Law International (2000-2001)
Cited as: FERRARI
In § 124
FOUCHARD, Philippe
GAILLARD, Emmanuel
GOLDMAN, Berthold
SAVAGE, John
Fouchard Gaillard Goldman on International Commercial
Arbitration
Kluwer Law International (1999)
Cited as: FOUCHARD ET AL.
In § 12, 20
FRY, Jason;
GREENBERG, Simon
The Arbitral Tribunal: Applications of Articles 7-12 of the ICC Rules
in Recent Cases
ICC Court Bulletin Volume 12 (2009)
Cited as: FRY/GREENBERG
In § 61
GARRO, Alejandro M. The Buyer's "Safety Valve" Under Article 40: What is the Seller
Supposed to Know and When?
Journal of Law and Commerce (2005-06)
Cited as: GARRO
In § 125
Memorandum for Respondent
VII
Global Compact LEAD Global Compact LEAD: Advancing Sustainability Leadership
through Innovation and Action
UN Global Compact, 2015
Cited as: Global Compact LEAD Brochure, 2015
In § 118
GRIMMER, Sarah The Expanded Role of the Appointing Authority under the
UNCITRAL Arbitration Rules 2010
Journal of International Arbitration, (Kluwer Law International 2011,
Volume 28 Issue 5) pp. 501 – 517, 2011
Cited as: GRIMMER
In § 12
HUBER, Peter
MULLIS, Alastair
The CISG, A New Textbook for Students and Practitioners
Sellier. European Law Publishers, Munich 2007
Cited as: AUTHOR in: Huber/Mullis
In §§ 83, 98, 100, 121
HWANG, Michael
LEE, Shaun
Survey of South East Asian Nations on the Application of the New
York Convention
Journal of International Arbitration, (Kluwer Law International 2008,
Volume 25 Issue 6) pp. 873 - 892
Cited as: HWANG/LEE
In § 42
INDLEKOFER, Manuel Chapter 3: Today's Activities of the Permanent Court of Arbitration,
International Arbitration and the Permanent Court of Arbitration
International Arbitration Law Library, Volume 27 (Kluwer Law
International 2013) pp. 233 - 298
Cited as: INDLEKOFER
In § 13
Memorandum for Respondent
VIII
KHAMBATA, Darius J. Tensions Between Party Autonomy and Diversity
Albert Jan van den Berg (ed), Legitimacy: Myths, Realities,
Challenges, ICCA Congress Series, Volume 18 (Kluwer Law
International 2015) pp. 612 – 637
Cited as: KHAMBATA
In § 56
KONERU, Phanesh The International Interpretation of the UN Convention on Contracts
for the International Sale of Goods: An Approach Based on General
Principles
Minnesota Journal of Global Trade, Volume 6, (1997)
Cited as: KONERU
In § 91
KRÖLL, Stefan The Burden of Proof for The Non-Conformity of Goods Under Art.
35 CISG
Annals of the Faculty of Law in Belgrade International Edition (2011)
Cited as: KRÖLL
In § 122
KRÖLL, Stefan Selected Problems Concerning the CISG’s Scope of Application
Journal of Law and Commerce [Vol. 25:39]
Cited as: KRÖLL II
In § 124
KRÖLL, Stefan
MISTELIS, Loukas
VISCASILLAS, Pilar P
UN Convention on Contracts for the International Sale of Goods
(CISG)
C. H. Beck, Munich 2011
Cited as: AUTHOR in: Kröll et al.
In §§ 114, 117, 120, 121, 123
Memorandum for Respondent
IX
LALIVE, Pierre Transnational (or Truly International) Public Policy and International
Arbitration
Revista Brasileira de Arbitragem, (Comitê Brasileiro de Arbitragem
CBAr & IOB; Comitê Brasileiro de Arbitragem CBAr & IOB 2014,
Volume XI Issue 41) pp. 173 – 230
Cited as: LALIVE
In § 23
LEISINGER, Klaus M. On Corporate Responsibility for Human Rights
Cambridge University Press, United Kingdom 2009
Cited as: LEISINGER
In § 118
LEW, Julian D. M.
MISTELIS, Loukas A.
KRÖLL, Stefan Micheal
Comparative International Commercial Arbitration
Kluwer Law International (2003)
Cited as: LEW/MISTELIS/KRÖLL
In §§ 42, 44
LINNE, Anna L. Burden of Proof Under Article 35 CISG
Pace International Law Review (Spring 2008)
Cited as: LINNE
In §§ 123, 124, 126
MAGNUS, Ulrich General Principles of UN-Sales Law
Max-Planck-Institute for foreign and international Private Law Rabels
Zeitschrift for foreign and international Private Law Hein Kötz in
honor of his 60th Birthday Part I, Volume 59 (1995)
Cited as: MAGNUS
In § 91
Memorandum for Respondent
X
MAZZONI, Alberto
AONDOAKKA, Chief M.K.
UNIDROIT Principles of International Commercial Contracts 2010
International Institute for the Unification of Private Law
(UNIDROIT), Rome 2010
Cited as: UNIDROIT Official Commentary
In §§ 107, 127
Nestlé S.A The Nestlé Supplier Code
Nestlé, 2013
Cited as: The Nestlé Supplier Code
In § 118
NEUMANN, Thomas Features of Article 35 in the Vienna Convention;
Equivalence, Burden of Proof and Awareness
Vindobona Journal of International Commercial Law and
Arbitration,2007
Cited as: NEUMANN
In § 122
Norton Rose Fulbright In the Know
Norton Rose Fulbright, United Kingdom 2014
Cited as: NORTON ROSE FULBRIGHT
In § 114
Oxford Dictionaries Oxford English Dictionary
Oxford University Press, June 2017
Cited as: Oxford Dictionary
In § 114
Memorandum for Respondent
XI
PARK, Willaim W.
ROGERS, Catherine
Chapter I: The Arbitration Agreement and Arbitrability, Third-Party
Funding in International Arbitration: The ICCA Queen- Mary Task
Force
Christian Klausegger, Peter Klein, et al. (eds), Austrian Yearbook on
International Arbitration 2015, Austrian Yearbook on International
Arbitration, Volume 2015 pp. 113 – 123
Cited as: PARK/ROGERS
In § 55
PAULSSON, Jan UNCITRAL Arbitration Rules, Section I, Article 6 [Designating and
appointing authorities], in Jan Paulsson and Georgios Petrochilos,
UNCITRAL Arbitration
Kluwer Law International, 2017
Cited as: PAULSSON
In §§ 12, 14
PERILLO, Joseph M. Editorial remarks on the manner in which the UNIDROIT
Principles may be used to interpret or supplement CISG Article 8
http://www.cisg.law.pace.edu/cisg/principles/uni8.html#edrem
Cited as: PERILLO
In § 107
Permanent Court of
Arbitration
Designation of Appointing Authorities, Dispute Resolution Services
Official Website of the Permanent Court of Arbitration, 2018
https://pca-cpa.org/en/services/appointing-authority/designation-
of-appointing-authority/
Cited as: PCA Website
In § 14
POSNER, Eric A. Fault in Contract Law
Michigan Law Review, Volume 107, Issue 8, 2009
Cited as: POSNER
In § 127
Memorandum for Respondent
XII
REDFERN, Alan
HUNTER, J. Martin
BLACKABY, Nigel
PARTASIDES, Constantine
Redfern Hunter on International Arbitration
Oxford University Press (2015)
Cited as: REDFERN/HUNTER
In § 45
SCHERER, Maxi
RICHMAN, Lisa
GERBAY, Rémy
'Chapter 11 Challenges, Removal and Replacement of Arbitrators', in
Arbitrating under the 2014 LCIA Rules: A User's Guide
Kluwer Law International (2015) pp. 167 – 184
Cited as: SCHERER ET AL.
In §§ 45, 56
SCHLECHTRIEM, Peter
BUTLER, Petra
UN Law on International Sales
Springer-Verlag, Berlin 2009
Cited as: SCHLECHTRIEM/BUTLER
In § 83, 98
SCHLECHTRIEM, Peter
SCHWENZER, Ingeborg
Schlechtriem & Schwenzer, Commentary on the UN Convention on
the International Sale of Goods (CISG) Oxford University Press, 3rd
ed., Oxford 2010
Cited as: AUTHOR in: Schlechtriem/Schwenzer
In §§ 73, 91, 107, 113, 114, 115, 118, 121, 123, 124
SCHMIDT-KESSEL, Martin On the Treatment of General Terms and Conditions of Business
under the UN Convention on Contracts for the International Sale of
Goods (CISG)
Commentary on decision of German Federal Supreme Court of 31
October 2001
Cited as: SCHMIDT-KESSEL
In § 73
SCHWENZER, Ingeborg CISG-AC Opinion No. 13
USA 2013
Cited as: CISG-AC Opinion No. 13
In § 77
Memorandum for Respondent
XIII
SCHWENZER, Ingeborg Ethical Standards in CISG Contracts
Uniform Law Review – Oxford University Press, United Kingdom
2017
Cited as: SCHWENZER
In § 118
SCHWENZER, Ingeborg
MOHS, Florian
Old Habits Die Hard: Traditional Contract Formation in a Modern
World
Internationales Handelsrecht, 2006
Cited as: SCHWENZER/MOHS
In § 73
TUPMAN, W. Michael
Challenge and Disqualification of Arbitrators in International
Commercial Arbitration
International and Comparative Law Quarterly (1989)
Cited as: TUPMAN
In § 23
VERBRUGGEN, P. W. J. Regulatory governance by contract: The rise of regulatory standards
in commercial contracts in 'Regulatory Governance'
Recht der werkelijkheid, Netherlands 2014
Cited as: VERBRUGGEN
In § 114
VERGNE, François The "Battle of the Forms" Under the 1980 United Nations
Convention on Contracts for the International Sale of Goods
33 American Journal of Comparative Law (1985) 233-258
Cited as: VERGNE
In § 98
Memorandum for Respondent
XIV
VIETRI, Raphaël de
DHARMANANDA, Kanaga
Impartiality and Issue of Repeat Arbitrators
Journal of International Arbitration (Kluwer Law International 2011,
Volume 28 Issue 3) pp. 187-200
Cited as: VIETRI/DHARMANANDA
In § 42
VISCASILLAS, Maria del Pilar
Perales
"Battle of the Forms" under the 1980 United Nations Convention on
Contracts for the International Sale of Goods: A Comparison with
Section 2-207 UCC and the UNIDROIT Principles
Pace International Law Review (1998)
Cited as: VISCASILLAS
In §§ 100
VOGENAUER, Stefan
KLEINHEISTERKAMP, Jan
Commentary on the UNIDROIT Principles of International
Commercial Contracts (PICC)
Oxford University Press, Oxford 2009
Cited as: AUTHOR in: Vogenauer/Kleinheisterkamp
In §§ 112, 127
VON GOELER, Jonas Third-Party Funding in International Arbitration and its Impact on
Procedure
International Arbitration Law Library, Volume 35 (Kluwer Law
International 2016)
Cited as: VON GOELER
In §§ 29, 39, 52
WAINCYMER, Jeffrey Procedure and Evidence in International Arbitration
Kluwer Law International (2012)
Cited as: WAINCYMER
In §§ 29, 45, 58
Memorandum for Respondent
XV
WALSH, Thomas W.
TEITELBAUM, Ruth
The LCIA Court Decisions on Challenges to Arbitrators: An
Introduction
Arbitration International Special Edition on Arbitrator Challenges
(2011), pp. 283-313
Cited as: WALSH/TEITELBAUM
In §§ 28, 29, 55, 67
WILDNER, Kaia Art. 19 CISG: The German Approach to the Battle of the Forms in
International Contract Law: The Decision of the Federal Supreme
Court of Germany of 9 January 2002
Pace International Law Review Volume 20 Issue 1 (2008)
Cited as: WILDNER
In § 104
WILSON, Simon Ethical Standards in International Sales Contracts: Can the CISG Be
Used to Prevent Child Labour?
LLB thesis, Victoria University of Wellington (2015)
Cited as: WILSON
In § 114
WORKING GROUP II OF
UNCITRAL
Report of the 45th Session of the Working Group II of UN
Commission on International Trade Law
www.uncitral.org (2012)
Cited as: Report WG45
In § 28
ZAHRADNÍKOVÁ, Radka Challenge Procedure in Institutional and Ad Hoc Arbitration under
the New Regulations in the Revised UNCITRAL Arbitration Rules
Czech (& Central European) Yearbook of Arbitration, USA, 2014
Cited as: ZAHRADNÍKOVÁ
In § 2
Memorandum for Respondent
XVI
INDEX OF CASES
Austria
Oberster Gerichtshof, 12 September 2006
No. 10 Ob 122/05x, Clout no: 753
Cited as: OGH, 12 Sept. 2006 (Austria)
In § 124
Belgium
Cour d’Appel Bruxelles, 29 October 2007
No. Palais200889GP20080329047
Cited as: CoA Brussels, 29 Oct. 2007 (Belgium)
In § 45
France
Cour d' appel de Grenoble, 26 April 1995
No. 93/4879, CLOUT No. 152
Cited as: CoA Grenoble, 26 Apr. 1995 (France)
In § 120
Court of Cassation of France, 16 July 1998
No. Arrêt n° 1309 P; Pourvoi n° J 96-11.984, CISG-online No. 344
Cited as: Cour de Cassation, 16 Jul. 1998 (France)
In § 104
Court of Cassation of France, First Civil Law Chamber, 20 October 2010
No. 09-68997
Cited as: Cour de Cassation, 20 Oct. 2010 (France)
In § 52
Court of Appeal of Paris, 8 Feb. 2001 (France)
No. Not Indicated
Cited as: CoA de Paris, 8 Feb. 2001 (France)
In § 39
Memorandum for Respondent
XVII
Court of Appeal of Reims, 2 November 2011
No. 10/02888
Cited as: CoA Reims, Nov. 2, 2011(France)
In § 61
Germany
Bundesgerichtshof, 31 October 2001
No. VIII ZR 60/01, CISG-online No. 617
Cited as: BGH, 31 Oct. 2001 (Germany)
In §§ 101, 102
Bundesgerichtshof, 9 January 2002
No. VIII ZR 304/00, CISG-online No. 651
Cited as: BGH, 9 Jan. 2002 (Germany)
In §§ 104, 106
Bundesgerichtshof, 30 June 2004
No. VIII ZR 321/03, CLOUT No.773
Cited as: BGH, 30 June 2004 (Germany)
In §§ 124, 125
Bundesgerichtshof, 31 October 2011
No. VIII ZR 60/01, CISG-online No.445
Cited as: BGH, 31 Oct. 2011 (Germany)
In §§ 73, 74
Oberlandesgericht Dresden, 27 December 1999
No. 2 U 2723/99, CISG-Online No. 511
Cited as: OLG Dresden, 27 Dec. 1999 (Germany)
In § 113
Memorandum for Respondent
XVIII
Oberlandesgericht Köln, 24 May 2006
No. 16 W 25/06, CISG-online No. 1232
Cited as: OLG, 24 May 2006 (Germany)
In § 104
Oberlandesgericht Frankfurt am Main, 26 June 2006
No. 26 Sch 28/05, CISG-online No. 1385
Cited as: OLG, 26 Jun. 2006 (Germany)
In § 104
Landgericht Landshut, 12 June 2008
No. 43 O 1748/07
Cited as: LG Landshut, 12 Jun. 2011 (Germany)
In § 73
India
High Court of Delhi at New Delhi, 11 February 2010
No. WP(C) 8904/2009
Cited as: High Court of Delhi, 11 Feb. 2010 (India)
In § 55
The Netherlands
Arrondissementsrechtbank Utrecht, 21 January 2009
No. LJN BH0723; 253099 / HA ZA 08-1624, CISG-online No.1202
Cited as: RB Utrecht, 21 Jan. 2009 (Netherlands)
In § 73
District Court of The Hague – Civil Law Section, Provisional Measure Judge, 5 November 2004
Decision on the Challenge of Prof. Emmanuel Gaillard
Cited as: DC The Hague, 5 Nov. 2004 (Netherlands)
In § 44
Memorandum for Respondent
XIX
Poland
Court of Appeals of Katowice, 5 September 2012
No. I ACa 410/12, CLOUT No: 1599
Cited as: CoA Katowice, 5 September 2012 (Poland)
In § 74
Spain
Provincial Court of Barcelona, 16th Division, 28 April 2004
No. 862/2003, CLOUT No. 553
Cited as: Provincial Court of Barcelona, 28 Apr. 2004 (Spain)
In § 118
Provincial High Court of Madrid, Section 14, 20 February 2007
No. 92/2007, CLOUT No. 850
Cited as: Provincial High Court of Madrid, 20 Feb. 2007 (Spain)
In § 118
Navarra Provincial High Court, Section 3, 27 December 2007
No. 229/2007, CLOUT No. 1039
Cited as: Navarra Provincial High Court, 27 Dec. 2007 (Spain)
In § 114
Cáceres Provincial High Court, 14 July 2010
No. 00296/2010, CLOUT No: 1034
Cited as: Cáceres Provincial High Court, 14 July 2010 (Spain)
In § 72
Audencia Provincial Madrid, Section 14, 21 June 2011
No. ECLI:ES:APM:2011:10062, CLOUT No. 1420
Cited as: AP Madrid, 21 Jun. 2011 (Spain)
In § 114
Memorandum for Respondent
XX
Audencia Provincial Madrid, Section 12, 30 June 2011
No. ECLI:ES:APM:2011:11690, CLOUT No. 1419
Cited as: AP Madrid, 30 Jun. 2011 (Spain)
In § 67
Switzerland
Bundesgericht, 20 March 2008
No. Case 4A_506/2007
Cited as: Bundesgericht, 20 Mar. 2008 (Switzerland)
In § 29
Bundesgericht, 5 April 2005
No. 4C.474/2004, CISG-Online No. 1012
Cited as: BGer, 5 Apr. 2008 (Switzerland)
In §§ 114, 120
Bundesgericht 7 July 2004
No. 4C.144/2004/lma, CLOUT No: 894
Cited as: BGer, 7 July 2004 (Switzerland)
In § 124
Bundesgericht, 13 November 2003
No. 4C.198/2003/grl, CLOUT No. 885
Cited as: BGer, 13 November 2003 (Switzerland)
In § 124
Bundesgericht, 22 December 2000
No. 4C.296/2000, CISG-online No. 628
Cited as: BGer, 22 Dec. 2000 (Switzerland)
In §§ 83, 118
Memorandum for Respondent
XXI
Kantonsgericht Freiburg, 11 October 2004
No. A1 2003-70, CISG-online No. 964
Cited as: KGer Fribourg, 11 Oct. 2004 (Switzerland)
In §§ 83-91
Handelsgericht des Kantons Zürich, 24 October 2002
No. HG 010395/U/zs, CISG-Online No. 857
Cited as: HG Zurich, 24 Oct. 2002 (Switzerland)
In § 113
Tribunale d'appello Ticino, 29 October 2003
No. 12.2002.181, CISG-online No. 912
Cited as: Trib app Ticino, 29 Oct. 2003 (Switzerland)
In § 91
United States
Properties Corporation v Falstaff Brewing Corporation
United States District Court, New York, 06 July 1978
No. 76 Civ. 3231 (CLB)
Cited as: DC New York, 6 Jul. 1978 (US)
In § 127
Filanto, S.p.A. v. Chilewich International Corp.
U.S. [Federal] District Court for the Southern District of New York, 14 April 1992
No. 91 Civ. 3253 (CLB), CLOUT No. 23
Cited as: DC New York, 14 Apr. 1992 (US)
In § 120
Joseph N. Kroboth et al. v. Shirley Brent
Appellate Division of the Supreme Court of the State of New York, Third Department. 04 May 1995
Cited as: SC New York, 17 Jun. 1999 (US)
In § 127
Memorandum for Respondent
XXII
Jean SCHMITZ; Leonard Schmitz, v. Carlos J. ZILVETI, III; Nicholas S. Meris; Prudential-Bache Securities Inc., aka
Prudential Securities, Inc.
United States Court of Appeals, Ninth Circuit, 05 April 1994
No. 92-16853
Cited as: CoA Ninth Circuit, Apr. 5, 1994 (US)
In § 61
Sphere Drake Insurance Limited v. All American Life Insurance Company
United States Court of Appeals, Seventh Circuit, 09 October 2002
No. 02-2458
Cited as: CoA Seventh Circuit, Oct. 9, 2002 (US)
In § 61
Scandinavian Reinsurance Co Ltd v Saint Paul Fire and Marine Insurance Company and Ors
United States Court of Appeals, Second Circuit. 3 February 2012
Cited as: CoA Second Circuit, 3 Feb. 2012 (US)
In § 45
Memorandum for Respondent
XXIII
INDEX OF ARBITRAL AWARDS
Ad Hoc Arbitrations
Country X v Company Q of 1995
Challenge Decision of 11 January 1995
Cited as: Country X v Company Q, 11 Jan. 1995 (Ad Hoc)
In § 42
AWG Group Ltd. v the Argentine Republic of 2006-2016
Decision on the Proposal for the Disqualification of a Member of the Arbitral Tribunal (2007) and
Decision on a Second Proposal for the Disqualification of a Member of the Arbitral Tribunal (2008)
Cited as: AWG Group v Argentine Republic, 22 Oct 2007 (Ad Hoc)
In §§ 52, 55, 56
ICS Inspection and Control Services Limited v the Republic of Argentina of 2009
Decision on Challenge to Mr. Stanimir A. Alexandrov
Cited as: ICS Inspection v Argentina, 17 Dec. 2009 (Ad Hoc)
In § 29
China International Economic & Trade Arbitration Commission [CIETAC]
CIETAC of 2000
CISG-online No. CISG/2000/06
Cited as: CIETAC, 7 Jan. 2000 (China)
In § 121
CIETAC of 2002
CLOUT No. 984
Cited as: CIETAC, 4 Nov. 2002 (China)
In § 114
International Chamber of Commerce [ICC]
ICC Case No. 11849 of 2003
Cited as: ICC Case No. 11849 (2003)
In § 117
Memorandum for Respondent
XXIV
International Centre for Settlement of Investment Disputes [ICSID]
ICSID Case No. ARB/81/2 of 1983
Cited as: ICSID Case No. ARB/81/2
In § 127
ICSID Case No. ARB/03/17 of 2007
Decision on the Proposal for the Disqualification of a Member of the Arbitral Tribunal
Cited as: ICSID Case No. ARB/03/17 (2007)
In § 58
ICSID Case No. ARB/07/16 of 2010
Decision on Respondent’s Proposal to Disqualify Arbitrator Dr. Yoram Turbowicz
Cited as: ICSID Case No. ARB/07/16 (2010)
In § 45
ICSID Case No. ARB/07/26 of 2010
Decision on Claimant’s Proposal to Disqualify Professor Campbell McLachlan, Arbitrator
Cited as: ICSID Case No. ARB/07/26 (2010)
In § 58
ICSID Case No. ARB/06/18 of 2011
Cited as: ICSID Case No. ARB/06/18
In § 127
ICSID Case No. ARB/10/14 of 2011
Decision on Proposal to Disqualify Professor Philippe Sands, Arbitrator
Cited as: ICSID Case No. ARB/10/14 (2011)
In §§ 46, 63
ICSID Case No. ARB/12/6 of 2015
Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd. Sti. v Turkmenistan
Cited as: ICSID Case No. ARB/12/6 (2015)
In § 29
Memorandum for Respondent
XXV
London Court of International Arbitration [LCIA]
LCIA Ref. No. UN96/X15 of 1996
LCIA Court Decision on Challenge to Arbitrator, 29 May 1996
Cited as: LCIA Ref. No. UN96/X15 (1996)
In § 64
LCIA Ref. No. 81160 of 2009
LCIA Court Decision on Challenge to Arbitrator, 28 August 2009
Cited as: LCIA Ref. No. 81160 (2009)
In § 56
LCIA Ref. No. 81224 of 2010
LCIA Court Decision on Challenge to Arbitrator, 15 March 2010
Cited as: LCIA Ref. No. 81224 (2010)
In § 46
Tribunal of International Commercial Arbitration at the Russian Federation Chamber of
Commerce and Industry [ICAC at the RF CCI]
The ICAC at the RF CCI Case No. 238/1998 of 1999
CLOUT No. 473
Cited as: The ICAC at the RF CCI, 7 Jun. 1999 (Russia)
In § 115
The ICAC at the RF CCI Case No. 95/2004 of 2005
CISG-Online No. 1456
Cited as: The ICAC at the RF CCI, 27 May 2005 (Russia)
In § 115
Memorandum for Respondent
XXVI
INDEX OF LEGAL RESOURCES
• Explanatory Note by the UNCITRAL Secretariat on the 1985 Model Law on International
Commercial Arbitration as amended in 2006
• ICC Rules of Arbitration 2017 (with Standard Clauses) (ICC Rules)
• International Bar Arbitration Guidelines on Conflicts of Interest (IBA Guidelines)
• International Centre for Dispute Resolution
• London Court of International Arbitration Rules (LCIA Rules)
• Rio Declaration on Environment and Development for States
• Stockholm Chamber of Commerce Rules (SCC Rules)
• Switzerland’s Federal Code on Private International Law
• UN Convention on International Sales of Goods (CISG)
• UN Convention on the Law of the Sea (UNCLOS)
• UN Model Law on International Commercial Arbitration (UML)
• UNCITRAL Arbitration Rules 2010 (UAR)
• UNIDROIT Principles of International Commercial Contract (UPICC)
• Zivilprozessordnung (ZPO) (Austria)
Memorandum for Respondent
XXVII
LIST OF ABBREVIATIONS
§(§) paragraph(s)
% per cent
Answ. Answer
AP Audencia Provincial
Arb. Arbitration
Art. Article
BGer Bundesgericht
BGH Bundesgerichtshof
CEO Chief Executive Officer
cf. confer
Chal. Challenge
Cl. Claimant
CoA Court of Appeal / Cour d’Appel
Corp. Corporation
DAL Danubian Arbitration Law
DC District Court
DIIA Declaration of Impartiality and Independence and Availability
et al. et alia/et aliae/et alii
et seq. et sequential
et seqq. et sequentes
Exh. Exhibit
GCP Global Compact Principles
GmbH Gesellschaft mit beschränkter Haftung
Memorandum for Respondent
XXVIII
IBA International Bar Association
ibid. ibidem
ICAC International Commercial Arbitration Court
ICC International Chamber of Commerce
ICDR International Centre for Dispute Resolution
ICJ International Court of Justice
ICSID International Centre for Settlement of Investment Disputes
i.e. id est
ITLOS International Tribunal for the Law of the Sea
LCIA London Court of International Arbitration
LG Landgericht
LP Limited Partnership
Ltd. Limited
Memo. Memorandum
No. Number
Not. Notice
OG Obergericht
OLG Oberlandesgericht
p(p). Page(s)
PCA Permanent Court of Arbitration
Ref. Reference
Req. Request
Resp. Response
PO Procedural Order
Memorandum for Respondent
XXIX
Prob. Problem
Rsp. Respondent
SA Sociedad Anónima
SCAI Swiss Chamber’ Arbitration Institution
SC Supreme Court
SCC Stockholm Chamber of Commerce
SIAC Singapore International Arbitration Centre
Sp Sociedad Participada
Swiss PIL Switzerland’s Federal Code on Private International Law
UAR UNCITRAL Arbitration Rules
UK United Kingdom of Great Britain and Northern Ireland
UML UNCITRAL Model Law on International Commercial Arbitration
UN United Nations
UNCITRAL United Nations Commission on International Trade Law
UNCLOS United Nations Convention on the Law of the Sea
UNIDROIT International Institute for the Unification of Private Law
US United States
USD US Dollar(s)
v versus
Vol. Volume
VJICASL Vindobona Journal of International Commercial Arbitration and
Sales Law
ZG Zivilgericht
ZPO Zivilprozessordnung (Austria)
Memorandum for Respondent
1
STATEMENT OF FACTS
The parties to this arbitration are Delicatesy Whole Foods Sp (hereinafter “CLAIMANT”) and
Comestibles Finos Ltd (hereinafter “RESPONDENT”, collectively “the Parties”).
CLAIMANT is a medium sized manufacturer of fine bakery products registered in Equatoriana.
RESPONDENT is a gourmet supermarket chain in Mediterraneo.
Mar. 3-6,
2014
Parties met at Danubian food
fair.
Mar. 10,
2014
RESPONDENT sent
invitation to tender to
CLAIMANT.
Mar. 17,
2014
CLAIMANT submitted Letter
of Acknowledgement.
Mar. 27,
2014
CLAIMANT sent its tender.
Apr. 7, 2014 RESPONDENT accepted the
tender by letter.
May 1, 2014 First delivery was made by
CLAIMANT.
2016 Mr. Prasad’s Article was
published on VJICASL.
Jan. 6, 2017 UNEP Report was released.
Jan. 19, 2017 Equatorian State Channel
showed a documentary
criticizing certification
process.
Jan. 23, 2017 Michelgault Business News
published the UNEP Report.
Jan. 27, 2017 RESPONDENT demanded
CLAIMANT to confirm
adherence to GCP.
CLAIMANT replied with a
promise to investigate.
Feb. 10, 2017 CLAIMANT informed
RESPONDENT about its
Suppliers involvement in
corruption.
Feb. 12, 2017 RESPONDENT terminated
the Contract.
May 4, 2017 Metadata was created by
CLAIMANT’s counsel Mr.
Fasttrack.
Jun. 30, 2017 Notice of Arbitration was
submitted. Mr. Prasad
appointed as arbitrator.
Jul. 31, 2017 Response to Notice of
Arbitration was submitted.
Aug. 29,
2017
RESPONDENT’s counsel
sent an e-mail about
CLAIMANT’s financing by a
third party funder.
Sep. 1, 2017 Order of President Rizzo for
disclosure of third party
funding.
Sep. 1, 2017 Prasad&Partner’s merger
with Slowfood is finalized.
Sep. 7, 2017 CLAIMANT informed the
Tribunal about Findfunds LP.
Sep. 11, 2017 Mr. Prasad’s disclosure
regarding connections with
Findfunds LP.
Sep. 14, 2017 Notice of Challenge of Mr.
Prasad was submitted.
Memorandum for Respondent
2
SUMMARY OF ARGUMENTS
Negotiations between the Parties got off to a start when they met in Danubian food fair in March 2014.
RESPONDENT, parallel with its tender process, sent an invitation to tender to CLAIMANT on March 10,
2014. At the end of the tender process, CLAIMANT was awarded the Contract (hereinafter “the
Contract”) on April 7, 2014. To produce the cakes, CLAIMANT bought cocoa beans from Ruritania
Peoples Cocoa GmbH. Unfortunately, a fraudulent scheme in Ruritania was discovered, which indicated
that the cocoa beans used in the cakes produced by CLAIMANT were not produced sustainably. Hence,
the cakes delivered were not in conformity with the Contract. RESPONDENT used its right to terminate
the Contract and refuse to pay for the non-conforming cakes. CLAIMANT refusing its liability, brought
the case before the Arbitral Tribunal (hereinafter “the Tribunal”).
In an attempt to gain unjust advantage in the arbitral proceedings, CLAIMANT appointed Mr. Prasad, a
biased arbitrator. RESPONDENT rightfully followed the necessary steps to initiate the challenge of Mr.
Prasad with the intention of his removal before the Tribunal. However, in order to hinder the process
agreed upon by the Parties within the arbitration clause, CLAIMANT now tries to divert the ongoing
proceedings from the Tribunal’s authority. Unfortunately, CLAIMANT’s incomprehensible, inconsistent
and groundless attempts to follow the challenge proceedings before ICC and PCA is no more than
ultimate disrespect to the Parties’ agreement and the Tribunal’s authority. Consequently, considering all
circumstances and applicable rules of law, the challenge proceedings shall take place before the Tribunal
without the participation of Mr. Prasad (ISSUE I).
Additionally, despite existence of many connections between Mr. Prasad and CLAIMANT or its third
party funder, CLAIMANT still tries to disregard such connections on grounds that have no actual basis.
By partially taking legal sources and placing them out of context, CLAIMANT tries to divert the Tribunal’s
attention from the important issue: RESPONDENT’s right to be heard by an open-minded arbitrator,
independent from and impartial to the Parties. RESPONDENT, here, proves Mr. Prasad’s partiality and
dependence upon CLAIMANT, its counsel, i.e. Mr. Fasttrack, and Findfunds LP. Hence, Mr. Prasad
should be removed from the Tribunal in order to ensure that no risk of bias exists during the arbitral
proceedings (ISSUE II).
CLAIMANT trying to evade its liability, asserts that its Standard Terms govern the Contract. However,
more fundamentally, CLAIMANT fails to identify what constituted an offer and acceptance and when the
Contract was concluded (Cl. Memo., lines 275-310, as used by CLAIMANT). Unfortunately, CLAIMANT
lacks the necessary knowledge regarding battle of forms doctrines, as it tries to apply last shot rule and
Memorandum for Respondent
3
knock out rule interchangeably (Cl. Memo., lines 326-351) and as it wrongfully claims UNIDROIT
Principles endorse the last shot rule (Cl. Memo., lines 355-359). These arguments are convoluted and
groundless. The correct application of legal theory in no case results in the application of CLAIMANT’s
Standard Terms (ISSUE III).
CLAIMANT, as a result of its vain attempt of evading its liability, unsuccessfully tries to argue that it was
not under a duty of result. However, it was more than obvious under RESPONDENT’s Standard Terms
that CLAIMANT guaranteed the result of the cakes being in conformity with the environmental
sustainability standards. Since it cannot prove that it fulfilled its obligation, CLAIMANT must be held
responsible under Art. 35 of CISG (ISSUE IV). Quite interestingly, CLAIMANT discusses whether its
breach was fundamental and it can be held immune from liability under Art. 79 of CISG (Cl. Memo, line
505 et seqq.) although Procedural Order No. 1 and No.2 clearly state that these issues are not to be
discussed at this stage of proceedings. This issue will not be addressed by RESPONDENT as required by
Procedural Order No. 1 and No.2.
ISSUE I: The Tribunal has the exclusive authority to decide on the challenge of
Mr. Prasad, without his participation.
1 Clause 20 of the Contract excludes the application of Art. 13(4) of UAR, as the parties have intended to
reflect the confidentiality concerns in Clause 20, deviations from the UAR may be made implicitly, and
Art. 13(4) of the UAR clearly involves arbitral institutions (A.). The Tribunal has the exclusive authority to
decide on the challenge of Mr. Prasad as per Art. 13(2) of the DAL and such recourse to the Tribunal by
no means can be a dilatory tactic, moreover Mr. Prasad must not participate in the challenge decision as
requested also by CLAIMANT (B.)
A. Clause 20 of the Contract excludes the application of Art. 13(4) of UAR.
2 Parties, under Clause 20 of the Contract, have agreed to settle their dispute through ad hoc arbitration. They
posited their intent to do so as “any dispute…shall be settled by arbitration in accordance with the
UNCITRAL Arbitration Rules without the involvement of any arbitral institution” (Not. of Arb., § 6).
Parties in resolving their disputes chose UAR, a set of rules considered tailor-made for the purposes of ad
hoc arbitration, and thus used very frequently in ad hoc arbitration (ZAHRADNÍKOVÁ, § 14.08). However,
in order to reflect their intention fully, the parties have also specifically incorporated an addition to the
arbitration clause, which reads “without the involvement of any arbitral institution” (Not. of Arb., § 6). This
custom-made and explicit addition illustrates the ultimate intention to deviate from any regime or rules
UAR may include relating to the involvement of any arbitral institution.
Memorandum for Respondent
4
3 The application of Art. 13(4) of the UAR has been excluded vis-à-vis the explicit wording of Clause 20
regarding the non-involvement of any arbitral institution. Such exclusion stems from the fact that (1.) the
parties have intended to reflect the confidentiality concerns in Clause 20, (2.) deviations from the UAR
may be made implicitly, and (3.) Art. 13(4) of the UAR clearly involves arbitral institutions.
1. Parties have intended and agreed to avoid the involvement of any arbitral institution
due to confidentiality concerns.
4 RESPONDENT operates its business in a very much reputation-sensitive manner and any potential threat
thereto results in RESPONDENT’s suffering great losses (Rsp. Exh. R 5). RESPONDENT, for this very
reason, made CLAIMANT aware of its confidentiality concerns stemming from a leak during previous
arbitration proceedings and that RESPONDENT switched to ad hoc arbitration as a consequence, as
specified by Annabelle Ming (Head of Purchasing of RESPONDENT) (Rsp. Exh. R 5). Such
confidentiality concerns naturally lead to RESPONDENT’s desire to refrain from any arbitral institution
for any purpose during the entire proceedings and let “as few persons as possible to know about the arbitration”
other than the parties and the Tribunal (Not. of Chal., § 8; Rsp. Exh. R 5).
5 CLAIMANT, in return to confidentiality concerns of RESPONDENT, voiced its concern as to the
composition of arbitral tribunal in ad hoc arbitration (Rsp. Exh. R 5). The e-mail dated Mar. 10, 2014 has
been sent in light of these previous communications and the concern voiced by CLAIMANT, and thus
constitutes the Parties’ final understanding of Clause 20 (Cl. Exh. C 1; Prob., p. 52). In this e-mail,
RESPONDENT has made its position very clear as to the concerns regarding composition of tribunal
giving way to the concerns regarding confidentiality (Rsp. Exh. R 5). CLAIMANT, having received such e-
mail yielding precedence to confidentiality, agreed to Clause 20 and to the non-involvement of any arbitral
institution.
6 CLAIMANT acknowledges the fact that it understood the addition as a deviation from the regime of
appointment of arbitrators foreseen in the UAR (Resp. to Not. of Chal). However, ironically, now
CLAIMANT asserts that such deviation does not apply to the regime of challenge of arbitrators. Art.
9(1)(2) of the UAR pointing out to the appointing authority for the appointment of arbitrators, and Art.
13(4) of the UAR pointing out to the appointing authority for the challenge of arbitrators are parallel in
their procedure and ratio legis. Moreover, in the e-mail dated Mar. 10, 2014, in defining what gives way to
confidentiality concerns, the term “composition of tribunal” has been used (Rsp. Exh. R 5). This term
refers both to the appointment and challenge of arbitrators as regulated under the UAR, and makes no
distinction between the two. Therefore, CLAIMANT in acknowledging the deviation from the regime of
appointment of arbitrators, also acknowledges the deviation from Art. 13(4) of the UAR.
7 The parties have intended and agreed to avoid the involvement of any arbitral institution due to
confidentiality concerns. Moreover, CLAIMANT has acknowledged that it has agreed to accrue the
Memorandum for Respondent
5
confidentiality concerns primarily over any concern it had raised relating to the composition of tribunal,
including also challenge of arbitrators. Therefore, the parties’ intention was no different than what the
explicit wording of Clause 20 mandates and it is the non-involvement of any arbitral institution.
2. Deviations from the UAR may be made implicitly.
8 CLAIMANT argues, “a clearer wording would have been required for a deviation from the standard procedure” of the
UAR (Resp. to Not. of Chal; Cl. Memo., lines 91, 92). Deviation from Art. 13(4) of the UAR qualifies as a
modification, in the meaning of Art. 1(1) of the UAR. Any such modification may be made through an
express or implicit agreement of the parties (CARON ET AL., p. 19). Travaux préparatoires illustrate that no
explicit reference to rule from which the parties intend to deviate has to be made (CARON ET AL., p. 20).
As illustrated above (see supra § 4 et seq.), the parties have intended and agreed to a deviation, for
confidentiality purposes, and moreover CLAIMANT has acknowledged and agreed to this deviation.
Therefore, the existence of Clause 20 with the addition qualifies easily as an implicit agreement to deviate
from Art. 13(4) of the UAR, and no clearer wording is required for that purpose.
9 CLAIMANT also argues that RESPONDENT’s invoking of Art. 13(1) of the UAR to trigger challenge is
contradictory, as RESPONDENT illustrates Art. 13(4) of the UAR is modified and excluded (Cl. Memo.,
line 85). However, by no means it is contradictory, as these sub-paragraphs of Art. 13 of the UAR are
completely different provisions and they can be modified separately.
3. Art. 13(4) of the UAR clearly involves arbitral institutions.
10 Parties have not agreed upon a separate procedure for challenge of arbitrators based on their autonomy.
Having acknowledged it, CLAIMANT requests ICC as the authority that must decide on the challenge of
Mr. Prasad (Cl. Memo., lines 35, 633). However, nowhere in Clause 20 of the Contract, or in the UAR and
the DAL, ICC has been authorized to make such decision. Moreover, any recourse to ICC would by all
means be in contradiction with the parties’ explicit agreement in Clause 20. Therefore, CLAIMANT’s
request must be dismissed.
11 Even in the unlikely event that the Tribunal should deem the references to ICC as an unfortunate clerical
error on part of CLAIMANT and should consider them references to the PCA, any such request must be
dismissed. CLAIMANT also argues that “the parties should refer the case to the Permanent Court of
Arbitration in The Hague” for it to function as the appointing authority (Cl. Memo., line 120). CLAIMANT in
asserting such, resorts to Art. 13(4) of the UAR (Cl. Memo., line 119).
12 According to Clause 20 of the Contract the UAR has been referred to specifically. However, by the virtue
of the abovementioned addition, the parties have intended and agreed to avoid the involvement of any
arbitral institution due to confidentiality concerns, and thus deviated from the provisions of the UAR
requiring a resort to arbitral institutions. Permanent Court of Arbitration in The Hague is also an arbitral
institution (FOUCHARD ET AL., § 969; BORN, p. 29; DAELE, p. 17; PAULSSON, p. 2.; GRIMMER, p. 1.)
Memorandum for Respondent
6
and therefore it cannot be empowered to undertake the task of acting as the appointing authority contrary
to the Parties’ explicit agreement.
13 Although CLAIMANT has not argued, one might argue that the Secretary-General of the PCA may
perform as the designating authority to determine a separate appointing authority, which would eventually
decide on the challenge of Mr. Prasad. However, any such involvement of the PCA would also constitute
involvement of an arbitral institution. “The integration of the PCA within an arbitral proceeding adds a permanent
institutional structure to the arbitral process. Such involvement within an arbitral proceeding can be named institutionalized
arbitration under the auspices of the PCA.” (INDLEKOFER, p. 2). Institutionalized arbitration under the
auspices of the PCA covers also appointing authority services for the appointment of arbitrators through
the Secretary General (ibid.; BORN, p. 33).
14 In acting as the designating authority, the Secretary-General does not act in his personal capacity, but he
acts as a position holder in the PCA. This is because (i) the Secretary-General uses his Secretariat
consisting of specialized lawyers in performing suck task (PAULSSON, p. 13) and (ii) the beneficiary of any
money transfer for benefitting from the designating authority services is the PCA (PCA Website). The use
of such secretariat and direct involvement of the PCA as the beneficiary would result in the exposure of
these arbitration proceedings, and would highly fuel the confidentiality concerns of the Parties.
15 The stance as to the RESPONDENT excluding all sorts of institutional involvement, including any
institutional support, has also been confirmed in paragraph 21 of PO2 (PO 2, § 21). Therefore, not only
direct recourse to institutions, but also any support or auspices they may provide has also been excluded.
16 Resorting either directly to the PCA as the appointing authority or to the Secretary-General of the PCA as
the designating authority would be in contradiction with Clause 20, as they would constitute either
institutional arbitration or institutionalized arbitration under the auspices of the PCA.
B. The Arbitral Tribunal has the exclusive authority to decide on the challenge of Mr. Prasad as
per Art. 13(2) of the DAL, without his participation.
17 The Tribunal has the exclusive authority to decide on the challenge of Mr. Prasad as per Art. 13(2) of the
DAL, and such recourse to the Tribunal can, by no means, considered a dilatory tactic, as this provision
provides procedural effectiveness (1.). The Tribunal must decide on the challenge without Mr. Prasad’s
participation, as also requested by CLAIMANT and as per the principle of nemo iudex in causa sua (2.).
1. The Arbitral Tribunal has the exclusive authority to decide on the challenge and such
recourse to the Arbitral Tribunal is not a dilatory tactic.
18 As the application of Art. 13(4) of the UAR has been excluded for the abovementioned reasons, “the
arbitral tribunal shall decide on the challenge” as per Art. 13(2) of the UML, which is lex arbitri and thus is
DAL.
Memorandum for Respondent
7
19 CLAIMANT argues that the challenge “… is an obvious attempt by RESPONDENT to derail these
arbitral proceedings and to postpone the date when it will be ordered to pay the amount long overdue”
(Resp. to Not. of Chal). However, CLAIMANT, through arguing that the authority to make a challenge
decision is vested on the Tribunal, actually makes a reference to the more rapid forum to resolve the
challenge. Moreover, any such alleged amount based on frivolous claims will not be ordered, as explained
below (see below § 71 et seqq.).
20 The system through the Secretary-General of the PCA requiring the designation of a separate appointing
authority is truly “cumbersome, onerous” and long as it involves a number of different stages, such as applying
to the Secretary-General of the PCA, his designating a separate appointing authority, and such authority’s
making a decision on challenge (FOUCHARD ET AL., § 970, 971). On the contrary however, recourse to
the Tribunal to resolve the challenge “ensures that the arbitration may commence and proceed effectively”
(UML Explanatory Notes, § 23). Therefore, ironically enough, CLAIMANT is willing to pursue the system,
which would cause considerable delays, contrary to its allegations towards RESPONDENT.
21 In accordance with Clause 20 and Art. 13(2) of DAL, the Tribunal shall decide on the challenge and the
Tribunal is the forum through which the challenge would be decided on most rapidly and efficiently.
2. The Arbitral Tribunal must decide on the challenge without Mr. Prasad’s
participation.
22 The Tribunal must decide on the challenge without Mr. Prasad. CLAIMANT also asserts that Mr. Prasad
must not decide on its own case as per the principle of nemo iudex in causa sua (Cl. Memo., line 125). As a
matter of fact, CLAIMANT asserts the same level of importance to “the problem of Mr. Prasad deciding on its
own challenge.” (Cl. Memo., line 125) as RESPONDENT does, and even in its headline it states, “the decision must
be made without Mr. Prasad’s participation” (Cl. Memo., line 36).
23 Although CLAIMANT has not argued, one might argue that the Tribunal must decide on the challenge
with its full composure, including Mr. Prasad. However, such an argument would be unmeritorious as the
legal nature of the principle of nemo iudex in causa sua must be given full effect in this case as Mr. Prasad is
obviously dependent and partial. “The very first fundamental principle of arbitration, and in particular of
arbitral procedure, is undoubtedly that of the impartiality of the arbitrator, a principle which overlaps with
the general principle of law nemo iudex in causa sua” (LALIVE, § 145). The prohibition to decide in one's
own cause is a guarantee of the impartiality of the judge and arbitrator and the respect of this principle
belongs to those rules of procedure, which are absolutely mandatory (ibid.).Under UML, an approach
similar to ICSID Convention has been adopted, and the two “other unchallenged arbitrators shall decide
on the challenge” (TUPMAN, pp. 31, 32).
24 In line with the principle of nemo iudex in causa sua, the other two members of the Tribunal must decide on
the challenge of Mr. Prasad.
Memorandum for Respondent
8
Conclusion to the First Issue
The parties have successfully agreed to exclude the application of Art. 13(4) of the UAR, as they intend to
avoid the involvement of arbitral institutions, including the ICC or PCA, in the arbitration proceedings.
Therefore, the Tribunal, the most rapid forum, must decide on the challenge of Mr. Prasad, without his
participation as also requested by CLAIMANT and as per the principle of nemo iudex in causa sua.
ISSUE II: Mr. Prasad should be removed from the Arbitral Tribunal.
25 RESPONDENT, in its Notice of Challenge has brought up four alleged grounds of challenge for declaring
absence of impartiality and independence of Mr. Prasad (Not. of Chal., §§ 8-11). First ground is the
appointment of Mr. Prasad as arbitrator in two different proceedings by the counsel of CLAIMANT’s law
firm, i.e. Fasttrack & Partners (“Appointment by Fasttrack & Partners”) (Cl. Exh. C 11). Second
ground is the previous appointments of Mr. Prasad by third party funder, i.e. Findfunds LP
(“Appointments by Third Party Funders”) (Prob., p. 36). Third ground is Mr. Prasad’s article on CSR
principles and conformity of goods (Rsp. Exh. R 4) (“VJICASL Article”). Last ground is the ongoing
arbitration counseled by Prasad & Slowfood, on whose side Findfunds LP also acts as a third party funder
(“Slowfood Arbitration”) (Prob., p. 36).
26 CLAIMANT tries to prevent RESPONDENT’s access to justice with the appointment of a partial and
dependent arbitrator and also with trying to conceal facts relevant to partiality and dependence of Mr.
Prasad. Although CLAIMANT may recourse to funding for this arbitration, the Tribunal should prevent
CLAIMANT’s intention to do so at the cost of impartiality and independence of the Tribunal.
27 RESPONDENT, in line with Art. 13(1) of the UAR, filed the Notice of Challenge for Mr. Prasad’s
removal from the Tribunal within the required time limit (B). Reasons why Mr. Prasad shall be removed
from the Tribunal are as follows: Mr. Prasad and CLAIMANT did not fulfill their disclosure obligations
(A), five grounds described below independently lead to justifiable doubts regarding impartiality and
independence of Mr. Prasad (C), and at the very least, cumulative consideration of these grounds lead to
justifiable doubts regarding impartiality and independence of Mr. Prasad (D).
A. Neither did Mr. Prasad nor CLAIMANT fulfill its disclosure obligation in accordance with
Art. 11 of UAR and IBA Guidelines.
28 Art. 11 of UAR and IBA Guidelines General Standard 3 prescribe that an arbitrator has the duty to
disclose all circumstances, which are “likely to give rise to justifiable doubts” for his impartiality and
independence “without delay” similar to established arbitral institution rules (CRISTANI, p. 157; cf. SCC
Rules Art. 14(3); cf. LCIA Rules Art. 5(5)). Furthermore, in line with Art. 11 of UAR, travaux préparatoires
determines the time frame of this obligation from the discussions for appointment until the publication of
Memorandum for Respondent
9
the award (Report WG45, § 64; cf. CROFT ET AL., § 117; cf. CARON ET AL., pp. 195-196; cf. DAELE, § 1-
086; cf. WALSH/TEITELBAUM, p. 289).
29 Furthermore, IBA Guidelines General Standard 7 imposes a disclosure obligation for parties “of any
relationship, direct or indirect, between …. the arbitrator and any person or entity with a direct economic
interest” and it is emphasized in the same standard to fulfill this obligation “at its own initiative at the
earliest opportunity” (Gen. Std. 7). Therefore, the Parties also have an ongoing disclosure obligation
throughout the arbitral proceedings. Although CLAIMANT argues that IBA Guidelines are inapplicable as
the Parties did not agree upon their application (Cl. Memo., lines 198-199), UAR does not establish set of
rules and conditions leading to the removal of the arbitrator from the Tribunal. In such cases, it is the
norm in international arbitration practice to refer to the case-law on the subject matter of the challenge
(WALSH/TEITELBAUM, p. 288; cf. BORN, p. 1841; cf. WAINCYMER, p. 296). As IBA Guidelines are set
of norms stemming from the international arbitration practice, the Tribunal, like many arbitral tribunals
(ICS Inspection v Argentina, 17 Dec. 2009 (Ad Hoc)), should regard them as set of rules governing disclosure
obligation and a spectrum of circumstances for the removal of the arbitrator from the Tribunal (ibid.;
BOGART, pp. 53-54; VON GOELER, p. 126; cf. ICSID Case No. ARB/12/6 (2015)). CLAIMANT,
unfortunately, partially quotes a court decision (Cl. Memo., line 202; Cl. Memo., footnote 11, as used by
CLAIMANT) stating non-binding nature of IBA Guidelines by being general principles of international
arbitration. The court decision states “yet [IBA Guidelines] are a precious instrument, capable of
contributing to harmonization and unification of the standards applied in the field of international
arbitration to dispose of conflict of interests (…) and such an instrument should not fail to influence the
practice of arbitral institutions and tribunals” (Bundesgericht, 20 Mar. 2008 (Switzerland)), parallel with the
scholars’ opinions and court decisions referenced above.
30 Thus, it is important to analyze all of the conflict of interest grounds with respect to both Mr. Prasad and
CLAIMANT for the fulfillment of disclosure obligation. As will be explained below, such failures shall lead
to removal of Mr. Prasad individually, even if not under cumulative consideration of conflict of interest
grounds (see below § 44 et seqq.).
31 With respect to Appointment by Fasttrack & Partners ground, RESPONDENT concedes to the fact that
Mr. Prasad partially fulfilled this obligation by his DIIA (Cl. Exh. C 11). However, Mr. Prasad had also the
duty to disclose the fact that he was specifically recommended by Mr. Fasttrack in one of these arbitrations
and in the ongoing arbitration (PO 2, § 10), thereby, creating a direct link between the counsel of
CLAIMANT and Mr. Prasad. Furthermore, with the knowledge of previous dealings between Mr.
Fasttrack and Mr. Prasad, CLAIMANT also had a duty to disclose that Mr. Fasttrack recommended
appointment Mr. Prasad in the current case (ibid.).
Memorandum for Respondent
10
32 Disclosure for the Appointments by Third Party Funders grounds was an obligation for both Mr. Prasad
and CLAIMANT due to significant material connection amounting to a commercial relationship between
Mr. Prasad and Findfunds LP as per IBA Guidelines Waivable Red List 2.3.6. Although Mr. Prasad
discloses such connections on September 11, 2017; material nature of these connections were not
disclosed in this letter (Prob., p. 36). Furthermore, CLAIMANT partially completes the disclosure obligation
pursuant to the order of the Tribunal (Prob., p. 34), as only the identity of the funder is released, despite the
need to release conditions and material aspects of the Funding Agreement (Prob., p. 35). Not only did
CLAIMANT failed to complete this disclosure on its own initiative, but also CLAIMANT failed to do so at
the earliest opportunity since the information was available on May 4, 2017 (Not. of Chal., § 3).
33 For the VJICASL Article, both Mr. Prasad and the CLAIMANT have failed to disclose this article
presenting an established opinion regarding the case as explained below (see below § 58 et seqq.). Only after
the Notice of Challenge, Mr. Prasad mentions the article, which does not fall in line with the requirements
of disclosure obligation to be at its own initiative and timely (Prob., p. 44). Metadata collected by
RESPONDENT also points out to the fact that CLAIMANT was made aware of this article latest on May
4, 2017 and therefore, it failed to fulfill its disclosure obligation as well in a joint attempt of CLAIMANT
and Mr. Fasttrack to conceal lack of impartiality and independence of Mr. Prasad (Not. of Chal., § 3).
34 Regarding the Slowfood Arbitration ground, RESPONDENT concedes to the fact that Mr. Prasad fulfilled
its disclosure obligation, as CLAIMANT’s connection with Findfunds LP was notified to him on
September 7, 2017. (Problem p. 35) However, CLAIMANT’s lack of cooperation for disclosing its
connections with Findfunds LP lead to the disclosure by Mr. Prasad on September 11, 2017 (Prob., p. 36).
As the CLAIMANT did not disclose the information regarding the third party funder, Mr. Prasad could
not disclose this fact on a timely manner under Art. 11 of UAR. Should CLAIMANT have abided its
disclosure obligation, Mr. Prasad could have disclosed the fact during the merger process, by being able to
detect such connection in the due diligence process (PO 2, § 7).
35 Consequently, on various occasions, Mr. Prasad and CLAIMANT failed to fulfill their disclosure
obligations and therefore, such failures should be considered by the Tribunal in favor of removal of Mr.
Prasad as these issues lead to justifiable doubts regarding impartiality and independence of Mr. Prasad (see
below §§ 44 et seqq.).
B. Challenge of Mr. Prasad was sent in timely manner in accordance with Article 13(1) of the
UAR.
36 Although CLAIMANT did not dispute the timeliness of challenge procedure and thereby waived its right
to pursue inadmissibility of the challenge, RESPONDENT shall in anyway prove that Notice of Challenge
was submitted in a timely manner. For Appointments by Third Party Funders and Slowfood Arbitration,
the time period to pursue a challenge starts from September 11, 2017 with Mr. Prasad’s disclosure of such
Memorandum for Respondent
11
connections. Whereas, challenge period for Appointment by Fasttrack & Partners start from November 3,
2017 with Procedural Order 2. Therefore, the Challenge of Mr. Prasad filed on September 14, 2017 falls
within the time period determined by Art. 13(1) of the UAR for all grounds.
37 For the Appointment by Fasttrack & Partners, although Mr. Prasad disclosed this connection with his
DIIA on June 30, 2017, it should be emphasized that this disclosure was made partially. Therefore, when
new facts were brought before RESPONDENT by the Procedural Order 2 on November 3, 2017, time
period to file the Notice of Challenge was renewed. In a clear contrast with his DIIA, Mr. Fasttrack gave
advise to his colleagues during the course of these arbitrations and additionally, Mr. Fasttrack
recommended Mr. Prasad in one of those arbitrations (PO 2, § 5). As these new facts concern Mr.
Fasttrack’s connection with Mr. Prasad, such facts lead to the conclusion that the time limit for filing of
challenge starts from November 3, 2017.
38 Even if one might argue that the time limit for filing the Notice of Challenge for Appointments by Third
Party Funders starts from the RESPONDENT’s discovery of the metadata, this is not the case in the
current arbitration. Firstly, the metadata only states that there exists a Third Party Funder and an Article by
Mr. Prasad (Not. of Chal., § 3). However, only on Mr. Prasad’s disclosure does RESPONDENT find out the
exact nature of the connections between Mr. Prasad and Findfunds LP. Especially, in the metadata it is
not stated that CLAIMANT is funded by a subsidiary of Findfunds LP or the nature of the Funding
Agreement. Thus, the circumstances mentioned in Art. 11 and 12 of UAR became known to
RESPONDENT on September 11, 2017, with partial explanation of the circumstances by Mr. Prasad
(Prob., p. 36).
39 Furthermore, the metadata points out to the intention of CLAIMANT to hide the funding from the
RESPONDENT and it fails to fulfill its disclosure obligation because of this action. Therefore, even if
CLAIMANT did not put forward an objection, any possible attempts to pursue the time limit to nullify the
challenge is in contradiction with the well-known legal principle “procedural good faith” (VON GOELER, pp.
399-400, CoA de Paris, 8 Feb. 2001 (France)).
40 For Slowfood Arbitration, it is apparent that RESPONDENT had no information regarding the merger
before Mr. Prasad’s disclosure of relevant circumstances (Prob., p. 36). Therefore, the designated time
period for Slowfood Arbitration ground also starts from September 11, 2017.
41 Consequently, RESPONDENT was in line with the time limits designated by Art. 13(1) of the UAR, when
filing the Notice of Challenge on September 14, 2017 (Not. of Chal., § 1).
C. There are various grounds that should lead to justifiable doubts regarding Mr. Prasad’s
impartiality and independence in the current circumstances as per Article 11-13 of the UAR.
42 In accordance with Art. 12 of UAR, the required basis for the removal of an arbitrator from the tribunal is
determined by the assessment of justifiable doubt (CROFT ET AL., § 11.4; CARON ET AL., p. 211),
Memorandum for Respondent
12
which requires the existence of a certain level doubt for risk of bias of the arbitrator in the decision process
(BORN, p. 1476; LEW/MISTELIS/KRÖLL, § 13-14; cf. VIETRI/DHARMANANDA, p. 193; cf. Country X
v Company Q, 11 Jan. 1995 (Ad Hoc); LCIA Case No. UN7949 (2007)). An objective assessment through the
perspective of a reasonable person is more compatible with Art. 12(2) of DAL and other rules in
international practice (BORN, p. 1476; UML Digest, § Art. 12-8; HWANG/LEE, p. 173; cf. Swiss PIL, Art.
180 (1); cf. LCIA Rules, Art. 10 (3); cf. ICDR Arbitration Rules, Art. 14(1)). This assessment should be made
from the perspective of the party filing the challenge, i.e. RESPONDENT in the current arbitration, for the
existence of doubt of opposing party “justifiable on some objective basis” for partiality and dependence of the
arbitrator (LEW/MISTELIS/KRÖLL, § 13-14).
43 It will be shown below that each ground defined above individually should lead to the removal of Mr.
Prasad from the Tribunal: Mr. Prasad and CLAIMANT’s non-fulfillment of disclosure obligation (1.),
Appointment by Fasttrack & Partners (2.), Appointments by Third Party Funders (3.), VJICASL Article
(4.) and Slowfood Arbitration (5.).
1. Failure of disclosure obligations by Mr. Prasad and CLAIMANT leads to justifiable
doubts regarding Mr. Prasad’s impartiality and independence.
44 Art. 11 of the UAR and IBA Guidelines General Standard 3 and 7 prescribe a disclosure obligation for
arbitrators and parties. In case of failure to fulfill such obligations, scholars and international practice state
that these failures create justifiable doubts regarding impartiality and independence of arbitrator
(LEW/MISTELIS/KRÖLL, § 11-36; DC The Hague, 5 Nov. 2004 (Netherlands)). Therefore, in line with Art.
12 of the UAR, existence of such doubts regarding impartiality and independence of an arbitrator shall
lead to the removal of the arbitrator (ibid.; SC United States, Nov. 18, 1968 (US)). As stated above, both Mr.
Prasad and CLAIMANT failed to fulfill their disclosure obligations to the extent required by both Art. 11
of the UAR and IBA Guidelines General Standard 3 and 7 (see supra § 28 et seqq.). Therefore, such failures,
in addition to attempts of CLAIMANT to hide the circumstances (Not. of Chal., § 3), leads RESPONDENT
to have justifiable doubts regarding Mr. Prasad’s impartiality and independence. Consequently, Mr. Prasad
should be removed from the Tribunal.
45 Although CLAIMANT did not argue regarding consequences for the failure of disclosure obligation, one
might argue that such failures do not lead to direct removal of the arbitrator without conduct of the
objective test for impartiality and independence. Even in that case, scholars and arbitration practice concur
on the idea that such failures should be considered as a contributing factor in the consideration of grounds
leading to justifiable doubts (REDFERN/HUNTER, §4.94; cf. WAINCYMER, p. 311; SCHERER ET AL.,
§ 178; cf. EWCH, 15 Sep. 2011 (UK); cf. ICSID Case No. ARB/07/16 (2010); cf. CoA Second Circuit, 3 Feb.
2012 (US); CoA Brussels, 29 Oct. 2007 (Belgium)). Therefore, RESPONDENT kindly requests the Tribunal to
Memorandum for Respondent
13
consider the failure of the disclosure obligation as an aggravating factor in the determination of existence
of justifiable doubt.
2. Repeated Appointments by Fasttrack & Partners affects impartiality and
independence of Mr. Prasad.
46 Appointment by Fasttrack & Partners creates a substantial relationship between the counsel of
CLAIMANT and Mr. Prasad. It is common in international practice that repeated appointments of
arbitrators by the same counsel lead to removal of the arbitrator from the Tribunal (LCIA Ref. No. 81224
(2010); ICSID Case No. ARB/10/14 (2011)). In the current case, Mr. Prasad was especially recommended
by Mr. Fasttrack in the current arbitration as understood from the metadata retrieved by RESPONDENT
(Not. of Chal., § 3). Furthermore, Mr. Fasttrack, as the managing partner of the law firm, had direct
involvement and direct economic relationship with the arbitrations, in which Mr. Prasad was acting as an
arbitrator (PO 2, § 9). In both of the arbitrations mentioned Mr. Prasad voted in favor of the party, of
which Fasttrack & Partner was the counsel, thereby, Fasttrack & Partners gained financial benefits from
these arbitratios as a consequence of Mr. Prasad’s vote (PO 2, § 15). Consequently, such level of
connection should enable the Tribunal to remove Mr. Prasad based on the existence of justifiable doubts
regarding his impartiality and independence.
47 Contrary to any possible arguments for RESPONDENT’s acceptance of such conflicts arising from
Appointments by Fasttrack & Partners, such acceptance in Response to the Notice of Arbitration was
restricted the issues stated in his DIIA (Resp. Not. of Arb., § 22). Not only did RESPONDENT find out that
the DIIA was partially incorrect, but also relevant additional facts not disclosed to RESPONDENT were
available to Mr. Prasad at the time of the disclosure. In his declaration (DIIA), Mr. Prasad has stated that
Mr. Fasttrack himself was not involved in the cases (Cl. Exh. C 11), however, in fact Mr. Fasttrack gave
advise to his colleague running the cases (PO 2, § 9). Furthermore, Mr. Fasttrack recommended Mr.
Prasad for the second arbitration, also proving his extensive involvement in the cases concerning Mr.
Prasad (ibid.) In overall consideration of additional circumstances revealed later on, the Tribunal should
consider RESPONDENT’s statement as to acceptance of restrictions in Mr. Prasad’s DIIA has been
nullified.
48 Therefore, such statement shall not prevent the Tribunal to consider this ground either independently or
under the cumulative consideration of the grounds (see below § 67 et seqq.).
Memorandum for Respondent
14
3. Repeated Appointments by Third Party Funders creates a material link between Mr.
Prasad and Findfunds LP leading to justifiable doubts.
Figure 1: Connections between Findfunds LP and Mr. Prasad
49 Mr. Prasad has been appointed four times by a party funded by Findfunds LP, which make up 20% of his
appointments overall, over the course of last three years (PO 2, § 10). This action of Findfunds LP created
a direct connection between Findfunds LP and Mr. Prasad. Such connection is considered as a “significant
commercial relationship” under IBA Guidelines Waivable Red List 2.3.6. Although one might argue that third
party funders are not one of the parties or its affiliates within the meaning of IBA Guidelines Waivable
Red List, these Guidelines themselves put the third party funders in an equivalent position with a party
(Exp. to Gen. Std. 6, § b). Findfunds LP has the direct and significant economic interest in the outcome of
this case, as it funds all costs associated to the arbitral proceedings (PO 2, § 6) and as it will gain “25% of all
amount awarded in the arbitration” (PO 2, § 1). Therefore, Findfunds LP should be considered together
with CLAIMANT for the purposes of conflict of interest catalog under the Waivable Red List.
50 Additionally, one might also argue that Mr. Prasad and Findfunds LP do not have a significant commercial
relationship, however, RESPONDENT believes the contrary even just by reviewing connections of Mr.
Prasad and Findfunds LP from Figure 1. Over the course of last three years, Findfunds LP has paid Mr.
Prasad significant amount of money for four proceedings it funded (PO 2, §§ 6, 10). From the six ongoing
arbitrations funded by Findfunds LP, two of them is conducted with the involvement of Mr. Prasad (PO
2, § 2). Considering all facts together, it is highly likely that Findfunds LP has started an unwritten and
established commercial relationship with Mr. Prasad in order to increase its possibility of success in the
current arbitration. Therefore, connections between Mr. Prasad and Findfunds LP amount to a significant
commercial relationship and thereby, requires explicit waiver of RESPONDENT in order for him not to
be removed from the Tribunal (App. of Gen. Std., § 2). RESPONDENT has made its rejection to grant such
waiver apparent from the moment it learned about the exact nature of the funding (Not. of Chal.).
Memorandum for Respondent
15
51 Even if the Tribunal does not consider such condition to be under IBA Guidelines Waivable Red List
2.3.6, the Funding Agreement between CLAIMANT and Findfunds LP grant an extensive authority to the
funder to intervene to the arbitral proceedings, thereby creating justifiable doubts regarding Mr. Prasad’s
impartiality and independence as per Art. 11 of the UAR. Funding Agreement, still concealed by
CLAIMANT, is said to grant extensive authority to Findfunds LP to take part in the arbitral proceedings
(PO 2, § 4). Considering previous connections of Mr. Prasad and Findfunds LP, during the course of the
arbitration, any intervention by Findfunds LP enabled by the Funding Agreement has a significant
potential to alter the outcome of the arbitration. In order words, as long as Mr. Prasad is an arbitrator in
the current case, there exists risk of bias to the level required by Art. 11 of the UAR.
52 Secondly, it is necessary to state that the Funding Agreement precedes Notice of Arbitration together with
Appointment of Mr. Prasad (PO 2, § 5). Even before that, metadata reveals Findfunds LP had been a
factor in the appointment of Mr. Prasad (Not. of Chal., § 3). Therefore, due to its previous gains from
previous arbitrations, Findfunds LP could have taken role in the appointment of Mr. Prasad in the current
arbitration. As a consequence, such issues regarding repeated appointments (Cour de Cassation, 20 Oct. 2010
(France)) should be examined under the principles established in AWG Group v Argentine Republic
(AWG Group v Argentine Republic, 22 Oct 2007 (Ad Hoc)) parallel to international practice. For such repeated
appointments, the four criteria set forth in this case evaluate if justifiable doubt exists: proximity, intensity,
dependence and materiality (BORN, p. 1865; VON GOELER, p. 266).
53 Firstly, the proximity criterion is satisfied, when the connection between an arbitrator and a party is direct
(ibid.; BERGER, pp. 491-492). Findfunds LP has a corporate structure that establishes a subsidiary for every
arbitration to be funded and no arbitration is funded by Findfunds LP directly (PO 2, § 3). As these
subsidiaries are established with an aim to conceal its conflicts of interests and to abide by the applicable
legal regulations (PO 2, § 2), it is not possible to consider its subsidiaries different legal entities than
Findfunds LP, since it has de facto control over these subsidiaries. As the majority shareholder of Funding
12 Ltd., i.e. the subsidiary established to fund the current arbitration, Findfunds LP and Mr. Prasad has a
direct connection.
54 Although CLAIMANT has argued that Findfunds LP may not have voting rights to be in control of
Funding 12 Ltd. (Cl. Memo., lines 160 – 190), CLAIMANT is the party in the position to obtain the
shareholding structure of Funding 12 Ltd. As CLAIMANT can point to no evidence supporting this claim,
the Tribunal should disregard CLAIMANT’s such argument that has no factual and legal basis, and should
assume that being majority shareholder grants Findfunds LP control over Funding 12 Ltd.
55 Secondly, the intensity of the connection to some level is needed to prove the bias of an arbitrator (AWG
Group v Argentine Republic, 22 Oct 2007 (Ad Hoc)). As mentioned before (see supra § XX), Findfunds LP has
repeatedly appointed Mr. Prasad as arbitrator or his law firm as legal counsel, to be exact Findfunds LP
Memorandum for Respondent
16
has funded four arbitrations with the inclusion of Mr. Prasad over the course of last three years, including
three arbitrations as party-appointed arbitrator (PO 2, §§ 6, 10). Currently, one-third of the arbitrations
funded by Findfunds LP are directly connected to Mr. Prasad (PO 2, § 2). Therefore, the intensity level to
such an amount should satisfy the necessary level for this criterion (BORN, pp. 1882-1883;
WALSH/TEITELBAUM, p. 300; PARK/ROGERS, pp. 119-120; High Court of Delhi, 11 Feb. 2010 (India);
OLG Hamburg, 22 Jul. 2002 (Germany)).
56 Lastly, material aspect of the connection should be considered for materiality and dependence conditions
for establishing the bias of the arbitrator (AWG Group v Argentine Republic, 22 Oct 2007 (Ad Hoc); cf. LCIA
Ref. No. 81224 (2011); KHAMBATA, p. 630). As these two conditions are highly interrelated, both of
these will be assessed at once. In order to uphold the challenge, arbitration practice expects arbitrator to be
dependent on third party funders by gaining monetary compensation (LCIA Ref. No. 81160 (2009);
SCHERER ET AL., p. 182). Mr. Prasad gained 20% of his arbitrator fees over the course of last three
years from Findfunds LP (PO 2, § 10), this is a considerable part of his earnings that constitutes material
aspect of the relationship. Furthermore, an additional benefit received from Findfunds LP is from
Slowfood Arbitration in the amount of 1.8 million US$ (see below § 63).
57 Considering these factors together, the connection between Mr. Prasad and Findfunds LP, satisfies all
criteria determined by AWG Group v Argentine Republic supported by international practice and
therefore, should lead to the removal of Mr. Prasad from the Tribunal.
4. VJICASL Article constitutes justifiable doubts as it presents a pre-judgment of the
case.
58 VJICASL Article leads to justifiable doubts as to the impartiality of the arbitrator as this article renders a
decision towards CLAIMANT at the current case. Mr. Prasad actually discusses the very subject matter of
the dispute in his article. In this article Mr. Prasad implies that there is no obligation to ensure that the
goods are in conformity with the CSR standards (Rsp. Exh. R4), reiterating CLAIMANT’s arguments on
the subject-matter of the case. Even though international practice and scholars concur on the fact that
independent articles on abstract matters should not lead to removal, specific articles written on the content
of the dispute leads to removal of the arbitrator even at the later stages of arbitral proceedings (ICSID Case
No. ARB/07/26 (2010); ICSID Case No. ARB/03/17 (2007); ICSID Case No. 05/07 (2009)). VJICASL
Article presents Mr. Prasad’s opinions regarding subject-matter of the case, on which CLAIMANT concurs
as well (Cl. Memo., lines 217 – 220). Furthermore, CLAIMANT argues that Mr. Prasad’s opinions may not
be determinative in this case (ibid.), however, it is apparent that Mr. Prasad’s established view regarding
conformity with the CSR standards cause a substantial risk regarding RESPONDENT’s right to have
open-minded arbitrators within the Tribunal (PCA Case No. 2013-09 (2013)). Mr. Prasad’s connections
and views is certain to prevent him from having an open mind to hear arguments of RESPONDENT,
Memorandum for Respondent
17
without any prejudgment or inclination towards one of the Parties, thereby, prevent RESPONDENT’s
access to right to be heard (ibid.; DÍAZ-CANDIA; WAINCYMER, pp. 307-308). Such substantial risk meets
the standards necessary for existence of justifiable doubts or existence of risk of bias leading to Mr. Prasad’s
removal from the Tribunal in line with Art. 11 of the UAR (emphasis added).
59 Additionally, CLAIMANT states that Mr. Prasad is the “perfect arbitrator” for this case due to VJICASL
Article and also tries to hide this fact (Not. of Chal., § 3). These actions of CLAIMANT aggravate
RESPONDENT’s understanding as to how much opinionated Mr. Prasad is and thereby, increasing the
level of risk of bias.
60 Consequently, the Tribunal should remove Mr. Prasad with such level of risk of bias and should not
endanger RESPONDENT’s access to fair trial in the unlikely chance that Mr. Prasad may “not decide based on
this opinion” (Cl. Memo., line 220).
5. Slowfood Arbitration constitutes a valid ground for establishing partiality.
61 Connection between Mr. Prasad and Findfunds LP for Slowfood Arbitration is a material one that could
impact the decision-making process of the current arbitration (cf. FRY/GREENBERG, § 20(2); CoA
Seventh Circuit, Oct. 9, 2002 (US); CoA Ninth Circuit, Apr. 5, 1994 (US)), which should be considered under
IBA Guidelines Waivable Red List 2.3.6 (CoA Reims, Nov. 2, 2011(France)).
62 Currently, the arbitration proceedings for Slowfood Arbitration is ongoing. Furthermore, in the merger
process of Prasad & Partners and Slowfood, a due diligence was conducted on Slowfood (PO 2, § 7).
Therefore, Mr. Prasad, by way of the findings of this due diligence, could be aware of the circumstances of
the Slowfood Arbitration (ibid.) and even may be informed of the circumstances as an equity partner of
Prasad & Slowfood (PO 2, § 8). This may lead Mr. Prasad to consider such circumstances in the decision-
making process.
63 Moreover, all costs associated with the arbitration is partially paid by Findfunds LP due to its shareholding
structure (PO 2, § 6). Considering the agreement between Prasad & Slowfood and CLAIMANT for legal
services, jointly with the Funding Agreement between CLAIMANT and a subsidiary of Findfunds LP
guaranteeing the payment of legal costs, Findfunds LP has a direct material connection with Prasad &
Slowfood in the amount of 1.8 million US$, with 1.5 million US$ already paid and the rest is due soon (PO
2, § 6). Thus, such amount of fees leads to a commercial relationship between law firm of Mr. Prasad and
Findfunds LP within the meaning of IBA Guidelines Waivable Red List 2.3.6 (ICSID Case No.
ARB/10/14 (2011)).
64 In conditions falling under Waivable Red List, IBA Guidelines require an express waiver by the opposing
party (App. of the Gen. Std., §§ 2, 4; cf. LCIA Ref. No. UN96/X15 (1996)) and in the absence of such waiver,
the arbitrator shall be removed from the Tribunal due to existence of “objective conflict of interest” (ibid.).
RESPONDENT, in the current case, explicitly stated its objections in the Notice of Challenge in a timely
Memorandum for Respondent
18
manner for Mr. Prasad to have such level of significant commercial relationship with Findfunds LP (Not.
of Chal., § 11).
65 Consequently, the Tribunal should remove Mr. Prasad due to his significant commercial relationship with
Findfunds LP as this leads to justifiable doubts regarding his independence and impartiality.
66 Even if one might argue that RESPONDENT’s acceptance of Mr. Prasad’s appointment includes
Slowfood Arbitration as well, that is not the case in the current arbitration since RESPONDENT was not
even made aware of the ongoing merger process and identity of third party funder, i.e. Findfunds LP, until
September 11, 2017 (Prob., p. 36). Thus, RESPONDENT’s acceptance, if not nullified (see supra XX), only
included Mr. Prasad’s colleagues at the former Prasad & Partners (Resp. Not. of Arb., § 22).
D. Cumulative consideration of all factors should lead to the removal of Mr. Prasad.
67 Tribunals and scholars have deliberated that although grounds for conflict cannot lead to disqualification
individually, cumulatively these could lead to removal of the arbitrator from the Tribunal
(PHILBLAD/KRISTENSEN, pp. 588-589; WALSH/TEITELBAUM, p. 288; LCIA Ref. No. UN3490
(2005); AP Madrid, 30 Jun. 2011 (Spain)).
68 Firstly, even if the Tribunal does not consider RESPONDENT’s acceptance for Appointments by
Fasttrack & Partners nullified, this ground should be reviewed under cumulative consideration of
circumstances together with other factors (see supra XX). This is because, various new issues pertaining to
statements made in the DIIA were revealed during the proceedings (see supra § 37) and therefore,
RESPONDENT can firmly say that if it knew such factors then, RESPONDENT would never have
accepted Mr. Prasad’s appointment.
69 Secondly, Findfunds LP has been granted a significant amount of control over the decision making
process of Mr. Prasad by way of the authorities granted under the Funding Agreement (see supra § 51) and
of becoming a counsel for the party funded by Findfunds LP in the Slowfood Arbitration (see supra § 61 et
seqq.). Furthermore, CLAIMANT’s action to conceal existence of such conflict grounds for such a long
period, between May 4, 2017 and September 7, 2017 (Not. of Chal., § 3; Prob., p. 36), leads RESPONDENT
to think that CLAIMANT has the idea that it might be able to impact Mr. Prasad regarding the outcome of
current arbitration through extensive connections he has with Findfunds LP.
70 RESPONDENT may agree with CLAIMANT that litigation funding should be available to it. However,
this should not intervene with RESPONDENT’s right to be heard by an impartial and independent
tribunal. Thus, Mr. Prasad has to be removed from the Tribunal as a consequence of conflict of interest
grounds individually and cumulatively.
Memorandum for Respondent
19
Conclusion to the Second Issue
Due to Mr. Prasad’s connections with Findfunds LP, CLAIMANT, CLAIMANT’s counsel Mr. Fasttrack
and Mr. Prasad’s established opinion in his article, it is apparent that there is justifiable doubts regarding
Mr. Prasad’s impartiality and independence. In order to ensure that RESPONDENT’s arguments will be
heard by an open minded, impartial and independent arbitrator, Mr. Prasad should be removed from the
Tribunal and be replaced.
ISSUE III: CLAIMANT’s Standard Terms in no way govern the contract.
71 CLAIMANT alleges that its Standard Terms govern the Contract. However, this allegation is groundless
because CLAIMANT's Standard Terms were not incorporated (A.), and even if they were incorporated,
CLAIMANT’s Standard Terms do not govern the Contract (B.).
A. CLAIMANT’s Standard Terms were not incorporated.
72 CLAIMANT seems to be confused about what constituted an offer and an acceptance in the case at hand
and consequently, when the Contract was concluded (Cl. Memo., lines 275-310). Hence, it is important to
eliminate this confusion before analyzing incorporation of CLAIMANT’s Standard Terms.
RESPONDENT sent its Tender Documents to CLAIMANT on March 10, 2014 (Cl. Exh. C 1). Those
documents included neither the price nor a detailed description of the product (Cl. Exh. C 2) and thus, it
was not sufficiently definite to constitute an offer pursuant to Art. 14 of CISG which requires proposals to
indicate the goods and fix the price. RESPONDENT also stated “I look forward to the submission of your
offer” in its letter (Cl. Exh. C 1) which clearly indicates that sending tender documents was solely an
invitation to offer. The offer, on the other hand, submitted by CLAIMANT on March 27, 2014 (Cl. Exh. C
3) fixed the price, described the goods as “Chocolate Cake - Queens’ Delight” and deviated from Tender
Documents regarding the payment process and the form of cakes (Cl. Exh. C 4). These points were
acceptable to RESPONDENT and therefore, it sent its acceptance on April 7, 2014 (Cl. Exh. C 5). Arrival
of the acceptance concluded the Contract which was performed for three years. Accordingly, there must
be no dispute whether or not the Contract was concluded.
73 RESPONDENT’s acceptance was for the price determined by CLAIMANT, payment process and shape
of cakes which deviated from provisions of Tender Documents. This acceptance clearly did not comprise
accepting CLAIMANT’s Standard Terms because those terms were not incorporated in the offer. Both
scholarly view and case law hold that the requirements for incorporation of standard terms in a contract
are apparent indication of the party’s intent to include these standard terms and availability of these
standard terms to the opposite party (FERRARI in: Kroll et al. § 39-40; SCHROETER in:
Schlechtriem/Schwenzer, p. 277; SCHMIDT-KESSEL; EISELEN; SCHWENZER/MOHS, p.241; BGH, 31 Oct.
Memorandum for Respondent
20
2011 (Germany); RB Utrecht, 21 Jan. 2009 (Netherlands); LG Landshut, 12 Jun. 2011 (Germany)). It is crucial to
analyze the first requirement in this case since RESPONDENT acknowledges that a reference was added
to the bottom of the offer (Cl. Exh. C 4) which could be sufficient to make the Standard Terms available.
74 Regarding the first requirement, “An effective inclusion of general terms and conditions thus first requires
that the intention of the offeror that he wants to include his terms and conditions into the contract be
apparent to the recipient of the offer.” (BGH, 31 Oct. 2011 (Germany); cf. CoA Katowice, 5 September 2012
(Poland)). In the case at hand, CLAIMANT’s intention to incorporate its Standard Terms- even if present-
was not reasonably apparent to RESPONDENT. Unfortunately, CLAIMANT now tries to get around its
liability arising from the delivery of non-conforming cakes by alleging the incorporation of these terms.
75 In order to determine if CLAIMANT had an intention to incorporate its Standard Terms that was
reasonably apparent to RESPONDENT, the offer should be interpreted based on Art. 8 of CISG.
Accordingly, it is necessary to go beyond the apparent meaning of the words by giving due consideration
to all relevant circumstances of the case including the negotiations (Secretariat Commentary Art.8 §§ 5-6).
76 First of all, the Contract was formed following a tender process initiated by RESPONDENT whose aim
was to receive offers in conformity with Tender Documents. This aim was ensured by requiring letters of
acknowledgement from offerors. CLAIMANT as well sent the Letter of Acknowledgement which clearly
stated “We have read the Invitation to Tender and will tender in accordance with the specified requirements.” (Resp.
Exh. R 1; emphasis added). Therefore, RESPONDENT had and a reasonable party in its position would have
an honest expectation that the offers would be in conformity with its Standard Terms. One of the
offerors, knowing the main aim of tender process, informed RESPONDENT about the changes it
requested in its letter of acknowledgement. Other four offerors sending letters of acknowledgement
indeed made offers fully conforming to Tender Documents (PO 2, § 23). CLAIMANT, however, claims to
have wanted to deviate from existing provisions despite its clear undertaking to offer in accordance with
Tender Documents in its Letter of Acknowledgement (Resp. Exh. R 1). Those deviations could of course
be possible, but there must have been specific notification and a following acceptance. CLAIMANT clearly
pointed out the deviation in the form of cakes and the payment process which were accepted by
RESPONDENT. However, it never mentioned its wish to change the set of standard terms the Contract
was subject to and therefore, it was never accepted by RESPONDENT.
77 Despite CLAIMANT’s allegations (Cl. Memo., line 260), the inclusion of Standard Terms was also a material
modification. “[E]xtent of one party's liability to the other” is counted as material change under Art.19 of
CISG and since these terms determined the nature of CLAIMANT’s obligation, i.e. whether it is a duty of
result or a duty of best efforts, inclusion of them constituted a material change. Like the other material
changes suggested by CLAIMANT, inclusion of its Standard Terms must have been clearly stated for such
intention to be reasonably apparent to RESPONDENT. Mere reference under the offer was not sufficient
Memorandum for Respondent
21
since the form was a template ordinarily used by CLAIMANT. Regarding their negotiation process,
CLAIMANT could not rely on such an automatic inclusion of reference since “[t]he obligation should be
on the party relying on [standard terms] to ensure that they are set out in a manner […]” (CISG-AC Opinion No.
13; emphasis added) where a reasonable party could understand their inclusion. Concerning the tender
process, CLAIMANT’s alleged intention to incorporate its own Standard Terms just by using a fixed form
clearly “differs from the expectation of the contractual partner to such an extent that the latter cannot
reasonably be expected to have anticipated that such a clause might be included” (LG Landshut, 12 June
2008 (Germany)).
78 Moreover, RESPONDENT made clear in its acceptance letter that it was not aware of any intention to
incorporate CLAIMANT’s Standard Terms by accepting only “the different payment terms and form of
the cake” and by clearly stating that it read CLAIMANT’s Standard Terms “out of curiosity” (Cl. Exh. C 5).
B. Standard Terms of CLAIMANT do not govern the Contract, even if they were incorporated.
79 CLAIMANT tries to equate the dispute with an ordinary battle of the forms situation while deciding on
which set of standard terms govern the Contract. As a consequence of this redundant attempt,
CLAIMANT presents an incomplete analysis of the facts both in its submission to arbitration and in its
memorandum. For instance, the Letter of Acknowledgement (Rsp. Exh. R1) was ignored by CLAIMANT
even though its importance was emphasized by RESPONDENT (Resp. to Not. of Arb., §§ 8,10, 25).
Additionally, CLAIMANT did not refer to the negotiations at the food fair in its memorandum. This lack
of the analysis of these facts causes CLAIMANT’s wrong conclusion about the governing standard terms
of the Contract.
80 The dispute regarding the nature of the obligation should be resolved by the application of
RESPONDENT’s Standard Terms. According to the facts of the case, a “battle of the forms” does not
exist (1.). Even if the Tribunal were to find otherwise, CLAIMANT’s Standard Terms do not govern the
Contract and it is either governed by RESPONDENT’s Standard Terms or should be interpreted in line
with RESPONDENT’S aim to become Global Compact LEAD Company (2.).
1. Tender process guarantees the application of RESPONDENT’s Standard Terms. A
“battle of the forms” does not exist.
81 CLAIMANT’s allegations regarding the battle of the forms problem are groundless. The Tender
Documents determine RESPONDENT’s Standard Terms as the set of rules governing the Contract (a.).
CLAIMANT accepted this fact by signing the Letter of Acknowledgement (b.). Furthermore,
RESPONDENT’s acceptance cannot be deemed as an assent to CLAIMANT’s Standard Terms due to
reliance promoted by CLAIMANT (c.).
Memorandum for Respondent
22
a. Tender documents expressly refer to application of RESPONDENT’s Standard
Terms.
82 RESPONDENT, as a super market chain known for its compliance with the fair-trade standards, decided
to procure sustainably produced chocolate cakes in 2014. RESPONDENT put out a tender for satisfying
its very specific need, namely buying high quality cakes and finding a supplier who adheres to the same
sustainability standards as RESPONDENT.
83 Art. 8 of CISG is used for interpretation of declarations of intent alongside with interpretation of contract
terms (SCHLECHTRIEM/BUTLER, p.56; BGer, 22 Dec. 2000 (Switzerland)). Art. 8(1) of CISG proposes a
subjective approach and Art. 8(2) of CISG introduces an objective one i.e. reasonable person theory
(HUBER in Huber/Mullis, p.12; KGer Fribourg, 11 Oct. 2004 (Switzerland)). RESPONDENT made clear its
intent concerning the application of its Standard Terms in the Tender Documents.
84 RESPONDENT prepared very detailed Tender Documents which consist of twenty-six sections (Cl. Exh.
C2). The aim of creating such a detailed document was to ensure the uniformity of the offers with regard
to these terms and conclude the Contract in a short period of time. This intent was made clear by the fact
that RESPONDENT requested letter of acknowledgements from the tenderers (Cl. Exh. C2; Rsp. Exh. R1)
85 General Conditions of Contract (Cl. Exh. C2) and Comestibles Finos’ Code of Conduct for Suppliers (Cl.
Exh. C2) state that the Contract is subject to RESPONDENT’s Standard Terms. RESPONDENT sent the
Tender Documents attached to Invitation to Tender on March 10, 2014 (Cl. Exh. C1). Thus,
RESPONDENT’s intent was known by CLAIMANT and this resulted in the inclusion of
RESPONDENT’s Standard Terms to the Contract.
b. CLAIMANT accepted to be bound by the Letter of Acknowledgement which
secures compliance of the offer with RESPONDENT’s Standard Terms.
86 The Letter of Acknowledgement was provided among the Tender Documents (Cl. Exh. C2). The Letter
of Acknowledgement was designed in a way to ensure the compliance of the offer with the Tender
Documents. The offerors confirmed that they got, read and were going to comply with the Tender
Documents. (Rsp. Exh. R1).
87 CLAIMANT submitted its Letter of Acknowledgement on March 17, 2014 which contained the following
statement: “We have read the Invitation to Tender and will tender in accordance with the specified
requirements.”, thereby CLAIMANT accepted to be bound by the Letter of Acknowledgement and to
make its offer accordingly (Rsp. Exh. R1).
88 RESPONDENT made the Letter of Acknowledgement a prerequisite for submitting an offer in the
Tender by asking CLAIMANT to return the Letter of Acknowledgment in case it decides to tender for the
Contract (Cl. Exh. C2). Thus, RESPONDENT gave possible offerors only a choice between making an
offer that complies with its Standard Terms or not to offer at all. Such intent on RESPONDENT’s part
Memorandum for Respondent
23
was made clear to the tenderers and unsurprisingly four of the tenderers out of six made no changes in
their offers. The only offeror who made changes in the Tender Documents other than CLAIMANT,
clearly notified RESPONDENT in its Letter of Acknowledgement of the changes it proposed (PO 2, § 23).
This shows that the tenderers were aware that RESPONDENT “would only accept offers which complied
with the Tender Documents” (Resp. to Not. of Arb. § 8). CLAIMANT was also aware that its offer should
comply with the Tender Documents. When it proposed the changes about the size of the cakes and the
payment, CLAIMANT notified RESPONDENT. However, CLAIMANT somehow refrained from making
a clear notification of the changes concerning its Standard Terms (Cl. Exh. C3).
89 Even though there exists “no common trade usage in Mediterraneo or Equatoriana stating that the
initiator of a tender process can bindingly dictate its General Conditions” (PO 2, § 44), CLAIMANT bound
itself to make an offer in line with the Tender Documents by signing the Letter of Acknowledgement. As
will be explained below, it was only natural for RESPONDENT to assume that CLAIMANT’s offer
pertained to a contract which would be governed by RESPONDENT’s Standard Terms.
c. RESPONDENT’s acceptance cannot be deemed as an assent to CLAIMANT’s
Standard Terms due to reliance promoted by CLAIMANT.
90 CLAIMANT based its allegations concerning the applicable standard terms on the acceptance of
RESPONDENT (Cl. Exh. C5). CLAIMANT misleadingly claims that by awarding the Contract,
RESPONDENT accepted to be bound by CLAIMANT’s Standard Terms (Cl. Memo., line 270). However,
this conclusion contradicts with the reliance promoted by CLAIMANT and disregards the basis that the
Contract was formed.
91 The protection of reliance is one of the general principles that CISG is based on and closely related to the
good faith principle. The principle relies on the idea that “a party who has created a situation of reliance,
upon which the other party has acted, has to bear the consequences of such situation.” (MAGNUS).
Article 8(2) of CISG accepts the reliance principle by the objective criterion for interpretation (KONERU,
p.118; SCHMIDT-KESSEL in Schlechtriem/Schwenzer, Art. 8 §20; KGer Fribourg, 11 Oct. 2004 (Switzerland); Trib
app Ticino, 29 Oct. 2003 (Switzerland)). Thus, the acceptance of RESPONDENT has to be evaluated in light
of the reliance promoted by CLAIMANT.
92 RESPONDENT accepted the offer because it was sure that the Contract will be governed by its Standard
Terms due to the reliance promoted by CLAIMANT. First of all, CLAIMANT committed to offer in
accordance with the Tender Documents by submitting the Letter of Acknowledgement (Rsp. Exh. R1).
The Letter of Acknowledgement is among one of the inseparable parts of the Tender Documents so the
offer has to be interpreted in light of the Letter of Acknowledgement. Therefore, RESPONDENT was
right to assume that the offer was complying with the Tender Documents.
Memorandum for Respondent
24
93 RESPONDENT received the sales offer attached to the Tender Documents (Cl. Exh C4). CLAIMANT
stated that “[to] be completely transparent, we have decided to submit a proper offer containing the
changes and have left the relevant sections in the Tender Documents open or refrained from including the
changes in the documentation” (Cl. Exh. C3). Namely, RESPONDENT received its Standard Terms as a
hard copy while CLAIMANT’s Standard Terms were only referred to in the footer (Cl. Exh. C4).
CLAIMANT notified RESPONDENT expressly about changing the size and payment terms and they were
expressed in the sales offer (Cl. Exh. C4). Other changes were presented as “minor amendments” (Cl.
Exh. C3). Thus, CLAIMANT directed RESPONDENT to focus on the changes made in size and payment
conditions. This explains why Ms. Ming read CLAIMANT’s Standard Terms merely “out of curiosity” and
did not feel the need to make a thorough inspection (Cl. Exh. C5).
94 Given the fact that the Parties’ Standard Terms share the same values and are both influenced by the GCP
(Cl. Exh. C5), it cannot be expected from RESPONDENT to notice the change in the nature of obligation
when Annabelle Ming read the boilerplate “out of curiosity”. Both Parties’ Standard Terms include similar
wording. Both of them include anti-bribery-corruption, environment protection, ethical business, human
rights, labour standards and health-safety provisions (Rsp. Exh. R 3; Cl. Exh. C 2).
95 CLAIMANT purports that the so-called inclusion of its Standard Terms is in fact a minor amendment (Cl.
Memo., line 255). However, it amounts to a change in the nature of the obligation and drastically affects the
liabilities of CLAIMANT. Hence, CLAIMANT’s Standard Terms cannot be accepted as a minor
amendment under Art. 19 of CISG (see supra § 77).
96 CLAIMANT’s attempt to change the nature of obligation by inserting its Standard Terms is fruitless. This
change does not constitute a minor amendment. Furthermore, CLAIMANT did not notify
RESPONDENT about this change as it did about other major amendments. Therefore, under Art. 8(2) of
CISG, RESPONDENT’s acceptance does not amount to a change in the nature of obligation. The
Contract was made subject to RESPONDENT’s Standard Terms and CLAIMANT has to bear this fact
due to reliance principle.
2. Even if a battle of the forms problem exists, the solution of the problem leads to a
duty of result. CLAIMANT’s Standard Terms do not govern the Contract.
97 If the Tribunal were to conclude that a battle of the forms problem exists, the knock-out rule would apply
through the application of the UNIDROIT Principles (a.). Even if the Tribunal were to rule that CISG
governs the battle of the forms problem, the knock out rule should nonetheless be applied to the dispute
(b.). Finally, the application of the knock out rule determines the nature of the obligation as a duty of result
(c.).
Memorandum for Respondent
25
a. Battle of the forms does not fall under the scope of CISG. The battle of the forms
analysis is governed by the UNIDROIT Principles.
98 During the drafting process of CISG several attempts were made for regulating the battle of the forms
problem (SCHLECHTRIEM/BUTLER, p.81). However, the proposal of the working group was rejected
and no provision regarding the battle of the forms was regulated in CISG (MULLIS in: Huber/Mullis, p.92;
VERGNE).
99 For the issues not dealt by CISG, the UNIDROIT Principles are applicable (PO 1, § 4). Article 2.1.22
deals with the battle of the forms. Unfortunately, CLAIMANT is unaware of the fact that Art. 2.1.22
regulates the knock out rule and erroneously stated that the article regulates the last shot rule (Cl. Memo. line
355). The last shot rule is not applicable under UNIDROIT Principles.
b. In case CISG determined as governing law to the battle of the forms problem, the
knock out rule should be applied.
100 Unlike the UNIDROIT Principles, CISG does not contain an express provision on the battle of the
forms problem. The last shot rule is criticized by many specialists. It is found to be mechanic and arbitrary
(VISCASILLAS, p.116 et seq.) and not to reflect the realities of the trade (BERGENTHAL/EISELEN,
p.221; MULLIS in: Huber/Mullis, p.94). It is disputed that whether the solutions reached by the last shot
rule accord with “the parties’ true intentions” (MULLIS in: Huber/Mullis, p.94).
101 The last shot rule contradicts with the observance of the good faith in international trade under Art. 7(1)
of CISG. In a decision by the German Supreme Court, the drawback of the last shot rule is emphasized as
follows: “(For) the user of the clauses, however, it is easily possible to attach to his offer the general terms
and conditions, which generally favor him. It would, therefore, contradict the principle of good faith in
international trade (Art. 7(1) CISG) as well as the general obligations of cooperation and information of
the parties to impose on the other party an obligation to inquire concerning the clauses that have not been
transmitted and to burden him with the risks and disadvantages of the unknown general terms and
conditions of the other party.” (BGH, 31 Oct. 2001 (Germany)). The behavior described by the court
corresponds with what CLAIMANT has done during the negotiations of the Contract.
102 As the initiator of the tender process, RESPONDENT does not have the chance to avoid the offers
provide the last shots. It leads to an unfair situation that can be taken advantage of like CLAIMANT tries
to do (Cl. Memo., line 295). If the Tribunal were to conclude that the last shot rule is applicable, the offerors
are given the option of determining the content of the Contract by only giving a reference to their
boilerplates in their offers despite the former negotiations with RESPONDENT. In case the last shot rule
was applied, RESPONDENT would be forced to burden with unbearable “risks and disadvantages of the
unknown general terms and conditions of the other party” and “obligation to inquire” (BGH, 31 Oct.
Memorandum for Respondent
26
2001, (Germany)). These negative aspects of the last shot rule are even more significant for
RESPONDENT, because as the initiator of the tender process it acquired six offers.
103 For the reasons explained above application of the last shot rule to the case at hand brings unfair result
which disregards the intention of RESPONDENT for putting out the Tender. Hence, the knock out rule
shall be preferred over the last shot rule even if CISG is applied to the battle of the forms problem.
c. The application of the knock out rule determines the nature of the obligation as a
duty of result.
104 The knock out rule separates contract formation from identification of the contract terms (BGH, 9 Jan.
2002 (Germany); OLG, 26 Jun. 2006 (Germany)). According to the knock out rule, contract is formed on the
essentialia negotii i.e. dickered terms of the parties (BERGENTHAL/EISELEN, p.224; OLG, 24 May 2006
(Germany)). Conflicting standard terms however are knocked-out and to be filled later (Cour de Cassation, 16
Jul. 1998 (France)). In other words, the battle of the forms leads to a gap filling problem (WILDNER, p.7).
105 There is no dispute about the Parties’ intent to be bound by the Contract. The relationship between the
Parties between 2014 and 2017 proves their intention to be bound (Not. of Arb., § 6).
106 The standard terms of the Parties diverge as regards the nature of CLAIMANT’s obligation. It is disputed
whether the Contract imposes a duty of best efforts or a duty of result. Therefore, these parts of the
standard terms should be knocked-out. At this point, there is no need for a one by one provision analysis
to knock the conflicting terms out. All of the conflicting content should be excluded and the gap should
be filled later (BGH, 9 Jan. 2002 (Germany)).
107 Art. 4.8 of UPICC provides the way of filling the gap concerning the nature of the obligation in the
Contract. The supplementation issue is not an “interpretation of the parties’ agreement” under Art. 4.8 of
UPICC. Therefore, while determining the nature of the obligation, the Tribunal “must create rather than
interpret” the terms that refer to a duty of result or a duty of best efforts (PERILLO). The supplied terms
should be derived from “the intention of the parties as inferred from, among other factors, the terms
expressly stated in the contract, prior negotiations or any conduct subsequent to the conclusion of the
contract” (UNIDROIT Official Commentary, Art 4.8, p.147). These criteria are analogous with the ones
regulated in Art. 8 of CISG (cf. SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 13).
108 The Parties repeatedly referred to the Global Compact Principles during their negotiations and also in
their further relations (Cl. Exh. C 6; Cl. Exh. C 8; Resp. to Not. of Arb., §§4-5; Rsp. Exh. R5; PO 2, §31).
RESPONDENT’s request to produce the cakes sustainably stems from the desire to become a Global
Compact LEAD Company (Cl. Exh. C 1). CLAIMANT’s commitment to the GCP was essential to
RESPONDENT in becoming a business partner with CLAIMANT (PO 2, § 23). RESPONDENT’s
General Business Philosophy is “largely identical” to GCP (PO 2, § 31). RESPONDENT admits that it
shares the same values as those of CLAIMANT on standards of sustainability under CLAIMANT’s Codes
Memorandum for Respondent
27
of Conduct (Cl. Exh. C 5). Hence, the Standard Terms of the Parties are the documents that
operationalize the maxims suggested by GCP. In other words, the intention of the Parties determines the
purpose of the Contract as practicing the GCP.
109 The GCP are general principles that designating the sustainability goals. To determine whether
CLAIMANT’s obligation is a duty of result or a duty of best efforts, one has to identify the level of
adherence to the GCP. At his point being a Global Compact LEAD Company provides a guideline for
determining the nature of the obligation of CLAIMANT. RESPONDENT made clear its aim to become
Global Compact LEAD Company to CLAIMANT Cl. Exh. C1). Accordingly, RESPONDENT expressed
the importance of its reputation to be invited to Global Compact LEAD and the detrimental effects of
the bad press campaigns on its reputation in the past. The aim of including confidentiality clauses and
preferring ad hoc arbitration were also provided as protecting the reputation of RESPONDENT and
hence for becoming a Global Compact LEAD Company (Resp. Exh. R5). RESPONDENT’s intention to
become a LEAD Company has also a reflection in the Contract, i.e. inclusion of a confidentiality clause
and the selection of ad hoc arbitration as the dispute resolution mechanism (Cl. Exh. C2) Therefore,
RESPONDENT’s aim to become a Global Compact LEAD Company implied as the common intention
of the Parties under Art. 4.8 of UPICC/ CISG Art. 8. Therefore, while supplementing the terms regarding
the nature of the obligation, the focus should be on the requirements of the LEAD system concerning the
adherence level to the GCP. The Global Compact LEAD system expects strict adherence to the GCP
from candidates. Therefore, the supplied terms should refer to a duty of result to satisfy the conditions for
becoming a Global Compact LEAD Company (see below §§ 118-119).
Conclusion to the Third Issue
CLAIMANT’s Standard Terms are unable to govern the Contract because they were not incorporated.
Even if they were incorporated, CLAIMANT’s Standard Terms do not govern the contract and the
dispute resolved by either RESPONDENT’s Standard Terms or the terms supplied in light of the aim to
become Global Compact LEAD Company.
ISSUE IV: In case RESPONDENT’s Standard Terms are applicable, CLAIMANT
delivered non-conforming goods pursuant to Art. 35 of CISG.
110 CLAIMANT alleges that conforming goods were delivered; however, RESPONDENT respectfully
requests the Tribunal to find that CLAIMANT is responsible under Art. 35 of CISG, because CLAIMANT
was under a duty of result (A.), and it fails to prove the conformity of the cakes (B.). Even if the Tribunal
were to conclude that CLAIMANT was under a duty of best efforts, it still did not fulfill this obligation
(C.). Furthermore, CLAIMANT asserts that RESPONDENT was not entitled to terminate the Contract
Memorandum for Respondent
28
arguing that the breach was not fundamental and in any case CLAIMANT cannot be held liable as the
failure was due to an impediment beyond its control under Art. 79 of CISG. However, RESPONDENT is
not going to discuss these issues as it is clearly stated in both Procedural Order No 1 (PO 1, § 3) and No 2
that “(…) at this stage of the proceedings no need to discuss whether a breach, should it exist, was it
fundamental or whether damages are due and if so in which amount” (PO 2, § 48).
A. RESPONDENT’s Standard Terms include a duty of result under Art. 8 of CISG.
111 CLAIMANT, without giving any concrete reason, argues that its obligation under Parts C and E of
RESPONDENT’s Code of Conduct for Suppliers was not a duty of result (Cl. Memo, lines 477 et seqq.).
CLAIMANT specifies neither the nature of the obligation nor the level of care that should be expected by
CLAIMANT (ibid). All relevant circumstances definitely demonstrate that RESPONDENT’s intent was a
duty of result which CLAIMANT could not have been unaware of, under Article 8 of CISG (1.).
CLAIMANT could have asserted that RESPONDENT’s Standard Terms should be interpreted contra
proferentem. However, the contra proferentem rule cannot be applied (2.).
1. All relevant circumstances must be taken into account in interpretation of
RESPONDENT’s Standard Terms.
112 To determine the intent of the parties or the understanding of a reasonable person of the same kind,
Article 8(3) of CISG refers to all relevant circumstances. The relevant circumstances that must be taken
into account in the case at hand are, firstly, the wording of RESPONDENT’s Standard Terms (a.),
secondly, the contractual price agreed by the Parties (b.), and thirdly, the conduct of the Parties during the
negotiations and after the Contract was concluded (c.).
a. The wording of RESPONDENT’s Standard Terms clearly shows that
CLAIMANT was under a duty of result.
113 CLAIMANT only refers to the wording of the clauses in the Contract, and it tries to come to a conclusion
without any kind of interpretation under Art. 8 of CISG. Therefore, CLAIMANT would have agreed that
while determining the intent of parties, “[t]he primary starting-point, which is not expressly mentioned in
Article 8(3), must nevertheless be the wording of the statement” (SCHMIDT-KESSEL in: Schlechtriem/Schwenzer,
Art. 8 § 13; emphasis added) (See also: OLG Dresden, 27 Dec. 1999 (Germany)). Art 5.1.5 of UPICC also refers to
“the way in which the obligation is expressed in the contract”, which more specifically regulates how the
relevant circumstances can be used in order to determine whether the contract includes a duty of best
efforts or a duty of result (VOGENAUER in: Vogenauer/Kleinheisterkamp, Art. 5.1.5 § 1). In Section III of
Tender Documents, Clause 1 expressly states that “Ingredients have to be sourced in accordance with the
stipulations under Section IV” (Cl. Exh. C2, emphasis added). In addition, this requirement is referred to as
one of the “paramount specifications” under the same clause (ibid). In Section IV, Special Conditions of
Contract, the preamble emphasizes that RESPONDENT has “zero tolerance” against unethical business
Memorandum for Respondent
29
behaviour (ibid), which undoubtedly includes the actions of Ruritania Peoples Cocoa GmbH. Moreover,
Article 2 of Section IV includes a reference to “all obligations” arising from the Contract, which comprises
all Tender Documents as stated under Article 5 of Special Conditions of Contract (ibid). Code of Conduct
for Supplier is among Tender Documents (ibid). Therefore, RESPONDENT’s intent was obviously a strict
adherence to its Supplier Code of Conduct.
114 CLAIMANT, referring to the obligations under Parts C and E of RESPONDENT’s Code of Conduct for
Suppliers, argues that “CLAIMANT is only forced to comply with [these] requirements, but that does not
necessarily mean that CLAIMAN[T] guarantees that the ingredients of the goods come from sustainable
sources” (Cl. Memo, lines 479 et seqq.). However, as will be shown, CLAIMANT contradicts itself in the sense
that complying with the requirements under these parts clearly means guaranteeing the result. “The usual
meaning of the words used by the parties” must be given particular importance under Article 8 of CISG
(SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 41; CIETAC, 4 Nov. 2002 (China)). In
RESPONDENT’s Code of Conduct for Suppliers Part C, the requirement related to sub-suppliers reads as
follows: “ensure that your own suppliers comply with the above requirements” (Cl. Exh. C2, emphasis added).
The word “ensure” is defined as “make certain that (something) will occur or be the case” (Oxford Dictionary;
emphasis added). Moreover, in Part E, it is stipulated that CLAIMANT will “make sure” that its sub-suppliers
adhere to standards agreed upon which are comparable to the ones in Code of Conduct for Suppliers (Cl.
Exh. C2; emphasis added). The meaning of “make sure” is very similar to “ensure”: “Establish that
something is definitely so; confirm” (Oxford Dictionary, emphasis added). It is clearly seen that these words refer
to guaranteeing the result (NORTON ROSE FULBRIGHT, p. 9; cf. VERBRUGGEN, p. 95). “The
consideration of the clear wording (…) must be given priority over all other criteria of interpretation
according to Art. 8(3) of CISG” (HG Zurich, 24 Oct. 2002 (Switzerland)) (See also: Navarra Provincial High
Court, 27 Dec. 2007 (Spain)). Even if CLAIMANT argues that its intention was different, RESPONDENT is
justified to rely on the fact that its “unequivocal intent” is shared by the other party (SCHMIDT-KESSEL
in: Schlechtriem/Schwenzer, Art.8 § 24). In the case at hand, “the actual will of one party was so easily
recognizable by the other party that it could not have been unaware of it” (BGer, 5 Apr. 2008 (Switzerland))
(See also: ZUPPI in: Kröll et al., Art. 8 § 15; SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 24; Cáceres
Provincial High Court, 14 July 2010 (Spain)). As a result, it is quite certain under Art. 8 of CISG that
CLAIMANT was under a duty of result (cf. WILSON, p. 42).
115 A contract must be interpreted as a whole (SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 30),
even if CLAIMANT is apparently unaware of this as it only refers to the wording of Part C and E (Cl.
Memo, lines 467 et seqq.). Therefore, the comparison of the content of one contract term with the other may
give clues about the meaning of the former (The ICAC at the RF CCI, 27 May 2005 (Russia); The ICAC at
the RF CCI, 7 Jun. 1999 (Russia)). In General Conditions of Contract, Clause 21, it is stipulated that both
Memorandum for Respondent
30
parties undertake “to exercise their best endeavours to procure that such persons as may be under their
control keep confidential, the Information (…)” (Cl. Exh. C2, emphasis added). This clause clearly shows
that RESPONDENT was aware of the distinction between a duty of best efforts and a duty of result while
drafting the Contract. The nature of the obligations with regard to adherence of sub-suppliers to
environmentally friendly production and employees’ compliance with confidentiality is very similar in
essence: responsibility of one party from the actions or inactions of a third party. However,
RESPONDENT preferred to subject the other party to a stricter criterion when it comes to sub-suppliers’
adherence to Code of Conduct for Suppliers, which makes sense for a party who aims to be a Global
Compact LEAD company. Therefore, CLAIMANT was under a duty of result to guarantee the
compliance of its suppliers.
b. The price agreed by the Parties justifies a duty of result.
116 The contractual price is a relevant circumstance under Art. 8(3) of CISG which may hint about the nature
of obligation, i.e. whether it is a duty of result or duty of best efforts (See also: Art. 5.1.5(b) of UPICC).
Although CLAIMANT could have argued that the quality of the cakes was quite high, “[t]he price paid was
towards the upper end of the price paid for a premium product in the relevant market segment (…)” (PO 2, § 40;
emphasis added). This shows that, even if the price was not extraordinary, CLAIMANT is entitled to expect
the guarantee of sustainable production from RESPONDENT given the fact that other premium products
in the market have considerably lower prices.
c. In the course of negotiations, and also subsequently, RESPONDENT clearly
emphasized the importance of strict adherence to environmentally friendly and
sustainable production.
117 Although there is neither any reference nor any discussion by CLAIMANT, the negotiations prior to the
conclusion of contract between the Parties is one of the most important “relevant circumstances” under
Article 8(3) of CISG to determine the real common intent of the parties (ICC Case No. 11849 (2003);
ZUPPI in: Kröll et al., Art. 8 § 26; SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 32). During the
course of negotiations, both parties consistently referred to the importance of GCP. Moreover, the reason
why RESPONDENT invited CLAIMANT to submit an offer in the first place was its “its strict adherence to
the principle of ethical and sustainable production” (Cl. Exh. C1, emphasis added). Eventually, CLAIMANT
was awarded the Contract because it was the only offeror which is a Global Compact company (PO 2, §
23). Therefore, we can conclude there is no disagreement on the adherence to GCP, as also admitted by
CLAIMANT (Cl. Memo, line 491).
118 CLAIMANT could have argued that Principle 7 of GCP requires only a duty of best efforts, as it refers to
the precautionary principle. Even if this is assumed to be correct, it does not mean that parties cannot
agree on a stricter level of obligation. The level of efforts which is stipulated under GCP can be seen as a
Memorandum for Respondent
31
minimum standard expected by Global Compact companies (SCHWENZER, p. 125; cf. LEISINGER, p. 7).
However, RESPONDENT emphasized its goal to become a Global Compact LEAD company repeatedly
during the negotiations since the parties met in Cucina Food Fair. “LEAD is an exclusive group of sustainability
leaders from across all regions and sectors that represent the cutting edge of the UN Global Compact” (Global
Compact LEAD Brochure, 2015; emphasis added). Moreover, LEAD is an invitation based initiative and only
companies with “strong history of engagement with the UN Global Compact” are invited (ibid.). There are
three Global Compact LEAD companies in the field of food production, namely Danone, Nestlé and
Unilever. Their supplier codes of conduct include similar wording to RESPONDENT’s with regard to
environmental protection. For example, The Nestlé Supplier Code and Danone’s Code of Conduct for
Business Partners use the word “ensure” for compliance with sustainable production (The Nestlé Supplier
Code, pp. 3-4; Danone’s Code of Conduct for Business Partners, p. 5). Besides these facts, RESPONDENT referred
to the importance of avoiding bad press (Rsp. Exh. R5), as it could make it impossible to be invited to
LEAD. The purpose of the Contract and specific terms must be given particular weight in interpretation
(SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 29; cf. Provincial High Court of Madrid, 20 Feb. 2007
(Spain)). Therefore, to avoid any possible bad press, the only possible way was that both CLAIMANT and
its suppliers strictly adhere to GCP, which justifies a duty of result. As a Global Compact company,
CLAIMANT could not have been unaware of all these circumstances (cf. BGer, 22 Dec. 2000 (Switzerland), cf.
Provincial Court of Barcelona, 28 Apr. 2004 (Spain)).
119 In addition to the foregoing, the code of conduct which CLAIMANT makes its suppliers sign, and made
Ruritania Peoples Cocoa GmbH sign as well (Cl. Exh. C8), states that CLAIMANT expects its suppliers to
“ensure that their suppliers and sub-contractors to comply with the principles of this Supplier Code of
Conduct” (Rsp. Exh. R3). This is similar to what RESPONDENT expected from CLAIMANT (Cl. Exh.
C2). Under this clause, CLAIMANT immediately terminated its contract with Ruritania Peoples Cocoa
GmbH, even though it was not 100% certain that Supplier Code of Conduct was breached (Cl. Exh. C9).
Therefore, the possibility of non-compliance with environmental standards which cannot be excluded
(ibid.) was enough for CLAIMANT to conclude that the obligation was breached. As both Parties’ codes of
conduct have similar wording, CLAIMANT must be under a duty of result given the likelihood of the
breach being public and its negative consequences over RESPONDENT’s reputation, which is very
important for RESPONDENT to reach its goal of becoming a Global Compact LEAD company as
explained above (see supra § 118).
120 CLAIMANT could have argued that it stated in its e-mail, to which its offer was attached, that it will use its
best efforts to comply with the obligations related to environmental protection (Cl. Exh. C3). However,
what CLAIMANT would have missed here is that it made an offer in a publicized tender. CLAIMANT
signed the Letter of Acknowledgement before making its offer, in which CLAIMANT explicitly stated that
Memorandum for Respondent
32
“[it has] read the Invitation to Tender and will tender in accordance with the specified requirements” (Rsp.
Exh. R1). Thus, it was absolutely reasonable for RESPONDENT to expect that the offers will be in
accordance with the specifications stipulated in tender documents (see supra § 92). Moreover,
RESPONDENT repeated its understanding of the nature of obligation one more time when the Contract
was awarded: “Your Codes show that Delicatesy Whole Foods and Comestibles Finos share the same
values and are both committed to ensure that the goods produced and sold fulfill the highest standard of
sustainability” (Cl. Exh. C5; emphasis added). If a duty of result was not acceptable for CLAIMANT, it must
have clearly indicated this to RESPONDENT, as one of the companies did with regard to another contract
term in its letter of acknowledgement (PO2, § 23). However, there was neither any specific inquiry nor a
question as regards the nature of the obligation by CLAIMANT since it signed the Letter of
Acknowledgement and agreed to tender in accordance with the specified requirements (PO2 26, Rsp. Exh.
R1). As CLAIMANT did not inquire in any way, its Letter of Acknowledgement must be held against it
(BGer, 5 Apr. 2008 (Switzerland); cf. CoA Grenoble, 26 Apr. 1995 (France); cf. DC New York, 14 Apr. 1992 (US);
cf. SCHMIDT-KESSEL in: Schlechtriem/Schwenzer; cf. ZUPPI in: Kröll et al., Art. 8 § 28).
2. The contra proferentem rule is not applicable.
121 CLAIMANT could have argued that RESPONDENT’s standard terms must be interpreted in favor of
CLAIMANT as they are drafted solely by one party, which is known as the contra proferentem rule. The contra
proferentem rule is derived from Article 8 of CISG and is only applicable when the meaning of standard
terms is ambiguous (SCHMIDT-KESSEL in: Schlechtriem/Schwenzer, Art. 8 § 49; cf. HUBER in: Huber/Mullis
p. 15, ZUPPI in: Kröll et al., Art. 8 § 24; CISG-AC Opinion No: 13; CIETAC, 7 Jan. 2000 (China)). However,
as shown above, all relevant circumstances unambiguously show that CLAIMANT was under a duty of
result. Therefore, the contra proferentem rule cannot be applied in the case at hand.
B. CLAIMANT having the burden of proof failed to prove the conformity of the cakes delivered.
122 RESPONDENT acknowledges that the main principle underlying CISG regarding burden of proof is
the actori incumbit probatio principle, thus who invokes Art. 35 in its favor bears the burden of proof (KRÖLL,
p.172; NEUMANN). Therefore, CLAIMANT could have argued that RESPONDENT, as the buyer, has
the burden to prove that the cakes delivered were non-conforming at the time risk passed. However,
many scholars and courts refrain from implementing this principle strictly and adopt further exceptions in
order to avoid possible unfair results.
123 The first exception is regarding the standard of proof. Although the standard is one of reasonable certainty
under CISG (DJORDJEVIC in: Kröll et al., Art. 4 §37), it must be adjusted in order to achieve the purpose
of relevant provisions. When the provisions have the purpose of prevention, the standard of proof should
be reduced to achieve this purpose (SCHWENZER/HACHEM in: Schlechtriem/Schwenzer, Art. 4 § 26).
Since the purpose of Art. 35 of CISG is to prevent the delivery of non-conforming goods (KRÖLL in: Kröll
Memorandum for Respondent
33
et al., Art. 35 §1), the standard of proof to be met by buyers must be reduced following this principle.
Otherwise sellers could abuse the high standard of proof in cases when some, but not all of their goods
are defective. In such cases, sellers could evade liability if it is expected from buyers to prove that the
goods delivered to them belong to the defective proportion. Accordingly, the buyer is only required to
“sufficiently demonstrate non-conformity of goods and that it did not do anything to contribute to the non-
conformity” (LINNE, p.40; emphasis added). In the case at hand, RESPONDENT can provide evidence
about the corruption in Ruritania which resulted in unsustainable production of up to %50 of the beans
used by CLAIMANT. Regarding the low standard of proof, this must be sufficient enough to decide that
RESPONDENT fulfilled its burden of proof.
124 Another exception which complements and advances the first one is derived from the principle of proximity
which requires “facts relating to a sphere clearly better known to one party than to the other party […] to
be proven by the party exercising control over that sphere.” (BGer, 7 July 2004 (Switzerland); cf. BGer, 13
November 2003 (Switzerland); BGH, 30 June 2004 (Germany); OGH, 12 Sept. 2006 (Austria); SCHWENZER in:
Schlechtriem/Schwenzer, Art.35 §53; KRÖLL II, p.49; FERRARI). The need for such an exception can be
emphasized by the following question: “If a party is injured by no fault of its own, and the other party had
exclusive control of the circumstances, should the injured party be required to establish proof that it was
the other party that caused the injury even though it would be impractical for the injured party to obtain
the proof?” (LINNE p.37).
125 The matter that must be proven in this case is whether the cakes sold to RESPONDENT were composed
of sustainably produced cocoa beans or not. This fact clearly falls in a sphere over which RESPONDENT
has no control. It is known that up to 50% of the beans came from farms illegally set up in protected areas
(PO 2, § 41), but it is almost impossible for RESPONDENT to prove that the cocoa beans used in the
cakes were in this portion. CLAIMANT, on the other hand, as the producer of the cakes, has control over
the ingredients it used which was provided to it by Ruritania Peoples Cocoa GmbH. As German Supreme
Court ruled, “the buyer’s burden could be alleviated by factors such as the seller’s proximity to the
production process into which the buyer has no insight” (BGH, 30 June 2004 (Germany)). Since the facts
suggesting non-conformity were within the domain of knowledge and expertise of the seller, the burden
of proof shifts to the seller (GARRO, p. 254).
126 Since the main principle is interpreted in a flexible way by a low standard of proof and the principle of
proximity (LINNE, p.40), RESPONDENT fulfilled its burden of proof by showing the corruption in
Ruritania and unsustainable production of some portion of cocoa beans. The burden of proof shifted to
CLAIMANT as the one who has exclusive control over the relevant circumstances. In order to evade from
liability, it has to prove that the cocoa beans used in cakes were in the sustainably produced portion and
Memorandum for Respondent
34
hence, it delivered conforming goods. Since in the case at hand it did not prove conformity of the cakes
delivered, CLAIMANT can be held liable under Art. 35 of CISG.
C. Even if Tribunal were to conclude that CLAIMANT had a duty of best effort, it still failed to
fulfill its obligation.
127 Duty of best efforts obliges a party to take all the steps that “a reasonable person, placed in similar
circumstances (nature of the product, characteristics of the market, importance and experience of the firm,
presence of competitors, etc.) would take” (UNIDROIT Official Commentary, Art 5.1.4). The duty of best
efforts is deemed to be fulfilled only when all the efforts that can be reasonably expected from a party is
made (VOGENAUER/KLEINHEISTERKAMP, p.551; POSNER, p.1431; ICSID Case No. ARB/81/2;
ICSID Case No. ARB/06/18; DC New York, 6 Jul. 1978 (US); SC New York, 17 Jun. 1999 (US)). Given the
circumstances of the case, further steps could have been reasonably expected from CLAIMANT which
results in its failure to fulfill its obligation.
128 First of all, CLAIMANT chose its supplier from Ruritania although the production and certification
structure in Ruritania was “poorly conceived from the start and had some real flaws” (Cl. Exh. C 7).
Regarding the importance of sustainable production for RESPONDENT and the delicacy of the cocoa
market in general, a reasonable party would make further research before choosing its supplier country. A
simple market search could make it apparent to CLAIMANT that Ruritania was risky regarding sustainable
production. Furthermore, CLAIMANT chose Ruritania Peoples Cocoa GmbH after an initial audit
conducted by Egimus AG (PO 2, §32), however, Egimus AG did not have the necessary expertise to spot
the fraudulent scheme. It only provided impact-focused reports which clearly was not enough to ensure
the sustainable production of cocoa beans (PO 2, §33). CLAIMANT could have conducted more
extensive audits, by a different auditing company before choosing its supplier. Moreover, CLAIMANT was
content with only one audit in such a risky market and decided to rely on the questionnaires filled by
Ruritania Peoples Cocoa GmbH itself for following years (PO 2, §32). This fact clearly shows how
negligent CLAIMANT acted during production. A reasonable party could have been expected to conduct
regular audits in such a delicate market and a risky country, by which unsustainable production could have
been easily detected. Instead of that, CLAIMANT incautiously chose to rely on the documentation sent by
the supplier itself (Cl. Exh. C 8). Those documentations could not of course substitute third party audits
especially in such a corrupt market.
129 CLAIMANT’s inadvertency can also be detected from the fact that it investigated the certification scandal
only after RESPONDENT’s e-mail (Cl. Exh. C 6; Cl. Exh. C 8). CLAIMANT clearly was not aware of the
documentary showed in Equatorian state news channel on January 19, 2017, which talked about
irregularities in Ruritanian certification practice and UNEP rapporteur’s report, or of the article published
in the leading business newspaper in Equatorina on January 23,2017, which disclosed details of fraud
Memorandum for Respondent
35
(Resp. to Not. of Arb., §§ 14-15; Cl. Exh. C 7). CLAIMANT had no knowledge of these news which were
severe enough to be reported in its own country’s state channel and leading business newspaper and were
solely about sustainable production in its supplier country, while RESPONDENT could follow them from
Mediterraneo. It can be reasonably expected from a prudent business person to follow the developments
that can have impact on its business. CLAIMANT’s failure to learn and investigate the irregularities in
Ruritanian certification practice proves its negligence and failure to employ its best efforts to ensure
sustainable production.
Conclusion to the Fourth Issue
In case RESPONDENT’s Standard Terms are applicable, CLAIMANT was under a duty of result, the
fulfillment of which cannot be proven. Even in the unlikely case that CLAIMANT had a duty of best
efforts, it still did not fulfil this obligation. Therefore, CLAIMANT must be held responsible for non-
conforming goods under Art. 35 of CISG.
REQUEST FOR RELIEF
In light of the submissions made above, RESPONDENT respectfully requests the Tribunal to find that:
I. Challenge of Mr. Prasad should be decided by the Tribunal, without the participation of Mr.
Prasad.
II. Mr. Prasad should be removed from the Tribunal due to the fact that his extensive connections
with CLAIMANT and its counsel create justifiable doubts regarding his impartiality and
independence.
III. Any possible content of the Contract results in a duty of result for CLAIMANT.
IV. In case RESPONDENT’s Standard Terms are applicable, CLAIMANT must be held responsible
from non-conforming cakes as per Art. 35 of CISG.
As a result, we reiterate our requests in Notice of Arbitration and respectfully ask the Tribunal:
I. to reject all claims for payment raised by CLAIMANT;
II. to order CLAIMANT to bear the costs of the arbitration.
Respectfully submitted,
Istanbul, January 18, 2018.
Memorandum for Respondent
We hereby confirm that this Memorandum was written only by the persons who signed below.
We also confirm that we did not receive any assistance during the writing process from any person who is
not a member of this team.
BURAKHAN ADAR
EMRE İLKER KARATAŞ
EMREHAN MERMER
ORCAN OK
GÖKÇE GÜL ÖNDER
PINAR ÖZCEYLAN