FIFTEENTHANNUALWILLEM C. VIS (EAST)
INTERNATIONALCOMMERCIALARBITRATIONMOOT
11March – 18March 2018
MEMORANDUM FORRESPONDENT
COUNSELS
CHANG ENNINGGU YUXINLI YANLONG LUO YINGKAILINNALV RUOYI
QIUMINGLIANGWANG JUN XIE YUTONGYAN JINYANG JIALI ZHONG JINGHUI
ON BEHALFOF: AGAINST:
Comestibles Finos Ltd
75 Martha Stewart Drive
CPAITAL CITY, MEDITERRANEO
Delicatesy Whole Foods Sp
39 Marie-Antoine Carême Avenue
OCEANSIDE, EQUATORIANA
RESPONDENT CLAIMANT
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT i
TABLE OFCONTENTS
TABLE OF CONTENTS............................................................................................................. i
INDEX OFAUTHORITIES......................................................................................................iii
STATUTESAND RULES................................................................................................. iii
COMMENTARY................................................................................................................ v
ARBITRATIONAWARDS................................................................................................xi
TABLE OFABBREVIATIONS.............................................................................................. xiv
STATEMENT OF FACTS.......................................................................................................... 1
PART 1: THE ARBITRAL TRIBUNAL SHOULD DECIDE ON THE CHALLENGEWITHOUT THE PARTICIPATION OF MR. PRASAD........................................................... 3
I. The Tribunal has authority over the challenge.................................................................3
A. The Parties excluded the application of Art. 13(4) of UNCITRAL Rules.............3
B. Art. 13 (2) of Model Law shall apply and grant the Tribunal authority on thechallenge..................................................................................................................... 5
II. The decision should be made without Mr. Prasad participation.....................................6
A. Mr. Prasad should not decide on his own challenge.............................................. 6
B. Leaving the two remaining arbitrators to make the decision is proper.................. 7
PART 2: MR. PRASAD SHOULD BE REMOVED FROM THE TRIBUNAL........................9
I. The challenge against Mr. Prasad is admissible.............................................................. 9
A. RESPONDENT has not waived its right to challenge Mr. Prasad........................ 9
B. The notice of challenge was sent timely.............................................................. 10
II. In the eyes of a reasonable and informed third party, Mr. Prasad lacks independenceand impartiality..................................................................................................................10
A. IBA-Guidelines shall apply to the present arbitration..........................................11
B. CLAIMANT and Mr. Prasad breached their obligations of disclosing conflicts ofinterest....................................................................................................................... 11
C. The connections between Mr. Prasad, CLAIMANT and the funder impair hisindependence.............................................................................................................13
D. Mr. Prasad expressed favorable opinions towards CLAIMANT in his article.... 16
E. The failure of disclosure and conflicts of interests are sufficient to disqualify Mr.Prasad altogether....................................................................................................... 16
PART 3: THE RESPONDENT'S STANRARD CONDTIONS SHALL GOVERN THECONTRACT............................................................................................................................. 17
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT ii
I. A contract has been concluded between CLAIMANT and RESPONDENT, which isgoverned by RESPONDENT's standard conditions......................................................... 17
A. Both CLAIMANT and RESPONDENT showed intention to applyRESPONDENT's standard conditions...................................................................... 17
B. Claimant failed to incorporate its standard conditions only by small front print inits mail.......................................................................................................................20
II. Even if RESPONDENT's standard conditions do not govern the contract, GlobalCompact principles will guide the contract.......................................................................22
A. CLAIMANT and RESPONDENT have no consensus on applying CLAIMANT'sstandard conditions................................................................................................... 23
B. The facts and circumstances of the case dictate that the Global Compactprinciples should govern the contract at a minimum................................................ 23
PART 4: THE CLAIMANT DELIVERED NON-CONFORMING GOODS PURSUANT TOART. 35 OF CISG BY THE CONDITIONS THAT RESPONDENT'S GENERALCONDITIONSAREAPPLICABLE........................................................................................ 25
I. CLAIMANT delivered non-conforming goods pursuant to Art. 35.1 of CISG as thecocoa was not farmed in accordance with the ethical standards underlying the GeneralConditions and the Code of Conduct for Suppliers.......................................................... 26
A. Art. 35.1 CISG set the contractual obligation of goods, which delivered by seller.26
B. The ETHICAL STANDARD should be included in the QUALITYREQUIREMENT of goods underlying the CISG, accordingly the CLAIMANTshould ensure cocoa farmed in a sustainable way.....................................................26
C. Michelgault Business News clearly disclose the unethical conduct ofCLAIMANT's supplier............................................................................................. 28
D. Based on analysis above, the non-conforming unethical product delivered byCLAIMANT constitutes the breach of QUALITY and other REQUIREMENTunderlying the General Conditions and the Code of Conduct for Suppliers............ 29
II. Turning a blind eye on the explicit contractual agreement, CLAIMANT's chocolatecakes do not conform with the contract under Art. 35.2 of the CISG...............................30
A.The contract did not exclude the use of CISG Art.35.2..................................... 30
B. The chocolate cakes are not fit for the purpose which sustainably sourced foodwould ordinarily be used under CISG Art.35.2.a..................................................... 31
C. The chocolate cakes does not fit for its particular purpose according to CISGArt.35(2)(b)............................................................................................................... 31
D. CLAIMANT willingly undertook the risk of its own supplier's non-conformity.32
E. Claimant could not be relieved by CISG Art.35.3 for exclusivity....................... 33
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT iii
INDEX OFAUTHORITIES
STATUTESAND RULES
CITEDAS DETAILS CITED IN
CIETAC China International Economic and Trade Arbitration
Commission, CIETACArbitration Rules (2015)
¶39
CISG CISG, United Nations Convention on International Sale
of Goods
¶¶55, 56, 57,
59
FAA Federal Arbitration Act, 9 U.S.C. § 10(a)(2) ¶40
Global
Compact
https://www.unglobalcompact.org/participation/join/com
mitment ,last access time: 10/24/2017.
¶75
IBA
Guidelines
IBA Guidelines on Conflicts of Interest in International
Arbitration
¶¶44, 45, 46,
48
LCIA Rules London Court of International Arbitration Rules (2014) ¶51
LCIA
Reference
LCIA Reference No. UN3490, Decision of 21 October
2005
¶51
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT iv
Model Law UNCITRAL Model Law on International Commercial
Arbitration (1985), with amendments as adopted in 2006
¶¶6, 11, 15,
17, 22, 23, 26
PICC UNIDROIT Principles of International Commercial
Contracts
¶55
UNCITRAL
Rules
Arbitration Rules of United Nations Commission on
International Trade Law, 2010
¶¶6, 12, 15,
22, 23, 24, 34
NYC United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, New York,
10 June 1958
¶25
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT v
COMMENTARY
CITEDAS DETAILS CITED IN
A/CN.9/246 Seventh session of the Working Group onInternationalContract Practices (New York,6-17 February 1984)
¶¶17, 26
A/40/17 Report of the United Nations Commission onInternational Trade Law on the work of its eighteenthsession (Vienna, 3-21 June 1985)
¶¶17, 22, 23
AML Bill 2016 Arbitration and Mediation Legislation (Third PartyFunding) (Amendment) Bill 2016 by Hong KongLegislative Council
¶39
Born 2014 Born, Gary, International Commercial Arbitration,Kluwer Law International (2nd ed. 2014).
¶¶10, 27, 35,
42, 46
Black Law
Dictionary
Garner, Bryan A., Black Law Dictionary. (10thed.,Thomson West, 2014)
¶26
Caron, Caplan Caron, David D., Caplan, Lee M. The UNCITRALArbitration Rules: A commentary(with an intergratedand comparative discussion of the 2010 and 1976UNCITRAL Arbitration Rules),(2nd, OxfordUniversity Press, 2013)
¶26
CETA Comprehensive Economic And Trade Agreement(CETA) by Canada and The EU
¶39
CISG Advisory
Op.No.3
“CISG-AC Opinion no 3, Parol Evidence Rule, Plain
Meaning Rule, Contractual Merger Clause and the
CISG.” (2004)
¶76
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT vi
CISG Digest UNCITRAL Digest of Case Law on the United
Nations on Contracts for the International Sale of
Goods, 2016 Edition
¶¶56, 88, 90
Daele Daele, Karel, Challenge and Disqualification ofArbitrators in International Arbitration, Kluwer LawInternational (2012).
¶¶32, 36
Goeler Goeler, Jonas, Third-Party Funding in InternationalArbitration and its Impact on Procedure, Kluwer LawInternational (2016).
¶¶38, 42, 35,
49
Guidelines for
TPF
Guidelines for Third Party Funding for Arbitration byCIETAC
¶39
IBA
Explanation
Explanation to General Standard 6 IBA Guidelines onConflicts of Interest.
¶37
IBA Report The IBA Guidelines On Conflicts Of Interest InInternational Arbitration: The First Five Years2004–2009, Report of the IBA Conflicts Committee, aSub-committee of the IBA Arbitration Committee,Dispute Resolution International, Vol 4, No 1, May2010
¶35
J Lew J.Lew, L.Mistelis & S.Krdl1,ComparativeInternational Commercial Arbitration (The Hague,Kluwer Law International, 2003)
¶37
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT vii
Kauffman
Kohler
Gabrielle Kauffman-Kohler, Soft Law in InternationalArbitration, Journal of International DisputeSettlement 1 (2010).
¶35
Lookofsky 2000 Lookofsky, Joseph “The 1980 United Nations
Convention on Contracts for the International Sale of
Goods.” (2000) ¶ 84
¶79
Luttrell Sam Luttrell, Bias Challenges in International
Commercial Arbitration: The Need for a “Real
Danger” Test, International Arbitration Law Library,
Volume 20.
¶46
McIlwrath &
Savage
Michael McIlwrath and John Savage, InternationalArbitration and Mediation: A Practical Guide, KluwerLaw International 2010
¶35
Model Law
Explanatory
Note
Explanatory Note by the UNCITRAL Secretariat onthe Model Law on International CommercialArbitration, para.23
¶¶19, 22, 23
Redfern and
Hunter
Redfern, Alan; Hunter, Martin et al., Redfern and
Hunter on International Arbitration, Kluwer Law
International (6th ed. 2015)
¶¶5, 35, 42
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT viii
Rogers Catherine Rogers, The Politics of International
Investment Arbitration, 12 Santa Clara J. Int'l L.223,
p.226 (2014).
¶¶46, 49
Schwenzer Schlechtriem & Schwenzer: Commentary on the UNConvention on the International Sale of Goods(CISG), (4th Ed. 2016)
¶¶57, 59, 116
UNCITRAL
Digest
UNCITRAL 2012 Digest of Case Law on the ModelLaw on International Commercial Arbitration
¶¶5, 50
Walsh &
Teitelbaum
Thomas W Walsh and Ruth Teitelbaum, The LCIA
Court Decisions on Challenges to Arbitrators: An
Introduction, Arbitration International, Vol 27 Issue 3,
283–313 (2011)
¶35
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT ix
CASES
CITEDAS DETAILS CITED IN
Beijing case Beijing Light Automobile Co. v. Connel, CLOUT case
no. 237, Stockholm Chamber of Commerce Arbitration
Award of 5 June 1998
http://cisgw3.law.pace.edu/cases/980605s5.html
¶¶107, 109
CC/Devas v.
India
CC/Devas (Mauritius) Ltd. et al. v. India; CC/Devas,supranote 3
¶50
CLOUT Case
No.999
Ad Hoc Arbitral Tribunal, Denmark, 10 November
2000
¶107
Cofely Cofely Ltd. v. Anthony Bingham, English High Court,[2016] EWHC 240 (Comm)
¶46
J & P Avax v.
Tecnimont
SAJ & P Avax v. Société Tecnimont SPA, ReimsCourd'appel, decision of 2 November 2011, Case No.10/02888.
¶37
Jung science Jung Science Information Technology Co. Ltd. v. Zte.Corporation, High Court-Court of First Instance, HongKong Special Administrative Region of China, 22 July2008, [2008]HKCFI 606
¶18
Karlseng
v.Cooke
Karlsengv.Cooke,346S.W.3d85,97(Tex.Ct.App.2011) ¶37
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT x
Rijin Blend
case
Netherlands Arbitration Institute, no.2319,
http://www.unilex.info/case.cfm?id=836
¶109
PTA powder
case
China International Economic and Trade Arbitration
Commission, People's Republic of China, 13 April 2008,
http://cisgw3.law.pace.edu/cases/080418c1.html
¶107
SA Fremarc SA Fremarc v. Societe ITM Enterprises, Cass. Civ. (2),French Court of Cassation, 6 Dec. 2001, Rev. Arb.1231 (2003).
¶46
SEC No.
4.837
Brazil No. 30, YPFB Andina S/A v. UNIVENPetroquímicaLtda, Superior Court of Justice of Brzail,SEC No. 4.837 – EX(2010/0089053-1), 15 August2012
¶27
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT xi
ARBITRATIONAWARDS
CITEDAS DETAILS CITED IN
Alpha Alpha Projektholding GMBH v. Ukraine, ICSID
Case No. ARB/07/16, Decision on Respondent's
Proposal to Disqualify Arbitrator Dr.Yoram
Turbowicz.
¶35
AWG Suez, Sociedad General de Aguas de Barcelona S.A.
and Interagua Servicios Integrales de Agua S.A. v.
Argentine Republic, ICSID Case
No.ARB/03/17,Decision on A Second Proposal for
the Disqualification of a Member of the Arbitral
Tribunal,
¶19
Canfor v. US NAFTA Chapter 11 arbitration, Undated Decision of
March 2003
¶50
Grand River Grand River Enterprises Six Nations, Ltd., et al. v.
United States of America, ICSID Decision on the
Challenge to Arbitrator James Anaya (28 November
2007)
¶35
Highbury Highbury Int'l AVV, Compañía Minera de Bajo
Caroní AVV & Ramstein Trading Inc. v. Bolivarian
Republic of Venezuela, ICSID Case No. ARB/14/10,
Decision on the Challenge of Professor Brigitte Stern
(9 June 2015)
¶46
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT xii
ICS Inspection ICS Inspection and Control Services Limited (United
Kingdom) v. The Republic of Argentina, PCA Case
No. 2010-9, Decision on challenge to Mr. Stanimir A.
Alexandrov
¶51
ICC 7331 CLOUT case No.303, Court of Arbitration of the ICC,
1994(Arbitral award no.7331)
¶57
National Grid National Grid plc v. The Argentine Republic, LCIA
Case No. UN 7949, Decision on the Challenge to Mr.
Judd L. Kessler (3 December 2007)
¶35
Suez Suez, Sociedad General de Aguas de Barcelona S.A.,
and Vivendi Universal S.A. v. The Argentine Republic,
ICSID Case No. ARB/03/19, Decision on a Second
Proposal for the Disqualification of a Member of the
Arbitral Tribunal (12 May 2008).
¶¶19, 49
S.L.U S.L.U. v. Bolivarian Republic of Venezuela, ICSID
Case No. ARB/10/9, Decision on the Proposal to
Disqualify Prof. Brigitte Stern and Prof. Guido
Santiago Tawil, Arbitrators (20 May 2011),
¶46
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT xiii
Vito Gallo v.
Canada
NAFTA; Challenge Decision of 14 October 2009,
para. 20
¶19
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT xiv
TABLE OFABBREVIATIONS
Art. Article
Arb. Arbitration
CISG United Nations Convention on Contracts for the International Sale ofGoods
Cl. Claim(ant)
Ex. Exhibit
ICC International Centre for Settlement of Investment Disputes
Memo Memorandum
Notc. Notice
No(s). Number(s)
Ord. Order
PCA Permanent Court of Arbitration
Proc. Procedural
Pres. President
Resp. Respondent
Resps. Response
UNCITRAL United Nations Commission on International Trade Law
UNIDROIT International Institute for the Unification of Private Law
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 1
STATEMENT OF FACTS
1. The parties to this arbitration are Delicatesy Whole Foods Sp (hereinafter “CLAIMANT”)
and Comestibles Finos Ltd (hereinafter “RESPONDENT”, collectively “the Parties”).
2. CLAIMANT is a medium sized manufacturer of fine bakery products registered in
Equatoriana.
3. RESPONDENT is a gourmet supermarket chain registered in Mediterraneo.
4. In March, 2014, RESPONDENT went to the yearly Danubian food fair Cucina to broaden
its cake offerings. Soon after the food fair, Respondent sent tender documents to five
businesses RESPONDENT had met at Cucina including CLAIMANT to invite them to
tender.
5. On 17 March 2014, RESPONDENT received the requested Letter of Acknowledgement
from CLAIMANT which clearly confirmed its intention to tender in accordance with the
specified requirements. One of the requirements is that tenderers shall make sure that
their suppliers comply with the standards of sustainability and ethicalnesss.
6. Consequently, on 17 March 2014 when CLAIMANT submitted a sales offer and informed
RESPONDENT of the two changes related to the form of cakes and the mode of payment,
which was not consistent with the international tender practice, Respondent was very
surprised. Yet, considering the creation of a long-standing, mutually beneficial
partnership, on 7 April, RESPONDENT expressed acceptance to the two changes
informed by Mr.Tsai but without any acceptance to the inclusion of CLAIMANT's
General Conditions of Sale.
7. CLAIMANT started delivery on 1 May 2014 and delivered its chocolate cake until 27
January 2017. Until that time, RESPONDENT had the impression that it got what it
contracted for: a first-class chocolate cake made out of ingredients from sustainable
farming. Only from a documentary about a scheme with falsified certificates for
environmental production showed on the Equatorian state news channel on 19 January
201 and an article published on the leading business newspaper in Equatoriana on 23
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 2
January 2017, did RESPONDENT learn the ingredients were not sourced sustainably,
which are contrary to RESPONDENT's most basic business values.
8. On 10 February 2017, CLAIMANT finally confirmed RESPONDENT's fear by way of
email that the chocolate cake was made with cocoa beans which had not been farmed in a
sustainable way but in clear contradiction to the requirements of the contract. In this
email, in an obvious attempt to downplay its breach, CLAIMANT alleged for the first
time that the contract would be governed by its own Conditions of Sales and not
RESPONDENT's General Conditions which formed part of the Tender Documents.
9. Given the undisputed fact that CLAIMANT failed to comply with the contractual
obligation to ensure the ingredients are sustainably sourced, this breach shall be
considered to constitute a fundamental breach entitling RESPONDENT to terminate the
contract with immediate effect and claim damages. With email of 12 February 2017,
RESPONDENT informed Claimant its intention to terminate the contract and claim for
damages.
10. On 30 May 2017, a meeting between the Parties did not lead to an amicable solution
11. On 30 June 2017, RESPONDENT recieved CLAIMANT's notice of arbitration and had
no objection to the appointment of Mr. Prasad at that time.
12. However, the unexpected result of a virus check of the Notice of Arbitration sent by
CLAIMANT induced RESPONDENT to suspect that there existed conflicts of interest in
the connection between Mr. Prasad and Findfunds. Led by such suspect, RESPONDENT
conducted further research in fear of potential impairment to the procedural justice of
arbitral proceeding. The results of Respondent's research gave rise to justifiable doubts of
RESPONDENT on the impartiality and independence of Mr. Prasad, the arbitrator
appointed by CLAIMANT. RESPONDENT thus sent Notice of Challenge to Mr. Prasad
and all members of the Arbitral Tribunal on 14 September, 2017 as soon as possible in
pursuant to the agreed-upon UNCITRAL Rules and in compliance with the lex arbitri and
lex fori, i.e. Model Law.
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 3
PART 1: THEARBITRALTRIBUNAL SHOULD DECIDE ON THE CHALLENGE
WITHOUT THE PARTICIPATION OFMR. PRASAD.
1. CLAIMANT contends that the challenge of Mr. Prasad should not be decided by the
Tribunal and even if so, Mr. Prasad should participate, which is not the case. First, the
Tribunal has authority over the challenge (I). Second, the decision should be made
without Mr. Prasad's participation (II).
I. The Tribunal has authority over the challenge.
2. The Parties excluded the application of Art. 13(4) of UNCITRAL Rules (A), causing a
failure of agreement on challenge procedure. Therefore, Art. 13 (2) of Model Law shall
apply and grant the Tribunal authority on the challenge (B).
A. The Parties excluded the application of Art. 13(4) of UNCITRAL Rules.
3. Art. 13(4) of UNCITRAL Rules was excluded since the functioning body provided in this
Article, which can be institutions or individuals pursuant to Art. 6 of UNCITRAL Rules,
is not permitted in the present arbitration due to Parties' consent in two respects. First,
under Clause 20 of the Contract, any arbitral institution cannot act as appointing authority
(1). Second, having individual act as appointing authority will impair RESPONDENT's
confidentiality concern (2).
(1) Any arbitral institution cannot act as appointing authority.
4. Clause 20 of the Contract, which is Dispute Resolution Clause, prohibits the involvement
of any arbitral institution during the whole proceeding [Cl. Ex. 2]. Thus for the challenge
procedure, arbitral institution cannot participate. This claim rests on the wording, which
is “any dispute…shall be settled by arbitration…without the involvement of any arbitral
institution”. It should not be interpreted as exclusion of institutions in the composition of
the Tribunal, but in any stage of the proceeding for three reasons.
5. First, the nature of arbitration clause is a contract [Redfern and Hunter] so the arbitration
should be conducted in accordance with the “contract”. The arbitration begins with the
composition of the arbitral tribunal, including the challenge of arbitrators [Contents of
UNCITRAL Rules], which means the challenge procedure should be in conformity with
the “contract”, specifically without the involvement of institutions. If the Parties had the
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 4
intention to made the challenge procedure separated from the whole arbitral proceeding
and immune from the “contract”, a clearer wording is required, For example, according to
one German court, the parties may go so far as to exclude any challenge procedure within
the arbitral proceeding [UNCITRAL Digest]. However, there is no such explicit
expression in Clause 20 to exclude the challenge procedure.
6. Second, emails between Ms. Ming and Mr. Tsai show the agreement on exclusion of
arbitral institutions in the challenge procedure. Ms. Ming used the phrase “composition of
arbitral tribunal” in her email, by which CLAIMANT asserts that RESPONDENT was
only concerned with problems relating to the “composition” of arbitral tribunals [Cl. Ex.
1]. However, the sphere of “composition of arbitral tribunal” covers “challenge
procedure”. According to the Contents of Model Law and UNCITRAL Rules, “Chapter
III. Composition of arbitral tribunal” includes “Article 13. Challenge procedure”
[Contents of Model Law], and “Section II. Composition of the arbitral tribunal” includes
“Article 11 to 13 Disclosures by and challenge of arbitrators” [Contents of UNCITRAL
Rules]. Thus, in a reasonable and informed third-party's eyes, the intention contained in
the emails should be interpreted as exclusion of arbitral institutions in the challenge
procedure.
7. Third, the discussion between Ms. Ming and Mr. Tsai on food fair show the agreement on
exclusion of arbitral institutions in the whole arbitration proceeding. Ms. Ming talked to
Mr. Tsai about the bad experience on information leakage in institutional arbitration once
before [Resp. Ex. 5]. Due to this detailed discussion, CLAIMANT understood
RESPONDENT's efforts to exclude the involvement of arbitral institutions in any stage
of arbitration and accepted Clause 20 with a reply that “we can very well live with the
clause as it is” [Cl. Ex. 3].
8. In addition, although CLAIMANT may argue that national court or PCA can act as
appointing authority, the Parties' consent to exclude arbitral institutions also apply to
national court and PCA since arbitral institutions includes them.
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 5
(2) Having individual act as appointing authority will impair RESPONDENT's
confidentiality concern.
9. As mentioned above, CLAIMANT understood RESPONDENT's concern on information
confidentiality and agreed to have as few persons as possible know about the arbitration
[Resp. Ex, 5]. Therefore, introducing an individual to act as appointing authority shall
violate the Parties' agreement and impair RESPONDENT's confidentiality concern since
he or she will be accessible to information of the present case, causing greater risk of
information leakage and such arrangement is meaningless for following reasons.
10. As scholar Born notes, first, individuals offer no real advantages (beyond, conceivably,
confidentiality) compared to institutions. Further, selecting an individual as the
appointing authority creates the risk that the individual will become unavailable,
conflicted, or otherwise incapable of acting properly. In most cases, there is no
affirmative reason to name the holder of an office at an institution that does not ordinarily
deal with arbitral issues as appointing authority. It makes little sense to select – as parties
sometimes do – the director of some public institution (a national court or an international
inter-governmental body) to act as appointing authority. By definition, bodies or
office-holders other than arbitral institutions have other focuses and competences than
selecting international arbitrators, while arbitral institutions are specialized in precisely
this task [Born 2014].
B. Art. 13 (2) of Model Law shall apply and grant the Tribunal authority on the
challenge
11. The Parties identify UNCITRAL Rules as the arbitration rules and Danubian law as lex
arbitri, which adopts Model Law[Notice of Arbitration][Proc. Ord. No.1]. Without other
agreement on challenge procedure, Art. 13(4) of UNCITRAL Rules was supposed to
apply. However, this Article is excluded, which leaves a failure of agreement on
challenge procedure. Thus, the Art. 13(2) of Model Law shall apply. Under the
circumstance that Mr. Prasad refused to withdraw from his office [Letter Prasad] and
CLAIMANT did not agree to the challenge [Letter Fasttrack], “the arbitral tribunal shall
decide on the challenge” [Art. 13(2) of Model Law].
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 6
12. Moreover, the Tribunal bears a duty to avoid unnecessary delay and provide an efficient
process to resolve the dispute [Art. 17 of UNCITRAL Rules]. Compared to appoint
another authority to decide on the challenge, Granting the power to the Tribunal will
prevent unnecessary delay and cost in arbitral proceeding.
II. The decision should be made without Mr. Prasad participation.
13. CLAIMANT insists that Mr. Prasad should participate to make the challenge decision
[Letter Fasttrack]. However, Mr. Prasad should not do so (A). Further, leaving the two
remaining arbitrators to make the decision is proper (B).
A. Mr. Prasad should not decide on his own challenge.
14. This position is deduced from two resources. First, one should not be his own judge (1).
Second, allowing Mr. Prasad to participate will impair the justice of the Tribunal (2).
(1) One should not be his own judge.
15. Both UNCITRAL Rules and Model Law refuse Mr. Prasad to decide his own challenge
when he refuses to resign and CLAIMANT does not agree to the challenge [Art.13 (4)
UNCITRAL Rules] [Art. 13(2) Model Law] for the sharing principle that one should not
be his own judge.
16. First, UNCITRAL Rules explicitly exclude the challenged arbitrator. Although Art. 13(4)
of UNCITRAL Rules is excluded, drafters' intention presented in Art.13 (4) UNCITRAL
Rules shall be taken into account since Parties have agreed to be bound by UNCITRAL
Rules in general. Drafters of UNCITR Rules entrust appointing authority to decide the
challenge [Art.13 (4) UNCITRAL Rules] in order to maintain the impartiality and
independence of the decision-making authority, which is the aim of whole challenge
procedure [Caplan]. Parties have agreed on the qualification standard sets out in
UNCITRAL Rules. Precluding Art. 13(4) does not alter the requirement on avoiding the
challenged arbitrator being his/her own judge.
17. Second, Model Law does not expressly allow the challenged arbitrator to participate in
the decision. Excluding Mr. Prasad does not violate the mandatory provision which
stipulates “the arbitral tribunal shall decide on the challenge” [Art. 13(2) Model Law].
Despite working group's suggestion that “the decision was entrusted to all members of
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 7
the tribunal including the challenged arbitrator”[A/CN.9/246], the Commission only
notes that it “did not adopt a suggestion to exclude the challenged arbitrator from the
deliberations and the decision of the arbitral tribunal on the challenge” [A/40/17].
18. In the exceptional case where the challenged arbitrator is not excluded, he/she shall have
at least one authorization among applicable rules, lex arbitri, or parties consent [Jung
science]. As analyzed above, Mr. Prasad has none of the authorization and shall be
excluded from the challenge decision.
(2) Allowing Mr. Prasad to participate will impair the justice of the Tribunal.
19. As mentioned above, UNCITRAL Rules drafters intend to ensure the authority called
upon to decide the challenge be an impartial and independence party [Caplan]. Drafters
of Model Law share the same intention in noting that the arbitral procedure is subject to
“the fundamental requirements of justice”[Model Law Explanatory Note]. In practice, the
challenged arbitrator is excluded from the deliberation of the challenge regardless of
resignation to ensure the justice of the tribunal [AWG][Vito Gallo v. Canada].
20. In the present case, not excluding Mr. Prasad will impair the justice of the Tribunal. Mr.
Prasad's partiality disqualifies him to participate in the challenge procedure. A reasonable
third person will find his refuse to resign as manifesting his partial vote.
B. Leaving the two remaining arbitrators to make the decision is proper.
21. The two remaining arbitrators shall decide the challenge for fairness and efficiency (1) as
well as recognition and enforcement of arbitral award (2).
(1) The two remaining arbitrators shall decide the challenge for fairness and
efficiency.
22. Having the challenged decided by two remaining arbitrators satisfy UNCITRAL Rules
and Model Law's requirement for fairness [Art.17(1) UNCITRAL Rules, Art.18 Model
Law] [Model Law Explanatory Note] and efficiency [Caplan][A/40/17]
23. First, Precluding Mr. Prasad from the deliberation of challenge decision will not impair
arbitral proceeding's fairness, which is required by UNCITRAL Rules and Model Law
[Art.17(1) UNCITRAL Rules, Art.18 Model Law] [Model Law Explanatory Note]
[Caplan] [A/40/17]. Parties' right to procedure fairness will neither be prejudiced or
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 8
impaired, because the challenge will be decided by the remaining two arbitrators who
have no predisposed partial inclination toward the decision. Besides, Mr. Prasad is still
entitled to make clarifications and disclosure to prove his impartiality and independence.
24. Second, the challenge decision will be efficient since an even number of arbitrators will
not cause dead-lock. According to Art.33(1) of UNCITRAL Rules, the decision on the
challenge shall be made by a majority of the Tribunal [Art.33(1) of UNCITRAL Rules].
With two arbitrators deciding on the challenge, only with unanimous approval or
rejection will a decision be made. If one-one vote appears, under Art. 33(2) of
UNCITRAL Rules, such questions of procedure could be decided by the presiding
arbitrator alone [Art.33(2) of UNCITRAL Rules].
(2) The two remaining arbitrators shall decide the challenge for recognition and
enforcement of arbitral award.
25. Art. V(1)(d) of New York Convention provides that if “the composition arbitral authority
or arbitral process was not in accordance with the agreement of the parties…or the law of
the country” [Art. V(1)(d) of NYC], recognition and enforcement of the award may be
refused.
26. In the case herein, parties agreement in Clause 20 that “the number of arbitrators shall be
three” [notice of arbitration] shall be subject to the mandatory provisions of arbitration
law, which is Model Law in the present arbitration [Caron, Caplan]. Art. 13(2) and
Art.12 Model Law are mandatory provisions since the word “shall” indicates that
something must be done, as opposed to the word “may” [Black Law Dictionary] and no
non-mandatory phrase, such as “unless otherwise agreed by the parties”, is
contained[A/CN.9/246]. Thus excluding Mr. Prasad complies with the requirement that
“the arbitral tribunal shall decide on the challenge” [Art. 13(2) Model Law] as explained
in Para No.17 of this work. Not excluding Mr. Prasad conflicts with the mandatory
requirement on arbitrators' impartiality for composition of Tribunal [Art. 12(1) Model
Law].
27. Moreover, courts seek to minimize judicial intervention when reviewing international
commercial arbitral awards in practice [CLOUT case No. 351]. This is because the
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 9
remaining arbitrators remain bound by obligations of impartiality, and there is no reason
to conclude that they will render an unfair or unjust award [BORN 2014].In practice,
even awards made by a truncated Tribunal are usually granted with recognition and
enforcement [SEC No. 4.837]. In the case herein, a decision made by two remaining
arbitrators is proper since they have no predisposed partial inclination toward the
challenge decision.
PART 2: MR. PRASAD SHOULD BE REMOVED FROM THE TRIBUNAL.
28. CLAIMANT considers the challenge against Mr. Prasad to be devoid of any merits and
Mr. should not be removed from the Tribunal. However, RESPONDENT initiates the
challenge based on admissible and tenable grounds. First, the challenge against Mr.
Prasad is admissible (I). Second, in the eyes of a reasonable and informed third party, Mr.
Prasad lacks independence and impartiality (II).
I. The challenge against Mr. Prasad is admissible.
29. Contrary to CLAIMANT's allegations, RESPONDENT has not waived its right to
challenge Mr. Prasad (A) because the consent to Mr. Prasad's appointment expressed in
the Response to the Notice of Challenge does not preclude RESPONDENT to raise this
challenge and the Notice of Challenge was sent timely (B).
A. RESPONDENT has not waived its right to challenge Mr. Prasad.
30. RESPONDENT stated no objection to the appointment of Mr. Prasad despite the
restrictions in his declaration of independence [Response to the Notice of Challenge],
which are the two previous appointments by the Law Firm of Mr. Fasttrack and
reservation about the business matter of his current colleagues at Prasad & Partners
[Prasad's Declaration of Impartiality and Independence]. However, as confirmed in SGS
S.A. v. Pakistan, the notice of challenge is not belated since “new fact shad a different
light on information that was already known” [SGS].
31. In the present case, yet the restrictions alone are not sufficient to bring a challenge.
Considering the new information, which is the relationship between CLAIMANT, Mr.
Prasad and Findfunds LP, RESPONDENT reasonably suspects Mr. Prasad's eligibility to
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 10
act as arbitrator. Therefore even though RESPONDENT stated no objection before, it still
has the right to challenge an arbitrator after knowing such new fact since the relationship
adds great possibility to disqualification of Mr. Prasad, which will be elaborated in Part 2,
Section II in this work.
B. The notice of challenge was sent timely.
32. Art. 13(1) of UNCITRAL Rules sets a 15-day time limit to start the challenge procedure
[Art. 13(1), UNCITRAL Rules]. To determine the starting point of the time limit, “actual
knowledge” test should be followed. That is “if the circumstances on the basis of which a
challenge is made become known to the challenging party as a result of a gradual process
and a fact finding mission, during which doubts gradually turn into hard facts, the time
for bringing a challenge only starts running from the day that these facts become known
to the challenging party”[Daele 2012]. This standard was also supported by Vito v.
Canada. In Vito v. Canada, the appointing authority rejected the notion that the Rules
contained a test of constructive knowledge of the circumstances underlying the challenge
[Vito v. Canada].
33. In the present case, the existence of third-party funder was confirmed by CLAIMANT on
7 September 2017 [Disclosure of Funder]. Mr. Prasad disclosed other two related
appointments and commercial relationship on 11 September 2017 [Connections with
Funder]. Then RESPONDENT knew Mr. Prasad's academic view on this case. Therefore,
RESPONDENT acquired the actual knowledge about the repeated appointments,
commercial relationship, academic view and CLAIMANT's failure to disclose on 11
September 2017 and immediately sent the notice of challenge on 14 September 2017,
which was within the 15-day scheme.
II. In the eyes of a reasonable and informed third party, Mr. Prasad lacks independence
and impartiality.
34. UNCITRAL Rules requires arbitrators to be independent and impartial and lack of these
attributes can be a ground for successful challenge of arbitrators, but the vague wordings
do not provide explicit standard [Arts. 11,12 of UNCITRAL Rules]. For the purpose of
evaluating arbitrators' independence and impartiality the IBA Guidelines shall apply to
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 11
serve as a supplemental and practical guidance (A). According to UNCITRAL Rules and
IBA Guidelines, CLAIMANT and Mr. Prasad breached their obligations of disclosing
conflicts of interest (B) and the circumstances they failed to disclose including
unacceptable relationships with CLAIMANT's attorney and funder (C) and favorable
opinions towards CLAIMANT in his article (D) are sufficient to disqualify Mr. Prasad
altogether(E).
A. IBA-Guidelines shall apply to the present arbitration.
35. IBA Guidelines have been widely accepted as the standard for determining independence
and impartiality in international arbitration [Redfern and Hunter; McIlwrath& Savage]
and have acquired considerable weight especially when assessing if a conflict situation
arises [IBA Report]. In practice, due to the fact that there is an absence of detailed
guidance on the duty of disclosure in both UNCITRAL Rules and Model Law while IBA
Guidelines provides specific parameter of the duties of arbitrators [Born; Walsh
&Teitelbaum], IBA Guidelines are often consulted to assess whether such disclosure
obligation exists [Kauffman-Kohler].Arbitral Tribunals referred to IBA Guidelines in
several challenge decisions applying UNCITRAL Rules[National Grid; Grand River]and
even in challenges where there was no such explicit agreement of applying IBA
Guidelines between parties [Alpha]. Besides, parties and tribunals often refer to the
IBA-Guidelines in all the three jurisdictions concerned [PO2 ¶ 18]. Accordingly, the
tribunal should have applied IBA Guidelines to decide whether an obligation of
disclosure exists as well as whether there are severe conflicts which would disqualify Mr.
Prasad.
B. CLAIMANT and Mr. Prasad breached their obligations of disclosing conflicts of
interest.
(1) Mr. Prasad bears disclosure obligation under UNCITRAL Rules and
IBA-Guidelines.
36. UNCITRAL Rules demands a pre-arbitrator “shall disclose any circumstances likely to
give rise to justifiable doubts as to his or her impartiality or independence”; and an
arbitrator should “disclose any such circumstances” during the whole arbitral proceedings
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 12
[Art.11 of UNCITRAL Rules]. Daele notes that, “the disclosure standard is further
clarified by two model statements contained in an annex to the UNCITRAL Rules”
[Daele]. In this case, the second statement applies, which requires Mr. Prasad disclose “(a)
my past and present professional, business and other relationships with the parties” and
“(b) any other relevant circumstances” [Annex UNCITRAL Rules].
37. This obligation further requires “an arbitrator to make inquiries as to whether
relationships exists which have to be disclosed and he cannot just rely on his existing
knowledge.”[J Lew] Practical view is that the duty of disclosure requires “a certain
degree of introspective reflection or what is commonly known as due
diligence.”[Karlseng v. Cooke] and “arbitrators to search proactively for conflicts”[J & P
Avax v. Tecnimont] Thereby, Mr. Prasad shall initially disclose, but failed, his article
published in VINDOBONA JOURNAL for potential bias against RESPONDENT, which
will be elaborated in sub-section D, section II, Part 2 of this work, for the reason “to
allow the parties to judge whether or not they agree with the evaluation of the arbitrator
and whether they wish to explore the situation further and challenge the arbitrator under
the objective test.”[IBA Explanation]
(2) CLAIMANT by itself shall disclose the information of the funding party even
though it is not a statutory obligation.
38. Goeler notes that “third-party funding may touch upon specific procedural issues
including impartiality and independence of arbitrators in the context of third-party
funding, which in turn require a party to disclose certain facts related to the funding in the
course of the arbitration proceedings.”[Goeler] In this case, RESPONDENT has lost
confidence in Mr. Prasad's impartiality because CLAIMANT intentionally concealed the
economic relationship between the Findfunds LP and Mr. Prasad.
39. UNCITRAL Rules is silent on the third-party funding, while as a newly-rising issue,
CLAIMANT's disclosure obligation has been enacted in several statutory regulations,
such as AML Bill 2016 by Hong Kong Legislative Council, Guidelines for TPF by
CIETAC, IBA Guidelines by the IBA Council and CETA by Canada and The EU. So it is
necessary for the Tribunal to consider the impact of CLAIMANT's non-disclosure on Mr.
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 13
Prasad's impartiality and independence.
(3) Failure to disclose severely increases the doubts on Mr. Prasad's qualification.
40. Violations of obligations of a judicial nature generally result in a right to have an
arbitrator removed [J.Lew]. Mr. Prasad will be removed if he is not impartial and
independent due to non-performance of his disclosure obligation. Similarly, the US
Federal Arbitration Act provides that an arbitral award may be vacated where there was
evident partiality or corruption of an arbitrator, which has been interpreted to cover
failure to make proper disclosures about relationships with parties and others that could
bear on partiality [FAA].
41. The fact that Mr. Prasad and CLAMIMANT fail to disclose the relationship may not the
main reason to disqualify Mr. Prasad, because it needs specific analysis for the conflict of
interest and how the conflict of interest influences his impartiality and independence. But
CLAMIMANT's unethical conduct to conceal the third-party funder and Mr. Prasad's
undue diligence to investigate will severely increase the doubts on Mr. Prasad's
qualification.
C. The connections between Mr. Prasad, CLAIMANT and the funder impair his
independence.
42. Dependence of an arbitrator refers to unacceptable external relationships between the
arbitrator and parties [Born 2014; Goeler; Redfern and Hunter]. In present case,
Findfunds LP can be deemed to bear the identity of CLAIMANT (1) and thus Findfunds
LP and its subsidiaries' repeated appointment of Mr. Prasad falls into the orange list of
IBA Guidelines (2). Furthermore, Mr. Prasad's law firm is having a significant
commercial relationship with Findfunds LP, which is categorized in the waivable red list
of IBA Guidelines (3).
(1) Findfunds LP can be deemed to bear the identity of CLAIMANT under IBA
Guidelines.
43. Although the direct funder of CLAIMANT is Funding 12 Ltd., one of the subsidiaries of
Findfunds LP, owing to the fact that Findfunds LP has a controlling influence on its
subsidiaries and their funding business (a) and shares a direct economic interest in the
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 14
award to be rendered in this arbitration (b), it can be considered to bear the identity of
CLAIMANT.
(a) Findfunds LP has a controlling influence on its subsidiaries and their funding
business.
44. Parties may be considered to bear the same identity if one of the parties has a controlling
influence on the other [General Standard 6 (b) IBA Guidelines]. According to the facts,
Findfunds LP owns 60% of the shares in Funding 12 [PO2 ¶2], which makes it the main
shareholder of the latter. It is also the practice of Findfunds LP to establish a separate
legal entity for each case which it intends to fund and makes a very thorough examination
of the cases [PO2 ¶2,3]. It is reasonable to conclude from the percentage of shareholding
and the business pattern that Findfunds LP has a controlling influence on its subsidiaries
and their funding business either under IBA Guidelines or from a commercial perspective.
Therefore, it is Findfunds LP who is behind all the funding business rather than its
subsidiaries which are merely tools of its funding business.
(b) Findfunds LP shares a direct economic interest in the award to be rendered in this
arbitration.
45. Pursuant to IBA Guidelines, parties sharing a direct economic interest in an award bears
the same identity [General Standard 6 (b) IBA Guidelines] and specifically, third-party
funders may have a direct economic interest in the award, and as such may be considered
to be the equivalent of the party[Explanation to General Standard 6 IBA Guidelines].In
present case, since Findfunds LP, through Funding 12, has a direct economic interest of
25% of the award to be rendered and it actively participate in the discussion of the case, it
shall be considered to bear the identity of CLAIMANT [Goeler].
(2) Findfunds LP and its subsidiaries' repeated appointments of Mr. Prasad fall into
the orange list of IBAGuidelines.
46. Recurrent appointments indicates arbitrator's professional familiarity with a party
[Luttrell] and even potential favoritism which may bring about bias[Rogers]. Repeated
appointment of the arbitrator by the same party twice or more within past three years is
also listed as an orange list circumstance providing possible ground for challenge by the
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 15
IBA Guidelines[para. 3.1.3, IBA Guidelines] and this conclusion has been affirmed by
scholars and numerous cases [Born; S.L.U; Highbury; Cofely]. Specifically, French Court
of Cassation finds that tribunal is not properly constituted because one of the arbitrator
had been appointed by the same party in three other cases and failed to disclose them [SA
Fremarc].
47. It has been established that Findfunds LP controls its subsidiaries and is equivalent to
CLAIMANT in this arbitration. Therefore, the two appointments of Mr. Prasad made
by100% subsidiaries of Findfunds LP [Letter Prasad] should be deemed as made by
CLAIMANT itself, and thus constitutes a ground for challenge against Mr. Prasad.
(3) Mr. Prasad's law firm currently has a significant commercial relationship with
CLAIMANT and RESPONDENT never expressly waived such conflict.
48. Significant commercial relationship between arbitrator's law firm and parties is
categorized by IBA as a circumstance in the waivable red list, which without express
consent of the other party will cause a serious conflict of interest directly resulting in the
removal of an arbitrator [para. 2.3.6, IBA Guidelines].The facts that Mr. Prasad's partner
is currently representing a client in an ongoing case funded by Findfunds LP and Mr.
Prasad has been appointed twice as arbitrator by Mr. Fasttrack's law firm and both of
them is making a profit from these cases indicate a commercial relationship between Mr.
Prasad's law firm and CLAIMANT, which is significant enough to raise a justifiable
doubt as to Mr. Prasad's independence and impartiality.
49. Several factors, namely closeness, intensity, materiality and dependence[Suez], may be
evaluated when assessing the significance of such business connection and its effect on
Mr. Prasad's qualification. First, the relationship is close enough since Findfunds LP and
CLAIMANT bears the same identity and Mr. Fasttrack, as CLAIMANT's counsel,
advised and even directly recommend his colleague to appoint Mr. Prasad [PO 2 ¶9].
Second, the intensity [Rogers] of the connection suffices because Mr. Prasad along with
his partner have participated in five cases relevant with CLAIMANT in total, and one of
them is an ongoing case. Finally, the fact that Mr. Prasad's partner's 1.8 million US $ as
well as Mr. Prasad's considerable income from the case funded by Findfunds LP [PO2 ¶
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 16
8,10]demonstrates the materiality [Goeler]of the relationship and thus indicates the
dependence[Rogers]of the law firm on the funder. Furthermore, although such
circumstance is listed in the “waivable” red list in IBA Guidelines, RESPINDENT never
expressly stated its willingness to accept Mr. Prasad regardless of the existing conflicts.
Therefore, the relationship between Mr. Prasad's law firm and the CLAIMANT, without
expressed waiver of RESPONDNET, constitute a solid ground for the challenge against
Mr. Prasad.
D. Mr. Prasad expressed favorable opinions towards CLAIMANT in his article.
50. The content of Mr. Prasad's article does give rise to substantial doubts on his impartiality
and leads to his disqualification. It is worth noting that the dispute at issue is which
party's General Conditions shall be applied; while in Mr. Prasad's article, his opinion
obviously and specifically favors CLAIMANT.As already shown in practice,
UNCITRAL Rules adopts “the basis of an objective assessment” when judging an
arbitrator's impartiality and independence [UNCITRAL Digest].Although Mr. Prasad is
certainly entitled to academic freedom; it is hard to say, from an informed and reasonable
third person's view, Mr. Prasad will remain impartial and probably he could not make a
decision solely based on the facts and the circumstances of the case. In Canfor v. US, the
final result also upholds “the arbitrator's comments reflected a prejudgment of two of the
measures”[Canfor v. US]. Apart from that, when associating this article with the
connections between Mr. Prasad and CLAIMANT and its funder, it is fair enough to
come to his disqualification. In practice, “on the basis of the prior view and any other
relevant circumstances, that there is an appearance of pre-judgment of an issue likely to
be relevant to the dispute on which the parties have a reasonable expectation of an open
mind” [CC/Devas v. India].
E. The failure of disclosure and conflicts of interests are sufficient to disqualify Mr.
Prasad altogether.
51. In case that tribunal considered the circumstances above insufficient to disqualify Mr.
Prasad separately, these conflicts altogether and the fact that CLAIMANT's deliberately
concealing such conflicts cumulatively justify a doubt concerning Mr. Prasad. In an
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MEMORANDUM FOR RESPONDENT 17
UNCITRAL arbitration in which the LCIA was acting as appointing authority, it has been
observed that an accumulation of circumstances may have spawned justifiable doubts,
where each circumstance, viewed in isolation, might have been insufficient to do so
[LCIA Reference]. In a case where PCA acted as appointing authority, the
Secretary-General cited two situations in the Orange List of IBA Guidelines and
considered that the conflict was sufficiently serious to give rise to objectively justifiable
doubts as to the arbitrator's impartiality and thus upheld the challenge [ICS Inspection].
In the present case, there are up to four circumstances which could be taken in to account
when deciding the challenge against Mr. Prasad and these situations have apparently
reached the level of a justifiable doubt.
PART 3: THE RESPONDENT'S STANRARD CONDTIONS SHALLGOVERN THE
CONTRACT.
52. A contract has been concluded between CLAIMANT and RESPONDENT, which is
governed by RESPONDENT's standard conditions (I). Even if RESPONDENT's
standard conditions do not govern the contract, Global Compact principles will guide the
contract (II).
I. A contract has been concluded between CLAIMANT and RESPONDENT, which is
governed by RESPONDENT's standard conditions.
53. The contract No.1257 concerning the trade of chocolate cakes was awarded by
RESPONDENT on 7 April 2014 [Cl. Ex. 5]. During and after the tender procedure, both
CLAIMANT and RESPONDENT showed intention to apply RESPONDENT's standard
conditions, namely the Tender Document, with some minor and primary changes to the
goods accepted by RESPONDENT (A). Claimant failed to incorporate its standard
conditions only by small front print in its mail (B).
A. Both CLAIMANT and RESPONDENT showed intention to apply RESPONDENT's
standard conditions.
54. CISG should govern the Contract No.1257 (1). In the previous dispute, it is telling that
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 18
CLAIMAT did intent to follow the instruction of RESPONDET's standard conditions (2).
RESPONDENT accepted some minor and primary changes to the goods, however, the
change of standard conditions is not in this case (3).
(1) CISG should govern the contract No.1257.
55. Since both Equatoriana and Mediterraneo are contracting states of CISG [Proc. Ord.1 3
(4)] and parties did not opt-out the application of CISG, CISG should govern the contract
[CISG 1 (1)]. It is consistent with CLAUSE 19 in RESPONDENT'S General Conditions
of Sale which stipulates CISG as governing law and UNIDROIT Principle as gap-filling
law [CL. Ex. 2]. Paradoxically, CLAIMANT's General Conditions of Sale declares
Equatoriana law to be applicable [Proc. Ord.2 29] while CLAIMANT directly applied
CISG [Cl. Memo. ¶¶ 92, 94, 95, 104] and UNIDROIT Principle [Cl. Memo. ¶116] when
alleging the successful incorporation and governing position of its own standard
conditions in the first place. It infers CLAIMANT directly applied RESPONDENT's
General Conditions of Sale other than its own.
(2) CLAIMANT did intend to follow RESPONDENT's standard Conditions at the
point the Sales Offer was made.
56. Contrary to CLAIMANT's allegation of “counter offer” “last shot principle” on the basis
of Art. 19 [Cl. Memo. ¶¶ 90,104], there is no ground to apply them. RESPONDENT's
Invitation to Tender and Tender Document failed to constitute an effective offer under
Art.18 for the absence of intention to be bound by acceptance [CISG Digest 86 ¶5]. In a
tender procedure, the invitation to tender is simply an invitation to treat [Mckendtrick 31].
Where there is no effective offer, there is no counter-offer as well because counter-offer
concerns a reply to an “offer” [CISG Art. 19(1)].
57. RESPONDENT agrees Art. 8 should be applied to determine the true intention of party
autonomy other than apply Art 8 (2) only [Cl. Memo. ¶92]. The case law [ICC 7331] and
legislative history indicate that Article 8 can also “equally applicable to the interpretation
of ‘the contract'.” Thus, the content of an offer must be interpreted subject to
CLAIMANT's genuine intention according to Article 8.1 CISG [Schwenzer 146]. If
failing so, a reasonable person standard must be referred to [CISG Art. 8(2)].
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 19
58. Applying CISG subjective standard and objective standard to the contractual text shows
that CLAIMANT did incorporate RESPONDENT's standard conditions and was willing
to follow. First, CLAIMANT attached a full set of RESPONDENT's Tender documents
with Sales Offer [Proc. Ord.2 ¶27]. It indicates Tender Document a part of Sales Offer.
Second, this ongoing arbitration procedure initiated by CLAIMANT is based on
arbitration clause set in RESPONDENT's General Conditions of Contract [Cl. Ex. 2]. As
mentioned before, CLAIMANT directly applied Choice of Law CLAUSE in
RESPONDENT's Tender Documents. Third, in Letter of Acknowledgement sent back by
CLAIMANT, it clearly stated that “We have read the Invitation to Tender and will tender
in accordance with the specified requirements [Resp. Ex 1].” Fourthly, during the
negotiations after this previous dispute arose, CLAIMANT entirely used contract
No.1257 to refer the present contract between CLAIMANT and RESPONDENT [Cl. Ex
9]. However, Contract No.1257 stands right for the whole version of Tender Documents
[Cl. Ex 2]. RESPONDENT is reasonable to conclude that why CLAIMANT insists on its
own standard conditions is to escape from the breach of contract, for RESPONDENT
stipulates a higher standard on goods. However, during the tender procedure till the final
award of contract, CLAIMANT intended to apply RESPONDENT's tender document to
win the tender, on which basis of RESPONDENT finally got into the contract with
CLAIMANT.
(3) RESPONDENT accepted some minor and primary changes to the goods,
however, the change of standard conditions is not in this case.
59. Concerning the fruitful cooperation and longstanding business relationship in the future,
RESPONDENT tolerated two modifications of Tender Documents, which are the
payment term and form of the cake. As what was stated in Sales Offer [Cl. Ex. 4] and
Letter from Tsai [Cl. Ex. 3], CLAIMANT clarified the changes relate primarily to the
goods and mode of payment expressly and explained reasons in detail. However,
CLAIMANT did never give even a hint to tell RESPONDENT that the governing
conditions of offer is altered into CLAIMANT's General Conditions of Sales, which
cannot be regarded as a “primary change”. Even though CLAIMANT wrote “The above
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 20
offer is subject to the General Conditions of Sale and our Commitment to a Fairer and
Better World” in Sales Offer, there was no consensus to accept this term in eyes of
RESPONDENT [Id.]. Silence or inactivity does not in itself amount to acceptance unless
other additional factors associated with the silence or inactivity [Schwenzer]. It should
combine with usages, practice established between parties, etc. [CISG Art.18(3)]. In this
case, no event indicates a mere silence can amount to an acceptance.
B. Claimant failed to incorporate its standard conditions only by small front print in its
mail.
60. The small front print in CLAIMANT mail is not enough to fulfill the obligation to arouse
the attention as a requirement of the standard form (1). The CLAIMANT doesn't put
much emphasis on the point of the application of general conditions of sales (2). To apply
the standard form, special actions must be taken to attract the attention of the other party
(3). The change in the standard term related to the general condition of sales cannot be an
effective modification (4).
(1) The small front print in its mail is not enough to fulfill the obligation to arouse
the attention as a requirement of the standard form.
61. From the structure and the words of the mail, comparing with the font between the special
conditions of sales and the general one, it is very easy to find that the CLAMIANT uses a
standard form [Cl. Ex. 4], to integrate its attitude towards the general conditions of sales.
From the action, we can be inferred the following meanings.
(2) The CLAIMANT doesn't put much emphasis on the point of the application of
general conditions of sales.
62. Standard terms will never be a clause with the attention of the CLAIMANT, since it is
always written in advance without the careful consideration case by case. On other words,
under the circumstance that the standard form has the risk of being eliminated, no one
will be glad to putting an important issue into it unless the party who raise the standard
form has the dominating power in the negotiation. Clearly, in this case, the CLAIMANT
and RESPONDENT are at the same level, and it is the RESPONDENT's freedom to deny
the offer from the CLAIMANT.
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 21
63. When coming to the use of standard terms, one facing the risk of being eliminated, for as
a standard term, it is not the result of the negotiation and it is unfair for one party to
blindly agree on it. As long as it is eliminated, the clauses won't cause any effect and be
kicked out of the contract, as if it has never been there. It is obvious that if the terms are
ruined, the purpose of the CLAIMANT cannot be achieved; the result is what the
CLAIMANT cannot afford.
(3) To apply the standard form, special actions must be taken to attract the
attention of the other party.
64. To incorporate a standard form, one must do something to help the other party fully aware
of the clause. The key point here is to “help the other party aware”, but not to “do
something”. In the case, the CLAIMANT must successfully make the RESPONDENT
aware of the clause that the CLAIMANT is changing the general condition of the contract.
Putting a close look at the clause [Cl. Ex. 4], it can be found that the clause uses a smaller
font and center format, locating together with the contact number and the address.
65. First, considering that whether using a smaller font and a center format can be a way to
attract the attention. From the context [Cl. Ex. 4], it is very hard to find out the difference
between the clause and the normal content unless being read very carefully, which is to
say, if being read very briefly, it will be difficult to pay attention to the clause. On the
other hand, since careful reading is available, the effect of attracting attention never exists.
In conclusion, the change in font and format cannot be an effective way to give the alert.
66. Second, even the change in font and format can be regarded as a feasible way of alert, the
extent is not enough to help the RESPONDENT aware of the clause, not to say the
meaning backward. Normally, to emphasize is to enlarge the font or to overstrike the
words, it is very strange to use a smaller font to emphasize. Similarly, the CLAIMANT
put the place of the clause with the telephone and address, although it is truly a part of the
contract, but clause with this information is very easy to be deemed as indifferent or
useless. The CLAIMANT just gives an appearance that the RESPONDENT does not
need to notice this clause, not to say help the RESPONDENT to be aware of the
modification.
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 22
(4) The change in the standard term related to the General Condition of Sales
cannot be an effective modification.
67. The content of the clause is another issue worthy of discussion, from the offer [Cl. Ex. 4]
CLAIMANT changes the General Condition of Sales by giving a website, which is a
URL. As the requirement of the modification, a change must be clear and complete,
however, this way of CLAIMANT to modify is neither clear nor complete.
68. Usually, a clear and complete modification, in this case, means giving a complete and
up-dated version of general condition of sales from the CLAIMANT to the
RESPONDENT, just a hyperlink is totally far from enough.
69. Under one circumstance can it be a correct reference, that is: when clicking into the
website, the page can give a clear overview to tell the reader the complete scope of the
general condition of sales [CISG-ACOP 5]. However, in this short principle, two
components are included: a) the hyperlink can be clicked into; b) the page linked to shall
give a clear scope of the reference. In this case, the CLAIMANT fit neither.
70. First, the offer is not an E-mail, but a written letter. Compare with the offer [Cl. Ex. 4]
and other documents [Cl. Ex. 5,6,8], the upper part is quite different, which indicates the
offer a hard copy. Since the URL is included in the written letter, it means the URL
cannot be clicked into, although the RESPONDENT can type in the website address, it is
not the RESPONDENT's responsibility, nor is regulated in the principle. On other words,
if the hyperlink cannot be directly clicked into, then it falls out of the principle.
71. Second, when the RESPONDENT goes to the website the hyperlink points to, it is so
confusing that it is very difficult to find the documents, and it is harder to clarify whether
all the relevant documents are found. Undoubtedly, it doesn't satisfy the requirement of
being clear and complete.
72. In conclusion, what the CLAIMANT does is far from successfully incorporating its
standard conditions into its offer.
II. Even if RESPONDENT's standard conditions do not govern the contract, Global
Compact principles will guide the contract.
73. Even if RESPONDENT's standard conditions do not govern the contract, both parties did
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 23
not reach a consensus on applying the CLAIMANT's standard conditions (A). The facts
and circumstances of the case dictate that the Global Compact principles should govern
the contract at a minimum (B).
A. CLAIMANT and RESPONDENT have no consensus on applying CLAIMANT's
standard conditions.
74. By concluding the contract, CLAIMANT and RESPONDENT both mentioned its General
Conditions of Sale, in tender document and sales offer respectively. Although
CLAIMANT alleged that its offer would be subject to the application of its own General
conditions of Sale, including its own Code of Conduct [Cl. Ex. 4], RESPONDENT only
accepted the changed specifications for the chocolate cakes and different payment
conditions [Cl. Ex. 5].
B. The facts and circumstances of the case dictate that the Global Compact principles
should govern the contract at a minimum.
75. The guidelines in Article 8 must be followed to determine the suitable standard conditions
govern the contract (1). The business philosophy of CLAIMANT Standard Terms and
RESPONDENT's Codes of Conduct is the same (2). Thus, under Article 8.1, the Global
Compact principles which adhere to both parties business philosophy must receive due
consideration (3). If the subjective intentions cannot be discerned, the objective
understanding of the contract by a reasonable person can be considered through Article
8.2 (4).
(1) Article 8 guides contract interpretation under the CISG.
76. If neither standard condition of parties is applied, the Tribunal should look to Article 8 to
determine the suitable standard conditions govern the contract. Article 8 clearly outlines
the steps and criteria for interpreting the statements and conduct of parties in privacy. The
underlying principle of Article 8 is the determination of the “true intent” of the parties,
arrived at through consideration of all the facts and circumstances surrounding the case
[CISG Advisory Op. No. 3 ¶ 2.8].
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 24
(2) The business philosophy of CLAIMANT standard terms and RESPONDENT's
codes of conduct is the same.
77. CLAIMANT's Standard Terms demand a best effort whereas RESPONDENT's Codes of
Conduct demand an absolution that the selling party will ensure its suppliers' compliance
to ethical production under any circumstances. [Cl. Memo] The core difference is about
the conformance to standards not business philosophy. Thus, if standard of neither party
is applicable, the tribunal must find one standard that has basically adhering to both
parties' business philosophy which is Global Compact principles.
(3) The parties intended to use the Global Compact principles as standard
conditions all the way up through the negotiation and conduct.
78. Under Article 8, the Tribunal must consider the intent of both the CLAIMANT and the
RESPONDENT that was either known or that should have been known (a). Both parties
underline that they are the members of Global Compact (b). Both parties explicitly had
the intention that the Global Compact principles are applicable to the Agreement through
negotiation and conduct (c).
(a) Under Article 8 of the CISG, the Tribunal must consider the intent of both the
CLAIMANT and the RESPONDENT, that was either known or that should have been
known.
79. This subjective test considers the actual meaning the parties gave the Agreement as well
as their intentions during contract formation [Lookofsky 2000]. Through the negotiation,
CLAIMANT and RESPONDENT used the Global Compact principle as guild line. [Cl.
Ex. 1 & 3] Thus Global Compact principles serve as standard conditions at a minimum
when neither of standard conditions has been acknowledged as exact one.
(b) Both parties underline that they are the members of Global Compact.
80. As both parties are the UN Global Compact members, they should aim to mobilize a
global movement of sustainable companies and stakeholders. Furthermore, the
RESPONDENT wants have the title of Global Compact LEAD Company by 2018 [Cl.
Ex. 1]. The philosophy of Global Compact points to be a rotten corporate culture in both
parties.
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 25
(c) Both parties explicitly had the intention that the Global Compact principles are
applicable to the Agreement through negotiation and conduct.
81. First, CLAIMANT has become a very interesting supplier for RESPONDENT at the
Danubian Food Fair because of its Global Compact membership and its strict adherence
to the principle of ethical and sustainable production [Cl. Ex. 1].
82. Second, both parties demonstrate their ideas adhering to Global Compact in their standard
conditions. RESPONDENT underlined its Global Compact member committed to high
standards of integrity and sustainability in its tender. CLAIMANT also showed the
philosophy in its Code of Conduct [Cl. Ex. 2; Resp. Ex. 2].
83. Third, as checking guild lines, the Global Compact principles at a minimum are standard.
When RESPONDENT required CLAIMANT to clarify whether its suppliers adhered to
the standard, RESPONDENT “demanded that CLAIMANT confirmed by the next
business day that CLAIMANT's suppliers all strictly adhered to Global Compact
principles” [Cl. Ex. 6].
(4) A reasonable understanding of the contract suggests the Global Compact
principle guide the contract.
84. The Tribunal should evaluate the statute of Global Compact principle to contract through
the understanding of a reasonable person. Both parties underline the Global Compact in
their standard conditions which a reasonable person can conclude that Global Compact
principle can govern the contract at a minimum. The core of standard conditions of both
parties is basically adhering to philosophy in Global Compact principles.
PART 4: THE CLAIMANT DELIVERED NON-CONFORMING GOODS PURSUANT
TOART. 35 OF CISG BYTHE CONDITIONS THAT RESPONDENT'S GENERAL
CONDITIONSAREAPPLICABLE.
85. The CLAIMANT delivered non-conforming goods pursuant to Art. 35.1 CISG as the
cocoa was not farmed in accordance with the ethical standards underlying the General
Conditions and the Code of Conduct for Suppliers (I). Turning a blind eye on the explicit
contractual agreement, CLAIMANT's chocolate cakes does not conform with the contract
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 26
under Art. 35.2 of the CISG (II).
I. CLAIMANT delivered non-conforming goods pursuant to Art. 35.1 of CISG as the
cocoa was not farmed in accordance with the ethical standards underlying the General
Conditions and the Code of Conduct for Suppliers.
86. CISG governs the contract and the Art. 35(1) set the contractual obligation of goods
delivered by seller (A). Following CISG, the ETHICAL STANDARD should be included
in the QUALITY REQUIREMENT of goods, accordingly the CLAIMANT should ensure
its cocoa farmed in a sustainable way (B). Unfortunately, the truth stated in the
Michelgault Business News also confirmed by CLAIMANT itself clearly uncovered the
unethical conduct of CLAIMANT's supplier (C). Thus, the non-conforming unethical
product delivered by CLAIMANT constitutes the breach of QUALITY and other
REQUIREMENT underlying the General Conditions and the Code of Conduct for
Suppliers (D).
A. Art. 35.1 CISG set the contractual obligation of goods, which delivered by seller.
87. In case RESP.'s General Conditions are applicable, where the Clause 19: CHOICE OF
LAW [Cl.Ex.2. Sec. V] indicated that “This Agreement is governed by the UN
Convention on the International Sale of Goods”, thus the CISG should governs the
contract.
88. Pursuant to the Art. 35.1 CISG, it requires a seller to deliver goods that meet the
specifications of the contract in terms of description, quality, quantity and packaging
[CISG Digest Art. 35.], which means goods delivered by seller are not of the quality
required by the contract should constitutes to the non-conforming goods.
B. The ETHICAL STANDARD should be included in the QUALITY REQUIREMENT
of goods underlying the CISG, accordingly the CLAIMANT should ensure cocoa farmed
in a sustainable way.
89. The ETHICAL STANDARD should be included in the QUALITY REQUIREMENT of
goods underlying the Art. 35(1). Under Article 35.1, the legal term QUALITY involves
ethical standard which the CLAIMANT should comply with this standard (a).
RESPONDENT's General Conditions are explicit enough for CLAIMANT to comply
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 27
with and have particularly important specification of goods (b).
(1) QUALITY REQUIREMENT can be determined by party autonomy.
90. In ascertaining, for purposes of article 35(1), whether the contract requires goods of a
particular quantity, quality or description, or requires that the goods be contained or
packaged in a particular manner, one must refer to general rules for determining the
content of the parties' agreement [CISG Digest Art.35(1) ¶4]. Thus, QUALITY
REQUIREMENT can be determined by party autonomy.
(2) UnderArticle 35.1 QUALITY REQUIREMENT involves ethical standard.
91. The Tribunal must consider the intent of both the CLAIMANT and the RESPONDENT
which explicitly show the fact that both parties agree on QUALITY REQUIREMENT
involving ethical standard all the way up through the negotiation and contract.
92. CLAIMANT has become a very interesting supplier for RESPONDENT at the Danubian
Food Fair because of its strict adherence to the principle of ethical and sustainable
production [Cl. Ex 1]. The General Conditions of Contract of RESPONDENT dictate that
‘conduct your business in an environmentally sustainable way' and ‘Any breach of some
relevance of Comestibles Finos' General Business Philosophy or its Code of Conduct for
Suppliers shall be considered to constitute a fundamental breach' [Cl. Ex 2].
93. In the emails between two parties, both underlined the importance of ethical standard.
RESPONDENT stated that “You can be assured that we will do everything possible to
guarantee that the ingredients sourced from outside suppliers comply with our joint
commitment to Global Compact Principles. [Cl. Ex 3]” and CLAIMANT stated that
“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. Ex 5]”
94. The ethical standard be attached so much importance on during the negotiations and
mails due to the specific requirement of quality. Interpret the surrounding circumstances,
that means nothing else but that the CLAIMANT guaranteed that not only its suppliers
but also the ingredients supplied by its suppliers were farmed in compliance with
sustainable farming methods. Contrary to what CLAIMANT alleges, the
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 28
RESPONDENT's Code of Conduct does not merely contain an obligation of best efforts
in this regard but an obligation of results.
95. Besides, pursuant to RESP.'s Code of Conduct for Suppliers, which in RESP.'s General
Conditions mentioned as should be complied with, the CLAIMANT also need to make
sure its supplier's conduct far away from breach the principle or ethical both parties
shared with and obeyed to. In the E. Procurement by supplier [CL.Ex.2. Sec. ⅩⅩⅥ]
clearly stated that “make sure that they comply with the standards agreed upon to avoid
that goods or services delivered are in breach of Comestibles Finos' General Business
Philosophy”.
C. Michelgault Business News clearly disclose the unethical conduct of CLAIMANT's
supplier.
96. Unfortunately, the truth mentioned in Resp.'s Request for Clarifications (January 27,
Thursday, 2017) [Cl.Ex.6 ¶1] and article excerpted in the Michelgault Business News
named THE MONEY WITH ETHICAL BUSINESS (January 23, Monday, 2017)
[Cl.Ex.7] (1) which are also confirmed by CLAIMANT itself in CLAIMANT's Email
sent in February 10, 2017[Cl.Ex.9 ¶1] (2) both clearly disclose the unethical conduct of
CLAIMANT's supplier.
(1) As mentioned in the email RESPONDENT's Request for Clarifications
97. The UNEP Special Rapporteur investigating the growing deforestation in Ruritania
released a report on the state of the Ruritanian cocoa industry and its compliance with the
accepted principles of sustainable farming and Global Compact which stated that there
was widespread fraud and corruption in Ruritania [Cl.Ex.6¶1].
98. The details stated in the article named THE MONEY WITH ETHICAL BUSINESS,
which mentioned shady deals, offshore accounts, money laundering [Cl.Ex.7¶2], a group
of business people bribed officials at the Ministry for Agriculture to change the zone
plans and issue permits within nature reserves [Cl.Ex.7¶5], wrong certificates of origin
where issued for cocoa farmed in protected areas so that the beans could be sold as
“sustainably grown” despite their real origin [Cl.Ex.7 ¶8].
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 29
(2) CLAIMANT confirm the content of NEWs.
99. In CLAIMANT's email (February 10, 2017), where expressly stated that CL.'s supplier
had not only breached its contractual obligation towards cl. but also obtained falsified
certificates to cover up such breach of contract, which meant that some of the cocoa
beans used for the CLAIMANT production of its chocolate cake had not been produced
in accordance with the contractually required principles [Cl.Ex.9¶1].
100.In another CLAIMANT's email (January 27, Thursday, 2017), which stated that in the
last two years, the CLAIMANT only relied regarding their compliance assessment on the
documentation sent to them by Ruritania Peoples Cocoa [Cl.Ex.8¶2].
D. Based on analysis above, the non-conforming unethical product delivered by
CLAIMANT constitutes the breach of QUALITY and other REQUIREMENT
underlying the General Conditions and the Code of Conduct for Suppliers.
101.The non-conforming unethical product delivered by CLAIMANT breached the quality
requirement as we proved in B. (1) underlying the General Conditions and the Code of
Conduct for Suppliers (1). Furthermore, the CLAIMANT breached the requirement
concerning the Procurement by supplier owing to its neglectful and careless towards its
supplier's unethical conduct, which constitute one of the real reasons of the
non-conforming goods' production (2).
(1) CLAIMANT breached the quality requirement as we proved in the B. (1)
underlying the General Conditions and the Code of Conduct for Suppliers.
102.As we proved in the B. (1), Under Art. 35.1 “Quality” involves ethical standard, which is
playing an increasingly important part in today's business age, the core content of
“Quality” can be determined by party autonomy and the intent of both the CLAIMANT
and the RESP. were explicitly showing the fact that both parties agree on “Quality”
involving ethical standard, also, RESP.'s General Conditions are explicit enough for
CLAIMANT to conform to and have particularly important specification of goods.
103.The truth lined above is hurtful and disappointing, the “Quality” requirement should be
fitted, but CLAIMANT fail to, the ingredient of the goods delivered should be ensured to
be farmed ethical, but also, CLAIMANT fail to.
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 30
(2) CLAIMANT breached the requirement concerning the Procurement by supplier
owing to its neglectful and careless towards its supplier's unethical conduct, which
constitute one of the real reasons of the non-conforming goods' production.
104.As we point out in the B. (2), the CLAIMANT also need to make sure its supplier's
conduct far away from breach the principle or ethical both parties shared with and obeyed
to because its explicitly stated in the Procurement by supplier.
105.While, the truth revealed the CLAIMANT's neglectful and careless towards its supplier's
unethical conduct, especially in the last two years CLAIMANT only relied regarding
their compliance assessment on the documentation sent to them by Ruritania Peoples
Cocoa [Cl.Ex.8¶2]. Of course by this mean there couldn't exist anything which suggested
fraud. Obviously, the CLAIMANT did not do its duty of care and let the unethical
business conduct in Ruritania becoming a serious problem, which constitute one of
reasons of the non-conforming goods' production.
II. Turning a blind eye on the explicit contractual agreement, CLAIMANT's chocolate
cakes do not conform with the contract underArt. 35.2 of the CISG.
106.Setting aside the promise CLAIMANT made to RESPONDENT within the contract,
CLAIMANT still has delivered non-conforming goods according to Art.35.2 of the CISG.
Art. 35.2 is applicable since both parties did not derogate from this part of the article (A).
The chocolate cakes are not fit for the purpose which sustainably sourced food would
ordinarily be used under CISG Art.35(2)(a) (B). The chocolate cakes are also not fit for
the particular purpose explicitly or implicitly made known to the CLAIMANT at the
conclusion of the contract according to CISG Art.35(2)(b) (C). The risk was passed to
CLAIMANT and therefore whether the cause of non-conformity is under its sphere of
control is irrelevant(d); CLAIMANT cannot seek relief under Art 35.3 of the CISG (D).
A.The contract did not exclude the use of CISG Art.35.2
107.While the contract sufficiently specifies in its General Conditions the requirements for
conforming goods, Art.35.2 was not explicitly derogated from [PTA powder case;
CLOUT case No.999]. Therefore, in the occurrence of dispute in interpreting the agreed
requirements, Art.35.2 supplemented the test of conformity with ‘general guarantees'
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 31
[Beijing Case].
108.Even if there is no agreement on whether the contract is specified enough in determining
products quality, Art.35(2) is in place to fill the gap the contract leaves behind since there
is no explicit agreement on products quality which inactivates the default test of Art.35
(2)(b)
B. The chocolate cakes are not fit for the purpose which sustainably sourced food would
ordinarily be used under CISG Art.35.2.a.
109.It is uncontested by both parties that CLAIMANT has used unsustainable cocoa in its
production of chocolate cakes. The test applicable under the Article 35(2)(a) should be
the ‘reasonable quality requirement' for the goods delivered [Rijin Blend case, Beijing
case], thus the buyer's reasonable expectation, in this case the Respondent's, should be
taken into account, on the basis of communication both before and after the conclusion of
the contract.
110.CLAIMANT has written in black and white “sustainably sourced cocoa” on its campaign
post on Cucina Food Fair where it draws the RESPONDENT's attention [Proc. Ord.1
P29]. Throughout the pre-contractual communication, CLAIMANT practically
emphasized nothing but its capability in ensuring sustainable production [Proc. Ord.1 4 ¶
3].
111.Also, unlike Art.35.2.b, Art 35.2.a is not limited to the time ‘at the conclusion of the
contract'. Therefore when CLAIMANT invited RESPONDENT to its premise in the
summer 2014 after the contract was concluded, it further assured RESPONDENT's belief
that 100 per cent sustainable product was guaranteed [Proc. Ord.2 ¶34 ]
112.Therefore, when CLAIMANT failed to meet this expectation, it has failed to past the test
of reasonable quality requirement of the chocolate cakes and its ordinary purpose of
being sold as sustainable products.
C. The chocolate cakes does not fit for its particular purpose according to CISG
Art.35(2)(b).
113.CLAIMANT's cakes were tainted by unsustainable cocoa. Therefore, as an ethical
company which aims to become one of the Global Compact LEAD company in 2018,
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 32
RESPONDENT could no longer sell the cakes. This particular purpose of only selling
ethical products was to made know to Claimant at the conclusion of the contract and
Claimant was well aware of the particular purpose (1); it was reasonable for Respondent
to rely on Claimant's skill and judgment in making sure the conforming supply of cocoa
(2).
(1) The particular purpose was to made known to CLAIMANT before the
conclusion of the contract which CLAIMANT was well aware of;
114.The particular purpose was made known to CLAIMANT at the conclusion of the contract
through the email accompanying the tender documents [Cl. Ex.1 ¶8].
115.CLAIMANT clearly understood that it was awarded the contract largely because of its
guarantee of ethical production on the entire supplying chain. While emphasizing on its
‘joint commitment to Global Compact Principles' with RESPONDENT, CLAIMANT
strongly agree with RESPONDENT in ensuring sustainable products [Cl. Ex 3 ¶5].
Therefore, CLAIMANT cannot argue it was not aware of the particular purpose explicitly
made known to it.
(2) It was reasonable for Respondent to rely on Claimant's skill and judgment in
making sure the conforming supply of cocoa.
116.A buyer may reasonably rely on seller's skill and judgment if the seller is a specialist or
expert at the manufacture or in any event holds the seller to the buyer as such [Schwenzer
Art.35 ¶24 ]
117.CLAIMANT is a bakery manufacture and a member of Global Compact [Cl. Notc. of Arb.
¶1]. While RESPONDENT as a gourmet supermarket chain deals with a variety of food
products, bakery and chocolate cakes are Claimant's area of expertise. Claimant clearly
owes more knowledge and is a better expert in sustainable manufacture of bakery than
Respondent is. It was reasonable for Respondent to believe that Claimant's Global
Compact membership and strict adherence to sustainable production would made it
dependable in ensuring the products serves the particular purpose [Cl. Ex 1 ¶1].
D. CLAIMANT willingly undertook the risk of its own supplier's non-conformity.
118.CLAIMANT argue that the non-conformity was contributed to a third party, in this case
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 33
its own cocoa supplier. CLAIMANT further submitted that this fell outside of its sphere
of control and therefore itself should be exempted from delivering non-conforming goods
[Cl. Memo 32, 33]. This is a complete misinterpretation of the applicable law, the CISG.
119.CLAIMANT's interpretation was taking scholars' opinion out of context. By “a party
should not be held liable for things which lie outside his sphere of control”, it was meant
to discuss the occasion where the things in dispute fall under the other party's sphere of
control. The CISG however, does not contain any article that exempts parties' obligation
in case of force majeure. Therefore, when the contract was concluded, regardless of how
the contractual obligation might be breached, CLAIMANT undertook the risk and was
obliged to ensure conformity of goods.
E. Claimant could not be relieved by CISG Art.35.3 for exclusivity.
120.Respondent didn't know and could not have been aware of the cocoa Claimant used were
lack of conformity at the conclusion of the contract, therefore Claimant could not be
relieved as CISGArt.35.3 is herein not applicable for exclusivity.
121.Ensuring sustainable cocoa remains in Claimant's scope of control, thus Claimant should
be held liable for the non-compliance of products.
East China University of Political Science and Law
MEMORANDUM FOR RESPONDENT 34