KAIHARI WAINA LTDfd.unl.pt/docentes_docs/ma/FPC_MA_28154.pdfTwenty-Third Annual Willem C. Vis International Commercial Arbitration Moot CASE NO. SCH-1975 IN THE MATTER OF AN ARBITRATION

Twenty-Third Annual

Willem C. Vis International Commercial

Arbitration Moot

CASE NO. SCH-1975

IN THE MATTER OF AN ARBITRATION

Between:

KAIHARI WAINA LTD (Equatoriana)

CLAIMANT

-v-

VINO VERITAS LTD (Mediterraneo)

RESPONDENT

Memorandum for Claimant

April 15, 2016

NOVA LISBON LAW SCHOOL

Carolina Paz • Diana Ranito • Sebastião Burnay • Vanessa Freitas

Twenty-Third Annual Willem C. Vis Nova Lisbon Law School

2

TABLE OF CONTENTS

ABREVIATIONS ............................................................................................................. 4

LEGAL AUTHORITIES .................................................................................................. 5

CASE LAW ...................................................................................................................... 5

ARBITRAL AWARDS .................................................................................................... 6

LEGAL SOURCES .......................................................................................................... 7

EXHIBITS ........................................................................................................................ 8

STATEMENTS OF FACTS ............................................................................................. 9

SUMMARY OF THE ARGUMENT ............................................................................. 12

ARGUMENT ................................................................................................................. 14

I. DOCUMENT PRODUCTION ................................................................................... 14

A. PARTIES ONLY EXCLUDED THE EXTENSIVE DISCOVERY PROCEEDINGS

..................................................................................................................................... 14

B. THE TRIBUNAL HAS THE POWER TO COMPEL DOCUMENT PRODUCTION

..................................................................................................................................... 15

1. THE VIENNA RULES AUTHORIZE THE ARBITRAL TRIBUNAL TO

ORDER DOCUMENT PRODUCTION ................................................................. 15

2. UNCITRAL MODEL LAW RATIFIES ARBITRATORS AUTHORITY ........ 16

C. THE TRIBUNAL SHALL GRANT ORDER FOR DOCUMENT PRODUCTION

..................................................................................................................................... 17

1. ISSUANCE OF ORDER FOR DOCUMENT PRODUCTION IS JUSTIFIED . 17

2. CLAIMANT’S PROCEDURAL DEMAND IS SUITABLE ACCORDING TO

IBA RULES ............................................................................................................. 18

II THE COSTS INCURRED AS A RESULT OF THE INITIATION OF THE STATE

COURT PROCEEDINGS SHALL BE RECOVERED AS DAMAGES FOR BREACH

OF ARBITRATION AGREEMENT ............................................................................. 21

A. THE ARBITRATION CLAUSE IS VALID SO HIGH COURT PROCEEDINGS

ARE A RESULTA OF RESPONDENT’S BREACH OF ARBITRATION

AGREEMENT ............................................................................................................ 22

B. THE CLAIMANTS’ ACTIONS FOR INTERIM INJUNCTION WAS

NECESSARY AND COMPATIBLE WITH ARBITRATION AGREEMENT ........ 23

3. RESPONDENT SHOULD BE AWARD WITH DAMAGES FOR DAMAGES IN

RESULT OF THE VIOLATION OF THE ARBITRATION AGREEMENT ........... 24

III CLAIMANT IS ENTITLED TO THE DAMAGES IT CLAIMS, INCLUDING

FURTHER PROFITS ..................................................................................................... 25


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A. CLAIMANT CAN CLAIM THE PROFITS RESPONDENT MADE BY SELLING

THE BOTTLES TO SUPERWINES AS PART OF ITS DAMAGES UNDER A

THEORY OF RESTORATIVE DAMAGES ............................................................. 26

B. RESPONDENT SHOULD NOT BE ALLOWED TO PROFIT FROM BREACH

OF CONTRACT, EVEN IF THIS AWARDS FURTHER DAMAGES TO

CLAIMANT ................................................................................................................ 28

C. CLAIMANT’S LOST PROFITS WERE FORESEEABLE UNDER ARTICLE 74

OF THE CISG ............................................................................................................. 29

D. CLAIMANT HAS TAKEN ALL REASONABLE MEASURES TO MITIGATE

LOSSES, INCLUDING LOSS OF PROFIT, RESULTING FROM RESPONDENT’S

BREACH ..................................................................................................................... 30

IV THE CLAIMANT IS ENTITLED TO BE REIMBURSED OF LITIGATION COSTS

REGARDING INTERIMN RELIEF. ............................................................................ 31

A. THE PRINCIPLE OF FULL COMPENSATION IS APPLICABLE .................... 31

1. ARTICLES 74.º CISG AND 7.4.2. DANUBIA CONTRACT LAW INCLUDE

THE PRINCIPLE OF FULL COMPENSATION ................................................... 32

2. LEGAL DOCTRINE AND JURISPRUDENCE HAVE ALREADY

SUPPORTED THE INCLUSION OF SOME LITIGATIONS COSTS ON THE

FULL COMPENSATION CONCEPT .................................................................... 32

3. THE CLAIMANT HAD COMPLIED WITH 77.º CISG ON WHAT CONCERNS

TO AVOIDAL OF FURTHER DAMAGES AFTER THE BREACH BY THE

COUNTERPARTY ................................................................................................. 33

B. IF THE CISG IS NOT APPLICABLE, THE RIGHT TO REIMBURSEMENT OF

LITIGATION COSTS STILL APPLIES .................................................................... 33

1. THE VIENNA RULES DON’T SPECIFY WHICH PARTY SHOULD BEAR

THE LITIGATION COSTS .................................................................................... 33

2. THE PRINCIPLE OF COSTS FOLLOW THE EVENT IS APPLICABLE ....... 34

REQUEST FOR RELIEF ............................................................................................... 35


4

ABREVIATIONS

AAL Austrian Arbitration Law

Answer Answer to Statement of Claim

Art. Article

CEO Chief Executive Officer

CISG United Nations Convention on the International Sale of

Goods

Contract Framework contract dated 22 April 2009

Ex.C Exhibit of Claimant

Ex.R Exhibit of Respondent

IBA Rules International Bar Association Rules on the Taking of

Evidence in International Arbitration

ICC International Chamber of Commerce

Ltd. Limited

No. Number

p. Page

Proc. O. 1 Procedural Order no. 1

Proc. O. 2 Procedural Order no. 2

St. Of Cl Statement of Claim

UNICITRAL United Nations Commission on International Trade Law

US United States

v. Versus

VIAC Vienna International Arbitral Center

Vienna Rules Vienna International Arbitral Center Rules of

Arbitration

§ Paragraph


5

LEGAL AUTHORITIES

Abbreviation Citation

Born

Born, Gary B. INTERNATIONAL COMMERCIAL

ARBITRATION. 2nd ed. Kluwer Law International

(2014).

Cooke

Cooke, Timothy

http://www.lexology.com/library/detail.aspx?g=eb4b4fa6-

d82d-4982-b61d-7f1c7a5d7608

Fouchard, Gaillard

Fouchard, Gaillard, Godman. INTERNATIONAL

COMMERCIAL ARBITRATION. Kluwer Law

International (1999)

Scherer

Scherer, Mathias.

http://kluwerarbitrationblog.com/2014/02/21/damages-as-

a-sanction-for-commencing-court-proceedings-in-breach-

of-an-arbitration-agreement/

Schlechtriem and

Schwenzer

Schlechtriem and Schwenzer. COMMENTARY ON THE

UN CONVENTION ON THE INTERNATIONAL SALE

OF GOODS (2010).

CASE LAW

Case Cited as

England

Channel Group v Balfourd Beatty Ltd.,

1993, Adj.L.R. 01/21 Channel Group v Balfourd Beatty Ltd

Greece

Polimeles Protodikio Athinon (Multi-

Member Court of First Instance of Athens,

2009). Case no. 4505/2009

Bullet Proof Vest Case

Singapore


6

Beng Tee & Co Pte Ltd v. Fairmount

Development Pte Ltd.

CA 100/2006 (Singapore Court of Appeal,

09 May 2007)

Soh Beng Tee & Co v. Fairmount

Devel

Front Carriers Ltd v Atlantic & Orient

Shipping Corp, 2006, 3 SLR 854

Front Carriers Ltd v Atlantic & Orient

Shipping Corp

Swift—Fortune Ltd v Magnifica Marine SA,

2007, 1 SLR 629

Swift—Fortune Ltd v Magnifica

Marine SA

Tjong Very Sumito and others v. Anting

Investments Pte Ltd, 2009, 4 SLR® 732

Tjong Very Sumito and others v.

Anting Investments Pte Ltd

Switzerland

Bundesgericht (Supreme Court, 17

December 2009)

Watches Case

X. SA v Z. Ltd. 4A_232/2013, September

30, 2013 X. SA v Z. Ltd.

ARBITRAL AWARDS

Award Cited as

International Centre for Settlement of Investment Disputes

R.R. Dev. Corp. (U.S.A.) v. Repub. of

Guatemala, Decision on Provisional

Measures in ICSID Case No. ARB/07/23

of 15 October 2008.

R.R. Dev. Corp. v. Guatemala

International Chamber of Commerce

ICC Case no. 6345 (1991) Case 6345

ICC Case no. 6959 (1992) Case 6959


7

LEGAL SOURCES

Abbreviation Citation

AAL Austrian Arbitration Law

CISG United Nations Convention on Contracts for the

International Sale of Goods (1980)

IBA Rules International Bar Association Rules on the Taking of

Evidence in International Arbitration

NBW Netherlands Burgerlijk Wetboek (Dutch Civil Code).

NYC New York Convention

UNCITRAL Arbitration

Rules

United Nations Commission on International Trade

Law Arbitration Rules, Vienna 2010

UNCITRAL Dig. UNCITRAL 2012 Digest of Case Law on the Model

Law on International Commercial Arbitration

UNCITRAL Model Law United Nations Commission on International Trade

Law, Arbitraton Rules

Vienna Rules Vienna International Arbitration Center Rules of

Arbitration, Vienna, 2013


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EXHIBITS

Exhibit No. Date Description

C-1 22 April 2009 Framework Contract

C-2 4 November 2014 Order of 10.000 bottles by Kaihari Waina Ltd

C-3 1 December 2014 E-mail from Mr Weinbauer

C-4 1, 2 December 2014 Publicity

C-5 8 July 2015 Witness Statement Isme Buharit

C-6 2 December 2014 Letter from Mr Friedensreich

C-7 4 December 2014 E-mail from Mr Weinbauer

C-8 12 December 2014 High Court Order

C-9 23 April 2015 High Court Declaration

C-10 5 December 2014 Contingent Fee Agreemet

C-11 25 May 2015 Invoice 1254

C-12 8 July 2015 Witness Statement Mrs. Kim Lee


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STATEMENTS OF FACTS

Claimant, Kaihari Waina Ltd (“Kaihari”) is a wine merchant located in Equatoriana. It

is specialized in top quality wines for collectors and high end gastronomy market and has

a particular expertise in Mediterranean Mata Weltin wines from the Vuachoua region.

Respondent, Vino Veritas Ltd (“Vino Veritas”) is one of the top vineyards in the Vuachoua region

of Mediterraneo. Its Mata Weltin wine has won the Mediterranean gold medal for the last five years.

1. On 22 April 2009, Claimant and Respondent entered into a Framework

Agreement, where Respondent guaranteed Claimant annual delivery of up to 10,000

bottles in exchange for a yearly minimum purchase of at least 7,500 bottles.

2. Claimant’s successful business is dependent on the quantity of wine guaranteed

by Respondent because the majority of Claimant’s customers rely on a preorder system.

Claimant explained to Respondent its need for the guarantee during negotiations.

3. Art. 20 of the Contract included an Arbitration Clause stating, “No discovery shall

be allowed”. Consequently, in its contacts with Claimant, Respondent wished to avoid

broad document requests prevalent in common law jurisdictions to ensure fast and

informal arbitration.

4. The Contract provided that the substantive law governing the Contract would be

the CISG and the law of Danubia, which has adopted the UNCITRAL Model Law on

International Commercial Arbitration. The parties agreed that any disputes would be

decided by arbitration under VIAC’s International Arbitration Rules in accordance with

international practice.

5. Claimant annually ordered the designated quantity of that year’s vintage wine no

later than 20 December. Every year, Claimant placed its orders prior to Respondent’s

negotiations with other customers, who concluded their contracts with Respondent in

January. Claimant always ordered between 7,500 and 8,500 bottles, generally increasing

the quantity each year.


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6. In August 2014, due to poor weather conditions, Respondent had one of its lowest

quantity harvests. This exquisite harvest won multiple awards, increasing Caimant’s

preorders by 20%. Respondent entered into an agreement with Claimant’s main

competitor, SuperWines, reducing Respondent’s overall wine supply. Respondent

eventually provided SuperWines with a total of 5,500 bottles.

7. On 4 November 2014, Claimant ordered 10,000 bottles of Mata Weltin 2014, the

maximum amount permitted under the Contract. On 25 November, Claimant’s

development manager, Isme Buharit, met with Respondent’s CEO, Mr. Weinbauer, to

discuss the importance of its order. Claimant explained to Respondent that it had incurred

a significant number of preorders, many of which had already been accepted. Respondent

stated that due to a decrease in the supply of wine, it would not be able to provide more

than 10,000 bottles however, it did not indicate an inability to honor its contractual

obligations to Claimant. In fact, Ms. Buharit left the meeting with the impression that

Respondent was going to deliver the quantity requested by Claimant.

8. However, on 1 December 2014, Claimant received a letter from Respondent

stating it would only deliver between 4,500 to 5,000 bottles of wine, 3,000 less than

Respondent guaranteed Claimant under the Contract. When Claimant notified

Respondent that it wished to enforce the Contract, Respondent accused Claimant of

outrageous behavior, stating that it would not deliver any of the wine, even if Respondent

had to drink all of it.

9. Claimant, conscious of its own contractual obligations, immediately sought

interim relief in the High Court of Mediterraneo to prevent Respondent from distributing

the wine guaranteed to Claimant under the Contract. Claimant had retained Lawfix, a

local Mediterranean firm, on a contingency fee basis to represent it in all matters in the

Courts of Mediterraneo that dealt with the parties’ Contract.

10. On 12 December 2014, the High Court granted Claimant’s injunction, and

Respondent did not challenge the Court’s order. For the interim injunction, Claimant

incurred $33,750 in attorney’s fees.


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11. Around this same time, Claimant contacted other top vineyards to make

alternative arrangements to fulfill the needs of its own customers. On 2 February 2015,

Claimant purchased 5,500 bottles of wine from Vignobilia Ltd, another high-end

producer of wine from Mediterraneo’s Vuachoua region. When Respondent figured out

that Claimant had secured 5,500 bottles from Vignobilia, it entered into further contracts

for the same amount without first seeking permission from the High Court of

Mediterraneo.

12. On 30 January 2015, Respondent required a declaratory judgment in

Mediterraneo, asking the court to find that Respondent was not liable for the breach of

the Contract, specifically the non-delivery of 10,000 bottles of diamond Mata Weltin

2014. The High Court dismissed the action for lack of jurisdiction, based on the

Arbitration Clause. As a result of Claimant’s successful defense, it incurred an additional

$16,530 in attorney’s fees.

13. Claimant started the current arbitral proceeding on 11 July 2015, with the Vienna

International Arbitral Centre, requesting the payment of damages for breach of contract.

During a telephone conference on 1 October 2015, the parties consented to the VIAC

Rules for this arbitration. The Tribunal also decided, for the purposes of this hearing, that

Respondent’s termination of the Contract constituted a breach.


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SUMMARY OF THE ARGUMENT

I: Parties Have Not Excluded the Standard Type of Document Production. While the

Framework Agreement provides that “no discovery shall be allowed” [Cl. Ex. 1, Art. 20],

this provision still allows for document production. Considering the different meaning of

discovery in the parties’ two legal systems, the parties did not agree to foreclose document

production.

II: The Arbitral Tribunal Has the Power to Compel Document Production. The

Vienna Rules, namely Art. 29, authorize the Arbitral Tribunal to order document

production on its own discretion. Also, UNCITRAL Model Law, which defines the terms

of document production ratifies arbitrator’s authority.

III: The Tribunal Shall Grant Order for Document Production. The Tribunal should

compel document production since the requested documents are crucial to the fair

settlement of the current dispute. Also, the request to produce made by CLAIMANT

meets all IBA Rules stipulated requirements for document production.

IV: The Arbitration Clause Is Valid So High Court Proceedings Are a Result of

Respondent’s Breach of Arbitration Agreement. As the Article 20 of the Framework

Agreement is valid and effective, the Respondent’s attempts to seek a declaration of non-

liability by the court in Mediterraneo was a merits-based claim, which is considered a

breach of an arbitration clause in international law. For that Claimant shall be reimbursed

for the damages of that breach.

V: The Claimants’ Actions for Interim Injunction Was Necessary and Compatible

with an Arbitration Agreement. The High Court Order is compatible with the Article

20 of the Framework Agreement.

VI: Respondent Should Be Award with Damages for Damages in Result of the

Violation of the Arbitration Agreement. The Claimant as innocent party can claim the

costs, as damages for damages, it incurred in responding to High Court proceedings and

for Respondent’s violation of the arbitration agreement because it resisted commencing

the arbitral proceedings.


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VII: Claimant can claim the profits that Respondent made by selling the bottles to

SuperWines as part of its damages, including further profits. Claimant’s request for

lost profits is uniform with the text of Article 74 of the CISG, which states “damages for

breach of contract by one party consist of a sum equal to the loss, including loss of profit,

suffered by the other party as a consequence of the breach” [CISG Art. 74].

VIII: Respondent Should Not Be Allowed to Profit from Breach of Contract, Even

If This Awards Further Damages to Claimant. Restorative and preventative theories

of damages support Claimant’s argument. Under the restorative theory of damages,

Article 74 of the CISG and the principle of full compensation (principe de la réparation

intégrale) entitle Claimant to these profits. The preventative theory of damages prevents

Respondent from profiting from its breach of contract.

IX: Claimant’s Lost Profits Were Foreseeable under Article 74 of the CISG. Article

74 includes two limiting principles that preclude parties from recovery of lost profits: the

principles of foreseeability and mitigation.

X: Claimant Has Taken All Reasonable Measures to Mitigate Losses, Including Loss

of Profit, Resulting from Respondent’s Breach. Claimant took reasonable measures to

mitigate the losses, including loss of profit, it suffered due to Respondent’s breach of

contract.

XI: The Principle of Full Compensation is Applicable. The Principle of full

compensation is applicable due to a liberal interpretation of the 74.º CISG and 7.4.2.

Danubia contract law.

XII: If The CISG Is Not Applicable, The Right to Reimbursement of Litigation Costs

Still Applies. In this case, the applicable rules to the arbitration is the Vienna Rules which

is omissive on what concerns to payment of litigation costs. Therefore, general principles

should be applied.


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ARGUMENT

I. DOCUMENT PRODUCTION

1. Faced with the impossibility of measuring damages caused by the breach of contract

by RESPONDENT and in order to facilitate the calculation of such damages,

CLAIMANT claims RESPONDENT´s profits from selling the 5.500 bottles to

SuperWines [St. of Cl., Statement of Relief sought]. Therefore, CLAIMANT requested

the Arbitral Tribunal to order RESPONDENT to provide documents pertaining to

communications, negotiations and contracting between RESPONDENT and SuperWines

concerning the purchase of diamond Mata Weltin 2014 [St. Of Cl., §27].

2. The parties stipulated that “no discovery shall be allowed” [Ex.C1]. This stipulation

gave rise to objections of RESPONDENT regarding the order for document production

[Answer, § 27]. The Arbitral Tribunal is requested to find that it has the power to issue an

order obliging RESPONDENT to produce the requested documents.

3. CLAIMANT submits that, in their Arbitration Agreement, the Parties only excluded

the extensive discovery proceedings (A). The Arbitral Tribunal has the power to compel

document production under the Vienna Rules and UNCITRAL Model Law (B) and should

do so, since the issuance of order for document production is justified and suitable

According to IBA Rules (C).

A. PARTIES ONLY EXCLUDED THE EXTENSIVE DISCOVERY PROCEEDINGS

4. RESPONDENT claims that this Arbitral Tribunal has no power to enforce the

production of documents through the procedure arguing that the parties expressly

excluded the possibility of discovery [Answer, §27].

5. CLAIMANT submits that, in their Arbitration Agreement the Parties did not excluded

standard document production requests and only intended to avoid the discovery similar

to the extensive pre-trial discovery in the US Courts. Discovery and document production

are not the same and must not be confused. The contractual provision “no discovery shall

be allowed” still permits the Tribunal to compel document production, since the exclusion

of “discovery” in the Arbitration Agreement was meant only to cover extensive discovery

proceedings.


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6. CLAIMANT has never meant to remove the whole process of document production,

which would have violated the parties' right to be heard. Such context would give ground

for refusing recognition of the award [Soh Beng Tee & Co v. Fairmount Development

(Singapore)].

7. Moreover, the interpretation of the Arbitral Agreement should take into account the

Parties legal background. CLAIMANT and RESPONDENT come from different legal

systems that have two distinct meanings of discovery. CLAIMANT comes from a

common law jurisdiction, Equatoriana, with broad discovery and RESPONDENT comes

from a civil law jurisdiction, that “only allows for disclosure requests directed to one or

several particular documents” [Answer, §30]. Furthermore, CLAIMANT was aware that

RESPONDENT had been involved in litigation in which the other party wanted to see

large quantities of documents [Ex.C12, §6]. The CEO of RESPONDENT admits in his

witness statement that based on the previous experience “[the company] wanted to avoid

having to face such requests again [Ex.R1, §6]. Accordingly, RESPONDENT shared

common intention with CLAIMANT and wished to exclude extensive discovery requests

in arbitral proceedings. Therefore, by introduction of Art. 20 in the Framework

Agreement the Parties' intention was to be protected from broad-style discovery.

B. THE TRIBUNAL HAS THE POWER TO COMPEL DOCUMENT PRODUCTION

8. CLAIMANT submits that based on the Parties' Agreement and the chosen procedural

laws the Arbitral Tribunal has power to issue the Order for Document Production.

As it shall be approached at a first moment, Vienna Rules authorize the Arbitral Tribunal

to order document production (1), as UNCITRAL Model Law ratifies arbitrator’s

authority (2).

1. THE VIENNA RULES AUTHORIZE THE ARBITRAL TRIBUNAL TO ORDER

DOCUMENT PRODUCTION

9. CLAIMANT submits that the power of the Arbitral Tribunal to order document

production from RESPONDENT stems from Art. 29 of the Vienna Rules.

10. The parties referred their dispute to the Arbitral Tribunal under the VIAC Rules


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[Ex.C1, Art.20]. Article 28 of the VIAC Rules provides that “the arbitral tribunal shall

conduct the arbitration in accordance with the Vienna Rules and the agreement of the

parties but otherwise in the manner it deems appropriate”.

11. The Vienna Rules provisions regarding document production must be taken in full

account as they authorize the Arbitral Tribunal to request the parties to collect evidence

according to the arbitrators' own discretion [Art. 29 Vienna Rules]. In the other hand, the

Vienna Rules have no provisions limiting the arbitrators' authority towards the collection

of documentary evidence. As a consequence, the Vienna Rules' provisions are not

compatible with the complete exclusion of document production as claimed by the

RESPONDENT.

12. Therefore, under the Vienna Rules the Arbitral Tribunal has power to order document

production from RESPONDENT.

2. UNCITRAL MODEL LAW RATIFIES ARBITRATORS AUTHORITY

13. The law that applies to this arbitration agreement and defines the terms of document

production is the UNCITRAL Model Law [Answer, §37; Proc. Ord. No. 1, §5 (3)], which

gives arbitrators the power to compel document production.

14. The Model Law states that the authority conferred to the arbitral tribunal includes the

power to determine the admissibility, relevance, materiality and weight of any evidence

[UNCITRAL Model Law, Art. 19(2)]. Thus, the procedural law undeniably ratifies this

Tribunal's authority to order document production. As well, the UNCITRAL Model Law

creates no obstacles the enforcement of document production.

15. Also, “article 27 grants arbitrators the power to seek judicial assistance in 'taking

evidence', which strongly implies the existence of authority on the part of the arbitrators

to order either party to produce evidence in the arbitral proceedings. Similarly, Article

26(1)(b) strongly implies that a tribunal has the power to order disclosure, by recognizing

a specific instance of such power in the context of providing information to experts; it is

very difficult to see whhy similar powers would not exist with regard to ordering the

parties to disclose information to the tribunal itself. The Model Law's drafting history also

leaves no question that the arbitral tribunal's general procedural powers, including


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particularly with regard to evidence-taking, include the inherent authority to order

disclosure by the parties” [Born, p. 2326].

16. Within the broad discretion that the UNCITRAL Model Law gives to arbitrators to

conduct proceedings as they consider appropriate, this Tribunal may order

RESPONDENT to produce the requested documents [Born, p.2326].

C. THE TRIBUNAL SHALL GRANT ORDER FOR DOCUMENT PRODUCTION

17. Once established that this Arbitral Tribunal has power to enforce document

production, it shall be hereinafter demonstrated that the Tribunal should order

RESPONDENT to produce the documents requested by CLAIMANT. Indeed, issuance

of order for document production is justified (1) since the requested documents are

indispensable to the fair settlement of the current dispute. Also, the request for document

production is suitable according to the IBA Rules (2).

1. ISSUANCE OF ORDER FOR DOCUMENT PRODUCTION IS JUSTIFIED

18. CLAIMANT submits that production for the requested documents is essential for two

main purposes: firstly, to establish whether RESPONDENT acted in good faith while

denying the delivery of the guaranteed amount of Mata Weltin wines; and secondly, to

calculate the actual amount of damages, in case the Arbitral Tribunal grants CLAIMANT

the profits of RESPONDENT made by selling the bottles to SuperWines.

19. CLAIMANT submits that RESPONDENT breached its obligation to deliver ordered

wine to CLAIMANT [Proc. Order no.1 §4], which caused CLAIMANT to suffer lost

profits in regard to 5.500 bottles it will not be able to sell [St. Cl., §26]. In order to

calculate damages resulting from the breach, CLAIMANT needs to have access to certain

documents possessed by RESPONDENT.

20. The requested documents pertain to communications and contractual negotiations

between RESPONDENT and SuperWines on the sale of Mata Weltin 2014. These

documents are supposed to specify the purchase price and the number of bottles purchased

by SuperWines. As so, it is not possible to measure the damages pursued by the

CLAIMANT without them.


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21. Furthermore, “there is an emerging consensus among experienced arbitrators and

practitioners that a measure of documents disclosure is desirable in most international

disputes. Justice is almost always best served by a degree of transparency, which brings

the relevant facts before the arbitrators; justice as well as efficiency is also best served by

ensuring disclosure of the relevants facts sufficiently in advance of the witness hearing

that the parties can prepare and present their cases in light of these facts” [Born, p. 2346].

22. Having said that, this Arbitral Tribunal should order RESPONDENT to produce the

Requested Documents. Once this court enforces the production of documents,

RESPONDENT's lack of good faith as the resulting profits shall be definitely

demonstrated.

2. CLAIMANT’S PROCEDURAL DEMAND IS SUITABLE ACCORDING TO IBA

RULES

23. The IBA Rules, which may and should be applied in the current procedure (a), also

enhance the suitability of CLAIMANT's procedural demand. Indeed, the request to

produce documents made by CLAIMANT meets all IBA Rules stipulated requirements

for document production (b).

(a) IBA RULES MAY AND SHOULD BE APPLIED IN THE CURRENT

PROCEDURE

24. The Tribunal may apply the IBA Rules on the Taking of Evidence, which grant the

Tribunal power to order document production, even though neither party refers to the IBA

Rules in the agreement to arbitrate. Art. 1.1 allows the application of the IBA rules either

when the parties agree to them or when “the Arbitral Tribunal has determined to apply

the IBA Rules of Evidence” [IBA Rules, Art. 1.1].

25. The IBA Rules are particularly advised in the present cases [IBA Rules, Preamble],

where the parties are from different legal traditions – CLAIMANT is settled in

Equatoriana, a common law jurisdiction, while RESPONDENT is from Mediterraneo,

which has a civil law tradition [Proc. Order no.2 §68] – and have different conceptions

on evidentiary procedures.


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26. Furthermore, the Vienna Rules provide general procedure rules, being vacant on

detailed regulation on evidentiary process. The IBA Rules constitute, therefore, suitable

supplement to the applicable legal framework.

27. Even if the Tribunal choose not to apply the IBA Rules as binding measure, it should

apply as guideline. Tribunals use the rules as a “guide even when not binding upon them”

[R.R. Dev. Corp v. Guatemala, 15].

(b) CLAIMANT’S PROCEDURAL REQUEST MEETS ALL STIPULATED

REQUIREMENTS FOR DOCUMENT PRODUCTION

28. As demonstrated above, the IBA Rules must be applied to the current litigation and

should guide the Tribunal to the fair settlement of the particular case. CLAIMANT

submits that the request for documents complies with the requirements of Arts. 3 and 9

of the IBA Rules.

29. According to article 3(3) of the IBA Rules, a request to produce should demonstrate

the description of the requested category of documents (i), their relevance and materiality

(ii), and state that the Documents are not in possession of the requesting Party and there

are reasons to believe they are under control of RESPONDENT (iii). Article 9.2 of the

IBA Rules relates to admissibility and assessment of evidence and sets out specific

grounds for exclusion from evidence or production any document. One of such grounds

is commercial or technical confidenciality (iv) [IBA Rules, Art. 9.2(e)].

(i) Description of the Requested Category of Documents

30. Article 3(3) (a) (ii) of the IBA Rules provides that a request to produce should contain

a description of the aimed documents.

31. CLAIMANT requests the production of documents exchanged between

RESPONDENT and SuperWines regarding the purchase of diamon Mata Welt in 2014

wine in the period from 1 January 2014 to 12 July 2015. Such documents include

contractual documents and their negotiation, relating the number of bottles acquired and

the price paid for each one of them [St. of Cl., §27]. Since several e-mails were exchanged

regarding meetings and details of trade between RESPONDENT and SuperWines [Proc.

Order no.2, §23], their production is also necessary.


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(ii) The Requested Documents Relevance and Materiality

32. Following Article 3(3)(b) of the IBA Rules, all mentioned documents are material and

essential to the outcome of the case, since the requested documents are the only source of

information necessary to establish that the breach of the Framework Agreement by

RESPONDENT was caused by internal arrangements between RESPONDENT and

SuperWines.

33. CLAIMANT is convinced that the 5.500 bottles sold to SuperWine rightfully

belonged to CLAIMANT and they were sold to SuperWines only because it paid

substantial premium [St. Of Cl. §26]. The requested documents include communications

between RESPONDENT and SuperWines and, therefore, will show that CLAIMANT's

conviction are true.

34. The Arbitral Tribunal needs to ascertain whether SuperWines did in fact pay any

premium to RESPONDENT, prompting it to breach of its obligations towards

CLAIMANT under the Framework Agreement. The requested documents are the only

source for establishing this fact.

35. Therefore, the Requested Documents are relevant and material to the dispute.

(iii) Document Possession

36. The production of these documents must be ordered since they are not in possession

of CLAIMANT, but in control of RESPONDENT. Documents concerning the

relationship between RESPONDENT and SuperWines are not public and CLAIMANT

has no access to them [St. Of Cl., §28]. In cases where one party alone has access to

essential factual materials, disclosure may be particularly appropriate [Born, p. 2346].

37. It is known that RESPONDENT has exchanged several e-mails summarizing

meetings and setting out details of its cooperation with SuperWines and had created

several internal memoranda and minutes discussing the cooperation with SuperWine

[Proc. Order no.2 §23]. Hence, it is undeniable that RESPONDENT possesses documents

regarding such business relationship.


21

(iv) The Requested Documents Are Not Protected by Confidentiality

38. CLAIMANT submits that the Requested Documents are not confidential and shall be

admitted into the arbitral proceedings.

39. RESPONDENT has not entered into any express or formal confidentiality agreement

with SuperWines [Proc. Order no.2 §25]. Accordingly, the requested documents are not

confidential and are not protected against disclosure within the arbitration proceedings.

40. Furthermore, the requested documents are restricted to the arbitration, as provides Art.

3(13) of the IBA Rules.

“Any Document submitted or produced by a Party or non-Party in the arbitration

and not otherwise in the public domain shall be kept confidential by the Arbitral Tribunal

and the other Parties, and shall be used only in connection with the arbitration. This

requirement shall apply except and to the extent that disclosure may be required of a Party

to fulfil a legal duty, protect or pursue a legal right, or enforce or challenge an award in

bona fide legal proceedings before a state court or other judicial authority. The Arbitral

Tribunal may issue orders to set forth the terms of this confidentiality. This requirement

shall be without prejudice to all other obligations of confidentiality in the arbitration.”

41. Moreover, protective orders are generally issued to safeguard the confidentiality of

materials produced in discovery in the arbitration, particularly commercial confidences

[Born, p. 2388].

42. Therefore, the Tribunal shall grant order for document production, since the requested

documents are not protected by confidentiality and the disclosure will not inflict

unnecessary damage on the RESPONDENT once the documents will be kept confidential

by the Arbitral Tribunal [Born, p. 2387].

II THE COSTS INCURRED AS A RESULT OF THE INITIATION OF THE

STATE COURT PROCEEDINGS SHALL BE RECOVERED AS DAMAGES FOR

BREACH OF ARBITRATION AGREEMENT


22

A. THE ARBITRATION CLAUSE IS VALID SO HIGH COURT PROCEEDINGS

ARE A RESULTA OF RESPONDENT’S BREACH OF ARBITRATION

AGREEMENT

43. As the Art. 20 of the Framework Agreement is valid and effective, the Respondent’s

attempts to seek a declaration of non-liability by the court in Mediterraneo was a merits-

based claim, which is considered a breach of an arbitration clause in international law.

For that Claimant shall be reimbursed for the damages of that breach.

44. Art. II (3) NYC provides that a State Court shall refer the parties to arbitration when

one of the parties to the litigation invokes the arbitration agreement made between them

in the related subject. UNCITRAL Art. 8 (1) provides that a court for “which an action is

brought in a matter which the subject of an arbitration agreement shall, if a party so

requests not later than when submitting his first statement on the substance of the dispute,

refer the parties to arbitration”.

45. Therefore, in accordance to Art. II (3) NYC and Art. 8 UNCITRAL Model Law, the

State Court cannot decide on a merits-based request because of its lack of jurisdiction

when facing a valid arbitration agreement. The request must be submitted to the arbitral

tribunal according to the contractual obligations between Claimant and Respondent.

46. Respondent started a court proceeding in the Courts of Mediterraneo to discuss its

liability on the delivery of the 10.000 bottles of Mata Weltin 2014 to Claimant.

Respondent’s action of starting a proceeding in the courts constituted a clear breach of

the Art. 20 of the Framework Agreement [Ex. C1] which covered all matter in relation to

the contract of 22 April 2009 and the order of 4 November 2014 made by Claimant. Also,

it is clear that the acronym “VIAC” contained on the Article 20 shows the willing of the

parties to arbitrate under the Vienna Rules and that the place of arbitration should be

Vindobona. The clause should be interpreted in the eyes of “pro-arbitration”, because that

was the true intention of the parties. It is possible to identify the institution with a degree

of certainty, for that, the clause remains effective [Fouchard, Gaillard, p. 262, 264].

Respondents’ action can be compared to the monopoly game, when you pass in the other

player’s property and try not to get attention so that with a bit of luck you get away with

the payment. In the present case, Respondent tried to pass through the arbitration

agreement so that it could escape from a neutral arbitral tribunal or at least delay any


23

arbitral proceedings known in international arbitration as “Guerilla tactics”.

47. State Court denied Respondent’s request for a declaration on non-liability when

Claimant’s defense invoked the arbitration agreement. The declaratory relief issued by

the State Court stated that the action initiated by Respondent was dismissed since the

court did not have jurisdiction due to the existence of a valid and binding arbitration

clause.

Again, commencing court proceedings in disrespect of a valid and binding arbitration

agreement is a breach of that agreement, it is a direct attack on the jurisdiction of an

arbitral tribunal to determine the parties’ disputes [Cooke, §13].

B. THE CLAIMANTS’ ACTIONS FOR INTERIM INJUNCTION WAS NECESSARY

AND COMPATIBLE WITH ARBITRATION AGREEMENT

48. Due to the Respondent transgression, Claimant was forced to seek the High Court of

Mediterraneo for interim injunction [Ex. C8] because of the imminent risk of irreparable

damages, since it might have been deprived from accomplishing its duties with the clients.

The High Court Order is compatible with the Art. 20 of the Framework Agreement.

49. Art. 9 UNCITRAL Model Law provides that “It is not incompatible with an arbitration

agreement for a party to request, before or during arbitral proceedings, from a court an

interim measure of protection and for a court to grant such measure” so it is compatible

with an arbitration agreement for a party to request, or for a court to grant an interim

measure [UNCITRAL Dig., 52]. Additionally, Art. 33 (5) VIAC Rules provides that it

“does not prevent the parties from applying to any competent State authority for interim

or conservatory measures” [Art. 33 (5) VIAC Rules] and that a request or grant of interim

relief “shall not constitute an infringement waiver of the arbitration agreement and shall

not affect the powers of the arbitral tribunal” [Art. 33(5) VIAC Rules]. It applies to this

case because Claimant requested interim injunction to the High Court of Mediterraneo

before arbitral proceedings and according to the VIAC Rules it is compatible with the

arbitration agreement that parties made.

50. Therefore, the arbitral tribunal should consider the interim relief compatible with the

arbitration agreement, according the provision above mentioned. The measure could only

be effectively take by the state court. Besides, “The intervention of the court it not such


24

an infringement of the jurisdiction of the arbitral tribunal as a means of assisting the

tribunal so that the award will be as effective as possible” [Fouchard, Gaillard, p. 414].

As held by England’s House of Lords, “The purpose of interim measures of protection

[...] is not to encroach on the procedural powers of the arbitrators but to reinforce them,

and to render more effective the decision at which the arbitrators will ultimately arrive on

the substance of the dispute” [Channel Group v Balfour Beatty Ltd.; Front Carriers Ltd v

Atlantic & Orient Shipping Corp; Swift—Fortune Ltd v Magnifica Marine SA].

51. In the present case, Claimant was forced to take action to seek interim relief because

it did not have an alternative option available. First, Claimant’s need to seek interim relief

was a direct result of Respondent’s breach when it refused to sell and deliver the

Claimant’s order for 10.000 bottles of wine. Second, Claimant’s need to seek interim

relief is further strengthened by Respondent’s threats of subsequent breach through Mr.

Weinbauer’s refusal to make the partial performance for delivery of 4.500 or 5.000 bottles

of wine that was promised by Respondent in its letter to Claimant [Ex. C3]. Third,

Respondent’s breach could not be diminishing through Claimant finding a substitute

supplier for the wine because the wine was a limited resource and a specific wine wanted

from Claimant’s customers. Once more when comparing to monopoly game, Claimant

didn’t jump any step or house of the game, it followed the rules through all the houses,

but the lucky card allowed it to go directly to the starting point to earn the money.

52. Again, as the arbitral tribunal was not constituted at the time of the urgency it was

necessary to apply to High Court in an attempt to prevent irreparable harm, because

Claimant is a successful and responsible business company and wanted to reach its

obligations to its customers and Respondent’s action lead to a breach of those Claimant’s

obligations. For all of that the interim injunction was necessary and in full harmony with

the Art. 20 of Framework Agreement.

3. RESPONDENT SHOULD BE AWARD WITH DAMAGES FOR DAMAGES IN

RESULT OF THE VIOLATION OF THE ARBITRATION AGREEMENT

53. The Claimant as innocent party can claim the costs, as damages for damages, it

incurred in responding to High Court proceedings and for Respondent’s violation of the

arbitration agreement because it resisted commencing the arbitral proceedings. The


25

breach has caused the innocent party to incur legal costs, and those costs shall be

recoverable on an indemnity basis [Tjong Very Sumito and others v. Anting Investments

Pte Ltd].

54. The art. II, (I) NYC provides that arbitration agreement arises a positive effect, the

obligation to submit disputes covered by the arbitration agreement to arbitration. An

arbitration agreement obliges the parties to honor the commitment [Fouchard, Gaillard,

p. 381, 382, and 383]. In addition, the art. II (3) relates the negative effect of the arbitration

agreement, establishing that State Courts shall refer the parties to arbitration when seized

of an action in a matter in respect of which the parties have made an agreement. The same

provides art. 584 AAL.

55. Therefore, the arbitral tribunal must award Respondent with the damages for damages

that Claimant incurred with the High Court proceedings, namely the time and cost

incurred in responding to the other party’s wrongful conduct [Cooke, §5]. The Swiss

Federal Supreme Court sustained an award made by an arbitral tribunal for any damages

that were subsequently ordered to be paid in the wrongfully-invoked litigation, known as

damages for damages [X. SA v Z. Ltd].

56. Respondent violated its duty to arbitrate when going to the High Court, betraying their

arbitration agreement for tactial reasons with the hope of obtaining a more favorable

decision from the courts and delaying the arbitration proceedings. Like in monopoly game

if you stop at the property of the player you will have to reimburse him because he has

some costs or damages with your accommodation.

57. Again, the choice made by Respondent when tried to obtain a non-liability declaration

from its local court, deferring the right resolution of the case under an arbitral tribunal

caused costs to the Claimant. Respondent shall compensate Claimant for those cost

damages and this might have a deterring effect on parties contemplating initiating state

court proceedings in order to obstruct the arbitration or to burden the counterparty.

III CLAIMANT IS ENTITLED TO THE DAMAGES IT CLAIMS, INCLUDING

FURTHER PROFITS


26

58. Claimant will suffer lost profits from the 5.500 bottles it will not be able to sell and

demands damages in accordance with Article 74 of the CISG. Both to facilitate the

calculation of damages and as a sign of goodwill, Claimant requests the profits made by

Respondent from selling the 5.500 bottles to SuperWines.

59. Claimant’s request for lost profits is uniform with the text of Article 74 of the CISG,

which states “damages for breach of contract by one party consist of a sum equal to the

loss, including loss of profit, suffered by the other party as a consequence of the breach”

[CISG Art. 74]. This article contains two essential notions: the principle of full

compensation (principe de la réparation intégrale) and limitation of liability by the

foreseeability rule. Article 74 is proposed to place parties in as good of a position as if the

contract had been performed. Furthermore, this article also allows Claimant to recover

these profits. The promise has the right to be fully compensated for all disadvantages

suffered as a result of the breach of contract. In the case we have in hands, Claimant will

suffer lost profits from the wine it will not be able to sell

60. Claimant should be allowed to claim Respondent’s profits from the sale of the 5.500

bottles to SuperWines for two reasons. Firstly, Claimant’s profits from sales to its

customers may have been higher than the premium paid by SuperWines as a trader to

Respondent. This means, Respondent’s profits are much less than Claimant’s damages.

Secondly, Respondent should not be allowed to profit from selling the bottles rightfully

belonging to Claimant to a third party and breaching the contract with the Claimant.

Moreover, under Article 74 Claimant can recover lost profits because damages were both

subjectively and objectively foreseeable by Respondent and were mitigated by Claimant.

Liability for damages agreeable to Articles 74 to 77 arises when the buyer or seller ‘fails

to perform any of his obligations under the contract or this Convention’. Consequently,

Claimant is entitled to recover its lost profits.

A. CLAIMANT CAN CLAIM THE PROFITS RESPONDENT MADE BY SELLING

THE BOTTLES TO SUPERWINES AS PART OF ITS DAMAGES UNDER A

THEORY OF RESTORATIVE DAMAGES

61. Claimant is entitled under Article 74 of the CISG to claim the profits Respondent

made by selling the 5.500 bottles of diamond Mata Weltin to SuperWines. Article 74

provides that “damages for breach of contract by one party consist of a sum equal to the

loss, including loss of profit, suffered by the other party as a consequence of the breach”


27

[CISG Art. 74]. This agreement for loss compensation reflects a principle of full

compensation, one of the general principles on which the CISG is founded. Full

compensation is to be gained through a monetary claim aimed at “the positive interest,

i.e., everything the damaged party would have had if the contract was performed” [Bullet-

Proof Vest Case]. As such, the term “damages” in Article 74 predicts compensation for

direct losses to Claimant due to non-performance, as well as consequential losses

originated by the breach of contract, including loss of profits and loss to reputation.

62. Claimant has suffered direct losses in the amount of €3.850,00, for which Respondent

is legally responsible under Article 74 of the CISG. If Respondent had fulfilled its

contractual obligations and delivered the 5.500 bottles of diamond Mata Weltin to

Claimant, the contractual price per bottle would have been €41,50. Because of doubts that

Respondent would remain in breach of contract in spite of the Mediterranean court’s

order, Claimant was forced to look for transactions with other high-end wine producers.

The result of Claimant’s efforts was a deal for 5.500 bottles of Mata Weltin with

Vignobilia on 2 February 2015. The terms of this substitute contract set a price of €42,20

per bottle. The price differential between the two contracts, €3.850,00, represents

Claimant’s direct losses due to Respondent’s breach of contract.

63. As well as direct losses, Claimant has suffered lost profits due to Respondent’s breach

of contract for which it must be compensated. Under Article 74 of the CISG, Respondent

must restore Claimant to the position it would have been in had the contract been

performed. It has been recognized that, “when the goods were not delivered and when,

being known to the seller, they were meant to be sold at retail, the buyer can claim as lost

profit the profit that was expected according to the common [profit] margins” [Watches

Case]. This principle is applicable to the present claim. In an email on 1 December 2014,

Mr. Weinbauer offered Claimant a price of €41,50 per bottle of 2014 diamond Mata

Weltin. Specialized wine merchants, including Claimant, are currently selling bottles of

the 2014 vintage at prices between €90 and €100. Using this common profit margin,

Claimant’s lost profits per bottle could possibly range as high as €58,50 per bottle, or

€321.750,00 in total. Under Article 74, Respondent is liable for this amount.

64. Once the calculation above is a reasonable way to approximate lost profits, Claimant

acknowledges that it is impossible to precisely calculate its loss. Furthermore, the

relationship with Respondent could irreparably be damaged by claiming the full amount


28

of lost profits. Furthermore, Claimant recognizes that Respondent is an important

business partner. Consequently, to facilitate the calculation of damages and demonstrate

goodwill, the most appropriate way to measure Claimant’s lost profits is to use the most

immediate and relevant substitute transaction – Respondent’s transaction with

SuperWines. This approach also comports with previous applications of Article 74.

B. RESPONDENT SHOULD NOT BE ALLOWED TO PROFIT FROM BREACH OF

CONTRACT, EVEN IF THIS AWARDS FURTHER DAMAGES TO CLAIMANT

65. Claimant should be able to recover the profits Respondent made by selling 5.500

bottles of diamond Mata Weltin to SuperWines as part of its damages, even if that

includes further profits, under the theory of preventive damages.

1. Under a Preventive Theory of Damages, Respondent Should Not Profit from Its

Breach of Contract

66. Using Respondent’s profits to estimate Claimant’s lost profits is very unlikely to

include further profits. However, even if recovering the amount of Respondent’s profits

does put Claimant in a better position than it would have been had the contract been

performed, Claimant should still be able to recover Respondent’s profits. Under a

preventive theory of damages, Respondent should not be able to profit from its breach of

contract. In keeping with principles of good faith and reasonable behaviour, Respondent

should be made to reimburse the profits that it made in breaching its contract with

Claimant

2. Scholarship Supports Ordering Respondent to Disgorge the Profits It Made from

Breaching Its Contract with Claimant

67. Ordering Respondent to disgorge the profits it made from its breach of contract does

justice in this particular case, and also sets up the correct incentives for other international

commercial actors. Commentators support these two lines of argumentation. First, a

doctrine of forced disgorgement of profits will “prevent the defendant’s unjust

enrichment by recapturing the gains the defendant secured in a transaction,” as Professor

Dan Dobbs has advanced. Preventing unjust enrichment gained through a breach of

contract not only serves principles of justice, but also sets up the correct incentive system

for all commercial actors. If Respondent is allowed to keep its profits, the breach will


29

have been riskless and sellers will be able to speculate at the expense of buyers in the

wine market.

3. Recent Shifts in Doctrine Have Allowed for Restitution of Profits

68. Further, there has been an increasing shift in national doctrines to allow for an injured

party to claim the breaching party’s profits in a variety of circumstances.

1) Dutch law states that in cases where a party receives profit due to non-performance

“which benefit he would not have enjoyed if he would have performed in conformity with

his obligation, he has to undo, in accordance with the rules for an unjustified enrichment,

the damage that the creditor has suffered from his non-performance” [NBW Art. 6:78].

2) In Great Britain, Attorney General v. Blake established that under English law, an

injured party may receive the wrongdoer’s profits when normal remedies are inadequate

[Attorney General].

3) In the U.S. context, Zippertubing Co. v. Teleflex Inc. also held that the “law says that

when one has unlawfully deprived another of a contract or a business opportunity and has

made that opportunity his own, he is not to be permitted to retain any of the profits, any

of the benefits of its unlawful conduct” [Zippertubing, 1411].

C. CLAIMANT’S LOST PROFITS WERE FORESEEABLE UNDER ARTICLE 74 OF

THE CISG

69. Article 74 includes two limiting principles that exclude parties from recovery of lost

profits: the principles of foreseeability and mitigation.

13. In terms of foreseeability, Article 74 of the CISG only allows parties to recover

damages that the breaching party foresaw or ought to have foreseen as a consequence of

the breach of contract. This limitation on liability allowed both parties to carefully

estimate and insure themselves from the financial risks arising from the contract. The

limitation of foreseeability incentivizes parties to openly exchange information and

disclose any particularly unusual risks, which in turn allows both parties to create stronger

contracts.

70. Under Article 74, damages are foreseeable if the party in breach foresaw or ought to

have foreseen the damage as a “possible consequence” of the breach at the time of the

conclusion of the contract. Arbitrators determine what a party foresaw or ought to have


30

foreseen by applying an objective standard. To apply the objective test, arbitrators first

ask what a reasonable person in the position of the promisor and aware of the

circumstances at the time of the conclusion of the contract would have foreseen.

71. The lost profits that Claimant suffered from Respondent’s breach of contract were

foreseeable at the time of contracting both on an objective and subjective basis.

Respondent ought to have foreseen that a breach of the contract would cause Claimant to

lose profits. This was evident for several reasons. First, Article 2 of the Contract stipulated

that Claimant would “market and resell the wine,” and therefore put Respondent on notice

that the Mata Weltin wine was merchantable [Cl. Ex. 1, Art. 2]. Second, the quantity of

wine ordered—“up to 10.000 bottles”—likewise indicated that Claimant viewed the

goods as merchantable and not for private use [Id.]. “When merchantable goods are sold

to commercial traders, profits from resale of the goods are regularly foreseeable”.

Furthermore, Article 20 of the Contract is evidence that Respondent subjectively knew

that its breach of contract would result in Claimant losing profits. Claimant and

Respondent provided that arbitration proceedings would be conducted in a “fast and cost

efficient way” [Cl. Ex. 1, Art. 20]. To reallocate Respondent’s unlawfully acquired profits

to Claimant is the fastest way to determine the value of the lost profits.

72. Because Claimant’s lost profits are foreseeable both under an objective and a

subjective standard, Respondent cannot argue that Article 74’s foreseeability requirement

bars recovery. Claimant is therefore entitled to recover lost profits under Article 74, as

Respondent foresaw that Claimant would lose profits as a consequence of any breach of

the contract at the time the contract was made.

D. CLAIMANT HAS TAKEN ALL REASONABLE MEASURES TO MITIGATE

LOSSES, INCLUDING LOSS OF PROFIT, RESULTING FROM RESPONDENT’S

BREACH

73. Claimant took reasonable measures to mitigate the losses, including loss of profit, it

suffered due to Respondent’s breach of contract. consequently, Claimant’s claim for

damages is not reducible under Article 77 of the CISG.

74. Article 77 provides that: “A party who relies on a breach of contract must take “such

measures as are reasonable in the circumstances to mitigate the loss, including loss of


31

profit, resulting from the breach. If he fails to take such measures, the party in breach may

claim a reduction in the damages in the amount by which the loss should have been

mitigated” [CISG Art. 77].

75. Courts have interpreted this language as requiring injured parties to activate

themselves, instead of remaining passive, to reduce damage already incurred and to

prevent further damage from materializing. The CISG does not define “reasonable” under

Article 77, and so it has been left to courts and tribunals to develop a doctrine through

application. Multiple jurisdictions have come to recognize as “reasonable” the conclusion

of cover sales within a reasonable time and at reasonable prices to replace goods that were

not delivered.

76. Applying Article 77 and multi-jurisdictional doctrine under the Article, Claimant

acted reasonably to mitigate its damages in three instances. Firstly, Claimant’s agreement

to purchase 4.500 bottles of diamond Mata Weltin from Respondent served to mitigate

both present and future damages by obtaining at least partial fulfillment of the contract.

Secondly, Claimant’s subsequent successful motion in Mediterranean court to prevent

Respondent from selling the 5.500 bottles of diamond Mata Weltin to SuperWines also

mitigated damages by preserving the possibility that Respondent would fully fulfil its

contractual obligations. Thirdly, Claimant alerted its customers of a trouble in supply,

required their approval to substitute wine of non-identical qualities, and reached an

agreement with Vignobilia that would limit reputational damage from the disruption in

supply. These reasonable actions to mitigate damages preclude any claims for reduction

in damages by Respondent. Therefore, Claimant’s recovery of lost profits is not precluded

under Article 74’s principle of mitigation.

IV THE CLAIMANT IS ENTITLED TO BE REIMBURSED OF LITIGATION

COSTS REGARDING INTERIMN RELIEF.

A. THE PRINCIPLE OF FULL COMPENSATION IS APPLICABLE

78. The Principle of full compensation is applicable due to a liberal interpretation of the

74.º CISG and 7.4.2. Danubia contract law.


32

1. ARTICLES 74.º CISG AND 7.4.2. DANUBIA CONTRACT LAW INCLUDE THE

PRINCIPLE OF FULL COMPENSATION

79. In fact, both articles 74.º CISG and 7.4.2. Danubia contract law – which foresee a

principle of full compensation – are applicable. The aforementioned norms are a result of

UNIDROIT principles doctrine. In both cases it is clearly defeasible that the choice for

an interim relief on a court that was not chosen by the parties on the Agreement is a choice

that was or ought to be “foreseeable by both parties” at the time of the conclusion of the

contract and in the light of available facts then. Indeed, the interim relief was an action

taken by the Claimant in order to avoid further damages on the specific emergent context.

As such, it would be perfectly foreseeable, at the time of the contract elaboration that both

parties could count on the resource for an emergent interim relief in case of such a sudden

and unrespecting breach such as the break of wine supply by the Respondent.

Additionally, not only the choice for this interim relief was foreseeable, but also the costs

involved due to the fact that conditional and contingency fee structures are permitted

under the laws of both Danubia and Mediterraneo [Proc. Order no.2, p.58, §40].

2. LEGAL DOCTRINE AND JURISPRUDENCE HAVE ALREADY SUPPORTED

THE INCLUSION OF SOME LITIGATIONS COSTS ON THE FULL

COMPENSATION CONCEPT

80. On an article published on Kluwer Arbitration Blog, Mathias Scherer wrote that “[...]

Seizing a state court in the face of a valid arbitration agreement without any reasonable

ground to do so might not go unpunished if the arbitral tribunal is sufficiently “robust”.

Pragmatic considerations might, however, persuade a party to nevertheless seize a state

court, especially if the court is likely to favor the local party because of a lack of

impartiality (particularly if the party is a state agency or state-owned company), or

because of specificities of the local law, which may also simply be invoked to disguise a

lack of impartiality. The attractiveness of such court proceedings will be heightened if the

other party has assets in the country of the court, while the seizing party has none outside

[...]” Specific jurisprudence approaches this issue: Swiss Federal Supreme Court’s

decision of 30 September 2013 (4A_232/2013) where there is compensation for costs

incurred as a result of court proceedings initiated in breach of an arbitration clause.


33

3. THE CLAIMANT HAD COMPLIED WITH 77.º CISG ON WHAT CONCERNS TO

AVOIDAL OF FURTHER DAMAGES AFTER THE BREACH BY THE

COUNTERPARTY

81. In conclusion, the litigation costs spent on the interim relief by the Claimant were,

due to the specific circumstances, impreterible costs to avoid further damage – in

compliance with article 77.º CISG – and able to be defined as “damage” on the lato sensu

that both articles 74.º CISG and 7.4.2 Danubia contract law permit to be interpreted.

Indeed, some courts in multiple countries have decided to interpret Article 74 as granting

recovery of damages for litigation costs. Under Article 7.º/1 CISG, the CISG should be

read to “promote uniformity in its application” [CISG Art. 7.º/1]. Therefore, recovery of

litigation costs is consistent with the object and purpose of the CISG.

82. As what concerns more specifically to compliance with the duty of further damage

avoidable of 77.º CISG, it is reasonable to defend that on the specific circumstances due

to the urge on defending the Claimant's reputation with its clients, to avoid further

pecuniary damage to both parties that would arise in case there was no interim relief – in

fact, in that case the consequence would be of a much higher liability to the Respondent

due to absolute non-compliance added to further compensations – and having in account

that the payment arrangement with LawFix was standard practice on the law of

Mediterraneo [Proc. Order no.2, p.58, §40], it is evident that the access to the interim

relief was the most reasonable and unexpansive solution to both parties on a short and

long term evaluation.

B. IF THE CISG IS NOT APPLICABLE, THE RIGHT TO REIMBURSEMENT OF

LITIGATION COSTS STILL APPLIES

83. In this case, the applicable rules to the arbitration is the Vienna Rules which is

omissive on what concerns to payment of litigation costs. Therefore, general principles

should be applied.

1. THE VIENNA RULES DON’T SPECIFY WHICH PARTY SHOULD BEAR THE

LITIGATION COSTS

84. In fact, what it stipulates on article 37.º is that in case there is lack of agreement

between parties, “[...] the arbitral tribunal shall decide on the allocation of costs in the


34

manner it deems appropriate.” In casu there was no such agreement and, therefore, the

Tribunal has discretionarily to decide the litigation costs issue.

2. THE PRINCIPLE OF COSTS FOLLOW THE EVENT IS APPLICABLE

85. This principle, according to which the losing party on a judicial procedure is bound

to support the litigation costs, is, according to UNIDROIT rules, to be considered as a

quasi-universal principle of international law. Additionally, that is the provision of

UNCITRAL Arbitration rules (article 42.º/1) and it is a repeated jurisprudence by the ICC

[Maxime, cases 6345 and 6959]. The Danubia law adopted the UNCITRAL model on

what concerns to arbitration rules. However, this model is silent as to litigation costs. In

this case, the Tribunal must find a solution having in account the fact that local tribunals

in Danubia have always followed the principle according to which the losing party on the

litigation procedure is bound to assume the procedural costs [Proc. Order no.2, p. 59,

§43].


35

REQUEST FOR RELIEF

In light of the above submissions, Claimant respectfully requests the Tribunal to:

1) Order Respondent to produce the documents requested by Claimant;

2) Respondent compensate Claimant for the damages from the breaching of

arbitration agreement

3) Find that Claimant can claim the profits Respondent made by selling the

bottles to SuperWines as part of its damages, including further profits;

4) Find that Claimant is entitled to recover litigation costs of US$50.280.

Claimant reserves the right to amend its request for relief as may be required.