Twenty-fourth Annual Willem C. Vis International ... · Commentary on the Draft Convention on Contracts for the International Sale of Goods, Prepared by the Secretariat Commentary

Twenty-fourth Annual

Willem C. Vis International Commercial Arbitration Moot

7 - 13 April 2017

Vienna, Austria

Memorandum for Claimant

Timo Fischer Christoph Ludwig Anna Nyfeler Laura Vogt

on behalf of

Wright Ltd

232 Garrincha Street

Oceanside

Equatoriana

-CLAIMANT-

against

SantosD KG

77 Avenida O Rei

Cafucopa

Mediterraneo

-RESPONDENT-

individually addressed as Party

or mutually as the Parties.

Bucerius Law School - Memorandum for Claimant

II

Outline of Contents

Statement of Facts .................................................................................................................... 1

Summary of Arguments ........................................................................................................... 2

Request for Security for Costs .................................................................................. 3

I. The TRIBUNAL has no power to order CLAIMANT to provide security for

costs .................................................................................................................................. 3

1. The Parties exercised their party autonomy in not giving the TRIBUNAL

power to order security for costs ............................................................................. 3

2. Power to order security is not conferred by the CAM/CCBC Rules ......................... 4

II. Alternatively, the TRIBUNAL should not order CLAIMANT to provide

security .............................................................................................................................. 7

1. The newspaper article constitutes mere hearsay evidence and is

inadmissible ............................................................................................................. 7

2. The alleged facts do not suffice to satisfy the grounds for security for costs ............ 8

Admissibility of claims ............................................................................................. 12

I. CLAIMANTS’s claims were submitted in time ............................................................. 12

1. The notice of arbitration is sufficient for initiation by the PARTIES’

agreement .............................................................................................................. 13

2. Alternatively, the requirements for commencement according to Art. 4

were satisfied in a timely manner .......................................................................... 14

II. Alternatively, RESPONDENT is prevented from relying on the time limit .................. 18

Outstanding payments ............................................................................................. 19

I. CLAIMANT is entitled to additional payment from RESPONDENT in the

amount of US$ 2,285,240.00 for the fan blades ............................................................. 19

1. The current exchange rate applies by contractual interpretation according

to Art. 8 and 9 CISG .............................................................................................. 20

2. Alternatively, the current exchange rate applies under the applicable law ............. 24

3. The Addendum did not change the applicable exchange rate ................................. 26

II. CLAIMANT is entitled to additional payment in the amount of US$

102,192.80 for the levy deduced by the Equatoriana ECB ............................................. 28


III

1. CLAIMANT is entitled to additional payment under Section 4.3 DSA and

Art. 54, 57 CISG .................................................................................................... 29

2. Art. 35 CISG does not exempt RESPONDENT from its obligation to pay

bank levy ............................................................................................................... 32


IV

Table of Contents

Outline of Contents ................................................................................................................. II

Table of Contents ................................................................................................................... IV

Index of Abbreviations........................................................................................................ VIII

Index of Authorities ................................................................................................................ X

Index of Cases ...................................................................................................................... XIX

Index of Arbitral Awards .............................................................................................. XXVII

Index of Rules ................................................................................................................... XXXI

Statement of Facts .................................................................................................................... 1

Summary of Arguments ........................................................................................................... 2

Request for Security for Costs .................................................................................. 3

I. The TRIBUNAL has no power to order CLAIMANT to provide security for

costs .................................................................................................................................. 3

1. The Parties exercised their party autonomy in not giving the TRIBUNAL

power to order security for costs ............................................................................. 3

2. Power to order security is not conferred by the CAM/CCBC Rules ......................... 4

a. Interpreted by its wording, Art. 8.1 does include security for costs .............. 4

b. Interpreted by its systematical context, Art. 8.1 does not include

security for costs ............................................................................................ 4

c. Interpreted by its rationale, Art. 8.1 does not include security for

costs................................................................................................................ 6

II. Alternatively, the TRIBUNAL should not order CLAIMANT to provide

security .............................................................................................................................. 7

1. The newspaper article constitutes mere hearsay evidence and is

inadmissible ............................................................................................................. 7

2. The alleged facts do not suffice to satisfy the grounds for security for costs ............ 8

a. There must be a serious probability that CLAIMANT will not

comply with the award ................................................................................... 8

b. The facts submitted by RESPONDENT do not establish such a

serious probability .......................................................................................... 9


V

CLAIMANTS’s financial shape does not necessitate security

for costs ................................................................................................ 9

i.CLAIMANT is in good financial shape ............................................. 9

ii.CLAIMANT willingly took the risk in regard to

CLAIMANTS’S financial situation .......................................... 10

CLAIMANT is willing to comply with possible awards ................... 10

c. Security for costs would be unjust in the present case................................. 11

Admissibility of claims ............................................................................................. 12

I. CLAIMANTS’s claims were submitted in time ............................................................. 12

1. The notice of arbitration is sufficient for initiation by the PARTIES’

agreement .............................................................................................................. 13

2. Alternatively, the requirements for commencement according to Art. 4

were satisfied in a timely manner .......................................................................... 14

a. The notice of arbitration in itself is sufficient for commencement .............. 14

The systematical context shows that the notice is the

centrepiece of the RfA ........................................................................ 14

The purpose of the RfA was served by CLAIMANTS’s

notice in itself ..................................................................................... 15

The principle of efficiency demands a substance over form

approach ............................................................................................. 15

Conclusion .......................................................................................... 15

b. Alternatively, the PoA submitted and the amount of the fee paid on

31 May 2016 satisfy the requirements of Art. 4 .......................................... 16

The PoA sufficiently provided for adequate representation ............... 16

Partial payment is sufficient for commencement ............................... 16

c. Alternatively, the amendments of 7 June 2016 unfold retroactive

effect ............................................................................................................ 17

II. Alternatively, RESPONDENT is prevented from relying on the time limit .................. 18

Outstanding payments ............................................................................................. 19

I. CLAIMANT is entitled to additional payment from RESPONDENT in the

amount of US$ 2,285,240.00 for the fan blades ............................................................. 19


VI

1. The current exchange rate applies by contractual interpretation according

to Art. 8 and 9 CISG .............................................................................................. 20

a. Considering the relevant circumstances ....................................................... 20

On the structure and the rationale of the contract ............................... 21

i.Fair risk allocation requires the application of the current

exchange rate ............................................................................. 21

ii.The unusual circumstances require the application of the

current exchange rate ................................................................ 22

On the usage of risk sharing in the aircraft industry .......................... 23

The de-risking guideline of EI is not applicable ................................ 23

Conclusion .......................................................................................... 23

b. No principle in terms of Art. 9. (1) CISG refutes this result ....................... 24

There is no practice established between the parties .......................... 24

The parties conduct indicates that there is no such practice ............... 24

Alternatively, a possibly established practice would not be

applicable to the current setting of the parties .................................... 24

2. Alternatively, the current exchange rate applies under the applicable law ............. 24

a. Art. 55 CISG does not provide any suitable mechanism to

determine the price of the fan blades ........................................................... 25

b. The current exchange rate applies according to Art. 6.1.9 (3) PICC ........... 25

3. The Addendum did not change the applicable exchange rate ................................. 26

a. No modification according to Art. 29 (1) CISG .......................................... 27

b. Alternatively, RESPONDENT has to bear the risk of unclear

wording ........................................................................................................ 28

II. CLAIMANT is entitled to additional payment in the amount of US$

102,192.80 for the levy deduced by the Equatoriana ECB ............................................. 28


Art. 54, 57 CISG .................................................................................................... 29

a. In Section 4.3 DSA the parties agreed that the bank charges are to

be borne by BUYER .................................................................................... 29

The wording of DSA imposes the coverage of the levy on

RESPONDENT .................................................................................. 29

Section 4.3 DSA was meant to regulate bank charges as

occurred with the levy ........................................................................ 30


VII

There are no usages or practices between the parties which

could refute this .................................................................................. 30

b. CLAIMANT is entitled to additional payment under Art. 54, 57

CISG ............................................................................................................ 31

RESPONDENTS’s obligation to pay is only performed when

the full price is credited to CLAIMANTS’s account ......................... 31

To effect full payment levy needs to be borne by

RESPONDENT as a formality under ML/2010C as a

statutory provision .............................................................................. 32

2. Art. 35 CISG does not exempt RESPONDENT from its obligation to pay

bank levy ............................................................................................................... 32

a. Art. 35 CISG is not applicable to RESPONDENTS’s duty to make

payment of the purchase price ..................................................................... 33

b. Also if the Trribunal applies the principles of Art. 35 CISG,

RESPONDENT would need to bear the bank levy ..................................... 33

RESPONDENT was required to bear the bank levy by the

DSA .................................................................................................... 33

Payment would not fulfil its purpose if RESPONDENT does

not bear the bank levy......................................................................... 34

i.RESPONDENT needs to make payment which complies

with the existing regulations ..................................................... 34

ii.RESPONDENT should have been informed about the

regulation ML/2010C and the occurrence of the levy .............. 34

Prayer for Relief ..................................................................................................................... 35


VIII

Index of Abbreviations

% percent

AG Aktiengesellschaft (German stock corporation)

Art. Article(s)

ASA Association Suisse de l’Arbitrage (Swiss Arbitration Association)

ASC Answer to Statement of Claim

CAM/CCBC Center for Arbitration and Mediation of the Chamber of Commerce

Brazil- Canada

CE CLAIMANTS’s exhibit

Cf. Confer

CISG United Nations Convention on Contracts for the International Sale of

Goods

Current exchange

rate

Exchange rate of US$ 1=1.79 EQD

DIS Deutsche Institution für Schiedsgerichtsbarkeit (German Arbitration

Institute)

DSA Development and Sales Agreement

e.g. exempli gratia (for example)

ECB Equatoriana Central Bank

ENB Equatoriana National Bank

Et seq. Et sequens

Fn. Footnote

HKIAC Hong Kong International Arbitration Centre

i.e. Id est (that is)

ICC International Chamber of Commerce

ICJ International Court of Justice

ICSID International Centre for Settlement of Investment Disputes

LCIA London Court of International Arbitration

LCIA India London Court of International Arbitration India branch

NAI Netherlands Arbitration Institute

No. Number

OtR Objection to request for security

p(p). page(s)

para(s). paragraph(s)

PCA Permanent Court of Arbitration


IX

PO Procedural order

PoA Power of Attorney

RE RESPONDENTS’s exhibit

RfA Request for arbitration

RfS Request for security

S.p.A. Società per Azioni (Italian stock corporation)

ToR Terms of Reference

UNIDROIT UNIDROIT Principles of International Commercial Contracts

v versus (against)

ZHK Zürcher Handelskammer (Zurich Chamber of Commerce)


X

Index of Authorities

Author Title Cited at

para.

Aldrich, George H. The Jurisprudence of the Iran–United States Claims

Tribunal, Oxford (1996)

cited as: Aldrich.

38

American Arbitration

Association

Handbook on Commercial Arbitration, 2nd Edition,

Huntington (2010)

cited as: AAA Handbook on Commercial

Arbitration.

11

Ashford, Peter Handbook on International Commercial Arbitration,

Huntington (2009)

cited as: Ashford.

46

Beraudo, John-Paul Recognition and Enforcement of Interim Measures

of Protection Ordered by Arbitral Tribunals, in:

Journal of International Arbitration, Volume 22,

Issue 3, pp. 245 – 254

cited as: Beraudo.

18

Berger, Bernhard

Kellerhals, Franz

International and domestic arbitration in

Switzerland, 2nd Edition, Bern (2010).

cited as: Berger/Kellerhals.

11

Bianca, Cesare Massimo Commentary on the International Sales Law,

Giuffre, Milan 1987

cited as: Bianca.

177

Blessing, Marc Introduction to arbitration: Swiss and international

perspectives, Basel (1999)

cited as: Blessing.

33


XI

Blessing, Marc The Conduct of Arbitral Proceedings Under the

Rules of Arbitration Institutions; The WIPO

Arbitration Rules in a Comparative Perspective,

submitted for the Conference on Rules for

Institutional Arbitration and Mediation on 20

January 1995 in Geneva

cited as: Blessing (1995).

33

Born, Gary B. International Commercial Arbitration, 2nd Edition,

the Hague (2014)

cited as: Born.

14, 46

Bösch, Axel Provisional remedies in international commercial

arbitration: a practitioner’s handbook, Berlin (1994)

cited as: Bösch.

13

Bühler, Michael

Webster, Thomas

Handbook of ICC Arbitration: Commentary,

Precedents, Materials, 1st Edition, London (2005)

cited as: Bühler/Webster.

96

Chartered Institute of

Arbitrators

International Arbitration Practice Guidelines:

Applications for Security for Costs

cited as: CIARB.

29, 32,

42, 60

Commentary on the Draft

Convention on Contracts

for the International Sale

of Goods, Prepared by

the Secretariat

Commentary on the Draft Convention on Contracts

for the International Sale of Goods

Prepared by the Secretariat, A/Conf. 97/5 (14 March

1979), reprinted in O.R., 14-66

cited as: Secretariat's Commentary.

115, 169


XII

Darwazeh, Nadia

Leleu, Adrien

Disclosure and Security for Costs or How to

Address Imbalances Created by Third-Party

Funding, in: Journal of International Arbitration,

Volume 33, Issue 2, pp. 125 – 150.

cited as: Darwazeh/Leleu.

29

Derains, Yves

Schwartz, Eric A

A guide to the ICC Rules of Arbitration, 2nd Edition,

The Hague (2005)

cited as: Derains/Schwartz.

22, 85,

99

Enderlein, Fritz

Maskow, Dietrich

International Sales Law, Oceana Publications 1992

cited as: Enderlein/Maskow.

115

Ferrari, Franco Auslegung von Parteierklärungen und -verhalten

nach UN-Kaufrecht, IHR 2003, 10

cited as: Ferrari, IHR 2003.

115

Ferrari, Franco

Kieninger, Eva-Maria

Mankowski, Peter

Internationales Vertragsrecht, 2nd edition, 2011

cited as: Ferrari-Author.

129, 167

Flechtner, Harry M. Conformity of Goods, Third Party Claims, and

Buyer’s Notice of Breach under the United Nations

Sales Convention (“CISG”), with Comments on the

“Mussels Case”, the “Stolen Automobile Case”, and

the “Ugandan Used Shoes Case”, University of

Pittsburgh School of Law Working Paper Series,

paper 64, 2007

cited as: Flechtner.

177

Fortier, Yves International Arbitration and National Courts: Who

Has The Last Word?, in International Arbitration

and National Courts: The Never Ending Story,

Albert Jan van den Berg (ed), the Hague (2001), pp.

69 - 70

cited as: Fortier.

85


XIII

Gaillard, Emmanual

Savage, John

Fouchard, Gaillard, Goldman on International

Commercial Arbitration, The Hague (1999)

cited as: Fouchard/Gaillard/Goldman.

85, 99

Garner, Bryan A. Black’s law dictionary, 8th edition, 2004

cited as: Black’s law dictionary.

159

Gu, Weixia Security for Costs in International Arbitration, in:

Journal of International Arbitral, Volume 22, Issue

3, pp. 167 – 205

cited as: Gu.

61

Henderson, Alastair Security for Costs in Arbitration in Singapore, in:

Asian International Arbitration Journal, Volume 7,

Issue 1, pp. 54 – 75.

cited as: Henderson.

42, 43,

60, 61

Henschel, René Franz The Conformity of Goods in International Sales An

analysis of Article 35 in the United Nations

Convention of Contracts for the International Sales

of Goods (CISG), Copenhagen 2005

cited as: Henschel.

174, 177

Huber, Peter Münchner Kommentar zum BGB, 3. Band, 7th

edition, 2016

cited as: MüKo-Author.

169

ICC Security for Costs, in: ICC Bulletin, Volume 25,

Supplement, pp. 61 et seq.

cited as: ICC, Security for Costs.

46


XIV

Kerr, Sir Michael Concord and Conflict in International Arbitration,

in: Arbitration International, Volume 13, Issue 2,

pp. 121 – 143.

cited as: Kerr.

44

Kirtley, William

Wietrzykowski, Koralie

Should an Arbitral Tribunal Order Security for

Costs When an Impecunious Claimant Is Relying

upon Third-Party Funding?, in: Journal of

International Arbitration, Volume 30, Issue 1,

pp. 17 – 30.

cited as: Kirtley/Wietrzykowski.

34

Konrad, Christian

Schwarz, Franz T.

The Vienna rules: a commentary on international

arbitration in Austria, Alphen aan den Rijn (2009)

cited as: Konrad/Schwarz.

44

Kröll, Stefan M.

Lew, Julian D.M.

Mistelis, Loukas A.

Comparative International Commercial Arbitration,

The Hague (2003)

cited as: Lew/Mistelis/Kröll.

18, 32,

73, 75,

100

Kröll, Stephan

Mistelis, Loukas

Pirales Viscasillas, Pelar

UN-Convention on the International Sales of Goods,

1st edition, 2010

cited as: Kröll-Author.

136,

140,

142, 165

Kruisinga, Sonia (Non-)conformity in the 1980 UN Convention on

Contracts for the International Sale of Goods: A

Uniform Concept?, Intersentia, Antwerp-Oxford-

New York, 2004

cited as: Kruisinga.

174, 177


XV

Lew, Julian M.D. Document Disclosure, Evidentiary Value of

Documents and Burden of Evidence, in: Written

Evidence and Discovery in International

Arbitration: New Issues and Tendencies, Giovannini

and Mourre (eds.), Paris (2009)

cited as: Lew.

39

Livingstone, Mia Louise Party Autonomy in International Commercial

Arbitration: Popular Fallacy or Proven Fact? In:

Journal of International Arbitration, Volume 25,

Issue 5, pp. 529 – 536

cited as: Livingstone.

14

Lookofsky, Joseph Understanding the CISG: A Compact Guide to the

1980 United Nations Convention on Contract for the

international sales of goods, Kluwer Law,

International The Hague 2008

cited as: Lookofsky.

177

Lynch, Katherine Security for costs in domestic and international

arbitration in Hong Kong and England, Hong Kong

(1996)

cited as: Lynch.

11

Moses, Margaret L. The Principles and Practice of International

Commercial Arbitration, Cambridge (2008)

cited as: Moses.

18

Mullis, Alastair “Conformity of Goods” in Peter Huber, Alastair

Mullis (eds.), The CISG: A New Textbook For

Students and Practitioners, Sellier, European Law

Publisher, Munich, 2007

cited as: Mullis.

174


XVI

Mustill, Sir Michael J.

Boyd, Stewart C.

Commercial Arbitration, The Law and Practice,

Butterworths, 2nd Edition, London (1989), with the

Compendium Volume to the Second Edition,

London (2001)

cited as: Mustill/Boyd.

75

Neumann, Thomas “Features of Article 35 in the Vienna Convention;

Equivalence, Burden of Proof and Awareness”, in 11 Vindobona Journal of International Commercial

Law and Arbitration, 2007/1, 81-97

available at:

http://www.cisg.law.pace.edu/cisg/biblio/neumann.h

tml

cited as: Neumann.

174

Newman, Lawrence W.

Hill, Richard D

The Leading Arbitrators’ Guide to International

Arbitration, 2nd Edition, Huntington (2008)

cited as: Newman/Hill.

18

Poikela, Teija Conformity of Goods in the 1980 United Nations

Convention on Contracts for the International Sale

of Goods, Nordic Journal of Commercial Law of the

University of Turku, Finland, Issue 2003 No. 1

cited as: Poikela.

177

Redfern, Alan

Hunter, Martin (found.)

Blackaby, Nigel

Partasides, Constantine

Redfern and Hunter on International Arbitration, 6th

Edition, Oxford (2015)

cited as: Redfern/Hunter.

30, 34,

46

Reith, Claudia The new UNCITRAL Rules on Transparency 2014

– significant breakthrough or a regime full of empty

formula? In: Yearbook on international arbitration,

Volume 4, pp. 121 – 148

cited as: Reith.

54


XVII

Rosenne, Shabtai The Law and Practice of the International Court,

1920–2004, 4th Edition, Leiden (2006)

cited as: Rosenne.

38

Rubins, Noah In God We Trust, All Others Pay Cash: Security for

Costs in International Commercial Arbitration, in:

11 American Review of International Arbitration

307, Juris Publishing, Inc., 2000

cited as: Rubins.

13

Schlechtriem, Peter

Butler, Petra

UN Law on International Sales – the UN

Convention on the International Sale of Goods,

Springer Verlag, Berlin Heidelberg, 2008

cited as: Schlechtriem/Butler.

174

Schlechtriem, Peter

Schwenzer, Ingeborg

Commentary on the UN Convention on the

International Sale of Goods (CISG), 6th edition,

2013

cited as: Schlechtriem/Schwenzer-Author.

129,

144,

146,

153,

164, 170

Schreuer, Christoph H. The ICSID Convention: A Commentary, 2nd

Edition, Cambridge (2009)

cited as: Schreuer.

27

Schwenzer, Ingeborg CISG-AC Opinion No. 13, Inclusion of Standard

Terms under the CISG. Adopted by the CISG

Advisory Council following its 17th meeting, in

Villanova, Pennsylvania, USA, on 20 January 2013

cited as: CISG Advisory Council Opinion No. 13.

153

Staudinger, Julius von

Kommentar zum Bürgerlichen Gesetzbuch mit

Einführungsgesetz und Nebengesetzen, Wiener UN-

Kaufrecht (CISG), Berlin (2013)

cited as: Staudinger-Author.

115, 153


XVIII

Turner, Peter

Mohtashami, Reza

A Guide to the LCIA Arbitration Rules, Oxford

(2009)

cited as: Turner/Mohtashami.

82

United Nations

Commision on

International Trade Law

UNCITRAL Digest of Case Law on the United

Nations Convention on Contracts for the

International Sale of Goods, 2012 edition, New

York

cited as: UNICITRAL Digest.

115

Veit, Marc D. Procedural Order No. 14 of 27 November 2002 –

Security for Costs in International Arbitration –

Some Comments to Procedural Order No. 14 of 27

November 2002, in: ASA Bulletin, Volume 23,

Issue 1, pp. 116 – 118.

cited as: Veit.

30

Verbist, Herman

Schäfer, Erik

Imhoos, Christophe

ICC Arbitration in Practice, 2nd Edition, the Hague

(2015)

cited as: Verbist/Schäfer/Imhoos.

11

Von Goeler, Jonas Third-party funding in international arbitration and

its impact on procedure, the Hague (2015)

cited as: Von Goeler.

11

Waincymer, Jeffrey Procedure and Evidence in International Arbitration,

Alphen aan den Rijn (2012)

cited as: Waincymer.

11, 26,

29, 38,

42, 43,

60, 82,

86, 104

Yeşilirmak, Ali Provisional Measures in International Commercial

Arbitration, The Hague (2005)

cited as: Yeşilirmak.

44


XIX

Index of Cases

Country Date Court Case Cited at

para.

Australia 11/05/1983 Supreme Court

of Victoria

7 ACLR 937 (Aspendale

Pastoral Co v W J Drever)

cited as: SC (AU 1983).

61

Austria 25/01/2006 Oberster

Gerichtshof

(Supreme Court)

7 Ob 302/05w (Frozen pork

liver)

available at:

http://cisgw3.law.pace.edu/ca

ses/060125a3.html

cited as: OGH (AT 2006).

176

31/08/2005 Oberster

Gerichtshof

(Supreme Court

7 Ob 175/05v

available at:


ses/050831a3.html

cited as: OGH (AT 2005).

136

Canada 20/12/1999 Vancouver Trial

Division

Frontier International

Shipping Corp v The Owners

and All Others Interested in

the Ship Tavors & Passport

Maritime

cited as: TD (CA 1999).

18

England 10/02/1995 Queen’s Bench

Division

(High Court)

Regia Autonoma de

Electricitate Renel v Gulf

Petroleum International Ltd,

in: [1996] ALL ER, Volume

2, pp. 319 et seq.

cited as: QB (EN 1995).

15


XX

13/04/1994 Court of Appeal Keary Developments Ltd v

Tarmac Construction Ltd and

another, in: [1995] All ER,

Volume 3, pp. 534 et seq.

cited as: CA (EN 1994).

61

11/01/1994 House of Lords

(former

Supreme Court)

Coppée-Lavalin S.A./N.V. v

Ken-Ren Chemicals and

Fertilizers Ltd., in: [1994]

Lloyd’s Law Reports,


cited as: HL (EN 1994).

31

01/11/1988 Court of Appeal De Bry v Fitzgerald and

Another, [1990] W.L.R.,



46

01/12/1987 Queen’s Bench

Division

(High Court)

First Steamship Co Ltd v

CTS Commodity Transport

Shipping, in: [1988] Lloyd’s

Law Reports, Volume 1, pp.

245 et seq.

cited as: QB (EN 1987).

107

08/06/1983 Court of Appeal 1983 H. No. 730 (Bank

Mellat v Helliniki Techniki

S.A.), in: [1984] Q.B., pp. 291

et seq.


15, 29

18/01/1973 Court of Appeal Sir Lindsay Parkinson & Co

Ltd v Triplan Ltd, in: [1973]

All E.R., Volume 2, pp. 273

et seq.


60


XXI

18/01/1967 Court of Appeal Liberian Shipping

Corporation v A. King &

Sons, Ltd, in: [1967] Lloyd’s

List Law Reports, Volume 1,

pp. 302 et seq.


104

European

Union

19/07/2012 European Court

of Justice

Case No. C-628-10 (Alliance

One International Inc. and

Standard Commercial

Tobacco Co. v European

Commission)

cited as: ECJ (2012).

91

10/09/2009 European

General Court

Case No. C-97/08 P (Akzo

Nobel and others v European

Commission)

cited as: EGC (2009).

91

Finland 31/05/2004 HO Helsinki

Appellate Court

S 01/269 (Crudex Chemicals

Oy v. Landmark Chemicals

S.A)

available at:


ses/040531f5.html

cited as: HO Helsinki (FI

2004).

115

France 13/09/1995 Court d’appel

Grenoble

(Appeal court)

93/4126 (Caito Roger v.

Société française de

factoring)

available at:


ses/950913f1.html

cited as: CA Grenoble (FR

1995).

176


XXII

Germany 11/04/2014 Oberlandesgeric

ht Frankfurt

(Higher regional

court)

26 Sch 13/13, in: SchiedsVZ

2014, pp. 154 et seq.

cited as: OLG Frankfurt (DE

2014).

60

14/01/2009 Oberlandesgeric

ht München

(Appellate

Court)

20 U 3863/08

available at:


ses/090114g1.html

cited as: OLG (DE 2009).

129

31/03/2008 Oberlandesgeric

ht Stuttgart

(Appellate

Court)

6 U 220/07 (Automobile case)

available at:


ses/080331g1.html

cited as: OLG (DE 2008).

153

03/08/2005 Landgericht

Neubrandenburg

(District Court)

10 O 74/04 (Pitted sour

cherries case)

available at:


ses/050803g1.html

cited as: LG (DE 2005).

140

13/04/2000 Amtsgericht

Duisburg

(Petty Court)

49 C 502/00 (pizza cartons)

available at:


ses/000413g1.html

cited as: AG Duisburg (DE

2000).

136, 164


XXIII

03/04/1996 Bundesgerichtsh

of

(Supreme Court)

VIII ZR 51/95 (Cobalt

sulphate case)

available at:


ses/960403g1.html

cited as: BGH ( DE 1996).

174


of

(Supreme Court)

VIII ZR 159/94 (New

Zealand mussels case)

available at:


ses/950308g3.html

cited as: BGH (DE 1995).

177, 178


of (Supreme

Court)

II ZR 99/51, in: BGHZ 3,

pp. 215 et seq.

cited as: BGH (DE 1951).

60

Hungary 25/09/1992 Supreme Court Gf.I. 31 349/1992/9 (Pratt &

Whitney v. Malev)

available at:


ses/920925h1.html

cited as: Supreme Court (HU

1992).

142

International 1986 International

Court of Justice

Military and Paramilitary

Activities in and Against

Nicaragua (Nicaragua v

USA), in: ICJ Reports,

Volume 14, Issue 42

cited as: ICJ (1986).

38


XXIV

New Zealand 30/07/2010 High Court of

New Zealand

CIV-2009-409-000363 (RJ &

AM Smallmon v. Transport

Sales Limited and Grant Alan

Miller)

available at:

http://www.unilex.info/case.c

fm?pid=1&do=case&id=1595

&step=Abstract

cited as: High Court (NZ

2010).

178

Singapore 02/06/2009 Court of Appeal

of Singapore

(Upper division

of the Supreme

Court)

CA 155/2008 (Insigma

Technology Co Ltd v Alstom

Technology Ltd), in: [2009]

SLR, Volume 3, pp. 936 et

seq.

cited as: CA (SG 2009).

28

Switzerland 27/04/2007 Tribunal

cantonal Valais

(Appellate

Court)

C1 06 95 (Oven case)

available at:


ses/070427s1.html

cited as: KG (CH 2007).

142

22/12/2000 Bundesgericht

(Federal

Supreme Court)

4C.296/2000/rnd (Roland

Schmidt GmbH v. Textil-

Werke Blumenegg AG)

available at:

http://www.cisg.law.pace.edu

/cisg/wais/db/cases2/001222s

1.html

cited as: BG (CH 2000).

174


XXV

03/12/1997 Zivilgericht

Basel

(Civil Court)

P4 1996/00448 (White urea

case)

available at:


ses/971203s2.html

cited as: ZG Basel (CH

1997).

167

10/05/1982 Bundesgericht

(Supreme Court)

BGE 108Ia, 197 (Edok S.A.

and others v.

Hydromechaniki S.à r.l. and

Eupalinos S.A.)

cited as: BGE (CH 1982).

Ukraine 21/06/2010 Dnipropetrovsk

Regional

Administrative

Court

2-a-10084/09/0470

(Dnipropetrovsk company

Dnepryanka v. Inter-state Tax

Administration of

Dnipropetrovsk city and

Department)

available at:

http://www.unilex.info/case.c

fm?pid=2&do=case&id=1706

&step=Abstract

cited as: AC (UA 2010).

145

United States 21/01/2010 U.S. District

Court, Eastern

District of

California

CV F 09-1424 LJO GSA

(Golden Valley Grape Juice

and Wine, LLC v. Centrisys

Corporation et al.)

available at:


ses/100121u1.html

cited as: District Court

California (US 2010).

144


XXVI

20/01/2010 U.S. District

Court, Eastern

District of

Pennsylvania

Civil Action 05-3078 (ECEM

European Chemical

Marketing B.V. v. The

Purolite Company)

available at:


ses/100129u1.html#ii


Pennsylvania (US 2010).

129

17/05/1999 U.S. District

Court, Eastern

District of

Louisiana

(A federal court

of 1st instance)

99-0380 Section "K" (1)

(Medical Marketing v.

Internazionale Medico

Scientifica)

available at:


ses/990517u1.html


Louisiana (US 1999).

178


XXVII

Index of Arbitral Awards

Institution Date Case Cited at

para.

ASA 25/09/1997 A S.p.A. (Italy) v B AG (Germany), in: ASA

Bulletin, Volume 19, Issue 4, pp. 745 – 750

cited as: A S.p.A. v B AG.

33

1995 X Panama v Une personne physique domiciliée à

Genève, in: ASA Bulletin, Volume 13, Issue 3, pp.

529 – 534

cited as: X Panama v Une personne physique.

13, 33

CIETAC 07/01/2000 Arbitral Award No. CISG/2000/06 (Cysteine case)

available at:

http://cisgw3.law.pace.edu/cases/000107c1.html

cited as: CIETAC (2000).

153

Economic

Court of the

Common-

wealth of

Independent

States (CIS)

23/06/1998 Request No. 01-1/6/97

available at:

http://www.unilex.info/case.cfm?pid=1&do=case&i

d=1385&step=Abstract

cited as: Economic Court CIS (1998).

145

ICC 25/05/2009 Case No. 15951/FM (XXX Inc., incorporée dans une

île des Caraïbes v YYY S.A., incorporée dans un

pays d’Amérique latine), Procedural Order 2, in:

ASA Bulletin, Volume 28, Issue 1, pp. 71 - 77

cited as: ICC Case No. 15952/FM.

43


XXVIII

07/2008 Case No. 15218, Procedural Order, in: ICC Bulletin,

Volume 25, Supplement, pp. 79 et seq.

Cited as: ICC Case No. 15218.

21

12/2007 Case No. 14993, in: ICC Bulletin, Volume 25,


cited as: ICC Case No. 14993.

46

05/2006 Case No. 13620, in: ICC Bulletin, Volume 25,



46

09/09/1999 ICC Case No. 10032, Procedural Order, cited by

Karrer & Desax, in: Liber Amicorum Böckstiegel,

pp. 339 et seq., p. 348 para. 42


43

01/07/1995 Arbitral Award No. 8240

available at:

http://www.unilex.info/case.cfm?pid=1&do=case&i

d=629&step=Keywords

cited as: ICC Brussels (2000).

145

1995 Case No. 8324 (Magnesium case)

cited as: ICC France (1995).

140

1990 Case No. 6784, in: ICC Bulletin, Volume 8, Issue 1,

pp. 54 et seq.


85

1990 Case No. 6228, in: ICC Bulletin, Volume 8, Issue 1,

p. 54


99


XXIX

20/09/2012 Case No. ARB/09/17 (Commerce Group Corp &

San Sebastian Gold Mines Inc v Republic of El

Salvafor

cited as: Commerce Group v El Salvador.

46

14/10/2010 Case No. ARB/10/6 (Rachel, Stephen, Miriam

Grynberg & RSM Production Corp v Government of

Grenada

cited as: RSM v Grenada.

34, 45

18/06/2010 Case No. ARB/07/24 (Gustav Hamester GmbH &

Co KG v Republic of Ghana)

cited as: Hamester v Ghana.

34

03/03/2010 Case No. ARB/05/18 (Ioannis Karassopoulos and

Ron Fuchs v The Republic of Georgia)

cited as: Fuchs v Republic of Georgia.

51

29/06/2009 Case No. ARB/08/5 (Burlington Resources Inc. and

others v Republic of Ecuador and Empresa Estatal

Petróleos del Ecuador (PetroEcuador

cited as: Burlington v Ecuador.

11

23/06/2008 Case No. ARB 06/8 (Libananco v Turkey

cited as: Libananco v Turkey.

46

17/08/2007 Case No. ARB/12/10 (RSM Production Corporation

v Saint Lucia)

cited as: RSM v St. Lucia.

42

28/10/1999 Case No. ARB/97/7 (Maffezini v Kingdom of Spain),

in: ICSID Review for Investment Law Journal,

Volume 16, Issue 207

cited as: Maffezini v Spain.

26, 27


XXX

ICSID 23/06/2015 Case No. ARB/14/14 (EuroGas and Belmont

Resources v Slovak Republic)

cited as: EuroGas v Slovak Republic.

26, 51

05/10/2012 Case No. ARB/06/11 (Occidental Petroleum

Corporation v Republic of Ecuador

cited as: Occidental Petroleum v Ecuador.

46

NAI 12/12/1996 Case No. 1694 (Producer v Construction Company),

Interim Award, in: Yearbook of Commercial

Arbitration 1998, Albert Jan van den Berg (ed),

Volume 23, pp. 97 – 112

cited as: NAI Case No. 1694.

29

12/07/1985 1st Claimant, 2nd Claimant, and others, v Dutch

Company, Interim Award, in: Yearbook:

Commercial Arbitration 1986, Albert Jan van den

Berg (ed.), Volume 11, pp. 189 et seq.

cited as: Cl. v Dutch Company.

33

PCA 11/01/2016 Case No. 2013-15 (South American Silver Limited v

Plurinational State of Bolivia)

cited as: SAS v Bolivia.

11, 27,

46, 51

31/01/2014 Case No. 2011-17 (Guaracachi America and

Rurelec v the Plurinational State of Bolivia)

cited as: Guaracachi v Bolivia.

27, 51


XXXI

Index of Rules

CAM-CCBC Rules Rules of the Center for Arbitration and Mediation of the Chamber of

Commerce Brazil-Canada

CISG United Nations Convention on Contracts for the International Sale of

Goods

DIS Rules DIS-Arbitration Rules 98

HKIAC HKIAC Administered Arbitration Rules (2013)

ICC Rules ICC Rules of Arbitration (2012)

LCIA Rules LCIA Arbitration Rules (2014)

NYC United Nations Convention on the Recognition and Enforcement of

Foreign Arbitral Awards (New York, 10 June 1958)

PICC UNIDROIT Principles of International Commercial Contracts (2010)

SCC SCC Arbitration Rules (2010)

Swiss Rules Swiss Rules of International Arbitration 2012

UNCITRAL Model

Law

UNCITRAL Model Law on International Commercial Arbitration

(1985), with amendments as adopted in 2006


1

Statement of Facts

CLAIMANT is a highly specialized manufacturer of fan‐blades for jet engines,

incorporated in Equatoriana.

RESPONDENT is a manufacturer of jet engines, incorporated in Mediterraneo.

Engineering

International SA

was the parent company of CLAIMANT and RESPONDENT until

2010.

Wright Holding

PLC

- addressed as HOLDING - bought CLAIMANT on 30 June 2010 and

is the current parent company of CLAIMANT.

SpeedRun is a Private Equity Fund, which bought RESPONDENT on

3 August 2010.

Earhart SP is a world-wide operating aircraft manufacturer for business jets.

1 August 2010 The PARTIES agree on the development and sale of a minimum of

2,000 fan blades for RESPONDENTS’s next generation of jet

engines.

26 October 2010 RESPONDENT additionally orders 2,000 clamps.

14 January 2015 RESPONDENT accepts the fan blades and clamps delivered by

CLAIMANT. The two attached invoices provide for a price in the

amount of US$ 20,438,560 (fan blades) and US$ 183,343.28 (clamps).

15 January 2015 RESPONDENT informs CLAIMANT about payment of the invoiced

amounts. CLAIMANT discloses a mistake in the fan blade invoice to

RESPONDENT by e-mail and attaches a corrected invoice providing

for a price US $22,723,800.

29 January 2015 US$ 20,336,367.20 are credited to the CLAIMANTS’s bank account.

9 February 2015 RESPONDENT refuses CLAIMANTS’s demand for payment of

outstanding US$ 2,387,432.80.

10 February 2015 An inquiry at the ENB reveals that the ECB deducted an 0.5 % levy

from RESPONDENTS’s payment for money laundering

investigations.

April 2016 CLAIMANTS’s audited accounts for the year 2015 are released.

1 April 2016 CLAIMANT informs RESPONDENT about its intent to initiate

arbitration proceedings.


2

Summary of Arguments

1 CLAIMANT was forced to initiate this arbitration, since RESPONDENT infringes its

contractual obligations in many respects and makes every attempt to deprive CLAIMANT of

its lawful rights. CLAIMANT fulfilled its part of the development and sales agreement free of

any faults. Still, it has not yet received the full purchase price.

2 First, RESPONDENT tries to take advantage of an obvious mistake in the fan blade invoice,

which had been immediately corrected, and alleges that CLAIMANT burdened the full

exchange rate risk for the full contract. However, this contradicts with every principle of the

Parties’ cooperation. In addition, RESPONDENT tries to avoid bank charges deducted from

its payment by the Central Bank. This constitutes an infringement of both, the clear agreement

of the Parties on this matter and the applicable law [Issue 3].

3 After CLAIMANT submitted its Request for Arbitration, RESPONDENT challenged the

admissibility of the claim and requested a security for costs order by the TRIBUNAL.

4 The TRIBUNAL has no power to order security for costs. Generally, it is the Parties’ decision

to either confer such power to the TRIBUNAL or not. Here, the choice of the CAM/CBCC

Rules illustrates the PARTIES’ intention to exclude any potential right for security. No

provision of these Rules addresses the question of security at all – different from other arbitral

rules. Further, Art. 8 CAM/CBCC serves a completely different purpose.

5 Moreover, ordering Claimant to provide security requires an indication that CLAIMANT

would or could not abide by the award. To the contrary, CLAIMANT is in an excellent

financial shape and willing to adhere to any judgement. RESPONDENT attempts to proof that

this notion lacks any substance. However, the submitted evidence is mere hearsay comprising

visibly confused facts – and it is thus inadmissible and inconsiderable [Issue 1].

6 The claim is also admissible. CLAIMANT submitted its Request for Arbitration within the

contractual 60-day time limit. This document sufficiently demonstrates CLAIMANT’s

intention to initiate arbitration proceedings. Also, CLAIMANT had informed RESPONDENT

about its intentions by email three months in advance. Thus, RESPONDENT was informed

and had plenty of time to prepare for the arbitration proceedings.

7 Now, RESPONDENT tries to avoid these proceedings by relying on minor formal mistakes.

The incorrect Power of Attorney and the incomplete fee payment do not compromise

RESPONDENT rights. They are meant to serve the administrative purposes of the CAM

secretariat. But those mistakes – immediately corrected by CLAIMANT a few days later –

must not be misused by RESPONDENT to obstruct the legal proceedings [Issue 2].


3

Request for Security for Costs

8 In its Request for Security for Costs from 6 September 2016, RESPONDENT requests the

TRIBUNAL to order CLAIMANT to provide security for RESPONDENTS’S costs in regard

to the arbitrators’ and legal fees as well as expenses regarding witnesses and experts [RfS,

p. 46 para. 1] totalling US$ 200.000. It bases this request on doubts regarding

CLAIMANTS’s financial situation [RfS, p. 46 para. 3], behaviour allegedly evidencing that it

does not intend to comply with awards [RfS, p. 46 para. 2], unsuccessful search for outside

funding [RfS, p. 46 para. 3] and alleged concealment of its true financial situation [RfS, p. 46

para. 4]. All of the allegations were taken from a newspaper article in the Carioca Business

News, written by a “usually well informed author” [RfS, p. 46 para. 3].

9 CLAIMANT first submits that the TRIBUNAL does not have the power to order security for

costs (I.). Alternatively, the grounds for such an order are not satisfied (II.).

I. The TRIBUNAL has no power to order CLAIMANT to provide security for costs

10 The issue at hand is who is to establish the power of the TRIBUNAL in regard to orders for

security for costs and whether this power was conferred upon it.

11 According to the fundamental principle of party autonomy, this is within the Parties’ powers

[Lynch, p. 17; Von Goeler, para. 9.01 A.; Waincymer, p. 51-2 para. 2.2.2, p. 644 para. 8.3.2],

as expressed in their agreement to arbitrate [SAS v Bolivia, PO10 para. 51; AAA Handbook on

Commercial Arbitration, p. 290]. The institutional rules and the lex arbitri, which the Parties

chose, complement and limit the Parties’ agreement [cf. Burlington v Ecuador, para. 47;

Berger/Kellerhals, para. 13; Verbist/Schäfer/Imhoos, p. 10].

12 CLAIMANT will establish that neither the Parties (1.) nor the CAM/CCBC Rules (2.) confer

the power to order security for costs on the TRIBUNAL.

1. The Parties exercised their party autonomy in not giving the TRIBUNAL power to

order security for costs

13 The Parties remained silent on the matter of security for costs. There is no rule on security for

costs in the DSA. This silence can only be interpreted in the way that the Parties did not

intend for the TRIBUNAL to order security for costs [cf. X Panama v Une personne physique,

para. 1.2.2; cf. Bösch, p. 208; Rubins, p. 367].

14 This is further supported by the fact that the Parties expressly and freely chose the

CAM/CCBC Rules [cf. Livingstone, p. 539]. Contrary to most other institutional arbitration

rules [cf. Born, p. 2495 para. 17.02 at G.4.e], these do not provide for an express provision on


4

security for costs. If the Parties had wanted the TRIBUNAL to have such power, they would

have chosen one of those institutions providing for it.

15 Lastly, and in regard to Art. 17 UNCITRAL Model Law, it cannot be inferred from the

chosen seat of arbitration that the Parties wanted to resort to the lex arbitri on security for

costs. Rather, it is likely that parties generally choose a given country as a neutral forum “on

pure grounds of convenience” [CA (EN 1983), p. 315; QB (EN 1995), p. 319].

2. Power to order security is not conferred by the CAM/CCBC Rules

16 RESPONDENT seems to be of the opinion that Art 8.1 gives the TRIBUNAL the power to

order security for costs when it submitted its RfS „pursuant to Art. 8“ [RfS, p. 45]. Art. 8.1

gives the TRIBUNAL the power to order „provisional measures, both injunctive and

anticipatory“. Therefore, the question at hand is whether Art. 8.1 includes the power to order

security for costs.

17 CLAIMANT will show that by the wording (a.), systematical context (b.) and its rationale

(c.), Art. 8.1 does not give the TRIBUNAL the power to order security.

a. Interpreted by its wording, Art. 8.1 does include security for costs

18 Provisional measures are defined as those intended to protect the ability of a party to obtain a

final award [cf. Beraudo, p. 246; Moses p. 101]. They pertain to protection, not payment [TD

(CA 1999), para. 7]. Therefore, security for costs does not fit this definition. It is a special

form of provisional measures, to which the criteria applicable for the other measures do not

apply and which should be treated separately [Lew/Mistelis/Kröll, para. 23-4; cf.

Newman/Hill, p. 208].

19 This indicates that Art. 8.1's references to injunctive and anticipatory provisional measures,

were not meant to include security orders.

b. Interpreted by its systematical context, Art. 8.1 does not include security for costs

20 By exercising their party autonomy and following the CAM/CCBC Rules, the Parties have

established a regime of rules that is final regarding the allocation of costs, making security for

costs superfluous and contradictory to those rules.

21 RESPONDENT is of the opinion that the TRIBUNAL will have to render an award on costs

pursuant to Art. 10.4.1 CAM/CCBC Rules. For such an award to order CLAIMANT to fully

reimburse RESPONDENT, the TRIBUNAL would have to follow the principle of “costs

follow the event” [cf. ICC Case No. 15218, para. 13, “Verfügungsanspruch”]. CLAIMANT

will establish that this is not the case.


5

22 Art. 10.4.1 in determining the appropriate liability of the Parties in regard to costs and fees

refers to the ToR. The procedural matters regulated in the ToR are binding on the Parties

[Craig/Park/Paulsson, p. 293 para. 15.05; Derains/Schwartz, p. 257]. Section 12.3 thereof

[ToR, p. 43] states that “[d]uring the course of the arbitration […], each party shall bear the

fees of its respective attorneys and […] technical assistants”.

23 Additionally, Art 12.7 CAM/CCBC orders each Party to deposit „its portion of the amount“

of the arbitrators’ fees at an early stage of the proceedings to ensure payment. Even more,

Art. 12.8 CAM/CCBC gives the Secretariat the power to request advance payments „to

establish an expense fund“, which „corresponds to the provision of expenses incurred with

sending documents, copies, prints, and with the contracting of suppliers to provide support

during hearing sessions, such as stenotyping and recording professionals, among others”

[CAM/CCBC Table of Fees, at III].

24 Therefore, ensuring the payment of fees for attorneys and technical assistants [Section 12.3

ToR] as well as arbitrators’ fees [Art 12.7] and expenses incurred with support during hearing

sessions [Art 12.8] is sufficiently provided for under the existing rules. This includes the sums

claimed by RESPONDENT [RfS, p. 46 para. 1]. Consequently, the general rule seems to be

that each party bears its respective portion of the fees and expenses during the proceedings.

25 Regarding the reimbursement, Section 12.4 ToR states that “[t]he Arbitral Award shall

establish the responsibility related to the payment of administrative costs and fees,

Arbitrators’ fees and Tribunal-appointed experts’ fees, attorneys’ fees, as well as the

reasonable expenses incurred by the parties in their defense process. The Arbitral Tribunal

shall also fix the amount or proportion of refund of one party to the other. The Arbitrators

will consider the behaviour of the parties in order to reduce the amount of cost refund”

[emphasis added].

26 This shows that by generally having each party bear its own costs and merely allowing for a

“refund” order, the TRIBUNAL was given a wide discretion in allocating the costs of the

arbitration proceedings, and the Parties did not follow the principle of “costs follow the

event”. Therefore, RESPONDENTS’s right to be (fully) reimbursed is highly hypothetical.

Consequently, it not only contradicts the general principles behind the provisions of cost

under the existing regime, but in its hypothetical nature is also not a legal right that would

require protection from a security for costs order [EuroGas v Slovak Republic, PO3

para. 116; Maffezini v Spain, PO2 para. 16 et seq]. In any event, disregarding the ToR’s

regime on costs would lead to the final award being subject to challenge for having failed to

follow them [cf. Waincymer p. 469].


6

27 In addition, the TRIBUNAL cannot specify the hypothetical reimbursement pursuant to

Section 12.3 ToR, as this would mean prejudging the Parties’ behaviour as a necessary part of

the consideration in regard to the refund and therefore violating their right to be heard by

prejudging the merits [cf. Guaracachi v Bolivia, para. 8; cf. Maffezini v Spain, PO2, para. 21;

cf. SAS v Bolivia, PO10 para. 55-6; cf. Schreuer, Art. 47 para. 2].

28 Hence, Art. 8.1 cannot include the power to order security for costs, as this would contradict

the existing regime of rules under the CAM/CCBC Rules and the ToR, which the parties have

themselves chosen by exercising their party autonomy [cf. CA (SG 2009), para. 30].

c. Interpreted by its rationale, Art. 8.1 does not include security for costs

29 The rationale of Art. 8.1 is to ensure equality and fairness. Generally, the purpose of

provisional measures is to establish a due process by ensuring equal treatment and fire power

[CA (EN 1983), p. 314; cf. Waincymer, p. 643 para. 8.3.1]. This is reached by balancing the

conflicting legal interests of the parties [NAI Case No. 1694, at II.4; CIARB, p. 4, Art. 1 at b].

Hence, in order to be justified, a provisional measure must contribute to this balance.

[Darwazeh/Leleu, para. 3.2 at a].

30 Security for costs can, in some cases, be justified in order to protect parties from situations

where an unforeseeable number of proceedings are initiated against them without legitimate

claims and assets. In such situations, and without security, a decision between defending and

subsequently not being able to recover their losses or forfeiting them would have to be made

[cf. ICC Case No. 14661, para. 4; Redfern/Hunter, para. 5.35 – 6; cf. Veit, p. 116]. However,

this is not the case in this instance.

31 First, the number of such situations is limited, since arbitration requires the parties to mutually

agree to enter into an arbitration [cf. HL (EN 1994), p. 123].

32 Second, the burden placed on the requesting party by the obligation to pay an advance on

costs under the institutional rules is considered to be a sufficient safeguard to exclude any

abusive and extravagant claims [CIARB, p. 11, Art. 4; Lew/Mistelis/Kröll, p. 600-1 para. 23-

54]. As shown above [para. 23], the CAM/CCBC Rules under Art. 12 and 4 serve this

purpose.

33 Third, any contracting party generally bears the risk of a dispute. Such a risk is a general

commercial risk [A S.p.A. v B AG, para. 8; Blessing, para. 886]. Similarly, not being able to

enforce an award is a general risk in international business [Blessing (1995), para. 46.14]. In

addition, such risk of not being able to enforce an award is substantially lower where the

eventual award is enforceable under the NYC [cf. Cl. v Dutch Company, para. 4; X Panama v


7

Une personne physique para. 1.2.2 et seq]. Both Parties have their seat in contracting states of

the NYC [PO2 para. 35].

34 Furthermore, the burden imposed on a party by a security for costs order may interfere unduly

with the right to be heard by stifling a genuine claim [Hamester v Ghana, p. 5 para. 17;

Redfern/Hunter, para. 5.35]. It is not part of the arbitral process and principles that a claim is

heard only if the claimant proves sufficient financial standing [RSM v Grenada, para. 5.19].

Furthermore, parties can use measures such as security for costs as a weapon to effectively

prevent the opposing party’s access to the courts [Kirtley/Wietrzykowski, para. 5].

35 In conclusion, security for costs under the given set of rules would unilaterally disadvantage

the requesting party by unduly interfering with their rights. The opposing parties are

sufficiently protected by the existing provisions. Therefore, security for costs would always

fail to strike a balance between the parties’ respective interests, directly contradicting

Art. 8.1’s rationale of establishing this.

II. Alternatively, the TRIBUNAL should not order CLAIMANT to provide security

36 Alternatively, the grounds for an order for security for costs are not satisfied. As stated above

[para. 8], RESPONDENT relies its request for security for costs on a newspaper article and

alleged non-compliance of CLAIMANT with an award [cf. RfS, p. 46 para. 2 - 4].

37 However, as CLAIMANT will show, the newspaper article as mere hearsay evidence is not

admissible (1.) and the alleged facts do not satisfy the grounds for security for costs (2.).

1. The newspaper article constitutes mere hearsay evidence and is inadmissible

38 The rule is that only evidence satisfying the requirement of providing credible testimony from

sources having knowledge of a party’s financial affairs should be sufficient. In particular,

press reports as a form of hearsay evidence [Waincymer, para. 10.16.3] should not be treated

in itself as evidence for judicial purposes, even if they seem to meet high standards of

objectivity [ICJ (1986), para. 62; cf. Aldrich, p. 352; Rosenne, p. 1046]. In the present case,

the journalist mixed up two investment arbitrations brought against the government of

Xanadu [PO2 para. 39(d)]. This demonstrates the flaws of hearsay evidence, particularly

regarding the evidence at hand, as it is very prone to errors.

39 Additionally, one should only have to defend what can be proven first [cf. Lew, para. 6].

However, if submitting hearsay evidence like a newspaper article speculating about

CLAIMANTS’s financial status would be sufficient to satisfy the standard of proof, it would

undermine this concept. CLAIMANT would now have to defend by enclosing financial


8

statements and other internal confidential information. Admitting hearsay evidence like the

newspaper would therefore lead to a practical shift of the burden of proof.

40 For these reasons, the TRIBUNAL should render it inadmissible.

2. The alleged facts do not suffice to satisfy the grounds for security for costs

41 The issue at hand is what the grounds for security for costs are in general (a.) and whether

they are satisfied in the present case (b. and c.).

a. There must be a serious probability that CLAIMANT will not comply with the award

42 For an order for security for costs to be justified, first, there must be a serious probability that

a party will not perform a future payment obligation [Henderson, p. 72 at F; Waincymer,

p. 647 para. 8.3.5]. This probability can be determined by the party’s ability and willingness

to pay [RSM v St. Lucia, para. 81; CIARB, p. 6, Art. 3]. Second, security for costs must be fair

in the circumstances of the given case [Waincymer, p. 647 para. 8.3.5].

43 In examining the ability to pay, the TRIBUNAL should concentrate on whether

CLAIMANTS’s financial situation has materially and substantially deteriorated between the

present situation and the time of entering into the DSA [cf. ICC Case No. 10032, para. 45;

ICC Case No. 15952/FM para. 2.1 et seq.]. It must be considered that RESPONDENT took

the risk of both doing business and having disputes with CLAIMANT in the financial

situation of the time of contracting, including the risk of not being able to recover losses in

disputes with it [Henderson, p. 72 at F.2; Waincymer, p. 650 para. 8.3.5].

44 Even more, where a respondent has access to assets to enforce an award under the NYC, the

risk of not being able to recover expenses is relatively low [cf. Kerr, p. 129 fn. 24;

Konrad/Schwarz para. 22-105; cf. Yeşilirmak, p. 218 para. 5-85].

45 Regarding the willingness to comply with an award, behaviour suggesting an intention to

avoid or delay payment of a cost award can only be assumed where there is a consistent

procedural history of not complying with awards or paying fees [RSM v Grenada, para. 63;

RSM v St Lucia, para. 82].

46 Lastly, tribunals have to be careful not to stifle a genuine claim, as security for costs orders

can interfere unduly with a party’s rights. This is particularly true where the one party is very

likely part of the reason for financial constraints of the other party [Born, para 17.02 G.4.e;

Redfern/Hunter, para. 5.35]. In those instances, granting security for costs would allow such

parties to “benefit from their improper conduct” [SAS v Bolivia, PO10 para. 40]. Therefore,

security for costs must only be ordered on the grounds of exceptional circumstances [ICC

Case No. 13620, para. 2.5; Libananco v Turkey, para. 57; Occidental Petroleum v Ecuador,


9

para. 59; Ashford, p. 223], for example where a degree of impecuniousness beyond mere

financial weakness is examined [Commerce Group v El Salvador, para. 45; CA (EN 1988), cf.

ICC Case No. 14993, para. 8; p. 559; ICC, Security for Costs, p. 61].

b. The facts submitted by RESPONDENT do not establish such a serious probability

47 In applying the facts to the rules established above, and contrary to RESPONDENTS’s

allegations, CLAIMANT will establish that it is able (aa.) and willing (bb.) to comply with

possible awards. There is no serious probability of RESPONDENT not being able to enforce

a hypothetical cost award.

CLAIMANTS’s financial shape does not necessitate security for costs

48 CLAIMANT is in sufficient financial shape to comply with any award (i.). Furthermore,

RESPONDENT deliberately took the risk of contracting with CLAIMANT and was aware of

potential intermittent and customary financial constraints (ii.).

i. CLAIMANT is in good financial shape

49 CLAIMANT submits that it possesses assets in the amount of $ 42.757.950. It possesses

property, plants and equipment valuing $ 37.580.000. Furthermore, the amount of bank loans

and other liabilities decreased since 2010 [PO2, p. 59, para. 28]. Except for the present case

and the award rendered against CLAIMANT in the case against its supplier, there are no other

enforcement proceedings that CLAIMANT is involved in [PO2, p. 60, para. 33].

Additionally, there are no insolvency or bankruptcy proceedings initiated against it [PO2,

p. 60 para. 31]. Even more, CLAIMANT has just developed a new generation of fan blades,

the sale of which will infuse CLAIMANT with new financial means [cf. CE9, p. 50].

50 This proves that CLAIMANT is in the financial shape to comply with hypothetical awards. In

any event, it proves that under the NYC, RESPONDENT would be able to enforce an award

against CLAIMANTS’s assets. The granting of security would be redundant.

51 Lastly, RESPONDENT seems to be of the opinion that CLAIMANTS’s search for outside

funding proves its inability to comply with awards [cf. RfS, p. 46, para. 3 - 4]. However, it is

merely a financial decision to look for outside funding as opposed to spending liquid means

[cf, SAS v Bolivia, PO10 para. 76]. RESPONDENT has to show a sufficient causal link

between the mere existence of outside funding and the danger of CLAIMANT not performing

on an award [EuroGas v Slovak Republic, PO3 para. 122-3; Fuchs v Republic of Georgia,

para. 691; Guaracachi v Bolivia, PO14 para. 7; SAS v Bolivia, PO10 para 61, 76]. It has

failed to do so.


10

ii. CLAIMANT willingly took the risk in regard to CLAIMANTS’S financial situation

52 Second, CLAIMANTS’s financial situation has not substantially or unexpectedly deteriorated

between the conclusion of the DSA and the present proceedings [CE9, p. 50; PO2, p. 59

para. 28]. Therefore, RESPONDENT willingly took the risk of making business and having

disputes with CLAIMANT in this very financial shape.

53 RESPONDENT is largely in the same business as CLAIMANT or is at last familiar with

CLAIMANTS’s business from their two prior contracts [cf. AtR, p. 25 para. 8]. Therefore, it

knows that the development of a new fan blade is normally associated with a considerable

financial effort largely depleting the freely available financial means [CE9, p. 50]. It is very

likely that all disputes that would be initiated by CLAIMANT will only arise during such a

time. Additionally, RESPONDENT knew that CLAIMANT was developing a new fan

generation [PO2, p. 58 para. 27]. This emphasises its awareness of the risk of having disputes

with a party that may be short on funds during certain time periods.

54 However, RESPONDENT claims that it was led to believe CLAIMANT had a claim against

the Xanadu government totalling $ 100 million [RfS, p. 46 para. 4; PO2, p. 60 para. 34],

influencing RESPONDENTS’s view on the risk it was taking. This impression was allegedly

given by the negotiators on CLAIMANTS’s behalf and not corrected when the award

totalling $ 12 million was rendered before the completion of the negotiations. However,

comments referring to an amount of $ 100 million were only made when both Parties were

still subsidiaries of the same parent company in November 2009 [PO2, p. 60 para. 34].

Comments on that occasion cannot be taken as statements influencing official contractual

negotiations. Furthermore, if RESPONDENT had a real interest as to the claim against

Xanadu, it could have always looked at the audited accounts that were publicly available.

These showed the claim with $ 15 million, which is not substantially more than the

$ 12 million eventually recovered [PO2, p. 59 para. 28; CE9, p. 50]. Even more,

CLAIMANT was under no obligation to disclose awards to RESPONDENT [cf. RfS, p. 46

para. 4]. Such obligations only pertains states, if any [cf. Reith, p. 124 at B]. These two facts

prove that CLAIMANT is not concealing its true financial situation [cf. RfS, p. 46 para. 4].

55 Therefore, RESPONDENT must be assumed to have willingly taken the risk of having

disputes with CLAIMANT in its financial situation.

CLAIMANT is willing to comply with possible awards

56 Contrary to what RESPONDENT submits, CLAIMANT has not shown behaviour evidencing

that it is not intending to comply with hypothetical awards [cf. RfS, p. 46 para. 2].


11

57 A general assumption must always be in favour of an intent to comply. The circumstances of

CLAIMANTS’s case against one of its suppliers as cited by RESPONDENT [RfS, p. 46

para. 2] do not refute this assumption.

58 CLAIMANT has not complied with the respective award as the supplier owes an even larger

amount to CLAIMANTS’s parent company due to a claim that is presently being litigated.

Any awarded sum will be set off against the award [OtS, p. 49; cf. PO2, p. 59 para. 30].

Setting off claims against each other financially makes more sense than having large amounts

of money being transferred back and forth, where one might incur bank charges. Therefore,

setting off claims is economically rational behaviour. Apart from that, one case does not

establish a procedural history of not complying with orders [cf. para. 45].

c. Security for costs would be unjust in the present case

59 Additionally, under the circumstances of the instant case security for costs would be unfair

[cf. para. 42, 46]. The RfS by RESPONDENT is aimed at stifling a legitimate and material

claim and not submitted in a timely manner.

60 The TRIBUNAL should consider the surrounding circumstances of RESPONDENTS’s RfS

to determine whether such a measure would be justified [CA (EN 1973), p. 273; CIARB, p. 10,

Art. 4 para. 1 at a]. Such circumstances can be whether RESPONDENT has contributed to

CLAIMANTS’s financial restraints [CIARB, p. 10, Art. 4 at b; Waincymer, p. 650 para. 8.3.5

at “Financial circumstances”] or unfair use of security for costs as an offensive weapon

blocking CLAIMANTS’s access to justice [Henderson, p. 74]. Access to justice is a major

pillar of arbitration [cf. BGH (DE 1951), para. 4] and must be complied with in arbitration the

same way as in national courts [OLG Frankfurt (DE 2014), p. 157].

61 Additionally, if the request is not made at the earliest opportunity, this constitutes a waiver of

rights [ICC Case No. 15951/FM para. 1.6; cf. SC (AU 1983), p. 942, Gu, at D.1.b]. Indeed,

there may be a good reason for the request to be made at a late stage of the proceedings, for

example where knowledge about the circumstances only occurs at a late stage of the process

[cf. CA (EN 1994), p. 542 at. F; Henderson, p. 74 at F].

62 RESPONDENT claims that it was only made aware of the financial circumstances by the

newspaper article of 5 September 2016 [RfS, p. 46 para. 4]. However, the main source in

regard to CLAIMANTS’S financial situation should be its publicly available audited

accounts. CLAIMANTS’S newest financial statement was publicly available in April 2016

[PO2 para. 28], and therefore far ahead of the initiation of the proceedings and the RfS.


12

63 Therefore, RESPONDENT ought to have known about CLAIMANTS’S financial situation

and simply failed to submit the RfS sooner, in which case it is submitted late.

64 Additionally, it clearly looked at CLAIMANTS’S audited accounts after reading the

newspaper article but before preparing the request for security for costs. It is asking for

$ 200.000, which is just slightly higher than the $ 199.950 CLAIMANT has shown as “Cash

and Cash Equivalents” in the audited account [p. 46 para. 1; PO2 para. 28]. Therefore, it is

clearly using security for costs as a weapon to interfere with CLAIMANTS’s access to

justice.

65 Therefore, it would not be fair to grant security for costs in the present case.

66 CONCLUSION: Neither the Parties nor the CAM/CCBC Rules confer the power to order

security for costs on the TRIBUNAL. In any case, RESPONDENT has failed to provide

sufficient evidence for an order for security for costs. Rather, security for costs would unduly

restrict CLAIMANTS’s access to justice. Therefore, the TRIBUNAL should not grant the

RfS.

Admissibility of claims

67 Section 21 of the DSA states that “each party has the right to initiate arbitration proceedings

within 60 days after the failure of the negotiation” [CE2, p. 11; emphasis added]. The

negotiations were declared to be failed on 1 April 2016 [RE3, p. 29]. According to

Art 6.6 CAM/CCBC Rules, CLAIMANT timely submitted its RfA enclosing a notice of

arbitration on 31 May 2016. It attached a PoA as well as proof of payment of the Registration

Fee. However, the PoA was signed by and on behalf of CLAIMANTS’s parent company and

the Registration Fee was only paid partially due to a mistake in the Secretariat. Notified of

this by the CAM/CCBC, CLAIMANT immediately amended its RfA on 7 June 2016.

68 The TRIBUNAL should admit CLAIMANTS’s claims. They were submitted within the

contractual 60 days time limit (I.). Alternatively, RESPONDENT is prevented from relying

on CLAIMANTS’S mistakes (II.).

I. CLAIMANTS’s claims were submitted in time

69 The Parties agreed that a party must “initiate” arbitration proceedings to comply with the time

limit. However, they did not expressly determine what is required for successful initiation.


13

70 RESPONDENT seems to be of the opinion that the Parties referred to the rules on

“commencement” according to Art. 4 CAM/CCBC Rules and that CLAIMANT failed to

commence the proceedings under these rules [cf. AtR, p. 25 para. 12].

71 To the contrary, CLAIMANT will establish that the Parties exercised their autonomy to

determine that a notice of arbitration is sufficient to initiate proceedings (1.). Alternatively,

the rules on commencement under Art. 4 were satisfied (2.).

1. The notice of arbitration is sufficient for initiation by the PARTIES’ agreement

72 Notwithstanding the rules on commencement under Art. 4 CAM/CCBC, the Parties were free

to establish differing rules on “initiation” in regard to complying with the time limit.

73 In general, where parties agree on contractual time limits as part of their autonomy, they must

also be able to determine what is sufficient to fulfil them [cf. Lew/Mistelis/Kröll para. 20 -

26]. This is also supported by Art. 1.2 CAM/CCBC, allowing parties to deviate from the

CAM/CCBC Rules.

74 The DSA is a commercial contract. Therefore, the general assumption must be that the Parties

intentionally and carefully chose their wording, Thus, the use of two different words speaks

against an interpretation in which Section 21 simply refers to Art. 4. According to the Oxford

Dictionary, the meaning of “initiate” is “to cause s.th. to begin”. On the other hand, the

meaning of “commence” is “to begin s.th.”. Initiation is therefore before commencement; the

Parties only required the initiating party to take the first step to commencing the arbitration.

75 The purpose of a time limit is to promote legal certainty [Lew/Mistelis/Kröll, p. 506 para. 20-

10; Mustill/Boyd, p. 201]. According to the principle of equality, both Parties must benefit

from this legal certainty. CLAIMANT must therefore be in a position to know whether it has

complied with the time limit. Furthermore, the time limit must not be practically shortened to

less than the 60 days agreed on by high barriers of complying with it. Therefore, and for

fairness reasons, the requirements for complying with the time limit must be low. Because

legal certainty is already provided by an unequivocal intent expressed by the initiating party

that it wants the CAM/CCBC to commence arbitration proceedings, such expression of intent

is sufficient.

76 CLAIMANT expressed its intent to request the CAM/CCBC to commence proceedings twice,

when it informed RESPONDENT about the initiation of proceedings on 1 April as well as

submitted the very detailed RfA on 31 May, both within the time limit [cf. p. 2 et seq, 29].


14

2. Alternatively, the requirements for commencement according to Art. 4 were

satisfied in a timely manner

77 Even if the TRIBUNAL should find that “initiate arbitration proceedings”, means initiation

in terms of Art. 4, CLAIMANTS’s RfA was sufficient to effect commencement and therefore

complies with the time limit.

78 The question is whether the requirements for commencement under Art. 4 were satisfied in a

timely manner. RESPONDENT objects, claiming that the RfA submitted on 31 May 2016 did

not comply with the requirements of Art. 4.1 and 4.2 because “neither had CLAIMANT paid

the Registration Fee in full nor had it submitted a power of attorney for the arbitration.”

Instead, they were allegedly only satisfied on 7 June 2016, when the amendments to the RfA

were made [AtR, p. 25 para. 12]. However, as CLAIMANT will show, the PoA and

Registration Fee need not be submitted to effect commencement under Art. 4. Instead, the

notice of arbitration is sufficient (a.). Alternatively, the PoA submitted by CLAIMANT and

the amount of the fee paid satisfy the requirements of Art. 4 (b.). Alternatively, the

amendments to the RfA on 7 June 2016 do not lead to commencement on that date, but rather

unfold retroactive effect. Therefore, they suffice for in time commencement (c.).

a. The notice of arbitration in itself is sufficient for commencement

79 Article 4 does not establish consequences of a failure to attach the correct PoA and proof of

payment of the full fee. Therefore, the issue at hand is whether failure to submit these

documents leads to suspension of commencement. By the systematical context , which shows

that the notice is at the core of commencement, (aa.), by the purpose of the relevant

documents (bb.) and the principle of efficiency, (cc.), the provisions on these documents are

mere directory ones, not leading to suspension of commencement.

The systematical context shows that the notice is the centrepiece of the RfA

80 The Rules clearly distinguish between the notice for commencement of arbitration itself and

the attachments to it, such as the Power of Attorney (cf. Art. 4.1) or proof of payment (cf. Art.

4.2.). When further considering the systematical context of the CAM/CCBC Rules it becomes

apparent that only the notice for commencement of arbitration has substantial legal relevance,

but not the attachments. This applies in particular with regard to matters of time: For instance,

Art. 12.5 refers to the “time of presentation of the notice for commencement of arbitration”

[emphasis added]. The same holds true for the Administrative Fee under Art 12.2, which is

“required from the date the notice” is filed.


15

81 In conclusion, the same must apply matter of time of commencement. Taking the

explanations above into account, the attached PoA and the proof of payment are irrelevant for

the subject-matter of commencement of arbitration proceedings.

The purpose of the RfA was served by CLAIMANTS’s notice in itself

82 Any legal proceedings should be commenced through a written notice identifying the party

against which the claim is directed, the basis of claim, and the relief sought

[Turner/Mohtashami, p. 28 para. 3.02; Waincymer, p. 217 para. 4.1.1].

83 The detailed notice submitted by CLAIMANT on 31 May 2016 [pp. 2 – 7] identified the DSA

as the basis for the claims and the relief sought [RfA, p. 7] and provided the facts to the case.

The principle of efficiency demands a substance over form approach

84 In interpreting the rules on commencement pursuing to the CAM/CCBC Rules, it is sensible

to analyse other arbitration rules. For instance, in a comparison to the LCIA Rules, it becomes

clear that failure to pay the Registration Fee does not lead to a stay of commencement under

the CAM/CCBC Rules. Art 1.1(vi) LCIA Rules explicitly deals with the consequences of

such a failure and provides that it leads to suspension of commencement. In contrast, the

CAM/CCBC Rules do not provide for such an effect of failure to comply with Art 4.2.

Therefore, it must be assumed that such a consequence of failure to submit certain documents

was not intended under the CAM/CCBC Rules.

85 Furthermore, Art. 4(4) ICC Rules has been deliberately drafted so as to make it clear that the

copies and payment required are not part of the request [ICC Case No. 6784, pp. 54-55;

Derains/Schwartz, p. 55]. The general practice is that as long as the other side has been

informed about the initiation of a claim, non-fulfilment of additional requirements will not

prevent the valid commencement of an arbitration [Fouchard/Gaillard/Goldman, para. 1215].

This is consistent with the wish to “save” the request and the arbitration whenever reasonably

possible [Derains/Schwartz, p. 52] to promote efficiency as a fundamental principle of

arbitration [cf. BGE (CH 1982), p. 201; Fortier, p. 69].

86 The general principle of promoting an efficient arbitration process can be drawn from these

comparisons. In exercising it, “technical” failures shall not hinder commencement of the

proceedings. Rather, a “substance over form approach” [Waincymer, p. 2204 para. 4.2.7] is

necessary, because an arbitration should not be caught up in technical debates.

Conclusion

87 In conclusion, Art. 4 must be interpreted in a way that promotes the efficiency of the process.

Therefore and in having regard to the systematical context of the rules on commencement, the


16

notice in itself as submitted on 31 May 2016 is sufficient for commencement, and therefore

initiation under Section 21 DSA.

b. Alternatively, the PoA submitted and the amount of the fee paid on 31 May 2016 satisfy

the requirements of Art. 4

88 Alternatively, CLAIMANT will establish that Art. 4’s requirements in regard to both the PoA

(aa.) as well as the Registration Fee (bb.) were satisfied by the submissions on 31 May 2016.

The PoA sufficiently provided for adequate representation

89 The authorization for Mr Fasttrack to act on behalf of the HOLDING shown in the PoA is

also sufficient to show adequate representation in regard to CLAIMANT.

90 Art 4.1(b) CAM/CCBC states that the initiating party shall submit a PoA providing for

adequate representation. Therefore, the question at hand is what “adequate” representation

requires and whether those requirements were satisfied by CLAIMANTS’s submission on

31 May 2016.

91 It is sensible to assume that multiple entities form a single economic unit, even if in law that

economic unit consists of several legal persons [cf. EGC (2009), para. 55]. This may be

assumed where the parent company holds a large portion of the shares of the subsidiary and

the subsidiary does not decide independently upon its own conduct on the market [ECJ

(2012), para. 43 et seq.]. Such an approach acknowledges the economic reality.

92 The HOLDING’s purpose is to control CLAIMANT. It is an 88 % owner of CLAIMANT. All

important decisions, i.e. those that go beyond the day to day business, are taken at the level of

the HOLDING [p. 20; PO2 para. 2]. Its name further evidences its sole purpose of controlling

CLAIMANT. They are one designated economic unit. Therefore, a maiore ad minus, the

power to speak on behalf of the parent company includes the power to speak on behalf of the

subsidiary.

93 Additionally, RESPONDENT, the Arbitrators and the CAM/CCBC knew about the internal

structure of CLAIMANT and the HOLDING from the notice of arbitration [p. 3 para. 2].

94 Therefore, the PoA provided for adequate representation.

Partial payment is sufficient for commencement

95 Even though the Registration Fee was only paid partially, CLAIMANT satisfied the purpose

of it.

96 This purpose is to prove a willingness to pay for the procedure, both preventing claims that

lack any factual or legal basis [see above, para. 32] and ensuring that the CAM/CCBC’s


17

expenses will be reimbursed [cf. Bühler/Webster, para. 4-55, 30-7]. Thereby, it makes sure

that the arbitral system is not abused.

97 CLAIMANT proved its willingness to pay. The partial payment was an obvious mistake.

Therefore, it satisfied the underlying goal of Art. 4.2 CAM/CCBC Rules.

c. Alternatively, the amendments of 7 June 2016 unfold retroactive effect

98 The President of the CAM/CCBC indicated the mistakes to CLAIMANT, setting a time limit

for CLAIMANT to amend the RfA within 10 days [p. 19 para. 3]. CLAIMANT immediately

corrected them on 7 June 2016. Following the fundamental principle of efficiency of the

arbitration process, this correction unfolds retroactive effect and therefore suffices for in time

commencement of the proceedings.

99 An arbitration should not be caught up in technical debates about sufficiency. In considering

the effect of partial non-compliance of requirements for commencement, the policy test

should be whether the respondent is prejudiced “other than through losing the right to

succeed on technical arguments” [cf. ICC Case No. 6228, p. 54;

Fouchard/Gaillard/Goldman, p. 656]. This is consistent with the wish to “save” the request

and the arbitration whenever reasonably possible [Derains/Schwartz, p. 52] to promote

efficiency of the arbitration process.

100 Under the ICC Rules the general practice is that missing parts can be remedied at a later stage

[Lew/Mistelis/Kröll, para. 20-48]. Additionally, the DIS Rules in Section 7.2 and 6.4, the

Swiss Rules in Art 3.5, the SCC in Art 3(2), and the HKIAC in Art 4.7 all allow amendments

and supplementation by means of a time limit set by the institution. If the claimant complies

with such directions within the applicable time limit, the amendments unfold retroactive

effect [see, e.g., Swiss Rules 2012 Art 3.5].

101 Article 6.4 CAM/CCBC Rules shows the wide discretion given to the TRIBUNAL in

extending time limits. While Art 6.4 only refers to such time limits “provided in these rules”,

a basic principle can be drawn from it. Furthermore, Art 4.5 gives the President of the

CAM/CCBC considerable power in matters regarding the arbitration agreement before the

arbitral tribunal is constituted. Consequently, Art 6.4 and 4.5 must be interpreted in a way

similar to the provisions of those arbitration rules quoted above. This view is apparently also

that of the CAM/CCBC itself, when it gave CLAIMANT an opportunity to amend its original

request on 1 June 2016 [p. 19] referring to CLAIMANTS’s submissions from 31 May 2016 as

the “original” request, which was merely “amended” [pp. 19, 40] or “supplemented” [p. 22]

on 7 June 2016.


18

102 In conclusion, the correction of the mistakes on 7 June 2016 unfolds retroactive effect.

Therefore, the in time commencement suffices to comply with the time limit of s21 DSA.

II. Alternatively, RESPONDENT is prevented from relying on the time limit

103 Pursuant to the DSA, which stresses the importance of “good faith” in conducting

negotiations if disputes arise [cf. CE2 p. 10 s4(3), p. 11 s21], the circumstances of the present

case prevent RESPONDENT from relying on CLAIMANTS’s mistakes. RESPONDENT is

using CLAIMANTS’s mistakes as a technical argument to stifle legitimate claims. Thereby, it

deprives CLAIMANT of its fundamental rights to be heard and access to justice [see above,

para. 60]. CLAIMANT sufficiently expressed its unequivocal intent to initiate arbitration by

informing RESPONDENT of this intent on 1 April 2016. Lastly, RESPONDENT has not

suffered any disadvantages from the formal mistakes made by CLAIMANT.

104 Even where the applicant is at fault, when considering the consequences of a failure to meet

time limits, a tribunal should accept certain breaches as there will be little adverse

consequences for the other party or for the sanctity of the proceedings as a whole

[cf. CA (EN 1967), p. 307]. Examples would be very short delays in filing of submissions

[Waincymer p. 420 para. 6.3.2].

105 RESPONDENT is merely using the time limit as a technical argument. It never substantially

relied on the legal certainty provided by it. Not CLAIMANT, but the CAM/CCBC is

responsible for forwarding the RfA to RESPONDENT. However, there is no stipulated time

period in which the CAM/CCBC is obliged to forward the RfA. Therefore, even if

CLAIMANT had submitted all documents on 31 May 2016, RESPONDENT could not have

been sure whether it was now able to rely on a belief that it will not be subject of proceedings

because of the effect of the time limit. Rather, it was equally likely that proceedings were

timely initiated and the CAM/CCBC merely had not forwarded the RfA yet. Thus,

RESPONDENT until 8 June 2016 did not have a legally safeguarded belief in not being the

subject of proceedings. This is in particular true because RESPONDENT was informed by

CLAIMANT about its intent to initiate proceedings [RE3, p. 29] on 1 April 2016.

106 Likewise, the Registration Fee protects the interests of the CAM/CCBC, not those of

RESPONDENT.

107 Lastly, it has been held that a deliberate disregard of a limitation provision constitutes a more

serious fault than a negligent failure to observe such a provision. The facts of the case might

mitigate the fault in permitting the limitation period to expire [QB (EN 1987), p. 252].

CLAIMANTS’s failure consists of a misunderstanding and an obvious mistake and was


19

therefore only negligent: It’s fault was not that if failed to acknowledge the time limit or that

it failed to comply with the requirements in general. Rather, its submission of the documents

merely contained formal mistakes. Additionally, this only led to a very short delay, if any.

CLAIMANT has shown that it was willing to satisfy all requirements. Even more so, it fixed

its possible mistakes as soon as possible.

108 For these reasons, RESPONDENT must be prevented from relying on CLAIMANTS’s

failure.

CONCLUSION: The TRIBUNAL should admit CLAIMANTS’s claims. They were

submitted within the contractual 60 day time limit and RESPONDENT is prevented from

relying on CLAIMANTS’s mistakes in any case.

Outstanding payments

109 For producing and delivering the fan blades, CLAIMANT is entitled to the purchase price of

US$ 22,723,800 pursuant to Section 4.1 DSA in connection with Art. 62, 53, 54 CISG.

However, CLAIMANT so far only received US$ 20,336,367,20 since RESPONDENT

unlawfully transferred a lower amount and tries to avoid its liability for the bank charges in

terms of Section 4.3 DSA.

110 Therefore CLAIMANT is entitled to additional payment from RESPONDENT in the amount

of US$ 2,285,240.00 for the fan blades (I.) and US$ 102,192.80 for the bank charges (II.).

I. CLAIMANT is entitled to additional payment from RESPONDENT in the amount

of US$ 2,285,240.00 for the fan blades

111 RESPONDENT is obliged to additionally pay US$ 2,285,240.00 to CLAIMANT under

Section 4.1 DSA in connection with Art. 62, 53, 54 CISG.

112 The parties did not agree on a fixed purchase price for the fan blades, but on a production cost

based price formula [CE 2, p. 10; CE 1, p. 8], i.e. the purchase price calculation in a first step

requires the calculation of the production costs. In this respect the problem of this case arises.

Due to RESPONDENT’s insistence, the purchase price is in US$, however, since

CLAIMANT produces in Equatoriana, its production costs are in EQD [RfA, p. 4 para. 5].

Due to this difference in currencies – which is solely caused by RESPONDENT – the


20

production costs need to be converted from EQD into US$, which eventually led to the

current dispute about the applicable exchange rate.

113 RESPONDENT tries to take advantage of these circumstances. After the price in the fan

blade invoice had been mistakenly based on the fixed exchange rate for the clamps [RfA, p. 5

para(s). 10,13; CE 4, p. 13], RESPONDENT refused to pay the outstanding amount as

requested by CLAIMANT only one day later and alleged that the fixed exchange rate also

applies to the fan blades [CE7, p 17].

114 However, this allegation lacks any substance. The interpretation of the DSA clearly leads to

the conclusion that the current exchange rate applies (1.). The same pertains under the

applicable law (2.). Furthermore, Art. 4.1 DSA is not subject to the fixed exchange rate (3.).

1. The current exchange rate applies by contractual interpretation according to

Art. 8 and 9 CISG

115 The contract does not explicitly state, which exchange rate applies to the conversion of the

production costs from EQD to US$ [cf. CE 2, p. 10]. Therefore the applicable exchange rate

has to be determined by interpretation of the DSA and in particular Sec. 4.1. In this respect

Art. 8 and 8 CISG apply [HO Helsinki (FI 2004); Secretariat's Commentary, Art. 7 para. 2;

UNICITRAL Digest, Art. 8 para. 3; Enderlein/Maskow, Art. 8 para. 2.3; Staudinger-Magnus.,

Art. 8 para. 7; Ferrari, IHR 2003], according to which due consideration has to be given to

all relevant circumstances of the case, including the negotiations, any practices which the

parties have established between themselves, usages and any subsequent conduct of the

parties.

116 As CLAIMANT will show, the consideration of all relevant circumstances leads to the

conclusion that the current exchange rate applies (a). In addition, the parties are not bound by

any practices between them in terms of Art. 9. (1) CISG, which could refute this result (b).

a. Considering the relevant circumstances

117 The structure and the rationale of the DSA require a conversion of the production costs and

the final payment of the purchase price at the same, i.e. the current, exchange rate (aa.). The

parties are also bound by the usage of risk-sharing in the aircraft industry which also implies

the application of the same exchange rate for the conversion of the production costs and the

conversion of the payment of the purchase price (bb.). Furthermore, the agreement between

the parties to eliminate any currency risk for RESPONDENT in contracts between them is no

longer applicable (cc.). Consequently, taking into account the intent of the parties, the


21

principle of risk-sharing in the aircraft industry and the fact that the agreement of the parties

to de-risk RESPONDENT is no longer applicable, the current exchange rate applies (dd.).

On the structure and the rationale of the contract

118 Since RESPONDENT wanted to make a binding purchase offer for the new fan blades to

Earhart [RfA, p. 4 para. 5], the Parties faced the problem that they had to agree on a purchase

price although the final production costs for the fan blades were not yet known.

119 Considering this uncertainty of development and production costs for the fan blades, the

Parties agreed on a fair allocation of the associated production cost risks, by agreeing on a

minimum and a maximum price, which should ensure that no Party makes losses. The

cooperation was based on respect for the other party’s respective interests and on the

objective to jointly develop the new fan blades.

120 It stands to reason that the same principle applies to the exchange rate risk. However, this

requires that the production costs and the payment of the purchase price are converted at the

same current exchange rate (i.), in particular, when considering the unusual circumstances of

this case (ii.).

i. Fair risk allocation requires the application of the current exchange rate

121 Similar to the production costs, the exchange rate at the time of payment was not known to

the parties at the time of the contract conclusion. With regard

122 The purchase price based on CLAIMANTS’s productions costs occurring in EQD which were

not yet known when negotiating the DSA. With decreasing production costs an increasing

percentage of profit is added to the final purchase price. However, as the final price is stated

and paid by RESPONDENT in US$ CLAIMANT has to convert the costs occurred in EQD

into US$ to be able to indicate the price in US$. Vice versa the paid purchase price in US$

needs to be converted into EQD to reimburse the production costs at their full amount in

CLAIMANTS’s home currency.

123 According to Section 4.1 DSA [CE 2, p. 10] CLAIMANT has the right to cover its production

costs and to realize a certain percentage of profit. This right can only be fulfilled when the

production costs as incurred in EQD are covered by the paid purchase price [RfA, p. 4 para. 5;

RfA, p. 7 para. 21], as illustrated below.


22

124 As explained the intended cost coverage and profit realization can only be reassured when the

production costs and the final payment are converted using the same exchange rate.

ii. The unusual circumstances require the application of the current exchange rate

125 In an international sale of goods when a party concedes to set the purchase price in a foreign

currency it agrees to take the full currency risk. Taking the currency risk means to bear the

probability that the exchange rate fluctuates negatively between the time of the conclusion of

the contract and the date of the payment. In the present case the Parties agreed to set the

purchase price in US$, the currency of RESPONDENT [CE 1 p. 8]. In conclusion,

CLAIMANT which accepts the foreign currency bears the currency risk.

126 However, the agreement at hand is not comparable to the usual fixed price agreement, where

the conceding party only has to bear the currency risk of one conversion. However, since the

pParties agreed to a flexible price formula based on variable production costs according to

Section 4.1 DSA [CE 2, p. 10] CLAIMANT has to convert its production costs from EQD

into US$ as well as the final payment of the purchase price made in US$ respectively. Hence,

CLAIMANT theoretically has to bear the currency risk twice.

127 This unfair risk distribution was not contractually intended by the parties in the DSA, as

neither of them should suffer losses [cf. para 119]. Where the maximum price enabled

RESPONDENT to already bindingly sell the new fan blades to Earhart [RfA, p. 4 para. 5] the

minimum price should ensure cost coverage on behalf of the CLAIMANT. However this

objective would not be reached, if CLAIMANT would have to bear two exchange rate risks,

since the exchange rate could fluctuate between the conversion of the production costs and the

conversion of the final payment [see illustration, para. 123].

128 Hence, the contract must be interpreted in the light of the Parties’ intention to share all

existing risks [CE 1. P. 8; RfA, p. 4 para. 5]. Therefore the production costs and the payment


23

of the purchase price need to be converted at the same exchange rate. i.e. the current exchange

rate.

On the usage of risk sharing in the aircraft industry

129 When interpreting the contract according to Art. 8 and 9 CISG practices established between

the parties and usages need to be considered [District Court Pennsylvania (US 2010); OLG

(DE 2009); Schlechtriem/Schwenzer-Schmidt-Kessel Art. 9 para. 1]. According to Art. 9 (1)

Alt. 1 CISG the parties are bound to any usage they agreed on. A usage is a business custom

which has been established amongst merchants in one specific sector [Ferrari-Sänger Art. 9

para. 2].

130 In the aircraft industry joint development of parts with a certain type of risk sharing are

normal and well established [RfA, p. 6 para .21]. Since their first contract in 2003 the Parties

distribute the risk in their business transactions equally amongst themselves. Also in the

present case they used a price clause which is in its structure largely identical to those used in

the contracts before [PO2, p. 54 para 5]. By using a comparable price structure, the parties

showed that they are willing to adopt and be bound by the usage of risk sharing in the aircraft

industry. Consequently, in order to reassure a fair distribution of risk the exchange rate at the

time when payment was due should be applied.

The de-risking guideline of EI is not applicable

131 RESPONDENT wrongly alleges that it was CLAIMANTS duty to bear all the currency risks

in the DSA based on the guideline of the former parent company of 2009 to de-risk

RESPONDENT [ASC, p. 24 para. 9]. However, this guideline is no longer applicable since

both parties were in completely different settings at the relevant time of contract conclusion.

132 CLAIMANT was sold to the HOLDING in July 2010. This means that CLAIMANT was no

longer a subsidiary of Engineering International SA at the time of conclusion of the contract

[PO 2, p.54 para.1]. Furthermore, the sale of RESPONDENT to SpeedRun was already

apparent and concluded only 2 days later [PO 2, p.54 para.1].

133 As a consequence, both Parties, but at least CLAIMANT was not bound to this guideline at

the time of the contract conclusion, and de-risking RESPONDENT was of no interest at all

for CLAIMANT. Hence, the internal guidelines of Engineering International SA are

irrelevant for the interpretation of the DSA.

Conclusion

134 Taking into account the intent of the Parties and the principle of risk-sharing in the aircraft

industry the production costs and the final payment have to be converted at the same


24

exchange rate. The applicable exchange rate of the final payment undoubtedly is the current

exchange rate as of the day when the payment was effected [CE 4 p. 13]. Consequently this

exchange rate must also be applied to the conversion of the production costs. As a result the

exchange rate of US$ 1=1.79 EQD is applicable.

b. No principle in terms of Art. 9. (1) CISG refutes this result

135 RESPONDENT argues that the parties are bound by practices established between them

through earlier contracts according to Art. 9 (1) CISG [ASC, p. 24 para. 8, 9]. Previously the

Parties only contracted in 2003 and 2005 [PO2, , p. 54 para. 5]. Both times the exchange rate

at the time of contracting had been used for the conversion of the cost elements [ASC, p. 24

para. 8]. However this has no relevance for the case at hand. The criteria for establishing a

practice has not been met (aa.). In addition, the Parties’ conduct shows that they did not

intend to rely on any previous agreements (bb.) and the corporation framework changed (cc.).

There is no practice established between the parties

136 A practice is defined as a conduct established between the parties for the fulfilment of their

respective obligations [OGH (AT 2005); Kröll-Viscasillas, Art. 9 para. 8] which was

incorporated at least three to four times [AG Duisburg (DE 2000); Kröll-Viscasillas, Art. 9

para. 11]. So far the Parties only had to convert cost elements twice, so this criteria is not met.

The parties conduct indicates that there is no such practice

137 RESPONDENT argues that according to this allegedly established practice the exchange rate

at the time of contracting should be used. In the instant case this would be US$ 1 = 2 EQD

[PO2, p. 56 para. 12]. However RESPONDENT itself claims that a rate of

US$ 1 = 2.01 EQD applies [CE 7, p. 18]. This contradicting behaviour of RESPONDENT

already shows that itself did not want to rely on this allegedly established practice.

Alternatively, a possibly established practice would not be applicable to the current

setting of the parties

138 Even if the contracts of 2003 and 2005 would have established a practice between

CLAIMANT and RESPONDENT the practice would not be in the instant case since the

parties are now in a completely different corporation setting, as explained in para. 132 above.

2. Alternatively, the current exchange rate applies under the applicable law

139 If the TRIBUNAL should find, however, that the exchange rate cannot be determined by

means of contractual interpretation, the current exchange rate applies under the applicable

law.


25

140 When assuming that the contract does not regulate the applicable exchange rate for the

production cost the ascertainment of the intent of the parties according to Art. 8 CISG can

lead to the conclusion that the parties wished to refer to the price formula set out in Art. 55

CISG [ICC France (1995); LG (DE 2005); Kröll-Butler/Harindranath Art. 55 para. 3].

However, CLAIMANT will show that none of the mechanisms stated in Art. 55 can be

applied (a) and that this gap can only be closed by applying the PICC leading to the

conclusion that the current exchange rate applies (b).

a. Art. 55 CISG does not provide any suitable mechanism to determine the price of the fan

blades

141 Art. 55 states that the price generally charged at the time of the conclusion of the contracts for

such goods sold under comparable circumstances in the trade concerned should be applied if

the parties have not expressly or implicitly fixed or made provisions for determining the price.

142 The generally charged price at that time can be determined by analysing the price for the same

goods in a common market under comparable circumstances [KG (CH 2007); Kröll-

Butler/Harindranath Art. 55 para. 7]. The parties agreed to develop a new fan blade for

RESPONDENTS’s next generation of high-spec jet engine which would make the jet engine

quieter than any other available jet engine [RfA, p. 4 para. 3]. Consequently, the produced jet

engines were the first of its type on the market which means that there are no comparable

goods the price could be adapted from. Hence, the criteria set out in Art. 55 CISG cannot be

used to determine a price for the fan blades which are solely produced for RESPONDENT

[Supreme Court (HU 1992); Kröll-Butler/Harindranath Art. 55 para. 8].

143 Furthermore, the issue set out in Art. 55 CISG does not exactly adress the issue at stake. In

the present case the Parties have theoretically agreed on a formula for determining the price.

This formula, however, cannot be applied properly since the Parties disagree on the currency

conversion of the production costs which are the main component of the formula. Hence, the

disagreement of the Parties does not concern the determination of the price but the application

of this determination mechanism. The latter cannot be resolved by Art. 55 CISG.

b. The current exchange rate applies according to Art. 6.1.9 (3) PICC

144 In Section 20 DSA the parties agreed on the application of PICC for issues not dealt with the

CISG [CE 2, p. 10]. Therefore the PICC apply in accordance with Art. 6 CISG and Section 20

DSA [cf. District Court California (US 2010); Schlechtriem/Schwenzer – Ferrari, Art. 6,

para(s). 35-37].


26

145 Art. 6.1.9 (3) UNIDROIT states that the applicable rate of exchange is that prevailing when

payment is due [ICC Brussels (2000); Economic Court CIS (1998)]. According to Section 4

para. 2 [CE 2, p. 10] payment is due upon the delivery of the fan rate. The exchange rate at

that point of time was the current exchange rate, e.g. US$ 1 = 1.79 EQD [CE 4, p. 13]. Even

though Art. 6.1.9 (3) UNIDROIT does not explicitly deal with the conversion of production

costs it stipulates the general and rational principle that the current exchange rate should apply

in absence of other contractual agreements. The rationale behind this approach is clear: The

seller shall receive an amount of money which approaches the coverage of the occurred cost

the most [AC (UA 2010)].

As a result, the exchange rate of US$ 1 = 1.79 EQD should be applied.

3. The Addendum did not change the applicable exchange rate

146 On 26 October 2010 the parties signed an addendum to the DSA to regulate the purchase of

200 additional clamps at a cost coverage basis and a fixed exchange rate of

US$ 1 = 2.01 EQD [CE 2, p. 11]. In RESPONDENTS’s opinion, the addendum did not only

regulate the purchase of the clamps but also fixed the exchange rate for the whole DSA

according to Art. 29 (1) CISG. As the party relying on the modifying agreement,

RESPONDENT must prove the modification [AG (CH 2008); Schlechtriem/Schwenzer-

Schroeter, Art. 29, para. 33]. However, RESPONDENT is lacking of any proof.

147 No amendment of the DSA itself was intended. The purchase of the clamps constituted a

completely independent business transaction from the purchase of the fan blades. The form of

an addendum was only chosen by the parties for convenience reasons. RESPONDENT did

not plan to buy the clamps from CLAIMANT but from another producer. When it became

clear that those clamps were not suitable and that RESPONDENT would have to buy the

clamps from CLAIMANT, the DSA was already signed [RfA, p. 5 para. 8]. The form of an

addendum contained a convenient opportunity to avoid the efforts of setting up an additional

contract solely to regulate the purchase of the clamps since delivery of fan blades and clamps

should be done together[PO2, p. 57 para. 16].

148 In the light of all relevant circumstances in terms of Art. 8 CISG [cf. para 115], the addendum

did not change the DSA according to Art. 29 (1) CISG (a). If the Tribunal finds that the

meaning of the addendum remains ambiguous despite interpretation in accordance of Art. 8

CISG also according to the applicable contra-preferentum-rule the addendum does not change

the exchange rate (b).


27

a. No modification according to Art. 29 (1) CISG

149 RESPONDENT falsely states that the applicable exchange rate was meant to be valid for the

whole DSA. However, this statement is clearly refuted by all relevant circumstances, i.e. the

wording of the addendum, the previous negotiations and the subsequent conduct of the

Parties. The addendum explicitly distinguishes between the agreement and the main

Agreement. The addendum says “The exchange rate for the agreement is fixed to US$ 1 =

2.01 EQD”. Further it states “other term as per main Agreement” [CE 2, p. 11]. The

capitalized “A” of the wording “main Agreement” shows that the two sentences referred to

two different agreements: namely the agreement on the clamps and the agreement on the fan

blades. Hence, the wording objectively states that the application of the fixed exchange rate is

restricted to the addendum.

150 The negotiations of the addendum started on the 22 October 2010 when Paul Romario

contacted Amelia Beinhorn via email suggesting the wording of the addendum. The email

was titled with the subject “Clamps” [RE 2, p. 28]. Amelia Beinhorn replied to this email on

the 24 October 2010 also using the subject “Clamps” and explicitly agreeing on linking the

agreement in form of the addendum in regard to the clamps to the DSA [RE 4, p. 30: CE 9,

p. 51]. The email subject used by RESPONDENT and the choice of words and the subject of

the reply by CLAIMANT show that addendum was only meant to amend the DSA in regard

to the purchase of the clamps. In line with Art. 8 (1) CISG the conduct of both parties prove

that the parties never had the intention to apply the fixed exchange rate to the DSA but that

the sole meaning of the addendum was to regulate the purchase of the clamp.

151 This choice of words and the subject of the email “Clamps” make clear that all the

information stated in the emails and in the addendum was only related to the purchase of the

clamps. Also, CLAIMANT wants to emphasize that the negotiations concerning the

development and production of the fan blade and the purchase of the clamps were held

separately. This fact is also illustrated by the form of the addendum since the addendum was

added in handwriting to the already existing DSA. There is no circumstance which could

effectively link the negotiations of the DSA to the negotiations of the addendum.

152 The independence of the DSA and the addendum is also indicated by the fact that

CLAIMANT issued two separate bills for the fan blades and the purchase of the clamps

[CE 4, p. 13].


28

b. Alternatively, RESPONDENT has to bear the risk of unclear wording

153 However, if the Tribunal finds that the meaning of the addendum remains ambiguous despite

interpretation in accordance of Art. 8 CISG the contra-preferentum rule is applicable [CISG

Advisory Council Opinion No. 13]. The concept of contra preferentum states that if a contract

term introduced by one party is unclear, an interpretation against that party shall be adopted

[OLG (DE 2008); CIETAC (2000); Schlechtriem/Schwenzer-Schmidt-Kessel, Art. 8 para. 47;

Staudinger-Magnus, Art 8 para. 18].

154 On 22 October 2015 RESPONDENT has suggested the wording of the addendum to

CLAIMANT [RE 2, p. 28]. Taking into account the wording and the negotiation concerning

the agreement it is clear for CLAIMANT that the addendum is only applicable to the purchase

of clamps. Consequently, this interpretation favourable to CLAIMANT should be valid.

CONCLUSION: CLAIMANT is entitled to receive additional payment from

RESPONDENT in the amount of US$ 2,387,432.80 based on the current exchange rate,

which is applicable according to the DSA and the applicable law. This is not refuted by the

additional agreement on the clamps.

II. CLAIMANT is entitled to additional payment in the amount of US$ 102,192.80 for

the levy deduced by the Equatoriana ECB

155 Section 4.3 DSA [CE 2, p. 10] states that RESPONDENT shall deposit the purchase price in

full into CLAIMANTS’s account at the Equatoriana National Bank and that “any bank

charges for the transfer of the amount are to be borne by the BUYER”, hence

RESPONDENT.

156 On 15 January 2015 RESPONDENT contributed to its obligation according to Section 4.3

DSA [CE 2, p. 10] and effected the partial payment of US$ 20,438,560 to CLAIMANTS’s

account [CE 3, p. 12]. However, RESPONDENT did not fulfil its contractual duty to bear the

bank charges as stated in Section 4.3 DSA [CE 2, p. 10]. As with all payments exceeding

US$ 2 million, the Financial Investigation Unit of the Equatoriana ECB investigated the

payment in regard to money laundering (Section 5 Regulation ML/2010C). To compensate

the efforts of the Financial Investigation Unit for the investigation a 0.5% levy was subtracted

as from every investigated sum of money according to Section 12 Regulation ML/2010C

[CE 8 p. 17]. Consequently, only US$ 20,336,367,20 was credited to CLAIMANTS’s account

[RfA, p. 6, para. 15; CE 6, p. 15]. This contradicts the clear wording of Section 4.3 DSA


29

which imposes the coverage of any possible bank charges on RESPONDENT. In order to

ensure compensation, CLAIMANT is therefore entitled to additional payment for the levy in

the amount of US$ 102,192.80 under Section 4.3 DSA and Art. 54, 57 CISG (1.). Art. 35

CISG does not exempt CLAIMANT from its contractual and statutory obligations to pay the

occurred bank levy.


Art. 54, 57 CISG

157 In Section 4.3 DSA [CE 2, p. 10] the parties agreed that the bank charges for the transfer of

the money are to be borne by buyer (a). The same applies according to Art. 54, 57 CISG (b).

a. In Section 4.3 DSA the parties agreed that the bank charges are to be borne by BUYER

158 The wording of this clause clearly imposes the coverage of the levy on RESPONDENT (aa).

Further, when interpreting this clause to the CLAIMANTS’s intent (Art. 8, 9 CISG) it

becomes obvious that Section 4.3 DSA [CE 2, p. 10] also imposes the levy on

RESPONDENT (bb). There are no usages or practices between the parties which could refute

this obvious interpretation according to Art. 9 CISG (cc).

The wording of DSA imposes the coverage of the levy on RESPONDENT

159 According to the Section 4.3 DSA [CE 2, p. 10] the bank charges for the transfer of the

amount are to be borne by the BUYER. A bank charge is defined as “A fee charged by an

institution. It can be for many reasons.” [Black’s law dictionary]. Under the new regime as

part of a package by which the Equatorianian government tries to improve the bad reputation

of Equatoriana as a safe haven for money of dubious origin [PO 2, p. 55, para. 7] all

payments into Equatoriana are routed via the Equatoriana ECB. Whenever the amount

transferred exceeds US$ 2 million the Financial Intelligence Unit as a subdivision of the

Equatoriana ECB will examine and investigate the transfer. Only after clearance of the

Financial Intelligence Unit the amount will be credited to the relevant bank account [PO 2,

p. 56, para. 10], after the investigaton the Financial Investigation Unit subtracts a 0.5% levy

from every sum investigated under Section 12 Regulation ML/2010C [CE 8, p. 17]. There is

no evidence why a charge due to the money laundering investigations deduced by the

transferring ECB [PO 2, p. 56, para. 10], should not be “a fee charged by an institution”.

Therefore, according to the wording of Section 4.3 DSA [CE 2, p. 10] RESPONDENT needs

to pay the levy of US$ 102,192.80.


30

Section 4.3 DSA was meant to regulate bank charges as occurred with the levy

160 Before ML/2010C entered into force on 1 January 2010 there had been considerable press

coverage in the Equatorianian press in December 2009 that the government was establishing a

Financial Intelligence Unit under the auspices of Equatoriana ECB with considerable

investigation powers. It was further reported about considerable criticism concering the cost

allocation for such examinations noting that private parties had to pay a fee for such types of

investigations and clearances [PO 2, p. 55, para. 7]. When negotiating the Development and

Sales Agreement CLAIMANT was aware of the press reports from December 2009 [PO 2,

p. 55, para. 8] and clearly intended to impose all cost possibly occurring when transferring

the money to RESPONDENT. Also the newspaper in Mediterraneo reported that the

Equatorianian government took actions against money laundering [PO 2, p. 55, para. 7].

161 According to Art. 8 (2) CISG the interpretation of the contract has to be based on the

understanding of a reasonable person of the same kind in the same circumstances would have

had. In the present case this would be a business person from the same industry and in the

same position as RESPONDENT [Slechtriem/Schwenzer-Schmidt-Kessel Art. 8 § 20]. Every

business person would have researched such newspaper articles when contracting with

business partners from the country the news had been reported from. As contracting partner

RESPONDENT ought to have known about the new costs occurring when transferring money

to Mediterraneo and the intent of CLAIMANT to cover these cost by CLAIMANT (Art. 8

CISG). According to the interpretation of Section 4.3 DSA under Art. 8 CISG,

RESPONDENT has to bear the levy of US$ 102,192.80 charged when RESPONDENT

effected payment.

There are no usages or practices between the parties which could refute this

162 So far there have only been two other cases where CLAIMANT was in the situation that the

bank deduced the levy from the money transferred. In one incident mentioned by

RESPONDENT, the levy charged concerned a payment by JumboFly in December 2011

[PO 2, p. 56, para. 9]. Since the DSA was concluded on 1 August 2010 this incident cannot

be of any relevance when interpreting Section 4.3 DSA according to Art. 9 (1) CISG.

163 The only incident which could be relevant when interpreting the DSA according to Art. 9 (1)

CISG is that CLAIMANT paid the levy in May 2010 when contracting with JetPropulse

[ASC, p. 26, para. 19]. The contract with JetPropulse had been concluded in January 2009 and

did not specifically provide of who should bear the cost for payment. The management of

CLAIMANT decided not to claim an additional amount of money from JetPropulse due to


31

two reasons: First, JetPropulse was contrary to RESPONDENT a long-standing customer.

And second, the agreement with JetPropulse was concluded before the regulation ML/2010C

entered into force [PO 2, p. 55, para. 8]. Both of these reasons cannot be applied to

RESPONDENTS’s case.

164 Furthermore, one incident is clearly not enough to establish a practice [AG Duisburg (DE

2000); Schlechtriem/Schwenzer-Schmidt-Kessel Art. 9 para. 8]. Also assuming that a practice

had been established this would be of no relevance to RESPONDENT. The parties are only

bound by practices established between them, as laid out in Art. 9 (1) CISG.

Hence, due to absence of any established between the parties CLAIMANT is entitled to

receive US$ 102,192.80 from RESPONDENT as stated in Section 4.3 DSA.

b. CLAIMANT is entitled to additional payment under Art. 54, 57 CISG

165 CLAIMANT is also entitled to additional payment under Art. 54, 57 CISG. To enable

payment and fulfil its contractual obligations RESPONDENT is required to comply with all

formalities under contract or any laws and regulations [Kröll-Butler/Harindranath Art. 54

para. 3]. RESPONDENTS’s obligation to pay is only fulfilled according to Art. 57 (1a) CISG

when the full amount of money is credited to CLAIMANTS’s account [Kröll-

Butler/Harindranath Art. 57 para. 12-13] (aa). Furthermore, the payment can only be

properly effected when RESPONDENT bears the levy as a formality under the ML/2010C as

statutory provision (bb).

RESPONDENTS’s obligation to pay is only performed when the full price is credited to

CLAIMANTS’s account

166 Art. 54 CISG ensures that the seller actually receives the purchase price payment and states

the obligation of the buyer to effect the payment of the purchase price [Kröll-

Butler/Harindranath Art. 54 para. 5]. The question is whether the duty of the buyer to pay the

purchase price is already fulfilled by assigning the payment or only when the seller actually

received the money.

167 In accordance with the DSA where the Parties agreed on the price, the means of payment, the

currency the payment should be made in, the time of the payment and the coverage of bank

charges for the transfer of money, the goods were delivered to RESPONDENT accompanied

by an invoice and RESPONDENT only had to pay the purchase price after the goods were

delivered [CE 2, p. 10]. However, the Parties have not agreed on the place of payment.

According to Art. 57 (1a.) CISG the seller’s place of business is the place for payment if the

parties have not agreed on another place of payment [ZG Basel (CH 1997)]. As a result,


32

RESPONDENTS’s obligation to pay is only performed when the full amount of money is

credited to CLAIMANTS’s account [Kröll-Butler/Harindranath Art. 57 para. 10-13].

RESPONDENT is responsible for complying with all the formalities which are required under

any statutory provisions to enable payment and all the necessary costs associated with the

money transfer not only in the country from which the payment is sent, but also in the country

in which the payment is to be made [Ferrari-Mankowski Art. 54 para. 1; Kröll-

Butler/Harindranath Art. 57 para. 10-13].

To effect full payment levy needs to be borne by RESPONDENT as a formality under

ML/2010C as a statutory provision

168 The charge of US$ 102,192.80 was deducted as a 0.5% levy from the payment

RESPONDENT originally effected for the expense of the investigation conducted by the

Financial Intelligence Unit according to Section 12 Regulation ML/2010C (C8 p.17).

169 Since the investigation is necessary for the payment to be passed to CLAIMANTS’s account

ML/2010C is a provision which is relevant to effect a timely and orderly payment of the

purchase price by the buyer [MüKo-Huber Art. 54 para 3; Secretariat's Commentary, Art. 50.

para. 2]. All costs which emerge from formalities of ML/2010C need to be borne by buyer.

As a result, RESPONDENT needs to pay the additional US$ 102,192.80 to fulfil its

obligations under Art. 54, 57 CISG.

2. Art. 35 CISG does not exempt RESPONDENT from its obligation to pay bank levy

170 RESPONDENT persistently tries to avoid the bank charges by referring to case law on

Art. 35 CISG [ASC, p. 26 para. 19]. Art. 35 CISG states that the seller must deliver goods,

which are of quantity, quality and description required by contract or, if no contractual

requirement is available, as required by the public law regulations at seller’s place of

business. The seller is not expected to know all public regulations at the buyer’s place of

business unless the buyer actually informs him about such regulations

[Schlechtriem/Schwenzer-Schwenzer Art. 35 para. 17]. RESPONDENT wants to apply this

consideration to its obligation to pay the price and claims that CLAIMANT had the duty to

inform RESPONDENT about the levy. However, this consideration is not applicable to the

present case. Art. 35 CISG regulates the conformity of goods and is not applicable to

RESPONDENTS’s duty to make payment of the purchase price (a). Even if the principles of

Art. 35 CISG were applicable to RESPONDENTS’s obligation to pay the fee it would lead to

the conclusion that RESPONDENT needs to bear the bank levy (b).


33

a. Art. 35 CISG is not applicable to RESPONDENTS’s duty to make payment of the

purchase price

171 The CISG applies to contracts of sale of goods between parties whose places of business are

in different States (Art. 1 (1) CISG). It is structured in paragraphs as “Conformity of Goods”

or “Obligations of Buyer” to cover all possibly arising issues during the contracting of

international parties. Issues which are not covered by any regulation within the CISG are to be

settled in conformity with the general principles on which the CISG is based on (Art. 7 (2)

CISG). A gap within the CISG exists when the matter is governed by the CISG but is not

expressly settled by it (internal gap) or when the matter is not governed by the CISG at all but

by the applicable national law (external gap) [Kröll-Pilares Viscasillas Art. 7 para. 47].

172 In the present case, RESPONDENT doubts whether it has to pay the levy accruing with the

payment of the purchase price. Chapter III Section 1 CISG regulates the obligations of the

buyer of paying the purchase price. Art. 54, 57 explicitly state that RESPONDENT needs to

bear all costs arising of the payment in order to ensure that the full amount of the purchase

price is credited to CLAIMANTS’s account. The CISG not only governs the issue but

expressly settles it. There are no existing gaps to fill in accordance with Art. 7 CISG. Hence,

there is no possibility of applying the underlying principles of Art. 35 CISG to the question

whether RESPONDENT has to bear the levy or not.

b. Also if the Trribunal applies the principles of Art. 35 CISG, RESPONDENT would

need to bear the bank levy

173 Even if the Tribunal should find that Art. 35 CISG was applicable to the present case,

RESPONDENT was required to bear the bank levy as described in the DSA (aa.). Also if the

tribunal finds that there is no contractual description concerning the bank levy, payment

would not fulfil its purpose if RESPONDENT does not bear the bank levy (bb.).

RESPONDENT was required to bear the bank levy by the DSA

174 Art. 35 CISG primarily aims to determine the obligations of the seller i.e. RESPONDENT by

the terms of the contract [BG (CH 2000); BGH ( DE 1996); Henschel, 65; Kröll, Art. 35

para. 37; Kruisinga, 28; Mullis, 130; Neumann; Schlechtriem/Butler, 113]. Section 4.3 DSA

explicitly states that the bank charges have to be borne by RESPONDENT. CLAIMANT

could not have made it any clearer to RESPONDENT that there was the chance of bank

charges and that it is the responsibility of RESPONDENT to cover them. RESPONDENT

failed to adhere to the contractual obligation. In order to preserve the quality of the payment it

needs to bear the levy imposed by ECB.


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Payment would not fulfil its purpose if RESPONDENT does not bear the bank levy

175 Even if the Tribunal finds that the content of the DSA is unclear or that the CLAIMANTS’s

understanding thereof is incorrect and that there is no contractual description concerning the

bank levy, the purpose of the payment is nevertheless only fulfilled if CLAIMANT is able to

fully reimburse the purchase price agreed upon. To ensure this it is the duty of

RESPONDENT to make payments which comply with the existing regulations (i.). In

Accordance, RESPONDENT should have been informed about the regulation ML/2010C and

the occurrence of the levy (ii.).

i. RESPONDENT needs to make payment which complies with the existing regulations

176 RESPONDENTS’s obligation to pay is only fulfilled when the amount received by

CLAIMANT complies with the amount CLAIMANT is entitled to under the DSA.

RESPONDENT was aware of the fact that the money was transferred to Equatoriana [CE 2,

p. 10]. To ensure compliance, RESPONDENT therefore needs to be aware of the different

regulations in CLAIMANTS’s country [OGH (AT 2006); CA Grenoble (FR 1995)]. It is not

the duty of CLAIMANT to provide RESPONDENT with the knowledge to fulfil its

contractual obligations [Kröll, Art. 35 para 111].

ii. RESPONDENT should have been informed about the regulation ML/2010C and the

occurrence of the levy

177 RESPONDENT claims that it was not aware of the new regulation ML/2010C. However,

RESPONDENTS’s knowledge has to be imputed when the introduced standards are in

accordance with internationally recognized standards [BGH (DE 1995); Bianca, Art. 35;

Flechtner, 6; Henschel, 207,208;Kruisinga, 218; Lookofsky, 80; Poikela, 54] . ML/2010C

implemented legislation based on the UN-Model Provisions in Money Laundering, Terrorist

Financing, Preventive Measures and Proceeds of Crime. Equatoriana therefore implemented

standards which are widely known in the sector and should have been taken in consideration

by every business dealing with huge sums of money.

178 Furthermore, ML/2010C entered into force under considerable coverage in the Equtaorianian

press on the implementation of the new regulation. Also the newspaper in Mediterraneo

reported that the Equatorianian government took actions against money laundering [PO 2,

p. 55, para. 7]. When interpreting the contract in regard to the purpose of the payment the

benchmark of the understanding of a reasonable person of the same kind and in the same

position as RESPONDENT applies under Art. 8 (2) CISG [Slechtriem/Schwenzer-Schmidt-

Kessel Art. 8 para. 20]. In the present case every business person of the same industrs as


35

RESPONDENT would have researched such newspaper articles when contracting with

business partners from the country the news had been reported from. Under these special

circumstances RESPONDENT should have definitely been aware of the regulation [High

Court (NZ 2010); District Court Louisiana (US 1999); BGH (DE 1995)].

CONCLUSION: CLAIMANT is entitled to receive additional payment in the amount of

US$ 102,192.80 for the levy deduced by the Equatoriana ECB under Section 4.3 DSA and

Art. 54, 57 CISG. Art. 35 CISG does under no circumstances exempt RESPONDENT from

its obligation to pay the outstanding amount of money.

Prayer for Relief

CLAIMANT respectfully requests the TRIBUNAL to

1. dismiss the RESPONDENTS’s request for security for costs,

2. find that CLAIMANTS’s claims are admissible and were submitted in time

3. find that CLAIMANT is entitled to receive additional payment in the amount of

US$ 2,387,432.80, comprising

a) the outstanding payment in the amount of US$ 2,285,240.00, and

b) the fee deducted by the Central Bank in the amount of US$ 102,192.80.

Respectfully submitted,

Hamburg, 8 December 2016

Timo Fischer Christoph Ludwig Anna Nyfeler Laura Vogt