memorandum for respondent · the clause does not belong to the category of “erroneously desig-...

Fourteenth AnnualWillem C. Vis International Commercial Arbitration Moot

30 March - 5 April 2007

Memorandum for Respondent

Rechtswissenschaftliche Fakultät der Universität Bern

Faculty of Law of the University of Berne

On Behalf of: Against:Mediterraneo Electrodynamics S.A. Equatoriana Office Space Ltd23 Sparkling Lane 415 Central Business CentreCapitol City OceansideMediterraneo EquatorianaRESPONDENT CLAIMANT

Counsel:

Ralph Hauri - Silvia Meier - Martina Nüesch

Stefanie Pfisterer - Andrea Wigdorovits - Piotr Wojtowicz

Contents

Abbreviations IV

Authorities VI

A. Summary of Argument 1

B. The Tribunal has no jurisdiction 1I. The Clause does not refer to the Court . . . . . . . . . . . . . . . . . . . 2

1. According to the principle of interpretation in good faith, the Par-ties’ intention was to choose an institution used primarily for in-ternational arbitration . . . . . . . . . . . . . . . . . . . . . . . . 2

2. Notwithstanding the principle of effective interpretation, the factthat the Court is the only court conducting international arbitra-tion does not result in a reference to the Court . . . . . . . . . . . 3a) Only a small percentage of the cases before the Court

are international . . . . . . . . . . . . . . . . . . . . . . 4b) The Contract is not governed by a standard contract

with specifications regarding arbitration . . . . . . . . . 5c) Consequently, the fact that the Court is the only court

administering international commercial disputes cannotprove the Parties’ intention . . . . . . . . . . . . . . . . 5

3. The substantial difference between the Clause and the Model Clauseof the Arbitration Rules of the Court is inconsistant with a refer-ence to the Court . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

4. The Clause does not belong to the category of “erroneously desig-nated institutions” . . . . . . . . . . . . . . . . . . . . . . . . . . 7

5. In any event, the Clause must be interpreted against Claimant . . 96. Consequently, the Clause does not refer to the Court . . . . . . . 9

I

II. The Clause does not refer to the Rules of Arbitration of the Court . . . . 101. The Parties intended ad hoc rather than institutional arbitration 102. The Rules of Arbitration of the Court do not satisfy the Parties’

intention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103. The Parties actually referred to the UNCITRAL Arbitration Rules 11

III. The award would not be enforceable under the NYC . . . . . . . . . . . 12

C. The fuse boards delivered conformed with the Contract 12I. The fuse boards met the description under Art. 35(1) CISG . . . . . . . 13

1. The Contract does not specify the fuse type to be installed . . . . 132. The Contract did not explicitly call for fuses complying with Equa-

lec’s requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . 153. The fuse boards delivered conformed with the description of the

Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15II. The fuse boards did not have to comply with Equalec’s policy pursuant

to Art. 35(2)(b) CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161. Respondent is generally not obliged to comply with Equalec’s policy 162. Compliance with Equalec’s policy was not established as a partic-

ular purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183. Claimant could not rely on Respondent’s skill and judgment . . . 20

D. Amendment of the Contract 22I. A change of fuse type did not call for an amendment of the Contract . . 23II. The parties agreed to use JS type instead of JP type fuses . . . . . . . . 23

1. Mr. Hart possessed the authority to modify the Contract . . . . . 24a) Mr. Hart was authorized to sign contracts up to the sum

of US$250,000 . . . . . . . . . . . . . . . . . . . . . . . . 24b) Claimant cannot invoke any lack of authority . . . . . . 24c) It is irrelevant if the Parties were of equal strength . . . 25

2. Mr. Hart accepted the amendment . . . . . . . . . . . . . . . . . 26III. Claimant is precluded from relying on the written form requirement by

its conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271. There was conduct in terms of Art. 29(2) 2nd sent. CISG that

can be attributed to Claimant . . . . . . . . . . . . . . . . . . . . 27

II

2. Respondent could rely on Claimant’s conduct . . . . . . . . . . . 28

E. Claimant’s failure to act excuses Respondent 29I. The adequacy of Equalec’s policy . . . . . . . . . . . . . . . . . . . . . . 30II. Consequences of the inadequacy of Equalec’s policy . . . . . . . . . . . . 32III. Claimant was under a greater obligation to act than Respondent . . . . . 33IV. Claimant was under obligation to act pursuant to Art. 80 CISG and to

mitigate pursuant to Art. 77 CISG . . . . . . . . . . . . . . . . . . . . . 33

F. Request for Relief 35

III

Abbreviations

Abbreviation Full Text§(§) paragraph(s)Arb. Int. Arbitration International (London)Art. ArticleBGE Entscheidungen des Schweizerischen Bundesgerichts (Decisions of

the Swiss Supreme Court)BGH Bundesgerichtshof (German Supreme Court)BS British StandardBull. ASA Bulletin de l’Association Suisse de l’ArbitrageCdA Cour d’AppelCE Chat Electronicscf. conferCISG United Nations Convention on Contracts for the International

Sale of Goods of 11 April 1980Cl. Ex. Claimant’s ExhibitClaimant Equatoriana Office Space LtdClause arbitration clause found in the ContractCoA Convention on Agency in the International Sale of Goods of 17

February 1983Commission Equatoriana Electrical Regulatory CommissionContract contract of 12 May 2005Court Court of International Commercial Arbitration attached to the

Chamber of Commerce and Industry of Romaniae. g. exempli gratia (for example)ERA Equatoriana Electric Service Regulatory Actet al. et alii (and others)etc. et ceteraet seq(q). et sequen(te)s (and the following)

IV

Abbreviation Full Textfuse boards primary distribution fuse boardsi. e. id est (that is)ICC International Chamber of CommerceJDI Journal du droit international (Paris)KG KammergerichtLGE Landgericht EllwangenMfC Memorandum for ClaimantNo. NumberNYC UN Convention on the Recognition and Enforcement of Foreign

Arbitral Awards, 1958OGH Oberster Gerichtshof (Austrian Supreme Court)p./pp. page(s)Parties Equatoriana Office Space Ltd and Mediterraneo Electrodynamics

S.A.PO Procedural OrderQ. QuestionRev. arb. Revue de l’arbitrage (Paris)Rsp. Ex. Respondent’s ExhibitRespondent Mediterraneo Electrodynamics S.A.sent. sentenceSoC Statement of ClaimUN United NationsUNCITRAL United Nations Commission on International Trade LawUNCITRAL Ar-bitration Rules

UNCITRAL Arbitration Rules of 28 April 1976

UNCITRAL ML UNCITRAL Model Law on International Commercial Arbitrationas adopted on 21 June 1985

US$ United States DollarUSDC United States District Courtvs. versus (against)w. r. t. with respect to

V

Authorities

Books

Title Cited as

Bernstein, Herbert / Lookofsky,Joseph, Understanding the CISG in Europe,2nd edition, Kluwer Law International:Cambridge (2003).

Bernstein/Lookofsky, page

Bianca, Cesare Massimo / Bonell,Michael Joachim, Commentary on the In-ternational Sales Law, Giuffrè: Milan (1987).

Bianca/Bonell, Art. §

Brunner, Christoph, UN-Kaufrecht –CISG. Kommentar zum Übereinkommen derVereinten Nationen über den internationalenWarenkauf von 1980, Stämpfli: Bern (2004).

Brunner, Art. §

Enderlein, Fritz / Maskow, Diet-rich / Strohbach, Heinz, InternationalesKaufrecht: Kaufrechtskonvention, Ver-jährungskonvention, Vertretungskonvention,Rechtsanwendungskonvention, Rudolf Haufe:Freiburg/Berlin (1991).

Enderlein/Maskow/Strohbach,Art. §

VI

Title Cited asFouchard, Philippe / Gaillard, Em-manuel / Goldman, Berthold On inter-national commercial arbitration, Kluwer LawInternational: The Hague (1999).

Fouchard/Gaillard/Goldman, page

Honnold, John O., Uniform Law for Inter-national Sales under the 1980 United NationsConvention, 3rd edition, Kluwer Law Interna-tional: The Hague (1999).

Honnold, Art. §

Lionnet, Klaus, Handbuch der inter-nationalen und nationalen Schiedsgerichts-barkeit, 3rd edition, Boorberg: Stuttgart(2005).

Lionnet, page

Redfern, Alan / Hunter, Martin, Lawand practice of international commercial ar-bitration, 4th edition, Sweet & Maxwell: Lon-don (2004).

Redfern/Hunter, ch. §

Schlechtriem, Peter / Schwenzer, Inge-borg, Commentary on the UN Convention onthe International Sale of Goods (CISG), 2nd(English) edition, Oxford University Press:Oxford/New York (2005).

Schlechtriem/Schwenzer, Art. §

von Staudinger, Julius / Magnus, Ul-rich, Julius von Staudingers Kommentar zumBürgerlichen Gesetzbuch; mit Einführungsge-setz und Nebengesetzen, 13th edition, Sellierde Gruyter: Berlin (2005).

Staudinger/Magnus, Art. §

VII

Title Cited asWitz, Wolfgang / Salger, Hanns-Christian / Lorenz, Manuel, Interna-tional einheitliches Kaufrecht: Praktiker-Kommentar und Vertragsgestaltung zumCISG, Recht und Wirtschaft: Heidelberg(2000).

Witz/Salger/Lorenz, Art. §

VIII

Articles

Title Cited asBonell, Michael Joachim, The 1983Geneva Convention on Agency in the Inter-national Sale of Goods, in: American Journalof comparative Law, 1984, Vol. 32, p. 717.

Bonell, page

Davis, Benjamin G., Pathological Clauses:Frédéric Eisemann’s Still Vital Criteria, Arbi-tration International (Arb. Int.), 1991, No. 4,p. 365.

Davis, page

Eisemann, Frédéric, La clause d’arbitragepathologique, in: Arbitrage Commercial – Es-sais im memoriam Eugenio Minoli, Unionetipografico – editrice torinese: Torino 1974,p. 129.

Eisemann, page

Florescu, Grigore, The Evolution of Com-mercial Arbitration in Romania, Journal ofInternational Arbitration, Vol. 10 No. 1(1993), pp. 95 - 104.

Florescu, page

Huber, Peter, Vertragswidrigkeit und Han-delsbrauch im UN-Kaufrecht, in: Praxis desInternationalen Privat- und Verfahrensrecht,Gieseking: Bielefeld 2004, pp. 358 - 360.

Huber, page

IX

Title Cited asKoller, Thomas / Stalder, Michael, Ver-tragsrecht und internationaler Handel, in:Gauchs Welt - Festschrift für Peter Gauchzum 65. Geburtstag, Zürich 2004, p. 477 -492.

Koller/Stalder, page

Scalbert, Hugues / Marville, Laurent,Les clauses compromissoires pathologiques,in: Revue de l’arbitrage (Rev. arb.) 1988No. 1, p. 117.

Scalbert/Marville, page

Schlechtriem, Peter, Vertragsmässigkeitder Ware als Frage der Beschaffenheitsvere-inbarung, Commenting on BGH 8 March1995, VII ZR 159/94, in: Praxis des Interna-tionalen Privat- und Verfahrensrecht, Giesek-ing: Bielefeld 1996, pp. 12 - 16.

Schlechtriem 1996, page

Schlechtriem, Peter, Noch einmal: Ver-tragsgemässe Beschaffenheit der Ware beidivergierenden öffentlich-rechtlichen Qual-itätsvorgaben, in: Praxis des Interna-tionalen Privat- und Verfahrensrecht, Giesek-ing: Bielefeld 2001, pp. 161 - 163.

Schlechtriem 2001, page

X

Internet Sources

Title and Website Cited asCommentary on the Draft Convention on Contracts for theInternational Sale of Goods prepared by the Secretariat;UN DOC. A/CONF. 97/5; available on <http://www.cisg-online.ch/cisg/materials-commentary.html>.

Secretariat Com-mentary, Art. §

Arbitration Clause Recommended by the Cham-ber of Commerce and Industry of Romania to beincluded in Commercial Contracts; available on<http://arbitration.ccir.ro/arbclause.htm>.

Model Clause

Schlechtriem, Peter, Compliance with local law; seller’sobligations and liability, Annotation to German Sur-preme Court decision of 2 March 2005; available on<http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem7.html>.

Schlechtriem 2005

XI

http://www.cisg-online.ch/cisg/materials-commentary.html

http://www.cisg-online.ch/cisg/materials-commentary.html

http://arbitration.ccir.ro/arbclause.htm

http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem7.html

Case Law and Awards

AustriaOberster Gerichtshof Österreich, 13 April 2000

Case No.: 2Ob100/00wSource: <http://cisgw3.law.pace.edu/cases/000413a3.html>cited as: OGH 2000

Oberster Gerichtshof Österreich, 27 February 2003Case No.: 2Ob48/02aSource: <http://cisgw3.law.pace.edu/cases/020307a3.html>cited as: OGH 2003

Oberster Gerichtshof Österreich, 25 January 2006Case No.: 7Ob302/05wSource: <http://cisgw3.law.pace.edu/cases/060125a3.html>cited as: OGH 2006

BulgariaThe Court of Arbitration at the Bulgarian Chamber of Commerce and Industry,Bulgarian sport organisation vs. Greek sport organisation, 1984

Case No.: 151/1984Source: Year Book XV (1990), p. 63cited as: Bulgarian sport organisation vs. Greek sport organisation, Bulgaria/1984

FranceCour d’appel de Grenoble, 13 September 1995

Case No.: 93/4126Source: <http://cisgw3.law.pace.edu/cases/950913f1.html>cited as: CdA Grenoble 1995

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http://cisgw3.law.pace.edu/cases/000413a3.html



http://cisgw3.law.pace.edu/cases/950913f1.html

Cour d’appel de Paris, 7 February 2002SA Alfac vs. Société Irmac Importacão, comércia e industria LtdaSource: Rev. arb. 2002 No. 2, p. 413cited as: Cour d’Appel de Paris 2002

GermanyBundesgerichtshof, 8 March 1995

Case No.: BGH VIII ZR 159/94Source: <http://cisgw3.law.pace.edu/cases/950308g3.html>cited as: Mussels Case

Landgericht Ellwangen, 21 August 1995Case No.: 1 KfH O 32/95Source: <http://cisgw3.law.pace.edu/cases/950821g2.html>cited as: LGE 1995 (Germany)

Hamburger Privat-Arbitrage im Kaffee-Einfuhrhandel (Hamburg Private Arbitrationfor Coffee Import), 28 September 1992

Source: Year Book XIX (1994), p. 48cited as: Panamanian buyer vs. Papua New Guinean seller, D/1992

ItalyItalian Arbitration Association, Manufacturer vs. Distributor, 1993

Case No.: 41/92Source: Year Book XXII (1997), p. 178cited as: Manufacturer vs. Distributor, I/1993

United States of AmericaUnited States District Court, E.D. Louisiana, 17 May 1999

Medical Marketing International, Inc. vs. Internazionale Medico Scientifia S.r.L.Case No.: CIV.A. 99-0380Source: <http://cisgw3.law.pace.edu/cases/990517u1.html>cited as: USDC 1999

XIII

http://cisgw3.law.pace.edu/cases/950308g3.html

http://cisgw3.law.pace.edu/cases/950821g2.html

http://cisgw3.law.pace.edu/cases/990517u1.html

U.S. Federal Appellate Court [9th Circuit], 5 May 2003Chateau des Charmes Wines Ltd. vs. Sabaté USA, Sabaté S.A.Case No.: 02-15727Source: <http://www.cisg.law.pace.edu/cisg/wais/db/cases2/030505u1.html#cx>cited as: U.S. Federal Appellate Court, 2003

ICC CasesICC Case No. 3460/1980Source : Journal du Droit International (JDI) 1981 No. 1, p. 939cited as : ICC Case No. 3460/1980

ICC Case No. 4727/1989Source : Rev. Arb. 1989, p. 325cited as : ICC Case No. 4727/1989

ICC Case No. 5103/1988Source : Journal du Droit International (JDI) 1988 No. 4, p. 1206cited as : ICC Case No. 5103/1988

ICC Case No. 6709/1991Source : Journal du Droit International (JDI) 1992 No. 4, p. 998cited as : ICC Case No. 6709/1991

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A. Summary of Argument

A. Summary of Argument

The following shall demonstrate in law and fact that:1

• Under the arbitration clause found in the Contract (Clause), the Tribunal doesnot have jurisdiction to consider this dispute [B.]

• Respondent delivered distribution fuse boards that were in conformity with thecontract of 12 May 2005 (Contract) as originally written [C.]

• Claimant cannot invoke the written form requirement [D.]

• Claimant had a responsibility to complain to the Equatoriana Electrical RegulatoryCommission (Commission). As it did not file a complaint, Respondent will beexcused from any liability [E.]

B. The Tribunal has no jurisdiction

Claimant puts forth three arguments to show that the Tribunal should have jurisdiction.2First, Claimant relies on the Tribunal’s Competence-Competence (MfC, §§4 - 10 ). Sec-ond, it asserts that the arbitration clause were valid (MfC, §11 et seqq.), and third, itclaims that it was the Parties’ intention to choose the Court as the relevant arbitrationinstitution and the Rules of Arbitration of the Court as the applicable procedural rules(MfC, §16 et seqq.).

Respondent does not contest the Tribunal’s Competence-Competence. The Tribunal3has the right to decide on its own jurisdiction. However, in contrast to Claimant, Re-spondent requests the Tribunal to decide that it has no jurisdiction over the dispute.

Contrary, to Claimant’s assertion, Respondent will prove that the Clause is pathologi-4cal since it neither refers to an arbitration institution [B.I.] nor to an existent set of rules

1


[B.II.]. No interpretation can remedy this defect. Therefore, the Clause is incapable ofbeing performed, and the Tribunal does not have jurisdiction.

Finally, Respondent will demonstrate that any award the Tribunal may make will not5be enforceable under the NYC [B.III.].

I. The Clause does not refer to the Court

Claimant asserts that the Parties intended to choose the Court of International Com-6mercial Arbitration attached to the Chamber of Commerce and Industry of Romania(MfC, §18 ).

However, Respondent will show that the Clause does not refer to the Court for the7following reasons, derived from the principles of interpretation applied to arbitrationagreements: First, according to the principle of interpretation in good faith, the Parties’intention was to choose an institution used primarily for international arbitration [B.I.1.].Second, despite the principle of effective interpretation, the fact that the Court is theonly court conducting international arbitration does not result in a reference to theCourt [B.I.2.]. Third, the substantial difference between the arbitration clause and theModel Clause of the Arbitration Rules of the Court is inconsistent with a reference tothe Court [B.I.3.]. Fourth, case law indicates that the Clause cannot be considered asjust an “erroneously designated institution” referring to the Court [B.I.4.]. In any event,the Clause must be interpreted against Claimant [B.I.5.]. Consequently, the Clause doesnot refer to the Court [B.I.6.].

1. According to the principle of interpretation in good faith, the Parties’intention was to choose an institution used primarily for internationalarbitration

Claimant refers to the principle that, when arbitration clauses are interpreted, the actual8intention should be established (MfC, §16 ). According to Claimant, the intention of theParties should take precedence over the wording in the arbitration clause (MfC, §20 ).The principle of interpretation in good faith means that the parties’ true intention shouldprevail over their declared intention (Fouchard/Gaillard/Goldman, p. 257 ). It statesthat “when interpreting a contract, one must look for the parties’ common intention”(Fouchard/Gaillard/Goldman, p. 257 ).

2


Where the parties involved in an arbitration clause are of different nationalities with9no connection to the place specified in the arbitration clause, tribunals tend to assumethat it must have been their wish to refer their disputes to an institution used primarilyfor international arbitration (Derains/Schwartz, p. 87 ). The Parties in this case havedifferent nationalites, Equatoriana and Mediterraneo, and have no connection to theplace specified in the Clause, Bucharest. It must therefore be assumed that they wishedto refer their disputes to an institution used primarily for international arbitration. Thisnotion also follows from the fact that the Clause calls for the “International ArbitrationRules used in Bucharest” (Cl. Ex.No. 1 ).

Claimant asserts that the Parties’ intention must be interpreted as meaning that the10Parties chose the Court (MfC, §17 ). However, the alleged selection of the Court isincompatible with the Parties’ intention to use an international arbitration institutionfor several reasons: First, the Court is based exclusively on Romanian legislation, whichreflects its national character (Florescu, p. 100 ). Second, the national character ofthe Court is confirmed by the fact that 80 % of the cases the Court hears are domestic(PONo. 2, Q. 11 ). This high number of domestic cases is irreconcilable with the Parties’intention to select an institution used primarily for international arbitration. Third,the limited variety of the nationalities on the list of arbitrators of the Court showsthat the Court is not international: 46 of the 88 arbitrators on the list are Romanian(<http://arbitration.ccir.ro/rom_arbitrators.htm>), which does not comply with therequirement that the arbitration panel of international arbitration institutions shouldbe multinational (Florescu, p. 100 ). Moreover, the arbitration rules of the Court are notcalled “international”, even though the Parties explicitly called for international rules.Therefore, and contrary to Claimant’s allegation, the Parties did not intend to choosethe Court.

2. Notwithstanding the principle of effective interpretation, the fact that theCourt is the only court conducting international arbitration does not resultin a reference to the Court

Claimant argues that tribunals should interpret pathological arbitration clauses so as11to render them effective (MfC, §§22 and 31 ). According to the principle of effectiveinterpretation, where a clause can be interpreted in different ways, the interpretation

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enabling the clause to be effective has to be preferred over any which prevents the clausefrom being effective (Fouchard/Gaillard/Goldman, p. 258; Redfern/Hunter, ch. 3 §68 ).

According to the principle of effective interpretation, arbitration clauses selecting an12inadequately defined institution can still remain effective when only one such institutionexists, i. e. where the institution can be identified with a sufficient degree of certainty(Fouchard/Gaillard/Goldman, p. 264 ). However, the principle of effective interpretationin this case does not lead to the conclusion that the Clause refers to the Court.

Claimant argues that the Parties could not have intended to choose an arbitration13institution other than the Court since it is the only institution in Romania settlinginternational commercial disputes (MfC, §19 ). Respondent does not dispute the caselaw, which held that, in the absence of another institution to which the clause could refer,it refers to the existing institution (ICC Case 6709/1991; Bulgarian sport organisationvs. Greek sport organisation, Bulgaria/1984; Derains/Schwartz, p. 87 ). However,bearing in mind the above-mentioned case law, Respondent would like to draw theTribunal’s attention to several elements showing that, the facts in this case are verydifferent so that the case law cannot apply. First, only a small percentage of the casesheard by the Court are international [B.I.2.a)]. Second, the Contract is not governed bya standard contract with specifications regarding arbitration [B.I.2.b)]. Consequently,the fact that the Court is the only court administering international commercial disputescannot prove the Parties’ intention [B.I.2.c)].

a) Only a small percentage of the cases before the Court are international

According to Claimant, the Clause refers to the Court because it is the only institution14settling international commercial arbitration (MfC, §21 ). However, only 20 % of thecases before the Court are actually international. It has been shown that the Parties in-tended to refer to an international arbitration institution [B.I.1.]. As the Court is mostlyused for domestic arbitration, it does not have as much experience in international arbi-tration as some other arbitration institutions (similar: Florescu, p. 100 ). Consequently,the Court has had comparatively little experience in international arbitration and doesnot satisfy the Parties’ intention. Even if the Court is the only institution in Romaniasettling international arbitration, the Clause cannot be interpreted as referring to it.

4


b) The Contract is not governed by a standard contract with specificationsregarding arbitration

Claimant cites the case law of the Arbitration Court of the German Coffee Association15as evidence for the argument that an arbitration clause leads to the institution in disputeif it is the only institution (MfC, §21 ). The Arbitration Court of the German CoffeeAssociation upheld its jurisdiction on the basis of a clause which stipulated “arbitration:Hamburg, West Germany” (Panamanian buyer vs. Papua New Guinean seller, D/1992;also Fouchard/Gaillard/Goldman, p. 265 ). However, in the cited case the parties basedtheir contract on a “European Contract for Coffee”, which stipulates in its Art. 43 thatdisputes shall be determined by arbitration at the place stated in the contract and underthe rules of the coffee trade organization there established. Therefore, the parties wereperfectly aware of the institution to which the stipulation “arbitration: Hamburg, WestGermany” must refer.

In the present case there is no such standard contract with specifications regarding16arbitration. Therefore, this case cannot be compared to the case law of the ArbitrationCourt of the German Coffee Association. The simple indication of “International Ar-bitration Rules used in Bucharest” in the Contract (Cl. Ex.No. 1 ) does not refer to adefinable institution and thus, cannot be regarded as reference to the Court.

c) Consequently, the fact that the Court is the only court administeringinternational commercial disputes cannot prove the Parties’ intention

Respondent showed that the Court does not satisfy the Parties’ intention to have their17dispute administered by an institution with extensive experience in international arbitra-tion. Despite the absence of another institution that conducts international arbitration,the Court cannot be identified with sufficiant degree of certainty as being the institutionthe Clause refers to.

3. The substantial difference between the Clause and the Model Clause of theArbitration Rules of the Court is inconsistant with a reference to the Court

Claimant argues that the Model Clause provided in the rules of the Court and the Clause18are “completely identical” (MfC, §21 ). The two clauses read as follows:

5


Clause Model ClauseAll disputes arising out of or in connectionwith this Contract, or regarding its con-clusion, execution or termination, shall besettled by

All disputes arising out of or in connectionwith this Contract, or regarding its con-clusion, execution or termination, shall besettled by

the International Arbitration Rules usedin Bucharest.

the Court of International CommercialArbitration attached to the Chamber ofCommerce and Industry of Romania, inaccordance with the Rules of Arbitrationof this Court.

The first part of the Clause corresponds to the first part of the Model Clause of the19Court. The first part of an arbitration clause is the part that states which disputesshall by settled by arbitration. Almost every model clause of an arbitration clausehas a first part similar to the one of the Court (cf. for a list of the common modelclauses Lionnet, p. 223 et seqq.). By using the first part of an existing model clause,the Parties were assured that any dispute arising out of the Contract would be settledby arbitration and that their arbitration clause was valid regarding its scope. How-ever, the Parties could have chosen the first part of any model clause since they arenearly all the same. The fact that the Parties chose the first part of the Model Clauseof the Court, which is inter alia exactly the same as the model clause of the Courtof Arbitration of the Chamber of Commerce and Industry of the Republic of Moldova(cf. <http://www.chamber.md/en/index.shtml?arbitration/clauza>), need not be inter-preted as a specific reference to the Court.

The Tribunal will notice that the Clause differs from the Model Clause. The second20part of an arbitration clause states which arbitration institution should conduct thearbitration. In this case, the institution is in dispute, which makes the second part ofthe Clause more important than the first. On closer look, the second parts of the Clauseand the Model Clause are, in fact, very different. The Clause calls for “InternationalArbitration Rules used in Bucharest”, instead of calling for the “Court of InternationalCommercial Arbitration”. Claimant’s assertion of “completely identical” clauses (MfC,§24 ) is therefore not a valid argument.

Indeed, the second part of the Clause even leads to the conclusion that the Parties did21not refer to the Court: The fact that the Parties chose the first part of the Model Clause,

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but changed its second part requires explanation. Surely, if the Parties intended to choosethe Court, they would have adopted the second part of the Model Clause as well. Bydoing so, the Parties would have been sure that they had an efficient arbitration clauseleading to the Court. If the Parties had actually intended to choose the Court, theywould have had no reason to change the second part. The sole explanation for havinga different second part of the Clause must be that the Parties intended to settle theirdisputes by other arbitration rules than those of the Court of International CommercialArbitration attached to the Chamber of Commerce and Industry of Romania. Therefore,the Parties did not intend to choose the Court.

4. The Clause does not belong to the category of “erroneously designatedinstitutions”

Claimant argues that the Clause belongs to the category of “erroneously designated rules22or institutions” (MfC, §28 ). Therewith, Claimant addresses the distinction made bydoctrine between curable and incurable pathological arbitration clauses. The distinctionbetween arbitration clauses that are less or more pathological is made with regard tothe essential functions of an arbitration clause (Scalbert/Marville, p. 117; Eisemann,p. 131; Davis, p. 366 ). The essential functions of arbitration clauses are: First, toproduce mandatory consequences for the parties; second, to exclude the interventionof state courts; third, to give power to the arbitrators to resolve disputes; and fourth,to permit an effective procedure (Scalbert/Marville, p. 116; Eisemann, p. 130; Davis,p. 366 ). Where arbitration clauses do not fulfill these four functions, the arbitrationcannot take place (Scalbert/Marville, p. 117 ).

In this case, it is unclear which arbitration institution is meant and which procedure23should be followed (SoC, §15 et seq.). Hence, the question is, whether the Clause fulfillsthe function of permitting an effective procedure.

Claimant bases its assertion that the Clause must be effective on case law (MfC,24§28 ) and gives the following examples of cases where arbitration was not denied. Thesecases, however, are all examples where the intended institution could be identified withcertainty, because the arbitration clauses only diverged slightly from the exact name ofthe institution. Hence, these clauses permitted an effective procedure.

7


Curable arbitration clausesArbitration clause indispute

Correct labelling Case

Règlement de la Cham-bre de commerce interna-tionale siégeant à Genève

Règlement de conciliationet d’arbitrage de la Cham-bre de commerce interna-tionale de Paris

ICC Case 3460/1980

Section Internationale dela Chambre de Commercede Paris

Chambre de Commerce In-ternationale de Paris

ICC Case 5103/1988

Arbitration: Hamburg,West Germany

Arbitration Court of theGerman Coffee Associa-tion in Hamburg

Panamanian buyer vs.Papua New Guineanseller, D/1992

Italy Commercial Arbitra-tion Association

Italian Arbitration Associ-ation

Manufacturer vs. Distrib-utor, I/1993

Respondent would like to draw the Tribunals attention to cases, where the arbitration25clause was held to be ineffective and the tribunal’s jurisdiction was denied. The followingcases have in common that they refer to no existing institution or commission.

Incurable arbitration clausesArbitration clause in dispute Correct labelling CaseRèglement de l’International ArbitrationAssociation, applicable dans la ville de Lon-dres, Angleterre

undefinable Eisemann, p. 152

Arbitrage de la Commission d’Arbitragesiègeant auprès de la Chambre de Com-merce de Paris

undefinable Eisemann, p. 152

In this case, the Clause refers to “International Arbitration Rules used in Bucharest.”26Contrary to Claimant’s assertion (MfC, §28 ), the discrepancy with the allegedly correctlabelling of the rules – Rules of Arbitration of the Court of International CommercialArbitration attached to the Chamber of Commerce and Industry of Romania – cannotbe considered as only slight. This case rather bears a resemblance to those incurable

8


arbitration clauses that refer to an inexistent “International Arbitration Association” oran inexistent “Commission d’Arbitrage.” The Clause is so unclear as to the selectedinstitution and rules that it is impossible for a reader to detect the Parties’ intention, orfor there to be a quick and effective arbitration.

Therefore, the Clause frustrates an effective settlement of the dispute between the27Parties and must be considered as incurable and ineffective.

5. In any event, the Clause must be interpreted against Claimant

Arbitration clauses must be interpreted according to the principle of interpretation con-28tra proferentem (Fouchard/Gaillard/Goldman, p. 259; Cour d’Appel de Paris, F/ 2002 ).

Claimant conveniently refrains from quoting this principle even though it is widely29recognized (Fouchard/Gaillard/Goldman, p. 259; ICC Case 3460/1980; ICC Case4727/1989; Techniques de l’Ingénieur vs. Sofel, F/1979 ). A comprehensive interpreta-tion of an arbitration clause must, however, also be based on this principle.

Accordingly the arbitration clause should be interpreted against the party that drafted30the clause (Fouchard/Gaillard/Goldman, p. 259; Cour d’Appel de Paris, F/2002 ). Ifone party has simply signed a contract drafted by the other party, the latter should not beable then to rely on an ambiguity in the arbitration clause (Fouchard/Gaillard/Goldman,p. 260 ).

In this case, Claimant drafted the Clause (Answer, §5 ). Therefore, Claimant is not31entitled to rely on the ambiguity in the Clause. Moreover, since Claimant is a companyof Equatoriana, it must be English speaking (PONo. 2, Q. 3 ), and should be able todraft an effective arbitration clause. Consequently, if Claimants’ drafting was negligent,it cannot rely on the ambiguous Clause as intending a reference to the Court.

6. Consequently, the Clause does not refer to the Court

Respondent agrees with Claimant’s proposal that the Tribunal should give preference to32the intention of the Parties (MfC, §19 ). However, a proper determination of the Parties’intention shows that they intended to choose an institution used primarily for interna-tional arbitration [B.I.1.]. The fact that the Court is the only institution in Romaniasettling international disputes does not necessarily mean that the Parties referred to theCourt [B.I.2.]. Due to the substantial difference between the Model Clause provided

9


by the Court and the Clause [B.I.3.] and its incurability [B.I.4.], it does not express acommon intention of the Parties to choose the Court.

II. The Clause does not refer to the Rules of Arbitration of the

Court

As Respondent has shown above, the Clause does not refer to the Court. Even if the33Tribunal finds that there is a possible construction of the Clause to refer to the Court,it is not clear what rules should apply (Answer, §15 ). Respondent will show that theClause does not refer to the Rules of Arbitration of the Court and presents the followingargumentation: Due to the unclear specification of the rules, the Parties chose ad hocrather than institutional arbitration [B.II.1.]. Alternatively, the Rules of Arbitration ofthe Court do not satisfy the Parties’ intention [B.II.2.]. A comparison of the ArbitrationRules of the Court and the UNCITRAL Arbitration Rules leads to the conclusion thatthe Clause refers to the UNCITRAL Arbitration Rules (Answer, §16 ) [B.II.3.].

1. The Parties intended ad hoc rather than institutional arbitration

The Clause has to be qualified as a “blank clause”. A “blank clause” (clause blanche)34contains no indication, whether directly or by reference to arbitration rules or an arbitralinstitution, as to how the arbitrators are to be appointed, e. g. “Resolution of disputes:arbitration, Paris” (Fouchard/Gaillard/Goldmann, p. 266 ). Such clauses are interpretedas providing for ad hoc arbitration (Fouchard/Gaillard/Goldmann, p. 267; ICC Case3460/1980 ) at the indicated seat.

The Clause neither mentions an existing set of rules, nor does it contain a reference to35an arbitration institution. However, it specifies the seat of the arbitration (Vindobona,Danubia) and the means of arbitration as dispute resolution (MfC, §13 ). Therefore, theParties chose ad hoc arbitration and the tribunal must be constituted according to thelex arbitri, the UNCITRAL Model Law, and not by the Court or its Rules of Arbitration.

2. The Rules of Arbitration of the Court do not satisfy the Parties’ intention

Respondent submits that the Parties intended to apply international rules to their ar-36bitration, since the Clause explicitly calls for “International Arbitration Rules” (Cl. Ex.

10


No. 1 ). Claimant does not challenge the Parties’ intention to apply international arbi-tration rules (MfC, §26 ).

Claimant argues that the Rules of Arbitration of the Court apply to international cases37(MfC, §26 ). Respondent does not contest Claimant’s assertion. However, the sole abilityto apply the Rules of Arbitration of the Court to international arbitration does not satisfythe Parties’ intention of international rules. According to Art. 2 Rules of Arbitrationof the Court, the Court organizes the settlement of domestic and international disputesby arbitration. However, only a few articles of the Rules of Arbitration of the Courtare specifically international, namely Art. 72 to 77 Rules of Arbitration of the Court.The fact that only 20 % of the cases before the Court are international (PONo. 2,Q. 11 ) suggests that the Rules of Arbitration of the Court are not really appropriatefor international arbitration. Moreover, Art. 72(2) Rules of Arbitration of the Courtallows the parties to agree on other international rules, which indicates that the Rulesof Arbitration of the Court, even in the opinion of their drafters, are not expected tonecessarily satisfy the parties’ intention to use international rules. Consequently, theClause does not refer to the Rules of Arbitration of the Court.

3. The Parties actually referred to the UNCITRAL Arbitration Rules

Respondent argues that the UNCITRAL Arbitration Rules should apply here (Answer,38§16 ). Claimant does not address the question of the applicability of the UNCITRALRules. A comparison of the Rules of Arbitration of the Court and the UNCITRAL Rulesreveals that they differ in important respects (Answer, §16 ), in particular, regarding therequired qualifications for the presiding arbitrator.

When applying the UNCITRAL Arbitration Rules, the arbitrators are free to choose39any presiding arbitrator (Art. 7(1) UNCITRAL Arbitration Rules). In contrast, theRules of Arbitration of the Court call for a presiding arbitrator enrolled in the list ofarbitrators (Art. 23 Rules of Arbitration of the Court). This lists only 88 arbitrators(<http://arbitration.ccir.ro/rom_arbitrators.htm>), which means the number of poten-tial presiding arbitrators is much more limited than it is in the UNCITRAL ArbitrationRules.

As the Parties did not specify any special requirements for the arbitrators40(cf. Cl. Ex.No. 1 ), it cannot be assumed that they opted for such restrictions on thechoice of the presiding arbitrator. Moreover, Claimant itself nominated an arbitrator

11

http://arbitration.ccir.ro/rom_arbitrators.htm

C. The fuse boards delivered conformed with the Contract

who is not on the Court’s list (Letter of Langweiler of 15 August 2006 ). Hence, theParties did not want to be bound by the requirements of the Rules of Arbitration of theCourt.

On the contrary, the intention of the Parties was to apply the UNCITRAL Arbitration41Rules. Therefore, Respondent contests the jurisdiction of the Tribunal established underthe Arbitration Rules of the Court.

III. The award would not be enforceable under the NYC

Should the Tribunal not follow the argumentation above and find that it has jurisdiction,42it should consider that this award would be subject to challenge. The countries whereit is most likely to be enforced, Mediterraneo and Equatoriana, have both ratified theNYC. According to Art. V(1)(d) NYC, the enforcement of an award may be refused if“the arbitral procedure was not in accordance with the agreement of the parties.”

First, the Parties’ intention is only clear in regard to the means of arbitration as dispute43resolution method and the place of the arbitration. Therefore, the arbitral tribunal wouldhave to be constituted according to the UNCITRAL ML [cf. §35]. Second, shouldthe Tribunal conclude that the Parties intended the Court to be the administrativeinstitution, Respondent has already shown that the Parties’ intention was to conductarbitration under the UNCITRAL Arbitration Rules [B.II.3.]. Either way, this meansthat undergoing arbitration under the Rules of Arbitration of the Court, as Claimantintends, is not in accordance with the agreement of the Parties.

To save both Parties time and money, the Tribunal should rule that it does not have44jurisdiction.

Conclusion: Respondent has shown that the Clause does not refer to the Court. In the45event, the Tribunal finds that the Clause is a reference to the Court, Respondent hasdemonstrated that the Parties did not intend to apply the Rules of Arbitration of theCourt. Therefore, Respondent respectfully requests the Tribunal to find that, contraryto Claimant’s allegation, it has no jurisdiction.

12


C. The fuse boards delivered conformed with the

Contract

Respondent will demonstrate that contrary to Claimant’s submission, the primary dis-46tribution fuse boards (fuse boards) delivered did conform with the Contract as it wasoriginally written. The fuse boards equipped with JS type fuses met the contractualdescription according to Art. 35(1) CISG [C.I.], and Respondent was not obliged underArt. 35(2)(b) CISG to comply with Equalec’s requirements [C.II.].

I. The fuse boards met the description under Art. 35(1) CISG

Claimant alleged that, because of the descriptive notes on the engineering drawings, the47Contract explicitly called for on the one hand JP type fuses from Chat Electronics (CE)and on the other hand, fuse boards complying with Equalec’s requirements (MfC, §35w. r. t. 62 ).

Yet as shown below, the descriptive notes must be interpreted as meaning that the48Contract neither specified the fuse type [C.I.1.] nor called for fuse boards complying withEqualec’s requirements [C.I.2.]. Finally, Respondent will submit that the fuse boardsdelivered were in conformity with the contractual description [C.I.3.].

1. The Contract does not specify the fuse type to be installed

The descriptive note “Fuses to be “Chat Electronics” JP type in accordance with BS4988” has to be interpreted according to Art. 8 CISG to determine whether the Contractexplicitly obliged Respondent to install a specified fuse type (Bianca/Bonell, Art. 35§2.1 ).

First, the actual intentions of the Parties must be determined (Art. 8(1) CISG).50While the wording of the note in question must be taken into account, a mere literalinterpretation without due consideration of the context and other means of interpretationis inappropriate (Brunner, Art. 8 §13 ).

13


In the present case, the wording of the note in question should be read in context.51Claimant did not intend to specify the fuse type to be installed. This note just remainedon the drawings because Claimant took Switchboards Ltd’s drawings without checkingthem thoroughly. Not knowing about Equalec’s policy, Claimant was not aware thata different fuse type might cause problems (Cl. Ex.No. 3 ). It was not concerned aboutwhich fuse type Respondent would install.

Furthermore, Mr. Hart would not have agreed to Respondent installing JS type fuses52if he had thought it to be an important detail. Mr. Hart considered himself not to beexperienced enough to make important decicions (Cl. Ex.No. 2; MfC §§55, 58 and 71 ).That he felt confident enough to tell Mr. Stiles to use JS type fuses makes it clear thatfor Claimant the fuse type was not important at all. Mr. Hart even explicitly statedthat to him “it did not seem to be a very important decision” (Cl. Ex.No. 2 ).

Moreover, Claimant certainly would have insisted on a written confirmation of the53telephone conversation of 14 July 2005 if it had considered the fuse type an importantissue. Not insisting on a written confirmation shows again that the type of fuse wasunimportant to Claimant.

Claimant correctly submits that if the seller does not raise objections, the goods54delivered must be as required by the buyer (MfC, §61 ). Consequently, as Claimant didnot intend the descriptive note as a specification of the fuse type and Respondent did notobject, the descriptive note at issue does not constitute a description under Art. 35(1)CISG.

If the descriptive note were interpreted under Art. 8(2) CISG according to the stan-55dard of a reasonable person, the result would not be different. The Contract only referredto the engineering drawings, whereas the descriptive notes were not explicitly mentioned.As the engineering drawings themselves were only a specification of the goods to deliver,the small descriptive notes on them are just a detail among other details of the contrac-tual description. A reasonable person would not consider a note beside the engineeringdrawings on the edge of the page to be a binding specification. Any such specificationshould have been with the other specification (the appropriate rating of each fuse).

The mention of “in accordance with BS 88” as a quality standard certainly implies56that this note is intended as a quality requirement, not a specification of the fuse type.A reasonable person in the shoes of Respondent would consider this note a qualityrequirement and understand the reference to CE JP type fuses only as a non-bindingsuggestion. Respondent was only obliged to ensure that the fuse boards were equipped

14


with fuses of the same quality as that of CE JP type fuses. The minimum qualitystandard these fuses had to fulfill was meeting BS 88.

A reasonable person would further assume that this reference to a certain fuse type57was only meant as an example of a fuse type with the appropriate functions. As longas fuses of the same functionality, i. e. with the same technical functions, are installed,they will conform with the Contract.

For these reasons, the descriptive note “Fuses to be “Chat Electronics” JP type in58accordance with BS 88” was not intended to oblige Respondent to equip the fuse boardswith JP type fuses only to conform with the Contract, but rather to ensure a certainquality standard and functionality of the fuses. It is shown below that Respondentcomplied with those requirements [cf. C.I.3.].

2. The Contract did not explicitly call for fuses complying with Equalec’srequirements

Despite Claimants’ argumentation (MfC, §§62 and 86 ), the second descriptive note “To59be lockable to Equalec requirements” obviously does not mean that the fuse boards hadto comply with Equalec’s policy. It only meant that the fuse boards could be lockedby Equalec with a padlock to which it had the key (PONo. 2, Q. 21 ). The ability tobe locked with a padlock is a technical requirement and has nothing at all to do withEqualec’s requirements of connecting fuse boards, including the policy regarding the fusetype. Consequently, this requirement does not touch the question of whether the fusetype conforms.

3. The fuse boards delivered conformed with the description of the Contract

The fuse boards delivered were equipped with fuses of the appropriate rating for the60circuit in which they were installed (PONo. 2, Q. 27 ). Claimant bases the allegednon-conformity of the fuse boards only on the fact that the installed fuses were notCE JP type (MfC, §62 ). As stated above, fuses other than CE JP type may be installedif the requirements regarding functionality and quality, as called for in the Contract, aremet [cf. C.I.1.].

Respondent equipped the fuse boards with CE JS type fuses. Hence, as in the example61provided in the descriptive note, it did deliver CE and J type fuses. The only differ-ence between JP type and JS type fuses is their size, but up to 400 amperes they are

15


completely interchangeable from a functional point of view (Cl. Ex.No. 3 ). The func-tionality requirement is clearly met as the technical characteristics of JP type and JStype fuses of the same ratings are identical.

Regarding quality JS type fuses also meet the contractual description. The use of62these fuses has been certified by the Commission, even for ratings inferior to 400 amperes(PONo. 2, Q. 28 ) and JS type fuses also meet the BS 88 standard (Rsp. Ex.No. 2 ).

Furthermore, as the price is the same for JP type and JS type fuses of the same rating63(Rsp. Ex.No. 2 ), no difference in functionality or quality is to be expected.

Concerning lockability, there is no indication that it was not possible to lock the fuse64boards delivered with a padlock and Claimant did not raise objections regarding thisissue. Thus, the fuse boards delivered did conform with this requirement.

Respondent in conclusion submits that it has delivered goods conforming with the65description of the Contract as fuse boards equipped with CE JS type fuses do meet thecontractual description pursuant to Art. 35(1) CISG.

II. The fuse boards did not have to comply with Equalec’s policy

pursuant to Art. 35(2)(b) CISG

Claimant further bases the alleged non-conformity of the fuse boards delivered upon66the assumption that compliance with Equalec’s policy was established as a particularpurpose according to Art. 35(2)(b) CISG (MfC, §63 et seqq.).

A particular purpose will be established only if the seller cannot be unaware of the67fact that the goods had to be fit for this purpose, and if the buyer can reasonably rely onthe seller’s ability to assess whether the goods are fit for this purpose (Honnold, Art. 35p. 257; Secretariat Commentary, Art. 33 §8 et seq.).

Respondent will demonstrate that a seller is generally not obliged to comply with68requirements applying at the point of destination of the goods such as Equalec’s policy[C.II.1.], and that compliance with this policy was neither established as a particular pur-pose [C.II.2.] nor could Claimant reasonably rely on Respondent’s skill and judgement[C.II.3.].

1. Respondent is generally not obliged to comply with Equalec’s policy

Claimant argues that Respondent was obliged to deliver goods complying with Equalec’s69

16


policy. Yet, as the following will show, Respondent was not obliged in general to complywith any requirements applying in Equatoriana, including Equalec’s policy.

A buyer can usually not expect a seller to comply with requirements applying in70the buyer’s or user’s country (Bianca/Bonell, Art. 35 §2.5.1; Schlechtriem/Schwenzer,Art. 35 §16; Staudinger/Magnus, Art. 35 §22 ). This has also been acknowledged bycourt decisions: In the widely accepted Mussels Case, the German Surpreme Courtestablished the following rule: A seller is generally not obliged to supply goods thatconform to public laws and regulations enforced at the buyer’s place of business. Theremay be exceptions only in three limited circumstances: first, if the public law andregulations of the buyer’s country are identical to those enforced in the seller’s country;second, if the buyer informed the seller about any such regulations; or third, if due to“special circumstances,” such as the existence of a seller’s branch office in the buyer’scountry, long-term business relationships, numerous exports to the country in question,advertisements in buyer’s country, etc., the seller knew or should have known about theregulations at issue (Mussels Case).

As the CISG has to be interpreted in the light of its international character (Art. 7(1)71CISG), but there is no international Surpreme Court, courts should acknowledge per-suasive authority to foreign awards. Several other courts have already taken this ruleestablished by the German Surpreme Court into account (USDC 1999; OGH 2000; OGH2003; OGH 2006 ). A number of legal commentators also consider the Mussels Case asstandard (Huber, p. 359; Honnold, Art. 35 §225; Schlechtriem/Schwenzer, Art. 35 §17;Staudinger/Magnus, Art. 35 §22 ). Thus, the rule of the Mussels Case certainly haspersuasive authority. The present case consequently should be regarded in the light ofthis rule.

As a seller is not even obliged to comply with public law requirements, it makes72no sense to say it should comply with private corporations’ policies. The reason forthe rule cited above is to protect the seller from an obligation to know all possible lawrequirements for the use or marketing of goods sold in the country of destination. Privatepolicies are even less likely to be familiar to foreign traders, and tend to be much moreunusual and special than public law requirements. Consequently, a buyer can expecta foreign seller to know even less about them. This makes it clear that a seller cangenerally not be obliged to deliver goods complying with rare and unexpected privatepolicies. This should especially apply if – as in the present instance – the buyer is in acontractual relationship with the entity that adopted this private policy and therefore

17


is in the buyer’s sphere of influence. Consequently, Respondent cannot be obliged todeliver fuse boards complying with Equalec’s requirements in general.

Should Tribunal consider that private corporation’s policies, such as that of Equalec73regarding the use of J type fuses, must be treated in the same way as public law re-quirements, Respondent alternatively submits that the general rule of the Mussels Caseregarding public law requirements is also applicable.

In applying this rule, Respondent is not obliged to deliver goods complying with74Equalec’s policy if no exception applies. The case at hand certainly cannot be subsumedunder one of these exeptions.

First, the policy of only accepting JP type fuses for circuits designed for less than75400 amperes is not identical to regulations applying in Mediterraneo (not even in otherEquatorianean regions). Otherwise, Respondent would not have suggested installing JStype fuses.

Second, Claimant did not inform Respondent about Equalec’s policy as it did not76know about it either (Cl. Ex.No. 3 ).

Third, there are no special circumstances, which would have meant that Respondent77would have to have been aware of Equalec’s policy. Courts have applied the “specialcircumstances exception” basically only if a seller obviously should have known about theregulation at issue – usually when the parties have had previous business dealings (LGE1995 (Germany); CdA Grenoble 1995; USDC 1999; OGH 2000 ), which in this case theParties did not. Although Respondent has previously exported to Equatoriana, it hasnever exported to a region where Equalec operates (PONo. 2, Q. 24; Rsp. Ex.No. 1 ). Asthe purpose of the third exception is to oblige a seller to comply with requirements ofwhich it could not have been unaware, only exports to the region where this requirementactually applies do constitute special circumstances. As Equalec is the only electricalcompany to have adopted such a policy in Equatoriana (PONo. 2, Q. 23 ), Respondentobviously could not have been aware of this unique policy. No other special circumstancessuch as a branch office, or advertisements in Equatoriana appear to prevail.

As no exception to the general rule applies, Respondent strongly contests any general78obligation to deliver fuse boards complying with Equalec’s policy.

2. Compliance with Equalec’s policy was not established as a particular purpose

Claimant alleged that through the descriptive note “To be lockable to Equalec’s79

18


requirements,” the Parties established a particular purpose under Art. 35(2)(b) CISGthe fuse boards had to meet (MfC, §63 et seqq.).

To determine conformity under Art. 35(2)(b) CISG, the contract should be interpreted80in the light of Art. 8 CISG (Witz/Salger/Lorenz, Art. 8 §3 ).

As stated above [cf. C.I.2.], the phrase in question meant that the fuse boards had to81be lockable with a padlock. It did not implement that the fuse boards had to complywith any requirements Equalec might have regarding connectability (PONo. 2, Q. 21 ).

Even if Claimant had argued that, because of the phrase in question, Respondent82could not have been unaware that Equalec was the supplying company, compliance withEqualec’s policy would still not have been established as a particular purpose accordingto Art. 35(2)(b) CISG.

As explained before [cf. C.II.1.], a seller is generally not obliged to deliver goods83complying with requirements applying in the country of destination that do not applyin its own country. Being obliged to comply with requirements in the buyer’s countryis an exception. Thus, the prerequisites of Art. 35(2)(b) CISG must be interpretedrestrictively.

The sole mention of Equalec as the supplying company is not sufficient to implic-84itly establish a particular purpose of compliance with its policy. A reasonable personin Respondent’s shoes, according to Art. 8(2) CISG, would consider explicit refer-ence to Equalec’s policy indispensable to establish such a particular purpose. This isstrongly supported by legal authorities who generally deny the establishment of suchparticular purposes where only the place of destination was made known to the seller(Bianca/Bonell, Art. 35 §3.2.; Brunner, Art. 35 §§12 and 16; Koller/Stalder, p. 489;Schlechtriem/Schwenzer, Art. 35 §17; Staudinger/Magnus, Art. 35 §34; Mussels Case;OGH 2000; OGH 2006 ).

Moreover, even authorities who accept that a seller who knows the goods’ destination85is generally obliged to comply with requirements applying there would not come to adifferent conclusion. Art. 8 CISG is still regarded as applicable and establishment of aparticular purpose will be denied if the public law requirements are unique, or hardlyknown, or their legal validity is in doubt. A reasonable person would not expect aseller, who only knows the destination of the goods to comply with such requirements(Schlechtriem 1996, p. 14 ). As explained below, Equalec was the only electrical com-pany in Equatoriana to adopt such a policy. It was not even legally binding, and aninquiry at the Commission would have forced Equalec to abandon its policy [cf. E.I.].

19


Thus Respondent cannot be expected to comply with this unique and legally invalidpolicy just because a phrase in the Contract mentions Equalec.

Furthermore, Claimant has considerable experience with connecting residential and86business properties in Equatoriana [cf. §90 et seq.]. It should have known that theremight be special policies and therefore would have been obliged to stipulate explicitlyin the Contract whether it had expected Respondent to comply with them.

3. Claimant could not rely on Respondent’s skill and judgment

Respondent further contests that Claimant could reasonably rely on Respondent’s skill87and judgment regarding knowledge about requirements Equalec might have. Withoutsuch reasonable reliance, even an indication of a particular purpose by the buyer wouldbe irrelevant (Bianca/Bonell, Art. 35 §2.5.3.; Koller/Stalder, p. 489 ).

In the first place, Respondent emphasizes that, despite Claimant’s argumentation88(MfC, §70 ), Mr. Hart’s behavior has nothing to do with determining the reasonablenessof the reliance. Mr. Hart was not previously involved and also not at the time of theconclusion of the Contract, the decisive point in time in this respect (Honnold, Art. 35p. 257; Secretariat Commentary, Art. 33 §8 ).

Reasonable reliance will be denied if buyer’s skill and judgment concerning the type89of goods are superior (Schlechtriem/Schwenzer, Art. 35 §23 ). In the present case,Claimant did have better skill and judgment than Respondent.

Even though Claimant is specialized in the construction of residential and business90properties and not only in electrical equipment, it cannot deny its extensive knowledge oftechnical issues. Every property has to be equipped with technical supply and Claimantemploys its own technical personnel with expert knowledge. Claimant must have ac-quired at least as much professional knowledge regarding electrical equipment and therequirements applying in Equatoriana as an Equatorianean specialist in electrical equip-ment.

Claimant’s allegation that the seller is generally more knowledgeable regarding the sold91goods (MfC, §72 ) certainly does not apply in this case. The question is not whetherRespondent was more knowledgeable about the goods and their technical particularities,but whether it could have been expected to know about a unique, foreign private policy.The prevailing case law indicates that it is the buyer and not the seller who can beexpected to know about certain requirements applying in the buyer’s country (Mussels

20


Case). Even the authority cited by Claimant to support its above-mentioned allegationholds this opinion (Staudinger/Magnus, Art. 35 §34 ). Claimant was a local companyand operated in the same country as Equalec. Thus Claimant was geographically closerto Equalec and its policy. It certainly had to be more knowledgeable of the requirementsfor the electrical supply than Respondent as a foreign supplier. The seller cannot beexpected to possess rarely needed knowledge of requirements applying only in a foreigncountry (Bianca/Bonell, Art. 35 §3.2.).

Above all, Switchboards Ltd, who was familiar with Equalec’s policy, advised Claimant92regarding the technical details of the fuse boards as it produced the engineering drawings.It was therefore to be found in Claimant’s sphere of influence and its knowledge has tobe added to Claimant’s. Respondent cannot be made liable for internal communicationproblems of Claimant.

Reasonable reliance is further denied if the buyer e. g. influences the manufacturing93process or provides precise specifications (Schlechtriem/Schwenzer, Art. 35 §23; Secre-tariat Commentary, Art. 33 §9 ). In the present case, Claimant was the one responsiblefor the main technical requirements of the fuse boards. Respondent only had to constructfuse boards according to the engineering drawings submitted. It had no responsibilityat all for the design of the fuse boards. Claimant would be inconsistent if it assumedthat a company whom it did not acknowledge any responsibility for technical details hadbetter skill and judgment than itself.

Even if the Tribunal did find that Claimant had no superior knowledge, it could94not have reasonably relied on Respondent’s skill and judgment. Claimant’s experiencewith electrical supplies in its own country, its technical personnel’s expert knowledge,the singularity of Equalec’s policy and the responsibility it assumed for the technicaldetails of the fuse boards to be constructed, it certainly had equivalent knowledge toRespondent’s. Reasonable reliance, however, can only be assumed if a seller has moreknowledge. In the case of equivalent knowledge, the buyer cannot reasonably rely onseller’s skill and judgment (Brunner, Art. 35 §15; Staudinger/Magnus, Art. 35 §32 ).

Buyer’s reliance will be denied, too, where it relied on compliance with special,95isolated, or unique requirements prevailing in the region where the goods are used(Schlechtriem/Schwenzer, Art. 35 §23; Schlechtriem, 2001, p. 163 ). A buyer cannotexpect the seller to know everything and to adhere to all public law regulations or otherlocal or regional (special) restrictions (Schlechtriem 2005 ). Equalec is the only localsupplier of electricity to adopt such a policy (PONo. 2, Q. 23 ) which neither Claimant

21

D. Amendment of the Contract

nor Respondent knew about (Cl. Ex.No. 3 ). The Commission certified the use of JStype fuses for ratings inferior to 400 amperes (PONo. 2, Q. 28 ), so neither Claimant norRespondent could have expected such restricted requirements as Equalec’s. Moreover,Equalec’s policy was not only unique, but also legally invalid as it contradicts Art. 14Equatoriana Electric Service Regulatory Act (ERA) [cf. E.I.].

These submissions explain why Claimant could not rely on Respondent’s skill and96judgment and Respondent was not obliged to deliver goods specifically to comply withEqualec’s policy.

Conclusion: The fuse boards delivered by Respondent, which were equipped with JS97type fuses, conformed with the contractual description according to Art. 35(1) CISG, asthey met the quality standard and functionality requirement of the Contract [cf. C.I.3.].Furthermore, compliance with Equalec’s policy was not established as a particular pur-pose pursuant to Art. 35(2)(b) CISG. Claimant made no such a purpose known toRespondent at the time of the conclusion of the Contract, nor could it reasonably relyon Respondent’s skill and judgment to anticipate such a purpose. Respondent in con-clusion, therefore respectfully requests the Tribunal to find that it has delivered fuseboards in conformity with the Contract as originally written.


Respondent will demonstrate that, contrary to Claimant’s arguments (cf. MfC, §37 et98seq.), the use of JS type instead of JP type fuses did not call for an amendment ofthe Contract [D.I.]. Should the Tribunal, despite the arguments given above [C.I. andD.I.], find that an amendment of the Contract was a prerequisite for the delivery of JStype fuses to be in conformity with the Contract, Respondent will demonstrate that anagreement modifying the Contract was reached by the Parties [D.II.], and that Claimantis precluded from relying on the written form requirement [D.III.]. The Contract wastherefore effectively amended according to Art. 29(2) 2nd sent. CISG.

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I. A change of fuse type did not call for an amendment of the

Contract

Claimant has stated that changing the fuse type called for an amendment (Cl. Ex.No. 3 ).99Even though technical modifications in specifications are among the modifications en-visaged by Art. 29(1) CISG (Secretariat Commentary, Art. 27 §3 ), there was no needfor a modification in the present case.

First, the substitution of JS type for JP type fuses did not involve a technical modi-100fication in specification. The substitution was irrelevant for the technical functionality[cf. C.I.3.]. Both types of fuses are functionally identical for ratings of less than 400amperes. The only difference is their size (Rsp. Ex.No. 2 ), but their size is irrelevantfor their functionality. Whereas it was important to use Chat Electronics fuses due totheir superior quality (PONo. 2, Q. 26 ), it was irrelevant whether JP type or JS typefuses were used. Moreover, Claimant did not object to the fuse type change althoughit had several opportunities to do so: in the phone call of 14 July 2005, in the timeperiod after the call when Mr. Konkler was available, and when General ConstructionLtd installed the fuse boards. As the functionality is the same, Claimant should haveobjected it, were it not willing to accept the fuse boards with JS type fuses. Claimantfailed to clarify the issue that the particular fuse type is of special importance.

Second, both JS type and JP type fuses meet the requirements of the Commission,101which has certified all fuses that meet the BS 88 standard (Rsp. Ex.No. 1 ). JS typefuses have also been certified for circuits of 400 amperes or less (PONo. 2, Q. 26 ). Bothfuse types have formerly been used in Equatoriana without any problems, especiallyin circuits designed for less than 400 amperes (Answer, §12 ). Thus Respondent, whendelivering fuse boards with JS type fuses, fulfilled all its obligations which could havebeen reasonably derived from the Contract and its original specifications [cf. also C.I.].

As a consequence, there was no need to amend the Contract when substituting JS102type for JP type fuses.

II. The parties agreed to use JS type instead of JP type fuses

Should the Tribunal rule that an amendment was needed in order for the JS type fuses103to conform with the Contract, Respondent will prove that indeed such an amendmentwas agreed upon by the Parties. Respondent objects to Claimant’s assertion that no

23


agreement was reached (MfC, §53 et seqq.). Respondent will show that Mr. Hart infact possessed the authority to modify the contract [D.II.1.] and that he unequivocallyindicated his acceptance of the new terms [D.II.2.].

1. Mr. Hart possessed the authority to modify the Contract

Mr. Hart possessed the authority to reach a binding agreement with Mr. Stiles. First,104Mr. Hart had the internal authority to sign contracts up to the sum of the Contract[D.II.1.a)]. Second, Claimant cannot invoke any lack of authority on his part [D.II.1.b)].Third, it is irrelevant if the parties were of equal strength [D.II.1.c)].

a) Mr. Hart was authorized to sign contracts up to the sum of US$250,000

Mr. Hart is employed as a procurement professional by Claimant (PONo. 2, Q. 17 ) and105is part of Mr. Konkler’s staff. He has the authority to sign contracts up to the limit ofUS$250,000 (PONo. 2, Q. 17 ). The Contract between the Parties totaled to the sum ofUS$168,000 therefore there can be no question that Mr. Hart had the authority to signa contract of the proportion of the Contract from a financial point of view.

b) Claimant cannot invoke any lack of authority

Claimant’s argument that Mr. Hart was not responsible for the Contract (MfC, §54 )106cannot be seen as relevant for several reasons. This fact was not known to Respondent.If Claimant had wanted to emphasize that Mr. Hart was not capable of making thisdecision, it should have made it clear to Respondent that it would have to wait untilMr. Konkler’s return to resolve the issue at hand. Mr. Hart did not in any way statethat he was not responsible and therefore could not make this decision.

Claimant is not allowed to invoke any lack authority against Respondent according107to Art. 14(2) Convention on Agency in the International Sale of Goods (CoA), whichstates:

(1) Where an agent acts without authority or outside the scope of his au-thority, his acts do not bind the principal and the third party to each other.

(2) Nevertheless, where the conduct of the principal causes the third partyreasonably and in good faith to believe that the agent has authority to acton behalf of the principal and that the agent is acting within the scope of

24


that authority, the principal may not invoke against the third party the lackof authority of the agent.

As Equatoriana and Mediterraneo are both party to the Convention (PONo. 2, Q. 16 ),108it is applicable according to Art. 2(1)(b) CoA (Bonell, p. 727 ). When Mr. Stiles calledClaimant on 14 July 2005, he asked to speak to Mr. Konkler. Because he was notavailable, Mr. Hart took the call. This reasonably made Respondent believe that he wasbeing directed to a person in charge, and that Mr. Hart was acting as Mr. Konkler’sdeputy during his absence. Contrary to Claimant’s assumption (MfC, §55 ), Respondentwas not acting in bad faith in reaching an agreement with Mr. Hart. It was not told towait until Mr. Konkler’s return, nor, as stated above, was it brought to Respondent’sattention that Mr. Hart might not be authorized to amend their Contract. This behaviorled Respondent to the conviction that it was talking to someone with authorization ingood faith (Bonell, p.740 ).

Mr. Hart decided to give an immediate answer because Claimant itself was under109time pressure (Cl. Ex.No. 2 ). Indeed, Respondent could have still produced the fuseboards within the deadline if Claimant had waited until Mr. Konkler’s return to make adecision about which fuses to use (Answer, §23 ). If a person makes this kind of decisionfreely, without expressing any kind of reservation, it is only natural to believe that heor she is acting within the scope of his or her authority. Therefore, Claimant as theprincipal may not invoke any lack of authority on Mr. Hart’s side against Respondent.This makes it clear that Claimant is bound by Mr. Hart’s decision even if he lacked theauthority to make it.

c) It is irrelevant if the Parties were of equal strength

Further, Claimant’s argument that the Parties were not of equal strength in negotiating110the amendment (MfC, §58 ) cannot be taken into consideration in the present case.As the cited authority in Claimant’s Memorandum states (Schlechtriem 1998, Art. 29,§10a), equal strength is necessarily of importance in cases where a clause is incorporatedin the contract that excludes the defense of abuse of rights of Art. 29(2) 2nd sent.CISG to reinforce the writing requirement. However, no such clause was incorporatedin the Contract. Besides, it cannot be said that the parties were not of equal strength[cf. also C.II.3.], as the parties are Claimant and Respondent, and not Mr. Hart and

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Mr. Stiles. Claimant does not explicate why it should be considered the weaker partyin this Contract.

2. Mr. Hart accepted the amendment

Claimant alleges that there was no indication of Mr. Hart accepting or agreeing to new111terms (MfC, §55 ). During their telephone conversation, Mr. Hart asked Mr. Stiles whathe thought would be the best way to proceed. Mr. Stiles gave him his recommendationafter considering Claimant’s wishes. In his Witness Statement Mr. Hart states “it didnot seem to be a very important decision”, and “I thought it best to give an immediateanswer” (Cl. Ex.No. 2 ). This makes it clear that he saw himself making a decision andtherefore accepting the amendment.

The case cited by Claimant in support of their argument (U.S. Federal Appellate112Court, 2003; MfC, §55 ) has a very different factual background than the case at hand.The disputed amendment in that case had never been discussed between the parties. Insuch a case it can of course be said that the parties reached no agreement and there hadonly been a unilateral attempt at modification. In the present instance, on the otherhand, Mr. Hart did discuss the issue with Respondent and reached not only a decisionbut also a consensus.

The alleged fact (MfC, §56 ) that Mr. Hart anticipated receiving a written confirma-113tion of their telephone conversation cannot be seen as a condition of acceptance. Hisbehavior must be interpreted according to Art. 8 CISG. Mr. Hart’s subjective intentaccording to Art. 8(1) CISG cannot be taken into consideration as Respondent was notaware of his subjective intent and could not have been aware of it. Mr. Hart did notmention his provisio to Mr. Stiles at any point of their conversation, even after theyhad decided to go ahead and use JS type fuses. Therefore, only his objective intent isrelevant, and it must be determined how a reasonable person would have understood hisbehavior in the light of all the relevant circumstances (Art. 8(2), (3) CISG; Lookofsky,Art. 8 §84 et seq.). Mr. Hart made the decision to use JS type fuses instantaneouslybecause he was afraid they would loose too much time if they waited for Mr. Konklerto return. A reasonable person would understand that Mr. Hart wanted Respondent tomanufacture the fuse boards as soon as possible, he did not even want to anticipate Mr.Konkler’s return to make the decision. In the light of those circumstances, it is clear

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that his acceptance was made unconditionally. In addition Claimant itself states thatMr. Hart “accepted the alleged amendment” (MfC, §37 ).

Contrary to Claimants’ arguments, Mr. Hart had authority to amend the Contract114and accepted Respondent’s alteration, reaching an agreement according to Art. 29 CISG.

III. Claimant is precluded from relying on the written form

requirement by its conduct

Art. 29(2) 2nd sent. CISG states: “However, a party may be precluded by his conduct115from asserting such a provision [written form requirement for contractual amendments]to the extent that the other party has relied on that conduct.” Claimant denies thatRespondent could have “relied on Claimant’s conduct because Claimant did not un-dertake any subsequent conduct to ensure that this alleged amendment was accepted”(MfC, §52 ). However, Respondent will show that there was reliance-inducing “conduct”in terms of Art. 29(2) 2nd sent. CISG, which can be attributed to Claimant [D.III.1.],and Respondent was allowed to rely on it [D.III.2.].

1. There was conduct in terms of Art. 29(2) 2nd sent. CISG that can beattributed to Claimant

The kind of conduct that will lead to a preclusion of asserting the written form require-116ment is not specified by Art. 29(2)2nd sent. CISG (Bianca/Bonell, Art. 29 §2.4 ). Inhis well-known treatise, “Uniform Law for International Sales,” Professor Honnold givesthe following example (Honnold, Art. 29 Ex.29A, p. 231 ):

Example 29A: A written contract called for Seller to manufacture 10,000units of a product according to specifications that were supplied by Buyerand set forth in the contract. The contract provided: “This contract mayonly be modified by a writing signed by the parties.” Before Seller startedproduction, the parties by telephone agreed on a change in the specifications.Seller produces 2,000 units in accordance with the new specifications; Buyerrefused to accept these units on the ground that they did not conform to thespecifications in the written contract.

In the discussion of this example, Honnold comes to the conclusion that reliance may117

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based on “conduct,” such as a statement by a party, i. e. the telephone conversation, ifthis statement leads to actions on the seller’s side, such as production and shipment.Honnold notes in particular (p. 231 ): “However, Buyer’s oral agreement could be heldto constitute “conduct” that would preclude him from invoking the contract clause “tothe extent the other party has relied on that conduct;” Seller’s production of the 2,000units in accordance with the oral agreement could constitute such reliance. However,Buyer is precluded only “to the extent” of the reliance; he should be able to insist on theoriginal specifications for further production.”

This is exactly the situation in the present case: It is undisputed that there was a118telephone conversation on 14 July 2005 between Mr. Stiles and Mr. Hart (SoC, §11 ).At the end of that conversation Mr. Hart decided that Respondent should produce thefuse boards with JS type fuses [cf. D.II.2.]. As Schlechtriem also refers to Honnold’s ex-ample (Schlechtriem/Schwenzer, Art.29 §10 ) without contradicting it, there is sufficientauthority to maintain that the agreement between the Parties in the present case is aprime example of what can be called “conduct” in terms of Art. 29(2) 2nd sent. CISG.

Claimant states that there was no “subsequent conduct” (MfC, §52 ). As just demon-119strated above, no “subsequent conduct” is needed to trigger the effects of Art. 29(2)2nd sent. CISG.

Contrary to Claimant’s statement, “conduct” in terms of Art. 29(2) 2nd sent. CISG120occured during the phone conversation between Mr. Stiles and Mr. Hart.

2. Respondent could rely on Claimant’s conduct

Claimant asserts that Respondent had, in any event, no reason to rely on Claimant’s121“conduct” (MfC, §48 et seqq.). Taking into consideration the above example [D.III.1.],Claimant’s argument cannot be accepted. Claimant’s oral agreement constitutes “con-duct” that precludes it from invoking the written modification contract clause to theextent that Respondent has relied on that conduct (cf. Honnold, Art. 29 §204 ). Thereliance must be externally observable, e. g. the party must have made dispositions,like expenditures or preparations to perform, as a result of that reliance (Brunner,Art. 29 §3 ). As in the example, Respondent has already manufactured the goods, i. e.fuse boards, before Claimant made any objections, therefore relying on its conduct.

Mr. Hart was the person in charge when Mr. Stiles was put through to him. Claimant122argues that Mr. Stiles, “knew or should have known that Mr. Hart was not an authorized

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E. Claimant’s failure to act excuses Respondent

person to amend the contract” (MfC, §55 ). There is no place for that argument asexplained above [D.II.1.]. The argument that Mr. Hart expected a written confirmationof the conversation is also without merit for Mr. Stiles could not know what Mr. Hartwas thinking.

Mr. Hart should have immediately informed Mr. Konkler or Claimant’s technical de-123partment about the changes and had them checked. There is no reason why Claimant’sinadequate flow of information internally should have any consequences for Respondent.Further, it is not certain that Mr. Konkler and the technical department of Claimantwould have objected to the changes as they did not know about Equalec’s policy either(PONo. 2, Q. 25 ).

Conclusion: Substituting JS type for JP type fuses did not call for an amendment124as JS type fuses met the quality standard and functionality requirement of the Con-tract. Even if an amendment were needed, Mr. Hart had authority to amend theContract and accepted Respondent’s alteration, reaching an agreement. Furthermore,according to Art. 29 CISG, Claimant’s oral agreement constitutes such reliance inducing“conduct” that invoking the written modification clause is precluded. Respondent re-spectfully requests the Tribunal to find that no amendment was needed or alternativelythe oral agreement between the Parties has to be seen as binding according to Art. 29(2)2nd sent. CISG.


Should the Tribunal assume that the goods delivered by Respondent did not conform125with the Contract, Respondent invokes Art. 77 CISG as well as Art. 80 CISG. Pursuantto both provisions, Claimant was under an obligation to act, i. e. to file a complaint withthe Commission or contact Equalec directly. As it failed to do so, it may not relay onany alleged failure of Respondent and thus has no basis for claiming damages.

As under both provisions, the adequacy and appropriateness of Equalec’s policy is the126crucial factor. It shall be examined first whether the policy was in compliance with theERA [E.I.]. Second, Respondent will discuss the consequences of Equalec’s inadequate

29


policy [E.II.]. Third, Respondent will show that Claimant was under a greater obligationto make a complaint than Respondent [E.III.]. Thus, the conclusion must be reachedthat all conditions both of Art. 77 CISG and Art. 80 CISG are fulfilled [E.IV.].

I. The adequacy of Equalec’s policy

Under the circumstances, there are several reasons why Equalec’s policy of connecting127primary distribution fuse boards designed for ratings of less than 400 amperes only tothe grid if JP type fuse are used (Cl. Ex.No. 4 ) does not comply with the requirementsin Art. 14 of the ERA, and why it has consequently to be considered as undue andunjust (Rsp. Ex.No. 4 ).

According to Claimant, who refers to a telephone conversation with Gregory Smith,128Superintendent of Customer Service at Equalec, the policy serves two purposes: first thatof security and second that of practicability (Cl. Ex.No. 3 ). In the following Respondentwill show that the policy does not, in fact, lead to greater security and that the secondreason does not legitimate such far-reaching requirements.

First, Equalec is the only electrical supply company in the whole Equatoriana that129refuses to connect fuse boards to circuits with ratings of less than 400 amperes when JStype fuses are installed. Thus it appears that a policy of this kind, which is unique inEquatoriana and not foreseeable for Respondent, is not needed to ensure the electricalservice is safe. Otherwise, electrical supplies in the rest of the country, where Equalecdoes not have a monopoly, would have to be declared unsafe.

Second, the policy is not suitable for reducing the risk contrary to Equalec’s inten-130tions, as even applying Equalec’s policy, it is still possible to install JP fuses with toohigh ratings. This is apparent in Equalec’s statement: “it was never clear to us who hadinstalled them” (Cl. Ex.No. 4 ). This confusion seems to have been caused by organisa-tional and personnel problems. If the fuse board was really locked with a padlock, itwould have been possible in an organisation with a clear internal structure to find theperson accountable. The mistake committed by Equalec’s own employees shows thatEqualec did not instruct its personnel properly, which is a serious omission. Every rea-sonable person would expect a safe security system to require well-trained employees,who can not be replaced by a policy. Equalec must account for this omission and find away to solve its personnel and organisational problems. Its customers should not haveto bear the consequences of these inadequacies.

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The requirement of lockability may not be a part of the new policy as Gregory Smith131does not mention it in its letter to Claimant. Should it actually be the case that Equalecdoes not lock every fuse board, its policy would be all the more superfluous as fuses couldthen be installed without Equalec’s approval and control.

Third, Equalec states that it discovered in summer 2003 several fuse boards where132circuits with fuses of either 250 or 355 amperes were required and the incorrect fuses(500 amperes) had been installed (Cl. Ex.No. 4 ). The difference between what wasallowed and what was actually installed ranged from 145 to 250 amperes. Hence, even ifonly JP fuses had been installed as the policy requires, the excess could still have beenup to 150 amperes. It is even conceivable that circuits requiring fuses of 32 amperes(according to the lowest rating of JP type fuses, cf. Rsp. Ex.No. 2 ) could have JP fusesof 400 amperes installed, i. e. 368 amperes too high. This shows that Equalec’s policydoes not prevent fuses that are far too high being installed. If Equalec is to provide anelectric service that is safe as required by the ERA, it will have to take steps to ensure,for instance, that its personnel receive better instruction.

Fourth, one has to bear in mind the probability of a fuse blowing. According to133Equalec, fuses blow very rarely (Cl. Ex.No. 3 ). Outside the primary distribution fuseboards there is at least one fuse of a lower capacity for each lessee (SoC, §6 ).

Thus should a short-circuit occur which is very rare, there is at least one upstream fuse134which would blow. The probability that the fuse in the primary distribution fuse boardwould blow is consequently very small. This light risk hardly justifies such a restrictivepolicy, which increases the customers’ costs.

Furthermore, both JS type and JP fuse types meet the requirements of the Commission135[cf. D.I.]. One may therefore reasonably assume that if JS type fuses for circuits of lessthan 400 amperes actually posed a serious risk, the Commission would have prohibitedthe use in circuits of less than 400 amperes and would not have left their regulation toeach electrical supply distribution company in Equatoriana.

Finally it should be added that Equalec is the only corporation that provides electrical136services in the area where Claimant is constructing Mountain View Office Park. As ithas a monopoly it should be especially careful to specify requirements clearly and checkthat these conform with the ERA.

To improve safety, it would be easy and cheap to attach a warning label. Equalec’s137employees would then only have to compare the information on the label with the spec-ifications on the fuses. This would be very effective and a simple task for the employees

31


as the fuses are labelled in large, easily readable letters (cf. picture in Rsp. Ex.No. 3 ).A further step to improve safety would be to store some proper backup fuses in the fuseboard. This would reduce the risk of installing wrong fuses, because they would have tobe checked at least twice: first, when storing them in the fuse board, and second, wheninstalling them. Moreover, simply storing some backup fuses would also mean Equalec’strucks would have to transport fewer fuses with them.

All these arguments lead to the conclusion that the adopted policy does not really138contribute to any appreciable risk reduction. It seems rather, that the policy serves notforemost to improve safety but to further Equalec’s own interests, especially in the caseof the “reason of practicability.” According to Mr. Smith customers would benefit fromthe trucks having to carry less stocks, which would help to ensure that the proper fuseswere available in case one blew (Cl. Ex.No. 3 ). Storing backup fuses would howeverbe much more interesting for customers. It would be simple, safe and fuses could beimmediately available. The small benefit of having to transport fewer fuses is only anadvantage for Equalec. For its customers, this counteracted by the restrictions theyhave to meet when constructing a building. Equalec’s own interests does not justifysuch far-reaching restrictions.

Considering the circumstances, the policy is both undue and unjust, and consequently139does not fulfill the requirement of Art. 14 ERA.

II. Consequences of the inadequacy of Equalec’s policy

As demonstrated above, Equalec’s policy does not comply with Art. 14 ERA according140to which a requirement shall neither be undue nor unjust. If the Commission hadchecked upon Equalec, it would have made it to change its policy (probably withoutformal action). Under these circumstances, probably the entire process would have onlytaken about one week (cf. PONo. 2, Q. 30 ). Even if the Tribunal held that the policy isappropriate in general, Claimant could have asked for an exemption from the policy andthereby have avoided a lengthy full investigation. This procedure would have causedClaimant very little effort as it already had contact with Equalec and consequently musthave known the person responsible (cf. SoC, §14 ). It could personally have explainedwhat damage any refusal to connect would cause, whereupon Equalec would surely nothave refused to connect. The abandonment of Equalec’s policy would clearly have been

32


in Claimant’s interest, but it did not even try to convince Equalec to give it up or tomake an exemption.

III. Claimant was under a greater obligation to act than

Respondent

Claimant alleges that its failure to complain to the Commission about Equalec’s refusal141to connect the fuse boards delivered by Respondent to the electrical grid shall notexcuse Respondent (MfC, §85 et seq.). In support of its position, Claimant submitsthat Respondent should have checked for Equalec’s policy and complained about it onthe grounds that it had never before traded with it (MfC, §86 ). Although Claimant doesnot bring up the argument that Respondent could as well have take an action against itas Claimant, Respondent will demonstrate that Claimant alone was obliged to enquireabout it and to act.

Claimant’s argument that Respondent had never traded before with Equalec whereas142Claimant was in a contractual relationship with it, shows that Claimant and not Re-spondent was under a greater obligation to act. This could either have involved filinga complaint with the Commission or contacting Equalec personally. Either would verylikely have been successful, especially as Claimant already had contact with Equalec,when Claimant notified it that the buildings were ready to be connected to the electricalgrid. Thus Claimant certainly knew the person responsible (cf. SoC, §14 ).

Moreover, Respondent was only Claimant’s deliverer of fuse boards and had nothing to143do with Equalec. The relationship between Claimant and Respondent may be comparedto that between a general contractor and its subcontractor. In this constellation thegeneral contractor is undoubtedly obliged to provide the subcontractor with correctspecifications of what it is expected to deliver.

Hence, it was clearly Claimant’s obligation to enquire about the policy and order the144appropriate fuse type from Respondent.

IV. Claimant was under obligation to act pursuant to Art. 80

CISG and to mitigate pursuant to Art. 77 CISG

In the following Respondent will demonstrate that due to the inadequacy of Equalec’s145

33


policy, Claimant should have been able to avert or to mitigate its losses.First, according to Art. 80 CISG, a party may not rely on a failure of the other146

party to perform to the extent that such failure was caused by the first party’s act oromission. The equivalence between omission and act is given if an act was necessary inthe interests of the promisee and objectively suited to making a performance possible(cf. Schlechtriem/Schwenzer, Art. 80 §3 ). The act or omission must have caused thepromisor’s failure to perform (Staudinger/Magnus, Art. 80 §12 ).

An obligation to act may, under Art. 80 CISG, be based on a contractual stipulation,147usage, established practices or the principle of good faith (Staudinger/Magnus, Art. 80§10 ). In the present case the principle of good faith is clearly applicable: As shown above[E.III.], Claimant was under a greater obligation to act than Respondent. Claimant wasaware of the fact that its supplier is a foreign company and not familiar with the localregulations. Respondent relied in good faith on Claimant’s decision made during thephone conversation on 14 July 2005. Since Claimant explained that it was under tighttime pressure in the Mountain View development, Respondent immediately began toproduce the products ordered (cf. SoC, §12 ). Claimant, aware that the productionwould begin right away, should have been even more careful to provide Respondent withthe right specifications and therefore have enquired without delay about the policy.

Not being aware of Equalec’s policy, Respondent could, in good faith, at least expect148of Claimant to contact the Commission as soon as it heard about the policy or to getin touch directly with Equalec. As Claimant had already been in contact with Equalec(SoC, §14 ), it would not have been a great effort to contact Equalec again to ask for anexemption and, if necessary, apply to the Commission.

For these reasons the principle of good faith is perfectly qualified to infer Claimant’s149obligation to act.

Second, should the Tribunal find that Art. 80 CISG is not applicable, Respondent150will invoke Art. 77 CISG. Pursuant to this provision, the party relying on a breach ofcontract must take such measures as are reasonable in the circumstances to mitigate theloss. If it fails to take them, the party in breach may claim a reduction of damages up tothe amount by which the loss should have been mitigated (Staudinger/Magnus, Art. 77§19 ). Consequently, if the party relying on a breach had the chance to avoid its damageby taking reasonable measures, then no damages will be awarded. Reasonable measuresare those that may be expected of a person acting in good faith under the prevailingcircumstances.

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F. Request for Relief

In the present case filing a complaint with the Commission or contacting Equalec151directly to ask for an exemption from the policy would have been a reasonable measureas shown above [E.III.]. Once Claimant had reason to know that Respondent would notperform (i. e. at the time of the phone call of the 14 July 2005 or at the latest whenit actually heard about the policy after Equalec refused to connect the fuse boards), itshould have taken appropriate steps to avoid loss (Bernstein/Lookofsky, p. 166 ). AsClaimant failed to do so, the award of its damages has to be reduced to an extent thatcorresponds to the amount it could have avoided by taking the appropriate mitigatingsteps. It is likely that Equalec would either have had to abandon its policy or to makean exemption [cf. E.II.]. Therefore Claimant could have prevented its loss and is thusnot to be awarded any damages.

Conclusion: Taking into consideration all these arguments, Claimant was clearly under152obligation to act pursuant to Art. 80 and Art. 77 CISG. As discussed above filing acomplaint with the Commission or contacting Equalec directly would surely have beena successful measure to avoid damages [cf. E.II.]. Consequently, Claimant’s omission toact undoubtedly caused to Respondents alleged non-performance. Therefore, Respon-dent respectfully requests the Tribunal to find that Claimant cannot be awarded anydamages.

F. Request for Relief

In the light of the above submissions, Respondent respectfully requests the Tribunal:153

• to dismiss the claim brought by Claimant on the grounds that it has no jurisdictionunder the clause found in the contract of 12 May 2005.

• to dismiss the claim brought by Claimant as unfounded, if it should find that ithas jurisdiction.

• to order Claimant to pay all costs of the arbitration, including the costs of legalrepresentation incurred by Respondent.

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memorandum for respondent · the clause does not belong to the category of “erroneously desig-...

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