THIRDTHEENS ANNUAL
WILLEM C. VIS (EAST)
INTERNATIONAL COMMERCIAL ARBITRATION MOOT
7
TH
HONG KONG
MARCH TO 13TH MARCH 2016
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
Against
On behalf of
Kaihari Waina Ltd
12 Riesling Street
Oceanside
Equatoriana
Vino Veritas Ltd
56 Merlot Rd
St Fundus
Mediterraneo
(CLAIMANT)
(RESPONDENT)
COUNSEL
Jacqueline Treichel Friederike Löbbert
Sean Beagan
Sebastian Endres
Lukas Jakobi
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
TABLE OF CONTENTS
TABLE OF CONTENTS
Table of Contents ............................................................................................................................II
Legal Index .................................................................................................................................... V
Index of Abbreviations ................................................................................................................. VII
Table of Authorities .....................................................................................................................VIII
Table of Court Decisions ........................................................................................................... XXII
Table of Arbitral Awards ....................................................................................................... XXVIII
Introduction .................................................................................................................................... 1
Issue I: The Tribunal should reject Claimant’s request for discovery. ............................................... 2
1.
The parties excluded document production by explicitly excluding “discovery”. ............. 3
1.1 The parties’ agreement to exclude discovery is binding on the Tribunal. ......................... 3
1.2. By excluding any type of discovery, the parties also excluded document production. .... 4
1.2.1 The plain meaning of the clause excludes requests for document production........... 4
1.2.2 The drafting history shows that the parties intended to exclude document
production............................................................................................................ 5
1.2.3 Claimant’s interpretation would render the clause meaningless. .............................. 6
1.2.4 Any remaining ambiguity must be resolved in Respondent’s favour in
accordance with the rule of contra proferentem. ................................................... 6
2.
Even if the parties had not excluded document production, Claimant’s request is not
permitted by the applicable arbitration rules. ................................................................... 7
2.1. Claimant’s request is too broad ..................................................................................... 7
2.1.1 The Tribunal should only allow requests to obtain evidence not to obtain
information. ......................................................................................................... 8
2.1.2 Even applying the IBA Rules to the permitted scope, Claimant’s request does not
sufficiently specify the requested category of documents. .................................... 9
2.2 Claimant requests documents that are not material and relevant. .................................. 10
2.3 The documents are confidential. ................................................................................... 11
3.
The Tribunal should decide the merits of Claimant’s Claim before it considers
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Claimant’s Procedural document request. ...................................................................... 12
4.
The Tribunal cannot draw an adverse inference. ............................................................ 13
5.
Conclusion .................................................................................................................... 14
Issue II: Claimant cannot request compensation for its legal costs ................................................. 14
1.
Attorney's fees cannot be awarded under Art. 74 CISG, but only under the applicable
procedural law. .............................................................................................................. 15
1.1
The procedural law of Mediterraneo exclusively controls the allocation of legal
costs. ........................................................................................................................ 15
1.2
The CISG reflects the principle that there is a clear distinction between substantive
damages and procedural costs. .................................................................................. 16
2.
The Mediteraneo High Court’s decision is binding for the Tribunal ............................... 18
2.1
Decisions of the MHC have res judicata effect on the Tribunal ................................. 18
2.2
The requirements of res judicata are met for both of the MHC’s decisions................ 19
2.3
Claimant should not be permitted to “cherry-pick” the favourable parts of the
MHC’s decisions. ..................................................................................................... 20
3.
The costs Claimant incurred in its action for interim relief are not recoverable, because
they were unnecessary expenses. ................................................................................... 20
4.
Claimant cannot recover the costs incurred in the declaratory relief based on a breach
of the arbitration agreement. .......................................................................................... 21
4.1
Respondent must not be sanctioned for its good faith attempt to clarify the legal
uncertainty by seeking declaratory relief. .................................................................. 21
4.2
Claimant cannot base its claim on Art. 45 CISG, because the CISG does not apply. .. 22
4.3
The parties did not intend to sanction the breach of an arbitration agreement with
damages.................................................................................................................... 23
5.
Claimant failed to comply with its duty to mitigate damages under Art. 77 CISG with
regard to the astronomical legal fees it paid. .................................................................. 24
Conclusion .................................................................................................................................... 26
Issue III: Claimant is not entitled to a disgorgement of Respondent’s profits ................................. 26
1.
Due to the bad harvest, Claimant was not entitled to get the additional 5.500 bottles it
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TABLE OF CONTENTS
now claims damages for ................................................................................................... 27
2. Under the CISG, no provision allows the disgorgement of profits under these circumstances .... 29
3. Respondent’s profits cannot be awarded as damages under Art. 74 CISG .................................. 30
3.1 Claimant must not calculate its loss on the basis of Respondent’s profits...................... 30
3.2 Claimant failed to prove that it suffered a loss as required by Art. 74 CISG. ................. 31
4. General principles of the CISG bar the disgorgement of profits. ................................................ 33
4.1 Overcompensation is not allowed. ................................................................................ 33
4.2 Penal damages are not permissible. .............................................................................. 34
5. The Tribunal cannot award the profits ex aequo et bono. ........................................................... 34
Conclusion .................................................................................................................................... 35
Request for Relief ......................................................................................................................... 35
IV
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
LEGAL INDEX
LEGAL INDEX
AAA Rules
American Arbitration Association, Commercial Arbitration Rules and
Mediation procedures
AJA
Access to Justice Act 1999, United Kingdom
Cannada Comm. Arb. Act.
Commercial Arbitration Act 1985, Canada
CPC - French
Code de Procédure Civile (French Rules on Civil Procedure)
CPC - Swiss
Zivilprozessbuch (Swiss Civil Procedure Code)
CISG
United Nations Convention on Contracts for the International Sale of
Goods, Vienna Convention of 1980
CFA
Contingency Fees Act 1997, South Africa (No. 66 of 1997)
DAL
Danubian Arbitration Law
ECPR
England Civil Procedure Rules 1998
IBA Rules
International Bar Association Rules on the Taking of Evidence in
International Arbitration
ICC Rules
International Chamber of Commerce Rules, 2012
SCC Rules
Swedish Chamber of Commerce Rules
UNCITRAL ML
UNCITRAL Model Law on International Commercial Arbitration
with 2006 amendments
UNIDROIT Principles
Principles of International Commercial Contracts, 2010. Institut
international pour l’unification du droit privé (International Institute
V
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
FOR
for
the Unification of Private Law).
U.K. Arbitration Act
United Kingdom Arbitration Act 1996
U.S. FRCP
United States Federal Rules on Civil Procedure
Vienna Rules
International Arbitration Rules of the Vienna International Arbitration
Centre
ZPO
Zivilprozessordnung (German Rules on Civil Procedure)
VI
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INDEX OF ABBREVIATIONS
INDEX OF ABBREVIATIONS
Abbreviation
Explanation
AC
Advisory Council
Art. / Artt.
Article / Articles
CEO
Chief Executive Officer
CIETAC
China International Economic and Trade Arbitration Commission
cf.
conferatur (Latin for ‘compare’)
CFA
Conditional Fee Agreement
Cir.
Circuit
Cp.
Compare
DCL
Danubian Contract Law
Ed./Eds.
Editor/Editors
Et. al.
et alii (Latin for “and others”)
Ex.
Exhibit
FS
Festschrift (liberum amicorum)
ICC
International Chamber of Commerce
ICSID
International Centre for Settlement of Investment Disputes
i.e.
id est (Latin for ‘that is’)
IHR
Internationales Handelsrecht (German Law Journal)
Ltd
Limited Company
No.
Number
NYC
New York Convention
NJW
Neue Juristische Wochenschrift (German Law Journal)
p. / pp.
page / pages
para. / paras.
paragraph / paragraphs
P.O.
Procedural Order
SchiedsVZ
Zeitschrift für Schiedsverfahren (German Law Journal)
Seq.
Et sequens (Latin for ‘following’)
supra
Latin for ‘see above’
UNCITRAL
United Nations Commission on International Trade Law
U.S.
United States of America
VIAC
Vienna International Arbitration Center
Vol.
Volume
VII
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TABLE OF AUTHORITIES
TABLE OF AUTHORITIES
Achilles, Wilhelm-
Kommentar zum UN-Kaufrechtsübereinkommen (CISG)
Albrecht
2000, Luchterhand publishing, Berlin
Cited as: ACHILLES
Para. 107, 148, 155, 162
Arroyo, Manuel
Arbitration in Switzerland: The Practitioner's Guide
1st Edition 2013, in Kluwer Law International
Cited as: AUTHOR IN: ARROYO
Para. 87
Bamberger, Heinz G.
Beck’scher Online-Kommentar BGB
Roth, Herbert
37th Edition 2015, C.H. Beck München
Cited as: AUTHOR IN: BECK ONLINE BGB
Para. 107
Barnett, Kate
Accounting for Profit for Breach of Contract
1st Edition 2012, Hart publishing
Cited as: BARNETT
Para. 163
Bell, Andrew S.
Forum Shopping and Venue in Transnational Litigation
1st Edition 2003, Oxford University Press
Cited as: BELL
Para. 113
Böckstiegel, Karl-
Arbitration in Germany – The Model Law in Practice
Heinz
2nd Edition 2015 Kluwer Law International
Kröll, Stefan Michael
Cited as: AUTHOR IN: BÖCKSTIEGEL/KRÖLL/NACIMIENTO
Nacimiento, Patricia
Para. 40
Born, Gary
International Commercial Arbitration
2nd Edition 2014, Kluwer Law International
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TABLE OF AUTHORITIES
Cited as: BORN
Para. 16, 38, 85, 86, 87, 88, 166
Bombrun, Helene
What Determines the Price of Wine? The Value of Grape
Sumner, Daniel A
Characteristics and Wine Quality Assessments
2003, Published in: http://aic.ucdavis.edu/oa/brief18.pdf.
Cited as: BOMBRUN/SUMNER
Para. 56
Bower, George
The doctrine of res judicata
Spencer
1924, Butterworth publishers
Cited as: BOWER
PARA. 86
Brand, Ronald
Recognition and Enforcement of Foreign Judgements
2012, Federal Judicial Center
http://www.fjc.gov/public/pdf.nsf/lookup/brandenforce.pdf/$file/brande
nforce.pdf
Cited as: BRAND
PARA. 93
Brunner,
Christoph UN-Kaufrecht – CISG
(ed.)
2nd edition 2014, Stämpfli Verlag
Cited as: AUTHOR IN: BRUNNER
Para. 77, 152, 155, 162
Bühler, Micha
Awarding Costs in International Commercial Arbitration: an Overview
2004, in: Association Suisse de l’Arbitrage, Vol. 22, pp. 249 et seq.
Cited as: BÜHLER
Para.71
Carbonneau, Thomas AAA Handbook on International Arbitration and ADR
E. (ed.)
1st edition 2006, JurisNet, LLC
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Jaeggi,
Jeanette
TABLE OF AUTHORITIES
A. Cited as: AAA HANDBOOK
(ed.)
Para. 16, 20
Demeyere, Luc
The Search for the“Truth”: Rendering Evidence under Common Law
and Civil Law,
SchiedsVZ 2003, 247
Cited as: DEMEYERE
Para.42
Djordevic, Milena
Mexican Revolution in CISG Jurisprudence and Case Law: Attorneys’
Fees as (non)recoverable loss for a breach of contract
2010, in: Private Law Reform in South East Europe, Liber Amicorum
Christa Jessel-Holst, Belgrade (2010)
Published in:
http://www.harmonius.org/sr/publikacije/clanci/milena_djordjevic/Priv
ate_Law_Reform_in_South_East_Europe.pdf
Cited as: DJORDEVIC
PARA. 75
Encyclopædia
Encyclopædia Britannica
Britannica
15th Edition 2010, Encyclopædia Britannica Inc.
Cited as: AUTHOR, IN: ENCYCLOPÆDIA BRITANNICA – ARTICLE
Para. 80
Erasmus, HJ
Cost an Fee Allocation in Civil Procedure – Republic of South Africa
2009,
in:
http://www-personal.umich.edu/~purzel/national_report-
s/South%20Africa.pdf
Cited as: ERASMUS
PARA. 71
Ferrari, Franco
Internationales Vertragsrecht
Kieninger, Eva-Maria
Rom I-VO, CISG, CMR, FactÜ
Mankowski, Peter
2nd Edition 2012, C.H. Beck
Et al.
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TABLE OF AUTHORITIES
Cited as: AUTHOR IN: FERRARI (ET AL.)
Para. 107, 140, 152
Flechtner, Harry
Recovering Attorneys' Fees as Damages under the U.N. Sales
Convention: A Case Study on the New International Commercial
Practice and the Role of Case Law in CISG Jurisprudence, with
Comments on Zapata Hermanos Sucesores, S.A. v. Hearthside Baking
Co.
2002, in Northwestern Journal of International Law & Business
Cited as: FLECHTNER
PARA. 72,76
Gabriel, Simon
Die Rechtsnatur der Schiedsvereinbarung im schweizerischen Recht
Girsberger, Daniel
2008, Schulthess-Verlag
Cited as: GABRIEL/GIRSBERGER
Para. 108
Geisinger, Elliott
International Arbitration in Switzerland: A Handbook for Practitioners
Voser, Nathalie
2nd Edition 2013, in Kluwer Law International
(ed.)
Cited as: AUTHOR IN: GEISINGER/VOSER
Para. 166
Gergen, Mark
Causation in Disgorgement
2012, in
http://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=3073&c
ontext=facpubs
Cited as: GERGEN
Para. 163
Haran, Harsh Hari
Anti-Suit Injunctions Issued by National Courts in Favour of
Arbitration:
Need
for
Greater
Judicial
Restraint
2015, in Asian International Arbitration Journal, Vol. 11, Issue 2
Cited
as:
HARAN
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TABLE OF AUTHORITIES
Para.112
Hartmann, Felix
Ersatzherausgabe und Gewinnhaftung beim internationalen Warenkauf
2009, in: Internationales Handelsrecht 05/2009, p. 189 et seq.
Cited as: HARTMANN
Para. 140, 148
Hondius, Ewoud
Disgorgement of Profits - Gain-Based Remedies throughout the World
Janssen, Andre (ed.)
1st Edition 2015, Springer Verlag
Cited as: AUTHOR IN HONDIUS/JANSSEN
Para. 70
Honnold, John
Documentary History of the Uniform Law for International Sales
1st Edition 1989,
in:
Kluwer
Law
and
Taxation Publishers
Cited as: HONNOLD
PARA. 108, 140, 152, 155, 160, 162
Honsell, Heinrich
Die Vertragsverletzung des Verkäufers nach dem Wiener Kaufrecht
1992, in: Schweizerische Juristen-Zeitung, 88. Edition, p. 362 et seq.
Cited as: HONSELL SJZ
Para. 146
Honsell, Heinrich (ed.) Kommentar zum UN-Kaufrecht - Übereinkommen der Vereinten
Nationen über Verträge über den Internationalen Warenkauf (CISG)
2nd Edition 2009, Springer Science+Business Media
Cited as: AUTHOR IN: HONSELL
Para. 154, 155, 162
Huber, Peter
The CISG – A new textbook for students and practitioners
Mullis, Alaister
1st Edition 2007, selliers, european law publisher
Cited as: HUBER/MULLIS
Para. 33
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International Law
Interim Report: "Res judicata"and Arbitration
Association
2004, in: http://www.ila-hq.org/download.cfm/docid/446043C4-9770-
Berlin Conference
434D-AD7DD42F7E8E81C6
(2004)
Cited as: BERLIN CONFERENCE ON INT. COMM. ARB.
PARA. 87
Israel, Ronald
Disgorgement as a viable theory of restitution damages
O’Neill, Brian
2014, in
http://www.csglaw.com/B8D11B/assets/files/News/israel_oneill__com
mercial_damages_reporter_jan_2014_lead_article.pdf
Cited as: ISRAEL/O’NEILL
Para. 163
Geimer, Rheinhold
Recht ohne Grenzen - Festschrift für Athanassios Kaissis zum 65.
Schütze, Rolf A.
Geburtstag
1st Edition 2012, sellier european law publishers
Cited as: AUTHOR IN: FS KAISSIS
Para. 96
Jackson, Rupert M.
Review of Civil Litigation Costs
1st Edition 2010, The Stationary Office
Cited as: JACKSON
Para. 119
Kaj, Hobér
Res Judicata and Lis Pendens in International Arbitration (Volume
366)
1st Edition 2014, Hague Academy of International Law
Cited as: KAJ
PARA. 85, 86, 88
Kindler, Peter
“Cherry Picking” and Good Faith in German Arbitration Law: Two
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Recent Decisions on the Most-Favoured Treatment Clause
February 2012, in: FS Athanassios Kaissis, sellier european law
publishers
Cited as: KINDLER
PARA. 96
Knight, C.J.S.
Owusu and Turner – The Shark in the Water?
2007, in: The Cambridge Law Journal, Vol. 66, pp. 288 et seq.
Cited as: KNIGHT
Para. 112, 113
Koch, Robert
The CISG as the Law Applicable to Arbitration Agreements?
2008, in: F.S. for Albert H. Kritzer; Wildly, Simmons & Hill publishing
Republished at: http://www.cisg.law.pace.edu/cisg/biblio/koch5.pdf
Cited as: KOCH
Para. 107
Kröll, Stefan
UN Convention on Contracts for the International Sale of Goods
Mistelis, Loukas
(CISG) 1st Edition 2011, C.H. Beck verlag, in cooperation with Hart
Perales Viscasillas,
Publishing, Oxford und Nomos Verlagsgesellschaft,
Pilar
Cited as: AUTHOR IN: KRÖLL (ET AL.)
Para. 40, 42, 54, 117, 140, 152
Lainé, Armand
De l’Exécution en France des sentences arbitrales étrangères
1899, Kessinger Publishing, LLC (2010)
Cited as: LAINÉ
PARA. 108
Law, Jonathan
A Dictionary of Law
8th Edition 2015, Oxford University Press
Cited as: LAW
Para. 65
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Lew, Julian
Comparative International Commercial Arbitration
Mistelis, Loukas A.
1st Edition 2003, Published in Kluwer Law International
Kröll, Stefan Michael
Cited as: LEW (ET AL.)
Para. 166
Lionnet, Klaus
Handbuch der internationalen und nationalen Schiedsgerichtsbarkeit
Lionnet, Annette
3rd Edition 2005, Richard Boorberg Verlag
Cited as: LIONNET/LIONNET
Para. 16, 19
Lookofsky, Joseph
Zapata Hermanos v. Hearthside Baking Commentary
2002 in: Vindobona Journal of International Commercial Law and
Arbitration
Cited as: LOOKOFSKY, ZAPATA COMMENTARY
PARA.72
Mankowski, Peter
Ist eine vertragliche Absicherung von Gerichtsstandsvereinbarungen
möglich?
2009, in: Praxis des internationalen Privat- und Verfahrensrecht, pp. 23
et seq.
Cited as: MANKOWSKI
Para 33, 107, 140
Moliterno, James
Global Issues in Legal Ethics
Paton, Paul
2nd Edition 2014, West Academic Publishing
Cited as: MOLITERNO/PATTO
Para. 119,
Von Mehren, Arthur
Recognition and Enforcement of Foreign Judgements: A New Approach
1994, in Law and Contemporary Problems, Vol. 57, pp. 271 et seq.
Cited as: MEHREN
PARA
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Moses, Margaret L.
TABLE OF AUTHORITIES
The Principles and Practice of International Arbitration
2nd Edition 2012, Cambridge University Press
Cited as: MOSES
Para.
O’Malley, Nathan
Rules of Evidence in International Arbitration
2012, Informa Law
Cited as: O’MALLEY
Para. 30
Perkins, David
Protective Orders in International Arbitration
Published in: ASA Bulletin Vol. 33 2015 p. 274-292
Cited as: PERKINS
Para. 70
Perzelova, Martina
Interpretation of the CISG: How to interpret and fill the gaps in the
CISG so as to maintain requirements of uniformity, good faith and
internationality as emphasized in the Article 7 of the CISG
1980, Dissertation submitted to the University of Bristol
http://www.cisg.law.pace.edu/cisg/biblio/perzelova.pdf
Para. 52
Cited as: PERZELOVA
Poudret, Jean F.
Comparative Law of International Arbitration
Besson, Sébastien
2nd edition 2007, Sweet & Maxwell Ltd.
Cited as: POUDRET/BESSON
Para. 34
Queen Mary University,
International Arbitration Survey - Current and Preferred Practices in the
London
Arbitral Process
2012
Published in: http://www.arbitration.qmul.ac.uk/docs/164483.pdf
Cited as: QMUL 2012
Para. 56
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Queen Mary University,
International Arbitration Survey - Improvements and Innovations in
London
International Arbitration
2015
Published in: http://www.arbitration.qmul.ac.uk/docs/164761.pdf.
Cited as: QMUL 2015
Para. 89
Rauscher, Thomas
Münchner Kommentar zur Zivilprozessordnung
Krüger, Wolfgang
4th Edition 2013, C.H. Beck
Cited as: AUTHOR IN: MÜKO ZPO
Para 78
Redfern, Alan
Law and Practice of International Commercial Arbitration
Hunter, Martin
4th Edition 2004, Sweet & Maxwell, London
Blackaby, Nigel
Cited as: REDFERN/HUNTER
Partasides, Constantin
Para. 67
Säcker, Franz Jürgen
Münchner Kommentar zum Bürgerlichen Gesetzbuch
Rixecker, Roland
7th Edition 2016, C.H. Beck
Et al.
Cited as: AUTHOR IN: MÜKO BGB
Para. 89
Saidov, Djakhongir
Methods of Limiting Damages under the Vienna
Convention on Contracts for the International Sale of Goods
2001, in http://www.cisg.law.pace.edu/cisg/biblio/saidov.html
Cited as: SAIDOV
Para.88
Savage, John
Fouchard Gaillard Goldman on International Commercial Arbitration
Gaillard, Emmanuel
1999, Published in: Kluwer Law International
(ed.)
Cited as: SAVAGE/GAILLARD
Para.6
Schack, Haimo
Internationales Zivilverfahrensrecht
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6th Edition 2014, C.H.Beck
Cited as: SCHACK
Para.45
Schlechtriem, Peter
Kommentar zum einheitlichen UN-Kaufrecht
Schwenzer, Ingeborg
6th Edition 2013, C.H. Beck
Cited as: AUTHOR IN: SCHL./SCHWENZER.(GERMAN EDITION)
Para. 45
Schlechtriem,Peter
Commentary to the CISG
Schwenzer, Ingeborg
3rd Edition 2010 Oxford University Press
Cited as: Author in: Schl./Schwenzer (ENGLISH EDITION)
Para. 67
Schmidt, Karsten (ed.)
Münchner Kommentar zum Handelsgesetzbuch
3rd edition 2010, C.H. Beck
Cited 4as: AUTHOR IN: MÜKO HGB
Para. 45.67, 89
Schneider, Egon
Der materielle Kostenerstatungsanspruch
1981, in: Monatsschrit für deutsches Recht, Heft 5 / 1981, S. 353
Cited as: SCHNEIDER
Para.78
Schwarz, Franz T.
The Vienna Rules: A Commentary on International Arbitration in Austria
Konrad, Christian W.
2009 Kluwer Law International
Cited as: SCHWARZ/KONRAD
Para.56
Schwartz, Damon
The Recovery of Lost Profits Under Article 74 of the U.N. Convention
on the International Sale of Goods
2006, in: Nordic Journal of Commercial Law
Republished in: http://www.cisg.law.pace.edu/cisg/biblio/schwartz.html
Cited as: SCHWARTZ
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Para.78
Smith, Arlo
Res Judicata in Calfornia
1952, in: California Law Review, Volume 40, Issue 3, pp. 412 et seq.
Cited as: SMITH
Para.115
Staudinger, Julius
BGB Kommentar – Wiener UN- Kaufrecht CISG
Magnus Ulrich
12th Edition 2013 Sellier-de Gruyter
Cited as: STAUDINGER/MAGNUS
Para.74
Torggeler, Hellwig
Praxishandbuch Schiedsgerichtsbarkeit
2007 Verlag Österreich
Cited as: AUTHOR IN: TORGGELER
Para.76
van den Berg, Albert
ICCA Congress Series No. 13 (Montreal 2006)
2007, in Kluwer Law International
Cited as: AUTHOR IN: VAN DEN BERG
Para.30
Vanto, Jarno
Attorneys' fees as damages in international commercial litigation
2003, in 15 Pace International Law Review (Spring 2003) 203-222
Cited as: VANTO
Para.16
VIAC -Vienna
Handbook Vienna Rules – A Practitioner’s Guide
International
2014 WKÖ-Service GmbH
Arbitration Center
Cited as: HANDBOOK VIENNA RULES
Para. 20
Vogenauer, Stefan
Commentary on the UNIDROIT-Principles of International Commercial
Kleinheisterkamp Jan
Contracts (PICC)
(ed.)
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2nd Edition 2015, in: Oxford University Press
Cited as: AUTHOR IN: VOGENAUER/KLEINHEISTERKAMP
Para. 67
Wagner, Gerhard
Prozessverträge: Privatautonomie im Verfahrensrecht
1st Edition 1998, Mohr Siebeck
Cited as: WAGNER
Para.100
Waincymer, Jeff
Procedure and Evidence in International Arbitration
2012, Kluwer Law International
Cited as: WAINCYMER
Para. 155
Weigand, Frank-Bernd
Practitioner’s Handbook on International Arbitration
2002 C.H. Beck Verlag
Cited as: Author in Weigand
Para.79
Weinrib, Ernest
Punishment and Disgorgement as Contract Remedies
2003, in Chicago-Kent Law Review, Vol. 78, Issue 1
Cited as: WEINRIB
Para.6
Zeller, Bruno
Four-Corners - The Methodology for Interpretation and Application of
the UN Convention on Contracts for the International Sale of Goods
http://cisgw3.law.pace.edu/cisg/biblio/4corners.html, 2003
Cited as: ZELLER
Para.75
Zuberbühler, Tobias
IBA Rules of Evidence – Commentary on the IBA Rules on the Taking of
Hofmann, Dieter
Evidence in International Arbitration
Oetiker, Christian
2012 sellier. european law publishers
Rohner, Thomas
Cited as: IBA RULES COMMENTARY
Para.102
XX
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
TABLE OF AUTHORITIES
1999 IBA Working Party Commentary on the revised text of the 2010 IBA Rules on the Taking of
& 2010 IBA Rules of Evidence in International Arbitration
Evidence
Subcommittee
Review
Published in:
http://www.ibanet.org/Document/Default.aspx?DocumentUid=DD2409320E08-40D4-9866-309A635487C0
Cited as: IBA REVIEW SUBCOMMITTEE
Para. 156
XXI
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
TABLE OF COURT DECISIONS
TABLE OF COURT DECISIONS
Argentina
Cámara Nacional de Apelaciones en lo Comercial (Appellate Court), 14th October 1993
Published in: http://cisgw3.law.pace.edu/cases/931014a1.html
Cited as: ARGENTINA COMMERCIAL COURT, 14TH OCTOBER 1993
Para. 108
Australia
Supreme Court of New South Wales, 15th December 2014
Published in: Westlaw
Cited as: SUPREME COURT OF NEW SOUTH WALES, 15TH DECEMBER 2014
Para. 120
Austria
Oberster Gerichtshof, 6th February 1996
Published in: http://cisgw3.law.pace.edu/cases/960206a3.html
Cited as: AUSTRIAN SUPREME COURT OF JUSTICE, 6TH FEBRUARY 1996
Para. 105
Canada
Supreme Court of British Columbia, 31st May 2013
Published in: Westlaw
Cited as: SUPREME COURT OF BRITISH COLUMBIA, 31ST MAY 2013
Para. 20
France
Cour de cassation, 20th December 1993
Published in:
http://www.legifrance.gouv.fr/affichJuriJudi.do?oldAction=rechJuriJudi&idTexte=JURITEXT0000
07030314&fastReqId=1260648628&fastPos=1
Cited as: FRENCH SUPREME COURT, 20TH DECEMBER 1993
XXII
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
Para. 110
Germany
Bundesgerichtshof, 18th April 2013
Published in: http://juris.bundesgerichtshof.de/cgibin/rechtsprechung/document.py?Gericht=bgh&Art=en&nr=64171&pos=0&anz=1
Cited as: GERMAN SUPREME COURT, 18TH APRIL 2013
Para. 80
Bundesgerichtshof, 2nd October 2012
Published in: Schieds VZ, 2013, p. 49
Cited as: GERMAN FEDERAL SUPREME COURT, 2ND OCTOBER 2012
Para. 16
Bundesgerichtshof, 12th December 2006
Published in:
http://juris.bundesgerichtshof.de/cgibin/rechtsprechung/document.py?Gericht=bgh&Art=en&nr=38
732&pos=0&anz=1
Cited as: GERMAN FEDERAL SUPREME COURT, 12TH DECEMBER 2006
Para. 80
Bundesgerichtshof, 24th March 1999
Published in: http://www.cisg.law.pace.edu/cases/990324g1.html
Cited as: GERMAN FEDERAL SUPREME COURT, 24TH MARCH 1999
Para. 105
Oberlandesgericht Frankfurt, 7th May 2015
Published in: https://openjur.de/u/775705.html
Cited as: HIGHER REGIONAL COURT FRANKFURT, 7TH MAY 2015
Para. 80
Oberlandesgericht Koblenz, 22nd April 2010
Published in: Internationales Handelsrecht (IHR) 2010, 255
Cited as: HIGHER REGIONAL COURT KOBLENZ, 22ND APRIL 2010
XXIII
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
Para. 152
Oberlandesgericht Stuttgart, 31st March 2008
Published in: http://cisg-online.ch/content/api/cisg/display.cfm?test=1658
CISG-online case No. 1658
Cited as: HIGHER REGIONAL COURT STUTTGART, 31ST MARCH 2008
Para. 33
Landgericht Essen, 24th March 2015
Published in: http://www.kluwerarbitration.com/CommonUI/document.aspx?id=kli-ka-15-42-015
Cited as: REGIONAL COURT ESSEN, 24TH MARCH 2015
Para. 19
Landgericht Berlin, 21th March 2003
Published in: http://cisgw3.law.pace.edu/cases/030321g1.html
Cited as: REGIONAL COURT BERLIN, 21ST MARCH 2003
Para. 79
Italy
District Court Roverto, 28th August 2004
Aquafili Textile Yarns S.p.A. v. Updeal Ltd
Published in: http://cisgw3.law.pace.edu/cases/040828i3.html
Cited as: DISTRICT COURT ROVERTO, 28TH AUGUST 2014
Para. 74
Singapore
Supreme Court of Singapore, 11th September 2012
Published in: http://www.kluwerarbitration.com/CommonUI/document.aspx?id=kli-ka-139703
Cited as: SUPREME COURT OF SINGAPORE, 11TH SEPTEMBER 2012
Para. 19
Switzerland
Bundesgericht Schweiz, 27th May 2014
XXIV
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
Published in: http://www.swissarbitrationdecisions.com/res-judicata-effect-foreign-judgment
Cited as: SWISS FEDERAL SUPREME COURT; 27TH MAY 2014
Para. 85
Bundesgericht Schweiz, 11th July 2000
Published in:
http://www.polyreg.ch/bgeunpub/Jahr_2000/Entscheide_4C_2000/4C.100__2000.html
Cited as: SWISS FEDERAL SUPREME COURT, 11TH JULY 2000
Para. 85, 87, 88
Bundesgericht Schweiz, 1st October 1991
Published in:
http://relevancy.bger.ch/php/clir/http/index.php?lang=de&zoom=&type=show_document&highlight
_docid=atf%3A%2F%2F117-II-394%3Ade
Cited as: SWISS FEDERAL SUPREME COURT, 1ST OCTOBER 1991
Para. 108
Bundesgericht Schweiz, 17th March 1975
Jugomineral (Croatia) v. Grillo Werke AG (Germany)
Cited as: SWISS FEDERAL SUPREME COURT 17TH MARCH 1975
Para. 108
Bundesgericht Schweiz, 28th May 1915
Building Operations Company (Switzerland) v. Builder (Switzerland)
Cited as: SWISS FEDERAL SUPREME COURT, 28TH MAY 1915
Para. 108
Tribunal Cantonal du Valais, 21st February 2005
Published in: http://www.globalsaleslaw.org/content/api/cisg/urteile/1193.pdf
CISG Online Case No. 1193
Cited as: SWISS DISTRICT COURT, 21ST FEBRUARY 2005
Para. 77
United Kingdom
XXV
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
House of Lords, 2nd April 1998
Patel and Others (Claimants) v. Airbus Industrie G.I.E. (Respondents)
Published in: http://www.publications.parliament.uk/pa/ld199798/ldjudgmt/jd980402/patel01.htm
Cited as: HOUSE OF LORDS 2ND APRIL 1998
Para. 112
United States
United States Supreme Court, 19th June 1978
Published in: Westlaw
Cited As: U.S. SUPREME COURT, 19TH JUNE 1978
Para. 20
Supreme Court of Washington, 25th October 1946
Published in: Westlaw
Cited as: SUPREME COURT OF WASHINGTON, 25TH OCTOBER 1946
Para. 141
Court of Appeals, 7th Circuit, 19th November 2002
Zapata Hermanos Sucesores v. Hearthside Baking Co.
Published in: http://cisgw3.law.pace.edu/cases/021119u1.html
Cited as: U.S. COURT OF APPEALS, 7TH CIRCUIT, 19TH NOVEMBER 2002
Para. 72, 78, 97
Superior Court of New Jersey, Civil Part, Atlantic County, 17th March 2009
Kleinman v. Merck Co., Inc.
Published in: https://casetext.com/case/kleinman-v-merck-co-inc
Cited as: U.S. SUPERIOR COURT OF NEW JERSEY, 17TH MARCH 2009
Para.
United States District Court for the District of New York, 25th November 2013
Published in: Westlaw
Cited as: U.S. DISTRICT COURT, NEW YORK, 25TH NOVEMBER 2013
Para. 163
XXVI
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
District Court for the Western District of Pennsylvania, 25th July 2008
Norfolk Southern Railway Company v. Power Source Supply, Inc.
Published in: http://www.globalsaleslaw.org/content/api/cisg/urteile/1776.pdf
CISG Online no. 1776
Cited as: U.S. DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA; 25TH JULY 2008
Para. 78
United States District Court for the District of North Carolina, 5th September 2005
Published in: Westlaw
Cited as: U.S. DISTRICT COURT, NORTH CAROLINA, 5TH SEPTEMBER 2005
Para. 20
United States District Court for the Northern District of Illinois, Eastern Division; 21st May 2004
Chicago Prime Packers, Inc, v. Northam Food Trading Co.
Published in: http://www.unilex.info/case.cfm?id=974
CISG Online Case No. 851
Cited as: U.S. DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS, E.D.; 21ST MAY 2004
Para. 78
U.S. District Court for the Northern District of Illinois, Eastern Division; 29th January 2003
Ajax Tool Works, Inc. v. Can-Eng Manufacturing Ltd.
Published in: http://cisgw3.law.pace.edu/cases/030129u1.html#cx
Cited as: U.S. DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS, E.D.; 29TH JANUARY 2003
Para. 78
XXVII
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
TABLE OF ARBITRAL AWARDS
TABLE OF ARBITRAL AWARDS
ICSID Award Case No. ARB/08/6
11th August 2015
Perenco Ecuador Ltd. v. The Republic of Ecuador
Published in: http://www.kluwerarbitration.com/CommonUI/document.aspx?id=kli-ka-15-41-002
Cited as: ICSID CASE NO. ARB/08/6
Para. 49
ICSID Award Case No. ARB(AF)/12/1
25th August 2014
Apotex v. United States
Published in: http://www.kluwerarbitration.com/CommonUI/document.aspx?id=kli-ka-15-2-013
Cited as: ICSID AWARD NO. ARB(AF)/12/1
Para. 19
ICSID Award
19th December 2014
Caribbean Bank Limited v. The Government of Belize
Published in: http://www.italaw.com/cases/177
Cited as: ICSID 2014
Para. 85, 87, 88
ICC Award No. 13730
2013
Published in: http://www.kluwerarbitration.com/CommonUI/document.aspx?id=kli-ka-1345011-n
Cited as: ICC AWARD NO. 13730
Para. 45
ICSID Award Case No. ARB/07/23
15th October 2008
Railroad Development Corporation v Guatemala
Published in: http://www.italaw.com/cases/887
XXVIII
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
TABLE OF ARBITRAL AWARDS
Cited as: ICSID NO. ARB/07/23
Para. 110
ICSID Award Case No. ARB (AF)/00/3
2008
Published in: http://www.italaw.com/sites/default/files/case-documents/ita0898.pdf
Cited as: ICSID NO. ARB(AF)/00/3
Para. 78
ICSID Award Case No. ARB/01/11
2005
Published in: http://www.italaw.com/cases/747
Cited as: ICSID CASE NO. ARB/01/11
Para. 85, 87, 88
ICSID Award Case No. ARB/99/01
2002
Marvin Roy Feldman Karpa v. United Mexican State
Published in:
https://icsid.worldbank.org/apps/icsidweb/cases/Pages/casedetail.aspx?caseno=ARB(AF)/99/1&tab
=PRO
Cited as: ICSID NO. ARB/99/01
Para. 64
ICC Award Case No. 4126
1984
Published in: Collection of ICC Arbitral Awards (1974-1985), p. 511
Cited as: ICC AWARD NO. 4126
Para. 87
American-Mexican Claims Commission, 31st March 1926
1926
Published in: http://legal.un.org/riaa/cases/vol_IV/35-41.pdf
Cited as: AMERICAN-MEXICAN CLAIMS COMMISSION, 31ST MARCH 1926
XXIX
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
Para. 62
XXX
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
INTRODUCTION
INTRODUCTION
THE PARTIES TO THE DISPUTE
1
Vino Veritas Ltd. [hereafter RESPONDENT] is a top vineyard in Mediterraneo. Kaihari Waina Ltd.
[hereafter CLAIMANT] is a wine merchant seated in Equatoriana.
THE FACTS OF THE DISPUTE
2
In April 2009, the parties conclude the Framework Agreement. The terms guarantee the parties’
cooperation for 5 years. RESPONDENT agrees to supply CLAIMANT “up to 10.000 bottles” of its Mata
Weltin wine each year. Usually, CLAIMANT places its order for the next vintage in November. After
thatIt takes RESPONDENT one year to produce, bottle and deliver the wine.
3
In August 2014, the harvest is reduced by 35% due to strong rains. The prevailing industry usage to
handle bad harvests is allocation on a pro-rata basis. On 3rd November 2014, RESPONDENT
accordingly informs all its customers that it will allocate bottles pro-rata. On 4th November 2014,
RESPONDENT nevertheless receives an order from CLAIMANT for 10.000 bottles. On 1st December
2014, RESPONDENT informs CLAIMANT that it will receive 4.500 – 5.000 bottles.
4
In December 2014, due to personal differences, RESPONDENT terminates the contract and informs
CLAIMANT that no wine will be delivered. The parties agree at this stage that this refusal to deliver
any wine breached the contract. CLAIMANT immediately files for interim relief in the Mediteraneo
High Court (hereafter MHC) despite the fact that the wine would not be delivered for another year.
RESPONDENT does not defend the order because its CEO undergoes open-heart surgery.
5
In January 2015, RESPONDENT offers to withdraw its termination and to deliver 4.500 bottles at a
reduced price. CLAIMANT rejects the offer. On 14th January, RESPONDENT seeks to clarify with
CLAIMANT if the arbitration agreement is valid. CLAIMANT forgets to respond to the email. On 30th
January, RESPONDENT seeks declaratory relief in the MHC both to clarify the arbitration agreement
and to be released from liability. CLAIMANT invokes the arbitration clause and the MHC rules that it
does not have jurisdiction to hear the case.
6
In February 2015, CLAIMANT buys 5.500 bottles of comparable Mata Weltin wine from Vignobilia
as a substitute. CLAIMANT’s customers are happy to accept Vignobilia’s wine, as it received
resounding reviews.
7
On 1st November 2015, RESPONDENT delivers 4.500 bottles of wine. CLAIMANT accepts delivery.
SUMMARY OF ARGUMENTS
MEMORANDUM FOR RESPONDENT1
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
8
ISSUE I
CLAIMANT tries to replace legal rules and the parties’ contract with wishful thinking. Both
CLAIMANT’s procedural request and its various requests for relief have no basis in either the
applicable law or the Framework Agreement.
9
CLAIMANT requests discovery of documents although the parties agreed expressly that “no discovery
shall be allowed”. Even ignoring the parties’ agreement, the request is inadmissible under the
applicable arbitration rules, because it is too broad, not material and directed at confidential
documents (Issue I). Likewise, CLAIMANT’s attempts to claw-back legal costs has no basis in the
CISG. Even if it did, CLAIMANT failed its duty to mitigate by paying astronomical attorneys’ fees
(Issue II). Lastly, CLAIMANT cannot claim a disgorgement of RESPONDENT’s profits, because this
remedy is not available under the CISG (Issue III).
ISSUE I: THE TRIBUNAL SHOULD REJECT CLAIMANT’S REQUEST FOR
DISCOVERY.
10
Despite excluding all forms of discovery in the Framework Agreement [EXHIBIT C1, ART. 20],
CLAIMANT makes an exceptionally broad request for document production namely:
11
“…all documents from the period of 1 January 2014 – 14 July 2015 pertaining to communications
between RESPONDENT and SuperWines in regard to the purchase of diamond Mata Weltin 2014 and
any contractual documents, including documents relating to the negotiation of the said contract
between SuperWines and the RESPONDENT in regard to the purchase of diamond Mata Weltin 2014.
That includes in particular all documents relating to the number of bottles purchased and the
purchase price.” [CLAIM, PARA 27].
12
In the business world, information is power. This is why CLAIMANT is attempting to gain access to
confidential negotiations between RESPONDENT and CLAIMANT’s main competitor, SuperWines.
CLAIMANT is going on a fishing expedition and wants the Tribunal to supply the boat. The Tribunal
should reject this demand. What CLAIMANT could never access in the normal course of business, it
should not be allowed to obtain under the guise of a discovery request in this arbitration.
13
First, CLAIMANT wrongfully believes that it could request discovery under UNCITRAL Rules
[CLAIMANT MEMO, P. 29, PARA 47]. It thereby completely ignores that the parties explicitly excluded
discovery in their Framework Agreement [EXHIBIT C1, ART. 20]. This agreement precludes the
Tribunal from granting CLAIMANT’s request (1). Second, even if the parties did not exclude
discovery, CLAIMANT’s request would not be admissible under the applicable arbitration rules (2).
Third, the Tribunal should first decide the merits of CLAIMANT’s novel theory of damages (see Issue
MEMORANDUM FOR RESPONDENT2
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE I
III), before it decides whether the documents requested by CLAIMANT are even relevant to the
outcome of this arbitration (3). Fourth, contrary to CLAIMANT’s argument [CLAIMANT MEMO P.22,
PARA 19],
1.
the Tribunal cannot draw any adverse inferences (4).
THE PARTIES EXCLUDED DOCUMENT PRODUCTION BY EXPLICITLY
EXCLUDING “DISCOVERY”.
14
The parties’ agreement that “no discovery shall be allowed” [EXHIBIT C1, ART. 20] is an
insurmountable obstacle to CLAIMANT’s request for document production. As a preliminary matter
and in response to CLAIMANT’s assertions [CLAIMANT MEMO, P. 19, PARA 5], the parties were free to
exclude all types of discovery by way of agreement (1.1). The Tribunal should interpret this
agreement to exclude any request for document production (1.2).
1.1 THE
PARTIES’ AGREEMENT TO EXCLUDE DISCOVERY IS BINDING ON THE
TRIBUNAL.
15
The parties have the power to exclude any form of discovery from the arbitration. CLAIMANT
appears to challenge this power when it warns that the “Tribunal has to ensure that the Parties’
right to be heard is not infringed which would be the case if no document production were granted”
[CLAIMANT MEMO. P. 19, PARA. 6].
16
This contention is inaccurate. The parties are free to waive any form of discovery. Discovery,
including document production, does not form part of the parties’ fundamental procedural rights
[CF. LIEBSCHER
IN:
TORGGELER (ED.), P. 170,
PARA
17, LIONNET/LIONNET P. 312]. It is telling that
CLAIMANT cites no authority except Art. 28 Vienna Rules to support its claim [CLAIMANT MEMO. P.
19, PARA. 6]. In fact, there is ample authority proving that discovery can be modified or completely
excluded as the parties’ see fit [SCHWARZ/KONRAD, P. 507
CH
20,
PARA
240, AAA HANDBOOK
ON
INTERNATIONAL ARBITRATION AND ADR, P. 254, BORN, P. 88]. In a recent decision the Higher Regional
Court of Frankfurt, applying Art. 19 UNCITRAL ruled that the parties’ agreement overruled the
Tribunal’s power to collect evidence under the applicable arbitration rules [HIGHER REGIONAL
COURT FRANKFURT, 17THFEBRUARY 2011]. This decision has been upheld by the German Supreme
Court [GERMAN FEDERAL SUPREME COURT, 2NDOCTOBER 2012]. Excluding document production
completely is not only legally possible, it is a common method in arbitration to keep the proceedings
short and cost efficient [QMUL 2012, P. 14]. In light of this, the exclusion of discovery in the
arbitration agreement is effective and binding upon the Tribunal.
MEMORANDUM FOR RESPONDENT3
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
1.2. BY
ISSUE I
EXCLUDING ANY TYPE OF DISCOVERY, THE PARTIES ALSO EXCLUDED
DOCUMENT PRODUCTION.
17
Contrary to CLAIMANT’s arguments [CLAIMANTS MEMO, P. 19,
PARA
5], the phrase “no discovery
shall be allowed” means that no part of discovery shall be allowed by the Tribunal. There are four
reasons why the Tribunal should interpret the arbitration clause as excluding document production.
First, the plain meaning of “no discovery shall be allowed” is that no part of discovery shall be
allowed (1.2.1). Second, the drafting history of the clause proves that the parties intended to exclude
document production (1.2.2). Third, CLAIMANT’s interpretation deprives the clause of all practical
utility. If the clause were meant to only exclude “broad U.S. Style discovery” [CLAIM, PARA. 29], it
would be obsolete. That kind of broad discovery is already excluded by the applicable Vienna Rules
(1.2.3). Even if the clause were ambiguous, it needs to be interpreted in favor of RESPONDENT
according to the principle of contra proferentem (1.2.4).
1.2.1 THE
PLAIN MEANING OF THE CLAUSE EXCLUDES REQUESTS FOR DOCUMENT
PRODUCTION.
18
The plain text of the arbitration clause excludes document production and not only restricts it as
CLAIMANT argues [CLAIMANT MEMO. P. 23,
PARA.
20
ET SEQ.].
CLAIMANT appears to agree that an
interpretation should start with the ordinary meaning of the terms used [CF. CLAIMANT MEMO. PARAS.
49, 119]. The two relevant terms used in the clause are “no” and “discovery”.
19
The plain meaning of “discovery” encompasses document production. Document production is a
more specific subcategory of the broader term discovery. By way of analogy, rectangles do not
equate to squares. Not every rectangle is a square – but every square is a rectangle. The same holds
true for discovery and document production. Every definition of discovery includes document
production (as well as depositions, interrogatories and requests for admission of facts) [U.S. FRCP
RULE 34, REDFERN/HUNTER,
CH.
6,
PARA
71, IBA RULES COMMENTARY ART. 3,
PARA
16,
LIONNET/LIONNET, P. 301, ICSID CASE NO. ARB(AF)/12/1, LG ESSEN, 24TH MARCH 2015, SUPREME
COURT OF SINGAPORE, 11TH SEPTEMBER 2012].
20
Indeed, document production is the most important and most commonly used part of discovery [U.S.
SUPREME COURT, 19TH JUNE 1978; U.S. DISTRICT COURT, NORTH CAROLINA, 5TH SEPTEMBER 2005].
Document production is such a key part of discovery that it is even used synonymously. [SUPREME
COURT OF BRITISH COLUMBIA, 31STMAY 2013; U.S. DISTRICT COURT, NEW YORK, 25TH NOVEMBER 2013;
SUPREME COURT OF NEW SOUTH WALES, 15TH DECEMBER 2014]. “To the American litigator, discovery
means document production and depositions. In international arbitration, discovery means limited
MEMORANDUM FOR RESPONDENT4
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE I
document production and no depositions.” [AAA HANDBOOK, P. 20]. CLAIMANT itself uses the two
terms interchangeably [CLAIMANT MEMO.
PP.
20,22,23,27,30,31,32]. Thus, the plain meaning of
discovery encompasses document production.
21
The plain meaning of “no” is no. CLAIMANT seems to miss this truth when it argues, “that the
Tribunal has enough power […] for order for document production” [CLAIMANT MEMO. P. 32 PARA.
43]. However, the clause unambiguously states “no discovery”. The word “no” does not narrow the
Tribunal’s power to order discovery – it excludes.
22
Thus, the phrase “no discovery shall be allowed” excludes discovery and all of its subcategories
such as document production. Picking up the analogy, it is not possible to exclude all rectangles
without also excluding squares.
23
In sum, document production is part of discovery and is therefore excluded in the Framework
Agreement.
1.2.2 THE
DRAFTING HISTORY SHOWS THAT THE PARTIES INTENDED TO EXCLUDE
DOCUMENT PRODUCTION.
24
CLAIMANT’s assertion that the parties’ intended to permit document production [CLAIMANT MEMO P.
19, PARA 5], is misleading at best. The opposite holds true: When the parties drafted the contract and
excluded “discovery”, their goal was above all to exclude document production. Both parties
regarded requests for documents as an unnecessary evil. Both parties had unpleasant past
experiences with document production [EXHIBIT C12, EXHIBIT R1].
25
Contrary to CLAIMANT’s assertion [CLAIMANTS MEMO. P. 19,
PARA.
5], Art. 20 of the Framework
Agreement was intended to preclude requests for documents in the possession of either party.
26
CLAIMANT’s representatives understood the clause to exclude document production at the time it
was drafted. CLAIMANT’s COO, Mr. Friedensreich, is a lawyer and is therefore familiar with specific
legal terms such as “discovery” [EXHIBIT C12]. The original version, used by Mr. Friedensreich’s
brother, even explicitly excluded “document discovery” [EXHIBIT C12]. CLAIMANT changed this
term to “discovery” [EXHIBIT C1], which broadened its scope to potentially include interrogations
and depositions.
27
CLAIMANT’s in-house counsel was not as informed, but she looked up the term “discovery” in
Wikipedia when she was reviewing the Framework Agreement [EXHIBIT C12]. The definition on the
website reads, “Discovery includes: interrogatories; motions or requests for production of
documents (…)” (emphasis added). CLAIMANT was therefore on notice that Art. 20 of the
MEMORANDUM FOR RESPONDENT5
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE I
Framework Agreement would protect both parties from turning over documents. It was also on
notice the RESPONDENT was concerned with the confidentiality of its business records.
28
RESPONDENT’s understanding of Art. 20 of the Framework Agreement is expressed in the witness
statement of Mr. Weinbauer, RESPONDENT’s then CEO [EXHIBIT R1]. RESPONDENT had an
unpleasant experience with the risks of discovery, and in particular the risks of document production
from a prior proceeding. This encounter with discovery requests caused RESPONDENT’s CEO to take
precautionary measures for future disputes: “Any such request would be seriously disruptive to our
business and could require us to disclose business secrets to the market. Consequently, we wanted
to avoid having to face such requests again.” [EXHIBIT R1].
29
This understanding of Art. 20 of the Framework Agreement – that it would prevent requests for
documents – was communicated to CLAIMANT at the meeting in which the Framework Agreement
was finalised [EXHIBIT R1].
30
Thus, both parties intendend to exclude document production.
1.2.3 CLAIMANT’S INTERPRETATION WOULD RENDER THE CLAUSE MEANINGLESS.
31
If the Tribunal were to interpret the clause as CLAIMANT wishes as a mere “limitation of U.S. style
discovery” [CLAIM
PARA.
29], it would render the clause void of all practical utility. As will be
elaborated in more detail in section 1.2.1 the procedural rules only allow extremely narrow
discovery requests [VIENNA RULES HANDBOOK ART. 29, PARA.11]. The arbitration is seated in a civil
law country [P.O. 2,
PARA.
59], where the courts do not allow U.S.-Style broad discovery either.
Moreover, both parties are seated in jurisdictions, which only allow narrow requests for document
production [P.O. 2, PARA. 59, EXHIBIT R1].
32
Against this backdrop, the only meaningful interpretation of the clause can be that the parties
wanted to exclude the type of discovery that they were familiar with and that could potentially be
practiced in an arbitration in Danubia. Thus, the meaningful interpretation of the clause is that it
excludes all types and styles of discovery.
1.2.4 ANY REMAINING AMBIGUITY MUST BE RESOLVED IN RESPONDENT’S FAVOUR IN
ACCORDANCE WITH THE RULE OF CONTRA PROFERENTEM.
33
Finally, in accordance with the rule of contra proferentem, the clause must be construed against
CLAIMANT. CLAIMANT as the drafter bears the risk and responsibility of clearly formulating the
contract. The contra proferentem rule is recognised to apply under the CISG [HIGHER REGIONAL
COURT STUTTGART, 31ST MARCH 2000, HUBER/MULLIS P.15, SCHMIDT-KESSEL IN: SCHL./SCHWENZER
MEMORANDUM FOR RESPONDENT6
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ART 8,
PARA
49, STAUDIGER/MAGNUS ART 8,
PARA
18], it is also embodied in Art. 4.6 of the
UNIDROIT principles which are the contract law of both Danubia and Equatoriana. The rule applies
to the interpretation of arbitration agreements [FOUCHARD/GAILLARD/GOLDMAN, PARA. 479].
34
In this case, CLAIMANT drafted the clause and insisted on its inclusion [EXHIBIT. C12, EXHIBIT. R1].
Although there is no ambiguity in the mind of RESPONDENT, CLAIMANT seeks to create an
ambiguity for its own benefit. The ambiguity CLAIMANT seeks to create is that the term “no
discovery” in the Framework Agreement, could mean “some limited discovery”. Even if
CLAIMANT’s interpretation of the clause were plausible, according to the contra proferentem rule,
the Tribunal should give the RESPONDENT’s interpretation of the clause the benefit of the doubt and
rule that all requests for discovery are inadmissible, including requests for document production.
2.
EVEN IF THE PARTIES HAD NOT EXCLUDED DOCUMENT
PRODUCTION,
CLAIMANT’S REQUEST IS NOT PERMITTED BY THE
APPLICABLE ARBITRATION RULES.
35
Even if the parties did not exclude all types of discovery, CLAIMANT’s request would be
inadmissible under the applicable arbitration rules. CLAIMANT’s request is too broad (2.1) and the
requested documents are not relevant to the outcome of the proceedings (2.2). Lastly, RESPONDENT
may refuse their disclosure, because the documents are confidential (2.3).
2.1. CLAIMANT’S REQUEST IS TOO BROAD
36
CLAIMANT’s request is too broad to be admissible. CLAIMANT requests “all documents from the
period of 1 January 2014 – 14 July 2015 pertaining to communications between RESPONDENT
and SuperWines in regard to the purchase of diamond Mata Weltin 2014 and any contractual
documents, including documents relating to the negotiation of the said contract between
SuperWines and the RESPONDENT in regard to the purchase of diamond Mata Weltin 2014 […]”
[CLAIM, PARA. 27].
37
Absent a special agreement by the parties, the rules for this arbitration only allow requests for
particular documents to obtain information, not to obtain evidence. The chosen rules, the chosen
seat and the arbitration clause all point to a restrictive approach to document production (2.1.1).
Even if the Tribunal applied the IBA Rules to this proceeding, which allow requests for information,
CLAIMANT’s request would not be sufficiently specific as required by Art. 3 IBA Rules (2.2.2).
MEMORANDUM FOR RESPONDENT7
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
2.1.1 THE TRIBUNAL SHOULD ONLY ALLOW REQUESTS TO OBTAIN EVIDENCE NOT TO
OBTAIN INFORMATION.
38
The Tribunal should only allow requests for particular documents for evidentiary purposes, as is
admissible in civil law proceedings. The scope of discovery in arbitration depends on the legal
background of the arbitrators, the seat of arbitration, the applicable law and the parties’ agreement
[BORN, P. 86]. The chosen rules, the seat and the arbitration clause all point to the adoption of a more
restrictive, civil law-influenced approach to document production.
39
First, the Vienna Rules, although sufficiently flexible for international arbitrations, adopt a more
civil law point of view. CLAIMANT alleges that the Vienna Rules “deliberately avoid specifying”
what kind of discovery is allowed [CLAIMANT MEMO. PARA. 14]. This statement is true insofar as the
Vienna Rules contain no provisions on discovery. Art. 29 Vienna Rules only states that the Tribunal
may collect the evidence it considers necessary. The Vienna Rules contain no provision on requests
for documents directed at the other party. If this silence on discovery were deliberate, it would
rather indicate that broad discovery is usually not appropriate and not the opposite, as CLAIMANT
alleges. A narrow approach is more in line with practice under the Vienna Rules: In 2014, 91% of
the parties arbitrating under the Vienna Rules were from civil law countries. All but one of the
arbitrators applying the Vienna Rules had a civil law background [WWW.VIAC.EU/STATISTICS].
40
Moreover, the parties chose Danubia as a seat for their arbitration, which is a civil law country [P.O.
2, PARA 68]. It is well recognised, that the choice of the seat often reflects the idea the parties have of
the procedure to be followed [WEIGAND IN: WEIGAND P.18, PARA 34; REDFERN/HUNTER, CH6 PARA 17;
WAGNER IN: WEIGAND P. 749, PARA 211]. Although “the provisions of the [Code of Civil Procedure]
dealing with the production of documents in state court proceedings are not applicable, the right of
an arbitral tribunal to order the production of documents has to be seen against this background”
[SACHS/LÖRCHER IN: BÖCKSTIEGEL/KRÖLL/NACIMIENTO, P. 284, PARA. 22].
41
Lastly, the agreement of the parties to exclude discovery confirms that the approach must be even
more restrictive than the usual approach in arbitration. Even if the Tribunal interpreted Art. 20
Framework Agreement to mean that some sort of document production is still permitted, the
agreement evidences the parties wish to limit discovery.
42
Under the restrictive civil law-approach, a request for documents is only permitted to obtain
evidence
not
to
obtain
information
[DEMEYERE,
P.
248/249;
SACHS/LÖRCHER
IN:
BÖCKSTIEGEL/KRÖLL/ NACIMIENTO, P. 285]. There is a significant difference between the two. The
presumption in civil law jurisdictions is that parties must prove their case based on their own
MEMORANDUM FOR RESPONDENT8
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
evidence [GERMAN CCP § 420; SWISS CPC § 303; FRENCH CCP § 138, 139]. Document production
cannot be a fishing expedition. It can merely be requested in exceptional circumstances to prove
facts already known, not to establish facts yet unknown.
43
If one applies this strict approach to the current case it becomes clear that CLAIMANT’s request must
be rejected. CLAIMANT is making a speculative attempt to obtain a significant information about its
main competitor. CLAIMANT does not state precisely what facts it needs evidence for. Instead, it
argues that the “full disclosure” will “give the proper idea” about RESPONDENT’s motives for nondelivery, about the losses that CLAIMANT suffered and generally so “that truth can come out and
justice can be served to the Claimant” [CLAIMANT MEMO. P. 27, PARA. 38]. This is clearly a request
for information, not a request for evidence.
44
Considering the parties’ background, their choice of arbitration rules and their choice of seat, the
Tribunal should adopt the restrictive civil law approach and reject CLAIMANT’s request because it
does not request a particular document for evidentiary purposes.
2.1.2 EVEN
APPLYING THE
IBA RULES
TO THE PERMITTED SCOPE,
CLAIMANT’S
REQUEST DOES NOT SUFFICIENTLY SPECIFY THE REQUESTED CATEGORY OF
DOCUMENTS.
45
RESPONDENT does not dispute CLAIMANT’s assertion that the IBA Rules can serve as useful
guidelines, even where they are not applicable, as in the present case [CLAIMANT MEMO. P. 23, PARA
20, ICSID CASE NO. ARB/01/11]. It must however be stressed that CLAIMANT’s assertion of how
universal their application is to the taking of evidence, is greatly exaggerated. In fact, it follows
from the very same survey that CLAIMANT quoted [CLAIMANT MEMO.
P.
24, PARA. 25] that in 40 %
cases the IBA Rules are not used, not even as guidelines [QMUL ARBITRATION SURVEY 2015, P.36].
46
In fact, each Tribunal must make an individual assessment in each individual case of whether it
would be proper to apply them. The request for document production can be completely resolved by
applying the Vienna Rules (see above 2.1.1). It is therefore not necessary to consult the IBA Rules
for further considerations.
47
Even if the Tribunal were to apply the IBA Rules, CLAIMANT’s request is too broad under Art. 3
IBA Rules. Art. 3 IBA Rules requires that the request limits the timeframe, the type of documents
and their content [IBA REVIEW SUBCOMMITTEE, P. 9]
48
CLAIMANT does not sufficiently limit the type or the content of the requested documents, but asks
for all documents in relation to the negotiations and the purchase of Mata Weltin 2014 [CLAIMANT
MEMORANDUM FOR RESPONDENT9
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
MEMO, P. 19,
PARA.
2]. This covers each and every single document ever exchanged between
SuperWines and RESPONDENT. The cooperation between SuperWines and RESPONDENT so far only
ever dealt with Mata Weltin 2014. There is almost no document conceivable that would not be
covered by CLAIMANT’s request. Importantly, CLAIMANT does not limit the requested documents to
documents that contain the purchase price, but requests all documents exchanged in the negotiation
[P.O. 2, PARA 26]. CLAIMANT also fails to provide what specific type of document it requests.
49
In the case Caribbean Bank Limited v. The Government of Belize [ICSID 2014], a request by the
respondent for “[a]ll written communications between the Caribbean Bank and Belize Telemedia
regarding the Loan, Loan Facility Agreement or Mortgage Debenture.” was rejected as
insufficiently specified. The Tribunal rejected the request pursuant to Art. 3 IBA Rules it was not
sufficiently limited with regard to type and content but rather asked for all communication between
two business partners. Likewise, the tribunal rejected the request for production of “[a]ll minutes of
the Board of Directors of the Caribbean Bank, the Credit Committee of the Bank, or any other
committee of the Bank regarding the Loan, Loan Facility Agreement or Mortgage Debenture”
because the content of the requested documents was not sufficiently narrow. The Tribunal should
regard this decision as persuasive authority.
50
In sum, CLAIMANT does not make a specific request, because it does not sufficiently limit the type
nor the content of the documents at request.
2.2 CLAIMANT REQUESTS DOCUMENTS THAT ARE NOT MATERIAL AND RELEVANT.
51
Contrary to CLAIMANT’s assertions [CLAIMANT MEMO, P. 19 PARA. 3, P. 22, PARA. 16], the documents
requested are not material and relevant to the outcome of the case. As CLAIMANT admits [CLAIMANT
MEMO,
P.
19
PARA.3],
relevance and materiality are generally accepted prerequisites for the
production of documents under both the Vienna Rules [VIENNA RULES HANDBOOK, ART. 29, PARA. 12]
and the IBA Rules [IBA RULES COMMENTARY ART. 3, PARA 129].
52
Documents are material and relevant, if there are no other documents stating the necessary
information and if their content could determine the outcome of the proceeding [IBA RULES
COMMENTARY, ART. 3 PARA 136]. CLAIMANT can rely on other documents to calculate how much loss
it suffered from the non-delivery of 5.500 bottles. CLAIMANT made a substitute purchase for the full
amount of bottles and sold all of the substitute bottles [P.O. 2, PARAS 10-12]. CLAIMANT can simply
calculate its losses by determining how much more it had to pay for the substitute purchase. These
documents are in CLAIMANT’s possession. CLAIMANT argues that the documentary evidence is
necessary because “without these documents Claimant is not able to calculate the damages it is
10
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
claiming” [CLAIMANT MEMO. P. 19
PARA.
3]. With this, CLAIMANT makes a fundamental error.
Damages are based on loss, CLAIMANT should determine its own losses even if it takes more effort.
This is not a situation where the other party’s documents are “material” and that warrants an order
for document production.
53
RESPONDENT accepts that if the Tribunal accepts CLAIMANT’s mystifying damages claim based not
on its loss but on RESPONDENT’s gain, then a document containing the price might be relevant.
Rather than claiming damages under that conventional analysis (which it could easily prove),
CLAIMANT chose to base its claim on an extravagant calculation, amounting to a disgorgement
claim, which it cannot prove. This, however, is CLAIMANT’s prerogative but also CLAIMANT’s risk.
Therefore, the Tribunal should postpone its decision on the production until it has decided on the
merits whether such an extravagant claim is actually justified (cf. infra p. para ).
2.3 THE DOCUMENTS ARE CONFIDENTIAL.
54
Even if the documents were specific and material, the Tribunal should not order RESPONDENT to
produce them, because they are confidential. Arbitral tribunals must not force parties to submit
“trade secrets and confidential information to avoid unnecessary damage on the parties” [PERKINS,
P.
279.] This exception is generally accepted in international arbitration [LEW/MISTELIS/KRÖLL, P.
567 CH. 22, PARA. 51]. It is also explicitly confirmed by Art 9 (2)(e) IBA Rules. This provision states
that document production can be denied for “grounds of commercial (…) confidentiality”. The
official IBA commentary explains that “price calculation and agreements with suppliers and
customers” are examples of commercially confidential documents, which a party must not be forced
to produce [IBA COMMENTARY, ART. 9(2)(E)].
55
CLAIMANT requests documents containing precisely that kind of information. CLAIMANT requests all
documents “pertaining to communications between Respondent and SuperWines in regard to the
purchase of diamond Mata Weltin 2014” and “in particular all documents relating to the number of
bottles purchased and the purchase price”. This request is directed at a full disclosure of
RESPONDENT’s business secrets.
56
While price calculation is generally commercially confidential, this applies even more to the pricing
of wine. Wine is not just a drink like orange juice. The pricing of wine depends on a number of
factors, not all of them rational [BOMBRUN/SUMNER, P.6] and is “fueled by fashion and rumours”
[LECOQUE/VISSER, P.1]. RESPONDENT in particular is known to engage in an individual pricing for
each customer [P.O. 2,
PARA.
61]. Factors such as personal loyalty or long term strategies for
positioning on a new market also play an important role which makes RESPONDENT’s pricing policy
11
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
consciously secret [P.O. 2,
PARA.
61]. Disclosing this sensitive information to CLAIMANT, would
unjustly strengthen CLAIMANT’s and would seriously damage RESPONDENT’s negotiation position
on the market.
57
Moreover, it would harm SuperWines if CLAIMANT would be over informed about their business.
Since SuperWines is CLAIMANT’s main competitor [P.O. 2,
business in the High-end wine market [CLAIM,
PARA
PARA
26], and also plans to expand its
7], SuperWines opposes the disclosure of its
purchase prices to CLAIMANT. There was an understanding that business negotiations with
SuperWines would be kept private [P.O. 2,
PARA.
61]. The documents therefore also need to stay
private to secure an uninvolved third party from unnecessary exposure.
58
What CLAIMANT could never access in the normal course of business, it should not be allowed to
obtain under the guise of a discovery request in this arbitration.
3.
THE TRIBUNAL SHOULD DECIDE THE MERITS OF CLAIMANT’S
CLAIM BEFORE IT CONSIDERS CLAIMANT’S PROCEDURAL DOCUMENT
REQUEST.
59
Should the Tribunal conclude that CLAIMANT’s request is in line with the parties’ agreement and the
applicable arbitration rules, it should at least postpone the order for production pending its analysis
of CLAIMANT’s controversial damages claim (Issue III). According to the procedural rules of this
arbitration and as shown above [ART. 29 VIENNA RULES HANDBOOK], a request for documents must be
material to the outcome of the case. Tribunals normally determine whether requested documents are
material based on the requesting party’s prima facie showing of the requested documents’ relevance
[IBA RULES COMMENTARY,
P.
8]. Where the Tribunal considers the materiality of requested
documents to be unclear at an earlier stage of the proceeding, it may postpone its decision until it
has decided the conditional issues that would make the requested documents relevant. [O’MALLEY, P.
58
PARA.
3.76; POUDRET/ BESSON/ BERTI/ PONTI, P. 556]. This approach is necessary because the
Tribunal must balance the confidentiality of the documents against its duty to conduct a fair hearing.
By postponing its decision until after considering the damages claim, the Tribunal can achieve this
balance.
60
In this case, CLAIMANT has requested confidential documents from RESPONDENT. The necessity for
the production of these documents is based on the controversial calculation of damages relied upon
by CLAIMANT. These documents do not affect the legal arguments of either party. They merely
contain a number against which CLAIMANT wishes to calculate damages. Therefore, these
12
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
documents need never be produced unless the Tribunal accepts CLAIMANT’s claim for
disgorgement.
61
In sum, the Tribunal may postpone making a decision on CLAIMANT’S document request until there
is actual need for the information requested. RESPONDENT submits that this sequencing would be the
most effective way for the Tribunal to balance the principles of confidentiality and fair hearing.
4.
62
THE TRIBUNAL CANNOT DRAW AN ADVERSE INFERENCE.
CLAIMANT argues that the Tribunal should draw an adverse inference if RESPONDENT fails to give
“full disclosure of the documents requested in the case” [CLAIMANT MEMO. P. 22, PARA 19,CITING TO
AMERICAN-MEXICAN CLAIMS COMMISSION, 31ST MARCH 1926]. This is a misinterpretation of both the
rule and its application.
63
The correct rule is, if a party does not comply with an order to produce documents without
reasonable excuse, a tribunal may infer that those documents would be adverse to the interests of
that party [VIENNA RULES HANDBOOK, ART. 29,
PARA
11; REDFERN/HUNTER,
CH
6,
PARA
113]. An
adverse inference can be drawn by the Tribunal following an order to produce documents; not as
CLAIMANT argues following a request to produce by CLAIMANT [CLAIMANT MEMO P. 22,
PARA
19].
Besides, RESPONDENT has given detailed arguments as to why an order to produce the requested
documents should not be made.
64
As to the application, it is unclear what the Tribunal could infer if RESPONDENT were to refuse to
produce documents. It is not possible to negatively infer an unknown number. It is only possible to
negatively infer specific allegations [ICSID ARB/99/01]. For instance, a claimant alleges that a
respondent has a document proving Mr. X attended a specific meeting. Should the respondent refuse
to produce this document, a tribunal could draw a negative inference against the respondent and
assume that indeed Mr. X was at that meeting. However, if the claimant alleged that respondent had
a document detailing who was at a specific meeting, a tribunal could not negatively infer who was
there. CLAIMANT recognizes this problem [CLAIMANT MEMO. P. 25, PARA 34], but does not recognize
that the latter example applies to the current. The latter example applies to the current case.
CLAIMANT requests documents to discover how much RESPONDENT got paid by SuperWines. The
Tribunal cannot negatively infer that number.
65
In sum, drawing an adverse inference is not possible in this case because the Tribunal has not yet
made an order to produce, RESPONDENT has given reasonable excuse and it is not possible to
negatively infer the price SuperWines paid.
13
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
5.
66
ISSUE II
CONCLUSION
In conclusion, the parties agreed in the Framework Agreement to exclude document production.
This follows from the plain language of the clause which allows “no discovery”, from the parties’
intent and application of the contra proferentem rule. Even if the only consequence of the parties’
agreement was to limit the scope of discovery to the normal rules of evidence in arbitral procedure,
the request is too broad, not material and improperly demands confidential information. Finally, if
the Tribunal considers the request to be admissible under both the parties’ agreement and the
applicable rules, it should postpone its decision pending the outcome of the damages claim
discussed in Issue III para .
ISSUE II: CLAIMANT CANNOT REQUEST COMPENSATION FOR ITS LEGAL
COSTS
67
CLAIMANT’s entire claim for reimbursement of its legal costs [CLAIMANT MEMO. P. 32-35] is without
merit. CLAIMANT and RESPONDENT both incurred legal costs in two disputes prior to this arbitration.
The first was an interim relief proceeding that CLAIMANT initiated in December 2015 [CLAIM, PARA.
10]. RESPONDENT’s CEO could not defend the case because he did not want to escalate the dispute
and he underwent open heart surgery during that time [RESPONSE, PARA. 19]. As a result, the order
was granted [RESPONSE, PARA. 19]. The second dispute was a motion for negative declaratory relief,
this time initiated by RESPONDENT [RESPONSE, PARA. 22]. It aimed to receive a declaration of nonliability. For that it was first necessary to clarify the arbitration clause. RESPONDENT considered it to
be void, because the clause did not designate an existing arbitration institution [EXHIBIT R1, EXHIBIT
C1]. CLAIMANT did not reply to RESPONDENT’s attempts at clarifying the legal uncertainty [EXHIBIT
R1, 14TH JANUARY E-MAIL]. The MHC finally decided that the arbitration clause was valid [EXHIBIT
C9]. It issued an order for costs in both cases. The Court decided, in line with Mediterranean
procedural law, that each party has to bear its own costs [EXHIBITS C8, C9].
68
CLAIMANT now makes a convoluted second attempt to get RESPONDENT to pay, this time relying on
a mystifying array of arguments and legal principles to try and show that legal fees are recoverable
under the CISG [CLAIMANT MEMO. P. 32, PARA. 58]. However, Court fees and attorneys’ fees cannot
be claimed under Art. 74 CISG, but only under the applicable procedural law (1). Moreover,
permitting CLAIMANT to claw-back of legal costs would circumvent the MHC’s final and binding
decision (2). Even ignoring these pressing concerns, CLAIMANT cannot claim costs incurred for
interim relief, because it was not reasonable for CLAIMANT to immediately involve a court (3).
Likewise, CLAIMANT cannot claim back the costs it incurred in the declaratory relief. RESPONDENT
14
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE II
should not be sanctioned for its good faith attempt to clarify the legal situation. In any event, the
CISG does not provide for damages for the breach of an arbitration agreement (4). Lastly, even
assuming CLAIMANT could claim fees of previous proceedings, it can only claim a fraction of its
astronomical attorney fees. Concluding the contingency fee agreement violated CLAIMANT’s duty to
mitigate its losses (5).
1.
ATTORNEY'S FEES CANNOT BE AWARDED UNDER ART. 74 CISG,
BUT ONLY UNDER THE APPLICABLE PROCEDURAL LAW.
69
The Tribunal should deny CLAIMANT’s request to award the attorneys’ fees incurred in the
proceedings before MHC. CLAIMANT based this request exclusively on the CISG which is, however,
not applicable. First, the Mediterraneo Code of Civil Procedure is the exclusive governing law with
respect to all legal costs CLAIMANT incurred. As CLAIMANT was well aware [CLAIM,
PARA.
13].
Mediterraneo requires each litigant to pay its own attorneys’ fees and half of the court fees (1.1).
Second, the CISG was never intended to disrupt the application of the procedural law of the forum.
Indeed, the drafting history and subsequent analysis of the CISG demonstrate that no award of
attorneys’ fees is possible under Art. 74 CISG (1.2).
1.1 THE
PROCEDURAL LAW OF
MEDITERRANEO
EXCLUSIVELY CONTROLS THE
ALLOCATION OF LEGAL COSTS.
70
The procedural law of Mediterraneo exclusively controls the allocation of legal costs.
71
Attorneys’ fees and court fees are governed by procedural law. Procedural law governs all matters
pertaining to the “machinery” of the courts, i.e. the proceedings themselves [SÄCKER IN: MÜKO BGB,
EINLEITUNG
PARA.
6, 7]. Examples would be matters such as jurisdiction of the courts, pleadings,
evidence, appeal, execution of judgments, representation of counsel and cost [WEIGEND IN: THE NEW
ENCYCLOPAEDIA BRITANNICA]. Substantive contract law on the other hand regulates legal rights and
duties between private individuals. Attorney fees for legal representation in a litigation as well as
court fees pertain to the proceeding, not to the rights and duties between the parties. Thus, they are
almost universally characterized as procedural and not as substantive [SEE, E.G., U.S. FEDERAL RULES
OF
CIVIL PROCEDURE 54; GERMAN CCP § 91; ENGLAND CIVIL PROCEDURE RULES 1998 PART 44;
ERASMUS, P. 1 ET SEQ., BÜHLER, PP.249 ET SEQ].
72
The characterization as a procedural matter is not just wordplay but it has important legal
consequences. Procedural law forms a comprehensive and exclusive regime [HUBER/MULLIS, P.
278]. “Comprehensive” means that the procedural law must be applied as a whole and cannot be
15
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE II
selectively ignored with regard to attorneys’ fees [FLECHTNER,
P.
153; LOOKOFSKY, ZAPATA
COMMENTARY, PP. 1 ET SEQ.]. “Exclusive” means that a procedural matter cannot at the same time be
governed by substantive law [HUBER/MULLIS, P. 278; U.S. COURT
OF
APPEALS, 7TH CIRCUIT, 19TH
NOVEMBER 2002 ].
73
Thus, CLAIMANT’s legal costs – attorneys’ fees and court fees – are a procedural matter which is
exclusively controlled by the Mediterraneo Code of Civil Procedure and no recourse to substantive
law should be allowed.
1.2 THE CISG
REFLECTS THE PRINCIPLE THAT THERE IS A CLEAR DISTINCTION
BETWEEN SUBSTANTIVE DAMAGES AND PROCEDURAL COSTS.
74
The CISG is designed to recognize and accept this distinction between procedural and substantive
law [DISTRICT COURT ROVERTO, 28TH APRIL 2004]. The exclusion of procedural matters such as legal
costs is supported by the drafting history and the CISG’s delineated scope. For these reasons, legal
fees are not to be awarded under the CISG. CLAIMANT’s reliance on judgments awarding prelitigation costs and debt collecting costs [CLAIMANT MEMO. P. 33, PARA. 61] is misleading.
75
First, the Convention is intentionally limited to substantive matters, excluding procedural issues
such as costs. The drafters of the CISG considered it:
76
“[…] inappropriate for the Convention, which relates to the international sale of goods, to deal with
matters of evidence or procedure” [HONNOLD, P. 330,
PARA.
178; LOOKOFSKY/FLECHTNER,
PP.
5
ET
SEQ.].
77
The limitation to substantive issues is apparent from the delineated scope of the CISG. According to
Art. 4 CISG, the Convention “governs only the formation of the contract of sale and the rights and
obligations of the seller and the buyer arising from such a contract”. The allocation of legal costs is
not an obligation arising from the sales contract. It is an obligation arising from a court’s procedural
order for costs [DORDEVIC, PP. 1 ET SEQ.]. Thus, it is the generally accepted view that an award of
attorney’s fees falls outside the CISG’s scope of application [SCHL./SCHWENZER (GERMAN EDITION),
ART. 4,
PARA.
33; SCHMIDT-AHRENDTS/CZARNECKI
IN:
BRUNNER, ART. 74,
PARA.
31; SCHWENZER
IN:
SCHL./SCHWENZER (GERMAN EDITION), ART. 74, PARA. 29; SWISS DISTRICT COURT 21ST FEBRUARY 2005;
SWISS SUPREME COURT, 11TH JULY 2000].
78
Second, the exclusion of legal costs from the CISG’s scope has been confirmed many times in case
law. The leading case on the issue of attorneys’ fees under the CISG is the so called “Zapata Case”,
decided by an U.S. Court of Appeals [U.S. COURT OF APPEALS, 7TH CIRCUIT, 19TH NOVEMBER 2002],
16
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
also cited by CLAIMANT [CLAIMANT MEMO, P. 33,
ISSUE II
PARA.
62]. The facts in that case are strikingly
similar to the present dispute. The claimant (Zapata Hermanos Sucesores Ltd.) demanded
compensation for a breach of contract that the respondent (Hearthside Baking Company Inc.)
committed. It also claimed an award of its legal costs in the amount of USD 550.000. The U.S.
Court of Appeals rejected Zapata’s claim for legal costs and stated, “The Convention is about
contracts, not about procedure. The principles for determining when a losing party must reimburse
the winner for the latter's expense of litigation are usually not a part of a substantive body of law,
such as contract law, but a part of procedural law.” [U.S. COURT
OF
APPEALS, 7TH CIRCUIT, 19TH
NOVEMBER 2002]. Many U.S. district Courts followed this decision, confirming that “attorneys' fees
are a procedural matter governed by the law of the forum” [U.S. DISTRICT COURT NORTHERN
DISTRICT
OF
ILLINOIS, E.D.; 29TH JANUARY 2003, U.S. DISTRICT COURT NORTHERN DISTRICT
ST
ILLINOIS, E.D.; 21 MAY 2004, U.S. DISTRICT COURT FOR
THE
OF
WESTERN DISTRICT OF PENNSYLVANIA;
25TH JULY 2008]..
79
CLAIMANT incorrectly relies on German Cases which awarded damages for pre-litigation costs and
costs of out-of-court debt collecting [CLAIMANT MEMO. P. 33, PARA. 61]. CLAIMANT cites a decision
by the High Court Berlin (LG Berlin) without giving any further detail apart from the fact that the
decision awarded out-of-court attorney fees. With this, CLAIMANT likely refers to the decision dated
21 March 2003 by the Berlin High Court. However, CLAIMANT is misguided in its reliance on
German case law.
80
The reason why pre-litigation attorney fees and out-of-court debt collection costs are recoverable in
some cases in Germany is simple: Their allocation is not covered by the procedural law. They do
not pertain to the court proceeding itself. Thus, the exclusivity of the procedural law does not come
into play. The German Federal Supreme Court consistently rules that a substantive claim to attorney
fees is only possible, where the German Code of Civil Procedure [§91 GERMAN CCP] does not
govern [GERMAN SUPREME COURT 12TH DECEMBER 2006; GERMAN SUPREME COURT 18TH APRIL 2013;
HIGHER REGIONAL COURT FRANKFURT, 7TH MAY 2015].
81
In the present case, however, the attorneys’ fees and court fees were ruled upon in the course of a
proceeding. All costs CLAIMANT requests were covered by the Mediterranean Code of Civil
Procedure. In short, CLAIMANT demands litigation costs, not pre-litigation costs.
82
Therefore, the fees CLAIMANT incurred before the MHC are not recoverable under the CISG.
17
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
2.
ISSUE II
THE MEDITERANEO HIGH COURT’S DECISION IS BINDING FOR THE
TRIBUNAL
83
Based on the Mediterranean procedural law, the MHC has already decided that each party has to
bear its own costs [EXHIBITS C8, C9]. Now, the Tribunal may not re-allocate the attorneys’ fees
incurred because it is bound by the Mediterraneo High Court’s decision pursuant to the principle of
res judicata. CLAIMANT contends that res judicata does not apply between the MHC’s decision on
cost and an award by the Tribunal re-allocating those costs [CLAIMANT MEMO. P. 35, PARA. 67]. This
contention is incorrect.
84
Foreign state court decisions that concern the same circumstances are generally binding for an
arbitral tribunal (2.1). The requirements of res judicata are fulfilled in the present case (2.2). Even
assuming that res judicata did not apply, CLAIMANT should not be permitted to “cherry picki” the
favorable parts of the decision (2.3).
2.1 DECISIONS OF THE MHC HAVE RES JUDICATA EFFECT ON THE TRIBUNAL
85
Contrary to CLAIMANT’s argument [CLAIMANT MEMO. P. 35, PARA. 67], the Tribunal is bound by both
of the MHC’s decisions on costs according to the principle of res judicata. Res judicata is an
accepted principle in international law [BORN, PP. 3787 ET SEQ., WAINCYMER P. 692; KAJ, PP. 120 ET
SEQ.; SWISS FEDERAL SUPREME COURT; 27
86
TH
MAY 2014; ICSID CASE NO. ARB(AF)/00/3].
The policy behind this rule is “the need for an end to litigation” [SMITH,
3736; BOWER, P. 4; KAJ,
PP.
120 ET SEQ., FRIEDMAN
IN:
VAN DEN BERG;
PP.
PP.
412 ET SEQ; BORN, P.
560 ET SEQ.]. Judicial
resources must be conserved by preventing endless re-litigation of the same issues.
87
Specifically, in an international context, res judicata prevents an “eternal ping-pong” of litigation.
The policy concerns behind the doctrine of res judicata apply especially between state courts and
arbitral tribunals [ICC AWARD
ICSID CASE
BOOG
IN:
NO.
NO.
4126, BERLIN CONFERENCE
ARB(AF)/00/3; SWISS FEDERAL
ARROYO,
CH
13,
PARA.
SUPREME
ON INT.
COMM. ARB., P. 20
ET SEQ;
COURT, 27TH MAY 2014; BORN, P. 3788;
71]. This has been very recently confirmed by the Swiss Federal
Supreme Court [SWISS FEDERAL SUPREME COURT 27TH MAY 2014]. The Court decided that “The
principle of res judicata is equally applicable on an international level and governs in particular the
relationship between a Swiss arbitration tribunal and a foreign state court.” Thus, the principle of
res judicata applies between the MHC and this Tribunal.
18
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
2.2 THE
ISSUE II
REQUIREMENTS OF RES JUDICATA ARE MET FOR BOTH OF THE
MHC’S
DECISIONS
88
A decision, when recognized by the relevant tribunal, has res judicata effect if the prior decision
addresses the same parties, as well as the same judicial question and circumstances and is meant to
be a final determination of that issue [BORN, P. 3787 ET SEQ.; KAJ, P. 120 ET SEQ., FRIEDMAN IN: VAN
DEN BERG; P. 560 ET SEQ.; ICSID CASE NO. ARB(AF)/00/3; SWISS FEDERAL SUPREME COURT, 27
TH
MAY
2014]. These requirements are met in the present case.
89
First, the parties before the MHC and before the Tribunal are the same. The MHC decided a dispute
solely between CLAIMANT and RESPONDENT, as will this Tribunal.
90
Second, the prior decision deals with the same judicial question and circumstances. The litigation
process before the MHC dealt with the same issues as the arbitration at hand [EXHIBIT C8, C9].
CLAIMANT already requested the MHC to be reimbursed for its costs and the court fees [P.O. 2, PARA.
44]. Now it is repeating this request for the Tribunal [CLAIM, PARA. 30, CLAIMANT MEMO. P. 32, PARA.
57].
91
Contrary to CLAIMANT’s argument [CLAIMANT MEMO. P. 32
PARA
58], it is not decisive what legal
provision the claim is based on [MOSES, P. 199]. What counts is the content and the aim of the
request. The core of CLAIMANT’s claim before the MHC, as before this Tribunal is that it does not
want to pay its own attorney fees and court fees. Instead, RESPONDENT should pay for them. This
claim is essentially the same back then and now. CLAIMANT even claims the exact same amount– the
costs it had to pay to LawFix. [P.O. 1,
PARA.
5]. The prior decisions therefore deal with the same
judicial question and circumstances.
92
Third, the cost allocation made by the Mediterraneo High Court was meant to finally determine the
issue of cost allocation. Decisions on cost are in themselves a final and binding part of a court
decision [SCHULZ IN: MÜKO ZPO, VOR § 91, PARA. 24; SCHNEIDER, PP.353 ET SEQ .]. This is also true
with regard to the interim order. While the interim order itself was not meant to resolve the dispute
on RESPONDENT’s delivery obligation finally, the order for costs of the interim proceeding is final
and binding [CF. MOSES, P. 199].
93
Lastly, in order to bind the Tribunal, the foreign decisions would have to be recognized in Danubia
as the seat of the Tribunal. There is no indication in the record that Danubia would not recognize the
decision. The general rule in civil law countries is that foreign state court decisions will generally be
recognized, as long as no grounds for refusal are evident [BRAND, PP. 13 ET SEQ]. Danubia is a civil
law country [P.O. 2,
PARA
68]. There are no grounds for a refusal to recognise. The sole fact that
19
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE II
Mediterraneo applies a different rule for cost allocation does not hinder recognition of the decision
[CF. MEHREN, P. 278].
94
Thus, the requirements for res judicata are fulfilled. The MHC’s decision on costs concerns the
same parties, the same claim, is a final determination of the issue and can be recognized in Danubia.
Therefor the Tribunal is bound by the MHC’s decision.
2.3 CLAIMANT
SHOULD NOT BE PERMITTED TO
“CHERRY-PICK”
THE FAVOURABLE
PARTS OF THE MHC’S DECISIONS.
95
Even assuming res judicata does not apply CLAIMANT cannot circumvent the MHC’s cost decision.
CLAIMANT inadmissibly attempts to circumvent the Mediterranean cost allocation, while it relies on
the same decision for other purposes [CLAIMANT MEMO. P. 35 PARA. 69]
96
The principle of good faith, which is enshrined in the CISG, requires a party to act consistently:
[ZELLER, CH 4E; KINDLER IN: FS KAISSIS, P. 481]. When a party accepts a court decision and relies on
its outcome, it has to take both the aspects it benefits from as well as the aspects that it may
experience losses from [KINDLER IN: FS KAISSIS, P. 481]. CLAIMANT however relies on the interim
order’s binding effect [CLAIMANT MEMO. P. 35,
PARA.
70], but does not accept the cost allocation.
Likewise, CLAIMANT relies on the MHC’s second decision in its Memorandum [CLAIMANT MEMO. P.
35, PARA. 68], but does not accept the judgment’s order on costs [CLAIMANT MEMO. P. 35, PARA. 68].
This amounts to inadmissible cherry-picking which the Tribunal should not permit.
3.
THE COSTS CLAIMANT INCURRED IN ITS ACTION FOR INTERIM
RELIEF ARE NOT RECOVERABLE, BECAUSE THEY WERE UNNECESSARY
EXPENSES.
97
Even if the Tribunal decides to ignore the MHC’s decision and apply Art. 74 CISG, the costs
CLAIMANT incurred in its action for interim relief would not be recoverable. RESPONDENT does not
dispute that taking legal action is often the only and unavoidable path an aggrieved party can take.
However, recovery of expenses under Art. 77 CISG is limited to “reasonable” and “objectively
necessary expenses” [SUPREME COURT OF AUSTRIA, 6TH FEBRUARY 1996; SWISS COMMERCIAL COURT
3RD DECEMBER 2002; SCHWENZER IN: SCHL./SCHWENZER (ENGLISH EDITION,) ART. 77 PARA. 11].
98
CLAIMANT’s application for interim relief in December 2014 was unnecessary and unreasonable.
The truth is that RESPONDENT could not have delivered any wine to any of its customers at this point
even if it had wanted to. The wine was not even bottled. It was still nearly six months until it would
20
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE II
be bottled in May or June 2015 [P.O. 2, PARA. 47]. Deliveries would not start until October 2015
[P.O. 2, PARA. 16]. CLAIMANT had a binding contract at this point that would take precedence over
those that followed. Therefore, the action for interim injunction was not necessary.
99
CLAIMANT was not at immanent risk of not being delivered the wine. It was even the majority view
under Mediterranean law that the risk did not meet the necessary threshold for interim relief [P.O. 2,
PARA. 48].
4.
Therefore, CLAIMANT cannot claw its legal costs back under the guise of loss mitigation.
CLAIMANT CANNOT RECOVER THE COSTS INCURRED IN THE
DECLARATORY RELIEF BASED ON A BREACH OF THE ARBITRATION
AGREEMENT.
100
CLAIMANT requests damages for the attorneys’ fees it incurred in the proceeding for declaratory
relief before the MHC [CLAIMANT MEMO. P. 35,
PARA.
67]. It relies on Art. 74 CISG, which it
considers an appropriate remedy where a party breaches an arbitration agreement [CLAIMANT MEMO.
P. 33, PARA.62].
101
CLAIMANT’s argument ignores the facts that led to the declaratory action. The only reason
RESPONDENT initiated this state court proceeding in the first place was due to CLAIMANT’s lack of
cooperation. RESPONDENT cannot be sanctioned for its good faith attempt to clarify the legal
situation (4.1). CLAIMANT also ignores the applicable law. Damages under Artt. 45 and 74 CISG are
not an “appropriate remedy”. The CISG is not applicable to damages for breach of the arbitration
agreement (4.2). In any event, such liability would constitute a novelty under both the CISG and the
Danubian Contract Law and would not be in line with the parties’ intentions (4.3).
4.1 RESPONDENT
MUST NOT BE SANCTIONED FOR ITS GOOD FAITH ATTEMPT TO
CLARIFY THE LEGAL UNCERTAINTY BY SEEKING DECLARATORY RELIEF.
102
CLAIMANT argues that RESPONDENT breached the arbitration agreement by seeking declaratory relief
before the MHC [CLAIMANT MEMO. P. 35,
PARA.
67]. However, RESPONDENT was entitled to do so.
CLAIMANT provoked RESPONDENT to seek declaratory relief, as it refused to respond to
RESPONDENT’s urgent requests for clarification.
103
The background to RESPONDENT’s request is as follows: The parties did not use a standard clause,
but used an arbitration clause individually drafted by CLAIMANT [P.O. 2,
PARA.
53]. The clause
excluded discovery and designated the “International Arbitration Tribunal (VIAC)” as the
competent arbitration body. While there is a “Vietnam International Arbitration Centre (VIAC)”
21
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
[SEE:
HTTP://ENG.VIAC.VN/]
HTTP://WWW.VIAC.EU/EN/],
104
ISSUE II
and a “Vienna International Arbitration Centre (VIAC)” [SEE:
a Danubian “International Arbitration Tribunal (VIAC)” does not exist.
While the parties now agree that VIAC is competent to arbitrate this dispute [P.O. 1,
PARA.
1],
RESPONDENT was in reasonable doubt as to whether the clause was valid or void for uncertainty
[EXHIBIT R2]. Therefore, RESPONDENT’s lawyer sent an e-mail on 14th January 2015 [EXHIBIT R2] to
CLAIMANT, asking for clarification. It stated “We are still interested in an amicable solution […] In
our view the arbitration clause is void for uncertainty as the institution mentioned in the clause does
not exist. If you consider the clause to be an arbitration clause in favour of VIAC arbitration we
would be willing to agree on the VIAC standard clause with the addition that document disclosure is
excluded. Otherwise we will start court proceedings before the High Court in Capital City”.
[EXHIBIT R 2]. CLAIMANT, however, did not take the reasonable step and did not respond within the
time frame given. As is stated in the record, CLAIMANT “simply forgot it” [P.O. 2, PARA. 57].
105
Both the CISG and Danubian Contract Law include the aggrieved party’s duty to mitigate. Courts
have regularly held that a failure to mitigate one’s loss can lead to the total exclusion of a damage
claim [GERMAN FEDERAL SUPREME COURT, 24THMARCH 1999; AUSTRIAN SUPREME COURT OF JUSTICE,
6TH FEBRUARY 1996]. CLAIMANT could have reduced the harm it incurred due to the declaratory relief
in its entirety. That would not have taken much effort – all CLAIMANT had to do was answer
RESPONDENT’s e-mail. It knew that RESPONDENT would otherwise initiate state court proceedings –
and that it would thereby incur legal costs [EXHIBIT R2].
106
As CLAIMANT failed to fulfill its duty to mitigate, RESPONDENT is not liable for any of the legal
costs CLAIMANT incurred due to the declaratory relief proceedings.
4.2 CLAIMANT
CANNOT BASE ITS CLAIM ON
ART. 45 CISG,
BECAUSE THE
CISG
DOES NOT APPLY.
107
CLAIMANT alleges that the majority of legal writers agree that the CISG applies to arbitration
agreements [CLAIMANT MEMO. P. 35, PARA. 68]. This is only half of the truth: The majority of legal
writers agree that arbitration agreements are only subject to the CISG in relation to their formation
[OTTE
IN:
FERRARI, ART. 33 CMR,
PARA.
2; HEBER/PIPER, ART. 33 CMR,
PARA.
4; KOCH, P. 271;
ACHILLES, ART. 11, PARA. 1; STAUDINGER/MAGNUS, ART. 11, PARA. 7; SAENGER IN: BECK ONLINE ART. 11,
PARAS.
5
ET SEQ.].
The question whether damages can be awarded for a breach of arbitration
agreement, however, is not a question of formation, but a question of the arbitration agreement’s
effects.
108
The effects of an arbitration agreement are not governed by the CISG. According to Art. 4 CISG,
22
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE II
the convention only applies to obligations arising from a sales contract. The obligation to arbitrate
arises from the arbitration agreement which is a separate contract from the sales contract
[ARGENTINA COMMERCIAL COURT 14TH OCTOBER 1993, GABRIEL/GIRSBERGER, P. 820; ADDOR, PP. 44 ET
SEQ.;
SWISS FEDERAL SUPREME COURT 28TH
1975; LAINÉ,
PP.
1
ET SEQ].
MAY
1915; SWISS FEDERAL SUPREME COURT 17TH
MARCH
Therefore, the obligation to arbitrate and damages based on that
obligation are not covered by the CISG [SWISS FEDERAL SUPREME COURT 11TH JULY 2000, KAROLLUS
IN: HONSELL, ART. 31 PARA. 49].
109
Consequently, CLAIMANT cannot claim damages for a breach of the arbitration agreement under
Art.45 CISG because the Convention does not govern this issue.
4.3 THE
PARTIES DID NOT INTEND TO SANCTION THE BREACH OF AN ARBITRATION
AGREEMENT WITH DAMAGES.
110
Leaving aside the question of the applicable law, the parties did not intend to allow claims for
damages because this would be an extremely unusual and inappropriate legal consequence. The
scope and effect of an arbitration agreement depends primarily on the parties’ intent [FRENCH
SUPREME COURT, 20THDECEMBER 1993].
111
First, liability based on the arbitration clause would be a complete novelty both under the CISG and
in Danubian jurisprudence. Up to now, there is no case law in Danubia dealing with damages for
breach of an arbitration agreement [P.O. 2,
PARA.
56]. Also, there is not one single case under the
CISG – and CLAIMANT did not point to one in its Memorandum [CLAIMANT MEMO. PP. 32-35] – that
awarded damages for breach of the arbitration agreement. Absent an express agreement, the
Tribunal cannot automatically assume that such was the parties’ intention [ CF. MANKOWSKI, PP. 26 ET
SEQ.; WAGNER, P. 257].
112
Second, it would be inappropriate for the Tribunal to award damages based on the arbitration
agreement. While not as intrusive as anti-suit-injunctions, damages for breach of the arbitration
agreement still port judgment on the prior proceeding’s legitimacy. This causes concerns for
international comity [ CF. HARAN, P. 161; KNIGHT, P. 510; HOUSE OF LORDS, 2ND APRIL 1998].
113
Allowing the award of damages for the breach of an arbitration agreement can lead to an endless
line of claw back litigation [KNIGHT PP. 512 ET SEQ.]. If a party was not pleased with an award or a
cost allocation, it could just commence litigation before another court. The latter could then award
the costs to the successful party of this trial. All parties involved in the dispute would be caught in a
vicious circle: “[…] The theoretical availability of damages is not particularly practicable or
desirable alterntive. This is because their assessment would entail the effective relitigation of a
23
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE II
dispute already tried […]” [BELL, P. 203].
114
Therefore, CLAIMANT cannot claim damages for a breach of the arbitration agreement.
5.
CLAIMANT FAILED TO COMPLY WITH ITS DUTY TO MITIGATE
DAMAGES UNDER
ART. 77 CISG WITH REGARD TO THE ASTRONOMICAL
LEGAL FEES IT PAID.
115
Even assuming damages for a breach of the arbitration agreement could be obtained under the
CISG, the duty to mitigate damages under Art. 77 CISG is not fulfilled . CLAIMANT failed to comply
with its duty to mitigate damages under Art. 77 CISG by entering into a success fee agreement. The
success fee promised to LawFix provided for the payment of USD 15.000 for “winning on
procedural matters” and of USD 30.000 for “winning on issues pertaining to the merits” [EXHIBIT
C10] in disputes before Mediterranean Courts [EXHIBIT C10]. In addition to the success fee, the
agreement determines a fixed hourly rate for LawFix. The rate is USD 200 per billable hour.
116
CLAIMANT violated its duty under Art. 77 CISG when it agreed to these terms. Art. 77 CISG states:
“A party who relies on a breach of contract must take such measures as are reasonable in the
circumstances to mitigate the loss.”
117
Art. 77 CISG requires a party suffering losses to take reasonable steps to mitigate its loss [GOTANDA
IN:
KRÖLL/MISTELIS/VISCASILLAS, ART. 77
PARA.
1]. Recovery of expenses is therefore limited to
“reasonable” and “objectively necessary expenses” [SCHWENZER
IN:
SCHL./SCHWENZER (ENGLISH
EDITION) ART. 77, PARA. 11].
118
The success fee was neither objectively necessary nor reasonable. First, it did not provide for any of
the usual benefits of a success fee. Second, the fee in itself was significantly too high and thus
unreasonable. Third, contrary to CLAIMANT’s contentions, LawFix was not the only law firm
willing to work for CLAIMANT.
119
First, the success fee was not beneficial to CLAIMANT. RESPONDENT does not challenge that success
fees as such are accepted in Mediterraneo [P.O. 2, PARA. 40]. Success fees and contingency fees serve
as an incentive to lawyers to represent clients with high value claims who would otherwise not be
able to afford representation [MOLITERNO/PATTO,
PARA.
58]. Thus, contingency fees are usually
calculated as a percentage of the amount that the client successfully recovers [JACKSON/RUPPERT, P.
189]. In such a scenario, a contingency fee – provided it is reasonable – is justified. In the present
case however, it is not. Both lawsuits do not come with a pecuniary gain, even if CLAIMANT wins.
The first lawsuit is an interim order preventing RESPONDENT to enter into contracts with other
24
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE II
suppliers. CLAIMANT won this proceeding, but did not recover any money. The second was a dispute
about the validity of the arbitration agreement. Again, there was no pecuniary benefit at stake. To
put it simple, winning those lawsuits did not help CLAIMANT to pay its lawyer, because it did not
recover any money.
120
CLAIMANT contends that it did not have sufficient liquid capital at its disposal to pay Mediterranean
legal fees [CLAIM, PARA. 13] This argument is surprising, considering that winning those lawsuits did
not in any way help CLAIMANT’s liquidity problems. CLAIMANT had to pay Lawfix using its own
funds, no matter the outcome of the case. And, as is apparent from the record, it had sufficient funds
to do so [EXHIBIT C 11; P.O. 2,
PARA.
41]. In this scenario, it did not make sense to agree upon a
contingency fee.
121
Second, the success was extremely overpriced. CLAIMANT argues that the fee was “reasonable and
proportionate” [CLAIMANT MEMO P. 48,
PARA
122] and that it pales in comparison to the monetary
value at stake. This statement misses the point that the agreement with LawFix only covered
litigation in front of the courts in Mediterraneo, and not the present arbitration. The matters before
the mediterranean courts where straight-forward and did not involve any complex legal issues. The
interim relief proceeding took LawFix 7 billable hours in total. The declaratory relief took 9 billable
hours. Still, CLAIMANT promised 30.000 USD and 15.000 USD respectively to LawFix for winning
on those matters.
122
The disproportionality of this payment can be seen if the amount is compared to the rates which are
usually paid. CLAIMANT paid 8 times as much as it would have paid for a partner in an average
Meditteraneo law firm. It still paid more than 6 times as much as it should have paid for a partner at
LawFix, without a success fee agreement. Paying 6 or 8 times as much as necessary is neither
reasonable nor “objectively necessary”. These figures result from the following calculation:
CLAIMANT finally paid USD 47.800, excluding the court fees, to LawFix covering both proceedings
[EXHIBIT C11]. LawFix billed 16 hours. The effective hourly rate CLAIMANT paid therefore
amounted to USD 2.987,50. The average hourly rate for a partner in Meditteraneo is USD 350 [P.O.
2, PARA 39]. For a partner of the top law firm LawFix the average hourly rate is USD 450 [P.O. 2,
PARA.
39]. Therefore, CLAIMANT paid 8, but at least 6, times as much as it should have paid. This
violates the duty to mitigate.
123
CLAIMANT tries to defend this overblown fee by pointing to the allegedly reduced hourly rate, which
CLAIMANT had to pay on top of the success fee. However, the rate of 200 USD only constitutes a
“reduced rate” in comparison to a LawFix hourly rate for a partner, which is 450 USD. An associate
at LawFix can only charge 150 USD, which is even cheaper than CLAIMANT’s “reduced” rate. The
25
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE III
crucial point is that the agreement between CLAIMANT and Lawfix does not prescribe that a partner
has to work on the case. And looking at LawFix’ bill shows that it was in fact a first year associate
that performed the legal work [EXHIBIT C11]. This can be inferred from the fact that LawFix only
billed the amount for a first year associate instead of the contractually agreed rate [EXHIBIT C11].
124
Lastly, CLAIMANT argues that hiring LawFix “was the only way CLAIMANT could afford legal
representation” [CLAIM,
PARA.
13]. However, the record tells us that CLAIMANT had the choice of
two other law firms and only chose LawFix because LawFix agreed to the contingency fee [P.O. 2,
PARA.
39]. Thus, CLAIMANT could have hired other law firms or even LawFix based on an hourly
rate.
125
Concluding this point, the fee agreement did not provide any of the usual benefits of a success fee
for CLAIMANT. The fee in itself was significantly too high, considering that it only covered limited
disputes before Mediterranean state courts and not arbitration disputes. Lastly, LawFix was not the
only law firm willing to work for CLAIMANT. In summary, the success fee agreement was neither
objectively necessary nor reasonable. Thus, CLAIMANT violated its duty to mitigate when it paid this
disproportionate amount of legal fees.
CONCLUSION
126
Court fees and attorneys’ fees cannot be claimed under Art. 74 CISG, but only under the applicable
procedural law. Moreover, permitting CLAIMANT to claw-back of legal costs would circumvent the
MHC’s final and binding decision. Even ignoring these pressing concerns, CLAIMANT cannot claim
costs incurred for interim relief, because it was not reasonable for CLAIMANT to immediately
involve a court. Likewise, CLAIMANT cannot claim back the costs it incurred in the declaratory
relief. RESPONDENT should not be sanctioned for its good faith attempt to clarify the legal situation.
In any event, the CISG does not provide for damages for the breach of an arbitration agreement .
Lastly, even assuming CLAIMANT could claim fees of previous proceedings, it can only claim a
fraction of its astronomical attorney fees. Concluding the contingency fee agreement violated
CLAIMANT’s duty to mitigate its losses.
ISSUE III: CLAIMANT IS NOT ENTITLED TO A DISGORGEMENT OF
RESPONDENT’S PROFITS
127
CLAIMANT believes to have a right to skim RESPONDENT’s profits with SuperWines, another
customer. That is incorrect. Usually, if one party has suffered any loss, it has to prove its loss so that
it can be compensated. CLAIMANT refuses to prove its own loss. Under the shield of getting a
26
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE III
compensation [CLAIMANT MEMO. P.36, PARA.72], CLAIMANT would benefit from the disgorgement in
two ways: It would get money for a “loss” which is not proven, and it could punish RESPONDENT for
contracting with its biggest competitor, SuperWines. The Tribunal should not allow such
disgorgement of profits.
128
First, due to the bad harvest, CLAIMANT would have never received the additional 5.500 bottles (1).
Second, the CISG does not provide an explicit basis for the disgorgement of profits made by the
other party (2). Third, CLAIMANT cannot demand disgorgement of profits as damages under the
general rule on damages in Art. 74 CISG (3). Fourth, there are no general principles of the CISG
that allow for disgorgement of profits (4). Lastly, the Tribunal cannot award RESPONDENT’s profits
ex aequo et bono (5).
1. DUE TO THE BAD HARVEST, CLAIMANT WAS NOT ENTITLED TO GET
THE ADDITIONAL 5.500 BOTTLES IT NOW CLAIMS DAMAGES FOR
129
CLAIMANT contends that due to the – undisputed – breach of contract, it can demand damages for
non-delivery of 5.500 bottles of wine [CF. CLAIMANT MEMO. P. 42,
PARA.
97]. That is not true. It is
important to distinguish between the undisputed breach and the solution which was found in the
end: allocating the bottles pro-rata.
130
On the one hand, it is uncontested that RESPONDENT breached the contract in its e-mail on 4th
December 2014 [EXHIBIT C7]. On the other hand and irrespective of this breach, CLAIMANT
remedied its refusal to deliver any wine, when it delivered 4.500 bottles to CLAIMANT in November
2015 [P.O. 2, PARA. 14]. These 4.500 bottles were sufficient because CLAIMANT was never entitled to
a higher amount. RESPONDENT was entitled to allocate bottles on a pro-rata basis for the following
reasons: First, during a bad harvest, pro-rata allocation is a common measure in the wine-industry.
Second, the Framework Agreement never excluded this right. Third, RESPONDENT’s allocation was
fair.
131
First, it is a common measure in the wine industry to allocate on a pro-rata basis during a bad
harvest. It is known from the record that “a pro-rata allocation of bottles available is prevailing in
the industry” [P.O.2, PARA. 31; CF. CLAIM, PARA. 21; EXHIBIT C12, PARA 2]. In a similar bad harvest in
2007, RESPONDENT also allocated the wine on a pro-rata basis [P.O. 2, PARA. 32].
132
Second, the Framework Agreement never excluded RESPONDENT’s right to allocate pro-rata in times
of a bad harvest. Art. 2 of the Framework Agreement states that RESPONDENT shall deliver each year
“up to 10.000 bottles” to CLAIMANT [EXHIBIT C1].
27
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
133
ISSUE III
As the Framework Agreement is governed by the CISG, this delivery obligation should be
interpreted in light of Art. 9(2) CISG. Pursuant to Art. 9(2) CISG, “the parties are considered,
unless otherwise agreed, to have impliedly made applicable to their contract […] a usage of which
the parties knew or ought to have known and which in international trade is widely known […]”
[EMPHASIS ADDED].
134
As already mentioned, pro-rata allocation in times of bad harvest is a trade usage of the wine
industry. Other traders in RESPONDENT’s situation would have allocated the wine in a comparable
manner [P.O. 2, PARA. 31]. CLAIMANT is a high-end wine merchant with years of experience in that
particular trade [RESPONSE, PARA. 6]. E.g. its in-house lawyer, Mrs. Lee, knew that pro-rata allocation
is a common measure in the wine industry [EXHIBIT C12, PARA. 2]. Hence, both parties knew of the
special usage to allocate the wine pro rate in times of a bad harvest. The parties did not exclude this
trade usage from their Framework Agreement.
135
Therefore, according to Art. 9(2) CISG, the Framework Agreement allows that – in times of a bad
harvest – RESPONDENT may allocate bottles pro-rata. Thus, RESPONDENT was entitled to reduce the
number of bottles CLAIMANT would receive.
136
Third, the pro-rata allocation was fair. It was clear from the outset that all of RESPONDENT’s
customers would only receive a limited amount of Mata Weltin 2014 due to the bad harvest.
RESPONDENT notified all of its customers by fax on the 3rd November 2014 [P.O. 2, PARA. 31]. At that
time, RESPONDENT had no binding orders – not even from CLAIMANT [P.O. 2, PARA. 29; EXHIBIT C2].
All customers were treated equally. CLAIMANT even received preferential treatment. SuperWines
ordered 15.000 bottles and was later supplied with 5.500 – only a third of its original order [P.O. 2,
PARAS.
PARA.
22, 24]. CLAIMANT, however, got nearly half of its original order [EXHIBITS C2, C3; P.O.1,
1]. Therefore, RESPONDENT acted in good faith from the beginning. CLAIMANT, on the other
hand, knew from the beginning that it would not receive 10.000 bottles. Despite the worst grape
harvest in many years, CLAIMANT petulantly insisted on delivery of its full order. This caused
RESPONDENT’s CEO great distress and induced an angry response [EXHIBIT C7]. To add insult to
injury, CLAIMANT now claims the profit RESPONDENT made by selling wine to another customer.
137
CLAIMANT would have never been entitled to 10.000 bottles. Therefore, CLAIMANT is not entitled to
damages arising from the non-delivery of 5.500 bottles.
28
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE III
2. UNDER THE CISG, NO PROVISION ALLOWS THE DISGORGEMENT OF
PROFITS UNDER THESE CIRCUMSTANCES
138
CLAIMANT urges the Tribunal to disgorge RESPONDENT’s profits because the CISG would allow
such disgorgement of profits [CF. CLAIMANT MEMO. P. 43, PARA. 100]. But the CISG does not contain
a provision which permits disgorgement of profits in our case.
139
The fact that CLAIMANT relies on the British Blake Case demonstrates that there is no authority in
the case law of the CISG to support a claim for disgorgement. CLAIMANT cites the Blake case to
support its opinion that “claim[s] of disgorgement of profits have been affirmed under various
domestic laws” [CF. CLAIMANT MEMO, P. 43, PARA. 101]. For the Tribunal, this case would only be of
any interest when the UK was a contracting state of the CISG, which it is not. Furthermore, the
Blake Case does not establish any authority. It deals with the memoirs of a former British
intelligence agent, Mr. Blake. Blake’s memoirs contain classified information, which he promised to
keep confidential in his employment contract. With publishing these, he breached the contract. The
court awarded the profits Mr. Blake made to the United Kingdom as damages. Even the judge Lord
Nicholls of Birkenhead stated about disgorgement that it “will have an unsettling effect on
commercial contracts where certainty is important. […] An account of profits will be appropriate
only in exceptional circumstances” [HOUSE OF LORDS, 27TH JULY 2000, EMPHASIS ADDED]. In our case,
there is a commercial contract, and it is governed by the CISG, not by English Law.
140
In principle, disgorgement claims are a matter of national unjust enrichment law, not a matter of the
CISG [HUBER IN: MÜKO BGB, ART. 74, PARA. 16; HARTMANN, P. 190]. There is only one exception in
which disgorgement of gains is admissible and this exception is not relevant here. Disgorgement is
allowed in case the buyer has to restitute the goods to the seller after the contract was terminated
[CF. ART. 84(2) CISG; MAGNUS IN: STAUDINGER, ART. 74, PARA. 18; MANKOWSKI IN: MÜKO HGB, ART.
74
PARA.
9]. If the buyer realised benefits from the delivered goods, these benefits must also be
restored to the seller [BRIDGE IN: KRÖLL (ET AL.), ART. 84, PARA. 2; FERRARI IN: FERRARI (ET AL.), ART.
84, PARA. 1; HUBER IN: MÜKO BGB, ART. 84; PARA. 1].
141
The policy behind these rules is that proprietary rights to an object include the right to its exclusive
use, including an exclusive use of the profits which have been achieved with the object [WEINRIB, P.
78; U.S. SUPREME COURT OF WASHINGTON, 25TH OCTOBER 1946]. A breach of contract, however, “is
not tantamount to the alienation of a proprietary right” [WEINRIB, P. 80;
MÜKO HGB, ART. 74,
PARA.
PARAS.
HONSELL, ART. 84,
5-6; WEBER
IN:
9; FOUNTOULAKIS
IN:
PARA.
CF. ALSO
MANKOWSKI
IN:
SCHL./SCHWENZER (GERMAN EDITION), ART. 84,
1-3]. CLAIMANT never owned the 5.500 bottles.
29
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE III
RESPONDENT never delivered them. They are RESPONDENT’s property, and RESPONDENT is the only
one who had the right to its exclusive use.
142
Hence, disgorgement of profits has no relevance to CLAIMANT’s damage claim.
3. RESPONDENT’S PROFITS CANNOT BE AWARDED AS DAMAGES UNDER
ART. 74 CISG
143
CLAIMANT contends that it would be allowed to disgorge RESPONDENT’s profits unter Art. 74 CISG
[CLAIMANT MEMO. P. 41, PARAS. 94 ET SEQ.]. But Art. 74 CISG does not allow such disgorgement.
144
Art. 74 CISG requires a loss. But the profits CLAIMANT lost are not the profits RESPONDENT earned:
There is no legal relationship with CLAIMANT’s alleged loss of profit and RESPONDENT’s sale of
inventory to its customers (2.1). Even if there was a relationship between RESPONDENT’s sales
receipts and CLAIMANT’s potential profits under the Framework Agreement, CLAIMANT has not
sufficiently substantiated that it suffered a loss as required in Art. 74 CISG (2.2).
3.1 CLAIMANT
MUST NOT CALCULATE ITS LOSS ON THE BASIS OF
RESPONDENT’S
PROFITS.
145
RESPONDENT’s profits cannot be awarded pursuant to Art. 74 CISG as CLAIMANT requests
[CLAIMANT MEMO,
P.
41,
PARA.
94
ET SEQ.].
CLAIMANT confuses its own lost profits with
RESPONDENT’s realized profits. First, lost profits under Art. 74 CISG cannot be calculated with the
infringer’s profits. Second, RESPONDENT’s profits with Superwines do not equate CLAIMANT’s loss.
146
First, CLAIMANT cannot calculate its lost profits with RESPONDENT’s profits in general. Art. 74
CISG only allows for compensation of the innocent party’s loss:
“Damages for breach of contract by one party consist of a sum equal to the loss, including loss of
profit, suffered by the other party as a consequence of the breach.” [ART. 74 CISG,
EMPHASIS
ADDED].
Thus, Art. 74 CISG in no way addresses profits made by the breaching party [MANKOWSKI IN: MÜKO
HGB, ART. 74, PARA. 9; HONSELL SJZ, P. 361].
147
Yet, instead of demanding compensation for its own lost profits, CLAIMANT asserts that it should be
awarded RESPONDENT’s profits as part of its damages, “even if that includes further profits” [P.O. 1,
PARA. 5(1)(C)].
148
But Art. 74 does not grant the disgorgement of profits, neither expressly, nor impliedly [SCHWENZER
30
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
IN:
ISSUE III
SCHL./SCHWENZER (ENGLISH EDITION), ART. 74,
PARA
43; MANKOWSKI
IN:
MÜKO HGB, ART. 74,
PARA. 9 ET SEQ.; HARTMANN, P. 197; ACHILLES, ART. 74, PARA.8].
149
CLAIMANT aims at disgorging all profits RESPONDENT made from selling 5.500 bottles of Mata
Weltin wine to Superwines. These profits exceed a compensation of CLAIMANT’s potential (and to
this day unsubstantiated) losses. Such a claim is not permissible under Art. 74 CISG.
150
Second, even if calculating loss pursuant to the infringer’s profits was allowed, CLAIMANT is not
entitled to receive the profit made with SuperWines in particular. RESPONDENT produced 65.497
bottles of Mata Weltin 2014 – hence it has a wide spectrum of customers [P.O. 2,
PARA.
49]. Yet,
CLAIMANT particularly demands the profits RESPONDENT made by trading with SuperWines –
CLAIMANT’s biggest competitor [P.O. 1, PARA. 5(1)(C); P.O. 2, PARA. 26]. Allegedly, these particular
5.500 bottles “belonged to the Claimant” [CLAIMANT MEMO, P.44,
PARA.106].
This is wrong.
RESPONDENT never allocated bottles originally belonging to CLAIMANT to SuperWines, as it
submitted its offers for both on the very same day [EXHIBIT C3; P.O. 2, PARA. 22]. Rather, CLAIMANT
received preferential treatment. SuperWines ordered 15.000 bottles and was later supplied with
5.500 bottles – only a third of its original order [P.O. 2,
PARAS.
22, 24]. CLAIMANT, however, got
nearly half of its original order [EXHIBITS C2, C3; P.O. 1, PARA. 1].
151
Thus, CLAIMANT cannot calculate its losses pursuant to the profits RESPONDENT made by selling
5.500 bottles to Superwines.
3.2 CLAIMANT FAILED TO PROVE THAT IT SUFFERED A LOSS AS REQUIRED BY ART. 74
CISG.
152
In order to claim lost profits under Art. 74 CISG, CLAIMANT must prove them concretely
[MANKOWSKI
IN:
MÜKO HGB ART. 74,
PARA.
9; SOENGER
IN:
FERRARI (ET
AL.),
ART. 74,
PARA.
7;
BRUNNER, ART. 74, PARA. 54; HIGHER REGIONAL COURT KOBLENZ, 22ND APRIL 2010]. Lost profits must
be established with reasonable certainty because the Tribunal may not automatically assume that the
loss exists [GOTANDA IN: KRÖLL (ET AL.), ART. 74, PARA. 26 ET SEQ.; MANKOWSKI IN: MÜKO HGB ART.
74.
PARA.
10]. Therefore, CLAIMANT bears the burden of proof [CF. KOLLER
IN:
HONSELL, ART. 74,
PARA. 45;BRUNNER, ART. 74, PARA. 58].
153
CLAIMANT failed to substantiate that it suffered any loss – albeit an unquantifiable loss – at all. It did
not prove that it made less profit by selling 5.500 bottles of Vignobilia’s wine instead of
RESPONDENT’S wine. First, it inadmissibly tries to “facilitate” a calculation of its own loss by
regarding RESPONDENT’s profits. Second, even if such a “facilitation”-rule existed, CLAIMANT’s
facts do not fulfil its own rule. Third, even if the Tribunal assumed that CLAIMANT suffered a loss
31
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE III
after selling the Wine from Vignobilia Ltd. RESPONDENT’s actions were not the cause in fact of
CLAIMANT’s purported losses.
154
First, CLAIMANT even admits that it could not quantify its own losses [CF. CLAIMANT MEMO. P. 43,
PARA.
103]. Instead, CLAIMANT simply demands the profit RESPONDENT made by selling 5.500
bottles to Superwines [CLAIMANT MEMO. P. 43, PARAS. 100 ET SEQ.]. Taking RESPONDENT’s profits as
its own loss would be “a way of calculating the promisee’s damages in cases where these are
otherwise difficult or impossible to prove” [CLAIMANT MEMO. P. 43, PARA. 102]. Thereby CLAIMANT
uses RESPONDENT’s profits to facilitate its own calculation of damages. But such a “facilitation” rule
does not exist under Art. 74 CISG [MANKOWSKI IN: MÜKO HGB, ART. 74, PARA. 9; HONSELL SJZ, P.
361].
155
RESPONDENT’s profits are not a factor involved in calculating CLAIMANT’s losses. To award
damages, Art. 74 CISG requires the aggrieved party to suffer lost profits or other foreseeable loss
[BRUNNER, ART. 74, PARA. 5; SCHÖNLE/KOLLER IN: HONSELL, ART. 74, PARA. 1; HUBER/MULLIS, PP. 268
ET SEQ.;
PARA
ACHILLES, ART. 74, PARA. 4; SCHWENZER IN: SCHL./SCHWENZER (ENGLISH EDITION), ART. 74,
18]. Lost profits may include every increase in assets that was prevented by the breach
[SCHWENZER IN: SCHL./SCHWENZER (ENGLISH EDITION), ART. 74, PARA 36; MANKOWSKI IN: MÜKO HGB
ART. 74, PARAS. 9 ET SEQ.; KOLLER IN: HONSELL, ART. 74, PARAS. 12 ET SEQ.]. The infringer’s profits are
not a factor involved in calculating the aggrieved party’s loss [SUPRA 2.1; MANKOWSKI
IN:
MÜKO
HGB, ART. 74, PARA. 9; HONSELL SJZ, P. 361]. Therefore, CLAIMANT cannot calculate its loss with the
profits RESPONDENT made by selling 5.500 bottles of Mata Weltin 2014 to Superwines.
156
Second, even if the Tribunal could “facilitate” the calculation of damages by looking at
RESPONDENT’s profits, CLAIMANT would still need to prove that it suffered some loss, albeit an
unquantifiable one. However, CLAIMANT cannot prove that it suffered a loss, because it successfully
managed to mitigate all of its losses by making a substitute purchase. As CLAIMANT concedes, when
a substitute purchase is made the aggrieved party should calculate its losses pursuant to Art. 75
CISG. [CLAIMANT MEMO. P. 49 PARA. 126]. This would be the difference between the two purchase
prices. The reality is that CLAIMANT substituted one award-winning, high-end Mata Weltin wine
from Mediterraneo with another award winning, high-end Mata Weltin wine from Mediterraneo
[P.O. 2, PARAS. 10, 11, 13] and that all of CLAIMANT’s customers were more than happy to accept the
Vignobilia wine as a substitute [P.O. 2,
PARA.
12]. The two purchase prices were almost identical.
Thus, CLAIMANT failed to prove that it suffered any loss by substituting RESPONDENT’s Mata Weltin
wine with Vignobilia’s Mata Weltin wine.
157
Third, even if the Tribunal assumed that CLAIMANT suffered a loss after selling the wine from
32
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
ISSUE III
Vignobilia Ltd. CLAIMANT would not have made the expected profit but for the breach anyway. The
key to this is CLAIMANT’s business model. Out of the 6.500 pre-orders, only 800 would have taken
the bottles even if the price would be up to 50% higher than in the previous year [P.O. 2, PARA. 7].
The remaining 5.700 pre-orders were highly uncertain. Those customers were willing to buy the
wine if the price was not 5% higher than in the previous year [P.O. 2, PARA. 6]. However, if the wine
was offered at a higher price, they were free to cancel their pre-orders [P.O. 2, PARA. 6]. Compared to
the price of Mata Weltin 2013, the price of Mata Weltin 2014 increased more than 5% [P.O. 2,
PARAS.
5, 14]. Hence, it is not certain if and how many of CLAIMANT’s customers would have
cancelled their pre-orders. Therefore, CLAIMANT can only prove a very small amount of its
expectation interest.
4. GENERAL PRINCIPLES OF THE CISG BAR THE DISGORGEMENT OF
PROFITS.
158
In pursuit of its novel claim for disgorgement of RESPONDENT’s profits, CLAIMANT apparently
resorts to the argument that the general principles of the CISG somehow allow this unconventional
remedy [CLAIMANT MEMO. P. 43,
PARA.
100]. But the disgorgement of profits through a damages
award would in fact contravene two of the Convention’s underlying principles: CLAIMANT would
inadmissibly be overcompensated (4.1). RESPONDENT would inadmissibly be punished (4.2).
4.1 OVERCOMPENSATION IS NOT ALLOWED.
159
CLAIMANT contends that there is “no risk of overcompensation” [CLAIMANT MEMO. P. 36, PARA. 72] if
CLAIMANT gets the requested damages. This is again misguided.
160
As CLAIMANT concedes [CLAIMANT MEMO. P. 42,
PARA.
96], damages under the CISG seek to
position the aggrieved party as if the contract had been properly performed [HUBER IN: MÜKO BGB,
ART. 74,
PARA.
16; SCHWENZER
IN:
SCHL./SCHWENZER (ENGLISH EDITION), ART. 74,
PARA.
52;
SCHÖNLE/KOLLER IN: HONSELL, ARTT. 74-77, PARA. 2]. The party should not be worse off – but it must
not be better off either. If the Tribunal ordered a disgorgement of “further profits” [CLAIM, PARA. 30],
i.e. of the premium SuperWines paid to CLAIMANT, CLAIMANT would be in a better situation as if
the contract had been performed properly. CLAIMANT’s only counter-argument to this inadmissible
is that “the loss cannot be adequately compensated by the usage of other selected remedies”
[CLAIMANT MEMO, P. 42, PARA. 96]. But insufficient remedies do not justify an overcompensation of
one party. Rather, insufficient remedies are a clear sign that CLAIMANT is not entitled to a
disgorgement of RESPONDENT’s profits.
33
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
161
ISSUE III
Therefore, CLAIMANT would benefit by disgorging RESPONDENT’s profit, which would violate the
principle of full compensation.
4.2 PENAL DAMAGES ARE NOT PERMISSIBLE.
162
Moreover, disgorging RESPONDENT’s profits would violate the convention’s principle that damages
may only be compensatory, not punitive [cf. MANKOWSKI IN: MÜKO HGB, ART. 74; PARAS. 9 ET SEQ.;
ACHILLES, ART. 74, PARA. 8; SCHWENZER IN: SCHL./SCHWENZER (GERMAN EDITION), ART. 74, PARA 8;
HUBER IN: MÜKO BGB, ART. 74, PARA. 16; BRUNNER ART. 74, PARA. 18; SCHÖNLE/KOLLER IN: HONSELL,
ART. 74, PARA. 8, HONSELL SJZ, P. 361]. That would be inadmissible.
163
Disgorging all profits of the infringing party implies a penalty function [BARNETT, CH. 4A; PARDOLESI
IN:
HONDIUS/JANNSEN,
SUPERIOR COURT
OF
PP.
155
ET SEQ.,
WEINRIB, P. 84; GERGEN, P. 830; ISRAEL/O’NEILL, P.8; U.S.
NEW JERSEY, 17TH MARCH 2009]. CLAIMANT even cites cases in which the
“[c]ourts have awarded punitive damages” [CLAIMANT MEMO. P. 43, PARA. 103] and it demands that
RESPONDENT “ought to be punished” [CLAIMANT MEMO. P. 44, PARA. 105].
164
Hence, CLAIMANT does not want RESPONDENT’s profits to compensate its losses, but to punish
RESPONDENT. Put in other words, CLAIMANT wants Justitia not to use her scales, but only her sword.
Such punishment is not allowed under the CISG. Hence, the disgorgement should be denied.
5. THE TRIBUNAL CANNOT AWARD THE PROFITS EX AEQUO ET BONO.
165
As no applicable legal provisions grant disgorgement of profits, CLAIMANT argues that the Tribunal
should disgorge RESPONDENT’s profits with a view to the claim’s “moral basis” [CLAIMANT MEMO. P.
44, PARA. 105]. However, the Tribunal is not permitted to act ex aequo et bono in this arbitration.
166
When an arbitral tribunal decides ex aequo et bono, it is not bound by any law rules, but rather
decides a case among the principles of fairness and common sense [LEW (ET
AL.), PARAS.
18-86;
FOUCHARD (ET AL.), PARA. 1505; BURCKHARDT/GROZ IN: GEISINGER/VOSER, PARA. 8.06; BORN P. 2772].
However, under Art. 27(3) Vienna Rules and Art. 28(3) UNCITRAL ML the Tribunal may only
decide ex aequo et bono “if the parties have expressly authorized it to do so”. This requirement is
widely supported, as it is a general principle governing the ex aequo et bono statute [LEW (ET AL.),
PARAS.
18-86; FOUCHARD (ET AL.), PARA. 1502; BURCKHARDT/GROZ IN: GEISINGER/VOSER, PARA. 8.06;
BORN P. 2772; WAINCYMER PARA. 13.14.1; REDFERN (ET AL.), PARA. 3.195].
167
The parties have not authorized the Tribunal to disregard the applicable law and act ex aequo et
bono. The Tribunal is bound by the applicable law rules, namely the CISG. These do not permit
disgorgement of profits. Hence, the Tribunal cannot award RESPONDENT’s profits ex aequo et bono
34
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
REQUEST FOR RELIEF
under the principles of fairness. Even if they could, awarding RESPONDENT’s profits would be
unfair.
CONCLUSION
168
CLAIMANT cannot be awarded RESPONDENT’s profits with SuperWines for several reasons. First,
CLAIMANT suffered no loss because CLAIMANT was never entitled to get 5.500 bottles. Second, it
cannot disgorge RESPONDENT’s profits, as disgorgement is not admissible under the CISG. Third,
CLAIMANT cannot include its request in an ordinary damage claim under Art. 74 CISG, as it has not
lost any profits. Lastly, the Tribunal is also not entitled to decide ex aequo et bono. Hence,
CLAIMANT
cannot
claim
RESPONDENT’s
profits
REQUEST FOR RELIEF
For the reasons stated above, and pursuant to Procedural Order No. 1, para. 5, RESPONDENT
respectfully requests the Tribunal to:
To reject CLAIMANT’s request for document production [Issue 1];
To reject CLAIMANT’S claim for legal costs[Issue 2];
To reject CLAIMANT’S claim for disgorgement of Respondents profits [Issue 3].
Respectfully submitted on 19 January 2016 by
35
MEMORANDUM FOR RESPONDENT
JOHANNES GUTENBERG-UNIVERSITÄT MAINZ
Sean Beagan
REQUEST FOR RELIEF
Sebastian Endres
Friederike Löbbert
Lukas Jakobi
Jacqueline Treichel
36
MEMORANDUM FOR RESPONDENT