2011 ALSA CONFERENCE INTERNATIONAL COMMERCIAL ARBITRATION MOOT 8 - 9 JANUARY 2011

MEMORANDUM FOR RESPONDENT

ALSA INDONESIA

On Behalf of: PROMPT PAY INC.

Against: BEST DEAL EDIBLE OIL INDUSTRIES PTE LTD

Deeerveer 55-23, Rotterdam Postbus 63000 Rotterdam, The Netherlands (RESPONDENT)

488 Wonder Bridge Road #04-01 Singapore 586721 Singapore (CLAIMANT)

COUNSELS: Beatrice Eka Putri Simamora

Sarah Eliza Aishah

Tiyana Sigi Pertiwi

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TABLE OF CONTENTS

TABLE OF CONTENTS .............................................................................................................. i TABLE OF AUTHORITIES ....................................................................................................... ii STATEMENT OF FACTS ........................................................................................................... 1 SUMMARY OF ARGUMENTS .................................................................................................. 3 ARGUMENT ON JURISDICTION............................................................................................ 4 I. THIS TRIBUNAL HAS NO JURISDICTION TO ENTERTAIN THE PRESENT CASE ................................................................................................................... 4 A. CLAIMANT and RESPONDENT Are Not Bound by The Arbitration Agreement......................................................................................................................... 4 B. Even If CLAIMANT and RESPONDENT Are Bound by The Arbitration Agreement, Both Parties Had Not Fulfilled The Condition Precedent to Arbitration......................................................................................................................... 5 ARGUMENT ON MERITS ......................................................................................................... 9 II. CLAIMANT COULD NOT RELY IN ARTICLE 74 CISG FOR

RESPONDENT COULD NOT HAVE FORESEEN SUCH BREACH AT THE CONCLUSION OF CONTRACT NO. 03162 ..................................................................... 9 A. The Production Cost of Packaging Bags Was Unforeseeable To RESPONDENT And To Any Reasonable Person ..................................................................................... 10 B. RESPONDENT is Excused from All Damage Claims Due To Force Majeur .............. 11 III.CLAIMANT HAD BREACHED CONTRACT NO. 03162 BY FAILING TO DELIVER THE GOODS ON TIME (ART.30 AND ART. 33 CISG) ............................. 12 IV. CLAIMANT HAD BREACHED CONTRACT NO. 03162 BY NONCONFORMITY GOODS DELIVERY (ARTICLE 35 CISG)Error! Bookmark not defined.

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TABLE OF AUTHORITIES

TREATIES, CONVENTIONS, AND LAWS

CISG

United Nations Convention on Contracts for the International Sale of Goods, Vienna, 1980

passim

Model Law

UNCITRAL Model Law on International Commercial Arbitration 1985

Model Law

UNCITRAL Model Law on International Commercial Conciliation

CASES

Him Portland Llc v. Devito Builders Inc United States Court of Appeals

317 F. 3d 41 - Him Portland Llc v. Devito Builders Inc United States Court of Appeals, First Circuit

641 A.2d 1381

641 A.2d 1381, 1387 (Conn. 1994). See also Handelsmaatschappij Vekoma BV (Netherlands) v. Maran Coal Corp. (US), Swiss Federal Court (Bundesgericht), Civil Division I (August 17, 1995)

Chateau des Charmes Wines Ltd. v. Sabat USA, Inc., 328 F.3d 528

328 F.3d 528 (9th Cir. 2003) (http://ftp.resource.org/courts.gov/c/F3/328/328.F3d.528.0215727.html)

MEMORANDUM FOR RESPONDENT | ii

ALSA INDONESIA

CLOUT case No. 106

CLOUT case No. 106 Oberster Gerichtshof, Austria, 10 November 1994

CLOUT case No. 215

CLOUT case No. 215 Bezirksgericht St. Gallen, Switzerland, 3 July 1997

CLOUT case No. 222

CLOUT case No. 222 Federal Court of Appeals for the Eleventh Circuit, United States, 29 June 1998

CLOUT Case No. 23 (CISG-online No. 45)

CLOUT Case No. 23 (CISG-online No. 45)

CLOUT case No. 268

CLOUT case No. 268 Bundesgerichtshof, Germany, 11 December 1996

3, 4

CLOUT case No. 313

CLOUT case No. 313 Cour dappel Grenoble, France, 21 October 1999

CLOUT Case No. 422

CLOUT Case No. 422 Oberster Gerichtshof, Austria, 29 June 1999

CLOUT case No. 429

CLOUT case No. 429 Oberlandesgericht Frankfurt, Germany, 30 August

Cortem SpA v

Federal Court of Australia, FCA 852, 13 August 2010

12

Controlmatic Pty Ltd (http://cisgw3.law.pace.edu/cases/100813a2.html) (2010)

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ALSA INDONESIA FCF S.A. v. Adriafil Commerciale S.r.l., Switzerland, 15 September 2000. FCF S.A. v. Adriafil Commerciale S.r.l., Supreme Court 4P.75/2000 (http://cisgw3.law.pace.edu/cases/000915s2.html) 11

Filanto, S.p.A. v. Chilewich International Corp,

F. Supp. 1229 (S.D.N.Y. 1992). 984 F.2d 58 (2nd Cir. 1993) (http://vlex.com/vid/filanto-chilewich-international-corp37510659)

Raw Materials Inc. v. Manfred Forberich GmbH & Co.

No. 03 C 1154, 2004 U.S. Dist.LEXIS 12510 (N.D. Ill. July 6, 2004) (http://cisgw3.law.pace.edu/cases/040706u1.html)

OTHER AUTHORITIES

D. Jason File

United States: Multistep Dispute Resolution Clauses 3 Mediation Committee Newsletter 1 (IBA Legal Practice AUTHOR Division), July 2007.

David St John Sutton, Judith Gill & Matthew Gearing

Russell On Arbitration (2007)

Gary B. Born

International Commercial Arbitration (3d ed., 2009)

Jennifer M. Bund

Force majeure Clauses: Drafting Advice for the CISG Practitioner. Reproduced with permission of 17 Journal of Law and Commerce (1998)

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COMMENTARY

Huber/Mullis

The CISG: A new textbook for students and practitioners (Baker&McKenzie)

7, 10

Larry A Dimateo et.al.

A Critical Analysis of CISG Jurisprudence

10

Secretariat Commentary

U.Huber/Widmer

U.Huber/Widmer, in: Schlechtriem/Schwenzer

19

AWARDS

Magnesium case

ICC Court of Arbitration, award No. 8324/1995 (http://cisgw3.law.pace.edu/cases/958324i1.html)

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ALSA INDONESIA

TABLE OF ABBREVIATIONS

ADR Art. Bger. Ch. Cir. CISG CLOUT Co. Dist. Doc. Ed. et al. FCA Id., Inc. Kg Ltd. Mt No. p. Para. U.S. US$

Alternative Dispute Resolution Article Bundesgerichtshof (Germany) Chapter Circuit (U.S. Court of Appeals) United Nations Convention on Contracts for the International Sales of Goods, Vienna, 1980 Case Law on UNCITRAL Text Coorporation District Document Edition and others Federal Court of Australia Idem Incoorporation Kilogram Limited Metric ton Number Page Paragraph United States of America United State Dollars
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ALSA INDONESIA UN UNCITRAL v. E.D.N.Y S.A. E.U. Pte. cf BV

LLC.

United Nations United Nations Commission on International Trade Law Versus (Against)
Eastern District of New York Socit Anonyme

European Union Private Compare

Betriebskostenverordnung
Limited Liability Company

F.Supp.

Federal Supplement (District Court Reports)

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STATEMENT OF FACTS
2008 21 March CLAIMANT and RESPONDENT enter Sales Contract No. 03162.

Early-April CLAIMANT delivers 900 mt to RESPONDENT. Mid-April 25 April Choline Chloride Price fell drastically. RESPONDENT sends a fax to CLAIMANT to inform that RESPONDENT may want to postpone taking up the balance. CLAIMANT replies RESPONDENTs fax with an email to inform that CLAIMANT is currently working with his suppliers for raw material. 29 April RESPONDENT send an email to CLAIMANT to cease the business due to the decreasing market price of Choline Chloride. CLAIMANT replies RESPONDENTs email to inform that CLAIMANTs factory is discussing the raw material prices with the major suppliers. CLAIMANT is informed about RESPONDENTs wish to cease the business. 8 May RESPONDENT sends an email to CLAIMANT that the remains quantity will be cancelled due to because CLAIMANTs price is no longer workable. CLAIMANT replies RESPONDENTs email to offer RESPONDENT a $5.00/mt discount. RESPONDENT replies CLAIMANTs email to rejects CLAIMANTs offer of discount. 21 May CLAIMANT sends an email to RESPONDENT to make further offer of discount to the RESPONDENTS of US$5.00/mt. CLAIMANT has a telephone conversation with RESPONDENT. 23 May CLAIMANT has a telephone conversation with RESPONDENT. Both parties agreed to settle the dispute by discussing it and never let them go to serious fights in court. Thus, RESPONDENT sends an email to CLAIMANT to rejects CLAIMANTs offer of discount again as in RESPONDENT belief notices that Best Deals office had sent were only meant
as formal records and not intended to form basis of legal action.

26 May

CLAIMANT sends a fax to RESPONDENT to inform RESPONDENT that CLAIMANT has been notified about RESPONDENTs cancellation of the

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ALSA INDONESIA entire outstanding contract based on sales contract No. 03162. RESPONDENT has the time to change his mind whether to complete the contract until 26 May 2008, 1700 hours. 29 May CLAIMANT sends a fax to RESPONDENT attached with Debit Note No. ARD03/05/5030. 30 June 2 July 3 July Expires date of contract. CLAIMANTS submit the payment of unutilized printed packing bags. CLAIMANT sends a fax to RESPONDENT to warned RESPONDENT about legal process. 2009 13 August CLAIMANT sends a letter to RESPONDENT to demand payment immediately. CLAIMANT will commence arbitration proceedings, if RESPONDENT does not reply within 7 days from date hereof. 13 August CLAIMANT sends a letter to Chairman of SIAC to request for Appointment of Arbitrator. 20 August RESPONDENT replies CLAIMANTs letter to refuse CLAIMANTs Arbitration Request and will lodge with the arbitration tribunal counterclaim arising out of an earlier Contract No 03159 dated 16 January 2008. 22 August CLAIMANT replies RESPONDENTs letter informing RESPONDENT that CLAIMANT still lodge to arbitration. 30 October SIAC sends letters to CLAIMANT and RESPONDENT to inform that the Chairman of the SIAC has appointed Mr. Arbitrator as the sole arbitrator. 1 November Preliminary meeting between Parties and Mr. Arbitrator. 2 December RESPONDENT ask Clarification from Mr. Arbitrator regarding Mr. Arbitrators relationship with Mr. BEST DEAL Counsel and his wife.

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SUMMARY OF ARGUMENTS
A. THIS TRIBUNAL HAS NO JURISDICTION AS BOTH PARTIES HAD NOT FULFILLED THE CONDITIONS PRECEDENT TO ARBITRATION This tribunal has no jurisdiction to entertain the present case. CLAIMANT alleges that both parties are bound by the Arbitration Agreement, but even so neither had fulfilled the condition precedent to arbitration. Therefore, this tribunal should be dismissed.

B. CLAIMANT COULD NOT RELY IN ARTICLE 74 CISG FOR RESPONDENT COULD NOT HAVE FORESEEN SUCH BREACH AT THE CONCLUSION OF CONTRACT NO. 03162 Without any means of waiving point, the tribunal when commenced, should not grant CLAIMANTs claim which is allegedly based on article 74 CISG. The production cost of the packing bags was unforeseeable to RESPONDENT and as to any reasonable person. As to the provisions foreseeability requirement remained unfulfilled, RESPONDENT is excused from all damage claims due to Force Majeur.

C. CLAIMANT HAD BREACHED CONTRACT NO. 03162 BY FAILING TO DELIVER THE GOODS ON TIME (Art.30 and Art. 33 CISG) As said in Contract No. 03162, there would be delivery installed each month even without confirmation by the RESPONDENT. Thus, Claimant had breached Contract No. 03162 by failing to deliver the goods on time.

D. CLAIMANT HAD BREACHED CONTRACT BY NON-CONFIRMITY GOODS DELIVERY (Article 35 CISG) According to article 35 CISG, CLAIMANTs obligations must what is what determined in the contract. However in fact the goods delivered to RESPONDENT were not in same quality promised in the contract. Therefore, CLAIMANT had breached the contract by delivering nonconformity goods and thus liable to RESPONDENT in damages.

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ALSA INDONESIA

ARGUMENT ON JURISDICTION
I. THIS TRIBUNAL HAS NO JURISDICTION TO ENTERTAIN THE PRESENT CASE 1. This arbitral tribunal has no jurisdiction in the present case as there is no arbitration agreement between the parties. CLAIMANT and RESPONDENT have mutually cancelled The Sales Contract Number 03162 dated 21 March 2008 (hereinafter Contract No. 03162) via telephone on 23 May 2008.1 Subsequentely CLAIMANT and RESPONDENT agreed to form a New Contract2 in which contain no arbitration agreement. Consequently CLAIMANT and RESPONDENT have no obligation to submit this case to arbitration since there is no arbitration agreement [A]. Additionally, the application of separability doctrine remains in the present case because the New Contract does not contain arbitration clause. In any event should the separability doctrine be applied, CLAIMANT and RESPONDENT had not conducted any negotiation which is the condition precedent to arbitration [B]. A. CLAIMANT and RESPONDENT Are Not Bound by The Arbitration Agreement 2. On 23 May 2008, CLAIMANT and RESPONDENT, via telephone conversation, agreed to cancel Contract No. 03162 and replaced it with a new contract 3 (hereinafter New Contract). The New Contract concerns a deal in which RESPONDENT would sort out the problems regarding the contaminated products of the January in Contract No. 031594 and CLAIMANT would in turn sort this contract.5 According Art. 29(1), Model Law UNCITRAL, it is enough for a modification or termination of Contract No. 03162 to have the mere agreement of the parties,6 either orally, in writing, by acts, or even by silence or Doc. C/11-13. New contract made by CLAIMANT and RESPONDENT on 23 May 2008 concerning a deal in which RESPONDENT would sort out the problems regarding the contaminated products of the January in Contract No. 031592 and CLAIMANT would in turn sort this Contract No. 03162. The New Contract then replaced the applications of Contract No. 03162 ad Contract No. 03159. 3 See Doc. C/11-13. 4 Contract No. 03159 is a contract between CLAIMANT and RESPONDENT dated 16 January 2008. 5 Witness Statement of Filip Van Hauten, para. 12. 6 Raw Materials Inc. v. Manfred Forberich GmbH & Co., No. 03 C 1154, 2004 U.S. Dist. LEXIS 12510 (N.D. Ill. July 6, 2004); Tribunale di Padova, Italy, 31 Mar. 2004, available at http://cisgw3.law .pace.edu/cases/040331i3.html; Bezirksgericht Sissach, supra note 19.
2 1

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ALSA INDONESIA inaction.7 This means the agreement between both parties regarding the New Contract, is enough to replace both Contract No. 03162 and Contract No. 03159. 3. The New Contract does not contain an arbitration clause. The New Contract only demonstrates the mutual consent of both parties to solve the problems arising out under Contract No. 03162 and Contract No. 03159. Nothing is stipulated under the New Contract that both parties agreed to bring any future disputes to arbitration. Therefore CLAIMANTs assertion regarding the obligation to arbitrate is unfounded. 4. Furthermore, the arbitration clause in Contract No. 03162 can neither be applied in the present case, because the sentence any dispute in connection with...8 which is considered as broad-form arbitration clause9 was limited only to conditions in connection with Contract No. 03162 or its execution. On the other hand, the dispute between both parties are regarding to the application of the New Contract. The New Contract has put new obligations between both parties with the respect to Contract No. 03162 and Contract No. 03159, thus its scope is different with the scope of arbitration clause in Contract No. 03162. Hence, arbitration clause in Contract No. 03162 cannot be applied in this case, since New Contract and arbitration clause in Contract No. 03162 have different concerns which make different scopes of application between them. 5. Even if the arbitration clause in Contract No. 03162 can be applied in this case, the problems arising out of Contract No. 03159 shall be solved as well in the same arbitration with the problems arising from Contract No. 03612. This is because the New Contract has eliminated the boundaries between those two Contracts, thus the scope of the New Contract will include any dispute arising under Contract No. 03162 and Contract No. 03159. Therefore, the settlement for disputes arose under Contract No. 03162 and Contract No. 03159 shall be held at the same arbitration since those disputes are related to each other. B. Even If CLAIMANT and RESPONDENT Are Bound by The Arbitration Agreement, Both Parties Had Not Fulfilled The Condition Precedent to Arbitration

7 8

CLOUT Case No. 422 [Oberster Gerichtshof, Austria, 29 June 1999], available at http://cisgw3.law.pace.edu/cases/990629a3.html. CLAIMANT Memorandum, para. 8.
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See the arbitration clause in Doc. A/8.

9

ALSA INDONESIA 6. The arbitration clause in Contract No. 03162 stated that Any dispute... shall be settled through friendly negotiations between two parties, if not... shall be referred to an arbitrator or arbitrators... RESPONDENT interprets this clause as a multi-step alternative dispute resolution clause (hereinafter multi-step ADR clause)10 where there is a condition precedent to arbitration which is friendly negotiations. In essence, if a party wishes to start arbitration proceedings, it must first negotiate with the other party in order to try to reach an amicable solution to the dispute.11 7. In cases where Contract No. 03162 is governed by the CISG, the relevant provisions of the CISG also determine whether the arbitration or forum selection clause was validly agreed upon.12 Article 8 (1) CISG, provides a guideline in which statements and other conduct of a party shall be interpreted according to his intent, as long as the other party knew or could not have been unaware of that intent. The plain language of the Convention, therefore, requires an inquiry into a partys subjective intent as long as the other party to Contract No. 03162 was aware of that intent13 or could not have been unaware of it.14 8. In determining a partys intent or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case. Such circumstances specifically include15 the negotiations, any practices which the parties have

See D. Jason File, United States: Multistep Dispute Resolution Clauses, 3 Mediation Committee Newsletter 1 (IBA Legal Practice Division), July 2007, at p. 36. 11 David St John Sutton, Judith Gill & Matthew Gearing, Russell On Arbitration (2007), at p. 48. 12 Filanto, S.p.A. v. Chilewich International Corp, 789 F. Supp. 1229 (S.D.N.Y. 1992), CLOUT Case No. 23 (CISG-online No. 45); for the same approach in relation to a forum selection clause see Chateau des Charmes Wines Ltd. v. Sabat USA, Inc., 328 F.3d 528 (9th Cir. 2003); in favour of such an approach see also WOLFGANG DRASCH, EINBEZIEHUNGS- UND INHALTSKONTROLLE VORFORMULIERTER GESCHFTSBEDINGUNGEN IM ANWENDUNGSBEREICH DES UN-KAUFRECHTS 49 (1999); BURGHARD PILTZ, INTERNATIONALES KAUFRECHT 2, 119 (1993). 13 CLOUT case No. 222 [Federal Court of Appeals for the Eleventh Circuit, United States, 29 June 1998] (internal citation in quoted material omitted) (see full text of the decision); for other cases in which the part of article 8 (1) referred to in the text was cited, see CLOUT case No. 313 [Cour dappel Grenoble, France, 21 October 1999] (see full text of the decision); CLOUT case No. 268 [Bundesgerichtshof, Germany, 11 December 1996]. For an express reference to the subjective interpretation, see CLOUT case No. 429 [Oberlandesgericht Frankfurt, Germany, 30 August 2000], http://cisgw3.law.pace.edu/cisg/text/000830g1german.html. 14 For references to this part of article 8, paragraph 1, see CLOUT case No. 215 [Bezirksgericht St. Gallen, Switzerland, 3 July 1997] (see full text of the decision). 15 According to the Official Records of the United Nations Conference on Contracts for the International Sale of Goods, Vienna,10 March-11 April 1980 (United Nations publication, Sales No. E.81.IV.3), 18, the list to be found in article 8, paragraph 3 is not an exhaustive list of elements to be taken into account in interpreting statements or other conduct by the parties.
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10

ALSA INDONESIA established between themselves, usages, and any subsequent conduct of the parties.16 Several decisions17 have noted that these criteria should be taken into account when interpreting a statement or other conduct under the standards of article 8 (1) CISG.18 9. RESPONDENTs intention when making this arbitration agreement is to oblige both parties with a condition precedent to arbitration which is friendly negotiations.19 This can be seen in the telephone conversation on 23 May 200820, where RESPONDENT was trying to make sure that both parties agreed to not bring the dispute between them to arbitration tribunal nor court, meaning that RESPONDENT wanted to solve the dispute as friendly as possible to keep their long term business development. RESPONDENTs intention can also be seen by his action in informing CLAIMANT about his situation and asking for reduction in price. This means RESPONDENT always try to solve the problems with friendly ways. 10. Using the Guaspian21 classification scheme, a series of requirements must be met in order to implement a negotiation clause that can be applied in this case, such as subjective requirements22, formal requirements23, and requirements to prove compliance with the obligation to negotiate24. In this case, CLAIMANT considers telephone converstations
16 17

Id.; CLOUT case No. 106 [Oberster Gerichtshof, Austria, 10 November 1994]. In arbitration, see ICC Court of Arbitration, award No. 8324/1995, published on the Internet at

http://www.unilex.info/case.cfm?pid=1&do=case&id=240&step=FullText. 18 CLOUT case No. 268 [Bundesgerichtshof, Germany, 11 December 1996], expressly stating that the elements referred to in article 8, paragraph 3 have to be taken into account when interpreting a statement or other conduct by a party in the light of article 8, paragraph 1 (see full text of the decision). 19 See the arbitration clause in Doc. A/8. 20 Doc. C/11-13. 21 Jaime Guasp Delgado, Chaired Professor of Procedural Law, and author of, among other works: Comentarios A La Ley De Enjuiciamiento Civil [Comments On The Civil Procedure Act] (1943); El Arbitraje En Derecho Espaol [Arbitration Under Spanish Law] (1956), And Derecho Procesal Civil [Civil Procedural Law] (1956) (with Alonso P. Aragoneses, 6th ed. 2006). 22 A request to negotiate must be made by the party that has established the existence of the controversy and seeks to commence the dispute resolution procedure agreed to by the parties. The request must be made by a representative of the company and addressed to a duly authorized representative of the other party. However, it is normally sufficient for the request to be sent to the bodies or individuals with whom contact has been maintained during, performance of the agreement. 23 In such a case, it seems logical that the request be made in writing to inform the receiving party of the exact nature of the dispute (and to be able to prove compliance with the obligation to negotiate). Nothing prevents the request from being oral, but this would raise significant problems of proof that negotiation was commenced, which could perhaps be resolved through affidavits or written statements from the individuals who participated in the negotiation process. In any event, in international practice, parties avoid the use of a verbal request alone and almost always make a written request. 24 As mentioned above, the request to negotiate is generally made in writing. Logically, one must prove not only that the negotiation was initiated but also that it actually took place. Given that negotiation usually involves the exchange of letters, emails and proposals, demonstrating this fact should not be difficult.
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ALSA INDONESIA between CLAIMANT and RESPONDENT on 21 May and 23 May, 2008 as negotiations.25 In fact, those telephone conversations can not be considered as negotiations because those telephone conversations had not fulfilled the requirements to implement a negotiation clause, as there were neither oral nor written request to negotiate made by both parties and also there was no confirmation from both parties that they were negotiating at that time. 11. The multi-step ADR clause has similarly been considered to be a pactum de non petendo, a temporary waiver of the right to commence arbitration until negotiation has ended. 26 By simply failing to initiate the negotiation phase, a party could avoid arbitration and take the case to court.27 The arbitral tribunal that rendered the award would be lack of jurisdiction, thus its decision is void from the outset. In the White v. Kampner case, the parties were required to participate in the mandatory negotiation sessions prior to arbitration.28 In this case, CLAIMANT and RESPONDENT had not conducted any proper negotiations, therefore, in the best interests of the both parties, the arbitration proceedings should be suspended, then send the parties to negotiation and to resume the proceedings if the negotiations fail.29 12. Even if the telephone conversations are considered as negotiations, CLAIMANT has acted in contrast with the deal agreed on 23 May 2008. CLAIMANT and RESPONDENT made a deal not to bring the case to arbitration court. By instituting the arbitration proceeding CLAIMANT had breached the negotiation outcome. Consequently the arbitration shall not be proceeding since this tribunal does not have the jurisdiction due to the parties waiver under the negotiation.
25

CLAIMANT Memorandum, para. 8 26 See KLAUS P. BERGER, Law and Practice of Escalation Clauses, 22 ARBITRATION INTERNATIONAL 1 (2006), at p. 5; In HIM Portland LLC v. DeVito Builders Inc.,26 the First Circuit Court of Appeals held that: ... [u]nder the plain language of Contract No. 03162, the arbitration provision is not triggered until one of the parties requests mediation. Consequently, because neither party ever attempted to mediate this dispute, neither party can be compelled to submit to arbitration. 27 Gary B. Born, International Commercial Arbitration (3d ed., 2009), at p. 241. 28 641 A.2d 1381, 1387 (Conn. 1994). See also Handelsmaatschappij Vekoma BV (Netherlands) v. Maran Coal Corp. (US), Swiss Federal Court (Bundesgericht), Civil Division I (August 17, 1995). 29 Cf. UNCITRAL Model Law on International Commercial Conciliation, art. 13, UN Doc. A/57/71, 2002, Annex I, at p. 6: Resort to arbitral or judicial proceedings: Where the parties have agreed to conciliate and have expressly undertaken not to initiate during a specified period of time or until a specified event has occurred arbitral or judicial proceedings with respect to an existing or future dispute, such an undertaking shall be given effect by the arbitral tribunal or the court until the terms of the undertaking have been complied with, except to the extent necessary for a party, in its opinion, to preserve its rights. Initiation of such proceedings is not of itself to be regarded as a waiver of the agreement to conciliate or as a termination of the conciliation proceedings.
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ARGUMENT ON MERITS
II. CLAIMANT COULD NOT RELY IN ARTICLE 74 CISG FOR RESPONDENT COULD NOT HAVE FORESEEN SUCH BREACH AT THE CONCLUSION OF CONTRACT NO. 03162 13. In 2008, there was a series of bombing in Iraq and occurring SARs numbers in China. EU health authorities on January 2008 even declared that the earlier Choline Chloride provided by CLAIMANT (from earlier contract) were contaminated and partly destroyed.30 CLAIMANTs first delivery of 900 metric ton of Goods on early April 2008 incurred a huge loss to RESPONDENT as the goods were quarantined in many ports 31. This inevitable condition leaded the Chinese manufacturers to drop their Choline Chloride price drastically making the original price in the Contract much higher compared with the current market price. When the contractual price was US$ 575 per metric ton and the market price was US$ 510 RESPONDENT had asked CLAIMANT to renegotiate the price. However CLAIMANT only offered a stringent discount. These bargaining processes were fruitless. Ultimately on 28 May 2008 both parties mutually agreed to cancel the Contract. On 28 May 2008 the market price for the Goods was US$ 545 per metric ton. At that time, RESPONDENT had already suffered a damage because of CLAIMANTs late delivery for the goods were supposed to be delivered by early May. Eventually on 3rd of July 2008, CLAIMANT charged a sum of US$ 90,320 on RESPONDENTs behalf for the cost of the printed packaging bags, which was not said in Contract 03162. 14. If all of the requirements are met article 74 CISG will grant a full compensation to the party in damaged. In the present case, CLAIMANT is not entitled to full compensation because the foreseeablity rule under Article 74 CISG is not met32. For RESPONDENT could not have foreseen the incidents leading to the occurrence of the breach [A]. Furthermore, RESPONDENT shall be excused from all damage claims due to force majeur [B].

30 31

This fact was already known by Claimant according to Thomas Songs Witness Statetement of Filip van Hauten (Prompt Pay), 3 Ovtober 2010. [Doc C, p. 6] 32 See P. Huber and A. Muis, The CISG, p. 268, para 4.
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ALSA INDONESIA A. The Production Cost of Packaging Bags Was Unforeseeable To RESPONDENT And To Any Reasonable Person 15. CLAIMANT filed a claim of US$ 90,320 for the cost of packaging bags printed under the name of Bollyboots B.V., a related company of RESPONDENT.33 CLAIMANT purported that the RESPONDENT is under obligation to make payment for this cost. As will be demonstrated below, this claim is unfounded. 16. Contract No. 03162 number 03162 dated on 21 May 2008 addressed that in times of a non performance of Contract No. 03162, the aggrieved party is entitled to receive the washout price, which is of 10% of the total contract value.34 This means the total contract value is the sole factor to determine the washout price is. Consequently CLAIMANT cannot claim for other expenses such as the packaging cost. 17. Furthermore it is impossible for RESPONDENT to have foreseen the occurrence of the sum of damage that has been claimed by CLAIMANT. RESPONDENT and CLAIMANT had never contracted for CLAIMANT to print custom designed packaging bags made purposely for the purchase under Contract No. 03162, let alone to print it under the name of RESPONDENTs subsidiary. In addition, Contract No 03162 also did not require for RESPONDENT to pay for the packaging costs. Although there is a notice that a packing list in two copies will be provided in following35, Contract No. 03162 never said anything about printed name on the packing bags. Contract No. 03162 only mentioned that the Goods will be packed in 25 kg bags. Several Chinese Choline Chloride suppliers such as Cangzhou Pangoo International Trade Co., Ltd36; Shandong Levoda Chemical Co., Ltd.37; and NB Group Co. Ltd.38 are using the same amount per bags which are 25 kg of PEPA bags with PE liners. PEPA bags or kraft paper bags is assumed to be the common bags used for

Fax from Thomas Song (Claimant) to Mr. Filip van Hauten (Respondent), 3rd of July 2008. [Doc B, p. 24] See Contract No. 03162 between Best Deal Edible Oil Pte Ltd (Claimant) and Prompt Pay Inc (Respondent), dated 21/3/2008, page 2. Other Terms of Trade, para. 5 35 See Contract No. 03162 between Best Deal Edible Oil Pte Ltd (Claimant) and Prompt Pay Inc (Respondent), dated 21/3/2008, page 2. Other Terms of Trade, page 1, Unit Price. 36 Website: http://pangoo.en.made-in-china.com/product/roamBSYcgKhA/China-Choline-Chloride.html 37 Their product specifications of Choline Chloride on Corn Cob 60% available at: http://www.alibaba.com/productgs/331391531/Choline_chloride_60_corn_cob_feed.html 38 See http://biz.efeedlink.com/Products/110/c02b05cd-d074-4aad-aab0-40806bb62ff7.html
34

33

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ALSA INDONESIA shipping Choline Chloride by these Chinese suppliers. However, none of these suppliers require their buyers to pay for the cost caused by printing a logo on the bags itself. 18. The amount asked by CLAIMANT for these bags are US$ 90,320, which would have been covered by Contract No. 03162ual washout value. Therefore, RESPONDENT had not foreseen that these bags would be also classified as damages. This condition is also unforeseeable to any reasonable person under the same circumstances as RESPONDENT. 19. CLAIMANT shall not claim the costs of the packing bags because first, it is against the agreed term of Contract No. 03162; And second, in any event, it was unforeseeable for RESPONDENT know that CLAIMANT had provided the custom-printed packing. Consequently based on the abovementioned reasons, the packaging cost shall not be included in the reimbursement. B. RESPONDENT is Excused from All Damage Claims Due To Force Majeur 20. Under certain circumstances, a party may be excused from performing its obligations in the occurrence of impediment which is beyond the non-performing party's control.39 This CISG Doctrine of Excuse is well recognized.40 This doctrine is contained in article 79 (1) CISG, whereas it requires the party in breach to prove the unforeseeablility nature of the consequences of the breach as a result of the impediment. 21. The sudden SARs outbreak leading EU health authorities to destroy a portion of Goods and the decreasing price of Choline Chloride were unforeseeable by RESPONDENT. RESPONDENT, as a regular customer to CLAIMANT, would not have expected to purchase Goods that are said to be contaminated. In addition, RESPONDENT, like any normal buyer, would not agree to a contract that would eventually cause more loss because of the existence of huge price discrepancies. All these events were unenforceable. 22. Thus, CLAIMANT could not rely on article 74 CISG for claiming such damages for it does not fulfill its prerequisites of foresee ability in accordance with article 79(1) CISG, RESPONDENT shall be excused for not performing its obligations, and RESPONDENT need not to reimburse all damages claimed by CLAIMANT.

39 40

Article 79(1) CISG.

Jennifer M. Bund, Force majeure Clauses: Drafting Advice for the CISG Practitioner. Reproduced with permission of 17 Journal of Law and Commerce (1998) 381-413. Available online at http://www.cisg.law.pace.edu/cisg/biblio/bund.html
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ALSA INDONESIA III. CLAIMANT HAD BREACHED CONTRACT NO. 03162 BY FAILING TO DELIVER THE GOODS ON TIME (ART.30 AND ART. 33 CISG) 13. The obligation of CLAIMANT as a seller is governed by article 30 CISG. The sellers primary obligation is to deliver the goods.41 As general rules, the delivery obligation can be performed unilaterally by the seller without the need for the buyers cooperation.42 CLAIMANT might argue that their failure to in making delivery on time was caused by the absence of fixed schedule provided by RESPONDENT.43 However, CLAIMANT should have delivered the goods, even though there was no confirmation from RESPONDENT in accordance with general rule. Moreover, based on the Contract, CLAIMANT agreed the delivery should be installed in each month (April, May, June 2008).44 Delivery terms had agreed by both parties with the fix period, thus CLAIMANT should automatically delivered the goods without waiting for a specific order from RESPONDENT. The time of delivery, it is governed by the article 33 CISG. Under Contract No. 0316245, there is only the period of time which was April, May, and June 2008 of which CLAIMANT can deliver at any time within that period.46 In principle therefore, it is for CLAIMANT to choose when during the period he wishes to deliver.47 As delivery terms stated clearly, there would be delivery each month even without confirmation by the RESPONDENT. For the second delivery was May, thus within May 1th to May 31th 2008, CLAIMANT should delivered the goods. 14. In any event the absent of fixed schedule from the RESPONDENT was caused by CLAIMANT. Based on Contract No. 0316248, the delivery terms do not require the seller to obtain insurance of the goods during carriage, and then he must nonetheless provide the buyer with all available information necessary to enable him to effect such insurance.49When the market price was falling suddenly, RESPONDENT requested

41 42

Secretariat Commentary, Art.. 29 para.1 U. Huber/Widmer, in : Schlechtriem/Schwenzer, Commentary, Art. 31 para.4 43 [Doc C 2/8] 44 [Doc A/7] 45 [Doc A/7] 46 Alastair Mullis, Commentary, Art. 33 (b), page 123, para. 2 47 U.Huber/Widmer, in: Schlechtriem/Schwenzer, Commentary, Art. 33 para. 9. 48 Id., 49 Larry A Dimateo et. all, A Critical Analysis of CISG Jurisprudence, page 103, art. 32 (3) CISG.
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ALSA INDONESIA CLAIMANT regarding price situation by fax on April 25th 2008.50 However CLAIMANT did not give the information until May 2th 2008.51 Without the information of price situation, RESPONDENT was not able to order the goods. Thus, at the time RESPONDENT had insufficient information to provide shipment schedule or take delivery of goods. 15. In the case of FCF S.A. v. Adriafil Commerciale S.r.l.,52 the cantonal Appellate Court considered that, on 8 July 1994, buyer had noted without protest that the goods would be deliverable during the month of August 1994. Many tons of cotton Ne 16/1 and 8/1 had been unloaded in Genoa on 7 August 1994 by the seller; nonetheless, these goods corresponded only partly to the subject matter of Contract No. 03162, which required the delivery of cotton Ne 8/1, 12/1, 16/1, 20/1 and 30/1. Seller did not succeed in establishing an offer to buyer for the cotton that arrived at Genoa, nor did it ask the buyer to take delivery. If this ruling is to be applied in the present case, CLAIMANT should delivered the next period by May 1th 2008. In fact, CLAIMANT failed to deliver the goods at that time.

IV.

CLAIMANT had breached the contract by non-conformity goods delivery accordance with Article 35 CISG (2)(b)

in

16. The goods that RESPONDENT received from CLAIMANT on the January product 2008 of shipment did not fit with RESPONDENTs particular purpose (A). Therefore CLAIMANT is liable to pay damages arising out form nonconforming goods (B). A. The choline silica delivered did not conform with the RESPONDENTs particular purposes. 17. Article 35(2)(b) addresses the sale of goods in which the seller is aware of the particular purpose for which the buyer will use the goods and the buyer is relying upon the seller to use skill and judgment to provide the goods. In the present case RESPONDENT had made known its particular purpose to the CLAIMANT upon the conclusion of the contract (1). Therefore CLAIMANT could not have been unaware of such particular purpose (2). In

50 51

[Doc B/9] [Doc B/14] 52 See BGer, 15 September 2000, CISG Online No. 4P.75/2000.
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ALSA INDONESIA fulfilling such particular purpose, RESPONDENT relies on CLAIMANTs skill and judgment. (3) 1. RESPONDENT had made known RESPONDENTs particular purpose is to have Choline Silica which can be sold in US and EU Market. The European Union Health Authorities imposed a regulation which limit the content of sodium salt for animal consumption. (BERAPA PERSEN??) The unwanted transformation of Choline Silica into salt showed that the goods delivered were not fit with the particular purpose as requireed under the contract.53 The nonconforming products could not be sold to the market. Consequently even until mid April 2008, RESPONDENT still had some of the January 2008 products unsold.54 Moreover, As at mid-April 2008, Part of it was destroyed by EU health authorities for contamination and the balance was sold as salt (for animal consumption) in Africa and Latin American countries.55 Since some of the goods had been destroyed by EU due to contamination, then the RESPONDENT could not sell it to Europe nor US as their market target. 2. The CLAIMANT is aware of the particular purpose for which the buyer will use the goods In this present case, CLAIMANT is aware or at least could not have been unaware of the particular purpose for which the RESPONDENT will use the good.. For this trade was a part of a routine contract.56 Moreover, the contract expressed clearly as to the quality of the choline and the methode to assay the Choline57. 3. RESPONDENT relied on CLAIMANTs skill and judgment On the contract, it is stated that they agreed to assay the Choline with Gravimetric Methods which is one of the techniques that only the expert can do. Thus, RESPONDENT trust that the CLAIMANT knows and is able to supply the qualities necessary for this particular purpose.
53 54 55 56 57

[Doc C/12] [Doc C/6 para.9]

Idem.,

Statement of Thomas Song [Doc C/2] [Doc A/7]

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ALSA INDONESIA B. CLAIMANT is liable to pay damages 18. In the case of Cortem SpA v Controlmatic Pty Ltd,58 Mr Venuti (Buyer) had made known to Cortem (Seller) that his purpose was to sell the products into the Australian market by way of wholesale trade. It seems clear that the goods were not fit for that purpose, because they had not achieved TestSafe certification and, as Buyer later discovered, they were incapable of certification in their then condition. The judge decided, therefore, that, by the operation of Art 35(2)(b) of the Vienna Convention, these products did not conform with the contract pursuant to which they were sold by Seller to Buyer. 19. In Roland Schmidt GmbH v. Textil-Werke Blumenegg AG case,59 the issue of whether a Spanish paprika seller had to certify that its product complied with the German Food Safety Laws demonstrates this nuance. The court found that the seller had prior knowledge of the laws and, therefore, could not argue that it was ignorant of the requirement that the goods comply with the German laws. The court held that because the paprika contained more ethylene oxide than permitted under German law, the goods failed to conform to the contract and specifically failed to meet the buyers purpose known to the seller 20. Similiarly with this case, RESPONDENT suffered from the same non-conformity goods problem. RESPONDENT expected to sell the goods in the EU members countries and US, while the goods did not pass the test by the EU health authorities. Then RESPONDENT discovered later that the goods were turn out to be Salt. Thus, it can be concluded that CLAIMANT had delivered the non-conformity goods in accordance to Art. 35 (2)(b) Vienna Convention Act (CISG). 21. For the foregoing reasons,CLAIMANT is liable to RESPONDENT in damages

quantified for US$300.000 being the estimated amount RESPONDENT had suffered due to the contamination in the previous shipment under Contract 03159.

58

CORTEM SPA V CONTROLMATIC PTY LTD [2010] FCA 852 (13 AUGUST 2010) LG Elwangen, 1 KfH O 32/95, available at http://cisgw3.law.pace.edu/cases/950821 g2.html

ON HTTP://WWW.AUSTLII.EDU.AU/CGI-

BIN/SINODISP/AU/CASES/CTH/FCA/2010/852.HTML
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