NINETH ANNUAL WILLEM C. VIS (EAST)
INTERNATIONAL COMMERCIAL ARBITRATION MOOT

MEMORANDUM FOR RESPONDENTOn Behalf of:Against:Equitoriana Control Systems Inc.

Mediterraneo Elite Conferences Services Ltd.

286 Second Avenue,

45 Conference Place,Oceanside, Equitoriana

Capital City, Mediterraneo

Tel: 0237 86 00

Tel: 0486 25 00

Fax:0237 86 01

Fax: 0486 25 11

RESPONDENT

CLAIMANT

KOBE UNIVERSITY FACULTY OF LAW
YUKI DOI * YUSUKE FURUKAWA *AYANO KOBAYASHIMAO MIYANISHI * AIRI MORITA * NAOKI NIHONMATSU *YUTO NAKAO * FENG HAOWEN * TIAN FENG * WANG XIAOXUE *YAN-UBOL AKEJAREE * ZHANG LILI * ZHAO YAN

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANTTABLE OF CONTENSLIST OF ABBREVIATIONS ............................................................................... IV
INDEX OF AUTHORITIES ............................................................................... VI
INDEX OF CASES ............................................................................................... X
STATEMENT OF FACTS ..................................................................................... 1
SUMMARY OF ARGUMENT................................................................................ 3
PART ONE: ARGUMENT ON PROCEDURE ...................................................... 4
I. THE TRIBUNAL SHOULD TAKE ANY MEASURE TO REMOVE THE JUSTIFIABLE
DOUBTS .................................................................................................................................... 4
1. The tribunal has jurisdiction to decide disputes arising from the contract ............................................... 4
2. Respondent challenges the participation of Dr. Elisabeth Mercado on the Elite legal team, and requests thetribunal to rule that she should cease all activities in this arbitration ......................................................... 4
2.1 Respondent challenges Dr. Mercado, but not Professor Presiding Arbitrator ............................................. 4
2.1.1 Professor Presiding Arbitrator is an appropriate choice in this arbitration, as he was designated by the joint agreement of thetwo parties ............................................................................................................................................................ 4
2.1.2 Dr. Mercado should have refused the offer to join the legal team of Claimant ............................................................. 5
2.1.3 The removal of the Professor Presiding Arbitrator would result in a large waste of time and money ............................... 5
2.1.4 Only with the removal of Dr. Mercado, Professor Presiding Arbitrator keeps perfect independence andimpartiality .......................................................................................................................................................... 6
2.2 The close relationship between Professor Presiding Arbitrator and Dr. Elisabeth Mercado may be a threat
to the integrity of the arbitration....................................................................................................................... 6
2.3 In this specific situation, the Tribunal has the authority to remove Dr. Mercado ....................................... 9
2.3.1 CIETAC Rules and UNCITRAL Model Law provide the legal basis for excluding a counsel of a party ... 9
2.3.2 There are judicial precedents allowing the exclusion of a party’s counsel .................................................................. 10
2.3.3 ICSID cases approve the exclusion of a party’s counsel ........................................................................................ 10i

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

2.3.4 Hrvatska case as an appropriate precedent ...........................................................................................................11
3. Respondent reserves the right to challenge the Professor Presiding Arbitrator, in case the challenge to Dr.
Mercado is rejected ................................................................................................................................ 12
3.1 The deadline for challenging Professor Presiding Arbitrator had not started when the challenge to Dr.
Mercado was made........................................................................................................................................... 12
3.2 Professor Presiding Arbitrator breached the obligation of disclosure ........................................................ 12

PART TWO: ARGUMENT ON MERITS ............................................................ 13
I. Respondent did not breach its obligation to supply, install and configure the master
control system at the date of performance............................................................................ 13
1. After the fire of the facility of High Performance, the date of performance was extended to the middle ofJanuary 2011 ......................................................................................................................................... 13
2. The contractual date of performance shall not be interpreted strictly .................................................... 14
2.1 The tribunal should interpret the provision of the date of performance according to Art. 9(2) CISG ....... 14
2.2 Respondent did not know that the date of performance was crucial at the time of contract ..................... 15

II. Respondent is exempt from its liability under Art. 79 CISG ......................................... 16
1. Art. 79(1) CISG should be applied to this case because Specialty Devices is not the “third person” which is
mentioned in Art. 79(2) CISG.................................................................................................................. 16
2. Respondent is exempt from liability under Art.79 (1) CISG ................................................................... 17
2.1 There was an impediment beyond the control of Respondent.................................................................... 17
2.2 The impediment was not foreseeable ......................................................................................................... 18
2.3 Respondent could not reasonably be expected to avoid or to surmount the impediment by any alternative
measures .......................................................................................................................................................... 19
3. Even if Art. 79 (2) CISG is applicable, Respondent should be exempted because both Respondent andSpecialty Devices satisfy the requirements of Art.79 (1) CISG .................................................................. 20
3.1 Respondent is exempted under Art. 79(1) .................................................................................................. 21
3.2 Specialty Devices is exempted under Art. 79(1) ......................................................................................... 21ii

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

3.2.1 The impediment was beyond the control of Specialty Device ................................................................................ 21
3.2.2 The impediment could not reasonably have been expected at the time of the contract................................................ 22
3.2.3 The impediment could not be avoided or overcome ............................................................................................. 23
4. Respondent gave notice to Claimant of the impediment according to Art.79 (4) CISG ............................. 23

III. Respondent is not liable to pay damages related to chartering the substitute yacht. 24
1. Respondent could not foresee that the delay of important conference would have been caused by the late
performance........................................................................................................................................... 24
2. Claimant did not take reasonable measurers to mitigate the loss under Art.77 CISG ............................. 26
2.1 Claimant was required to discuss with Respondent the various possibilities to mitigate the loss under
Art.77 CISG ..................................................................................................................................................... 27
2.2 The chartering M/S Pacifica Star was not reasonable ............................................................................... 28
2.3 Paying success fee was in no way reasonable ............................................................................................ 29
2.4 The ex-gratia payment was not necessary ................................................................................................. 30
2.4.1 Corporate Executives did not request it ............................................................................................................. 30
2.4.2 The ex-gratia payment was unrelated to the loss made by contract .......................................................................... 30

IV. The tribunal shall not deal with the claim for damages tainted by the corruption .... 31
1. The Clean Hands doctrine requires the tribunal to refuse relief to a party who has acted wrongfully ...... 31
2. Claimant has a lack of clean hands because it acted wrongfully in the bribe for facilitating the rental of the
M/S Pacifica Star ................................................................................................................................... 32
3. There is a transnational public policy that bribery should be resisted not only in public but also in private
sectors ................................................................................................................................................... 33
4. The lease contract is tainted because Claimant’s wrongful behavior lead to the crime under the Criminal
Code of Pacifica ...................................................................................................................................... 34iii

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

LIST OF ABBREVIATIONSApp. for Arb.

Application for Arbitration

Art./ Arts.

Article/ Articles

CIETAC

China International Economic and Trade Arbitration Commission

CIETAC Rules

Arbitration Rules of China International Economic and Trade
Arbitration Commission

Cl. Ex.

Claimant Exhibit

CISG

United Nations Convention on contracts for the International Saleof Goods(Vienna 1980)

Co.

CompanyCo., Ltd

Limited Company

Corp.

Corporation

ed./eds.

editor/editors

EDI

Electronic Data Interchange

IBA

International Bar Association

IBA Guidelines

IBA Guidelines on Conflicts of Interest in International Arbitration

ICC

International Chamber of Commerce

ICSID

International Centre for Settlement of Investment Dispute

ICSID Arbitration
Rules

Rules of Procedure for Arbitration Proceedings

ICSID

Convention on the Settlement of Investment Disputes between

Convention

States and Nationals of Other States

Inc.

Incorporation

ITL

International Trade Law

L/C

Letter of Creditiv

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

Mem. for Cl.

Memorandum for Claimant

No / Nos

number/ numbers

NY Convention

Convention on the Recognition and Enforcement of Foreign
Arbitral Awards(New York, 1958)

Para./¶

paragraph/ paragraphs

Pro. Or.

Procedural Order

Re. Ex.

Respondent Exhibit

St. of De.

Statement of Defense

UNCITRAL

United Nations Commission on International Trade Law

UNCITRALUNCITRAL Model Law on International Commercial Arbitration

Model Lawof 1985v

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANTINDEX OF AUTHORITIESRULES AND LAWS;ABBREVIATION CITATIONCIETAC Rules

CITED ON

Arbitration Rules of China International Economic Passim
and Trade and Arbitration Commission

CISG

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

General Standards

IBA

Guidelines

on

ConflictsofInterest

in Passim

International Arbitration Part Ⅰ: General Standards
Regarding Impartiality, Independence And Disclosure
IBA

IBA

Guidelines

on

ConflictsofInterest

in Passim

International Arbitration
IBA. Int.

IBA Guidelines Introduction

IBA Part Ⅱ

IBA

Guidelines

Internationalon

PassimConflicts

Arbitration

Part

of

Interest

Ⅱ :in Passim

Practical

Application of the General Standards
ICSID Convention

Convention on the Settlement of Investment Disputes ¶25
between States and Nationals of Other States

UNCITRALUNCITRAL Model Law on International Commercial Passim

Model Law

Arbitration 1985 With amendments as adopted in 2006vi

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANTSCHOLARLY WORKS;
AndersenAndersen, Eric G.

¶91“Good Faith in the Enforcement of Contracts,”
Iowa Law Review (January 1988)
http://heinonline.org/HOL/Page?handle=hein.journal
s/ilr73&div=19&g_sent=1&collection=journals(accessed on 14 January)
AtamerIngeborg H. Schwenzer, Peter Schlechtriem¶50,58Commentary on the UN Convention on the International Saleof goods (CISG),
Oxford University New York, 2010
Bastida Int.

Bruno Manzanares Bastida¶25“The Independence and Impartiality of Arbitrators inInternational Commercial Arbitration,”
REVIST@e-Mercatoria Volumen 6, Número 1 (2007)
http://www.emercatoria.edu.co/PAGINAS/volumen6/01.html (accessed on 11 January 2012)Black's Law

Bryan A. Garner¶118

Dictionary

Black's Law Dictionary 2nd ed.
West Group, 2004

vii

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

UNCITRAL

United Nations Commission on International Trade

Digest Art. 74“Convention on the International Sale of Goods;¶83

Digest of Article 74 case law”
UNCITRAL Digest of case law on the United Nations
Law(Last updated 2 July 2009)http://www.cisg.law.pace.edu/cisg/text/digest-art-74.html (accessed on 17 Jan 2012)
Garro

Garro, Alejandro M.

¶49

Expecting of Liability for Damages under Article 79 of
the CISGCISG Advisory Council Opinion No.7, 2007
http://www.cisgac.com/default.php?ipkCat=128&ifkC
at=148&sid=169 (accessed on 11 January 2012)
Gordon/Miyake

Kathryn Gordon, Maiko Miyake“Business Approaches to Combating Bribery: A Studyof Codes of Conduct”
Directorate for financial, fiscal and Enterprise Affairs
working Papers on International Investment, no.
2000/1 (January 2004)(Last revised January 2001)
http://www.oecd.org/dataoecd/45/32/1922830.pdf(Last accessed on 18 January 2012)

viii

¶124

KOBE UNIVERSITY FACULTY OF LAW

Hwang S.C/ Lim

MEMORANDUM FOR CLAIMANT

Michael Hwang S.C. , Kevin Lim¶124“Corruption in Arbitration: Law and Reality,”
http://www.arbitration-icca.org/media/0/1326172032
0840/corruption_in_arbitration_paper_draft_248.pdf(accessed on 15 January 2012)
Takayanagi

Kazuo Takayanagi¶42

Handbook of International Project Contract,
Yuhikaku, Japan. 1987
Lawrence

Lawrence, William J. III¶130“Application of the Clean Hands Doctrine in Damage
Actions,” Notre Dame Lawyer,
http://heinonline.org/HOL/LandingPage?collection=journals&handle=hein.journals/tndl57&div=33&id=&
page=(accessed on 18 January 2012)
Sarcevic /Volken

Petar Sarcevic; Paul Volken¶91International Sale of Goods: Dubrovnik Lectures
Oceana Publications, New York, 1986
Schwenzer/Schlechtriem

Ingeborg H. Schwenzer, Peter Schlechtriem
Commentary on the UN Convention on the International Saleof goods (CISG)
2 nd., Oxford University Press, New York, 2005

ix

¶35,37,40,50

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANTINDEX OF CASES

Arbitration Awards
ICSID

HrvatskaICSID Case No. ARB/05/24¶23,24,25

6 May 2008
Hrvatska Elektroprivreda, d.d v. The Republicof Slovenia

Rompetrol

ICSID Case No. ARB/06/3¶25,26,27

14 January 2010
The Rompetrol Group N.V. v. Romania
CIETAC

Aluminium

CIETAC Arbitration Proceedingoxide case

29 September 1997¶75

Docket No. CISG/1997/28
Bulgaria

Belgiumcasecoal Bulgarian Chamber of Commerce and Industry
24 April 1996
CISG-online 435x¶58

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

STATEMENT OF FACTS

Claimant

Mediterraneo Elite Conferences Services, Ltd. is a company which
operates high-end venues in which it provides a complete
conference package. It focuses on professional associations that
hold a “flagship” event at least once a year.

Respondent

Equatoriana Control Systems, Inc. is a company which supplies,
installs and configures the elements of the on-board technology.

Spring 2010

Claimant purchased a luxury yacht, the M/S Vis for use as aseventh conference venue.

26 May 2010

Claimant contracted with Respondent which was to supply, installand configure the master control system essential for events in
M/S Vis. In the contract the refurbishing of the M/S Vis wasscheduled to be completed on 12 November 2010.

5 August 2010

Respondent was informed that the annual conference ofCorporate Executives was scheduled 12-18 February 2011.

The middle of August

The production of the D-28 chips was scheduled to begin.

10 September 2010

Specialty Devices was informed that there was a fire at the
production facility of High Performance.

13 September 2010

Respondent informed Claimant that due to the serious fire, theproduction of the D-28 chips had been interrupted and deliveryof the control systems and installation on the M/S Vis could not
be expected as scheduled. Hence, Claimant had to charter the M/SPacifica Star as an alternative.

24-25 October 2010

The damage from the fire was repaired.
1

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

2 November

High Performance delivered the D-28 chips to Specialty Devices.

12 November 2010

The refurbishing of the M/S Vis was scheduled to be completed.

29 November,Specialty Devices shipped the control system.

14 January 2011

Respondent delivered the control system to the M/S Vis.

12-18 February 2011

Corporate Executives held an event on the M/S Pacifica Star.

11 March 2011

Installation, configuration and verification were completed.

21 March 2011

Respondent got a full payment by L/C issued by Mediterraneo
National Bank.

25 April 2011

Claimant wrote to Respondent that the latter was legally
responsible for the costs arising out of the delay.

9 May 2011

Respondent denied all responsibility by letter.

15 July 2011,

Claimant filled the Application for Arbitration to CIETAC inaccordance with the arbitration clause in the contract concluded by
the two parties.

2 August 2011

Claimant appointed Ms. Arbitrator 1 as an arbitrator and Professor
Presiding Arbitrator as the presiding arbitrator.

3 August 2011

Respondent appointed Dr. Arbitrator 2 as an arbitrator and agreed
on the presiding arbitrator.

22 August 2011

Ms. Arbitrator 1 signed Declaration of Acceptance and Statementof Independence.

30 August 2011

The afore-mentioned three arbitrators formed the arbitral tribunal.

2 September 2011

Respondent submitted a Statement of Defense to CIETAC andrequested the tribunal to rule that Dr. Elisabeth Mercado should
withdraw from the legal team representing Claimant.

2

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

SUMMARY OF ARGUMENT

PART ONE: ARGUMENT ON PROCEDURE
The tribunal has jurisdiction under the arbitration clause in the contract. Respondent seeks anorder to remove Dr. Mercado rather than Professor Presiding Arbitrator on the issue of
impartiality and independence; (1) Professor Presiding Arbitrator is an appropriate choice in thisarbitration and the removal of Professor Presiding Arbitrator would result in a large waste oftime and costs. There is no reason to challenge Professor Presiding Arbitrator before the tribunal
allows Dr. Mercado to continue participating on the Elite legal team; (2) The close relationshipbetween Dr. Mercado and Professor Presiding Arbitrator may be a threat to the integrity of thearbitration; (3) The tribunal has the authority to remove Dr. Mercado in the circumstance of thiscase. If the challenge to Dr. Mercado is not accepted by the tribunal, Respondent reserves theright to challenge Professor Presiding Arbitrator.

PART TWO: ARGUMENT ON MERITS
Regarding the substantive issues, Respondent argues four submissions: (1) Respondent did notbreach any obligation of the contract; (2) Even if Respondent breached the contract, Respondentis exempted from the liability of late performance under Art. 79 CISG; (3) Respondent is notliable to pay the damages because of two reasons; first, Respondent did not foresee or could nothave foreseen the damages at the time of the conclusion of the contract under Art. 74 CISG;
secondly, Claimant did not take reasonable measure to mitigate its losses determined in Art. 77
CISG; (4) Claimant has no right to claim for the damages arisen from the lease contract which
was tainted by a corruption.

3

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

ARGUMENT
PART ONE: ARGUMENT ON PROCEDURE

I. THE TRIBUNAL SHOULD TAKE ANY MEASURE TO REMOVE THE
JUSTIFIABLE DOUBTS
1. The tribunal has jurisdiction to decide disputes arising from the contract
1.

Under the arbitration clause in the contract dated 26 May 2011, ｔhe Arbitral tribunal wasproperly constituted according to CIETAC rules Art. 25. Therefore, the Tribunal has
jurisdiction over all disputes arising from or in connection with the contract.
2. Respondent challenges the participation of Dr. Elisabeth Mercado on the Elite legalteam, and requests the tribunal to rule that she should cease all activities in thisarbitration2.

Respondent seeks an order from the tribunal requesting Claimant to remove Dr. Mercado fromthe team of counsel representing Elite, for the following reasons.
2.1 Respondent challenges Dr. Mercado, but not Professor Presiding Arbitrator

3.

It is common ground between the parties that the rules governing the present arbitration
proceeding, i.e. CIETAC rules and UNCITRAL Model Law, contain no provision allowing achallenge to the appointment of a Party’s counsel. Nevertheless, Respondent requests the
Tribunal to terminate Dr. Elisabeth’s role in Claimant’s legal team.
2.1.1 Professor Presiding Arbitrator is an appropriate choice in this arbitration, as
he was designated by the joint agreement of the two parties

4.

Respondent affirmed that it did not wish Professor Presiding Arbitrator to resign. He is on the
CIETAC Panel of Arbitrators, is from Danubia, where the arbitration will take place, and has
broad experience suitable for this arbitration [Pro. Or. No 2 ¶34]. Although, he is not a specialist
in arbitration, he sits as an arbitrator in investor-state arbitrations including ICSID as well as
4

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANTWTO arbitrations and occasionally in commercial disputes [St. of De. ¶17]. Both parties came tothe conclusion independently to suggest him as the presiding arbitrator [Pro. Or. No 2 ¶34] Thus,
he is an obvious choice as a presiding arbitrator in this case.
2.1.2 Dr. Mercado should have refused the offer to join the legal team of Claimant5.

According to CIETAC Art.9, the parties shall proceed with the arbitration in bona fide
cooperation. Moreover, it is the interest of everyone in the international arbitration communitythat international arbitration proceedings not be hindered by any growing conflicts of interest
issues [IBA Int. ¶3].

6.

As argued below, Dr. Mercado has a close personal relationship with the Professor Presiding
Arbitrator. When appointed as a counsel representing Elite legal team on 30 August 2011 [Pro.
Or. No 2 ¶29], Dr. Mercado was fully aware that Professor Presiding Arbitrator had alreadybeen appointed as a presiding arbitrator. Moreover, considering that Dr. Mercado had spenttime as General Counsel in a large international trading company in the past and worked as acounsel of a party in arbitration regularly [St. of De. ¶20], she should have enough knowledgeof the IBA Guidelines, and could foresee that her relationship with Professor Presiding
Arbitrator would give rise to a duty of disclosure [IBA Part II ¶3]. If she intended to act ingood faith in this situation, she would have disclosed her relationship with Professor Presiding
Arbitrator to allow the parties and CIETAC to judge whether or not they approve of theexistence of this relationship. Respondent would like to assert that under these circumstances,
it is Dr. Mercado who should first be responsible for the disclosure as she also has the
responsibility for ensuring the integrity of arbitration. Alternatively, in deference to the
independence of the Professor Presiding Arbitrator, she should have refused the request of
joining to Claimant’s legal team. Therefore, Dr. Mercado has not acted appropriately
threatening the integrity of the arbitration and should thus cease all activities in thisarbitration.
2.1.3 The removal of the Professor Presiding Arbitrator would result in a large
5KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

waste of time and money
7. The removal of the Professor Presiding Arbitrator would be considerably more disruptive than
the removal of Dr. Mercado. In these proceedings, both parties have already exchanged one
round of memorandums, and the hearing will have already taken place by the time the tribunal
makes its decision about Dr. Mercado. If Professor Presiding Arbitrator is removed, theproceedings may have to start over from the beginning. This would result in a huge waste oftime and money.
2.1.4 Only with the removal of Dr. Mercado, Professor Presiding Arbitrator keeps
perfect independence and impartiality
8.

CIETAC Rules Art. 30 (3) indicates that a party may challenge the arbitrator in writing within
fifteen days after such reason become known. In this case, before the tribunal allows Dr.
Mercado to continue participating as a counsel of Elite legal team, there is no reason tochallenge the Professor Presiding Arbitrator. It is the participation of Dr. Mercado that would
be a threat to the integrity of the tribunal. If the tribunal allows her to continue participating
as a counsel of Elite legal team, the conflict of interest between the Professor Presiding
Arbitrator and Dr. Mercado would exist.

9.

Therefore Respondent believes that, in this specific situation, requesting the removal of Dr.
Mercado rather than challenging the Professor Presiding Arbitrator is the correct approach tobe taken.
2.2 The close relationship between Professor Presiding Arbitrator and Dr. Elisabeth
Mercado may be a threat to the integrity of the arbitration

10.

Pursuant to CIETAC Art. 22, an arbitrator shall not represent either party, and shall be andremain independent of the parties and treat them equally. UNCITRAL Model Law Art.18
also provides that the parties shall be treated with equality and each party shall be given a fullopportunity to represent their cases.

11.

In this case, however, there are some facts or information relating to the close personal
6

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

relationship between Dr. Mercado and the Professor Presiding Arbitrator that could cause areasonable third person to have justifiable doubts as to the impartiality of this arbitration
procedure.
12.

The Professor Presiding Arbitrator is the Schlechtriem Professor of International Trade Law
at Danubia National University, and also sits on the Management Committee of the ITL
Faculty. He is responsible with the other members of the Committee for all ITL activities,
including arbitration [St. of De. ¶17]. Meanwhile, Dr. Mercado is a Visiting Lecturer atDanubia National University, who was selected after an interview by a panel of three, chairedby the Professor Presiding Arbitrator [St. of De. ¶18, 19]. Although Dr. Mercado obtained
the Visiting Lectureship by a public application process, it was evident that Professor
Presiding Arbitrator played a major role in the selection procedure, because he was thechairman of the panel. Dr. Mercado delivers approximately 50% of the arbitration lectures.
She also delivers the lectures to the ITL Faculty as part of Professor Presiding Arbitrator’scourse on international trade [St. of De. ¶19, 20]. Obviously, Dr. Mercado and the Professor
Presiding Arbitrator have to keep contact with each other as to these lectures.

13.

Moreover, Dr. Mercado has a very close personal friendship with the wife of Professor
Presiding Arbitrator. Their friendship began soon after Dr. Mercado had been appointed as
Visiting Lecturer [Pro. Or. No 2 ¶38]. Presumably, it is Professor Presiding Arbitrator who
introduced Dr. Mercado to his wife because they knew each other through professional workcommitments.

14.

The two women occasionally meet in the city for a lunch or a coffee. She is on first name termswith the Professor’s four children. And in October 2010 she was asked to be the godmotherto the youngest of the Professor’s children [St. of De. ¶21]. It is a common understanding thata person, who is in the position of a godmother, would have a very close personal relationshipwith other members of the family. Therefore it can be concluded that a close personal
friendship exists between the Professor Presiding Arbitrator and Dr. Mercado.
7

KOBE UNIVERSITY FACULTY OF LAW

15.

MEMORANDUM FOR CLAIMANT

There is no detailed standard in the CIETAC Rules providing guidance as to how to judge therelationship between the counsel of one party and an arbitrator and as to what situations giverise to justifiable doubts as to whether a conflict of interest exists. Consequently, Respondent
submits that the IBA Guidelines should be relied on in these circumstances. Although these
Guidelines are not legally binding and do not override any arbitral rules chosen by the parties,
they are regarded as a generally accepted code of conduct within the international arbitration
community, covering many of the varied situations that commonly arise and might cause
conflict of interests in practice[IBA Int. ¶6].

16.

In developing the practical application of the IBA General Standards, the practical situations
are divided into three lists: Red, Orange and Green Lists. The Orange List is an enumerationof specific situations which, in the eyes of the parties, may give rise to an arbitrator’s duty of
disclosure [IBA Part II ¶3]. The Orange List 3.3.6 indicates that a close relationship exists
between an arbitrator and a counsel of one party on the basis that they regularly spend
considerable time together unrelated to professional work.

17.

Given the personal relationship mentioned above, Dr. Mercado might spend considerable time
together unrelated to professional work with Professor Presiding Arbitrator, such as family
gatherings etc. Therefore, the relationship between them is likely to fall within the Orange List
3.3.6.

18.

In addition, regarding Claimant’s argument, Respondent would like to affirm that therelationship between Dr. Mercado and Professor Presiding Arbitrator does not comply with
the Green List 4.4.1, which refers only to membership in a professional or social organization.
Thus, the application of Green List is not appropriate to exempt Professor Presiding
Arbitrator’s duty of disclosure.

19.

In addition, in the three previous arbitrations in which Dr. Mercado has appeared as counsel
before Professor Presiding Arbitrator, she had been successful in two arbitrations with aunanimous tribunal, but was unsuccessful in a third arbitration in which Professor Presiding
8

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

Arbitrator nonetheless dissented in favor of Dr. Mercado’s client [St. of De. ¶22]. Dissents
occur in arbitration but not systematically. It is generally true that tribunals will work to reachconsensus and avoid the need for a dissenting opinions. That means dissents rarely happen inarbitration. Therefore, it could be reasonably concluded that the act of Professor Presiding
Arbitrator gives rise to a suspicion of bias due to their personal relationship. Given theprevious arbitration results, Respondent justifiably suspects that Claimant has attempted togain an improper advantage through its choice of counsel. This advantage presumably rests
on an assumption that Professor Presiding Arbitrator would have a natural sympathy, or at thevery least, that there would be an appreciable risk of this, severe enough so as to jeopardize
public confidence in the arbitral process.
20.

As a consequence, Respondent is deeply concerned whether the close relationship mentioned
above would affect the integrity of this arbitration. Therefore, Respondent seeks only Dr.
Mercado’s disqualification and does not challenge the tribunal itself or any of its members.
2.3 In this specific situation, the Tribunal has the authority to remove Dr. Mercado

21.

Although there is no provision under CIETAC rules allowing a challenge to the appointment
by a Party’s counsel, the tribunal does in principle possess an inherent or implied power tocontrol a Party’s representation before it in arbitral proceedings.
2.3.1 CIETAC Rules and UNCITRAL Model Law provide the legal basis for
excluding a counsel of a party

22.

As stated in CIETAC Rules Art. 33 (1), the arbitral tribunal shall act impartially and fairly andshall afford a reasonable opportunity to all parties to make submissions and arguments.
Similarly, UNCITRAL Model Law Art. 17 (2) also provides that the arbitral tribunal may, atthe request of a party, grant interim measures such as section (b) ordering a party to takeaction that would prevent, or refrain from taking, action that is likely to prejudice to thearbitral process itself.

23.

In other words, the overriding principle is that of the immutability of properly constituted
9

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

tribunals [Hrvatska ¶25]. Respondent seeks to remove Dr. Mercado on the basis of an
implication drawn from general nature and purpose of the arbitration rules, and by invoking
an inherent general power on the part of any tribunal to police the integrity of its proceeding.
2.3.2 There are judicial precedents allowing the exclusion of a party’s counsel
24.

Authority supporting the existence of such a power to exclude counsel may be found in the
recent decision of ICSID Tribunal in the case of Hrvatska Elektroproveda d.d v. Republic ofSlovenia, read in conjunction with the IBA Guidelines on Conflicts of interest in International
Arbitration. The decision of the Hrvatska Tribunal cites legal principle and widespreadpractice supporting the inherent authority of an international court or tribunal to exercise
such powers as are necessary to preserve the integrity and effectiveness of its proceedings[Hrvatska ¶33]. The tribunal removed a counsel of Respondent’s legal team because both thearbitrator and the counsel were members of the same Chamber and the composition of thelegal team was changed in such a fashion as to imperil the tribunal’s status or legitimacy[Hrvatska ¶26].
2.3.3 ICSID cases approve the exclusion of a party’s counsel

25.

The decision is not a legally binding precedent [Rompetrol ¶15]. However, when comparing
CIETAC rules and ICSID Arbitration rules applied in the Hrvatska case, both of them apply
the same principles in tribunal proceedings. The Hrvatska case discusses the “fundamental
rules of procedure” referred to in Article 52 (1) (d) of the ICSID Convention, that theproceedings should not be tainted by any justifiable doubts as to the impartiality or
independence of any Tribunal member [Hrvatska ¶30]. This is in common spirit with
UNCITRAL Model Law Article 12(2). Similarly, both ICSID rules Art. 6 (2) and CIETAC
rules Art. 22 protect the integrity of the tribunal. Moreover, although ICSID is arbitration
between contracting state and the nationals of other contracting states [ICSID Convention],
both arbitrations under CIETAC and ICSID deal with important issues on international trade
and there is no difference on the provisions about the impartiality and independence of
10

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

arbitral tribunals, which is one of the fundamental principles of the international commercial
arbitration [Bastida Int.]. Therefore, the ICSID case can be the basis when interpreting
CIETAC rules and UNCITRAL Model law, which are applicable to this case.
2.3.4 Hrvatska case as an appropriate precedent
26.

Although Claimant argued in accordance with ICSID case of Rompetrol, that “[t]here should be
no room for any idea to gain ground that challenging counsel is a handy alternative to raise achallenge against the tribunal itself ” [Rompetrol ¶21], Respondent submits that it is proper torefer to Hrvatska case rather than Rompetrol case.

27.

In Rompetrol case, the request for removing a party’s counsel was challenged on the ground thatboth the counsel and Member of the Tribunal had until recently been members of the samelaw firm [Rompetrol ¶5]. However, the relevant relationship had existed prior to the arbitrationand the tribunal ruled that a professional association between counsel and arbitrator in thatcase, which both of them had affirmed to be nominal, is not of a kind to affect the arbitrator’s
independence of judgment [Rompetrol ¶25].

28.

To the contrary, the reason for the disqualification of counsel in the Hrvatska case was the lateannouncement of the new appointment of counsel and the contemporaneous existence of apersonal relationship with the arbitrator.

29.

In this case, it was on 30 August 2011 that Claimant notified Respondent of the participationof Dr. Mercado [Pro. Or. No 2 ¶29]. This was only five days before the deadline of thestatement of defense. Further, the relationship between Dr. Mercado and Professor Presiding
Arbitrator at Danubia National University is analogous to the Hrvatska case, rather than theRompetrol case [St. of De. ¶17,18]. Therefore, it is appropriate to refer to the Hrvatska case toaffirm that the tribunal has an authority to remove Dr. Mercado.

30.

In conclusion, as Respondent intended to cooperate in the arbitral proceedings in good faith, it
made a request to remove Dr. Mercado from Claimant’s legal team as a suitable measure under
the present circumstances.
11

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

3. Respondent reserves the right to challenge the Professor Presiding Arbitrator, in casethe challenge to Dr. Mercado is rejected
3.1 The deadline for challenging Professor Presiding Arbitrator had not started when
the challenge to Dr. Mercado was made31.

As mentioned 2.1.3, there is no reason to challenge the Professor Presiding Arbitrator before
the tribunal reaches any decision allowing Dr. Mercado to continue participating as a counselof Elite legal team. The time for challenging Professor Presiding Arbitrator should be
calculated from the time when the participation of Dr. Mercado is approved by the tribunal,
namely on the first hearing. Therefore, the deadline for challenging the Professor Presiding
Arbitrator has not passed, and Respondent should not be deprived of its right to challenge
Professor Presiding Arbitrator when the reason for challenging an arbitrator becomes evident[St. of De. ¶16].
3.2 Professor Presiding Arbitrator breached the obligation of disclosure

32.

According to CIETAC Art. 29 (1), an arbitrator should disclose any facts or circumstances
likely to give rise to justifiable doubts as to his impartiality or independence. Furthermore, Art.
29 (2) indicates that if the circumstance that need to be disclosed arise during the arbitration
proceedings, the arbitrator shall promptly disclose such circumstance in writing to CIETAC.
Because there is no detailed standard determining the situation which regarded as justifiabledoubts in CIETAC Rules, the IBA guidelines on conflict of interest should apply under thiscircumstance.

33.

However, after Professor Presiding Arbitrator learned that Dr. Mercado had been added to
Claimant’s legal team on 12 September 2011 [Pro. Or. No 2 ¶35], he neither submitted a newstatement of independence to CIETAC nor promptly declared such relationship as requiredby the CIETAC Rules Art. 29. Therefore, he breached his duty of disclosure. Had he met his
prompt disclosure obligation in a timely manner, the prospect of impartiality over theseproceedings could have been avoided.
12

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANTPART TWO: ARGUMENT ON MERITS

I. Respondent did not breach its obligation to supply, install and configure the master
control system at the date of performance
34.

Claimant and Respondent concluded the contract on 26 May 2010. [App. for Arb. ¶7] According
to the contract, the parties agreed that the date of performance was 12 November 2010. [Cl.
Ex. No 1] Respondent completed its duty on 11 March 2011. [App. for Arb. ¶16] Claimantargued that Respondent breached the contract under Art. 33(a) CISG. [Mem. for Cl. ¶54]
However, the delay of performance does not constitute a breach of contract for the following
reasons. First, the date of performance was extended to the middle of January 2011. Second,even if the date of performance was not extended, the provision concerning the date ofperformance should be interpreted that Claimant did not require Respondent to complete
supply, installation and configuration strictly on time.
1. After the fire of the facility of High Performance, the date of performance was
extended to the middle of January 201135.

According to Art. 29(1) CISG, “a contract may be modified or terminated by the mere
agreement of the parties.” The principle of freedom from requirements as to form, which isprovided by Art. 11 CISG, is also applicable to the agreement to modify the contract.
[Schwenzer/Schlechtriem, 329] Thus, the parties are not required to use any particular form inorder to modify the contract.

36.

On 13 September 2010, three days after Respondent was informed of the fire incident in thefactory of High Performance, Respondent informed Claimant that the performance would
be delayed. [Cl. Ex. No 2] At that time, it was clearly impossible for Respondent to complete
its performance by 12 November 2011. In the e-mail, Respondent mentioned that “deliveryof the control systems and the beginning of installation on the M/S Vis cannot be expected
before the middle of January 2011.” [Cl. Ex. No 2] Respondent offered Claimant the13

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

modification of the date of performance on that time.
37.

As to the acceptance, Art. 18(1) CISG is also applied to the modification of the contract.
[Schwenzer/Schlechtriem, 329] According to Art. 18(1), the conduct indicating assent to an offer
is also regarded as an acceptance. In this case, after Respondent notified Claimant of thedelay of performance, Claimant communicated with Respondent about the technical mattersof the installation. [Pro. Or. No 2 ¶15] Further, Claimant did not make any claims as to thedelay of performance. Such conduct indicates that Claimant accepted the offer ofRespondent.

38.

Therefore, the parties effectively agreed to extend the date of performance to the middle ofJanuary 2011.
2. The contractual date of performance shall not be interpreted strictly

39.

Even if the date of performance was not extended to the middle of January 2011, thetribunal should still interpret the date of performance as not requiring Respondent tocomplete its duty strictly on time.
2.1 The tribunal should interpret the provision of the date of performance according toArt. 9(2) CISG

40.

Art. 9(2) CISG provides that “the parties are considered, unless otherwise agreed, to have
impliedly made applicable to their contract or its formation a usage of which the parties
knew or ought to have known and which in international trade is widely known to, andregularly observed by, parties to contracts of the type involved in the particular tradeconcerned.” Art. 9(2) is applied in order to determine the content of the parties’ agreement
or supplement the contract on the basis of a hypothetical intent of the parties.
[Schwenzer/Schlechtriem, 142, 146]

41.

In this case, Respondent contracted with Specialty Devices in order to get the processing
units which were the core elements in the master control system. [App. for Arb. ¶8] Specialty
Devices and High Performance concluded the sales contract for the D-28 chips which were14

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

to be used in the processing units. [App. for Arb. ¶9] It is difficult to consider suchcontractual relationships as the same as the relationship of a pure sales contract. It can besaid that this contractual relationship is similar to the procurement contract in regards to its
process of performance because of the nature of the procurement contract. The purpose of
the procurement contract is to constitute the large-scale system or machinery, requiring the
involvement of many persons and processes to complete performance.
42.

In the practice of the procurement contract, it is difficult to expect that the duty was always
completed perfectly on time because many complicated processes are involved in suchcomplex contractual relationships. Ordinarily, the promisee provides Liquidated Damages in
the contract in order to guarantee the obligation to secure the date of delivery strictly.
[ Takayanagi, 338]

43.

In this case, Claimant did not know who had contracted with Respondent specifically.
However, Claimant “knew that it is common that a party from whom it procured a productwould have purchased that product or some elements of it from a third party.” [Pro. Or. No 2
¶6] It is reasonable to conclude that, when the contract was concluded, Claimant was awareof Respondent’s difficulty in finishing all process to equip the master control system strictly
on time. It is not clear whether Claimant provided the Liquidated Damages in the contract ornot. However, taking into account the order of the provision and its contents in this contract,
it is reasonable to consider that there is no such provision. Thus, applying to the usage ofthe procurement contract, the tribunal should consider that Claimant did not impose theobligation to strictly observe the date of performance on Respondent.
2.2 Respondent did not know that the date of performance was crucial at the time ofcontract

44.

Claimant stated that the annual conference of Corporate Executives was scheduled to beheld on the M/S Vis 12 – 18 February 2011. [App. for Arb. ¶11] However, Respondent was
only informed of this fact on 5 August 2010. [Pro. Or. No 2 ¶14] Therefore, when the parties
15

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

concluded the contract, Respondent did not know of any plan to hold a conference, evenless the date of the annual conference of Corporate Executives. There is no available
evidence as to when Claimant contracted with Corporate Executives for the conference.
However, given that the conference had already been scheduled prior to the conclusion of
the contract, Claimant should have expressly stated the importance of the date in thecontract if Claimant wanted Respondent to observe the date of performance strictly.
45.

Even if Respondent might be aware of the general nature of Claimant’s business when thecontract was concluded, it was impossible for Respondent to know on which date theconference is to be held on M/S Vis.

46.

Moreover, after completing the refurbishing, Claimant suddenly claimed the damages
concerning the conference of Corporate Executives. [Cl. Ex. No 4]

47.

Therefore, the tribunal should interpret the provision relating to the date of performance as
not requiring Respondent to complete its duty strictly on time.

II. Respondent is exempt from its liability under Art. 79 CISG
48. As the damage was caused by an inevitable accident, Respondent is not liable for the delay of
performance according to Art.79 CISG.
1. Art. 79(1) CISG should be applied to this case because Specialty Devices is not the“third person” which is mentioned in Art. 79(2) CISG
49. Specialty Devices is the manufacturer of processing units of the newly furbished M/S Vis.
Third-party supplier or subcontractors, to whom the seller turns as a source for supply thegoods, are not a relevant “third person”. [Garllo, ¶18] Therefore, Specialty Devices is not thethird-person which is mentioned in Art. 79(2) CISG. Thus, Art. 79(1) should be applied to this
case.
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KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

2. Respondent is exempt from liability under Art.79 (1) CISG
50. The question Art.79 (1) is concerned with is allocating a loss which was caused by a supervening
event impeding performance. [Atamer, 44] In general, a party cannot be exempted from liability.
However, a different conclusion would be justified if “the supplier is the only available sourceof supply, because he has a monopoly over raw material supplies and supplies are unavailable
due to unforeseen events.” [Schwenzer/Schlehtriem, 822]
51.

In this case, High Performance is the only manufacturer of the D-28 chips. As Specialty
Devices designed the processing units only using the D-28 chips, the processing units werenecessary for Respondent to fulfill its contractual obligation with Claimant. However, there
was a fire accident at the facility where High Performance produced the D-28 chips [App. forArb. ¶12]. As a consequence, the supply of the D-28 chips was not available on time. This is
the reason why Respondent could not performed its obligation in time.

52.

Therefore, Respondent meets requirements of the Art. 79(1) CISG, and should be exemptedfrom its liability. Because the late performance was caused by an event beyond Respondent’s
control (2.1), the impediment was not foreseeable at the time of the contract conclusion (2.2)
and Respondent could not reasonably be expected to avoid or to surmount the consequencesof this unforeseeable event by any alternative means (2.3).
2.1 There was an impediment beyond the control of Respondent

53.

According to Art. 79(1), in order to exempt the obligor, the impediment has to occur outsideof his sphere of control. In this case, the impediment of Respondent’s performance is thefailure to receive processing units from his supplier, Specialty Devices, on time. Because an
unexpected fire occurred at the facility where High Performance produced the D-28 chips,
Specialty Devices could not acquire the D-28 chips from High Performance, and thus
Respondent could not get the processing units using for M/S Vis from Specialty Devices.
Under such circumstances, Respondent should use a substitute for the D-28 chips. However,in this case, the D-28 chips had no substitute for three reasons.
17

KOBE UNIVERSITY FACULTY OF LAW

54.

MEMORANDUM FOR CLAIMANTFirst, High Performance was the only manufacturer of the D-28 chips at that time, andSpecialty Devices designed the processing unit in a way requiring the use of the D-28 chips. A
chip of comparable qualities to the D-28 chips would not be available for another six months.
[App. for Arb. ¶9] This would be too late for Respondent because it was asked to fulfill its
obligation by 12 November 2010 [Cl. Ex. No 1].

55.

Second, using rival chips was infeasible. Redesign of the processing units using a substitutechip with a different specification to the D-28 chips would have involved severe delay andcosts while providing no guarantee of comparable performance given the unique qualities of
the D-28 chips. [Pro. Or. No 2 ¶12] It could not have helped Respondent to fulfill its
obligations.

56.

Third, in addition to intellectual property issues, using a ‘clone’ of the D-28 chips fromanother manufacturers, would also have involved delay and costs. [Pro. Or. No 2 ¶12]

57.

Respondent could not fulfill its obligation without the D-28 chips. However, for the reasonsstated above, the D-28 chips had no substitute. Therefore, the fact that Respondent could notreceive processing units from Specialty Devices was beyond its control.
2.2 The impediment was not foreseeable

58.

Whether the supervening impediment was foreseeable or not should be judged according to
an objective standard. [Atamer,¶52] If at the time of contracting the obligor was aware of therisk threatening performance, it is assumed that this would have reflected itself in the termsof the contract, either by provisions limiting liability or by a higher or lower price. CISG
presupposes that a party may be regarded as having taken the risk of occurrence of a certain
event, if that risk would have been appreciated by a reasonable person engaged in the type ofbusiness in question and had been accordingly externalized. [Belgium coal case] However,foreseeability cannot mean that every impediment which generally might occur such as war,
famine, flood or the like is considered to have been taken into account by the obligor. [Atamer,¶51]
18

KOBE UNIVERSITY FACULTY OF LAW

59.

MEMORANDUM FOR CLAIMANT

In the present case, the fire accident occurred more than three months after the contract was
concluded. [App. for Arb. ¶12] The accident led to the shortage of the D-28 chips, andSpecialty Device could not receive the chips on time, which in turn lead to Respondent’s late
performance. [Pro. Or. No 2 ¶8] Thus, Respondent did not need to take the accident of fire
into account. Also, it is natural that the fire would fall outside the ordinary range offoreseeability when both parties concluded the contract.

60.

In addition, High Performance made an abnormal decision to send all the chips in stock to its
CEO’s friend’s company, Atlantic Technical, in return for its help. From Respondent’s
standpoint, it is hard to take into account that its supplier’s supplier would make such a
decision directly leading to Respondent’s late performance.

61.

For these reasons, Respondent should be exempt from its liability, because the impediment
was not foreseeable at the time of contract conclusion.
2.3 Respondent could not reasonably be expected to avoid or to surmount the
impediment by any alternative measures

62.

Art.79 (1) obliges the parties to make a reasonable effort to overcome the effects of animpediment which occurred all of a sudden without leaving any margin for preventive
measures. Therefore, alternative performance methods should be taken by obligor to
overcome the impediment. Possible alternative measures include obtaining chips in stock fromHigh Performance, to acquire chips from Atlantic Technical Solutions, or to use substitutechips of the D-28 chips. However, according to the facts, none of these measures werepossible.

63.

First, Respondent could not obtain chips from High Performance. Even if High Performanceallocated the chips in stock on pro rata, the D-28 chips available in the warehouse would havesufficed to make the master control system function.[Pro. Or. No 2 ¶9] However, High
Performance stated in its mail to Specialty Device that allocating the stock pro rata would nothave been satisfactory for the majority of the customers of Atlantis High Performance. [Cl.
19

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

Ex. No 3] In addition, neither the contracts High Performance had with its customers nor thelaw of Atlantis required it to pro rate its immediately available supply among its customers.
For these reasons, it is appropriate to consider that as a reasonable merchant, High
Performance would not take measures to satisfy an irregular customer without accounting for
its own interests. Moreover, while Respondent directly contracted with Specialty Device, there
was no direct relationship with High Performance. It is normally impossible for a party tocontrol its supplier’s supplier. In conclusion, Respondent could not stop High Performancefrom sending the whole stock of chips to Atlantic Technical solutions.
64.

Second, Respondent could not get the D-28 chips from Atlantic Technical Solutions either.
Since all chips left at the stock were sent to Atlantic Technical Solutions, it seems that
Respondent could be expected to get chips directly from it. However, according to the facts,
Specialty Devices had approached Atlantic Technical Solutions to see whether it could
purchase the chips it needed for an even higher price, but Atlantic Technical Solutions refused
this request.[Pro. Or. No 2 ¶11] Therefore, even if Respondent had made a similar request, theresult would have been the same. In addition, Respondent was not in a reasonable position totake this measure because there was no direct contractual relationship between Respondentand High Performance.

65.

Third, the D-28 chips had no substitute for the three reasons stated in 2.1.

66.

Beyond untenable possibilities, in this specific situation, there was nothing Respondent could
have or should have been expected to do.

67.

In conclusion, the late performance lies in an impediment which was beyond Respondent’s
control; the impediment was not foreseeable at contract conclusion; and Respondent could
not reasonably have been expected to avoid or to surmount the consequences of thisunforeseeable event by any alternative means. Therefore, Respondent should be exemptedfrom its liability under Art.79(1) CISG.
3. Even if Art. 79 (2) CISG is applicable, Respondent should be exempted because both
20

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

Respondent and Specialty Devices satisfy the requirements of Art.79 (1) CISG
68.

As mentioned above, Specialty Devises is not the third person mentioned in Art. 79(2) CISG.
However, in case that the tribunal should find that Specialty Devices is the third person andArt. 79(2) CISG is applied, Respondent should still be exempted from its liability because bothRespondent and Specialty Devices satisfy the requirements in Art. 79(1) CISG.

69.

Art. 79(2) CISG proves that “If the party’s failure is due to the failure by a third person
whom he has engaged to perform the whole or a part of the contract, that party is exempt
from liability only if: (a) he is exempt under the preceding paragraph (Art. 79(1)); and (b) the
person whom he has so engaged would be so exempt if the provisions of that paragraph wereapplied to him.”
3.1 Respondent is exempted under Art. 79(1)70.

As mentioned above, Respondent is exempt from liability under Art. 79(1). Thus Art. 79(2)(a)is satisfied.
3.2 Specialty Devices is exempted under Art. 79(1)71.

In this case, High Performance was the only company which could supply the D-28 chips,
and the D-28 chips was the only chip which could be equipped in the processing units for
M/S Vis. Those circumstances were threatened because of the destruction of the plant of the
D-28 chips in a fire accident. Therefore Specialty Devices meets the conditions to be exempt
from liability under Art. 79(1) CISG. The impediment in this issue is the impossibility ofgetting qualified chips for the processing units which is different from what is defined as an
impediment in Memorandum for Claimant, “High Performance’s discretionary of chips”.
[Mem. for Cl. ¶71]
3.2.1 The impediment was beyond the control of Specialty Device

72.

According to the clarifications, at the time Specialty Devices faced the impossibility of getting
the D-28 chips from High Performance, the purchase of a substitute chip with a different
specification to the D-28 chips would have involved severe delay and costs, and also if another21

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

manufacturer tried to clone the D-28 chips, it would have involved delay and costs too. [Pro.
Or. No 2 ¶12] Thus there were no means to get a chip qualified as the processing units for
M/S Vis as a substitute for the D-28 chips.
73.

Moreover, the decision made by High Performance to sell the D-28 chips remaining after thefire was legally justifiable. Since Specialty Devices was not the regular customer for Highperformance [Cl. Ex. No 3], it is natural that the priority to allocate the D-28 chips which wasstocked should be for Atlantis Technical Solutions. Even if the Atlantis Technical Solution
was not chosen to be allocated the D-28 chips from High Performance, Specialty Devices
could not have acquired the D-28 chips because other regular customers would have been
preferenced. Thus, as neither a substitute chip nor the D-28 chips itself was available forSpecialty Devices, the impediment was beyond Specialty Device’s control.
3.2.2 The impediment could not reasonably have been expected at the time of thecontract

74.

The conclusion of the contract was on 26 May 2010, and the origin of impediment was thedestruction of the plant of the D-28 chips caused by fire was occurred on 6 September 2010.
The circumstance in which the qualified chips for processing unit were unavailable, is theresult of multiple problems. First, all the D-28 chips which were not burned were allocated for
Atlantis Technical Solutions and that was legal measure. Second, cloning of the D-28 chips byanother manufacturer or redesigning around a substitute chip with a different specification to
the D-28 chips would have involved delay and costs. [Pro. Or. No 2¶12]. Due to those
problems the impossibility of getting qualified chips for the processing units arose. Thus it
could be possible to say that because the impediment came from a complicated and unusual
situation, in which there were no measure to improve the situation, Specialty Devices could
not have expected the impediment.

75.

In the Memorandum for Claimant, there is a mention about the Aluminum Oxide Case inwhich the buyer who claimed that he could be exempted from liability under Art.79 CISG
22

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

because he faced the force measure caused by the doubt of his insolvency from a bank [Mem.
for Cl.¶74][Aluminum Oxide Case]. The tribunal concluded that because the problem was not
unforeseeable when the contract was made, and it should not be a force measure so that thebuyer could not be exempt from liability. However, this case cannot be used as the evidenceof existence of foreseeability in our case. The reason is that the buyer in the case is supposed
to have alternative measures instead of depending on the bank which had a doubt for thebuyer. In our case Specialty Devices became unable to take any measure to improve thesituation. The case cannot prove the foreseeability of the impediment in this case.
3.2.3 The impediment could not be avoided or overcome
76.

Specialty Devices tried to purchase the D-28 chips from Atlantis Technical Solutions [Pro. Or.
No 2 ¶12]. It means that Specialty Devices took reasonable measure to avoid or overcome thesituation that the qualified chip for the processing units is unavailable. As mentioned above,the substitute chips which were equal to the D-28 chips were unavailable so that the only way
to complete the processing units for M/S Vis was to get the left D-28 chips. However,Atlantic Technical Solutions refused the offer in spite of the proposal from Specialty Devices
to purchase the D-28 chips even for higher price. And that measure was legal. Thus the
impediment could not be avoided or overcome.

77.

In conclusion Specialty Devices should be exempted from its liability according to Art. 79(1)CISG, and it leads that the situation meets Art. 79(2) (b) CISG. Thus Respondent should be
exempted from liability even according to Art. 79(2) CISG.
4. Respondent gave notice to Claimant of the impediment according to Art.79 (4) CISG

78.

Art. 79(4) CISG mentions that “the party who fails to perform must give notice to the otherparty of the impediment and its effect on his ability to perform. If the notice is not received
by the other party within a reasonable time after the party who fails to perform knew or ought
to have known of the impediment, he is liable for damages resulting from such non-receipt.”

79.

Respondent gave notice to Claimant on 13 September 2010 by letter that Respondent was23

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

informed by Specialty Devices that there was a fire at the production faculty of High
Performance and the fire was severe enough that production of the D-28 chips had beeninterrupted. In addition Respondent informed that the delay to get the D-28 chips leaded thedelay to get processing unit from Specialty Devices so that delivery of the control systems andthe beginning of installation on the M/S Vis cannot be expected before the middle of January
2011. [Cl. Ex. No. 2]
80.

The information is enough to show that Respondent surely referred the impediment and its
effect on his ability to perform. And it was within reasonable time because the scheduled dateof Corporate Executives’ event was about five months after the notice of information.
Therefore Claimant had enough time to take some measures. Thus Respondent fulfilled therequirement in Art. 79(4) CISG to exempt from the liability of damages.

81.

In conclusion Respondent satisfies the necessary condition to be exempted from the liability
mentioned in Art. 79 CISG, Respondent is not liable for the delay of performance and does notbear the liability of damage.

III. Respondent is not liable to pay damages related to chartering the substitute yacht.
1. Respondent could not foresee that the delay of important conference would havebeen caused by the late performance82.

According to Art. 74 CISG, the damages for breach of contract by one party ‘‘may notexceed the loss which the party in breach foresaw or ought to have foreseen at the time of theconclusion of the contract, in the light of the facts and matters of which he then knew orought to have known, as the possible consequence of the breach contract.’’

83.

Thus, Art. 74 CISG limits recovery of damages to the losses that the breaching party foresaw
or could have foreseen at the time when the contract was concluded as a possible consequenceof its breach. [UNCITRAL Digest Art.74 ¶32]

84.

The parties signed the contract on 26 May 2010. The content of the contract is that24

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

Respondent is going to supply, install and configure a master control system on the M/S Vis
by the provisional date of 12 November 2011. [App. for Arb. ¶7, 8]
85.

Claimant argues that Respondent knew about the conference scheduled to take place on the
M/S Vis from 12-18 February 2011 and without the master control system, the venue would
be inoperable for the scheduled conference. [Mem. for Cl. ¶92] However, Respondent was
informed of the conference of Corporate Executives on 5 August 2010. [Pro. Or. No 2 ¶14]
Therefore, at the time of contract, Respondent did not know that the conference ofCorporate Executives and that its refurbishment of M/S Vis would act as an important role
for the contract between Claimant and Corporate Executives.

86.

Claimant argues that Respondent knew that the D-28 chips are the core elements used in themaster control system [Mem. for Cl. ¶93]. Although Respondent knew this at the time of thecontract, Respondent could not foresee the conference that Corporate Executives was held on
12-18 February 2011. Thus, Claimant’s argument about the D-28 chips is irrelevant to thisargument.

87.

In addition, Claimant argues that Corporate Executives is one of Claimant’s most importantclients. [Cl. Ex. No 4] Claimant and Corporate Executives emphasized that the event ofCorporate Executives had to be held on a luxury yacht [App. for Arb. ¶17].

However,

Respondent did neither know nor was informed of these facts at the time of the conclusionof the contract.
88.

Another argument of Claimant is that the importance of the large-scale and the scheduled
dates of the conference for Corporate Executives. Although the conference was the mostimportant client’s order for Claimant and members of Corporate Executives who planned toattend have already made various commitments [Pro. Or. No 2 ¶24], Respondent was not
informed of those facts at the time of signing the contract. Respondent did not have enoughinformation to foresee the losses caused by the delay of delivery of the master control system.

89.

Therefore, Respondent could not foresee that the delay of installation of the master control
25

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

system would trigger neither the problematic situation nor the damages as possible
consequences of the delay.
2. Claimant did not take reasonable measurers to mitigate the loss under Art.77 CISG
90.

Claimant argues that the lease contract of M/S Pacifica Star was a reasonable measure taken
to mitigate damages. However, Claimant did not take reasonable measures for mitigating
damages. According to Art. 77 CISG, Claimant should take reasonable measures to mitigate
the loss; otherwise the amount of damages is reduced. Specifically, Art. 77 states: ‘A party whorelies on a breach of contract must take such measures as are reasonable in the circumstances
to mitigate the loss, including the loss of profit, resulting from the breach’.

91.

Art. 77 CISG establishes a “duty to cooperate in case of breach”. [Sarcevic /Volken, 250]
When a breach of contract occurs, even the party who has no relationship with the breach is
obliged to take necessary measures to mitigate the total loss caused by the breach. If the party
fails to do so, then the party who breached the contract can claim the reduction of damages it
owed to the other party. “It is obvious that this is a very serious obligation on the part of ” thecreditor, since the sanction consists of the reduction of damages. [Sarcevic /Volken, 251]“[R]emedies for breach of contract […] attempt to accommodate two goals […] (1) securing
to the injured party the benefit of the bargain, (2) without imposing unnecessary cost on
breaching party.” [Andersen, 306] According to these authoritative commentators, this duty
aims for ‘joint cost minimization’ to be realized through the cooperation between the partiesof a contract. To realize this duty both parties are strongly required to act cooperatively.

92.

Thus, according to Art. 77 CISG, Claimant has an obligation to cooperate with Respondent
in order to mitigate the loss caused by breach of contract and to avoid unnecessary costs by
taking reasonable measure. However, in this case, Claimant did not take reasonable measures
to mitigate the loss or to avoid unnecessary cost in cooperation with Respondent, thus it was abreach of this duty.

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KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

2.1 Claimant was required to discuss with Respondent the various possibilities tomitigate the loss under Art.77 CISG
93.

Respondent immediately informed Claimant of the fire that occurred at the warehouse ofHigh Performance and that the beginning of the installation on M/S Vis could not becompleted until the middle of January 2011. [Cl. Ex. No 2]

94.

However, until 9 April 2011, Claimant did not mention any issue in regard to the fact that theconference had been held on M/S Pacifica Star. [Pro. Or. No 2 ¶15] During this period, theonly communications made by both parties were about the technical matter of installation by
the technical staff. There were no communications from Claimant to mention any problems
about the conference of Corporate Executives. [Pro. Or. No 2 ¶15] Therefore, it was
reasonable for Respondent to believe that Claimant did not have any serious problems causedby the delay of which Respondent had punctually advised Claimant.

95.

Moreover, five months were long enough for Respondent to discuss with Claimant andexplore together the various possibilities to deal with the problem caused by delay of therefurbishment. Though Claimant did not have to repudiate the contract with Corporate
Executives, it still had a duty to act and cooperate with Respondent to mitigate the loss andavoid unnecessary cost. One of the possible actions might have been to ask Corporate
Executives to change the time schedule of the conference from the original dates until after
the refurbishment was completed.

96.

Corporate Executives is a long-standing client of Claimant. [App. for Arb. ¶11] It is natural toconsider that Claimant and Corporate Executives had an existing relationship. Just asking
them to change the date of the conference would be unlikely to lead to the immediate
withdrawal of its future business from Claimant.

97.

Though it was not possible for the members of the Corporate Executives to change the datesof the conference, Claimant should have tried to discuss rescheduling with Corporate
Executives, because it had enough time to do so and it was difficult to charter a substitute27

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

luxury yacht for a reasonable cost. However, Claimant made no attempt to cooperate with
Respondent. This should be considered as a serious failure of Claimant to take reasonablemeasures for mitigating the loss as required under Art. 77 CISG.
2.2 The chartering M/S Pacifica Star was not reasonable98.

The chartering of M/S Pacifica Star was far from reasonable for mitigating damages
according to the following reasons. When it turned to realize that the installation for M/S
Vis could not be completed before the starting day of the conference due to the unfortunate
fire incident, Claimant informed this fact of the officials of Corporate Executives. The
officials mentioned their unhappiness and stated that the on-shore location for the
conference would not be acceptable. [App. for Arb. ¶17]

99.

As a quick and dirty decision, Claimant then made a yacht broker find the substitute ‘luxury
yacht’ without giving any notice to Respondent, and chartered the M/S Pacifica Star for the
replacement. [App. for Arb. ¶18]

100.

The dates of the conference were hard to be changed. [Pro. Or. No 2 ¶24] However, during
the expected dates of the conference, there were very few comparable and available yachts
except Mr. Goldrich’s. Mr. Goldrich did not normally lease his yacht. [Pro. Or. No 2 ¶21]
Considering from the facts above, it was natural to judge that the chartering a substituteyacht would cause extraordinary expenses and some irregular approach to the owner even if
it might be realized. However, Claimant leased the M/S Pacifica Stars without any priordiscussion with Respondent. Claimant should have contacted with Respondent to take morereasonable measure in order to avoid unnecessary cost and to mitigate loss under Art. 77
CISG.

101.

As a result, Claimant even caused the bad effect on its goodwill which it tried to protect inevery means. Therefore, in no way, the lease of M/S Pacifica Star was a reasonable measure
to mitigate damages under Art. 77 CISG.

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KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

2.3 Paying success fee was in no way reasonable102.

The success fee to yacht broker is not customary. [Pro. Or. No 2 ¶23] Claimantcommissioned the broker to find the appropriate substitute luxury yacht. The broker foundthe M/S Pacifica Star for the replacement of the M/S Vis and reported it to Claimant.
Claimant then promised the success fee in addition to the original brokerage fee if thebroker was able to secure the contract. [Pro. Or. No 2 ¶22]

103.

Then, the broker passed the success fee in part to the personnel assistant to get an
introduction to the owner of the vessel, Mr. Goldrich. [Res. Ex. No 1 ¶13] After that,
Claimant chartered the M/S Pacifica Star.

104.

In this case, it can be estimated that the broker could not get an acceptance of chartering
M/S Pacifica Star if the broker did not pass the monetary to the assistant to effect the
introduction, because Mr. Goldrich did not normally lease his yacht except a few occasions.
[Pro. Or. No 2 ¶21]

105.

It should be emphasized here that Claimant promised the success fee before the broker
passed the money to the personnel assistant.

106.

It is quite natural to guess that if the broker did not expect the success fee, the broker would
not give it in part to the assistant. It is possible to estimate that Claimant’s promise to pay
the success fee would accelerate the intention of passing a bribe to the assistant to get the‘introduction’.

107.

Moreover, nothing was said about what it might take for the broker to secure the contract.
[Pro. Or. No 2 ¶22] The purpose of this success fee was unclear. Even for the sake of
securing a contract, passing a bribe is not reasonable and acceptable. Claimant’s payment
the success fee to the broker was not reasonable measure to mitigate the loss and avoid
unnecessary cost. Respondent has no obligation to recover this unreasonable payment.

108.

Therefore, in conclusion about the cost of chartering M/S Pacifica, Respondent believe that
Claimant did not take its best efforts to avoid the unnecessary cost, thus, the measures of29

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

Claimant were not reasonable and never be recoverable by Respondent.
2.4 The ex-gratia payment was not necessary
2.4.1 Corporate Executives did not request it
109.

The ex-gratia payment was not necessary and reasonable, because Corporate Executives did
not request for a refund. [Pro. Or. No 2 ¶20] They merely did express its unhappiness to
Claimant. It was not certain whether Corporate Executives requested the refund forchanging the location of the conference.

110.

They did not state its intention to withdraw future business, either. Corporate Executives is along-standing client of Claimant. [App. for. Arb. ¶11] It is difficult to think that Corporate
Executives did withdraw immediately just because Claimant did not pay this voluntary
payment.

111.

From the fact above, there is no certain evidence to prove the Corporate Executives’
intention to withdraw its future conference from Claimant if it did not pay this voluntary
refund. Thus, the ex-gratia payment made by Claimant was not necessary to be recovered
by Respondent.
2.4.2 The ex-gratia payment was unrelated to the loss made by contract

112.

Without paying this voluntary refund, Claimant could mitigate the loss occurred by thebreach of contract and retain its future relationship with Corporate Executives.

113.

As stated above, Corporate Executives did not request any refund and there was no concrete
certainty that Corporate Executives would withdraw from future business with Claimant.

114.

In this case, repudiation of the contract might have led Corporate Executives not to choose
Claimant as a conference service for its future conferences. If Claimant had repudiated thecontract of the conference, it would have lost more money in respect of this contract. [Pro.
Or. No 2 ¶17] However, Claimant did not repudiate the contract with Corporate Executives
and took the measures to mitigate the loss occurred by breach of the contract. Thus, it has
an obligation to mitigate it under Art. 77 CISG.
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KOBE UNIVERSITY FACULTY OF LAW

115.

MEMORANDUM FOR CLAIMANT

Nevertheless, Claimant paid the voluntary refund and this caused further unnecessary costto mitigate the loss. Considering from the facts above, Claimant could have mitigated theloss without paying the voluntary payment. Thus, Claimant is not entitled to give thisunreasonable and unnecessary payment from Respondent.

116.

As Respondent stated above, Claimant did not take reasonable measures to mitigate thelosses of the four kinds of the costs. Therefore, according to Art. 77 CISG, Claimant was
not entitled to give full compensation for the breach of the contract.

IV. The tribunal shall not deal with the claim for damages tainted by the corruption
117.

Claimant asks this Tribunal to claim that it is entitled to all the damages arisen from the lease
contract. However, under the doctrine of Clean Hands, the tribunal should not consider thecontract for the lease of the M/S Pacifica Star or its consequences, so Respondent rejects
this assertion for four reasons. First, The Clean Hands doctrine requires the tribunal torefuse relief to a party who has acted wrongfully. Second, Claimant acted wrongfully in thebribe for facilitating the rental of the M/S Pacifica Star. Third, there is a transnational
public policy that bribery should be resisted. Fourth, the lease contract was tainted because
Claimant’s wrongful behavior leaded to a violation to the Criminal Code of Pacifica and thetransnational public policy.
1. The Clean Hands doctrine requires the tribunal to refuse relief to a party who has
acted wrongfully

118.

Clean Hands doctrine is validly accepted in both of common law and civil law systems.
The general principle of “Clean Hands” provides that a party must be free from unfair
conduct in respect to the subject matter of his/her claim [Black’s law dictionary]. It means aparticipant who conducts a wrongful act cannot recover damages resulting from it andcannot sue the other participants in the wrongful act.
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KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

2. Claimant has a lack of clean hands because it acted wrongfully in the bribe forfacilitating the rental of the M/S Pacifica Star
119.

Claimant’s broker passed some of the success fee to the personal assistant of Mr. Goldrichto effect an introduction to Mr. Goldrich [St. of De.¶13], which was recognized as bribery
under the criminal code of Pacifica [Cl. Ex. No 2]. Even though Claimant asserted that it
had no knowledge of the bribery until it was contacted by the Pacifica police, this cannot
exempt Claimant from its wrongful conduct. It is arguable that the broker conducted thisbribery because the broker was induced to do so with the connivance of Claimant.

120.

In this case, there were very few yachts that would have met Claimant’s needs and, with the
exception of Mr. Goldrich’s, those yachts were not available for lease during the necessary
time period [Pro. Or. No 2¶21] . Though Mr. Goldrich had done so on a few occasions,normally, he did not lease his yacht [Pro. Or. No 2¶22] .

121.

Judging from all the facts reported by the broker, Claimant knew it would be extremely
difficult to rent the M/S Pacifica Star in a common way. Therefore, Claimant promised an
excessively high success fee to the broker. The success fee, USD 50,000 [Pro. Or. No 2 ¶22], separated from the brokerage (USD 60,600), was such a big sum that it was equivalent
to 82.5% of the brokerage. In addition, compared with the cost of the charter, which was
USD 404,000, the commission the broker received from the lease contract, a total sum of
USD 110,600, was an unusually huge amount. The only explanation which could be given
to such a high commission is that Claimant understood in order to secure the contract, thebroker need to take a risk to do some irregular things.

122.

In this case, the broker was the agent of Claimant and strongly influenced by Claimant.
Through the unreasonable brokerage and success fee, not expressly, Claimant induced thebroker to obtain the rental, no matter in what way. Because of this enticement, the broker
conducted a bribe. It can be concluded that the bribe grew out of and is a consequence ofClaimant’s acquiescence. Claimant was involved in this bribe for its misconduct.
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KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

3. There is a transnational public policy that bribery should be resisted not only inpublic but also in private sectors
123.

There is no dissension that almost every country has a policy to against public sector bribery.
At the same time, the private sector corrupt conduct is also becoming to be resisted
comprehensively, not only in legislations, but also in practice. There is an international
consensus that corruption and bribery in the private sector are also contrary to international
public policy.

124.

Recent commentary confirms that “most modern states regard the definition of corruption
as extending to include all persons who are induced to act corruptly in the discharge of theirduties, whether in the public or private sectors.” [Hwang S.C./ Lim] This international
consensus on a broad definition of both public and private sector corruption can also befound in the United Nations Convention against Corruption (Art. 21). Even OECD, ofwhich both Claimant and Respondent are members, is working to take bribery in private
sector as against the public interests. The revision of the OECD Guidelines forMultinational Enterprises is expected, “when finalized, to contain a broad definition ofbribery and corruption, covering public officials, private-to-private bribery, gift giving andpolitical contribution.” [Gordon/ Miyake]

125.

Furthermore, many companies restrict corrupt conduct in their policies. For example, inJapan, although the criminal law does not take private bribery as a crime, there were somecases in which the courts approved the strict internal punishments to the employee who
received bribes.

126.

All these prove that there is a common value which private sector bribery should be resisted.
The bribe conducted by Claimant’s agent went against the criminal law of Pacifica and wascontrary to transnational public policy.

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KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

4. The lease contract is tainted because Claimant’s wrongful behavior lead to the crime
under the Criminal Code of Pacifica
127.

To seek the business opportunity for Claimant, Claimant’s agent conducted a bribe under thecriminal law of Pacifica [Re. Ex. No 2]. And no matter in what occasion, it is irrational for an
assistant to accept such a big sum of money (part of USD 50,000) [Re. Ex. No 1]. As proved
above, the bribe was a consequence of Claimant’s wrongful inducement. Claimant cannot be
exempted from the bribe for its involvement.

128.

The facts whether the legislations of Danubia, Mediterraneo and Equatoriana take bribery
in private sector as a criminal offense or not, or whether Claimant had known the Criminal
Code of Pacifica that time, is not important in this case, for it would not change the fact that
Claimant acted wrongfully under the law of Pacifica. Moreover, it is inconceivable that
Claimant, as a company engaging in international business, had no idea of the international
public policy mentioned above. It is also inconceivable that Claimant had not known the big
difference of legislations between the two countries since it clearly understood the lease
contract had a close relationship with the laws of Pacifica, for the owner is a resident ofPacifica and the yacht is registered there [Pro. Or. No 2 ¶25].

129.

Therefore, Claimant cannot deny its misconduct in the bribe by making the excuse that
other countries’ legislations have different rules concerning the private bribery [Mem. for Cl.
¶117]. Since Claimant wrongfully abetted a bribe which was an offense against theinternational public policy and the criminal law of Pacifica, the entire lease contract was
tainted by the corrupt.

130.

The Clean Hands doctrine requires that the party who claims damage must be free from
unfair conduct in regard to the subject matter of its claim. In regard to the subject of theclaim of damages, Claimant cannot be exempted from the unfair conduct as it violated atransnational public policy to abet its broker to commit bribery. “Allowing an unclean
plaintiff to recover would not only abet him in his inequitable conduct, but would also raise34

KOBE UNIVERSITY FACULTY OF LAWMEMORANDUM FOR CLAIMANT

doubts as to the justice provided by the judicial system.” [Lawrence] To avoid these, thetribunal should rule that it has no authority to consider the contract for the lease of the M/SPacifica Star or its consequences.

REQUEST FOR RELIEF
For the reasons stated in this memorandum, Respondent respectfully requests this Tribunal
find that:(1) The Tribunal has jurisdiction to hear this case, and the Tribunal should remove Dr.
Mercado.
(2) If the challenge to Dr. Mercado is not accepted by the Tribunal, Respondent reserves theright to challenge Professor Presiding Arbitrator.
(3) Respondent did not breach its obligation to supply, install and configure the master control
system.
(4) Even if the Tribunal finds that Respondent breached the contract, Respondent is exempt
from its liability.
(5) Respondent is not liable to pay the damages because it could not foresee the possible
consequence of the late performance at the time of conclusion of the contract.
(6) Even if the Tribunal finds that Respondent could foresee, or could have foreseen thedamages, Claimant failed to take reasonable measures to mitigate the losses.

35