Procedural Law/Rules of Law

- March 2011 CIETAC Arbitration Rules (See Moot website for a copy of the rules. The Rules are in force for the purposes of the Moot, but have not yet been formally adopted by CIETAC.)

- 1985 UNCITRAL Model Law on International Commercial Arbitration with 2006 amendments. Danubia has adopted the UNCITRAL Model Law on International Commercial Arbitration with the 2006 amendments.

- 1958 New York Convention on the Recognition and Enforcement Arbitration Awards: Equatoriana, Mediterraneo, Oceania, Atlantis and Danubia are all party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention)

- International Bar Association (IBA) Guidelines on Conflict of Interest in International Arbitration (IBA Guidelines)

Substantive Law/Rules of Law

- The contract has a choice of law clause. It provides:

15.2 This contract is subject to the law of Mediterraneo

- Equatoriana and Mediterraneo as well as Danubia are all party to the United Nations Convention on Contracts for the International Sale of Goods (CISG). Consequently, pursuant to CISG article 1(1)(a) the contract is governed by the Convention.

- Danubia, Equatoriana and Mediterraneo are party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

SUMMARY OF FACTS

There are many facts on file, originally made available through the case file, the statement of claim, the statement of defense and the exhibits presented by the CLAIMANT and the RESPONDENT, as well as in Procedural Order no. 2. It is essential that the teams use the facts available to them and to use them to their case’s benefit. The facts are to be applied to the law(s) in question.

CLAIMANT engaged RESPONDENT to supply, configure and install the on-board master control system. The contract between CLAIMANT and RESPONDENT was signed on 26 May 2010 and provided that the “[i]nstallation and configuration of the control system shall be completed by 12 November 2010”. This date was chosen due to the fact that ten weeks of testing were required before the master control system would be fully functional. Although CLAIMANT was aware that third-party suppliers would be involved in its procurement of the master control system, it had no specific knowledge that the manufacture of the processing units would be performed by someone other than RESPONDENT. As such, the contract contained no requirement as to suppliers.

CLAIMANT contracted with Worldwide Corporate Executives Association (“WCEA”), a high profile, long-standing client, to hold its annual conference aboard the M/S Vis from 12-18 February 2011. WCEA demanded the very finest in comfort and efficiency, and was delighted to be the first to hold an event on the M/S Vis. WCEA emphasized in its publicity for the event that it would be held on a luxury yacht. RESPONDENT was informed of the conference on 5 August 2010.

The core element in the master control system is a series of semi-configurable processing units. Although the contract between CLAIMANT and RESPONDENT only mentioned performance requirements and made no mention of the specific component parts, RESPONDENT contracted with Oceania Specialty Devices (“Specialty”), who manufactured the processing units to be solely compatible with the D-28 “super chip”. The D-28 chip is designed and produced by another party, Atlantis High Performance Chips (“High Performance”).

On 13 September 2010, RESPONDENT informed CLAIMANT that it would be unable to meet its contractual obligation to deliver the control system by 12 November 2010 due in part to a fire in the production facility of the D-28 super chips. While there were enough chips in existence that a distribution to Specialty could have been made that would have sufficed to complete the master control system on time (Claimant’s Exhibit No. 3), High Performance distributed the chips to only one of its regular customers. As a result, delivery of the control system was delayed until 14 January 2011 and installation, configuration and verification were delayed until 11 March 2011. CLAIMANT paid the full purchase price of USD 699,950 to RESPONDENT on 21 March 2011.

When it learned that the M/S Vis would not be available for the WCEA event, CLAIMANT offered WCEA use of one of its on-shore facilities for the conference, but WCEA refused to accept this alternative. CLAIMANT proceeded to make arrangements for a suitable substitute location. CLAIMANT chartered a substitute yacht, the M/S Pacifica Star, at a cost of USD 448,000 which included USD 404,000 rental fee plus port and handling fees of USD 44,000. It also incurred the cost of a standard broker commission of 15%, or USD 60,600, and a Broker Success Fee of USD 50,000. Finally, CLAIMANT made a rebate payment of USD 112,000 to WCEA to maintain the goodwill of its long-time client.

CLAIMANT by a written communication sent to RESPONDENT on 9 April 2011 requested that RESPONDENT compensate CLAIMANT for costs it incurred from the delay in the installation of the control system. RESPONDENT replied several days later categorically refusing

ISSUES

CLAIMANT referred this dispute to CIETAC on 15 July 2011 seeking a total of USD 670,600 in damages due to RESPONDENT’S late performance of its contractual duties. RESPONDENT denies all liability for damages, challenges the jurisdiction of the Tribunal to hear all claims in relation to the lease of the M/S Pacifica Star based on allegations of bribery, and challenges the participation of Dr. Elisabeth Mercado as a member of CLAIMANT’S legal team. Further, RESPONDENT attempts to reserve a right to challenge Professor Presiding Arbitrator as arbitrator in the case, if the challenge to counsel is not successful.

CLAIMANT suggests that, after the fire at the production facility of Atlantis High Performance Chips, the latter could have delivered all the D-28 chips needed for the master control system from the amount already produced and in its warehouse. It further states that the only reason the chips were not delivered to Oceania Specialty Devices was because of the close friendship between the CEO of High Performance and the CEO of Atlantis Technical Solutions, to whom the entire stock in the warehouse at the time of the fire was delivered. This speculation is based upon a news story in the Technology Reporter. (CLAIMANT’s Exhibit No. 7)

Control Systems, Inc accepts that the entire supply of D-28 chips in the warehouse was delivered to Atlantis Technical Solutions and that the two CEOs were good friends. This, however, is not enough to reach the factual conclusion that that was the only reason the chips were delivered to Atlantis Technical Solutions.

It also does not prove that, even if that was the reason, the necessary amount of chips would have been delivered from the stock in the warehouse to Oceania Specialty Devices. The available chips might have been allocated on a pro rata basis among all of the orders placed with High Performance. In that case Oceania Specialty Devices would have received some chips, but not enough to fabricate all of the processing units for the M/S Vis.

Assuming that Elite is able to convince the Tribunal at the appropriate time that High Performance could have performed its contractual obligations to Specialty Devices, Control Systems may nevertheless not be liable to Elite. CISG Article 79(1) provides that

“[a] party is not liable for a failure to perform any of its obligations if he proves that the failure was due to an impediment beyond his control ...”

The impediment to Control System’s performance, according to RESPONDENT, was the failure to receive the processing units from Oceania Specialty Device. Article 79(2) goes on to say that where the RESPONDENT’s “failure is due to the failure by a third party whom he has engaged to perform the whole or a part of the contract”, ie Specialty Devices, is exempt under the conditions of article 79(1). Specialty Devices also could not meet its contractual date of delivery of the processing units to Control Systems for reasons that were beyond its control, ie the failure of High Performance to deliver the D-28 chips to it at the contractual date of performance.

RESPONDENT challenge the participation of Dr Mercado on the Elite legal team and request the tribunal to rule that she should cease all activities in this arbitration. If the challenge to Dr. Mercado is not accepted by the Tribunal, RESPONDENT reserves its right to challenge Professor Presiding Arbitrator for the reasons of certain proximity to Dr Mercado.

RESPONDENT requests that the Tribunal decide that Dr. Elisabeth Mercado shall terminate her role in the legal team representing Elite; on the merits decide that Equatoriana Control Systems is exempt from liability for the late delivery and installation of the master control system on the M/S Vis; decide that, if Equatoriana Control Systems is held liable for the delay, the ex gratia payment of USD 112,000 is not an allowable item of damages; decide that the payment of USD 50,000 as the yacht broker’s “success fee” that was used by the broker in part to pay a bribe is not an allowable item of damages; decide that the corruption in the procuring of the lease contract for the M/S Pacifica Star renders all costs associated with that lease contract not allowable items of damages; award the costs of arbitration including the cost of legal representation to Equatoriana Control Systems.

As such the jurisdiction of the Tribunal is not fully contested: due to the arbitration clause in the Contract between CLAIMANT and RESPONDENT, the Tribunal has jurisdiction to hear this case. There are, however, other legal questions requiring attention from participating teams. These include:

- Has the Tribunal the power to remove Counsel from the arbitral process?

- Can RESPONDENT reserve its right to challenge Professor Presiding Arbitrator?

- Has RESPONDENT breached the Contract for late delivery and late installation?

- What damages is CLAIMANT is entitled to recover under Art. 74 CISG?

- Is there an exemption from liability to pay damaged pursuant to Art. 79 CISG?

- What is the impact of the allegation of bribery?

Date: 2015-12-11; view: 1147