SUMMARY OF ARGUMENTS

1. Concerning the procedural issue of the case presented it should be noted that the body of evidences to be disclosed in the Arguments clearly demonstrates that the nature of the relationship between Dr.Mercado and the Presiding Arbitrator goes far beyond the limits of “professional” one and gives rise to a conflict of interest and constitutes all the grounds necessary in order to dismiss Dr.Mercado from this arbitration or, if the Claimant insists on preserving her status in the arbitration, to challenge Professor Presiding Arbitrator.

2. In particular, the fact that Professor Presiding Arbitrator and Dr. Mercado teach at the same university, i.e. social institution named as such in the Orange List of IBA Guidelines, constitutes a conflict of interest that gives rise to a justifiable doubt in the compliance with the principle of impartiality in this arbitration. Additionally, the Presiding Arbitrator and Dr. Mercado’s encounters in previous arbitrations constitutes a conflict of interest that gives rise to a justifiable doubt mentioned. The final circumstance to rise justifiable doubt on whether the bias exists or not is the relationship between Dr. Mercado and the Presiding Arbitrator’s wife and children.

3. The existence of the bias specified below makes it legally possible to remove Dr. Mercado from the present arbitration.

4. We believe that despite of the lack of the Tribunal’s expressed authority, there are sufficiently enough reasons, supported by international commercial arbitration practice, to claim there is an implied authority to perform such sort of action as challenging Claimant’s counsel (legal representative) – Dr. Elisabeth Mercado. Herewith, it has to stressed that, for a number of reasons, challenging Dr. Mercado does not seem to be an alternative of challenging an arbiter.

5. Our point on the liability matters of the case is that the Respondent did not “breach the Contract fundamentally”, as Claimant says attempting to imply on the Respondent the liability for the impediments that we are not responsible for. Particularly, late delivery cannot be considered as a fundamental breach of contract according to the Article 25 CISG and commentary to it.

6. We believe the Respondent should be exempted from liability under the article 79 of CISG by virtue of impossibility to foresee and overcome the impediment which was the reason of why the late delivery and installation of master control system occurred since it was beyond the Respondent’s control. Furthermore, the Respondent should be exempted from liability due to good faith conduct.

7. In accordance with CISG provisions, the Respondent, in order to be exempted from liability under Art. 79(2) because the “third party” with regard to the Respondent should be also exempted from liability under Art. 79(1) because of failure to perform its obligation due to the impediment occurred beyond its control. Specialty Devices, as a participant of the supply chain, could not overcome the consequences of impediment occurred and there are no sufficient grounds to allege that D-28 chips might have been supplied before fire occurred.

8. Moreover, it should be noted, that, as far as we are concerned, the Claimant is under no obligation to restitute full damages under article 74 CISG on the strength of dispositive construction of this article.

9. In our understanding of the disputes around the damages to be reimbursed the Respondent [R1] is under no obligation to restitute full damages under article 74 CISG on the strength of dispositive construction of this article. General damages of USD 448 000 are not coming under repayment as normal compensatory damage. Besides, by virtue of the reasons shown below, we do not think the Respondent does not have to cover damages caused by standard yacht broker commission of 15% for rental cost of M/S Pasifica Star, and USD 50 000 for yacht broker success fee which Claimant paid on top of the commission because they are unreasonable incidental damages.

10. That is why the Respondent should be excused from liability under the article 79 (2) of CISG.

ARGUMENTS

I. THE NATURE OF THE RELATIONSHIP BETWEEN DR. MERCADO AND THE PRESIDING ARBITRATOR GIVES RISE TO A CONFLICT OF INTEREST AND DR. ELISABETH MERCADO IS TO BE NEEDS THE DISMISSED FROM THIS ARBITRATION

A. The Presiding Arbitrator and Dr. Mercado’s teaching at the same university constitutes a conflict of interest that gives rise to a justifiable doubt in Professor’s impartiality.

11. It is completely clear form the factual background of the case concerning the bias issue that exists with respect to the ties between Dr. Elisabeth Mercado and Professor Presiding Arbitrator apparently fits with the situation described in clause 3.3.6 IBA Guidelines Orange List [Orange List 3.3.6]: “a close personal friendship exists between an arbitrator and a counsel of one party, as demonstrated by the fact that the arbitrator and the counsel regularly spend considerable time together unrelated to professional work commitments or the activities of professional associations or social organizations”.

12. It should be stressed, additionally, that according to Guidelines “the IBA List is only a schematic reflection of the very complex reality. Always, the specific circumstances of the case shall prevail”.

13. The specific circumstances are that the body of evidences excludes any possibility of Professor Presiding Arbitrator being impartial and independent considering the case presented.

14. In our opinion the mere circumstances of Dr.Mercado appointment as a lecturer give rise sufficiently enough in order to realize the connection between her and Professor Presiding Arbitrator and, consequently, to challenge her.

15. Dr. Mercado was appointed after she “received a telephone call from someone who introduced herself as the Professor Presiding Arbitrator’s assistant and said she was calling on his behalf. Dr. Mercado was shortlisted along with one other and was selected after interview by a panel of three, chaired by Professor Presiding Arbitrator”. (para 18, Statement of Defense)

16. Additionally, the academic interconnection gives rise to the question whether Professor Presiding Arbitrator gave some sort of professional advice to Dr. Mercado.

17. The Claimant says that “their relationship was only professional”. However, Dr.Mercado and Professor Presiding Arbitrator have more than just a history of “academic communication”. Moreover, Face to-face, she calls him “Peter” but in company, for some unknown reasons, normally adopts the more formal “Professor”. (para 20, Statement of Defense). There is a logical question: “why?”

18. And, finally, there is another thing needed to be paid attention on. Professor Presiding arbitrator, as an experienced professional, did not declare the existence of the mentioned relationship in the Arbitrator’s Declaration of Acceptance and Statement of Independence, although a man without an appropriate and adequate knowledge and experience could not find that the sort of relationship he has with Dr.Mercado constitutes an obstacle for him to make decision based on factors other than the merits of the case as presented by the parties.

19. Under article 25 of the CIETAC Rules “An arbitrator appointed by the parties or by the Chairman of the CIETAC shall sign a Declaration and disclose to the CIETAC in writing any facts or circumstances likely to give rise to justifiable doubts as to his/her impartiality or independence. 2. If circumstances that need to be disclosed arise during the arbitral proceedings, the arbitrator shall promptly disclose such circumstances in writing to the CIETAC”. [CIETAC RULES]

20. In accordance with Canon II A of the Code of Ethics for Arbitrators in Commercial Disputes [Code of Ethics for Arbitrators in Commercial Disputes] “persons who are requested to serve as arbitrators should, before accepting, disclose : 1) Any personal interest in the case outcome 2) Existing professional and personal relationships. Prospective arbitrators should disclose any such relationship which they have with any party or its lawyer. 3) Any prior knowledge they may have of the dispute; 4) other matters, relationships or interests which they are obligated to disclose.

21. Claimant states that there are grounds that give rise to justifiable doubts in the compliance of the relationships between Dr.Mercado and Pr. Presiding Arbitrator with the principles of impartiality and independence. Meanwhile, according to clause 3.1 of the Rules of Ethics for International Arbitrators: “ Dependence arises from relationships between an arbitrator and one the parties (or with someone connected with one of the parties”. In clause 3.5 of the Rules it is said that “continuous and substantial social or professional relationships between a prospective arbitrator and a party will normally give rise to justifiable doubts as the impartiality or independence of a prospective arbitrator”.

22. Furthermore, the Rules contains clause 4.1 establishing as a norm that “a prospective arbitrator should disclose all facts or circumstances that may give rise to justifiable doubts as to his impartiality or independence. Failure to make such disclosure creates an appearance of bias and may of itself be a ground for disqualification even though the non-disclosed facts or circumstances would not of themselves justify qualification”.

23. Under clause 4.2. “a prospective arbitrator should disclose

a) Any business relationship … including prior appointment as arbitrator with … any representative of a party. The duty of disclosure applies irrespective of their magnitude.

b) the nature and duration of any substantial social relationships with any party or any person to be important in the arbitration”.

24. Thus, the abovementioned situation contained in the Rules is exactly what the relationship between Dr.Mercado and Professor Presiding Arbitrator are about.

B. The Presiding Arbitrator and Dr. Mercado’s encounters in previous arbitrations constitutes a conflict of interest that gives rise to a justifiable doubt

25. We believe the interconnection between Dr. Elisabeth Mercado and Professor Presiding Arbitrator also complies with clause 3.3.7 of Guidelines: “the arbitrator has within the past three years received more than three appointments by the same counsel” - which is exactly what took place in our case.

26. If this tribunal does not find the Orange list applicable to the present issue, then it is the Green List, where it categorizes the situation where “the arbitrator and counsel for one of the parties . . . have previously served together as arbitrators or as co-counsel” [Green List 4.4.2]

27. “In cases involving close-knit professional communities, it is almost impossible to completely avoid appointing prior acquaintances or associates unless the parties are willing to appoint inexperienced arbitrators without proper knowledge [Morelite, p. 83]. In international commercial arbitration, many players are “in some way acquainted with each other” [El-Kosheri/Youssef, p. 48]. Because “the same people are often involved as arbitrators or counsel, having too high conflicting burdens leads to inexperienced and poor appointments” [Kee, p. 194]. “[T]he small size and population of an industry might require a relaxation of judicial scrutiny of arbitrator impartiality” [Morelite, p. 83].”

28. Yes, indeed, it is very likely that the arbitrators and the counsels, especially those who specialize in the particular sort of cases are very likely to meet more than once during different cases considered. However, this is not the case where such decisions might be applicable hence the body of evidences concerning the character of the relationship between Dr.Mercado and Professor Presiding Arbitrator, which are mentioned by the Claimant himself.

29. Dr. Mercado has appeared as Counsel before Professor Presiding Arbitrator in three previous arbitrations. In the first two, Dr. Mercado’s client was successful with a unanimous tribunal. In the third case, Dr. Mercado’s client was unsuccessful on a majority decision with Professor Presiding Arbitrator issuing a Dissenting Opinion in her client's favor ”. (para 22, Statement of Defense).

30. Of course, this fact of itself does not necessarily mean there is an impartiality violation, however, along with other evidences presented in this Memorandum, this fact seems to be, at least, “suspicious”.

31. Although, they did not “serve together” as arbitrators or co-counsel, there it should be stressed once again that “this is only a schematic reflection of the very complex reality. Always, the specific circumstances of the case prevail”. [IBA Guidelines].

C. The relationship between Dr. Mercado and the Presiding Arbitrator’s wife and children constitutes a conflict of interest that gives rise to a justifiable doubt

32. Dr. Mercado is “very good with Professor’s children and his wife”. She is even a Godmother of one of the Professor’s kids. (para 21, Statement of Defense).

33. The Claimant says that “being a godmother does not necessarily mean that there is close friendship between the Presiding Arbitrator and Dr. Mercado. The personal relationship between Dr. Mercado and the Presiding Arbitrator’s wife and children, was not something the IBA Guidelines prohibited.” Well, the facts mentioned do not necessarily create “close friendship” between Professor Presiding Arbitrator and Dr.Mercado, however it certainly means that their relationships go beyond the limits of “professional”, which gives rise to all justifiable doubts in Professor’s impartiality.

34. Besides, although the mentioned personal ties between them are fully covered by the description given in the IBA Guidelines and, though, the latter does not prohibit it directly, it should be stressed once again that “this is only a schematic reflection of the very complex reality. Always, the specific circumstances of the case prevail”. [IBA Guidelines]

Date: 2016-01-14; view: 677