FIFTEENTH ANNUAL

WILLEM C. VIS (EAST)

INTERNATIONAL COMMERCIAL ARBITRATION MOOT

HONG KONG SAR

11th - 18th MARCH 2017

MEMORANDUM FOR RESPONDENT

ON BEHALF OF: AGAINST:

Comestibles Finos Ltd Delicatesy Whole Foods Sp

RESPONDENT 
 CLAIMANT
75 Martha Stewart Drive 39 Marie-Antoine Carême Avenue
Capital City, Mediterraneo Oceanside, Equatoriana

LI HAOCHEN, ZENG JIE, ZHOU DANYI, ZHOU YIWEN

LIST OF ABBREVIATIONS ........................................................................................V

INDEX OF AUTHORITIES ......................................................................................VII

INDEX OF CASES ....................................................................................................... X

INDEX OF ARBITRAL DECISIONS ...................................................................... XII

INDEXT OF LEGAL TEXTS .................................................................................. XIV

SUMMARY OF FACTS ...................................................................................................1

ARGUMENT.................................................................................................................. 3

I. THE ARBITRAL TRIBUNAL SHOULD DECIDE ON THE CHALLENGE

TO MR. PRASAD WTIHOUT HIS PARTICIPATION. .............................................. 3
1. The Tribunal rather than appointing authority should decide on the challenge to Mr.
Prasad. ..................................................................................................................................... 3
a. The parties excluded appointing authority in the challenge procedure. ....................................3
b. The challenge to Mr. Prasad should be decided by the Tribunal................................................5
2. The challenge should be decided without the participation of Mr. Prasad. ................. 6
a. The legislative history of UNCITRAL Rules provides basis for two members of the
tribunal to decide on the challenge............................................................................................................6
b. No one can be their own judge is a general principle embodied in Model Law. .....................7
c. Letting two other arbitrators to decide on the challenge does not violate the parties’
agreement. .....................................................................................................................................................9

II. MR. PRASAD SHOULD BE REMOVED FROM THE TRIBUNAL BECAUSE

PRESENT CIRCUMSTANCES ARE SUFFICIENT TO ESTABLISH
JUSTIFIABLE DOUBT TO HIS IMPARTIALITY AND INDEPENDENCE......... 10
1. The challenge to Mr. Prasad is admissible ................................................................... 10
a. RESPONDENT has raised the challenge in a timely manner. ............................................... 10
b. RESPONDENT is not estopped from challenging Mr. Prasad.............................................. 12
2. The circumstances are sufficient to establish justifiable doubts regarding Mr. Prasad’s
impartiality and independence.............................................................................................. 13
a. The intention to conceal the third-party funder gives rise to preliminary doubts. ............... 14
b. The involvement of third-party funders forms the basis for justifiable doubt. .................... 15
c. Mr. Prasad has been repeatedly appointed as arbitrator on four occasions, giving rise to

II
 justifiable doubts. ...................................................................................................................................... 18
d. Ongoing business relationship between Mr. Prasad and Findfunds LP further aggravates
justifiable doubt. ........................................................................................................................................ 20
e. Mr. Prasad has previously expressed his opinion on the issue at dispute, adding to
justifiable doubts. ...................................................................................................................................... 20

III. RESPONDENT’S GENERAL CONDITTIONS SHOULD GOVERN THE

SALES CONTRACT. ....................................................................................................23
1. RESPONDENT’s Code of Conduct is incorporated into its General Conditions. .... 23
a. Issue III requires the Parties to discuss whose General Conditions should be applied. ..... 23
b. RESPONDENT’s General Conditions include its Code of Conduct ................................... 23
c. The Tender Documents should be interpreted in a broader sense ......................................... 24
2. The Sales Contract includes RESPONDENT’s General Conditions .......................... 25
a. CLAIMANT agreed to the inclusion of RESPONDENT’s General Conditions ............... 25
b. CLAIMANT had a reasonable opportunity to take notice of the terms............................... 26
3. CLAIMANT’s General Conditions are not included in the Sales-Offer ...................... 26
4. CLAIMANT’s General Conditions are surprising terms and thus cannot apply to the
Contract. ................................................................................................................................ 27
a. The applicability of CLAIMANT’s standard conditions is surprising by virtue of its
presentation. ............................................................................................................................................... 27
b. RESPONDENT has not expressly accepted these surprising terms. .................................... 29

IV. CLAIMANT DELIVERED NON-CONFORMING GOODS PURSUANT

TO ART 35 OF THE CISG. .......................................................................................... 31
1. RESPONDENT’s General Conditions fall into the scope of Art 35 ........................... 31
2. CLAIMANT’s delivery violates Art 35(1) of the CISG. ................................................ 32
a. Subjective evidence under Art 8(1) indicates the standard of conformity is guaranteeing a
specific result. ............................................................................................................................................ 32
b. Objective evidence under Art 8(2) suggests that the standard of conformity is more than
making best effort. .................................................................................................................................... 33
3. CLAIMANT’s delivery violates Art 35(2) of the CISG................................................. 34
a. RESPONDENT intended to purchase ethical goods and this purpose was expressly made
known to the CLAIMANT. ..................................................................................................................... 34
III
 b. RESPONDENT relied on CLAIMANT's skill and judgement to purchase ethical goods.35
4. The standard of conformity should be guaranteeing a specific result under Art 5.1.5
of the UNIDROIT Principle. ............................................................................................... 36
a. The obligation expressed in RESPONDENT’s General Conditions states clearly a duty to
achieve a specific result. ........................................................................................................................... 36
b. Price of the Contract suggests a duty to achieve a specific result. .......................................... 36
c. The degree of risk indicates a duty to achieve a specific result. .............................................. 36
d. RESPONDENT does not have a degree of influence over the performance. .................... 37

REQUEST FOR RELIEF ............................................................................................38

IV
 LIST OF ABBREVIATIONS

Art(s) Article(s)

Declaration I Exhibit C 11 (Prasad’s Declaration of Impartiality and Independence

and Availability – 26 June 2017)

Declaration II Declaration Prasad (Connections with Funder – 11 September 2017)

Exhibit C Claimant’s Exhibit C

Exhibit R Respondent’s Exhibit R

General Conditions General Conditions of Contract

IBA International Bar Association

ICSID International Center for Settlement of Investment Disputes

Letter Fasttrack Letter Fasttrack (Disclosure of Funder – 7 September 2017)

Letter Langweiler Letter Langweiler (Request to Disclose Funder – 29 August 2017)

Letter Prasad Letter Prasad (Refusal to Step Down - 21 September 2017)

LCIA London Court of International Arbitration

Memo C Memorandum for Claimant

No Number

NoA Notice of Arbitration (30 June 2017)

NoC Notice of Challenge of Mr. Prasad

P(P) Page(s)

Para(s) Paragraph(s)

PCA Permanent Court of Arbitration

PO Procedural Order

V
Response Response to the Notice of Arbitration

UNIDROIT The International Institute for the Unification of Private Law

v. versus

VI
 INDEX OF AUTHORITIES

Cited as Source Cited in

Advisory Council Sieg Eiselen, CISG Advisory Council Opinion No. 13: Inclusion 77,
80,
Opinion No. 13 of Standard Terms under the CISG, 20 January 2013 83,
86

Born Gary B. Born, International Commercial Arbitration, Second edition, 12,

(Wolters Kluwer Law &Business
 2014).

Caron and Caplan David D. Caron and Lee M. Caplan, The UNCITRAL Arbitration 28

Rules: A Commentary, Second Edition, (Oxford University Press

2013).

UNCITRAL Report of Working Group II (Arbitration and Conciliation) on 28,

36
Working Group the work of its forty-ninth session, Vienna, 15-19 September

2008, available at

http://www.uncitral.org/uncitral/en/commission/sessions/42nd

.html

CISG Digest United Naitons Commissions on International Trade Law, 91,

99,
UNICITRAL 2016 Digest of Case Law On the International Sale of 107
Goods, 2016 available at:

http://www.uncitral.org/pdf/english/clout/cisg_

digest_2016.pdf

CIETAC HK CIETAC Hong Kong Arbitration Center, Guidelines for Third 43

Guidelines Party Funding for Arbitration (September 2017).

HKLRC The Law Reform Committee of Hong Kong, Third Party 43

Funding for Arbitration Consultation Paper (October 2015)


VII
ICC Note ICC, Note to Parties and Arbitral Tribunals on the Conduct of 43

the Arbitration (October 2017).

Nieuwveld and Lisa Bench Nieuwveld, Victoria Shannon, Third Party Funding in 43

Shannon International Arbitration (Kluwer Law International 2012).

Pulle Austin I. Pulle, Securing Natural Justice in Arbitration 17

Proceedings, 20 Asia Pacific Law Review
pp. 63-88, 2012.

QM Task Force ICCA-Queen Mary Task Force, Draft Report for Public Discussion of 36

the ICCA-Queen Mary Task Force on Third Party Funding in

International Arbitration (September 2017).

Rosengren Jonas Rosengren, Contract Interpretation in International 75

Arbitration, Journal of International Arbitration (2013/Vol. 30, Issue

1), pp. 1-16


Autor in: Galston and Smit ed., International Sales: The United Nations 105

Galston and Smit Convention on Contracts for the International Sale of Goods, Chapter 6,

Peter Schlechtriem, The Seller's Obligations Under the United

Nations Convention on Contracts for the International Sale of

Goods, available at

http://cisgw3.law.pace.edu/cisg/biblio/schlechtriem10.html

Schwenzer and Ingeborg Schwenzer and Benjamin Leisinger, Ethical Values and 103

Leisinger International Sales Contract, In Commercial Challenges in the 21st

Century: Jan Hellner in Memoriam 249 (Ross Cranston et al. eds.,

2007).

Schlechtriem and Peter Schlechtriem and Ingeborg Schwenzer, Commentary on the 75

Schwenzer UN Convention on the International Sale of Goods (CISG) Oxford

University Press, 4th ed., Oxford 2016


SCC Note SCC, Practical Note: Board Decisions on Challenges to Arbitrators 66

VIII
 2013-2015 (2016)

UNCITRAL Report of the United Nations Commission on International 14

Report Session 8th Trade Law on the work of its eighth
session A/10017, (April
1975), available at

http://www.uncitral.org/pdf/english/yearbooks/yb-1975-e/vol6

-p9-45-e.pdf.

Vogenauer Stefan Vogenauer och Jan Kleinheisterkamp, Commentary on the 75

and UNIDROIT Principles of International Commercial Contracts (PICC)

Kleinheisterkamp Oxford University Press, Oxford 2009


Von Goeler Jonas Von Goeler, Third-Party Funding in International Arbitration and 36,
41
its Impact on Procedure (Wolters Kluwer International, 2016).

IX
 INDEX OF CASES

Cited as Full Citation Cited in

Athens Court of Multi-Member Court of First Instance of Athens (the 103

First Instance bullet-proof vest case) 4505/2009, 2009, available at:

2009 http://cisgw3.law.pace.edu/cases/094505gr.htm

California U.S. Federal Court, California Eastern District Court, 78

District Court Golden Valley Grape Juice and Wine, LLC v. Centriys

2010 Corporation et. al., CV F 09-1424 LJO GSA, 21 January

2010, available at

http://cisgw3.law.pace.edu/cases/100121u1.html

Germany Federal Federal Supreme Court, Germany (Cobalt sulphate case), 100

Supreme Court VIII ZR 51/95, 3 April 1996, available at:

1996 https://cisgw3.law.pace.edu/cases/960403g1.html.

Germany Federal Federal Supreme Court, Germany VIII ZR 410/12, 75

Supreme Court (Bowling alleys case), 28 May 2014, available at:

2014 http://cisgw3.law.pace.edu/cases/140528g1.html

Hong Kong Hong Kong High Court (Court of First Instance), (Jung 39

High Court 2008 Science Information Technology Co. Ltd. v. Zte. Corporation),

22 July 2008, [2008] HKCFI 606, available on the

Internet at http://www.hklii.hk/eng/hk/cases/

hkcfi/2008/606.html.

Navarre Provincial Court of Navarre, Third Division, Spain 91

Provincial Court (Waukesha Engine Division/Dresser Industrial Products B.V.

2003 v. Ceramica Utzubar), 223/2003, 22 September 2003;

X
Background: Court of First Instance No. 4 of

Pamplona, 13 September 2001, CLOUT NO. 547,

available at: http://www.uc3m.es/cisg/sespan37.html.

XI
 INDEX OF ARBITRAL DECISIONS

Cited as Full Citation Cited in

ICC No. ICC International Court of Arbitration, Assignee of 75

11869 buyer (Republic of Korea) Respondent: Seller (Australia) v.

Seller (Australia), Award, 2011.

ICSID No. ICSID (OPIC Karimum Corporation v. The Bolivarian 53, 58

ARB/10/14 Republic of Venezuela) Decision on the Proposal to

Disqualify Professor Philippe Sands, Arbitrator, 5

May 2011.

ICSID No. ICSID (Universal Compression Int’l Holdings, S.L.U. v. 35

ARB/10/9 Venezuela) Decision on the Proposal to

Disqualify
Professor Brigitte Stern and Professor

Guido Santiago
Tawil, Arbitrators, 20 May 2011.

ICSID No. ICSID (Tidewater Inc., Tidewater Investment SRL, 54

ARB/10/5 Tidewater Caribe, C.A., et al. v. The Bolivarian Republic

of Venezuela) Decision on Claimants’ Proposal to

Disqualify Professor Brigitte Stern, Arbitrator, 23

December 2010.

LCIA No. London Court of International Arbitration 36

UN7949 (National Grid PLC v. The Republic of Argentina)

Decision on the Challenge to Mr. Judd L. Kessler,

14 October 14 2009.

PCA No. Permanent Court of Arbitration (Valeri Belokon v. 25, 64,

AA518 The Kyrgyz Republic) Decision on Challenges to 66

Arbitrators Professor Kaj Hober and Professor Jan

XII
 Paulsson, 6 October 2014.

PCA No. PCA, (Perenco Ecuador Limited v. The Republic of 63

IR-2009/1 Ecuador and Empresa Estatal Petroleos de Ecuador)

Decision on
Challenge to Arbitrator, 8 December

2009.

PCA No. Permanent Court of Arbitration (CC/Devas Ltd., 63

2013-09 Devas Employees Mauritius Private Ltd. and Telecom

Devas Mauritius Ltd. v. The Republic of India) Decision

on the Respondent's Challenge to the Hon. Marc

Lalonde as Presiding Arbitrator and Prof. Francisco

Orrego Vicuna as Co-Arbitrator, 30 September

2013.

PCA No. Mr. Jernej Sekole (ICS Inspection and Control Services 34, 35

2010-9 Limited v. The Republic of Argentina) Decision on

Challenge to Arbitrator, 17 December 2009.

PCA No. PCA (Vito G. Gallo v. Canada) Decision on the 28, 34

55798 Challenge to Mr. J. Christopher
Thomas (Nassib G.

Ziadé, ICSID Deputy Secretary-General,

Appointing Authority), 14 October 2009

Iran-US Iran-US Claims Tribunal, Decision of the 28

2006 Appointing Authority, W E Haak, in the Challenge

of Judges Assadollah Noori, Koorosh H Ameli,

Mohsen Aghahosseini, April 19, 2006

XIII
 INDEXT OF LEGAL TEXTS

Cited as Source

CISG United Nations Convention on Contracts for the

International Sale of Goods

IBA Guidelines IBA Guidelines on Conflicts of Interest in International

Arbitration

ICSID Rules ICSID Convention Arbitration Rules

IBA Ethic Rules IBA Rules of Ethics for International Arbitration

LCIA Rules London Court of International Arbitration Rules 1998

Model Law UNCITRAL Model Law on International Commercial

Arbitration

UNCITRAL Rules United Nations Commission on International Trade Law

Arbitration Rules

UNIDROIT Principles UNIDROIT Principles of International Commercial

Contract 2010

Global Compact Principles The Ten Principles of the UN Global Compacts

XIV
 SUMMARY OF FACTS

Delicatesy Whole Foods Sp [CLAIMANT], is a medium sized manufacturer of fine bakery

products registered in Equatoriana. Comestibles Finos Ltd [RESPONDENT], is a

gourmet supermarket chain in Mediterraneo.

March 2014 CLAIMANT met RESPONDENT at Danubian food fair in

Cucina, where they discussed possible cooperation.

10 March 2014 CLAIMANT received an Invitation to Tender and Tender

Documents from RESPONDENT for the delivery of

chocolate cakes.
17 March 2014 CLAIMANT sent the Letter of Acknowledgement.
27 March 2014 CLAIMANT submitted its tender. In its tender, CLAIMANT

made clear that its offer would be subject to the application

of its own General Conditions of Sale, including its own

Code of Conduct.
7 April 2014 CLAIMANT was awarded the contract by letter. In this letter,

RESPONDENT explicitly accepted the changed

specifications for the chocolate cakes and the changed

payment conditions, and impliedly agreed to the inclusion of

CLAIMANT’s standard conditions. Thus, the contract was

concluded with CLAIMANT’s General Conditions of Sale.

12 February 2017 CLAIMANT received an E-mail from RESPONDENT, in

which RESPONDENT terminated the contract.

RESPONDENT refused to make any further payment.

30 June 2017 CLAIMANT sent the Notice of Arbitration, in accordance

with the Clause 20 Dispute Resolution in the contract.

Together with the Notice, Mr. Prasad’s Declaration of

Impartiality and Independence and Availability was

1
 communicated to RESPONDENT.
27 August 2017 RESPONDENT retrieved a note written by Mr. Fasttrack

through virus check.

7 September 2017 CLAIMANT disclosed the existence and information

regarding Funding 12.

11 September 2017 Mr. Prasad made his second disclosure after he learned that

CLAIMANT is funded by Funding 12.

14 September 2017 RESPONDENT sent the Notice of Challenge of Mr. Prasad

and stated its reasons.

21 September 2017 Mr. Prasad refused to withdraw from his office as arbitrator

and stated his reasons.

29 September 2017 CLAIMANT objected to the challenge of Mr. Prasad

2
 ARGUMENT

I. THE ARBITRAL TRIBUNAL SHOULD DECIDE ON THE

CHALLENGE TO MR. PRASAD WTIHOUT HIS PARTICIPATION.

1. In this case, the UNCITRAL Rules has been selected by the parties to govern the

arbitration procedure. As the seat of this arbitration is based in Danubia, Danubian

Arbitration Law, which is Model Law will apply as lex arbitri. The issue of who has the

power to decide on the challenge to arbitrator is a procedural matter governed by the

agreement of the parties. The agreement consists of two elements: first, the UNCITRAL

Rules and second, the provisions in the arbitration clause (Clause 20).

2. Contrary to CLAIMANT’s allegation, appointing authority in UNCITRAL Rules is

effectively excluded by the arbitration clause. As a consequence, to comply the

compulsory requirement in Model Law, the arbitral tribunal should decide on the

challenge to Mr. Prasad.

1. The Tribunal rather than appointing authority should decide on the challenge to
Mr. Prasad.

a. The parties excluded appointing authority in the challenge procedure.

3. CLAIMANT has repeated argued that RESPONDENT has not proved appointing

authority is excluded by the arbitration clause. [Memo C, Paras. 4-31]. In the following,

RESPONDENT will address first, how the arbitration clause exclude the appointing

authority and second, this intent to exclude outsider involvement is shared by both

parties.

4. First, excluding arbitral institutions have the natural consequence of excluding appointing

authority. CLAIMANT argues that RESPONDENT never explicitly expressed its

intention to exclude Art. 13(4). [Memo C, Para. 5]. Art. 13(4) provides for the appointing

authority to decide on a contested challenge in ad hoc proceedings. [UNCITRAL Rules，

Art. 13(4)]. It is true that the parties did not make direct reference to Art. 13(4) of
3
 UNCITRAL Rules. However, this does not change the fact that this article is, in effect,

excluded as a natural result of Clause 20.

5. This clause provides that any dispute shall be settled by arbitration in accordance with the

UNCITRAL Rules “without the involvement of any arbitral institution” (hereinafter

referred as the “Exclusion”). [General Conditions, P. 12, Clause 20]. CLAIMANT may

argue that the appointing authority itself is not necessarily an arbitral institution. But,

arbitral institution will be inevitably involved in the appointing authority procedure. In a

word, the Exclusion has the effect to exclude Art. 13(4) of UNCITRAL Rules.

6. UNCITRAL Rules provides that a party may at any time propose the names of one or

more institutions or persons to serve as appointing authority. [UNCITRAL Rules, Art.6].

In this case, the parties have not agreed on an appointing authority. Thus the selection of

appointing authority might be triggered by the unilateral nomination by CLAIMANT

pursuant to Art. 6(2) of the UNCITRAL Rules. Then it will be out of RESPONDENT’s

control. Chances are that CLAIMANT would nominate an arbitral institution.

7. Even if CLAIMANT were to claim that they would conform to the Exclusion and

nominate a natural person, RESPONDENT cannot guarantee to agree to the nomination,

and finally the PCA will be involved to make the final decision. The role of PCA here is

of “last-resort” character and to guarantee the procedural efficiency. However, PCA is

exactly an arbitral institution that the parties have excluded. In another word, by excluding

arbitral institution, the whole appointing authority procedure in UNCITRAL Rules will

not be able to perform its function. As a result, Art.13(4) loses its chance of application.

8. Second, there is common intention between the parties. Contrary to CLAIMANT’s

statement, CLAIMANT was fully aware of RESPONDENT’s intent to exclude. Mr. Tsai,

Head of Production of CLAIMANT, was aware of the information leak event. [Exhibit

R 5, Para. 5]. As a result, RESPONDENT changed its arbitration clause from an

institutional arbitration clause to an ad hoc arbitration clause providing for arbitration

4
 under the UNCITRAL Rules. [Exhibit R 5, Para. 4]. Exclusion uses clear wording to

exclude any possible involvement of arbitral institution. This intention was also

understood by CLAIMANT as RESPONDENT shared this experience with

CLAIMANT during the conversation in Cucina Food Fair and CLAIMANT showed

great interest in this subject. [Exhibit R 5, Para. 5].

9. Not only CLAIMANT was aware of RESPONDENT’s intent, CLAIMANT also

impliedly consented to it. CLAIMANT has impliedly consented to the Exclusion by

relying on the Clause 20 in to commence this arbitration. There is another dispute

resolution clause contained in CLAIMANT’s own General Conditions of Sale. That

clause provides that disputes shall be settled under ICC Arbitration Rules seated in

Equatoriana. However, CLAIMANT did not use their own arbitration clause but instead,

initiated the arbitral proceeding by Clause 20 that was provided by RESPONDENT. To

conclude, there is a clear and solid agreement between the parties to exclude outside

involvement in arbitration procedure. Minor difference such as “composition” and

“constitution” should not affect the interpretation as those phrases were written in

informal correspondence by non-legal professionals. [Memo C, Para. 15; NoA, Para. 3].

10. Moreover, CLAIMANT mentioned that appointing authority mechanism is designed to

“shield the arbitration from intervention of national courts” and consistent with the

confidentiality concerns. [Memo C, Para. 7]. But it would be more confidential to limit the

procedure only to the Tribunal instead of involving any potential outsiders, be it national

court or appointing authority. In the following, RESPONDENT will address why this

Tribunal should decide on the challenge to Mr. Prasad.

b. The challenge to Mr. Prasad should be decided by the Tribunal.

11. As a result of the Exclusion, the situation the tribunal now faced with is, the parties do

not have an agreement on who can decide the challenge. Now the parties should turn to

5
 the law of the arbitral seat, Model Law. It requires the Tribunal itself to decide on the

challenge when the parties do not have an agreement. [Model Law, Art. 13(2)].

12. In addition, the Tribunal enjoys broad procedural discretion to decide on the challenge

under arbitration rules. Art. 17(1) of UNCITRAL Rules provides that “[s]ubject to these

Rules, the arbitral tribunal may conduct the arbitration in such a manner as it considers

appropriate, provided that the parties are treated with equality and that at appropriate

stage of the proceedings each party is given a reasonable opportunity of presenting its

case”. The better view of the Rules is that the arbitral tribunal is granted broad

procedural authority by Art. 17(1), subject only to mandatory obligations under the same

provision of (a) equal treatment and due process (b) efficiency (c) a general obligation to

give effect to the parties’ agreed arbitral proceedings. [Born, P. 2150].

13. Now the Parties do not have an agreement on whom to decide the challenge. For the

arbitration to proceed efficiently, the Tribunal should conduct the arbitration in such a

manner as it considers appropriate. Now the appropriate manner would be for the

Tribunal itself to decide on the challenge. Resort to other bodies will result in extra time

and cost, which is inconsistent with the requirement of efficiency. What’s more,

RESPONDENT reiterates its concern for confidentiality and would like the relevant

information to be confined in the arbitral tribunal. This is the intent both parties shared

when concluding the contract and should be respected by the Tribunal.

2. The challenge should be decided without the participation of Mr. Prasad.

a. The legislative history of UNCITRAL Rules provides basis for two members
of the tribunal to decide on the challenge.

14. The preparatory work of Art. 13(4) of the UNCITRAL Rules sheds light on this issue.

Art. 13(4) shows that the drafter of the UNCITRAL Rules wanted to avoid the

challenged arbitrator decides on its own case. So they entrusted the task to appointing

authority. It further shows, the delegates were once even concerned about the impartiality

of appointing authority. Then they put forward the solution that the other two members

6
 of the tribunal decide on the challenge to arbitrator in a three-member tribunal.

[UNCITRAL Report Session 8th, Para. 85]. This shows that the drafters considered two

other members as an alternative to appointing authority. In the present case, now that

appointing authority is excluded by the parties, it is more appropriate to have the two

other members of the tribunal decide on the challenge, which also reflects the original

intent of the drafters of UNCITRAL Rules.

b. No one can be their own judge is a general principle embodied in Model

Law.

15. CLAIMANT invoked an opinion of the drafters of the Model Law that the arbitral

tribunal, including the challenged arbitrator, should decide the challenge. [Memo C, Para.

35]. However not only are drafting documents non-binding in the present case, but also in

the final version of Model Law, no clear wording which might express such opinion exist.

Art. 13(2) of Model Law uses the wording as “the arbitral tribunal shall decide on the

challenge” rather than further defining what kind of arbitral tribunal it is. In comparison,

Art. 29 of the Model Law clearly uses the wording “all its members”. Therefore, there

must be certain reason for the drafters of the final version of Model Law to deliberately

omit whether “the arbitral tribunal” in Art. 13(2) includes the challenged arbitrator and

leaves such ambiguity. At least, it reflects that “the arbitral tribunal” in Art. 13(2) cannot

be simply understood as all members of the tribunal.

16. In light of the foregoing, Art. 2 of Model Law answers the ambiguous question. Art.

2A.(2) of Model Law stipulates that questions concerning matters governed by this Law

which are not expressly settled in it are to be settled in conformity with the general

principles on which this Law is based. Therefore, when interpreting the ambiguity in the

provision, the Tribunal may resort to general principles. There is a principle derived from

natural justice saying that no man can be his own judge. Letting Mr. Prasad decide his

own challenge would definitely cause a violation of such principle.

7
17. Even if not from the perspective of Model Law, Mr. Prasad should also not participate in

the decision-making process of his own challenge. First, because arbitration has become a

popular alternative to litigation, the observation of the principles of natural justice in

arbitration proceedings is an indispensable requirement in order to preserve it legitimacy.

[Pulle, P. 65]. Since Mr. Prasad is the object of the decision of challenge, he should not at

the same time act as the subject to make the decision. Second, the principle that no one

can be his own judge is also called the rule against bias. It goes to the root of the integrity

of the adjudication. Often, parties choose arbitration in order to get a neutral forum and

avoid a biased nationalist judge. It would be ironical if they chose arbitration for this

reason and end up with a biased arbitrator. [Pulle, P. 83]. Therefore, since Mr. Prasad has

clearly stated in his letter that he refused to step down, Mr. Prasad has formed a

predetermined view in his mind which renders him inevitably bias when deciding his own

case.

18. In addition, contrary to CLAIMANT’s allegation that letting two other members of the

tribunal to decide the challenge violates due process, it actually further protects the

fairness of this arbitration. CLAIMANT invokes the concept of due process to argue

that both parties should be heard and represented equally. The procedural balance of

interests of the parties should be paid attention to. However, letting a biased arbitrator

like Mr. Prasad to decide his own case would definitely cause damage to RESPONDENT’

interests and thus breaking the procedural balance mentioned before. Furthermore, Mr.

Prasad is free to deliver his opinion as long as he does not participate in the

decision-making process. As a matter of fact, he has presented lots of opinions through

several letters. Therefore, CLAIMANT does not need to worry about not being heard.

19. Such rationale could also be observed in other arbitration rules. Art. 58 of the ICSID

Arbitration Rules provides that “[t]he decision on any proposal to disqualify a conciliator

or arbitrator shall be taken by the other members of the Commission or Tribunal as the

8
 case may be”. This reflects that when deciding on the challenge of an arbitrator, it is more

impartial for the other members to decide on the challenge.

c. Letting two other arbitrators to decide on the challenge does not violate the
parties’ agreement.

20. The arbitration clause, as part of the agreement, only stipulates that the number of

arbitrators shall be three. There is a difference between the number of arbitrators

composing the tribunal and the number of arbitrators when making a decision. As is

explained before, Art. 13(2) of the UNCITRAL Model Law deliberately use an

ambiguous term “the tribunal” instead of “all members of the tribunal”. Therefore, even

under Model Law, the tribunal does not necessarily mean all members of the tribunal.

Looking at the parities’ agreement, they merely agreed on the number of arbitrators

composing the tribunal. They never agreed on certain challenge procedures let alone the

rightful body to decide on the challenge. Thus, letting two other arbitrators to decide on

the challenge cannot possibly violate any agreement that does not even exist.

21. In conclusion, the tribunal should decide on the challenge of Mr. Prasad since Art. 13(4)

of the UNCITRAL Rules has been excluded. Further, the decision should be made

without the participation of Mr. Prasad under the UNCITRAL Rules.

9
II. MR. PRASAD SHOULD BE REMOVED FROM THE TRIBUNAL
BECAUSE PRESENT CIRCUMSTANCES ARE SUFFICIENT TO
ESTABLISH JUSTIFIABLE DOUBT TO HIS IMPARTIALITY AND
INDEPENDENCE.

22. A challenge to remove an arbitrator under UNCITRAL rules has to satisfy two

requirements. First, the challenge must be admissible in the procedural aspect. Second,

with respect of the merit, there has to be sufficient grounds to give rise to justifiable

doubts as to that arbitrator’s impartiality and independence. [UNCITRAL Rules, Arts.

12-13]. In the following, RESPONDENT responses to CLAIMANT respectively

regarding the admissibility and the merit of the challenge to Mr. Prasad.

1. The challenge to Mr. Prasad is admissible

23. RESPONDENT filed the challenge to Mr. Prasad on September 14 of 2017. [NoC, P. 38].

Contrary to CLAIMANT’s statement in its memorandum, this request for challenge is

admissible. First, this challenge is not belated because CLAIMANT has incorrectly

calculated the starting date for the 15-day period. Second, RESPONDENT is not

estopped from invoking the grounds on which the challenge is based.

a. RESPONDENT has raised the challenge in a timely manner.

24. CLAIMANT made two mistakes regarding when the 15-day period should start. First,

there should be only one starting date rather than three. Second (and consequently), the

starting date should be September 11, rather than respectively June 26, July 31 and August

27.

25. CLAIMANT stated that RESPONDENT became aware of the circumstances

respectively on June 26, July 31 and August 27 of 2017. [Memo C, Paras. 47-50]. But it

would be unreasonable to start the 15-day period for challenge respectively from June,

July and August because the scattered facts were not connected by further information

disclosed in September 7 and September 11. As reasoned in another arbitration case

10
 under UNCITRAL Rules, when the challenging party relies on an accumulation of

circumstances, “the relevant date is not any one of the circumstances invoked by the

RESPONDENT became known to it, but the date on which it became aware of a

sufficient number of circumstances to form the basis of a challenge”. [PCA No. AA518].

Therefore, CLAIMANT cannot take apart the grounds and separately assess each of

them as they did in it memorandum. [Memo C, Paras. 47-49]. Instead, there should be an

overall assessment to find out on which date the 15-day limit should start to calculate. In

the following, RESPONDENT will present to the Tribunal how it gradually realized that

Mr. Prasad needs to be removed due to justifiable doubts about his impartiality and

independence.

26. On June 26, Mr. Prasad made his declaration. This declaration was notified to

RESPONDENT on June 30, four days later with the Notice of Arbitration. At that time,

RESPONDENT was merely informed of Mr. Prasad’s two previous appointments by

CLAIMANT’s law firm, which was obviously not sufficient to raise justifiable doubts.

[Declaration I, P. 23].

27. Before July 31 when RESPONDENT submitted the Response to Arbitration, admittedly,

it visited the personal website of Mr. Prasad. But there is no evidence that

RESPONDENT had been aware of the article and Mr. Prasad’s views since July 31. [PO2,

Para. 14].

28. Moreover, UNCITRAL Rules adopt the standard of actual prior knowledge instead of

constructive knowledge. [PCA No. 55798; Iran-US 2006]. CLAIMANT cannot argue that

RESPONDENT should be deemed to have known of Mr. Prasad’s legal views. [Memo C,

Para. 50]. This indicates an incorrect interpretation Art. 13(1) of the UNCITRAL Rules

and a deviation from existing case laws. The UNCITRAL Rules notably does not contain

“should have known” or “ought to have known”. [Caron and Caplan, P. 245]. This is a

clear intention of the drafters of the Rules to reject a test of constructive knowledge.
11
 [UNCITRAL Working Group, P. 16]. Therefore, at the stage of July 31,

RESPONDENT’s awareness of Mr. Prasad’s journal article cannot be established.

29. On August 27, RESPONDENT accidentally retrieved the metadata on August 27 and

learned about the note from Mr. Fasttrack. Admittedly, RESPONDENT learned of

third-party funding and their suspicious connections. But RESPONDENT insisted not to

utilize this information obtained through informal channels. Within only two days,

RESPONDENT promptly notified the Tribunal and asked for confirmation. [Letter

Langweiler, P. 33]. While RESPONDENT has acted in a timely manner, CLAIMANT

spent a whole week to make disclosure under the order of the Tribunal. [Letter Fasttrack,

P. 35].

30. On September 7, CLAIMANT disclosed the existence of the funder Funding 12 Ltd. and

its main shareholder Findfunds LP. But four days later on September 11, Mr. Prasad

further disclosed that he was appointed in two cases funded by Findfunds and his law

firm has ongoing commercial relationship with Findfunds. [Ibid]. This two circumstances

significantly aggravate the doubt perceived by RESPONDENT. Therefore,

RESPONDENT immediately prepared the Notice of Challenge in three days and hastily

filed the challenge on September 14.

31. In particular, CLAIMANT accused RESPONDENT of playing dilatory tactics. [Memo C,

Para. 52]. This accusation does not have any evidence. On the contrary, Ms. Chian

Ducasse has already been nominated as a replacement arbitrator. She has been informed

of all the submissions and will be present at the next hearing. [PO1, Para. 1]. In case of a

successful challenge, the proceeding would be able to continue without any suspension.

RESPONDENT has agreed to address both the challenge and the substantive issue in the

next hearing, with the cooperative attitude to speed up the procedure. [Ibid]. In a word,

RESPONDENT is behaving in good faith in the procedure without any tactics.

b. RESPONDENT is not estopped from challenging Mr. Prasad

12
32. CLAIMANT overtly ignored the clear wording “Prasad & Partners” in Mr. Prasad’s

Declaration. [Memo C, Paras. 54-57]. RESPONDENT only agreed to the reservation that

“Prasad & Partners” may continue existing and accept further work. [Exhibit C 11]. This

agreement does not apply to the new firm “Prasad & Slowfood”, which was formed after

RESPONDENT consented to Mr. Prasad’s reservation. So RESPONDENT is not

estopped from challenging Mr. Prasad on the grounds it listed in the Notice of Challenge

filed on September 14.

33. To summarize, RESPONDENT filed the challenge to Mr. Prasad in a timely manner and

RESPONDENT’s consent to the reservation is irrelevant. The challenge to Mr. Prasad is

admissible.

2. The circumstances are sufficient to establish justifiable doubts regarding Mr.

Prasad’s impartiality and independence.

34. Contrary to CLAIMANT’s allegation, the applicable standard for challenge is a more

subjective one. An arbitrator may be challenged when “[c]ircumstances exist that give rise

to justifiable doubts as to his impartiality and independence”. [UNCITRAL Rules, Art. 12;

Model Law Art. 12]. Under the UNCITRAL Rules, doubts are justifiable if they give rise

to an apprehension of bias that is, to the objective observer, reasonable. [PCA No. 55798].

The test does not seek to ascertain whether the challenged arbitrator truly harbors any

bias, but rather whether the circumstances could create a reasonable perception of a lack

of impartiality or independence. [IBID; PCA No. 2010-9]. Accordingly, disqualification

of Mr. Prasad may be warranted for “prudential” concerns to help ensure the legitimacy

of this arbitration. [IBID]. RESPONDENT submits that under this “justifiable doubts”

standard, there are sufficient circumstances that warrant the removal of Mr. Prasad.

35. In determining the justifiable doubts under UNCITRAL Rules and Model Law, IBA

Guidelines shall be a good reference. IBA Guidelines “are widely recognized in

international arbitration as the pre-eminent set of guidelines for assessing arbitrator

13
 conflicts”. [ICSID No. ARB/10/9]. RESPONDENT understands and does not object
that the Guidelines are not binding rules. [Memo C, Para. 61]. Even though they are not

directly binding, the IBA Guidelines are of indicative value to determine whether the

circumstances give rise to justifiable doubts.

36. There are three principal reasons. First, the IBA Guidelines adopt the same “justifiable

doubts” standard as in Model Law and UNCITRAL Rules. The working group of IBA

Guidelines explains that the wording “impartiality and independence” is derived directly

from the Model Law and UNICTRAL Rules. [IBA Guidelines, P. 6]. This explanation

further confirms such consistency between the Guidelines and the applicable standard to

the present challenge. Second, the IBA Guidelines reflect the understanding of best

current international practice. [IBA Guidelines, P. 2]. Despite its non-binding nature, the

Guidelines provide guidance to determine whether doubts are justified under the standard

of UNCITRAL Rules. [LCIA No. UN 7949; PCA No. 2010-9]. Finally, the IBA was the

first organization to officially take a position in the debate of third-party funding conflicts

of interest. [QM Task Force. P. 69]. The latest IBA Guidelines, amended in 2014,

specifically address the issue of third party funding in international arbitration. [Von

Goeler, P. 128]. Given its leading authority on third party funding, it is more than

appropriate to use IBA Guidelines to evaluate the conflicts of interests between Mr.

Prasad and CLAIMANT.

37. Therefore, RESPONDENT will proceed to illustrate, with the assistance of IBA

Guidelines, that the circumstances regarding Mr. Prasad are able to establish justifiable

doubts as to his impartiality and independence.

a. The intention to conceal the third-party funder gives rise to preliminary

doubts.

38. CLAIMANT invoked the Saudi Cable case to argue non-disclosure on the part of

arbitrator does not lead to bias. [Memo C, Para. 66]. This case discusses the challenge

standard under English Arbitration Act 1996 which is clearly different from the Model

14
 Law in the present case. More importantly, the case invoked by CLAIMANT addresses

non-disclosure on the part of arbitrator. It does not deal with a party’s intentional

concealment of facts. While RESPONDENT agrees that Mr. Prasad has not violated any

disclosure obligation, but it is the intention of CLAIMANT and their counsels that give

rise to doubts.

39. RESPONDENT recognizes that “CLAIMANT was not obliged to disclose any facts

about third party funding”. [Memo C, P. 13]. However, it is not important whether there

is such obligation. The core issue is CLAIMANT and their counsels’ intentional

concealment. Regardless of such an obligation, non-disclosure of itself, can give rise to a

reasonable apprehension of bias as the party may well be left with the impression that

there was intentional concealment. [Hong Kong High Court 2008].

40. Similarly, in the present case, what matters is the clear intention of CLAIMANT and its

law firm to trying to conceal such facts from the Tribunal and RESPONDENT. [NoC, P.

38]. Neither Model Law nor UNCITRAL Rules require parties to disclose third-party

funding in the procedure of arbitration. Nevertheless, CLAIMANT and Mr. Fasttrack

were extremely sensitive to the potential information leak and intentionally trying to cover

up the existence of third-party funder and their connections with Mr. Prasad. At the same

time, CLAIMANT contends that they are not obligated to disclose third-party funding.

[Memo C, Paras. 60-71]. This has left the impression that, there may be more

circumstances that CLAIMANT has not disclosed to RESPONDENT and to the

Tribunal. To conclude, making allegation that there is no such obligation does not in any

way clear up this suspicious behavior. Instead, it makes the connections between

CLAIMANT’s law firm, Findfunds and its subsidiaries and Mr. Prasad even more

suspicious.

b. The involvement of third-party funders forms the basis for justifiable doubt.

41. CLAIMANT has underestimated the significance of third-party funding in arbitration. As

15
 third-party funding has become increasingly common, the relationships between the

parties, the law firm, the funders and arbitrators create circumstances that may “call into

question an arbitrator’s impartiality and independence”. [Von Goeler, P. 253]. One

particular aspect is the status of third-party funder. The involvement of Findfunds and its

subsidiaries in this case has formed the basis for justifiable doubts in two aspects.

42. First, the funding companies have the same status as the parties they fund.

43. Depending on the funding structure, the funder may legally control or influence the legal

representation or may completely take over the case. [Nieuwveld and Shannon, P. 8].

There has been a growing tendency to believe that third party funders have a direct

economic interest in the arbitral award and funders are treated as the equivalent of the

party when assessing conflicts of interests. [CIETAC HK Guidelines, Para. 1.2; HKLRC,

PP. 126-127; ICC Note, Para. 24; IBA Guidelines, PP. 13-14].

44. In this arbitration, CLAIMANT is funded by Funding 12 and maintains close connections

to Findfunds. [Letter Fasttrack, P. 35; NoC, P. 38]. According to its funding arrangement

between CLAIMANT, Funding 12 will get 25% of the total amounts awarded, [PO2,

Para. 1]. In this sense, Funding 12 must be considered as the equivalent of CLAIMANT

because it has a “direct economic interest” in the award to be rendered by this Tribunal.

[IBA Guidelines, General Standard 6(b)].

45. Similarly, the same rationale applies to Funding 8, the subsidiary that funds the case

represented by Prasad & Slowfood, and other subsidiaries that funded two cases where

Mr. Prasad acted as arbitrator. In those circumstances, the subsidiaries are all to be

considered as the same as the parties in those cases.

46. Second, Findfunds and all its subsidiary funds are affiliated entities.

47. Funding 8, Funding 12 and other subsidiaries are owned by the same shareholder

Findfunds LP. [Letter Fasttrack, P. 35; PO2, Para. 6]. All the funds are controlled by a

single shareholder Findfunds through shareholding relationships.

16
48. CLAIMANT may argue that these funds are separate legal entities. However, in addition

to the shareholding relationship, Findfunds actually has effective control over its

subsidiaries. Findfunds establishes the practice to set up special subsidiaries to fund each

of the cases it acquires. [PO2, Para. 3]. As suggested by some of the names like Funding

12 and Funding 8, these subsidiaries do not have any meaningful purposes, other than to

get away with conflicts of interest. These subsidiaries belong to the same group of

companies and are all under the actual control of Findfunds.

49. CLAIMANT argues that Findfunds and its subsidiaries “leave the conduct of the

arbitration largely” to the parties and their lawyers. [Memo C, Para. 84]. This statement

does not conceal the fact that Findfunds actively engages in the strategy-making process

of the cases. [PO2, Para. 4]. While CLAIMANT is funded by one subsidiary, Findfunds

was also involved in the negotiation of the funding agreement. [PO2, Para. 5]. Further, as

revealed by Mr. Fasttrack’s instruction on Notice of Arbitration, Findfunds LP had

particularly exerted influence in selecting Mr. Prasad as arbitrator. [NoC, P. 38]. Mr.

Prasad was appointed on June 26. It happened to be just one day after on June 25 on

which CLAIMANT signed the funding agreement with Funding 12. [PO2, Para. 5]. All

the aforementioned circumstances have suggested contrary to CLAIMANT’s statement.

50. In this regard, IBA Guidelines contemplate the problem of corporate structuring and

introduce the notion of “affiliate”. [IBA Guidelines, P. 1] An affiliate encompasses all

companies in a group of companies, including the parent company. [Ibid, P. 21].

51. In conclusion, in the present case, Funding 12 has the same status as CLAIMANT.

Consequently, Findfunds has become an affiliate of CLAIMANT.

52. Having submitted the two aspects above, RESPONDENT proceed to illustrate how Mr.

Prasad’s past and ongoing connections with CLAIMANT, its law firm and the third-party

funders, have given rise to justifiable doubts.

17
 c. Mr. Prasad has been repeatedly appointed as arbitrator on four occasions,
giving rise to justifiable doubts.

53. Contrary to CLAIMANT’s argument [Memo C, P. 73], there is no uniform approach as

to whether repeat appointment constitute grounds for challenge to an arbitrator. There

are tribunals that consider repeat appointment or multiple appointment raises concerns of

impartiality and independence. [ICSID No. ARB/10/14]. Specifically, multiple

appointments as arbitrator by the same party and the same law firm are not a neutral

factor. Instead, it must be carefully considered in the context of impartiality and

independence. [IBID]. Moreover, IBA Guidelines consider repeat past appointment an

important factor when assessing conflicts of interest in international arbitration. [IBA

Guidelines, Part II Para. 2].Mr. Prasad has been appointed twice by affiliate of

CLAIMANT. Mr. Prasad disclosed on 11 September 2017 that he had acted as arbitrator

in two arbitrations funded by 100% subsidiaries of Findfunds. [Declaration II, P. 36;

Letter Prasad, P. 43]. As previously established, these two subsidiaries should be seen as

the same as the parties who appointed Mr. Prasad in the two cases. [Memo R, Para. 45].

Taking into consideration the aforementioned status of Findfunds [Ibid, Paras. 49-51],

this has constituted repeat appointment by affiliate of CLAIMANT, which is considered

to be problematic by IBA Guidelines. [IBA Guidelines, Para. 3.1.3].

54. CLAIMANT argued that in one of the two cases, funding agreement was signed after Mr.

Prasad’s appointment. [Memo C, Para. 84]. However, whether third-party funder enters

after or before the appointment, does not change the dependent relationship between the

arbitrator and the funder. The conflicts of interest arising from repeat appointment is

“the prospect of continued and regular appointment, with the attendant financial benefits,

might create a relationship of dependence or otherwise influence the arbitrator’s

judgment”. [ICSID No. ARB/10/5]. As long as the funder has a direct economic interest

in the award render by the arbitrator, such dependent relationship will lead to perception

of doubts. In those two cases where Mr. Prasad acted as arbitrator, both the awards were

made in favor of the parties funded by Findfunds. [PO2, Para. 15]. Interestingly enough,
18
 in the present case, Mr. Prasad was appointed just the next day on which CLAIMANT

signed the funding agreement with Funding 12. [Exhibit C 11; PO2 Para. 5]. Such an

“coincidence” without further explanation has to give rise to justifiable doubts.

55. Moreover, CLAIMANT’s law firm has appointed twice Mr. Prasad. Repeat appointment

by the same law firm is also considered problematic by IBA Guidelines. [IBA Guidelines,

Para. 3.3.8]. In their memorandum, CLAIMANT invoked two arbitration cases under

LCIA Rules and ICSID Rules. [Memo C, P. 73]. However, they are jurisprudence under

different arbitration rules that adopt different standard with regard to challenge to

arbitrators. As a result, these two cases are neither binding nor indicative in the present

case conducted under UNCITRAL Rules.

56. CLAIMANT contended that both cases are finished and Mr. Fasttrack was not directly

involved. [Memo C, Para. 74]. Indeed, Mr. Fasttrack was not directly involved in the

previous two cases, but he had actually given his advice and even explicitly recommended

Prasad as arbitrator to his colleagues. [PO2, Para. 9]. Moreover, the fact that the cases are

finished do not in any way alleviate the doubts. The dependence that has developed in

past repeat appointments will still remain.

57. One important aspect of this dependence is financial returns. Although CLAIMANT

argues that the two cases are of minor value, but this does not change the fact that Mr.

Prasad earns almost half of his income from serving as arbitrator. [PO2, Para. 10]. This

has to be viewed against the fact that as an equity partner of an international law firm, the

volume of revenues obtained from repeat appointment is significant. [PO2, Para. 8].

58. To conclude, Mr. Prasad had actually served as arbitrator on four occasions related with

CLAIMANT. There were two appointments by Findfunds, an affiliate of CLAIMANT,

and two appointments by Prasad & Partners, the law firm of CLAIMANT. There has

formed certain degree of dependence, either financially or otherwise, between Mr. Prasad

and Findfunds LP and the firm. These multiple appointments have adversely affected
19
 RESPONDENT’s confidence in the arbitration because it is an objective indication of

the view of CLAIMANT and their counsels that the outcome of the dispute is more

likely to be successful with the multiple appointed Mr. Prasad. [ICSID No. ARB/10/14].

d. Ongoing business relationship between Mr. Prasad and Findfunds LP further

aggravates justifiable doubt.

59. In addition to past connections, Mr. Prasad also has ongoing commercial relationship

with CLAIMANT’s affiliate. Prasad & Slowfood, the law firm of Mr. Prasad, is currently

representing a client funded by Funding 8 Ltd, another subsidiary of Findfunds.

[Declaration II; PO2, Para. 6]. This circumstance is considered as “significant commercial

relationship” in the Waivable Red List of IBA Guidelines. [IBA Guidelines, Para. 2.3.6.].

Without express consent from RESPONDENT, Mr. Prasad may not as act arbitrator in

such circumstances. [IBA Guidelines, Part II, Para. 2].

60. CLAIMANT contested the sums charged by Prasad & Slowfood is small. Indeed, it only

makes up 5% of the annual turns, but, CLAIMANT ignores the absolute value of high

up to 1.5 million dollars. [Memo C, Para. 80; PO2, Para. 6]. Only counting the amount to

be charged after the merger, it will still be as much as 300 thousand US dollars. [PO2,

Para. 6].

61. In addition to the monetary value, the “significancy” is also reflected in the role of

Findfunds in this business deal. Findfunds has been a key factor to make this deal happen.

As evidenced in the record, the client would not have been able to bring the case without

the funding support from Findfunds. Findfunds LP has been paying all the costs of the

arbitration. [PO2, Para. 6]. In another word, Prasad & Slowfood derived the profits not

from the client, but directly from Findfunds.

62. To conclude, this ongoing business relationship between Prasad & Slowfood and

CLAIMANT’s affiliate further aggravates RESPONDENT’s doubt about Mr. Prasad.

e. Mr. Prasad has previously expressed his opinion on the issue at dispute,
adding to justifiable doubts.

20
63. An arbitrator is certainly entitled to his views, including his academic freedom. But equally

RESPONDENT is entitled to have its arguments heard and ruled upon by arbitrators

with an open mind. [PCA No. 2013-09]. Publications often express the arbitrator’s

pre-determined positions on certain issues. There are already cases under UNCITRAL

Rules where arbitrator was removed because of previous expression of opinion. [PCA

No. 2013-9; PCA No. IR-2009/1].

64. CLAIMANT stated that the article only deals with general understanding and is not

specific enough. [Memo C, Para. 90]. However, in his article discussing the concept of

conformity, he has comprehensively analyzed all the possible situations and clearly

expressed his conclusive views regarding each of the situations. [Exhibit R 4]. In fact, Mr.

Prasad’s opinion is sufficiently specific to form the basis for a challenge. [PCA No.

AA518].

65. Moreover, this circumstance has to be considered in the whole context. Mr. Fasttrack

explicitly expressed the reason why they appointed Mr. Prasad was that he has a

pre-determined view about the subject of the case. [NoC, P. 38]. Noting that Mr. Prasad

had already been appointed by Prasad & Partners two times in the past [Declaration I, P.

23], it would reasonably appear that CLAIMANT’s law firm has relied on Mr. Prasad’s

pre-determined disposition for their clients. This has raised even more suspicion about

whether Mr. Prasad could be impartial and independent.

66. In the end, RESPONDENT requests the Tribunal to make an overall assessment of the

repeat appointment by the same law firm, repeat appointment by the same party, ongoing

business relationship, the intentional attempt to conceal relevant information, Mr. Prasad’s

appearance of pre-determined views, and any other circumstances that the Tribunal may

consider relevant. Summarizing all the aforementioned circumstances, there is sufficient

evidence to justify the doubts that Mr. Prasad may not be impartial and independent.

RESPONDENT recognizes that some of the circumstances may not necessarily lead to
21
the disqualification of Mr. Prasad, but the accumulation of the circumstances is sufficient

to remove Mr. Prasad based on the test of justifiable doubts. [PCA No. AA518; SCC

Note, P. 10].

22
III. RESPONDENT’S GENERAL CONDITTIONS SHOULD
GOVERN THE SALES CONTRACT.

67. RESPONDENT respectfully request the tribunal to find that RESPONDENT’s General

Conditions govern the Sales Contract for four reasons: RESPONDENT’s Code of

Conduct is incorporated into its General Conditions (1).The Contract includes

RESPONDENT’s General Conditions (2). CLAIMANT’s General Conditions are not

included in the Sales-Offer (3). In any case, if the tribunal insists that CLAIMANT’s

General Conditions are included, they are surprising terms and thus cannot be applied to

the Sales Contract (4).

1. RESPONDENT’s Code of Conduct is incorporated into its General Conditions.

68. Contrary to CLAIMANT’s submission, Issue III requires the Parties to discuss whose

General Conditions should be applied (a). RESPONDENT’s General Conditions include

its Code of Conduct (b), and the Tender Documents should be interpreted in a broader

sense (c).

a. Issue III requires the Parties to discuss whose General Conditions should be
applied.

69. The prerequisite of Issue 4 is “[i]n case RESPONDENT’s General Conditions are

applicable”. [PO1, Para. 3]. Therefore, the discussion in Issue III should focus on

whether RESPONDENT’s General Conditions should govern the Sales Contract.

RESPONDENT agrees with CLAIMANT that in Art 5, it has stated clearly “[t]he

contract is made up of The Special Conditions, The General Conditions and The Tender

Documents”. [Exhibit C 2, P. 11, Para. 9]. Therefore, the Contract should include

RESPONDENT’s General Conditions. CLAIMANT’s submission that because

RESPONDENT’s Code of Conduct is not incorporated in the Contract, its standard

conditions do not apply to the Contract is digression of the Issue [Memo C, Paras. 95-96].

b. RESPONDENT’s General Conditions include its Code of Conduct

23
70. Contrary to CLAIMANT’s allegation [Memo C, Paras. 97-100], RESPONDENT’s

General Conditions incorporate its Code of Conduct.

71. First, in the preamble part of RESPONDENT’s General Conditions, it has clearly stated

that “[A]s a supplier, you must comply with all applicable laws and regulations, the

requirements set out in Comestibles Finos’ Code of Conduct and your contractual

obligations” [Exhibit C 2, P. 12, Para. 1]. Therefore, RESPONDENT’s General

Conditions include Code of Conduct and they cannot be treated separately.

72. Second, mentioning General Conditions and Code of Conduct in different sections does

not equal to the idea that these are two separate documents. It should also be applied to

the interpretation of the content of Invitation to Tender. Even if Invitation to Tender,

Tender Instructions, Specification of Goods and Delivery Terms, etc. are presented in

different sections, the content of Invitation consists of all the above-mentioned

documents. Therefore, although RESPONDENT did not attach its Code of Conduct to

General Conditions in the same section, CLAIMANT cannot conclude that they are

separate.

c. The Tender Documents should be interpreted in a broader sense

73. In response to CLAIMANT’s submission [Memo C, Para. 102], the content of Tender

Documents should include RESPONDENT’s General Conditions, Special Conditions

and its Code of Conduct.

74. First, contrary to CLAIMANT’s allegation that RESPONDENT’s Special Conditions of

Contract, General Conditions of Contract, and Tender Documents are all separate

documents [Memo C, Para. 99], in fact, “[C]laimant had attached its offer a full set of the

Tender Documents where some of the blanks in the Special Conditions of Contract were

filled in” [PO 2, Para. 27]. Therefore, documents such as RESPONDENT’s Special

Conditions and General Conditions are all included in the Tender Documents.

75. Second, CLAIMANT invokes the contra proferentem rule to establish that the

24
 Addendum must be interpreted in its favor [Memo C, Paras. 106-110]. However, the

contra proferentem rule does not apply. Art. 4.6 UNIDROIT Principle and Art. 8 CISG

both include the contra proferentem rule [Vogenauer and Kleinheisterkamp; Schlechtriem

and Schwenzer][ Germany Federal Supreme Court 2014]. This rule states that where a

clause is ambiguous even after interpretation, the wording will be construed against the

party who drafted it [ICC No. 11869; Rosengren; Vogenauer and Kleinheisterkamp] In

this case, the interpretation of the content of Invitation to Tender leads to an

unambiguous result: Tender Documents includes RESPONDENT’s General Conditions

as well as its Code of Conduct.

76. To conclude, the contra proferentem rule does not apply.

2. The Sales Contract includes RESPONDENT’s General Conditions

77. “Standard terms are included in the contract where the parties have expressly or impliedly

agreed to their inclusion at the time of the formation of the contract (a), and the other

party had a reasonable opportunity to take notice of the terms (b).” [Advisory Council

Opinion No. 13, Para. 2]

a. CLAIMANT agreed to the inclusion of RESPONDENT’s General

Conditions

78. First, it is CLAIMANT that attached RESPONDENT’s General Conditions to its

Sales-Offer [PO 2, Para. 28]. “It was the clear intention of the offeror that all of the

attachments were relevant for the agreement being negotiated.” Therefore, “The General

Conditions were part of the offer”. [California District Court 2010].

79. Second, in response to CLAIMANT’s allegation [Memo C, Paras. 113-116], the reference

to CLAIMANT’s General Conditions in the Sales-Offer is the form CLAIMANT

normally uses to contract with its customers [PO 2, Para. 28]. In this case, the attachment

of RESPONDENT’s General Conditions should be deemed as modification of the

applicability of CLAIMANT’s General Conditions. To conclude, CLAIMANT accepted

25
 RESPONDENT’s General Conditions by virtue of their conduct.

b. CLAIMANT had a reasonable opportunity to take notice of the terms

80. “Where the terms are attached to a document used in connection with the formation of

the contract, a party is deemed to have had a reasonable opportunity to take notice of the

standard terms.” [Advisory Council Opinion No. 13, Para 3.1]

81. In this case, RESPONDENT attached the full set of its General Conditions to the

Tender Documents. The Tender Documents is related to the formation of the contract,

where CLAIMANT made amendments to it. Therefore, CLAIMANT could have a

reasonable opportunity to take notice of it.

82. In conclusion, RESPONDENT’s General Conditions satisfy all the requirements and

thus are included in the Contract.

3. CLAIMANT’s General Conditions are not included in the Sales-Offer

83. “Standard terms are included in the contract where the parties have expressly or impliedly

agreed to their inclusion at the time of the formation of the contract.” [Advisory Council

Opinion No. 13, Para. 2]

84. In this case, in response to CLAIMANT’s submission [Memo C, Paras. 118-120],

RESPONDENT didn’t agree to the inclusion of CLAIMANT’s General Conditions.

85. First, RESPONDENT did not expressly agree to the inclusion of CLAIMANT’s General

Conditions. RESPONDENT only accepted the modification about “[t]he different

payment terms and form of the cake” [Exhibit C 5, P. 17, Para. 1]. Therefore, the wording

that “[t]he changes suggested by you” [Exhibit C 5, P. 17, Para. 2] is only related to the

payment and the form of cake. RESPONDENT didn’t mention the applicability of

CLAIMANT’s General Conditions in this paragraph, not to mention the acceptance of

inclusion of it.

86. Second, RESPONDENT did not impliedly agree to the inclusion of CLAIMANT’s

General Conditions. “Acceptance of the standard terms will often result from some
26
 conduct of the offeree objectively indicating that it has accepted the standard terms.”

[Advisory Council Opinion No. 13, Para 2.13, Comment] Thus, when it comes to the

implied acceptance, only certain conduct can show a party’s acceptance. In this case, there

is no evidence to show RESPONDENT has performed certain conduct which is

regulated in CLAIMANT’s General Conditions. Accordingly, CLAIMANT’s General

Conditions are not incorporated in the Contract by virtue of RESPONDENT’s conduct.

87. To conclude, due to the fact that RESPONDENT did not agree to the inclusion of

CLAIMANT’s General Conditions, they are not included in the Contract.

4. CLAIMANT’s General Conditions are surprising terms and thus cannot apply to
the Contract.

88. The choice of law clause states that “[F]or issues not dealt with by the CISG, the

UNIDROIT Principles are applicable”. [Exhibit C 2, P. 12, Para. 4]. Since no provision in

the CISG deals with the issue of standard term, the UNIDROIT Principles should be

applied.

89. “If standard terms contain surprising terms that the other party could not reasonably

have expected, such surprising terms are ineffective unless they have been expressly

accepted by that party. In determining whether a term is of such a character, regard shall

be had to its content and presentation” [UNIDROIT Principles, Art. 2.1.20]. The

applicability of CLAIMANT’s General Conditions is surprising by virtue of its

presentation (a), and RESPONDENT has not expressly accepted these surprising terms

(b). Therefore, CLAIMANT’s General Conditions do not form part of the Contract.

a. The applicability of CLAIMANT’s standard conditions is surprising by virtue

of its presentation.

90. First, in determining whether or not a term is unusual, regard must be had on the one

hand to the terms which are commonly to be found in standard terms generally used in

the trade sector concerned, and on the other to the individual negotiations between the

27
 parties. [UNIDROIT Principles, Art, 2.1.20. Comment].

91. In the Letter Tsai regarding Sales-Offer, CLAIMANT only mentioned the “[m]inor

amendments” about “[t]he goods and the mode of payment”. [Exhibit C 3 P. 15, Para. 2].

CLAIMANT did not mention anything about RESPONDENT’s General Conditions.

However, additional or different terms relating, among other things, to the settlement of

disputes are considered to alter the terms of the offer materially. [CISG, Art. 19]

Therefore, if CLAIMANT desires to change the applicability of Code of Conduct, it

would render material modification. In the interpretation of the contract, regard is to be

have to good faith, which is a general principle set forth in CISG. The content of a

contract should be as anticipated by the parties, in accordance with the principle of

reasonable expectation. [Navarre Provincial Court 2003; CISG Digest, Art. 7].

Considering the fact that CLAIMANT did not mention the amendment about

RESPONDENT’s General Conditions, the content of changing the applicability of

General Conditions, which is a modification material, cannot be anticipated by a

reasonable person.

92. In conclusion, changing the applicability of General Conditions is material modification.

Due to the fact that the Sales-Offer is based on the Tender Documents, and that

CLAIMANT didn’t mention the amendment about RESPONDENT’s General

Conditions, this cannot be anticipated by a reasonable person. Therefore, CLAIMANT’s

standard conditions are surprising by virtue of their content.

93. Second, “other reasons for a particular term contained in standard terms being surprising

to the adhering party may be the way in which it is presented typographically, for instance

in minute print. Therefore, unless the term is presented in bold letters or in any other way

apt to attract the attention of the adhering party, it will be without effect” [UNIDROIT

Principles, Art. 2.1.20. Comment]. In this case, the wording “[T]he above offer is subject

to the General Conditions of Sale” is in minute print. [Exhibit C 4, P. 16, Para. 2]. As

what has mentioned above, changing the applicability of Code of Conduct is material

28
 modification of the Contract. If CLAIMANT desires to govern the contract by its

General Conditions of Sale, the proposed amendment of it should have been obvious to

RESPONDENT, as the proposed amendments were of other two amendments, print the

terms in large front in the main part of the Sales-offer. In addition, the wording ‘[T]he

above offer is subject to the General Conditions of Sale’ is placed at the bottom of the

Sales-Offer with a simple hyperlink. [Exhibit C 4 P. 16, Para. 2] If CLAIMANT really

wants to change the applicability of the standard terms, it should attach to the Sales-offer

a full set of its General Conditions of Sale, as what RESPONDENT has done in its

Tender Documents. Therefore, CLAIMANT’s Standard Conditions are not obvious

enough and thus fall into the category of surprising terms.

94. “Where the fulfilment of a resolutive condition is brought about by a party contrary to

the duty of fair dealing, that party may not rely on the fulfilment of the condition.”

[UNIDROIT Principles, Art. 5.3.4] Therefore, presenting the term in minute front and

providing a hyperlink is hard for a reasonable person to understand CLAIMANT’s

intention. With respect to fair dealing, the applicability of CLAIMANT’s standard

conditions is surprising and thus, CLAIMANT cannot rely on the fulfilment of the

condition.

95. In conclusion, both the minute letter and the form of the standard conditions lead to the

conclusion that CLAIMANT’s standard terms are surprising.

b. RESPONDENT has not expressly accepted these surprising terms.

96. If a party hasn’t expressly accepted the surprising terms, such surprising terms should not

apply. [UNIDROIT Principles, Art. 2.1.20] In RESPONDENT’s Decision on

CLAIMANT’s offer, it expressly accepted the amendments by the wording “[T]he

different payment terms and form of the cake are acceptable to us and we are looking

forward to a fruitful cooperation”. [Exhibit C 5 P. 17, Para. 1]. Therefore,

RESPONDENT only expressly accepted the amendments about the mode of payment
29
 and the goods. However, it has never expressly stated that it accepted CLAIMANT’s

General Conditions. RESPONDENT only mentioned CLAIMANT’s Code of Conduct

by the wording “[S]uch commitment is well evidenced in your impressive Codes of

Conduct which I downloaded following your tender out of curiosity”. [Exhibit C 5, P. 17,

Para. 2]. Therefore, there is a great difference in RESPONDENT’s attitude toward the

amendments and CLAIMANT’s General Conditions. In fact, the recognition of

CLAIMANT’s Code of Conduct by RESPONDENT in the letter is just to demonstrate

that CLAIMANT shares the same value with RESPONDENT in sustainable production.

And this is the main reason why RESPONDENT choose CLAIMANT as its supplier.

Thus, it is impossible for RESPONDENT to accept the applicability of CLAIMANT’s

General Conditions.

97. In conclusion, based on the fact that CLAIMANT did not mention the amendment about

the changing applicability of General Conditions, and the presentation of its General

Conditions is in minute letter with a simple hyperlink, the applicability of CLAIMANT’s

General Conditions is surprising by virtue of content and presentation. RESPONDENT

considers the applicability of it not an issue worth of acceptance. Therefore,

RESPONDENT has not expressly accepted this surprising term, and thus CLAIMANT’s

General Conditions should not apply.

30
IV. CLAIMANT DELIVERED NON-CONFORMING GOODS
PURSUANT TO ART 35 OF THE CISG.

98. In case RESPONDENT’s General Conditions apply, CLAIMANT has delivered the

non-conforming good for four reasons: RESPONDENT’s General Conditions fall into

the scope of Art 35 of the CISG (1). CLAIMANT’s delivery violates Art 35 of the CISG

(2). Even if the Tribunal determines that CLAIMANT has not breached its contractual

obligation under Art 35(1), it has breached Art 35(2) of the CISG (3). The standard of

conformity should be guaranteeing a specific result under Art 5.1.5 of the UNIDROIT

Principle (4).

1. RESPONDENT’s General Conditions fall into the scope of Art 35

99. Art 35 of the CISG provides the standards for determining whether goods delivered by

the seller conform to the contract in terms of type, quantity, quality, and packaging. The

provision thus defines the seller’s obligations with respect to these crucial aspects of

contractual performance. [CISG Digest, Art. 35]

100. When it comes to the conformity of goods, ethical standard should be taken into

consideration. “Basic ethical standards can be regarded as an international trade usage and,

thus, as an implied term in every international sales contract. Goods processed under

conditions violating the contractually fixed ethical standards are not of the quality asked

for by the contract.” [Germany Federal Supreme Court 1996].

101. In this case, RESPONDENT’s Code of Conduct is part of the Contract [Exhibit C 2, P.

11, Para. 9]. Therefore, the standard of conformity should include it. If CLAIMANT

cannot meet the requirements set forth in RESPONDENT’s Code of Conduct, the

goods violating these requirements are not of the quality asked by the Contract.

102. To conclude, RESPONDENT’s General Conditions fall into the scope of Art 35. The

content should be relevant to CLAIMANT’s obligation.

31
2. CLAIMANT’s delivery violates Art 35(1) of the CISG.

103. “In ascertaining, for purposes of Art 35 (1), whether the contract requires goods of a

particular quantity, quality or description, or requires that the goods be contained or

packaged in a particular manner, one must refer to general rules for determining the

content of the parties’ agreement. General rules for construing the parties’ agreement

include the CISG provisions pertaining to the meaning and content of a contract for sale,

including Art 8”. [Athens Court of First Instance 2009]. Therefore, “the overriding

source for the standard of conformity is the contract between the parties.” [Schwenzer

and Leisinger].

104. Statements made by a party shall be interpreted according to his intent and according to

the understanding that a reasonable person of the same kind as the other party would

have had in the same circumstances. [CISG, Art. 8] In this case, subjective evidence under

Art 8(1) indicates the standard of conformity is guaranteeing a specific result. (a) In

addition, objective evidence under Art 8(2) suggests that the standard of conformity is

more than making best effort. (b)

a. Subjective evidence under Art 8(1) indicates the standard of conformity is

guaranteeing a specific result.

105. “In many cases, the quality and description required by the contract are not expressly

fixed by the parties, so that an interpretation of the contract becomes necessary in order

to find out the exact definition of the seller's obligations. For these details of the seller's

obligations to be obtained via interpretation, the purposes for which the buyer wants to

use the goods have overriding significance.” [Schlechtriem in Galston and Smit]. In this

case, several factors should be considered together to show both parties’ intention about

the standard of quality.

106. First, in the letter sent by RESPONDENT, it has clearly stated that “[i]t is very

important for us to make sure that we can be sure that also your suppliers adhere to

Comestibles Finos’ Philosophy and our Code of Conduct for Suppliers” [Exhibit C 1, P. 8,

32
 Para. 3]. Thus, RESPONDENT has the intention that the standard of conformity should

be guaranteeing a specific result.

107. Second, in this case, CLAIMANT has sent a picture advertising for their cakes to

RESPONDENT. In this picture, CLAIMANT stressed the “[S]ustainably Sourced Cocoa”

[Exhibit R 2, P. 29]. Therefore, CLAIMANT also has the intention to deliver the goods

which are environmentally-friendly. Such content can be anticipated by RESPONDENT

in accordance with the principle of reasonable expectation. [CISG Digest, Art. 7]. If

CLAIMANT cannot honor its commitment shown in this picture, their commitment

should be considered as fraud. Thus, this would lead to the breach of contract.

108. To conclude, both CLAIMANT and RESPONDENT have the intention to guarantee

that the goods are sustainable. The standard of conformity in the Contract should be

interpreted as guaranteeing a specific result.

b. Objective evidence under Art 8(2) suggests that the standard of conformity is
more than making best effort.

109. Several evidences in RESPONDENT’s General Conditions demonstrate CLAIMANT

should deliver sustainable products.

110. First, RESPONDENT mentions that “[C]omestibles Finos Ltd has a ‘zero tolerance’

policy when it comes to unethical business behavior, such as bribery and corruption”

[Exhibit C 2, P. 12, Para. 1]. Therefore, RESPONDENT never stands the chance that its

suppliers’ behavior is unethical. However, in this case, the certificates CLAIMANT relies

on are falsified, and thus they are contrary to RESPONDENT’s requirement.

111. Second, the preamble part of RESPONDENT’s Code of Conduct, which is parts of

RESPONDENT’s General Conditions, clearly states that “[I]t is important that

Comestibles Finos’ Suppliers are aware of that Philosophy and adhere to it. To guarantee

such adherence, the measures and conduct expected from suppliers are set out in this

Code of Conduct for Suppliers” [Exhibit C 2 P. 13, Para. 6]. Therefore, CLAIMANT
33
 should guarantee sustainable products. Any conduct that doesn’t meet the requirement of

sustainable production should be regarded as breach of Contract.

112. Third, RESPONDENT reiterates that CLAIMANT should “[e]nsure that your own

suppliers comply with the above requirements” and “[m]ake sure that they comply with

the standard agreed upon to avoid that goods or services delivered are in breach of

Comestibles Finos’ General Business Philosophy” [Exhibit C 2, P. 14, Paras. 1, 3].

Therefore, RESPONDENT never agrees that CLAIMANT only needs to do their best

efforts in case the product is not environmentally-friendly. CLAIMANT should guarantee

the result that its own suppliers comply with the sustainable standards.

113. To conclude, RESPONDENT’s General Conditions clearly states that the standard of

conformity is guaranteeing sustainable production. However, in this case, CLAIMANT

has delivered the goods which are not environmentally-friendly. Therefore, CLAIMANT

is in breach of the Contract.

3. CLAIMANT’s delivery violates Art 35(2) of the CISG.

114. In addition, even if the Tribunal determines that CLAIMANT has not breached its

contractual obligations under Art 35(1). RESPONDENT submits that CLAIMANT has

breached Art 35(2) of the CISG.

115. According to the UN Digest on CISG, Art 35(2)(b) of CISG prescribes the implied

standards that bind the seller even without affirmative agreement or contract. Under Art.

35(2)(b), goods do not conform to the contract unless they are “fit for the purpose

expressly made known to the seller at the time of the conclusion of the contract (a), and

“the circumstances show that the buyer rely, or that it was reasonable for him to rely, on

the seller's skill and judgement.” (b).

a. RESPONDENT intended to purchase ethical goods and this purpose was

expressly made known to the CLAIMANT.

34
116. During the negotiation process and in the contract, RESPONDENT explicitly specified

its requirements and this was clearly made known to CLAIMANT. Since

RESPONDENT has enumerated subjective and objective evidence, these evidence also

could be used to support argument that CLAIMANT has known the intent.

117. Specifically, at the beginning of the negotiation, in the invitation to Tender Documents,

RESPONDENT wrote that its intention was to become a Global Compact LEADING

Company, and one of the decisive issues is a proper supply chain [Exhibit C 1, P. 8, Para.

3].

118. Most importantly, RESPONDENT also shared with the CLAIMANT a bad experience

it had with other suppliers which did not comply with RESPONDENT’s Code of

Conduct and resulted in negative press for RESPONDENT. In addition,

RESPONDENT claims that it will never allow it to be affected by such scandal again

[Exhibit C 1, P. 8, Para. 3]. The sharing of this bad experience also distinctly demonstrates

that RESPONDENT only intended to make offer with suppliers who could provide

goods living up to ethical standards.

b. RESPONDENT relied on CLAIMANT's skill and judgement to purchase

ethical goods.

119. CLAIMANT, is a medium sized manufacturer, which asserts monitoring its supplier in

line with its guideline. More importantly, CLAIMANT also received the compliance

assessment on the documentation sent by its suppliers. [Exhibit, C 8, P. 20, Para. 1]. While

RESPONDENT is only a gourmet supermarket chain in Mediterraneo. RESPONDENT

has no professional skills concerning the selection or supervision of ethical goods.

120. To conclude, these two elements satisfied in this case. Therefore, CLAIMANT violates

Art 35 2(b) of CISG. CLAIMANT was required to deliver ethically sourced cakes and, in

breach of the contract and Art 35 of the CISG, failed to deliver cakes conforming to the

standards required by RESPONDENT and agreed by the parties

35
4. The standard of conformity should be guaranteeing a specific result under Art
5.1.5 of the UNIDROIT Principle.

121. “[F]or issues not dealt with by the CISG the UNIDROIT Principles are applicable”

[Exhibi C 2, P. 12, Para. 4]. Art 5.1.5 of UNIDROIT Principles stipulates that several

factors should be considered “in determining the extent to which an obligation of a party

involves a duty of best efforts in the performance of an activity or a duty to achieve a

specific result: the way in which the obligation is expressed in the contract (a); the

contractual price and other terms of the contract (b); the degree of risk normally

involved in achieving the expected result (c); the ability of the other party to influence the

performance of the obligation (d)”. [UNIDROIT Principles, Art. 5.1.5].

a. The obligation expressed in RESPONDENT’s General Conditions states

clearly a duty to achieve a specific result.

122. As is mentioned above, the wording in RESPONDENT’s General Conditions i.e. “zero

tolerance”, “guarantee”, “ensure” and “make sure” suggests that CLAIMANT should

guarantee a specific result. [Exhibit C 2 PP. 12-14].

b. Price of the Contract suggests a duty to achieve a specific result.

123. “[T]he price paid was towards the upper end of the price paid for a premium product in

the relevant market segment” [PO 2, Para. 40]. Therefore, in response to CLAIMANT’s

allegation [Memo C, Para. 168], the price maximum 2.50 USD is not low compared with

the organic markets. In any case, it is not clear the exact amount of money CLAIMANT

needs to investigate production. Thus, CLAIMANT cannot take a one-sided approach to

the problem and conclude a duty of best efforts based on the price.

c. The degree of risk indicates a duty to achieve a specific result.

124. Only in cases such as “a space agency undertaking to put a telecommunication satellite

into orbit, whose rate of failure of past launchings having been 22%” should be

considered as a duty of high risk [UNIDROIT Principle, Art. 5.1.5, Comment].

125. Therefore, in response to CLAIMANT’s allegation [Memo C, Paras. 170-172], the

36
 opposite conclusion will be drawn when the desired result can as a rule be achieved

without any special difficulty [UNIDROIT Principles, Art. 5.1.5, Comment]. In this case,

CLAIMANT could have chosen a better supplier who complies with ethical standard.

Ruritania Peoples Cocoa mbH is not the only supplier CLAIMANT can choose as its

supplier. Therefore, CLAIMANT bears no risk choosing its supplier and thus the duty is

to achieve a specific result.

d. RESPONDENT does not have a degree of influence over the performance.

126. “In some situations one party may have a degree of influence over the performance of

the other party’s obligations. This fact may transform into duties of best efforts

obligations which might otherwise be characterized as duties to achieve specific results”

[UNIDROIT Principles, Art 5.1.5, Comment].

127. In response to CLAIMANT’s allegation [Memo C, Paras. 173-175], RESPONDENT

doesn’t have a degree of influence over the performance. CLAIMANT in fact does its

transaction independently with its supplier. CLAIMANT’s purchase of Cocoa doesn’t

depend on RESPONDENT’s performance. RESPONDENT doesn’t have a degree of

influence over the performance. Therefore, a duty to achieve specific results can be

concluded.

128. To conclude, the criteria set forth in Art 5.1.5 of UNIDROIT Principle suggests a duty

to guarantee a specific result by virtue of obligation expressed in RESPONDENT’s Code

of Conduct, contractual price, the degree of high risks as well as its influence.

37
 REQUEST FOR RELIEF

In light of the above, RESPONDENT requests the Arbitral Tribunal

1. to sustain the challenge of Mr. Prasad;

2. to reject all claims for payment raised by CLAIMANT;

3. to order CLAIMANT to pay RESPONDENT’s costs incurred in this arbitration.

38