TWENTIETH ANNUAL

WILLEM C. VIS INTERNATIONAL COMMERCIAL ARBITRATION MOOT

22 TO 28 MARCH 2013

MEMORANDUM FOR CLAIMANT

LUDWIG-MAXIMILIANS-UNIVERSITÄT MÜNCHEN

ON BEHALF OF: AGAINST:

Mediterraneo Exquisite Supply, Co. Equatoriana Clothing Manufacturing, Ltd.

45 Commerce Road 286 Third Avenue
Capital City Oceanside
Mediterraneo Equatoriana

CLAIMANT RESPONDENT

COUNSEL:
Felix Aiwanger Clara Freißmuth Ronja Schregle
Sophie Schröter Luise Seidel Michael Strecker
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

TABLE OF CONTENTS

INDEX OF AUTHORITIES ....................................................................................................... V  

INDEX OF CASES ............................................................................................................XVIII  
INDEX OF ARBITRAL AWARDS ......................................................................................... XXII  
INDEX OF LEGAL SOURCES ............................................................................................ XXVI  
LIST OF ABBREVIATIONS...............................................................................................XXVII  
STATEMENT OF FACTS ........................................................................................................... 1  
SUMMARY OF ARGUMENT ......................................................................................................3  
ARGUMENT ............................................................................................................................4  
I.   MR. SHORT’S WRITTEN WITNESS STATEMENT IS INADMISSIBLE ...................................4  
A.   Mr. Short’s Written Statement Alone Does Not Suffice as Evidence Under the
CEAC Rules ............................................................................................................4  
1.   The circumstances call for a dismissal of Mr. Short’s written statement......................5  
(a)   Discrepancies in the witnesses’ perception need to be challenged in an oral
hearing.............................................................................................................................5  
(b)   An oral hearing is indispensible to ensure Mr. Short’s testimony is objective ....5  
2.   Admitting Mr. Short’s written statement would frustrate CLAIMANT’s right to an
oral hearing.............................................................................................................................6  
B.   The Tribunal Shall Disregard Mr. Short’s Statement under the IBA Rules...........7  
1.   The Tribunal should apply the IBA Rules as they reflect international practice in
the taking of evidence...........................................................................................................7  
(a)   International commercial arbitration recognizes the IBA Rules as best practice7  
(b)   The IBA Rules take account of the different approaches in the parties’ legal
systems ............................................................................................................................8  
2.   Mr. Short’s written witness statement shall be disregarded under Art. 4 (7) IBA
Rules ........................................................................................................................................8  
(a)   Mr. Short’s absence is not justified by a valid reason..............................................8  
(b)   No exceptional circumstances legitimize an admission of Mr. Short’s statement9  
C.   Disregarding the Statement Does Not Violate RESPONDENT’s Right to Be Heard9  
D.   An Award Based on Mr. Short’s Written Statement Might Be Set Aside ............. 10  
1.   The admission of the statement would violate CLAIMANT’S right to be heard......... 11  
2.   Admitting the written statement would amount to unequal treatment...................... 11  

II
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

II.   DUE TO RESPONDENT’S LATE DELIVERY CLAIMANT IS ENTITLED TO THE AGREED

SUM OR DAMAGES ......................................................................................................... 12  
A.   RESPONDENT’s Non-Delivery on 19 February 2011 Was a Breach of Contract .... 12  
1.   The parties did not amend the Contract......................................................................... 13  
(a)   There was no need to amend the Contract as Sec. 10 provided for the situation
of late delivery............................................................................................................. 13  
(b)   Mr. Long’s conduct does not imply his intent to amend the Contract ............. 13  
(c)   Mr. Long’s reference to “paper work” does not suffice to indicate an intent to
change the Contract................................................................................................... 14  
2.   Any purported amendment is invalid lacking written form......................................... 15  
(a)   Mediterraneo’s reservation under Art. 96 CISG is mandatory rendering the
parties’ agreement ineffective................................................................................... 15  
(i)   Parties cannot change the effect of Part IV of the CISG ............................... 16  
(ii)  The parties could not exclude Art. 96 CISG in particular .............................. 16  
(b)   Mediterraneo’s Art. 96 CISG reservation directly leads to a written form
requirement ................................................................................................................. 17  
B.   The Strike at a Factory of RESPONDENT’s Supplier Does Not Exclude Its
Liability ................................................................................................................. 18  
1.   The strike was not beyond RESPONDENT’s control...................................................... 18  
2.   RESPONDENT could have overcome the consequences of its supplier’s non-
delivery ................................................................................................................................. 18  
C.   CLAIMANT Is Entitled to the Agreed Sum Under the Contract ............................ 19  
1.   The applicable law allows for an agreement on specified sums .................................. 19  
2.   The sum is not grossly excessive...................................................................................... 19  
D.   Subsidiarily, CLAIMANT Is Entitled to Damages under the CISG........................ 20  

III.   DUE TO RESPONDENT’S USE OF CHILD LABOR CLAIMANT IS ENTITLED TO

REIMBURSEMENT OF THE PURCHASE PRICE AND DAMAGES ........................................ 21  
A.   RESPONDENT Breached Its Obligation Not to Use Child Labor ......................... 21  
1.   The shirts were not of the quality required by the Contract........................................ 22  
(a)   “Highest ethical standards” exclude the use of child labor ................................. 22  
(i)   The term “highest ethical standards” by definition disallows the use of child
labor ..................................................................................................................... 22  
(ii)  In light of Oceania Plus’s policy the requirement “highest ethical standards”
prohibits child labor........................................................................................... 22  

III
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

(iii)   The circumstance that ILO Convention No. 182 is in force in both
parties’ countries underlines that the parties understood “highest ethical
standards” to exclude child labor .................................................................... 23  
(b)   The exclusion of child labor applies to RESPONDENT’s entire business activities23  
(i)   The term “conduct of business” requires RESPONDENT to refrain from
using child labor in its entire business activites............................................. 24  
(ii)  The “Yes Casual” brand requires the overall absence of child labor............ 24  
2.   The polo shirts were unfit for their particular purpose ................................................ 25  
(a)   The shirts were not fit for resale in Oceanian Doma Cirun stores .................... 25  
(i)   CLAIMANT made the particular purpose known to be the resale in Oceanian
Doma Cirun stores............................................................................................. 26  
(ii)  CLAIMANT reasonably relied on RESPONDENT’s skill and judgement to
deduce from the particular purpose that it may not use child labor .......... 26  
(b)   RESPONDENT is liable since CLAIMANT was not aware of its use of child labor27  
3.   RESPONDENT breached its obligations under Sec. 12 of the Contract ...................... 28  
B.   RESPONDENT’s Breach Is Fundamental............................................................... 28  
1.   CLAIMANT is substantially deprived of its expectation ................................................. 29  
(a)   CLAIMANT was entitled to expect polo shirts from a child labor free company29  
(b)   CLAIMANT was substantially deprived of its expectation..................................... 29  
2.   This substantial detriment was also foreseeable to RESPONDENT.............................. 30  
3.   In any case, the Tribunal should confirm a fundamental breach since avoidance
is the only remedy which fully compensates CLAIMANT’s detriment......................... 30  
C.   CLAIMANT Declared Non-Conformity and Avoidance of the Contract ................ 31  
D.   CLAIMANT Is Entitled To Damages...................................................................... 32  
1.   CLAIMANT suffered revocerable losses as a result of RESPONDENT’s breach .......... 32  
2.   The losses CLAIMANT demands were foreseeable ......................................................... 33  
3.   CLAIMANT duly mitigated all arisen losses...................................................................... 34  

REQUEST FOR RELIEF ......................................................................................................... 35  

IV
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

INDEX OF AUTHORITIES

Oxford Dictionaries Online

Available at: [Link]
Cited as: Oxford Dictionaries
In § 104

Statista 2006: Boykott unsozialer Firmen, Kinderarbeit, schlechte

Löhne
Available at:
[Link]
tt-unsozialer-firmen-kinderarbeit-schlechte-loehne-etc/
Cited as: Statista 2006
In § 117

AMERASINGHE, Evidence in International Arbitration

Chittharanjan Martinus Nijhoff Publishers, Leiden/Boston, 2005
Cited as: AMERASINGHE
In § 13

BEECHEY, John Cross-Examination, in: BÖCKTIEGEL, Karl-Heinz (Ed.),

Beweiserhebung in internationalen Schiedsverfahren
Carl Heymanns Verlag, Cologne et al., 2001
Cited as: BEECHEY
In §§ 13, 45

BENEYTO, José-Maria/ Neue Wege in der Schiedsgerichtsbarkeit: das Chinese European

BRÖDERMANN, Eckart/ Arbitration Centre (CEAC) für China-Verträge
MEYER, Bernhard F./ [2011] Recht der Internationalen Wirtschaft, pp. 12-29
ZHAO, Hang Cited as: BENEYTO ET AL.
In § 64

V
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

BIANCA, Cesare/ Commentary on the International Law of Sales

BONELL, Michael The 1980 Vienna Sales Convention
Joachim Guiffre, Milan, 1987
(Eds.) Cited as: AUTHOR in Bianca/Bonell
In §§ 68, 70, 149

BINDER, Peter International Commercial Arbitration and Conciliation in

UNCITRAL Model Law Jurisdictions
Thomson Reuters, London, 3rd ed. 2010
Cited as: BINDER
In §§ 17, 39, 45

BLESSING, Marc Die LCIA Rules – aus der Sicht des Praktikers
[2003] SchiedsVZ, pp. 198-205
Cited as: BLESSING
In §23

BRÖLSCH, Martin W. Schadensersatz und CISG

Peter Lang, Frankfurt am Main, 2007
Cited as: BRÖLSCH
In § 138

BROWNLIE, Ian Principles of Public International Law

Oxford University Press, Oxford et al., 5th ed. 1998
Cited as: BROWNLIE
In § 67

BRUNNER, Christoph UN-Kaufrecht – CISG. Kommentar zum Übereinkommen der

Vereinten Nationen über Verträge über den Internationalen
Warenverkauf von 1980
Stämpfli, Bern, 2004
Cited as: BRUNNER
In § 134

VI
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

BUTLER, Allison E. A Practical Guide to the CISG: Negotiations Through Litigation

Aspen Publishers, New York 2006
Cited as: BUTLER
In §§ 67, 75

CARON, David D./ The UNCITRAL Arbitration Rules. A Commentary

CAPLAN, Lee M./ Oxford University Press, Oxford et al., 2006
PELLONPÄÄ, Matti Cited as: CARON ET AL.
In § 18

CHU, Ben Shoppers show they still care as ethical products beat downturn
The Independent, London, 15 December 2011
Cited as: CHU
In § 117

ENDERLEIN, Fritz/ International Sales Law: United Nations Convention on Contracts for
MASKOW, Dieter the International Sale of Goods
Oceana Publications, New York, 1992
Cited as: ENDERLEIN/MASKOW
In § 166

FERRARI, Franco Fundamental Breach of Contract Under the UN Sales Convention:

25 Years of Article 25 CISG
[2006] 25 Journal of Law and Commerce 2, pp. 489-508
Cited as: FERRARI
In § 144

FLAMBOURAS, The Doctrines of Impossibility of Performance and clausula rebus sic

Dionysios P. stantibus in the 1980 Vienna Convention on Contracts for the
International Sale of Goods and the Principles of European Contract
Law: A Comparative Analysis
[2001] 13 Pace International Law Review, pp. 261-293
Cited as: FLAMBOURAS
In § 79

VII
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

FLECHTNER, Harry M. The Several Texts of the CISG in a Decentralized System –

Observations on Translations, Reservations and other Challenges to
the Uniformity Principle in Article 7 (1)
[1998] 17 Journal of Law and Commerce, pp. 187-217
Cited as: FLECHTNER
In § 68

GARRO, Alejandro M. CISG Advisory Council Opinion No. 7, Exemption of Liability for
Damages under Article 79 of the CISG
Available at: [Link]
Cited as: CISG-AC Op. No. 7
In § 81

GODFREY, Paul C./ The Relationship Between Corporate Social Responsibility and
MERRILL, Craig B./ Shareholder Value: An Empirical Test of the Risk Management
HANSEN, Jared M. Hypothesis
[2009] 30 In: Strategic Management Journal, pp. 425-445
Cited as: GODFREY ET AL.
In § 170

GREENBERG, Simon/ International Commercial Arbitration. An Asia-Pacific perspective

KEE, Christopher/ Cambridge University Press, Cambridge et al., 2011
WEERAMANTRY, J. Cited as: GREENBERG ET AL.
Romesh In § 25

HANOTIAU, Bernard Document Production in International Arbitration: A Tentative

Definition of ‘Best Practices’
[2006] ICC Special Supplement 2006: Document Production in
International Arbitration, pp. 113-119
Cited as: HANOTIAU
In § 24

VIII
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

HENSCHEL, René F. Conformity of Goods in International Sales

Forlaget Thomson/Gadjura, Copenhagen, 2005
Cited as: HENSCHEL
In § 100

HERBER, Rolf/ Internationales Kaufrecht. Kommentar zu dem Übereinkommen vom

CZERWENKA, Beate 11. April 1980 über Verträge über internationalen Warenkauf
C.H. Beck Verlag, Munich, 1991
Cited as: HERBER/CZERWENKA
In § 145

HOLTZMANN, Howard/ A Guide To The UNCITRAL Model Law on International

NEUHAUS, Joseph Commercial Arbitration. Legislative History and Commentary
Kluwer Law and Taxation Publishers, Deventer, 1989
Cited as: HOLTZMANN/ NEUHAUS
In § 19

HONNOLD, John O./ Uniform Law for International Sales under the 1980 United Nations
FLECHTNER, Harry M. Convention
Kluwer Law International, The Hague, 4th ed. 2009
Cited as: HONNOLD/ FLECHTNER
In §§ 84, 134

HONSELL, Heinrich Kommentar zum UN-Kaufrecht

(Ed.) Springer, Berlin et al., 1997
Cited as: AUTHOR in Honsell
In § 127

HUBER, Peter/ The CISG: A new textbook for students and practitioners
MULLIS, Alastair Sellier. European Law Publishers, Munich, 2007
Cited as: AUTHOR in Huber/Mullis
In §§ 100, 136, 144, 168

IX
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

HUßLEIN-STICH, Das UNCITRAL-Modellgesetz über die internationale

Gabriele Handelsschiedsgerichtsbarkeit
Carl Heymanns Verlag, Cologne et al., 1990
Cited as: HUßLEIN-STICH
In § 18

KAZAZI, Mojtaba Burden of Proof and Related Issues. A Study on Evidence Before
International Tribunals
Kluwer Law International, The Hague, 1996
Cited as: KAZAZI
In § 37

KEILY, Troy Harmonisation and the United Nations Convention on Contracts for
the International Sale of Goods
[2003] 1 Nordic Journal of Commercial Law of the University of
Turku
Cited as: KEILY
In § 67

KELLER, Bertram Favor Contractus. Reading the CISG in Favor of the Contract,
in: ANDERSON, Camilla B./SCHROETER, Ulrich G. (Eds.), Sharing
International Commercial Law across National Boundaries:
Festschrift for Albert H. Kritzer on the Occasion of his Eightieth
Birthday
Wildy, Simmonds and Hill Publishing, London, 2008
Cited as: KELLER
In § 74

KIM, René/ The added value of corporate social responsibility

VAN DAM, Erik NIDO, Leeuwarden, 2003
Cited as: KIM/VAN DAM
In § 117

X
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

KOCH, Robert The Concept of Fundamental Breach of Contract Under the United
Nations Convention on Contracts for the International Sale of Goods
(CISG), in: Pace International Law Review, Review of the Convention
on Contracts for the International Sale of Goods (CISG) 1998
Kluwer Law International, The Hague, 1999
Cited as: KOCH
In § 153

KRÖLL, Stefan/ UN Convention For The International Sale of Goods (CISG)

MISTELIS, Loukas/ C.H. Beck/Hart/Nomos, Munich, 2011
VISCASILLAS, Pilar Cited as: AUTHOR in Kröll et al.
Perales (Eds.) In §§ 100, 107

KRUISINGA, Sonja (Non-)conformity in the 1980 UN Convention on the International

Sale of Goods – a uniform concept?
Intersentia, Antwerp, 2004
Cited as: KRUISINGA
In § 136

LEW, Julian D.M./ Harmonizing Cultural Differences

SHORE, Laurence [1999] 54 Dispute Resolution Journal, p. 33-38
Cited as: LEW/SHORE
In § 25

LIU, Chengwei Remedies in International Sales. Perspectives from CISG,

UNIDROIT Principles and PECL
JurisNet, New York, 2007
Cited as: LIU
In § 166

XI
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

Force Majeure - Perspectives from the CISG, UNIDROIT Principles,

PECL and Case Law [2nd edition: Case annotated update (April
2005)]
Available at: [Link]
Cited as: LIU Force Majeure
In § 79

MAGNUS, Ulrich Die allgemeinen Grundsätze im UN-Kaufrechts

[1995] 59 Rabels Zeitschrift für ausländisches und internationales
Privatrecht, pp. 469-494
Cited as: MAGNUS
In § 48

MALEY, Kristian The Limits to the Conformity of Goods in the United Nations
Convention on Contracts for the International Sale of Goods (CISG)
[2009] 12 International Trade & Business Law Review, pp. 82-126
Cited as: MALEY
In § 129

NEUMAYER, Karl H./ Convention de Vienne sur les contrats de vente international de
MING, Catherine marchandises – Commentaire
Centre du Droit de l'Entreprise de l'Université, Lausanne, 24th ed.
1993
Cited as: NEUMAYER/MING
In §§ 79, 145

O’MALLEY, Nathan Rules of Evidence in International Arbitration. An Annotated Guide

Informa, London, 2012
Cited as: O’MALLEY
In passim

XII
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

PETROCHILOS, Georgios Procedural Law in International Arbitration

Oxford University Press, Oxford et al., 2004
Cited as: PETROCHILOS
In § 35

PILTZ, Burghardt Internationales Kaufrecht: Das UN-Kaufrecht in praxisorientierter

Darstellung
C.H. Beck München, Munich, 2nd ed. 2008
Cited as: PILTZ
In § 136

REDFERN, Alan/ Redfern and Hunter on International Arbitration

HUNTER, Martin/ Oxford University Press, Oxford et al., 5th ed. 2009
BLACKABY, Nigel/ Cited as: REDFERN/HUNTER
PARTASIDES, In §§ 13, 45
Constantine

SANDERS, Pieter Procedures and Practices under the UNCITRAL Rules

[1979] 27 American Journal of Comparative Law, pp. 453-468
Cited as: SANDERS
In § 17

SCHLECHTRIEM, Peter/ UN Law on International Sales

BUTLER, Petra Springer, Heidelberg, 2009
Cited as: SCHLECHTRIEM/BUTLER
In § 168

SCHLECHTRIEM, Peter/ Commentary on the UN Convention on the International Sale of

SCHWENZER, Ingeborg Goods (CISG)
(Eds.) Oxford University Press, Oxford et al., 3rd ed. 2010
Cited as: AUTHOR in Schlechtriem/Schwenzer
In passim

XIII
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

SCHOOP, Jan Die Haftungsbefreiung für arbeitskampfbedingte

Vertragsverletzungen im UN-Kaufrecht (CISG)
LIT Verlag, Münster et al., 2000
Cited as: SCHOOP
In § 79

SCHROETER, Ulrich G. The Cross-Border Freedom of Form Principle Under Reservation:

The Role of Articles 12 and 96 CISG in Theory and Practice -
Working Paper 31 October 2012
Available at: [Link]
=2169834
Cited as: SCHROETER
In §§ 57, 67

SCHWENZER, Ingeborg CISG Advisory Council Opinion No. 5, The buyer’s right to avoid the
contract in case of non-conformity of the goods or documents
Available at: [Link]
Cited as: CISG-AC Op. No. 5
In § 153

SCHWENZER, Ingeborg/ Ethical Values and International Sales Contracts, in: Cranston, Ross/
LEISINGER, Benjamin Ramberg, Jan/Ziegel, Jacob (Eds.), Commercial Law Challenges In
The 21st Century
Iustus Förlag, Uppsala, 2007
Cited as: SCHWENZER/LEISINGER
In §§ 153, 171

SHENTON, David Supplementary rule governing the presentation and reception of

evidence in international commercial arbitration, in: Lew, Julian D.M.
(Ed.), Contemporary Problems in International Arbitration
Martinus Nijhoff Publishers, Dordrecht et al., 1987
Cited as: SHENTON
In §24

XIV
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

SHORE, Laurence Three Evidentiary Problems in International Arbitration: Producing

the Adverse Document, Listening to the Document that does not
Speak for Itself, and Seeing the Witness through her Written
Statement
[2004] SchiedsVZ, pp. 76-80
Cited as: SHORE
In § 14

SUTCLIFFE, Jonathan/ Witness Evidence: Written or Oral, Who asks the Questions?, in:
WIRTH, Markus BÖCKSTIEGEL, Karl-Heinz/BERGER, Klaus-Peter/BREDOW, Jens, The
Taking of Evidence in International Commercial Arbitration
Carl Heymanns Verlag, Cologne et al., 2010
Cited as: SUTCLIFFE/ WIRTH
In § 25

UNCITRAL UNCITRAL Digest of Case Law on the United Nations Convention

on Contracts for the International Sale of Goods 2012 Edition
Available at: [Link]
[Link]
Cited as: UNCITRAL Digest
In §§ 70, 79

UNICEF Child protection from violence, exploitation and abuse, Child labour
Available at: [Link]
Cited as: UNICEF
In § 104

UNITED NATIONS Report of the Working Group on the work of its seventh session, in:
COMMISSION ON Yearbook Volume XV: 1984
INTERNATIONAL TRADE United Nations, New York, 1987
LAW Cited as: Working Group Report
In § 42

XV
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

VOGENAUER, Stefan/ Commentary on the Unidroit Principles of International Commercial

KLEINHEISTERKAMP, Contracts (PICC)
Jan Oxford University Press, Oxford et al., 2009
(Eds.) Cited as: AUTHOR in Vogenauer/Kleinheisterkamp
In § 87

VON MEHREN, George/ Submitting Evidence in an International Arbitration: The Common

SALOMON, Claudia Lawyer’s Guide
[2003] 20 Journal of International Arbitration 3, pp. 285-294
Cited as: VON MEHREN/SALOMON
In § 25

VON STAUDINGER, J. von Staudingers Kommentar zum Bürgerlichen Gesetzbuch mit

Julius (Ed.) Einführungsgesetz und Nebengesetzen. Wiener UN-Kaufrecht
(CISG)
Sellier-de Gruyter, Berlin, 1999
Cited as: AUTHOR in Staudinger
In §§ 93, 129, 144

VOSER, Nathalie Harmonization by Promulgating Rules of Best International

Arbitration
[2005] SchiedsVZ, pp. 113-118
Cited as: VOSER
In § 24

WALTHER, Lena/ Declaration according to Article 96 CISG – Senseless?

MORAWIETZ, Matthias [2006] 6 Internationales Handelsrecht, pp. 252-254
Cited as: WALTHER/MORAWIETZ
In § 75

XVI
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

WARHURST, Alysson Future roles of business in society: the expending boundaries of

corporate responsibility and a compelling case for partnership
[2005] 37 Futures, pp. 151-168
Cited as: WARHURST
In § 117

WEIGAND, Frank-Bernd Practitioner’s Handbook on International Arbitration

(Ed.) C.H. Beck Verlag, Munich, 2002
Cited as: AUTHOR in Weigand
In § 35, 42

WITZ, Wolfgang/ International Einheitliches Kaufrecht. Praktiker-Kommentar und

SALGER, Hanns- Vertragsgestaltung zum CISG
Christian/ Verlag Recht und Wirtschaft, Heidelberg, 2000
LORENZ, Manuel Cited as: AUTHOR in Witz et al.
In § 145

ZUBERBÜHLER, Tobias/ IBA Rules of Evidence. A commentary on the Taking of Evidence in

HOFMANN, Dieter/ International Arbitration
OETIKER, Christian/ Sellier. European Law Publisher, Munich, 2012
ROHNER, Thomas Cited as: ZUBERBÜHLER ET AL.
In § 29

XVII
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

INDEX OF CASES
Austria
Oberlandesgericht Linz, 23 January 2006
Available at: [Link] (full text in English)
Cited as: OLG Linz 23 January 2006 (Austria)
In § 68, 72

Canada
Corporacion Transnacional de Inversiones S.A. de C.V. et al. v. STET International, S.p.A. et al.
Superior Court of Justice, 22 September 1999
[1999] CanLII 14819 (ON SC)
Cited as: STET v. COTISA (Canada)
In § 35

France
Cour d’Appel de Grenoble, 22 February 1995
Available at: [Link] (full text in English)
Cited as: Cour d’Appel Grenoble 22 February 1995 (France)
In § 138

Germany
Bundesgerichtshof, 3 April 1996
Available at: [Link] (full text in English)
Cited as: BGH 3 April 1996 (Germany)
In § 153

Oberlandesgericht Hamburg, 28 February 1997

Available at: [Link] (full text in English)
Cited as: OLG Hamburg 28 February 1997 (Germany)
In § 58

XVIII
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

Oberlandesgericht Köln, 21 May 1996

Available at: [Link] (full text in English)
Cited as: OLG Köln 21 May 1996 (Germany)
In § 93

Oberlandesgericht Frankfurt, 17 September 1991

Available at: [Link] (full text in English)
Cited as: OLG Frankfurt 17 September 1991 (Germany)
In §§ 138, 146

Italy
Tribunale di Vigevano, 12 July 2000
Available at: [Link] (full text in English)
Cited as: Tribunale di Vigevano 12 July 2000 (Italy)
In § 72

Appellationsgericht Basel-Stadt, 22 August 2003

Available at: [Link] (full text in English)
Cited as: AG Basel-Stadt 22 August 2003 (Switzerland)
In § 147

Schweizerisches Bundesgericht, 15 September 2000

Available at: [Link]/cases/[Link] (full text in English)
Cited as: BG 15 September 2000 (Switzerland)
In § 145

Schweizerisches Bundesgericht, 7 September 1993

BGE 119 II pp. 386-391 (full text in German)
Cited as: BG 7 September 1993 (Switzerland)
In § 35

XIX
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

USA
Forestal Guarani S.A. v. Daros International, Inc.
United States Federal Appellate Court (3rd Cir.), 21 July 2010
Available at: [Link] (full text in English)
Cited as: Forestal Guarani S.A. v. Daros International, Inc. (USA)
In § 75

Chateau des Charmes Wines Ltd v. Sabaté Inc.

United States Federal Appellate Court (9th Circuit), 5 May 2003
Available at: [Link] (full text in English)
Cited as: Chateau des Charmes Wines Ltd v. Sabaté Inc.
In § 57

China National Building Material Investment Co. Ltd. v. BNK International LLC.
United States District Court (Western District of Texas), 3 December 2009
LEXIS 113194 (full text in English)
Cited as: China National Building Material Investment Co. Ltd. v. BNK International LLC.
(USA)
In § 30

Norfolk Southern Railway Company v. Power Source Supply, Inc.

United States District Court (Western District of Pennsylvania), 25 July 2008
Available at: [Link] (full text in English)
Cited as: Norfolk Southern Railway Company v. Power Source Supply, Inc. (USA)
In § 60

Solae, LCC v. Hershey Canada, Inc.

United States District Court (Delaware), 9 May 2008
Available at: [Link] (full text in English)
Cited as: Solae, LCC v. Hershey Canada, Inc. (USA)
In § 57

XX
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

Parsons & Whittemore Overseas Co. Inc. v. Société Générale de l’ Industrie du Papier (RAKTA)
United States Circuit Court of Appeals (2nd Cir.), 23 December 1974
508 F.2d pp. 969 et seq. (full text in English)
Cited as: Parsons & Whittemore Overseas Co. Inc. v. Société Générale de l’ Industrie du Papier
(USA)
In § 30

XXI
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

INDEX OF ARBITRAL AWARDS

China International Economic & Trade Arbitration Commission [CIETAC]
CIETAC Award of 31 December 1997
Available at: [Link] (full text in English)
Cited as: Award of 31 December 1997 (CIETAC)
In § 75

CIETAC Award of 25 October 1994

Available at: [Link] (full text in English)
Cited as: Award of 25 Oct 1994 (CIETAC)
In § 93

Hamburg Chamber of Commerce [HCC]

Partial award of 21 March 1996
Available at: [Link] (full text in English)
Cited as: Award of 21 March 1996 (HCC)
In § 81

Tribunal of International Commercial Arbitration at the Russian Federation Chamber of

Commerce and Industry [ICAC]
ICAC Arbitration Award of 9 June 2004
Available at: [Link] (full text in English)
Cited as: Award of 9 June 2004 (ICAC)
In § 75

ICAC Arbitration Award of 5 June 1997

Available at: [Link] (full text in English)
Cited as: Award of 5 June 1997 (ICAC)
In § 87

XXII
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

ICAC Arbitration Award of 16 March 1995

Available at: [Link] (full text in English)
Cited as: Award of 16 March 1995 (ICAC)
In § 79

International Chamber of Commerce [ICC]

ICC Arbitration Case No. 14925 (2007), Procedural Order No. 1
[2012] O’Malley, Rules of Evidence in International Arbitration, p. 232 et. seq. (extract in
English)
Cited as: Case No. 14925 (ICC)
In § 17

ICC Arbitration Case No. 13225 (2004), Procedural Order of 8 October 2004
[2010] Special Supplement 2010: Decisions on ICC Arbitration Procedure; A Selection of
Procedural Orders issued by Arbitral Tribunals acting under the ICC Rules of Arbitration (2003-
2004), pp. 97-100 (full text in English)
Cited as: Case No. 13225 (ICC)
In § 24

ICC Arbitration Case No. 12296 (2004), Procedural Order of 21 June 2004
[2010] Special Supplement 2010: Decisions on ICC Arbitration Procedure; A Selection of
Procedural Orders issued by Arbitral Tribunals acting under the ICC Rules of Arbitration (2003-
2004), pp. 45-46 (full text in English)
Cited as: Case No. 12296 (ICC)
In § 7

ICC Arbitration Case No. 8128 (1995)

Available at: [Link] (full text in English)
Cited as: Case No. 8128 (ICC)
In § 79

XXIII
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

ICC Arbitration Case No. 15892

[2012] O’Malley, Rules of Evidence in International Arbitration, p. 129 et seq. (extract in English)
Cited as: Case No. 15892 (ICC)
In § 29

ICC Arbitration Case No. 11258

[2012] O’Malley, Rules of Evidence in International Arbitration, p. 130 (extract in English)
Cited as: Case No. 11258 (ICC)
In § 29

International Centre for Settlement of Investment Disputes [ICSID]

Gemplus S.A. et al. v. The United Mexican States, 16 June 2010
Available at: [Link]
Val=showDoc&docId=DC2112_En&caseId=C41 (full text in English)
Cited as: Gemplus S.A. v. United Mexican States (ICSID)
In § 13

Railroad Development Corporation v. Republic of Guatemala, 15 October 2008

Available at: [Link]
Val=showDoc&docId=DC870_En&caseId=C116 (full text in English)
Cited as: Railroad Development Corporation v. Republic of Guatemala (ICSID)
In § 24

Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, 24 July 2008

Available at: [Link]
Val=showDoc&docId=DC1589_En&caseId=C67 (full text in English)
Cited as: Biwater Gauff Ltd. v. United Republic of Tanzania (ICSID)
In § 24

Noble Ventures Inc. v. Romania, 12 October 2005

Available at: [Link] (full text in English)
Cited as: Noble Ventures Inc. v. Romania (ICSID)
In § 24

XXIV
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

Iran-United States Claims Tribunal [Iran-US Claims Tribunal]

Harris International Telecommunications Inc. v. The Islamic Republic of Iran et. al.,
2 November 1987
[1987] 17 Iran-US CTR, pp. 31 et seqq.
Cited as: Harris International Telecommunications Inc. v. Islamic Republic of Iran (Iran-US
Claims Tribunal)
In § 7

London Court of International Arbitration [LCIA]

LCIA Arbitration Case No. UN 5699, Procedural Order No. 1
[2012] O’Malley, Rules of Evidence in International Arbitration, p. 9 (extract in English)
Cited as: Case No. UN 5699 (LCIA)
In § 24

XXV
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

INDEX OF LEGAL SOURCES

• Arbitration Rules of the Chinese European Arbitration Centre in Hamburg, 2012 (CEAC
Rules)
• IBA Rules on the Taking of Evidence in International Arbitration, 29 May 2010 (IBA Rules)
• Free Alongside Ship INCOTERMS ® 2010 (FAS INCOTERMS® 2010)
• International Labour Organisation, Convention Concerning the Prohibition and Immediate
Action for the Elimination of the Worst Forms of Child Labour, 17 June 1999 (ILO
Convention No. 182)
• UNCITRAL Model Law on International Commercial Arbitration, 1985 with 2006
Amendments
• UNCITRAL Arbitration Rules, 2010 (UNCITRAL Rules)
• UNIDROIT Principles of International Commercial Contracts (PICC)
• United Nations Convention on the International Sale of Goods, 1980 (CISG)
• Vienna Convention on the Law of Treaties, 1969

XXVI
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

LIST OF ABBREVIATIONS
% per cent
& and
§(§) paragraph(s)
AG Appellationsgericht (Swiss Court of Appeal)
Art(t). Article(s)
BG Schweizerisches Bundesgericht (Federal Supreme Court of
Switzerland)
BGH Bundesgerichtshof (German Federal Supreme Court)
CEAC Rules Arbitration Rules of the Chinese European Arbitration
Centre, Hamburg, September 2012
cf. confer
CIETAC China International Economic and Trade Arbitration
Comission
Cir. Circuit
CISG United Nations Convention on the International Sale of
Goods, Vienna, 11 April 1980
CISG-AC Op. No. CISG Advisory Council Opinion Number
Cl. Ex. No. Claimant’s Exhibit Number
Co. Company
DAL Danubian Arbitration Law
Ed(s). Editor(s)
ed. Edition
EGBGB Einführungsgesetz zum Bürgerlichen Gesetzbuch
emph. add. emphasis added
et al. et alii (and following)
et seq. et sequented (and following)
FAS INCOTERMS® 2010 Free Alongside Ship International Commercial Terms ®
2010
HCC Hannover Congress Centrum
i.e. id est (that means)
IBA International Bar Association

XXVII
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

IBA Rules IBA Rules on the Taking of Evidence in International

Arbitration, London, 29 May 2010
ibid. ibidem (the same)
ICAC Tribunal of International Commercial Arbitration at the
Russian Federation Chamber of Commerce and Industry
ICC International Chamber of Commerce and Industry
ICSID International Centre for Settlement of Investment
Disputes
ILO International Labour Organization
Inc. Incorporated
infra see below
Iran-US Claims Tribunal Iran-United States Claims Tribunal
LCIA The London Court of International Arbitration
LG Landgericht (German Regional Court)
LLC Limited Liability Company
Ltd. Limited
Mr. Mister
No. Number(s)
Oceania Plus Oceania Plus Enterprises
OG Obergericht (Swiss High Court)
OLG Oberlandesgericht (German Regional Court of Appeal)
p(p). pages
Pacifica Trading Pacifica Trading Co.
passim throughout
Proc. Procedural
Proc. Order No. Procedural Order Number
Prof. Professor
Res. Ex. No. Respondent’s Exhibit Number
Sec. Section
sent. sentence
supra see above
U.S. United States
UN United Nations
UNCITRAL United Nations Commission on International Trade Law

XXVIII
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

UNICEF United Nations Children’s Fund

UPICC UNIDROIT Principles of International Commercial
Contracts
USA United States of America
USD United States Dollar(s)
v. versus

XXIX
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

STATEMENT OF FACTS

Oceania Plus
Jumpers Production
is known for its
high ethical standards

owns
Mr. Tomas Short amongst
changed employers others

RESPONDENT sold shirts CLAIMANT sold shirts Doma Cirun

produced „Yes Casual“ procured „Yes Casual“ retailed “Yes Casual”
polo shirts polo shirts for Doma Cirun polo shirts

Pacifica Trading Co. Gold Service Clothing

bought the remaining shirts delivered shirts as substitute

The parties to this arbitration are Mediterraneo Exquisite Supply, Co. (hereinafter CLAIMANT)
and Equatoriana Clothing Manufacturing, Ltd. (hereinafter RESPONDENT).
CLAIMANT is a supplier in the fashion business. It procures clothing for its mother company
Oceania Plus Enterprises (hereinafter Oceania Plus) and their subsidiaries. For this purpose
CLAIMANT contracts with a range of different manufacturers.
Oceania Plus is a large multi-national group supplying leisure clothing to a variety of retailers. It
is known for its high ethical standards. Amongst others, its subsidiaries are CLAIMANT and Doma
Cirun.
Doma Cirun is a retailer of clothing targeting the upper end of the middle market segment. It
operates in the ethically sensitive Oceanian market. Its house brand is “Yes Casual”.
RESPONDENT is a manufacturer of clothing. It agreed to produce 100,000 polo shirts for
CLAIMANT.

1
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

April 2008 CLAIMANT audits RESPONDENT in regard to its ethical standards,

particularly labor matters.
2 January 2011 Doma Cirun enquires with CLAIMANT for the supply of 100,000 polo
shirts in time for the launch of its summer collection.
5 January 2011 CLAIMANT and RESPONDENT conclude a contract over the manufacture
of 100,000 polo shirts to be delivered on 19 February 2011. They agree
that RESPONDENT would adhere to the highest ethical standards in the
conduct of its business.
7 January 2011 CLAIMANT and Doma Cirun conclude a contract over the delivery of the
polo shirts.
9 February 2011 Mr. Short, contracting officer of RESPONDENT, calls Mr. Long,
procurement specialist of CLAIMANT letting him know that RESPONDENT
would not meet the delivery date of 19 February 2011. Mr. Long
emphasizes the importance of timely delivery.
24 February 2011 RESPONDENT delivers the polo shirts five days late.
5 April 2011 CLAIMANT learns from the media that RESPONDENT has employed child
labor in at least one of its production facilities. The media condemn
Oceania Plus as well as Doma Cirun for dealing with RESPONDENT.
8 April 2011 Since there are almost no sales of “Yes Casual” polo shirts Doma Cirun
avoids the procurement contract with CLAIMANT. CLAIMANT declares the
Contract with RESPONDENT avoided.
18 August 2011 RESPONDENT’s witness Mr. Short submits a written statement alleging
that the parties amended the delivery date of the shirts.
15 September 2011 Doma Cirun initiates arbitral proceedings against CLAIMANT. CLAIMANT
reaches a very favourable settlement agreement with Doma Cirun.
January 2012 Mr. Short’s employment at RESPONDENT’s is terminated. He now works
for Jumpers Production.
15 February 2012 Oceania Plus brings suit against CLAIMANT. CLAIMANT pays Oceania Plus
the requested sum. Independent advisors confirm that this payment could
not have been avoided.

2
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

SUMMARY OF ARGUMENT
1 Contracts require commitment. RESPONDENT neither committed to the Contract nor is it
now committed to resolving the ensuing dispute. CLAIMANT on the other hand was
committed beyond its contractual obligations in order to overcome RESPONDENT’s
shortcomings.
2 Seasons change and today’s trend is outdated tomorrow. In the fashion business, time is
of the essence. This is particularly true in the present case. At short notice, Doma Cirun had
learned that its original supplier had declared bankruptcy. It thus needed CLAIMANT to
procure polo shirts on a rush basis for the launch of its summer collection. RESPONDENT
understood that timely delivery was essential and agreed to deliver the shirts on 19 February
2011. When it realized that it could not meet this deadline it did not commit to taking any
additional measures. Rather, it frustrated its commitment to deliver on time. Instead of
avoiding it, CLAIMANT did commit to the Contract even though its essential interest of timely
delivery was frustrated. RESPONDENT now misinterprets this commitment as intent to amend
the Contract (Issue 2).
3 When CLAIMANT finally did receive the shirts, it had to learn from the media that
RESPONDENT had used child labor, enriching itself at the expense of infants. This was
particularly frustrating for CLAIMANT since RESPONDENT had promised to adhere to highest
ethical standards. A manufacturer who lets children do the work cannot be considered
adhering to any ethical standards, least of all the highest. This left no choice for CLAIMANT but
to avoid the contract. Since it was still committed to minimize the losses CLAIMANT organized
a cover purchase for Doma Cirun and sold the shirts on RESPONDENT’s account (Issue 3).
4 Now, RESPONDENT does not demonstrate commitment by amicably resolving the
dispute. It submitted a written witness statement of its former employer Mr. Short to support
its allegation that the parties changed the delivery date in the contract. It was up to
RESPONDENT to produce its witness for oral testimony. It tries to shift this burden to
CLAIMANT and have the witness’s written statement admitted without the possibility to
question Mr. Short. Rather than contributing to the fair resolution of the case, an admission of
this statement would endanger any eventual award (Issue 1).

3
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

ARGUMENT

I. MR. SHORT’S WRITTEN WITNESS STATEMENT IS INADMISSIBLE

5 CLAIMANT respectfully requests the Tribunal to find that the written witness statement
RESPONDENT relies on (Res. Ex. No. 1) is inadmissible. RESPONDENT has presented this piece
of evidence in order to substantiate its allegations that the parties amended the delivery date in
the Contract (Statement of Defense § 7). Despite CLAIMANT’s request, Mr. Short refuses to attend
an oral hearing (Proc. Order No. 1 § 4). Since there is no possibility to subpoena him (Proc. Order
No. 2 § 28) RESPONDENT is not able to produce the witness for oral questioning.
6 Without oral examination the written witness statement shall be disregarded both under
the Rules of the Chinese European Arbitration Centre (hereinafter CEAC Rules) (A.) and the
IBA Rules on the Taking of Evidence (hereinafter IBA Rules) (B.). This result does not
violate RESPONDENT’s right to be heard (C.). Any award on the basis of inadmissible
evidence is in danger of being set aside (D.).

A. Mr. Short’s Written Statement Alone Does Not Suffice as Evidence

Under the CEAC Rules
7 Without the requested oral examination Mr. Short’s written statement is inadmissible (cf.
Case No. 12296 (ICC)). In general, Art. 27 (2) CEAC Rules allows for witness statements to be
presented in writing (Harris International Telecommunications Inc. v. Islamic Republic of Iran (Iran-US
Claims Tribunal) [on the equivalent UNCITRAL Rules]). However, the CEAC Rules limit this
general principle in two regards.
8 First, Art. 27 (2) sent. 2 CEAC Rules allows the Tribunal to regard written witness
statements as inadmissible if the circumstances so require. Second, under Art. 17 (3) CEAC
Rules written statements without an evidentiary hearing do not suffice if one party has
requested such a hearing.
9 Since the circumstances require Mr. Short’s written witness statement to be challenged
and verified by oral examination, it cannot be admitted without the possibility to question Mr.
Short (1.). The written statement is also inadmissible because CLAIMANT cannot exercise its
right to an oral hearing under Art. 17 (3) CEAC (2.).

4
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

1. The circumstances call for a dismissal of Mr. Short’s written statement

10 Under the given circumstances the Tribunal cannot admit Mr. Short’s written statement
by itself (Art. 27 (2) sent. 2 CEAC Rules). Discrepancies in the witnesses’ written statements
as to the alleged amendment of contract (Cl. Ex. No. 2; Res. Ex. No. 1) need to be clarified in
an evidentiary hearing (a). Furthermore, it must be evaluated whether RESPONDENT’s witness
gave an objective account of the events (b).

(a) Discrepancies in the witnesses’ perception need to be challenged in an oral hearing

11 RESPONDENT argues that the telephone conversation between Mr. Short and Mr. Long
amounted to an amendment of contract (Statement of Defense § 13). CLAIMANT rejects this
notion (Statement of Claim §§ 13, 14, 33; infra §§ 49 et seqq.). It is undisputed between the parties
that Mr. Long agreed to change the delivery date of the polo shirts in the “paper work” (Proc.
Order No. 2 § 27). Yet, both witnesses draw differing conclusions as to what that entailed.
While Mr. Short seems to have interpreted this statement as an amendment of contract
(Statement of Defense § 7), Mr. Long did not intend to amend the delivery date (Cl. Ex. No. 2).
The interpretation of the statement is crucial for the dispute’s resolution.
12 For its decision, the Tribunal must gain insight into how Mr. Short deduced that “paper
work” referred to the contract itself. The written statement does not reveal his train of
thought leading up to this conclusion. An evidentiary hearing with Mr. Short would serve to
clarify his perception. The Tribunal could thereby determine whether a reasonable third
person would have come to the same conclusion.

(b) An oral hearing is indispensible to ensure Mr. Short’s testimony is objective

13 Admitting a written witness statement on its own would allow RESPONDENT to present
its case without direct challenge to the reliability of its only piece of evidence. An oral
examination would provide the opportunity to test a written statement’s reliability and
authenticity (REDFERN/HUNTER § 6.136; cf. Gemplus S.A. v. United Mexican States (ICSID)). The
Tribunal’s impression of a witness answering questions is more detailed and vivid than a pre-
drafted statement (BEECHEY p. 99). If there are concerns about the reliability of a witness their
written statement is inadmissible without an evidentiary hearing (AMERASINGHE p. 180). Mr.
Short’s written statement needs verification in two regards.
14 In international arbitration counsel influence or even draft written witness statements
(SHORE p. 79). This is appropriate in regard to formal requirements. But the line between
formal assistance and substantial influence is often blurry. CLAIMANT must anticipate that
Mr. Short’s written statement might have been modified by RESPONDENT’s counsel.

5
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

15 Moreover, it cannot be excluded that Mr. Short later interpreted the telephone
conversation in favour of his employer RESPONDENT and not according to his intent at the
time of the conversation. At that time, Mr. Short did not bother to ensure that the contract
was amended, as was his purported intention. In fact, neither RESPONDENT nor Mr. Short
himself mentioned an amendment of contract until the Statement of Defense. Mr. Short’s
conduct might also be motivated by personal reasons to avoid responsibility as a non-
amendment could be accounted as his fault. This might have motivated him to interpret the
conversation in light of RESPONDENT’s interests. Now, Mr. Short is not employed by
RESPONDENT anymore (Proc. Order No. 2 § 26) and is thus free of influences which might have
modified his testimony in the first place. By examining Mr. Short now, the Tribunal could
detect inaccuracies in his statement, which he submitted more than a year ago (cf. Res. Ex.
No. 1). Such outdated witness statements weaken the reliability of a witness.
16 In light of the concerns mentioned, without the possibility to question Mr. Short on his
perception of the telephone conversation and to verify his written statement, this exhibit is
inadmissible to the proceedings.

2. Admitting Mr. Short’s written statement would frustrate CLAIMANT’s right to an oral
hearing
17 Mr. Short’s written statement is inadmissible because CLAIMANT cannot exercise its right
to an oral hearing under Art. 17 (3) CEAC (cf. Case No. 14925 (ICC)). Under this provision the
Tribunal shall grant an oral hearing, if a party requests so at an appropriate stage of the
proceedings. Such request is binding upon the Tribunal (BINDER § 5-109; SANDERS p. 459 [on
the equivalent UNCITRAL Rules]). CLAIMANT duly submitted its request when it informed Prof.
Presiding Arbitrator that it wanted to question Mr. Short (Proc. Order No. 1 § 4).
18 The term “oral hearing” includes evidentiary hearings with the possibility to question
witnesses (CARON ET AL. p. 45; HUßLEIN-STICH p. 124 [on the equivalent UNCITRAL Rules]).
Thus, Art. 17 (3) CEAC Rules covers CLAIMANT’s request for examination of Mr. Short.
19 CLAIMANT also made its request “at an appropriate stage of the proceedings”. This
requirement serves to prevent disruption of proceedings (HOLTZMANN/NEUHAUS p. 673 [on
the equivalent UNCITRAL Rules]). CLAIMANT’s counsel requested Mr. Short’s appearance
during the conference call with Prof. Presiding Arbitrator and RESPONDENT’S counsel on 4
October 2012 (Proc. Order No. 1 § 4). This conference call was organized in order to plan the
further course of the proceedings (Proc. Order No. 1 § 2). It was the appropriate occasion for its
request.

6
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

20 Since the prerequisites of Art. 17 (3) CEAC Rules are met CLAIMANT is entitled to an
evidentiary hearing with Mr. Short. His absence frustrates the possibility of such a hearing.
The written witness statement itself does therefore not suffice as evidence, rendering the
written statement inadmissible.

21 In conclusion, under Art. 27 (2) sent. 2 CEAC Rules the circumstances of the case lead to
the inadmissibility of Mr. Short’s written statement. The same results from CLAIMANT’s right
to question Mr. Short in terms of Art. 17 (3) CEAC Rules. Under the applicable procedural
rules, the statement is therefore inadmissible.

B. The Tribunal Shall Disregard Mr. Short’s Statement under the IBA Rules
22 The inadmissibility of Mr. Short’s written statement is also in line with the IBA Rules
referenced by the Tribunal (cf. Proc. Order No. 2 § 24). CLAIMANT submits that the proceedings
would benefit from their application (1.). Under Art. 4 (7) IBA Rules Mr. Short’s witness
statement shall be disregarded (2.).

1. The Tribunal should apply the IBA Rules as they reflect international practice in the
taking of evidence
23 The IBA Rules are commonly accepted to be an efficient tool for the taking of evidence
in international arbitration (BLESSING p. 203). The proceedings would profit from the
application of the IBA Rules as they are best practice in international commercial
arbitration (a) and account for national differences in the taking of evidence (b).

(a) International commercial arbitration recognizes the IBA Rules as best practice
24 The IBA Rules provide an efficient and fair process for the taking of evidence in
international arbitration (O’MALLEY § 1.24). Accordingly, they have found widespread
acceptance within the arbitration community and are often referred to (VOSER, p. 116); this is
not only true for commercial arbitration but even for the more regulated investment
arbitration (cf. Noble Ventures Inc. v. Romania (ICSID); Biwater Gauff Ltd. v. United Republic of
Tanzania (ICSID)). Even when not directly binding, tribunals consider them as guidelines as
they reflect the experience of recognized professionals (Railroad Development Corporation v.
Republic of Guatemala (ICSID); cf. Case No. 13225 (ICC); Case No. UN 5699 (LCIA)). They can
thus be regarded as best practice and can be applied as default rules for the taking of evidence
(HANOTIAU p. 114; SHENTON p. 188).

7
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

(b) The IBA Rules take account of the different approaches in the parties’ legal systems
25 It is particularly useful to apply the IBA Rules when the parties are from different legal
cultures (Preamble of the IBA Rules). They reflect a compromise between the different
approaches towards the taking of evidence (VON MEHREN/SALOMON p. 292;
GREENBERG ET AL. § 7.124). The gulf between the different approaches is particularly wide
between common and civil law countries (cf. LEW/SHORE p. 34; SUTCLIFFE/WIRTH p. 34).
CLAIMANT’s place of business is located in the common law country Mediterraneo.
Equatoriana as RESPONDENT’s place of business and Danubia as the seat of arbitration are
civil law countries (Proc. Order No. 2, § 36). In order to take account of the international
character of this arbitration, the Tribunal should apply the IBA Rules to evidentiary questions.
26 In conclusion, the Tribunal would be in line with international practice when applying the
IBA Rules as guidelines. Therefore, CLAIMANT endorses the Tribunal’s reference to the IBA
Rules.

2. Mr. Short’s written witness statement shall be disregarded under Art. 4 (7) IBA Rules
27 The present situation falls within the scope of Art. 4 (7) IBA Rules. Pursuant to this
provision the Tribunal shall disregard written statements by witnesses whose appearance has
been requested but fail to attend an evidentiary hearing without valid reason. The Tribunal
may only still consider the written statement in exceptional circumstances.
28 Mr. Short refuses to appear for examination although CLAIMANT has requested his
appearance (supra § 19). His absence cannot be justified by a valid reason (a). There are also
no exceptional circumstances that would justify the admission of Mr. Short’s written
statement (b).

(a) Mr. Short’s absence is not justified by a valid reason

29 Under Art. 4 (7) IBA Rules the Tribunal may only admit a written statement if the
witness’s failure to appear is excused by a valid reason. Generally, the party submitting a
written statement carries the duty to present this witness at an evidentiary hearing if so
requested (O’MALLEY § 4.53). Consequently, the presenting party bears the risk of removal of
the statement in case this burden is not met (ibid.). The term “valid reason” must be
interpreted in light of this principle (ibid.). Reasons that lie within the witness’s sphere of
control and reliability do not excuse their failure to attend an oral hearing (Case No. 15892
(ICC)). Hence, this term only refers to objective reasons such as serious illness, overlong travel
distance or death (cf. Case No. 11258 (ICC); ZUBERBÜHLER ET AL. Art. 4 § 73).

8
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

30 Accordingly, neither conflicting appointments nor inconvenience are valid reasons in

terms of Art. 4 (7) IBA Rules (cf. Parsons & Whittemore Overseas Co. Inc. v. Société Générale de
l’Industrie du Papier (USA); China National Building Material Investment Co. Ltd. v. BNK International
LLC. (USA)). Thus Mr. Short’s tight timetable at Jumpers Production (Proc. Order No. 2 § 26)
does not justify his absence from an evidentiary hearing. Neither does the inconvenience of
acting contrary to the wish of his new employer. There is no legal obligation to comply with
his employer’s “wish” (Proc. Order No. 1 § 4). Mr. Short’s decision to avoid the inconvenience
is solely subjective. Hence, no valid reason justifies Mr. Short’s absence.

(b) No exceptional circumstances legitimize an admission of Mr. Short’s statement

31 RESPONDENT did not allude to any circumstances, which would require to regard Mr.
Short’s written statement without an oral hearing. There are none.
32 Only in exceptional circumstances may a Tribunal admit a written statement without
examination of the witness. The fact that Mr. Short is RESPONDENT’s only witness is not an
exceptional circumstance. The exception may refer to the probative value of the written
statement and applies when the Tribunal has little or no other evidence (cf. O’MALLEY § 4.58).
However, Mr. Long’s and Mr. Short’s written statements both express that Mr. Long referred
to “paper work” that would reflect the new delivery date. The crucial issue which would need
to be addressed and challenged in an evidentiary hearing is the discrepancy of their
perceptions. No special probative value can thus be accounted to Mr. Short’s statement as it
does not contain any facts not stated in Mr. Long’s statement.

33 In conclusion, no valid reason excuses Mr. Short’s absence at an evidentiary hearing. An

admission of his statement can also not be justified by exceptional circumstances. Thus
Mr. Short’s written statement shall be disregarded pursuant to Art. 4 (7) IBA Rules.

C. Disregarding the Statement Does Not Violate RESPONDENT’s Right to

Be Heard
34 RESPONDENT may allege that ignoring Mr. Short’s witness statement would violate its
right to be heard under Art. 17 (1) CEAC Rules and Art. 18 of the Danubian Arbitration Law
(hereinafter DAL), which is equivalent to the UNCITRAL Model Law. This is not the case.
35 The right to be heard entails that each party should have an equal opportunity to express
its views on all crucial points the tribunal intends to adopt (PETROCHILOS § 4.86). In particular,
it entitles the parties to participate in the proceedings and submit evidence (BG 19 December

9
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

1990 (Switzerland)). Though it is of fundamental nature, this principle is limited on grounds of

fair and efficient proceedings (ROTH in Weigand p. 1229). In particular, it does not protect a
party from its own failures or strategic choices (cf. STET v. COTISA (Canada)). Accordingly,
the Tribunal can disallow evidence not offered in due form without violating the requesting
party’s right to be heard (BG 7 September 1993 (Switzerland)).
36 Upon CLAIMANT’s request, the due form for Mr. Short’s witness statement would have
been to produce him for oral questioning (supra § 19). It was up to RESPONDENT to fulfil this
requirement as it was its evidential burden.
37 To determine which party bears the evidential burden the Tribunal should take into
account the parties’ circumstances in addition to the rules concerning the burden of proof
(KAZAZI pp. 35 et seqq.). RESPONDENT’S connection to Mr. Short as its former employee is
much closer than CLAIMANT’s. Furthermore, pursuant to Art. 27 (1) CEAC Rules
RESPONDENT bears the burden of proving the contract amendment supporting its defense (cf.
Statement of Defense § 13). Under these circumstances the evidential burden lies with
RESPONDENT. It did not produce Mr. Short’s testimony in due form and has therefore
forfeited its right to be heard.

38 Thus the restriction of RESPONDENT’s opportunities to be heard is justified.

RESPONDENT neglected its responsibilities arising out of its evidential burden. It thereby
restricted its rights itself. Not admitting the written statement does not violate RESPONDENT’s
right to be heard.

D. An Award Based on Mr. Short’s Written Statement Might Be Set Aside

39 RESPONDENT’s rights are not infringed when disregarding Mr. Short’s written witness
statement. CLAIMANT’s procedural rights, however, would be violated if the Tribunal based an
award on Mr. Short’s inadmissible written statement. In that case, CLAIMANT reserves its right
to challenge any eventual award on grounds of Art. 34 (2) (a) (ii) and (iv) DAL. Both grounds
refer to Art. 18 DAL (BINDER § 5-010) which sets forth that “[t]he parties shall be treated with
equality and each party shall be given a full opportunity of presenting his case.”
40 A violation of the right to present one’s case (Art. 18 alternative 2 DAL) is grounds for
setting aside under Art. 34 (2) (a) (ii) DAL. An award risks annulment under
Art. 34 (2) (a) (iv) DAL if a party’s right to equal treatment (Art. 18 alternative 1 DAL) has
been violated.

10
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

41 If the Tribunal considered Mr. Short’s inadmissible witness statement, it would deprive
CLAIMANT of its opportunity to directly contest the statement (1.). Admitting Mr. Short’s
written statement would amount to an unequal treatment of CLAIMANT in regards to Art. 18,
1st alternative DAL (2.).

1. The admission of the statement would violate CLAIMANT’S right to be heard

42 A party’s right to present its case generally requires oral hearings as laid down in
Art. 24 (1) DAL (ROTH in Weigand p. 1243). The term “oral hearing” thereby comprises
contesting a written statement by cross-examination of the witness (Working Group Report § 79).
43 As Mr. Short is not available for examination, CLAIMANT does not have the opportunity
to question his statement. Therefore, Mr. Short’s absence infringes CLAIMANT’s right to
present its case by cross-examining Mr. Short. CLAIMANT would not need to contest
Mr. Short’s statement in the first place if the Tribunal did not admit it. To the contrary,
admitting Mr. Short’s written statement would prevent CLAIMANT from presenting its case,
thus violating Art. 18, alternative 2 DAL. Such violation is a ground for annulment under
Art. 34 (2) (a) (ii) DAL.

2. Admitting the written statement would amount to unequal treatment

44 Upon request, RESPONDENT may challenge CLAIMANT’s witness by cross-examination.
CLAIMANT in contrast does not have the opportunity to question Mr. Short despite its request.
45 Art. 18 alternative 1 DAL provides that neither party shall be given an advantage over the
other (cf. BINDER § 5-008). The Tribunal’s impression of a witness answering questions is more
detailed and vivid than a pre-drafted statement (BEECHEY p. 99). Being able to cross-examine
a hostile witness is therefore advantageous to a party. It allows for challenging the witness’s
statements directly, thereby assisting the Tribunal to detect inaccuracies
(cf. REDFERN/HUNTER § 6.140).
46 If RESPONDENT requests Mr. Long’s oral examination, it can contest his written witness
statement. CLAIMANT, however, is deprived of the opportunity to directly challenge
Mr. Short’s testimony though it had requested an examination.

11
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

47 RESPONDENT’s advantage of an unchallenged witness constitutes unequal treatment in

terms of Art. 18, alternative 1 DAL. If the Tribunal based its award on Mr. Short’s written
statement it would risk annulment action under Art. 34 (2) (a) (ii) or (iv) DAL.

CONCLUSION: The Tribunal should strike Mr. Short’s written witness statement from the record.
It is inadmissible under the CEAC Rules and not to be regarded under the IBA Rules. Rather
than supporting the case, a consideration of the statement would lead to further proceedings.

II. DUE TO RESPONDENT’S LATE DELIVERY CLAIMANT IS ENTITLED TO THE

AGREED SUM OR DAMAGES
48 In their Contract, the parties agreed for the polo shirts to be delivered on 19 February 2011
(Cl. Ex. No. 1 § 3). RESPONDENT failed to meet this deadline and now tries to evade the
consequences of its late delivery. It tries to deduce an amendment of contract from Mr. Long’s
reference to “paper work” that he would take care of (Statement of Defense § 7; Proc. Order No. 2
§ 27). RESPONDENT bears the burden of proof for any such allegation (cf. MAGNUS No. 5 b 26).
Since Res. Ex. No. 1 is inadmissible (supra § 20), it fails to substantiate its allegation and cannot
discharge its burden of proof. Thus, the Tribunal may not find that the parties changed the
delivery date.
49 Even if the Tribunal did attach weight to Mr. Short’s perception, RESPONDENT still cannot
discharge its burden. The parties’ conduct cannot be interpreted as an amendment of Contract.
Consequently, RESPONDENT’s non-delivery on 19 February 2011 constituted a breach of contact
(A.). RESPONDENT is not exempt from liability under Art. 79 (1) CISG (B.). The non-
performance triggered the agreed payment under Sec. 10 of the Contract entitling CLAIMANT to
the agreed sum of USD 27,500 (C.). In any case, the late delivery constitutes a breach of
Art. 33 (a) CISG entitling CLAIMANT to damages under Artt. 45 (1) (b), 74 CISG (D.).

A. RESPONDENT’s Non-Delivery on 19 February 2011 Was a Breach of

Contract
50 Since the parties did not amend the Contract RESPONDENT’s non-performance constituted a
breach of contract. Sec. 3 of the Contract calls for delivery of the shirts on 19 February 2011
(Cl. Ex. No. 1 § 3). At no point did the parties agree to adjust this delivery date and to thereby
amend the Contract in terms of Art. 29 (1) CISG (1.). Even if they had agreed to amend the

12
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

contract, such amendment lacked written form required by Mediterraneo’s reservation under
Art. 96 CISG (2.).

1. The parties did not amend the Contract

51 The parties’ conduct cannot be construed as an agreement to amend the contract in terms of
Art. 29 (1) CISG. This conduct has to be interpreted in light of the understanding of a reasonable
third person in the position of the other party (Art. 8 (2) CISG).
52 In the case at hand, such a reasonable third person would not have understood Mr. Long to
want to amend the contract. It cannot have been his intent to amend the Contract since the
Contract already anticipated the exact situation of late delivery and provided a solution (a).
Neither can Mr. Long’s conduct (b) or his reference to “paper work” (c) be construed as an
agreement to amend the Contract.

(a) There was no need to amend the Contract as Sec. 10 provided for the situation of
late delivery
53 In the fast-paced fashion business, time is of the essence. This is particularly true in the
present case as CLAIMANT was under pressure to supply the polo shirts for the launch of Doma
Cirun’s majorly advertised summer collection (cf. Statement of Claim §§ 7, 11). This is why the
parties included a clause dealing with deviations from the fixed delivery date (Cl. Ex. No. 1 § 10).
Sec. 10 b) of the Contract anticipates exactly the situation of late delivery (ibid.). Any reasonable
person would have realized that an amendment as to the delivery date would have been
unnecessary and contradictory to the parties’ intent behind the clause, effectively leaving no room
for the purported amendment.
54 In any case, such amendment would have been economically unviable. Mr. Long was aware
that late delivery would “cause all kinds of trouble for Doma Cirun” (cf. Cl. Ex. No. 2 § 4)
meaning that CLAIMANT would be liable to pay damages (cf. Cl. Ex. No. 3). A reasonable third
person would have understood that it could not have been CLAIMANT’s intent to act
economically unfeasible by waiving its right to the agreed sum. It cannot have been its intent to
pay the damages out of its own pocket.

(b) Mr. Long’s conduct does not imply his intent to amend the Contract
55 Mr. Long changed the shipping contract as well as the letter of credit and had to accept the
delayed delivery. This would not have led a reasonable person to the conclusion that Mr. Long
agreed to an amendment of Contract.

13
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

56 By including the clause FAS INCOTERMS® 2010 Oceanside, Equatoriana, the parties
agreed that RESPONDENT would only have to deliver the shirts to the port of its place of business
(Cl. Ex. No. 1 § 2, Cl. Ex. No. 7). In order to ensure delivery from Equatoriana to Doma Cirun’s
place of business in Oceania, the shipping contract needed to reflect the delayed date of arrival at
Oceanside, Equatoriana. However, this measure did not form part of the contractual relation
between CLAIMANT and RESPONDENT. The shipping contract does therefore not affect the
Contract.
57 Neither did the change in the letter of credit. Where a party’s conduct constitutes no more
than steps in performing the contract this cannot be given the explanatory power of an
agreement to amend the contract (cf. Chateau des Charmes Wines Ltd v. Sabaté Inc (USA); Solae, LLC
v. Hershey Canada, Inc. (USA); SCHROETER in Schlechtriem/Schwenzer Art. 29 § 54). The step in
question is the payment of the purchase price. Since a bank will only cash the letter of credit if it
reflects the actual delivery date (cf. WIDMER in Schlechtriem/Schwenzer Art. 34 §§ 3 et seq.)
CLAIMANT’s change of the letter of credit was a necessary step to fulfil its obligation to pay the
purchase price.
58 CLAIMANT’s statement that it would have to accept the delayed delivery only shows its intent
to still receive the shirts. It had repeatedly emphasized the importance of timely delivery
(Cl. Ex. No. 2 § 3). Accordingly, its statement is more similar to granting an additional period of
time pursuant to Art. 47 (1) CISG in order to be able to immediately avoid the contract after
expiration of this period (OLG Hamburg 28 February 1997 (Germany); MÜLLER-CHEN in
Schlechtriem/Schwenzer Art. 47 § 5) than to an agreement to amend the Contract.
59 A reasonable third person must have understood that Mr. Long’s conduct does not reflect
his intent to amend the contract.

(c) Mr. Long’s reference to “paper work” does not suffice to indicate an intent to change
the Contract
60 With “paper work” Mr. Long referred to the letter of credit and the shipping contract. These
documents are of merely administrative nature (supra §§ 54 et seqq.). The Contract already
provided a pragmatic and fair solution for changes in the delivery date. In Norfolk v. Power Source
one party had indicated that it would “shoot for” a certain delivery date. This ambiguous
reference was held to be insufficient to fix a delivery date (cf. Norfolk Southern Railway Company v.
Power Source Supply, Inc. (USA)). Therefore, for a deviation from the contractually provided
solution indirect reference to a different delivery date is insufficient. Mr. Long’s statement that he
would take care of the “paper work” (Proc. Order No. 2 § 27) is such insufficient reference.

14
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

61 Even if the Tribunal still had doubts whether there was an agreement to amend the contract,
such doubts cannot suffice to assume an amendment of contract. Rather the unambiguous
original contract needs to be honored. The parties did therefore not amend the Contract in terms
of Art. 29 (1) CISG. The original delivery date of 19 February 2011 is to be upheld.
RESPONDENT breached its contractual obligation under Sec. 3 of the Contract when it did not
deliver on the fixed day.

2. Any purported amendment is invalid lacking written form

62 Even if the parties had agreed on an amendment of Contract, such amendment would have
been invalid lacking written form. This form requirement stems from Mediterraneo’s reservation
under Art. 96 CISG.
63 Mediterraneo, where CLAIMANT is seated, has a written form requirement for contracts and
their amendments in its national legislation (Proc. Order No. 2 § 34). Accordingly it has submitted a
reservation under Art. 96 CISG (Proc. Order No. 1 § 6). This reservation declares the freedom of
form principle in Artt. 11, 29 CISG inapplicable. It is mandatory rendering all agreements
changing the effect of Art. 96 CISG ineffective (a) and directly leads to a written form
requirement for contract amendments (b).

(a) Mediterraneo’s reservation under Art. 96 CISG is mandatory rendering the parties’
agreement ineffective
64 The Tribunal is respectfully requested to find that the mandatory nature of Art. 96 CISG
renders the party agreement ineffective. The parties have agreed to apply the “CISG without
regard to any national reservation” (Cl. Ex. No. 1 § 20; Standard Choice of Law Clause, Art. 35 (1)
CEAC Rules). While this constitutes an agreement to apply the CISG to the substance of the
dispute (BENEYTO ET AL. p. 19) the parties have not expressly provided for a law governing the
validity of this choice of law clause itself. Their agreement does, however, reflect an intent to
apply the CISG in some way. Since it is the law with the closest connection to the Contract, the
Tribunal should apply the CISG as such to determine the validity of the parties’ choice of law
clause.
65 Art. 4 CISG sets forth that, in general, the Convention is not concerned with the validity of
contractual clauses. However, it does provide that parties cannot validly agree to deviate from
mandatory provisions. The parties’ agreement to apply the CISG “without regard to any national
reservation” is ineffective. This is because Part IV of the CISG (Artt. 89-101) in general (i) and
Art. 96 CISG in particular (ii) are mandatory and thus not up to the parties’ discretion.

15
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

(i) Parties cannot change the effect of Part IV of the CISG

66 Since Part IV of the CISG is directed at the Contracting States it is not up to the parties to
change the effect of any of its provisions.
67 Part IV of the CISG includes Art. 98 which allows for reservations to the CISG. A
reservation is a Contracting State’s declaration that particular parts of an international treaty such
as the CISG do not apply (cf. Artt. 2 (1) (d), 19 Vienna Convention on the Law of Treaties;
BROWNLIE p. 612; BUTLER § 2.03). Such reservations were included where no consensus on
certain issues could be reached in the drafting process of the CISG (SCHROETER p. 2). The
drafters did not just want to impose a unilateral decision on these issues risking that some states
would not ratify the CISG. To rather promote uniformity (Art. 7 CISG) and make the CISG
more attractive to a wider range of States, they therefore included the possibility to abstain from
certain provisions as a compromise (KEILY § 2.6).
68 Art. 21 (a) and (b) of the Vienna Convention on the Law of Treaties which the relevant
countries are parties to (Proc. Order No. 2 § 36) determines the effect of such reservations. It
stipulates that a reservation automatically modifies the provisions of a treaty such as the CISG for
the Reserving State and the other Contracting States. The reservations in Part IV of the CISG are
thus addressed at Contracting States and not at parties (SCHLECHTRIEM ET AL. in
Schlechtriem/Schwenzer Introduction to Artt. 89-101 § 4, 7). The latter cannot control the application
or exclusion of these provisions (OLG Linz 23 January 2006 (Austria); FLECHTNER § 29; RAJSKI in
Bianca/Bonell Art. 96 CISG § 2.2) restricting their party autonomy in this regard.

(ii) The parties could not exclude Art. 96 CISG in particular

69 Its legislative history and Art. 12 CISG determine the essential importance of the
Art. 96 CISG reservation.
70 As to the drafting process, Art. 96 CISG aimed at resolving difficulties arising because some
states considered it indispensible to keep up their national writing requirement for contracts
(UNCITRAL Digest Art. 96 § 1; RAJSKI in Bianca/Bonell Art. 96 CISG § 1.1). Thus, the general
freedom of form principle could only be agreed upon because the exception of Art. 96 CISG was
granted (SCHLECHTRIEM ET AL. in Schlechtriem/Schwenzer Art. 96 §§ 1, 2).
71 The great significance of this particular reservation is furthermore stressed in the declaratory
provision of Art. 12 CISG. It reaffirms that the parties cannot change an Art. 96 CISG
reservation (sent. 1) and underlines its mandatory nature (sent. 2). Other than Part IV of the
CISG, Art. 12 CISG is the only limitation of the principle of party autonomy in the CISG
(SCHWENZER/HACHEM in Schlechtriem/Schwenzer Art. 6 § 9). When the parties agreed on the

16
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

application of the CISG they also agreed on applying Art. 12 CISG and thereby accepted the
mandatory character of the Art. 96 reservation.
72 Its history and Art. 12 CISG underline the outstanding importance of an Art. 96 reservation
and its mandatory nature. Due to this mandatory nature, party agreements dissenting from
Art. 96 CISG are ineffective (Tribunale di Vigevano 12 July 2000 (Italy); cf. OLG Linz 23 January
2006 (Austria)).
73 The parties could therefore not effectively agree to apply the CISG “without regard to any
national reservation”. The CISG applies in its entirety including Mediterraneo’s Art. 96 CISG
reservation.
74 Rather than declaring the entire choice of law clause null and void, CLAIMANT requests the
Tribunal to uphold the clause in its essence. This is in line with the principle of favor contractus.
This principle is inherent to the CISG and provides that an otherwise pathological contractual
agreement should be maintained as far as possible (KELLER p. 259). The Tribunal should
therefore clear the parties’ choice of law clause of the ineffective agreement that no national
reservations should apply. It should preserve the applicability of the CISG in its entirety,
supplemented by the UNIDROIT Principles and these supplemented by the otherwise applicable
national law (cf. Cl. Exh. No. 1 § 20).

(b) Mediterraneo’s Art. 96 CISG reservation directly leads to a written form requirement
75 Mediterraneo’s Art. 96 CISG reservation has the effect that all contracts and their
amendments have to be concluded in written form. Art. 96 CISG directly refers back to the
domestic substantive provisions of the Reserving State and preserves the writing requirement as
it exists in its national legislation (BUTLER § 2.03 F). In light of the compromise between states
which advocated freedom of form and those which wanted to keep up their national writing
requirements (supra § 66), it would be inconsistent to circumvent the Reserving State’s
requirement for written form (Award of 31 December 1997 (CIETAC); Award of 9 June 2004
(ICAC); Forestal Guarani S.A. v. Daros International, Inc. (USA)). Any other conclusion would
render Art. 96 CISG needless. Rather, legal certainty and foreseeability demand direct application
of written form (cf. WALTHER/MORAWIETZ p. 254).
76 Therefore, Mediterranean substantive law applies to matters of form. It provides that for
international contracts both the original contract as well as any amendments thereto have to be
concluded in writing (Proc. Order No. 2 § 33). This writing requirement is not fulfilled for the
purported contract amendment in the present case. Since the purported Contract amendment
was not recorded in writing the parties have not changed the fixed delivery date.

17
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

77 In conclusion, the parties did not agree on changing the contractually agreed delivery date.
Even if the parties had agreed on an adjustment of Contract, such amendment was not recorded
in writing rendering it invalid. The Contract applies in its original form. When RESPONDENT did
not deliver on 19 February 2011 it breached Sec. 3 of the Contract.

B. The Strike at a Factory of RESPONDENT’s Supplier Does Not Exclude Its

Liability
78 RESPONDENT may try to argue that a strike at its supplier’s production facility exempts it
from liability according to Art. 79 (1) CISG. CLAIMANT rejects this notion. Art. 79 (1) CISG
provides that a party is not liable if its failure to perform was due to an impediment beyond its
control and it could not have overcome the consequences of it. However, the strike at
RESPONDENT’s supplier lies within RESPONDENT’s sphere of control (1.) and it could have
overcome the consequences of it (2.).

1. The strike was not beyond RESPONDENT’s control

79 The strike at the production facility of RESPONDENT’s supplier was within its sphere of
responsibility. The seller’s responsibility for his supplier is an integral part of the general risk of
the supply of goods (Case No. 8128 (ICC)). Thus, the seller is not exempt from liability only
because his supplier caused the seller’s failure to perform the contract (Award of 16 March 1995
(ICAC); OLG Hamburg 28 February 1997 (Germany); FLAMBOURAS p. 268; LIU Force Majeure 6.3 § 1
note 20; UNCITRAL Digest Art. 70 § 14). Especially, difficulties in obtaining deliveries due to a
supplier’s involvement in a labor dispute are generally part of the seller’s procurement risk
(SCHWENZER in Schlechtriem/Schwenzer Art. 79 § 2; c.f. NEUMAYER/MING Art. 79 § 3; SCHOOP
pp. 197-200).
80 The strike at RESPONDENT’s supplier’s production was thus not beyond RESPONDENT’s
control.

2. RESPONDENT could have overcome the consequences of its supplier’s non-delivery

81 If the seller can overcome the impediment with reasonable financial effort it is not exempt
from liability (Award of 21 March 1996 (HCC); CISG-AC Op. No. 7 §33). After having received the
information that its supplier would not be able to deliver RESPONDENT enquired for other
suppliers (Proc. Order No. 2 § 13). It found various suppliers offering the fabric on a rush basis for
a higher price (ibid). Considering that RESPONDENT could have collected the price difference
from its original supplier it would not have had to make any additional financial effort

18
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

whatsoever. RESPONDENT could therefore have overcome the consequences of the supplier’s
non-delivery.

82 As the strike was not beyond RESPONDENT’s control and RESPONDENT could have
overcome its consequences, its liability is not exempt under Art. 79 (1) CISG.

C. CLAIMANT Is Entitled to the Agreed Sum Under the Contract

83 In Sec. 10 b) of the Contract, the parties agreed that CLAIMANT would be entitled to a
payment of 1% of the contract price per day for late delivery not exceeding fifteen days (Cl. Ex.
No. 1 § 10). The applicable law allows for such agreement (1.) and the arising sum is not grossly
excessive (2.).

1. The applicable law allows for an agreement on specified sums

84 An agreement on specified sums such as Sec. 10 b) of the Contract is valid under the
applicable law. According to Art. 4 (a) CISG, the Convention does not decide on the validity of
contractual provisions such as agreed sums. The effectiveness of provisions not governed by the
CISG is based on the subsidiarily applicable law (OLG München 8 February 1995 (Germany);
SCHWENZER in Schlechtriem/Schwenzer Art. 74 § 58; HONNOLD/FLECHTNER Art. 74 § 498.1). The
Contract at hand includes a choice of law clause providing for the UNIDROIT Principles of
International Commercial Contracts (UPICC) to apply subsidiarily (Cl. Ex. No. 1 § 20).
85 Art. 7.4.13 UPICC establishes the possibility of agreeing on a specified sum for non-
performance. Non-performance is a failure by one party to perform any of its obligations under
the contract, including late delivery (Art.7.1.1 UPICC). Therefore, the parties validly agreed on a
specified sum for late delivery.

2. The sum is not grossly excessive

86 CLAIMANT submits that the payable sum of USD 27,500 should not be reduced under
Art. 7.4.13 (2) UPICC. According to this provision a specified sum is to be reduced if it is grossly
excessive. This means that parties can agree on an excessive sum, higher than the actual harm
suffered. Just a grossly excessive sum is to be reduced.
87 A sum is grossly excessive if it “would clearly be so to any reasonable person” (MCKENDRICK
in Vogenauer/Kleinheisterkamp Art. 7.4.13 § 18; emph. added). This was the case where the specified
sum was higher than half of the costs of the goods (cf. Award of 5 June 1997 (ICAC)).
RESPONDENT’s delay of delivery by five days entitled CLAIMANT to a reduction of the purchase
price by only 5%. In light of the case law this is not “clearly” grossly excessive.

19
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

88 Another factor to determine whether a sum is grossly excessive is the equality of the
bargaining power between the parties (MCKENDRICK in Vogenauer/Kleinheisterkamp Art. 7.4.13
§ 18). When negotiating the Contract, CLAIMANT had repeatedly stressed the importance of
timely delivery (Statement of Claim § 14). RESPONDENT had understood this necessity and still
guaranteed to deliver on time (Cl. Ex. No. 1 § 3, Cl. Ex. No. 2 § 3). Both parties thus knew about
the significance of the clause on the specified sum. In addition, RESPONDENT is a major clothes
manufacturer as it was able to produce 100,000 polo shirts on a rush basis besides its normal
course of business (Statement of Claim § 9). The parties have thus equal bargaining power. Also in
this regard the specified sum is not grossly excessive. CLAIMANT submits that the payable sum of
USD 27,500 should thus not be reduced under Art. 7.4.13 (2) UPICC.

89 When RESPONDENT did not deliver on time it triggered Sec. 10 b) of the Contract. This
entitles CLAIMANT to 5 % of the purchase price amounting to USD 27,500.

D. Subsidiarily, CLAIMANT Is Entitled to Damages under the CISG

90 Even if the Tribunal found that CLAIMANT is not entitled to the agreed sum, it may, in any
case, claim damages for late delivery under Artt. 45 (1) (b), 74 CISG.
91 Art. 45 (1) (b) CISG entitles the buyer to claim damages under Art. 74 CISG if the seller
breached the contract. Art. 74 CISG sets forth, that the party in breach has to pay a sum equal to
the loss suffered as a consequence of the breach not exceeding the loss which it foresaw or ought
to have foreseen. As a consequence of the late delivery CLAIMANT had to pay a respective sum
under a settlement to Doma Cirun (Statement of Claim § 27). As this loss was foreseeable,
CLAIMANT may recover this sum from RESPONDENT.
92 RESPONDENT’s non-delivery on 19 February 2011 consitutes a breach of Art. 33 (a) CISG.
93 This breach was the precondition for the detriment (“but-for-rule”) (cf. MAGNUS in Staudinger
Art. 74 §§ 28 et seqq.). Had RESPONDENT delivered on time the shirts would have been in the
Doma Cirun stores for the launch of the summer collection. Doma Cirun would not have
incurred losses due to the late delivery. CLAIMANT would not have had to pay a respective sum
under the settlement with Doma Cirun. Such settlements with third parties are recoverable
damages under Art. 74 CISG (cf. Award of 25 October 1994 (CIETAC); OLG Köln 21 May 1996
(Germany)).
94 RESPONDENT could have foreseen that late delivery would result in a loss for CLAIMANT.
CLAIMANT has repeatedly stressed the importance of delivery on 19 February 2011 (Cl. Ex. No 2
§ 3; cf. Cl. Ex. No 1 § 10). RESPONDENT had “understood” this (Cl. Ex. No. 2 § 3).

20
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

95 Furthermore, CLAIMANT fulfilled its duty to mitigate under Art. 77 CISG. This provision
requires a buyer to take such measuers as a reasonable to mitigate the loss. CLAIMANT enquired
whether the airlines it normally used could transport the goods in order to still deliver the shirts
on time and thereby tried to minimise the loss (Proc. Order No. 2 § 14).
96 CLAIMANT is therefore entitled to damages under Artt. 45 (1) (b), 74 CISG in the amount to
be quantified at a later stage of the proceedings (Proc. Order No. 1 § 9).

CONCLUSION: The parties did not change the contractually agreed delivery date. RESPONDENT’s
late delivery triggered the clause on specified sums in the Contract. Alternatively, CLAIMANT is
entitled to damages.

III. DUE TO RESPONDENT’S USE OF CHILD LABOR CLAIMANT IS ENTITLED TO

REIMBURSEMENT OF THE PURCHASE PRICE AND DAMAGES
97 Not only did RESPONDENT deliver the shirts late but it also breached the contract by using
child labor. CLAIMANT thus respectfully requests the Tribunal to grant reimbursement of the
purchase price under Art. 45 (1) (a) CISG as it effectively avoided the contract under Artt. 49
(1) (a) CISG. It is also entitled to damages under Artt. 45 (1) (b), 74 CISG.
98 Pursuant to Art. 49 (1) (a) CISG, the buyer is entitled to declare the contract avoided if the
failure by the seller to perform any of his obligations under the contract or the CISG amounts to
a fundamental breach. RESPONDENT breached its obligation to refrain from the use of child labor
in its entire course of business (A.). This breach was fundamental within the meaning of
Art. 25 CISG (B.). CLAIMANT duly notified RESPONDENT of the lack of conformity and declared
the Contract avoided (C.). In addition to reimbursement of the purchase price CLAIMANT is
entitled to damages (D.).

A. RESPONDENT Breached Its Obligation Not to Use Child Labor

99 RESPONDENT breached its obligations under Art. 35 (1) CISG as the shirts were not of the
quality required by the contract (1.). In any case, the shirts delivered were not fit for their
particular purpose under Art. 35 (2) (b) CISG (2.). Regardless of whether there was a breach of
Art. 35 CISG, RESPONDENT failed to fulfil its obligation under Sec. 12 of the Contract (3.).

21
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

1. The shirts were not of the quality required by the Contract

100 By producing shirts for CLAIMANT while using child labor in one of its plants, RESPONDENT
breached its obligations under Art. 35 (1) CISG. Under this provision a seller is required to
deliver goods of the quality required by the contract. Quality includes non-physical attributes like
the circumstances of the production (HUBER in Huber/Mullis p. 132; KRÖLL in Kröll et al.
Art. 35 § 25). These attributes have to be determined by the parties’ agreement and may include
the observance of ethical principles, such as the prohibition of child labor (HENSCHEL p. 162; cf.
SCHWENZER in Schlechtriem/Schwenzer Art. 35 § 9).
101 In the case at hand, the parties agreed that RESPONDENT would adhere to “the highest
ethical standards in the conduct of [its] business” (Cl. Ex. No. 1 § 12). This agreement is
incompatible with the use of child labor (a) and applies to RESPONDENT’s entire course of
business (b).

(a) “Highest ethical standards” exclude the use of child labor

102 Under an interpretation according to Art. 8 (2), (3) CISG, the parties agreement on “highest
ethical standards” cannot include the use of child labor. The understanding of a reasonable
person in terms of Art. 8 (2) CISG is to be determined under the relevant circumstances
(Art. 8 (3) CISG).
103 A reasonable person would have understood the term “highest ethical standards” as to
exclude child labor due to its literal meaning (i), the reference to Oceania Plus’s policy (ii) and the
circumstance that ILO Convention No. 182 is in force in both parties’ countries (iii).

(i) The term “highest ethical standards” by definition disallows the use of child labor
104 Ethical standards are meant to “avoid activities […] that do harm to people or the
environment” (Oxford Dictionaries). Child labor “harm[s] the physical and mental development of
children” (UNICEF). In the present case RESPONDENT employed children as young as eight
years under “appalling conditions” (Statement of Claim § 18). A reasonable person would have
understood that such practice does not uphold any ethical standards, least of all the “highest”.

(ii) In light of Oceania Plus’s policy the requirement “highest ethical standards” prohibits child labor
105 The parties have agreed for RESPONDENT to adhere to the policy of Oceania Plus (Cl. Ex.
No. 1 § 12). Oceania Plus is CLAIMANT’s parent company and known for its high ethical
standards (Cl. Ex. No. 4). As a subsidiary, CLAIMANT needs to comply with these standards (cf.
Proc. Order No. 2 § 1). When considering this policy, it becomes evident to a reasonable person
that the term “highest ethical standards” forbids the use of child labor.

22
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

106 Oceania Plus’s policy covers “labor matters and especially the use of child labor” (Statement of
Claim § 9, emph. add.). CLAIMANT provided RESPONDENT with the policy codified in a one-page
document (Proc. Order No. 2 § 4). Subsequently its content was “extensively discussed” (ibid.). A
reasonable person would have understood that in light of this policy the term “highest ethical
standards” prohibits child labor.

(iii) The circumstance that ILO Convention No. 182 is in force in both parties’ countries underlines that the
parties understood “highest ethical standards” to exclude child labor
107 As ILO Convention No. 182 on the Worst Forms of Child Labor is in force in both parties’
countries (Statement of Claim § 32) it must be presumed that CLAIMANT and RESPONDENT
understand “ethical standards” to exclude child labor. In Artt. 1, 3 the Convention condemns
work which is likely to harm the health, safety or morals of children. As 175 countries worldwide
have ratified ILO Convention No. 182 (Source) it can be considered a well-recognized standard
(cf. KRÖLL in Kröll et al. Art. 35 § 126). Such standards form a trans-national ordre public (Quelle),
reflecting common ethical values in all participating countries. Both parties therefore must have
shared the understanding that ethical standards are incompatible with child labor.
108 In light of the literal meaning of “highest ethical standards”, Oceania Plus’s policy and the
fact that ILO Convention No. 182 is in force in both parties’ countries, a reasonable person must
have understood that the adherence to “highest ethical standards” constitutes a contractual
obligation not to use child labor.

(b) The exclusion of child labor applies to RESPONDENT’s entire business activities
109 RESPONDENT tries to excuse itself by arguing that the shirts in question were not produced
by child labor (Statement of Defense § 15). However, the obligation to refrain from the use of child
labor extends to all of RESPONDENT’s business activities. The parties agreed that RESPONDENT
should adhere to the highest ethical standards in its entire “conduct of […] business” (Cl. Ex.
No. 1 § 12). RESPONDENT’s obligation not to employ child labor is not limited to the
manufacture of any specific shirts but embraces RESPONDENT’s entire course of business.
110 This can be directly derived from the term “conduct of […] business” (i). In addition, the
value of the “Yes Casual” brand is determined by the fact that its products are not associated
with child labor (ii).

23
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

(i) The term “conduct of business” requires RESPONDENT to refrain from using child labor in its entire
business activites
111 The phrasing of Sec. 12 of the Contract and the parties’ previous conduct provide that no
child labor be used in any of RESPONDENT’s production plants.
112 As to the wording, had the parties wanted to agree that only the particular shirts would be
produced without child labor, they would have phrased the clause differently. The contract would
have required RESPONDENT to adhere to “the highest ethical standards in the production of the
goods”. Rather, it includes a more comprehensive term, extending the prohibition of child labor to
RESPONDENT’s entire “conduct of […] business” (Cl. Ex. No. 1 § 12, emph. add.). To a reasonable
person the literal meaning of this term suggests that all of RESPONDENT’s business activities shall
be free of child labor.
113 In terms of the parties’ previous conduct, it becomes evident from CLAIMANT’s audit in
2008 that it intended to extend the elimination of child labor to RESPONDENT’s entire business
activities. Prior to the 2008 contract between the parties, CLAIMANT audited RESPONDENT
(Statement of Claim § 9). This audit revealed that one of RESPONDENT’s suppliers used child labor
(Proc. Ord. No. 2 § 3). This was an item of concern to CLAIMANT leading to discussions with
RESPONDENT (Statement of Claim § 9; Proc. Order No. 2 § 4). Subsequently, RESPONDENT made sure
that its supplier’s manager got laid off (Proc. Order No. 2 § 3).
114 CLAIMANT already raised concerns when only one of RESPONDENT’s suppliers used child
labor. A reasonable person would have understood that child labor was all the more to be
eliminated from RESPONDENT’s business dealings altogether. RESPONDENT must have been
aware of this since otherwise it would not have caused the manager to get fired.
115 The wording of Sec. 12 and the parties’ previous conduct thus show that the term “conduct
of […] business” refers to the abolition of child labor in RESPONDENT’s entire course of
business.

(ii) The “Yes Casual” brand requires the overall absence of child labor
116 Pursuant to Art. 8 (3) CISG, it also needs to be taken into account that the ethically correct
production environment of “Yes Casual” clothing dermines its value. From this, a reasonable
person must have understood that it may not use child labor in any of its factories.
117 Social corporate responsibility increases a product’s financial value (cf. KIM/VAN DAM
passim). This is because customers do not only buy the physical product but also the ethical values
behind it (cf. CHU passim; WARHURST pp. 151 et seqq.). In fact, consumers may turn reluctant
towards products distributed by a company that uses child labor (cf. Statista 2006).

24
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

118 In the case of “Yes Casual” this is particularly true. In order to sell the shirts they could not
be brought in any connection with child labor. It is of no regard whether the specific shirts were
manufactured by child labor or child labor is only generally used in the production facilities.
119 This was evidenced by the reactions of the Oceanian public. As soon as the public found out
that RESPONDENT used child labor, not only did the sales of the specific shirts drop (Proc. Order
No. 2 § 19) but the public boycotted the entire “Yes Casual” brand (Proc. Order No. 2 § 17), all
Doma Cirun stores (Statement of Claim § 20) and Oceania Plus (Statement of Claim § 21). It was thus
crucial for CLAIMANT that RESPONDENT did not use any child labor whatsoever.
120 A reasonable person in RESPONDENT’s position must have been aware of this crucial
importance. It has previously delivered clothing to Oceania (Proc. Order No. 2 § 15), which is
known for its ethically highly responsive consumers (cf. Statement of Claim § 20). Since it is
furthermore familiar with the “Yes Casual” brand (Proc. Order. No. 2 § 16) it must also have been
aware that this brand is targeted at customers attentive to ethical issues. A reasonable person in
RESPONDENT’s shoes therefore would have known that it may not use child labor in any of its
production facilities in order for the shirts to fit CLAIMANT’s demands.
121 In conclusion, the term “highest ethical standards” excludes the use of child labor. This
requirement extends to RESPONDENT’s entire business activities. When RESPONDENT delivered
shirts while employing child labor in one of its plants, it breached the parties’ quality agreement
in terms of Art. 35 (1) CISG.

2. The polo shirts were unfit for their particular purpose

122 Even if the Tribunal found that the parties did not contractually agree on the prohibition of
child labor, the polo shirts were not fit for their particular purpose, namely the resale in Oceanian
Doma Cirun stores (a). RESPONDENT’s liability is not excluded under Art. 35 (3) CISG (b).

(a) The shirts were not fit for resale in Oceanian Doma Cirun stores
123 Art. 35 (2) (b) CISG sets forth that the goods do not conform with the contract unless they
are fit for their particular purpose except where the buyer could not reasonably rely on the seller’s
skill and judgement.
124 CLAIMANT made the particular purpose known to be the resale in Oceanian Doma Cirun
stores (i). It reasonably relied on RESPONDENT’s skill and judgment to deduce from this purpose
that RESPONDENT must not use child labor in any of its production facilities (ii).

25
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

(i) CLAIMANT made the particular purpose known to be the resale in Oceanian Doma Cirun stores
125 According to Art. 35 (2) (b) CISG the particular purpose of the goods must be made known
to the seller. The particular purpose is “made known” if a reasonable seller would have
recognized the purpose from the circumstances (SCHWENZER in Schlechtriem/Schwenzer
Art. 35 § 22).
126 In the case at hand, RESPONDENT was aware that the “goods were destined for Oceania for
sale there” (Proc. Order No. 2 § 15). The shirts were to “carry the label ‘Yes Casual’ on the inside
collar” (Cl. Ex. No. 1 § 1), which is a well known brand “to manufacturers of clothing in
Equatoriana” (Proc. Order No. 2 § 16). From these circumstances RESPONDENT knew that “the
goods were to be delivered finally to Doma Cirun” (cf. Proc. Order No. 2 § 16).

(ii) CLAIMANT reasonably relied on RESPONDENT’s skill and judgement to deduce from the particular
purpose that it may not use child labor
127 Generally, the buyer may rely on the seller’s skill and judgment to deliver goods suitable for
their particular purpose (MAGNUS in Honsell Art. 35 § 21). A buyer can in any case rely if the seller
is an expert in the manufacture of goods for the particular purpose intended by the buyer
(SCHWENZER in Schlechtriem/Schwenzer Art. 35 § 24).
128 RESPONDENT was able to handle the production of 100.000 polo shirts on a rush basis
besides its normal course of business (Statement of Claim § 9), which demonstrates its expertise as a
major producer. Furthermore, it had previously contracted with parties from Oceania and
CLAIMANT over deliveries to Oceania Plus subsidiaries (ibid.; Proc. Order No. 2 § 15). It was thus an
expert in the Oceanian market. CLAIMANT thus reasonably relied on RESPONDENT’s skill and
judgement since the latter is an expert.
129 If the seller is aware of where the goods will eventually be used he is responsible for the
goods’ fitness in respect to the actual conditions of use, such as climate or ideological persuasions
of the consumers (SCHWENZER in Schlechtriem/Schwenzer Art. 35 § 21). If, for example, a seller is
aware that hydrolic pumps are to be used in Siberia, they have to be fit to handle frost (MAGNUS
in Staudinger Art. 35 § 27). Likewise, if the goods are to be sold in a market which is known for
being particularly conscious of environmental or social issues, the goods may not be associated
with environmentally or socially unsustainable methods (MALEY p. 116).
130 RESPONDENT was aware that the polo shirts were to be sold in Oceania’s Doma Cirun stores
(supra § 119). Oceanian customers are very attentive to ethical standards and child labor (cf.
Statement of Claim § 20) and would not buy clothing from a company using child labor. Thus,
RESPONDENT ought to have concluded that it needed to deliver shirts that were not associated
with the use of child labor in order to fulfil the particular purpose.

26
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

131 In conclusion, RESPONDENT knew the particular purpose to be the resale in Oceanian Doma
Cirun stores. CLAIMANT reasonably relied on RESPONDENT’s skill and judgment to conclude that
this meant that RESPONDENT could not use child labor in any of its plants.
132 Due to RESPONDENT’s use of child labor, Oceanian customers stopped purchasing the polo
shirts (Statement of Claim § 20). The shirts were therefore not fit for their particular purpose which
constitutes a breach of Art. 35 (2) (b) CISG.

(b) RESPONDENT is liable since CLAIMANT was not aware of its use of child labor
133 RESPONDENT cannot argue that CLAIMANT should have been aware that it used child labor
and that it is therefore exempt from liability under Art. 35 (3) CISG. This provision sets forth
that a seller is not liable where the buyer knew or could not have been unaware of the lack of
conformity at the time of the conclusion of the contract.
134 Liability is only excluded for a lack of conformity that is obvious (SCHWENZER in
Schlechtriem/Schwenzer Art. 35 § 35; cf. HONNOLD/FLECHTNER Art. 35 § 229; BRUNNER Art. 35
§ 20). CLAIMANT had carried out an “ethics audit” for a prior contract with RESPONDENT in 2008
(Statement of Claim § 9). Although this audit reveal that one of RESPONDENT’s suppliers was using
child labor (Proc. Order No. 2 § 3) it was not obvious that RESPONDENT was still concerned with
child labor when the parties concluded the instant contract in 2011.
135 In a discussion with RESPONDENT, CLAIMANT had voiced its concerns about the results of
the 2008 audit (Statement of Claim § 9; cf. Statement of Defense § 3; Proc. Order No. 2 § 3). As a
consequence, the manager of the plant had been laid off (Proc. Order No. 2 § 3). This action and
the fact that RESPONDENT complied with Oceania Plus’s policy in all subsequent contracts with
Oceania Plus’s subsidiaries (Proc. Order No. 2 § 5) indicated that RESPONDENT had understood
CLAIMANT’s need for a child-labor free production environment. It was thus by no means
obvious that RESPONDENT would again resort to the use of child labor. To the contrary,
CLAIMANT could reasonably expect that for future contracts RESPONDENT would refrain from
using child labor.
136 Moreover, RESPONDENT cannot argue that CLAIMANT should have conducted another audit
prior to the conclusion of the contract at hand. Art. 35 (3) CISG does not establish an
examination-obligation for the buyer prior to the conclusion of contract (MULLIS in Huber/Mullis
p. 143; PILTZ § 5-52; KRUISINGA p. 53). The fact that CLAIMANT did not audit RESPONDENT again
is a matter of intra-group policies (cf. Statement of Claim § 9) and has no impact on
Art. 35 (3) CISG.

27
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

137 RESPONDENT’s use of child labor was thus not obvious at the time of the conclusion of the
contract. CLAIMANT did not know and could not have been aware of such lack of conformity.
RESPONDENT’s liability is not precluded under Art. 35 (3) CISG.

3. RESPONDENT breached its obligations under Sec. 12 of the Contract

138 Should the Tribunal hold that the polo shirts were in conformity with Art. 35 CISG,
RESPONDENT still breached its obligations arising from Sec. 12 of the Contract. Under
Art. 45 (1) CISG one reason for avoidance of the contract is that “the seller fails to perform any
of his obligations under the contract” (emph. add.). Thus, besides a breach of Art. 35 CISG, non-
compliance with contractual agreements in addition to quality requirements also entitles a buyer
to take the measures under Art. 45 (1) CISG (cf. Cour d’appel Grenoble 22 February 1995 (France);
OLG Frankfurt 17 September 1991 (Germany), BRÖLSCH p. 27 et seq.).
139 In Sec. 12 of the Contract, the parties agreed that RESPONDENT would “conform to the
highest ethical standards in the conduct of [its] business” (Cl. Ex. No. 1 § 12). This constituted an
additional duty of conduct not to use child labor in any of its business activites (supra § 119).
RESPONDENT breached this obligation by using “child labor in at least one of its production
plants” (cf. Proc. Order No. 1 § 8).

140 In conlusion, RESONDENT breached its contractual obligation not to use child labour in it
entire course of business.

B. RESPONDENT’s Breach Is Fundamental

141 In its production facilities, RESPONDENT neglected ethical standards when it used child
labor. It accepted that this would result in a breach of its contractual obligations as set forth in
Sec. 12 of the Contract. It further accepted that its negligence would amount to a breach of the
particular purpose. RESPONDENT ought to have foreseen that its indifference would not only
cause a breach of contract but beyond that lead to a substantial detriment for CLAIMANT.
Accordingly, RESPONDENT now needs to accept the ensuing consequences of its indifference.
142 A breach is fundamental under Art. 25 CISG if it substantially deprives the other party of
what it was entitled to expect under the contract unless such result was not foreseeable. In the
case at hand, the breach resulted in a substantial detriment of CLAIMANT’s expectation to receive
shirts from a child labor free producer (1.). This detriment was foreseeable for RESPONDENT
(2.). In any case, the Tribunal should confirm a fundamental breach since avoidance is the only
remedy which fully compensates CLAIMANT’s detriment (3.).

28
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

1. CLAIMANT is substantially deprived of its expectation

143 CLAIMANT was entitled to expect polo shirts produced in a child labor free production
environment (a). It was substantially deprived of this expectation (b).

(a) CLAIMANT was entitled to expect polo shirts from a child labor free company
144 A buyer is entitled to expect that the obligations be fulfilled to which he attached particular
importance (FERRARI p. 497; HUBER in Huber/Mullis p. 214). The purpose of the contract gives
indication as to what was particularly important for the buyer (MAGNUS in Staudinger Art. 25
§ 13). The purpose of the contract was that the shirts be resold to Doma Cirun stores in Oceania
which required that RESPONDENT did not use child labor (supra § 129). This was CLAIMANT’s
reasonable expectation.

(b) CLAIMANT was substantially deprived of its expectation

145 A substantial detriment is one which makes the seller lose any interest in the performance of
the contract (NEUMAYER/MING Art. 25 § 4; HERBER/CZERWENKA Art. 25 § 8; SALGER in
Witz et al. Art. 25 § 7). The interest does not have to relate to monetary considerations (BG 15
September 2000 (Switzerland); NEUMAYER/MING Art. 25 § 7). Case law affirms that it is decisive
whether the purpose of the Contract was endangered.
146 In the “Marlboro case” two parties had agreed on an exclusivity clause in addition to the
mere production of shoes. The seller still displayed the shoes for his own purposes at a trade fair.
Despite the buyer not having suffered major monetary loss, the seller’s failure to comply with its
contractual obligation amounted to a substantial detriment as it endangered the purpose of the
contract (OLG Frankfurt 17 September 1991 (Germany)).
147 Similarly, in the “Soyprotein products case” significance had been attached to the obligation
that in addition to their general quality requirements soyprotein products were free from genetic
modification. A substantial detriment was confirmed when the seller still did not refrain from
said modifications, since they made the contractual purpose, namely the processing into tofu
schnitzel, impossible (AG Basel-Stadt 22 August 2003 (Switzerland)).
148 Equally, the parties in the case at hand have agreed that RESPONDENT should not use child
labor besides the obligation to produce the shirts according to the quality requirements set forth
in the annex of the Contract. Though not resulting in major monetary loss, it made CLAIMANT
lose all interest in the performance of the contract since it could not resell the shirts to Doma
Cirun. CLAIMANT was thus substantially deprived of its reasonable expectations.

29
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

2. This substantial detriment was also foreseeable to RESPONDENT

149 RESPONDENT could have foreseen the substantial detriment as it was aware of the
importance CLAIMANT had attached to child labor free production facilities. Under Art. 25 CISG,
the party in breach and a reasonable person in the same circumstances must have foreseen the
substantial detriment. Foreseeability has to be determined in light of the facts and matters known
at time of the contract conclusion (Will in BIANCA/BONELL § [Link]).
150 When the parties concluded the Contract RESPONDENT was and any reasonable person
would have been aware of the importance CLAIMANT attached to the prohibition of child labor.
This was evident from the purpose of the Contract. Being aware of this importance,
RESPONDENT and any reasonable person must have foreseen that a frustration of this obligation
would result in a substantial detriment.
151 In conclusion, RESPONDENT fundamentally breached the Contract when it delivered shirts
which were not manufactured in a child labor free production environment.

3. In any case, the Tribunal should confirm a fundamental breach since avoidance is
the only remedy which fully compensates CLAIMANT’s detriment
152 Regardless of whether the Tribunal finds that RESPONDENT’s delivery of shirts unfit for
resale in Oceania amounted to a fundamental breach, the mere granting of damages does not
suffice in the case at hand.
153 In order to determine whether a party’s breach is fundamental it is to be considered whether
it is reasonable for the buyer that the contract be upheld or whether the buyer needs to be able to
avoid the contract (“remedy-oriented approach”) (cf. KOCH, p. 12; BGH 3 April 1996 (Germany)).
The circumstances of the case determine whether the approach is justified (ibid.). Such
circumstances are given where ethical standards have been violated (cf. CISG-AC Op. No. 5 § 4.1;
SCHWENZER/LEISINGER p. 268). The agitated public will only be appeased if the buyer
completely distances itself from the contract by avoiding it, rather than merely claiming damages
(ibid.).
154 Under the circumstances CLAIMANT needs to be entitled to avoid the Contract. Beyond the
fact that the shirts were not fit for resale by Doma Cirun, the entire Oceania Plus Group suffered
severe harm to its reputation and credibility.
155 Oceania Plus and Doma Cirun had been condemned in strong terms for dealing with
RESPONDENT (Statement of Claim § 17). Moreover, there were continuous demonstrations at the
Doma Cirun stores throughout Oceania (Statement of Claim § 20). Even Oceania’s Prime Minister
called CLAIMANT’s mother company Oceania Plus and urged it to take immediate actions
(Statement of Claim, § 21), giving Oceania’s national outcry a voice. In addition, the Children

30
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

Protection Fund, which had invested majorly in Oceania Plus, announced its intention to sue
Oceania Plus and its directors for its losses and for the damage to its reputation (ibid.). Finally,
Oceania Plus’ share price dropped 25 % wiping hundreds of millions of dollars of value off its
stock market valuation (ibid.)
156 All these consequences show what far-reaching damage RESPONDENT’s breach did to the
reputation and credibility of the Oceania Plus Group. In order to restore the customer’s, the
government’s and the shareholders’ faith in the adherence of Oceania Plus and its subsidiaries to
highest ethical standards, CLAIMANT as the acting company needed to distance itself from
RESPONDENT using child labor. It could thus not have been expected of CLAIMANT to content
itself with claiming damages. Avoiding the contract with the company whose behaviour caused
the aforementioned strong public reactions was thus the only sensible measure to be taken by
CLAIMANT.

157 In conclusion, regardless which approach the Tribunal follows RESPONDENT fundamentally
breached the contract under Art. 25 CISG.

C. CLAIMANT Declared Non-Conformity and Avoidance of the Contract

158 In its Statement of Defense, RESPONDENT does not dispute that CLAIMANT notified
RESPONDENT of the lack of conformity (Art. 39 CISG) and declared the Contract avoided
(Art. 26 CISG), fulfilling the content and time requirements. CLAIMANT did so with its letter of
8 April 2011 (Cl. Ex. No. 6). Therein, CLAIMANT specified that the employment of children is the
reason why it is no longer willing to perform the contract. The notice was submitted only three
days after CLAIMANT duly discovered via the media that RESPONDENT had used child labour.
Thus, no further submissions in this regard shall be made.

159 In conclusion, CLAIMANT duly avoided the Contract under Artt. 45 (1) (a),
49 (2) (b) (i) CISG. As a consequence, it is entitled to reimbursement of the purchase price
pursuant to Art. 81 (2) CISG.

31
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

D. CLAIMANT Is Entitled To Damages

160 Under Artt. 45 (1) (a), 74 CISG CLAIMANT is entitled to damages out of the settlements with
Doma Cirun and Oceania Plus. It may further claim the loss of profit from the lost sale to Doma
Cirun. These provisions require a breach of contract resulting in a foreseeable loss (supra § 90).

Investors in Oceania Plus

including
Children Protection Fund of Oceania

• drop in shares

settlement

Doma Cirun Oceania Plus

• purchase price • settlement with

• cover purchase investors
• lost sales due to the
lack of polo shirts after
contract avoidance
• loss of reputation

CLAIMANT

• loss of profit

161 As a result of RESPONDENT’s breach (supra § 139) CLAIMANT incurred recoverable

losses (1.). RESPONDENT could have foreseen these losses (2.). The respective sum is not to be
reduced since CLAIMANT duly mitigated the losses (3.).

1. CLAIMANT suffered revocerable losses as a result of RESPONDENT’s breach

162 As a consequence of RESPONDENT’s use of child labor CLAIMANT had to pay the two
settlements which are recoverable under Art. 74 CISG (cf. supra § 92).
163 Had RESPONDENT not used child labor, Doma Cirun could have sold the shirts. It would
not have had to claim reimbursement of the purchase price and suffered the losses due to the
cover purchase, the lost sales after it had returned the shirts and the loss of reputation. Neither
would Oceania Plus’s share price have dropped. In that event, Doma Cirun and Oceania Plus
would not have brought suit against CLAIMANT.

32
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

164 RESPONDENT’s breach further resulted in CLAIMANT’s loss of profit since it could not realize
its profit margin with Doma Cirun.

2. The losses CLAIMANT demands were foreseeable

165 It was foreseeable that CLAIMANT itself would suffer the loss of profit due to the lost sale to
Doma Cirun. It was furthermore foreseeable that Doma Cirun and Oceania Plus would not bear
their losses but rather collect them from CLAIMANT. Doma Cirun’s and Oceania Plus’s losses in
turn were foreseeable.
166 Generally, the loss must be foreseeable to a reasonable person (ENDERLEIN/MASKOW
Art. 74 § 10; LIU § 14.1.2).
167 As to Doma Cirun’s loss, the items the settlement comprised were foreseeable. Any
reasonable person with RESPONDENT’s knowledge about the Oceanian market would have
foreseen that it would turn impossible to sell the shirts if child labor was employed (supra § 129).
It was further foreseeable that this impossibility would result in the claim for reimbursement of
the purchase price, the costs for the cover purchase, the lost sales after Doma Cirun had returned
the shirts.
168 Loss of reputation is foreseeable when the buyer is a distributor in a sensitive market
(SCHWENZER in Schlechtriem/Schwenzer Art. 74 § 56; SCHLECHTRIEM/BUTLER § 306; HUBER in
Huber/Mullis p. 279). Doma Cirun was a distributor in a market highly responsive to the issue of
child labor (supra § 129). All of Doma Cirun’s losses were thus foreseeable.
169 In regard to Oceania’s Plus’s loss, it was foreseeable for RESPONDENT that its use of child
labor would lead to a drop in Oceania Plus’s shares. It was further foreseeable that Oceania Plus
would have to reimburse its stock holders for this drop.
170 From the Contract and the parties’ previous business relationship it was evident that
CLAIMANT was one of Oceania Plus’s subsidiaries (Proc. Order No. 2 § 4; Cl. Ex. No. 1 § 12). A
reasonable seller in RESPONDENT’s position would have further known that Oceania Plus had a
reputation for its high ethical standards. Its high ethical standards feature prominently on its
website and in its public relations and other communications (Statement of Claim § 6). Such social
compliance translates into shareholder value (cf. GODFREY ET AL., passim). This is particularly true
for Oceania where the business community strongly supports its government’s engagement to
fight child labor (Cl. Ex. No. 4).
171 It was foreseeable that a frustration of this corporate identity would adversely reflect on
Oceania Plus’s stock price (cf. SCHWENZER/LEISINGER p. 251). It was also comprehensible that
Oceania Plus’s shareholders would then sue for their losses.

33
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

172 In conclusion, the losses of Doma Cirun and Oceania Plus were foreseeable. So were the
suits they then brought against CLAIMANT. Furthermore, CLAIMANT’s loss of profit was
foreseeable.

3. CLAIMANT duly mitigated all arisen losses

173 CLAIMANT furthermore fulfilled its duty to mitigate the arising losses in terms of
Art. 77 CISG. It sold the remaining polo shirts to Pacifica Trading (Proc. Order No. 2 § 21) and
negotiated two favourable and unavoidable settlements (Proc. Order No. 2 § 29). These measures
satisfy the obligation under Art. 77 CISG.

174 In conclusion, all prerequisites of Art. 74 CISG are met. CLAIMANT may thus claim damages
out of the settlements with Doma Cirun and Oceania Plus as well as for the loss of profit due to
the lost sale to Doma Cirun. Claimant is entitled to these damages in addition to the specified
sum – or respectively damages – for the late delivery (supra §§ 95, 158) and reimbursement of the
purchase price (supra § 160).

CONCLUSION: When RESPONDENT used child labor it fundamentally breached the Contract.
CLAIMANT is therefore entitled to avoid the Contract and claim damages.

34
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

REQUEST FOR RELIEF

In light of the above submissions, counsel for CLAIMANT respectfully requests the Tribunal to
find that
(1) Mr. Short’s written witness statement is inadmissible to the further proceedings;
(2) CLAIMANT is entitled to the specified sum due to RESPONDENT’s late delivery;
(3) CLAIMANT is entitled to reimbursement of the purchase price and damages for the
losses incurred due to RESPONDENT’s use of child labor.

35
 L U D W I G -M A X I M I L I A N S -U N I V E R S I T Ä T M Ü N C H E N

Munich, 6 December 2012

We hereby confirm that this Memorandum was written only by the persons who signed
below. We also confirm that we did not receive any assistance during the writing process from
any person that is not a member of this team.

______________ ________________ _____________

Felix Aiwanger Clara Freißmuth Ronja Schregle

______________ _______________ _____________

Sophie Schröter Luise Seidel Michael Strecker

XXX