International Commercial Arbitration - Assignment Example

Name : xxxxxxxxxxx Institution : xxxxxxxxxxx Course : xxxxxxxxxx Title : International Commercial Arbitration Tutor : xxxxxxxxxxx @2010 TABLE OF CONTENTS Table of Abbreviations 2 Index of Authorities 3 Rules 3 Statement of Facts 4 Request for Arbitration and Statement of Claim 6 Relief Requested 10 Table of abbreviations Art, Arts: Article / Articles ICC: International Chamber of Commerce Ltd. Limited Company No: Number Par: Paragraph / paragraphs Proc: Procedure or procedural Assn Association Com. Commercial Corp. Corporation Ex. Exhibit UNCITRAL United Nations Commission on International Trade Law Index of authorities Model Law UNCITRAL Model Law on International Passim Commercial Arbitration, 1985 Insolvency UNCITRAL Model Law on Cross Border Insolvency, 73 Convention 1997 Rules ICC Rules International Court of Arbitration of the International 69 Chamber of Commerce Rules of Arbitration SCC Rules Arbitration Rules of the Arbitration Institute of the 4,5 Stockholm Chamber of Commerce International Commercial Arbitration MEMORANDUM FOR CLAIMANT On behalf of Against John Frost Ltd. Honest Dealers Ltd Millers Rd. Nathan Rd Melbourne Hong Kong (“CLAIMANT”) (“RESPONDENT”) STATEMENTS OF FACTS John Frost of John Frost Ltd. Sent a letter on 1st December 2009 to Mr. Chan of Honest Dealers Ltd. requesting for a business contract to deliver the company cattle throughout the year. On December 10 2009, John Chan contacted John Frost and informed him that he was glad his company could supply the cattle and stated that Honest Dealers Ltd. required 10.000 steers annually and sent along his company’s conditions. John Chan further presented arbitration clause in the contract which stated that any dispute would be solved through arbitration and according to SIAC Arbitration Rules and the Arbitration seat would be Hong Kong and the language to be used would be English. On December 15, 2009, John Frost sent John Chan a letter confirming having receiving the latest latter and informed him that John Frost Ltd. only supplied Angus cross cattle and that the prices would be established basing on Melbourne stock exchange at the day of ship’s departure. John Frost also informed John Chan that he would call to discuss terms and conditions among other things. On December 20, 2009, Mr. Chan sent John Frost an email confirming approval of the terms but reminded him of the arbitration clause. He further informed Mr. Frost of the first cattle shipment, 25.000(plus or minus2%), mode of transportation as well as the delivery date. On December 21, 2009 John Frost confirmed the acceptance of the arbitration clause through an e-mail and informed Mr. Chan that the cattle had been inspected and documentation sent to the bank as per instructions. On January 21, 2010 sent another e-mail to Mr. Chan providing him with his company’s terms and conditions. On March 7, 2010, Mr. Chan contacted Mr. Frost a telephone conversation they had that day and informed him that his company was satisfied with their previous shipment and that since a supermarket chain in China had contracted them, they needed new trial basis. On March 10, 2010, Mr. Frost wrote to Mr. Chan and informed him that his company was not in a position to make such supply that year. On April 23, 2010 Mr. Chan confirmed that day’s telephone conversation and informed him that both his company and the clients were satisfied with the shipment. However, on June 23, 2010, Mr. Chan wrote to Mr. Frost and informed him that his company had breached the agreement since after counting the cattle in the latest shipment the heifer count was 12% and not 10% as per the agreement. He also informed Mr. Frost that Honest Dealers Ltd. would deduct five cents per kilo of the total shipment to cater for the additional costs of placing the meat to the outlets. On July 10, 2010, Mr. Frost protested to Honest Dealers Ltd company’s unilateral decision thorough a letter and informed Mr. Chan that deducting five cents per kilo over the total shipment was a penalty clause and this was unlawful in common law. Mr. Frost also informed Mr. Chan that his company was willing to compensate for the extra costs even though according to his company, they doubted the extra costs since they were aware that they had sold the heifers on to the live market and hence the extra costs had been covered. Additionally, Mr. Frost informed Mr. Chan that his company would begin arbitration if Honest Dealers Ltd did not communicate to them within two weeks. Accordingly, John Frost Ltd. sought arbitration and as a result Honest Dealers Ltd. was sent a letter by Ms Francis the secretary general ICC, Melbourne on August, 20, 2010 informing them that arbitration request had been lodged with ICC by John Frost Ltd. On September, 30, 2010, Mr. Chan sent a letter to the Secretary General objecting the tribunal and asserting that litigation was applicable in their case. Claimant John Frost Ltd Company is the proprietor of a 2, 000,000 hectare property, and deals with cattle supply. It is located at Millers Rd, Melbourne. Respondent Honest Dealers Ltd Company purchases cattle for transportation various destinations and it is located at Nathan Rd, Hong Kong. Request for Arbitration and Statement of Claim Counsel prepared this Memorandum for CLAIMANT in accordance with the Arbitral Tribunal’s procedure Order No. 1. It is argued that: Terms and conditions were agreed on between the CLAIMANT and the RESPONDENT on March 7, 2010 through a letter. RESPONDENT breached the contract agreement by deducting five cents per kilo over the whole shipment. CLAIMANT is entitled to claim the deductions the CLAIMANT made through a unilateral decision. Common law is applicable on the contract and hence the RESPONDENT committed a penalty clause which is not allowed in common law. Arbitration was fundamental since both the CLAIMANT and the RESPONDENT had agreed into the contractual arbitration clause provided. Arguments The CLAIMANT and the RESPONDENT had agreed that if any dispute occurred, it would be resolved through arbitration according to SIAC Arbitration Rules and the Arbitration seat would be Hong Kong and the language to be used would be English. Consequently, the Tribunal has the authority to rule on it own jurisdiction. 1. CLAIMANT and RESPONDENT concluded a valid arbitration agreement A. Through e-mail on December 21, 2009 CLAIMANT and the RESPONDENT concluded a business contract in writing. In the business contract, both parties agreed to settle any dispute, controversy or claims that would occur in regard to the contract through arbitration. This included the validity, invalidity and breach of the contract. The period of Limitation has not expired prior to the beginning of Arbitration A. CLAIMANT tenders that its claim is actionable. The claim arise out of the contract completed between the CLAIMANT and the RESPONDENT on June 23, 2010 when the John Frost Ltd. protested against Honest Dealers Ltd unilateral decision to deduct five cents per kilogram over the entire shipment even though they had previously confirmed validity of the shipment (CLAIMANT EXIHBIT) . 2). [hereinafter Business Contract). Because the period of limitation starts when the incident leading to the claim take place, it started to run earliest June 23, 2010, when the RESPONDENT alleged that John Frost Ltd. had breached the agreement since after counting the last shipment they noted the heifer count was 12% and not permitted 10% and decided to deduct five cents per kilogram of the complete shipment to cater for the extra costs they claimed occurred. Basically, the limitation period stops expiring with the beginning of the arbitration. The existing proceedings started on August, 20, 2010 when John Chan was notified of the arbitration and sent a statement of claim by Ms Francis the secretary general ICC, Melbourne. Therefore, the claim of the CLAIMANT remains actionable. C. RESPONDENT contradicted itself during the contract communication On April 23, 2010, the Respondent confirmed through telephone that the cattle shipment the claimant has made was satisfactory and that both the Respondent and its clients were happy with the shipment. However, on June 23, 2010, the Respondent contended that Claimant breached the agreement since the heifer count was 12% and not allowed 10% and as a result decided to make the deductions. This contradiction illustrates that the Respondent was not candid during the contract dealings since even the Claimant has evidence demonstrating that the costs the Respondent alleged had been covered. A. The dispute cannot be resolved through litigation Since both the Claimant and the Respondent were bound by arbitration clause, this dispute should be resolved through arbitration. According to the laws and rules governing arbitration, once the parties have agreed to have their case settled through arbitration, then the case cannot be settled through litigation (Campbell 2007). B. Respondent is supposed to respect arbitration clause The respondent presented a contract to the claimant, John Frost Ltd which was bound by arbitration clause. The arbitration clause stated that the disputes that would occur would be solved through arbitration. Therefore, the Respondent deciding to resolve the dispute through litigation is completely erroneous (Campbell 2007). C. There is clear breach of contract by the Respondent During the contract agreement, the parties had not decided on the type of penalty to be exalted in case of any default by any party. Therefore, when the Respondent made a unilateral decision of deducting some money without consulting the Claimant, the respondent went against the mutual consent of the contract (Campbell 2007). D. Claimant satisfied intended obligations John Frost Ltd complied with the arbitration conditions. It submits that it attempted conciliation procedure with the Respondent and Mr. Delbon, has the suitable authority to represent John Frost Ltd during arbitration. John Frost Ltd also filed the suit with the arbitration court to solve their disputes. This is according to the contract since the contract was bound by arbitration clause. In addition, John Frost Ltd agreed into the arbitration clause that the Respondent provided for their contract. E. Conclusion on substantive matters 1. The Tribunal should find that the Respondent is not entitled to litigation since there was availability of arbitration clause in the contract. The clause stated that in case of any dispute, it would be solved through arbitration. 2. The tribunal should also hold that the Respondent was untrue in making his allegations. Previously he had commended John Frost Ltd for satisfactory supply of cattle and after two months claimed that the supply was not as agreed. Furthermore, sources indicate that the Respondent had sold heifers to live market and not as meat as they claimed. As a result, the Respondent had covered for the incurred losses. 3. The Tribunal should also find that the Claimant never failed to take cover of consequences of their supply because they offered to reimburse the Respondent but the Respondent turned down. Relief Requested John Frost Ltd. requests the Tribunal to find that: Respondent breached the contract agreed terms John Frost Ltd never failed in mitigating the outcome of supposedly unsuitable cattle supply The respondent was not truthful in its allegations and was making contradictory allegations To reject the challenge of John Chan (Honest Dealers Ltd.) The tribunal has jurisdiction to take into consideration the dispute between the Claimant (John Frost Ltd.) and the Respondent (Honest Dealers Ltd.) To declare that the RESPONDENT breached the contract by declining to comply with its contractual requirements That the breach of the contract constituted a fundamental breach: Claim for uncalled for deductions. Therefore, CLAIMANT courteously requests the Arbitral Tribunal to approve that Honest Dealers Ltd: Pays back John Frost Ltd all deductions made Compensate the Claimant for the damages Pay all arbitration costs (Signed and Date) Mr. Delbon, Managing Director, Elders group of shipping companies Part 2 Question 1 The arbitration clause is an important part of a contractual document since it represents the agreement of both parties in that: in case of any dispute in regard to the obligations whereby one party has undertaken to the other, such disputes are solved by the tribunal of their own constitution. Normally, arbitration clause does not enforce on one of the parties an obligation in favor of the other party (Yuval 2004). An arbitration clause within a contract affirms that each and every dispute in the contract will be solved through arbitration and not litigation. With the congestion being witnessed in the courts, delayed discovery as well as motion practice increasing the litigation cost, arbitration is considered as an important alternative for resolving the disputes. Arbitration enables an independent arbiter to resolve a dispute instead of presenting the dispute before court in proceedings. If there is no arbitration clause in a contract, then the parties are not needed to put forward disputes to arbitration. Apparently, the key advantages of having an arbitration clause which consequently allows the disputes to be resolved through arbitration involves; arbitration is always faster and less costly when compared to litigation, it is less formal and also the arbitrators are normally more sophisticated in addition to being knowledgeable when compared to the judges (Yuval 2004). Arbitration is quicker since there is either no up-front law discovery (the procedure of producing the documents as well as witness depositions) or very restricted discovery. Most arbitral bodies that offer process regulations and administration, for instance ICC, have regulations with expedited time periods for filings and responses; they make it a component of their undertaking to offer apt dispute resolution. Moreover, the award is usually ultimate and binding, and hence there are no appeals. Therefore, even if the parties pay the arbitrator for the time, the whole procedure is basically quicker and less costly largely. Arbitration is also advantageous since it is private; there is no bureaucrat record to be publicized. As a result, if a party has a dispute with another party whereby the party might require to carry out business again, then this is a key advantage. The parties can also lay down their arbitrators who have expertise in specific fields that would be applicable to their business or the kind of dispute. Specifically within the international contracts, arbitration is normally utilized in bypassing the fear (real or superficial) of not getting a fair hearing within a foreign nation’s courts, or fear of their cases being corrupted in such courts (Alan 2007). Finally, one of the most vital but unpopular function of having an arbitration clause in the international contract is enforceability. Courts rulings are much more complex to enforce when compared to arbitral awards since there are comparatively a small number of international treaties between or among nations concerning enforcement of foreign court rulings. Litigation is not possible in obligatory and binding arbitration. This is because the parties are bound by the arbitration clause and this means that the parties chose to settle the disputes through litigation and not through a court case (Steven 2004). Question 2 According to arbitration rules, the arbitration should proceed effectively and should also offer an enhanced guidance to the parties and the tribunal as well. For instance, article 2.3 of the rules affirms that “by choosing the Rules the parties do not aim at leaving out the operation of the UNICITRAL Model Law on international Commercial Arbitration (Campbell 2007). Australian granite limited case is a bad case since adoption of arbitration regulations does not do away with the Model Law. During the ruling, Supreme Court of Queensland's Court of Appeal ascertained that the parties involved in the case did not leave out the UNCITRAL Model Law by selecting the UNCITRAL Arbitration Rules 1976, effectively taking into the account the principles involved in the case, in establishing the case’s verdict. It has been argued that the case was not appropriately decided and the court also powerfully claimed the case could not be settled in the same way if it was presented before the court again (Steven 2004). In Australian granite limited case, the Supreme Court of Queensland's Court of Appeal asserted that when the parties adopted the ICC Arbitration Rules, they had elected to contract out of the UNCITRAL Model Law. In this case, it was held by approving on a set of arbitration rules the parties had opted out if the application of the UNCITRAL Model Law on International Commercial Arbitration (Model Law). Moreover, the revision of Australian Act has tackled this inopportune interpretation and article 2.3 of the Rules is therefore required to be interpreted against such a set in this case. Lastly, since in this case the parties were held to have opted out the provisions of the Model Law, the case was regarded as wrongly decided and hence the decision made in this case is not likely to be followed within any consequent cases. The submissions to the IAA review in principal support this point (Margaret 2008). Question 3 In regard to the choice of Law Rules, for the international arbitrations under the Model Law, article 28 (1) states that the tribunal is supposed to make a decision in regard to the rules of law which were selected by the parties as practical to the substance of the dispute, where any designation of the law or legal structure of a certain country shall be regarded as openly referring to the substantive law of that country and not its conflict of law rules. According to the International Arbitration Act 1974 in Australia there are provisions for the court to pursue enforcement of an arbitration award before a foreign court (Margaret 2008). Furthermore, according to ICC rules, an arbitration agreement within a contract is not obligatory. Additionally, under federal law, a party might be bound to an arbitration clause even if the party did not in particular sign an agreement to arbitrate. The law merely obliges that there be the presence of “an agreement in writing”. In this case, the ICC court will only be required to establish if there was an existence of an agreement between Mr. Schmidt and Mr. Smith and if the terms of agreement requires arbitration. After this, arbitration will be done regardless irrespective of whether Mr. Smith had signed the document. This is the reason why Mr. Smith does not object that Mr. Schmidt commences arbitration in Singapore under ICC rules because Singapore court has jurisdiction over Mr. Smith, basing on his transactions with the country. The location where arbitration will take place is not where the parties are located. Arbitration location is usually not the locality where the parties, the witnesses, or the documents are situated (Yuval 2004). Mr. Smith is not likely to win this case since there are specific requirements of the International Arbitration Act 1974, the UNICITRAL Model Law, the New York Convection as well as the commercial arbitration Acts of the states and territories. Even if all these laws necessitate that an arbitration agreement should be in writing, article 7(2) of the Model Law has a little unrestrained definition in that it in particular offers that arbitration agreements can be communicated within any form that give a record of the agreement. Moreover, Article II of the New York Convention and also IAA necessitates that an arbitration agreement to either have been signed by the parties or to be found within an exchanger of letter, telex and even telegrams. This means that even if Mr. Smith claims that he had not signed the document, the documents used in the contract for communications can be used to making the ruling if there was a contract or not (Goldman 2005). Question 4 Enforcement of an award in Australia Australia has been a signatory to New York Convection from 1975. Australia’s agreement to the New York Convection does not have reservations and pulls outs to all of its territories apart from Papua New Guinea. New York Convection is annexed to offer the force of law by the IAA and hence Australia can enforce an award in this capacity (National Library Australia 2007). Australian arbitration courts have an outstanding reputation for enforcement of foreign arbitral awards. Section 8 of the IAA is founded on article V of the New York Convention and offers that foreign awards can be enforced within the courts of state or Territory just like the award had been made within that state or territory according to those laws. Nevertheless, section 8 of the IAA just covers the awards made within convection state outside Australia. In cases where enforcement provisions under the IAA are not applicable, enforcement can be made possible through using article 25 of the Model Law (Born 2006). In cases where enforcement of awards in not covered by both the Model Law and the New York Convention, section 33 of the CAA can be applicable which is operated in the same way as section 8 of the IAA. Normally, an arbitral award in Australia has the same res judicata impacts as a ruling and does away with the dispute (procedural and substantively). Parties are prohibited from resubmitting the dispute in any form whatsoever (National Library Australia 2007). Challenging the award Under the Model law, a request to set aside the award is the restricted remedy against an award. The bases in which an award may be challenged are in article 34(2) of the Model Law and this also provides the basis for rejecting acknowledgement and enforcement of a foreign award under article V of the New York Convention. In regard to domestic arbitrations, section 38(2) of the CAA permits appeal to the Supreme Court regarding any law that is questionable and arose as a result of the award. However, an appeal can just be brought ether with the assent from all the parties to the arbitration contract or with the leave of the Supreme Court (section 38(4) of the CAA). The basis for awarding such leave are however very narrow. After hearing the appeal, a court can substantiate, differ or set aside the award, or pass on the award jointly with the Supreme Court’s opinion about the law in question to the arbitrator for reconsideration (section 38(3) of the CAA) (National Library Australia 2007). Even if there is no Australian authority proposing that article 34 of the Model law cannot be rejected in any manner by the parties, provided that the grounds specified therein are allied to natural justice and fairness; it appears implausible that an Australian court would permit parties to derogate from that provision (Taylor 2009). In particular, Section 40 of the CAA allows parties to exclude or restrict the appeal rights under section 38(2) of the CAA. The ruling out agreement should be entered into after the start of arbitration. For particular kinds of contracts, for instance insurance, transport as well as commodity contracts, limitations on exclusion agreements are applicable (section 41 of the CAA) (Martin 2006). Bibliography Alan, R., 2007, Law and practice of international commercial arbitration, Sage, Vienna. Campbell D., 2007, The Comparative Law Yearbook of International Business 2007, Volume 29, Kluwer Law International, New Jersey. Martin, O., 2006, International commercial arbitration: developing rules for the new millennium, Jordan’s, Sydney. Taylor, A., 2009, International commercial arbitration: a transnational perspective. Thomson, Austria. National Library Australia, 2007, Australian national bibliography, Volume 1, National Library Australia, Melbourne. Goldman, B., 2005, Goldman on international commercial arbitration. Hong Kong, Kluwer Law International, 2005. Born, G., 2006, International commercial arbitration: commentary and materials, Kluwer Law International, Sydney. Margaret, M., 2008, The principles and practice of international commercial arbitration, Cambridge University Press, Cambridge. Steven, M., 2004, Fundamentals of international franchising, American Bar Association, New York. Yuval, S., 2004, The competing jurisdictions of international courts and tribunals International courts and tribunals series, Oxford University Press, London. Read More