International Commercial Arbitration - John Frost Ltd and Honest Dealers Ltd - Essay Example

Name Course Tutor Date 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”) Statement of Facts CLAIMANT John Frost Ltd Company is the proprietor of a 2, 000,000 hectare property, involved in the supply of cattle throughout the year and it is located at Millers Rd, Melbourne. Respondent Honest Dealers Ltd Company buys cattle for transportation to Indonesia. It is located at Nathan Rd, Hong Kong. On December 1, 2009, the Claimant wrote to the Respondent regarding the contract of cattle delivery. After nine days, on December 10, 2009, the Respondent contacted the Claimant and laid out their requirements as well as their conditions. The respondent also provided the arbitration document in case of any dispute. On December 15, 2009, the Claimant contacted the Respondent and acknowledged that they were satisfied with the cattle supplies. The Claimant also informed the respondent the type of cattle they stock as well as how their prices are determined. Further, the Claimant promised to call the Respondent to discuss the terms and conditions among other things. On December 20, 2009, the respondent sent the claimant an e-mail reminding them about their arbitration clause. The Respondent pledged to deliver their first shipment of 25, 000 cattle (+- 2%). The delivery was to be on 30th December 2009 and transportation was to be through the ss “Elders”. The Respondent promised credit letter would be opened after being confirmed and after receiving the documents. The following day, 21st December 2009, the Claimant sent an e-mail to the Respondent confirming the acceptance of the Respondent’s arbitration clause. Additionally, the Claimant informed the Respondent regarding the cattle inspection which conformed to Respondent’s requirements. The Claimant also informed the Respondent about the mailing of the documentation to their bank. On 7th March 2010, the Respondent confirmed their conversation on 7th March in writing. The Respondent approved the Claimant’s quality of their most recent shipment. The Respondent further informed the Claimant that they had been contacted by a China supermarket chain and availed the requirements. The requirements were different and included: 25, 000 old cows (+-800 kilograms) Fat array between 7mm-10mm Carcass category B After three days, on 10th March 2010, the Claimant contacted the Respondent and informed them that they were not in a position to oblige to their requirements since they had by then sold all the aged cattle. On 23rd April 2010, the Respondent wrote to the Claimant and confirmed their conversation on that day. The Respondent informed the Claimant that their first shipment was satisfactory and looked forward for their subsequent shipment. On 23rd June 2010, the Respondent contacted the Claimant and claimed that they had violated their agreement. The Respondent claimed that the shipment in the previous shipment was twelve percent and not the agreed ten percent. The Respondent informed the claimant that they would subtract five cents in every kilo of the entire shipment to take care of the additional costs of placing the meat at the pertinent outlets. On 10th July 2010, the Claimant informed the Respondent that they disapproved the Respondent’s independent decision. The Claimant further informed the Respondent that subtracting five cents in every kilogram over the entire shipment amounted to a penalty clause and this was against the common law. Moreover, the claimant promised the respondent that they were ready to refund for any incurred losses even though this appeared cynical according to the Claimant. The Claimant also notified the respondent that they were aware that they sold the heifers on to live market and hence they had fully compensated their expenses. Finally, the Claimant informed the Respondent that they would start arbitration to their clause if there was no communication in two weeks. 1. Pre-conditions to arbitration availed within the contract were appropriately fulfilled 1. Respondent challenges the jurisdiction of the Tribunal basing on the fact that the Claimant ruled out the UNICITRAL model law. The respondent suggested they would file claims that Commercial Arbitration Act in Melbourne would fail and that the litigation was suitable and that they would file a case with the Supreme Court in Melbourne in a fortnight. The Claimant has met its pre-arbitral requirements: (1.2) Respondent cannot opt for litigation since arbitration clause had been approved by both parties (1.3) both parties are not willing to return to conciliation (United Nations 30). 1.1 Claimant met its pre-arbitral requirements (A) Intention of the parties ensuring an effort at amicable resolution 2. The arbitration clause in the contract shows the parties had an intention of including conciliation as a pre-arbitral step. 3. Claimant, John Frost Ltd acknowledges that the parties needed to try to resolve their difference by conciliation as a pre-requisite to arbitration and tried to uphold this requirement. On 10th July 2010, the John Frost Ltd informed the Respondent that “in case you do not contact us within a fortnight, we shall file arbitration”. This shows that party’s obligation to set off and try amicable resolution before arbitration (Moses 25-28). (B) Intention of the parties was to make sure they were represented by appropriate authority 4. In order to establish the contractual pre-condition to arbitration, the tribunal is supposed to consider the parties’ intentions as well as the purpose of including the arbitration clause in their contract. The purpose of clause was also to make sure that the representatives had the required authority to represent the interest of the parties. An acknowledged principle of international commercial arbitration is that all parties must be represented at proceeding by a person having adequate authority in resolving the disputes. The arbitration clause stated that any dispute regarding the shipment would be resolved though arbitration according to the SIAC arbitration rules and the arbitration seat would be Hong Kong. It further states that the language to be used would be English. 5. The statements made within the contract should be interpreted in accordance with the intention of the parties. The fact that both parties agreed to resolve any dispute by arbitration using Hong Kong seat indicates the intention of both having representatives with the required authority. (C) Claimant fulfilled intended obligations 6. John Frost Ltd fulfilled the arbitration conditions. It submits that it attempted conciliation procedure with the Respondent and Mr. Delbon, has the appropriate 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 per contract required since the contract was bound by arbitration clause. Furthermore, John Frost Ltd agreed into the arbitration clause that the Respondent presented (Gary 26). (D) Conclusion on jurisdiction 7. Tribunal is supposed to exercise jurisdiction over the dispute since (1.1) John Frost Ltd obliged to its pre-arbitral requirements: (1.2) The Respondent does not have the right to litigation since there was arbitration clause in the contract (1.3) The parties are not willing to solve their dispute through conciliation (Van 10-12). (E) Respondent breached common law and failed to oblige to the contract requirements 8. By subtracting five cents over the entire shipment means a penalty clause which is unlawful in accordance with common law. Furthermore, the Respondent had sold the supplied heifers to live market and hence they had replaced the expenses incurred. Earlier on 23rd April 2010, the respondent had also informed John Frost Ltd of their satisfactory delivery only to counteract this later on 23rd June 2010. 9. Any dispute in the contract should be solved through arbitration not litigation (F) Respondent was obliged to agree on reimbursement 10. John Frost Ltd offered to reimburse any losses incurred but the Respondent did not agree into that. The Respondent claimed that the shipment in the previous shipment was twelve percent and not the permitted ten percent. However, the Respondent insisted on deducting five cents in every kilo for the entire shipment even when the Claimant offered to repay the incurred costs. (G) Respondent made a unilateral decision 11. The Respondent did not consult with the claimant John Frost Ltd while making a decision on deducting five cents per kilo. Since this is a contract between the two parties, there should have consultations with John Frost Ltd. (H) Respondent did not oblige to arbitration clause 12. 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 opting to solve the dispute through litigation is completely incorrect (Berthold 14-16). (I) Respondent contradictory messages breached trust between the parties 13. The Respondent clearly confirmed to the Claimant that the cattle delivered were of high quality and that the customers were satisfied. After exactly two months the Respondent disapproved of the delivery and amicably made deductions. Moreover, even after the Claimant requested to repay the Respondent the expenses incurred, they refused into that. The claimant also has evidence that the Respondent did not sell the supplied cattle as meat as alleged but as live mean and hence there were no losses incurred as the Respondent alleged. (J) Claimant has evidence counteracting Respondent’s claims 14. The Claimant has substantial evidence from reliable sources indicating the Respondent sold the heifers on to the live market and not as meat as the Respondent alleged and this had catered for the Respondent’s expenses even more. (K) Conclusion on substantive matters 15. The Tribunal is supposed to establish that the Respondent breached the contract terms by making a unilateral decision. Respondent was obligated to consult with John Frost Ltd before making the deductions. 16. The Tribunal should also 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. 17. 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. 18. Moreover, the Tribunal should find that the Respondent is opting for litigation which is not possible since there was provision of arbitration clause for both parties in which they all agreed into (Van 14-18). 19. Finally, the Tribunal should establish that John Frost Ltd did not fail to mitigate the negative outcomes of their supply since they proposed reimbursement to the Respondent but the Respondent declined (Berthold 12-14). Relief requested CLAIMAINT considerately requests that the Arbitral Tribunal establish that: Each and every pre-condition to arbitration availed within the contract was appropriately met Respondent did not follow 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 As a result, CLAIMANT respectfully calls for the Arbitral Tribunal to authorize Honest Dealers Ltd to: Repay John Frost Ltd all deductions they had made Reimburse damages in the total sum of $ 200,000 Pay the required interest on the stated sums Pay all arbitration costs For John Frost Ltd., Sign __________________________________________ 15th December 2008 Mr. Delbon, Managing Director, Elders group of Shipping companies Part 2 Question 1 Arbitration clause should be a part of contractual document since an arbitration agreement is required while establishing a contract. An arbitration agreement refers to a contractual condition where the parties bound to the contract surrender their right to go to court and as an alternative have any disputes in the contract resolved through an arbitrator. Basically, an arbitration contract is supposed to be in writing. Therefore, an arbitration clause is important in establishing the regulations which will be followed incase a dispute occurs, and illustrates the kind of disputes that might be arbitrated Arbitration clauses are incorporated within consumer contracts and are also an element of collective bargaining contracts within both the employment and labor law area as well. Arbitration can be voluntary or non-binding. For example, a contract can offer that before filing a lawsuit, the parties are initially supposed to agree that a non-binding contract will be utilized while trying to resolve any dispute. In case a party does not agree with the decision of the arbitrator and the dispute is not resolved, a lawsuit can be filed and as a result the decision of the arbitration is disregarded (James 10-15). Litigation is not possible in obligatory and binding arbitration. Mostly in consumer transactions the public is basically bound to compulsory arbitration. In this circumstance, it is compulsory for the consumer to arbitrate any dispute and also the decision made by the arbitrator is ultimate. Even though the client might not be satisfied with the decision of the arbitrator, he or she cannot appeal. Incase the client does not pay the total sum the arbitrator awards or does not satisfy a requirement the arbitrator established was present under the contract, the prevailing party can file a suit in court in order to implement the award of the arbitrator. Within such court case, the court will just establish if there was an agreement: in case the contract’s terms called for the arbitration, and incase this is the case, the arbitrator’s decision will be the court’s judgment. Even though there are situations where a court can decline entering the judgment on an arbitration award, it is hard in numerous circumstances to convince a court against entering the ruling on the award. After entering the verdict against the loser within arbitration proceeding, the judgment’s holder can then implement on the judgment (Van 55). Question 2 Australian granite limited case is a bad case because adopting arbitration regulations does not rule out the Model Law. In undisputed verdict, Supreme Court of Queensland's Court of Appeal established that the parties involved in the case did not exclude the UNCITRAL Model Law by choosing the UNCITRAL Arbitration Rules 1976, successfully taking into the account the principles raised, in establishing the case’s verdict. It has been argued that the case was not properly decided and the court also strongly alleged the case could not be settled in the same way in case it was presented before the court again (James 16-18). In the case, Model law was applicable. The court’s responsibility was ascertaining the intent of contracting parties by referring to the contract’s words and, usually, to the surrounding conditions that the parties were aware of as well as the key aim and entity of the transaction. In the conditions of the case before the court, which initiated the construction of specific words of the contract, the court asserted that a logical individual having the parties’ attributes knew that UNCITRAL Arbitration Rules and the Model Law can run jointly. As a result, the court arrived at its conclusion through distinguishing Eisenwerk but the procedure of reasoning unquestionably did not support the verdict, even though not ruling it out all together. Therefore, the decision presents a pro-arbitration decision (Simon 52-55). 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 (www.practicallaw.com/7-205-6044). Australian arbitrators have for a long time regarded the judgment to be out of step, so much to the point the latest amendments of the International Arbitration Act 1974have revised section 21 to successfully over-rule the verdict. Currently, this case is not appropriate since the Act just came into effect on 6th July 2010. The latest amendments to the 1974 Act imply that the model worth of the case is of lesser significance (James 25-26). Question 3 This is an international arbitration agreement. It is possible to enforce arbitration awards within numerous foreign nations because of the United Nations Convection as well as New York Convection which both Singapore and Australia are members. Both parties were conducting international trade and both countries Singapore and Australia are governed by International Chamber of Commerce when it comes to international businesses. ICC has an international court of arbitration which offers settlement of disputes through arbitration of business disputes of international characters according to the Rules of Arbitration of the ICC. Still, when empowered by an arbitration agreement, the Court can also solve disputes through arbitration according to the Rules of business disputes not of international character (Odams 64). International Arbitration Act 1974 in Australia provides provisions for the court to pursue enforcement of an arbitration award before a foreign court. Mr. Smith does not object that Mr. Schmidt starts actions within Singapore under ICC rules because Singapore court has jurisdiction over Mr. Smith, basing on his transactions with the country. The ICC rules grant that except when the parties decide otherwise, the location of the arbitration shall be determined by the ICC Court. The location where arbitration will take place is not where the parties are located. Arbitration location is normally not the locality where the parties, the witnesses, or the documents are situated (Odams 60-62). However, parties are only supposed to use ICC arbitrations if there is an earlier existing contract between the parties that offers for ICC arbitration. The pre-existing agreement is normally within an ICC arbitration clause in a business contract. Nevertheless, this clause can be entered into by the parties when the dispute occurs, if the dispute involves the business contract. Mr. Smith is not likely to be successful. This is because States have passed laws allowing arbitration and in some incidences if arbitration will be carried out is dependant on if arbitration clause meets the terms of the laws applied within that state. For example, in some states, the verity that a contract is governed though an arbitration agreement should be evidently displaced on the document and if otherwise arbitration cannot be carried out (Van 16-18). Nevertheless, under ICC rules, an arbitration agreement in 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 necessitates arbitration. After this, arbitration will be carried out irrespective of if Mr. Smith had signed the document (Redfern 20-24). Question 4 Arbitration can be enforced with Australia through a court of State or Territory or the Federal Court as like a judgment of that court. The Act ensures the enforcement of foreign awards a clear-cut procedural issue. The arbitration agreements that can be enforced should be in writing. The amendments to the clause, consistent with the amendments to the Model law, demonstrate that an arbitration agreement will be in writing when: Its content is recorder within any written form even when the agreement or contract it is related had been completed orally or through conduct. So for instance, the seller sends a fax proposing to sell goods internationally on specific terms which consist of an arbitration clause. The customer consents to procure the goods over the phone but does not confirm this in writing. Such arbitration agreement is in writing and therefore can be enforced. It is within an electronic communication, for example an email The content is within an exchange of statements of claim and defence within which the subsistence of the arbitration agreement is claimed by one party and not denied by the other party (Redfern 36-40). Enforcing arbitration within Australia Model Law applicable The most important reform is that the Act specifies that the Model Law is limited law governing arbitration within Australia and does away with a party’s capability to choose to apply one of the State Commercial Arbitration Acts to the arbitration. Earlier, parties were able to avoid the Model Law. The provision was construed by the Queensland Court of Appeal in Australian Granites Ltd v Eisenwerk Hensel Bayreuth Dipl-Ing Burkhardt GmbH [2001] 1 Qd R 461, signifying the parties had done away with the Model Law in case the arbitration agreement stipulated the usage of procedural regulations like the ICC Arbitration Rules. Nonetheless, this decision has been questioned. Provided it is ordinary including a reference to procedural regulations within an arbitration clause, this led to immense ambiguity to the relevance of the Model Law to arbitrations taking place within Australia. The Model Law is responsible for governing the international arbitration within Australia; this means that international parties will not be in a position to access the leave of appeal provisions within the State Commercial Arbitration Acts (Redfern 44-45). Challenging an arbitration award Arbitration award can be challenged on the equivalent restricted grounds on which an award can be set aside or in case the award has not hitherto become binding or has been set aside or deferred. The amendments to the Act explain that the court lacks any good judgment to decline enforcement on any other ground (Arthur 22-24). Arbitration award within Australia may solely be set aside on the following restricted grounds established within the Model Law: A party by that time was not in a position when the arbitration agreement took place The arbitration agreement was not lawfully legitimate The party was unable to present its case within the arbitration procedures or given suitable notice regarding the appointment of the tribunal The award tackles dispute that are not in the scale of the arbitration agreement The key reason that led to the dispute cannot be settled through arbitration within Australia Enforcement of the award is goes against Australian public policy Currently, the arbitration clause defines the public policy. Arbitration Award goes against Australian public policy in case the establishment of the award was stimulated or was affected by fraud or corruption was involved or rules of natural justice were violated took place while establishing the arbitration award (Arthur 23-25). Works Cited Arthur Taylor. International commercial arbitration: a transnational perspective. Austria: Thomson/West, 2009. Berthold Goldman. Goldman on international commercial arbitration. Hong Kong: Kluwer Law International, 2005. Gary Born. International commercial arbitration: commentary and materials. Sydney: Kluwer Law International, 2006. United Nations. UNCITRAL Model Law on International Commercial Arbitration: 1985 - with Amendments as Adopted In 2006. Amsterdam: United Nations Publications, 2008. Moses Margaret. The principles and practice of international commercial arbitration. Cambridge: Cambridge University Press, 2008. Redfern Alan. Law and practice of international commercial arbitration. Vienna: Sweet & Maxwell, 2006. James Mark. International commercial arbitration: a handbook. Michigan: University of Michigan. Odams Martin. International commercial arbitration: developing rules for the new millennium. Sydney: Jordans, 2006. Simon Kee. International Commercial Arbitration: An Asia-Pacific Perspective. Singapore: Cambridge University Press, 2011. Van Den. International commercial arbitration: important contemporary questions Issue 11 of ICCA congress series, Volume 11 of International Council for Commercial Arbitration Congress Series. New Jersey: Kluwer Law International, 2005. Read More