Nani Palkhivala Runners-Up R PDF

TWENTY THIRD ANNUAL
WILLEM C. VIS INTERNATIONAL COMMERCIAL ARBITRATION MOOT

19 TO 24 MARCH 2016
MEMORANDUM FOR RESPONDENT
ILS LAW COLLEGE, PUNE
ON BEHALF OF:
AGAINST:
Vino Veritas Ltd
Kaihari Waina Ltd
56 Merlot Rd
12 Riesling Street
St Fundus
Oceanside
Vuachoua
Equatoriana
Mediterraneo
RESPONDENT
CLAIMANT
COUNSEL:
Tanya Singh
Rishabh Malaviya
Jyothi Ratna Anumolu
Kumar Sambhav
TABLE OF CONTENTS
TABLE OF CONTENTS ........................................................................................................ I
LIST OF ABBREVIATIONS .............................................................................................. IV
INDEX OF AUTHORITIES ................................................................................................ VI
INDEX OF COURT CASES ............................................................................................. XXI
INDEX OF ARBITRAL AWARDS ................................................................................ XXV
STATEMENT OF FACTS ...................................................................................................... 1
INTRODUCTION.................................................................................................................... 3
ARGUMENT ON THE PROCEDURAL ISSUE ................................................................. 3
I.
THE TRIBUNAL DOES NOT HAVE THE POWER TO GRANT CLAIMANTS REQUEST FOR
DOCUMENT PRODUCTION AND SHOULD NOT GRANT THE SAME. .............................................. 4
The Tribunal does not have the power to grant CLAIMANTS document production
A.
request. ................................................................................................................................... 4
1.
The procedure under the VIAC Rules is subject to the agreement of the parties. ..... 5
2.
The parties have agreed to exclude discovery, which encompasses document
production. ......................................................................................................................... 6
An interpretation of the arbitration agreement reveals that CLAIMANTS request is
3.
precluded. ........................................................................................................................... 6
a)
RESPONDENT was neither aware, nor could have been aware, of CLAIMANTS
purported intention. ........................................................................................................ 7

b)
A reasonable person in the place of RESPONDENT would not have understood the
clause to allow production of categories of documents. ................................................ 7

c)
CLAIMANT may not argue that the term regarding international practice is of
any significance in interpreting the contract. ................................................................. 8

d)
Article 20 of the Framework Agreement should be interpreted contra
proferentem. ................................................................................................................... 8
4.
The agreement of the parties is valid and enforceable. .............................................. 9

a)
It is recognized that the parties may validly agree to limit or exclude document
production. ..................................................................................................................... 9
b)
CLAIMANTS mandatory right extends only to reasonably presenting its case. ..... 9
c)
The type of document production requested by CLAIMANT is not a part of the
right to evidence. .......................................................................................................... 10
d)
CLAIMANT may not argue that enforcement of the agreement could put the
finality of the award at risk. ......................................................................................... 11

Assuming, without accepting, that the Tribunal has the power to grant CLAIMANTS
B.
request for document production, the Tribunal should not grant CLAIMANTS document
production request. ............................................................................................................... 11
1.
The requirements for document production have not been fulfilled........................ 12

a)
The documents requested are not sufficiently specific. ....................................... 12
b)
CLAIMANT has failed to establish the relevance and materiality of the documents
requested. ..................................................................................................................... 12
2.
The documents requested are privileged under the most favored nation rule. ........ 13
3.
Alternatively, granting the requests will violate RESPONDENTS right to equal
treatment. ......................................................................................................................... 14
4.
The balance of convenience favors RESPONDENT. ................................................... 14

a)
Document production would require RESPONDENT to disclose commercially
confidential information............................................................................................... 15
b)
The CISGs rules on the burden of proof make document production unnecessary.
..16
c)
CLAIMANTS request for document production seems to be motivated by bad
faith. ............................................................................................................................. 17
ARGUMENT ON THE SUBSTANTIVE ISSUES ............................................................. 17
II. CLAIMANT CANNOT CLAIM THE PROFITS RESPONDENT MADE BY SELLING THE
BOTTLES TO SUPERWINES AS PART OF ITS DAMAGES. ........................................................... 17
A.
CLAIMANT has not proved a loss within the meaning of Art.74 CISG. ....................... 18
1.
CLAIMANT merely had an opportunity to earn a profit. ........................................... 18
2.
CLAIMANT has not discharged its burden of proving that it suffered a loss of profit.
..19
B.
In any case, the CISG disallows damages on the basis of disgorgement of profits. .... 20
C.
In any case, disgorgement of the profits earned by RESPONDENT in its dealings with
SuperWines should not be allowed. ..................................................................................... 21

1.
The profit earned by RESPONDENT had nothing to do with CLAIMANT. .................. 21
2.
Allowing CLAIMANT to recover damages for loss of profits would lead to
overcompensation. ........................................................................................................... 22
a)
The transaction with Vignobilia was a replacement transaction. ........................ 22

II
b)
The CISG provides a method for calculation of damages in case of a replacement
transaction. ................................................................................................................... 23
c)
Allowing for disgorgement of the profits earned by RESPONDENT would lead to
overcompensation of CLAIMANT.................................................................................. 23
d)
Alternatively, if the transaction with Vignobilia was not a replacement
transaction, CLAIMANT failed in its duty to mitigate its losses, thereby disentitling it to
damages........................................................................................................................ 24
3.
III.
Further profits cannot be allowed. ........................................................................... 24

CLAIMANT IS NOT ENTITLED TO THE DAMAGES CLAIMED FOR THE LITIGATION
COSTS OF US$ 50,280, INCURRED PARTLY IN ITS APPLICATION FOR INTERIM RELIEF AND
PARTLY IN ITS SUCCESSFUL DEFENCE AGAINST RESPONDENTS SUIT FOR DECLARATORY
RELIEF. ..................................................................................................................................... 25
A.
Litigation costs are not recoverable under the CISG. .................................................. 25

Litigation costs are not a loss within the meaning of Art.74 CISG. ..................... 25
1.
a)
The CISG governs only substantive sales law. .................................................... 26
b)
Recovery of litigation costs is a procedural issue, not governed by the CISG. ... 26
c)
The CISG was never intended to undo the local laws on recovery of litigation
costs.............................................................................................................................. 27
d)
There is no causal link between breach and loss. ................................................ 28
e)
In any case, the decision of the High Court of Mediterraneo as to costs should be
treated as final and binding. ......................................................................................... 28

2.
Allowing for recovery of litigation costs would be contrary to the principle of
equality. ............................................................................................................................ 29
3.
CLAIMANTS reliance on the plain language of Art.74 is erroneous. ....................... 30
B.
In any case, CLAIMANTS suit was not foreseeable. ..................................................... 31
C.
In any case, costs incurred in RESPONDENTS suit should not be awarded. ................. 32
1.
Damages are not available as a remedy for breach of the arbitration agreement. ... 32
2.
In any case, damages for breach of an arbitration agreement may not be claimed
under the CISG. ............................................................................................................... 33

3.
D.
In any case, CLAIMANT may not rely on RESPONDENTS non-performance. ........... 34

The contingency fee agreement entered into by CLAIMANT was not reasonable......... 35
REQUEST FOR RELIEF ..................................................................................................... 35
III
LIST OF ABBREVIATIONS
%
per cent
&
and
paragraph/paragraphs
section
Art./Artt.
article/articles
ASA
association suisse de l'arbitrage
BGH
Bundesgerichtshof (German Supreme Court)
CEO
Chief Executive Officer
CIETAC
China
International
Economic
and
Trade
Arbitration
Commission
CISG
United Nations Convention on Contracts for the International

Sale of Goods
CISG-AC
CISG Advisory Council
CLOUT
Case Law on UNCITRAL Texts
Co.
Company
Corp.
Corporation
DAL
Danubian Arbitration Law
DIS
German Institution of Arbitration
Doc
Document
e.g.
exemplum gratia (for example)
ed(s).
editor(s)
et al.
et alii (and others)
EUR
Euro
Exhibit C
CLAIMANTS Exhibit No.
Exhibit R
RESPONDENTS Exhibit No.
FA
Framework Agreement
FCA
Federal Court of Australia
GmbH
Gesellschaft mit beschrnkter Haftung (Limited Liability

Company)
HGer
Hofgericht
i.e.
id est (that is)
IV
IBA Rules
IBA Rules on the Taking of Evidence in International

Arbitration
IBA
International Bar Association
ICC
International Chamber of Commerce
Id.
ibidem (in the same place)
LCIA
London Court of International Arbitration Rules
Ltd.
Limited
MD
Managing Director
MFN
Most Favoured Nation
n/a
Not available
no(s).
number(s)
NYC
New York Convention on the Recognition and Enforcement of

Foreign Arbitral Awards
OLG
Oberlandesgericht
p./pp.
page/pages
PECL
Principles of European Contract Law
PO
Procedural Order
Pte
Private
SCC
Arbitration Rules of the Arbitration Institute of the Stockholm

Chamber of Commerce
SpA
Societ per Azioni (Stock Corporation)
Srl
Societ a Responsabilit Limitata (Limited Liability Company)
UK
United Kingdom
UN
United Nations
UNCITRAL
United Nations Commission on International Trade Law
UNIDROIT
International Institute for the Unification of Private Law
UNIDROIT Principles
UNIDROIT Principles of International Commercial Contracts

of 2010
US$
United States Dollar
US/USA
United States of America
USFRCP
United States Federal Rules of Civil Procedure.
v./vs.
versus
VIAC
Vienna International Arbitral Centre
vol.
Volume
V
INDEX OF AUTHORITIES
1999 IBA WORKING PARTY Commentary on the revised text of the 2010 IBA Rules of
2010 IBA RULES OF
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PRIEM, C.,
Arbitrations
2 American Review of International Arbitration 249 (1991)
Cited: Wetter
In 90
WIRTH, MARKUS
Ihr Zeuge, Herr Rechtsanwalt!: Weshalb Civil-LawSchiedsrichter Common-Law-Verfahrensrecht anwenden

German Arb. J. 2003 9
Cited: Wirth
In 33
ZUBERBHLER, TOBIAS
IBA Rules of Evidence: Commentary on the IBA Rules on the
WAINCYMER, JEFFERY
Procedure and Evidence in International Arbitration

Kluwer Law International (2012)
Cited: Waincymer
In 25, 30
XX
INDEX OF COURT CASES

Australia
Downs Investments v. Perwaja Steel, Australia
Supreme Court of Queensland, 17 November 2000
<http://cisgw3.law.pace.edu/cases/001117a2.html>
Cited: Downs Investments (Australia)
In 101
Austria
Propane case
Supreme Court of Austria, 6 February 1996
10 Ob 518/95
Cited: Propane (Austria)
In 101
SA Alfac v. Socit Irmac Importaco, commrcia e industria Ltda
Paris Cour dappel, 7 February 2002
2002 Rev. arb. 413
Cited: SA Alfac (France)
In 22
Socit Natl Cie for Fishing & Marketing Nafimco v. Socit Foster Wheeler Trading Co.
Paris Cour dappel, 2004
2004 Rev. arb. 647
Cited: Nafimco (France)
In 28
Germany
Iron molybdenum case [Case name n/a]
Appellate Court Hamburg, 28 February 1997
<http://cisgw3.law.pace.edu/cases/970228g1.html>
Cited: Iron molybdenum (Germany)
In 70
India
XXI
National Thermal Power Corporation v. Singer Company

Supreme Court of India, 7 May, 1992
AIR 1993 SC 998
Cited: NTPC (India)
In 14
Singapore
Dongwoo Mann+Hummel v. Mann+Hummel GmbH
Singapore High Court
[2008] SGHC 67
Cited: Dongwoo (Singapore)
In 28
Switzerland
Lambskin coat case
Commercial Court Zrich, 30 November 1998
< http://cisgw3.law.pace.edu/cases/981130s1.html>
Cited: Lambskin coat (Switzerland)
In 46
Gutta-Werke AG v. Drken-Gutta Pol. and Ewald Drken AG
Federal Supreme Court, 11 July 2000
< http://cisgw3.law.pace.edu/cases/000711s1.html>
Cited: Gutta-Werke (Switzerland)
In 82
UK
Chaplin v. Hicks
1911, 2 K.B. p. 786.
Cited: Chaplin (UK)
In 53
Hyundai Merchant Marine Co. Ltd. v. Americas Bulk Transport Ltd.
High Court of Justice, 8 February 2013
<http://www.kluwerarbitration.com/CommonUI/print.aspx?ids=KLI-KA-1321791>
XXII
Cited as: Hyundai (UK)

In 22
Union Discount Co. v. Zoller (Union Cal Ltd.)
English Court of Appeal
(2001) EWCA (Civ.) 1755, 2002 WLR 1517
Cited: Zoller (UK)
In 106
USA
Chateau des Charmes Wines Ltd v. Sabat Inc.
United States Federal Appellate Court (9th Circuit), 5 May 2003
Cited: Chateau des Charmes Wines (USA)
In 14
Delchi Carrier, SpA v. Rotorex Corp.,
United States Federal Appellate Court (2nd Circuit), 6 Dec. 1995
71 F.3d 1024
Cited: Delchi Carrier (USA)
In 55
Karnette v. Wolpoff & Abramson, LLP
444 F.Supp.2d 640
(E.D. Va. 2006)]
Cited: Karnette (USA)
In 20
MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D'Agostino, S.P.A.
144 F.3d 1384 (11th Cir. 1998)
Cited: MCC-Marble (USA)
In 83
Paul Revere Variable Annuity Ins. Co. v. Kirschhofer
226 F.3d 15, 25 (1st Cir. 2000)
Cited: Paul Revere (USA)
XXIII
In 22
TeeVee Tunes, Inc. et al v. Gerhard Schubert GmbH
Federal District Court [New York], 23 August 2006
<http://cisgw3.law.pace.edu/cases/060823u1.html>
Cited: TeeVee (USA)
In 55
XXIV
INDEX OF ARBITRAL AWARDS

China International Economic and Trade Arbitration Commission
PTA powder case
CISG/2008/01 < http://cisgw3.law.pace.edu/cases/080418c1.html>
Cited: PTA Powder (Arbitration)
In 101
Court of Arbitration of the International Chamber of Commerce
ICC Award No. 5946
XVI Y.B. Comm. Arb. 97 (1992)
Cited: ICC Award No. 5946
In 20
ICC Case No. 8261
4 Unif. L. Rev. 170 (1999)
Cited: ICC Case No. 8261
In 22
ICC Award No. 8324
Magnesium case, 1995
<http://cisgw3.law.pace.edu/cases/958324i1.html>
In 101
ICC Award No. 8486
(1999) 24 Y.B. Com. Arb.
In 76
Foreign Trade Court of Arbitration Attached to the Serbian Chamber of Commerce
and Industry
Milk packaging equipment case
Award in Case no. T-4/05, 15 July 2008
Cited: Milk Packaging (Arbitration)
In 101
XXV
International Centre for Settlement of Investment Disputes

Biwater Gauff Tanzania) Ltd v. United Repub. of Tanzania, 24 May 2006
Procedural Order No. 2
ICSID Case No. ARB/05/22
Cited: ICSID Case No. ARB/05/22
In 33
Tribunal of International Commercial Arbitration of the Russian Federation Chamber
of Commerce and Industry
Case name n/a
Award in Case No. 302/1996, 27 July 1999
Cited: Award in Case No. 302/1996

In 55
Used equipment case
Award in Case No. 122/2005, 19 May 2006
Cited: Used Equipment (Arbitration)
In 101
XXVI
STATEMENT OF FACTS
The parties to this arbitration are Kaihari Waina Ltd. (CLAIMANT) and Vino Veritas Ltd.
(RESPONDENT).
RESPONDENT is a vineyard based in Mediterraneo and is well known for its diamond quality
Mata Weltin wine (RESPONDENTS wine). CLAIMANT is a wine merchant in Equatoriana
selling Mata Weltin wine of diamond quality in top quality wines for the collectors and high
end gastronomy markets.
April 22, 2009: RESPONDENT agreed to supply CLAIMANT with up to 10,000 bottles of wine
annually by entering into a Framework Agreement with CLAIMANT. The exact number of
bottles was to be determined annually as per orders placed by CLAIMANT.
3 November, 2014: RESPONDENT informed its customers about the extraordinary drop in the
quantity of harvest (all time worst) due to which ultimately only around 65,000 bottles of
wine could be produced.
November 4, 2014: In light of increased demand for RESPONDENTS wine following a series
of awards to it, CLAIMANT ordered 10,000 bottles of the wine, the maximum quantity that it
was entitled to under the Framework Agreement.
December 1, 2014: RESPONDENT replied to CLAIMANTS order wherein it stated that it could
supply only 4,500-5,000 bottles out of the 10,000 ordered. RESPONDENT reasoned that due to
adverse weather conditions, the harvest that year was greatly diminished and that it had
chosen to fulfill its contractual obligations to its customers on a pro-rata basis.
December 2, 2014: CLAIMANT wrote to RESPONDENT demanding performance for the full
order of 10,000 bottles and alleged that the real reason for RESPONDENTS non-delivery of
wine was a new contract with SuperWines.
December 4, 2014: RESPONDENT attempted to terminate the Framework Agreement citing
CLAIMANTS outrageous behavior as the reason.
December 8, 2014: CLAIMANT sought an interim injunction in the High Court of Capital
City, Mediterraneo, seeking to prohibit RESPONDENT from selling to other customers the
10,000 ordered by the CLAIMANT (CLAIMANTS suit).
December 12, 2014: The interim injunction was granted.
December 2014-January 2015: CLAIMANT contacted other vineyards so as to make alternate

arrangements for 5,500 bottles of diamond Mata Weltin wine.
January 30, 2015: RESPONDENT initiated court proceedings in the High Court of Capital
City, Mediterraneo, seeking a declaration of non-liability (RESPONDENTS suit).
February 2, 2015: CLAIMANT entered into an alternate arrangement for 5,500 bottles with
Vignobilia Ltd.
April 23, 2015: RESPONDENTS suit was dismissed by the Court.
Subsequently, RESPONDENTS management contacted CLAIMANT and offered to deliver up to
4,500 bottles of the wine, as a sign of their goodwill and to terminate all legal proceedings.
Nevertheless, CLAIMANT seeks to recover, by way of this arbitration, the costs it incurred as a
result of the two proceedings in Mediterraneos courts, and damages for lost profits suffered
in regard to the 5,500 bottles that RESPONDENT refused to deliver. Purportedly to facilitate the
calculation of lost profits, CLAIMANT also makes a request for document production.
INTRODUCTION
1
In an effort to allow cost efficient dispute resolution, RESPONDENT has refrained from
challenging the jurisdiction of the Tribunal. RESPONDENT only challenges the power of the
Tribunal to grant CLAIMANTS request for document production, as such a request is validly
precluded by the parties arbitration agreement. Without prejudice to this position,
RESPONDENT further asserts that the Tribunal should not exercise any such power in favour of
CLAIMANT, on the grounds of non-compliance with the requirements for document
production, legal privilege, and violation of equality. Lastly, RESPONDENT asserts that the
balance of convenience lies in its favor.
CLAIMANT seeks to recover lost profits for RESPONDENTS non-delivery of 5,500 bottles of
wine. RESPONDENT submits that CLAIMANT has not proved that it suffered a loss within the
meaning of Art.74, which is a necessary prerequisite for claiming under Art.74. In any case,
CLAIMANTS method of calculating its damages on the basis of the profits earned by
RESPONDENT is impermissible. RESPONDENT also submits that CLAIMANT may not recover
the profits earned in the dealings with SuperWines as these had nothing to do with
CLAIMANT, and as their recovery would lead to overcompensation of CLAIMANT.
Further, CLAIMANT seeks to recover the litigation costs incurred by it, partly in its own suit
and partly in its defense of RESPONDENTS. RESPONDENT submits that litigation costs, being
procedural in nature, are not recoverable under Art.74 CISG. RESPONDENT asserts that these
costs are not consequential to the breach and even if this be the case, the decision on costs of
the High Court of Mediterraneo must be treated as final and binding. RESPONDENT submits
that the costs incurred in CLAIMANTS suit were not foreseeable as required by Art.74.
Further, CLAIMANT may not recover for the costs incurred in RESPONDENTS suit as the costs
were incurred as the result of an alleged breach of an arbitration agreement, for which
damages are not recoverable. In any case, damages for the breach of the arbitration clause
may not be recovered under the CISG, as the remedy for breach is already provided for in the
procedural laws applicable to the clause. In any case, the breach was caused due to
CLAIMANTS failure to discharge its duties.
ARGUMENT ON THE PROCEDURAL ISSUE

4
The dispute between CLAIMANT and RESPONDENT arises from the Framework Agreement
dated 22nd April, 2009 between them. Danubia, the seat of this arbitration, has adopted as its
national arbitration law (DAL), the UNCITRAL Model Law on International Commercial
3
Arbitration [PO 1, 5(3)]. The New York Convention is applicable as all three countries
involved are parties to the said Convention [PO 2, 58]. Further, the parties have agreed to
arbitration in accordance with the VIAC Rules [Art.20, FA]. Since the Statement of Claim
was filed after 30th June, 2013, the VIAC Rules 2013 are the relevant version of the Rules
[Art.47, VIAC Rules]. RESPONDENT has recognised the general jurisdiction of the Arbitral
Tribunal and does not propose to challenge the same [Answer to Statement of Claim, 4].
However, RESPONDENT has challenged CLAIMANTS procedural request for production of
documents.
I.
THE TRIBUNAL DOES NOT HAVE THE POWER TO GRANT CLAIMANTS REQUEST FOR
DOCUMENT PRODUCTION AND SHOULD NOT GRANT THE SAME.
CLAIMANT has attempted to calculate its damages for non-delivery of 5,500 bottles of wine
on the basis of the profits earned by RESPONDENT from its dealings with SuperWines
[Statement of Claim, 26]. Purportedly to facilitate the calculation of such damages,
CLAIMANT has requested the Tribunal to order RESPONDENT to produce the documents
regarding its contractual dealings with SuperWines [Statement of Claim, 27]. While such
an award of damages is impermissible (See 51-78), RESPONDENT further asserts that
CLAIMANTS request for document production may not be granted as the Tribunal does not
have the power to grant such a request (A). In any case, the Tribunal should not grant
CLAIMANTS request for document production (B).
A. The Tribunal does not have the power to grant CLAIMANTS document
production request.
Art.19 DAL allows the arbitral procedure to be determined by the agreement of the parties.
Document production, being an aspect of the arbitral procedure [Born, p. 2324; Sachs, pp.
291-92; Kaufman-Kohler, p. 14], will also be determined by the agreement of the parties. In
the present case, the parties have agreed that all disputes are to be settled by the VIAC under
its rules, with the addition that no discovery shall be allowed [Art.20, FA].
CLAIMANT asserts that the VIAC Rules empower the Tribunal to grant CLAIMANTS request
for document production, and that the parties have not agreed to limit the Tribunals
discretion to grant CLAIMANTS request [Cl. Memo 32-42]. However, RESPONDENT submits
that the procedure under the VIAC Rules is subject to the agreement of the parties (1), and
that this agreement of the parties precludes CLAIMANTS request for document production (2),
which is confirmed by an interpretation of the arbitration agreement (3). Further,

RESPONDENT submits that such an agreement is valid and enforceable (4).
1. The procedure under the VIAC Rules is subject to the agreement of the parties.
8
Art.28 VIAC Rules provides that the Tribunal is to conduct the proceedings in accordance
with the agreement of the parties and the VIAC Rules, but otherwise in the manner it deems
appropriate. Only where there is no agreement of the parties can the arbitrators determine the
conduct of the proceedings [Schwarz, p. 448]. This preponderance of the parties' agreement
over the arbitrators' discretion is acknowledged as a basic principle of the arbitral process
[Schwarz, p. 449].
CLAIMANT has asserted that there is no agreement of the parties directly addressing the issue
of document production, and for this reason the Tribunals general discretion (under Art.28)
to regulate the proceedings extends to ordering document production [Cl. Memo, 33].
CLAIMANT errs in its contention as it fails to consider that the parties have explicitly agreed
that no discovery shall be allowed. This agreement validly curtails the power of the Tribunal
to order document production (See 12-29).
10 CLAIMANT could also have contended that Art.29 VIAC Rules specifically empowers the
Tribunal to request parties to submit evidence, if it deems such submission necessary to
establish the facts of the case. This argument would hardly advance CLAIMANTS case, as the
parties have validly derogated from Art.29 VIAC Rules by their agreement. The VIAC Rules
are incorporated by reference into the parties agreement to arbitrate and are merely an
extension of such agreement [Schwarz, p. 484]. Therefore, these rules have only a contractual
status [Berger, p. 485; Poudret, p. 69]. By virtue of this contractual nature of the institutions
rules, the parties are free to diverge from them on particular points [Poudret, p. 70; Schwarz,
p. 484]. Therefore, the agreement of the parties can limit the arbitrators evidentiary
authority, and the same analysis should hold true for Art.29 of the VIAC Rules [Schwarz, p.
484].
11 Thus, the procedure under the VIAC Rules is subject to the agreement of the parties, which
provides for the exclusion of discovery. This exclusion of discovery precludes CLAIMANTS
request for document production and the VIAC Rules by themselves cannot empower the
Tribunal to grant CLAIMANTS request for document production.
2. The parties have agreed to exclude discovery, which encompasses document

production.
12 CLAIMANT has attempted to distinguish between discovery and disclosure, linking
discovery to US style discovery [Statement of Claim, 29; Cl. Memo, 40]. However,
CLAIMANT fails to consider that the word discovery encompasses devices such as document
production. Both terms, discovery and document production point toward tribunal-ordered
(or court-ordered) production of materials which may be used in support of the parties
claims in the arbitral proceeding [Born, p. 2322]. The pertinent difference between the two
terms lies in the range of the material that must be produced [Born, p. 2322].
13 With specific reference to CLAIMANTS differentiation of the concept of US style discovery,
it is submitted that the United States Federal Rules of Civil Procedure (UFSRCP) provide
for broad discovery in judicial proceedings, one of the most important instruments of
discovery being document production [Rule 34, USFRCP; Kaufman-Kohler, p. 15].
Therefore, discovery of documents is one of several discovery devices to obtain information
[Marghitola, p. 9; Craig, p. 14]. In light of the above, it is submitted that, on a plain reading,
an exclusion of discovery (even US style discovery) necessarily implies an exclusion of
document production.
3. An interpretation of the arbitration agreement reveals that CLAIMANTS request is
precluded.
14 Interpretation of the arbitration agreement is governed by the law applicable to it [Gaillard,
475; Redfern, 3.12; NTPC (India); Collins, 16R- 001]. Since the CISG is the law
applicable to the arbitration agreement [PO 1, (3)], it is submitted that the CISG would
then govern interpretation of the arbitration agreement. Art.8 CISG governs interpretation of
contracts [Honnold 1991, p. 163; Chateau des Charmes Wines (USA); Secretariat
Commentary, p. 18]. Under Art.8(1), the offerors intention will prevail only if the offeree
was aware or could not have been unaware of that intention [Farnsworth, p. 98]. If Art.8(1)
is inapplicable, Art.8(2) applies, under which the understanding of a reasonable person in the
place of the offeree is determinative. Thus, under Art.8(2) either parties intention may
prevail, depending on what a reasonable person in place of the offeree would have
understood [Id, p. 99].
15 In the present case the arbitration clause was proposed by CLAIMANT and subsequently
accepted by RESPONDENT. CLAIMANT asserts that its intention was to exclude only US style
6
discovery [Exhibit C 12; Cl. Memo, 37]. It is submitted that RESPONDENT was neither
aware, nor could have been aware, of CLAIMANTS intention (a) and that no reasonable party
in the place of RESPONDENT would have understood the term to allow for production of
categories of documents (b). Further, CLAIMANT may not argue that the term regarding
arbitration in accordance with international practice is of any significance in interpreting the
arbitration agreement (c). Lastly, it is submitted that that the arbitration agreement should be
interpreted contra proferentem (d).
a) RESPONDENT was neither aware, nor could have been aware, of CLAIMANTS purported
intention.
16 CLAIMANT errs in its contention that Mr. Weinbauers (RESPONDENTS former MD) statement
indicates that RESPONDENTS intention matched that of CLAIMANT [Cl. Memo, 38].
CLAIMANT fails to appreciate the distinction between one or several documents, and
categories of documents. Mr Weinbauer states that the intention of RESPONDENT was to
exclude all document production requests other than requests for particular documents in very
specific circumstances [Exhibit R 1]. RESPONDENT never contemplated disclosure of
categories of documents as now requested by CLAIMANT. Moreover, the arbitration clause
was subject to minimal discussion between the parties. CLAIMANT had forwarded the
arbitration clause to RESPONDENT with no background information except that the clause was
taken over from a multinational company [PO 2, 53]. Therefore, CLAIMANT cannot argue
that RESPONDENT was aware of its intention, nor can it argue that RESPONDENT could not
have been unaware of its intention.
b) A reasonable person in the place of RESPONDENT would not have understood the
clause to allow production of categories of documents.
17 No reasonable person in the place of RESPONDENT would have understood the clause
according to CLAIMANTS purported intentions. As already submitted, the plain wording of an
exclusion of discovery would suggest that document production is excluded as well (See
12-13). Moreover, CLAIMANT had not offered any special explanation regarding the nodiscovery clause [PO 2, 53].
18 Further, American or even English style disclosure is anyhow unsuitable and not obtainable
in international arbitration, except where the parties specifically agree to it. [KaufmanKohler, p. 17; IBA Commentary 2000, p. 152; Born, p. 485; Marghitola, p. 36]. CLAIMANT
itself has argued that in practice, document production is granted in line with the IBA Rules,
which do not allow for document production of the scope allowed in the US [Cl. Memo,
7
50]. Therefore, CLAIMANTS purported intentions would not have been understood by most
reasonable parties as there was anyhow no need to exclude discovery wider than that
provided for in the IBA Rules.
19 Moreover, RESPONDENT belongs to a civil law jurisdiction which allows for document
production of only one or several sufficiently specified documents in specific circumstances
[Exhibit R 1, Answer to Statement of Claim, 30], and was unaware of the IBA Rules [PO 2,
53]. RESPONDENT was merely informed by its lawyer that some common law jurisdictions,
such as CLAIMANTS home jurisdiction, allow for production of categories of documents
[Exhibit R 1]. Consequently, a reasonable person in the place of RESPONDENT would have
understood a clause excluding discovery to exclude all document production requests other
than requests for one or several sufficiently specified documents.
c) CLAIMANT may not argue that the term regarding international practice is of any
significance in interpreting the contract.
20 CLAIMANT could also have argued that the arbitration clause contained a term requiring
arbitration in accordance with international practice and that international practice with
respect to document production is to allow such production. Such an argument would have
been erroneous as not only was no such intention attached to this term, but also in cases of
conflict the specific provision prevails over the general one [UNDROIT Principles, p. 143].
This rule of interpretation, that the more specific provision takes precedence over and
controls the more general one, has been regularly relied upon by national courts and arbitral
tribunals [ICC Award No. 5946; Karnette (USA)]. Consequently, the term regarding
arbitration in accordance with international practice, being the more general term, cannot
change the effect of the no-discovery term, which is inherently more specific.
d) Article 20 of the Framework Agreement should be interpreted contra proferentem.
21 According to the contra proferentem rule, the risk of ambiguity in a contract term must be
borne by the party who drafted it, and an interpretation against that party should be preferred
[Art.4.6, UNIDROIT Principles]. The less the contract term in question was the subject of
further negotiations between the parties, the greater the justification for interpreting it against
the party who included it in the contract [UNIDROIT Principles, p. 144].
22 In the present case, the arbitration clause was proposed by CLAIMANT and subsequently
accepted by RESPONDENT [Exhibit C 12; Exhibit R 1; PO 2, 53]. The parties engaged in
negligible discussion with respect to this clause [PO 2, 53]. Therefore, CLAIMANT bore the
8
risk of any ambiguity in the clause, and an interpretation against CLAIMANT should be
preferred. This principle of interpreting the contract contra proferentem is internationally
approved by authors and in case law alike [Hyundai (UK); Baldus, p. 118; Gaillard, N479;
Lewison, N7.08; Schmidt-Kessel, N49; SA Alfac (France); ICC Case No. 8261], and applies
equally to terms of an arbitration agreement [Paul Revere (USA)].
4. The agreement of the parties is valid and enforceable.
23 RESPONDENT submits that it is recognized that the parties may validly agree to limit or
exclude document production (a). Further, it is RESPONDENTS contention that CLAIMANT has
a right only to reasonably present its case (b), and that the right to evidence does not include
the right to document disclosure (c). Moreover, CLAIMANT may not argue that enforcing the
no-discovery clause will put the finality of the award at risk (d).
a) It is recognized that the parties may validly agree to limit or exclude document
production.
24 RESPONDENT asserts that the parties are competent to determine the scope of document
production by their agreement. The arbitration agreement between the parties may expressly
limit and even completely prohibit discovery or disclosure [Born on Drafting, p. 96], as has
happened in this case. This principle that the parties can limit the discretion of the Tribunal to
order document production is broadly recognized across legal systems [Marghitola, p. 21;
Born, p. 2322]. The prohibition by a Contracting State, of agreements negating the
arbitrators disclosure powers would be a failure to recognise a material term of the
agreement to arbitrate, contrary to Articles II(1) and II(3) of the NYC [Born, p. 2324].
Consequently, it is submitted that the no-discovery clause is valid and enforceable, and the
Tribunal should reject any assertion to the contrary.
b) CLAIMANTS mandatory right extends only to reasonably presenting its case.
25 Art.18 DAL provides that each party shall be given a full opportunity to present his case.
Relying on this mandatory due process requirement, CLAIMANT submits that a denial of its
request would deprive it of any opportunity to comment on the quantum of damages it is
entitled to [Cl. Memo, 46]. It is submitted that CLAIMANT errs in this regard. A full
opportunity is not an open-ended one [Marghitola, p. 23; Waincymer; p. 751]. The use of
the words full opportunity is not to be construed as conferring upon the parties a right to
present as much and whatever evidence it sees fit [Redfern, 6.14; Marghitola, p. 23]. The
words must be given a more sensible meaning. According to the position of the Austrian
9
Oberster Gerichtshof, the right to be heard is only violated if there was no opportunity at all
for a party to present its case on all factual assertions and the evidence, neither orally nor in
writing [Schwarz, p. 434]. If CLAIMANTS request is rejected, it will have the opportunity to
quantify its damages based on its own contracts with its final customers, thereby ensuring it a
reasonable opportunity to present its case.
c) The type of document production requested by CLAIMANT is not a part of the right to
evidence.
26 CLAIMANT submits that any agreement to exclude document production would be a violation
of its right to be heard and would, therefore be void [Cl. Memo, 43]. Contrary to
CLAIMANT, the following will establish that CLAIMANTS right to be heard is not violated.
While RESPONDENT does not contest that the right to be heard is widely construed to include
the right to evidence, RESPONDENT does assert that the right to evidence does not include the
right to request disclosure of categories of documents. There is no right to document
production in international arbitration [Kaufman-Kohler, p. 17]. RESPONDENTS position
finds support in case law, which holds that there is no violation of a partys right to be heard
when evidentiary applications are denied or if the Tribunal fails to establish the facts
sufficiently [Rechberger, 6 ].
27 So as to become a part of an international minimum standard, document production needs to
be an essential element of fair proceedings in both, civil law and common law countries
[Marghitola, p. 213]. However, evidence-taking in civil law countries is primarily controlled
by the court and the parties have no (or virtually no) right to demand relevant materials from
one another [Born, p. 2345]. The civil law courts themselves rarely require parties to produce
material which has not been voluntarily tendered [Born, p. 2345; Rubino-Sammartano, p.
87]. Therefore, in civil law countries, the right to be heard generally does not include a right
to adverse document disclosure [OMalley, n. 3.22]. Even in the present case, while
CLAIMANTS home jurisdiction allows for document production to the extent allowed by the
IBA Rules [PO 2, 59], RESPONDENTS home jurisdiction does not envisage disclosure
requests beyond requests for disclosure of only one or several sufficiently specified
documents [Exhibit R 1; Answer to Statement of Claim, 29]. Moreover, as argued below,
document production is not necessary in the present case (See 45-47). Consequently, a
right to production of categories of documents, as requested by CLAIMANT, can hardly be
recognised as an element of the right to evidence.
10
d) CLAIMANT may not argue that enforcement of the agreement could put the finality of
the award at risk.
28 CLAIMANT contends that enforcement of such an agreement could furnish grounds to
challenge the award, thereby putting the finality of the award at risk [Cl. Memo, 47].
However, RESPONDENT submits that the Tribunal is competent to take a rational and
proportionate approach to limiting the scope of evidence, without risking the finality of the
award [Redfern, 6.14]. Courts have underscored that the Tribunals interpretation and
application of the parties agreed upon procedures will not be subject to judicial second
guessing [Born, p. 3562], and that the decision by the arbitrator limiting or refusing
document production does not constitute a ground for challenging the award [KaufmanKohler, p. 17; Dongwoo (Singapore); Nafimco (France)].
29 In light of the above, it is submitted that the Tribunals power to order document production
has been validly restricted by the agreement of the parties.
B. Assuming, without accepting, that the Tribunal has the power to grant
CLAIMANTS request for document production, the Tribunal should not grant
CLAIMANTS document production request.
30 Without prejudice to its position, RESPONDENT shall also address why the Tribunal should not
grant CLAIMANTS request for document production. CLAIMANT has asserted that the Tribunal
should be guided by the IBA Rules in deciding CLAIMANTS request for document production
[Cl. Memo, 49]. While affirming that the Tribunal is bound by the IBA Rules only where
the parties have expressly agreed to them, RESPONDENT concedes that, in practice, Tribunals
usually exercise their discretion to order document production in accordance with these Rules
[Born, p. 2360; OMalley, 3.04; Zuberbhler, p. 41; Waincymer, p. 757]. RESPONDENT
only seeks to emphasize that the IBA Rules were not intended to limit the flexibility which is
inherent in international arbitration. The Tribunal should apply these Rules in the manner that
best suits the circumstances of the case [IBA Commentary, p. 4].
31 RESPONDENT submits that the requirements for document production have not been fulfilled
in the present case (1), and that the documents requested are privileged via the MFN rule
(2). In the alternative, RESPONDENT submits that a non-application of the MFN rule would
result in a denial of its right to equal treatment (3). Lastly, it is submitted that the balance of
convenience favors RESPONDENT (4).
11
1. The requirements for document production have not been fulfilled.

32 Art.3(3) of the IBA Rules requires that the request be for a narrow and specific category of
documents, and that the documents requested be relevant to the case and material to its
outcome. The non-fulfilment of these requirements furnishes grounds to the other party to
object to such request [Art.3(5), IBA Rules]. CLAIMANT has requested for all documents
pertaining to communications and negotiations between SuperWines and RESPONDENT, as
well as all contractual documents in regard to the purchase of RESPONDENTS wine
[Statement of Claim, 27]. It is submitted that the documents requested are not sufficiently
specific (a), and CLAIMANT has not established why the documents requested are relevant and
material (b).
a) The documents requested are not sufficiently specific.
33 Tribunals have found that requests which have been phrased in general, expansive terms, do
not meet the specificity requirement of the IBA Rules [Born, p. 2361; ICSID Case No.
ARB/05/22]. Similar to the present request, document production requests that begin with all
memoranda, minutes and correspondence are characteristically considered to be too broad
to be allowed in international arbitration [Marghitola, p. 41; Ashford, n. 3-28; Lowenfeld, p.
27]. Additionally, a request for all documents relating to a specific contract usually does not
satisfy the requirement of specificity [Marghitola, p. 41; Hanotiau (Massive Productions), p.
358; Tercier, p. 95; Wirth, p. 12]. Therefore, it is submitted that CLAIMANTS request does
not fulfill the specificity requirement, and should not be granted.
b) CLAIMANT has failed to establish the relevance and materiality of the documents
requested.
34 Moreover, CLAIMANT has failed to sufficiently establish why the documents requested are
relevant and material to the case. It merely states that the requested category of documents
contributes to the calculation of damages [Cl. Memo, 58]. CLAIMANT, however, fails to
consider that the two requirements of relevance and materiality are independent of each other
and both need to be satisfied in a given case [Marghitola, p. 48]. A document is relevant if
the requesting party can use the requested documents to present its case [Marghitola, p. 49].
A document is material to the outcome of the case if it is needed to allow complete
consideration of the factual issues from which legal conclusions are drawn [Marghitola, p.
60]. The documents would be relevant and material to the case only if the Tribunal allows
CLAIMANTS method of calculating damages. Not only has the Tribunal not rendered a
decision on whether to allow CLAIMANTS method of calculating damages, CLAIMANT has
12
also not stated why RESPONDENTS pre-contractual negotiations and communications with
SuperWines are relevant and material. If the purpose of document production was to calculate
RESPONDENTS profits from the sale to SuperWines, a request for documents relating to the
contract would suffice. Therefore, CLAIMANT should have established why the documents are
relevant and material to its case.
2. The documents requested are privileged under the most favored nation rule.
35 RESPONDENT submits that the documents requested by CLAIMANT are privileged, by virtue of
which RESPONDENT need not produce them. A privilege is a legal rule which entitles a party
to withhold documentary evidence from legal proceedings [Meier, p. 145; Kaufmann-Kohler,
p. 19; Carter, p. 177]. The IBA Rules recognize that the Tribunal shall exclude from
production any documents that are privileged [Art.9(2)(b), IBA Rules].
36 The question that arises is about the law applicable to privileges. CLAIMANT comes from a
jurisdiction which allows for document production to the extent allowed by the IBA Rules
[PO 2, 59]. Consequently, the local laws have developed a sophisticated system of rules
applicable to privileges, under which CLAIMANT would be freed from any obligation to
produce contractual and pre-contractual communications with its customers [Answer to
Statement of Claim, 30]. Therefore, CLAIMANTS home jurisdiction recognizes that
protection of business secrets is one of the most important privileges [Kaufmann-Kohler, p.
19]. Being intrinsically linked to its aversion to document production, the rules on privilege
applicable in Mediterraneo are underdeveloped [Answer to Statement of Claim, 30].
However, if the scope of document production has grown by opting for arbitration, the scope
of privileges must necessarily grow [Magnus, p. 3; Metzler, p. 276].
37 In the 2010 version of the IBA Rules, the most important application of Article 9(2)(g) IBA
Rules, i.e., equal treatment in relation to privileges [Raeschke-Kessler, p. 61], was included
in Article 9(3)(e) IBA Rules as a factor to be taken into account when considering issues of
legal privilege. Therefore, the most favoured nation approach is preferred in determining
the law applicable to privileges, wherein the developed rules on privilege of one party (which
offer the greatest protection), in this case CLAIMANT, are applied to both parties [Berger
(Evidentiary Privileges), p. 518; Rubinstein, p. 599]. As the rules on privilege applicable to
each party differ, such an approach would be in accordance with the equal treatment of the
parties, and their prior expectations [Carter, p. 179; Berger (Evidentiary Privileges), p. 21].
13
In fact, CLAIMANT has argued extensively in favour of adopting the most favoured nation
approach [Cl. Memo, 52-57].
38 CLAIMANT has made a request for production of RESPONDENTS contractual and precontractual communications with its final customer [Statement of Claim, 27]. However,
under this approach, a party should be allowed to call only for the documents which it itself
would be required to disclose. Since CLAIMANTS contractual and pre-contractual
communications with its final customers would be privileged and exempt from production,
this privilege and exemption applies to RESPONDENT as well.
3. Alternatively, granting the requests will violate RESPONDENTS right to equal
treatment.
39 If the Tribunal declines to apply the most favoured nation approach in determining the
privileges applicable to either party and the Tribunal applies each partys national law on
privilege, such an approach would be contrary to RESPONDENTS right to equal treatment.
Art.9(2)(g) of the IBA Rules excludes compelled document production on grounds of
equality and fairness. As already contended, the legal privileges applicable to both parties
differ (See 36). However, where documents are considered privileged in one national legal
system, but not in the other, the Tribunal may, pursuant to this provision, decline the request
to produce the technically non-privileged documents [IBA Commentary, p. 26].
40 Not only is equality of the parties a ground to decline document production, unequal
treatment of the parties is contrary to Art.18 DAL. A violation of this due process right of
RESPONDENT may furnish grounds for challenging the finality of the award. On these
grounds, the Tribunal should decline CLAIMANTS document production request.
4. The balance of convenience favors RESPONDENT.
41 Finally, it is submitted that the balance of convenience lies in RESPONDENTS favor. The harm
caused to RESPONDENT, by granting CLAIMANTS request, would be greater than the harm
caused to CLAIMANT by denying the request. Granting CLAIMANTS request for document
production would require RESPONDENT to disclose commercially confidential information (a).
Conversely, denying CLAIMANTS document production request would cause little harm to
CLAIMANT as the CISGs allocation of the burden of proof makes document production
unnecessary for CLAIMANT (b). Further, CLAIMANTS request for document production seems
to be motivated by bad faith (c).
14
a) Document production would require RESPONDENT to disclose commercially

confidential information.
42 RESPONDENT contends that document production would require it to disclose commercially
confidential information. Confidential information is that which provides some value to the
party and that which a reasonable person in the position of the party would regard as
confidential [Toulson, p. 81]. If this commercial confidentiality is found to be compelling,
the Tribunal would exclude such documents from production, on this ground alone
[Art.9(2)(e), IBA Rules]. RESPONDENT asserts that the documents requested by CLAIMANT
would reveal RESPONDENTS pricing policy, which has generally been kept secret [PO 2,
61]. Examples of confidential information are not only documents covered by confidentiality
agreements with third parties, but also information such as price calculations [Marghitola, p.
93; OMalley, n. 9.86]. Moreover, RESPONDENTS pricing policy is motivated by factors such
as long term market strategies [PO 2, 61], which could possibly be revealed if the
documents were disclosed.
43 Further, SuperWines had discussed with RESPONDENT their shared future strategy to use the
market force of SuperWines in order to make RESPONDENTS wine popular in emerging
markets [PO 2, 20; PO 2, 28]. In turn, RESPONDENT had created several internal
memoranda and minutes discussing its cooperation with SuperWines [PO 2, 23]. Both,
SuperWines and RESPONDENT, had assumed that the other side would not disclose details
pertaining to the contract between them [PO 2, 25]. Certainly, SuperWines would not want
its biggest competitor (CLAIMANT) to know its business strategies. An order granting
CLAIMANTS request for document production would not only reveal RESPONDENTS business
strategies, it would also reveal SuperWines- which in turn could possibly jeopardise
RESPONDENTS business relations with SuperWines. It is pertinent to note that, in the wine
industry, the distribution network of the top distributors plays an important role for getting
the wine to the right people in order to build up the wines reputation [PO 2, 33].
Moreover, as submitted above, RESPONDENTS future business strategy involves extensive
cooperation with SuperWines. This makes continued business relations with SuperWines
imperative. Therefore, it is submitted that document production would require RESPONDENT
to disclose commercially confidential information.
44 CLAIMANT has contended that if the documents were treated as business secrets, RESPONDENT
would have taken some measures to secure their confidentiality [Cl. Memo, 66]. However,
it must be borne in mind that no reasonable person in the place of RESPONDENT would see the
15
need to secure the confidentiality of such documents. Disputes in the wine industry are
usually solved amicably [PO 2, 33]. In any case, RESPONDENT had entered into a written
contract only with CLAIMANT [PO 2, 35]. This contract contained an arbitration clause
which RESPONDENT perceived as excluding document production (See 16-19). Further,
RESPONDENTS home jurisdiction required document production only in limited
circumstances [Exhibit R 1; Answer to Statement of Claim, 29, 30]. Therefore, there was
no threat of compelled disclosure and it was reasonable that even confidential business
information was not secured by undertaking confidentiality measures.
b) The CISGs rules on the burden of proof make document production unnecessary.
45 While CLAIMANT relies upon the view that the question of the allocation of burden of proof is
not a matter governed by the CISG [Cl. Memo, 73-77], the predominant, and nearly
undisputed, view holds that allocation of burden of proof is governed by the CISG, although
not explicitly settled within it [Ferrari, II; Kroll, p. 169; Schwenzer/Hachem (Art.4), 25].
Contrary to CLAIMANTS assertion [Cl. Memo, 76], RESPONDENT submits that the drafting
history of the CISG does not provide support for the argument that the burden of proof is a
matter falling outside the scope of the CISG. Certain proposals for including explicit rules on
the burden of proof were rejected on the basis of such rules being superfluous for stating the
obvious [Kroll, p. 169]. Therefore, it is submitted that the question of allocation of burden of
proof is a matter governed by the CISG.
46 Burden of proof under the CISG is allocated on the basis of three general principles
[Lambskin coat (Switzerland)]. The first two acknowledge that a party which wants to derive
beneficial legal consequences from a legal provision has to prove the existence of the factual
prerequisites of that provision, and that a party claiming an exception has to prove the
existence of the factual requirements for the exception. RESPONDENT submits that the third
principle allocates burden of proof based on the rule that those facts which are exclusively in
a partys sphere of responsibility have to be proven by that party. This third general principle
recognizes the principle of proof proximity relied upon by CLAIMANT [Cl. Memo, 8082].
47 CLAIMANT erroneously contends that the logical extension of these principles is that
document production requests are perfectly appropriate under the CISG [Cl. Memo, 81].
Contrary to CLAIMANTS argument, RESPONDENT asserts that the logical extension of these
principles (and the balance set out in them) is that document production is not only
inappropriate, but also unnecessary under the CISG.
16
c) CLAIMANTS request for document production seems to be motivated by bad faith.

48 In any case, it is submitted that CLAIMANTS request for document production seems to be
motivated by bad faith. The only purpose that compelled document production would serve
would be to reveal RESPONDENTS and SuperWines business secrets. While CLAIMANT
purportedly requires the documents to calculate the profit earned by RESPONDENT in the
dealings with SuperWines, it has made a request for not only the contractual documents, but
also for all communications and negotiations between RESPONDENT and SuperWines
[Statement of Claim, 27]. If CLAIMANT was only motivated by a desire to calculate the
profits earned by RESPONDENT, a request for the contractual documents would suffice. In
such a case, production of the pre-contractual negotiations and communications spanning a
year and a half would have been unnecessary. Therefore, the balance of convenience is in
favor of RESPONDENT and CLAIMANTS request for document production should be rejected.
49 In light of the above, Respondent submits that, even if the Tribunal has the power to order
document production, it should decline to do so.
ARGUMENT ON THE SUBSTANTIVE ISSUES

50 The Framework Agreement for the sale of RESPONDENTS wine to CLAIMANT is a contract
governed by the CISG. In Art.20 of the Framework Agreement, the parties have chosen the
law of Danubia including the CISG as the applicable law [Exhibit C 1]. Further, the parties
are in agreement that the contract is governed in principle by the CISG [PO 1, 5 (3)].
II.
CLAIMANT
CANNOT CLAIM THE PROFITS
RESPONDENT
MADE BY SELLING THE
BOTTLES TO SUPERWINES AS PART OF ITS DAMAGES.
51 CLAIMANT had placed an order for 10,000 bottles of the 2014 vintage of RESPONDENTS wine
[Exhibit C 2]. Due to adverse weather conditions diminishing the quantity of wine bottled,
RESPONDENT had resorted to a pro-rata allocation of wine among its customers, and refused
to deliver 5,500 out of the 10,000 bottles ordered by CLAIMANT [Exhibit C 3]. Ultimately,
RESPONDENT (without recognising any liability to do so) delivered 4,500 bottles of its wine to
CLAIMANT [Answer to Statement of Claim, 25; PO 1, 2]. For the purpose of this phase of
the proceedings, it has been assumed by the Tribunal that RESPONDENT breached the
Framework Agreement by not delivering the promised 5,500 bottles to CLAIMANT [PO 1,
4]. Pursuant to Art.74 CISG, the party injured by a breach is entitled to damages equal to the
loss, including loss of profit, which it suffered as a consequence of the breach of the contract.
17
CLAIMANT is trying to claim, as part of its damages under Art.74 CISG, the profits that
RESPONDENT made by selling 5,500 bottles of the 2014 vintage to SuperWines [Statement of
Claim, 26]. However, RESPONDENT asserts that Art.74 disallows this demand made by
CLAIMANT. It is submitted that CLAIMANT has not proved that it suffered a loss within the
meaning of Art.74 CISG (A). Further, disgorgement of profits is not allowed under Art.74
CISG (B). In any case, recovery of the profits earned by RESPONDENT is not allowed under
Art.74 (C).
A. CLAIMANT has not proved a loss within the meaning of Art.74 CISG.
52 CLAIMANT has contended that it will suffer lost profits in regard to the 5,500 bottles that it
will not be able to sell [Statement of Claim, 26; Cl. Memo, 19]. It must be borne in
mind that CLAIMANT had also entered into a substitute transaction with Vignobilia Ltd. for
5,500 bottles of diamond Mata Weltin wine [PO 2, 11; Statement of Claim, 11].
Therefore, according to CLAIMANT, it would have been able to sell a total of 15,500 bottles of
diamond Mata Weltin wine (4,500 from RESPONDENT + 5,500 from Vignobilia Ltd. + 5,500
that CLAIMANT will not be able to sell). RESPONDENT submits that CLAIMANT merely had an
opportunity to earn a profit (1), and CLAIMANT has not discharged its burden of proving that
it actually suffered a loss of profit (2).
1. CLAIMANT merely had an opportunity to earn a profit.
53 It is submitted that CLAIMANT did not have any contractual certainty that it would be able to
sell a total of 15,500 bottles of diamond Mata Weltin wine. Up until December 8, 2014,
CLAIMANT had pre-orders for only 6,500 bottles of RESPONDENTS wine. Moreover, under
CLAIMANTS business model, its customers were not even bound to finally purchase the full
quantity which they had pre-ordered [PO 2, 6]. Therefore, it is submitted that CLAIMANT
merely had an opportunity or chance to earn a profit on the 5,500 bottles of RESPONDENTS
wine, but was not guaranteed a profit in case of delivery. Where, following a breach of
contract, the injured party claims to have suffered a loss from a missed opportunity to engage
in an opportunity for gain, he is said to seek damages for loss of chance or opportunity to
earn a profit [Chaplin (UK)]. Consequently, CLAIMANTS attempt to recover damages for the
5,500 bottles that it will not be able to sell qualifies as a claim for loss of opportunity.
54 The pertinent difference between a loss of chance and the general category of loss of profits
lies in the existence of a contingency which separates the promisees realization of gain from
the promisors performance [CISG-AC Opinion no. 6]. Since the realization of profits
18
depends on the occurrence of the contingency (in this case the actual sale of the wine), the
injured party is usually unable to prove with the requisite degree of certainty that it would
have made a profit if the contract had been performed [CISG-AC Opinion no. 6]. Thus,
damages for the loss of a chance or opportunity to profit are customarily not recoverable
under Art.74 [Saidov Paper, p. 10].
2. CLAIMANT has not discharged its burden of proving that it suffered a loss of profit.
55 CLAIMANT has relied upon the economic principle of demand and supply to assert that since
the stock of diamond Mata Weltin 2014 was low, the prices were high, and therefore, it was
reasonably likely that CLAIMANT would have been able to sell the Mata Weltin wine at its
market price of EUR 90-100 [Cl. Memo, 17]. However, CLAIMANT has failed to establish
that it had the customers to sell the extra 5,500 bottles to. The market price notwithstanding,
CLAIMANT would not realize profits from the extra 5,500 bottles unless it was actually able to
sell the extra bottles. For the recovery of damages under Art.74 CISG, the injured party has
the burden to prove, with reasonable certainty, that it has suffered a loss [CISG-AC Opinion
no. 6, 2; Saidov, pp. 157 - 158; Schlechtriem/Schwenzer 2010, p. 1026]. This requisite of
proving the fact of loss with reasonable certainty is in line with the UNIDROIT Principles
[Art.7.4.3, UNIDROIT Principles], and also finds support in case law [Award in Case No.
302/1996; Delchi Carrier (USA); TeeVee (USA)].
56 There should be a strict application of this standard of reasonable certainty to the fact of loss
[Saidov, p.13]. CLAIMANT has furnished no evidence to indicate that it had sufficient demand
from its customers to be able to sell 15,500 bottles of diamond Mata Weltin wine. In the
absence of orders for the goods which the seller failed to deliver, it is difficult to state with
precision that the alleged profits would have been earned [Schwartz, 3; Saidov (Standards),
p. 19].
57 CLAIMANT has asserted that the price of the bottles increased to a particular amount when
sold to SuperWines, which CLAIMANT then became entitled to [Cl. Memo, 15]. Even
assuming (without conceding) that the bottles sold to SuperWines rightfully belonged to
CLAIMANT, the mere fact that the party in breach sold the goods to a third buyer at a higher
price than agreed on with the first buyer, does not in itself prove that the buyer had suffered a
loss of the corresponding amount [Galva, p.35].
58 Quite to the contrary, the facts already on record indicate that CLAIMANT was never in a
position to sell 15,500 bottles of Mata Weltin wine. RESPONDENT had been CLAIMANTS only
19
supplier of top quality Mata Weltin from Mediterraneo until 2014 [PO 2, 11]. CLAIMANT,
over the years, had only placed orders for between 7,500 and 8,500 bottles of RESPONDENTS
wine [Statement of Claim, 4; Answer to Statement of Claim, 8]. It follows that every year
the demand amongst CLAIMANTS customers was only for 7,500-8,500 bottles of top quality
Mata Weltin wine from Mediterraneo. In fact, as already submitted, up until December 8,
2014, CLAIMANT had pre-orders for only 6,500 bottles of RESPONDENTS wine, which (under
CLAIMANTS business model) its customers were not even bound to finally purchase the full
quantity of [PO 2, 6].
59 Therefore, CLAIMANT has hardly proved with any degree of certainty, much less reasonable
certainty, that it had enough demand from its customers to sell a total of 15,500 bottles of
diamond Mata Weltin wine. Unless CLAIMANT proves this, it cannot contend that it suffered a
loss of profits within the meaning of Art.74. A loss being a prerequisite of Art.74, CLAIMANT
cannot in this case claim for damages.
B. In any case, the CISG disallows damages on the basis of disgorgement of profits.
60 Disgorgement of profits is a method of calculating damages on the basis of the profits earned
by the breaching party. It is submitted that, in principle, disgorgement of profits is not
allowed under Art.74. The principle underlying Art.74 CISG (i.e., the remedy of damages for
breach) is to place the injured party in the same economic position he would have been in,
had the contract been performed [Stoll/Gruber, 2; Honnold 1999, p. 445]. Since it is the
loss of the injured party which forms the starting point for the calculation of damages, a
calculation by reference to the breaching partys profit or gain is impermissible under the
CISG [Schlechtriem/Schwenzer 2005, p. 567].
61 Moreover, it is submitted that disgorgement of profits is a form of punitive damages
[Roberts, 33, 43]. Punitive damages (which are also known as exemplary damages) are
sums awarded in excess of any compensatory damages in order to punish a party for
misconduct [CISG-AC Opinion no. 6]. However, Art.74 CISG limits damages to a sum equal
to the loss, including loss of profit, suffered by the other party as a consequence of the
breach. Consequently, recovery of punitive damages is contradictory to the very language of
Art.74 and it is generally held that the CISG does not allow for their recovery [Butler, p. 6].
Further, there is a widespread consensus among several authors that Art.74 does not allow for
the disgorgement of profits acquired by the party in breach [Schlechtriem/Schwenzer 2010, p.
20
1017]. In light of the above, it is submitted that CLAIMANTS method of calculating its
damages is impermissible under the CISG.
C. In any case, disgorgement of the profits earned by RESPONDENT in its dealings
with SuperWines should not be allowed.
62 Assuming, without accepting, that Art.74 CISG in principle allows for disgorgement,
disgorgement of the profits earned by RESPONDENT in its dealings with SuperWines should
not be allowed in the present case. It is submitted that the profit earned by RESPONDENT from
its dealings with SuperWines had nothing to do with CLAIMANT (1). Further, the
disgorgement of profits would lead to overcompensation of CLAIMANT (2). Finally, it is
submitted that further profits cannot be allowed (3).
1. The profit earned by RESPONDENT had nothing to do with CLAIMANT.
63 CLAIMANTS arguments, for the recovery of the profits earned by RESPONDENT in its dealings
with SuperWines, are based on the presumption that the bottles sold to SuperWines
rightfully belonged to CLAIMANT [Statement of Claim, 26; Claimant Memo, 15, 16].
CLAIMANT errs in making this presumption.
64 In November 2014, RESPONDENT had already promised to SuperWines a certain number of
bottles [PO 2, 24]. In spite of this, after an interim injunction dated December 12, 2014,
was granted in CLAIMANTS favour, RESPONDENT had managed to preserve 10,000 bottles of
its wine to be able to fulfill its obligations towards CLAIMANT [PO 2, 49]. It was only after
CLAIMANTS substitute transaction of February 2, 2015, (wherein CLAIMANT purchased 5,500
bottles of substitute wine) that RESPONDENT entered into further contracts for 5,500 out of the
10,000 bottles preserved [PO 2, 49]. It follows that RESPONDENT would have been able to
fulfill its obligations towards CLAIMANT, despite the sale to SuperWines [PO 2, 27].
Consequently, it is submitted, there was no link between the 5,500 bottles promised to
CLAIMANT and the 5,500 bottles that were sold to SuperWines. Therefore, the two
transactions were independent and there is no rational basis for asking for disgorgement of
the profits earned by RESPONDENT specifically in the transaction with SuperWines.
65 Further, CLAIMANT has asserted that disgorgement of profits should be allowed as
RESPONDENT benefitted from the breach, which is prohibited by the CISG [Cl. Memo,
26-28]. For the same reasons outlined in the preceding paragraph, CLAIMANTS arguments
must be rejected. RESPONDENTS refusal to deliver had nothing to do with its transaction with
SuperWines, but was a result of CLAIMANTS unpalatable behavior. Moreover, CLAIMANTS
21
reliance on AG v Blake [Cl. Memo, 28], is strikingly out of context. Not only is such a
case inconceivable in the context of international sales [Schwenzer/Hachem, p.101], the
damages awarded in that case were restitutionary in nature thereby removing them from the
scope of Art.74 CISG [Saidov/Cunnington, p.176].
2. Allowing CLAIMANT to recover damages for loss of profits would lead to
overcompensation.
66 RESPONDENT asserts that CLAIMANT may not be overcompensated for the breach. It is
submitted that the transaction with Vignobilia was a replacement transaction (a), and the
CISG provides a method of calculating damages in case of a replacement transaction (b).
RESPONDENT submits that allowing for disgorgement of profits in these circumstances would
lead to overcompensation of CLAIMANT (c). Alternatively, if the transaction with Vignobilia
was not a replacement transaction, then CLAIMANT failed in its duty to mitigate damages (d).
a) The transaction with Vignobilia was a replacement transaction.
67 In line with its duty to mitigate damages, the injured party can avoid part of its loss as a result
of the breach by entering into a substitute transaction [Farnsworth on Contracts, vol. 3, pp.
216, 225]. This substitute transaction may even be entered into before avoidance of the
contract, but after a breach [CISG-AC Opinion no. 6, 8.1]. In the present case,
RESPONDENTS refusal to deliver 5,500 bottles of its wine to CLAIMANT had led CLAIMANT to
contact other top vineyards so as to make substitute arrangements for those bottles [Statement
of Claim, 11]. CLAIMANT was able to purchase these 5,500 bottles of wine from Vignobilia
Ltd., which was another high end producer of wine from the region [PO 2, 11]. CLAIMANT
purchased 5,500 bottles from Vignobilia so as to ensure that it could deliver at least some
wine from Mediterraneo, should RESPONDENT not deliver the full amount promised [PO 2,
11].
68 CLAIMANT had previously contacted its customers to assess whether they would be willing to
accept Mata Weltin wine from any other top producer in the event that RESPONDENT refused
delivery despite the injunction in CLAIMANTS favor. A considerable number of CLAIMANTS
customers were willing to do so, and in the end accepted a mixture of Mata Weltin from
RESPONDENT and from Vignobilia [PO 2, 10]. In fact, one of the main reasons why
CLAIMANT demands payment of damages in respect of the 5,500 bottles of RESPONDENTS
wine instead of insisting on specific performance is that CLAIMANTS customers had been
willing to accept in place of these bottles, the 5,500 bottles from Vignobilia [PO 2, 12].
22
69 Although not raised, CLAIMANT may argue that RESPONDENTS wine was a unique
commodity for which no substitute was possible. However, a substitute transaction does not
mean that the goods must be identical and have the same terms or form as the original
contract [Butler, p. 4]. Further, since CLAIMANT itself had been trying to replace
RESPONDENTS wine with that of other top producers so as to reduce its dependence on
RESPONDENT [PO 2, 11], it can be reasonably stated that CLAIMANT itself considered
RESPONDENTS wine to be replaceable.
b) The CISG provides a method for calculation of damages in case of a replacement
transaction.
70 Art.75 CISG provides that damages are to be calculated on the basis of the difference
between contract price and price of substitute transaction, when there is avoidance and a
substitute transaction. In situations where a substitute transaction has taken place, even
without avoidance, the injured party may calculate its damages using the same method for
recovering damages under Art.75 CISG [Iron molybdenum (Germany)]. That is, the
aggrieved party may recover as damages under Art.74 the difference between the contract
price and the substitute transaction [Schlechtriem, p. 3].
c) Allowing for disgorgement of the profits earned by RESPONDENT would lead to
overcompensation of CLAIMANT.
71 CLAIMANT asserts that it is limiting its damages claim and is merely claiming the profits
that RESPONDENT earned [Cl. Memo, 18; Statement of Claim, 26]. Contrary to this,
RESPONDENT submits that allowing such a damages claim would lead to CLAIMANT being
overcompensated. So as to preclude over-compensation of the injured party, all gains made
and costs saved as a result of the breach need to be taken into account when calculating
damages [Saidov, p. 29]. In a situation like the present one, where a substitute transaction
was entered into, the buyer (i.e. CLAIMANT) cannot claim damages for loss of profit in
addition to the difference between the contract price and the price of the substitute
transaction. This is because the substitute transaction has provided the buyer with the goods
to perform its subsequent contracts and earn profits from those subsequent contracts [Saidov
(Standards), p. 30]. Allowing CLAIMANT to now demand the premium earned by
RESPONDENT as damages for loss of profits, despite the occurrence of a substitute transaction
(in which profits would have been earned), would be to allow overcompensation of
CLAIMANT.
23
72 The principles of full compensation and protection of the partys expectation interest also
limit the quantum of damages that a party may recover [Saidov, p. 29]. These principles
prohibit the award of damages which exceed the amount of loss suffered by the party, and
which would put the party in a better position than the one in which it would have been had
the contract been performed [Id.]. This would be the case if CLAIMANT were allowed
damages for loss of profits, when it had already earned the profits by selling Vignobilias
wine. Consequently, CLAIMANT is not entitled to disgorgement of RESPONDENTS profits.
d) Alternatively, if the transaction with Vignobilia was not a replacement transaction,
CLAIMANT failed in its duty to mitigate its losses, thereby disentitling it to damages.
73 Art.77 CISG places upon the injured party the duty to enter into a replacement transaction, so
as to mitigate its losses [Friedmann, p. 86; Riznik, p. 272]. Consequently, if CLAIMANT were
to argue that the transaction with Vignobilia was not a replacement transaction, RESPONDENT
would assert that CLAIMANT failed in its duty to mitigate its losses, which in turn would
disentitle it to damages.
3. Further profits cannot be allowed.
74 CLAIMANT asserts that the loss suffered by it would have been significantly higher than the
profits RESPONDENT obtained by selling the goods it had promised to CLAIMANT to
SuperWines [Cl. Memo, 16]. However, CLAIMANTS argument ignores the facts already on
record. There is a possibility that Claimant is seeking an amount higher than what it would
have earned, had the contract been performed.
75 As already submitted, it is more than likely that CLAIMANT did not have enough demand from
its customers to sell to them 5,500 extra bottles (See 53-59). Therefore, the profits that
CLAIMANT would have earned may well have been low to begin with. Further, even if
CLAIMANT sold all the bottles, there is also a possibility that the profits that CLAIMANT would
have earned by selling the 5,500 bottles would have been lower than the premium which
RESPONDENT earned from SuperWines (which is now demanded by CLAIMANT) [PO 2, 17].
Therefore, there is a possibility that CLAIMANTS loss of profits would have been lower than
the damages it is claiming.
76 However, as contended above, the general principles underlying Art.74 (full compensation
and protection of performance interest) prohibit the recovery of damages which exceed the
loss suffered by the injured party [Saidov, p. 29]. A party is not entitled to be put in a better
position than the one in which it would be if the contract had been performed [Id.].
24
77 CLAIMANT argues that, in such a situation, it would still be entitled to disgorgement of these
profits as, under Art.74 CISG, a party is not to benefit from its breach of a contract [Cl.
Memo, 26; Statement of Claim, 26]. However, CLAIMANT fails to consider that the very
purpose of the remedy of damages is to compensate the injured party for the loss suffered by
it. Consequently, the benefits or gains earned by the breaching party as a result of the breach
are generally irrelevant for measuring damages [Saidov, p. 33]. It follows that the restitution
interest, which focuses (instead of on the injured partys loss) on these benefits or gains in
order to prevent the party from being unjustly enriched, is not protected [Id.]. Such a
recovery could also be considered a form of punitive damages, which, as argued above, is
impermissible under the CISG (See 61).
78 Hence, it is submitted that CLAIMANT may not recover under Art.74 CISG the damages it is
claiming.
III.
CLAIMANT
COSTS OF
IS NOT ENTITLED TO THE DAMAGES CLAIMED FOR THE LITIGATION
US$ 50,280, INCURRED PARTLY IN ITS APPLICATION FOR INTERIM RELIEF
AND PARTLY IN ITS SUCCESSFUL DEFENCE AGAINST
RESPONDENTS
SUIT FOR
DECLARATORY RELIEF.
79 CLAIMANT is attempting to recover under Art.74 CISG the litigation costs incurred by it,
partly in its application for interim injunction and partly in its defense against RESPONDENTS
suit for declaratory relief. RESPONDENT submits that litigation costs are not recoverable under
the CISG (A). RESPONDENT further contends that in any case, CLAIMANTS suit was not
foreseeable (B), and the costs incurred in RESPONDENTS suit should not be awarded (C).
Moreover, Claimants contingency fee agreement with its lawyers was not reasonable (D).
A. Litigation costs are not recoverable under the CISG.
80 RESPONDENT asserts that litigation costs are not, as a matter of principle, recoverable under
the CISG. Art.74 CISG disallows the recovery of costs associated with litigation of a breach
[CISG-AC Opinion no. 6, 5]. It is submitted that litigation costs are not a loss within the
meaning of Art.74 CISG (1) and allowing for allowing for such recovery would be contrary
to the principle of equality of the parties (2). Further, CLAIMANTS reliance on the plain
meaning of Art.74 is erroneous (3).
1. Litigation costs are not a loss within the meaning of Art.74 CISG.
81 Art.74 allows for the recovery of damages equal to the loss suffered by the injured party,
provided such loss was consequential to the breach. RESPONDENT asserts that litigation
25
costs are not a loss for the purposes of Art.74. It is submitted that the CISG governs only
substantive sales law (a) and recovery of litigation costs, being a procedural issue, is not
governed by the CISG (b). RESPONDENTS assertion finds support in the travaux
prparatoires of the CISG (c). Moreover, there is no causal link between breach and loss. (d).
In any case, the decision of the High Court of Mediterraneo as to costs should be treated as
final and binding (e).
a) The CISG governs only substantive sales law.
82 It is submitted that the CISG deals with contracts, but not with procedure [Flechtner, p. 97].
The preamble of the CISG itself declares that the purpose of the CISG is the adoption of
uniform rules which govern contracts for the international sale of goods and not the
adoption of rules which govern procedures of their court enforcement [Schwenzer/Hachem,
p. 471; Lookofsky, p. 283; Gutta-Werke (Switzerland)].
83 RESPONDENTS assertion is affirmed on an interpretation of the Conventions provisions
dealing with its scope of application. Art.4 CISG (being the preponderant provision in this
regard), by restricting the scope of application of the Convention to formation of contracts of
sale and the rights and obligations arising from such a contract, unambiguously limits the
Conventions applicability to issues of a substantive character (unless specifically provided
otherwise) [orevi, p. 218]. Such an approach is in line with case-law on the issue, which
explicitly recognizes that the CISG governs substantive sales law and that procedural rules
are beyond its scope [MCC-Marble (USA)].
84 The legislative history of the Convention further encourages this view [orevi, p. 218].
The drafters of the CISG themselves adopted the distinction between substance and
procedure in order to determine the appropriate scope of the Convention, albeit in different
contexts. It was considered improper for the CISG, which regulates international sales of
goods, to deal with matters of procedure [J Honnold, p. 330]. Therefore, the CISG governs
only substance and not procedure.
b) Recovery of litigation costs is a procedural issue, not governed by the CISG.
85 It is submitted that the recovery of litigation costs is outside the scope of applicability of the
CISG as it is a procedural matter [CISG-AC Opinion no. 6, 5.2]. CLAIMANT has asserted
that allowing for such recovery would not undo domestic law on the issue, but would merely
take the same into account [Cl. Memo, 95]. On the contrary, RESPONDENT contends that the
forums procedural rules on allocation of litigation costs should be regarded as a complete
26
and exclusive regime governing the matter, thereby precluding recourse to Art.74 CISG for
recovery of such costs [Huber, p. 278]. Even in legal systems (such as Mediterraneo) which
adopt the rule of each party bearing its own costs, recovery of litigation costs should not be
permitted [Id.].
86 CLAIMANT may contest the applicability of the substance/procedure distinction. Despite such
challenges, such a distinction is unhindered when founded on a comparative survey and
supported by the international uniform classification on the matter [orevi, p. 217]. In this
context, it is submitted that there is not a single jurisdiction that treats attorneys fees incurred
in litigation as a loss for breach of contract, and the issue is left to be regulated by domestic
procedural codes [orevi, pp. 216-217]. Not only this, such a classification also finds
acceptance in various transnational and international codes, such as the ALI/ UNIDROIT
Principles of Transnational Civil Procedure (Article 25), the rules of many international
arbitral institutions and international courts, all of which categorize recovery of attorneys
fees incurred in litigation/arbitration as a matter of procedural law and not substantive law,
thereby being governed by the procedural codes or rules themselves [orevi, p. 217-218].
Consequently, treating the issue as one of substance and not procedure in order to allow
recovery would be contrary to prevailing international consensus [Id.].
c) The CISG was never intended to undo the local laws on recovery of litigation costs.
87 RESPONDENT submits that the drafters of the CISG and the States signing the CISG did not
(through the CISG) want to undo the local laws on the recovery of costs in legal proceedings
[Answer to Statement of Claim, 32]. CLAIMANT has stated that there is no indication in
the travaux prparatoires that the drafters considered the issue of recovery of litigation costs
at all [Cl. Memo, 94]. However, RESPONDENT submits that a more accurate statement
would be that there is nothing in the travaux prparatoires which indicates that the issue of
recovery of litigation costs ever actually arose or that the drafters ever contemplated the
wild notion that Art.74 (or any other CISG rule) governed this issue [Flechtner (Zapata
Retold), p. 8]. With respect to this issue, the drafters of the CISG adopted the
substance/procedure distinction, even if inadvertently. They appear to have assumed that the
Convention does not deal with the litigation costs issue, because they would have thought it
obviously a matter of procedure [Id.].
88 In fact, given the importance of the issue of recovery of litigation costs and the lack of an
international consensus regarding the same, such an omission on the part of the drafters
assumes greater significance [Fletcher, p. 151]. It indicates that the countries (such as the
27
USA) which generally require each litigant to bear its own expenses did not anticipate or
intend that the CISG would alter such an important aspect of the litigation process [Id.]. Not
just these countries, but also those which follow the loser pays principle (i.e. costs follow
the event) would be averse to the issue of litigation costs being governed by the Convention,
especially where their domestic rules impose restrictions (or special requirements) on the
amount of recoverable litigation costs [Flechtner, pp. 99-100]. These specially designed
domestic rules would reflect well thought out and well understood peculiarities of domestic
law, and would certainly be more appealing than the uncertainties and absurdities involved in
an application of Art.74 [Schlectriem (Attorneys Fee), pp. 206-207]. Therefore, the CISG
was never intended to undo the local laws on recovery of litigation costs.
d) There is no causal link between breach and loss.
89 For the recovery of damages under Art.74 CISG, the loss suffered must be a consequence of
the breach, i.e., a causal link must exist between the breach and the loss suffered [Kritzer, p.
158]. CLAIMANT has asserted that litigation costs are a consequence of the breach, and should
therefore be recoverable under Art.74 [Cl. Memo, 97-100]. Contrary to CLAIMANTS
contention, RESPONDENT asserts that the litigation costs are not a consequence of the breach.
90 It is submitted that the litigation costs incurred are more closely connected with the court
proceedings themselves [orevi, p. 215]. Accordingly, such costs have been consistently
not treated as losses arising out of the breach of contract, whether they are incurred in
countries allowing for recovery or not [Wetter, p. 329]. The initiation of litigation
proceedings transforms the sales contract between buyer and seller into a three party
litigation involving the court, thereby making the basis of recovery of costs in the litigation
itself and not in the breach which was the reason of the proceedings [orevi, p. 216].
Therefore, it is more appropriate to say that the parties have incurred expenses as a result of
the court proceedings [Vanto, p. 214], rather than as a result of the breach. This is more so
the case since these expenses are independent of the breach and would be incurred even if the
court were to determine that there was no breach of the contract [orevi, p. 216].
Consequently, the litigation costs are a loss too distinct from the usual losses suffered as a
consequence of the breach, thereby precluding recourse to Art.74 for their recovery.
e) In any case, the decision of the High Court of Mediterraneo as to costs should be
treated as final and binding.
91 It is submitted that if litigation costs were to be treated as consequential to the breach, it is
imperative that any previous decision on the issue be considered as final and binding. If the
28
Tribunal were to hold otherwise, the ensuing cycle of recovery of litigation costs would defy
all logic and reason, more so in forums (such as Mediterraneos courts and the VIAC) which
do not mandate the recovery of all of the litigation costs from the losing party. Therefore, if
CLAIMANTS argument that its litigation costs were the consequence of the breach was to be
upheld, it is imperative that the Tribunal recognize that the decision of the High Court of
Mediterraneo is final and binding.
2. Allowing for recovery of litigation costs would be contrary to the principle of
equality.
92 CLAIMANT has relied on the principle of full compensation to argue that litigation costs
should be recoverable under the CISG [Cl. Memo, 91-92]. RESPONDENT submits that
adopting such an interpretation of the principle of full compensation would be contrary to the
principle of equality between buyers and sellers. The remedies for breach of a contract are
analogous for both buyers and sellers, with the remedy of damages being most
appropriately placed in a chapter titled Provisions Common to the Obligations of the Seller
and of the Buyer [Liu, pp. 1-2]. However, awarding litigation expenses as damages under
Art.74 would lead to an anomaly wherein a successful claimant would be entitled to recovery,
with a successful respondent being denied recovery [CISG-AC Opinion no. 6, 5.3; Keily,
5.6; Vanto, pp. 203, 221].
93 Art.74 CISG allows for recovery of damages only where the damages claim is founded on the
breach of a contract. A successful respondent will not be able to claim litigation expenses
incurred by him in the proceedings wherein he prevailed, as there would be no breach on the
part of the claimant upon which he could base his claim for damages [See Vanto, p. 221;
Keily, 6.2(b)]. Therefore, the aim of making a prevailing party whole for the costs incurred
in litigation would not be realized in the case of a successful respondent.
94 CLAIMANT has contended that the CISGs goal is merely to determine the consequences of
breach of a contract, and awarding damages for litigation costs is in line with this goal,
despite such inequality [Cl. Memo, 96]. However, CLAIMANT fails to consider that
remedies are fundamental to any contract law, and that an interpretation allowing for
inequality in remedies is contrary to the scheme of the CISG [Keily, 6.2(b)]. The drafters of
the CISG, having provided for the intrinsic equality of the buyers and sellers, could never
have intended to allow such an inequality between them in the matter of recovery of damages
[Felemegas, n. 5(d)].
29
95 CLAIMANT may further argue that the aforementioned anomaly would constitute a gap in the
CISG, to be resolved by recourse to domestic law under Art.7(2). That is, Art.74 would leave
the ability of successful respondents to recover these expenses dependent on applicable
domestic laws or rules. However, this does not solve the problem as a successful respondent
may still be unable to recover its litigation expenses in a jurisdiction that requires each party
to bear its own litigation expenses. Moreover, certain jurisdictions impose restrictions and
strict regulations on the recovery of litigation expenses, and subjecting the successful
respondent to these additional restrictions would be to treat him unequally [John Gotanda, p.
133]. Thus, allowing for recovery of litigation costs would be contrary to the principle of
equality.
3. CLAIMANTS reliance on the plain language of Art.74 is erroneous.
96 CLAIMANT has argued that the recoverability of litigation costs is suggested by the plain
language of Art.74 CISG [Cl. Memo, 87]. However, CLAIMANT errs in this regard. The
plain text of Art.74 is at the very least vague on the question of recovery of litigation costs
and does not, by itself, require such recovery [Flechtner, p. 98]. Moreover, relying on the
plain meaning of the provision leads to absurdities when such an approach ignores the
intention behind the provision being interpreted [Flechtner (Zapata Retold), p. 8]. As already
submitted (See 85-88), the intention behind Art.74 was never to include litigation costs as
a category of damages that could be recovered.
97 CLAIMANT has relied on three cases in which litigation costs were declared recoverable under
Art.74 CISG [Cl. Memo, 90]. This, according to CLAIMANT, supports its argument that the
plain language of Art.74 suggests that recovery of litigation costs is allowed. However,
CLAIMANTS arguments do not withstand scrutiny. It is submitted that these cases are
distinguishable on facts, as in these cases, the litigation costs under Art.74 were asked for in
the very proceedings in which they were incurred. In the present case, litigation costs are
claimed before the Tribunal for proceedings that have already occurred in the courts of
Mediterraneo.
98 Furthermore, it is noteworthy that the predominant practice in countries which follow the
loser pays approach is to compensate for litigation costs on the basis of the domestic
procedural rules, and not on the basis of Art.74 [Fletcher, p. 2]. Not just in these countries,
the recovery of litigation costs has been allowed only on the basis of applicable procedural
rules in the overwhelming majority of CISG cases [orevi, p. 218]. In fact, these majority
30
cases will serve as counter-precedents to the three cases relied upon by CLAIMANT. It follows
that the case-law relied upon by CLAIMANT represents the minority view on the issue.
99 In any case, decisions interpreting the CISG are to have regard to the mandate of Art.7(1),
which is to interpret the CISG in light of the international character of the Convention, the
need to promote its uniform application, and the need to promote good faith in international
trade. None of the cases awarding CISG damages for litigation costs (including the cases
relied upon by CLAIMANT) conform to these principles [Fletcher, p. 95]. Specifically, they
have failed to view the CISG from an international standpoint and to look beyond their own
countries [Id.].
100 In light of the above, it is submitted that the plain language of Art.74, in light of the intention
of its drafters and as interpreted by courts and tribunals, in fact suggests the exclusion of
litigation costs from the scope of recovery.
B. In any case, CLAIMANTS suit was not foreseeable.
101 Art.74 CISG provides that only those losses which are foreseeable as a consequence of the
breach are recoverable [Propane (Austria); PTA Powder (Arbitration); Used Equipment
(Arbitration); Milk packaging (Arbitration)]. What is pertinent is foreseeability at the time of
conclusion of the contract [Art.74, CISG; ICC Award No. 8324; Downs Investments
(Australia)]. It is submitted that CLAIMANTS suit for interim injunction was not foreseeable;
consequently, the losses incurred therein were not foreseeable.
102 CLAIMANT justifies its interim injunction on the grounds that it feared that RESPONDENT
would enter into new contracts with other customers, which in turn would affect
RESPONDENTS ability to deliver the 10,000 bottles to CLAIMANT [Cl. Memo, 97-99; PO 2,
48]. However, RESPONDENT submits that there was never any threat of the bottles being
promised to other customers. RESPONDENT only entered into contracts with other customers
in the period between January and March [PO 2, 45]. CLAIMANT was well aware of this
fact as the business relationship between the parties had been structured in such a way that
CLAIMANT could place its orders in December, before all other customers [Exhibit C 6].
Therefore, RESPONDENT could not have foreseen that CLAIMANT, despite such knowledge,
would initiate court proceedings for interim injunction as early as it did.
103 Moreover, there was no imminent threat of the actual delivery of the bottles to other
customers, as the wine would only be bottled in April or May [PO 2, 45]. The majority
view under Mediterranean law would hold that the existing risk did not meet the threshold for
31
granting interim relief as there was no imminent threat of the actual delivery of the bottles
[PO 2, 48]. Since there was no imminent threat of the 10,000 bottles of wine being
promised or delivered, CLAIMANT did not need to file for an interim injunction at that point in
time. CLAIMANT could have initiated proceedings for a final declaration instead of inflating
its litigation costs by asking for an interim injunction as well. In light of the above, it is
submitted that the suit for interim injunction filed by CLAIMANT was completely unnecessary
and therefore not foreseeable.
C. In any case, costs incurred in RESPONDENTS suit should not be awarded.
104 The uncertainty created by the interim injunction being granted in CLAIMANTS favor led
RESPONDENT to initiate court proceedings in the High Court of Mediterraneo. CLAIMANT now
asserts that RESPONDENTS initiation of court proceedings was a breach of the arbitration
agreement, thereby giving rise to liability for damages under Art.74 CISG [Statement of
Claim, 19; Cl. Memo, 114]. On the contrary, RESPONDENT submits that damages are not
available as a remedy for breach of the arbitration agreement (1), and in any case, damages
for breach of an arbitration agreement are not available under the CISG (2) In any case,
Claimant may not rely on Respondents non-performance (3).
1. Damages are not available as a remedy for breach of the arbitration agreement.
105 The claim for damages concerns an alleged breach of the arbitration agreement. CLAIMANT
has submitted that damages are recoverable for breach of an arbitration agreement [Cl.
Memo, 113]. However, RESPONDENT submits that it is hardly practical to implement the
arbitration agreement in the same way as an ordinary contract [Lew, p. 160]. Arbitration
agreements are considered to be procedural agreements, for the breach of which damages are
not an appropriate remedy [Friedland, pp. 274-75].
106 In any case, it is submitted that liability for the breach of the arbitration agreement would not
be triggered in this case. Such liability would arise only in cases where there is a presence of
some subjective element of overreaching bad faith or abuse of process [Jaroslavsky, p. 2021; Zoller (UK)]. Even in common law systems which usually require the mere breach of the
contract term in order to give rise to liability, arbitration agreements would be subjected to
these higher standards by arbitrators who would be reluctant to apply purely contractual
principles to the arbitration agreement [Id.].
107 In the present case, RESPONDENT was acting under the genuine belief that the arbitration
agreement was void for uncertainty. The arbitration clause contained in the Framework
32
Agreement referred to arbitration before an institution which does not exist [Exhibit R 2].
RESPONDENT even sought to notify CLAIMANT of its inhibitions regarding the arbitration
clause [Id.]. CLAIMANT, on the other hand, was highly uncooperative and unresponsive,
choosing instead to keep all its options open [PO 2, 57]. It was only when the court
proceedings had started that CLAIMANT opted to enforce the arbitration agreement, that too
with the motive of having greater flexibility in matters of document production [PO 2, 57].
108 When this arbitration commenced, RESPONDENT refrained from challenging the jurisdiction
of the Tribunal, instead expressly recognizing such jurisdiction, in the interest of a swift and
cost effective resolution of the dispute. Without recognizing any legal obligation to do so,
RESPONDENT even agreed to deliver to CLAIMANT 4,500 bottles of its wine at a price of EUR
41.50, despite the market price having risen to EUR 90-100 in light of the wines confirmed
extraordinary quality [PO 1, 2; PO 2, 14]. RESPONDENTS commitment to efficient
dispute resolution was expressly acknowledged by the Tribunal [PO 1, 1]. Meanwhile,
CLAIMANT exercised the greater flexibility it had wanted, to request documents regarding
RESPONDENTS dealings with SuperWines [Statement of Claim, 27], which happened to be
CLAIMANTS biggest competitor [Exhibit C 6]. Consequently, it cannot be said that
RESPONDENT was acting in bad faith or that it was indulging in abuse of process.
109 In the absence of the subjective elements of bad faith and abuse of process, a party acting on
the belief that the agreement was null and void would be pardoned for a breach, if found
faultless in so believing [Takahashi, p. 72]. In light of the above, it is submitted that
RESPONDENT should not be held liable to pay damages for any breach of the arbitration
agreement.
2. In any case, damages for breach of an arbitration agreement may not be claimed
under the CISG.
110 In the present case, the CISG applies to the arbitration agreement only where no special
procedural rules apply to it [PO 1, 3]. CLAIMANT submits that the applicable procedural
rules do not provide for damages in the event of a breach of arbitration agreement, and for
that reason recourse may be had to the CISG which provides for damages [Cl. Memo, 116].
111 CLAIMANT errs in this regard. While the applicable procedural rules (i.e. DAL and VIAC
Rules) do not specifically provide for the remedy of damages for breach of an arbitration
agreement, the DAL (which reflects Art.II of the NYC) provides that where courts are seized
of a matter in respect of which an arbitration agreement exists, they shall refer the matter to
33
arbitration. This provision establishes a mandatory duty of the national courts to refer the
parties to arbitration where a claim is brought before them despite the existence of an
arbitration clause [Brekoulakis, p. 344]. On ascertaining the validity of the arbitration
agreement, the courts will remedy the breach in accordance with the statutory remedy of
compelling the parties to resort to arbitration [Tan, pp. 553, 567-568, 571-574; Kaufmann, p.
111]. Therefore, it is submitted that the DAL provides for a remedy in the form of compelling
the parties to resort to arbitration. Since the applicable special procedural rules deal with the
matter of remedy for breach of the arbitration agreement, recourse to the CISG is barred in
the present case.
3. In any case, CLAIMANT may not rely on RESPONDENTS non-performance.
112 As contended above, RESPONDENT was acting under the genuine belief that the arbitration
clause was void for uncertainty, and CLAIMANT was unresponsive to RESPONDENTS
overtures (See 107-108). RESPONDENT had made a reasonable offer to arbitrate using the
VIAC standard clause, with the addition that document disclosure would be excluded
[Exhibit R 2]. Such an arbitration clause would be materially similar to the previous one, with
the added clarity inherent in using the VIACs standard clause. The term regarding exclusion
of disclosure would make little difference as the parties had anyhow agreed to exclude
disclosure under their previous agreement (See 12-22). Pursuant to Art.77 CISG,
CLAIMANT was under a duty to mitigate its losses, which it failed to discharge by ignoring
RESPONDENTS offer to arbitrate using the VIAC model clause.
113 Not just a duty to mitigate, but also a duty to settle disputes in good faith and amicably was
imposed on CLAIMANT [Art.20, FA]. Art.80 CISG provides that a party may not rely on the
other partys breach, to the extent that such breach was caused by the first partys act or
omission. CLAIMANT chose to ignore RESPONDENTS letter [PO 2, 57], despite the fact that
RESPONDENT had made it clear that it considered the arbitration clause void for uncertainty
and that it would approach the courts in Mediterraneo for a final resolution of the dispute
between the parties. It was this omission of CLAIMANT which ultimately caused RESPONDENT
to breach the arbitration clause. RESPONDENTS subsequent suit in the High Court of
Mediterraneo would have been avoided had CLAIMANT discharged its duties, or at the very
least replied to RESPONDENTS letter. Therefore, CLAIMANT cannot now rely on
RESPONDENTS breach of the arbitration agreement to recover litigation costs incurred in
RESPONDENTS suit for declaratory relief, as such costs could have been entirely avoided, had
CLAIMANT chosen to act.
34
D. The contingency fee agreement entered into by CLAIMANT was not reasonable.
114 In order to pursue litigation in the State Courts of Mediterraneo, CLAIMANT engaged a local
law firm on a contingency fee basis. RESPONDENT submits that this contingency fee
agreement entered into by CLAIMANT was unreasonable. A breach of contract does not hand
the aggrieved party untrammeled power to enter into agreements regarding attorneys fees
[Schlectriem (Attorneys Fee), 3(b)]. Any and all avoidable costs would not be recoverable
[Schlectriem (Attorneys Fee), 2; ICC Case 8486 (1996)]. Therefore, it is necessary for the
Tribunal to investigate and for CLAIMANT to prove why the contingency fee agreement was
necessary [Schlectriem (Attorneys Fee), 1]. RESPONDENT has already argued why
CLAIMANTS proceedings were not important and wholly avoidable (See 101-103). With
respect to RESPONDENTS suit, CLAIMANT submits that given RESPONDENTS reservations
about the arbitration clause, it anticipated that RESPONDENT would approach the court, and
therefore the contingency fee agreement was necessary [Cl. Memo, 120]. CLAIMANTS
argument is a distortion of facts as RESPONDENT only objected to the arbitration agreement on
January 14, 2015 [Exhibit R 2], which was more than a month after the contingency fee
agreement was entered into (December 5, 2014 [Exhibit C 10]). Moreover, less time than
usual was spent on the case [PO 2, 39]. Therefore, it cannot be said CLAIMANTS
contingency fee agreement was reasonable.
115 In addition to this, the Tribunal should appreciate that an award allowing for the recovery of
the contingency fee may be in conflict with the public policy of Equatoriana and
Mediterraneo. Equatoriana prohibits such agreements themselves, whereas Mediterraneo
allows these agreements, but prohibits their endorsement to the detriment of third parties by
prohibitng recovery of litigation costs. Any conflict with public policy could pose a threat to
the finality of the award. Therefore, CLAIMANT should not be allowed endorse its contingency
fee agreement to the detriment of a third party (i.e. RESPONDENT).
REQUEST FOR RELIEF

In light of the above submissions, counsel for RESPONDENT respectfully seek:
Rejection of CLAIMANTS request for document production;
Rejection of all claims for damages raised by CLAIMANT;
Imposition of the costs of this arbitral proceeding on CLAIMANT.
35

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TWENTY THIRD ANNUAL

WILLEM C. VIS INTERNATIONAL COMMERCIAL ARBITRATION MOOT

MEMORANDUM FOR RESPONDENT

ILS LAW COLLEGE, PUNE

Vino Veritas Ltd

Kaihari Waina Ltd

ILS LAW COLLEGE, PUNE

DOCUMENT PRODUCTION AND SHOULD NOT GRANT THE SAME. .............................................. 4

The parties have agreed to exclude discovery, which encompasses document

purported intention. ........................................................................................................ 7

clause to allow production of categories of documents. ................................................ 7

any significance in interpreting the contract. ................................................................. 8

Article 20 of the Framework Agreement should be interpreted contra

The agreement of the parties is valid and enforceable. .............................................. 9

The type of document production requested by CLAIMANT is not a part of the

right to evidence. .......................................................................................................... 10

ILS LAW COLLEGE, PUNE

finality of the award at risk. ......................................................................................... 11

The requirements for document production have not been fulfilled........................ 12

The documents requested are not sufficiently specific. ....................................... 12

Alternatively, granting the requests will violate RESPONDENTS right to equal

The balance of convenience favors RESPONDENT. ................................................... 14

Document production would require RESPONDENT to disclose commercially

CLAIMANTS request for document production seems to be motivated by bad

CLAIMANT merely had an opportunity to earn a profit. ........................................... 18

SuperWines should not be allowed. ..................................................................................... 21

The profit earned by RESPONDENT had nothing to do with CLAIMANT. .................. 21

Allowing CLAIMANT to recover damages for loss of profits would lead to

The transaction with Vignobilia was a replacement transaction. ........................ 22

ILS LAW COLLEGE, PUNE

The CISG provides a method for calculation of damages in case of a replacement

Allowing for disgorgement of the profits earned by RESPONDENT would lead to

Alternatively, if the transaction with Vignobilia was not a replacement

Further profits cannot be allowed. ........................................................................... 24

Litigation costs are not recoverable under the CISG. .................................................. 25

The CISG governs only substantive sales law. .................................................... 26

There is no causal link between breach and loss. ................................................ 28

treated as final and binding. ......................................................................................... 28

Allowing for recovery of litigation costs would be contrary to the principle of

CLAIMANTS reliance on the plain language of Art.74 is erroneous. ....................... 30

In any case, CLAIMANTS suit was not foreseeable. ..................................................... 31

under the CISG. ............................................................................................................... 33

In any case, CLAIMANT may not rely on RESPONDENTS non-performance. ........... 34

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

ILS LAW COLLEGE, PUNE

association suisse de l'arbitrage

Bundesgerichtshof (German Supreme Court)

Chief Executive Officer

United Nations Convention on Contracts for the International

CISG Advisory Council

Case Law on UNCITRAL Texts

Danubian Arbitration Law

German Institution of Arbitration

exemplum gratia (for example)

et alii (and others)

CLAIMANTS Exhibit No.

RESPONDENTS Exhibit No.