Sunday, October 3, 2010

Vindobona Junction - Understanding the 18th Vis Problem (Part I)

The posts is this section are intended to be of assistance to the  participants in the Willem C. Vis International Commercial Arbitration Moot. Other Readers may find some of these posts too basic. Apologies for the same. However, as this section progresses, the posts will move on from being introductory and discuss topics relevant to the moot at a higher level.

Sixty six pages to read is not a simple task for most people. Yet, one of the initial challenges that every participant in the 18th Willem C. Vis International Commercial Arbitration Moot and the 8th Willem C. Vis (East) International Commercial Arbitration Moot will have to overcome is reading and comprehending the mammoth of a moot problem. As the first post in this section, I will try to guide you through how to read the moot problem and identify the key issues involved. 
Vis problems invariably follow a formula. Two parties in two jurisdictions (countries) enter into a contract under which one party (seller) will sell to the other (buyer) a specified good. There is some failure or alleged failure on the part of the seller to perform his part of the contract and that evokes a response (like the avoidance of the contract or cover purchase) from the buyer. The seller, in most cases (though not all), disputes not his initial failure itself but the course of action adopted by the buyer. In loose terms, the seller, in most cases considers the buyers action to be an over-reaction to the situation. The buyer invokes the arbitration clause in the contract and tries to get remedies against the seller. The seller disputes the jurisdiction of the tribunal, composition of the tribunal, etc. on some ground. Therefore, the tribunal has to first decide on the objection to its jurisdiction and then move on to the "merits" of the dispute. This means, in a standard Vis problem there are two different branches of law that will be involved - (i) the law of international commercial arbitration and (ii) the law under which the contractual claims are to be adjudicated (which is invariably the United Nations Convention on Contracts for the International Sale of Goods).

This year's problem deals with a contract for the sale of squid to be used as bait in long-liner fishing. Only squid within a particular size range is fit for use as bait. The seller had, before entering into the contract, supplied a sample to the buyer which excepting very few pieces, fell within the weight range. When the squid was supplied, only a small randomly selected portion was examined by the buyer as examination required defrosting of the squid, after which the defrosted piece could not be stored for usage. This portion fell within the size range. However, when the squid was resold by the buyer to its customers (fishing vessels) they found the squid to be undersized and returned it to the buyer. Upon examination, it was found that 60% of the squid remaining in the warehouse of the buyer was undersized. 

Before we get into a legal analysis of the facts (which I will do over the next two posts) let me explain how this problem should be read. From the large assortment of documents that constitute the sixty six pages of the problem, the most important ones are titled "Request for arbitration" (pages 4 to 8) and "Statement of defence" (pages 24 to 27). 

The "Request for arbitration" also contains what is commonly known as the statement of claim. This document gives a brief outline as to the facts as alleged by the Claimant and what the Claimant asserts are the legal rights and remedies accruing to it and the liabilities accruing to the Respondent from the given facts. The "Statement of defence" is the Respondent's version of the story. This is where the Respondent can dispute the facts if it chooses to, and defends itself against the liability that the Claimant asserts has accrued to it. The statement of defence can also contain allegations against the Claimant. For instance, in the present case, the Respondent alleges in the statement of defence that the Claimant has violated the confidentiality requirements under the relevant rules. These documents together give an outline of the facts and what the contested issues between the parties are. I suggest these pages be read first to get an overview of the problem before proceeding to read the rest of the problem.

Please note that in this problem, there is an amendment to the "Statement of defence", in which the Respondent has raised a challenge to one of the arbitrators. This document is equally important and should be read along with the "Request for arbitration" and the "Statement of defence".

Other than the "Request for arbitration" and the "Statement of defence", the moot problem contains a number of other documents, including the contract between the parties and communications involving the parties, the Milan Chamber of Arbitration (the arbitral institution in this case - the significance of choosing an arbitral institution will be explained in a later post), individual arbitrators, etc. These communications serve two main purposes - (i) they show the procedural developments in the arbitration like appointment of arbitrators, challenge to arbitrators, etc; (ii) where the parties differ on their versions or interpretations of the facts or of the contract, these communications may be of great assistance in making arguments in favour of one position or the other. Therefore, after the outline of the problem has been gathered from the "Request for arbitration" and the "Statement of defence", close attention should be paid to these documents.

A part of the problem yet to be released is Procedural Order III. This document will contain clarifications to the problem. Seeking clarifications is a valuable opportunity to get more facts which may be used to plug the holes in your arguments. Teams should pay sufficient attention to seek clarifications that can be of strategic advantage to them.

On a final note (for this post), it is my suggestion that a Vis problem, in its first two to three readings, should be approached from the view point of a prudent businessman than that of a lawyer. Most good teams in Vis make arguments which are not just legally valid, but which are also sound on commercial considerations.

In subsequent posts I will introduce and discuss the different legal aspects involved in the problem.

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