16th CIETAC CUP

International Commercial Arbitration Moot

19-23 November 2018

MEMORANDUM FOR CLAIMANT

Team Number：37

ON BEHALF OF AGAINST
Phar Lap Allevamento Black Beauty Equestrian
Rue Frankel 1 2 Seabiscuit Drive
Capital City Oceanside
Mediterraneo Equatoriana

1
TABLE
TABLE OF ABBREIVATION ........................................................................................................ 4

TABLE OF LEGAL SOURCES .................................................................................................... 5

STATEMENT OF FACTS .............................................................................................................. 6

ISSUE A:THE LAW OF MEDITERRANEO GOVERNS THE ARBITRATION

AGREEMENT AND ITS INTERPRETATION, AND THE TRIBUNAL HAS THE POWERS

UNDER THE ARBITRATION AGREEMENT TO ADAPT THE CONTRACT. .................... 8

I. The Law of Mediterraneo, which is also the law of the substantive contract, governs the

arbitration agreement and its interpretation. ............................................................................. 8

A In accordance with the integration doctrine, the express choice of law in the Sales

Agreement governs the contract as a whole. ..................................................................... 8

B. Even if the express choice of law is challenged, there is an implied choice of law

preferring the law of Mediterraneo. ................................................................................ 10

C. In case there is neither an express nor an implied choice of law, the closest and most

real connection doctrine shall apply. ............................................................................... 12

II. The tribunal has powers to adapt the contract under the arbitration agreement governed

by the law of Mediterraneo. .................................................................................................... 13

A. The power of the tribunal to adapt the contract derives from an oral agreement made

by the parties. .................................................................................................................. 14

B. It’s not necessary to include the empowerment into the Sales Agreement.

......................................................................................................................................... 15

III. Even if the law of Danubia governs the arbitration, the arbitral tribunal has powers to

adapt the contract. ................................................................................................................... 15

A. An express empowerment in the arbitration agreement is not necessary if there is

legal authority. ................................................................................................................. 16

B. The arbitral tribunal is authorized to adapt the contract under the arbitration law of

Danubia. .......................................................................................................................... 16

ISSUE B: CLAIMANT SHOULD BE ENTITLED TO SUBMIT EVIDENCE FROM THE

OTHER ARBITRATION PROCEEDINGS EVEN IF THIS EVIDENCE HAD BEEN

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OBTAINED EITHER THROUGH A BREACH OF A CONFIDENTIAL AGREEMENT OR

THROUGH AN ILLEGAL HACK OF RESPONDENT’S COMPUTER SYSTEM. ............. 18

I. Evidence from the other arbitration proceedings is admissible in the present arbitration.

................................................................................................................................................ 18

A. HKIAC rules embraces increased transparency in international commercial

arbitration. ....................................................................................................................... 19

B. The Disclosure Is Furthermore Authorized Due To Reasonable Necessity. ............ 23

II. The evidence from the other arbitration is still admissible even though it was obtained

through irregular approach. ..................................................................................................... 25

A. Under Art. 22.3 of HKIAC rules, any evidence related to the case and material to the

outcome should be allowed to submit. ............................................................................ 25

B. Since the evidence at issue does not fall into the scope of excluion of evidence, the

defect of the evidence can not impede its admissibility. ................................................. 27

ISSUE C: CLAIMANT IS ENTITLED TO THE PAYMENT OF US$1,250,000 OR OTHER

AMOUNT RESULTING FROM AN ADAPTATION OF THE PRICE. .................................. 28

I. CLAIMANT is entitled to request the arbitral tribunal to restore the equilibrium of the

contract by adapting the price. ................................................................................................ 28

A. CLAIMANT is entitled to request the arbitral tribunal to restore the equilibrium of

the contract by adapting the price under Clause 12......................................................... 29

B. CLAIMANT is entitled to require the arbitral tribunal to restore the equilibrium of

the contract by adapting the price under CISG. .............................................................. 33

II. The claim for the payment meets the requirement of equilibrium. ............................... 36

A. The newly imposed tariffs caused disproportional burden to CLAIMANT. ........... 36

B. RESPONDENT should bear more burden according to the principle of good faith.

......................................................................................................................................... 37

REQUEST FOR RELIEF ............................................................................................................ 41

TABLE OF AUTHORITIES ........................................................................................................ 42

TABLE OF COURT DECISIONS ............................................................................................... 47

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TABLE OF ABBREIVATION
Art. Article(s)
Cl.Ex.1 CLAIMANT’s EXHIBIT C1
CISG The United Nations Convention on
Contracts for the International Sale of
Goods
Re.Ex.1 RESPONDENT's EXHIBIT R1
UNCITRAL United Nations Commission on
International Trade Law
UNCITRAL Model Law UNCITRAL Model Law on International
Commercial Arbitration (1985),with
amendments as adopted in 2006
IBA-Guidelines IBA Guidelines on Conflicts of Interest in
International Arbitration
Ltd Limited
No. Number
Party/Parties CLAIMANT or/and RESPONDENT
v. Versus
DDP Delivered Duty Paid
HKIAC RULES Hong Kong International Arbitration
Centre Rules
ICC The International Chamber of Commerce
UNIDROIT PRINCIPLES UNIDROIT Principles of International
Commercial Contracts 2004

4
TABLE OF LEGAL SOURCES
CISG The United Nations Convention on
Contracts for the International Sale of
Goods,1980
UNCITRAL Arbitration Rules The UNCITRAL Arbitration Rules(as
revised in 2010)
IBA Guidelines on Conflicts of Interest in IBA Guidelines on Conflicts of Interest i n
International Arbitration International Arbitration adopted by
resolution of the IBA Council on Thursday
23 October 2014
UNCITRAL Arbitration Rules Model Law UNCITRAL ARBITRATION RULES
Model Law on International Commercial
Arbitration,1985 with 2006 Amendments
UNIDROIT PRINCIPLES UNIDROIT Principles of International
Commercial Contracts 2004
HKIAC RULES Hong Kong International Arbitration
Centre Rules,2018
ICC Hardship Clause The International Chamber of Commerce
Hardship Clause,2003
the Transparency Rules of UNCITRAL The UNCITRAL Rules on Transparency
in Treaty-based Investor-State
Arbitration,1 April 2014
Clause 12 Clause 12 of the Sales Agreement
Clause 14 Clause 14 of the Sales Agreement
Clause 15 Clause 15 of the Sales Agreement

5
STATEMENT OF FACTS
The parties to this arbitration are Phar Lap Allevament (hereafter “CLAIMANT”) and
Black Beauty Equestrian (hereafter “RESPONDENT”). CLAIMANT runs the oldest
and most renowned stud farm and is particularly known for its breeding success
regarding racehorses. The company is registered in Meditteraneo. RESPONDENT is a
company based in Equatoriana, which is famous for its broodmare lines.

1. 21 March 2017: CLAIMANT sent an Email to RESPONDENT, inquiring about

the availability of Nijinsky III, including its terms and conditions. At that time, the
ban on artificial insemination for racehorses had been temporarily lifted.

2. 24 March 2017: CLAIMANT agreed to offer RESPONDENT 100 doses of

Nijinsky III’s frozen semen under certain conditions, noting that the frozen semen
would have to be provided in several installments and might not be re-sold to third
parties without CLAIMANT’s express written consent. Furthermore,
CLAIMANT would like to be informed about the use of every dose.

3. 28 March 2017: RESPONDENT accepted most of the terms of the offer except
“Price and Delivery Terms” and “Applicable Law and Dispute Resolution”. It
required a lower price, a DDP delivery and the jurisdiction of courts of Equatoriana
if the Law of Meditteraneo was applied.

4. 31 March 2017: CLAIMANT was only willing to accept a DDP delivery with a
moderate price increase, the transfer of certain risks to RESPONDENT and the
inclusion of a hardship clause to temper some of the additional risks taken. It
suggested arbitration in Mediterraneo.

5. 10 April 2017: RRESPONDENT’s draft called for an arbitration clause based on

the model clause of the HKIAC-Rules and made clear that the seat of arbitration
shall be Equatoriana and the law of this clause shall be the law of Equatoriana.

6. 11 April 2017: CLAIMANT suggested that the seat of arbitration shall be Danubia
and the law applicable to the Sales Agreements remained the law of Mediterraneo.
It also suggested reliance on the ICC-Hardship clause.

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7. 12 April 2017: Ms. Napravnik (negotiator of CLAIMANT) and Mr. Antley
(negotiator of RESPONDENT) were severely injured in an accident after the
annual colt auction in Danubia.

8. 6 May 2017: FROZEN SEMEN SALES AGREEMENT was signed.

9. 19 December 2017: Government of Equatoriana imposed a tariff of 30 per cent

upon all agricultural goods including the frozen semen of racehorses from
Mediterraneo as a retaliation

10. 20 January 2018: Julie Napravnik (representative of CLAIMANT), sent an email

to Greg Shoemaker(representative of RESPONDENT) to ask for a solution to the
increased tariff.

11. 21 January 2018: Greg Shoemaker (representative of RESPONDENT) showed

confidence in a solution to the tariffs and urged Julie Napravnik (representative of
CLAIMANT) to authorize the shipment as planned during the phone call.

12. 23 January 2018: CLAIMANT complied with its delivery obligation, delivered the
remaining 50 doses and paid the extra 30% tariffs before an agreement on the new
price.

13. February 2018: RESPONDENT stopped the negotiations and refused to pay any
additional amount for the tariffs due to CLAIMANT’s discovery and accusation
that RESPONDENT was actually breaching the resale prohibition under the
contract.

14. 31 July 2018: CLAMANT’s Notice of Arbitration was submitted to HKIAC,

according to Article 4, HKIAC-Rules 2013.

15. 24 August 2018: RESPONDENT’s Answer to the Notice of Arbitration was

submitted to HKIAC, according to Article 5, HKIAC-Rules 2013.

16. 2 October 2018: CLAIMANT informed the Tribunal of another RESPONDENT’s

arbitration and asked for an adaptation of the price invoking an unforeseeable
change of circumstances, according to the Transparency Rules of UNCITRAL.

17. 3 October 2018: RESPONDENT rejected the submission from CLAIMENT of the

7
 material of the other arbitration out of the HKIAC RULES of confidentiality.

ISSUE A: THE LAW OF MEDITERRANEO GOVERNS THE ARBITRATION

AGREEMENT AND ITS INTERPRETATION, AND THE TRIBUNAL HAS
THE POWERS UNDER THE ARBITRATION AGREEMENT TO ADAPT THE
CONTRACT.

I. The Law of Mediterraneo, which is also the law of the substantive contract,
governs the arbitration agreement and its interpretation.
In line with the integration doctrine, the applicable law of the substantive contract and
the arbitration agreement can be unified. As a matter of fact, Clause 14 is an express
choice of law that governs the contract as a whole and the arbitration agreement
within.Even if the express choice of law is challenged, there is an implied choice of law
by the parties preferring the law of Mediterraneo. In case the express and implied choice
of law is not recognized, the closest and most real connection shall apply which also
refers to the law of Mediterraneo.

A．In accordance with the integration doctrine, the express choice of law in the

Sales Agreement governs the contract as a whole.

1. Clause 14 choice of law governs the contract as a whole, which does not go
against the independence of an arbitration agreement.
The integration doctrine which applies to the choice of law of the substantive contract
and the arbitration agreement has justified grounds.

Firstly, in terms of the essence of an arbitration agreement, it is an integral part of the

contract, especially when it exists in the form of an arbitration clause along with the
many other clauses of the contract. Concerning the integration of the contract, there is
no reason to depart the arbitration agreement with the substantive contract and the
8
independence of the arbitration agreement does not sufficiently challenge the
conformity of law in the same contract.[ICC 6162]

Secondly, when there is no choice-of-law clause in the arbitration agreement, the law
of the substantive contract shall extend to apply. This is because by choosing the
applicable law of the substantive contract and intentionally omitting the choice-of-law
clause in the arbitration agreement, the Parties have tacit intention to let the law of the
main contract govern the arbitration agreement as well. [Union of India case].

In conclusion, the integration doctrine does not go against the independence of an

arbitration agreement in a contract while also recognizes the conformity of the
applicable law between the substantive contract and the arbitration agreement. As a
general rule, the arbitration agreement will be governed by the same law, since it is part
of the substance of the underlying contract.[ Mustill]. [Black Clawson case].[ ICC 3752]

2. The express choice of law of the arbitration agreement is included in Clause

14.
To begin with, in Clause 14, the parties agreed that, “This Sales Agreement shall be
governed by the law of Mediterraneo, including the United Nations Convention on
Contracts for the International Sale of Goods (1980) (CISG)”.[Cl.Ex.5] It is a choice-
of-law clause governing the whole contract when Clause 15 never includes any choice
of law governing the arbitration agreement, which reads Any dispute arising out of this
contract, including the existence, validity, interpretation, performance, breach or
termination thereof shall be referred to and finally resolved by arbitration administered
by the Hong Kong International Arbitration Centre (HKIAC) under the HKIAC
Administered Arbitration Rules in force when the Notice of Arbitration is submitted.
The seat of arbitration shall be Vindobona, Danubia. The number of arbitrators shall be
three. The arbitration proceedings shall be conducted in English. [Cl.Ex.5]More telling
is that the initials are capitalized as S and A, which differs the Sales Agreement from
9
the substantive part of it and refers to the entire contract.

If there is an express choice of law to govern the contract as a whole, the arbitration
agreement will also expressly be governed by that law.[Dicey]

Therefore, since there is already a choice of law governing the integrate contract, there
is naturally an express choice preferring the law of Meditteraneo to govern the
arbitration agreement.

B. Even if the express choice of law is challenged, there is an implied choice of

law preferring the law of Mediterraneo.

1. Parties’ choosing the law of Mediterraneo as the law of the underlying

contract is a strong indication to choose it as the applicable law of the arbitration
agreement.
It is common for parties to make an express choice of law to govern their contract, but
unusual for them to make an express choice of the law to govern any arbitration
agreement contained within it; and where they have not done so, the natural inference
is that they intended the proper law chosen to govern the substantive contract also to
govern the agreement to arbitrate. [Channel Tunnel case]. In the absence of an express
choice of law of the arbitration agreement, the implied choice of law should be taken
into consideration. When deciding the implied choice of law, several factors are quite
important, with the first to be the substantive law of the contract.

In the absence of any indication to the contrary, an express choice of law governing the
substantive contract is a strong indication of the parties' intention in relation to the
agreement to arbitration" [Sulamérica case]. In this case, it is undisputed that at least
the law of the substantive contract is the law of Mediterraneo, which indicates parties’
implied choice to let the law of Mediterraneo govern the arbitration agreement,
10
especially when there is no separate choice of law in Clause 15.[Sonatrach case].

2. Parties had specifically excluded the operation of any foreign law of

Mediterraneo.

a. CLAIMANT informed RESPONDENT of its unwillingness to apply any

foreign law to the contract.
According to CLAIMANT’s statement, Phar Lap has an internal policy according to
which consent to a contract submitted to a foreign law or providing for dispute
resolution in the country of the counterparty requires special approval by the creditors’
committee, a board in which all financing banks are included. It would, however, be
possible to agree on arbitration in a neutral country[Re.Ex.2]. It showed CLAIMANT’s
unwillingness to apply any foreign law to the contract, whether the substantive part or
the arbitration agreement as a result of the troublesome internal policy. It can be easily
deduced that CLAIMANT would hardly choose a foreign law governing their contract,
including arbitration agreement which is a certain kind of contract as well.

b. CLAIMANT deleted the choice of law in RESPONDENT’s draft and

emphasized that the law applicable to the Sales Agreements remains the law of
Mediterraneo.
After receiving RESPONDENT’s first draft of the arbitration clause, which regulated
that “The seat of arbitration shall be Equatoriana. The law of this arbitration clause
shall be the law of Equatoriana”, CLAIMANT made several modifications.

Firstly, CLAMANT deleted the choice of law clause proposed by RESPONDENT in

the first draft to exclude any other proper law, which is out of the concerns that
RESPONDENT did not know its intent to exclude the application of foreign law.
Secondly, CLAIMANT changed the seat of arbitration to Danubia, which is also set in
clause 15. Thirdly, CLAIMANT emphasized that “That offer is naturally on the
11
condition that the law applicable to the Sales Agreements remains the law of
Mediterraneo”, suggesting that the law of Meditteraneo governed the whole contract
including the arbitration agreement within it.

Therefore, the parties intended not to apply any foreign law of Mediterraneo to the
contract. Had CLAIMANT endorsed foreign law other than that of Meditteraneo, it
would have made no change and simply accepted the proposed choice of law by
RESPONDENT.

3. There was no contrary indication that the law of Mediterraneo was not the
implied choice.
As CLAIMANT made several modifications to the draft proposed by RESPONDENT,
the final draft was quite different from the former one and is the original version of
Clause 15. Compared with the final draft, Clause 15 only added a choice of language
and the number of arbitrators. RESPONDENT had tacit consent to the law of
Meditteraneo as it raised no objections to the absence of choice-of-law clause nor raised
any doubt as to the exclusion of any foreign law of Meditteraneo either when receiving
the final draft or signing the Sales Agreement. Therefore, there is no contrary indication
that the law of Meditteraneo was not the implied choice of the parties.

C. In case there is neither an express nor an implied choice of law, the closest and
most real connection doctrine shall apply.

When either an express or implied choice of law is absent, the closest and most real
connection doctrine shall apply. Considering the law of the substantive contract, the
place of the signing of the contract, the performance, the law of Mediterraneo has the
closest and most real connection with the arbitration agreement.

In the absence of an express or implied choice, the system of law with which the
12
arbitration agreement has “the closest and most real connection.” [Sulamérica case]
When applying the closest and most real connection doctrine to a contract, several
factors should be taken into consideration, including but not limited to the parties, the
place of conclusion of the contract, the place of arbitration and the performance of the
contract, etc. Where there is no clear preponderance of such factors, one then begins
to assess the weight of each of such factors. [James Miller & Partners case]Taking
these factors into consideration, the conclusion will come out that the law of
Meditteraneo has the closest and most real connection to the arbitration agreement.

First, CLAIMANT as a party of the contract, is from Mediterraneo. Secondly, the

substantive contact has already chosen the law of Meditteraneo as the governing law,
which is in equal position with an arbitration agreement in a whole contract and has the
closest connection to the arbitration agreement. Thirdly, the contracting place is
Meditteraneo, as in the preamble of Sales Agreement, this Agreement is made in
Mediterraneo.

To conclude, the law of Meditteraneo has the closest and most real connection with the
arbitration agreement, and thus should apply.

II. The tribunal has powers to adapt the contract under the arbitration
agreement governed by the law of Mediterraneo.

Under the law of Mediterraneo, extrinsic evidence is allowed to determine and interpret
a contract. In this case there is an oral empowerment made by the parties to the tribunal
for contract adaptation. It’s not necessary to include the empowerment into the Sales
Agreement as it is already recognized by the parties.

13
A. The power of the tribunal to adapt the contract derives from an oral
agreement made by the parties.

1. The CISG allows for the application of extrinsic evidence including witness to
determine and interpret the contract.
There is consistent jurisprudence in Mediterraneo that in sales contracts governed by
the CISG, the later also applies to the conclusion and interpretation of the arbitration
clause contained in such contracts.[Procedure Order NO.1]

Art. 11 CISG regulates that, a contract of sale need not be concluded in or evidenced
by writing and is not subject to any other requirement as to form. It indicates that a
contract and its terms may be proved by any means, including witness. Together with
Art.8 CISG, which article generally permits all relevant circumstances to be considered
in the course of contract interpretation, it allows a broad interpretation of the content as
well as different forms of a contract. [MCC-Marble case] ; [Mitchell case]

Therefore, extrinsic evidence including negotiations and oral statements in any form
are permissible to determine the content and interpretation of a certain contract
governed by CISG.

2. The contract in this case includes an oral empowerment to the tribunal on the
adaptation of the contract.
Since the arbitration agreement is governed by the CISG, the extrinsic evidence should
be used to prove that the parties have reached an agreement to let the tribunal adapt the
contract if they cannot agree, which constitutes part of the contract.

According to Julie Napravnik, she mentioned to Mr. Antley that it was important to
have a mechanism in place which would ensure an adaptation of the contract for the
unlikely event that the Parties could not agree on an amendment. In response to that,
14
Mr. Antley said that in his view it should probably be the task of the arbitrators to adapt
the contract if the Parties could not agree.

It’s clear that two parties have agreed to empower the tribunal to adapt the contract in
case they cannot reach an agreement on the price. The empowerment agreement was
made orally and not expressly included into the Sales Agreement.

Thus, regardless of the form of the empowerment, by evidence of witness, the oral
empowerment of the parties becomes part of the contract under Art. 8 and Art. 11 CISG.

B. It’s not necessary to include the empowerment into the Sales Agreement.

Due to an existing oral empowerment by the Parties which constitutes part of the
contract, including it in the Sales Agreement was not necessary from a legal point of
view.

According to Julia Napravnik’s presumption, the reasons why there is no express

empowerment may be that the successors of the previous negotiators forgot it or merely
considered it unnecessary. Neither reason will influence the validity of the oral
empowerment before the Sales agreement was concluded.

In conclusion, the contract in this case includes an oral empowerment to the tribunal on
the adaptation of the contract. And it is not necessary to include the empowerment in
the Sales Agreement. Therefore, the tribunal has jurisdiction to adapt the contract.

III. Even if the law of Danubia governs the arbitration, the arbitral tribunal has
powers to adapt the contract.

In case the law of Danubia shall apply, the tribunal still has powers to adapt the contract.
15
The empowerment is no longer needed, if there is legal authority for contract adaptation.
It is more so under the arbitration law of Danubia as the arbitral tribunal is authorized
to adapt the contract.

A. An express empowerment in the arbitration agreement is not necessary if

there is legal authority.

In spite of the absence of express authorization in the contract, there is legal authority
in the applicable arbitration law. [Klaus] Such grant will be not inconsistent with
principle pacta sunt servanda. Although there is no consent of parties to transfer the
power of contract revision to the arbitral tribunal, there is no express exclusion of such
jurisdiction. The arbitration clause renders to arbitral tribunal any disputes containing,
but not limited to, existence, validity, interpretation, performance, breach or
termination of contract[Cl.Ex.5], without excluding adaptation, revision or gap-filling
of contract. As long as the arbitration agreement does not contain any express
restrictions, it must be assumed that the parties intended to accept an all-embracing
jurisdiction of tribunal, including the power to fill gaps and amend the contract.[Swiss
case] Since the power has been allowed by the law governing the arbitration in Danubia,
the award providing for adaptation rendered by the arbitral tribunal will not be set aside
or challenged.[34(2)(iii) UNCITRAL MODEL LAW]

B. The arbitral tribunal is authorized to adapt the contract under the arbitration
law of Danubia.

1. The arbitral tribunal is empowered to revise the contract under the

arbitration law of Danubia if the courts of that jurisdiction have the same power.
In Danubia, the procedure of the arbitration is determined by the UNCITRAL Model
law, [Procedure Order NO.1] which contains no express provisions dealing with the
arbitrators' authority to adapt or supplement contracts. To be more exact, UNCITRAL
16
Model law neither empowers the tribunal to do so nor restricts its permissibility.
Considering that, reference to the competence of domestic courts in that particular
jurisdiction is necessary. [KlausⅡ] If the courts in Danubia have the power of contract
revision, the arbitral tribunal acting under the arbitration law of that jurisdiction should
have the same power, [Christoph Bruner] in accordance with the principle of
synchronized competence.[Sanders]

2. The courts at the seat of arbitration have the powers to adapt contracts under
the substantive law of Danubia.
In those legal systems where the hardship exemption and the adaptation of the contract
as a possible legal consequences are recognized as a matter of substantive law, state
courts are necessarily given the procedural powers to adapt a contract.[Christoph
Bruner]. Thus, the substantive law of Danubia can serve as a statutory basis for contract
adaptation and gap-filling by courts, accordingly by the arbitral tribunal.

In addition, the substantive law of Danubia recognizes such jurisdictional powers to the
changed circumstances. As Danubia, the seat of arbitration, is a contracting state of
CISG, which, thus, can be used as an indicator for the powers of courts.[ ART.1 CISG]
However, when questions concerning matters governed by this Convention are not
expressly settled in it, they shall be settled in conformity with the general principles.
[ ART.7 CISG] Considering the ambiguities of the concept of hardship and the
adaptation of the contract as a possible legal consequences, the UNIDROIT Principle ,
set forth as general rules, shall be referred to. It stipulates that where the performance
of a contract becomes more onerous for one of the parties, that party is nevertheless
bound to perform its obligations subject to the following provisions on
hardship [Art. 6.2.1 UNIDROIT PRINCIPLES], which explicitly recognizes the concept
of hardship. Also it dictates that under certain circumstances either party may resort to
the court and if the court find hardship it may adapt the contract reasonably[Art. 6.2.3
UNIDROIT PRINCIPLES]. The court here includes an arbitral tribunal. [Art. 1.11
17
UNIDROIT PRINCIPLES]. These provisions expressly confer the jurisdiction to
contract revision upon the arbitral tribunal.

Thus, the courts, accordingly the arbitral tribunals in Danubia, are empowered to revise
contract based on the substantive law.

Conclusion：

The law of Mediterraneo, which is also the law of the substantive contract, governs the
arbitration agreement and its interpretation.The tribunal has powers to adapt the
contract under the arbitration agreement governed by the law of Mediterraneo. Even if
the law of Danubia governs the arbitration, the arbitral tribunal has powers to adapt the
contract.

ISSUE B: CLAIMANT SHOULD BE ENTITLED TO SUBMIT EVIDENCE

FROM THE OTHER ARBITRATION PROCEEDINGS EVEN IF THIS
EVIDENCE HAD BEEN OBTAINED EITHER THROUGH A BREACH OF A
CONFIDENTIAL AGREEMENT OR THROUGH AN ILLEGAL HACK OF
RESPONDENT’S COMPUTER SYSTEM.

I. EVIDENCE FROM THE OTHER ARBITRATION PROCEEDINGS IS

ADMISSIBLE IN THE PRESENT ARBITRATION.

There is a growing trend towards increased transparency in international commercial

arbitration, which is embraced by HKIAC rules. Thus, the arbitration under HKIAC
rules can not achieve complete confidentiality. In other words, disclosure of documents
from the other arbitration is admissible under certain circumstances. As to the current
arbitration, the evidence at issue is admissible due to reasonable necessity.

18
A. HKIAC RULES EMBRACES INCREASED TRANSPARENCY IN
INTERNATIONAL COMMERCIAL ARBITRATION.

1. Greater Transparency Is Required And Widely Practiced In International

Commercial Arbitration.

a. The fact that confidentiality is not an “essential attribute” of arbitration allows

more transparency
It is widely accepted that privacy and confidentiality are different concepts in
international commercial arbitration. They are distinguishable in that privacy deals with
who may or may not be present at an arbitral hearing, while confidentiality deals with
the obligations of the parties not to reveal any information or materials concerning the
arbitration. [The Center] The subtle differences between privacy and confidentiality
have caused confusion and lead parties to mistakenly believe that their disputes are
automatically confidential since confidentiality is not “an essential attribute” in
international commercial arbitration.

Arbitration is a private process but not a confidential one. As the High Court of
Australia, found that confidentiality, is not part of the inherent nature of the arbitration,
and of the relationship thereby established, and that, even in cases where the duty to
confidentiality exists, it is nevertheless subject to exceptions.[Esso case] The rationale,
for the approach of the High Court in Esso/BHP v Plowman, was, essentially, that
confidentiality is unachievable, because no obligation of confidentiality attaches to
witnesses, and, secondly, because there are various ways in which an award may come
before a court, involving disclosure to the court by a party to the arbitration and
publication of the court proceedings. In other words, it would seem futile to try to
impose an obligation of confidence, which, in reality, cannot be enforced. In practice,
various jurisdictions acknowledge the private nature of arbitration, while they reject the
idea that confidentiality is essential to achieve privacy in arbitration.
19
Therefore, an express confidential agreement is needed in order to achieve the
confidentiality in arbitration, which is absent in the current arbitration. In the United
States, Sweden, and Australia, an unconditional duty of confidentiality is rejected and
express confidentiality agreements are required.In Bulgarian Foreign Trade Bank Ltd.
v A.L. Trade Finance Inc, the Supreme Court ruled that a party, is not bound by
confidentiality, unless the parties have entered into a specific agreement to that effect.
[Swedish case]

Moreover, the IBA Guidelines for Drafting International Arbitration Clauses, one of the
guidelines suggested by HKIAC, expressly suggest that the parties, if concerned about
confidentiality and such interest is essential for the parties, should address this issue in
their arbitration clause at paragraphs 60-65. While in the former arbitration, such an
agreement was missing. RESPONDENT merely alleged that “HKIAC 2013 Rules,
which contain in Article 42 an express obligation to keep the proceedings
confidential.”[The letter from Julia Clara Fasttrack to HKIAC] In other words,
RESPONDENT didn’t expressly state the confidentiality requirement in the other
arbitration. Considering that confidentiality is not “an essential attribute”,
RESPONDENT can not assume complete confidentiality was achieved in the former
arbitration

b. Arguments against absolute confidentiality lead to increased transparency.

In recent years, there have been incessant calls for increased transparency in the
international commercial arbitration system due to the following reasons. [Avinash
Poorooye]

For one thing, publication of certain documents or awards is not as detrimental as it

may seem since many commercial arbitration matters do not involve sensitive
commercial information, making confidentiality not such a serious concern. [Stefan
Pislevik]
20
For another, absolute confidentiality does more harm than good. The continued
confidentiality of arbitration awards reduces the availability of relevant precedent that
can benefit both the judiciary and the business community.[Avinash PoorooyeⅡ]

Moreover, arbitral transparency has many benefits including the consistency of arbitral
awards, development of arbitral law, prevention of prospective disputes, better openings
to develop the arbitral system, and increased efficacy in determining the expertise of an
arbitrator. The publication of awards would make people learn of mistakes and
misbehaviors of others, avoiding future disputes. [Avinash PoorooyeⅢ]

Consequently, it is suggested that the traditional notion of confidentiality is untenable

and that greater transparency in international commercial arbitration is required which
is now evidenced and practiced in several rules and institutions, for instance, the
UNCITRAL Rules on Transparency. It indicates that there is a global trend toward
acknowledging the significance of transparency as a means of promoting and ensuring
effective democratic participation, good governance, accountability, predictability, and
the rule of law. Although the scope of the UNCITRAL Rules on Transparency is
restricted to investor-state arbitration, but its impact has led to appeals for greater
transparency in international commercial arbitration. And some arbitral institutions
have already promulgated transparency rules in order to foster goodwill such as
Stockholm Chamber of Commerce and International Chamber of Commerce.

2. The duty of confidentiality is not absolute under HKIAC arbitration rules.

The duty of confidentiality of HKIAC rules 2013 is contained in Article 42.1, which
prohibited parties from publishing, disclosing, or communicating any information that
is from arbitration proceedings or arbitral awards. However, the duty of confidentiality
or award is not absolute. Consistent with international practice, the HKIAC rules
provided for a number of exceptions to the duty of confidentiality, which are intended
21
to strike a balance between protecting confidentiality in arbitration and the need for
disclosure in certain exceptional cases regulated in Article 42.3. [Michael Moser]

More than that, as illustrated in the development of HKIAC rules itself, the tendency to
embrace greater transparency is apparent. In other words, HKIAC rules is not adapting
the concept of an overall duty of confidentiality in arbitration.

Article 39.9, 2013 HKIAC rules, which regulates the exclusion of the duty of
confidentiality, reads that “An award may be published, whether in its entirety or in the
form of excerpts or a summary, only under the following conditions: (a) a request for
publication is addressed to the HKIAC Secretariat; (b) all references to the parties’
names are deleted; and(c) no party objects to such publication within the time limit
fixed for that purpose by the HKIAC Secretariat. In the case of an objection, the award
shall not be published.”

While the circumstances that publication is allowed are expanded in Article 42.3 of
2013 HKIAC rules, which stipulates “The provisions in Article 42.1 do not prevent the
publication, disclosure or communication of information referred to in Article 42.1 by
a party: (a) (i) to protect or pursue a legal right or interest of the party; or (ii) to enforce
or challenge the award referred to in Article 42.1 in legal proceedings before a court or
other judicial authority; (b) to any government body, regulatory body, court or tribunal
where the party is obliged by law to make the publication, disclosure or communication;
or (c) to a professional or any other adviser of any of the parties, including any actual
or potential witness or expert. ”

To make the 2018 HKIAC rules even include more exceptional cases in Article 45.3,
which reads “Article 45.1 does not prevent the publication, disclosure or
communication of information referred to in Article 45.1 by a party or party
representative: (a) (i) to protect or pursue a legal right or interest of the party; or (ii)
22
to enforce or challenge the award or Emergency Decision referred to in Article 45.1 in
legal proceedings before a court or other authority; or (b) to any government body,
regulatory body, court or tribunal where the party is obliged by law to make the
publication, disclosure or communication; or (c) to a professional or any other adviser
of any of the parties, including any actual or potential witness or expert; or (d) to any
party or additional party and any confirmed or appointed arbitrator for the purposes of
Articles 27, 28, 29 or 30; or (e) to a person for the purposes of having, or seeking,
third party funding of arbitration. ” It further proved that HKIAC arbitration rules
contains no categorical duty of confidentiality. Instead, the HKIAC rules provide the
limited confidentiality in its clause that disclosure is allowed under certain circumstance.

B. The Disclosure Is Furthermore Authorized Due To Reasonable Necessity.

1. Reasonable necessity is a widely accepted criterion for the admissibility of

disclosure in arbitration.
Since confidentiality in arbitration is within limits, there are generally recognized
principle cases established by courts and authorities for disclosure of documents
produced in arbitration, including awards and pleadings within, to a third party in
another arbitration proceeding. Although full disclosure and lifting of the veil of
confidentiality damages business reputation, publication of certain information at
certain stages of the arbitral process, such as the revelation of some information, could
be allowed.[Noussia K.] In Hassneh insurance Co. of Israel v. SteuartJ. [HASSNEH
case], a party wished to disclose both awards and claims while the other party objected
to the disclosure of the claims or pleadings.

The case established that disclosure of materials can be allowed when: (1) the
documents are relevant and (2) disclosure is necessary for disposing fairly of the cause
or matter. Another criterion from Henkel, Supra Note 8 [Christoph Henkel] stated that
the disclosure of materials can be compelled by first, demonstrating a significant
23
necessity for the material, and second, showing an inability to acquire such information
without undue hardship.

From the above, the disclosure of information from arbitration proceeding can be
permitted when there is reasonable necessity to do so, which requires that: (1) the
information is relevant, and (2) disclosure is necessary for the material and disposing
fairly of the matter, and (3) it takes undue hardship to acquire such information
otherwise.

2. Accordingly, the submission of the evidence at issue is furthermore permitted

since it is reasonably necessary in this case.
Firstly, the evidence at issue is relevant to the dispute raised between the two parties.
The evidence from the other arbitration demonstrates that RESPONDENT asked for an
adaptation of the price under unforeseeable circumstance, which is exactly what
CLAIMANT sought for in this case.

Secondly, there is considerable necessity for disclosure in this case. For one thing, the
evidence at issue is of significant necessity for its materiality. The evidence tends to
expose the fact that RESPONDENT made completely opposite pleadings in two
essentially consistent issues, with which CLAIMANT can request the tribunal to
preclude RESPONDENT’s claim in this case, and subject RESPONDENT to its
previous claim by pleading claim preclusion. That is to say, the evidence at issue is
material used to give rise to the award which defined the rights and obligations of the
parties to the arbitration. For another, the evidence is necessary for fair treatment of
matter in arbitration.

Lastly, CLAIMANT has to bear undue hardship to obtain evidence about the pleading
which RESPONDENT made in the other arbitration as it is produced in a closed

24
arbitration proceeding. The acquisition of such evidence is impossible without a
disclosure in breach of confidentiality clause.

Following the reasonable necessity rule, the award and the pleading within of the other
arbitration that RESPONDENT involved in should be allowed to submit to the tribunal
by CLAIMANT in this case.

II. THE EVIDENCE FROM THE OTHER ARBITRATION IS STILL

ADMISSIBLE EVEN THOUGH IT WAS OBTAINED THROUGH
IRREGULAR APPROACH.
Under HKIAC rules, any evidence related to the case and material to the outcome of
the arbitration should be allowed to submit even if the tribunal assume that the evidence
from the other arbitration through breach of confidential agreement or illegal hack.
Such defects will not lead to the exclusion of the evidence at issue, since the tribunal
shall not apply strict rules of evidence under the very circumstance.

A. UNDER ART. 22.3 OF HKIAC RULES, ANY EVIDENCE RELATED TO THE

CASE AND MATERIAL TO THE OUTCOME SHOULD BE ALLOWED TO
SUBMIT.

Under Article 22.3 of HKIAC rules, the arbitral tribunal has wide discretion to allow or
order production of documents that are “relevant to the case and material to its outcome.”
The arbitral tribunal is not bound by any strict rules of evidence. This provision is in
line with Article 19(2) of the UNCITRAL Model Law (2006),143 Section 47(3) of the
Arbitration Ordinance,144 and Article 9(1) of the IBA Rules on the Taking of Evidence
in International Arbitration (2010) (the ‘IBA Rules of Evidence’)

1. There Are Similarities In The Two Cases To Prove The Relevance.

Referring to A Guide to the HKIAC Arbitration Rules, the concept of relevance suggests
25
that the evidence submitted is useful to establish the truth of the party‘s factual
allegations. On the basis of, the obvious similarities of cases confirm the relevance
through analyzing the elements included in both cases, which are crucial and decisive.
Firstly, the changing circumstances in two cases are similar. The main reason caused
the both arbitrations is the unforeseen and excessive tariffs in the process of trading.

Besides, the remedies of two cases are the same. Overburdened the tariffs, CLAIMANT
in this arbitration and RESPONDENT itself in the other arbitration both chose to
retrieve a loss through adapting the contract.

Furthermore, it is highly contradictory that in such case an additional tariff of 25% is

sufficient to justify a request for adaptation while an even less predictable retaliatory
tariff of 30% allegedly does not justify an adaptation when it is to RESPONDENT’s
detriment.[Cl. Ex. 9]

Thus, the two cases are under the similar background and the parties involved request
remedy for losses in the same way, which clearly reveal the relevance.

2.The contradictory pleadings of RESPONDENT in two arbitrations lead to

material impact.
In the current arbitration, the evidence at issue indicates that RESPONDENT who is
here vigorously denying any need to adapt the contract to a change of circumstance had
itself asked for an adaptation of the price invoking an unforeseeable change of
circumstances in the other arbitration, while the issues in two arbitrations are identical.
In this case, CLAIMANT can request the tribunal to preclude the respondent’s claim in
this case, and subject RESPONDENT to its previous claim by pleading issue preclusion
in respect of certain findings made in the other arbitration. Hereto, the evidence at issue
is material used to give rise to the award which defined the rights and obligations of the
parties to the arbitration. In addition, the evidence is necessary for fair treatment of
26
matter in arbitration. [Mobilia]

In conclusion, the above-mentioned evidence which fully complies with Art.22.3 of the
HKIAC arbitration rules should be admitted to submit.

B. SINCE THE EVIDENCE AT ISSUE DOES NOT FALL INTO THE SCOPE
OF EXCLUION OF EVIDENCE, THE DEFECT OF THE EVIDENCE CAN
NOT IMPEDE ITS ADMISSIBILITY.

1. The parties shall refer to IBA rules of evidence to determine the admissibility of
the evidence at issue.
Under Article 22.2 and Article 22.3, HKIAC rules 2018, the arbitral tribunal is not
bound by any strict rules of evidence. Considering that the two parties didn’t make any
agreement on whether apply any established rules of evidence, the admissibility of
evidence is not clear. In this respect, the IBA Rules of Evidence are commonly adopted
or referred to in HKIAC arbitration. These Rules are suggested by HKIAC to use as
guidelines because of the following reasons.

First, the rules themselves have evolved based on years of judicial and legislative
experience and expertise. They are, by and large, rational and designed to achieve
fairness. Second, the rules are comprehensive and should cover most situations. They
will therefore be a source of persuasive guidance to the tribunal. Third, if the tribunal
were to make decisions on evidential issues based on its own whims and without any
rational basis, the parties may have legitimate grounds to feel aggrieved, and possibly
recourse.[Michael Moser]

2. Under IBA rules of evidence, the evidence at issue is admissible.

According to Article 3.9, IBA rules of evidence, when considering the admissibility of
certain evidence, the tribunal shall take the reasons for objection set forth in Article 9.2
27
into account. Article 9.2 entitles the tribunal to exclude evidence or production any
Document, statement, oral testimony or inspection for the legal impediment under the
legal or ethical rules determined by the Arbitral Tribunal to be applicable. Furthermore,
in considering issues of legal impediment or privilege under Article 9.2, and insofar as
permitted by any mandatory legal or ethical rules that are determined by it to be
applicable, the Arbitral Tribunal may take several aspects into account, where the
current circumstance is not included.

Conclusion：

In the first place, evidence from the other arbitration proceedings is admissible in the
present arbitration. The HKIAC Rules embraces increased transparency in international
commercial arbitration, which makes the duty of confidentiality not absolute. In the
current arbitration, disclosure of the evidence at issue is authorized due to reasonable
necessity. Furthermore, the evidence from the other arbitration is still admissible even
though it was obtained through irregular approach. Any evidence related to the case and
material to the outcome should be allowed to submit under the HKIAC rules.
Meanwhile the evidence at issue does not fall into the scope of exclusion of evidence,
the defect of the evidence can not impede its admissibility.

ISSUE C: CLAIMANT IS ENTITLED TO THE PAYMENT OF US$1,250,000

OR OTHER AMOUNT RESULTING FROM AN ADAPTATION OF THE
PRICE.

I. CLAIMANT is entitled to request the arbitral tribunal to restore the

equilibrium of the contract by adapting the price.
The newly imposed tariffs are contained in the circumstance of hardship under both
Clause 12(A) and CISG(B). The advanced payment by CLAIMANT requires the
arbitral tribunal to restore the equilibrium of the contract by adapting the price.
28
A. CLAIMANT is entitled to request the arbitral tribunal to restore the
equilibrium of the contract by adapting the price under Clause 12.

1. The imposition of the new tariffs is covered in Clause 12.

a. The imposition of the new tariffs is one of the “hardship” circumstances in

Clause 12.
The word “comparable” in Clause 12 means “a person or thing able to be likened to
another”, which insinuates the enumeration mentioned as “missed flights, weather
delays, failure of third party service, or acts of God” is inexhaustive.

The principle of ejusdem generis is applicable in the explanation of the word

“comparable”. Ejusdem generis does not mean “of the same kind”, but “of the same
genus”. In other words, it is used in its strict logical meaning, and not in a popular sense.
[Wayne B]

In Clause 12, health and safety requirements are expressly described as a hardship.
Since health and safety requirements and imposition of tariffs are both acts of
government, the increase of the tariffs can also be interpreted as a hardship because
they are of the same genus under the principle of ejusdem generis.

That an undeniable fact is the authority of Equatoriana had always been an ardent
supporter of free trade. Thus, CLAIMANT had sufficient reasons to believe that the
government of Equatoriana would still support free trade even if Mediterraneo’s newly
elected President brought restrictions on the import from Equatoriana. In the initial
stage of the Parties’ negotiation, the additional tariffs were never expected to be
imposed on agricultural products from Mediterraneo, which can be defined as an
unforeseen event. In addition, racehorse semen is categorized differently from pigs,
29
sheep, or cattle, which are generally defined as agricultural products. However, frozen
racehorse semen was listed in the schedule that fell under the new tariffs-regime. This
was also a fact which made the present circumstance unforeseen.

The unforeseen character of the newly imposed tariffs is the reason why it was not
explicitly listed in Clause 12. However, it definitely pertains to “comparable unforeseen
event” and thus covered by Clause 12

b. It is the Parties’ intent to have the newly imposed tariffs included in Clause 12.

i. CLAIMANT’s intent to cover the newly imposed tariffs in Clause 12 is clear and
unambiguous to RESPONDENT.
Pursuant to Art.8(1) CISG, statements made by and other conduct of a party are to be
interpreted according to his intent where the other party knew or could not have been
unaware what that intent was.

By concluding the Clause 12, RESPONDENT had clearly understood the intent of
CLIAMANT through the written provision itself. In Clause 12, the events which the
seller shall not be responsible for form a brief list instead of an exhaustive one. So is
the latter part of the Clause 12, which stipulates hardship. What’s more, the phrase
“comparable unforeseen events” clearly showed that CLAIMANT wanted to involve
not only additional health and safety requirements in “hardship” but also those making
the contract more onerous, namely, the newly imposed tariffs. RESPONDENT surely
knew or could not have been unaware that Clause 12 is an inexhaustive list of events
which covered the present situation.

The “hardship” part expressly mentioned additional health and safety requirements
which is one kind of administrative action as the same as tariffs. It is obvious to
RESPONDENT that the newly imposed tariffs are parallel to additional health and
30
safety requirements.

In conclusion, RESPONDENT knew or could not have been unaware that

CLAIMANT’s intents were to cover not only additional health and safety requirements
but also comparable events dominated by authority in Clause 12. Clause 12 should be
interpreted according to above intents. Thus, RESPONDENT had no excuse to deny
the inclusion of the increased tariff by arguing that Clause 12 is narrowly worded that
merely regulates some risks directly.

ii. A reasonable person of the same kind as RESPONDENT could understand

CLAIMANT’s intents to cover the newly imposed tariffs in Clause 12.
Pursuant to Art.8(2)(3) CISG, in case that the tribunal thought RESPONDENT did not
know or could not have been aware CLAIMANT’s intents which were expressly
written in the contract, the contract was to be interpreted according to the understanding
that a reasonable person of the same kind as RESPONDENT would have had in the
same circumstances. In determining the understanding a reasonable person would have
had, due consideration is to be given to all relevant circumstances of the case including
the negotiations of the Parties.

CLAIMANT clearly stated that the acceptance of a DDP delivery did not mean “to take
over any further risks associated with such a change in the delivery terms, in particular
not those associated with changes in customs regulation or import restriction [Cl.Ex.4]”
CLAIMANT also emphasized the commercial basis of the deal, by mentioning the past
experiences “unforeseeable additional health and safety requirements may make highly
expensive tests necessary which can increase the cost by up to 40% [Cl.Ex.4].”
Considering all these factors, RESPONDENT had explicitly understood that the risk of
tariffs was covered in Clause 12, which was consistent with CLAIMANT’s intents.

What’s more, the initial intent RESPONDENT came up with a DDP delivery was to
31
seek for a speedy delivery and rely on CLAIMANT’s “much greater experience in the
shipment of frozen semen including the necessary export and import documentation
[Cl.Ex.3]”. The prime purpose to profit from CLAIMANT’s experience in the
transportation of frozen semen instead to burden CLAIMANT with all the risks
associated with a DDP delivery was consented by RESPONDENT without any
objection. Both parties agreed on the inclusion of Clause 12 to exempt responsibility of
CLAIMANT in certain circumstances, which contains the newly imposed tariffs
drawing from the negotiation process.

Though the hardship part of Clause 12 was a bit narrowed down on account of both
Parties’ willingness, the final version in the FROSEN SEMEN SALES AGREEMENT
still covered health and safety requirements and the most similar risks. Thus,
CLAIMANT has sufficient grounds to believe RESPONDENT is clearly aware that the
increased tariffs pertain to hardship in Clause 12.

In conclusion, Clause 12 covers the newly imposed tariffs which are beyond doubt to a
reasonable person of the same kind as RESPONDENT in the same circumstances.

2. The arbitral tribunal should adapt the price because Clause 12 does not provide
any remedy to restore the equilibrium.
The purpose of a hardship clause is to provide a higher level of flexibility and to balance
the risk between the parties. The essence of hardship is to find a balance under the
principle of equity and good faith [Lorenz & Partners].

Clause 12 in the present case made an express declaration to exempt the responsibility
of CLAIMANT without any concrete remedy. The parties failed to achieve a rational
agreement in the further discussion because RESPONDENT unilaterally terminated the
negotiation. Considering the facts that CLAIMANT had delivered the remaining 50
doses of frozen semen and paid the tariffs in advance, the best method to find a balance
32
is to adapt the price through this arbitration, which is one of the legal consequence of
hardship and obviously the most important one [Dietrich].

B. CLAIMANT is entitled to require the arbitral tribunal to restore the

equilibrium of the contract by adapting the price under CISG.

1. The UNIDROIT Principles are applicable pursuant to Art.7(2) CISG.

In case the tribunal thought that the increased tariffs are not covered in Clause 12 of the
contract, whether the newly imposed tariffs constitute a “hardship” is still unsettled. As
hardship is the matter related to liability exemptions while the prevailing opinion is that
CISG does not cover hardship [Lorenz & PartnersⅡ], hardship should be regarded as
the matter governed but not expressly settled in CISG according to Art.7(2) CISG. As
a consequence, in a situation of hardship, the arbitral tribunal may provide further relief
consistent with the “general principles” on which the CISG is based. [CISG-AC 7]

Since the UNIDROIT Principles can be used to interpret or supplement international

uniform law instruments [UNIDROIT Preamble]. To bridge the above “gap” of
hardship in CISG, the UNIDROIT Principles which contain the specific definition and
effects of hardship are applicable to the present situation. [Scaforn case]

2. The arbitral tribunal should adapt the price pursuant to Art.6.2.3 UNIDROIT
Principles.
CLAIMANT only had a profit margin of 5 percent for the transaction but made a loss
of 25 percent due to the imposition of the new tariffs. Due to these governmental
regulations, the costs for CLAIMANT to perform its obligation had substantially
increased [Silviya] The occurrence of the much higher costs following the imposition
of the new tariffs had fundamentally altered the equilibrium of the contract. The newly
imposed tariffs undoubtedly constitute a “hardship” pursuant to Art.6.2.2 UNIDROIT
Principles[commentⅠ].
33
Firstly, the newly imposed tariffs occurred and became known to CLAIMANT after the
conclusion of the FROZEN SEMEN SALES AGREEMENT. The Parties had signed
the contract on 6 May 2017. After two shipments of the products without any problem,
two months before the last shipment, the newly elected President of Mediterraneo
announced 25 percent higher tariffs on agricultural products from Equatoriana and the
government of Equatoriana took retaliatory measures. The situation that increased
tariffs were applicable to animal products including frozen semen became known to
CLAIMANT only two days before the delivery date.

Secondly, the newly imposed tariffs could not be taken into account by CLAIMANT at
the time of the conclusion of the contract. Although the newly elected President of
Mediterraneo showed his preference for a more protectionist approach to international
trade in its election program in January 2017 [Cl.Ex.6], CLAIMANT had sufficient
reasons to believe that Equatorianian authorities, which held a firm attitude towards
free trade, would never unexpectedly retaliated Mediterraneo by imposing tariffs on
agricultural product. RESPONDENT cannot allege CLAIMANT had foresee ability
because Equatorianian authorities had once took retaliatory measures. What happened
once makes the parties beware cannot make everything foreseeable. [Silviya Ⅱ ].
Furthermore, frozen racehorse semen was listed in the schedule that fell under the new
tariffs-regime, which makes it more impossible for CLAIMANT to take the newly
imposed tariffs into account when concluding the contract.

Thirdly, the newly imposed tariffs were beyond control of CLAIMANT since it was the
action of Equatorianian authority.

Lastly, the risk of the newly imposed tariffs was not assumed by CLAIMANT.
CLAIMANT has already considered in advance possible dangers associated with
customs regulation and import restrictions [Cl.Ex.4], what’s more, it has taken the
34
exclusion of such risks as prerequisite for the acceptance of DDP delivery terms. The
reason why it did not specifically list the tariffs imposition in the contract is that it could
not foresee such event when concluding the contract, as illuminated above.
Consequently, CLAIMANT should never be deemed to assume the risk of the newly
imposed tariffs [Silviya Ⅲ].

In conclusion, the newly imposed tariffs clearly meet the requirements of “hardship”
defined in Art.6.2.2 UNIDROIT Principles. In case the tribunal thought that the newly
imposed tariffs were not covered in Clause 12, it also constitutes a “hardship” pursuant
to Art.6.2.2 UNIDROIT Principles, especially considering CLAIMANT had been
trapped in financial difficulty, which will result in a lower standard threshold test of the
hardship [Christopher BrunnerⅢ].

After being informed that the newly imposed tariffs were applicable to the last shipment
of frozen semen i.e. the hardship occurred, CLAIMANT emailed RESPONDENT
immediately to find a solution before the last delivery. Due to Mr. Shoemaker’s
behaviors, which caused CLAIMANT to form a reasonable understanding that
RESPONDENT would bear the additional costs related to the newly imposed tariffs,
CLAIMANT delivered the last shipment. However, after the 30% increased tariffs had
been paid, RESPONDENT acted inconsistently with the reasonable understanding of
CLAIMANT at the delivery. What’s more, facing CLAIMANT’s rightful request for
renegotiation on the basis of hardship pursuant to Art.6.2.3(1) UNIDROIT Principles,
it was RESPONDENT’s conduct that terminated negotiations against good faith and
fair dealing that caused the parties’ failure to reach an agreement within a reasonable
time. Hence, CLAIMANT resorted to the arbitral tribunal pursuant to Art.6.2.3(3),
Art.1.11 UNIDROIT Principles. Since CLAIMANT had already paid the newly
imposed tariffs, the arbitral tribunal should adapt the price to restore the equilibrium of
the contract pursuant to Art.6.2.3(4)(b) UNDROIT Principles.

35
In conclusion, the newly imposed tariffs constitute a “hardship” no matter under Clause
or under CISG. The tribunal should restore the equilibrium by adapting the price.

II. The claim for the payment meets the requirement of equilibrium.
When adapting the price to restore the equilibrium, the tribunal should take two aspects
into consideration. Firstly, the newly imposed tariffs caused disproportional burden to
CLAIMANT (A). Secondly, RESPONDENT should bear more burden according to the
principle of good faith (B).

A. The newly imposed tariffs caused disproportional burden to CLAIMANT.

The initial price proposed by CLAIMANT was 99,500 $ per dose in the email of 24
March 2017.While RESPONDENT mentioned that the price and delivery terms were
not acceptable for it and required for a delivery on the basis of DDP considering the
urgency of the delivery and the much greater experience in the shipment of frozen
semen including the necessary export and import documentation. Thus, CLAIMANT
intended to increase the price by 1,000$ per dose given the additional costs associated
with a DDP delivery. However, in the final contract, CLAIMANT set the price at
100,000$ per dose, surrendering 500$ per dose comparing with the previous proposed
price.

The 30% increased tariffs values 1,500,000$, which is six times of the third shipment
profits. Moreover, the additional fee CLAIMANT charged for the DDP delivery of the
third shipment was 25,000$, which means the increased tariffs--1,500,000$ are sixty
times of the original money CLAIMANT paid for DDP delivery term.

The comparison between gross profits and the newly imposed tariffs as well as the
original money paid for DDP and the newly imposed tariffs apparently shows that the
increase of the tariffs is so overwhelming that the fundamental equilibrium of the
contract is destroyed, which caused grossly disproportional burden to CLAIMANT.
36
The newly imposed tariffs resulted in an extremely onerous situation for CLAIMANT.
It has not only destroyed its profit margin of 5% but resulted in considerable hardship
[Cl.Ex.8]. The last two years have been financially difficult for CLAIMANT since it
has already been in such an economic dilemma. CLAIMANT even gave up the deserved
few profits of 5% as a compromise just for no loss in order to maintain its normal
business, therefore, it is unreasonable and unfair for CLAIMANT to undertake the
increased 30% tariffs in such a tough economic situation.

B. RESPONDENT should bear more burden according to the principle of good

faith.

1. RESPONDENT should bear more burden since it had benefited a lot from
breaching the resale prohibition.
Since the substantial part of the contract is undisputedly governed by the law of
Mediterraneo, including the CISG [Cl.Ex.5], the contract should be interpreted in a
broad sense pursuant to Art.11 CISG. That is to say, the contract governed by CISG is
not subject to any requirement as to form and it may be proved by any means including
negotiation process and witnesses.

When negotiating the details about the deal, CLAIMANT had emphasized that the
goods shall not be re-sold to third parties without its express written consent [Cl.Ex.2],
which was accepted by RESPONDENT without any objection [Cl.Ex.3]. However,
after the final shipment had been made, CLAIMANT discovered that RESPONDENT
actually had breached the resale prohibition and needed part of the doses shipped for
commitments towards other parties. The resale behavior was absolutely for
RESPONDENT’s interests since RESPONDENT could not only earn additional
revenue by increasing the original price charged by CLAIMANT, but help increase the
number of breeders at least in Equatoriana who had an interest in completely abolishing
37
the ban on artificial insemination, which was supported by the investors of
RESPONDENT.

After its receipt of the last shipment of frozen semen, it could still benefit from the
delivered goods unjustifiably while CLAIMANT had suffered unbearable losses. Due
to the doctrine of “No one shall profit from his misconduct”, bearing RESPONDENT
more burden meets the requirement of equilibrium.

2. RESPONDENT should pay for losses of CLAIMANT in consequence of

reasonable reliance.
Pursuant to Art.1.8 UNIDROIT Principles, A party cannot act inconsistently with an
understanding it has caused the other party to have and upon which that other party
reasonably has acted in reliance to its detriment. The “understanding” may result, for
example, from a representation made, from conduct, or from silence when a party
would reasonably expect the other to speak to correct a known error or
misunderstanding. In determining whether the reliance is reasonable, the
communications and conduct of the Parties, the nature and the setting of the dealings,
the expectations they could reasonably entertain of each other should be considered
[Comment Ⅱ ]. The inconsistent actions were allowed by paying for costs or losses
incurred by reason of reliance [CommentⅢ].

After receiving the message that the government of Equatoriana suddenly imposed 30%
tariffs on the agricultural products CLAIMANT had requested for renegotiations
subject to good faith and fair dealing as well as the duty of cooperation, which showed
its willingness to continue to perform the contract in the premise that the agreement on
the price could be reached.

CLAIMANT finally made the delivery for the following reasons.

38
Firstly, RESPONDENT constantly emphasized the long-term relationship and the
interest in further business between the Parties, which caused CLAIMANT’s
reasonable reliance on RESPONDENT. And RESPONDENT even mentioned the
second stallion of world reputation of CLAIMANT, which made this trust even more
sufficient.

Secondly, RESPONDENT continuously stressed that timely delivery was extremely

important because it needed the doses urgently, and needed CLAIMANT to ensure the
remaining 50 doses were actually shipped [Re.Ex.4] In the case that CLAIMANT
clearly expressed the necessity of a price increase before the shipment, RESPONDENT
still persisted in the shipment as soon as possible, which can be apparently considered
as an acceptance to the price adaptation. Thirdly, Mr. Shoemaker, the employee of
RESPONDENT, alleged that he had clarified the legal situation with the legal
department of RESPONDENT and confirmed with his superiors about the obligation
of CLAIMANT, which showed that his promise is at the instruction of his superiors and
thus could represented the will of RESPONDENT.

In light of the above facts and considering that RESPONDENT had created the
impression of accepting the price adaptation, CLAIMANT performed its delivery
obligation and delivered the remaining 50 doses on 23 January 2018.

In conclusion, the decision of delivery was based on the reasonable reliance resulting
from RESPONDENT’s representation and conduct. Due to the importance of timely
delivery, the interest in long-term relationship and the insistence on an agreement on
the increased price which were all emphasized by RESPONDENT, CLAIMANT made
the last delivery and paid in advance the newly imposed tariffs. It was the unilateral
termination of the subsequence negotiation and the refusal to pay additional tariffs, the
inconsistent behaviors of RESPONDENT, that caused losses to CLAIMANT.
RESPONDENT should pay for that kind of losses.
39
3. The unilateral termination of the negotiation by RESPONDENT led to the loss
of the only opportunity to reach an agreement by negotiation.
Facing the request for renegotiation due to hardship, RESPONDENT has the obligation
to renegotiate in good faith. Once the request has been made, both Parties must conduct
the renegotiations in a constructive manner, in particular by refraining from any form
of obstruction and by providing all the necessary information. [CommentⅣ]. Moreover,
as illustrated above, CLAIMANT delivered the last shipment of semen and paid in
advance the newly imposed tariffs based on the reasonable reliance on further
negotiations resulting from the representation and conduct of RESPONDENT.

However, RESPONDENT terminated the renegotiation and refused to pay any

additional amount for the tariffs when being found its resale behavior, which leads to
an impossibility on the price agreement. The unilateral and malicious termination of
renegotiation was an obstruction to an agreement on the price, violating the obligation
of renegotiating in constructive manner and the duty of cooperation. RESPONDENT
failed to comply with the principle of conforming to the good faith and fair dealing
during the renegotiation process.

In conclusion, the newly imposed tariffs loaded the extremely disproportional burden
to CLAIMANT, thus brought a crushing blow to the company trapped in financial
difficulty. The conducts by RESPONDENT, including the violation of the resale
prohibition, the inconsistent act against reasonable reliance, the malicious termination
in subsequent negotiation, totally went against the principle of good faith. The
arbitration tribunal should adapt the price to restore the equilibrium of the contract with
the guidance of these factors.

Conclusion：

CLAIMANT is entitled to request the arbitral tribunal to restore the equilibrium of the
40
contract by adapting the price under Clause 12 and under CISG. And the claim for
the payment meets the requirement of equilibrium. The newly imposed tariffs caused
disproportional burden to CLAIMANT. RESPONDENT should bear more burden
according to the principle of good faith.

REQUEST FOR RELIEF

CLAIMANT respectfully requests the Arbitral Tribunal:

1.to order RESPONDENT to pay CLAIMANT an additional amount of US$1,250,000
which is 25 per cent of the price for the third delivery of semen;
2.to order RESPONDENT to bear the costs of the Arbitration.

41
TABLE OF AUTHORITIES
Cited as Reference Cited in
Mustill Mustill & Boyd, Commercial ISSUE.a.I.A.1
Arbitration, 2nd ed. p. 63
Dicey Dicey, Morris & Collins, The Conflict of ISSUE.a.I.A.2
Laws, 14th ed., paragraph 16R-001.
Klaus Klaus Peter Berger, Power of Arbitrators ISSUE .a. III. A.
to Fill Gaps and Revise Contracts to
Make Sense, p.5
Klaus II Klaus Peter Berger, Power of Arbitrators ISSUE.a.III.B.1
to Fill Gaps and Revise Contracts to
Make Sense, p.10
Christoph Bruner Christoph Bruner, Force Majeur and ISSUE.a.III.B.2
Hardship under General Contract
Principles: Exemption for non-
performance in International
Arbitration, p.495
Sanders Sanders, in (1975) Revue de L'Arbitrage ISSUE.a.III.B.1
83, p.84
Sanders II Sanders, International Encyclopedia of ISSUE.a.III.B.1
Comparative Law, Vol. XVI, Ch. 12, p.
70
Schlosser Schlosser, Das Recht der internationalen ISSUE.a.III.B.1
privaten Schiedsgerichtsbarkeit(2nd edn
1989) No. 29
Schmitthoff Schmitthoff, 'Hardship and Intervener ISSUE.a.III.B.1
Clauses' (1980) J.Bus.L. p.88
Nicklisch Nicklisch, in (1988) HJ.Int'I Arb. 35, ISSUE.a.III.B.1
p.38
42
Nicklisch II Nicklisch, in (1989) RIW 15, p.18
Peter Peter, Arbitration and Renegotiation of ISSUE.a.III.B.1
International Investment Agreements
(2nd edn 1995), p. 257
Bernard Bernard, in New Trends in the ISSUE.a.III.B.1
Development of International
Commercial Arbitration and die Role of
Arbitral and other Institutions (Sanders
ed.) (1983), p. 214
Berger Berger, in (1993) The American Revue ISSUE.a.III.B.1
of International Arbitration, p.86
Kroll Kroll, Erganzung und Anpassung von ISSUE.a.III.B.1
Vertragen durch Schiedsgerichte (1998),
p.19
Fouchard Fouchard, Gaillard and Goldman, On ISSUE.a.III.B.1
International Commercial Arbitration
(1999), p.43
Holtzmann Holtzmann and Neuhaus, A Guide to die ISSUE.a.III.B.1
UNCITRAL Model Law (1994), pp.
1126-1131
Christoph Bruner II Christoph Bruner, Force Majeur and ISSUE.a.III.B.1,2
Hardship under General Contract
Principles: Exemption for non-
performance in International
Arbitration, p.495
The Center The Center for Transnational Litigation ISSUE.b. I.A.1
and Commercial Law, Confidentiality
vs. Transparency In Commercial
Arbitration: A False Contradiction To
43
 Overcome, NYU, DECEMBER 28,
2012
Avinash Poorooye Avinash Poorooye* & Rona ́n Feehily, ISSUE.b. I.A.1
Confidentiality and Transparency in
International Commercial Arbitration:
Finding the Right Balance, Spring 2017,
p.282
Stefan Pislevik Stefan Pislevik, Precedent and ISSUE.b. I.A.1
development of law: Is it time for greater
transparency in International
Commercial Arbitration?, p.246
Avinash Poorooye Avinash Poorooye* & Rona ́n Feehily, ISSUE.b. I.A.
II Confidentiality and Transparency in
International Commercial Arbitration:
Finding the Right Balance, Spring 2017,
p.286
Avinash Poorooye Avinash Poorooye* & Rona ́n Feehily, ISSUE.b. I.A.
III Confidentiality and Transparency in
International Commercial Arbitration:
Finding the Right Balance, Spring 2017,
p.289
Michael Moser Michael Moser & Chiann Bao, A Guide ISSUE.b. I.A.
to HKIAC Arbitration Rules, 2017
Noussia K. Noussia K., Confidentiality in ISSUE.b. I.B
International Commercial Arbitration,
2011, p.57-78.
Christoph Henkel Christoph Henkel, The Evaluation of ISSUE.b. I.B
Privacy and Confidentiality in
International Commercial Arbitrations
44
 by the English Court of Appeal in City
of Moscow v. Bankers Trust, 20
MEALEY’S INT’L ARB. REP. 1, 6
(2005), p.972
Mobilia Mobilia, Offensive Use of Collateral ISSUE.b. II.A
Estoppel Arising Out of Non-Judi cial
Proceedings, 50 ALB. L. REV. 305
Michael Moser II Michael Moser & Chiann Bao, A Guide ISSUE.b. I.A
to HKIAC Arbitration Rules, 2017,
p.154
Wayne B Wayne B. Wheeler, Which Definition of ISSUE.c. I.A.
Concurrent Power Will the Supreme
Court Choose, 90 Cent. L.J. 283(1920),
p.285
Lorenz & Partners Lorenz & Partners Co. Ltd, Comparison ISSUE.c. I.A.
of commonly used Hardship and Force
Majeure Clauses, Newsletter No. 119
(EN), 2017, p.4
Dietrich Dietrich Maskow, Hardship and Force ISSUE.c. I.A.
Majeure, 40 Am. J.Comp. L. 657 (1992),
p.661
Lorenz & Partners Lorenz & Partners Co. Ltd, Comparison ISSUE.c. I.A.
II of commonly used Hardship and Force
Majeure Clauses, Newsletter No. 119
(EN), 2017, p.6
CISG-AC 7 CISG Advisory Council Opinion No.7, ISSUE.c. I.B
Art.3.2
UNIDROIT UNIDROIT Principles Preamble Art.5
Preamble
45
Silviya Silviya Tsoneva, Hardship in Bulgarian ISSUE.c. I.B
Law, 2011 Acta U. Danubius Jur. 118
(2011), p.123
Comment I Comment 2.a on Art.6.2.2 UNIDROIT ISSUE.c. I.B
Principles
Silviya II Silviya Tsoneva, Hardship in Bulgarian ISSUE.c. I.B
Law, 2011 Acta U. Danubius Jur. 118
(2011), p.122
Silviya III Silviya Tsoneva, Hardship in Bulgarian ISSUE.c. I.B
Law, 2011 Acta U. Danubius Jur. 118
(2011), p.122
Christopher Christopher Brunner, Force majeure and ISSUE.c. I.B
Brunner III hardship under general contract
principles: exemption for non-
performance in international arbitration,
pp.438-439
Comment II Comment 2 on Art.1.8 UNIDROIT ISSUE.c.II.B
Principles
Comment III Comment 3 on Art.1.8 UNIDROIT ISSUE.c.II.B
Principles
Comment IV Comment 5 on Art.6.2.3 UNIDROIT ISSUE.c.II.B
Principles

46
TABLE OF COURT DECISIONS
Cited as Reference
Union of India case Union of India v. McDonnell Douglas Corp. 1993
Case No. 2 Lloyd's Rep. 48

Black Clawson case Black Clawson International Ltd v Papierwerke Waldhof-

Aschaffenburg AG
1982
Case No.2 Lloyd’s Rep. 446

ICC 3752 Final Award in ICC Case

1989
Case No.3752, XIV Y.B.Comm.Arb.Ill

Channel Tunnel case Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd
1993
Case No. [1993] A.C. 334

SulAmérica case The United Kingdom

SulAmérica Cia Nacional de Seguros S.A. and others v. Enesa
Engenharia S.A and others
16 May 2012
Case No. A3/2012/2049

Sonatrach case Sonatrach Petroleum Corp v Ferrell International Ltd

2002
Case No. [2002] 1 All E.R. (Comm)

47
James Miller & James Miller & Partners Ltd v Whitworth St Estates
Partners case (Manchester) Ltd
1970
Case No.[1970] AC 583

MCC-Marble case Spain

MCC-Marble Ceramic Center Inc v Ceramica Nuova
D’Agostino
1998
Case No. 144 F 3d 1384(11 cir (Fla) 1998)

Mitchell case Mitchell Aircraft Spares, Inc. v. European Aircraft Service AB

Case No. 97 C 5668

Swiss case Swiss

Swiss Supreme Court Decision
2001
Case No. 4P.114/2001

Esso case Australian High Court

Esso Australia Resources Limited v Plowman
1995
Case No. (1995) 183 CLR 10

Swedish case Swedish Supreme Court

Bulgarian Foreign Trade Bank Ltd v Al Trade Finance Inc
27 October 2000
Case No. N T 1881-99

48
Hassneh case Hassneh Insurance Co.of Israel and Others v. Steuart J. Mew
1993
Case No. [1993] 2 Lloyd's Rep. 243

N.V.Belgische case N.V.Belgische Scheepaatmaatschappij-Compgnie Maritime

Belgae v. N.V.Distrigas
19, December 2001
Case No. 4P.114/2001

Scaforn case Belgium

Scaforn International BV & Orion Metal BVBA v. Exma CPI
SA
25 January 2005
Case No. A.R.A/04/01960

49