ATENEO DE MANILA UNIVERSITY INTERNATIONAL COMMERCIAL ARBITRATION MOOT 11 FEBRUARY 2012

CLAIMANT AL SHAHRIR
TRADING CO. LTD.

RESPONDENT MERINO MEAT EXPORTS PTY. INC.

MEMORANDUM FOR RESPONDENT

Counsels for Respondent

Katrina Elaine C. Aguila Krystle Bacani Joyce Chan Victor Siriban

TABLE OF CONTENTS

INDEX OF AUTHORITIES STATUTES AND TREATIES Cited as

Cited in

Model Law

New York Convention

UNCITRAL Model Law on International Commercial Arbitration (1985), as amended (2006). Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958)

Passim

JUDICIAL DECISION

Cited as
Biggers v. Evangelist Cecala v. Moore Hooper Bailie v. Natcon Kemiron v. Aguakem Montgomery v. Montgomery Poire v.Tripier Suisse Atlantique v. NV Rotterdamsche Biggers v. Evangelist, 71 N.C. App. 35, 321, S.E. 2d 524 (1984). Cecala v. Moore, 982 F. Supp. 609 (ND III 1997). Hooper Bailie Associates Ltd. v. Natcon Group Pty Ltd, Supreme Court of New South Wales (1992). Kemiron Atlantik, Inc. v. Aguakem International, Inc. 290 F. 3d 1287, 1291 (2002). Montgomery v. Montgomery, 110 N.C. App. 234,238, 429, S.E. 2d 438-39, 441 (1993). Poire v. Tripier, 14 February 2003, Cour de Cassation, Revue de larbitrage (2003). Suisse Atlantique Socit d Armement Maritime SA v. N.V. Rotterdamsche Kolen Centrale, 1 A.C. 361 (1967).

Cited in

SCHOLARLY WORKS AND ARTICLES Cited as Blackby Nigel Blackby, Constantine Parastides, Alan Redfern, J. Martin H. Hunter, THE AGREEMENT ARBITRATE

Cited in

Fouchard

Jolles Lew

Born

(Kluwer Law International, 2003). Emmanuel Gaillard, John Savage, FOUCHARD, GAILLARD, GOLDMAN ON INTERNATIONAL COMMERCIAL ARBITRATION (1999). Alexander Jolles, Consequences of Multi-tiered Arbitration Clauses, 72 ARBITRATION 329 (2006). Julian Lew, Loukas A. Mistelis and Stefan M. Kroll, COMPARATIVE INTERNATIONAL COMMERCIAL (Kluwer Law International, 2003). Gary B. Born, INTERNATIONAL COMMERCIAL ARBITRATION (Kluwer Law International, 2009).

STATEMENT OF FACTS On 15 June 2011, by a contract for the sale of live sheep, Merino (Respondent) agreed to sell and deliver to Al Shahri (Claimant) 50,000 long tailed lambs at the price of USD75 per head. The parties agreed that it shall be delivered to designated feedlots in the port of Jebel Ali, UAE to arrive on or

before 3 December 2011 to meet the demands of the Muslim Eidul-Adha festival in December 2011. The parties also agreed to the following: that the sheep shall be delivered unblemished, healthy and suitable for use in Korban; that the sheep must be certified fit for export by the Australian Quarantine Inspection Service (AQIS); and that the payment shall be made as follows (1) 10% of the purchase price, on shipment at loadport Fremantle and (2) the balance within 30 days on delivery of the sheep at discharge port. On 10 November 2011, pursuant to the contract, Respondent shipped 50,000 heads of long tailed lambs from Fremantle, Australia on board their sheep carrier MV Coma Dose. As agreed upon, the sheep were certified by the AQIS as complying with the export regulations of Australia. On 13 November 2011, the animal welfare organization called the Protection of Ethical Sheep Treatment (PEST), made a press release that the conditions in which live sheep were brought from Australia to Middle East countries were not halal. PEST alleged that under the Holy Quran, subjecting the animals to cruelty would be the same as perpetrating such ill-treatment on a human being. PEST also presented evidence to show that live sheep imported from Australia were confined amid the waste of tens and thousands of animals for weeks, which caused the death of many ship on board filthy transport ships. Moreover, those that survive the grueling journey arrive with diseases like salmonella, scabby mouths and sheep pox. The PEST report was also carried in the Gulf Daily on 15 November 2011. Concerned that the negative media might affect its sale of the live sheep, Claimant asked Respondent to clarify conditions of the sheep shipped on MV Coma Dose. Respondent assured Claimant that the sheep husbandry on board was sophisticated, with a computerized system for air and water cooling pens, and a self-cleansing sewerage discharge system that would operate continuously throughout the journey. A veterinarian was also on board to provide treatment if necessary. On 28 November 2011, MV Coma Dose arrived at port Jebel Ali but discharged only 47,500 heads of sheep into the quarantine feedlot. Around 1700 heads have died onboard due to heatstroke or

dehydration and were later or disposed by incineration. Some 800 suffered injuries and were considered maimed thus unfit for ceremonial Korban use. They were simply sold to local butchers for non-hallal users. Claimant agreed to accept the 47,500 heads and both parties signed a non-disclosure agreement not to disclose the number of dead or unfit sheep to any third party. Notwithstanding embargo against disclosure, news of mortality rate and unfit sheep soon got into the local media. This was traced to an inadvertent slip by the boarding officer employed by Merinos port agent. This leaked news caused another round of negative press resulting in many of Claimants customers cancelling their orders. Only 10,000 of them were eventually sold as live sheep. The balance were eventually sent to abattoirs and exported as frozen lamb to Slovak Republic and Armenia. Claimant refused to make payment for the balance of the purchase price of USD3,187,500. On June 5 January 2012, Claimant commenced an action against Respondent in the Dubai court for damages for lost sales and breach of non-disclosure agreement. Respondent also commenced arbitration proceedings against Claimant before the Australian Centre for International Commercial Arbitration (ACICA) to the arbitration clause in the contract which reads: These terms and conditions shall be governed by the laws of South Australia. Any disputes concerning them that cannot be solved by negotiation in good faith between the parties shall be determined by mediation or, failing that, by arbitration conducted in accordance with the relevant UNCITRAL Model law. Claimant, upon receipt of a copy of Request for Arbitration, it filed before the Dubai court for the issuance of an anti-arbitration injunction, which the Dubai court issued. Claimant filed jurisdictional objections to the arbitration proceedings commenced by Respondent on the following grounds: (1) Respondent failed to comply with the conditions precedent to the filing of the arbitration proceedings; (2) ACICA has no jurisdiction over the arbitration because arbitration clause does not provide for arbitration in ACICA; (3) there is pending case in the Dubai courts over the same parties in relation to the same facts and the Dubai courts has issued an anti-arbitration injunction; (4) there is in fact no arbitration agreement as the arbitration clause is contained in the form purchase order of Respondent and Claimant did not expressly agree to any such arbitration clause.

SUMMARY OF PLEADINGS PART TWO: CLAIMANTS ACT OF COMMENCING AN ACTION CLAIMANTS ACT OF COMMENCING AN ACTION BEFORE THE DUBAI COURT RENDERS THE CONDITIONS PRECEDENT NUGATORY AND THUS, RESPONDENT VALIDLY INSTITUTED THE ARBITRATION PROCEEDING Respondent submits that there being a valid arbitration agreement between the parties, the conditions precedent embodied in the arbitration clause are valid and binding, and hence, must be complied with. In support of this position Respondent submits that first, under the arbitration clause, the parties are obliged to comply with the conditions precedent prior to resorting to

arbitration; second, that negotiation and mediation are mandatory; third, Claimants act of instituting the action before the Dubai court renders the conditions precedent nugatory; and finally, Respondent has validly instituted the arbitration proceeding before the ACICA. PART FOUR: THE DUBAI COURT CANNOT ISSUE AN ANTI-ARBITRATION INJUNCTION BECAUSE OF THE EXISTENCE OF A VALID ARBITRATION AGREEMENT BETWEEN THE CLAIMANT AND THE RESPONDENT The existence of a valid arbitration agreement between the Claimant and the Respondent precludes the Dubai Court in issuing an anti-arbitration injunction against the proceedings commenced before the ACICA. Such issuance would be in contravention to Articles II (3) of the 1958 New York Convention which states that: The court of Contracting State, when seized of an action in a matter in respect of which the parties have made agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative, or incapable of being performed [Art. II(3), New York Convention]. The very same provision embodied in the New York Convention is likewise reiterated in Art.8 of the UNCITRAL Model Law which is the law chosen by the parties to govern the agreement to arbitrate. Art. 5 of the same law even reiterated the requirement that no court shall intervene in any matter governed by such law. Instead of issuing an antiarbitration injunction, the Dubai court should have referred the parties to arbitration. Lastly, it is well-settled that anti-arbitration injunctions must be exercised by national courts with extreme caution. It cannot be used to enjoin arbitration proceedings on claims merely based on merit, prescription, and multiplicity of suits.

I. A VALID ARBITRATION AGREEMENT EXISTS BETWEEN AL SHAHRIR AND MERINO A. The purchase form order satisfies the formal requisites for the validity of an arbitration agreement have been met B. There is a defined legal relationship between Claimant and Respondent C. The dispute arising from the contract of sale is arbitrable. II. CLAIMANTS ACT OF COMMENCING AN ACTION BEFORE THE DUBAI COURT RENDERS THE CONDITIONS PRECEDENT NUGATORY AND THUS, RESPONDENT VALIDLY INSTITUTED THE ARBITRATION PROCEEDING Having thus established the validity of the arbitration agreement, Respondent submits that pursuant to the arbitration clause, both parties are obliged to comply with the preconditions to arbitration (A). However, because of Claimants deliberate non-compliance with these preconditions, said preconditions have been rendered nugatory (B). Hence, for failure of the parties to resolve their disputes either through negotiation and subsequent mediation, Respondent validly instituted this arbitration proceeding (C). A. UNDER
THE ARBITRATION CLAUSE, PARTIES ARE OBLIGED TO SATISFY THE CONDITIONS PRECEDENT TO ARBITRATION

1. The contract contains multi-tiered arbitration clause.

Parties to an arbitration agreement may decide that, prior to submitting any dispute to arbitration, they want to attempt an amicable settlement of the matter through negotiations or non-binding procedures such as mediation [Blackby at 114]. Clauses that provide for an escalation of the dispute through at least two different forms of dispute resolution are called multi-tier dispute resolution clauses [Jolles at 329]. Here, by providing for the two preconditions to arbitration, namely, negotiation and mediation [Scenario 7], a multi-tier dispute resolution clause is clearly contemplated by the parties. 2. Negotiation and subsequent mediation in the arbitration clause are mandatory.

i. Pursuant to the principle of party autonomy, negotiation and mediation must precede arbitration.
Arbitration is a contractual institution [Fouchard 50] that is governed by the principle of party autonomy. The principle of party autonomy grants parties the freedom to contract and to establish such stipulations, clauses, terms and conditions that will govern their agreement [Suisse Atlantique v. NV Rotterdamsche]. Once so established and agreed upon, these contractual provisions become binding on the parties. Here, both parties agreed that any disputes concerning them that cannot be resolved by negotiation in good faith between the parties shall be determined by mediation, or failing that, by arbitration [Scenario 7]. It is clear, therefore, that the parties had intended that the two-tiered condition precedents of negotiation and mediation be satisfied prior to resorting to arbitration. Being a product of the parties voluntary agreement, the procedure preceding, and leading to, arbitration must necessarily be followed [Lew 1-11]. ii. The conditions precedent to arbitration are mandatory. Whether an obligation to conciliate is mandatory or permissive is a matter that may be resolved by simply assessing the intention of the parties to be bound by an obligation to participate in an earlier resolution phase contemplated by the clause [Poire v. Tripier]. In the process of ascertaining this intention, the phraseology of the clause must be assessed [Hooper Bailie v. Natcon].

In this case, the arbitration clause specifically uses the term shall in pertaining to mediation. The clear import of this clause therefore, is that the parties intended to make the preconditions to arbitration mandatory. Thus, where the terms of the contract are clear and unambiguous, this Tribunal is bereft of any power to rewrite the plain meaning of the contract [Montgomery v. Montgomery] and must give ordinary words their ordinary meanings [Bigger v. Evangelist]. 3. Even assuming that the negotiation and mediation clauses are separate from the arbitration agreement, they are still binding and enforceable Even assuming that the clauses on negotiation and mediation are separate from the arbitration agreement, they remain binding and enforceable. As held in Cecala v. Moore, an agreement to resort to mediation prior to the commencement of arbitration cannot be bypassed. The very act of placing preconditions to arbitration shows the clear intention of the parties to make arbitration a last resort for resolving disputes [Kemiron v. Aguakem]. Hence, even assuming that the negotiation and mediation clauses were held to be separate from the arbitration agreement, the same remain valid and enforceable and hence, must be complied with prior to resort to arbitration. B. Claimants deliberate non-compliance with the condition precedent renders the said preconditions nugatory Claimant urges this Tribunal to rule that the conditions precedent have not been complied with. However, Respondent disagrees. By Claimants very act of instituting proceedings before the Dubai Court on 5 January 2012 [Scenario 7], it deliberately disregarded the valid arbitration agreement that it had entered into with Respondent. Here, the arbitration clause provides that any disputes concerning them that cannot be resolved by negotiation in good faith between the parties shall be determined by mediation, or failing that, by arbitration in accordance with the relevant UNCITRAL Model Law. Respondent submits that because of Claimants act of instituting an action before the Dubai Court, there is in fact a failure of both conditions precedent thereby giving rise to Respondents proper institution of the arbitration proceedings. C. Hence, Respondent validly instituted this arbitration proceeding.

As Respondent has already established that the conditions precedent to the arbitration have been rendered nugatory by Claimant itself, it follows that Respondents only resort is to commence arbitration against Al Shahrir [Scenario 7] over the dispute arising from the contract of sale between Claimant and Respondent.

III. THE AUSTRALIAN CENTER FOR INTERNATIONAL COMMERCIAL ARBITRATION (ACICA) HAS JURISDICTION OVER THE DISPUTE UNDER THE APPLICABLE PROCEDURAL RULES. A. The ACICA has implied power to rule on the dispute under the arbitration clause. IV. IN ANY EVENT, THE DUBAI COURT DOES NOT HAVE THE POWER TO ENJOIN ARBITRATION.

A. UNDER

THE

UNCITRAL MODEL LAW,

A COURT IS GENERALLY MANDATED TO

REFER THE PARTIES TO ARBITRATION

The UNCITRAL Model Law is not devoid of provisions reiterating the need for any national court to refer a matter which is subject of an arbitration agreement. Art. 8 of the Model Law specifically mandates a court before which an action is brought in a matter which is subject of an arbitration agreement to refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed. Thus, instead of issuing an anti-arbitration injunction, the Dubai court should have referred the parties to the ACICA which was validly chosen pursuant to the arbitration agreement between the Claimant and the Respondent. It is likewise embodied in Article 5 of the UNCITRAL Model Law that in matters governed by the Law, no court shall intervene except where so provided in this law [Art. 5, Model Law]. The arbitration agreement between Claimant and Respondent clearly states that the arbitration shall be conducted pursuant to the UNCITRAL Model Law. Thus, the application of Article 5 is clear and conclusive. This renders an intervention from any national court an unavailable remedy to any party.

B. EXCEPTIONS

THAT MAY WARRANT THE COURTS ISSUANCE OF THE ANTI-

ARBITRATION INJUNCTION DO NOT EXIST IN THIS CASE.

Lastly, the power to issue an anti-arbitration injunction must be exercised with extreme caution and only in certain exceptional circumstances. As an example, arbitration agreements made in pursuant to the New York Convention can only be enjoined on jurisdictional grounds. Grounds which tend to establish that the claim is meritless and time-barred, or that the arbitration is merely duplicative are not available and proper grounds for the issuance of an anti-arbitration injunction [Brown at 700]. Thus that the objection of the Claimant that there is already pending case in the Dubai courts over the same parties in relation to the same facts is clearly not a ground for a court to issue an anti-arbitration injunction. C. THE ISSUANCE OF AN ANTI-ARBITRATION INJUNCTION WHEN A VALID ARBITRATION AGREEMENT EXISTS VIOLATES THE NEW YORK CONVENTION Having thus proved the existence of a valid arbitration agreement (see Part I supra), Respondent submits that in any event, the Dubai Court does not have the power to enjoin arbitration. The existence of a valid arbitration agreement renders any national court powerless in issuing an anti-arbitration agreement to stay the arbitration proceedings initiated by one of the parties. It is true that the New York Convention does not contain any provision which prevents any national court from enjoining an arbitration proceeding. Nevertheless, an issuance of an anti-arbitration injunction against an arbitration proceeding made within the purview of valid arbitration agreement is considered as a breach of Articles II (3) and III of the Convention [Born at 699]. It arises from this principle that, if there is a valid arbitration agreement, disputes arising out of or in connection with the contract containing the arbitration agreement are to be decided by the arbitrators.