1. The Substantive (CISG) Issues in the 2016-17 Vis Problem
International Commercial Arbitration Course

2. The Place You Must Start: Procedural Order #1 at the End of the File (pp. 52-53)
First, note the agreed exclusion of certain issues in Para. 3 of Procedural Order #1.
Re procedural (arbitration) issues, see esp. the first and fourth items.
Re substantive issues, see second and third items.
Re all issues, see the fifth item.
Even more critically, see the definition in Para 5 of the issues that the tribunal will hear and decide.
This defines, with substantial precision, the issues you must address at this point.

3. Definition of Issues to Be Addressed in Para 5 of Procedural Order #1
Procedural (arbitration) issues identified in Procedural Order #1: a. and b.
Do not forget the first item in Para 3.
Substantive issues identified in Procedural Order #1:
1) c.i. (“Exchange Rate Issue”), and
2) c. ii. (“Money Laundering Investigation Fee Issue”).
THE ISSUES IDENTIFIED IN PROCEDURAL ORDER # 1 ARE THE ISSUES YOU MUST ADDRESS, AND OTHER ISSUES YOU MAY SEE ARE NOT OPEN FOR ARGUMENT AT THIS POINT

4. Claimant’s Request for Arbitration on the Exchange Rate Issue
Claimant’s Factual Narrative:
Paras (pp ); Paras 10 – 14 (p. 5).
See also § 4 of the Development & Sales Agreement (p. 10) & the “Addendum” (p. 11).
Claimant’s Legal Argument(s):
Paras. 20 – 22 (pp. 6 – 7).
Please Paraphrase Claimant’s Legal Argument(s).
What Legal Rules Are Relevant to Claimant’s Legal Arguments?
See Para 5(4) of Procedural Order No. 1 (p. 53) & § 20 of D & S Agreement (p. 10).
In Para 20 of its Request for Arbitration (p. 6) Claimant, invokes CISG Articles “62, 53 & 54.” What do these provisions say and how are they relevant to this issue?
Are There Any Other Rules Not Cited by Claimant that Are Relevant to its Argument?
Consider CISG Article 8.

5. Respondent’s Answer to the Statement of Claim on the Exchange Rate Issue
Respondent’s Factual Narrative:
Para 2 (p. 23); Paras 7 – 10 (pp ).
See also § 4 of the Development & Sales Agreement (p. 10) & the “Addendum” (p. 11).
Respondent’s Legal Argument(s):
Paras 15 – 17 (p. 25).
Please Paraphrase Respondent’s Legal Argument(s).
What Legal Rules Are Relevant to Claimant’s Legal Arguments?
See Para 5(4) of Procedural Order No. 1 (p. 53) & § 20 of D & S Agreement (p. 10).
Consider CISG Article 8.

6. Claimant’s Request for Arbitration on the Money Laundering Investigation Fee Issue
Claimant’s Factual Narrative:
Paras 15 – 16 (p. 6).
Claimant’ Legal Argument(s):
Para 23 (p. 7).
See also last sentence of § 4(3) of the S & D Agreement (Group 4)
Please Paraphrase Claimant’s Legal Argument(s).
What Legal Rules Are Relevant to Claimant’s Legal Arguments?
See Para 5(4) of Procedural Order No. 1 (p. 53) & § 20 of D & S Agreement (p. 10).
In Para 23 (p. 7) of its Request for Arbitration, Claimant invokes CISG Articles 53 & 54. What do these provisions say and how are they relevant to this issue?

7. Respondent’s Answer to the Statement of Claim on the Money Laundering Investigation Fee Issue
Respondent’s Factual Narrative: None.
Respondent’s Legal Argument(s):
Para 2 (p. 23); Paras 18 & 19 (p. 26).
Please Paraphrase Respondent’s Legal Argument(s).
What do you make of the passage beginning “In general, the present situation . . .” starting with the third sentence of para 19 (p. 26)?
See the “New Zealand Mussels Case,” and its progeny and the many commentaries thereon, (including Harry M. Flechtner, Funky Mussels, a Stolen Car and Decrepit Used Shoes: Non-Conforming Goods and Notice thereof under the United Nations Sales Convention ("CISG"), Boston University International Law Journal (Spring 2008) 1.

8. One More Thing (Not Sure If It’s Relevant)
At the end of Para 6 of Claimant’s Request for Arbitration (p. 4), Claimant states that the parties’ agreements meant that “CLAIMANT had to bear the risk that the production cost would be actually above that maximum price [$13,125 per blade in the Development and Sales Agreement], subject to t he ordinary hardship defence.” What is this “ordinary hardship defence,” and does it apply under the CISG?
See Scafom Int’l BV v. Lorraine Tubes S.A.S.,
See also Articles through of the Unidroit Principles of International Commercial Contracts,
See also, e.g., Harry M. Flechtner, "The Exemption Provisions of the Sales Convention, Including Comments on "Hardship" Doctrine and the 19 June Decision of the Belgian Cassation Court" Belgrade Law Review, Year LIX (2011) available online at

9. Final Thoughts (for our First Class)
You must quickly get up to speed.
This applies to both the substantive issues I am exploring you this week, and the procedural issues that Professor Brand will take up when he returns.
Your Draft Arguments Headings Are, in Essence, the Memorandum for Claimant.
Your Argument Headings must present a coherent, complete and convincing factual-legal for Claimant. Treat them as the statement of your client’s entire case.
As Professor Brand says, an arbitrator who reads through your headings should come away thinking, “Well obviously Claimant should prevail.”

10. Delving More Deeply into Claimant’s Exchange Rate Argument
Claimant must make two interpretation arguments in favor of its position on the exchange rate to be used in calculating the cost element of the price for the fan blades (i.e., what exchange rate should be used to calculate how many dollars are needed to cover Claimant’s per blade costs, which were incurred in Equatorian Denars:
1) The original Sales and Development contract should be interpreted to provide for the exchange rate Claimant wants [Compare C Claim para 22 (p. 7) with R Answer paras 8, 9, 10 & 17 (pp. 24 & 25) and last para of Exhibit R5 (p. 31)]; and
2) The Addendum, and particularly the fixed exchange rate provision in it, should be interpreted not to apply to (and hence not to change) the exchange rate in the original (or “main”) agreement [Compare C Claim para 22 (p. 7) with R Answer para 17 (p. 25) and last para of Exhibit R5 (p. 31)].
See the end of para 8 (p. 5) of Cl’s Statement of Claim: ”Furthermore, upon Respondent’s insistence and deviating from the rules applicable to the price calculation for the fan blades, the parties agreed on a fixed exchange rate for the cost of the clamps.” Compare last para of Exhibit R5 (p. 31) (“merely spells out what had already been the understanding of the parties when the entered” the D & S K).

11. Exactly What Exchange Rate is Claimant Asking For?
It’s obviously a market exchange rate (rather than a fixed rate set by agreement), but the market rate when?
In para 12 (p. 5), Claimant recounts that the corrected invoice for the fan blades was calculated “[o]n the basis of the correct exchange rate at the time of production. . .”
Thus Claimant’s position is that the silence of the D&S K re exchange rates should be interpreted to mean the market exchange rate at the time of production, when the costs were incurred.
[Remember, if the US$ falls in value as against the EQD, that means it will take more US$’s to cover the same amount of expenses incurred in EQD. I.e., each US$ buys less EQD.]

12. Delving More Deeply into Respondent’s Exchange Rate Argument
Respondent also must address both the exchange rate under the original D & S Agreement and under the Addendum.
Paras 8-10 of Respondent’s Answer to Statement of Claim, pp
According to Respondent, what is the exchange rate under the original D & S agreement?
According to Respondent, why was a fixed exchange rate included in thee Addendum?
According to Respondent, did the fixed exchange rate in the Addendum change the original exchange rate in the D & S agreement? See Para 17 of Respondent’s Answer, p. 25.

13. Delving More Deeply into Claimant’s Money Laundering Investigation Fee Argument
See Para 23 of Claimant’s Statement of Claim (p. 7).
What legal authority does Claimant invoke?
See also § 4(3) of the D & S Agreement, p. 10.
Why did claimant not cite this contractual provision?

14. Delving More Deeply into Respondent’s Money Laundering Investigation Fee Argument
See Paras 18 & 19 (p. 26) of Respondent’s Answer to the Statement of Claim.
What does Respondent mean by, “In general, the present situation is comparable to the much more frequent problem in relation to the seller’s obligation to deliver goods that [comply with??] public law regulations at the buyer’s place potentially affecting the conformity of the goods. It is now largely accepted that unless the parties have agreed differently the public law regulations at the seller’s place of business are relevant for the conformity of delivery under Article 35 (2) CISG. The seller is not expected to know all public law regulations at the buyer’s place of business unless the buyer actually informs it about such regulations. The same consideration must be applied to the obligation to pay the price. Thus CLAIMANT was either under a duty to inform RESPONDENT about the extraordinary levy known to CLAIMANT or to bear the costs for it.”