NLIU ARBITRATION POOL SELECTIONS, 2019

BHOPAL | 14th SEP – 15TH SEP, 2019

MEMORANDUM FOR RESPONDENT

NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL

MADHYA PRADESH, INDIA

ON BEHALF OF: AGAINST:

IVORY COAST BREWBAKES

TORCHWOOD & CO. LTD.

EXITLAND REPUBLIC OF COWLANDIA

RESPONDENT CLAIMANT

COUNSEL
SHAGUN SINGHAL | AAKASH RAO
RITIK RATH | JYOTIRANJAN MALLIK | ABHIJEET KASHYAP
MEMORIAL OF RESPONDENT TABLE OF AUTHORITIES

STATEMENT OF FACTS........................................................................................................3

SUMMARY OF ARGUMENTS...............................................................................................5

ARGUMENTS...........................................................................................................................6

ISSUE 1- THE ARBITRATION PROCEEDINGS WERE WHOLLY WITH

JURISDICTION BECAUSE:.................................................................................................6

SUB ISSUE 1: THE ARBITRATION PROCEEDINGS WERE WHOLLY WITHOUT

JURISIDICTION BECAUSE THE ARBITRATION AGREEMENT WAS WHOLLY
UNENFORCEEABLE SINCE A CHALLENGE OF AN ARBITRAL AWARD
OUGHT TO BE SUBJECT TO SCRUTINY BEFORE A COURT..................................6

(A) Finality of award is one of the basic characteristic of arbitration. appealing to a

second arbitral tribunal will be in violation with this principle......................................6

I. Finality of awards according to the seat of the arbitration...................................7

II. Judicial Review of Awards ensures finality as well as fairness...........................7

(B) there are certain limitations to party autonomy. thus, every procedure agreed
to, cannot be followed by the parties...............................................................................8

ISSUE 2: THE ARBITRATION PROCEEDINGS WERE WHOLLY WITHOUT

JURISDICTION SINCE THE PRE-ARBITRAL MEDIATION BEING A MANDATORY
REQUIREMENT WAS NOT COMPLIED WITH AND THE INVOCATION OF
ARBITRATION BEING PRE-MATURE, THE ARBITRAL TRIBUNAL COULD NOT
HAVE EXERCISED ITS JURISDICTION.........................................................................10

I. The pre-arbitral clause is mandatory..................................................................11

ISSUE 2- THE ETHICAL BUSINESS PRACTICES CLAUSE WAS EX-FACIE

UNENFORCEABLE FOR WANT OF CERTAINTY IN TERMS OF PERFORMANCE
OBLIGATIONS ARISING THEREFROM.........................................................................14

(A) terms in clause 6 are not defined with certainty.................................................14

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 INDEX OF AUTHORITIES

CASES

Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] 153 F.L.R. 236---------------------------12
Deojit v Pitambar (1875) ILR 1 All 275--------------------------------------------------------------16
Emirates Trading Agency LLC v Prime Mineral Exports private Limited,---------------------12
Hooper Bailie Associated Ltd. v. Natcon Group Power Ltd (1992)------------------------------13
International Research Corp PLC v. Lufthansa Systems Asia Pacific [2013]-------------------14
Kovuru Kalappa Devara vs Kumar Krishna Mitter AIR 1945 Mad 10--------------------------18
Mamidoil‐Jetoil Greek Petroleum Company SA v Okta Crude Oil Refinery AD [2001]-----17
Oriental Insurance United Company v. United India Insurance Ltd CIVIL APPEAL NO.
8146 OF 2018-----------------------------------------------------------------------------------------14
Radha Chemicals vs. Union of India Civil Appeal No. 10386 of 2018----------------------------9
Resort Condominiums International Inc v. Ray Bolwell and Resort Condominiums Pvt Ltd
reported in YCA 1995 , pp 628 -650---------------------------------------------------------------10
SA v. B. SA, no. 4A_124/2014------------------------------------------------------------------------11
Scammell and Nephew Ltd v HJ and JG Ouston [1941] AC 25---------------------------------19
Scammell and Nephew Ltd v Ouston 1 AC 251----------------------------------------------------16
United Group Rail Services v. Rail Corp New South Wales (2009)-----------------------------14
Willis UK Ltd v Cable & Wireless Plc and Pender Insurance Ltd [2005]-----------------------16

STATUTES

(Singapore) International Arbitration Act, Art. 24---------------------------------------------------7

Arbitration Law of People's Republic of China, Art. 70---------------------------------------------7
Austrian Code of Civil Procedure (aCCP), Art. 595(1)----------------------------------------------7
Dutch Code of Civil Procedure (DCCP), Art. 1065(1);---------------------------------------------7
Federal Arbitration Act, 9 U.S.C. ss 9–11-------------------------------------------------------------7
French Code of Civil Procedure, Art. 1502(1---------------------------------------------------------7
Indian Contract Act ,1872 § 2-------------------------------------------------------------------------18
LCIA, RULE 16.2----------------------------------------------------------------------------------------8
Swiss Private International Law (PILA), Art. 190(2)(e----------------------------------------------7
UK Arbitration Act 1996 § 69--------------------------------------------------------------------------8

TREATISES

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UNCITRAL Model Law Art 34(2)-------------------------------------------------------------------10
UNCITRAL Model Law, Art. 34-----------------------------------------------------------------------7

BOOKS

P. Mayer, Seeking the Middle Ground of Court Control: A Reply to I. N. Duncan Wallace, 7
Arb. Intl. 310 (1991).----------------------------------------------------------------------------------8

JOURNALS/ARTICLES

6th , Nigel Blackaby, Constantine Partasides , Redfern and Hunter on International

Arbitration,200----------------------------------------------------------------------------------------10
Alexander Jolles, Consequences of Multi-Tier Arbitration Clauses: Issues of Enforcement, 72
Arbitration 329, 336 (No. 4, 2006).----------------------------------------------------------------13
Álvaro López De Argumedo Piñeiro: “Multi-Step Dispute Resolution Clauses----------------12
Carita Wallgren, ADR and Business, in Adr In Business 3–7-------------------------------------14
Dyala Jimenez-Figueres, Multi-Tiered Dispute Resolution Clauses in ICC Arbitration, 14
ICC Bull. 71 (No. 1, 2003),-------------------------------------------------------------------------12
James H. Carter, Issues Arising from Integrated Dispute Resolution Clauses------------------13
Kirby, Finality and Arbitral Rules: Saying an Award is Final does not necessarily make it so,
29 J. Intl. Arb. 118 (2012)----------------------------------------------------------------------------8
Rowan Platt,  30 Journal of International Arbitration, Issue 5, pp. 531–560, (2013)-----------7

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MEMORIAL OF RESPONDENT STATEMENT OF FACTS

STATEMENT OF FACTS
CLAIMANT- ICB is a leading, fair trade organic coffee company in the republic of
Cowlandia, they sell their product at a premium price due to their representation of them
being a brand which produces ethically made products.
RESPONDENT -TC on the other hand is a logistic and supply change company, who
supervises the production centers and plantation of ICB, and has long term contractual
agreement with them; this long term contract has also resulted in there being a fiduciary
relationship enjoyed by both of them through this contract. The TC has the responsibility for
supplying physical capitals and labor for running the said plantations and production centers.
Key Points Arising Out Of Relationship Between ICB and TC
1. All employment contracts are between TC and individual employees, the policies
governing them are drafted by TC and negotiated between them, and in terms of other
policy decisions(location, manufacturing) TC has significant independence to decide
on the matter.
2. The extent of liability and apportionment of risks is strictly limited to and governed
by the contract between TC and ICB, all policies governing both the production
process and employment thereby are expressly subject to the terms of TC’s
obligations, contractual and fiduciary, to ICB.
3. TC has no say, in the representations ICB can or cannot make to other entities –
whether downstream contractors who assist in running their cafes or their customers.
This means that ICB can represent their production process according to its own wish
and TC has neither any say nor has any liability arising from such from
representations.

Key point from judgment of Supreme court of Cowlandia

1. Martin daily on 6th march 2018 a leading daily published news regarding the highly
deplorable conditions of laborers in in coffee plantations and manufacturing centers
from where ICB sourced its ingredients.
2. People’s font against capitalism(PFA) filed a petition before the supreme court of
Cowlandia in the wake of this story, seeking directive under article 142. The court
found that ICB made aggressive representation of it making fair trade practices, which
was justified by the premium prices which it charged for its product.
3. Accordingly an inquiry committee was made under the leadership of Bautam Ghatia.

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MEMORIAL OF RESPONDENT STATEMENT OF FACTS

4. The committee examined such facilities and found, firstly that TC use to run incentive
programmes in which women who used medical and surgical intervention to repress
their menstrual cycles were paid bonuses and aggressively promoted this, and those
who seeked maternity leave were discharged or faced pay-cuts.
5. Secondly the shrewd tactics used by the TC to grow only coffee related crops, created
a lack of alternative source of employment which impacted the people from
indigenous tribe, this deteriorated the ecological pattern of the region.
6. Finally the TC practiced highly unethical practices of gender pay discrimination,
discriminating minorities by pay-cuts, arbitrary termination from employment etc.
7. The court considered the matter with Iron hands and interest of justice, and good
conscience the Court deemed it proper to not only direct ICB to rectify the wrongful
and unfair trade practices immediately, but also sanctioned a record amount of
damages to the tune of 3 million US Dollars.( 16TH OCTOBER 2018)

Arbitration Proceedings
18TH October 2018 - ICB addressed an email to TC stating its intention to invoke arbitration
proceedings, on the basis of violation of many provisions of contract., specifically clause 6, in
the light of the recent judgment.
20th October 2018 - TC rejected all the contentions and accountability citing privity of
contract and that it had no say in the representation which ICB makes to its customers.
23RD October 2018- Parties met for mediation as per clause 24(1) but it ended as failure due
to hostility of both parties to agree and no one was ready to make compromise.
24th October 2018- ICB invoked arbitration proceedings, Soly Sorryman appointed as sole
arbitrator,
30th November 2018- Soly lied on the principle of Kompetenz-Kompetenz to find that the
tribunal did not in fact have jurisdiction, and the multi-tiered arbitration clause between the
parties was mandatory and there was failure of meeting mediation compliance rules.
5th December 2018- ICB filed an appeal before impugning the award rendered by Mr.
Sorryman ,Additionally, ICB as the Claimant before the LCIA, sought 5 million US Dollars
in damages on account of losses arising from the judgment rendered SC Cowlandia, alleging
multiple contractual breaches on TC’s part, long with the loss of goodwill in its aftermath.

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MEMORIAL OF RESPONDENT SUMMARY OF ARGUMENTS

SUMMARY OF ARGUMENTS
The arbitral award should be subject to scrutiny before a court as it ensures finality of arbitral
awards which is one of the basic principles of arbitration. Appealing to another arbitral
tribunal will be in violation with this principle. Even though, the parties have laid down the
procedure according to their will, the instant case falls within the ambit of limitations to party
autonomy.
The arbitral tribunal could not have exercised its jurisdiction as the pre-arbitral mediation
clause is certain and thus obligatory. Furthermore, the parties have consented to this
particular clause. Furthermore, after consenting CLAIMANT cannot contend willingness as
mediation is a process through which cooperation arises. (I)
The impugned clause is uncertain and is in vague terms, hence is unenforceable and liable to be
strucked down, reference for this is made to the section 29 of the Indian contract act 1872. The
impugned clause is uncertain as it has not specified any criteria for fixing the liability n case of the
breach, hence such clause is merely an agreement to agree if we refer to various case laws. Moreover
the impugned clause isn’t definite and certain so as to enforce it and hence needs to be read down
from the contractual provision. (II)

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MEMORIAL OF RESPONDENT SUMMARY OF ARGUMENTS

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MEMORIAL OF RESPONDENT ARGUMENTS

ARGUMENTS

ISSUE 1- THE ARBITRATION PROCEEDINGS WERE WHOLLY WITH

JURISDICTION BECAUSE:
SUB ISSUE 1: THE ARBITRATION PROCEEDINGS WERE WHOLLY WITHOUT
JURISIDICTION BECAUSE THE ARBITRATION AGREEMENT WAS WHOLLY
UNENFORCEEABLE SINCE A CHALLENGE OF AN ARBITRAL AWARD
OUGHT TO BE SUBJECT TO SCRUTINY BEFORE A COURT.

1. Clause 24 of the Contract states that the parties agree to settle any and every dispute
arising out of the contract, through mediation first. If they are unable to settle their
dispute through mediation, they shall refer it to arbitration.
2. Further, if either party is in disagreement with the decision rendered then they will have a
right to appeal to the Lostdon Court of International Arbitration (LCIA). CLAIMANT
contends that according to the agreement the arbitral award should be appealed to the
LCIA.
3. RESPONDENT rejects this contention and respectfully submits to the tribunal [A]
finality of award is one of the basic characteristic of Arbitration and allowing appeal will
be in violation with this principle. [B] there are certain limitations to party autonomy.
Thus, every procedure agreed to, cannot be followed by the parties.

(A) FINALITY OF AWARD IS ONE OF THE BASIC CHARACTERISTIC OF

ARBITRATION. APPEALING TO A SECOND ARBITRAL TRIBUNAL WILL BE IN

VIOLATION WITH THIS PRINCIPLE.

4. The principal of finality is reflected as a general rule that awards made in an international
arbitration cannot be appealed.1 Arbitral awards are usually considered to be final and
binding and in most instances, can be subject to national courts only to enforce or set
aside, that too on limited grounds.2
1
Rowan Platt,  30 Journal of International Arbitration, Issue 5, pp. 531–560, (2013) the appeal of appeal
mechanisms in arbitral tribunals, fairness over finality?
2
UNCITRAL Model Law, Art. 34; (United States) Federal Arbitration Act, 9 U.S.C. ss 9–11 (FAA);
(Singapore) International Arbitration Act, Art. 24; (Australia) International Arbitration Act 1974 (Cth), s. 8;
Arbitration Law of People's Republic of China, Art. 70; Swiss Private International Law (PILA), Art. 190(2)(e);
Dutch Code of Civil Procedure (DCCP), Art. 1065(1); Austrian Code of Civil Procedure (aCCP), Art. 595(1);
Belgian Judicial Code (as amended in 1999), Art. 1717(4); French Code of Civil Procedure, Art. 1502(1 );
German Code of Civil Procedure (Zivilprozessordnung (ZPO)), s. 1059.

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MEMORIAL OF RESPONDENT ARGUMENTS

5. Insulating awards for judicial review therefore ensures finality by ensuring that the courts
do not transform to appellant courts and therefore do not transform the award they have
passed.3 Laws of several countries state that arbitral awards should not be subject to
appeal.4 It is in very limited circumstances that they can be subjected to judicial review.

I. Finality of awards according to the seat of the arbitration.

6. The present consensus is that appeal of awards should not be allowed and major
arbitrations including the LCIA promote finality. However, this understanding is also
largely dependent on the seat of the arbitration.5
7. In the present case, the seat of the arbitration is London. 6 Section 69 and 70 of the UK
Arbitration Act lay down the appeal mechanisms that should be followed. 7 Even though,
these articles allow appeals, this section has been in controversy since it has been drafted.
8. The Departmental Advisory Committee while drafting these sections made it clear that
they only intend to provide a very narrow route of appeal that too in extreme
circumstances. It had also stated that allowing appeals “generally” is considered to
8
frustrate the agreement. These include circumstances when the arbitrator is obviously
wrong or when the award is against public policy.
9. Furthermore, in order to incorporate the finality doctrine into these sections, the appeal
granted under these sections include only setting aside and enforcement of awards. Thus,
it can be concluded that the appeal granted through these sections implicitly are only
limited to judicial scrutiny by the courts.

II. Judicial Review of Awards ensures finality as well as fairness.

10. CLAIMANT has contended that fairness of awards should be of supreme importance in
an international commercial transaction as the stakes are relatively high financially or

3
P. Mayer, Seeking the Middle Ground of Court Control: A Reply to I. N. Duncan Wallace, 7 Arb. Intl. 310
(1991).
4
Ibid.
5
Kirby, Finality and Arbitral Rules: Saying an Award is Final does not necessarily make it so, 29 J. Intl. Arb.
118 (2012)
6
LCIA, RULE 16.2
7
UK Arbitration Act 1996 § 69
8
Supra 1

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MEMORIAL OF RESPONDENT ARGUMENTS

otherwise. RESPONDENT rejects this contention as fairness of an arbitral award can also
be ensured through judicial review.
11. UNCTAD states that a national court can only set aside awards that have the same
nationality as the court itself.9 The first arbitration proceeding was conducted in
Cowlandia whose laws are pari-materia to India’s laws. Therefore, only Indian Courts can
enforce/set aside the arbitral award that has been passed.
12. Even though the courts in India do not have the jurisdiction to remand the matter back to
the arbitral tribunal for fresh consideration, it has been held by the Court in Radha
Chemicals v. Union of India, that the Court is vested with the power to decide a challenge
to the validity of an arbitral award.10
13. This mean that the court can act as an arbitrator on the challenge of the arbitral award and
review the case on merits if required. This was done in order to maintain certainty of
arbitral awards and ensure fairness at the same time. Thus, the court by reviewing the
matter on merits can ensure both finality and fairness in International Commercial
Disputes.
14. In the present case, Part 3 of the Dispute Resolution Clause states that if either party is in
“disagreement” with the decision rendered by the single arbitrator, they have a right to
appeal to the LCIA to review the matter in the form of a second arbitration. This is in
contravention to the “finality” of arbitral awards as it allows appeals generally therefore
frustrating the agreement.
15. Further, if CLAIMANT’s contend that fairness of arbitral awards is of supreme
importance, it is stated that court by reviewing the awards can ensure both finality and
fairness in the arbitration proceedings. Therefore, the contract is wholly unenforceable as
the arbitral award should have been subject to scrutiny before a court.

(B) THERE ARE CERTAIN LIMITATIONS TO PARTY AUTONOMY. THUS, EVERY

PROCEDURE AGREED TO, CANNOT BE FOLLOWED BY THE PARTIES.

16. Party Autonomy can be defined as parties will in choosing the law of the procedure of the
contract. The principle of party autonomy has been stated in several conventions like the

9
UNCTAD , Recognition and Enforcement of Arbitral Awards - UNCTAD/EDM/Misc.232/Add.37 , 2003
10
Radha Chemicals vs. Union of India Civil Appeal No. 10386 of 2018

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MEMORIAL OF RESPONDENT ARGUMENTS

UNCITRAL and the New York Convention. However, these conventions do not state that
party autonomy is divine or unlimited but are subjected to certain restrictions.11
17. CLAIMANT may contend that since Party Autonomy is one of the fundamental
principles of UNCITRAL12 it should be adhered to and therefore parties should have the
right to lay down their own procedure. However, the same Convention in “recourse
against awards” states that only one measure of recourse should be allowed.
18. Article 34(1) provides that a sole recourse for setting aside award should be enforced. 13
Further, it also states that Article 34 (1) is limited to action before a court. 14 Subsequently,
it may be contended that the UNCITRAL does provide an exception that the party is not
precluded from appealing to an arbitral tribunal of second instance if the parties have
agreed on such a possibility.
19. However, it has been argued by several authors that such a recourse is only available
when the parties adhere to the procedure that has been laid down in the agreement.
Commentary on Article 19 of the Model law states that if the parties fail to adhere to the
procedure then the result would be courts setting aside the awards under Article 34(2).15
20. The commentary on the above mentioned article further clarifies that the setting aside
proceedings should not be considered as appeal proceedings in which evidence on merits
is re-evaluated.16 Article V of the New York Convention affirms the same rule and states
that when the procedure laid down has not been followed, the competent authority has the
“discretion” to recognize/enforce it17.
21. In the case of Resort Condominiums International Inc v. Ray Bolwell and Resort
Condominiums Pvt Ltd, the court held that competent authority can only be regarded as a
court and not an arbitrator.18
22. In the instant case, the procedure has not been followed (Para 38 & 39) as the parties did
not mediate before resorting to arbitration. Thus, the sole recourse left with them is
judicial review of awards. Therefore, the parties can not appeal to the arbitral tribunals.

11
6th , Nigel Blackaby, Constantine Partasides , Redfern and Hunter on International Arbitration,2009
12
UNCITRAL Model Law Art 34(1)
13
Ibid.
14
Ibid.
15
UNCITRAL Model Law Art 34(2)
16 nd
2 , David D. Caron and Lee M. Caplan , The UNCITRAL Arbitration Rules ,2010
17
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New
York 1958 , Art 5
18
Resort Condominiums International Inc v. Ray Bolwell and Resort Condominiums Pvt Ltd reported in YCA
1995 , pp 628 -650

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MEMORIAL OF RESPONDENT ARGUMENTS

ISSUE 2: THE ARBITRATION PROCEEDINGS WERE WHOLLY WITHOUT

JURISDICTION SINCE THE PRE-ARBITRAL MEDIATION BEING A
MANDATORY REQUIREMENT WAS NOT COMPLIED WITH AND THE
INVOCATION OF ARBITRATION BEING PRE-MATURE, THE ARBITRAL
TRIBUNAL COULD NOT HAVE EXERCISED ITS JURISDICTION.

23. Clause 24 of the Contract states that the parties agree to settle any dispute arising out of
their contract through mediation first. It is only after they are unable to settle their dispute
through mediation, shall they refer to arbitration. Further, Oakie Faith principles should
be complied with while mediating.
24. Pursuant to Clause 24(1) the parties met at Hotel Pointless on 23 rd October to mediate
their dispute but since none of the parties was willing to make a compromise, the hostility
escalated to an extent where talks broke down irreparably.
25. CLAIMANT contends that the pre-arbitration clause was complied with. Thus, the
arbitral tribunal can exercise its jurisdiction. RESPONDENT refutes this contention and
respectfully submits that [A] the pre-arbitration clause was certain making the Parties
under an obligation to abide by it. [B] the parties have consented to mediate which is a
process through which cooperation arises. [C] the arbitral tribunal does not have
jurisdiction to hear the claim as it is pre-mature.

[A] THE PRE-ARBITRATION CLAUSE WAS CERTAIN. HENCE, PARTIES WERE UNDER AN

OBLIGATION TO ABIDE BY IT.

26. The Swiss Federal Supreme Court has stated that when the wording of the contract states
the true will of the parties, there will be no reason to depart from it. 19 Hence, the ADR
proceedings should be drafted in such a way that they provide that it is a precondition to
arbitration, therefore making it obligatory for the parties to abide by it.

19
SA v. B. SA, no. 4A_124/2014.

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MEMORIAL OF RESPONDENT ARGUMENTS

I. The pre-arbitral clause is mandatory.

27. CLAIMANT may contend that the pre-arbitration clause was not certain and hence the
pre-arbitration clause does not give rise to an obligation to adhere to it. It is submitted that
use of the words like “shall” give rise to an obligation on the part of the parties to abide to
the pre-arbitration clause.20 On contrary words like “may” do not. 21
28. An ICC tribunal held that the word “shall” is indicative of the parties’ intention to make
the clause mandatory and hence, enforceable. 22The court in the case of Emirates Trading
Agency LLC v. Prime Mineral Exports Private Limited affirmed this view.23
29. Claimants may contend that the transition from one step to another was vague therefore
making the said clause uncertain. It has been held by the Court in the abovementioned
case, that usage of words like “shall” make the ADR clause a precedent to arbitration,
therefore making the transition from one step to other certain.24
30. Further, if the parties have contracted a pre-arbitral clause to be a precedent to arbitration
and later not adhered to it, the arbitral tribunal has no jurisdiction to review the matter. 25 It
was further laid down that when the pre-arbitration clause is based on certain specific
conditions, the arbitrators tend to make the parties adhere to the conditions and only
submit the dispute to arbitration when those are fulfilled.26
31. In the instant case, Clause 24(2) states that if the parties are unable to settle their dispute
through mediation, they “shall” refer the dispute to arbitration. Therefore, usage of the
word “shall” makes the said clause to be mandatory. Further, it also lays down mediation
as a precedent to arbitration and therefore makes it obligatory to follow.
32. The pre-arbitral clause is also subjected to certain conditions. It has been stated in the
Dispute Resolution Clause that mediation shall be conducted through the Oakie faith
principles, thus making them obligatory to follow. The Oakie faith principles lay down
certain specific conditions that have to be followed by the parties. These include

20
Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] 153 F.L.R. 236.
21
ibid.
22
Dyala Jimenez-Figueres, Multi-Tiered Dispute Resolution Clauses in ICC Arbitration, 14 ICC Bull. 71 (No.
1, 2003), pp. 84 – 85, (all emphasis added). Ibid.
23
Emirates Trading Agency LLC v Prime Mineral Exports private Limited, High Court Of Justice, Queen's
Bench Division, Commercial Court, [2014] EWHC 2104 (Comm), Case No: 2013 Folio 1559
24
ibid.
25
Álvaro López De Argumedo Piñeiro: “Multi-Step Dispute Resolution Clauses”, in Miguel Ángel Fernández-
Ballesteros and David Arias (eds),Liber Amicorum Bernardo Cremades, (© Wolters Kluwer España; La Ley
2010) p. 735.
26
supra note 23.

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MEMORIAL OF RESPONDENT ARGUMENTS

mediating three days in a week, completing the mediation in 6 months, maintaining good
faith, taking responsibility for their actions so on and so forth. According to the stated
case, arbitration can only be resorted to when these conditions are fulfilled therefore
making the said clause certain.
33. In the instant case, both parties met at Hotel Pointless on 23 rd October, 2018 to mediate.
The parties did not mediate three days in a week, neither did the mediation go for a
reasonable period of time. Talks broke down irreparably between the parties and the
arbitration clause was invoked the next day itself. Therefore, the laid conditions were not
followed and the arbitration claim was pre-mature.

[B] THE PARTIES HAVE CONSENTED TO MEDIATE. FURTHER, MEDIATION IS A PROCESS

THROUGH WHICH COOPERATION ARISES.

34. If the parties have consented to a pre-arbitration clause, then a claim for pre-mature
27
arbitration should be treated as invalid. That is, if the parties have agreed to
mediate/negotiate before arbitration, a claim to arbitrate before exhausting these
procedures will be treated as inadmissible. Article 13 of the Model Law and Section 9 of
the UK Arbitration Act propagate this as well.28
35. CLAIMANT may argue that since parties were not willing to mediate, they should have
resorted to arbitration since the ultimate result would have been the same. Doing so
would rather save time of the parties.
36. However, they fail to acknowledge that mediation is a process which provides
cooperation of the parties by using procedures designed to compromise. 29The Court in
Hooper Bailie Associated Ltd. v. Natcon Group Power Ltd. stated that what is enforced in
these procedures are not cooperation and consent but a process from which cooperation
and consent may come.30
37. Further, it may be argued that if there is no willingness to mediate, arbitration should be
resorted to as the parties do not want to hamper their Relationship [Oakie Faith
Principles]. But, through mediation and adhering to the procedures, the parties are likely

27
Alexander Jolles, Consequences of Multi-Tier Arbitration Clauses: Issues of Enforcement, 72 Arbitration 329,
336 (No. 4, 2006).
28
UNCITRAL Model Law Art 13, English Arbitration Act 1996 § 9
29
James H. Carter, Issues Arising from Integrated Dispute Resolution Clauses, in New Horizons in International
Commercial Arbitration and Beyond, ICCA Congress Series No. 12, 446 (A.J. van den Berg ed., 2005), at 456.
30
Hooper Bailie Associated Ltd. v. Natcon Group Power Ltd 28 N.S.W.L.R. 194. At 206. (1992)

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MEMORIAL OF RESPONDENT ARGUMENTS

to save their relationship as both of them through cooperation may gain something for
their respective benefits.31
38. In the instant case, both the parties did meet to mediate at Hotel Pointless on 23 rd October
but the procedure was not exhausted. In a mediation process, the parties have to give an
opening statement, the agenda has to be summarised, there should be private sessions and
caucuses and finally after the parties are done mediating, an agreement has to be signed.
In the present case, talks broke down irreparably and none of these conditions were met.
39. Further, the mediation should have conducted by the Oakie faith Principles. The Oakie
faith principles state that the parties should mediate three times in a week and even
though there is no deadline, the mediation should be over by six months. In the instant
case, the arbitration clause was invoked the next day i.e. 24 th October. Therefore, it can be
concluded that a one day mediation cannot satisfy all these conditions.

[C] THE ARBITRAL TRIBUNAL DOES NOT HAVE JURISDICTION TO HEAR THE CLAIM AS

IT IS PRE-MATURE.

40. CLAIMAN may contend that pre-mature arbitrations concern admissibility of an arbitral
tribunal and not its jurisdiction. However, it has been stated by several courts that arbitral
tribunals do not have jurisdiction to hear pre-mature claims.
41. The Australian High Court in United Group Rail Services v. Rail Corp New South Wales
held that the pre-arbitration clause was enforceable and thus, the arbitral tribunal did not
have jurisdiction to review the matter before that clause was exhausted.32
42. Similarly, in International Research Corp PLC v. Lufthansa Systems Asia Pacific, the
Singapore Court of Appeal ruled that compliance with a multi-tier dispute resolution
clauses are a binding precondition to arbitration, the non-compliance with which can
deprive a tribunal of its jurisdiction.33
43. The Supreme Court of India in Oriental Insurance Company and United India Insurance
Ltd, also took the view that arbitration requirements must be construed “strictly” therefore
requiring completing of the pre-arbitration requirements.34
31
Carita Wallgren, ADR and Business, in Adr In Business 3–7 (G.H. Pointon & A. Ingen-Housz eds., 2006).
32
United Group Rail Services v. Rail Corp New South Wales 74 NSWLR 618 (2009)
33
International Research Corp PLC v. Lufthansa Systems Asia Pacific  SGCA 55 [2013]
34
Oriental Insurance United Company v. United India Insurance Ltd CIVIL APPEAL NO. 8146 OF 2018

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44. In the instant case, it has been proved that mediation was not complied with (para 38 &
39) and therefore, the claim was premature. Therefore, it can be concluded that the
arbitral tribunal does not have the jurisdiction to review the matter.

ISSUE 2- THE ETHICAL BUSINESS PRACTICES CLAUSE WAS EX-FACIE

UNENFORCEABLE FOR WANT OF CERTAINTY IN TERMS OF
PERFORMANCE OBLIGATIONS ARISING THEREFROM.

(A) TERMS IN CLAUSE 6 ARE NOT DEFINED WITH CERTAINTY

45. It is submitted that the given clause is defined in uncertain and vague terms. It is,
therefore, an unenforceable contractual clause, henceforth non-binding in nature.
46. As per Section 29 of the Indian Contract Act, “that an agreement is void when its terms
are vague and uncertain and thus cannot be made certain. In other words, if the
contractual terms cannot be reasonably ascertained, then the contract is not
enforceable.” Therefore, in order to check whether Clause 6 is certain, it is pertinent to
also check whether the clause can be reasonably ascertained, along with other
parameters that the Supreme Court of Cowlandia usually looks for while dealing with
the question of validity of contractual clauses.
47. It is submitted that the clause is not ascertainable hence is liable to be read down, now
the confusion arises from the reading of the Clause 6(1) which states that, “TC shall
perform its obligations under this Agreement in accordance with the principles of
fairness and good conscience, including without limitation those relating to
discrimination against employees, protection of human rights and environmental
responsibility.” To understand how the liability will be fixed when there is a violation of
the clause as no mechanism has been framed to determine the share of liability,
moreover, from the facts of the case it is pertinent to note that obligation and liabilities
would be shared in accordance to the apportionment principle. The extent of liability
and apportionment of risks is strictly limited to and governed by the contract between
TC and ICB. No risks other than those expressly assumed by and consented to by TC can
be imputed to TC. 35TC has no obligation to bear the entire amount of liability which is
imposed on the ICB by the Supreme Court of Cowlandia.

35
Refer to Para 4, Pg. 2 of moot proposition.

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48. It is thus, imperative that the agreement exhaustively mentions the terms in proper
wordings so as to create a contractual liability. In a landmark case of Deojit v Pitambar
36
, where the defendants themselves as residents of a certain place, executed a bond
and hypothecated as security for the amount “our property, with all the rights and
interest”, the hypothecation was held too indefinite to be acted upon. The mere fact
that the defendants described themselves in the bond as residents of a certain place
was not enough to indicate their property in that place as the property that was
hypothecated. If they had described themselves as the owners of certain property, it
would have been reasonably to refer the indefinite expression to the description.
49. It is submitted that the mechanism is in the form of an agreement to agree, this can be
implied from the fact that even after a yearlong contractual deliberation the parties still
didn’t formulate any proper liability mechanism. The Court of Appeal has, in Willis
Management (Isle of Man) Ltd and Willis UK Ltd v Cable & Wireless Plc and Pender
Insurance Ltd37, overturned a decision of the High Court and held that an agreement
between the parties was not binding because it did not have sufficient certainty to be
enforceable. The documents (a letter agreement and e-mail) read together contained
an "agreement to agree" an essential term, and as such the agreement was void for
uncertainty. Similarly in, Scammell and Nephew Ltd v Ouston 38, a clause stipulating the
price of buying a new van as "on hire purchase terms" for two years was held
unenforceable because there was no objective standard by which the court could know
what price was intended or what a reasonable price might be.
50. It is submitted that in the instant case, “ICB inserted Clause 6 in the Contract. However,
Clause 6 was not new to the contractual arrangement between the parties, in fact,
Clause 6 was retained in the latest contractual arrangement after yearlong negotiation
between the parties and after some amendments being made to the language of the
‘Ethical Business Practices’ clause appearing in the earlier contracts between the
parties.” While the factual scenario clearly imply that the terms were put in place by the
ICB, and not TC. Also, the fact that negotiations did take place only reflect that both ICB
and TC did not agree on a liability mechanism in case of breach, as it is apparent from

36
Deojit v Pitambar (1875) ILR 1 All 275.
37
Willis UK Ltd v Cable & Wireless Plc and Pender Insurance Ltd [2005] EWCA Civ 806
38
Scammell and Nephew Ltd v Ouston 1 AC 251

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the language of the clause. Therefore, it can be said that the impugned clause is a “to
be agreed” agreement. In simple words, uncertain and hold no binding value.
51. In Mamidoil‐Jetoil Greek Petroleum Company SA v Okta Crude Oil Refinery 39, the Court
of Appeal reviewed the authorities and distilled a (non‐exhaustive) list of principles that
should guide any court or arbitrator considering contractual provisions that might
appear uncertain or incomplete. The first principle, a hallmark of the law of contract, is
that each agreement must be constructed in light of its own terms and surrounding
circumstances. Subject always to that. Rix L J gave the following pointers (only relevant
included):
i. Where the parties have clearly not yet concluded a contract, but have exchanged
correspondence in the hope of reaching an agreement, the use of the phrase “to be
agreed” in relation to any essential term is likely to preclude a contract from being
formed: The law (still) does not allow the parties to ‘agree to agree’. If there is no
consensus at all on an essential part of the transaction, there is probably no
contract. This can be related to the impugned clause as already stated, the parties
failed to devise a mechanism even after yearlong considerations. Hence, the clause
is uncertain as it cannot be ascertained (for the want of liability mechanism).
ii. If commercial parties dealing in the same industry, who are familiar with the
custom of the trade act in the apparent belief that they have a binding contract, then
the court should be willing to imply terms to allow that contract to be performed,
where that can be done. While it is true that the industry is same, however, ICB
inherently is a marketing and retail oriented company, it cannot be said that both
the parties will be “familiar with each other’s customs.”
iii. Especially where the contract envisages performance over a prolonged period, and
where the parties may wish to leave certain matters to be adjusted in the future, the
court will be willing to support the bargain rather than destroy it. This is where the
principle ‘whatever can be made certain, is certain’ may come into play. While
miniscule considerations can be left out, it is very important that major part of the
clause was “not fully agreed on”.
iv. The parties are free to agree expressly that they want the price or consideration to
be ‘fair and reasonable’. Even if they do not, such a term may be implied, either
pursuant to statute (as noted above), or at common law. In the instant case, it is

39
Mamidoil‐Jetoil Greek Petroleum Company SA v Okta Crude Oil Refinery AD [2001] EWCA Civ 406

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absolutely not reasonable to pin all the damages on TC, this implies that ICB had
no role whatsoever.
52. Therefore, another key parameter is reasonableness. Section 29 40 of ICA provides the
meaning of an agreement that should be clear on the face of it, as shown in Kovuru
Kalappa Devara vs Kumar Krishna Mitter41, but the effect can be provided to the
contract if its meaning is found with reasonable clearness. If this is not possible then the
contract would not be enforceable. Merely difficulty in interpretation will not be
considered as vague. The principle can be formulated as a party who seeks remedy
from court for breach of a contract, the obligation must be able to identify the
obligation with sufficient precision to justify the remedy. The law thus stated is more
flexible, and recognizes that different levels of certainty may be needed for the
remedies.

[B] WHETHER THE GIVEN CLAUSE IS ENFORCEABLE?

53. It is submitted that the impugned clause is unenforceable, since it has been adequately
proved that it is uncertain. To deal with its enforceability, it is important to understand
the meaning of the clause. For this purpose, a close reading to the terms of the clause is
required.
54. It is submitted that the term “Ethical Business Practice” is a broad term that defines
“good” versus “bad” behavior in business. More specifically, the phrase encompasses
policies and practices regarding controversial issues such as corporate governance,
insider trading, bribery, discrimination, corporate social responsibility and fiduciary
responsibilities. Although many of these topics are governed by law, some can be
overseen by individual corporations.
55. It is submitted that the impugned clause contains three attributes. Discrimination
against employees, protection of human rights and environmental responsibility, all in
accordance with the principles of fairness and good conscience. However, there exists
no ascertainable mechanism with which liability can the borne. This is because, “the
extent of liability and apportionment of risks is strictly limited to and governed by the
contract between TC and ICB. No risks other than those expressly assumed by and
consented to by TC can be imputed to TC.”
40
Indian Contract Act ,1872 § 29
41
Kovuru Kalappa Devara vs Kumar Krishna Mitter AIR Mad 10.1945

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56. It is submitted that the issue of unenforceable contracts was dealt with in detail in the
case of Scammell and Nephew Ltd v HJ and JG Ouston 42, there was an agreement for a
purchase on ‘hire-purchase terms’ and it was challenged as being too uncertain. It was
held that there were many possible forms of such an agreement. The agreement was
void for uncertainty. Lord Wright: “There are in my opinion two grounds on which the
court ought to hold that there never was a contract. The first was that the language
used was so obscure and so incapable of any definite or precise meaning that the court
is unable to attribute to the parties any particular contractual intention. The object of
the court is to do justice between the parties, and the court will do its best, if satisfied
that there was an ascertainable and determinate intention to contract, to give effect to
that intention, looking at substance and not mere form. It will not be deterred by mere
difficulties of interpretation. It is a necessary requirement that an agreement in order to
be binding must be sufficiently definite to enable the court to give it a practical
meaning. Its terms must be so definite, or capable of being made definite without
further agreement of the parties, that the promises and performances to be rendered
by each party are reasonably certain. In my opinion that requirement was not satisfied
in this case. . .”
57. The instant issue deals with performance obligations i.e. to make good ICB for the
deviance from representations it makes, however, as it can be drawn from Scammell’s
case that it is pertinent that the contract definitely mentions promises and
performances to be rendered, which is not the case in the instant case. Therefore, there
exists no obligation under the clause since it is unenforceable in the first place.

42
Scammell and Nephew Ltd v HJ and JG Ouston AC 251 [1941]

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