Issue 1: A contract has been entered into by Deep Well and Speculative concerning the sale of drilling rig # 23

1st Place Memoranda for Claimant



International Arbitral Tribunal

Case No. Moot 5


Memorandum for Claimant


On Behalf of

Speculative Drilling, Co.
123 Water Street
Petroleum City

Mediterraneo Claimant

Against

Deep Well Drilling, Inc.
1 Deep Well Plaza
Industrial City

Equatoriana Respondent


Table of Contents

Index of Authorities

Index of Legal Sources

Introduction

Issue 1: A contract between CLAIMANT and RESPONDENT is in existence

A. The contract was concluded

I. RESPONDENT's offer of 13 May 1997

1. Offer not terminated by rejection

a) Offer not immediately rejected

b) Offer not rejected by counter-offer

c) No statement of legal significance made

2. Offer not withdrawn

3. Offer not revoked

a) Fixed time for acceptance

b) Resulting irrevocability 6

aa) Automatic irrevocability

bb) Rebuttable presumption of irrevocability

II. CLAIMANT's acceptance of 5 June 1997

B. The contract is still in existence

I. Right to avoid the contract not arisen

1. Right of avoidance under the CISG

2. Right of avoidance under the contract

a) First payment not late

b) Bank guarantee not late

II. Right of avoidance not exercised

III. Right of avoidance lost

IV. Exertion of avoidance not effective

1. Good faith under the CISG

2. Breach of good faith

Issue 2: RESPONDENT should be ordered to deliver rig #23 to CLAIMANT

A. Requirements of Art. 46(1) CISG are met

I. Breach of obligation by RESPONDENT

II. Order should be issued at the present moment

III. No resort to inconsistent remedy

B. No discretion for the Tribunal to decline the order of specific performance

I. Art. 28 CISG not applicable

II. Other features of domestic laws do not hinder the Tribunal to issue the order

III. Requirements of Art. 28 CISG not met

1. CLAIMANT not able to acquire an adequate substitute rig

2. Damages incapable of calculation

Issue 3: RESPONDENT should be ordered not to sell rig #23 to any third party

A. Order if final award cannot be granted by 14 April 1998

I. Tribunal's authority

II. Tribunal's jurisdiction

III. Request of party

IV. Necessity of measure

1. Substantial breach impending

2. Prejudice likely to occur within the foreseeable future

3. Necessity not lessened by the most recent development

V. Relation to subject-matter in dispute

VI. Only inter partes effect

VII. No anticipation of final award

VIII. Substantiation of facts

IX. Likelihood of success

B. Order if final award can be granted

I. Tribunal's authority

II. Further prerequisites met

Conclusion


Index of Authorities

Audit, Bernard

La vente internationale de marchandises - Convention des Nations - Unies du 11 avril 1980, Paris 1990

[cited as: Audit]

Berg, Albert Jan van den

The New York Arbitration Convention of 1958 towards a Uniform Judicial Interpretation, Deventer, Antwerp, Boston, London, Frankfurt 1981

[cited as: van den Berg]

Berger, Klaus Peter

Formalisierte oder Ąschleichende" Kodifizierung des transnationalen Wirtschaftsrechts, Berlin, New York 1996

[cited as: Berger, Kodifizierung]

Berger, Klaus Peter

International Economic Arbitration, Deventer, Boston, 1993

[cited as:Berger, Arbitration]

Bianca, Cesare Massimo/

Bonell, Michael Joachim

Commentary on the International Sales Law - The 1980 Vienna Sales Convention, Milan 1987

[cited as: Bianca/Bonell-Reviser]

Boele-Woelki, Katharina

Principles and Private International Law - The UNIDROIT Principles of International Commercial Contracts and the Principles of European Contract Law: How to apply them to International Contracts, in: Uniform Law Review (ULR) 1996, at 652-678

[cited as: Boele-Woelki, ULR]

Bonell, Michael Joachim

An International Restatement of Contract Law - The UNIDROIT Principles of International Commercial Contracts, Irvington, New York 1994

[cited as: Bonell, Restatement]

Bonell, Michael Joachim

The UNIDROIT Principles of International Commercial Contracts and CISG - Alternatives or Complementary Instruments?, in: Uniform Law Review (ULR) 1996, at 26-39

[cited as: Bonell, ULR]

Bonell, Michael Joachim/

Liguori, Fabio

The U.N. Convention on the International Sale of Goods: a Critical Analysis of Current International Case Law (Part I) in: Uniform Law Review (ULR)1996, at 147-163

[cited as: Bonell/Liguori, ULR]

Borris, Christian

Die UNCITRAL-Schiedsregeln in der Praxis des Iran-United States Claims Tribunal, in: Jahrbuch der Schiedsgerichtsbarkeit 1988, at 3-22

[cited as: Borris, Jahrbuch der Schiedsgerichtsbarkeit]

Caemmerer, Ernst von /

Schlechtriem, Peter

Kommentar zum Einheitlichen UN-Kaufrecht, 2nd ed., München 1995

[cited as: v.Caemmerer/Schlechtriem-Reviser]

Caron, David

Interim Measures of Protection: Theory and Practice in the Light of the Iran-United States Claims Tribunal, in: Zeitschrift für ausländisches Öffentliches Recht und Völkerrecht (ZAÖRV) 1986, at 465-518

[cited as: Caron, ZAÖRV]

David, René

Arbitration in International Trade, Deventer, 1985

[cited as: David]

Enderlein, Fritz /

Maskow, Dietrich /

Strohbach, Heinz

Internationales Kaufrecht - Kaufrechtskonvention, Verjährungskonvention, Rechtsanwendungskonvention, Berlin, 1991

[cited as: Enderlein/ Maskow/ Strohbach-Reviser]

Habscheid, Walther/

Berti, Stephen

Schweizerisches Zivilprozess- und Gerichtsorganisationsrecht: ein Lehrbuch seiner Grundlagen, 2nd ed., Basel, Frankfurt am Main, 1990

[cited as: Habscheid/Berti]

Hausmaninger, Christian

Die einstweilige Verfügung im schiedsgerichtlichen Verfahren, Vienna, New York 1989

[cited as: Hausmaninger]

Herber, Rolf /

Czerwenka, Beate

Internationales Kaufrecht - Kommentar zum Übereinkommen der Vereinten Nationen vom 11. April 1980 über Verträge über den internationalen Warenkauf, Munich 1991

[cited as: Herber/Czerwenka]

Hof, Jacomijn J. van

Commentary on the UNCITRAL Arbitration Rules - The Application by the Iran-U.S. Claims Tribunal, Deventer, Boston 1991

[cited as: van Hof]

Holtzmann, Howard M./

Neuhaus, Joseph E.

A Guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary, Deventer, Boston 1989

[cited as: Holtzmann/Neuhaus]

Honnold, John O.

Documentary History of the Uniform Law for International Sales, The studies, deliberations and decisions that led to the 1980 United Nations Convention with introductions and explanations, Deventer 1989

[cited as: Honnold, Documentary History]

Honnold, John O.

Uniform Law for International Sales under the 1980 United Nations Convention, 2nd ed., Deventer 1991

[cited as: Honnold]

Honnold, John O. /

Schnader, William A. Uniform Words and Uniform Application. The 1980 Sales Convention and International Juridical Practice, in: Schlechtriem, Peter (ed.), Einheitliches Kaufrecht und nationales Obligationenrecht, Baden-Baden 1987, 115-147;

Uniform Words and Uniform Application. The 1980 Sales Convention and International Juridical Practice, in: Schlechtriem, Peter (ed.), Einheitliches Kaufrecht und nationales Obligationenrecht, Baden-Baden 1987, at 115-147

[cited as: Honnold/Schnader in Schlechtriem]

Honsell, Heinrich

Kommentar zum UN-Kaufrecht, Berlin, Heidelberg 1997

[cited as: Honsell-Reviser]

Hußlein-Stich, Gabriele

Das UNCITRAL-Modellgesetz über die Internationale Handelsschiedsgerichtsbarkeit, Cologne, Berlin, Bonn, Munich, 1990

[cited as: Hußlein-Stich]

Karollus, Martin

UN-Kaufrecht - Eine systematische Darstellung für Studium und Praxis, Wien, New York 1991

[cited as: Karollus]

Kegel, Gerhard

Internationales Privatrecht, 7th ed., Munich 1995

[cited as: Kegel]

Keinath, Steffen

Der gute Glauben im UN-Kaufrecht, Konstanz 1997

[cited as: Keinath]

Kohl, Berthold Johannes

Vorläufiger Rechtsschutz in internationalen Handelsschiedsverfahren, Frankfurt a. M., Bern, New York, Paris 1990

[cited as: Kohl]

Kritzer, Albert H.

Guide to Practical Applications of the United Nations Convention on Contracts for the International Sale of Goods, Deventer, Boston (latest date of renewal July 1994)

[cited as: Kritzer]

Lando, Ole /

Beale, Hugh

The Principles of European Contract Law, Part I: Performance, Non Performance and Remedies, Dordrecht, Boston, London 1995

[cited as: Lando/Beale]

Loewe, Roland

Internationales Kaufrecht - Wiener UN-Kaufrechtsübereinkommen und New Yorker UN-Verjährungsübereinkommen, Wien 1989

[cited as: Loewe]

Ludwig, Katharina S.

Der Vetragsschluß nach UN-Kaufrecht im Spannungsverhältnis von Common Law und Civil Law, Frankfurt a. M. 1994

[cited as: Ludwig]

Magnus, Ulrich

Die allgemeinen Grundsätze im UN-Kaufrecht, in: Rabels Zeitschrift für ausländisches und Internationales Privatrecht (RabelsZ) 1995, at 469-494

[cited as: Magnus, RabelsZ]

Malik, Shahdeen

Offer: Revocable or irrevocable. Will Art. 16 of the Convention on Contracts for the International Sale ensure Uniformity?, in: Indian Journal for International Law (Ind. J.Intíl. L.) 1985, at 26-49

[cited as: Malik, Ind. J. Intíl. L.]

Maskow, Dietrich

The Convention on the International Sale of Goods from the Perspective of the Socialist Countries, in: La Vendita Internazionale (Convegno S. Margherita Ligure 26.-28.9.1980), Milano 1981, at 39-59

[cited as Maskow, in: La Vendita Internationale]

Nassar, Nagla

Sanctity of Contracts Revisited - A study in the Theory and Practice of Long-Term International Commercial Transactions, Dordrecht, Boston, London 1995

[cited as: Nassar]

Neumayer, Karl H.

Offene Fragen zur Anwendung des Abkommens der Vereinten Nationen über den internationalen Warenkauf, in: Recht der Internationalen Wirtschaft (RIW) 1994, at 99-109

[cited as: Neumayer, RIW]

Neumayer, Karl H. /

Ming, Catherine

Convention de Vienne sur les contrats de vente international de merchandises - Commentaire, Lausanne 1993

[cited as: Neumayer/Ming]

Piltz, Burghard

Internationales Kaufrecht - Das UN-Kaufrecht (Wiener Übereinkommen von 1980) in praxisorientierter Darstellung, Munich 1993

[cited as: Piltz]

Redfern, Alan/

Hunter, Martin

Law and Practice of International Commercial Arbitration, 2nd ed., London 1991

[cited as: Redfern/Hunter]

Rehbinder, Eckhard

Vertragsschluß nach UN-Kaufrecht im Vergleich zu EAG und BGB, in: Schlechtriem, Peter (ed.), Einheitliches Kaufrecht und nationales Obligationenrecht, Baden-Baden 1987, at 149-177

[cited as: Rehbinder, in Schlechtriem]

Rosett, Arthur

Critical Reflections on the United Nations Convention on Contracts for the International Sale of Goods, in: Ohio State Law Journal 1984, at 265-305

[cited as: Rosett, Ohio State Law Journal]

Rudolph, Helga

Kaufrecht der Export- und Importverträge, Kommentierung des UN-Übereinkommens über internationale Warenkaufverträge mit Hinweisen für die Vertragspraxis, Freiburg, Berlin 1996

[cited as: Rudolph]

Sanders, Pieter

Commentary on UNCITRAL Arbitration Rules, in: Yearbook Commercial Arbitration II (1977), at 172-219

[cited as: Sanders, Yearbook Commercial Arbitration]

Sandrock, Otto

Welches Kollisionsrecht hat ein internationales Schiedsgericht anzuwenden?, in: Recht der Internationalen Wirtschaft (RIW) 1992, at 785-795

[cited as: Sandrock, RIW]

Staudinger, Jochen von

Kommentar zum Bürgerlichen Gesetzbuch mit Einführungsgesetz und Nebengesetzen - Wiener UN-Kaufrecht (CISG), 13th ed., Berlin 1994

[cited as: Staudinger-Reviser]

Swan, John/

Reiter, Barry J.

Contracts - Cases, Notes and Materials, 2nd ed., Toronto 1982

[cited as: Swan/Reiter]




Index of Legal Sources


Arbitration Rules of the United Nations Commission on International Trade Law as adopted by the general Assembly on 15 December 1976, Supplement No. 17, Doc. No. A/31/17 Chpt. V, Section C [abbreviated as: UNAR];

Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 10 June, 1958 [abbreviated as: New York Convention]

Convention relating to the Uniform Law on the International Sale of Goods, Diplomatic Conference, The Hague, 2-22 April 1964 [abbreviated as: Convention relating to ULIS]

Official Commentary to the Preamble of the UNIDROIT-Principles, reprinted in: UNIDROIT, Principles of International Commercial Contracts, Rome 1994;

Principles of European Contract Law, Part I, prepared by: The Commission on European Contract Law, reprinted in: Lando, Ole/Beale, Hugh (eds.), Dordrecht, Boston, London 1995 [abbreviated as: European-Principles];

UNCITRAL Model Law on International Commercial Arbitration as adopted by the United Nations Commission on International Trade Law on June 21, 1985, UN Doc. No. A/40/17 (Annex I) [abbreviated as: UNML];

UNIDROIT-Principles of International Commercial Contracts, Rome 1994 [abbreviated as: UNIDROIT-Principles];

Uniform Law on the International Sale of Goods, Diplomatic Conference, The Hague, 2-22 April 1964 [abbreviated as: ULIS]

United Nations Convention on Contracts for the International Sale of Goods of 11 April 1980, UN Doc. No. A/Conf. 9 7/18 (Annex I) 1980 [abbreviated as: CISG]


Introduction

In response to the Tribunalís Procedural Order No. 1 of 3 October 1997, we respectfully make the following submissions on behalf of our client SPECULATIVE DRILLING, Co. (CLAIMANT).


Issue 1: A contract between CLAIMANT and RESPONDENT is in existence

A contract concerning the sale of drilling rig #23 under the CISG was concluded by the parties [A.] and still exists [B.]. The CISG is applicable due to ß 8 of the contract representing the partiesí choice of law. If, as alleged by RESPONDENT, a contract should not exist, the applicability of the CISG results from Art. 1(1)(a) CISG as both Equatoriana and Mediterraneo, the principle places of business of the parties, have ratified it.

A. The contract was concluded

On 5 June 1997, the parties entered into the contract pursuant to Artt. 23, 18(2) CISG. RESPONDENT made an offer contained in its letter dated 13 May 1997 [I.] and CLAIMANT accepted this offer in its telefax of 5 June 1997 [II.].

I. RESPONDENTís offer of 13 May 1997

With its letter of 13 May 1997, RESPONDENT made an offer for the sale of drilling rig #23. Pursuant to Art. 14(1)(1) CISG, a statement forms an offer if it proposes the conclusion of a contract to a specific person, is sufficiently definite and indicates the intention to be bound in case of acceptance. The letter proposed the conclusion of a contract and was addressed to CLAIMANT, a specific person. It contained a specification of the purchase item and a proposed price and was thus sufficiently definite pursuant to Art. 14(1)(2) CISG. In addition, by signing the draft contract, RESPONDENT expressed its intention to be legally bound. It was thus an offer. Pursuant to Art. 15(1) CISG, an offer becomes effective when it reaches the offeree. On 16 May 1997, the offer reached CLAIMANT and was hence effective. It was still effective when accepted on 5 June 1997 as by that date, it had neither been terminated by rejection [1.], nor withdrawal [2.], or revocation [3.].

1. Offer not terminated by rejection

The offer of 13 May 1997 was not terminated by rejection pursuant to Art. 17 CISG by CLAIMANTís letter of 21 May 1997. Firstly, this letter did not contain an immediate rejection under Art. 17 CISG [a)]. Also, it did not constitute a rejection by counter-offer under Art. 19(1) CISG [b)]. In fact, this reply was merely an informal inquiry as to the state of negotiations and hence of no legal significance [c)].

a) Offer not immediately rejected

With its letter dated 21 May 1997, CLAIMANT did not immediately reject RESPONDENTís offer of 13 May 1997 as this letter did not constitute a rejection pursuant to Art. 17 CISG. Our client stated that the price of E$ 30,000,000 had not been accepted during the negotiations preceding RESPONDENTís offer and suggested further consideration of the fairer price of E$ 28,000,000. The mere fact that our client did not respond to the formal offer of 13 May 1997 in the manner prescribed by RESPONDENT by sending along the contract makes clear that our client did not want to adhere to these formalities and therefore did not want to allocate any legal consequence to its message: CLAIMANT could have substituted the lower price in the draft contract and sent it back. Instead, it simply faxed. In addition, when CLAIMANT stated that it had previously rejected the price, it was referring to the prior informal negotiations and not to the current state of affairs. This should lead the Tribunal to conclude that CLAIMANT did not mean to reject RESPONDENTís offer.

If one persists that the wording of CLAIMANTís message remains ambiguous, it must be construed pursuant to Art. 8 CISG. Such construction entails the same result as stated above. Pursuant to Art. 8(2) CISG, a statement must be construed the way a reasonable person of the same kind as the other party would do. A reasonable person would have arrived at the same conclusion in the light of the given circumstances:

CLAIMANT had commenced negotiations with RESPONDENT 1Ĺ years prior to the expected grant of the drilling concession. It had done so because RESPONDENT owned the only drilling rig available in the country of Polarity. This implies that CLAIMANT tried to evade any imponderables as to not being able to commence drilling within short notice by the Government of Polarity. Such short notice was possible under the concession agreement: The Government of Polarity did not have to announce its decision before 15 September 1998. This would be merely 2Ĺ months before CLAIMANT was prescribed to commence drilling. Being aware of that, CLAIMANT foresaw the necessity to take all precautions to ensure that it would not be caught off-guard and have a rig available when the concession would be granted. A failure to commence drilling on time would result in contractual penalties in excess of E$ 27,000,000 under the concession agreement. Therefore, it would be unreasonable to assume that CLAIMANT dared to jeopardize any chances to safeguard having a rig available.

This argument is further supported regarding the proportionally small amount of money which CLAIMANT wished to save. The said difference of E$ 2,000,000 forms less than 6 % of the entire purchase price. As to long-term profits, this represents a mere 0.2 % of the 1 billion Equatorian dollars which CLAIMANT expects to gain by developing Active #2. It is hard to believe that our client should have intended to reject this contract in order to save such a proportionally small sum of money.

RESPONDENT was well aware of all these facts at the end of the informal negotiations and could therefore not reasonably construe CLAIMANTís letter of 21 May 1997 to truly indicate a rejection.

One explanation for the fact that RESPONDENTís assessment of CLAIMANTís reaction differs so significantly from its true nature may be that the market for drilling rigs had tightened immensely after the discovery of a large oil field in Oceania. RESPONDENT now had the opportunity to enter into a more profitable contract. This explanation may reflect RESPONDENTís economic interests but should not hinder the Tribunal from finding that under the facts set out above, CLAIMANTís message of 21 May 1997 cannot be held to constitute a rejection pursuant to Art. 17 CISG.

b) Offer not rejected by counter-offer

RESPONDENTís offer of 13 May 1997 was not rejected by counter-offer pursuant to Artt. 19(1), 17 CISG. CLAIMANTís reply of 21 May 1997 does not constitute a rejection by counter-offer under Art. 19(1) CISG. This provision does not apply. Art. 19(1) CISG is applicable only to a reply "which purports to be an acceptance . Whether a reply purports to be an acceptance is to be determined by interpretation pursuant to Art. 8 CISG. According to Art. 8(1) CISG, CLAIMANTís reply of 21 May 1997 is thus to be construed according to its true intention if that was known to RESPONDENT. In its letter of 21 May 1997, CLAIMANT stated that RESPONDENTís letter of 13 May 1997 had been "a major disappointment and that the submitted price was "just too much . With this, CLAIMANT indicated that it did not intend to accept RESPONDENTís offer at these conditions. In addition, RESPONDENT knew that CLAIMANT did not mean to accept: In its message dated 3 June 1997, RESPONDENT stated that it wished to withdraw [its] offer in the light of [CLAIMANTís] rejection . Pursuant to Art. 8(1) CISG, CLAIMANTís reply of 21 May 1997 can thus not be held to purport to be an acceptance. As it does not purport to be one, Art. 19(1) CISG is not applicable. RESPONDENTís offer of 13 May 1997 was therefore not rejected by counter-offer.

c) No statement of legal significance made

In its message of 21 May 1997, CLAIMANT made no statement of legal significance at all. As demonstrated above, CLAIMANTís message of 21 May 1997 contained neither an acceptance nor a rejection or a counter-offer. Analysis of CLAIMANTís reply of 21 May 1997 thus reveals that CLAIMANT did not intend to make any statement of legal significance. In fact, CLAIMANT merely suggested that RESPONDENT re-consider the offered price. The possibility of making such informal inquiries or simple suggestions is commonly recognized under the CISG. Such inquiries constitute neither acceptance nor rejection. As a consequence, they are not subject to Artt. 19(1) or 17 CISG. RESPONDENTís offer was not terminated by rejection.

2. Offer not withdrawn

RESPONDENT did not effectively withdraw its offer of 13 May 1997 in its message of 3 June 1997. In that message, RESPONDENT declared to withdraw the offer. However, pursuant to Art. 15(2) CISG, a withdrawal of an offer after it has reached the offeree is not possible. By 3 June 1997, RESPONDENTís offer of 13 May 1997 had already reached CLAIMANT. The offer could therefore not be terminated by withdrawal.

3. Offer not revoked

Even interpreting RESPONDENTís message of 3 June 1997 to express a revocation instead of a withdrawal pursuant to Art. 8 CISG, such revocation was not possible pursuant to Art. 16(2)(a) CISG. Art. 16(2)(a) CISG provides that an offer is irrevocable if, whether by stating a fixed period for acceptance or otherwise, it expresses its irrevocability. In its offer of 13 May 1997, RESPONDENT stated a fixed time for acceptance [a)], which results in the irrevocability of RESPONDENTís offer [b)].

a) Fixed time for acceptance

In its offer of 13 May 1997, RESPONDENT stated a fixed time for acceptance under Art. 16(2)(a) CISG. RESPONDENT stated to expect to hear from CLAIMANT by 10 June 1997. The meaning of this statement is to be determined by applying Art. 8 CISG. Pursuant to Art. 8(2) CISG, the statement must be construed according to how a reasonable person of the same kind would interpret it. In todayís fast-lived business world and in view of commercial practice, it would be unreasonable to assume that mentioning a date in such a context is supposed to mean anything else but the intention to express not to be bound beyond that respective date. Modern business does not allow the parties to chat but imposes upon them the need to express themselves tersely. Therefore, every sentence in a business communication must be construed as to be of significance. In the light of this, it is reasonable to assume that a party stating that it expects to hear from the other side by a certain date intends to set a fixed time for acceptance. This interpretation is supported by the fact that RESPONDENT stated its wish to "bring this negotiation to a close" in that same offer of 13 May 1997. By using this wording, RESPONDENT wanted to express that it did not intend to be bound beyond 10 June 1997. Later acceptance by CLAIMANT would not have been effective pursuant to Art. 18(2)(2) CISG. RESPONDENT stated a fixed period of time for CLAIMANT to accept the offer under Art. 16(2)(a) CISG.

b) Resulting irrevocability

With RESPONDENT having stated a fixed time for acceptance, the offer became irrevocable. This occurs automatically under Art. 16(2)(a) CISG [aa)]. However, if one assumes that the said provision merely states a rebuttable presumption of the offerorís intention to state an irrevocable offer, the same conclusion must be arrived at under the circumstances of this particular case [bb)].

aa) Automatic irrevocability

RESPONDENTís offer became automatically irrevocable. Pursuant to Art. 16(2)(a) CISG, stating a fixed time for acceptance automatically results in the irrevocability of the offer. This must be deduced from the legislative history of Art. 16 CISG: An amendment to subparagraphs (a) and (b) proposed by the United Kingdom to the effect that stating a fixed time for acceptance should itself not amount to the irrevocability of the offer was rejected by 31 to 7 votes at the Diplomatic Conference. As demonstrated above, RESPONDENT stated a fixed time for acceptance in its offer of 13 May 1997. As a consequence, the offer was automatically irrevocable.

bb) Rebuttable presumption of irrevocability

Even assuming that Art. 16(2)(a) CISG merely states a rebuttable presumption of the offerorís intention to state an irrevocable offer, one cannot arrive at the conclusion that RESPONDENT effectively revoked its offer of 13 May 1997. If Art. 16(2)(a) CISG states no more than a presumption, such presumption must be reversed. The burden of evidence for such reversion is upon the offeror. It is thus upon RESPONDENT to convincingly demonstrate the lack of its intention to make an irrevocable offer to the Tribunal. RESPONDENT must fail at this attempt. As the rebuttable presumption of Art. 16(2)(a) CISG is subject to Art. 8 CISG, the lack of such intention must have been discernible to the offeree (Art. 8(1) CISG) or to any reasonable person in an equivalent position (Art. 8(2) CISG). This however, could not be the case: In its offer of 13 May 1997, RESPONDENT expressed that it believed one month to be sufficient for CLAIMANT to make the necessary financial arrangements and that it would like to bring this negotiation to a close . This indicates that RESPONDENT meant to leave it to CLAIMANT to take all further steps necessary to conclude the deal. It also implies that RESPONDENT was aware of the possibility that CLAIMANT might commence making financial arrangements prior to 10 June 1997 and that it favored CLAIMANT to do so. As RESPONDENT suggested this approach to CLAIMANT, pursuant to Art. 8(2) CISG its offer of 13 May 1997 must be construed as to express the wish to be legally bound until 10 June 1997. No other construction of the wording would make sense to a reasonable observer.

In conclusion, as the offer had been neither rejected nor revoked or withdrawn, it remained effective until 10 June 1997 and was thus effective on 5 June 1997, the date of CLAIMANTís acceptance.

II. CLAIMANTís acceptance of 5 June 1997

CLAIMANT validly accepted RESPONDENTís offer of 13 May 1997 with its message of 5 June 1997. Pursuant to Art. 18 CISG, a statement indicating assent to an offer is an acceptance. In its message of 5 June 1997, CLAIMANT stated to accept the offer and thus expressed assent to RESPONDENTís offer. This acceptance was not ineffective because of delay: In order to be effective, pursuant to Art. 18(2)(2) CISG, acceptance has to reach the offeror before the latest date specified for acceptance. RESPONDENT had specified 10 June 1997 to be this date. CLAIMANTís acceptance of the offer reached RESPONDENT on 5 June 1997, five days before the date stipulated. Consequently, RESPONDENTís offer was validly accepted.

With CLAIMANT accepting the offer on 5 June 1997, the contract was concluded pursuant to Art. 23 CISG.

B. The contract is still in existence

The contract concluded on 5 June 1997 is still in existence. It has not been terminated by avoidance as maintained by RESPONDENT. Such right of avoidance has not arisen [I.]. Even if so, it was not exercised [II.]. Even if exercised, it had been lost prior to its exercise [III.]. Even if not lost, the exertion of the alleged right of avoidance was not effective [IV.].

I. Right to avoid the contract not arisen

A right for RESPONDENT to avoid the contract has not arisen. It has neither arisen under Art. 64(1) CISG [1.] nor under ß 3 of the contract [2.].

1. Right of avoidance under the CISG

A right for RESPONDENT to avoid the contract has not arisen under Art. 64(1) CISG. The fundamental breach of contract required by Art. 64(1)(a) CISG has not occurred. Such fundamental breach could only lie in the alleged delay of the making of the first payment (ß 1 of the contract) or the issue of the bank guarantee (ß 2 of the contract). It is generally recognized that a delay of payment does not represent a fundamental breach unless this delay frustrates the purpose of the contract. The alleged delay of the first payment did not frustrate the purpose of the contract. The purpose was the delivery of the rig in exchange for the purchase price. This purpose can still be accomplished. Hence, the delay of the first payment does not constitute a fundamental breach. The same argument applies to the bank guarantee because the issue of a bank guarantee is considered to be part of the obligation to pay the purchase price. Thus, its delay must be treated like the delay of the first payment. RESPONDENT could hence not avoid the contract under Art. 64(1)(a) CISG.

2. Right of avoidance under the contract

A right for RESPONDENT to avoid the contract has not arisen under ß 3 of the contract. ß 3 of the contract presupposes the delay of either the transfer of the first payment or the establishment of the bank guarantee. These requirements are not met since neither the first payment [a)] nor the bank guarantee [b)] were late.

a) First payment not late

The first payment was not late as the time period for compliance ceased on 17 June 1997, the day the payment was credited to RESPONDENTís account. According to ß 1 of the contract, CLAIMANT had to transfer the amount of E$ 3,000,000 to RESPONDENT within 10 days of the conclusion of the contract. The contract was concluded on 5 June 1997. Originally, the period for transfer would therefore have expired on 15 June 1997. However, regard must be had to the fact that 15 June 1997 was a Sunday. Pursuant to Art. 20(2)(2) CISG, which is commonly recognized to be applicable to the calculation of time periods for measures of legal significance under the CISG, this period was extended to the next working day in the place of business of the receiving party. With 16 June 1997 being a legal holiday in Equatoriana, RESPONDENTís place of business, the period was therefore extended until 17 June 1997. On this day at 10:30 am, the first payment was credited to RESPONDENTís account at the Equatoriana Industrial Credit Bank. The payment was thus not late.

b) Bank guarantee not late

The bank guarantee was not late as the time period for its establishment had not expired by 18 June 1997, the date of its issue. Under ß 2 of the contract, CLAIMANT was obliged to have the bank guarantee issued within 10 days of the conclusion of the contract. Prima facie, this would mean that the guarantee would have had to be issued by 15 June 1997. In the light of the interests of the parties, however, this period must be extended until 20 June 1997.

Pursuant to Art. 8(1) CISG, ß 2 of the contract must be construed subject to the partiesí intentions. The fact that the parties had convened to allow a period of 10 days for the guarantee to be established indicates the unanimous intention to allow a time period long enough to exclude the slightest chance for any circumstances causing a delay of the guarantee. This estimation is supported by the fact that this period is more than three times longer than the time which may be reasonably expected to be necessary: In commercial banking practice, the procedure of establishing a bank guarantee usually takes between 3 to 4 days; but it is also possible within 2 days. This was known to CLAIMANT and, given its experience as a global player in the same business where bank guarantees are commonly used and regarded to be the life-blood of international commerce , this must have been known to RESPONDENT as well. It is therefore safe to conclude that the parties wanted to ascertain a temporal buffer zone which would suffice at any rate. In other words, this part of the deal was meant to be the last to raise any obstacles whatsoever.

What follows from this interest-oriented construction is that the time period in ß 2 of the contract must be considered flexible in case of unforeseeable delay. The generally recognized idea that a fixed period ought to be stretched in the presence of unforeseeable circumstances is embodied in Artt. 21(2) and 27 CISG as well. Such unforeseeable delay had occurred: As it is general banking practice that bank guarantees are established within 3 to 4 days, it was unforeseeable that it would take 13 days to make the necessary arrangements to have the guarantee issued.

Of course, this flexibility is limited by opposing party interests. Such an interest may have been RESPONDENTís need to receive the guarantee before a certain date. As may be derived from RESPONDENTís offer of 13 May 1997, such date, however, could not have been before 20 June 1997: In its offer of 13 May 1997, RESPONDENT stated that CLAIMANT could accept the offer until 10 June 1997. Furthermore, RESPONDENT wrote that it would not be able to reserve the rig unless [it] receive[d] receipt of [...] the establishment of the bank guarantee at the latest by the time specified in the contract . As CLAIMANT was free to accept the offer until 10 June 1997 and the contract provided a 10-day period for the establishment of the bank guarantee, it was apparently no problem for RESPONDENT to receive the bank guarantee as late as 20 June 1997. Therefore, RESPONDENTís interests did not oppose an extension of the time period until 20 June 1997. Consequently, the period of ß 2 of the contract must be considered to extend at least until the date of the issue of the bank guarantee on 18 June 1997. Thus, the guarantee was not late.

II. Right of avoidance not exercised

Even if the Tribunal rejects the above argument, RESPONDENT did not exercise its alleged right to avoid the contract under ß 3 of the contract as RESPONDENT failed to declare its avoidance pursuant to Art. 26 CISG.

Art. 26 CISG is applicable. It has not been dispensed with by ß 3 of the contract pursuant to Art. 6 CISG. ß 3 of the contract merely regulates the accrual of the right of avoidance. It does not provide for rules as to how to exercise such right. Art. 26, however, regulates the exertion of this right and is thus not interfered with. Art. 26 CISG is applicable.

Pursuant to Art. 26 CISG, "[a] declaration of avoidance is effective only if made by notice to the other party . For reasons of legal certainty, avoidance must be stated explicitly to the other party and the declaring party must clearly state its intention to avoid the contract. RESPONDENT failed to do this: In its letter of 24 June 1997, RESPONDENT simply pointed out that [it] would have the right to avoid the contract if either the payment or the bank guarantee had not been established by the date specified in the contract . This, however, can also be considered to be a mere threat or clarification, the more so as RESPONDENT itself classified this statement to be a "reminder". Statements of this kind do not sufficiently determine the intention to avoid the contract. As RESPONDENTís statement therefore lacked the necessary determination, RESPONDENT never declared avoidance. It never exercised its right.

III. Right of avoidance lost

Even assuming that RESPONDENT exercised its alleged right to avoid the contract, it is submitted that it had previously lost such right. According to Art. 64(2)(a) CISG, the seller loses the right of avoidance if he does not declare avoidance before discovering that performance has been rendered. The applicability of Art. 64(2) CISG results from the same reason as the applicability of Art. 26 CISG as, again, Art. 64(2) CISG governs the exertion of avoidance. CLAIMANT rendered performance with the establishment of the bank guarantee on 18 June 1997. Although Art. 64(2) CISG demands the payment of the price in total, the establishment of the bank guarantee must be considered to be of the same effect. Consequently, Art. 64(2) CISG may be applied by analogy. Firstly, the bank guarantee in the amount of E$ 33,000,000 covers and secures more than the entire amount of the remaining E$ 27,000,000 owed. Secondly, Art. 64(2) CISG serves the purpose to bind the avoiding party to the contract as soon as it has became evident that the party in delay will adhere to its contractual obligations. With the establishment of the bank guarantee, CLAIMANT had demonstrated that it was willing and able to perform, especially as the bank guarantee would be readily available to RESPONDENT on simple certification.

RESPONDENT was aware of the establishment of the bank guarantee before its alleged declaration of avoidance in its letter of 24 June 1997. In this letter, RESPONDENT stated that "the bank guarantee was not opened until 18 June . RESPONDENT had therefore discovered performance before dispatching its letter of 24 June 1997. As the requirements of Art. 64(2)(a) CISG are met, RESPONDENT had lost its alleged right of avoidance when it threatened to exercise it.

IV. Exertion of avoidance not effective

Even if RESPONDENT had not lost its alleged right of avoidance, the exertion of such right violates the principle of good faith. This principle constitutes a behavioral standard under the CISG [1.]. By exercising its alleged right of avoidance, RESPONDENT is in breach of this principle [2.].

1. Good faith under the CISG

Good faith is implemented as a basic principle covering all questions raised by a contract under the CISG. In addition to the wording of Art. 7(1) CISG, this principle is not only applicable when interpreting the CISG itself, but also as a standard of party behavior.

In Art. 7(1), the CISG expressly mentions that "[i]n the interpretation of this convention regard is to be had [...] to the need to promote [...] the observance of good faith in international trade . This provision, however, refers to good faith only in the context and for the purpose of the interpretation of the convention. Contrary to this, the UNIDROIT-Principles in Art. 1.7 as well as the European-Principles in Art. 1.106(1) explicitly impose upon the parties the substantive duty to act in good faith. The aforementioned sets of rules apply by virtue of the choice of law clause in ß 8 of the contract which provides that "[a]ny matters not governed by the convention shall be governed by the general principles of law governing international contracts . By this choice of law, both sets of rules are applicable: No. 3 of the Preamble of the UNIDROIT-Principles and Art. 1.101(3)(a) of the European-Principles state that the principles are applicable "when parties have agreed that their contract [is to] be governed by general principles of law . As both works are restatements of such general principles of contract law, they are applicable in accordance with the partiesí contractual agreement. Furthermore, no. 5 of the Preamble of the UNIDROIT-Principles provides that they may "be used to interpret or supplement international uniform law instruments .

Because of the applicability of these restatements, the UNIDROIT-Principles and the European-Principles can be taken to concretize an unspecified provision such as Art. 7(1) CISG. Art. 1.7. of the UNIDROIT-Principles and Art. 1.106(1) of the European-Principles state that "[e]ach party must act in accordance with good faith and fair dealing in international trade . Thus the principle of good faith embodied in Art. 7(1) CISG is to be extended as to apply to the partiesí contractual behavior.

2. Breach of good faith

By exercising its alleged right of avoidance, RESPONDENT breached its duty of observing good faith. The principle of good faith reflects numerous duties in contractual relationships. Among these is the prohibition of the abuse of a formal position at law. The alleged declaration of avoidance by RESPONDENT in accordance with ß 3 of the contract violates the prohibition of abuse of a formal position at law. ß 3 of the contract, which grants to RESPONDENT the right to avoid the contract under certain conditions, was incorporated into the contract to provide RESPONDENT with a means to withdraw from its contractual obligations in case of substantial failure by CLAIMANT. This possibility was meant to ensure that RESPONDENT would not be tied to the contract without assurance that it would receive remuneration. In case of the substantial non-compliance by CLAIMANT to provide for security, it would have been untenable for RESPONDENT to be left without it.

However, even presuming the bank guarantee was issued too late, such non-compliance by CLAIMANT as to justify avoidance has not occurred. First of all, CLAIMANT had submitted the first payment in time. Secondly, even if the guarantee was late, it was late only by a single day. This extremely short delay did not put RESPONDENT in any situation comparable to the one envisaged when drafting ß 3 of the contract. RESPONDENT did not remain without security for more than a day. RESPONDENT was not thrown into ambiguity concerning CLAIMANTís willingness and capacity to pay the purchase price. The situation ß 3 of the contract was meant to govern had not arisen.

What had arisen, however, was a change in the market for drilling rigs and a subsequent opportunity for RESPONDENT to, put bluntly, make more money. It is for this reason and for this reason only that RESPONDENT now persists to have avoided the contract. This notion is supported by the lack of any other possible reason for RESPONDENT to retreat from the contract: RESPONDENT did not and will not suffer any damages from the fact that neither the bank guarantee nor the first payment were available on 15 June 1997. The only reason conceivable for RESPONDENT to invoke ß 3 of the contract is a failure by our client to comply with a mere formality. Striking down the entire agreement with the ultima ratio relief of avoidance because of a delay that has not caused any disadvantages is abusive. RESPONDENT thus abused a formal position at law and is in breach of good faith.

The consequence of such breach of good faith is either a restriction of the scope of the respective remedy or its forfeiture in total. Avoidance puts an end to the entire contract and cannot be restricted to certain parts of it. The remedy is thus lost completely. This results in the legal ineffectiveness of the alleged declaration of avoidance.

Summing up, as RESPONDENTís right to avoid the contract had neither arisen, nor been exercised at all or in time, and since such avoidance would constitute a breach of good faith and thus be ineffective, RESPONDENT did not avoid the contract. The contract is still in existence.


Issue 2: RESPONDENT should be ordered to deliver rig #23 to CLAIMANT

RESPONDENT should be ordered to deliver rig #23 to CLAIMANT in accordance with ßß 5, 6 of the contract. The requirements of Art. 46(1) CISG for an order of specific performance are met [A.] and Art. 28 CISG does not accord to the Tribunal any discretion to decline the requested remedy [B.].

A. Requirements of Art. 46(1) CISG are met

The requirements of Art. 46(1) CISG are met. There will be a breach of an obligation by RESPONDENT should it not deliver rig #23 to CLAIMANT in accordance with the provisions of the contract [I.]. Although this breach is yet to occur, the Tribunal should issue the order at the present moment [II.]. Finally, the requirement that CLAIMANT has not resorted to any inconsistent remedy is met [III.].

I. Breach of obligation by RESPONDENT

Should RESPONDENT not deliver rig #23 in accordance with the contract, this non-delivery will constitute a breach of an obligation. Pursuant to ß 5 of the contract and Artt. 30, 33(a) CISG, RESPONDENT is obliged to place the rig at CLAIMANTís disposal on 30 September 1998. Non-compliance with this duty will result in the breach of RESPONDENTís eminent obligation and frustrate the partiesí original contractual intentions.

II. Order should be issued at the present moment

Even though RESPONDENT is not yet in breach of its obligation, the Tribunal should grant the relief sought by CLAIMANT at the present moment. The Tribunal should issue an order compelling RESPONDENT to deliver rig #23 on 30 September 1998. The Tribunal should issue this order now and thus before the date on which delivery is due. In issuing this order, the Tribunal would not grant to CLAIMANT more than it is entitled to under the contract and would thus not unduly disadvantage RESPONDENT.

The specific relief requested by CLAIMANT, however, is not explicitly provided for in the CISG. The two remedies CLAIMANT could resort to are a claim for specific performance once a breach has occurred under Art. 46(1) CISG and avoidance of the contract as a breach is impending under Art. 72 CISG. Neither of these provides adequate protection.

If CLAIMANT awaited breach of contract by RESPONDENT and sued for specific performance under Art. 46(1) CISG when the claim is due on 30 September 1998, it would be too late and the order would be ineffective. CLAIMANT is obliged to commence commercial drilling by 1 December 1998. This would allow less than 2 months for initiating proceedings, conducting them, enforcing the respective award, transporting the rig to the site and installing it. Evidently, this period does not suffice for our client to meet its obligations under the concession agreement. Failure to do so would result in our client being subject to immense penalties under the concession agreement with the Government of Polarity. Hence, waiting for RESPONDENT to breach the contract would block the way to an effective protection.

On the other hand, the CISG recognizes the need for the suffering party to be protected before the breach has actually occurred: Pursuant to Art. 72(1) CISG, if prior to the date for performance it is clear that one of the parties will commit a fundamental breach of contract, the other party may avoid the contract. These prerequisites of Art. 72(1) CISG are fulfilled. RESPONDENTís conduct up to the first set of hearings has been such as to impose the impression that RESPONDENT is desperately trying to retreat from its contractual obligations. RESPONDENT has not only denied the existence of the contract with CLAIMANT, but has even entered into a purchase agreement concerning rig #23 with a third party. These circumstances allow the conclusion that a breach of contract by RESPONDENT is impending. Since non-delivery represents the breach of RESPONDENTís primary obligation, this breach will also be fundamental pursuant to Art. 25 CISG. CLAIMANT could thus invoke Art. 72 CISG and avoid the contract. With this, CLAIMANT could react to RESPONDENTís breach in time; this reaction, however, would be at the cost of what CLAIMANT had originally hoped to gain: The rig would be lost. This shows that neither of these two remedies would provide adequate relief. It is therefore legitimate to say that under the particular circumstances of this very case, the remedies expressly provided for under the CISG are incapable of rendering justice.

Nevertheless, it is possible for the Tribunal to administer the adequate protection basing its award on fundamental ideas underlying the CISG:

Firstly, the list of remedies available to the buyer in Art. 45 CISG is not exhaustive. This is evident as e.g. Artt. 72 and 78 CISG are not even mentioned.

Secondly, if Art. 72 CISG entitles the suffering party to draw the sharp sword of avoidance on the party in breach, the suffering party should all the more be granted the milder dagger of performance: Specific performance, corresponding to the maxim of pacta sunt servanda, is the primary remedy available to the buyer under the CISG. In addition, in the instant case performance is possible and would not unduly burden RESPONDENT as it is obliged to deliver the rig at that time anyway.

Thirdly, the remedies granted are meant to serve the party relying upon them. This is true of avoidance. In the instant case, such avoidance would serve RESPONDENTís cause only as RESPONDENT would be free to profit from the more beneficial contract with Oceania Oil Ltd. and CLAIMANT would lose the rig. In other words, if the Tribunal should find that a contract existed and CLAIMANT had only the right to avoid it, CLAIMANT would have succeeded in litigation but not gained anything in reality.

Fourthly, numerous jurisdictions representing the Common Law and the Civil Law traditions recognize the need to sue for an order of specific performance at a time when such performance is not yet due compelling the respective debtor to perform when it will be due. As the CISG has its roots in both Common Law and Civil Law traditions, the recognition of this need should find its way into the CISG as well. Such an order generally presupposes that a violation of the primary obligation is pending. As demonstrated above, this requirement is met as a breach of the primary obligation to deliver the rig must be feared.

For all these reasons, the Tribunal should form the relief accordingly and exercise its wide discretion in order to ascertain the effectiveness of its award: It should grant the requested order.

III. No resort to inconsistent remedy

Furthermore, CLAIMANT has not resorted to any remedy inconsistent with the request for specific performance pursuant to Art. 46(1) CISG. The only remedy inconsistent with a claim for performance before such performance has taken place is avoidance. CLAIMANT has not declared avoidance. Thus, under Artt. 45, 46(1) CISG, CLAIMANT is entitled to require delivery by RESPONDENT according to the contract.

B. No discretion for the Tribunal to decline the order of specific performance

CLAIMANT is entitled to request an order compelling RESPONDENT to deliver rig #23 in accord with the contract. The Tribunal is bound to enter such a judgment. Art. 28 CISG does not accord any discretion to the Tribunal to refrain from granting the requested relief. This is because Art. 28 CISG does not apply to this Tribunal [I.] and other features of domestic laws do not hinder the Tribunal to issue the said order [II.]. Even if Art. 28 CISG is applicable, its requirements are not met [III.].

I. Art. 28 CISG not applicable

Art. 28 CISG is not applicable to international arbitral tribunals. Firstly, the wording of this provision, as opposed to Artt. 45(3), 61(3) CISG, does not include arbitral tribunals. Secondly, the ratio legis of Art. 28 CISG does not call for an extension of its scope by analogy. Art. 28 CISG provides that a court is not bound to order specific performance unless it would do so under its own law. The own law of a court is the domestic law of its seat, the lex fori. Art. 28 CISG is intended to allow a court to refrain from granting an order of specific performance if such order contravenes the legal tradition of its lex fori. This purpose cannot be extended to international arbitral tribunals as they do not possess a lex fori. Hence, there is no domestic legal tradition to which they could adhere. As a matter of fact, the seat of an international arbitral tribunal often is coincidental. Commonly, a neutral place of arbitration is chosen. Such a place of arbitration then merely represents a formal legal domicile without any factual or legal connection to that state. As a consequence, no attention has to be paid to whether the courts at the place of arbitration usually issue orders of specific performance. For these reasons, Art. 28 CISG does not apply to this Tribunal.

II. Other features of domestic laws do not hinder the Tribunal to issue the order

In addition, there are no other features of the domestic laws that can hinder this Tribunal from issuing an order for specific performance. Such a hindrance could arise as the award could be subject to a setting aside by a Danubian court and arbitral tribunals should generally ensure that their awards will sustain. In addition, such a hindrance could arise under the law of Polarity which is called upon for the enforcement of the award as rig #23 is located in Polarity.

The possibility of the award being set aside can be excluded if the award is in accordance with Danubian law. Danubian law is called upon for the question of setting aside the award due to the principle of territoriality. Danubia has adopted the UNCITRAL Model Law on International Commmercial Arbitration (UNML) which in Artt. 34, 6 provides for the setting aside of awards. Under this body of law, the only conceivable reason for this award to be set aside is an infringement of the ordre public of Danubia pursuant to Art. 34(2)(b)(ii) UNML. Such an infringement presupposes an unbearable incongruence with the basic principles of Danubian law. In Danubia, specific performance is the "natural remedy". The single fact that Danubian law recognizes specific performance as a remedy at all excludes an infringement of the ordre public from the very start. Thus the requested order cannot be set aside under Art. 34 UNML. Consequently, there is no feature of Danubian law that hinders this Tribunal from issuing the order of specific performance.

The question of enforceability of the award under the law of Polarity arises - despite the fact that Art. 28 CISG, contrary to Art. 16 of the Uniform Law on the International Sale of Goods (ULIS) in connection with Art. VII of the Convention relating to ULIS, does not mention the enforceability of a judgment - because the Tribunal should be interested in issuing enforceable awards. Polarity has adopted the Convention on the Enforcement and Recognition of Foreign Arbitral Awards (New York Convention). Therefore, under Art. V(2)(a) of the New York Convention, the competent authority in Polarity must enforce the award if it is reconcilable with the ordre public of Polarity. As in Polarity, specific performance is said to be the special remedy , it is recognized as a remedy. An order of specific performance is thus reconcilable with and cannot infringe the ordre public of Polarity and must thus be enforced under the New York Convention.

For these reasons, there are no features of domestic laws that prevent this Tribunal from granting an order of specific performance.

III. Requirements of Art. 28 CISG not met

Even assuming that Art. 28 CISG applies to international arbitral tribunals by way of analogy, this presumption does not entail any deviating result as the requirements of Art. 28 CISG are not met. In a similar case, the Tribunal would grant an order of specific performance under its own law and thus be bound to enter a judgment of specific performance pursuant to Art. 28 CISG. An arbitral tribunalís "own law" is the substantive law of the seat of the arbitration. With this Tribunal being seated in Danubia, this is the law of Danubia. In Danubia, orders to deliver goods are declined if the buyer could purchase substitute goods that would be adequate to satisfy its needs, but given if the goods are unique or if the buyer cannot purchase substitute goods. Furthermore, such an order will be issued if the contemplated damages are incapable of calculation. These requirements are met: First of all, CLAIMANT cannot obtain a substitute rig that would adequately satisfy its needs [1.]. In addition, the damages CLAIMANT will face are not yet computable [2.].

1. CLAIMANT not able to acquire an adequate substitute rig

CLAIMANT cannot obtain a substitute rig that would adequately satisfy its needs. Rig #23 is the only rig available in Polarity. Plus, with the market having tightened up on a global scale, it is unlikely that another rig will be available at short notice outside Polarity. This estimation is supported by the willingness of Oceania Oil Ltd., a company that is engaged in the oil business outside of Polarity, to purchase rig #23: Oceania Oil Ltd. was not discouraged by the transportation costs involved in order to secure any rig. This demonstrates how scarce rigs have become.

Still, assuming another rig could be located, it could not be used by CLAIMANT in due time. Under normal circumstances, it would take three to four months to procure and transport a drilling rig from outside the country to Polarity. As the circumstances cannot be considered to be "normal" after the tightening of the market for drilling rigs, the period of procurement will extend in a way unbearable for our client. Furthermore, the price would augment considerably as transportation costs and the rise in prices would have to be added. Assuming that rig #23 is not the only rig available and thereby not strictly "unique", the above considerations lead to the conclusion that it is commercially unique: There may be a substitute, but not an adequate one.

In addition, regard is to be had to the particularities of the contract. The mere existence of the contractual right to be delivered the rig at the agreed price renders the search for a replacement inadequate. In addition, in the light of the aforementioned tightening of the market for drilling rigs, our client will not be able to negotiate the specific terms of this contract. During the extensive negotiations CLAIMANT had succeeded in reserving a right of cancellation in case it would have no use for the rig (ß 6 of the contract). Under the present market conditions, the position of a party intending to purchase a drilling rig has weakened considerably. Accordingly, CLAIMANT will not be able to conclude a contract tailored to its needs as precisely as the one entered into on 5 June 1997. Consequently, CLAIMANT could not purchase a substitute rig that would be adequate to satisfy its needs.

2. Damages incapable of calculation

Moreover, the damages our client will face if the rig is not delivered in accordance with the contract are not computable. The damages will include the higher price of a substitute rig, the penalties due under the draft concession agreement, as well as the loss of profit for not being able to proceed with the exploitation of Active #2. Apart from the uncertainty of the length of delay and the fact that the loss of profit can only be approximated, the price of a substitute rig is especially hard to determine. CLAIMANT and RESPONDENT unanimously consider the price of drilling rigs difficult to estimate because of the turbulent nature of the market. The contemplated damages are thus incapable of calculation.

In conclusion, the Tribunal would enter a judgment of specific performance under its own law as the prerequisites for an order of specific performance under its own law are met.

Consequently, as the requirements of Art. 46(1) CISG are complied with and Art. 28 CISG does not accord any discretion to the Tribunal to decline the said order, the Tribunal is bound to issue the requested order under Artt. 45, 46(1), 28 CISG.


Issue 3: Respondent should be ordered not to sell rig #23 to any third party

RESPONDENT should be ordered not to sell the rig to any third party. If the Tribunal should not be in a position to grant the final award by 14 April 1998, such relief can be administered by granting an interim injunction in the form of an interim award pursuant to Artt. 26(1), 26(2) UNCITRAL Arbitration Rules (UNAR), Art. 17 UNML forbidding RESPONDENT to sell rig #23 to any third party until the tribunal reaches a final award [A.]. If, however, the Tribunal should be able to issue the final award by 14 April 1998, the same order should be granted [B.].

A. Order if final award cannot be granted by 14 April 1998

The Tribunal should grant an interim injunction ordering RESPONDENT not to sell rig #23 to any third party as all the prerequisites stipulated in Art. 26(1) UNAR and developed by arbitral tribunals and legal doctrine are met: The Tribunal has authority [I.] and jurisdiction [II.] to grant the award. Furthermore, the award has been requested [III.] and is necessary [IV.]. Moreover, the order relates to the subject-matter of the dispute [V.], is merely of inter partes effect [VI.] and does not anticipate the final award [VII.]. As the facts are sufficiently substantiated [VIII.] and the likelihood of success was demonstrated [IX.], the order should be granted.

I. Tribunalís authority

The Tribunal has authority to order RESPONDENT not to sell rig #23 to any third party pending the delivery of the final award. The general power to take interim measures is expressly conferred upon arbitral tribunals by Art. 26(1) UNAR and Art. 17(1) UNML. The first of these provisions governs these proceedings by party convention (ß 9 of the contract). The latter is applicable as Danubia, the place of this arbitration, has adopted the UNCITRAL Model Law.

The Tribunal also has the power to take this specific kind of measure. Art. 26(1) UNAR grants ample authority for interim measures. As Art. 26(1) UNAR explicitly provides, a tribunal may take any measure directed at the conservation of the goods forming the subject-matter in dispute. The Tribunal is, however, not restricted to the methods of conservation expressly provided for in Art. 26(1) UNAR. The enumeration of possible remedies in Art. 26(1) UNAR is merely exemplary. The Tribunal is thus free to determine the nature and scope of any interim measure it grants with respect to conserving the goods in question. Therefore, an interim injunction ordering a party to refrain from selling goods is generally admissible if this serves the purpose of conserving the goods forming the subject-matter. The requested order serves this purpose: If RESPONDENT is ordered to keep the rig in its custody, it will not be lost for CLAIMANT and hence be conserved. Consequently, the Tribunal is free to take this specific kind of measure and grant the order as requested under Art. 26(1) UNAR.

II. Tribunalís jurisdiction

As generally required, the arbitral tribunal has a prima facie jurisdiction to order this interim measure: Pursuant to ß 9 of the contract, this Tribunal has authority to settle any dispute, controversy or claim arising out of or relating to this contract. The necessity to preserve the good in dispute relates to this contract: RESPONDENT can only fulfill its obligations if the rig is still at its disposal by the time performance is due. Hence, the order serves to protect a right arising out of the contract. The Tribunal thus has jurisdiction to take the said interim measure.

III. Request of party

The interim measure was requested in accordance with Art. 26(1) UNAR. The Statement of Claim contained CLAIMANTís request to order RESPONDENT to refrain from selling rig #23 to any third party.

IV. Necessity of measure

As required by Art. 26(1) UNAR, the interim measure requested is necessary as its absence would leave RESPONDENT free to sell the rig to Oceania and thus frustrate CLAIMANTís cause. It is necessary as a substantial breach is impending [1.]. This prejudice is likely to occur within the foreseeable future [2.]. At last, the necessity of the requested order is not lessened by the most recent development as submitted by RESPONDENT [3.]

1. Substantial breach impending

An interim measure is necessary if the duration of the proceedings could lead to a substantial prejudice of the rights of the moving party. Even though this prejudice must be substantial, the damage caused by this prejudice need not be irreparable. All that is necessary is an act that is capable of irreversibly prejudicing the rights of the requesting party. Such a prejudicial act is impending: RESPONDENT has signed a contract of sale concerning rig #23 with Oceania Oil Ltd.. Under that contract, RESPONDENT will be obliged to deliver rig #23 to Oceania Oil Ltd. in the early spring of 1998 if it is free to do so by 30 April 1998. This delivery to Oceania Oil Ltd. will prejudice our clientís right to demand delivery. If the rig is not in RESPONDENTís custody anymore, an award ordering delivery cannot be enforced anymore. Furthermore, this non-delivery would substantially prejudice CLAIMANTís rights as our clientís cause would be damaged severely both legally and factually: As under Art. 25 CISG, non-delivery constitutes a fundamental breach of the sellerís obligation, our clientís position at law would be decisively injured. The same is true of our clientís factual position as RESPONDENTís failure to comply with its obligations will entail immense damages for our client: Most prominently, CLAIMANT will lose the rig. As already emphasized above, it will then be forced to locate a substitute and commence negotiations for its purchase; however, with the price for drilling rigs having risen enormously, such substitute would only be available at a much higher price. Apart from that, with the tightening of the market for drilling rigs, it is highly improbable that CLAIMANT will have the opportunity to purchase a substitute at all. But even if so, as RESPONDENT recognizes, it is very dubious whether a substitute contract on equivalent terms can be negotiated. In fact, it cannot be reasonably expected that CLAIMANT would then have the chance to negotiate a contract meeting CLAIMANTís specific needs as effectively as the one entered into with RESPONDENT: With the demand for drilling rigs having increased as it has, no provider of a substitute rig will allow for a right for CLAIMANT to cancel the contract. In addition to these considerations, it should again be emphasized that our client is subject to immense penalty claims under the draft agreement with the Government of Polarity if the concession should be granted but our client had not commenced drilling by 1 December 1998. These penalty claims may be reason enough for the Government of Polarity to grant the concession if it knows that CLAIMANT is unable to start drilling on time.

Further, it cannot be argued that the requested order is not necessary because CLAIMANT could still secure itself a rig by entering into a contract with another rig provider despite the disadvantages depicted above: With view to the most recent change in the global market of drilling rigs and the subsequent strengthening of the position of drilling rig providers, it is highly improbable that CLAIMANT would again be able to negotiate a contract that allows it to withdraw in case the drilling concession is not granted. If CLAIMANT were awarded as it seeks, it would consequently be a party to two contracts: The first of which it had entered into at high costs and could not retreat from, the second of which it could cancel, but only so at the costs of what it had initially hoped to gain. It is thus untenable for CLAIMANT to enter into a second contract as it would thereby not protect itself from consequences of losing rig #23 but increase the financial loss it would be subject to.

It is thus evident that our clientís legal and factual position would be prejudiced substantially an irreversibly if the order is not granted.

2. Prejudice likely to occur within the foreseeable future

As generally required, the prejudice is likely to occur within the foreseeable future: With the order of protection issued by the Commercial Court of Mediterraneo expiring on 14 April 1998 and RESPONDENT planning to hand over rig #23 to Oceania Oil Ltd. in the early spring of 1998 already - thus within approximately 3 weeks from the date of the first set of hearings - such frustration is imminent.

3. The necessity not lessened by the most recent development

This necessity is not lessened by the facts submitted by RESPONDENT in its Statement of Defense:

Firstly, the announcement of 15 September 1997 issued by the Prime Minister of Polarity is of no influence on our clientís need to obtain interim protection. The fact that the Government of Polarity is reviewing all major capital programs, including the program to build the infrastructure necessary for the exploitation of Active #2, does not mean that the final decision concerning this issue has been reached yet. Above all, with the development of Active #2 not being due before another yearís time, chances are that the economic situation in Polarity will improve so that the construction of such infrastructure may become possible. This assessment is supported by the fact that the first test drills conducted at Active #2 have proved very promising and that a successful exploitation of the field would be of great advantage to the country as a whole. Thus, the construction of infrastructure might become one of the primary goals of the Government of Polarity. Apart from that, it is conceivable that our client will provide for that infrastructure by its own means if it finds this to be a profitable investment. Furthermore, even if the Government of Polarity finds it should postpone the building of the required infrastructure and consequently denies the concession to exploit Active #2, it is still possible that our client decides not to withdraw from the contract in accordance with ß 3 of the contract and finds another way of using the rig, possibly outside Polarity. Hence, the announcement is of no effect on the necessity of interim protection.

Secondly, the same must be said about the fact that RESPONDENT has entered into a contract with a third party. This argument is of no legal significance. If RESPONDENT willingly enters into another contract of sale concerning an object it has already promised to somebody else, it must face the consequences of such deliberate misconduct. RESPONDENT was well aware of the fact that a solution of the legal dispute between it and CLAIMANT had not yet been reached when it entered into the contract with Oceania Oil Ltd. If this were a reason to deny our client the necessary protection, our client would be punished for RESPONDENTís misconduct.

All this demonstrates that the recent development as submitted by RESPONDENT is of no impact on the necessity of interim protection for our client.

In conclusion, the requested order is necessary.

V. Relation to subject-matter in dispute

As presupposed by Art. 26(1) UNAR, the interim measure relates to the subject-matter in dispute. Rig #23 is the good forming the subject-matter in dispute. As the requested order is to serve the necessary conservation of rig #23, the order is related to the subject-matter in dispute.

VI. Only inter partes effect

As required, the Tribunal merely takes a measure that is of inter partes effect. If the order is granted, it will be directed at RESPONDENT only. It will not conflict with any party not subject to this litigation.

VII. No anticipation of final award

As commonly required, the requested interim measure does not anticipate the final relief. As final relief, CLAIMANT requests delivery of rig #23. The instant order is merely supposed to prevent RESPONDENT from selling rig #23 to a third party. It is not directed at coercing RESPONDENT to hand over rig #23 to CLAIMANT, but to keep it in its custody. Thus, the order protects the status quo. It does not anticipate the final relief.

VIII. Substantiation of facts

As generally required, the facts upon which the motion is based are sufficiently substantiated. As recognized by the Tribunal, the facts are not in dispute. A further substantiation of facts is of no necessity.

IX. Likelihood of success

Although the likelihood of success is generally no criterion for the order of interim protection, [w]hen a case manifestly lacks merit, the necessarily costly and disruptive interim measures to protect such dubious rights should not be granted". As demonstrated under Issues 1 and 2, CLAIMANT is entitled to the delivery of rig #23 in accordance with the contract. Its claim to receive rig #23 is thus not prima facie unfounded.

In conclusion, as the requested interim measure meets all the prerequisites, the Tribunal should grant it.

B. Order if final award can be granted

The Tribunal should grant an injunction ordering RESPONDENT not to sell rig #23 to any third party pursuant to Artt. 26(1) UNAR, 17 UNML. It should do so even if the relief of ordering RESPONDENT to deliver rig #23 as provided for under the contract has been awarded. The Tribunal has the authority to issue this order [I.] and should use its authority to do so as all further prerequisites are met as well [II.].

I. Tribunalís authority

The Tribunal has the authority to issue the order requested. As demonstrated above, pursuant to Artt. 26(1),(2) UNAR, 17 UNML, the Tribunal has the general authority to order an interim award of protection. As further demonstrated above, the Tribunal also has the authority to order this special injunction order. The fact that this injunction order will take effect only after the final relief has been granted does not deny such authority. This follows from the special power the Tribunal is given to by the parties and from the special circumstances of the instant case.

In appointing an arbitral tribunal, the parties convey to the arbitrators the power to order such measures that will guarantee the effectiveness of the Tribunalís decision-making. Thus, measures of protection generally serve to ensure that the Tribunalís decisions will come to their full effect. This effectiveness cannot be reached by sticking to rigid rules as to how to construct such measures of protection; rather, the structure of the relief must be tailored to the particularities of the individual case and the interests of the parties.

As laid out above, the protection our client is in need of is an order directed at RESPONDENT not to sell rig #23 to a third party. An order of the same content issued by the Commercial Court of Mediterraneo will expire on 14 April 1998. This, however, will be 5Ĺ months prior to the prescribed date of delivery of rig #23 to CLAIMANT. If RESPONDENT is not ordered to refrain from selling the rig to a third party, CLAIMANT will be left without any judicial protection and RESPONDENT will be left free to perform its contract with Oceania Oil Ltd. The need for protection is hence evident.

Furthermore, it is not lessened in case the Tribunal should find itself in a position to be able to grant the final award. Even if the maximum award of ordering RESPONDENT to deliver rig #23 in accordance with the contract between CLAIMANT and RESPONDENT is granted, RESPONDENT will still be free to deliver the rig to third parties before such delivery is to take place: The award recognizing CLAIMANTís right to demand delivery is not enforceable until the date for delivery prescribed in the contract. CLAIMANT cannot demand a delivery that is not yet due. As our clientís position before the date for delivery would thus not improve without protection until that date, our client would not gain anything until such enforceability. Our clientís claim would not be truly secured. This, however, would completely strip the award of all its effectiveness: Our client would have no legal protection until 30 September 1998. Since it is the partiesí intention to provide this Tribunal with the power to guarantee such effectiveness, it must be concluded that the parties have provided the Tribunal with the necessary authority to not only grant protection orders that cease at the issue of the final award but also to grant orders that take effect after the final award has been granted if there is need for them.

This estimation is supported by the particularities of the case as well: As mentioned before, with RESPONDENTís obligation to deliver rig #23 not being due before 30 September 1998, CLAIMANT would be without judicial protection securing its claim. This, however, seems odd in the light of the fact that such protection could and would be granted if the Tribunal did not yet find upon the final award. What this ultimately means is that in a situation in which the substantiation of our clientís claim is recognized, this Tribunal would be forced to deny the protection which it would grant if the substantiation still remained dubious. This reflects the possibility that there are situations in which the partyís interest to receive interim protection beyond the final relief is a legitimate one and should be recognized. This legitimate interest can be addressed if the Tribunal uses the wide discretion it has received from the parties. It must thus follow from these considerations that this Tribunal has the authority to grant the order as requested.

II. Further prerequisites met

Under its authority, the Tribunal should grant the order as requested as the necessary prerequisites are met. As demonstrated above, the order is requested, the Tribunal has jurisdiction, the order relates to the subject-matter in dispute, does not infringe third partiesí rights, is based on sufficiently substantiated facts and does not anticipate the final award. Furthermore, as has been shown, the general necessity to grant the said legal protection is not lessened by the fact that CLAIMANT is awarded the relief to demand delivery after 30 September 1998. With the prerequisites thus met, the Tribunal should grant the order to forbid RESPONDENT to sell rig #23 to any third party.


Conclusion

In response to the Tribunal's Procedural Order No. 1 of 3 October 1997, we have respectfully made the above submissions on behalf of our client SPECULATIVE DRILLING, Co. May it accordingly please the honorable Tribunal: