AMERICAN ARBITRATION ASSOCIATION

Team members:
Maria C. Bardram
Klaus H. Lindblad
Ulrik Lindow Sørensen

Amendment to Statement of Defence:

List of Authorities.

List of Cases.

Index of Legal Sources.

Amendment to Statement of Defence:

Pursuant to Art. 17(1) of the International Arbitration Rules of the American Arbitration Association[1] Essential Controls, S.A. [2] has prepared this Memorandum in response to Superb Paper, Plc.'s [3] Memorandum.

Respondent argues as follows:

I Respondent does qualify for exemption from liability under CISG Art. 79(1) and (2)(a). The delay was caused by an impediment beyond Respondent's control, and the impediment was not reasonably foreseeable and could not unreasonably have been avoided or overcome.

II Claimant breached its obligations by avoiding the contract [4] and by not taking delivery of the Control System [5] pursuant CISG Art. 53.

III Claimant was not entitled to sell the System on 4 April 1997. Respondent was not unreasonably delayed in taking back the System pursuant to CISG Art. 88(1). Furthermore, the sale of the System made by Claimant was not carried out by appropriate means.

IV Reliable Installation Co. [6] shall be joined in the arbitration between Respondent and Claimant, since Reliable is embraced by clause 24 of the Contract.

Respondent respectfully requests the Arbitral Tribunal to rule and declare that Respondent is exempt from paying damages, that Respondent suffered damages from Claimant's breach of the Contract which can be setoff against the advance payment, that Respondent suffered damages from improper sale of the System, and that Reliable shall be joined in the arbitration.

1. Respondent is exempt from liability pursuant to CISG Art. 79(1) and (2)(a), since the delay was caused by an impediment beyond Respondent's control, and since the impediment was not reasonably foreseeable and could not reasonably have been avoided or overcome.

Under the Contract the System should be installed by Reliable on or before 16 September 1996. On 16 September 1996 the installation had not been commenced, and CISG Art. 45 provides that Respondent is liable on a no-fault basis. However, CISG Art. 79(1) contains a modification to this starting point. Pursuant to CISG Art. 79(1) "a party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it or its consequences". Therefore, Respondent is not liable for the delay if it proves: I That the lack of installation was due to an impediment. II That the impediment was outside Respondent's control. III That the impediment was reasonably unforeseeable when the Contract was concluded. IV That the impediment, or its consequences, could not reasonably have been avoided or overcome.

Respondent submits that all of the requirements in CISG Art. 79(1) are met in the present case, and it is therefore exempt from liability for the delay in the installation of the System.

1.1 The plane crash and the lack of personnel at Reliable constituted an impediment, since it was a barrier for performance.

Respondent submits that the delay in installing the System was due to an impediment. It was caused by both the plane crash and the problems Reliable had in getting qualified electricians. These two causes cannot be separated. After the plane crash the only available personnel at Reliable was tied up to a large assignment [7]. However, Reliable's other contractual commitment did not cause the delay. Reliable had stated work on its other commitment before the job at Claimant's premises was due to start. The scarcity of qualified electricians, which meant that Reliable could not assign a new installation team, was due to the plane crash. If the plane had not crashed there would have been enough personnel to do the installation irrespective of Reliable's other commitments.

Claimant argues that if a problem, i.e. the lack of personnel, is possible "in the normal course of business" it is not an impediment [8]. However, it would be wrong not take into account how the problem arose. Lack of personnel due to strikes or lock-outs are examples of risks "in the normal course of business" because it is well-known that they occur frequently. On the contrary, a plane crash is an extremely rare accident, cf. 1.3. below, and can not be considered as normal. The impediment was the plane crash and its consequence, i.e. lack of personnel at Reliable. The problem with the lack of personnel arose due to the plane crash.

An impediment must be a barrier of an objective circumstance [9]. This means that the impediment would be a barrier to everybody irrespective of their personal and economic situation. Examples of such barriers are natural phenomena, decisions by States, and extraordinary events like war or accidents [10]. A plane crash with loss of personnel is a serious accident, and should be recognised as an objective impediment. Claimant subscribes that a plane crash is an objective impediment[11].

Another example of an impediment is when the supply for needed materials is so reduced that only a few of the producers which need the materials can continue the production [12]. This example corresponds to the present situation. The number of qualified electricians after the crash was far from enough to prevent lack of personnel. Therefore, when the plane crash occurred it constituted a barrier, since Reliable for a period was not in a position to continue its actions. The installation was delayed because of this barrier. Therefore, the lack of personnel constituted an impediment [13].

Claimant has submitted that the plane crash did not constitute an impediment because it did not prevent performance. In support to this Claimant refers to an arbitral award from 1995 [14] where a production stoppage of chemical products was not found to be an impediment. The 1995-award is distinguishable from the present situation, and can therefore not be applied. A production stoppage is incomparable with a plane crash and its consequences. It is more difficult to overcome an accident like the plane crash than it is to deal with a production stoppage of chemicals. Chemicals can be procured from other factories, and chemicals have the same characteristics no matter where they are produced. On the contrary, the personnel involved in the plane crash had special skills because they knew how to install the System. Moreover, the installation depended on Reliable's personnel because Respondent had an obligation to use them pursuant to the Contract, cf. 1.4.2. below. Thus, the plane crash and the loss of personnel was an impediment that constituted a barrier for performance.

1.2. The plane crash and the lack of personnel was beyond Respondent's sphere of control, since Respondent was not involved in the use of the plane or in the assignment of the electricians.

The installation team from Reliable flew with an aeroplane from a respected company with one of the company's pilots [15]. Respondent did not have anything to do with the company, the plane or the arrangement of its departure. Consequently, the plane crash was outside Respondent's sphere of control.

Respondent as the promisor is liable prima facie for third persons such as Reliable engaged by Respondent, including the way Reliable organises its tasks [16]. However, this is not the case when an impediment "was insuperable for [Respondent] and [Reliable] would [itself] have been exempted under [CISG] Article 79(1) if [it] had been the promisor" [17]. As shown 1.4. below the impediment was insuperable, i.e. impossible to overcome, and Respondent is thus not liable for Reliable's conduct [18]. Furthermore, the lack of personnel was caused by the plane crash. As submitted 1.1. above the plane crash was a barrier for performance that constituted an impediment, and Reliable would have been exempted if it was the promisor. Moreover, since Respondent did not have license to do the installation in Mediterraneo it could not participate in the assignment of Reliable's electricians, and was thus without any control of the lack of personnel. Therefore, the lack of personnel was beyond Respondent's control.

Claimant has not pleaded anything to the question concerning Respondent's sphere of control in its Memorandum, and must thus be taken to accept that the plane crash and the lack of personnel was beyond Respondent's control.

1.3. Respondent could not reasonably be expected to have taken the plane crash and the lack of personnel at Reliable into account when the Contract was concluded, since plane crashes are extremely rare.

A plane crash is an extremely rare occurrence and could not reasonably have been expected [19]. If this was possible such accidents would be prevented. Against such rare incidents it is not reasonable to expect that Respondent had a spare installation team available. This would lead to high prices which in the majority of instances would not be justified, since it would not be necessary to have an extra team. According to Professor Schlechtriem "excessive concern is not expected" [20], and not even an anxious business person would have thought of the plane as a possible disturbance. Thus, Respondent could not have been expected to do so. Furthermore, it is not to be expected that a promisor takes "preventive measures against general risks of impediment…" [21]. A plane crash is not even a "general risk". Against this background Respondent could not reasonably be expected to make special precautions[22].

Claimant has submitted that Respondent should have had an emergency plan when it became clear that Reliable had problems [23]. The question under CISG Art. 79(1) of whether Respondent could reasonably have been expected to take the impediment into account only relates to the time of the formation of the Contract. Pursuant to this part of the provision Respondent is not exempt if it should have foreseen the impediment before it contracted with Claimant, and hereby should have prevented that Claimant was exposed to delay even before their business relation began. It is not relevant to CISG Art. 79(1) whether Respondent took the impediment into account after the conclusion of the Contract. The question whether Respondent should have made alternative arrangements after the plane crash is relevant to the possibilities to avoid and overcome the impediment, cf. 1.4. below.

If Claimant had submitted that Respondent should have taken Reliable's number of electricians into consideration before the Contract was signed, Respondent would have argued that Claimant was closer to foresee these problems than Respondent. Reliable was recommended by Claimant, and Respondent should not be blamed that it did not foresee the problem with the lack of personnel. If Claimant, who had prior experience with Reliable, did not take into consideration that Reliable's labour force could cause problems, how could Respondent be reasonably expected to do so? Respondent was not familiar with Reliable until it did business with Claimant.

1.4. Respondent made reasonable efforts to try to avoid and overcome the plane crash and the lack of personnel, since it tried to make Reliable procure a new team, and since it tried to have the System installed as soon as possible.

Under CISG Art. 79 Respondent is exempt from liability if it in a reasonable manner tried to avoid and overcome the impediment. To avoid an impediment "measures have to be taken against disturbances which are clearly approaching" [24], and to overcome the impediment Respondent must remove the consequences of the disturbances. In the effort to avoid and overcome the impediment it is required that Respondent tries to fulfil its contractual obligations. However, the scale is what reasonably can be expected by Respondent[25].

1.4.1. Respondent made reasonable efforts in trying to make Reliable procure a new team.

When the impediment became apparent Respondent did everything in its power to make Reliable fulfil its obligation under their contract.

First, Respondent almost daily reminded Reliable by telephone of the contract date for installation, and the importance of meeting this date [26]. This was sufficient to any business party to understand the significance of the problem, and Reliable understood the seriousness of the situation.

Secondly, by the letter to Reliable dated 13 September 1996 [27] Respondent stressed that the situation was serious, and that Respondent would "have to turn to another firm". This could only be understood in the way that Reliable would loose the contract with Respondent, and would be met with a claim in damages, if it did not complete the installation of the System. Because of Respondent's warnings Reliable would or should have done anything in its power to prevent such a unfortunate situation.

If Respondent's requests to Reliable is compared with Claimant's appeals to Respondent, it will show that they are of the same character and language. Claimant can not expect Respondent to act differently and more force full than Claimant itself. Indeed, Respondent telephoned Reliable almost daily whereas Claimant only called Respondent four times [28].

Respondent did not, as claimed by Claimant [29], sanction Reliable to wait until 30 October 1996 before commencing the installation. Respondent informed Reliable that the installation at least should be commenced 30 October 1996[30]. This was Respondent's deadline towards Reliable, and Respondent did not expect Reliable to wait until 30 October 1996 if it had assigned a new team before then. Because Respondent had stressed the seriousness of the situation Reliable knew that it should begin with the installation as soon as possible.

1.4.2. Respondent made reasonable efforts to ensure that the System was installed as soon as possible.

Respondent tried to overcome the impediment, since it made reasonable efforts so that the System was installed as soon as possible.

Under the Contract it was Reliable who should have done the installation [31]. Respondent and Claimant agreed to use Reliable, and according to the Contract it was a condition for the sale of the System that the installation was carried out by Reliable. Pursuant to CISG Art. 29 a contract can only be modified by the parties' agreement. A replacement of Reliable would have required an approval from Claimant. Until 18 September 1996, where Claimant suggested another firm [32], Respondent had no reasons to believe that such an approval would be given as it was Claimant who had recommended Reliable and who wanted the installation done by Reliable [33]. If Respondent had avoided its contract with Reliable it would therefore have breached the Contract.

Respondent had reasons to believe that Claimant wanted the installation done by Reliable rather than by another firm, since Claimant suggested Reliable because it had good experiences with the firm. It could therefore not reasonably be expected that Respondent itself asked Claimant if it wanted the installation carried out by another firm. Respondent was minded to give Reliable a chance to perform if this would lead to Claimant's satisfaction, and contracting with another firm would be very time-consuming as Respondent would need to be sure that the new firm was as good as Reliable and to Claimant's satisfaction. It was reasonable to believe that Reliable during that time could have a new team ready. Reliable had continuously promised this since the plane crash[34], and it was reasonable for Respondent to rely on Reliable because of Relaible's good reputation, and because of Claimant's good experiences with Reliable.

Furthermore, Claimant waited until 18 September 1996 before letting Respondent know that Claimant did not necessarily wanted the installation done by Reliable [35]. At that point of time the original completion date had passed, and Reliable had had several weeks to procure a new team. Again, it was reasonable to believe that the installation could be commenced earlier if it was done by Reliable than if Respondent had to find a new firm. Moreover, on 18 September 1996 the installation was two days delayed. Thus, none of the three other available firms [36] could have completed the installation 16 September 1996 anyway. Claimant could have informed Respondent earlier that Respondent should look for another firm. By waiting until the original contract date had passed Claimant gave the expression that it wanted Reliable to do the installation.

Respondent's situation was very difficult, and it could not overcome it without unreasonable efforts. Indeed, Claimant has not suggested how Respondent could have avoided or overcome the impediment, and must thus be taken to accept that Respondent made reasonable efforts.

1.5. Respondent's exemption was effective during the whole period after the plane crash, since the lack of personnel existed until Claimant avoided the Contract.

Pursuant to CISG Art. 79(3) "the exemption provided by [CISG Art. 79(1)] has effect for the period during which the impediment exists". This means that if an impediment is only temporary it has only excusing effect until the barrier ends. Respondent submits that the impediment existed until Claimant avoided the Contract, and Respondent was therefore exempt during the entire period. Reliable's lack of personnel caused by the plane crash was the impediment. Before Claimant breached the Contract Reliable had not been able to procure the needed personnel. The impediment was still in existence, and thus, Respondent's exemption had effect during the whole period. Therefore, Claimant can not invoke CISG Art. 79(3)[37].

1.6. Claimant was aware of the plane crash and the lack of personnel, since Respondent informed it about the impediment, and Claimant has not suffered a loss due to the non-receipt of a notice. Therefore, Claimant can not invoke CISG Art. 79(4) [38].

According to CISG Art. 79(4) "the party who fails to perform must give notice to the other party of the impediment and its effect on his ability to perform. If the notice is not received by the other party within a reasonable time after the party who fails to perform knew or ought to have known of the impediment, he is liable for damages resulting from such non-receipt". Respondent as the party invoking the impediment must give Claimant notice of it. Otherwise, Respondent will be liable for losses "resulting from such non-receipt". However, Claimant cannot invoke CISG Art. 79(4) if it was aware of the impediment [39]; positive knowledge is not required.

Respondent did not send a notice about the plane crash and the lack of personnel and its consequences because such a notice is only required when it is certain that the impediment no longer can be avoided [40]. It was not certain until 2 September 1996 that the consequence would be delay. On that date there was only two weeks to completion date, and the installation would take two weeks [41] but was not commenced yet. Furthermore, on 2 September 1996 Claimant should be aware of the impediment. Already 27 August 1996 Respondent informed Claimant about the plane crash [42], and 29 August 1996 Respondent told Claimant about the difficulties Reliable were having in assigning a new team [43]. On four occasions at the end of August and beginning of September Claimant called Respondent inquiring when the new team from Reliable would arrive [44]. Respondent answered that Reliable was working on it. The installation could therefore not be commenced immediately. Three of the four times Claimant called Respondent was after 2 September 1996. Installation takes two weeks and should have been completed 16 September 1996. Therefore, on 2 September 1996 Claimant was or ought to have been aware of that the installation would be delayed due to the plane crash and the lack of personnel.

Moreover, according to CISG Art. 79(4) Respondent would only be liable for damages "resulting from such non-receipt", i.e. non-receipt of a notice. This means that even if the Tribunal finds that Claimant was not aware of the impediment and its effect, Claimant has not suffered a loss due to non-receipt of a notice of the impediment. Indeed, Claimant has not claimed a loss due to the non-receipt. The only loss Claimant has claimed is the loss of $50,000 arising from the replacement of the System. This loss is not caused by the lack of notice but by the delay of the installation. Thus, even if Claimant had received a notice this would not have changed that it chose to replace the System.

2. Claimant's avoidance of the Contract 9 October 1996 was a breach, since it had not fixed an additional period as required pursuant to CISG Art. 49(1)(b), and Claimant breached its obligation to take delivery pursuant to CISG Art. 53 since Respondent had the right pursuant to CISG Art. 48 to install the system on or before 30 October 1996.

Avoidance of contract is the most serious remedy offered by CISG. The exercise of it should be restricted and only allowed in situations where the party which is not in breach have no alternative remedies. The buyer can avoid the contract pursuant to CISG Art. 49 (1) in the following situations a) the failure by the seller to perform any of his obligations amounts to a fundamental breach of contract; or b) if the seller does not deliver the goods within the additional period fixed by the buyer in accordance with CISG Art. 47(1) or declares that he will not deliver within the period so fixed. In the present case situation, a) is of no relevance. On the other hand, Respondent submits that Claimant was not in a situation where it could avoid the Contract pursuant to situation b) above.

Respondent submits that Claimant's avoidance 9 October 1996 was a breach of the Contract since Claimant had failed to fix an additional period. Furthermore, Respondent had the right to install the System on or before 30 October 1996.

By avoiding, Claimant did not respect the legal mechanism in CISG Art. 47 to 49 which allows Respondent to perform within a reasonable period if it can do so without causing Claimant unreasonable delay or inconvenience.

Claimant therefore breached its obligations by avoiding the Contract, and by failing to take delivery as stated in the Contract and CISG Art. 53. Furthermore, Claimant breached the principle of good faith as stated in CISG Art. 7(1) by ignoring Respondent's request as to whether Claimant would accept performance at 30 October 1996 at the latest.

2.1. The additional period fixed by Claimant 18 September 1996 was not reasonable nor was the notice specific.

When Claimant fixes an additional period pursuant to CISG Art. 47 this period must be reasonable granting Respondent a fair opportunity to fulfil its obligation. Otherwise, Claimant could circumvent CISG Art. 49(1), which only allows avoidance when Claimant has fixed an additional period in which Respondent had a reasonable opportunity to perform. Since Claimant can avoid the Contract after the additional period, the notice must be specific as to what its intentions are.

Respondent submits that the additional period fixed by Claimant pursuant to CISG Art. 47 was unreasonable since it did not grant Respondent an opportunity to fulfil its obligations. Neither was the notice specific as to what the intentions of Claimant was. Consequently, Claimant has failed to fix an additional period and therefore Claimant did not have the right to avoid pursuant to CISG Art. 49(1)(b)[45].

Claimant must fix the additional period after the original delivery date has passed, cf. CISG Art. 45(1)(a). Pursuant to CISG Art. 47 Claimant must give Respondent a notice in order to initiate the additional period. It is therefore incorrect when Claimant states [46] that "[t]he additional period of time or Nachfrist, fixed by [Claimant] in its notice of 18 September 1996 i.e., the period from 16 September to 9 October 1996". The period started 18 September 1996 at the earliest since this was the day Claimant faxed it to Respondent, cf. CISG Art. 20(1) or its analogy[47].

2.1.1. The additional period was unreasonable, since it was impossible to have the System installed within the period fixed by Claimant.

The additional period fixed by Claimant runs from 18 September to 9 October 1996. The additional period was unreasonable because it was based on the assumption that Respondent would be able to start installation immediately. This was, however not the case. Respondent submits that Claimant knew or ought to have known that this was impossible. First, Respondent was under a contractual obligation to use Reliable, cf. the Contract clause 4 and 1.4. above. In order to relieve Respondent of this obligation Claimant should have submitted a notice to Respondent allowing it to have the installation done by another company, cf. CISG Art. 29. Secondly, it is acknowledged that it would be nearly impossible to have another installation company perform the installation if approached after 2 September 1996 [48]. Even if Respondent had succeeded in finding another installation company it would still be impossible to perform within the additional period, because the company would have required one weeks notice before commencing the installation. The installation could therefore have been commenced 26 September 1996 at the earliest. Between Thursday 26 September 1996 and Wednesday 9 October 1996, there is less than two weeks, which is required to install the System. It was therefore impossible to have the installation and certification of the System completed on or before the 9 October 1996.

Claimant did therefore show bad faith when it fixed the additional period. Claimant knew or ought to have known that it was impossible for Respondent to meet the deadline, and the additional period was therefore unreasonable.

2.1.2. The notice 18 September 1996 was not specific, since it did not outlined Claimant's intention.

Since fixing an additional period may entitle Claimant to avoid the contract it is required that the notice specific and clearly outlines Claimant's intentions to Respondent.

Claimant's letter dated 18 September 1996 [49] only states that it would have to look at its legal rights if the System was not installed and operational 9 October 1996. There was no indication of what Claimant meant by this sentence. Claimant should have stated that it would avoid the Contract if the System was not installed within the period. Even though Claimant could easily have done so, it failed to do so.

Respondent interpreted Claimant's letter as a request for a reduction in the purchase price pursuant to CISG Art. 50. Neither the telephone conversations with Claimant nor the letters from it gave Respondent reason to consider that Claimant no longer was interested in the System. Respondent immediately reacted in accordance with this belief, and wrote [50] to Claimant that it would accept a reduction of the purchase price in order to compensate Claimant for its forbearance.

As it is shown that Claimant's notice was not specific as to what its intentions were, the notice was not effective and consequently, Claimant did not succeed in establishing an additional period.

Since the additional period was impossible to honour, and therefore not reasonable, and since the notice was not specific Claimant has not succeeded in fixing an additional period. Consequently, Claimant can not avoid the Contract pursuant to CISG Art. 49(1)(b)[51].

2.2. Claimant was bound by Respondent's proposal to cure dated 19 September 1996 pursuant to CISG Art. 48, as Claimant's failure to reply must be taken as tacit consent pursuant to CISG Art. 48(2).

Avoidance should only be used in cases where there is no other reasonable alternative. CISG provides Respondent with the right pursuant to CISG Art. 48 to attempt to cure its failure to perform if it can do so without causing Claimant unreasonable delay or inconvenience. During this period when Respondent was performing Claimant is not allowed to use any remedies.

2.2.1. Even if Claimant succeeded in fixing an additional period Respondent could propose another date to perform pursuant to CISG Art. 48(2).

CISG Art. 48 states that it is subject to CISG Art. 49. The reason for this reservation is that the buyer shall not be deprived of its right to avoid if he has already acquired this right [52]. In the present case Claimant received the request from Respondent 19 September 1996 at which date Claimant did not have the right to avoid pursuant to CISG Art. 49(1)(b).

Claimant has submitted [53] that it could avoid the Contract 19 September 1996 since Respondent's letter was a refusal to perform. Respondent submits that the letter was a request to perform pursuant to CISG Art. 48, and not a refusal to deliver.

Claimant implied in its letter dated 18 September [54] 1996 that it might be willing to accept that Respondent found another installation company to carry out the installation of the System.

Respondent's letter dated 19 September 1996 must be read in this light - a proposal to perform no later than on 30 October 1996. There is no room for Claimant to understand this otherwise than as a promise to perform within that date as paragraph three reads "[n]evertheless, it is clear that the control system must be installed at your plant promptly". This is supported by the fact that Respondent suggested adjusting of the purchase price to compensate Claimant for its forbearance due to the late delivery. The statement of the letter must be interpreted according to the understanding what a reasonable person would have under the same circumstances, cf. CISG Art. 8. Consequently, Claimant cannot interpret the letter from Respondent dated 19 September 1996 as a refusal to deliver, and it can not state that it had ground to avoid pursuant to CISG Art. 49(1)(b).

Respondent submits that Claimant was not entitled to avoid pursuant to CISG Art. 49(1)(b) 19 September 1996. Respondent was therefore entitled to make a request pursuant to CISG Art. 48.

2.2.2. Respondent had the right to perform until 30 October 1996, since the delay was not unreasonable or inconvenience to Claimant.

CISG Art. 48 states that the seller can perform even after the date of delivery if it can do so without causing the buyer unreasonable delay or inconvenient.

Respondent submits that it had the right to cure 30 October 1996 at the latest pursuant to CISG Art. 48 because it was able to do so without causing Claimant unreasonable delay or inconvenience.

The offer from Bridget Control GMBH, received by Claimant 25 September 1996 [55] presumably states that Bridget Control GMBH could have a system installed within 30 days of completion of contract. Claimant knew [56] that 9 October 1996 was the absolute earliest date which it could resort to other remedies. One can therefore presume that on 25 September 1996 when Claimant received the offer from Bridget Control GMBH, it would be willing to accept that a control system was operational at its plant on 8 November 1996. This date would be 30 days after 9 October 1996. Claimant proves that this presumption is correct by contracting with Bridget Control GMBH on 10 October 1996 with installation complete 30 days later, i.e. 11 November 1996. From Claimant's actions one can deduct, that it would not have constituted unreasonable delay nor inconvenience to allow Respondent to perform 30 October 1996 because this day was nine days before Claimant was able to have a control system from Bridget Controls GMBH installed.

2.2.3. Claimant was bound by Respondents proposal to cure on 30 October 1996 pursuant to CISG Art. 48(1), cf. 48(2), as Claimant's failure to reply must be taken as tacit consent pursuant to CISG Art. 48(2).

CISG Art. 48(2) states that if Claimant does not react to the proposal from Respondent, the silence is deemed to be a consent to the proposal, regardless of the proposal caused Claimant unreasonable delay or inconvenience[57].

Respondent submits that it is irrelevant if Claimant has succeeded or not in fixing an additional period or if, the delay is unreasonable or inconvenient to Claimant because it did not react to Respondent's proposal[58]. Claimant is consequently bound of the proposal from Respondent pursuant to CISG Art. 48(1) and (2).

Since the proposal from Respondent did not cause Claimant any unreasonable delay nor inconvenience, and since Claimant was silent to Respondents proposal, it was allowed to perform on or before 30 October 1996. Claimant's avoidance 9 October 1996 was therefore a breach of the Contract and its obligation to take delivery pursuant to CISG Art. 53.

3. Claimant was not entitled to sell the System on 4 April 1997. Respondent was not unreasonably delayed in taking back the System pursuant to CISG Art. 88(1). Furthermore, Claimant's sale of the system was not carried out by appropriate means.

Pursuant to CISG Art. 88(1) Claimant was entitled to sell the System if it fulfilled the conditions laid down in the article. The conditions are, I that Claimant was bound to preserve the System in accordance with CISG Art. 86, II that Respondent was unreasonably delayed in taking back the System, III that the System was sold by appropriate means, and IV that Claimant gave Respondent reasonable notice of its intention to sell.

Respondent submits that Claimant did not fulfil all of these conditions.

Respondent does not dispute that Claimant was obligated to preserve the goods pursuant to CISG Art. 86 since it intended to exercise a right to reject the goods which it might have under the convention[59].

3.1. Respondent was not unreasonable delayed in taking back the goods.

One of the effects of avoidance is that the parties are released from their obligations under the contract pursuant to CISG Art. 81(1). Another effect is that the parties are bound to make restitution concurrently pursuant to CISG Art. 81(2).

The mutual duty to make restitution concurrently raises the question which party had to initiate restitution. It is Respondent submits that Claimant had this duty.

Both parties must observe the principle of good faith in international trade [60]. In the light hereof it could be reasonable [61] to expect the party to which restitution is less burdensome initiates the restitution[62]. Restitution was indeed less burdensome to Claimant than to Respondent. The System was delivered at Claimant's premises[63]. The place of the restitution of the System was therefore at seller's premises[64]. On the other hand Respondent had to return the advance payment to Claimant. Pursuant to the Contract the advance payment was to be made upon delivery of the System to the facilities of Claimant[65]. This means that, Respondent should not be obliged to transfer the money before the System was at Respondent's doorstep. If Claimant had wanted the advance payment back earlier than at that point it could just have provided security for the System.

It would have been very burdensome for Respondent to return the whole $400,000 without keeping the $70,000 in damages. Respondent was entitled to these damages since Claimant breached the Contract by cancelling it. If Respondent was to initiate restitution by returning the $400,000 it would have jeopardised the money and its security for damages.

Claimant was the party who breached the contract and the forms of concurrence should therefore be chosen to the disadvantage of this party[66].

For these reasons Claimant was obliged to initiate restitution. Thus when Claimant opposed restitution of the advance payment less the amount of damages, Respondent was entitled to suspend its restitution of the advance payment pursuant to CISG Art. 71(1)(b) applicable by analogy[67].

Claimant was the party who caused the deadlock and as a consequence hereof Respondent was not unreasonably delayed in taking back the System.

3.2. Respondent observed the duty to mitigate its loss pursuant to CISG Art. 77.

Following Claimant's breach of the Contract Respondent suffered a loss in the amount of $70,000[68]. Pursuant to CISG Art. 77, I Respondent was under a duty to mitigate its loss, and II such measures as were reasonable in the circumstances should have been taken.

It must therefore be determined whether it was possible for Respondent to take reasonable measures.

As long as the System was at Claimant's premises Respondent did not have the possibility to mitigate by selling the System, e.g. to another firm. This was the only way in which Respondent could in a reasonable way have mitigated its loss. Nevertheless, Claimant would not return the System if Respondent only returned the advance payment less the damages to Claimant. Claimant argues that Respondent had a duty to mitigate its loss pursuant to CISG Art. 77. CISG Art. 77 implies that Respondent was entitled to damages as a result of Claimant's breach of the Contract. This means that Respondent only had a possibility to mitigate if it accepted the unlawful terms for restitution demanded by Claimant. Respondent submits that it was not obliged to try to mitigate its loss pursuant to CISG Art. 77 taken these circumstances into consideration.

Respondent submits that the loss suffered was unavoidable. When Claimant cancelled the Contract Respondent lost the profit from this sale of a control system. Respondent could very well have found another buyer, but the fact is that it was not possible for Respondent to mitigate its loss by selling the System to another buyer. Respondent could just as well have produced a new control system and sold this control system to the new buyer. So by reselling the System which was returned by Claimant Respondent would have lost profit from the sale of a control system which it would otherwise have sold to this new buyer. No matter what Respondent did it would still suffer damages in the amount of the profit from the sale of one control system[69].

3.3. Respondent was not given a reasonable notice of Claimant's intention to sell.

Pursuant to CISG Art. 88(1) the selling party must give a reasonable notice of its intention to sell.

Respondent received a notice 10 days before the System was offered for sale. These 10 days was not enough time for Respondent which is located in another country to take measures to take back the System. The unreasonableness must also be seen in the light of the fact that when the System was to be delivered to Claimant's premises Respondent had about 40 days to deliver the System[70]. Claimant submits that the reasonableness must be evaluated on the basis of the practices which Claimant and Respondent had established between them pursuant to CISG Art. 9.

3.4. In any event Claimant was not entitled to sell the system at $250,000. The System was not sold by appropriate means pursuant to CISG Art. 88(1).

Pursuant to CISG Art. 88(1) the party who sells the goods by appropriate means. When carrying out the sale Claimant had to take to things into consideration; the price and the way in which the sale was carried out.

3.4.1. The System was not sold by appropriate means because it was sold for only $250,000.

After having received Claimant's notice of its intention to sell the System, Respondent demanded that the System was sold at a price of minimum $290,000. This price was the price of the System in its present condition[71]. Claimant sold the System for only $250,000.

Claimant should have known that this was below the market price for this System. Respondent is a firm which has extensive experience in selling this type of systems. The valuation in the letter took into consideration the condition the system was in[72]. It also took into consideration that the system was located in Mediterraneo, and that it was second-hand goods[73]. Claimant had received Respondent's letter before selling the system, and was thus aware that $250,000 was below market level and that this price would not fulfil the conditions in CISG Art. 88(1)[74]. Claimant nevertheless sold the System at this price.

3.4.2. A broker selling the System under the instructions of Claimant did not fulfil the requirement to conduct the sale by appropriate means.

Respondent further submits that Claimant did not sell the System by appropriate means, and in the light of its obligation to act in good faith, cf. CISG Art 7(1). The price of $250,000 was a price for a system sold by a broker experienced in the sale of similar equipment, "selling on the instructions of a party in the position of SUPERB" [75]. This emphasises that even though Claimant used a broker it was not sufficient when the selling took place under the instructions of Claimant who is not experienced with such sales. Claimant should at least have tried to get the price of $290,000. Claimant could very easily have asked Respondent how to get the best price so as to mitigate both parties losses. Claimant could e.g. have asked Respondent to help instruct the broker. Instead of reacting to Respondent's letter in which Claimant was informed that the System could be sold for at least $290,000, Claimant chose not to co-operate and ignored this information given to it as an act of co-operation[76].

The estimate made by Respondent was a reasonable price. The System was in 1998 sold for $290,000. This was de facto 17 % less than the list price for a new system[77]. Contrary to this, Claimant sold the System at a price which was 29 % less the list price. This difference is striking and shows in fact how insufficient the instructions from Claimant to the broker must have been.

Thus, the sale did not take place by appropriate means. Therefore Respondent is entitled to damages caused by the improper sale. These damages could be set off against the advance payment.

4. Reliable must be joined in the arbitration, since Reliable is embraced by clause 24 of the Contract.

In complex vertical contractual relationships a main contractor contracts with a supplier who is performing an independent part of the main contract. In this situation it is necessary that liability can be traced down to the party in breach. If an employer raises a claim against its main contractor, and this is found to be justified, the main contractor must raise a claim against the supplier who is responsible for the breach. The main contractor must be allowed to do so. The way to achieve this is by incorporating a clause in the sub contract that insures that the supplier is liable in the same degree and amount as the main contractor is liable towards the employer. These clause are often referred to as back-to-back clauses. If disputes between the employer and the main contractor are to be settled in arbitration the main contractor can benefit by having the back-to-back clause, and the consent from the employer that the supplier can be joined in the arbitration, incorporated into the main contract. If the supplier gives his consent [78] to be joined in the arbitration then he must be joined, and thereby the disputes can be settled in the same arbitration.

In a chain of contracts as in the present case a dispute in a case between the employer and the main contractor will have effect on a dispute between the main contractor and the sub contractor. It is therefore important that the two disputes are decided in the same way. To achieve concurrent interpretation of the contractual terms and of the facts the same arbitrators should hear both cases. The best way to achieve this is by multi-party arbitration rather than by holding two individual arbitrations before the same tribunal. The tribunal may arrive at a different conclusion from the one they arrived at in the first arbitration when deciding the second arbitration, e.g. because the lawyers argue with different strength or because of new evidence from witnesses[79]. Similarly in the present case. This can only be prevented if Reliable is joined in the arbitration between Claimant and Respondent. Hereby the disputes will be settled once and for all on the same facts, and setting both claims in one arbitration would save both time and costs. As the dispute between Claimant and Respondent and the dispute between Respondent and Reliable both relates to Reliable's situation there would be a large amount of overlapping if two arbitrations were conducted. The reduction of cost will over time reduce prices to mutual benefit.

Therefore, it is desirable both from a legal and from a legal from a practical point of view that Reliable is joined in the arbitration.

Furthermore, this was what the parties decided in clause 24 of the Contract[80]. They agreed that a claim made by Claimant which, if found justified, and would give rise to a claim by Respondent against its supplier, could be settled in the same arbitration as the parties' claim[81]. Clause 24 of the Contract is drafted with the intention to achieve the above mentioned benefits[82]. Claimant is bound by this agreement[83], and must show good faith and allow joining of Reliable[84]. The UNCITRAL Model law [85] nor the AAA-rules contain no provisions which prevent third party arbitration and long as the parties have agreed on third party preceding can go forward[86].

The conditions pursuant to the Contract's clause 24 under which Respondent can join a third party is: I That Claimant's claim against Respondent, if justified, gives rise to a claim by Respondent against the supplier. II That the supplier agrees that the claim against it may be settled in the arbitration. III That the supplier waives any right it has in participate in selecting the Arbitral Tribunal. IV That the claims against the supplier does not give rise to questions of new facts, or V new law.

Respondent submits that these conditions are met, and that Reliable is embraced by clause 24 of the Contract.

4.1. If the Tribunal rules that Respondent is exempt pursuant to CISG Art. 79(1) and (2)(a) it gives rise to a claim against Reliable which is supplier under the Contract.

CISG Art. 79(2) states that "if the party's failure is due to the failure by a third person whom he has engaged to perform the whole or a part of the contract, that party is exempt from liability only if: (a) he is exempt under [CISG Art. 79(1)]; and (b) the person whom he has engaged would be so exempt if [CISG Art. 79(1)] were applied to him". If the Tribunal finds that Respondent meets the criteria for exemption from liability under CISG Art. 79(1) the next step is to decide whether Reliable also meets the criteria of CISG Art. 79(1), cf. 79(2)(b). It is Respondent who has the burden of proof that Reliable fulfils the conditions in CISG Art. 79(1)[87]. Reliable must be joined in order to make Respondent able to prove that Reliable is exempt, and consequently will Respondent be exempt pursuant to CISG Art. 79(1) and (2).

4.1.1. An interpretation of the words in clause 24 shows that Reliable must be seen as a supplier, and thus can be joined in the arbitration.

The essential question is whether Reliable is a supplier. The meaning of the word "supplier" in clause 24 is not defined in the Contract. Pursuant to CISG Art. 8(3) 'supplier' must be understood the way it is normally understood. A supplier is then a person or a company which has an agreement with another person or company, pursuant to which the 'supplier' provides the other party with goods or services which makes the other party able to produce or sell a product.

Respondent, which normally carries out installations, was not licensed to do installations in Mediterraneo[88]. Reliable was engaged to do this installation on behalf of Respondent. This means Reliable provided Respondent with the ability to enter into a contract pursuant to which Respondent could sell a fully operational control system[89]. Reliable is therefore a supplier within the normal understanding of the word. Claimant throughout its Memorandum refers to Reliable as "supplier"[90], and must thus be taken to agree.

4.1.2. Claimant's claim against Respondent, if justified, gives rise to a claim by Respondent against Reliable.

Reliable has in the back-to-back clause [91] agreed that if Respondent is liable towards Claimant due to Reliable it will be liable towards Respondent in the same degree and amount.

4.2. Reliable has agreed that Respondent's claim against it can be settled in the arbitration.

In the contract between Respondent and Reliable the latter agreed to defend Respondent in the arbitration against Claimant. Reliable also agreed that on basis of the award it will be liable to Respondent to the same degree and in the same amount as Respondent might be found liable to Claimant[92]. This is repeated in Reliable's letter dated 3 august 1998[93]. Respondent submits that Reliable has agreed that Respondent's claim against it can be settled in the arbitration.

4.3. Reliable on 7 June 1996 and on 3 August 1998 waived its right to appoint an arbitrator.

Reliable has waived its right on two occasions - before [94] and after [95] the dispute arose. In the Dutco-case, which Claimant has referred to[96], the court stated that "…one can waive [the right to appoint an arbitrator] only after the dispute has arisen" (emphasise added). In the present case Reliable clearly and unconditionally waived its right in the letter dated 3 august 1998, i.e. after the dispute arose. Reliable also waived its right after the arbitration had begun, and after it had seen the copy of the Statement of Claim dated 6 July 1996 which Respondent sent to Reliable[97]. Thus, when Reliable made its second waiver it was fully aware of the dispute and of Claimant's submissions. It was also aware of which arbitrator Claimant appointed[98], and knew that Respondent had not appointed one yet[99]. Therefore, Reliable knew on what grounds it made its waiver, and the waiver is therefore valid.

4.4. Respondent's claim against Reliable will not raise questions of new facts.

Clause 24 of the Contract allows joining of a third party if this will not raise questions of new facts. Joining Reliable will not raise questions of new facts. To decide whether Respondent is exempt from liability under CISG Art. 79(1) it is necessary to discus Reliable's situation and the circumstances concerning the plane crash and the lack of personnel. The examination of Respondent's exemption will include an examination of Reliable's exemption, cf. CISG Art. 79(1) and (2)(b). This will take place in the Second Phase of the arbitration, and all facts - which have not already been pleaded in the First Phase - about the lack of personnel and about the plane crash will be pleaded in Second Phase[100]. Hereby, all facts will be presented in the First and in the Second Phase of the arbitration. Therefore, a claim from Respondent against Reliable will not raise questions of new facts.

4.5. Respondent's claim against Reliable will not raise questions of new law.

Respondent's contract with Reliable is governed by the UNIDROIT Principles[101]. Pursuant to CISG Art. 3(2) CISG does not apply to contracts in which the preponderant part is supply of labour and other services. Hence, according to Claimant [102] Reliable cannot be joined since the purpose of joining Reliable is to decide whether Reliable is exempt under CISG Art. 79(1), cf. 79(2)(b), and since CISG does not apply to Reliable's situation because of the supply of service, cf. CISG Art. 3(2).

Respondent submits that this does not exclude that Reliable can be joined in the arbitration. The examination of whether Reliable is exempt must be made in conjunction with CISG Art. 79(1) and (2)(b) because Reliable is a third party engaged by Respondent, and because it was the lack of personnel at Reliable that caused the delay. Reliable will only be subject to an hypothetical examination of the requirements in CISG Art. 79(1), cf. 79(2)(b) in order to decide if Respondent is exempt. The law governing the relationship between Respondent and Reliable is irrelevant in this situation as CISG Art. 79(2)(b) does not require that CISG is applicable between Respondent and Reliable. There is nothing in CISG Art. 79(2) that lays down that CISG must be applicable in relation to the third party. Therefore, it is without importance when deciding Respondent's exemption under CISG Art. 79(1) and (2) that the UNIDROIT Principles govern the relationship between Respondent and Reliable. The back-to-back clause states that Reliable is liable to the same degree and in the same amount as Respondent is found liable towards Claimant. Therefore, Reliable is consequently liable towards Respondent. Thus, the UNIDROIT will not be applied in the dispute between Respondent and Reliable, since Reliable will be liable due to the back-to-back clause.

Moreover, Claimant contends [103] that "the concept of force majeure under the UNIDROIT Principles differs significantly from CISG's concept of 'impediment'", and Reliable therefore not should be joined because this will raise question of new law.

The wording of force majeure under UNIDROIT [104] is the same as the definition of impediment under CISG[105]. Pursuant to UNIDROIT Art. 7.1.7(2) a temporary impediment has an excusing effect for such period as is reasonable having regard to the impediment's effect on the performance. Pursuant to CISG Art. 79(3) a temporary impediment will only excuse the party in breach as long as it exists. The only difference is thus that a temporary impediment under UNIDROIT can have an excusing effect for a longer time than under CISG, but this is not relevant in the present dispute. Where the impediment was still in existence when Claimant avoided the Contract. The relevant provisions are CISG Art. 79(1) and UNIDROIT Art. 7.1.7(1) which are identical.

CISG and UNIDROIT are generally reconcilable, and Reliable should therefore be joined. The UNIDROIT Principles "set forth general rules for international commercial contracts" [106] which according to the preamble may be used as a tool in interpretation of uniform laws, and can be applicable even if the parties have not agreed hereon. UNIDROIT contains gap-filling rules which can be applied where CISG or other international laws govern the parties' contract, and it is thus reconcilable with CISG. UNIDROIT was intended as a supplement to international rules, including CISG. There may be minor differences between UNIDROIT and CISG [107], but these differences are not relevant to the present dispute, and does not exclude the joining of Reliable.

Respondent submits that Reliable is embraced by clause 24 of the Contract. Therefore, the Tribunal must order Reliable to be joined as a defendant in the arbitration.

Respectfully submitted,

Copenhagen 10 February 1999

Maria C. Bardram

Klaus H. Lindblad

Ulrik Lindow Sørensen

List of Authorities.

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].

Bianca, Cesare Massimo/Bonell, Michael Joachim.
Commentary on the International Sales Law - The 1980 Vienna Sales Convention. Giuffré, Milan 1987.
[cited as: Bianca & Bonell].

David, René.
Arbitration in International Trade. Deventer, 1985.
[cited as: David].

Delaume, George R.
Law and Pratice of Transnational Contracts. Ocena Publications Inc., New York, 1987.

Domke, Martin.
The Law and Practice of Commercial Arbitration. Callaghan & Company, 1968.
[cited as: Domke].

Enderlein, Fritz / Maskow, Dietrich.
International Sales Law. United Nations Convention on Contracts for the International Sale of Goods. Oceana Publications, NY 1992.
[cited as: Enderlein/Maskow].

Galston, Nina M. / Smit, Hans.
International Sales: United Nations Convention on Contracts for the International Sale of Goods. Matthew Bender 1984.
[cited as: Galston/Smit].

Gomard, Bernhard.
Obligationsret 1-3, Jurist og Økonomforbundets Forlag 1993.
[cited as: Gomard 1-3].

Gomard, Bernard.
Almindelig Kontraktsret. Jurist og Økonomforbundets Forlag1992.
[cited as: Gomard II].

Gomard, Bernhard / Rechnagel Hardy.
De forenede Nationers konvention om internationale køb. Jurist og Økonomforbundets Forlag1991.
[cited as: Gomard/Rechnagel].

Hanotiau, Bernard.
Complex - Multicontract-Multiparty - Arbitrations
Arbitration International Volume 14 Number 4 1998. Kluwer Law International on behalf of the LCIA
[cited as: Hanotiau]

Honnold, John O.
Uniform Law for International Sales under the 1980 United Nations Convention, 2^nd ed. Deventer 1991.
[cited as: Honnold].

Huleatt-James, Mark / Gould, Nicholas.
International Commercial Arbitration, a handbook. Lovell, White, Durrant 1996.
[cited as: Huleatt-James & Gould].

Koneru, Phanesh.
The International Interpretation of the UN Convention on Contracts for the International Sale of Goods: An approach based on general principles. 6 Minnesota Journal of Global Trade (1997) p.105-152.
[cited as: Phanesh].

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].

Lookofsky, Joseph.
Understanding the CISG in Scandinavia. DJØF Publishing Copenhagen 1996.
[cited as: Lookofsky I].

Lookofsky, Joseph.
Consequential Damages in Comparative Context. Jurist og Økonomforbundets Forlag 1996.
[cited as: Lookofsky II].

Lookofsky, Joseph.
Transnational Litigation and Commercial Arbitration. Transnational Juris Publications Inc., New York 1992.

Rubino-Sammartano, Mauro.
International Arbitration Law. Kluwer Law and Taxation Publishers, 1990.
[cited as: Rubino-Sammartano].

Schlechtriem, Peter.
Commentary on the UN Convention on the International Sale of Goods, 2^nd ed. (in translation). Clarendon Press, Oxford, 1998.
[cited as: Schlechtriem].

Schwartz Eric A.
A Guide to the New ICC Rules of Arbitration. Kluwer Law International 1998.

Treitel, G. H.
Frustration and Force Majeure. London Sweet & Maxwell 1994.

Principles of International Commercial Contracts
Commentary

UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW.
Twenty - sixth session
Vienna, 5- 23 July 1993

Text of Draft Convention on Contracts for the International Sales of Goods.
Approved by the United Nations Commission on International Trade Law.
Commentary prepared by the Secretariat. Vienna, March 1980.

List of Cases

Dutco vs. BKMI and Siemens, Revue de l'Arbitrage 1992.470.

Oberlandesgericht Düsseldorf 6 U 119/93 Claut case 82.

Tribunal of Int'l Commercial Arbitration at the Russian Federation Chamber of Commerce, No. 155/94, 16 March 1995.

Arbitration 10 December 1996, Arbitration Court of Chamber of Commerce and Industry of Budapest (CLOUT No. 163)

Index of Legal Sources

International Arbitration Rules of the American Arbitration Association. Amended and effective 1 April 1997. New York 7, July 1997 [abbreviated as the AAA-Rules]

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

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

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: the UNCITRAL Model Law];

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

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]

FOOTNOTES

1. As Amended and Effective on April 1, 1997. Hereinafter referred to as the AAA-rules.

2. Hereinafter referred to as Respondent.

3. Hereinafter referred to as Claimant.

4. The contract between Claimant and Respondent dated 10 June 1996, Claimant's Exhibit No. 1. Hereinafter referred to as the Contract.

5. Hereinafter referred to as the System.

6. Hereinafter referred to as Reliable.

7. Statement of Defence, § 7.

8. Claimant's Memorandum, § 2.1.2.

9. Cf. Schlechtriem p. 608, § 17: " The UNCITRAL Working Group's introduction of 'impediment'…was intended to ensure a[n]…objective interpretation of [CISG] Article 79".

10. Cf. Enderlein/Maskow p. 322.

11. Claimant's Memorandum, § 2.1.1:"A loss of personnel is clearly an event which could be invoked as an insurmountable impediment…".

12. Cf. Honnold p. 543: "This situation clearly constitutes an 'impediment'…"

13. Respondent wants to emphasise that Claimant in its memorandum, § 2.1, submits "that the impediment underlying [Respondent's] failure to provide timely installation in accordance with the [C]ontract…, was Reliable's failure to supply the installation services…". Claimant agrees with Respondent that the lack of qualified personnel was an impediment.

14. Russian Federation: Tribunal of International Commercial Arbitration at the Russian Federation Chamber of Commerce and Industry. Case No. 155/1994 16 March 1995. Cf. Claimant's Memorandum, § 2.1.

15. Procedural Order No. 2, question 20.

16. Cf. Schlechtriem p. 615, § 35: "The promisor is basically liable for third person's conduct…" (emphasise added).

17. Cf. Schlechtriem p. 615, § 35.

18. Cf. Bianca & Bonell, p. 584: "In short, [Respondent] is liable for [Reliable's] non-performance except in the case of total impossibility" (emphasise added).

19. In 1996 there was only 23 aircraft accidents world wide involving passenger fatalities. In the same year there was only 0.13 fatal accidents per 100.000 aircraft landings and only 0.18 fatal accidents per 100 million miles flown. Source: The International Civil Aviation Organization (ICAO) Annual Report to the Counsel 1997 - Accident/Incident Statistics.

20. Schlechtriem p. 611, § 23.

21. Schlechtriem p. 612, § 24.

22. Cf. Arbitration 10 December 1996, Arbitration Court of Chamber of Commerce and Industry of Budapest (CLOUT No. 163). In this case an UN embargo in 1992 against Yugoslavia was an excusing impediment. An embargo against a country is due to political problems which has been on the way for some time. Thus, there is a chance to predict the embargo. Contrary, a plane crash is unpredictable. Therefore, when the 1996-award stated that the embargo was an exempting impediment the plane crash should also be recognised as one.

23. Claimant's Memorandum, § 2.2.

24. Enderlein/Maskow p. 324.

25. Pursuant to CISG Art. 79(1) "a party is not liable…if…he could not reasonably be expected…"

26. Statement of Defence, § 8.

27.Respondent's Exhibit No. 2.

28. Cf. Statement of Defence, § 8 and Statement of Claim, § 6.

29. Claimant's Memorandum, § 2.3.

30. Respondent's Exhibit No. 4.

31. Cf. Claimant's Exhibit No. 1, § 4.

32. Claimant's Exhibit No. 4.

33. Cf. Statement of Defence, § 5.

34. Cf. Statement of Claim, § 6, Claimant's Exhibit No. 2, and Respondent's Exhibit No. 4.

35. Cf. Claimant's Exhibit No. 4: "…why you have not looked to some other firm to do the installation…"

36. Cf. Procedural Order No. 2, question 14.

37. Claimant's Memorandum, § 2.1.3.

38. Claimant's Memorandum, § 2.6.

39. Cf. Schlechtriem p. 624, § 59: " The promisee [Claimant] has no damages claim if it can be shown that he was aware of the impediment anyway".

40. Cf. Bianca & Bonell, p. 586: "The duty to notify exists only when the occurrence of the impediment is certain, not when it may still be avoided".

41. Statement of Defense, § 6.

42. Claimant's Exhibit No. 2.

43. Statement of Defense, § 7.

44. Statement of Claim, § 6.

45. Oberlandsgericht Düsseldorf, 6 U 119/93 10 February 1996 (Clout case 82): "However, it was found that the defendant failed to fix an additional period of time of reasonable length for performance by the plaintiff, and consequently, it was held that the defendant could not exercise those rights (articles 39, 47(2) and 49(1)(b) CISG).

46. Claimant's Memorandum 3.1.1 first line.

47. CISG Art. 20(1): "A period of time for acceptance fixed by the offeror in a telegram or a letter begins to run from the moment the telegram is handed in for dispatch…"

48. Procedural Order No. 2, Question 14.

49. Claimants Exhibit No. 4.

50. Claimants Exhibit No. 5.

51. Cf. Footnote 45.

52. Schlechtriem p.407 § 17 "If the buyer has fixed an additional period of time for delivery by the seller and the seller has failed to do so (article 49(1)(b)), the seller is not intended to have the opportunity of claiming an additional period of time by relying on Article 48".

53. Claimant's Memorandum § 3.2 and § 3.2.1

54. Claimant's Exhibit No. 4, last paragraph .

55. Procedural Order No.2, question 9 indicates that the offer from Bridget Controls GMBH was accepted without objections compared Statement of Claim, § 9.

56. 9 October 1996 the additional period would have expired provided that the period had been reasonable, and the notice had been specific.

57. Schlechtriem p. 412, § 32: "Article 48(2) governs the case where [Claimant] does not reply. In that case [Respondent] is entitled to perform within the time indicated in his request, even if the preconditions for the exercise of the right to cure under Article 48(1) are nor satisfied."

58. Schlechtriem p.412 § 36 "If [Claimant] has fixed an additional period of time for performance by [Respondent] and [Respondent] considers the period too short, but offers to perform within a longer period, Article 48(2) and (3) apply. Consequently, if [Claimant] does not object within delay to the counter proposal by [Respondent] his silence is deemed to constitute acceptance."

59. Cf. Honnold, p. 581: " The term "reject" has not appeared earlier in the Convention; this broad term is used here to assure the buyer's duty to preserve the goods will apply whenever the buyer may refuse to accept the goods -- i.e.," reject" them. Thus, a buyer's declaration that the contract is avoided because of tender of seriously defective goods (Arts. 25, 26, 49) terminates buyers obligation to " take delivery " of the goods". Schlechtriem., p. 671 "…he just intend to reject the goods..."

60. As provided by CISG Art. 7(1).

61. As argued by Claimant. Memorandum for Claimant 4.1.2.1.

62. Cf. Schlechtriem p. 642f: " a gap as regards the place of performance of restitution can be filled under Article 7(2)…The rule should be based on the positive indications given in Articles 31 and 57…Those obligations are the mirror images to make restitution ".

63. This statement is based on the fact that it is said in the Contract that "Payment of $ 400.000 is to be made upon delivery of the control system to the facilities of Buyers." The fact that Respondent has a contractual obligation to secure the installation.

64. 6 Cf. Schlechtriem p. 641f: " The rule should be based on the positive indications given in the rules in Articles 31 and 57 governing the place of payment and the place of delivery (the primary obligations under the contract). Those obligations are the mirror image of the obligations to make restitution.", and Biance & Bonell p. 605 " In a bilateral contract, avoidance constitutes the reverse of performance.".

65. Claimant's Exhibit No. 1 Clause 1.

66. Cf. Maskow/ Enderlein p. 344: " We believe, however that in choosing the forms of concurrence, it has to play a role whether a party is liable for a breach of contract."

67. Cf. Bianca & Bonell p. 605: " The rules governing the suspension of the performance (Article 71) are applicable by analogy. The buyer can refuse to restore the goods if the seller does not offer to restitute the price and vice-versa by virtue of the principle that a party may suspend the performance of his obligations if .. it becomes apparent that the other party will not perform a substantial part of his obligations".

68. Respondent's Exhibit No. 5 and 6. In accordance with the Tribunal's order No. 2 the argumentation for this amount will not take place at this phase of the arbitration.

69. Cf. Lookofsky I p. 112: " Where seller's own (presumably unlimited) market supply exceeds his own market demand, he cannot really "cover" buyer's breach, because the subsequent sale of the 5 Volvo trucks to another buyer is no substitute for the first transaction. In such a situation, where S can deliver as many Volvos his various buyers demand, there is no causal relationship between B's breach and the subsequent sale..."

70. The Contract was concluded June 10 1996 and the System was delivered on 20 August 1996.

71. Respondent's Exhibit No. 6.

72. Respondent's Exhibit No. 6.

73. Procedural order No. 3 question 4.

74. Cf. Schlechtriem p. 682: " Such an objection will at most cause the party making the self-help sale to exercise increased care to observe all the conditions laid down for such a sale."

75. Pursuant to Procedural order No 2 question 3.

76. Pursuant to UNIDROIT Article 5.3: " Each party shall co-operate with the other party when such co-operation may reasonably or expected for the performance of the party's obligations.

77. The list price is in 1998 $ 350,000 cf. Procedural order No. 2.

78. Cf. Hanotiau, p. 372: "…arbitration is consensual by nature…" Cf. also Cf. Huleatt-James and Gould p. 42: "... arbitration is entirely a matter of contract and the procedures available in court are not available to the parties to a multi-party arbitration, unless the arbitration agreement says so". The supplier cannot be forced in the arbitration.

79. Cf. Huleatt-James/Gould p. 41: "…because if the two arbitrations are heard at different times, with different advocates and possibly different or additional witnesses, the arbitrator may feel, when deciding the second arbitration, that he should arrive at a different conclusion from the one he arrived at in the first arbitration".

80. Cf. Domke p. 1: " An arbitration can validly take place if the parties have specifically and expressly agreed to use this method for the settlement of their disputes."

81. Cf. Claimant's Exhibit No. 1, § 24:"If, in any arbitration arising out of or relating to this contract, Buyer shall make a claim which, if found to be justified, would give rise to a claim by Seller against one of its suppliers, Buyer agrees that the claim of Seller against the supplier may be settled in the arbitration between Buyer and Seller, provided that the supplier agrees to have the claim of Seller against it settled in the arbitration, that the supplier agrees to waive any right it may have to participate in the selection of the arbitral tribunal, and that the claims of seller against the supplier raise no new questions of law or fact from those to be decided in the arbitration between Buyer and Seller."

82. Cf. Hanotiau, p. 377: "As Leboulanger emphasizes: 'Whenever the signature of one or more agreements is the reason that leads the parties to sign another agreement or agreements, it can be considered that there is a link between them. It seems logical to conclude that the disputes arising out of these agreements should be treated together'".

83. Cf. Rubino-Sammartano, p. 34 :" The main source of international arbitration law remains the intention of the parties.... This expression of their intention, in the shape of an arbitral clause or of a submission agreement, is the main source of arbitration law."

84. Cf. Hanotiau, p. 374: "It is indeed another basic principle of international commercial arbitration that the parties have the duty to co-operate in good faith in the performance of their agreement…"

85. Hereinafter referred to as the Model law.

86. Cf. Huleatt-James and Gould p. 71: "Once again, it is the arbitration agreement, the law applicable to the arbitration agreement, and the law applicable to the arbitration proceedings which will be relevant. They should be considered in that order. The obligations imposed are by the arbitration agreement are of two kinds: (a) Those expressly set out by the parties in their agreement; and (b) Those referred to indirectly (i.e. in arbitration rules incorporated in the arbitration agreement)."

Pursuant to the AAA-rules Art. 1 the parties can agree on any modification to the rules they wish to. Provided that the agreement respects the provisions in the Model Law.

87. Cf. Galston/Smit, p. 5-22: "[The seller] must also show that [the sub-contractor's] failure was beyond [the sub-contractor's] own control and that [the sub-contractor] could not have been expected to anticipate or overcome it".

88. Statement of Defence, § 5.

89. Claimant's Exhibit No. 1.

90. Claimant's Memorandum p. 1, 9 and 11.

91. Cf. Respondent's Exhibit No. 1, clause 14.

92. Respondent's Exhibit No. 1, § 14.

93. Respondent's Exhibit No. 7.

94. Respondent's Exhibit No. 1.

95. Respondent's Exhibit No. 7.

96. Claimant's Memorandum, § 5.5.2, footnote 101.

97. Cf. Respondent's Exhibit No. 7.

98. Cf. Statement of Claim, § 22.

99. Respondent appointed an arbitrator in its Statement of Defence dated 13 August 1998, i.e. ten days after Reliable's latest waiver.

100. Cf. Procedural Order No. 2, question 21.

101. Cf. Respondent's Exhibit No. 1, § 12.

102. Claimant's Memorandum, § 5.

103. Claimant's Memorandum, § 5.2.1.1.

104. The UNIDROIT Art. 7.1.7(1).

105. CISG Art. 79(1).

106. Cf. the preamble of the UNIDROIT Principles.

107. E.g. UNIDROIT Art. 7.1.7(2) and CISG Art. 79(3).