1. DEEP WELL has a concession from the Government of Polarity to develop a field designated as "Active #1". The field has been largely explored and little new oil is expected to be found. In the spring of 1997 DEEP WELL foresaw that by the autumn of 1998 it would no longer need the one remaining drilling rig that it was using in that field, namely rig #23.
2. On 24 September 1996 SPECULATIVE signed a contract with the Government of Polarity whereby SPECULATIVE is to explore for oil and other hydrocarbons in a tract designated as "Active #2". The contract provides that by 15 September 1998 the Government of Polarity must decide whether to open Active #2 for commercial development. Since commercial development of the field would require the Government of Polarity to make significant capital investments, the Government's decision will rest in large measure on its expectation as to the quantity of oil and other hydrocarbons that can be extracted. The contract provides that if the field is to be opened for commercial development, the concession would be granted to SPECULATIVE on terms consistent with a draft agreement attached to the exploration contract.
3. The draft concession agreement provides, among other matters, that SPECULATIVE would be required to begin drilling for commercial production by 1 December 1998. It further provides for substantial penalties if the drilling schedule is not maintained. Since the results of the early exploratory wells were promising, during the spring of 1997 SPECULATIVE began to take steps to assure itself that it would have sufficient drilling equipment available to exploit the field promptly if the concession were granted. It was in that light that SPECULATIVE approached DEEP WELL to inquire about purchasing drilling rig #23.
4. Negotiations for the sale of rig #23 to SPECULATIVE were carried on from 15 March 1997 to 9 May 1997. Agreement was reached on all terms except the price. The offer sent by DEEP WELL to SPECULATIVE on 13 May 1997 contained all the terms that had been agreed in the negotiations. (Claimant's Exhibit 2) The offered price was E$30,000,000, which was the last offer that had been made by DEEP WELL in the negotiations on 9 May 1997. The letter that conveyed the offer stated "In the light of our extensive negotiations, we expect to hear from you by 10 June." (Claimant's Exhibit 1)
5. SPECULATIVE replied on 21 May 1997, stating "The price of E$30,000,000 is the same price that we rejected in our meeting with you on 9 May 1997. It is just too much. A fairer price for the rig would be the E$28,000,000 that we have already offered you, and we would ask you again to consider it." (Claimant's Exhibit 3)
6. On 28 May 1997, the existence of a large oil field was announced in the country of Oceania. The press release announcing the existence of the field indicated that the contours of the field were well established and that commercial drilling was expected to begin as soon as the necessary technical arrangements could be made. As a consequence of this announcement, the world-wide price of drilling rigs immediately rose about 15%. The price has fluctuated sharply and as of the date of this statement of claim the price is about 25% above the level immediately prior to 28 May 1997. It is more than usually difficult to estimate the market price for drilling rigs during the coming year.
7. On 3 June 1997 DEEP WELL sent a telefax to SPECULATIVE that said "in the light of your rejection of our offer of 13 May 1997, we have decided to withdraw it. We would be willing to consider continuing our earlier negotiations, but you should be aware that the market for drilling rigs has tightened considerably in the last few days and the rig may not be available for sale for very long." (Claimant's Exhibit 4)
8. SPECULATIVE replied by telefax on 5 June 1997 that it accepted the offer from DEEP WELL dated 13 May 1997. The telefax from SPECULATIVE made it clear that its letter of 21 May 1997 had not been a rejection of the DEEP WELL offer, but only an inquiry to see if DEEP WELL would not consider reducing the price in its offer. (Claimant's Exhibit 5)
9. On 6 June 1997 DEEP WELL replied that the telefax from SPECULATIVE dated 5 June 1997 had arrived too late as DEEP WELL had already withdrawn the offer prior to that time. (Claimant's Exhibit 6)
B. Time for Acceptance of the Offer of 13 May 1997
10. As stated above, the letter from DEEP WELL of 13 May 1997, which conveyed the offer to sell the drilling rig in question stated that "we expect to hear from you by 10 June 10." As indicated above, SPECULATIVE accepted the offer by its telefax of 5 June 1997.

C. Terms of the Contract and actions in regard to them

11. The contract is set forth in Claimant's Exhibit 2. The terms that are relevant to this arbitration are explained below as well as the actions taken in regard to them.
12. Price was payable in two amounts. E$3,000,000, was due to be paid to DEEP WELL within ten days of acceptance of the offer. The balance of E$27,000,000 is to be paid within five working days prior to delivery of the rig in September 1998. The first payment of E$3,000,000 was transferred by SPECULATIVE from its account at the Farmers and Merchants Bank of Mediterraneo to the Equatoriana Industrial Credit Bank. It was received by Equatoriana Industrial Credit Bank on 13 June at 14:00. That was after the cut-off time for the bank to credit customer accounts that day. 16 June was a legal holiday in Equatoriana. The payment was credited to the account of DEEP WELL on 17 June 1997 at 10:30 a.m. At 12:30 that day DEEP WELL informed the Bank that it refused to accept the credit. The Equatoriana Industrial Credit Bank re-transferred the E$3,000,000 to the Farmers and Merchants Bank of Mediterraneo for our account, where it was credited on 19 June 1997. SPECULATIVE instructed the Bank to hold the sum for the account of DEEP WELL. The funds remain at the Farmers and Merchants Bank of Mediterraneo at the disposal of DEEP WELL.
13. SPECULATIVE was required to have a bank guarantee issued by a first class bank in Equatoriana in the sum of E$33,000,000 as a payment guarantee within ten days of acceptance of the offer . On 5 June 1997 SPECULATIVE requested the Farmers and Merchants Bank of Mediterraneo to instruct the General Credit Bank of Equatoriana to issue the required bank guarantee. The Farmers and Merchants Bank of Mediterraneo sent the instructions to the General Credit Bank of Equatoriana on 9 June 1997. The bank guarantee was issued by the General Credit Bank of Equatoriana on 18 June 1997.
14. SPECULATIVE has the right until 30 September 1998 to decide whether or not to take the drilling rig. If it decides not to take the rig before 15 May 1998, it must pay DEEP WELL the sum of E$3,000,000. If it so decides between 16 May and 30 September 1998, it must pay DEEP WELL the sum of E$4,500,000. As noted above, SPECULATIVE expected the Government of Polarity to extend to it the concession for Active #2. The drilling rig was being purchased to drill in that tract. However, granting of the concession was not certain and, if the concession was not granted, SPECULATIVE would have no need of the rig in Polarity. Since the cost of transporting the rig to another location would be high, with the exact cost dependent on the place to which it would be transported, SPECULATIVE had insisted on the right not to take the rig until such time as the Government of Polarity had decided whether or not to grant the concession. The payment of 10% or 15%, as the case may be, of the agreed price to DEEP WELL was intended to cover the additional expenses DEEP WELL might have in selling the rig or transporting it to another location.
15. If the drilling rig in question is re-sold by SPECULATIVE prior to 15 July 2000, SPECULATIVE must pay to DEEP WELL any profit that might be realized on the sale plus 10%. DEEP WELL insisted on this clause when it acquiesced to the request of SPECULATIVE that it have the right until 30 September 1998 to refuse to take the drilling rig. The provision was intended to eliminate any incentive SPECULATIVE might have to speculate on the price of drilling rigs prior to September 30, 1998.
16. Arbitration clause calls for ad hoc arbitration under the UNCITRAL Arbitration Rules, with the arbitration to be administered by the International Arbitration Center of Danubia.
17. Contract to be governed by the United Nations Convention on Contracts for the International Sale of Goods. Where the Convention does not govern an issue, the contract is to be governed by the general principles of international contracts.

II. Legal Position

A. Applicable law
18. Paragraph 8 of the contract provides that the United Nations Convention on Contracts for the International Sale of Goods is the governing law of the contract and that any matters not governed by the Convention shall be governed by the general principles of law governing international contracts. Since Equatoriana and Mediterraneo are both parties to the United Nations Convention on Contracts for the International Sale of Goods, the Convention would apply in the absence of the clause.
19. Danubia has adopted the UNCITRAL Model Law on International Commercial Arbitration. Equatoriana, Mediterraneo and Danubia are all parties to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
B. Offer was irrevocable until 10 June 1997
20. The letter by which DEEP WELL conveyed its offer on 13 May 1997 said "In the light of our extensive negotiations, we expect to hear from you by 10 June." (Claimant's Exhibit 1) Article 16(2) of the United Nations Convention on Contracts for the International Sale of Goods provides that "an offer cannot be revoked: (a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable;". This offer stated a fixed time for acceptance and, therefore, was irrevocable until the date specified, i.e., 10 June 1997.
C. SPECULATIVE did not reject DEEP WELL's offer by its letter of 21 May 1997
21. In its letter of 21 May 1997 SPECULATIVE said that "The price of E$30,000,000 is the same price that we rejected in our meeting with you on 9 May 1997. It is just too much. A fairer price for the rig would be the E$28,000,000 that we have already offered you, and we would ask you again to consider it." It is obvious from reading the letter that SPECULATIVE was stating that it had rejected the price of E$30,000,000 during the negotiations that were prior to the formal offer of 13 May 1997. It is also obvious that the letter did not reject the formal offer. Certainly SPECULATIVE was suggesting that DEEP WELL should reconsider the offer of E$28,000,000 that SPECULATIVE had made during the negotiations. However, to repeat, the letter was not a rejection of the offered price of E$30,000,000.
D. SPECULATIVE accepted the offer by its telefax of 5 June 1997 and a contract was concluded at that time
22. Article 18(2) CISG provides that "An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror." Article 23 provides that "a contract is concluded at the moment when an acceptance of an offer becomes effective in accordance with the provisions of this Convention." Since the acceptance contained in the telefax reached DEEP WELL on 5 June, five days before the end of the period of irrevocability, a contract was concluded for the sale of the drilling rig at that time.
E. The Tribunal should order DEEP WELL to deliver the drilling rig to SPECULATIVE if SPECULATIVE should decide to take the rig in accord with article 5 of the contract
23. Article 46(1) CISG provides that "The buyer may require performance by the seller of his obligations unless the buyer has resorted to a remedy which is inconsistent with this requirement." SPECULATIVE, the buyer, has not resorted to any remedy other than commencing this arbitration, and the associated action in the Commercial Court of Mediterraneo. If it receives the concession to develop tract Active #2, it will need the rig.
F. The Tribunal has the authority to order DEEP WELL not to sell the drilling rig to any third party pending the decision as to whether SPECULATIVE will receive the concession
24. Article 26 of the UNCITRAL Arbitration Rules provides that "the arbitral tribunal may take any interim measures it deems necessary in respect of the subject-matter of the dispute, including measures for the conservation of the goods forming the subject-matter in dispute... ." This power is confirmed by Article 17 of the UNCITRAL Model Law on International Commercial Arbitration, as adopted by Danubia. The appropriate manner of conserving the goods in this case would be to order DEEP WELL not to sell them to a third party.
G. The Tribunal should exercise its authority and order DEEP WELL not to sell the drilling rig to any third party pending the decision as to whether SPECULATIVE will receive the concession
25. It is particularly important in the context of this contract that the drilling rig remain available for DEEP WELL to deliver it to SPECULATIVE if SPECULATIVE should receive the concession to develop tract Active #2. Under the draft concession agreement, if the Government of Polarity should decide to grant the concession to SPECULATIVE, it would be obligated to begin drilling for commercial production by 1 December 1998. That would give it a period of only three months to begin drilling. In order to meet such a short deadline, SPECULATIVE must have drilling rigs available almost immediately. There are no sources of drilling rigs within Polarity, other than those in use in Active #1. Under normal circumstances it would take three to four months to procure and transport a drilling rig from outside the country to Polarity. It was for that reason that SPECULATIVE entered into the contract in question a full year in advance of the expected date for the granting of the concession. All of those factors that were in existence at the time of the negotiation and the extension of the offer of 13 May 1997 were in themselves sufficient to justify the Arbitral Tribunal in requiring DEEP WELL to live up to its obligations under the contract.
26. The change in the market for drilling rigs after the announcement of the existence of the oil field in Oceania on 28 May 1997 renders it even more important that DEEP WELL live up to its obligations. If SPECULATIVE receives the concession but this drilling rig is not available to it, SPECULATIVE will be at a serious disadvantage. It will have to locate a substitute rig at that time and begin negotiations for its purchase. Since the eventual decision of the Government of Polarity is not known, and it is not possible to estimate the likelihood that it will be positive, it is not feasible for SPECULATIVE to begin that process at the present time. In order for an order of this Tribunal to be effective that DEEP WELL has the obligation to deliver the drilling rig to SPECULATIVE if, and to the extent, provided in the contract, it is also necessary that this Tribunal order DEEP WELL not to sell the rig to any third party in the meantime.
27. Therefore, may it please this Tribunal

• Declare that a contract of sale of the oil drilling rig was entered into between DEEP WELL as seller and SPECULATIVE as buyer on the terms contained in the DEEP WELL offer of 13 May 1997 and accepted by SPECULATIVE on 5 June 1997;
• Order DEEP WELL to deliver the drilling rig to SPECULATIVE if SPECULATIVE should decide to take the rig in accord with articles 5 and 6 of the contract.
• Order DEEP WELL not to sell the drilling rig to any other party prior to the determination to be made by SPECULATIVE in accord with article 6 of the contract,

For Speculative Drilling, Inc.

(Signed)________________
Attorneys

6 August 1997
Date