International Arbitration Vis Moot

William C. Vis International Commercial Arbitration.  

The purpose of the moot is to foster the study of international commercial law and arbitration, while providing practical training for law students in resolving international business disputes. It is a clinical tool meant to engage students in the business community's preferred mode of resolving international commercial disputes: namely, arbitration. 

 

Case No. FAI Moot 100/2024

Arbitration Commenced July 31, 2024 (According to the Rules for Expedited Arbitration 2024)

 

Claimant:      GreenHydro plc, from Mediterrano, Seller

GreenHydro sells plants for the production of green hydrogen and connected services for the industry, energy and mobility sector. 

Respondent:    Equatoriana RenPower Ltd, from Equatoriana, Buyer

Equatoriana RenPower is a fully government owned company, operating in the field of renewables. It owns wind and solar farms and was tasked to invest in the creation of a "sustainable hydrogen infrastructure covering the entire value chain needed to decarbonize Equatoriana's large steel and transport industry," as part of the government's "Green Energy Strategy."  

 

Purchase and Service Agreement, dated  July 17, 2023; signed by the parties. (Note: GreenHydro made 5% reduction in final price based on exclusion of right to terminate Agreement for convenience). 

Additional Events:

In October of 2023, local elections in Equatoriana led to a shift in power. 

Mr. Positive, Minister for Energy and Environment, was replaced by Ms. Theresa Vent (from the Equatoriana National Party or "ENP.").  Ms Vent was opposed to the Green Energy Strategy. 

Dec. 27, 2023, Ms. Michelle Faraday CEO at ERenPower called Mr. Cavendish, CEO of GreenHydro, explaining she would be replaced by the end of the month by Mr. Henry la Cour, a well known critic of hydro energy and a member of the ENP.  She confirmed rumors that ERenPower would review all contracts to see if they fit with new policy objectives. 

 

ERenPower Notice of Termination of Purchase and Service Agreement. Feb. 29, 2024.

States that termination was due to a delay of 28 days in the delivery of final plans for the entire plant including the options.  Final plans were due Feb. 1. 

Also due to change in policy. Under Equatorian law,  state entities could terminate contracts for convenience.  (Mr. La Cour statement)

 

 

FAI Board decided that the FAI Arbitration Rules of 2024, rather than the Expedited Rules would apply, based on the agreement of the parties.  (Aug. 27, 2024)

 

 

Purchase and Service Agreement, dated  July 17, 2023; signed by the parties.

• 100 MegaWatt plant for production of green hydrogen at price of EUR 285 million
• Maintenance and training services for one year
• Two options for extending the plant:  (i) double the fixed construction capacity, or (ii) add a part for production of eAmmonia
• Claimant characterizes as a "mixed contract containing engineering and planning wok, as well as the delivery of goods." 
• Note: Request for Quotation stated that 25% of the materials must be from Equatoriana

Article 3 – TERMS OF DELIVERY / CONTRACTUAL MILESTONES The Contractor agrees to deliver and hand over the Plant as agreed no later than 2 January 2026. To ensure the timely hand-over the Contractor agrees to the following milestones described in detail in Annex 5:

1 November 2023 Submission of Permission Planning for approval

1 February 2024 Submission of Final Plans for approval (including a plan for eAmmonia Option)

1 June 2024 Start of building activities on-site

1 October 2025 Test run

1 November 2025 Performance and Acceptance Test

 

Article 28: TERMINATION

1. Both Parties may terminate this Agreement for cause in case of a failure of the other Party to perform any of its obligations resulting from this Agreement that amounts to a serious and fundamental non-performance.

2. There is no right for the CUSTOMER or the CONTRACTOR to terminate the Agreement for convenience against the payment of compensation. Both Parties will use their best endeavours to realize the project

 

Article 29: Choice of Law

The Agreement is governed by the law of Equatoriana to the exclusion of its conflict of laws principles.

 

Article 30 Arbitration Agreement

“Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or validity thereof, shall first be submitted to mediation in accordance with the Mediation Rules of the Finland Chamber of Commerce.

(a) The place of mediation shall be Danubia.

(b) The language of the mediation shall be English.

Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or validity thereof, shall be finally settled by arbitration in accordance with the Rules for Expedited Arbitration of the Finland Chamber of Commerce.

However, at the request of a party, the Arbitration Institute of the Finland Chamber of Commerce may determine that the Arbitration Rules of the Finland Chamber of Commerce shall apply instead of the Rules for Expedited Arbitration if the Arbitration Institute considers this to be appropriate considering the amount in dispute, the complexity of the case, and other relevant circumstances

 

Language of Arbitration:                   

Art. 30 of Dispute Resolution Clause               English

 

Place of Arbitration:                          

Art. 30 of Dispute Resolution Clause                Vindobona, Danubia

_________________________________________

 

FAI Procedural Order 1:  Oct. 11, 2024 (pp. 50 to 51)

 

The FAI made the following order:

In their next submissions and at the Oral Hearing in Vindobona (Hong Kong) the Parties are required to address the following issues:

 a. Should the Arbitral Tribunal reject the claim for lack of jurisdiction or admissibility or as part of its discretion?

ERenPower states that the Arbitral Tribunal lacks jurisdiction to decide the case, "Compliance with the mediation requirement is a condition precedent for the validity of the arbitration agreement or at least a requirement for the admissibility of the claim and should guide the Arbitral Tribunal in exercising its procedural discretion" 

GreenHydro states that Article 15 of the FAI-Rules governs consideration of a prima facie decision on jurisdiction. Argues that mediation is not a condition precedent for jurisdiction. Futhermore, "mediation would have been a mere waste of time," given Mr. la Cour's clear statement that a price reduction of 15% was a kind of pre-condition of any further talks. 

Note:  "Article 15 of the Rules" refers to the Rules for Expedited Arbitration 2024 of the Finland Chamber of Commerce.  FAI will determine jurisdiction based on Article 15 of the Rules. (p. 40)

On Aug. 27, 2024, FAI Board decided that the arbitration shall be allowed to proceed because it is prima facie satisfied that an arbitration agreement under the Rules that binds the parties may exist.  (p. 39)

Board also decided that, as both parties agree on the application of the Arbitration Rules of 2024 of the Finland Chamber of Commerce (the "Arbitration Rules" instead of the "Rules," the arbitration should be conducted under the Arbitration Rules. 

b. Should the Arbitral Tribunal order the exclusion of the documents Exhibits C 7 and R 3

ERenPower states that GreenHydro engaged in a blatant breach of the confidentiality of the negotiations between the parties.  "The confidentiality obligation in Article 15 of the FAI Mediation Rules...also extends to all negotiations preceding the mediation." ERenPower wants exclusion of Exhibit C 7. 

GreenHydro objects to ERenPower's request for exclusion of C7.  Equatoriana has signed the Mauritius Convention on Transparency and publicly declared that they would submit all of their rules to the UNCITRAL Rules of Transparency. Contrary to good faith article in CISG Art. 7 if the state-owned company could argue for confidentiality to exclude critical documents from the arbitral proceedings. 

• C7:  Equatoriana RenPower Letter from CEO Henry la Cour to Mr. Cavendish, May 25, 2024
  • Possible option on the use of hydrogen in the production of green steel
  • "To be competitive, the price for the plant including the two extension options would have to be at least 15% lower." Minister Ms. Vent will only agree to continuation of the project if the hydrogen is produced at a price which makes it competitive with other forms of energy
  • Make following offer without prejudice:  
    • Reduction of the price by 15% (or at least a two digit number)-
    • Realization of the Greenfield-Hydrogen-Project as planned, including a first demand guarantee for the performance of the obligations undertaken by Respondent in the value of 10% of the reduced price

GreenHydro wants the exclusion of Exhibit R3.  "The document was obtained in the course of an illegal criminal investigation used by the Government of Equatoriana...to pressure (GreenHydro) into settling the dispute...The criminal dispute has in the meantime been terminated and Mr. Deiman has been released and is cleared of all charges." (August 14, 2024 letter). 

• R3:  Email from Heidi Smith of GreenHydro Legal Dept. (Licensed in Mediterraneo)  to Poul Cavendish and Wilhelm Deiman (both at GreenHydro), July 10, 2023, on law of Equatoriana concerning assurances and misrepresentations and Wilhelm's email to Johanna Ritter (Esq. at RenPower)
  • according to the RfQ local content is a relevant consideration for being awarded the contract for the green hydrogen plant at Greenfield, Equatoriana;
  • in your initial offer, you had mentioned a price of EUR 300 million for the entire 100MW plant (turnkey), of which EUR 200 million were for the electrolyser part of the Agreement and EUR 100 million for the EPC part;
  • The initial offer indicated that in the electrolyser part, materials and services in the value of EUR 60-80 million would come from entities from Equatoriana (parts of stacks/transformer and electrical equipment/packaging);
  • for the eAmmonia module (EUR 100 million) you had been in negotiation with P2G from Equatoriana, which originally looked very promising but had remaining quality issues, and the price now speaks in favor of another supplier (Green Ammonia), which would cover 80% of the works and deliveries to be done with just 20% of planning and engineering done by GreenHydro; and •
  • you wanted to make sure with the draft of the email attached you would neither enter into a binding commitment nor could be accused of misrepresentation if the contract with P2G does not materialize due to the quality concerns and the price, which is not unlikely.
  • "I have checked that under all potentially applicable regimes and think that if you tone down the draft a little bit concerning the likelihood that the contract may materialize, point out the ongoing quality issues, and state that you are confident that we may be able to overcome them, you should not engage in any misrepresentation or give actionable assurances."

c. Is the CISG applicable to the Agreement? Convention on International Sale of Goods.

• Does a mixed contract containing engineering and planning work as well as the delivery of goods, fall within the CISG? GreenHydro states that 60% of the value of the overall price consists of the delivery of goods. 
• ERenPower states that the dispute is governed by Civil Code of Equatoriana and not the CISG. See Article 29 of the agreement. This should be seen against background of Equatoriana public procurement law. See Exhibit R-1. 
  • Also, part of a reverse auction in a public procurement process so it is excluded under CISG Art 2 lit b. 
  • Argues this is not an international sales transaction. (Considerable part of agreement is planning an engineering and "most of the actual deliveries of good were made in Equatoriana.")

d. If so, have the Parties validly excluded its application? Did the parties exclude CISG by stating in Article 29 of the Agreement that the "conflict of laws principles of Equatoriana" would not apply?

 

No further questions going to the merits of the claims should be addressed at this stage of the proceedings, in particular no questions relating to the remedies requested and their availability. 

Applicable Law?

Art. 29 of Agreement:              Law of Equatoriana, "to the exclusion of its conflict of laws principles."  

Law of Equatoriana allows governmental entity to terminate any of its contracts for convenience if it conflicts with the policies of the government.

Article 7.3.1 of the Equatorianian Civil Code, Equatoriana is entitled to terminate a contract with immediate effects in cases of a fundamental breach of contract.

Equatoriana, Meditrraneao and Danubia are all parties to the CISG.  

All countries have consistent jurisprudence that in sales contracts governed by CISG, the CISG also applies to the conclusion and interpretation of the arbitration clause (as long as the applicable arbitration law does not contain any conflicting provisions)

Equatoriana, Meditrraneao and Danubia are all member states to the New York Convention

The New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards provides for the international enforcement of arbitral awards. Considered as the most successful international convention in international private law, the Convention now has over 160 Contracting States and more than 2,000 court decisions interpreting and applying the Convention. 

 

UNIDROIT Principles on International Commercial Contracts  

 

The International Institute for the Unification of Private Law (UNIDROIT) is an independent intergovernmental Organisation with its seat in the Villa Aldobrandini in Rome. Its purpose is to study needs and methods for modernising, harmonising and co-ordinating private and in particular commercial law as between States and groups of States and to formulate uniform law instruments, principles and rules to achieve those objectives.

 

General Contract Law of Mediterraneao and Danubia are verbatim adoptions

Equatoriana has included Art. 7.3 provision that governmental entities may always terminate contracts which have concluded in the pursuance of a particular strategy if the government has changed the strategy.  In these cases, the counterparty has to be reimbursed for the costs incurred in connection with the contract. 

UNCITRAL Model Law on International Commercial Arbitration with the 2006 Amendments, Article 7--Option 1. (all parties adopted)

 

UNCITRAL is the United Nations Commission on International Trade Law. It is a legal body with membership specializing in commercial law reform,   which seeks to modernize and harmonize international business rules. 

Participation in UNCITRAL is voluntary and all decisions are made by consensus.  The choice of whether to use an UNCITRAL legislative text is a matter for the lawmakers of individual states.