MEMORANDUM FOR RESPONDENT - Pace University

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QUEEN’S UNIVERSITY FACULTY OF LAW progressed any further, and the Tribunal has not yet considered the substantive merits of the dispute, none of the proceedings will need to be repeated [McIlwrath/Savage 263; Zuberbühler et al. 271]. Furthermore, both the jurisdiction and merits of the dispute will be heard by the Tribunal at the same time [Proc. Ord. 2], so there will be no delay in rendering a final award. As a result, the cost of proceeding with Respondent’s challenge to the Tribunal’s jurisdiction, in terms of time or money, is negligible. 21. Moreover, the reconstitution of the Tribunal according to the Parties’ Agreement will not result in protracted delays of the proceedings. If jurisdiction of the Tribunal is denied, the proceedings will only be suspended to appoint a new presiding arbitrator. There is nothing to suggest that the reconstitution of the Tribunal would be unduly prolonged—the Milan Rules set out efficient appointment procedures and both the Parties and party-appointed arbitrators were cooperative in the constitution of the present Tribunal. On the other hand, if the Tribunal proceeds to issue an award and that award is set aside or refused enforcement, the entire arbitral process would have to be repeated. A Tribunal with the full confidence of both Parties is the best means to ensure voluntary compliance with an eventual award [Lew et al. 236]. III. IF THE TRIBUNAL AFFIRMS ITS JURISDICTION, AN EVENTUAL AWARD IS AT RISK OF BEING SET ASIDE OR DENIED RECOGNITION AND EN<strong>FOR</strong>CEMENT. 22. A central duty of a tribunal in any arbitral proceeding is to render an enforceable award [Born 2537; Horvath 135; Lew et al. 119]. If the Tribunal finds that it was properly constituted and renders an award on the merits, this award would likely be set aside or refused recognition and enforcement. The courts of Danubia, the seat of arbitration, would have jurisdiction over an application to set aside an award; enforcement can be sought in jurisdictions where parties have assets [Lew et al. 703]. There are sufficient grounds for a Danubian court to set aside an eventual award [art. 34(2)(a)(iv) Model Law] or for courts in Equatoriana or Mediterraneo to refuse it recognition or enforcement [art. V(1)(d) NY Convention]. Respondent preserved its right to challenge an award by raising an objection to the Tribunal’s constitution during the arbitral proceedings [Amd. St. of Def. 1; Born 2592; Binder 61; Zuberbühler et al. 272; Ghiradosi v. B.C. (Canada 1966) 17]. 23. Under art. V(1)(d) NY Convention, an award may be challenged where “the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties” [Luttrell 11; Gaillard/Savage 453]. This provision is mirrored in art. 34(2)(a)(iv) Model Law. Here, all states involved are signatories to the NY Convention [Req. for Arb. 25], and the national arbitration laws of Equatoriana and Mediterraneo must be at least as favourable to 8
QUEEN’S UNIVERSITY FACULTY OF LAW recognition and enforcement as art. V NY Convention [Darwazeh in Kronke et al. 333; McIlwrath/Savage 344]. 24. Courts look at the parties’ agreement and the national law of the seat of arbitration to determine whether a tribunal has been improperly constituted [Nacimiento in Kronke et al. 281]. The types of defects sufficiently serious to justify setting aside an award, or refusing to enforce it, are not defined in art. 34(2)(a)(iv) Model Law or art. V(1)(d) NY Convention [Poudret/Besson 840]. Commentators and courts agree that a defect in the composition of a tribunal constitutes grounds for setting aside an award if the defect potentially affected the award [Binder 382; Nacimiento in Kronke et al. 297; BOL Sept 2004; Werner v. The N's (Hong Kong 1978)]. 25. Claimant may argue that for an award to be set aside or refused enforcement, Respondent must prove that the defect—the Council’s refusal to confirm Mr. Y and the appointment of Mr. Z— resulted in “substantial prejudice” to Respondent. A standard of “substantial prejudice” has been applied by some courts, particularly in the United States [Compagnie v. Hammermills (USA 1992); Karaha v. Perusahaan (USA 2001)]. However, courts in some Model Law jurisdictions have set aside awards when the defect is one that “potentially cause[d] an unfavourable outcome” [BOL Feb 1999; BOL Sept 2004; Werner v. The N's (Hong Kong 1978)]. Applying this standard, an award rendered by the Highest Arbitral Tribunal of the Bavarian Commodities Trading Association was set aside by the Bavarian Court of Appeal for deviating from the appointment and challenge process in the arbitration agreement. Applying national legislation based on the Model Law, the Court found that the Highest Arbitral Tribunal “might have decided—in a different composition—differently on the appeal” and that the procedural irregularity “potentially caused an unfavourable outcome for the claimant” [BOL Feb 1999]. It is unclear which standard a Danubian court would apply. Accordingly, the Tribunal should proceed with caution. The only way to ensure that an award issued in this dispute will be enforceable is for the dispute to be submitted to a properly constituted tribunal. PART TWO: CLAIMANT BREACHED ITS DUTY OF CONFIDENTIALITY. 26. Four days after Claimant commenced this arbitration, Claimant’s CEO, Mr. Herbert Schwitz, gave an interview to Commercial Fishing Today, a trade newspaper distributed in 45 countries [Resp. Ex. 1; St. of Def. 4]. He divulged the subject matter of this dispute, the existence of arbitration and made inflammatory allegations about Respondent’s conduct [Resp. Ex. 1]. This interview constituted a breach of confidentiality. Admittedly, the scope of the duty of confidentiality in international arbitration remains uncertain; the major international arbitration conventions do not mention the issue at all, and institutional rules and national arbitration laws vary widely with respect to confidentiality [Coppo in Finkelstein 28]. However, there is no 9
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MEMORANDUM FOR RESPONDENT - Pace University

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