A hypothetical case to show how a dispute gets resolved through arbitration in accordance with Rules of AACC Arbitration Institute

Here is an example that tries to show a dispute being resolved through arbitration. In this hypothetical case, as much as possible different issues are addressed in order to apply almost the whole rules of the AACC Arbitration Institute
Hypothesis:

• Parties: Claimant = Ethiopian New Seed Ltd [ENS]
• Respondent = Express charm Pvt Ltd

Origins of the dispute: Parties entered into a contract on June 4, 2002 for the sale and delivery of 100 tons of coffee beans, the price of which was agreed to be USD 200,000, i.e. USD 200 per ton.
Both parties agreed that the price would be paid by installments. The seller would receive a fifth of the price upon delivery of the coffee beans to the Port of Djibouti and the rest of the money upon reception of the goods in the premises of his company in Italy within 60 days from the day of shipment.
The goods safely arrived in Djibouti on July 1st 2002 where Expressocharm's local representative verified and certified both the quality and the quantity of the coffee beans. Therefore, the Commercial Bank of Ethiopia transferred the amount of the first letter of credit that the buyer had opened for the seller at the bank of buyer's choice.
On July 5th 2002, the goods were safely shipped towards Italy. The boat was right on schedule up until a change of weather caused some delay. The coffee beans arrived to the premises of the buyer's company on the 4th of September 2002, thus 2 days after the agreed date.
Notwithstanding the unpredictable change of weather, Expressocharm alleged that ENS had breached the terms of the contract for it had failed to deliver the goods on time. The buyer simply refused to pay the rest of the price.
However, ENS soon learned that Expressocharm had in fact purchased the same amount of coffee beans from a Columbian company during the shipment of the Ethiopian coffee beans. The coffee market in Columbia having just collapsed, the Italian coffee producer had paid a third of what it still owned to ENS. The latter alleged that Expressocharm had never intended to pay for the Ethiopian coffee beans. It had entered into another contract with a South American company before it had performed all of its contractual obligations towards ENS.
On January 2nd 2003, after several unreturned calls, fax and e-mail messages to the buyer, the seller finally decided to have the matter resolved through arbitration. Hence, he brought the case to the Addis Ababa Chamber of Commerce [AACC] Arbitration Institute.

Initiation of Proceedings

A. Claimant's request for arbitration
In the Sale contract, ENS and Expressocharm have included an arbitration clause according to which any dispute arising from the contract will be settled through AACC Arbitration rules. They have also agreed upon the applicable law to their contract: the French law.
Therefore, ENS addressed a request in writing to the secretariat of the Institute (Articles 1.1 and 3.1of AACC Arbitration Rule).
B. Statement of claim
In the application for arbitration, ENS specified the following mandatory information:

• Name + address of both claimant and respondent including the phone, fax and email;
  
• The arbitration clause included in their contract and upon which claimant relies;
• Facts of the case and the main points of the dispute i.e. the absence of payment by the buyer, the delay in the delivery by the seller, about force majeure, then who breached the contract?
• Claimant's claim + facts + reasons on which ENS's claim is based (i.e. breach of contract by respondent: he had no intention of performing or paying the price)=is of bad faith.
• It would be good for the claimant at this stage to specify the name and/or address of his arbitrator, as per Article 4(1)(i)(e) of AACC Arbitration Rule, for the parties have decided that the arbitral tribunal will be tripartite; each party appointing their own arbitrator who will in turn choose the chairman/president of the tribunal.
• Name + address of the attorney which in this case has the power to represent the claimant on all matters.

The claimant and/or the attorney signed the application for arbitration

• As requested, the claimant submitted to the Institute all the evidence on which his claim is based such as copy of their contract, the bill of lading, the certificate issued by Expressocharm's representative in Djibouti (Article 4(1) ii;
• The claimant also shall pay in advance the administrative fee that will be fixed by the Institute as per the administrative fee schedule (Article 4(1) iii cumulative the administrative schedule).2.
• The claimant also shall pay in advance the administrative fee that will be fixed by the Institute as per the administrative fee schedule (Article 4(1) iii cumulative the administrative schedule).

As requested, the claimant submitted to the Institute all the evidence on which his claim is based such as copy of their contract, the bill of lading, the certificate issued by Expressocharm's representative in Djibouti (Article 4(1) ii;

I. Respondent
A. Statement of defense and of counterclaim

• Within 45 days from the date of receipt of the notice of arbitration, Express charm submitted as per Article 5:
  • Written defense (stating ENS breached contract failing to deliver on time…);
  • Appoint arbitrator (Mrs. Y) if more than one is to be appointed;
  • Attach relevant documentary evidence to the secretariat (i.e. copy of contract, bill of lading…)
• Expressocharm did not lodge a counterclaim but if he had, respondent's written statement should have mentioned same information on respondent as claimant's statement mentioned.

B. Amendments to claims and to counterclaims

• Both parties had the opportunity to amend either their claim or counterclaim but chose not to do so. So, the next stage will be the composition of the arbitral tribunal.

II. Composition of the arbitral tribunal [Arts 7-12 of the AACC Arbitration Rule]

A. Number of arbitrators and manner of appointing them

• ENS and Expressocharm have agreed on the number of the arbitrators, i.e. 3 arbitrators will decide on the dispute
• Each party appointed his own arbitrator (Mr. X for the claimant and Mrs. Y for the respondent) who, in turn, will appoint the president of the tribunal.

B. Nationality of arbitrators

• The parties have agreed in the Sale contract that the arbitrators appointed by each of them will appoint the president of the tribunal. The claimant being Ethiopian and the respondent Italian, they have agreed that the third arbitrator shall be South African.

C. Challenge of Arbitrators

• On February 15 2003, ENS was informed that Mr. X had been an employee of Expressocharm some ten years ago and decided to challenge the arbitrator.
• On February 24, 2003 (thus respecting the 15 days period planned for introducing such challenge), claimant alleged in a written statement sent to the Institute, that Mr.X did not present the required qualities of impartiality and independence because of the arbitrator's prior ties with respondent.
• After hearing all parties, the Institute decided to disqualify the arbitrator and to remove him.

D. Replacement of Arbitrators

• The Institute decided to use its prerogative to or not to follow the original appointing system and chose Mr. Z in place of the removed arbitrator (Mr. X). Of course, it took into consideration parties' and the remaining arbitrators' point of view. Afterwards, the arbitral proceeding follows.

V. Arbitral Proceedings [Arts. 13-18 of the AACC Arbitration Institute]

A. First steps taken before the arbitral tribunal

• Judging that the facts of the case were not clear, the arbitral tribunal decided to hold hearings even though the parties had not made such a request.
• All documents presented by ENS were communicated to Expressocharm and vice versa, under the Institute's supervision.
• Both parties were given a 2 months notice to appear before the tribunal in Djibouti. Even though he was duly summoned through its representative in Djibouti, the respondent failed to appear on the fixed date and place. In accordance with the AACC Arbitration Institute's rules, the arbitrators proceeded with the hearing.

A Place and language of arbitration

• In their Sale contract, ENS and Expressocharm have agreed that the arbitration would be held in Djibouti. Hence, the award was made in Djibouti [Article 14.4].

B Establishing the facts of the case

• Mr. Z and Mrs. Y along with the tribunal's president Mr. T, after studying the written submissions of both claimant and respondent and all the documents relied upon such as the Sale contract, the letter of credit, the bill of lading…decided to hear the parties again.
• During the hearings, the arbitrators summoned ENS to present evidence that the respondent has indeed entered into another contract with another company before the deadline agreed upon by ENS and Expressocharm
• C Closing of the proceedings
• The parties were given 3 months to present their case and evidence since the arbitral tribunal deemed it to be appropriate. Therefore, the arbitrators declared the proceedings closed.
• It then indicated to the Secretariat that the draft award would be ready for submission to the Institute for approval on April 10 2003.
• V. The award

A Decision

• After examination of the facts of the case, the evidence presented and after hearing all concerned parties (in the respondents case, the legal representative), the tripartite arbitral tribunal made its decision. Judging that the claimant had not presented sufficient evidence to prove Expressocharm's bad faith and after it reaffirmed that delays due to bad weather are foreseeable and therefore do not enter in the definition of a FORCE MAJEURE, the arbitral tribunal unanimously ruled in favor of the respondent.

B Form and effect of the award

• The parties waived their rights to appeal against the award. It is therefore final and binding on them. A signed copy of the award containing the date on which and the place where the award was made, was sent out to both ENS and Expressocharm.
  The award can be made public but only if both parties give their consent

C Applicable Law

• The tripartite arbitral tribunal applied the French law that had been designated by the parties in their contract. Therefore, it was the French definition of Force Majeure that was applied to evaluate if the claimant had breached any of his obligations.