UNIVERSITY OF CAPE TOWN

DEPARTMENT OF COMMERCIAL LAW

SCHOOL FOR ADVANCED LEGAL STUDIES

CML5641S COMMERCIAL ARBITRATION

______________________________________________________________________

EXAMINERS: PROF L BOSMAN; MR V MOVSHOVICH; MS N KAMAU; MR F ADAMS

TOTAL MARKS: 80 MARKS

PAGES: 8

TIME: 12 HOURS

_____________________________________________________________________

INSTRUCTIONS
1. ANSWER THE FOLLOWING QUESTIONS:
Question 1; and
Question 2; and
Question 3; and
Question 4.
2. Please upload your answer paper (document) in pdf format.
3. The document must be saved as: ‘yourpeoplesoftnumber-CML5641S’.
4. Please put your PeopleSoft number in the header or footer and paginate your
document.
5. Please note that the portal will close at 20:00. Leave yourself enough time to upload
the document.
6. The exam counts 60% towards the final mark for the course.

1
PART A: COMMERCIAL ARBITRATION

QUESTION 1

Picha Ltd (“Picha”) is a company registered in the Kingdom of Kush. It specialises in the sale of
African art and artefacts. Picha Holdings Inc (“Picha Holdings”) is the parent company of Picha,
and is incorporated in Kisima, an island state in the Indian Ocean.

Barabara Mrefu SARL (“Barabara”) is a logistics company incorporated in the Empire of Mali,
which specialises in the transport of fragile and valuable goods across the African continent.

Picha and Barabara have entered a long-term contract (‘Contract”) for the transport of art and
artefacts to Picha’s customers across the African continent. According to the Contract, Barabara
shall submit an invoice to Picha every month for the goods transported that month (if any), and
Picha shall pay the invoice within 30 days of the invoice’s date.

Picha did not pay the invoices submitted by Barabara from March – December 2020.

On 15 January 2021, Barabara sent a notice of arbitration to Picha.

Clause 14 of the Contract states the following,

Dispute Resolution

Any dispute, controversy or claim arising out of relating to this contract, or the breach,
termination or invalidity thereof, shall be settled by arbitration in accordance with the
UNCITRAL Arbitration Rules 2010.

The seat of the arbitration shall be Axum, Kingdom of Axum.

The arbitration shall be conducted in English.

The IBA Guidelines on the Conflicts of Interest in International Arbitration shall apply.

2
Questions:

Notes: The Kingdom of Axum has adopted the UNCITRAL Model Law 2006.

The Kingdom of Kush has adopted the New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (“New York Convention”) with a reciprocity
reservation. The Kingdom of Axum has signed, but not ratified, the New York Convention.

You are asked to advise your client (either Picha or Barabara of all its options in the following
scenarios.

1. The Parties cannot agree on the appointment of a sole arbitrator. Advise Barabara on its
options to ensure the appointment of a sole arbitrator under the applicable procedural
rules. Would your advice change if the arbitration agreement referred to the ICC
Arbitration Rules 2021? Explain.

2. Three weeks after the arbitration has commenced, but before the Sole Arbitrator is
appointed, Barabara would like to include Picha Holdings in the arbitration. Advise
Barabara on its options. Would your answer change if the ICC Arbitration Rules 2021 were
applicable to the arbitration? Explain.

3. On 15 August 2021, two weeks before a hearing held in the arbitration, Barabara learns
that the Sole Arbitrator and Picha’s lead counsel are members of the same running club.
Advise Barabara.

4. On 29 October 2021, the Tribunal issued an award in favour of Barabara. Picha would like
to challenge the award. Advise Picha.

5. Barabara applies to enforce the award in the Kingdom of Kush. Advise Picha on its options.

In your answers, you must refer to specific provisions of the applicable rules and laws and apply
those provisions to the facts of the case. (20 MARKS)

3
QUESTION 2

South African Fruits Pty Ltd (“SAF”) is a company registered and operating in South Africa. It is in
the business of growing and exporting strawberries from Cape Town to various countries
internationally. The delivery point of the strawberries is always at the buyer’s home port and
payment is made by Electronic Funds Transfer into SAF’s account in Cape Town. A series of
contracts between SAF and Duvel BV, a company situated in Antwerp, Belgium were concluded.
Disputes have arisen in one of the contracts between the parties. In the contract SAF agreed to
hold some of the arbitral hearings in Antwerp but chose Johannesburg as the legal seat of the
arbitration with the arbitration to be administered under the UNCITRAL Arbitration Rules 2010.
The parties did not choose a substantive law of the contract. SAF is concerned about the failure
to include a choice of law clause and approaches you for an opinion. SAF thinks that it may be
able to convince Duvel to accept a choice of lex mercatoria as the governing law of the contract.
Advise SAF on whether this is a suitable choice and, if not, how the tribunal should embark on
designating the applicable law in the absence of choice. (20 MARKS)

QUESTION 3

Houdini Helmets ("Houdini") is an international defence equipment and armoury supplier, with
manufacturing facilities in the Philippines, Laos and Spain and retail outlets throughout Africa,
Asia and Europe. It also has an online presence. Houdini's place of incorporation is the Republic
of Ireland. It has a registered office in Ireland, but this is no more than a post box for any official
correspondence and is maintained to comply with the company legislation of Ireland. Two of its
directors are resident in Algeria and the remaining directors are resident in Botswana and Dubai.
It does not have and does not need physical headquarters, given the nature of its business.

Houdini's online business was active for several years prior to 2020 but gained substantial
additional traction during the Covid-19 pandemic, and it accepts orders from anywhere in the
world and ships to anywhere in the world using conventional couriers and air and sea shipping
agents.

4
Houdini makes use of standard form contracts which it has developed to facilitate its sales
business. If the purchase takes place online, the purchaser has to tick a box prior to checkout
indicating that it agrees to Houdini's standard terms and conditions, which include the conditions
of sale (collectively, "the Terms"), a 17-page document drafted by its lawyers in Dubai. A link to
the Terms is provided next to the box which is to be ticked.

The Terms include various provisions, including exclusion of liability in respect of any malfunction
or defect of the merchandise purchased, other than that caused by intentional misconduct of
Houdini or its employees, and any damages claim by the purchaser is capped at the amount of
the purchase price received by Houdini for the merchandise in question. The Terms also include
a governing law and dispute resolution clause in the following terms:

"This contract is governed by laws of Dubai. The parties consent to the exclusive
jurisdiction of the courts of Egypt in respect of any proceedings arising out of these Terms.
Notwithstanding this, either party may, at their election, refer any dispute to final
resolution by way of arbitration before a panel of three arbitrators. In such an instance,
all court proceedings shall be pended, except where Houdini by written notice determines
otherwise."

The Terms make no other mention of dispute resolution processes.

On 30 September 2021, a South African security company, All That Jazz ("Jazz"), ordered 40,000
khaki uniforms and 300 bayonets from Houdini online for a total purchase price of USD 850,000.
It requires this equipment and clothing for military parades and training by the South African
National Defence Force ("SANDF") starting in late November 2021. Prior to sending the order,
Jazz confirmed with Houdini's call centre agent that the estimated delivery time of the
merchandise would be end of October 2021. The order was then placed and accepted by
Houdini. Houdini's automated response indicated that orders are usually delivered within three
weeks of the order being accepted.

In mid-October 2021, a political conflict broke out in the country where one of Houdini's
manufacturing facilities is located. Houdini thus notified Jazz on 21 October 2021 that there is a
force majeure situation and that the shipment will be delayed by up to four months, but this
5
timeline is "dependent on the circumstances and unfortunately cannot be guaranteed". Houdini
mentioned in this communication that under the Terms it is not in any event obliged to render
delivery at a specific time and it can shift the delivery schedule at will.

Jazz approaches you for advice on 8 November 2021. Jazz is very concerned about these
developments, given that it has committed to supplying the goods to the SANDF and that this
delivery is time-sensitive. At this stage, it would not be able timeously (and would not want) to
procure the clothing and equipment from other manufacturers (as they have an eight-week lead
time), have poorer quality of goods and are 30% more expensive than Houdini's prices.

Jazz has also been informed by way of an anonymous letter delivered to Jazz's Johannesburg
offices that Houdini has continued to supply uniforms and bayonets to other customers who
placed orders at retail outlets in Asia. Jazz suspects that the Asian customers were willing to pay
a higher price and that is the reason those orders continue to be filled.

Please advise Jazz on what you consider to be the best legal strategy. Your advice should cover
what proceedings should be instituted, where and in what sequence; what relief should be
sought; and what can practicably be accomplished through legal processes. You should also
consider what further information you may need or would be of assistance to you or your client
and incorporate this into your legal strategy. How would the information be procured?

(20 MARKS)

PART B: TREATY-BASED INVESTOR-STATE ARBITRATION

Notes:

(1) Assume for the purposes of this question that all jurisdictions named in this question have
arbitration legislation based on the UNCITRAL Model Law and are parties to the 1958 UN
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York
Convention” or “NYC”).

6
(2) Assume also for the purposes of this question that France and Mauritius are parties to the
1965 ICSID Convention; and that there has been a bilateral investment treaty (“BIT”) in force
between France and Mauritius since late 2014, containing all the usual investor protections.
The BIT also includes the option to arbitrate disputes at the choice of the investor under: the
ICSID Rules of Procedure for Arbitration Proceedings (the “ICSID Arbitration Rules”); the ICSID
Additional Facility Arbitration Rules (the “ICSID-AF Rules”); or the UNCITRAL Arbitration Rules.

You are the legal adviser to the French-incorporated solar panel manufacturer French Solar
(“FS”), which entered into a joint venture with a local Mauritian company, “Shine” to establish a
vast solar energy farm along the Mauritian coastline, south of the Mauritian capital Port Louis, in
2018. FS and Shine intended to take advantage of subsidies from the Mauritian government for
the creation of sustainable energy sources. Construction is near-complete, and the solar farm is
due to commence operations in early 2022. The dispute resolution clause in the agreement
between FS and Shine refers future disputes to the courts of Port Louis.

In late 2019, Shine was affected by transport delays caused by the COVID-19 pandemic and
delayed payments to FS, causing delays and additional costs to the project. In early 2020, the
Mauritian government changed its policy on subsidies for renewable energy projects, deciding to
limit subsidies only to African investors, citing a budget crisis due to the pandemic, as well as
opposition from a local community that the wind farm would encroach on a site of cultural
significance.

Questions:

1) Potential claims:
a) What possible claims might FS have in the above circumstances? What obstacles might
FS face in pursuing these claims? Against which party and in which forum should they be
brought? What, in your view, is the best course of action for FS to take, and why?
b) Would your answer to 1(a) be any different if Mauritius had withdrawn from the ICSID
Convention and terminated all its BITs on 1 January 2020? Explain. (7 marks)

7
2) Assume that FS initiates arbitration under the ICSID Arbitration Rules in July 2021.
a) What role, if any, might local activists be able to play in the proceedings?
b) How would the role of local activists be different if instead FS had initiated arbitration
under the UNCITRAL Arbitration Rules in July 2021?
c) Explain the policy reasons underlying the trend towards increased transparency in ISDS
and how this fits into current reform initiatives around ISDS, with reference to the current
work of UNCITRAL Working Group III. (7marks)

3) Assume that FS succeeds in obtaining a successful decision against the Mauritian government
in the arbitral proceedings.
a) Assume that proceedings were conducted under the ICSID Arbitration Rules and that the
Mauritian government is threatening to challenge the award. Advise FS what remedies
are available to the government against the award, and how FS should go about enforcing
the award.
b) Assume that instead the decision was obtained in proceedings under the UNCITRAL
Arbitration Rules in an arbitration seated in Mauritius. Advise FS how it should go about
enforcing the award and how Mauritius might seek to resist enforcement. (6 marks)

[TOTAL PART B: 20 MARKS]

TOTAL: 80 MARKS