International Arbitration: PetroTech v. PPD - Contract Breach Report

This memorandum outlines the arguments presented in an arbitration case between PetroTech, a US-based company, and PPD, a Syrian company. The dispute arises from an international sales agreement for aerial exploration equipment. PetroTech alleges that PPD breached the contract by retaining the equipment beyond the agreed-upon test period without purchasing it. The report details PetroTech's claims for damages, including the price of the equipment and accrued interest. Key arguments include the Tribunal's jurisdiction, the need for PPD to produce relevant documents, and the calculation of lost profits. The report emphasizes the application of the UN Convention on Contracts for the International Sale of Goods (CISG) and addresses the limitations imposed by the arbitration clause. The core of the dispute revolves around the interpretation of the contract terms, specifically concerning the equipment's usage period and the resulting financial obligations. The report seeks to establish PPD's liability for breach of contract and the associated financial remedies.

MEMORANDUM FOR CLAIMANT
PetroTech

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MEMORANDUM FOR CLAIMANT
On behalf of:
PetroTech,
Dallas
Texas.
CLAIMANT
Against:
PPD,
Syria.
RESPONDENT

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STATEMENT OF FACTS
1. PetroTech (“CLAIMANT”), is an American company that develops and sells high-
tech equipment that can be used in the aerial exploration of natural gas and oil, based
in Dallas, Texas. PPD ("RESPONDENT," jointly with CLAIMANT, the "Parties"), is
one a Syrian company engaged in the business of oil exploration which it has the
limit to only inside Syria.
2. In 2008, the Parties entered into an International Sales Agreement (“Contract”) which
provided that the RESPONDENT was allowed to use the equipment of the
CLAIMANT for a particular time period which was considered to be a test period and
was mentioned in terms of the contract. The Contract was made for using of
equipment by the RESPONDENT up to the test period and paying the price for each
equipment to the CLAIMANT in case the RESPONDENT wishes to purchase that
equipment. Article 20 of the Contract (“Arbitration Clause”) provided that the
disputes between CLAIMANT and RESPONDENT shall be decided by arbitration in
Syria. The Contract is said to be governed by the laws which incorporate the UN
Convention on Contracts for the International Sale of Goods ("CISG").
3. A fixed test period was dating from...…to…..had been mentioned in terms of contract
for the use of equipment by the Respondent. But the RESPONDENT had retained all
the equipment beyond this designated period which was mentioned in the contract.
4. The CLAIMANT has asked the RESPONDENT to pay the price for the equipment as
it was agreed in the contract that the RESPONDENT could use the equipment only up
to the designated time period and beyond that it will have to pay the price of all the

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equipment as it will be deemed that the RESPONDENT wants to make a purchase of
all those equipment.
5. On asking by the CLAIMANT to pay the price for all the equipment, the
RESPONDENT made several contentions that it believed absolved it of any kind of
liability that it must be owing towards the CLAIMANT.
6. But the CLAIMANT considered it as a breach of contract and following the failure of
RESPONDENT’S action for a declaration of non-liability, CLAIMANT initiated the
current arbitration by filing a Statement of Claim (“SoC”) on ….. The Arbitral
Tribunal was constituted on ……..it was decided by the Tribunal on….,
RESPONDENT had entered into an enforceable sales contract with the CLAIMANT
and also that there has been a breach of contract. In response to this, the CLAIMANT
now wants to move further to claim the damages from the RESPONDENT on
account of the breach of contract done by him and also for the interest that might have
accrued because of RESPONDENT’S breach of contract.
SUMMARY OF ARGUMENTS
1. CLAIMANT and RESPONDENT had agreed to a contract for the sale of equipment that
is used in the aerial exploration of gas and oil. RESPONDENT breached the Contract and
sought to profit by using the equipment for oil exploration beyond the stipulated test time
as agreed by the CLAIMANT thereby getting commercial gains. RESPONDENT’S
breach forced CLAIMANT to ask the RESPONDENT to pay the price for all the
equipment. In response, RESPONDENT sought a declaration of non-liability by making
several contentions that it believed absolved it of any liability to the CLAIMANT.
CLAIMANT’S successful defense against that action has led the arbitration to decide that

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the there was an enforceable sales contract between the CLAIMANT and the
RESPONDENT and also that there has been a breach of the sales contract by the
RESPONDENT. CLAIMANT has requested for the damages for the breach of the
contract along with the interest that might have incurred.
2. First, the Tribunal has jurisdiction to hear this matter. Second, the Tribunal also has the
power to order the production of any document under the law that governs the Contract
and international practice. The Parties have given the Tribunal this power by virtue of the
agreement. The Tribunal must use this power and must order RESPONDENT to produce
any specific documents in relation the time period for the use of the equipment and any
other negotiation with CLAIMANT as these documents are considered as material and
relevant to the dispute. These documents are also considered vital in ascertaining the
quantum of CLAIMANT’S remedy. Accordingly, the Tribunal must try to preserve
CLAIMANT’S right to be heard and thus must order the production of the documents
(Spence, 2015).
3. Finally, RESPONDENT’S breach has caused the CLAIMANT to suffer lost profits. Thus
the CLAIMANT is entitled to the compensation for these losses. It is very difficult to
calculate CLAIMANT’S lost profits precisely, but are most likely to be the price of the
equipment that was hold by the RESPONDENT beyond the stipulated test period, and
accordingly, CLAIMANT requests the Tribunal to award it the price of the equipment
retained by the RESPONDENT beyond the stipulated test period as a measure of its loss.
Regardless, RESPONDENT should not be allowed to profit from breaching the Contract
in bad faith. Accordingly, the Tribunal should require RESPONDENT to disgorge its
profits, if any, derived from the exploration of oil by using the equipment so retained in

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order to compensate CLAIMANT for its lost profits. Also, the CLAIMANT has asked for
the interests to be awarded to him besides the price of the equipment as damages.
ARGUMENTS
I. THE ARBITRAL TRIBUNAL HAS JURISDICTION TO HEAR THE DISPUTE.
1. The jurisdiction of the Tribunal to hear this dispute is unchallenged.
II. THE ARBITRAL TRIBUNAL SHOULD ORDER RESPONDENT TO PRODUCE
THE DOCUMENTS CLAIMANT REQUESTED.
2. 2. In order to prove the damages rightfully which shall be due to CLAIMANT, the
CLAIMANT seeks the production of various documents which are both relevant to the
claims and material to the outcome of the dispute. CLAIMANT has requested the
Tribunal to order RESPONDENT to provide CLAIMANT with all documents from
the period of …. To …. (that is, from entering into the contract to the period up to
which the equipment was retained by the RESPONDENT) pertaining to
communications that were made between RESPONDENT and CLAIMANT with
respect to the stipulated test period and “any contractual documents”, including
documents relating to the negotiation for the price of each equipment beyond that test
period or in case the RESPONDENT wants to purchase them, as entered in the
contract between CLAIMANT and RESPONDENT, including the number of
equipment purchased and their actual purchase price” (KIM, 2017).
3. In the Arbitration Clause, the Parties agreed that "no discovery shall be allowed." By
the term "discovery," the Parties meant to exclude any other discovery proceedings
like those which are conducted in the US, which involves requests for "all types of
documents, depositions, and interrogatories." However, the Parties have not agreed to

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eliminate document production in its complete sense. This brings upon the Tribunal’s
duty to ensure that the Parties’ right to be heard is not being infringed in any way and
which would be the case if no document production were granted. Thus, for these
purposes, the Tribunal has the power to order RESPONDENT to produce the
documents that have been requested by the CLAIMANT, and the Tribunal must
exercise that power by ordering the production of documents.
A. The Tribunal has the power to order RESPONDENT to produce
documents.
1. The discovery clause limits the Tribunal’s power but does not extinguish its power to order
document production.
4. The Parties here are free to make any special agreement clauses which may be
pursuant to UNCITRAL Article 19 as they have done in this particular case. Under
this Contract, the Parties had made a special agreement providing that "no discovery
shall be allowed." This limitation on discovery has limited the Tribunal’s power to
order the production of any document, but it has not extinguished it completely. It has
been suggested that a discovery provision as contained in any contract generally only
provides for debate as to the scope of discovery that can be ordered (Issa, 2015).
5. Here, the interpretation of the discovery clause is governed by the CISG which does
not equate it to document production. CLAIMANT intended for the discovery clause
in order to exclude the US-style of discovery.
6. Whenever there is any ambiguity between the parties with regards to the issue of
interpreting intent, then the CISG Article 8(3) governs it and seeks for an
understanding that a reasonable person would have had, with due consideration to all
other relevant circumstances of the case, including all the negotiations, any other

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practices which the Parties might have established between themselves, usages and
any subsequent conduct of the Parties.
B. The Tribunal should order RESPONDENT to produce documents.
7. CLAIMANT requests that the Tribunal must order RESPONDENT to provide
CLAIMANT with a narrow set of documents from the period of ….. To …. Pertaining
to the communications between RESPONDENT and CLAIMANT with respect to the
negotiations for and the purchase of equipment. The Tribunal may order a party to
produce any documents which the requesting Party might think are relevant to the case
and are material to its outcome (Gillette, 2015).
C. Refusing the specifically requested documents would impair CLAIMANT’S
opportunity to be heard.
8. The documents which are requested by the CLAIMANT which are pertaining to the
negotiations between CLAIMANT and the RESPONDENT are relevant and material
to the outcome of the damages. Thus, the CLAIMANT further provides that they are
sufficiently specific to meet the standards set out in the international procedure of sale
between the parties. Refusing to the request of the CLAIMANT, the opportunity to
access such documents would be considered as an infringement on of the fundamental
right of being heard of the CLAIMANT.
III. CLAIMANT IS ENTITLED TO RECOVER ITS DAMAGES
9. The CISG has defined the damages as the “loss, including loss of profit, which has been
suffered by the other part on account of the breach by one party” [Art. 74 CISG]. The Article
74 of the CISG provides for the principle which talks about full compensation to be made to

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the aggrieved party as the damages on account of the breach by the other party which is
limited by the application of the doctrines of foreseeability and mitigation (Muñoz, 2016).
Thus, in this way the innocent party is to be fully compensated for all foreseeable loss that it
might have suffered due to the breach of the contract subject to the fact that it adequately
mitigates its losses. It has been made clear by The Secretariat Commentary on the 1978 Draft
of the Convention which is considered as the closest document to an Official Commentary on
the CISG that “the major philosophy of the action for providing for damages to the injured
party is mainly in order to place that injured party in the same economic position as he/she
would have been in in case the contract had not been breached and had been performed.
A. The price of each equipment constitutes loss for the purposes of Article 74
10. CLAIMANT’S price of the equipment is recoverable as an incidental loss in accordance
with the provisions of Article 74 CISG, which provides that the loss that has been suffered on
account of a breach of contract shall be recoverable. In this sense, the CLAIMANT’S price
for each equipment must constitute as the incidental loss suffered by him, including the
“expenses … incurred in order to avoid any additional disadvantages”. The awarding of such
expenses is being supported by various academic commentary, case laws and relevant
principles given under the law.
11. It has also been provided under the Article 75 of the CISG that the damages are to be
measured by the difference between the cost of the substitute transaction and the contract
price in case of avoidance of the contract. And that in other cases, the provisions of Article
76 provides that the damage must be measured as the difference between the current price
and the market price of the goods in question (Mai, 2014).

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B. The costs of interest that might have accrued on the cost of that equipment are also
recoverable.
12. Article 78 of the CISG provides that a claim for interest shall be without subject to any
other claim for damages shall be recoverable as under article 74. It has also been provided
that the CISG contains two explicit references with respect to the awarding of interest as
damages, which are namely; Articles 78 and 84(1). Under Article 84(1) it has been provided
that if the party is asked to refund the price, then he must also pay the interest on it, which
shall be measured from the date on which the price was paid. On the other hand, it has been
provided under Article 78, that if a party fails to pay the price, then, in that case, the other
party is also entitled to the interest on it, without subject to any other claims for the damages
that are recoverable under Article 74.
13. But it has also been given that Article 84(1) of CISG refers only to the interest which is to
be collected by the buyer on the price (which is considered to be a liquidated amount)
whereas Article 78 of the CISG refers to the interest which can be collected by the buyer or
by the seller and to interest on the price or any other sum that is in arrears. It has also been
given that the Article 78 is silent as to the application to unliquidated as well as liquidated
damages and no guidance has been provided for calculating such interest, and no guidance as
to the circumstances is given under which pre-judgment interest should be awarded (Lee,
2016)
1. RESPONDENT breached the Arbitration Clause
14. The CLAIMANT considers that the question that whether the CISG is applicable
generally to the arbitration clauses is not relevant to this issue. This is major because the

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Tribunal is more concerned with whether an existing claim for damages in principle covers
completely the various types of damages claimed or not, and which shall be including the
damages that may arise out of the breach of the Arbitration Clause by the RESPONDENT
(Mai, 2016).
2. CLAIMANT is entitled to be compensated for RESPONDENT’S breach of the
Arbitration Clause in the same manner as any other breach of contract
15. RESPONDENT’S failure to perform any of its contractual obligations to pay the price of
the equipment to the CLAIMANT will automatically give the right to the CLAIMANT to
claim for damages under Article 45(1) of the CISG. Thus, the CLAIMANT can claim
damages which have been provided under Article 74, since CLAIMANT will have mitigated
its losses as required under Article 77, and thus the RESPONDENT’S breach will not be
exempted from liability as given under Article 79 of the CISG.
F. The purposes of Article 74 allow the Tribunal to award gain-based damages.
16. It has been given that by compensating an aggrieved party by disgorging the breaching
party of its profits helps in satisfying the purposes of Article 74 of the CISG which talks
about awarding to an aggrieved party a full compensation, good faith, and uniformity. It has
been observed that the primary goal of the Convention is to compensate the aggrieved party
fully and in situations where it is difficult to determine the losses, then gain-based damages
must be allowed as a method to determine the appropriate amount of compensation for the
injured party.
REQUEST FOR RELIEF

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On the basis of the above submissions, the CLAIMANT respectfully requests that the
Tribunal:
(1) Order RESPONDENT to produce the documents requested by CLAIMANT;
(2) Award CLAIMANT damages as the price of the equipment;
(3) Award CLAIMANT damages as the amount of interest that has accrued on that price.
Tribunal, Syria
Date…..
Respectfully submitted,
Name of the first person in legal team
Name of the second person in legal team
Name of the third person in legal team