L1020 - Respondent Memoriallawasiamoot.org/pdf/files2013/internationalrounds/L1020-R.pdf · l1020-r...

L1020-R

THE 8TH LAWASIA INTERNATIONAL MOOT COURT, 2013

IN THE KUALA LUMPUR REGIONAL ARBITRATION CENTRE

AT SINGAPORE

BETWEEN

JACK SMALL LIMITED

Claimant

AND

TAN SEN IMPORTS

Respondent

--MEMORIAL FOR THE RESPONDENT--

I


TABLE OF CONTENTS

INDEX OF AUTHORITIES ................................................................................................ V

STATEMENT OF JURISDICTION .................................................................................... IX

QUESTIONS PRESENTED ................................................................................................ X

STATEMENT OF FACTS .................................................................................................. XI

SUMMARY OF PLEADINGS ........................................................................................ XIII

PLEADINGS ........................................................................................................................ 1

I. THE ARBITRAL TRIBUNAL DOES NOT HAVE THE AUTHORITY TO

ADJUDICATE MATTERS PERTAINING TO UNFAIR TRADE PRACTICES. ...... 1

A. The Law Governing the Arbitration Agreement is the Law of Singapore ............... 1

i. The law governing the arbitration agreement shall be the law of the place of

arbitration. ................................................................................................................. 1

ii. An express choice of the parties overrides the implied choice of selection of the

arbitral seat. ............................................................................................................... 2

iii. The law governing the arbitration agreement shall be subject to the closest

connection test. .......................................................................................................... 3

B. The present matter before the Arbitral Tribunal is not arbitrable ............................ 3

i. There exists a public interest element to the dispute. ............................................ 3

II


ii. The Endangered Species (Import and Export) Act does not provide for the

private right of action................................................................................................. 4

II. THE RESPONDENT HAS NOT ENGAGED IN UNFAIR TRADE PRACTICES

6

A. Singapore law governs the subject matter of the dispute between the parties .......... 6

i. The MAA requires the application of the Conflict of Laws Rules. ....................... 6

ii. Singapore Law must be applied to the subject matter of the dispute according to

the Conflict of Laws Rules......................................................................................... 7

B. Arguendo: The Respondent has not violated the laws of Singapore pertaining to

protection of Endangered Species. ................................................................................. 7

C. The Respondent has not violated the laws of Singapore pertaining to advertising. .. 8

i. The Respondent has not violated the Singapore Code of Advertising Practice,

2008 (“SCAP”). ......................................................................................................... 9

a. The principles derived from the SCAP are not applicable to the present

matter. ................................................................................................................... 9

b. Arguendo: The Respondent has not engaged in deceptive and misleading

advertisement under SCAP. ................................................................................... 9

ii. The Respondent has not violated of the Consumer Protection (Fair Trading)

Act, 2004 (“Consumer Protection Act”). .................................................................. 10

a. The principles of the Consumer Protection Act are not applicable to the

present matter. ..................................................................................................... 10

III


b. Arguendo, The absence of knowledge on the part of the Respondent is a valid

defense under the Consumer Protection Act ......................................................... 10

c. Arguendo, The absence of the intention to deceive is a relevant consideration

under the Consumer Protection Act. ..................................................................... 11

III. THE KLRCA DOES NOT HAVE THE AUHTORITY TO GRANT

PENALTIES FOR FUTURE SALES OF MISLABELED GOODS. .......................... 12

A. The punitive nature of a penalty is contrary to the tribunal’s private nature. ......... 12

i. An agreement to arbitrate does not warrant punitive damages. ........................... 12

ii. Penalties can only be imposed by national courts. .......................................... 12

B. In the absence of inherent authority, the arbitration agreement did not offer explicit

consent. ....................................................................................................................... 13

i. The law of seat does not envisage punitive damages. ......................................... 13

ii. Only explicit consent permits imposition of penalties. .................................... 14

IV. THE KLRCA DOES NOT HAVE THE AUTHORITY TO GRANT INTERIM

RELIEF. ........................................................................................................................ 15

A. The KLRCA Rules do not provide for interim relief. ........................................... 15

i. The parties have agreed not to apply for interim relief. ...................................... 15

ii. Arguendo, Article 26 of the UNCITRAL Rules envisages only temporary

measures. ................................................................................................................. 15

iii. The KLRCA lacks adequate supervisory power. ............................................ 16

IV


B. The permanent injunction is not an award and cannot be enforced. ...................... 16

i. The injunction does not resolve a substantive issue. ........................................... 16

ii. Orders cannot be enforced. ............................................................................. 17

iii. The Permanent Injunction is not an ‘award’. .................................................. 17

iv. In any case, the award is beyond the scope of the arbitration. ......................... 18

CONCLUSION AND PRAYER FOR RELIEF ................................................................... 19

V


INDEX OF AUTHORITIES

CASES

Adams v. ETA Foods Ltd, (1987) 78 A.L.R. 611 (Australia). ............................................... 11

Aloe Vera of America, Inc. v. Asianic Food (S) Pte. Ltd. & Anor, [2006] 3 S.L.R. 174. ......... 4

Amin Rasheed Shipping Corporation v. Kuwait Insurance Co., [1984] A.C. 50. .................... 3

Bonython v. Commonwealth of Australia, [1951] AC 201, 219 (Privy Council on appeal from

Australia). ......................................................................................................................... 7

Bradford House Pty Ltd. v. Leroy Fashion Group Ltd., (1983) 46 A.L.R. 305 (Australia). .. 11

Comandate Marine Corp v. Pan Australia Shipping Pty Ltd., [2006] FCAFC 192, 200. ........ 4

Compagnie Tunisienne de Navigation S.A. v. Compagnie d’Armement Maritime S.A., [1971]

A.C. 572, 596. ................................................................................................................... 2

Des Forges v. Wright [1996] 2 N.Z.L.R. 758 (New Zealand). ............................................. 10

Garrity v. Lyle Stuart Inc., 353 N.E.2d 354, 359 (N.Y. App. Div. 1976)........................... 12

Henjo Investments Pty. Ltd. v. Collins Marrickville Pty. Ltd (1989) 79 A.L.R. 83 at 92

(Australia). ...................................................................................................................... 11

Judgment of 30 May 1994, XX Y.B. Comm. Arb. 745.747 (Tokyo High Court) (1995) ......... 1

Judgment of 4 August 1993, Owerri Commercial Inc. v. Dielle Srl, XIX Y.B. Comm. Arb.

703, 706 (Hague Gerechtshof) (1994) ................................................................................ 3

Larsen Oil and Gas Pte Ltd v. Petroprod Ltd, [2011] SGCA 21 [Singapore]. ........................ 4

Lloyd’s London v. Argonaut Ins., 264 F.Supp.2d 926, 944 (N.D. Cal. 2003) 55 ................... 14

VI


McDaniel v. Bear Stearns & Co. 196 F.Supp 2d 343, 364 (S.D.N.Y.2002) ....................... 14

Nicola v. Ideal Image Development Corporation Incorporated, [2009] FCA 1177. ............... 4

R. v. International Trustee for the Protection of Bondholders, [1937] A.C. 500, 529. ............ 2

Re An Arbitration Between Hainan Machinery Import and Export Corp and Donald &

McArthy Pte Ltd, [1995] SGHC 232. ................................................................................. 1

Re United Railways of Havana, etc., Warehouses Ltd., [1960] Ch. , 91(C.A.)........................ 3

Resort Condominiums Int’l Inc. v. Bolwell, XX Y.B Comm. Arb. 628 (Queensland Supreme

Court, Australia). ............................................................................................................. 17

Spedley Securities Ltd. (in liq) v. Bank of New Zealand, (1991) A.T.P.R. 41 at 53 (Australia).

........................................................................................................................................ 10

Superadio Ltd Partnership v. Walt “Baby” Love Prod. Inc., 818 N.E.2d 589, 593 (Mass. Ct.

App. 2004). ..................................................................................................................... 14

The Hollandia, [1983] 1 A.C. 565. ........................................................................................ 3

Vita Foods Products Inc. v. Unus Shipping Co. Ltd., [1939] A.C. 277, 299 (P.C.). ................ 2

Westbrook International LLC v. Westbrook Tech. Inc., 17 F.Supp.2d 681 (E.D. Mich. 1998). 2

Whitworth Street Estates (Manchester) Ltd. v. James Milller and Partners Ltd. [1970] AC

583, 603 (England). ........................................................................................................... 7

Y.K. Fung Securities Sdn Bhd v. James Cape (Far East) Ltd, 3 [1997] 2 MLJ 621. ............... 7

STATUTES/CONVENTIONS

Consumer Protection (Fair Trading) Act, 2004 .................................................................... 10

VII


Endangered Species (Import and Export) Act, 2008 .............................................................. 4

Malaysian Arbitration Act, 2005 ........................................................................................... 6

Singapore Arbitration Act, 2001 .......................................................................................... 18

Singapore Code of Advertising Practice, 2008....................................................................... 9

OTHER AUTHORITIES

Resolutions de l’Institut de droit international, 1957-1991 (1992), 409. ................................ 2

Singapore Code of Advertising Practice, CONSUMER ASSOCIATION OF SINGAPORE (CASE),

http://www.case.org.sg/Advertising_code.html. ................................................................. 9

Singapore Parliamentary Debates, Vol. 76, No. 24 .............................................................. 11

RULES

Kuala Lumpur Regional Centre for Arbitration Fast Track Rules, (2nd Edition, 2012).......... 15

UNCITRAL Arbitration Rules, 2011. .................................................................................. 15

TREATISES

Goldman, The Complementary Rules of Judges and Arbitrators in Ensuring that

International Commercial Arbitration is Effective, 257, 278 (ICC Publication No. 412,

1984).....................................................................................................................................12

BOOKS

Alan Redfern & Martin Hunter, Law and Practice of International Commercial Arbitration

(London, Sweet & Maxwell, Second Edition, 1991) .................................................... 3, 17

Arthur W Rovine, Contemporary Issues in Arbitration and Mediation, 190, (2007) ........... 16

VIII


Eady, David and Smith, A.T.H. (eds) Arlidge, Eady and Smith, On Contempt (2d ed., Sweet

& Maxwell 1999) ............................................................................................................ 13

G. Petrochilos, Procedural Law in International Arbitration 64, 207 (2004) ......................... 1

Gary B. Born, International Commercial Arbitration, Vol. I (3rd ed., The Hague, Kluwer

Law International, 2009) ................................................................................................... 2

Gary B. Born, International Commercial Arbitration, Vol. II (3rd ed., The Hague, Kluwer

Law International, 2009) ................................................................................................. 23

J. Lew, L. Mistelis & S. Kroll, Comparative International Commercial Arbitration, ¶¶24-25

(2003). ............................................................................................................................ 17

W. Craig, W. Park, J. Paulsson, International Chamber of Commerce Arbitration ¶12.01 (3rd

ed. 2000) ........................................................................................................................... 1

ARTICLES

Bernard Hanotiau, The Law Applicable to Arbitrability, in Albert Jan ven den Derg (ed.),

Imporving Efficiency of Arbitration and Awards; 40 Years of Application of the New York

Convention, ICCA Congress Series, Volume 9 (The Hauge, Kluwer Law International,

1998) ................................................................................................................................. 4

Elder, The Case Against Arbitral Awards of Specific Performance in Transnational

Commercial Disputes, 13 Arb. Int’l 1 (1997). .................................................................. 16

J.-P Lachmann, Handbuch fur die Schiedsverfahrens, ¶2060 (3rd. ed., 2003). ..................... 17

IX


STATEMENT OF JURISDICTION

Jack Small Limited (“Claimant”) and Tan Sen Imports (“Respondent”) jointly submit the

present dispute to the Kuala Lumpur Regional Centre for Arbitration (“KLRCA”), Malaysia,

according to the KLRCA Fast Track Rules (“KLRCA Rules”).

The dispute includes issues on the Tribunal’s jurisdiction. Pursuant to Article 6 of the

KLRCA Rules, the Tribunal may elect to rule on its jurisdiction as a preliminary question or

in an award on its merits. Both parties shall accept the judgment of the Tribunal as final and

binding and execute it in good faith in its entirety.

X


QUESTIONS PRESENTED

I. WHETHER THE ARBITRATION TRIBUNAL HAS THE AUTHORITY TO ADJUDICATE

MATTERS PERTAINING TO UNFAIR TRADE PRACTICES?

II. WHETHER THE RESPONDENT HAS ENGAGED IN UNFAIR TRADE PRACTICES?

III. WHETHER THE KLRCA HAS THE AUTHORITY TO ESTABLISH PENALTIES FOR

FUTURE SALE OF MISLABELLED GOODS?

IV. WHETHER THE KLRCA HAS THE AUTHORITY TO GRANT A PERMANENT INJUNCTION

ENFORCEABLE IN SINGAPORE?

XI


STATEMENT OF FACTS

BACKGROUND

There is a business dispute between two parties, Jack Small Ltd. (hereinafter CLAIMANT) and

Tan Sen Imports (hereinafter RESPONDENT) who own and operate Singapore departmental

stores selling garments, including fur garments. There are two types of fur sold in the market,

real fur and faux fur. Faux fur is synthetically designed to closely resemble real fur. The

claimant complained to the Enforcement Support Office of the Convention on International

Trade in Endangered Species (CITES) that the Respondentwas selling real fur products made

from the fur of endangered species, the ‘Asian Golden Cat’. Trade or sale in any fur products

made from the pelts of endangered species is prohibited by CITES.

DISPUTE

Upon investigation, it was found that the Respondentwas selling real fur of the Asian Golden

Cat, and advertising it as “having the touch, feel and smell of real fur”. The

Respondentclaims to have acquired these products from China Fur, who represented the fur

as being made from the pelts of “Asian cats”. This sale by the Respondentresulted in a loss of

sales to the claimant.

Unable to resolve their issue, the parties agreed to submit their dispute to binding arbitration

in accordance with the rules for arbitration of the Kuala Lumpur Regional Centre for

Arbitration (hereinafter “KL Rules”), namely, the “Fast Track” rules. All hearings and

proceedings were to be held in Singapore. The parties did not decide the law applicable to

resolving the dispute.

XII


CLAIMS AND COUNTER-CLAIMS

Around 60% of the claimants total sales include fur products, which amounts to over 90% of

its profits. Since the Respondentstarted to sell real fur of the Asian Golden Cat, the claimant’s

total sales reduced by 40% and fur products sale by 70%. The claimant asserted before the

Tribunal that the Respondenthas engaged in unfair practices by violating the Endangered

Species (Import and Export) Act and CITES, not disclosing to the public that the fur was

made of endangered species and engaging in deceptive and misleading advertising. The

claimant requested an order to refrain the Respondentfrom carrying out, promoting, and/or

selling the fur of any endangered species. Further, a penalty of 500 USD was claimed for

each item sold by the Respondent containing the fur of an endangered species, and this

amount would be donated to The Nature Society (Singapore).

The Respondent contended that it had no knowledge of the fur being real, and that buyers too

could not generally tell the difference between real and faux fur. The Respondent claimed

that advertising a product to have the “touch, feel and smell of real fur” does not constitute

misleading and deceptive advertising, as it was indeed true.

Moreover, it stated that neither the Endangered Species (Import and Export) Act, nor CITES

allows a private right of action between businesses for the violation of their provisions. Only

the Government possesses the authority to enforce its laws and treaty obligations.

Further, it was asserted that the Arbitral Tribunal lacks the authority to award a “penalty” for

the future sale of mislabelled goods. The Respondent held that the under the KL rules, which

follows Article 26 of UNCITRAL Arbitration Rules, the Arbitral Tribunal does not possess

the authority to impose future injunctive relief. Under Article 26 only an interim relief can be

claimed and not a permanent injunction and that no Singapore Court would enforce such an

order.

XIII


SUMMARY OF PLEADINGS

I. THE ARBITRATION TRIBUNAL DOES NOT THE AUTHORITY TO ADJUDICATE MATTERS

PERTAINING TO UNFAIR TRADE PRACTICES.

Since the parties have expressly designated the place of arbitration to be Singapore, the laws

of Singapore govern the arbitration agreement. Under such laws, the present dispute is not

arbitrable by virtue of the existence of an element of public policy associated with it.

Furthermore, since the Endangered Species (Import and Export) Act, 2008 does not envisage

a right of private action, the present dispute is not arbitrable.

II. THE RESPONDENT HAS NOT ENGAGED IN UNFAIR TRADE PRACTICES.

By the application of the closest connection test, the subject matter of the present dispute is

governed by Singapore Law. Under such law, the Respondent has not engaged in activities in

violation of the laws protecting endangered species, i.e. the CITES and the Endangered

Species (Import and Export) Act, 2008. Furthermore, the Respondent has not engaged in

misleading and deceptive advertising, which is in contravention to the Singapore Code of

Advertising Practice and the Consumer Protection (Fair Trading) Act, 2004.

III. THE KLRCA DOES NOT HAVE THE AUTHORITY TO ESTABLISH PENALTIES FOR

FUTURE SALE OF MISLABELLED GOODS.

The KLRCA lacks authority to impose penalties on the Respondents because first their

punitive nature runs contrary to the KLRCA’s private nature. A penalty is contrary to the

Arbitral Tribunal’s private nature because an agreement to arbitrate does not warrant punitive

damages. Moreover, penalties can only be imposed by national courts.

Second, the arbitration agreement did not offer express consent to establish penalties in the

absence of inherent authority. The arbitration agreement between the parties did not offer

XIV


explicit consent to establish penalties. In the absence of such authority, the law of the seat

does not envisage punitive damages. Further, only explicit consent permits imposition of

penalties.

IV. THE KLRCA DOES NOT HAVE THE AUTHORITY TO GRANT A PERMANENT

INJUNCTION ENFORCEABLE IN SINGAPORE.

In the present matter, the Arbitral Tribunal cannot grant interim relief because the KLRCA

Fast Track rules do not provide for the same. Additionally, the permanent injunction is not an

award and cannot be enforced by courts in Singapore.

The KLRCA cannot grant interim relief because the Rules governing the arbitration do not

provide for interim relief since the parties have agreed not apply for it. Additionally, Art. 26

of the UNCITRAL Rules envisage only temporary relief. Lastly, the KLRCA lacks adequate

supervisory power.

The permanent injunction is not an “award” because the injunction does not resolve a

substantive issue. Second, the injunction does not resolve a substantive issue. Third, orders

cannot be enforced. Fourth, the permanent injunction is not an ‘award’. Fifth, arguendo it is

an award, it is beyond the scope of the arbitration and hence, is unenforceable.

1


PLEADINGS

I. THE ARBITRAL TRIBUNAL DOES NOT HAVE THE AUTHORITY TO

ADJUDICATE MATTERS PERTAINING TO UNFAIR TRADE PRACTICES.

1. Since Singapore law governs the arbitration agreement [A], and under such law the

arbitrability of the present dispute cannot be furthered [B], it is contended that the arbitral

tribunal does not have the authority to adjudicate the present matter.

A. THE LAW GOVERNING THE ARBITRATION AGREEMENT IS THE LAW OF SINGAPORE

2. By virtue of the place of arbitration being Singapore, the law governing the arbitration

agreement shall be Singapore law [i]. Furthermore, since an express choice of the parties

overrides an implied choice of selection of seat [ii] and on application of the closest-

connection test [iii], it may be concluded that the arbitration agreement between the

parties to the dispute would be governed by Singapore law.

i. The law governing the arbitration agreement shall be the law of the place of

arbitration.

3. In a vast majority of cases, it is observed that the country chosen as the place of the

arbitration is the same as that of the seat.1 In almost all cases, there is no difference in the

meaning intended by the use of terms such as seat, place, forum, etc.2 The law of the

place of arbitration shall apply to the agreement in the absence of express will of the

parties regarding the governing law.3 Furthermore, the selection of a certain place for

1 G. Petrochilos, Procedural Law in International Arbitration 64, 207 (2004). 2 W. Craig, W. Park, J. Paulsson, International Chamber of Commerce Arbitration ¶12.01 (3d ed., 2000). 3 Judgment of 30 May 1994, XX Y.B. Comm. Arb. 745.747 (Tokyo High Court) (1995); Re An Arbitration Between Hainan Machinery Import and Export Corp and Donald & McArthy Pte Ltd, [1995] SGHC 232 (Singapore High Court).

2


arbitration is an indication that the parties intended the law of that place to govern the

arbitration agreement.4

4. In view of the above, it is contended that since the parties have expressly demarcated

Singapore to be the place where the arbitral proceedings shall be conducted,5 it was their

implied intention to have it as the seat of the arbitration. Thus, it follows that the law

governing the arbitration agreement shall be that of the State of Singapore.

ii. An express choice of the parties overrides the implied choice of selection of the

arbitral seat.

5. It is the fundamental principle of the rule of conflict of laws that intention is the general

test of what law is to apply.6 In cases wherein there exists an express choice of law with

respect to the law of the contract, assuming its bonafides, that choice shall be conclusive.7

Furthermore, if certain Institutional Arbitration Rules provide for the selection of the seat

of arbitration, it would be applicable only when the parties have failed to make a choice

of the forum explicitly,8 and provisions within the scope of such rules governing

arbitration proceedings will not override the express selection of the arbitral seat by the

parties to the arbitration.9

6. Therefore, in furtherance of the autonomy of the parties, which is a fundamental principle

of Private International Law,10since they have explicitly required Singapore to the place

for the conduct of the arbitral proceedings,11 the claimant contends that the laws of

Singapore must be applied as the law governing the arbitration agreement.

4 Compagnie Tunisienne de Navigation S.A. v. Compagnie d’Armement Maritime S.A., [1971] A.C. 572, 596. 5 Proposition, P.3. 6 Vita Foods Products Inc. v. Unus Shipping Co. Ltd., [1939] A.C. 277, 299 (P.C.). 7 R. v. International Trustee for the Protection of Bondholders, [1937] A.C. 500, 529. 8 Gary B. Born, International Commercial Arbitration, Vol. I (3d ed., The Hague, Kluwer Law International, 2009), P.1679 [hereinafter “Gary Born I”]. 9 Westbrook International LLC v. Westbrook Tech. Inc., 17 F.Supp.2d 681 (E.D. Mich. 1998). 10 Resolutions de l’Institut de droit international, 1957-1991 (1992), 409. 11 Proposition, P.3.

3


iii. The law governing the arbitration agreement shall be subject to the closest

connection test.

7. Where all other elements relevant to the dispute are connected with one country only, the

fact that the parties have chosen a law does not prejudice the application of the rules of

that country to the contract.12 In the absence of the parties’ express intention, the

arbitration agreement is governed by the system of law with which the transaction has its

closest and most real connection.13 In determining such system of law, factors such as the

place of contracting, the place of performance, the place of residence or business of the

parties and the nature and the subject matter of the contract must be considered.14 In the

present factual matrix, since the place of business,15 and contracting16 of the parties is

Singapore, the law governing the arbitration agreement should be that of Singapore, and

not Malaysia.

B. THE PRESENT MATTER BEFORE THE ARBITRAL TRIBUNAL IS NOT ARBITRABLE

8. Since there exists a public interest in the dispute between the parties [i] and as the

Endangered Species (Import and Export) Act, 2008 (hereinafter “the Act”) does not

provide for a private right of action [ii], the present matter before the Arbitral Tribunal is

not arbitrable.

i. There exists a public interest element to the dispute.

9. Each state may decide, in accordance with its own economic and social policy which

matters may be settled by arbitration and which may not.17 If the matter does not involve

12 The Hollandia, [1983] 1 A.C. 565. 13 Judgment of 4 August 1993, Owerri Commercial Inc. v. Dielle Srl, XIX Y.B. Comm. Arb. 703, 706 (Hague Gerechtshof) (1994); Amin Rasheed Shipping Corporation v. Kuwait Insurance Co., [1984] A.C. 50. 14 Re United Railways of Havana, etc., Warehouses Ltd., [1960] Ch. , 91(C.A.). 15 Proposition, P.1. 16 Id. at P.3. 17 Alan Redfern & Martin Hunter, Law and Practice of International Commercial Arbitration (London, Sweet & Maxwell, Second Edition, 1991), P.137.

4


broader public interest, it is not prevented from being decided by arbitration.18 But, if

there exists a public interest element in the dispute, then, under Singapore Law, the matter

would not be arbitrable.19 In the present case, as it the alleged violation on the part of the

Respondents is of a criminal statute,20 it is reasonable to assume that such transgressions

have implications towards larger public interest, and hence, such a right matter would not

be arbitrable.

ii. The Endangered Species (Import and Export) Act does not provide for the

private right of action.

10. The notion of “capable of being settled by arbitration” or “arbitrability” is to be

understood as dealing with the question “whether the dispute is of the type that comes

properly within the domain of arbitration.”21 If under the law governing arbitrability, the

dispute is not capable of settlement by arbitration, then the arbitral tribunal should declare

itself incompetent to hear the dispute.22 Under the Endangered Species Act, the power of

inspection,23 of investigation,24 entry search and seizure25 and arrest26 is vested only in

authorized officers and the Director-General, with no scope for private right of action or

private procedure. It has further been held in the case of Larsen Oil and Gas Pte Ltd v.

Petroprod Ltd.,27 that those claims which are in rem cannot be undertaken by private

individuals and therefore are non-arbitrable.

11. Furthermore, in the present case, the right of private action is not vested with parties

under the Endangered Species Act by virtue of it being a penal statute. It therefore

18 Nicola v. Ideal Image Development Corporation Incorporated, [2009] FCA 1177. 19 Aloe Vera of America, Inc. v. Asianic Food (S) Pte. Ltd. & Anor, [2006] 3 S.L.R. 174. 20 Endangered Species (Import and Export) Act, 2008 [hereinafter “Endangered Species Act”]. 21 Comandate Marine Corp v. Pan Australia Shipping Pty Ltd., [2006] FCAFC 192, 200. 22 Bernard Hanotiau, The Law Applicable to Arbitrability, in Albert Jan ven den Derg (ed.), Imporving Efficiency of Arbitration and Awards; 40 Years of Application of the New York Convention, ICCA Congress Series, IX (The Hauge, Kluwer Law International, 1998), P.157. 23 §9, Endangered Species Act. 24 §10, Endangered Species Act. 25 §11, Endagered Species Act. 26 §14, Endangered Species Act. 27 Larsen Oil and Gas Pte Ltd v. Petroprod Ltd, [2011] SGCA 21 [Singapore].

5


follows that action against any violation of any right in rem would not be the private

prerogative of any individual, but of the State. This case falls within this category as there

is no relevant provision under the Endangered Species Act, the Act is in the nature of a

penal statute and thereby, gives merely a right in rem which is non-arbitrable.

6


II. THE RESPONDENT HAS NOT ENGAGED IN UNFAIR TRADE PRACTICES

12. Laws of Singapore govern the subject matter of the dispute between the parties to the

arbitral proceeding [A]. Under Singapore law, the Respondent has neither violated the

Singapore law pertaining to protection of endangered species [B] nor the laws pertaining

to advertising [C]. Therefore, unfair trade practices cannot be alleged against him.

A. SINGAPORE LAW GOVERNS THE SUBJECT MATTER OF THE DISPUTE BETWEEN THE PARTIES

13. Section 30(4) of the Malaysian Arbitration Act, 2005 (hereinafter “MAA”) states that the

tribunal should apply the law determined by the conflict of laws rules whenever there is

no agreement relating to the choice of law [i]. Following these rules, the domestic law of

Singapore is the applicable law [ii].

i. The MAA requires the application of the Conflict of Laws Rules.

14. The MAA states that in the absence of an agreement deciding the law applicable, the

arbitral tribunal shall apply the law determined by the conflict of laws rule.28

Furthermore, they are also derived from a place, which the parties can be considered to

have impliedly regarded as acceptable.29 This is especially so where the place of

arbitration was agreed upon by the parties themselves.30 Employing the conflict rules of

the seat is certain and efficacious, avoiding the complexity and ambiguity of arbitrators

deciding between various existing conflicts rules, or even developing new ones.

28 §30(4), Malaysian Arbitration Act, 2005. 29 Gary B. Born, International Commercial Arbitration, II (3d ed., The Hague, Kluwer Law International, 2009), P.2139 [hereinafter “Gary Born II”]. 30 Id.

7


ii. Singapore Law must be applied to the subject matter of the dispute according

to the Conflict of Laws Rules.

15. The applicable law under Malaysian conflict rules depends on express or inferred

intention of the parties.31 In the absence of intention, the applicable law is that with the

“closest and most real connection” to the transaction.32

16. The Malaysia Court of Appeal held that the determination of the law with the “closest and

most real connection” involved consideration of several connecting factors. These

include: the place of performance, the place of contracting, the places of residence or

business of the parties, and the nature and subject matter of the contract.33 The facts in

this particular case provide no precise guidance as to the intention of the parties,

therefore, the closest and most real connection test should be applied. The place of

agreeing to arbitrate and the place of business of parties are both Singapore. Furthermore,

even the nature and subject matter of the contract point to Singapore. The alleged false

and misleading advertising and violation of the laws of endangered species are within the

territory of Singapore. Therefore, applying the closest and most real connection test, it is

clear that the law governing the substantive aspects of the dispute is the Singapore

domestic law.

B. ARGUENDO: THE RESPONDENT HAS NOT VIOLATED THE LAWS OF SINGAPORE PERTAINING TO

PROTECTION OF ENDANGERED SPECIES.

17. In the alternative, even if it is held that a private right of action exists and the matter is

arbitrable, the Respondent has not violated any provisions of the Endangered Species

(Import and Export) Act, 2008 (“Act”). Singapore by virtue of being a party to the CITES

enforces it in its territory through the Act. Under this Act, it is stated that the export or

31 Whitworth Street Estates (Manchester) Ltd. v. James Milller and Partners Ltd. [1970] AC 583, 603 (England). 32 Bonython v. Commonwealth of Australia, [1951] AC 201, 219 (Privy Council on appeal from Australia). 33 Y.K. Fung Securities Sdn Bhd v. James Cape (Far East) Ltd, 3 [1997] 2 MLJ 621. (Malaysia).

8


import of a scheduled specimen without a permit constitutes an offence.34 There is a

defence to this statement, suggesting that if the offence was committed due to the act or

omission of another, a cause beyond the person’s control and if he took reasonable

precautions to avoid the commission of the same, he cannot be said to have violated the

Act.35

18. The Respondent acquired the goods from China Fur, the manufacturer, and these goods

were made in the Liaoing Province of China.36 Further, the products were represented to

him as being made out of pelts of “Asian Cats”, there was no clear specification relating

to the species of the cat.37 The Respondent merely labelled and advertised the goods.

Further, there is an absence of intention on the part of the Respondent to commit any

offence since he was genuinely unaware of the fact that he was trading in fur of

endangered species. The Respondent could not tell the difference between real fur and

faux fur and it was a cause beyond his control. As the Respondent lacked the awareness

and the knowledge of the actual quality of the fur, he cannot be held liable under the Act.

Therefore, the Respondent has not breached the provisions of the Act and can avail the

defence under Section 6 of the same.

C. THE RESPONDENT HAS NOT VIOLATED THE LAWS OF SINGAPORE PERTAINING TO

ADVERTISING.

19. The Respondent has not engaged in misleading and deceptive advertising as, there is no

violation of the Singapore Code of Advertising Practice, 2008 [i], nor is there a violation

of the Consumer Protection (Fair Trading) Act, 2004 [ii].

34 §4, Endangered Species Act. 35 §6, Endangered Species Act. 36 Clarifications, Second Set, P.1. 37 Clarifications, First Set, P.1.

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i. The Respondent has not violated the Singapore Code of Advertising Practice,

2008 (“SCAP”).

a. The principles derived from the SCAP are not applicable to the present matter.

20. The SCAP is a code by the Consumer Association of Singapore (CASE), a non-

governmental organization.38 The SCAP provides a self-regulatory mechanism. It does

not have a direct legislative mandate; it is an informal source of resolution of advertising

complaints. Therefore, the principles of the SCAP do not have any value of persuasion

before this Tribunal.

b. Arguendo: The Respondent has not engaged in deceptive and misleading

advertisement under SCAP.

21. In the alternative, even if the SCAP were to apply, the Respondent has not violated any of

its principles. The SCAP states that a “truthful presentation” should be provided by

advertisements and that there should be no misleading by way of inaccuracy,

exaggeration, etc.39. Honesty is an important element for advertising40 and no falsity

should be communicated.41 The advertisement by Respondent is a truthful presentation,

since the products were made of real fur, the statement stands true, and furthermore, the

products did have the “touch, feel and smell” of real fur. No falsity was communicated

through the advertisement in relation to the source or quality. There was no intention on

the part of the Respondent to misrepresent the goods to any customers as he himself was

unaware of whether the fur was genuine or faux.42 The Respondent has, in all honesty,

portrayed the advertisements, and to the best of his knowledge, it is a truthful

presentation. Therefore, there is no violation of the SCAP.

38 Singapore Code of Advertising Practice, CONSUMER ASSOCIATION OF SINGAPORE (CASE), available at: http://www.case.org.sg/Advertising_code.html. 39 Part II, §5.1, Singapore Code of Advertising Practice, 2008 [hereinafter “SCAP”]. 40 Part II, §3.1, SCAP. 41 Id. 42 Proposition, P.4.

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ii. The Respondent has not violated of the Consumer Protection (Fair Trading)

Act, 2004 (“Consumer Protection Act”).

a. The principles of the Consumer Protection Act are not applicable to the present

matter.

22. The Consumer Protection Act applies to a dispute if there is a “consumer transaction”

between the parties. A consumer transaction refers to the supply of goods or services by a

supplier to a consumer or an agreement between a supplier and a consumer for goods or

services.43 A consumer is one who receives or has the right to receive goods or services

from a supplier or has a legal obligation to compensate the supplier.44 In order to prove

that the Respondent was indulging in unfair practices, it is first necessary to ascertain that

there is a consumer transaction out of which the claim arises.45 In light of the above, it

may be concluded that there is no consumer transaction between the parties in this

particular matter. The claimant does not fall within the ambit of a “consumer” as he has

no right to receive goods or make payments to the Respondent. As none of these pre-

conditions can be ascertained, the principles of this Consumer Protection Act are not

applicable to the present matter.

b. Arguendo, The absence of knowledge on the part of the Respondent is a valid defense

under the Consumer Protection Act

23. Silence regarding a particular matter can amount to misrepresentation only so far as the

supplier knows of the information to begin with,46 since one cannot inform what is

unaware of. 47 In this particular case, the defendant has clearly stated that he himself could

not tell the difference between the two kinds of fur. The fur was represented to the

43 §2(1), Consumer Protection (Fair Trading) Act, 2004 [hereinafter “Consumer Protection Act”]. 44 Id. 45 Id. at §4,. 46 Spedley Securities Ltd. (in liq) v. Bank of New Zealand, (1991) A.T.P.R. 41 at 53 (Australia). 47 Des Forges v. Wright [1996] 2 N.Z.L.R. 758 (New Zealand).

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Respondent by the manufacturer as being made from the pelts of “Asian Cats”, and there

was no specification as to the type of species.48

24. Further, when a person’s reliance on a third party is reasonable and innocent, then such

person cannot be held liable for misleading or deceptive advertising.49 The defendant in

this case procured the goods from China Fur, a third party. His honest reliance on the

source proves that he cannot be held liable any deceptive or misleading advertisement.

c. Arguendo, The absence of the intention to deceive is a relevant consideration under

the Consumer Protection Act.

25. When the term “deceived” is used, there is an element of intention.50 If a particular

advertisement was not intended to deceive consumers, the supplier cannot be held liable.

Further, in common law it has been held that the caveat emptor principle should be

applied and the consumers themselves should reasonably ascertain the information

provided.51 The Consumer Protection Act does not intend to do away with this caveat

emptor principle.52 Therefore, in this factual matrix, consumers cannot hold the

Respondent liable for their misunderstanding, if any, as his representation was honest and

truthful. The Respondent believes that he had honestly represented the goods and that

there was no intention to mislead or deceive the consumers. Further, there was no element

of falsity in the statements. Even if the defendant admits to have sold real fur, the

statement of advertisement “having the touch, feel and smell of real fur” is true, and is in

no way false.

48 Clarifications, First Set, P.1. 49 Adams v. ETA Foods Ltd, (1987) 78 A.L.R. 611 (Australia). 50 Henjo Investments Pty. Ltd. v. Collins Marrickville Pty. Ltd (1989) 79 A.L.R. 83 at 92 (Australia). 51 Bradford House Pty Ltd. v. Leroy Fashion Group Ltd., (1983) 46 A.L.R. 305 (Australia). 52 Singapore Parliamentary Debates, Vol. 76, No. 24 at P.22.

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III. THE KLRCA DOES NOT HAVE THE AUHTORITY TO GRANT

PENALTIES FOR FUTURE SALES OF MISLABELED GOODS.

26. The KLRCA lacks authority to impose penalties on the Respondents because their

punitive nature runs contrary to the KLRCA’s private nature [A]. In addition, the

arbitration agreement did not offer express consent to establish penalties in the absence of

inherent authority.

A. THE PUNITIVE NATURE OF A PENALTY IS CONTRARY TO THE TRIBUNAL’S PRIVATE NATURE.

27. A penalty is contrary to the Arbitral Tribunal’s private nature because an agreement to

arbitrate does not warrant punitive damages [i]. Moreover, penalties can only be imposed

by national courts [ii].

i. An agreement to arbitrate does not warrant punitive damages.

28. An Arbitral Tribunal has no power to award punitive damages, even if agreed upon by the

parties, because the “freedom of contract does not embrace the freedom to punish, even

by contract.”53 Moreover, the lack of imperium and the absence of statutory basis prevent

a Tribunal from doing so.54 The agreement to arbitrate did not mean that the Arbitral

Tribunal was authorized to impose punitive measures on the parties. Such action is

invalid without statutory authority. The lex arbitiri does not mention penalties, punitive

damages or penal measures. Hence, the KLRCA lacks authority to establish a penalty on

the Respondent.

ii. Penalties can only be imposed by national courts.

29. Penalties are a social exemplary “remedy” that acts a form of retribution when the

defendant has committed a moral wrong against society.55 In addition, a penalty, unlike a

compensatory damage serves to punish reprehensible conduct. In Singapore, illegal use of

53 Garrity v. Lyle Stuart Inc., 353 N.E. 2d 793, 797 (N.Y. 1976). 54 Goldman, The Complementary Rules of Judges and Arbitrators in Ensuring that International Commercial Arbitration is Effective, 257, 278 (ICC Publication No. 412, 1984). 55 Garrity v. Lyle Stuart Inc., 353 N.E.2d 354, 359 (N.Y. App. Div. 1976).

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fur attracts penalties from the State.56 Such penalties can only be imposed by a national

court owing to its public mandate. National courts are constituted by statutes created by

legislators who represent their respective electorates’ political views. Hence, national

courts have a public mandate to punish socially reprehensible behaviour on behalf of the

public.57

30. However, an Arbitral Tribunal’s mandate accrues from the two consenting parties alone.

It does not have the public mandate to punish either party for conservation of a species.

Thus, the KLRCA cannot penalise the Respondent.

B. IN THE ABSENCE OF INHERENT AUTHORITY, THE ARBITRATION AGREEMENT DID NOT OFFER

EXPLICIT CONSENT.

31. The arbitration agreement between the parties did not offer explicit consent to establish

penalties. In the absence of such authority, the law of the seat does not envisage punitive

damages [i]. Further, only explicit consent permits imposition of penalties [ii].

i. The law of seat does not envisage punitive damages.

32. The powers of an arbitral tribunal to impose sanctions are derived from the agreement of

the parties and the law of the seat.58 If the tribunal has jurisdiction, the Singapore

Arbitration Act [‘SAA’] and KLRCA Fast Track Rules govern the proceedings under the

arbitration agreement. No such power arises either from agreement or from the law of the

seat. Neither the SAA nor the KLRCA Fast Track Rules provides for a power to establish

a penalty. Therefore, the Arbitral tribunal cannot impose penalties in this matter.

56 §§17-18, Endangered Species Act. 57 Eady, David and Smith, A.T.H. (eds) Arlidge, Eady and Smith on Contempt (2ndedn, Sweet & Maxwell 1999) 54-55. 58 Blackaby et al, Redfern and Hunter on International Arbitration (Oxford University Press, 5th ed 2009), ¶9.47.

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ii. Only explicit consent permits imposition of penalties.

33. Such authority can only arise from statute or the parties’ explicit agreement.59 It is

undisputed that both parties implicitly agreed for the KLRCA Rules and the Arbitration

Act to govern the proceedings. Courts have vacated sanction orders from tribunals in

the absence of explicit terms permitting tribunals to do the contrary.60 Nothing in the

KLRCA Fast Track Rules expressly permits the Tribunal to issue monetary sanctions for

conduct resulting in delays. Thus, the KLRCA cannot establish penalties in the absence of

consent to do so.

59 Certain Underwriters at Lloyd’s London v. Argonaut Ins., 264 F.Supp.2d 926, 944 (N.D. Cal. 2003) 55. 60 McDaniel v. Bear Stearns & Co. 196 F.Supp 2d 343, 364 (S.D.N.Y.2002); Superadio Ltd Partnership v. Walt “Baby” Love Prod. Inc., 818 N.E.2d 589, 593 (Mass. Ct. App. 2004).

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IV. THE KLRCA DOES NOT HAVE THE AUTHORITY TO GRANT INTERIM

RELIEF.

34. In the present matter, the Arbitral Tribunal cannot grant interim relief because the

KLRCA Fast Track rules do not provide for the same [A]. The permanent injunction is

not an award and cannot be enforced [B]. In any case, Singapore courts will not enforce

interim relief of such nature [C].

A. THE KLRCA RULES DO NOT PROVIDE FOR INTERIM RELIEF.

35. The Rules governing the arbitration do not provide for interim relief since the parties have

agreed not apply for it [i]. Additionally, Article 26 of the UNCITRAL Rules envisages

only temporary relief [ii]. Lastly, the KLRCA lacks adequate supervisory power [iii].

i. The parties have agreed not to apply for interim relief.

36. The parties have agreed by virtue of their arbitration agreement61 that they shall not apply

for an interim award under the KLRCA Fast Track Rules due to the overriding interest of

an expeditious determination of the dispute(s).62 Hence, there is no interim relief available

by the consent of the parties themselves.63 Therefore, the tribunal does not have the

authority to grant injunctive relief.

ii. Arguendo, Article 26 of the UNCITRAL Rules envisages only temporary

measures.

37. The Chapeau of Article 26, UNCITRAL Rules clearly reads that interim measures of a

“temporary nature” may be granted.64 However, the claimants have sought relief which is

of a permanent nature.65 Hence, Art. 26 of the UNCITRAL Rules do not warrant relief of

61 Proposition, P.3. 62 Art. 12(1), Kuala Lumpur Regional Centre for Arbitration Fast Track Rules, (2nd Edition, 2012). 63 Born II, P.1952. 64 Art. 26, UNCITRAL Arbitration Rules, 2011. 65 Proposition, P.4.

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the nature of a permanent injunction. Thus, the KLRCA does not have the authority to

grant permanent injunctory relief.

iii. The KLRCA lacks adequate supervisory power.

38. Arbitrators should not be afforded the power to order injunctive relief because they lack

the power to supervise compliance with their award.66 There is force in this argument

relating to concerns about adequate oversight of long term remedies.67 Further, permanent

injunctions that are issued by the Arbitral tribunal can only be enforced in a judicial

proceeding.68 The KLRCA is seated in Singapore and the award will be deemed to be

passed in Malaysia. Hence, it will not have the power to oversee the enforcement of such

injunctory relief. Therefore, it lacks power to grant such provisional relief of a permanent

nature.

B. THE PERMANENT INJUNCTION IS NOT AN AWARD AND CANNOT BE ENFORCED.

39. The permanent injunction is not an “award” because the injunction does not resolve a

substantive issue. First, the injunction does not resolve a substantive issue [i]. Second,

orders cannot be enforced [ii]. Third, the permanent injunction is not an ‘award’ [iii].

Fourth, arguendo, it is an award and it is beyond the scope of the arbitration and hence, is

unenforceable [iv].

i. The injunction does not resolve a substantive issue.

40. An arbitral award must set forth the arbitrator’s resolution of an essentially substantive

issue in the arbitration.69 Purely procedural or purely administrative decisions are not

awards within the meaning of international arbitration conventions or national arbitration

66 Elder, The Case Aginst Arbitral Awards of Specific Performance in Transnational Commercial Disputes, 13 Arb. Int’l 1 (1997). 67 Gary Born II, P.2482. 68 Arthur W Rovine, Contemporary Issues in Arbitration and Mediation 190. 69 Born II, P.2350.

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legislation.70 Further, interlocutory decisions, by their nature do not resolve parts of

parties underlying disputes and therefore cannot be final decisions.71

41. The dispute between the parties relates to the mislabelling of fur. Hence, the Arbitral

Tribunal has been asked to determine whether the Respondent has violated the Singapore

(Import and Export) Act, CITES or has indulged in deceptive or misleading advertising.

However, the permanent injunction seeks to establish a penalty in addition to the

damages.72 Thus, the injunctory relief does not decide a substantial issue or disputed

matter before the KLRCA. Moreover, it prohibits the Respondent from sale of its

products even before the substantive issue has been decided. Hence, the permanent

injunction is not award

ii. Orders cannot be enforced.

43. An interlocutory order which may be rescinded, suspended, varied or reopened by the

tribunal which pronounced it is not ‘final’ and binding on the parties.73 The permanent

injunction will be granted as an interim measure before the KLRCA determines whether

the Respondent has mislabelled its products. Hence, the interim relief will be granted

before the Arbitral Tribunals determined the merits of the case. Hence, its order may be

rescinded or varied. Therefore, the permanent injunction is an ‘order’ and cannot be

enforced by courts in Singapore.

iii. The Permanent Injunction is not an ‘award’.

44. Only “final” arbitral “awards” can be enforced and “provisional” measures are not

“final” by definition.74 The definition of an award under the Singapore Arbitration Act

only includes “decision of the Arbitral Tribunal on the substance of the dispute” and

70 Born II, P.2354. 71 J. Lew, L. Mistelis & S. Kroll, Comparative International Commercial Arbitration P.24-25 (2003). 72 Proposition, P.4. 73 Resort Condominiums Int’l Inc. v. Bolwell, XX Y.B Comm. Arb. 628 (Queensland Supreme Court, Australia). 74 J.-P Lachmann, Handbuch fur die Schiedsverfahrens, P.2060 (3d ed., 2003).

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excludes “orders or directions”.75 Hence, the order of the KLRCA does not classify as an

“award” under the Singapore Arbitration Act. Only an “award made by the Arbitral

Tribunal” may be “enforced in the same manner as a judgment of the Court to the same

effect”.76 Hence, the interim measure cannot be enforced in Singapore.

iv. In any case, the award is beyond the scope of the arbitration.

45. The Singapore Court may set aside an award if “it deals with a dispute not contemplated

by or not falling within the terms of the submission to arbitration, or contains decisions

on matters beyond the scope of the submission to arbitration”.77 The Claimants contend

that the alleged mislabelling of fur, deceptive and misleading advertising is with respect

to the endangered species namely, the Asian Golden Cat.78 However, the permanent

injunction order and penalty established by the KLRCA will for fur of “any endangered

species”.79 Hence, the award will be dealing with a dispute not falling within the terms of

submission of the arbitration.

46. Moreover, that part of the award which contains decisions on matters not submitted to

arbitration may be set aside.80 In the present matter, the interim relief sought would mean

that an award would be passed on the concept of mislabelling, without hearing the merits

if the case in totality. Thus, the order would be on a decision on matters not submitted to

the KLRCA. Therefore, the award is beyond the scope of the arbitration and will be set

aside by courts in Singapore. Hence, the interim relief will not be enforceable in

Singapore.

75 §2(1), Singapore Arbitration Act, 2001; §2(1), §28, Singapore Arbitration Act, 2001. 76 §46(1), Singapore Arbitration Act, 2001. 77 §48(1)(4), Singapore Arbitration Act, 2001. 78 Proposition, P.3. 79 Proposition, P.4. 80 §48(1)(4), Singapore Arbitration Act, 2001.

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CONCLUSION AND PRAYER FOR RELIEF

The Respondent, Tan Sen Imports, respectfully requests this Tribunal to adjudge and declare

as follows:

I. To dismiss the claim for damages.

II. To dismiss the claim for an order to prohibit the Respondent from continuing to carry,

promote, and/or sell clothing.

III. To dismiss the claim for penalties to the tune of US $500 for each item of clothing

alleged containing the fur of an “endangered species” it sells.

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