POWER TO THE PEOPLE

INTRODUCTION

1. Sandy Corp Limited (SCL) is Multi-national Corporation specializing in hydroelectric power

projects, with its registered office in the State of Riverdell. SCL specializes in manufacture and supply
of equipment for hydroelectric power projects. Its range of services include large hydro power plants,
automation systems, electrical and mechanical auxiliaries, and the modernization of power plants.

2. Subho Duss Limited (SDL) is another company, which is incorporated and has its registered
office in New Town, which is in the State of Newton. SDL is a Special Purpose Vehicle (SPV) of
Universal Energy Limited (UEL), created for implementing a 100 MW Hydroelectric Power Plant (the
Project) on the river Newton, on a build-operate-transfer (BOT) basis for the Government of Newton.
SDL has been moving towards completing the project on a fast track basis with a scheduled completion
time in order to serve the electricity needs of the State of Newton. Currently, 45% of the Newton’s
energy needs comes from hydroelectric power plants. The Government of Newton plans to increase it
to 75% until 2030. UEL has been involved in other hydroelectric power projects too.

3. SCL and SDL entered into a Supply Contract on 20th June 2014 after a round of negotiations.
Under the Supply Contract, SCL was to design, manufacture, supply, storage, erection, testing and
commissioning of the Electro-Mechanical works (E&M) for the Project in Newton. SCL and SDL agreed
to a lumpsum price of USD 200 million. The effective start date of the Supply Contract was the 20th
December 2014, and the entire E&M works were required to be completed on or before 20th Aug 2018,
i.e., 44 months from the effective start date of the Supply Contract. It was agreed between SCL and
SDL that the aforesaid time would be the essence of the Supply Contract.

4. Besides agreeing to the terms of the Supply Contract, SDL stated that the various other details
like the delivery schedule, payment terms, and schedule of completion of erection, testing and
commissioning of the equipment would be incorporated in the Supply Contract, and that these were to
be finalized later in joint consultations with the SCL. In this regard, the Supply Contract also gave a list
of precedence for all documents in case of any ambiguity or conflict among them: it stipulates that the
primary contract (which is the Supply Contract) would prevail over any other document in case of any
ambiguity or conflict.

EVENTS LEADING TO DISPUTE

5. On 14th December 2014, the representatives of SCL and SDL came together for a Technical
Coordination Meeting (TCM) to discuss the various aspects of the Project. In this meeting SCL
undertook to submit a draft Master Time Schedule (MTS) that was prepared by SCL. An MTS is
important for maintaining the coordination between the E&M works by SCL and the various other civil

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construction works being rendered by other contractors of SDL. Generally, and as per the Supply
Contract as a whole, the E&M works would follow the civil works.

6. However, the MTS prepared by SCL wasn't formally approved by SDL in any of the TCMs that
took place during the course of the Project. Nevertheless, SCL continued working in accordance with
the MTS (with the necessary revisions from time to time, keeping in view of the on-going civil works).
To this MTS there was never any objections or protests from SDL. SCL had deployed its manpower
and mobilized resources, and it had started the execution of the Supply Contract in a manner
commensurate with the requirements of the Project and the MTS.

7. Immediately after the effective start date, SCL had also entered into various sub-suppliers, in
connection with the works to be carried out under the Supply Contract and maintain their work as per
the MTS. Representatives of SCL and SDL met on several occasions to discuss the progress and
technical aspects of the project. During that course, SCL consistently sent out a quarterly Progress
Reports to SDL to keep them abreast of the work undertaken by SCL under the Supply Contract and
the activities proposed to be undertaken in the next quarter.

8. While the project was underway, the parties faced a stumbling block which ultimately led to
disputes arising out of the Supply Contract. In the arrangements that SCL had made with various other
sub-suppliers, five of these sub-suppliers were to provide SCL with various important custom-made
components (equipment) costing USD 90 million required for the Project.

9. This equipment constituted 45% of the Supply Contract price. As per the terms of the Supply
Contract, SDL was required to inspect this equipment before SCL could supply it to SDL on-site for
erection, testing and commissioning. For that purpose, the equipment was temporarily stored in rented
warehouses for inspection, before supplying them to SDL. On 26th April 2017, SCL sent a request over
email to SDL to inspect the equipment, however, there was no response from SDL. SCL sent repeated
requests to SDL to inspect those equipment, but there was no action taken on behalf of SDL.

10. On 20th November 2017, SDL notified that the Project has been delayed due to some protests
and agitation by the locals near the Project-site. A few NGOs are either involved or leading these
protests through the help of the locals, and they have sought the Government of Newton to intervene
and address the environmental impact issues, as well as the displacement and rehabilitation of the
locals in a fair and adequate manner. NGOs claim that the dam will majorly alter the course and flow
of the river and affect the local population (upstream and downstream).

11. Thus, due to the hinderances from the local protests (especially, some incidents of damage to
machinery and threats to injure the workers by some violent groups of the local population), SDL was
not in a position to accept the equipment that were to be delivered by SCL. In consequence of this
delay, SCL incurred additional expenses for the storage of the equipment procured from its sub-
suppliers. Another consequence of this delay was that SCL’s sub-suppliers were demanding payments
from SCL, which SCL couldn't pay because the inspection of the equipment and its collection and
payment by SDL were pending.

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12. The terms of the Supply Contract did also provide that if SDL had failed to inspect the custom-
made equipment, SCL could take it up on themselves to conduct the inspection and dispatch the
equipment to SDL. In such a case, the terms of the Supply Contract required SCL use the services of
a recognized or suitable inspector/inspection agency that could inspect on behalf of SDL. However, no
such inspector or inspection agency was considered by SCL and, thus, it did not go ahead with the idea
of conducting any inspection of the equipment on its own. SCL feared that the Project had only bleak
chances of resuming, given the protests and potential environmental suits. SCL is, however, confident
about the quality and conformity of the equipment.

13. In this regard, it was SDL’s claim that SCL had failed to provide a sequential list of equipment
being procured by SCL and its scheduled delivery plan, which was necessary for SDL before inspecting
and accepting delivery of the equipment, given the simultaneous civil works being undertaken by other
contractors on-site. SDL claimed that it was under no obligation to conduct the inspection and accept
the delivery of the equipment on-demand, instead of following the Project schedule. In response, SCL
contended that though such sequential list of equipment was not sent to SDL, SDL was aware of the
equipment being procured, as well as the progress of the Project through the routine Progress Reports
being sent by SCL to SDL.

14. In fact, there were some minor but fairly important and urgent works on site that were left
undisturbed by the protests, and those works continued that way. SDL sought for equipment relating
these minor works from SCL, however, SCL had refused to supply them to SDL stating that SDL could
not pick and choose the components for delivery on its own preference but needed to follow the MTS.
SCL reiterated that the equipment (which was lying uninspected) that was ready and had to be first
inspected by SDL so that SCL could supply them and claim the payments.

SUSPENSION OF THE CONTRACT

15. Despite several requests from SCL, it received no cooperation from SDL regarding the
inspection and supply of the equipment, and it continued to incur financial burdens which it attributed
to SDL. SDL failed to inspect the equipment and make the corresponding payments. For that reason,
on 12th April 2018, SCL invoked a ground for suspension of contract under the Supply Contract on the
specific ground of the employer’s (i.e. SDL) failure to inspect the equipment procured by the supplier
(i.e. SCL). SCL stated that it would not perform any of its obligation any further until SDL conducted the
inspection, accepted delivery, and made the respective payments. On the other hand, SDL responded
that SCL’s suspension of the contract was so wrongful that there was nothing else but to consider
SCL’s suspension as a repudiation of the contract. According to SDL, such wrongful suspension was
a material breach of the Supply Contract which led to the termination of the contract on behalf of SDL.

16. The dispute resolution clause in the Supply Contract provides for a multi-step process. As per
the clause, the disputes must be taken to an adjudicator first, who is in the dispute resolution clause.
As per the clause, parties may proceed with binding arbitration only if any one of the parties (or both)
is unsatisfied with the adjudicator's decision, or if the adjudicator has failed to give decision within 28
days of the dispute being referred to the adjudicator. Therefore, parties intended an ad hoc arbitration
under the UNCITRAL Arbitration Rules. The dispute resolution clause speaks thus:

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 “(1) The parties are expected to conduct their business amicably. However, in case
of any dispute between them, arising out of any issues out of this contract, or related to
it, the parties must first take the dispute to Mr. Anubhav Chanda (Chief Engineer, SDL),
an adjudicator that both parties have agreed upon. The parties may only proceed with
binding arbitration if either of the parties or both are unsatisfied with the adjudicator’s
decision or the adjudicator fails to provide a decision within 28 days of the dispute being
referred to the adjudicator. In case of the adjudicator’s absence, withdrawal, or
resignation the parties agree that Mr. Athal Dev (the Deputy Engineer, SDL) will be
appointed by both the parties.

(2) The tribunal should follow UNCITRAL Rules for its procedure. The named
arbitrators are: Mr. R. Matthew as the presiding arbitrator, and Mr. Amartya Mazumdar,
and Ms. Ananyaa Khamroi as the other two arbitrators.”

(3) The seat of arbitration shall be New Town, State of Newton. The UNCITAL
Arbitration Rules (with new Article 1, paragraph 4, as adopted in 2013) shall apply. The
substantive law applicable to the contract is that of the UNIDROIT Principles of
International Commercial Contracts, 2016, and the U.N. Convention on the International
Sale of Goods, 1980.”

17. In the present case, the adjudication process was invoked by SCL on 20th July 2018 wherein it
made its claims to be settled by the adjudicator, however, the adjudicator resigned without arriving at
a decision. The dispute resolution clause also provides for such a scenario: in the event an adjudicator
resigns, the clause provides for the appointment of a new adjudicator (also named in the dispute
resolution clause). However, no new adjudicator was appointed.

18. A notice of arbitration was sent by SCL to SDL on 15th October 2018. A copy of the notice was
also sent to the three named arbitrators in the dispute resolution clause. SCL claims for the price of the
equipment and, in the alternative, damages for breach by SDL of the Supply Contract. In addition, SCL
claims for the losses arising from the storage costs it incurred, which SCL claims to be a direct
consequence of SDL’s failure to inspect, collect and pay for the equipment. SCL is also claiming for the
engineering costs that it has already incurred under the Supply Contract.

19. On the other hand, SDL contends that the arbitral tribunal has no jurisdiction. It argues that the
present arbitration does not emanate from the dissatisfaction with the adjudicator's decision: neither
was there was any decision by the adjudicator, in the first instance, for the arbitration to trigger, nor was
the arbitration clause triggered due to the failure of the adjudicator to give a decision within 28 days of
a dispute being referred to it. As per SDL, the adjudication step was a condition to SDL’s consent to
arbitration; thus, without the adjudication, the arbitration does not have SDL’s consent. SCL, on the
other hand, argues that the adjudication was merely a matter of procedure and has no substantive
bearing on the arbitration.

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20. Since the first meeting of the arbitral tribunal, which was on 17th November 2018, SDL has put
forth another issue regarding the independence and impartiality of the presiding arbitrator, Mr. R
Matthew. This is without prejudice to SDL’s position that the arbitral tribunal lacks jurisdiction. Though
Mr. Matthew was one of the named arbitrators in the dispute resolution clause, it has come to the
knowledge of SDL that the Counsel of SCL is a newly appointed member of the Governing Body (the
new Vice President) of the International Society of Construction Law or ISCL (which based in the State
of Riverdell) along with Mr. Matthew (who is the President of ISCL). The Counsel of SCL was appointed
to the Governing Body of ISCL on 30th November 2018. The Counsel was, in fact, a nominee of Mr.
Matthew and was appointed as the Vice President unanimously by the other members of the Governing
Body.

21. In response to SCL’s claims, SDL has raised several defenses without prejudice to its position
on the tribunal’s lack of jurisdiction. SDL primarily argues that SCL wrongfully suspended, which could
only be treated as repudiation on their behalf and, thus, a material breach on which SDL has rightfully
terminated the contract. Moreover, SDL contends that the title in the equipment never passed on to
SDL. Therefore, SDL cannot be held liable for the price of the equipment. Further, SDL emphasizes
that there has been no breach on its end for which SDL can be held liable towards SCL. As for the
protests that hindered the Project, which at best affected the sequence of procurement of the equipment
by SCL, was anyway beyond its control.

22. Moreover, SDL claims that SCL was itself is breach for failing to finalize the MTS in consultation
with SDL and providing SDL with a sequential list of equipment being procured (admittedly, both are
contractual requirements under the Supply Contract). If this was followed by SCL, SCL could have
avoided the situation that it is currently in with its sub-suppliers, for which SDL cannot be held liable.

23. The arbitral tribunal will hear from both the parties on the following issues at the hearing in
December 2018:

A. The jurisdiction of the arbitral tribunal.

B. The challenge to the presiding arbitrator, Mr. R. Matthew.
C. SCL’s claim for price of the equipment or, in the alternative, the damages for SDL’s breach of
contract.

24. The venue of arbitration shall be in New Town, State of Newton, with the courts of New Town
having exclusive jurisdiction.

25. Both the State of Newton and the State of New have adopted the UNCITRAL Model Law on
International Commercial Arbitration 1985 (with amendments as adopted in 2006) and the Draft
UNCITRAL Model Law on International Commercial Mediation and International Settlement
Agreements Resulting from Mediation, 2019 (amending the UNCITRAL Model Law on International
Commercial Conciliation, 2002). The State of Newton is a signatory to the U.N. Convention on the
Recognition and Enforcement of Foreign Arbitral Awards, 1958, and the Convention on International
Settlement Agreements Resulting from Mediation, 2019. Both the State of Newton and the State of
Riverdell have ratified the U.N. Convention on the International Sale of Goods, 1980 (CISG).

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