RMIT Classification: Trusted RMIT Classification: Trusted RMIT Classification: Trusted JUST2326/2331 (Arbitration) Assignment -2 Smart Publication Company against The New Zealand Machine and Tools Company Facts 1. Smart Publication Company (SPC) is a company which was set up in Melbourne Australia in 2015. SPC mainly focuses on publishing academic books (“the books”) which are used in the Australian tertiary education institutions. In order to reduce the cost of publication of the books, SPC decided to establish a printing press in Fiji. After printing the books in Fiji, SPC arranges for the delivery of the books into Australia and then sells them through shops in Australia including bookshops in Universities. 2. In March 2015, SPC contacted the New Zealand Machinery and Tools Company (“NMTC”) to purchase the various machinery (“the various machinery”) which was needed for its book printing business such as printing machines, sewing machines, binding machines and individual binding and wrapping machines. In particular, SPC was also looking for heavy duty machinery which can operate for long hours without any breakdown. After intense negotiations lasting two months the parties finally entered into a contract (“the first contract”). It was a term of the contract that SPC will pay in half yearly installments to be fully paid by 2019 to purchase the various machinery to build a printing press (“the original printing press”) in Fiji (“the Fiji facility”). See further details as to the terms of first contract in Exhibit/s [1 ] and [2 ]. 3. During the negotiations NMTC also informed SPC that a fully automated and one-stop machine (“the new machine”) would be launched in the printing market in the second half of 2016 which would, in all likelihood, revolutionize the book printing process. In this regard, instead of having to buy the various machinery a printer could just buy the new machine. The new machine was being produced by a German company, Book Printing Wizard Machine (BPWM), as a joint venture with NMTC. It was expected that the total cost of the new machine might be more than double the total cost of the various machinery. SPC, being a new entrant in the market and also to expedite the launch of their books, decided to buy various machines. Both parties agreed to revisit the purchase of the new machine on a later date. 4. Over a short period following conclusion of the contract SPC acquired a significant portion of the booming book market in Australia and it also acquired a number of clients from overseas. Currently, some of SPC’s clients also agreed to get their books printed at the Fiji facility to save their costs. Of course, SPC charges these clients money to recover its costs and to make a profit. 5. In early 2017, SPC contacted NMTC to discuss the possibility of SPC buying the fully automated one-stop machine as it (SPC) was thinking of setting up another printing unit in Fiji. During these negotiations, SPC stated it was mainly concerned with the speed of the new machine and it was expecting that the new machine produce at least 30 books per hour. NMTC advised SPC that it was hopeful that the new machine would perform up to SPC’s expectations in this respect but that NMTC could not be definitive. Finally, SPC agreed to buy one new machine from NMTC (“the second contract”), Pursuant to the second contract, the new machine was duly delivered by NMTC to the Fiji facility and installed and also tested there by NMTC. See further details as to the terms of second contract in Exhibit/s [3 ] and [4 ]. 6. In the very first month its operation, SPC realized that the new machine was not performing up to its expectations. The new machine was barely producing 15-20 books per hour. After SPC made a complaint to NMPC about this problem (“the first problem”), NMPC arranged for BPWM technicians of BPWM to look at the new machine and to repair. After completing these repairs, the new machine started producing around 20-25 books per hour. A few months later, the new machine started slowing down the number of books it could print again. The original printing press also was not operating at full capacity because of a problem with over-heating. As a result, after every eight hours the original printing press had to be shut down for almost four hours (“the second problem”). The CEO of SPC became fed up with the first and second problems and decided to terminate the contact with NMTC and, in addition, to withhold payment on the outstanding amount owing in relation to the new machine as well as the outstanding installments owing in relation to the purchase of the various machinery used to build the original printing press. 7. In order to recover payments due under the first and the second contract NMTC initiated arbitration proceedings in Sydney which was to be administered by ACICA using the ACICA rules. The ACICA appointed a sole arbitrator to hear both claims for payments under the first and second contracts. SPC has objected to the jurisdiction of the arbitral tribunal. 8. Australia, New Zealand, and Fiji are all signatories to the New York Convention on Recognition and Enforcement of Foreign Arbitral Award, and have adopted Model Law on International Commercial Arbitration (2006 Amendment with Option I of Article 7) 9. The President of the arbitral tribunal has asked both parties to provide him with written submissions on the following issues at the arbitration hearing: A. Whether there is a valid arbitration Agreement? B. Which arbitration rules are applicable to this arbitration? C. Where is the seat of arbitration and where should be the place of hearning? D. Whether the same arbitration tribunal can hear the two payment claims? E. Would there be any risk of enforcement of the arbitral award rendered by this tribunal? (Note: Students can answer these questions on behalf of either the Claimant (NMTC) or the Respondent (SPC). But students must answer/argue all three questions on behalf of one side only. Students cannot choose different sides for different issues. Student may also decide the case like an arbitrator but in this case as an arbitrator you need to consider/raise arguments from both sides and then give decision like an arbitrator. Exhibit -1 (By e-mail) 1 May 2015 To Richard Booker CEO, SPC Re: Purchase of printing machines from NMTC to SPC. Dear Mr. Booker After two months of discussion, I am glad that we have finally reached the stage where I am able to send you our contract for the purchase of printing machines. As we have agreed, all these machines will cost you AUD$5 million in total, inclusive of delivery, installation, testing and repairing. SPC will have to pay NMPC AUD$1 million immediately and the remainder of the monies owing will be paid in half yearly installments from now until the end of 2019. As you have suggested that we use arbitration to resolve any disputes arising out of this contract we are ready to accept that. I should tell you that generally, we agree to arbitrate in Auckland and to use NZ Arbitration Rules. We are also willing to arbitrate in Sydney in accordance with the ACICA Rules. I read that now Australia also has a new Arbitration Centre in Perth so would it be too inconvenient for you to use the Perth Arbitration rules instead? I wish you all the best for your business. Regards Daan Mechanics CEO, NMTC Exhibit-2 (by e-mail, 2 May 2015) Dear Danny I hope you don’t mind if I call you Danny instead of Daan as your name is difficult for me to write and pronounce. I am very happy that we have finally entered into a business relationship and I do hope it is a long term one. As I told you during our discussion I will contact you again in relation to conducting future business. Don’t worry about payments as I will transfer these into NMTC’s bank account as per our agreed schedule. I am happy that you agreed to arbitration in Sydney. It is correct that Perth now has an Arbitration Centre. I can understand that you are familiar with Perth Rules but ACICA rules are also satisfactory. You will not be disappointed with the ACICA rules. You should try new things in life! Best Richard Exhibit-3 (By e-mail, 14 February 2017) Dear Danny, You may recall that we discussed SPC buying NMTC’s and BPWM’s one-stop fully automatic printing machine last time but I could not buy it at that time. Now my business is roaring and I want to expand it. In this regard I am writing to you to see if the machine is now available in the market and how much it will cost me. I hope you will give me a discount, as I am your old friend. I want this new machine to produce at least 30 books per hour. Your old machine is not working as per my expectation. Although your mechanics have repaired it twice, it has started heating up again which is slowing down my production. Best Richard Exhibit – 4 (By e-mail, 15 February 2017) Dear Richard, It is so nice to hear from you after a long time. We have launched our one-stop automatic machine and I am happy to tell you that it is in high demand. While I cannot be absolutely definitive about this, I am optimistic that this machine will perform up to your expectations. The machine will certainly cost you more but being my old business partner I will give you a discount. It will cost you AUD$7 million although our usual market price is AUD$8 million. Our price again includes delivery, installation, testing and repairing. You just have to pay NMTC AUD$2 million immediately and the remaining monies in half yearly installments to be fully paid by the end of 2019. This time I hope you will agree to use the Perth Arbitration rules in Sydney for arbitrating any dispute which may arise out of this contract. Regards Danny Exhibit No-5 (e-mail, 20 February 2017) Dear Danny, As we spoke on the phone yesterday, I confirm that SPC will buy the new machine and price is agreeable to me. I can see that you are still interested in using the Perth Arbitration Rules in Sydney should the need for arbitration arise. But I recommend instead that we agree to apply the same rules i.e. ACICA Rules. I have heard the new ACICA rules are equal if not better than the Perth Arbitration rules. Best Richard Exhibit No-6 (E-mail, 14 January 2018) Dear Danny, I am writing this letter in great pain and frustration. Your new machine is very slow and it is producing only 15-20 books. After the first repairs were carried out by your mechanic it only produced between 20-25 books for a period of one month after these repairs. Now it is slowing down again. Your old machine has started heating up again