Insights into the Vis Problem: Initial Reflections

The 2024/25 #Vis moot problem has been released and this year's soon-to-be famous professionals include, amongst others, Mr. Cavendish, Ms. Ritter, Mr. Deiman and -my personal favorite name- Mr. La Cour.

The arbitration rules applicable are those of the Finland Arbitration Institute (FAI). It is refreshing to see these "younger" institutional rules being applied, as the Vis problem undoubtedly enables students and arbitration practitioners to gain a rather in-depth knowledge of the applicable rules. Quite a few businesses from emerging countries are seeking alternatives to mainstream institutional rules and -stating the obvious- this is one of the ways for the arbitration world to become acquainted with them.

The gist of this years problem involves a mixed/ hybrid contract signed between the Claimant, GreenHydro Plc and a fully government-owned company Equatoriana RenPower Ltd. A reverse auction was carried out for a green energy project and afterwards, following negotiations lasting more than two months, the contract was executed. As always, things do not turn out as anticipated and the state owned company, Equatoriana RenPower Ltd., terminates the contract.

The procedural issues include a jurisdictional claim in relation to a Med-Arb clause and the exclusion of privileged and possibly unlawfully obtained documents.

Med-Arb clauses are gaining traction in the international business world. I, as well as many others in the international community, have discussed the theory of the ethical considerations, the pro's and the con's of Med-Arb. However, oftentimes, the "real world" practice is similar to that depicted in the Vis moot scenario. One or both parties see little value in it, and the clause is included merely to "check all the boxes" in line with new trends. As the Vis moot scenario suggests, the perception is that "mediation would have been a mere waste of time and resources." Albeit, the fact that many-if not all- disputes are suitable for mediation, the parties fail to look beyond their positions. In the given facts of the Vis Moot Scenario, although the primary position of both parties is depicted to be the purchase price, there are other interests that could lead to an amendable solution such as, for example, the opportunity to reference the project or the usage of locally sourced contents.

As for privilege in international arbitration, the FAI rules will provide some guidance, but the IBA Rules on Taking of Evidence will fall short. The IBA Arbitration Committee has launched a new task force to explore the creation of uniform guidelines on privilege in international arbitration, publishing an initial report in February 2024. Determining which rules of privilege apply in international arbitration is not straightforward, though the Vis moot scenario seems to suggest exploring U.S. law, as it references "those jurisdictions which have followed the American approach such as Equatoriana". U.S., English and common law practitioners are familiar with discovery, disclosure and as an extension, handling privileged communications in proceedings; it will be interesting to see how civil law practitioners handle the privilege issue, as under civil law, it is primarily embedded in the duty of professional confidentiality.

The substantive law issue to be addressed by the teams is whether the CISG applies and, if so, have the parties opted out of the CISG. In the "real world", the crux of the matter would be whether the fundamental breach and specific performance provisions of the CISG apply. However, given time constraints, it has been instructed that this part is not to be addressed by the Vis teams.

The applicability of the CISG mainly concerns Arts. 2(b) and 3. The application of the CISG to mixed contracts has been pleaded numerous times in previous Vis and other moots, with the CISG-AC Opinion No: 4 being a common starting point. CISG Art. 2(b) excludes the application of the CISG to sales "by auction". The CISG's legislative history and CISG case law regarding the procurement of health supplies during COVID19 offer a good starting point for contemplating this issue. Another case worth reviewing is the 2016 Swiss Federal Supreme Court case highlighting commentary and (unluckily for non- German speaking folks) the 2018 Swiss Appellate Court case history bearing similarities to the present Vis moot scenario.

The second part of the substantive issue concerns the exclusion of the CISG under Art. 6. The relevant clause states that the law of Equatoriana is applicable "to the exclusion of its conflict of laws principles". While conflict of laws principles and uniform substantive law are technically distinct, sometimes in the "real world" practice, such clauses seem to be drafted to intend otherwise. As such, the Vis moot scenario will be a good exercise for the contract drafters of the future to comprehend these convoluted concepts. There is abundant CISG case law regarding different opt-out scenarios, and the Pace Annotated text is a helpful starting point resource. A somewhat related issue to consider is the preemption or simultaneous application of local public procurement laws, as there is a provision stating that "governmental entities may always terminate contracts which have been concluded in the pursuance of a particular strategy if the government has changed the strategy ."

On a final note, especially for teams with limited research resources, check out the full text of Schlechtriem's seminal work and Honnold's commentary. The Pace annotated text is also regularly updated and contains references to related articles, legislative history, case law and more!