International commercail disputes

DEPARTMENT OF LAW

Module Code:

Module Name: LLM INTERNATIONAL COMMERCIAL DISPUTES

LLM ASSESSMENT COURSEWORK 2014/2015

Coursework must be submitted in MS Word format. All work must be word processed in 12 point font Times New Roman or Ariel and double spaced.

Please ensure that you provide the following details on the first page of your coursework:
Student Number
Module Name and Number
Coursework question
Word count

WORD LIMIT – 3500 words (maximum)

The word limit does not include footnotes, appendices or bibliography. Footnotes must be used for references only. Any narrative or description contained within footnotes or appendices will be disregarded by the marker. References must be made in OSCOLA format.

The following rules apply to word limits for the coursework assessment:
a. Word count includes everything in the main body of the text (including headings, tables, citations, quotes, lists, etc.).
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d. The word count needs to be clearly and correctly stated on the title page of the assignment. Incorrectly understating the word count constitutes an assessment offence and may result in further action.

RESIT WRITTEN COURSEWORK QUESTION

INTERNATIONAL COMMERCIAL DISPUTES

WORDS COURSEWORK

Naprum is a Texan company specialised in the distribution of drinking water for domestic supply and the installation of domestic sewage systems. In 2011 it signed a deal with the newly independent Latin American country Oztu. The deal included the installation of a new water and sewage network in rural areas of Oztu by Naprum.

The government of Oztu has, as one of its post electoral priorities, the supply of basic services to all the population as part of an extensive programme of reform in social and public services. The deal signed with Naprum is part of this endeavour and, in particular, it is considered crucial for the reduction of the very high infant mortality in the country.

Payment for the installation of water and sewage was to take place by providing Naprum with a right to the exclusive charging on the domestic water supply for 20 years. Under the terms of the contract Naprum was free to fix a ‘fair market price’ for the water supply, comparable to that of other suppliers in the region.

The deal included several clauses, among them a penalty clause in case the installation was delayed beyond August 2014.

Naprum was very pleased with the deal as it looked at extending its operations in the region. It had also been advised by its marketing department that it could gain some much needed positive publicity if it could be seen as the ‘champion on the cause of bringing clean water to poor families’ in this impoverished region. Especially after recent media criticisms for its charging policies in the USA and in some African countries where some families had their water supply cut off due to their inability to pay what they denounced as extortionate prices. Many investors are moving away from Naprum and in the last few months its shares’ prices had plummeted. The deal in Oztu could be just what is needed to rebuild its damaged image.

Once the paperwork with Oztu was complete Naprum subcontracted different parts of the work to three different companies:

– All excavations and preparatory works were subcontracted to Magnum Gmbh, a German company with whom Naprum has worked successfully in Africa in the past.

– The installation of the sewage system was subcontracted to SWCT Inc a US firm with whom Naprum works regularly in the US domestic market.

– Installation of piping and meters for the domestic water supply are subcontracted to Amide S.A. a Spanish company. This was a new commercial relationship for Naprum that in the past used mostly US’s firms but Amide had an excellent reputation and offered a very competitive price for the work. Amide also had experience working in the Latin American region, something that Naprum lacked.

Work started on schedule on March 2012, with Magnum’s engineers supervising and drafting the plans for the excavations for both the water supply and the sewage. In late August, however, severe hurricanes were followed by torrential rain and flooding and the excavation works had to stop for over two months. As a consequence of this the ground works were not ready by December 2012 the date when SWCT was due to start the installation of the sewage system.

In order to accelerate the work Naprum employed a local firm to help with the excavations. The idea being that they would start the work in at the Eastern and most remote region and work their way westwards until they meet up with Magnum’s excavations. Magnum is not informed of this arrangement until it is well underway and is not happy to hear that some of the work contracted to them is now being done by a different firm. Naprum’s representative re-assures Magnum that this is only a temporary measure to help out with the delay and that Magnum’s terms and conditions are not affected.

In January 2013 a change in government following civil unrest takes place. The new government passes several laws that ban foreign firms from undertaking work that could be carried out by a local firm. Naprum, consequently, was ordered to employ local firms to do the rest of the excavations. At the same time visas for Magnum’s workers were revoked and all personnel ordered to leave the country within one month.

With works already delayed by the flooding and the installations by Amide and SWCT due to start in just over six weeks Naprum employs two more local firms to carry on with the excavation works but progress is slow. The equipment of these firms is not comparable to that of Magnum nor are the skills of the workmen or, indeed the working hours that the local firms seem to operate. With a long break of over three hours in the middle of the day when workers return to their houses for lunch and very slow progress it is clear to Naprum that the deadlines will not be met. Naprum tries to speak to the managers at the local firms but it is clear that nothing can be done as strict labour laws designed to protect workers’ rights and enhance working conditions are a priority of the government.

In February 2013 Naprum contacted Amide and informed them of the delay suffered and the fact that the excavations would not be ready by March, the date when Amide was due to start works. Naprum asked whether a re-schedule was possible. As the works were scheduled to extend for 16 months, Amide suggests that the engineers and personnel can start later but cannot guarantee that the work will be finished by the agreed date, not even finished at all. It also warms Naprum that all its workers are booked in other projects later next year and for a period in excess of 28 months.

Naprum also contacted SWCT and SWCT agreed to a delayed start of its works but ‘reserving all their rights ad per their own terms and conditions’. Their terms and conditions include a clause exonerating them of liability for any delays on the agreed installations if the delays are caused by acts or omissions of other parties’, and a clause by which ‘any work that needs to be carried out outside the agreed scheduled time due to the acts or omissions of other parties will be charged at the agreed price plus a 20% penalty’.

SWCT and Amide are finally called to start with the installations in August and October 2013 respectively. In December 2013 a general strike followed by much civil unrest paralysed the country for three weeks. In the following months several acts of sabotage by locals cause further delays to the installations. As a result, by August 2014 only 40% of the installation has taken place.

Naprum approaches the government department of trade and industry to explain the reasons for the delay and tries to discuss a reviewed schedule. The officials in charge have now changed since the deal was concluded and the new minister is a militant communist, wary of foreign multinationals and particularly hostile to US firms. It gives Naprum a cold reception and a warning that he is in breach of contract and the government takes contractual dates very seriously.

In October 2014 Naprum receives a letter from the government informing them that due to the severe delays in the installation and non-compliance with the agreed dates the contract is terminated and all foreign workers must leave the country within one month.

Naprum has heard that the government is now in talks with other companies and intends to organise a tender for the remaining works.

On 20 October Naprum received an invoice from Amide for the full contractual price as agreed. This was followed by an invoice from SWCT and an invoice by Magnum, also for the full asking price requesting payment within 28 days.
Naprum is unable to pay.

On 1st December Magnum sent a second invoice and a note indicating that if payment does not take place within two weeks the matter would be passed on to their legal department. Similar letters follow from Amide and SWCT.

With fears as to its possible liabilities to its subcontractors and no real prospects of recouping its investment Naprum now seeks your advice.

Advise Naprum on the dispute resolution systems that it can use to resolve its disputes with:

– The Government of Oztu
– Magnum
– SWCT, and,
– Amide

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