Posted: December 6th, 2014

Module in International Commercial Arbitration

Module in International Commercial Arbitration
Unit 5

Case Study 5

Mumbai Call Centres Ltd (MCC – a company incorporated, managed and controlled in the Republic of India) entered into an agreement with the Derksen Mees Bank BV (DMB – a company incorporated, managed and controlled in the Netherlands) for the provision of call centre services by MCC for DMB from 1 January 2008 to 31 December 2015 (‘the Service Period’).  This service was to be a 24-hour service, 7 days a week for the whole of the Service Period – without interruption.  The fee payable by DMB was payable in monthly instalments, with the proviso that if any one instalment was paid more than seven days late, the whole of the outstanding fee was to be paid within seven days.  It was a condition of the agreement that all individuals who operated the telephones would receive training in English, that being the language used by about 95% of DMB’s Dutch customers, and all of its English customers.  It was a further condition of the agreement that the language training was to be provided by the English language department of the University of Cambridge, UK.  The University of Cambridge entered into a tripartite agreement with MCC and DMB in which the standard of English was identified, including the level of clarity of pronunciation.  There was no mention, in the agreement, as to the location of any call centre, nor as to the number of call centres involved.

The agreement between MCC and DMB (the ‘Parties’) included this clause:

“All disputes, disagreements and differences between the Parties arising out of or in any way connected with this Agreement shall be submitted to arbitration for resolution.  The seat of the arbitration shall be in London, England; the governing law of this Agreement shall be the law of the Republic of India.”

MCC operated four call centres around the world so that, as one call centre closed for the night, another would take over.  The principal call centre was in Mumbai, and another one was in Glasgow, Scotland.  MCC arranged language training for personnel in the Mumbai call centre and the other two call centres, but not for the personnel in Glasgow.  This did not normally cause any difficulties for DMB’s customers in the Netherlands, but did cause problems for some customers in England.   DMB made a complaint to MCC about this, but the complaint was rejected by MCC.

At around the same time, DMB’s banking branch in Syria failed to make a payment to MCC’s bank account on a number of occasions.  MCC’s bank account was changed from a bank in Mumbai to a bank established in Israel, and the law in Syria prohibits any money being paid from Syria to Israel: this rule is included in Syria’s Financial Code, specifically in the part dealing with exchange control.   MCC claimed that the whole of the outstanding fee is immediately payable.  DMB has denied that it is liable to pay the whole fee at once.  DMB served a notice of commencement on MCC on 13 October 2013; the tribunal was constituted on 27 October that year; and the First Meeting on Directions was held by TeleConferencing on 3 March 2014.  In that meeting DMB outlined its claims: (a) compensation for breach of the language condition; and (b) a declaration that it is not liable to pay the whole of the fee in one amount.  MCC has outlined its defences to DMB’s claims.

It is contrary to UK law for the UK to act in any way which ‘render[s] ineffective another member’s exchange control regulations’ {See Qureshi, International Economic Law, 1999, 153; Art. VIII(2)(b) International Monetary Fund Articles of Agreement; and the Schedule, Part 1 to the Bretton Woods Agreements Order in Council 1946 (1946/36)}.   Please advise the tribunal on what to do next.

“Article VIII, Section 2(b)”
“Exchange contracts which involve the currency of any Member and which are contrary to the exchange control regulations of that member maintained or imposed consistently with this Agreement shall be unenforceable in the territories of any member . . .”

http://www.lexisnexis.com/uk/legal/results/docview/displayUnit.do?bct=A&risb=21_T7852469474&A=0.16968019690877523&&origLNI=4SX4-6930-TX07-Y0CY-00000-00&csi=283304&level=3&dynamicDuNodeIds=2,TAAEABS,TAAEABSAAB,TAAEABSAABAAF&pisb=25_T7852469498&duApproachInd=DISP_APPROACH_DYNAMIC

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