Question: I need to respond to Respondent memorandum below (Comanche/WinnerTech Case Study)

On behalf of Respondent, I dispute the competence of the arbitration panel. The Respondent would be ready to engage in arbitration, if it still had a contractual relationship with Claimant. Yet, as the Claimant unilaterally terminated the Supplier Agreement with Respondent on April 1, 2020 (see exhibit 6), Respondent sees no reason to be bound by the arbitration clause in section 12.2 of said Agreement. Since the parties no more agree to prefer arbitration over regular court procedure, the panel has no power to decide this case.

If, however, the panel considers that it may proceed to decide on the merits of the case, on behalf of Respondent I put forward the following statements and claims and ask the panel to:

1) reject all of the Claimant's claims.

2) order Claimant to pay the outstanding purchase price of 10 425 000 against delivery DDP of 15.000 Chacma Nature phones and 30.000 Chacma7 phones, next to applicable interests for late payment accrued since May 1, 2020.

3) order the Claimant to pay 2 800 for reasonable storage costs, next to applicable interests for late payment accrued since May 1, 2020.

4) order the Claimant to bear all costs of the arbitration, including reasonable fees of the Respondent's lawyer.

As to point 1)

The Claimant asserts seven claims, each of which are to be rejected. The seven claims could be separated into three groups:

a) The Claimant's posts "Brand Image and Reputational damage 20 000 000 euros" (post V.), "Profit loss from cancellation of the BaboonChacma7's auction 14 957 000 euros" (post IV.), "loss of profit with WirhabensAG 1,750,000" (post III.), "Relief fund contribution 500 000 euros" (post II.), and "Expense of private investigation 125.000 eurso" (post I.) are all

predicated on the premise that a subcontractor of Respondent has violated the Claimant's Code of Conduct and that the Respondent would be liable for this according to section 7.5 of the Supplier Agreement. Respondent rejects the allegation that its subcontractor violated the Supplier and Manufacturer Code of Conduct. The panel does not have to be reminded that under Art. 74 CISG, or any other damages claim, it is up to the Claimant to prove a breach of contract that could result in damages. I would invite the Claimant to present at least minimal evidence that could back up Claimant's various allegations.

The Claimant puts forward as evidence the results of an investigation carried out by "Good Spies". Note that these results are wholly inconclusive for the issue in question, which is if a subcontractor of Respondent has violated Claimant's code of conduct. Good Spies found that products with BaboonChacma symbols have been manufactured at a certain company named "Green Dolphin" and noted some reticence of that company's employees to respond to the investigators' questions. These findings prove nothing, and they certainly don't provide prima facie evidence, against which respondent would need to present counterevidence. First and foremost, the company Green Dolphin is not a subcontractor of Respondent. The investigators surmise that "Green Dolphin" may be a subcontractor of Respondent's subcontractor "Red Hat". There is no evidence for this. In particular, finding phones with BaboonChacma symbols on them could be explained by a number of other reasons, the most obvious one being an instance of illicit counterfeiting. Even if Green Dolphin was subcontracted by Red Hat without Respondent's knowledge, in no way could Green Dolphin be considered a subcontractor under section 7.5. Section 7.5 does not speak of "subcontractors of subcontractors", but only of "subcontractors". Finally even if Respondent had hired Green Dolphin (which is not the case) and the company was to be considered a subcontractor, there is no evidence whatsoever that Green Dolphin actually violated the Claimant's code of conduct. One cannot infer a code of conduct violation such as the use of prohibited substances from the mere observation that employees were reticent to answer questions that were asked by people who were complete strangers to them, which the private detectives "Good Spies" in fact were.

Now, even if the Claimant could establish that a subcontractor violated Claimant's code of conduct for whatever reason, the Claimant would still need to prove that this breach was directly causal for the losses that the Claimant purports to have suffered. Claimant has so far not bothered to offer the slightest demonstration of such a causal link.

I am afraid that what the Claimant is trying to achieve with the claims mentioned above is to shift the consequences of a mismanaged product launch to its supplier that is not at all involved in the Claimant's business except for delivering contractually compliant and high quality products.

b) The claim "Breach of Supplier Agreement regarding Subcontractors 3 525 000 euros" (post VII.) essentially builds on the allegation that Respondent subcontracted the production of contract products without Claimant's approval and that this would be in violation of section 4.2 of the Supplier Agreement resulting in a contractual penalty.

This claim must fail, because the Claimant indeed approved the subcontracting. At the time of the Purchase Orders in question Claimant was fully aware of Respondent's production capacities, and, when submitting the purchase order in November 2019 over an additional 70.000 phones, it tacitly approved that part of this order could only be manufactured by a trusted subcontractor of Respondent. In this case, insisting on a written approval of subcontracting is nothing else than abusive and inconsistent behavior on Claimant's part, which should be sanctioned and not rewarded.

Should the panel nevertheless follow the Claimant's argument at least to the point that there was an incidence of subcontracting without written approval, it should take into account that only a portion of the purchase order's manufacturing needs were in fact subcontracted. Section 4.2 of the Supplier Agreement reads "Supplier will be fined a contractual penalty of 50% of the sales price of the Purchase Order for which the subcontractor has been used" (see exhibit 1). The clause makes it clear that the penalty is not calculated on the basis of the entire purchase order but rather on the portion of the Purchase Order "for which the subcontractor has been used". We will substantiate how much of the Purchase Order in question has been subcontracted, if need be.

c) Claimant supports the claim "Difference of cover purchase 2.152.500" (post VI.) with the argument that Respondent had not delivered the third instalments of Purchase Orders from 28 Oct 2019 and from 19 November 2019. This argument cannot prevail. The costs of a cover purchase may only be claimed if the Claimant has successfully cancelled the Purchase Orders in question. Yet, at no point was Respondent in breach of contract that would have entitled Claimant to cancel the Purchase Orders. In particular the argument that Respondent did not deliver in mid February 2020 according to schedule is fruitless. I would like to recall that in February 2020 the Chinese Government ordered a strict lockdown in Wuhan that caused a standstill of our factory's operations. The delivery of the outstanding two instalments was therefore impeded temporarily. Since, at the moment of either Purchase Order (28 October and 19 Novmeber), none of the parties could have foreseen the lockdown that occurred months later and since the lockdown measures were beyond any of the party's control, the Respondent is exempted from performing the contract as long as the impediment was in place. This does not have to result from the contract, as Claimant contends. Respondent was temporarily exempted from performing its duties under Art. 79 of the CISG that is applicable to the contractual agreements between Claimant and Respondent as they have chosen to apply French law to the contract, and the French law for the International Sale of Goods happens to be the CISG. When the lockdown was lifted, Respondent resumed production and was ready to deliver. Respondent still is.

As to point 2)

This claim is based on the Claimant's continued obligation to pay the outstanding purchase price for the 3rd instalments of PO of 28/10/2019 and PO of 19/11/2019. Below please find the payment plan for these two instalments:

Number of units Unit Price Total price Prior payments Outstanding price

PO 28/10/2019 15.000 250 3.750.000 375.000 3.375.000

PO 19/11/2019 30.000 235 7.050.000 0 7.050.000

Total 10.425.000

The Claimant has no right not to take delivery. In particular it has not right cancel the Purchase Orders:

Firstly, according to 2.3 of the Supplier Agreement (exhibit 1), Claimant may not cancel a purchase order without Respondent's agreement after Respondent has commenced to manufacture the products nominated in the purchase order. This was the case, and Claimant was informed of this fact (exhibit 4).

Secondly, at no time was Respondent in breach of contract that would have justified avoidance under the CISG. In particular Respondent's non-delivery in February does not result in a breach of contract, as Respondent was exempted from performing its obligations under the contract until the temporary impediment was lifted (see above).

Ever since the end of the lockdown Respondent has been ready to deliver DDP 15.000 Chacma Nature phones and 30.000 Chacma 7 phones in exchange for the payment of the outstanding purchase price.

Had Claimant taken delivery as it was obliged to (Art. 53. 60 CISG), it would have paid the outstanding purchase price on May 1, 2020. For this reason, interest for late payment commences on that date.

Pacta sunt servanda!

As to point 3)

By not taking delivery of the manufactured products, Claimant is in breach of contract (Art. 53, 60 CISG) entitling Respondent to claim damages (Art. 74 CISG).

Since Respondent has finished the manufacture of the products, it had to adequately store them on its premises in order to prevent product deterioration and risk of theft. Storing 45.000 phones takes up approximately 9 cubic meters of storage space. A fee of 400 monthly for 9cubmic meters storage space for valuable items is more than reasonable. The products have been stored for at least 7 months so far.