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CISG CASE PRESENTATION

Austria 30 June 1998 Supreme Court (Pineapples case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/980630a3.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISIONS: 19980630 (30 June 1998)

JURISDICTION: Austria

TRIBUNAL: Oberster Gerichtshof [Supreme Court]

JUDGE(S): Dr. Schlosser (presiding judge), Dr. Schiemer, Dr. Gerstenecker, Dr. Rohrer, Dr. Zechner

CASE NUMBER/DOCKET NUMBER: 1 Ob 273/97x

CASE NAME: Austrian case citations do not generally identify parties to proceedings

CASE HISTORY: 1st instance BG Wels (9 C 408/93k) 9 December 1996; 2nd instance LG Wels (22 R 85/97z-61) 21 April 1997 (remanded)

SELLER'S COUNTRY: Germany [plaintiff]

BUYER'S COUNTRY: Austria [defendant]

GOODS INVOLVED: Pineapples


Case abstract

AUSTRIA: Oberster Gerichtshof 30 June 1998

Case law on UNCITRAL texts (CLOUT) abstract no. 305

Reproduced with permission from UNCITRAL

An Austrian buyer, defendant, ordered [pineapples] from the seller, plaintiff. When the buyer discovered that a portion of the goods was spoiled, it claimed lack of conformity and paid the purchase price partially. The buyer alleged to have immediately notified the seller by fax of the lack of conformity of the goods. However, such fax had been transmitted only the following day. The court had to decide whether the notice of lack of conformity of the goods had been sent by the buyer within the 12 hours period provided by 17(2)c COFREUROP, the application of which had been agreed by the parties.

The court remanded the case to the court of first instance, instructing it to make a clear fact finding on the circumstances that had prevented the buyer to effect a timely transmission of the notice of lack of conformity. The court held that although the buyer did not bear the risk of a delay or error in the transmission of the notice as provided by article 27 CISG, the burden of proof that such notice had been timely given, lied with it.

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Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 27 ; 38 ; 39

Classification of issues using UNCITRAL classification code numbers:

27A1 [Dispatch of communication by appropriate means: effective in spite of delay, error or loss in transmission];

38A1 [Buyer's obligation to examine goods as soon as practicable in the circumstances];

39A11 [Requirement to notify seller of lack of conformity (buyer must notify seller within reasonable time): burden of proof (lies with buyer)]

Descriptors: Communications, risk of ; Examination of goods ; Lack of conformity notice, timeliness ; Burden of proof

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Editorial remarks

Excerpt from analysis of Austrian case law by Willibald Posch & Thomas Petz*

        * "Austrian Cases on the UN Convention on Contracts for the International Sale of Goods", 6 Vindobona Journal of International Commercial Law and Arbitration (2002) 1-24, at 16-17.

Communications, risk of ; Lack of conformity notice, timeliness. "This decision involved an international contract for the sale of tropical fruit, which by agreement of the parties was subject to the COFREUROP-rules. [COFREUROP is the acronym for "Common European Usages for the Domestic and International Sale of Eatable Fruits and Vegetables".] These rules impose on the buyer an obligation to monitor the goods in an appropriate way and to immediately notify any defect. Notwithstanding the incorporation of the COFREUROP-rules into the contract, the Austrian Supreme Court applied Article 27 CISG to the case and exempted the party dispatching the notice of lack of conformity from the risk of delay or loss. Apart from a reference to a comment by Kramer [in Straube, M. (ed.), HGB-Kommentar 2d ed., 1995 Manz, Vienna, Comment No. 43 to 377, 378 HGB], the Court failed to provide any reason for this decision. However, the Court of First Instance did not make any findings of fact on whether the notice of defects had happened in due time. As a consequence, the case had to be remitted."

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Citations to other abstracts, case texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

English: Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=482&step=Abstract>

German: [1998] Zeitschrift für Rechtsvergleichung, Internationales Privatrecht und Europarecht (ZfRV) 248-249 No. 71; [1999] ecolex - Fachzeitschrift für Wirtschaftsrecht 92

CITATIONS TO TEXT OF DECISION

Original language (German): CISG-Austria website <http://www.cisg.at/1_27397x.htm>; [1998] ZfRV 922-924; [1999] Juristische Blätter (JBl) 252-255; [1998] Österreichisches Recht der Wirtschaft (RdW) 736; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=482&step=FullText>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Willibald Posch & Thomas Petz, 6 Vindobona Journal of International Commercial Law and Arbitration (2002) 1-24, at 16-17 [English translation of German commentary cited below] [Go to these commentaries for an excellent comprehensive analysis of Austrian case law on the CISG]; CISG-AC advisory opinion on Examination of the Goods and Notice of Non-Conformity [7 June 2004] (this case and related cases cited in addendum to opinion); [2004] S.A. Kruisinga, (Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept?, Intersentia at 183; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 27 paras. 4, 9, 13 Art. 39 paras. 11, 34

German: Willibald Posch & Ulfried Terlitza, Internationales Handelsrecht (2001) 47-56, at relevant pages

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Case text (English translation)

Queen Mary Case Translation Programme

Supreme Court (Oberster Gerichtshof) of Austria

30 June 1998 [1 Ob 273/97x]

Translation [*] by Nina Cankar [**]

Edited by Jan Henning Berg [***]

COURT COMPOSITION; PARTIES; COUNSEL

The Supreme Court as the Court of Final Appeal through the President of the Senate of the Court, Dr. Schlosser as the presiding judge, and Drs. Schiemer, Gerstenecker, Rohrer and Zechner as further judges in the case of the Plaintiff *****D***** GmbH [Seller], represented by Dr. Friedrich Schwank, Attorney at Law in Vienna, vs. Defendant *****H***** GmbH [Buyer], represented by Dr. Hans Christian Kollmann, Dr. Edgar Hofbauer and Mag. Jürgen W. Zahradnik, Attorney at Law in Lambach, for DM [Deutsche Marks] 9,000.- (= öS 64,404.-) sA [Austrian schillings] due to the [Seller]'s appeal against the decision of the [Landesgericht] of Wels as the initial Appellate Court dated 2 April 1997, GZ 22 R 85/97z-61, that approved the decision of the District Court [Bezirksgericht] of Wels dated 9 December 1996, GZ 9 C 408/93k-55, in a non-public hearing.

DECISION

      -   The appeal is admissible and justified.
 
      -   The decisions of the Lower Instance Courts are invalidated and the suit is remanded to the Court of First Instance for renewed proceedings and decision.
 
- The costs of the appellate proceedings are further costs of the proceedings.

FACTUAL BACKGROUND

Both parties trade fruit, tropical fruit and vegetables. On 9, respectively 10 December 1992, the [Buyer] ordered from the [Seller] 2,340 crates A, each of six pineapples. [Seller] confirmed the order with telexes dated 9 and 10 December 1992, respectively. Both communications contained the remark "in accordance with EC trade conditions" as well as "qualitative takeover Antwerp". In Antwerp on 11 December 1992, 1,950 crates A, each containing six pineapples, and 1,170 crates C, each containing twelve pineapples that had been ordered by the [Buyer] from the [Seller] as well, were handed over to drivers of the company ordered for the transport by the [Buyer]. With the help of two trucks, the pineapples were transported onwards on the very same day, and arrived at [Buyer]'s storehouse in Wels on 12 December 1992 in late afternoon, and at night, respectively. There it was established that the crates containing six pineapples were mouldy to a great extent, beginning to rot, and were overripe. The defect affected 846 crates containing six pineapples each, while those pineapples packed in crates of twelve were faultless. For the delivered pineapples packed in crates of six, the [Seller] issued an invoice for the sum of DM 30,810 on 14 December 1992, and for the sum of DM 7,702.50 on 15 December 1992, respectively. [Buyer] deducted DM 9,000 from the total invoice sum and paid the difference only.

POSITIONS OF THE PARTIES

[Seller]'s claim

The [Seller] claimed the payment of the rest of the purchase price in the sum of DM 9,000. At the time of conclusion of the contract, the parties agreed that the contract was subject to the rules of the "Common European Usages for the Domestic and International Sale of Eatable Fruits and Vegetables" (COFREUROP). These usages are trade customs as well. According to the trade custom, the buyer is obliged to adequately and expertly examine the goods before the handover at a departure point, and to notify of existing defects; this did not happen. Defects claimed by the [Buyer] were to be classified as apparent; drivers of the transport vehicle did not discover the defects due to inadequate expert knowledge and inadequate examination of the goods. However, the [Buyer]'s reclamation made on 13 December 1992 would have been late even if the defects in question had been hidden. Because of discovered defects, the [Buyer] was obliged to stop unloading immediately and notify [Seller] of these defects. [Buyer] should not have dispatched the goods and should have informed the [Seller] of the time and place of the formation of the expert's opinion on the defects. [Seller] did in no way suppress eventual defects aforethought. Moreover, the goods were not defective, in any event, not to the extent claimed by [Buyer].

[Buyer]'s response to the claim

[Buyer] objected that pursuant to the examination conducted, which necessarily consisted of random trial checking, the defects could not have been discovered. The defects were first discovered during the unloading of pineapples due to their onward transportation. In accordance with its obligation to mitigate the damages, the [Buyer] tried to dispatch the fruits. At the time of the discovery of defects in the evening of 12 December 1992 (Saturday), the [Seller] could not be reached either by phone, or by fax; the complaint given on 13 December 1992 was therefore timely. Informing the [Seller] of the time and place of the formation of the expert's opinion in accordance with Art. 18 of the COFREUROP was not possible. The [Seller] should not be referring to Art. 17 of the COFREUROP, since the [Seller] fraudulently suppressed the defects. In addition, [Buyer] filed an indemnification claim for sA 97,801.12 to compensate for the defective delivery.

DECISION IN FIRST INSTANCE

The Court of First Instance rejected [Seller]'s claim.

The Court of First Instance ascertained that the contract of sale in this lawsuit -- corresponding to the usage in the European transport of goods regarding fruit, vegetables and tropical fruit -- was subject to the COFREUROP rules by the agreement of the parties. The [Buyer] was aware that the pineapples originating at the Ivory Coast were of worse quality. For the transport of the pineapples from Antwerp to Wels, it used a transport company whose drivers had special knowledge in the field of transport and fruit handover. They knew that at the handover the pineapples should be green, and that no mould should be noticeable at the stump. They were familiar with the required transport, and fruit temperature as well. They were instructed by the [Buyer]'s manager to monitor the whole upper layer of pineapples in each crate. As long as the upper layer is without defects, at the crate loaded in the end the whole pile had to be examined from up down. During the examination, a few crates had to be opened randomly for the fruit to be taken out and checked for its color and firmness. Apart from that, the temperature of the goods distributed over the whole crate height had to be checked with the help of a small hatchet. Moreover, a vigilant eye had to be kept on the prevailing temperature in the cooling room and the temperature in the refrigerator had to be monitored. The truck drivers examined and accepted the fruit in Antwerp in the manner they had been instructed and ordered to and discovered no defects. Due to the late arrival of the load to Antwerp and the time pressure, a correct and conscientious qualitative handover in such situation was barely possible. Due to the lack of time, the qualitative handover could not be made with the necessary diligence in compliance with the COFREUROP, yet was sufficient in the sense of existing trade usages and the actual practice. For organizational and logistic reasons, the more work intense and time consuming inspections were neither feasible nor usual. The [Seller] did not examine the goods and did not know about the eventual defects. In Antwerp the goods were examined by two experts, engaged by [Seller]'s suppliers; these experts perceived no defects. On 11 December, the goods were handed over to the truck drivers and refrigerated transported to Wels. On 12 December 1992 at around 5 p.m., they were stored there in [Buyer]'s warehouse. Still no defects were discovered in the course of a random examination conducted by the chief of the unloading sector. Only in the course of taking the pineapples out of the crates for delivery to [Buyer]'s customers, were defects first perceivable and discovered. The unloading was therefore immediately terminated by request of [Buyer]'s manager. On 12 December 1992 at around 6 p.m., he examined the fruit himself and afterwards tried to contact the [Seller] by phone, yet without success. The fax machine "did not transmit the message". The [Buyer] had another fax machine at its disposal, yet the manager was not able to handle it and never tried to find anybody who could have operated this fax machine. Consequently, the manager ordered unloading to be continued and the fruit that was rotten to a great extent to be set aside, while the mouldy ones were to be cleaned and re-packed. In the evening of 12 December 1992 at the latest, the pineapples were delivered to [Buyer]'s customers who, however, partly rejected the delivery. On Saturday 13 December 1992, the [Buyer]'s manager called his purchaser on duty and ordered him to claim the lack of conformity with the [Seller]. The claim of the lack of conformity was done through the telex. It cannot be determined when exactly the telex was sent, nor when the [Seller] was informed about it. In any case, the telex was received by the [Seller] on Monday, 14 December 1992 by 7:30 a.m. at the latest. The [Seller]'s office had a phone, telex and fax at its disposal, the telex and fax being turned on continually, without stopping during the weekend. The [Seller]'s office was occupied from around 1:00 to 2:00 p.m. on Saturday, and for 2 to 3 hours on Sunday, from morning until early afternoon. On 14 December 1992, [Seller]'s manager informed the [Buyer]'s manager that it could not accept the claim of lack of conformity, since it had been agreed for the handover to take place in Antwerp. The inspection of the identity of goods was therefore not possible anymore. The latter informed him that in the course of the morning he would order the goods checked by a judicial expert. The goods had been encumbered with discovered defects already during the handover in Antwerp. During the loading, as well as during the transport, the cooling temperature and the temperature of the fruit were optimal. By claiming a reduction in price for the total sum of DM 9,000, the [Buyer] exercised its right to a price reduction. On the occasion of the handover in Antwerp, the [Buyer] examined the goods with due diligence, the defects have first become ascertainable during unloading in Wels. The claim of lack of conformity is to be regarded as given within due time in compliance with the COFREUROP; defects were discovered on Saturday evening, while the [Seller]'s office was occupied for a couple of hours only, therefore the [Buyer] could not have seriously and effectively counted on any reaction from the [Seller] until Monday morning anyway.

JUDGMENT IN SECOND INSTANCE

The Appellate Court of Wels confirmed this decision and passed judgment that a regular appeal is allowed. The decisive element was the contents of the COFREUROP rules that represent the trade usages, the applicability of which had been agreed upon. The examination of goods conducted by truck drivers at the handover in Antwerp was carried out expertly in the sense of Article 17, Par. 1 of the COFREUROP rules. The COFREUROP rules themselves do not define the notion of "the expert examination", therefore the Austrian and German judicature in relation to Article 377 HGB (Handelsgesetzbuch = Commercial Code) can be used. In the sense of this judicature, the examination is conducted expertly if it is carried out in accordance with prescribed procedure and prevailing usages. Differentiation between the expertly conducted examination in the sense of the COFREUROP, on one hand, and the real practice or the trade usage, on the other hand, is not legally justified. The expert examination in the sense of the COFREUROP is given when the inspection that is actually performed complies with the trade usages and the actual usages, which was the case in the case at hand. Since the [Buyer] carried out the examination expertly and not superficially, the defects determined in the case at hand were hidden defects that, in accordance with the COFREUROP rules, should have been notified immediately after they had been discovered. The notice of lack of conformity that arrived in the [Seller]'s office on Monday morning at the latest is still timely, because the load had arrived at the [Buyer]'s place on Saturday evening the earliest, while the [Seller]'s office was only occupied for a couple of hours on Saturday and on Sunday, with the [Seller]'s actual reaction not to be counted on until Monday anyways.

JUDGMENT OF THE AUSTRIAN FEDERAL SUPREME COURT

The [Seller]'s appeal is admissible and justified. The [Seller] alleges that, since the agreement of the parties was subject to the "EC trade conditions" (COFREUROP) rules -- the origin of which has not been explained in details in this procedure, yet the application as well as the decisive contents of which are not disputable -- and due to the qualitative handover in Antwerp, the inspection carried out by the truck drivers in Antwerp was not sufficient; the inspection should have been carried out in such a way that all the potential unconformities could have been determined with greater possibility. Any complaints for non-conformity during unloading in Wels, in accordance with Article 17, par. 2 of the COFREUROP rules, are therefore not to be considered.

The Court does not agree with this view.

It is not disputed that in this case the agreement of the parties was subject to the COFREUROP rules. In Article 17, par. 1 of these trade conditions an expert examination of goods is foreseen, the notion of which, however, is not defined in details in the COFREUROP rules themselves. The Court of Second Instance held that Austrian and German judicature could be used when trying to interpret this notion. The agreement of "qualitative handover Antwerp" only means that the quality (and not only the quantity) of goods has to be examined already at the departure point; the meaning of the qualitative handover was, therefore, expanded to the quality of the delivered pineapples as well. According to the findings, trade usages and the actual (prevailing) usage exist for examination of the pineapples; they were fulfilled by the truck drivers of the transport company, acting for the [Buyer] (p. 8 of the decision of the Court of First Instance). The findings of the existence of the transport comprehension and the trade usages belong to the actual state of affairs that cannot be thwarted by appeal (SZ 68/105; 7 Ob 550/94 uva). According to the findings, the examination was not superficial but performed with professional care; it therefore has to be classified as conducted according to the rules. As a consequence, the defects first discovered during the unloading at the [Buyer] in Wels are hidden defects, for they could not have been revealed during the expert examination (WB1 1993, 334; compare SZ 55/31; SZ 53/63). The actions that a buyer is expected to take are determined according to the objective point of view and circumstances of each particular case (WB1 1990, 247; SZ 53/63). The opinion of the Appellate Court that a professional examination in the sense of the COFREUROP rules is given when the actual inspection that is performed is in compliance with the trade usages and the actual usage is to be acceded, for in case of doubt, the business provisions used in the agreement (in this case: COFREUROP and "qualitative handover Antwerp") have to be understood in a way they are normally understood in commercial trade (Kramer in Straube, HGB, Rz 15 to par. 346 et seq.).

It therefore has to be determined whether the [Buyer], after having discovered defects during unloading in Wels, has given notice of this non-conformity of the goods in due time. This, however, cannot yet be ultimately resolved from the factual findings.

According to Article 17, par. 2 of the COFREUROP rules, notice of initially hidden defects may be made after the arrival at the first destination point, if the inspection is carried out immediately after receiving the notice of the arrival and the place of the freight. It is not disputed that the examination was performed immediately in the evening of 12 December 1992. According to Article 17, par. 2b of the COFREUROP rules, the defects that in spite of a professional inspection could not be discovered before unloading, have to be notified "at that time". The unloading has to be discontinued promptly. According to Article 17, par. 2c of the COFREUROP, the notification of non-conformity has to follow without delay. For rapidly perishable and very perishable food, the notice of lack of conformity has to be dispatched within six hours, while for other goods within twelve hours after determining the place of the freight. According to Article 17, par. 3 of the COFREUROP rules, hidden defects have to be notified immediately after they have been discovered; that is, according to par. 4 of the quoted trade conditions, at a departure point orally or through phone, and at a destination point through phone, telegraph or fax. [Buyer] therefore had to, by all means, notify the discovered defects within twelve hours after their discovery. The purpose of a notification duty is informing the seller of the lack of conformity of goods as fast as possible in order to enable him to undertake the measures needed for protection of his interests as soon as possible (SZ 63/197; WBl 1990, 247; 8 Ob 513/80; SZ 53/63 uva). Even a small negligence that, according to the objective measures, could have been avoided in a procedure causes a tardiness of notification (WBl 990, 247; 8 Ob 513/80). In principle, Saturdays and Sundays are not taken into consideration when determining whether or not the notification of non-conformity is due (3 Ob 535/90; SZ 53/63). In the case at hand, however, the agreement is subject to the COFREUROP rules, in which the maximum twelve-hour time limit for the notification of non-conformity is explicitly foreseen. Such an extremely short notification period is undoubtedly justified, for it is the transport of fruit, vegetables and tropical fruit that is in question; that is, the transport of relatively fast perishable goods. If, as in the case at hand, the parties agreed upon the applicability of the COFREUROP rules, the notification of non-conformities has to be dispatched within twelve hours unconditionally. In this case, the defects had been determined on 12 December 1992 at around 6 p.m.; therefore, the non-conformity should have been notified by 6 a.m. of the following day at the latest. The burden of proof that the notice of lack of conformity has been sent in time and by proper means lies wholly with the buyer (Kramer aaO Rz 45 to par. 377, 378 et seq.). According to Article 27 of the CISG applied in this case, the party dispatching the notice of lack of conformity is exempted from the risk of delay or loss (Kramer aaO Rz 43 to par. 377, 378). According to the findings, it cannot be determined whether the notice of non-conformities had been made in due time. Namely, the Court of First Instance found out that the [Buyer]'s attempt to reach the [Seller] on the phone had not succeeded. Due to the fact that [Buyer] had made this unsuccessful attempt on Saturday around 8 p.m., it was by all means obliged to communicate the discovered defects to the [Seller] by fax. In this context, the Court of First Instance found that "The telefax machine did not transmit the message" (p. 9 f of the judgment). At the same time, the Court found that during the weekend the fax machine in the [Seller]'s office had been turned on continually (p. 10 of the judgment). The two findings are not compatible one to another. In particular, there is an explanation missing as to why the [Seller]'s fax machine, which was turned on, failed to accept the transmission. Namely, the following is essential: if the manager of the [Buyer] sent the fax in due time, and the reason that the [Seller] did not receive this fax is within the [Seller]'s sphere of responsibility, the notice of lack of conformity should be regarded as timely. It is not essential whether the [Seller] reacted or could have reacted to this notice in due time but whether the non-conformity was notified in due time. The [Seller] is responsible for the fact that the machine could not receive the telex. [Seller] should have taken into account that since the agreement was subject to the COFREUROP rules, the notification of non-conformity could have been expected during weekend as well and an appropriate reaction thus should have been made. The manager of the [Buyer] cannot be reproached for not sending the telex in addition to its telephone attempts. [Buyer]'s duty to notify was fulfilled after it had properly sent the fax in due time. The requirements from Article 17, par. 4b of the COFREUROP had been fulfilled. Despite this finding, it does not impair [Buyer]'s position that it used fax as the modern means of communication, especially since the recipient of the message was using the same device. The finding of the Court of First Instance (enclosure Q and 3) that the exact time of dispatching the notice on 13 December 1992 cannot be determined (even though the time 11:30 is clearly evident from this enclosure), and the fact that [Buyer] did not object to this negative finding, are therefore not fundamental. Proceeding from the fact that the telex was sent at 11:30 a.m., the twelve-hour notice period had already expired.

In continuation of this procedure, the Court of First Instance shall non-contradictorily decide regarding the dispatch of the fax by the [Buyer], in order to be able to judge reliably whether this fax was sent within the notification period as required by the COFREUROP rules that are applicable in the case at hand. On the basis of the above finding, the case shall be decided upon once more.

Reservation regarding costs is based upon Article 52 the Law on Civil Procedure.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Plaintiff-Appellant of Germany is referred to as [Seller] and the Defendant-Appellee of Austria is referred to as [Buyer].

** Nina Cankar is a law graduate of the University of Ljubljana. Following graduation, she was employed as a Legal Assistant in the law office of Jadek & Pensa, working mostly in the area of commercial and corporate law. In 2001, she received Honorable Mention for the Martin Domke Award for the Best Oral Advocate in the General Rounds of the Willem C. Vis International Commercial Arbitration Moot. In 2003-04, she is reading for the LL.M. degree in Commercial Law at the University of Cambridge. She is President of the International Commercial Law Society of Slovenia.

*** Jan Henning Berg is a law student at the University of Osnabrück, Germany, who participated in the 13th Willem C. Vis Moot with the Osnabrück team. He has coached the team of the University of Osnabrück for the 14th Willem C. Vis and the 4th Willem Vis (East) Moot.

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