On 22 November 2002, the Tribunal Concerning the Bank for International Settlements (hereafter the "Tribunal") unanimously rendered a Partial Award (hereafter "Partial Award") in the cases concerning Dr. Horst Reineccius (hereafter "Dr. Reineccius" or "Claimant No. 1"), First Eagle SoGen Funds, Inc. (hereafter "First Eagle" or "Claimant No. 2") and Mr. Pierre Mathieu and the Société de Concours Hippique de La Chatre (hereafter collectively "Mr. Mathieu" or "Claimant No. 3") against the Bank for International Settlements (hereafter the "Bank" or "BIS"). In that Partial Award, the Tribunal rendered the following decisions:

1. DETERMINES that the amendment of the Statutes of the Bank for International Settlements of 8 January 2001 to the effect that private shareholders are excluded as shareholders of the Bank was lawful;

2. DETERMINES that Claimants Nos. 1, 2 and 3 are entitled to a compensation for each of their recalled shares in the Bank for International Settlements corresponding to a proportionate share of the Net Asset Value of the Bank, discounted by 30%;

3. NOTES that, for the purposes of the compensation referred to in Decision No. (2), Claimants Nos. 1, 2 and 3 accept that the Net Asset Value of the Bank for International Settlements is US$ 10,072,000,000, being US$ 19,034 (equivalent to CHF 33,820) per share, not counting the value of the real estate of the Bank;

4. GRANTS the relief sought by Claimants Nos. 1, 2 and 3 to the extent that it is consistent with the foregoing Decisions and DISMISSES all other relief sought by Claimants Nos. 1, 2 and 3 inconsistent therewith as well as the relief sought by the Bank for International Settlements relating to those Decisions;

5. RETAINS jurisdiction with respect to the valuation of the real estate of the Bank for International Settlements, the determination of the exact amount owing by the Bank per share including interest thereon to Claimants Nos. 1, 2 and 3, the counterclaim of the Bank for International Settlements against Claimant No. 2 (First Eagle), and the costs of the arbitration, as well as any relief requested by any of the Parties relating to those matters;

6. DETERMINES that it will issue one or more Procedural Orders with respect to the conduct of the next phase of the arbitration concerning the matters mentioned in Decision No. (5) after consultation with the Parties.¹

Pursuant to the terms of the Partial Award, the Tribunal received: (1) an Application dated 17 January 2003 from First Eagle for the Production of Documents from the Bank, (2) an Application dated 17 January 2003 from the Bank for the Production of Documents from First Eagle, (3) a Revised Application dated 21 January 2003 from First Eagle for Documents from the Bank, (4) First Eagle's Objections to the Bank's Application dated 28 January 2003, (5) the Bank's Response and Objections to First Eagle's Application dated 28 January 2003, (6) a Reply of the Bank dated 30 January 2003 to First Eagle's Objections, and (7) First Eagle's Reply dated 4 February 2003 to the Objections of the Bank. The Bank and First Eagle were unable to agree on:

(i) First Eagle's request for documents relating to the formation of the Tribunal,

(ii) First Eagle's request for documents which would permit the calculation of the Bank's NAV on 8 January 2001, and

(iii) the Bank's request for documents relating to First Eagle's decision to sue the Bank and documents relating to communications between First Eagle and its shareholders or public officials concerning the exclusion transaction.⁵

The Tribunal considered the submissions of the Parties and issued Procedural Order No. 10 deciding that

First Eagle's Application in (i) above disregards the schedule agreed between the Parties for a phase within which jurisdictional or lack of independence objections were to be lodged. Requesting documents relating to the formation of the Tribunal in this phase of the arbitration, after the Parties' explicit acceptance⁶ of the jurisdiction and independence of the Tribunal, is untimely.

The Tribunal deferred a decision upon First Eagle's request in (ii) above to a later date "should the Tribunal hold that the 8 January 2001 date be used to calculate the U.S. dollar/Swiss franc exchange rate in determining the amount to be paid to claimants."⁷

The Tribunal granted the Bank's Application in (iii) above, for documents relating to the Bank's claim that First Eagle violated Article 54(1) of the Statutes of the Bank for International Settlements of 20 January 1930; text as amended on 8 January 2001 (hereafter "Statutes of the Bank" or "Bank's Statutes"). First Eagle was ordered to produce to the Bank:

a. All non-privileged documents relating to First Eagle's decision to sue the Bank in the United States and the conduct of such suit ("First Eagle's United States Litigation"), other than briefs, affidavits and other materials filed by First Eagle with the United States courts;

b. All documents created on or after 11 September 2000 (the public announcement of the Bank's intention to amend its Statutes to exclude private shareholders) and before 31 August 2001 (the date of First Eagle's Notice of Arbitration) reflecting communications among First Eagle and any shareholder (or purported shareholder) of the Bank (including any advisor of such shareholder) regarding (i) the transaction by which the Bank withdrew its shares held by persons other than central banks (the "exclusion transaction") and (ii) First Eagle's United States Litigation;

c. All communications among First Eagle and its own shareholders concerning (i) the exclusion transaction and (ii) First Eagle's United States Litigation; and

d. All documents reflecting First Eagle's communications with public officials in the United States (other than courts) seeking to block the exclusion transaction.⁸

The Tribunal issued Procedural Order No. 11 (On Consent) on 16 May 2003 (hereafter "Procedural Order No. 11") which recorded that:

[T]he Tribunal received from the expert its statement of independence in this matter as required by the Parties on 7 April 2003, and the expert, accompanied by the Secretary of the Tribunal, inspected all of the properties on 16 April 2003, and then provided on 28 April 2003 a Certificate of Valuation and underlying Valuation Reports which were circulated to, and accepted by, the Parties....

…

B. The Tribunal will use the value of CHF 168,094,000 (One hundred and sixty-eight million, ninety-four thousand Swiss Francs), as determined by the expert, for the purpose of valuing as of 7 September 2000 the Bank's buildings and their contents as required by the 22 November 2002 Partial Award.¹⁰

In addition, the Tribunal confirmed the agenda for oral argument.

Dr. Reineccius indicated his willingness to stipulate to the J.P. Morgan calculation of the NAV of the Bank as described in paragraph 2 supra. Regarding the valuation of the real estate pursuant to paragraph 205 of the Partial Award, Dr. Reineccius wrote on 27 November 2002:

Ich überlasse es First Eagle, in ihrem und in meinem Namen einen Vorschlag für die Benennung eines Immobilien-Experten und seinen Zeitplan für die Bewertung zu machen.¹⁴

First Eagle stipulated to the appointment of an expert.¹⁵

Dr. Reineccius requested the Tribunal to find that:

(i) as decided by the Tribunal in para. 209(3) of the Partial Award, he should be paid a proportion of the J. P. Morgan Report NAV of the Bank which he calculated to be CHF 33,936 per share compensation for his compulsorily recalled shares;¹⁶

(ii) the proportionate value of the Bank's buildings and their contents to be paid to him should be CHF 767 per share;¹⁷

(iii) the Bank must pay him interest at a minimum of 3¼% per annum from 8 January 2001 to the date of payment on the above compensation;¹⁸

(iv) his costs of the Arbitration (the deposits he made to the BIS Tribunal Account), i.e. EUR 1,852.64 should be reimbursed and compensation should be paid to him for his expense and his efforts (Bemühungen) in bringing his case to the Tribunal;¹⁹

(v) a specific date for payment of this compensation including interest is ordered;²⁰

(vi) the Tribunal should "expressly forbid the Bank from making upcoming payments dependent on signing a waiver".²¹

First Eagle argued in its submissions of 28 February 2003 and 16 May 2003 that the Bank's NAV for the purposes of determining the base award of First Eagle's damages must be set at CHF 33,936 per share, the value calculated by J.P. Morgan in its report of 7 September 2000.²⁷

[T]his result is compelled by the parties' stipulation at the August 2002 hearing accepting J.P. Morgan's calculation of the Bank's NAV. By so stipulating, the parties agreed to accept as conclusive a September 2000 valuation analysis... in the event that the January 2001 exchange rate were to be used, the NAV would have to be recalculated as of that date as well.²⁸

Without such a recalculation, First Eagle would be forced to "bear the downside effect of changing currency conversion rates... without calculating the offsetting increase in the Bank's NAV as of the later date."²⁹

First Eagle characterized the Bank's argument that the date of Swiss franc to U.S. dollar exchange should be 8 January 2001, not 7 September 2000, as "an attempt to deny First Eagle the compensation to which the Partial Award entitles it."³⁰ First Eagle asserted that the Bank's actual use of the J.P. Morgan Report in the exclusion transaction relied upon J.P. Morgan's Swiss franc calculations.

In the exclusion transaction out of which First Eagle's claim arises, the Bank first, on 10 September 2000, fixed a redemption price in Swiss francs. It did so in reliance on the J.P. Morgan Report, which used exchange rates prevailing in September 2000.... The Bank then, on 8 January 2001, committed to pay (and subsequently did pay) that same redemption price in Swiss francs.³¹

First Eagle argued that the Bank's past share issuance practice was irrelevant but nonetheless supported reliance on J.P. Morgan's September 2000 Swiss franc NAV:³²

[P]ast share practices were of little or no significance compared to the Bank's actual practice in the exclusion transaction, which was to set a purchase price in Swiss francs in September 2000, based on the then-prevailing exchange rates, and to hold that price constant over the entire period of the share repurchase.³³

First Eagle asserted:

First Eagle is also entitled to reimbursement from the Bank of the costs of the arbitration and its legal fees and expenses. First, as the prevailing party, First Eagle is entitled to its costs and fees in order to be fully compensated for the Bank's refusal to pay lawful compensation at the time it was due. Second, because this proceeding was necessary to correct the otherwise unlawful compensation paid by the Bank, and hence to ensure that the transaction met the requirements of international law, First Eagle's costs, fees, and expenses constitute a component of the transaction costs necessary to put into effect the exclusion transaction. Finally, at a minimum, because First Eagle's efforts have substantially benefitted all the Bank's excluded shareholders, those shareholders should share, pro rata, in First Eagle's expenses.³⁷

First Eagle maintained it was entitled to interest from 8 January 2001 "on the outstanding compensation payment, as well as [on] its costs, fees, and expenses, at a rate of at least 7% compounded monthly."³⁸ First Eagle reasoned that 7% interest

reflects the minimum return First Eagle would have expected to earn on alternative investments of the same risk had it received full compensation when it was due. If First Eagle were paid less than 7% interest, the Bank would earn a windfall... and thereby be unjustly enriched.³⁹

Interest should be compounded monthly, First Eagle stated, "in accordance with the current international law and financial practice, including that of the Bank itself".⁴⁰

First Eagle further argued it was entitled to an award ordering the Bank to pay compensation and interest due on all 9,110 shares claimed by First Eagle, both those registered to First Eagle and those held by a custodian. On 8 January 2001, First Eagle was the registered owner of 5,250 shares in the Bank.⁴³ However, First Eagle claimed compensation for 9,110 shares of the Bank. First Eagle indicated that the 3,860 shares for which First Eagle claims compensation, but is not the registered owner,

were held by two custodians in whose names the shares were registered.... Serving as the Swiss subcustodian for the Bank of New York, Credit Suisse First Boston... held 3655 shares, and serving as the Swiss subcustodian for J.P. Morgan Chase, UBS held 205 shares.... For purposes of this proceeding, each of the Bank of New York and J.P. Morgan Chase has confirmed that, if any compensation is paid to them rather than First Eagle on the shares they held as custodian, they will pay that compensation over to First Eagle.⁴⁴

First Eagle further explained that it had

earlier claimed in this proceeding for 9085 shares, or 25 shares less than the total for which it now claims... in January 2001, a prospective trade was pending... [which] was cancelled after the exclusion transaction prevented it from settling.... It now seeks the additional compensation due on those shares as well.⁴⁵

First Eagle stated during the Hearings that it was prepared to stipulate, if the Bank also so stipulated, that the NAV of the Bank is as determined by J.P. Morgan in Exhibits in Support of First Eagle's Memorial (hereafter "FE Ex.") 43. Regarding a stipulation concerning the value of the Bank's real estate, First Eagle stated:

In their 7 January 2003 stipulation the parties agreed that they would "attempt to resolve by agreement the value of the real estate of the Bank and, failing agreement on the value, seek to propose an agreed process and schedule by which the question might be determined." The parties have since agreed to the Tribunal's retention of an appraiser to value the real estate.⁵¹

First Eagle, with the other Parties, proposed that the Zurich office of the firm of C.B. Richard Ellis be appointed by the Tribunal to determine the value of the Bank's buildings and their contents whose valuation would be final and would be added to the NAV.⁵²

First Eagle requested in its Reply Memorial that the Tribunal issue a final award ordering the Bank to:

a) pay First Eagle additional compensation of CHF 7755.20 per share (equal to 70% of NAV of CHF 33,936 per share less the CHF 16,000 per share compensation already received) for each of the 9110 shares held by First Eagle, or a total of CHF 70,649,872;

b) pay First Eagle its share of the value of the Bank's real estate;

c) pay First Eagle its costs of the arbitration, which currently amount to $546,913.40, or, at a minimum, the share of such costs in excess of First Eagle's share of the total amount of the shares subject to the exclusion transaction;

d) pay First Eagle its legal fees and expenses in an amount to be fixed after the May 2000 [sic] hearing in this matter in a manner to be directed by the Tribunal or, at a minimum, the share of such legal fees and expenses in excess of First Eagle's share of the total amount of the shares subject to the exclusion transaction;

e) pay First Eagle interest at a rate of at least 7% compounded monthly and running, as to the additional compensation, from 8 January 2001 through the date of payment of such compensation and, as to First Eagle's costs and fees, from the date of payment by First Eagle through the date of reimbursement by the Bank;

f) deny all relief requested by the Bank, BIS CM2 p. 91; and

g) provide First Eagle such other and further relief as the Tribunal may deem just and proper.⁵⁷

Mr. Mathieu asked the Tribunal to calculate the additional compensation owed to the former private shareholders pursuant to the 22 November 2002 Partial Award utilizing the 6 September 2000 rate of exchange:

Dire que la date devant être retenue pour déterminer le taux de change applicable en vue de la conversion en francs suisses de l'actif net réévalué de la BRI libellé en dollars américains a d'ores et déjà été fixée par le Tribunal au 6 septembre 2000.⁵⁸

Mr. Mathieu argued that the Bank's proposed substitution of the 8 January 2001 date contradicted the Parties' stipulation to the NAV in the J.P. Morgan Report.⁵⁹ Further, Mr. Mathieu argued, the Bank's claims that its past practice justified the use of the 8 January exchange rate were irrelevant to the compulsory repurchase:

[L]a BRI a en effet soutenu dans son Contre-mémoire que le calcul de l'indemnité doit se faire sur la base de son procédé habituel de calcul des montants en matière d'émission d'actions nouvelles. Cependant, cet usage n'a aucun titre à être appliqué à l'instance. La BRI fait en réalité une interprétation contestable du raisonnement du Tribunal dans la Sentence partielle. Qui plus est, la méthode proposée n'est pas adaptée à la situation du retrait forcé.⁶⁰

If the Tribunal were to use the 8 January 2001 date proposed by the Bank, the NAV of the Bank must be recalculated, by an expert of the Tribunal's choosing, at the Bank's expense:

A titre subsidiaire, si le Tribunal devait décider qu'il convient de retenir le taux de change applicable au 8 janvier 2001, dire que l'actif net de la BRI devra être réévalué à cette même date et désigner à cette fin, aux frais de la BRI, tel expert indépendant qu'il plaira au Tribunal de nommer....⁶¹

Mr. Mathieu argued that 6 September 2000 is the date, consistent with the Partial Award and the J.P. Morgan valuation, to set the exchange rate for the additional compensation to be paid to the former shareholders:

La différence est en effet significative : en appliquant le taux de change ayant cours au 6 septembre 2000, à savoir 0,5628 dollar américain pour un franc suisse, une action de la banque évaluée à 19,034 dollars américains se convertit à la somme de 33,820 francs suisses. Si, comme le soutient la Banque, le taux de change devant être retenu était celui applicable au 8 janvier 2001, à savoir 0,6256 dollar américain pour un franc suisse, la contre-valeur en francs suisses de cette même action ne serait plus que de 30,425,80. La controverse porte donc sur un enjeu d'un montant de 3,394,20 francs suisses par action. Ce montant correspond, pour la Banque, à l'économie qu'elle espère réaliser sur l'indemnisation que le droit international lui impose de verser en contrepartie des actions, don't elle conserve pour l'avenir la propriété et les espérances de plus values qui leur sont attachées - ne serait-ce qu'en considération de la décote de 30% sur la valeur d'actif net retenue aux termes de la Sentence.⁶²

Mr. Mathieu further requested that he be paid interest on the CHF 16,000 which the Bank had offered as compensation but which Mr. Mathieu had declined to accept until after the Tribunal's 22 November 2002 Partial Award.

Le Demandeur, dans son Mémoire en demande du 13 mai 2002, développe ainsi trois moyens : (i) l'illégalité de la résolution amendant les statuts, (ii) l'illicéité de l'opération de rachat forcé des actions et (iii) l'insuffisance de l'indemnité accordée aux actionnaires privés.

Le Demandeur aura par conséquent, du premier jour du litige jusqu'à la Sentence du 22 novembre 2002, toujours soutenu que l'opération de rachat forcée était illégale et qu'en raison de cette illégalité, il possédait toujours sa qualité d'actionnaire de la Banque. Il n'est dès lors pas surprenant que ce dernier se soit toujours opposé à percevoir l'indemnité qui lui était proposée, afin de rester cohérent dans sa démarche à l'encontre de la Banque. L'on ne saurait, en effet, demander une chose et son contraire.⁶⁴

Mr. Mathieu requested that the Tribunal award 7% compound interest by reference to the J.P. Morgan Report that stated the Bank's cost of capital to be in the 6.7-7% range.⁶⁵ Compound interest should be paid in keeping with the requirements of international law and modern commercial practice:

Le principe de réparation intégrale exige enfin que les intérêts soient capitalisés. En effet les intérêts à percevoir contribuent à former un capital et doivent donc eux-mêmes être porteurs d'intérêts, ainsi que l'exige une jurisprudence établie en droit international. Conformément aux usages du commerce international, ces intérêts seront capitalisés sur une base mensuelle.⁶⁶

Mr. Mathieu, in his submission of 16 May 2003, requested the following relief:

Le Demandeur requiert qu'il plaise au Tribunal Arbitral de:

Dire que la date devant être retenue pour déterminer le taux de change applicable en vue de la conversion en francs suisses de l'actif net réévalué de la BRI libellé en dollars américains a d'ores et déjà été fixée par le Tribunal au 6 septembre 2000;

A titre subsidiaire, si le Tribunal devait décider qu'il convient de retenir le taux de change applicable au 8 janvier 2001, dire que l'actif net de la BRI devra être réévalué à cette même date et désigner à cette fin, aux frais de la BRI, tel expert indépendant qu'il plaira au Tribunal de nommer;

Dire que les intérêts dus par la BRI au Demandeur ont couru, à compter du 8 janvier 2001, et à titre subsidiaire à compter du 14 février 2001, tant sur le complément d'indemnité en cours de détermination et ce jusqu'à parfait paiement, que sur la somme de 16,000 francs suisses entre le 8 janvier 2001 et le 9 janvier 2003 par la BRI, au taux minimum de 7%; ordonner la capitalisation des intérêts sur une base mensuelle;

Dire que la BRI supportera seule l'intégralité des frais liés au présent arbitrage; à titre subsidiaire, dans l'hypothèse où le Tribunal déciderait du contraire, donner acte au Demandeur de l'engagement de la BRI de supporter en toute hypothèse la moitié des frais d'arbitrage, et dire que toute partie de ces frais qui ne sera pas mise à la charge de la BRI sera répartie entre la totalité des actionnaires privés de celle-ci proportionnellement au nombre d'actions don't chacun de ces actionnaires était propriétaire au 8 janvier 2001 rapporté au nombre total de 74,952 [sic] actions; réserver la justification des frais (pour mémoire);

Dire que des intérêts sont dus par la BRI sur les frais d'arbitrage à compter de la date du déboursement effectif de ces sommes jusqu'à parfait paiement par la BRI, au taux minimum de 7% avec capitalisation sur une base mensuelle;

Condamner, en toute hypothèse, la BRI à régler au Demandeur la totalité des honoraires d'avocat encourus dans le cadre du présent arbitrage (pour mémoire);

Enfin, rectifier dans la sentence finale le nom de la Société de Concours hippique de La Châtre.⁷¹

The Bank cited the text of Article 54(1):

If any dispute shall arise between the Bank, on the one side, and any central bank, financial institution, or other bank referred to in the present Statutes, on the other side, or between the Bank and its shareholders, with regard to the interpretation or application of the Statutes of the Bank, the same shall be referred for final decision to the Tribunal provided for by the Hague Agreement of January, 1930.⁷⁹

The Bank alleged:⁸⁰

First Eagle tried to avoid its duty to arbitrate these issues under Article 54 by pretending that the shares recall was a voluntary tender offer rather than a mandatory redemption. But this did not fool the District Court, which found that "[p]laintiff's only real issue is with the price and method of valuation."⁸¹... Nor did it fool the Court of Appeals, which recognized that "[i]ndeed, the primary complaint advanced by First Eagle appears to be that the valuation methods employed by J.P. Morgan and Arthur Andersen undervalued the privately held shares."⁸²

Article 54(2) specifically provides that the Tribunal has "power to decide all questions [concerning the terms of submission under Article 54(1)] (including the question of its own jurisdiction)"... [and] Article 16(1) of the Tribunal's Rules of Procedure, which provides that "[t]he Tribunal shall have the power to decide the question as to its own jurisdiction...."⁸³ All questions of jurisdiction in disputes between the Bank and its shareholders with regard to the interpretation or the application of the Statutes must therefore be raised exclusively before the Tribunal.⁸⁴

The Bank argued that the rules which bind it, including those concerning its dispute-resolution forum, are not the subject of private agreement.

The obligation of the Bank and its shareholders to refer questions of arbitrability exclusively to the Tribunal is... an obligation created by the treaty mechanism establishing the Bank, which provides its own exclusive mechanism for resolving internal disputes over "the interpretation or application of the Statutes of the Bank." Such disputes implicating an international organization's internal law are excluded from municipal legislative, administrative, and adjudicative competence.⁸⁶

The Bank denied "First Eagle's assertion that there is a universal principle that parties to an arbitration may seek interim measures from a court".⁸⁷ The Bank quoted the United Nations Commission on International Trade Law ("UNCITRAL") Working Group for Arbitration and Conciliation, in paragraph 22 of its Note on Preparation of Uniform Provisions on Interim Measures of Protection of January 2002:

Other laws provide that the authority to issue interim relief is vested exclusively in the arbitral tribunal and the courts do not have the power to issue interim measures in support of arbitration. The court's lack of jurisdiction may be the result of provisions that oust the jurisdiction of the court where there is an arbitration agreement.⁸⁸

The Bank further distinguished the legal authorities cited by First Eagle as indicating that in the context of a commercial arbitration agreement, the right of a party to seek interim measures from a court exists where the rules governing the arbitration or the parties' agreement reserve that option. The Bank argued that the Convention on the Settlement of Investment Disputes between States and Nationals of Other States ("ICSID")⁸⁹ treaty regime provides a closer analogy.

[T]he Rules of Procedure for Arbitration Proceedings, Arbitration Rules under the 1965 Convention on the Settlement of Investment Disputes provides that a party can apply to a non-ICSID forum for provisional relief only if the arbitration agreement permits such applications.⁹⁰

The Bank pointed out that:

[M]embers of international courts and tribunals, including courts and tribunals that decide disputes between the states concerned and private parties, are usually appointed by governments. The role of national governments in appointing members of international courts and tribunals has never been considered incompatible with the independence of members of international courts and tribunals. As regards internal disputes of international organizations, such disputes are typically referred to internal courts or arbitration. From an organizational point of view, the courts or tribunals established by or within the framework of an international organization are organs of the organization concerned. As a result, the organization or the governments of its member states, rather than the parties to the dispute, exercise rights in respect of the tribunal's composition, competence and procedure that are not reserved to the tribunal itself. The European Court of Human Rights confirmed in Waite and Kennedy v. Germany that the dispute settlement procedure provided for in the European Space Agency (the "ESA") Convention, which subjects disputes between the Agency and its staff members and former staff members to the ESA's Appeals Board, satisfies the standards of the European Convention on Human Rights.⁹²

The Bank answered the Claimants' arguments regarding the calculation of the sum owed the former private shareholders:

The Bank believed [its stipulation at the August Hearings regarding the J.P.Morgan NAV calculation] this to be an agreement to the accuracy of the J.P. Morgan-calculated NAV of U.S. $19,099 and nothing more.... Consistent with the Tribunal reasoning in adopting the NAV minus 30% formula and the underlying principle of equal treatment of all shareholders (both central bank and former private shareholders), that formula should be applied to the NAV calculated by J.P. Morgan in the same manner as the Bank has consistently applied it to the pricing of shares for central bank subscriptions. Under a consistent application of the NAV minus 30% formula to the withdrawn shares, as illustrated in Part III.A.2 infra, the total amount of additional compensation would be CHF 4,494 per share.

Alternatively, if instead of following past practice the Tribunal were simply to take the J.P. Morgan-calculated NAV and apply it to the statutory obligation that arose on the 8 January 2001 share withdrawal under Article 18A to pay compensation in Swiss francs for the private shareholders interest in that NAV, the most straightforward method of converting the discounted U.S. dollar NAV to the amount of Swiss franc compensation would be to use the 8 January 2001 exchange rate. This would result in additional compensation of CHF 5,458 per share.⁹⁵

The Bank argued that the J.P. Morgan-calculated NAV should be adjusted by reference to the January 2001 Swiss franc/U.S. dollar exchange rate. The Bank maintained

that its balance sheet is effectively in US dollars (its official unit of account for the period at issue was the gold franc, which had a fixed parity of US$ 1.94149) and that its consistent past practice in applying the discounted NAV formula has been for the board of directors to decide on a share issuance, at a fixed gold franc price, with payments in hard currencies to be made applying the exchange rate of the date of payment; hence, the discounted NAV stated in US dollars in the J.P. Morgan report should be converted to Swiss francs as of the 8 January 2001 date of withdrawal of the privately owned shares, rather than applying the 6 September 2000 exchange rate stated in the J.P. Morgan report....⁹⁶

The Bank contended:

1. neither international law nor special rules applicable to the BIS require the Tribunal to award interest to the Claimants in these proceedings;

2. should the Tribunal nevertheless determine to award interest on the additional amount of the compensation, it should be at no more than the Swiss franc market rate for the period between 8 January 2001 and the date of the final award;

3. there is no basis for awarding compound interest; and

4. in the case of First Eagle and M. Mathieu, no interest should be awarded at all.⁹⁸

The Bank asserted that the lex specialis of the Bank precludes an award of costs and fees.

These claims have no basis in the lex specialis of the Bank, which the Tribunal determined to be the governing law of these proceedings. Under the lex specialis, consisting of the Bank's Statutes and the treaties under which they were enacted, the costs of the Tribunal are required to be divided equally between Claimants and the Bank; the Tribunal has the power to allocate the Claimants' portion of these costs among the various Claimants, but not to impose that portion on the Bank. The lex specialis also expressly requires each party to bear its own expenses, which includes legal expenses.¹⁰²

The Bank resisted First Eagle's demand that First Eagle be paid for 9,110 shares.

The BIS does not register shares in the name of a "nominee" acting as holder of record for an unidentified beneficial owner... Article 18 [of the Bank's Statutes] conclusively establishes that First Eagle has a valid and enforceable interest in only those shares registered in the Bank's books under its name. The Bank share register shows that on 8 January 2001 First Eagle owned 5,250 shares, and not the 9,110 shares First Eagle has claimed to have owned.... Any beneficial interest First Eagle may purport to have had in the shares as a result of contractual relations with third parties is invalid, irrelevant to and unenforceable against the Bank.¹⁰⁴

The Bank requested that the Tribunal render an award:

(a) declaring that the Tribunal has exclusive jurisdiction over any claims against the Bank arising out of or in connection with the validity, procedures and amount of compensation provided in the 8 January 2001 redemption of the Bank's privately held shares;

(b) finding that First Eagle violated Article 54(1) of the Statutes by suing the Bank in the United States courts on claims committed to the Tribunal's exclusive jurisdiction;

(c) granting the Bank damages from First Eagle in an amount of US$ 587,413.49 in reimbursement of direct legal expenses and additional relief the Tribunal deems appropriate for First Eagle's breach of Article 54(1) of the Statutes[;]¹⁰⁷

[d] declaring that the Tribunal's award is final and binding on the parties and that payment of additional compensation of CHF 4,494 per share to Claimants for each share registered in their own names on the books of the Bank on 8 January 2001 discharges the Bank from any obligation towards Claimants in connection with the compulsory recall of its former privately held shares;

[e] dismissing Claimants' requests for legal fees and costs;

[f] dismissing Claimants' requests for interest, or alternatively awarding interest at the Swiss franc market rate from 8 January 2001 to the date of the final award; and

[g] granting the Bank further relief as the Tribunal deems just and proper.¹⁰⁸

Procedural Order No. 9 (On Consent) provided in pertinent part:

Whereas the Parties are agreed that the Bank's net asset value (NAV) in US dollars for purposes of the final award shall be as stated in the J.P. Morgan report (with the addition of the value of the real estate), but

(a) the Bank takes the position that its balance sheet is effectively in US dollars (its official unit of account for the period at issue was the gold franc, which had a fixed parity of US $1.94149) and that its consistent past practice in applying the discounted NAV formula has been for the board of directors to decide on a share issuance, at a fixed gold franc price, with payments in hard currencies to be made applying the exchange rate of the date of payment; hence, the discounted NAV stated in US dollars in the J.P. Morgan report should be converted to Swiss francs as of the 8 January 2001 date of withdrawal of the privately owned shares, rather than applying the 6 September 2000 exchange rate stated in the J.P. Morgan report, while

(b) [First Eagle takes] the position that the Tribunal should award the net asset value in Swiss francs stated in the J.P. Morgan report (as noted in paragraph 209(3) of the Partial Award), but that if the US dollar value were converted as of 8 January 2001 (which it should not be) instead of as in the J.P. Morgan report, the Bank's net asset value should be reassessed as of that date to take account of the impact of the change in the conversion rate on the Bank's non-dollar denominated assets, and hence on its net asset value, as well as of any retained earnings since the J.P. Morgan valuation date.

While the parties argued extensively over the meaning of the stipulation in the Procedural Order No. 9 (On Consent), the Tribunal does not find it dispositive, as the Order merely states, in pertinent part, that "the Parties are agreed that the Bank's net asset value (NAV) in US dollars for purposes of the final award shall be as stated in J.P. Morgan Report...." That agreement does not resolve the question before the Tribunal and, indeed, the rest of the quoted section of Procedural Order No. 9 proceeds to state precisely the issue in controversy here. Nor does the Tribunal find dispositive the Bank's submission that:

Consistent with the Tribunal's reasoning in adopting the NAV minus 30% formula and the underlying principle of equal treatment of all shareholders (both central bank and former private shareholders), that formula should be applied to the NAV calculated by J.P. Morgan in the same manner as the Bank has consistently applied it to the pricing of shares for central bank subscriptions. Under a consistent application of the NAV minus 30% formula to the withdrawn shares, as illustrated in Part III.A.2 infra, the total amount of additional compensation would be CHF 4,494 per share.

Alternatively, if instead of following past practice the Tribunal were simply to take the J.P. Morgan-calculated NAV and apply it to the statutory obligation that arose on the 8 January 2001 share withdrawal under Article 18A to pay compensation in Swiss francs for the private shareholders' interest in that NAV, the most straightforward method of converting the discounted U.S. dollar NAV to the amount of Swiss franc compensation would be to use the 8 January 2001 exchange rate. This would result in additional compensation of CHF 5,458 per share.¹¹⁰

Nor is assistance to be found in the dividend payment practice of the Bank, as the transaction under review here is not a dividend payment, but a compulsory repurchase of shares.

Dr. Reineccius claimed interest on the additional compensation due under the Partial Award, reasoning that on 8 January 2001 he had become "a creditor of the Bank. Therefore, the compensation due to me has to carry interest... the money market interest in Swiss francs on that particular date..."¹²⁰ which he quantified as no less than 3¼% per annum.¹²¹ First Eagle maintained it was entitled to interest from 8 January 2001 on the outstanding compensation payment, as well as on its costs, fees, and expenses, at a rate of at least 7% compounded monthly. Mr. Mathieu also requested a minimum of 7% interest with "la capitalisation des intérêts sur une base mensuelle".¹²² First Eagle and Mr. Mathieu base their claim for interest on the principle of full compensation. As Mr. Mathieu contended:

En tout état de cause, les intérêts ayant pour fonction d' "(...) indemniser un créancier de l'absence, pendant un certain temps, des fonds qui lui sont dus (...)", le Demandeur a droit aux intérêts portant sur la somme qui aurait dû être versée le 8 janvier 2001.¹²³

First Eagle and Mr. Mathieu argued that the measure of interest should be the return the Bank would have received on the retained funds. First Eagle also reasoned that 7% interest reflects the minimum return First Eagle would have expected to earn on alternative investments of the same risk had it received full compensation when it was due. First Eagle argued that were it paid less than 7% interest, the Bank would earn a windfall from the compensation withheld and thereby be unjustly enriched. First Eagle asserted:

A reasonable rate of interest should first and foremost reflect the fact that the Bank retained part of the compensation payment due the private shareholders and had the funds available for its own use as equity.¹²⁴

Similarly, Mr. Mathieu stated:

Le Tribunal tiendra également compte du fait que la Banque a réalisé une économie substantielle en retenant le complément d'indemnité du aux actionnaires évincés et qu'elle a pu faire libre usage de ce capital obtenu sans rien débourser entre la date de rachat forcé et la date ou elle devra effectivement verser le complément d'indemnité.¹²⁵

The Bank argued:

[T]he Bank's lex specialis does not speak directly to the question of interest. However, Article 18A of the Statutes clearly provides that compensation after the 8 January 2001 share recall will be paid to former private shareholders only after they present their share certificates to the Bank and does not provide for the accrual or payment of interest during the open-ended period for presentation of share certificates, verification by the Bank and payment of the recall price. Nor is an award of interest required under general principles of international law. Should the Tribunal nonetheless make such an award with respect to the additional amount of compensation, it should be made at the Swiss (noncompounded) market rate, since the compensation is payable in Swiss francs and Switzerland is the place where payment is due.¹³⁰

Further, the Bank addressed the Claimants' argument that interest should be determined by reference to the rate of return on its investments stated in the Morgan Report:

[A]ny other argument that the former private shareholders should receive interest that is in any way linked to the profits or returns of the Bank, is fundamentally inconsistent with the Tribunal's decision upholding the lawfulness of the shares withdrawal. While shareholders, they did have a claim on the profits of the Bank (in the attenuated form of dividends, as declared by the Board of Directors under Article 51), but on 8 January 2001 that property right was transformed into something different, i.e., a statutory claim for compensation not in any way related to the earnings or profits of the Bank.¹³¹

In the view of the Tribunal, these facts make it appropriate to refer to Swiss law¹³⁴ for guidance on the rate of interest. Article 73 of the Code of Obligations provides:

1. Celui qui doit des intérêts dont le taux n'est fixé ni par la convention, ni par la loi ou l'usage, les acquitte au taux annuel de 5 pour cent.

2. La repression des abus en matière d' intérêts conventionnel est réservée au droit public.

Article 104 (intérêts moratoire) of the Code provides:

1. Le débiteur qui est en demeure pour le paiement d'une somme d'argent doit l' intérêts moratoire a 5 pour cent l'an, meme si un taux inférieur avait été fixé pour l' intérêts conventionnel.

2. Si le contrat stipule, directement ou sous la forme d'une provision de banque périodique, un intérêt supérieur a 5 pour cent, cet intérêt plus élevé peut également etre exigé du débiteur en demeure.

3. Entre commercants. tant que l'escompte dans le lieu de paiement est d'un taux supérieur a 5 pour cent, l' intérêts moratoire peut etre calculé au taux de l'escompte.

Swiss law thus applies a 5% simple rate for moratory interest.

The NAV computation in the J.P. Morgan Report to which all the parties, as noted in paragraphs 18, 32, 45, and 67 supra, stipulated their agreement did not include a current valuation of the real estate of the Bank. In paragraph 205 of the Partial Award, the Tribunal stated that the valuation of the real estate would be made by an expert, whose identity, terms of reference and timetable would be determined by the Tribunal after consultation with the Parties. As the Parties could not resolve by agreement the value of the real estate, in accordance with paragraph 209(5) of the Partial Award, the Parties notified the Tribunal of their selection of the Zurich office of C.B. Richard Ellis to determine the value of the real estate. The Tribunal confirmed to the Parties its appointment of the Ellis firm in Procedural Order No. 10. The Tribunal received from the expert the statement of independence as required by the Parties, and the expert, accompanied by the Secretary of the Tribunal, inspected all of the properties and provided a Valuation Report on 28 April 2003, whereupon the Secretary of the Tribunal circulated copies of the Report to the Parties, with an invitation for comments. None were forthcoming. On 16 May 2003, in Procedural Order No. 11 (On Consent), the Tribunal stated:

The Tribunal will use the value of CHF 168,094,000 (...), as determined by the expert, for the purpose of valuing as of 7 September 2000 the Bank's buildings and their contents as required by the 22 November 2002 Partial Award.

The Bank claimed that First Eagle's suit in the United States¹⁴⁴ which (1) challenged the Bank's right to carry out the redemption and the amount of compensation provided by Article 18A of the Bank's Statutes, and (2) sought money damages "in the amount of the full value of plaintiffs' proportionate interest in the Bank," breached Article 54 of the Statutes of the Bank.¹⁴⁵

As a result of this breach, the Bank incurred direct economic damages in excess of U.S. $587,000 defending First Eagle's lawsuit, as well as wasted internal legal and management resources.¹⁴⁶

The Bank challenged First Eagle's representation that First Eagle's "attempt to enjoin the shares recall"¹⁴⁷ was intended to obtain disclosure,¹⁴⁸ and its refusal to arbitrate was intended "to determine the validity" of its "agreement" to arbitrate under Article 54.¹⁴⁹ Instead, the Bank argued, First Eagle had "disregarded Article 54, and sued the Bank in the United States for a judgment [and]... money damages in the amount of the full value of plaintiff's proportionate interest in the Bank, together with interest thereon".¹⁵⁰ The Bank argued that even if the "securities claims had been independent of First Eagle's claims for conversion, breach of contract and breach of fiduciary duty... that would not somehow excuse First Eagle from its obligation to arbitrate the latter under Article 54."¹⁵¹

The Bank argued that First Eagle's second defense (that it had invoked the jurisdiction of the U.S. courts "to determine the validity and applicability of [its] agreement to arbitrate"¹⁵² was "doubly false":

[L]egally, because Article 54 is not a private commercial "agreement to arbitrate," but an integral part of a self-contained legal regime that excludes the competence of national courts with respect to the "interpretation or application of the Statutes of the Bank," including issues of the Tribunal's jurisdiction; and factually, because First Eagle in any case did not seek a declaration regarding the validity of Article 54, but sued the Bank for damages in breach of that Article.¹⁵³

The Bank pointed out that it is an international organization:¹⁵⁴

governed... by a self-contained statutory legal regime, created by the 1930 Hague Agreement, the Convention and the Constituent Charter of the Bank. Under that regime, the rights and duties of its shareholders vis a vis the Bank, including their rights and duties under Article 54, must be resolved by reference to the Bank's constituent instruments. See Partial Award ¶¶173-74.... National courts do not have the competence to adjudicate the organic disputes of an international organization, unless that competence is specifically and affirmatively provided for in the organization's governing instruments.... Article 55(1) of the Statutes confirms the Bank's immunity from national court jurisdiction, subject only to the narrow (and inapplicable) exceptions provided therein.¹⁵⁵

Article 54(2) specifically provides that the Tribunal has "power to decide all questions [concerning the terms of submission under Article 54(1)] (including the question of its own jurisdiction)"... [and] Article 16(1) of the Tribunal's Rules of Procedure, which provides that "[t]he Tribunal shall have the power to decide the question as to its own jurisdiction". All questions of jurisdiction in disputes between the Bank and its shareholders with regard to the interpretation or the application of the Statutes must therefore be raised exclusively before the Tribunal.¹⁵⁶

As to First Eagle's assertion that it was free to seek interim measures from a municipal court, the Bank argued that the lex specialis of the Bank's Statutes provides for interim measures of protection:

Before giving a final decision and without prejudice to the questions at issue, the President of the Tribunal, or, if he is unable to act in any case, a member of the Tribunal to be designated by him forthwith, may, on the request of the first party applying therefor, order any appropriate provisional measures in order to safeguard the respective rights of the parties.¹⁵⁸

The Tribunal notes at the outset that the lex specialis of the Bank for International Settlements is comprised of the 1930 Hague Convention, the Constituent Charter of the Bank for International Settlements (20 January 1930) (hereafter "Constituent Charter"), and the Statutes of the Bank. These are international instruments, a characteristic that is particularly important when assessing the relation between them and municipal law. Article 54(1) of the Statutes provides:

If any dispute shall arise between the Bank, on the one side, and any central bank, financial institution, or other bank referred to in the present Statutes, on the other side, or between the Bank and its shareholders, with regard to the interpretation or application of the Statutes of the Bank, the same shall be referred for final decision to the Tribunal provided for by the Hague Agreement of January, 1930.

Article 55(1) of the Statutes provides:

The Bank shall enjoy immunity from jurisdiction, save:

a) to the extent that such immunity is formally waived in individual cases by the President, the General Manager of the Bank, or their duly authorized representatives; or

b) in civil or commercial suits, arising from banking or financial transactions, initiated by contractual counterparties of the Bank, except in those cases in which provision for arbitration has been or shall have been made.

As part of its Counterclaim, the Bank has requested the following declaratory relief.

For all of the foregoing reasons, the Bank requests that the Tribunal render an award:

a. declaring that the Tribunal has exclusive jurisdiction over any claims against the Bank arising out of or in connection with the validity, procedures and amount of compensation provided in the 8 January 2001 redemption of the Bank's privately held shares...¹⁷⁰

The Tribunal now turns to the costs of the Arbitration.¹⁷⁹ The Tribunal notes that Annex XII ("Arbitration. Rules of Procedure") of the 1930 Hague Agreement¹⁸⁰ provides: "In particular Article 85 of the Hague Convention shall apply to these proceedings, and each Party shall pay its own expenses and an equal share of those of the Tribunal." Article 85 of the 1907 Hague Convention reads: "Each Party pays its own expenses and an equal share of the expenses of the Tribunal."

In applying the obligations of Article 54(1) to private shareholders as well as central banks, the drafters clearly intended to establish a regime that would enable, rather than prevent, private shareholders to exercise that right. Hence, the Tribunal is of the view that Article 54 of the Bank's Statutes¹⁸¹ providing for Arbitration between shareholders and the Bank must be interpreted in a way which makes access to justice for every shareholder not only theoretically possible but, in reality, feasible. This has been recognized by the Bank from the very beginning of these proceedings.¹⁸² The reference to Article 85 of the 1907 Hague Convention must be applied in the light of this principle of effective access to justice which is fully recognized in present-day human rights law. Even if this rule was not fully developed in 1930, international law has evolved and the Tribunal must apply the law in its contemporary acceptance.

In its 31 August 2001 Procedural Order Concerning R. Howe, the Tribunal stated:

H. With respect to the allocation of deposits and costs: does the Tribunal have the legal competence or "equitable discretion" to allocate deposits and costs to take account of the circumstances of any particular claimant?

H.1. The 1930 Agreement and the 1907 Convention contemplated an equal division of the costs of an arbitration between the parties. As the context of those instruments was inter-state arbitration and not arbitration between a state or an international organization, on the one hand, and individual claimants on the other, that system of equal allocation was consistent with the notion of the sovereign equality of states and may have provided a formula that was likely to achieve equity in specific cases.

H.2. Article 54 of the Statutes of the Bank extended the jurisdiction of the Tribunal to disputes between the Bank and individual shareholders. In this form of privity, the equal division of costs that was, not unreasonably, prescribed for inter-state arbitration could create inequities and even restrain or "chill" the access of individuals to arbitration. In this regard, the Tribunal takes note of the statement of the Bank in its letter of August 23, 2001, that "[t]he Bank does not wish that costs alone should serve to prohibit individual former private shareholders from arbitrating a claim." Wholly aside from the Bank's expression of its wish, an interpretation of a provision in one of the instruments of the Tribunal's regime that had the effect of prohibiting individuals entitled to arbitrate from doing so could hardly be lawful. As will be recalled, Article 9(1) of the Tribunal's Rules provides that

Subject to these Rules and the Agreement and Convention under which it operates, the Tribunal may conduct the arbitration in such manner as it considers appropriate, provided that the parties are treated with equality and that at any stage of the proceedings each party is given a full opportunity of presenting its case.

An allocation of deposits and costs that had the effect of not providing a party with a "full opportunity of presenting its case" would not meet the test of Article 9(1).

H.3. The "Rules for Arbitration Between the Bank for International Settlements and Private Parties," which were adapted on the basis of the authority in the 1930 Agreement to regulate arbitrations between the Bank and private shareholders, empower the Tribunal in Article 33 to "fix" the costs, a term which, in the context of this form of arbitration, includes the competence to allocate the costs in ways that further the shared objectives of the parties to the arbitration in order to achieve a fair process and a just outcome, consistent with law.

H.4. Hence, the Tribunal has the competence with respect to arbitrations under Article 54 of the Statutes of the Bank to allocate costs in ways that conduce to the optimum use of the arbitration as contemplated by the Article 54 and justice and fairness in the process of each arbitration.

H.5. The Tribunal takes note of the statement of the Bank in its letter of August 23, 2001 which says in relevant part that:

[I]t is the Bank's understanding of Article 33 of the Tribunal's Rules that the Tribunal has equitable discretion to apportion costs as it sees fit, including awarding them to a successful claimant. We also understand that any advance deposit of costs under Article 34 could be subject to similar equitable allocation, which could appropriately take account of the circumstances of any particular claimant.... It remains, however, for the Tribunal to determine how any advance deposits should be apportioned based on the total number of claims ultimately filed and all the other facts and circumstances regarding such claims.

H.6. Given the case-by-case and contextual imperative of any equitable allocation, the Tribunal cannot decide, in advance, the allocation of costs, all the more insofar as such an allocation is to "appropriately take account of the circumstances of any particular claimant." But even without knowing those circumstances in cases that have yet to advance or even to be filed, the Tribunal takes note of the Bank's statement that "[i]t is certainly not the Bank's understanding that multiple claimants, collectively, must bear more than half the Tribunal's costs...."

H.7. The foregoing observations also apply mutatis mutandis to the deposits for the arbitration as provided for by Articles 33 and 34 of the Rules of the Tribunal.

H.8. Accordingly, the Tribunal has the legal competence and equitable discretion to allocate costs in ways that contribute to access to the arbitral procedure provided for in Article 54 of the Statutes, that ensure the fairness of the procedure and that secure a meaningful award.

It will be recalled that the Bank, for its part, stated in H.5. supra : "it is the Bank's understanding of Article 33 of the Tribunal's Rules that the Tribunal has equitable discretion to apportion costs as it sees fit, including awarding them to a successful claimant."

FOR THE FOREGOING REASONS, the Arbitral Tribunal unanimously renders the following decisions:

1. DETERMINES that the amount now to be paid to each Claimant is CHF 7,977.56 per share.

2. DETERMINES that with respect to the shares claimed by Claimant No. 2 (First Eagle) that are not registered in its name, the Bank is entitled to pay the above amount only to the share owners of record as they are inscribed in the Bank's share register.

3. DETERMINES that Claimant No. 2 (First Eagle) must reimburse the Bank US$ 587,413.49, the Bank's costs in defending the law suit brought by Claimant No. 2 (First Eagle) in the United States, which the Bank may set off against the sums owing to Claimant No. 2 (First Eagle) as a consequence of this Award.

4. DETERMINES that 5% simple interest is to be paid to all of the Claimants on the amount in paragraph 138(1) supra from 8 January 2001 until the date of this Award.

5. REJECTS the claim of Claimant No. 3 (Mr. Mathieu) for interest on the amount set by the Extraordinary General Meeting on 8 January 2001 under Article 18A of the Statutes of the Bank.

6. DETERMINES that the Bank shall reimburse directly to Claimant No. 3 (Mr. Mathieu) EUR 4,436.75 for expenses. The Tribunal also determines that Claimant No. 2 (First Eagle) shall bear its own attorneys' fees and other expenses.

7. DETERMINES that the costs of the Arbitration shall be fully borne by the Bank as follows: the Bank shall reimburse directly to Claimant No. 1 (Dr. Reineccius) EUR 1,852.64; the Bank shall reimburse directly to Claimant No. 2 (First Eagle) US$ 806,086.40; the Bank shall reimburse directly to Claimant No. 3 (Mr. Mathieu) EUR 760.25.

8. REJECTS the Claimants' requests for interest on the sums paid for the costs of the Arbitration.

9. DETERMINES that all of the above amounts are to be paid within 90 days.

10. DETERMINES that no other remedy is available to the Parties inter se with respect to the issues determined in the present Arbitration.

11. DISMISSES all other relief inconsistent with the foregoing Decisions.