|Abbreviations / Defined Terms|
|CM + number||Denotes a submission filed by Claimant (written sub-mission/memorial, letter)|
|CX + number||Exhibited documentary evidence filed by Claimant|
|C-WS + number||Witness statement or expert report filed on behalf of Claimant|
|1RM + number||Denotes a submission filed by Respondent 1 (written submlssion/memorial, letter)|
|2RM + number||Denotes a submission Filed by Respondent 2 (written submission/mennorial, letter)|
|RX + number||Exhibited documentary evidence filed by Respondents|
|R-WB - number||Witness statement or expert report filed on behalf of Respondent|
|AIPT or Alternative Terminal IAT)||The BOT- Project (build-operate- transfer project), launched in 2007 as a PPP (public-private partnership) with the Northern Capital Gateway Consortium for the construction of an alternative International passenger terminal ("AIPT") at Pulkovo Airport. The 51-page Dewey & LeBoeuf Preliminary information Memorandum (CX-89) on the Project contained (he Prequalification Criteria for the applicants (and affiliates) requiring inter alia to own total assets of US$ I billion, and a demonstration that the applicant has operated and maintained at least one airport with at least 10 million passengers per year, and proven fund" raising ability during the last 3 years for two US$ 500 mio plus projects.|
|Charter||means the 1595 Charter of the Closed Joint Stock Company 'International Airport Terminal Pulkovo', (CX-5); It was executed in the Russian language (RX- 2); Respondents filed an English translation as RX-24|
|DMG||Deutsche Morgan Grenfell & Co., Ltd, London|
|Foreign Parties||as defined in the ingress of the Founders' Agreement,|
|mean Pulkovo (Strategic Partners) Limited, a Cypriote company, Grassi Hotelbeteiligungs und Errichtungs GMBH (an Austrian private company) ant SPED Investment Ltd., a Cypriote company; the term, as used in the framework of this Award, includes Claimant (as the transferee pursuant to CX-66/CX-59|
|Founders' Agreement||means the 1995 IAT Pulkovo Founders Agreement (CX-6); It was executed in the Russian language (RX-1); Respondents Filed an English translation as RX-23|
|Ground Lease||means the Agreement on the Lease of a land plot consisting of an area of 51'300 m2 located at Pulkovskoe Highway - Startovaya ul, in respect of which the Ground Lease was signed and which was Intended for the construction of the NIPT (CX-17)|
|IAT Pulkovo||means the investment vehicle for the International passenger terminal at the Pulkovo Airport, i.e, the Closed Joint Stock Company "International Airport Terminal Pulkovo’, as per the Charter, CX-5|
|Investment Contract||This term was used by the Parties to denote the 1995 IAT Pulkovo Founders Agreement (CX-6) and the 1995 Pulkovo Charter (CX-5), which contain terms For developing and operating an international passenger terminal at the St, Petersburg Pulkovo Airport; in CM- 84 para. 7, Claimant characterized the contract as a SOT scheme (build - operate - transfer project). The Charter as such, under Russian law, is not considered to constitute a contract in the ordinary sense.|
|NIPT||abbreviation for the New International Passenger Terminal at Pulkovo Airport, as projected in 1994 by way or the Protocol of Agreement and the Founders' Agreement respectively the Charter|
|PH - Brief | C-PH-Brief | R-PH-Brief |||The Post-Hearing Memorials filed by Claimant, respectively by Respondents 1 and 2, on 20 January 2012|
|Russian Parties||The term, as used in thi$ Award, denotes all of Ute Respondents/shareholders of IAT Pulkovo, as well as - according to the context - IAT Pulkovo itself|
|Project||The NIPT development project as contemplated under the Protocol of Agreement|
|Protocol of Agreement||Means the "Agreement" signed on 16 March 1994 (CX-2; in these proceedings, this document was mostly referred to as 'the Protocol of Agreement")|
|PSP||Pulkovo (Strategic Partnere) Limited is a Cypriot company, said to be in good legal standing (letter of Antis Trianaflyllides & Sons of 0 April 2011), which can be brought up to date within 6 months, upon payment of fees; CX-24I; there was no need to ascertain the actual status as of the date of this Award|
|SP||Strategic Partners, Inc. (USA)|
|SPH||Strategic Partners (Holdings) Limited Is a Cayman Islands Company, which was struck from the Company's Register on 31 October 2005, but - according to Claimant - its reinstatement could be sought within two months, and upon Court approval; letter of Cayman Island's counsel Broadhurst Barristers of 24 March 2011 and letter of Cayman Island Registrar of Companies of 2S March 2011 (CX-242/243). There was no need to ascertain the actual status as of the date of this Award.|
|SPBD||SPBD Investment Ltd, a Cypriote company, controlled by Russian-American persons.|
|Transcript plus Date||The verbatim Protocols established by professional court reporters, of the Hearings In Zurich 16/17 De cumber 2010 and in Stockholm 18 to 21 October 2011|
As Claimant explained, the Pulkovo-Airport was transferred to the City of St. Petersburg, by Presidential Decree signed by President Putin on 25 September 2007.2
Respondents 4, OJSC Aviation Company "Rossiya" and Respondent 5 OSO Airport Pulkovo are legal successors to State Enterprise "Pulkovo" which had been a party to the Founders' Agreement, and had been described as being the owner of the assets at Pulkovo Airport. State Enterprise Pulkovo was privatized by a decree of the Government of the Russian Federation of 9 June 2006.
• First, evidence of the financial ability of the City of St. Petersburg to comply with its agreement to finance US$ 16+ million to construct access roadways and utilities for servicing the New International Passenger Terminal, and the proposed guarantee of the City of St. Petersburg's obligation by the Ministry of Finance of the Russian Federation.
• Second, the financial ability of State Enterprise Pulkovo and the Federal Aviation Service of the Ministry of Finance of the Russian Federation to finance US$ 10+ million to construct the apron to service the New International Passenger Terminal, and the proposed guarantee of State Enterprise Pulkovo's obligation by the Ministry of Finance of the Russian Federation.
• The third issue related to customs duties and VAT deferrals for the construction period and its inclusion within any Ministry of Finance Guarantee (CX-25).
"is also the holder of a 1998 US$ 20 million receivable incurred in connection with the development of a new International airport terminal in St, Petersburg's Pulkovo International Airport, known as Pulkovo-3, presently valued in excess of US$ 50 million, and demanding on behalf of Mr Sax the reinstatement of his 29.7% interest, or the anticipated value, upon completion or Pulkovo-3, of a 29.7% interest in that entity, and the reimbursement of the US$ 20 million resp, US$ 50 million pre-development expenses incurred by Mr Sax." CX-84.
The fetter closed with a paragraph inviting open bona fide negotiations, and mentioning the intention to bring arbitration proceedings under the terms of the Founders' Agreement and the Charter, both dated 19 May 1996 (CX-S4).
"Respondents maliciously liquidated the corporate vehicle for Claimants Investment in order to: (a) assert a defense, (b) deprive Claimant of a corporate vehicle, in an attempt to prevent reinstatement, and (c) deny claimant Justice both within the Russian judicial system and within this Arbitral Proceeding." (CM-49, para, 102).
ARTICLE X II - DISPUTE RESOLUTION
Section 12. 1.: Dispute Resolution Generally all Disputes and conflicts that may arise out of or In connection with this Agreement and the Charter shall be amicably settled by the Founders. In the event that any dispute, controversy or claim arising out of or relating to this Agreement or the Charter, or the breach, termination or invalidity thereof cannot be settled amicably, they shall be settled by arbitration in accordance with the provisions set forth in the Charter.
Chapter 20 : DISPUTE RESOLUTION
20.1 Generally, all disputes and conflicts that may arise out of or in connection with this Charter and the Founders' Agreement shall be amicably settled by the Parties.
20.2 In the event, that any dispute, controversy or claim arising out of or relating to this Charter or the Founders' Agreement, or the breach, termination or invalidity thereof cannot be settled amicably, they shall be settled by arbitration. The Award of the Arbitrators shall be final and binding upon the Parties.
20.3 The arbitration shaft be in accordance with the UNCITRAL Arbitration Rules as in effect on the data of the arbitration, except that in the event of any conflict between those Rules and arbitration provisions of this Charter, the provisions of this Charter shall govern. The Russian material law of shall govern in the trial and award making process.
20.4 The Stockholm Chamber of Commerce shall be the appointing authority, except for the specific provisions in points 19.6(i) and (ii).
20.5 The number of Arbitrators shall be three.
20.6 Each party shall appoint one Arbitrator. If within thirty days after receipt of the Claimant's notification of the appointment of an arbitrator the Respondent has not, by telegram, telex, telefax or other means of communication in writing, notified the Claimant of the name or the Arbitrator ho appoints, the second Arbitrator shall be appointed in accordance with the following procedures:
(i) If the Respondent is a natural or legal person of the Russian Federation, the second Arbitrator shall be appointed by the Chamber of Commerce and industry of the Russian Federation:
(ii) If the Respondent is a legal or natural person of any other country, the second Arbitrator shall be appointed by the American Arbitration Association; and
(iii) If within thirty days after receipt of the request from the Claimant, the Chamber of Commerce and Industry of the Russian Federation or the American Arbitration Association, as the case may be, has not, by telegram, telex, telefax or other means of communication In writing, notified the Claimant of the name of the second Arbitrator, the second Arbitrator shall be appointed by the Stockholm Chamber of Commerce.
20.7 The two Arbitrators thus appointed shall choose the third Arbitrator who will act as the Presiding Arbitrator of the Tribunal, If within thirty days after the appointment of the second Arbitrator, the two Arbitrators have nor agreed upon the choice of the Presiding Arbitrator, then at the request of either Party the Presiding Arbitrator shall be appointed by the Stockholm chamber of Commerce in accordance with the following procedure:
(i) The Stockholm Chamber of Commerce shall submit to both Parties an identical list consisting of the names of all of the persons listed on the then existing joint panel of presiding arbitrators established by the Chamber of Commerce and Industry of the Russian Federation and the American Arbitration Association.
(ii) Within fifteen days after receipt of the list, each Party may return the list to the Stockholm Chamber of Commerce utter having deleted the names to which he objects and having numbered any remaining names □n the list in the order of his preference;
(iii) After the expiration of the above period of time, the Stockholm Chamber of Commerce shall appoint the Presiding Arbitrator from among the names not deleted on the lists returned to it and In accordance with the order of preference indicated by the Parties; and
(iv) Should no joint panel then be available, or if for any other reason the appointment cannot be made according to this procedure, the Stockholm Chamber of Commerce shall appoint as Presiding Arbitrator a person not on the joint panel who shall be of a nationality other than that of Russia or the USA or France.
20.8 The arbitration, Including the making of the Award, shall take place in Stockholm, Sweden.
20.9 The Founders agree that English shall be the language used for the arbitration proceedings.
20.10 The Company shall bear all expense of an arbitration brought m actor dance with this Chapter 19, unless there shall he a determination by the panel that, in connection with tile matter that is subject to arbitration, a party has acted in had faith or committed gross negligence or willful misconduct. The arbitration panel shall make such a determination upon the request of the Company or any party to the arbitration.
Chapter 19: INDEMNIFICATION
19.1 The Company shall indemnify any Director and officer (including the Chairman, Vice-Chairman and Co-Presidents) against all suits, claims and actions, brought against such Stockholder, Director or officer, that may arise out of or in connection with the activities of the above Company, except for knowingly committed violations of law by such Stockholder, Director or officer.
19.2 The State Enterprise shall Indemnify the Company against any liability or damages which may arise from earlier environmental conditions The Company shall comply with published, readily accessible environmental regulations and shall adopt operating methods which comply with environmental and safely standards.
"Claimant has been damaged in an amount to be proved at the Hearing of this matter but believed to be in excess of USD 5O million. In addition, In the event that Claimant's 29.7% interest in EAT "Pulkovo" is not reinstated in the entity which will develop "Pukovo"-3, Claimant is entitled to recover, and seeks an award of, the anticipated value, upon completion of "Pulkovo"-3, of a 29.7% Interest in that entity. Finally, Claimant respectfully requests that the Arbitrators award to him his attorneys' fees, costs and expenses..
"Claimant, as successor-in-interest to Strategic Partners and PSP, demands payment, by Respondents, jointly and severally, of US$ 212,500,000, as follows:
(a) The Pre-Development Advance Claim :
The US$ 19,772,277 Pre-Development Advance, which, as of April 30, 2009, together with interest at LIBOR +2%, aggregates US$ 36,715,527, which will, on the anticipated date of the arbitral award, towards the end of 2010 (the "Anticipated Date of the Arbitral Award"), be no less than US$ 37,500,000.
(b) The 29.7% Interest Claim:
The anticipated value, upon completion, of a 29.7% interest in the Alternative International Passenger Terminal, which will, on the Anticipated Date of the Arbitral Award, in Claimant's opinion, based on the 6.5% capitalized value of the second year’s cash flow from operations (before debt service) of the Alternative International Passenger Terminal (to be determined with specificity during the Arbitral Proceeding), be no less than US$ 159,000,000.
(c) The Development Fee Claim:
The 4.5% Development Fee due Claimant, which, according to Respondents' estimate of the 2006 development cost for the Alternative International Passenger Terminal, is US$ 21,832,681, which will, on the Anticipated Dale of the Arbitral Award, in Claimant's opinion, based on the 2010 estimated aggregate development cost of the Alternative International Passenger Terminal (to be determined with specificity during the Arbitral proceeding), be no less than US$ 25,000,000.
(d) Expenses (including Legal Fees) of the Arbitral Proceeding.
Expenses (Including legal fees) of the Arbitral Proceeding should be awarded/allocated amongst Claimant and Respondents, 29.7% and 70.3%, respectively, according to their Interests in IAT Pulkovo, as more particularly discussed below.
(e) Non-Waiver of Claim for Reinstatement: Claim for Specific Performance
i. Claimant, by monetizing the 29.7% Interest Claim as one for nut less than USS 150,000,000, does not waive his claim, as set forth in the Request for Arbitration, for reinstatement (the "Claim far Reinstatement") of his 29.7% Interest (on a fully diluted basis), as project developer, in the entity which will develop either the New International Passenger Terminal or that portion of the alternative terminal (the "AT") proposed in the Public Private Partnership ("PPP"> entered into by some or all of Respondents with Northern Capital Gateway Consortium designed to service international flights, as defined In Section 8.5 of the Founders Agreement ('International Flights"), However, Claimant conditions his Claim for Reinstatement on the Arbitration Tribunal's imposition on Respondents of conditions precedent and subsequent, acceptable to Claimant, to avoid an Illusory award of reinstatement.
ii. Claimant is entitled to an award of reinstatement requiring Respondents to restructure the PPP to grant Claimant the benefit of the terms of the agreements between Claimant and Respondents, as follows:
a. partition the physical facilities in the AT used to service International Flights from the physical facilities in the AT used to service all other flights;
b. segregate all passengers arriving and/or departing on International Flights from all other arriving and/or departing passengers;
c. segregate all accounting mechanisms for the AT related to that part of the at used to service International Flights, including expenses for development and construction and revenues and expenses for operation of international Flights;
d retain Claimant as the developer of that portion of the AT used to service International Flights; and
e. restructure the PPP for that portion of the AT used to service International Flights to;
1) eliminate the revenue charge of Respondents,
2) grant Claimant a 29.7% interest in that portion of the AT used to service International Flights,
3) extend the lease for the AT to two terms of 49 years each, and impose controls to protect Claimant's rights as a minority shareholder.’
"the pre-development advance claim which is calculated to range between US$ 37'185'672 and US$ I46'353'668, plus the development fee of US$ 18,800,000, plus the value of Claimant's 29.7% interest in IAT Pulkovo which has been calculated at US$ 294’500'000, plus interest to he calculated, plus all legal expenses and other expenses related to this Arbitration "
• Total claim US$ 459'700'000):
• a) Pre-development Advance Claim, with interest at the contractual rate of 15.5% US$ 146'400 000 as of 31 December 2011
• b) The 29.7%, Interest Claim upon completion of the Alternative International Passenger Terminal; US$ 294'500'000
• c) The 4.5% Development Fee Claim (based on the cost of the Alternative International Passenger Terminal; US$ 18'800'000
• d) Expenses (including legal fees) of the Arbitral Tribunal, to be aworded/alloceted amongst Claimant and Respondents in trie ratio 29.7% and 70.3%, end
• e) Reinstatement of Claimant of his 29.7% interest as project developer, in the entity which will develop the NIPT or the Alternative international Passenger Term Inst, conditioned on the Tribunal's Imposition on Respondents of conditions precedent and subsequent, acceptable to Claimant, to avoid an Illusory award of reinstatement.
• The claim under (a) basically stands for the Pre-development Costs incurred by the Foreign Parties, essentially in the 1990s;
• the claims under (b), (c) and (e) are claims connected to the frustrated participation as investor and developer in the new project vehicle for constructing and developing the Alternative International Passenger Terminal, whereby the reinstatement claim is a claim which first was submitted as a claim for specific performance, and was then re-phrased as a claim alternatively for specific performance or for a the monetized value respectively a damage claim;
• claim (d) deals with the allocation of arbitration costs.
• First, Claimant's monetary claim as a creditor for reimbursement of pre-development expenditures incurred (essentially in the 1990s), plus the related interest claim;
• Second, Claimant's monetary claim for a 4.5% developer fee;
• Third, Claimant's investor-claim for the (new) Alternative International Passenger Terminal, or the monetary value ascribed thereto;
• Fourth, Claimant's claim for recovering arbitration costs.
"The Respondents deny, in full, all claims made by the Claimant (para. 162 a-d of the Statement of Claims) and requests that the Tribunal shall reject those claims.
The City requests that the Tribunal shall reject those claims, inter alia for the following reasons:
(i) Claims have not been proven, since the documents presented in confirmation of such claims, cannot serve as acceptable evidence.
(ii) Claims are groundless and do not have clear subject, i.e. are objectless.
(iii) Claims are not based on provisions of applicable law and are in contradiction with such provisions.
(iv) The Claimant has failed to prove succession of rights to the shares of IAT Pulkovo and therefore no is not in the position to file claims under the Statement of Claims.
(v) Claims should be addressed to IAT Pulkovo rather than the City and the City is undue respondent to such claims.
(vi) The statute of limitations applicable to the claims under the Statement of Claims has already expired.
(vii) As of today the project on development of the Terminal has already terminated.
(viii) Claims do not meet criteria of reasonableness, justifiability and commensurability.
(ix) Expenses of the Claimant have not been confirmed, and the calculations of the relief sought are wrong.
Above reasons and many other reasons for rejecting the claims of the Claimant are set out in more detail in this Statement of Defense."
"Locus standi, Jurisdiction, Valid Representation
1 Claimant's focus standi as a shareholder of IAT Pulkovo (validity of CX-66 and CX-59) (considering Respondents comments regarding the non-issuance of the shares).
2 Claimant's focus standi to make claims as an Investor under the Investment Contract (as opposed to his locus standi ss an assignee of Claims for certain payments and for damages) - this question has to do with the issue whether under the notion of intuitu personae - Strategic Partners as an investor could validly transfer the investor's position tv Mr Sax; this latter question arises because, in the framework of interim measures, Mr Sax requests his reinstatement as an investor, and not solely as a creditor for monetary claims.
3 Liability in principle of the Respondents: are the Respondents the correct parties to this arbitration (Respondents allege that Claimant should have directed his claim against IAT Pulkovo, and that the liability of other shareholders was specifically excluded)
4 Are the Respondents property represented in this arbitration?
5 Are Respondents lawyers properly mandated?
6 Do the Protocol, the Founders Agreement and the Charter Impose binding Obligations on the Parties?
7 Did Claimant respectively PSP perform correctly, under a preliminary and prima facie reasonableness test?
8 What was the significance of the time-window for coming up with the financing?
9 What is the significance of the continued efforts of the parties beyond the time-window?
10 Did the project "fail", as Respondents argue, due to shortcoming of Claimant respectively Strategic Partners/PSP?
11 Did Respondents breach their obligations?
12 Were PSP and /or the Claimant over granted exclusivity?
13 Would exclusivity violate Russian antitrust laws? In 1995/96? In 2007? Under Article 7 of the 199.1 -Law? Article 15 of the 2006 Law?
14 Was the project "up end alive" oven during the years. oF the late 1990s to 2007, or was it conclusively/tacitly (although not through formal notice) abandoned? Was - nt some stage - the momentum lost for realizing the initial project?
15 Hence: Did the corporate and contractual relationship come to an end at some stage, tacitly, by conclusive behavior or otherwise?
16 Impact of any statute of limitations on (i) the position as investor, and (ii) the position as a creditor for monetary claims for expenditures and damages? Are contractual or corporate actions time-barred?
17 Why did Claimant or hrs predecessors not raise the monetary claims (e q for expenditures incurred m 1995 onwards) earlier, for Instance in 1999, or at least in subsequent years?
The Alternative Terminal
18 Why was PSP not invited to tender for the Alternative Terminal?
19 Could Claimant have satisfied the pre-qualification requirements for the tender for the AT?
20 Comparing the initial project with the new project IAT): is the AT the kind of project which had been envisaged in 1995/1996, or is it on ''aliud" (a Latin term) i.e. so different that one must consider if as being a new project?
21 What is the status of the AT development?
22 Can it still he stopped and put on fee?
23 What would be the consequences and impact, if e.g. a stand-still of 12 to 18 months would be imposed?
24 What would be (i) the practicality and (ii) the proportionality of the requested measure, having regard to the actual situation and the merits of the case?
25 Would the requested measure - reinstating Claimant as the investor - be realistically possible?
26 How could Claimant satisfy the normal pre-qualifying means-test?
27 Does the project objectively require that the investor/developer must meet certain credentials, and are Claimant's actual credentials as a developer for such an airport project sufficient, based on what is mentioned in Mr Sax' witness statement?
28 Would Claimant’s position be reparable by a simple award of damages (provided the legal and factual prerequisite Would be satisfied)?
29 If the Tribunal decides to order Interim measures in the sense of Claimant's request: Is security required and offered, and if so In what amount and in what kind?
30 Finally: Documentary issues to he discussed: (a) Documents requested by Claimant, (b) Documents requested by Respondents 1 and 2."
"(a) An Injunction precluding Respondents from Facilitating the construction or financing of that portion of the AT used to service International Flights, including but not limited to:
i. participating in any act to facilitate initial disbursement of financing of the AT by the EBRD, the IFC and/or any other entity for that portion of the AT used to service international Flights;
ii. participating in any act to facilitate; the construction of that portion of the AT used to service International Flights.
(b) An order requiring Respondents in take such actions as are necessary to cause Northern Capital to refrain from:
i. participating in any act to facilitate initial disbursement of financing of the AT by the EBRD, the IFC and/or any other entity which would he used to finance the construction of, or which would encumber the facility of revenues of, that portion of the AT used to service International flights;
ii. participating in any act to facilitate the construction of that portion of the AT used to service International Flights.
(c) An order requiring Respondents to notify Northern Capital, Fraport AG and any and all financiers of the AT (referred to collectively here as the "Third Parties") of the pendency of this Arbitral Proceeding and of Claimant’s Claim for specific performance herein.
(d) Alternatively, if for some reason the Arbitration Tribunal does not consider it appropriate to grant the above requests, Claimant requests that the Arbitral Tribunal deem waived any and all objections to Claimant's claim fur specific performance in the Arbitral Proceeding, and strike paragraphs 378-384 of Respondents' Statement of Defense.
(e) The drawing of adverse inferences by the Arbitration Tribunal from Respondents' failure to inform Claimant and the Arbitration Tribunal of Respondents' ongoing efforts to aggravate the current dispute by proceeding speedily with the construction of the AT, which is dearly incompatible with the pendency or this Arbitral Proceeding."
"The Tribunal concludes, for the purpose of the present decision on the granting of interim relief referring to Claimant's reinstatement as an investor, that the Interim Requests - absent a showing of proper locus standi of the Claimant - must be denied.
This conclusion, however, only applies to Mr Sax' reinstatement claim, but does not as such apply to purely monetary interests/claims which might have been validly assigned to him by PSP on the basis of the assignment filed as CX-66. This, however, is not to be reviewed in the present Order."
(Note: some 15 pages of text of the 24" Order are not reflected here, as they essentially drill with the basic requirements for obtaining interim relief according to the 1976 UNCITRAL rules, the 2010 UNCITRAL Roles and the Swedish Arbitration Act and the criteria of the avail shinty rations materia, considerations of practicability and proportionality, the general requirement for posting security and the requesting party's liability for damages, - The text hereinafter reflected deals with the most significant Issue of Claimant' locus standi.)
"assembled one of the Fust consortia to offer airpor t terminal development, construction, reparation, financing and management services through a consortium of internationally recognized companies, known as Strategic Partners (Holdings) Limited ("Strategic Partners"). Strategic Partners' shareholders and/or participants included American International Group, American International Underwriters Overseas, Ltd. a/k/a, AIG; Deutsche Bank f/k/a, Deutsche Morgan Grenfell f/k/a, Morgan Grenfell & Co., Ltd.; STV Group, incorporated; AvFuel Incorporated, VINCI f/k/a, Group GTM; Aeroports de Paris; SKANSKA and others.''
• one thing to deal with Strategic Partners in 1994 and thereafter with the - at that time - impressing business partners lined up and associated with Strategic Partners at that tune (as described by Mr Sax in bis witness statement, CWS-5, pages 3/4, specifically referred to above), and the numerous projects then worked on (also referred to above, projects numbered (i) to (xiii).
• and another thing to see and accept Mr Sax re instated as an investor, in his personal capacity, with no established record whether or not he had kept any personal activity in airport development since the later 1990s, and without the support he had indicated standing behind Strategic Partners in the 1990s, simply with the proposition that - as he affirmed during the Hearings (see the passages quoted above) still today he would easily be in a positron to put together a consortium which would match any required standard for a requisite qualification to realize the Alternative Terminal Project.
• First, the shareholder's position of the investor PSP was clearly ad personam, and was transferable only upon a prior offering of shares to the other parties, and thereafter by complying with all further transfer restrictions; nothing of this was done; end it could not even be done, since the IAT Pulkovo shares had never been issued; consequently. Claimant (quite correctly) only describes himself as a "successor-in-interest", and not, legally, as o successor.
• Second, under the circumstances, the Russian Parties, in 2007, could not reasonably be expected to accept Mr Carl A Sax as the individual Investor, not even on the basis of a promise - which had not even been made - to put together a strong consortium, 13 years after the discussions regarding the Protocol in 1994. During those years, the momentum got lost, and the "world'' changed, possibly in Russia even faster than elsewhere.
• During this period of time, relevant Russian law changed or may have changed. in particular, Russian anti-trust law changed, and possibly new procurement laws and requirements were enacted or became more closely observed or enforced than, for Instance, in 1994/1995.
• If this, as a legal hypothesis, is correct, and if in 2007 new public procurement rules and tendering requirements were applied, the question is whether, in the framework of a contractual relationship, a party has an implied or vested right that, during the term of the contractual relationship, changes in the legislative framework would not apply to such existing relationships.
• This issue is normally answered in the negative, i.e.. in the sense that a contractual party (such as PSP respectively Mr Sax) has no protected or vested right, absent very particular assurances or particular stabilization-of-law clauses (as controversial as they are), that the applicable laws remain unchanged during the contract period, or even during an unlimited period of time.
• Hence, it is not an exception, but rather a normal situation, that laws are changing. in some countries more often and more rapidly than in others, arid in specific areas of business more rapidly than in others.
• For instance, changed financial and economic situations have given rise to new urgent measures and regulations, and - absent very specific guarantees -parties have no choice but to adapt to changed legal parameters, possibly after a certain transitory period, and in exceptional circumstances, new regulations even purport to take a retroactive effect.18
a) If yes: what are the consequences?
b) If no: what are the consequences? Did the Project - as Respondents allege - fail due to shortcoming of Strategic Partners/PSP? Would this bar any and all of Claimant's claims?
a) And was thereby the contractual relationship terminated?
b) If so; at what moment in time?
c) And what would be the effect of such a determination on the dies a quo regarding the running of any statute of limitations?
a) Does this trigger a liability in principle vis-a-vis Claimant? Of which Parties?
b) Is liability excluded due to Section 8.4 of the Founders' Agreement?19
c) If not' liability for disbursements only, or disbursements and loss of expected profits?
a) Should Strategic Partners, or PSP, or Claimant have voiced claims earlier? And why was this not done?
b) Are any and all claims time-barred?
c) If not: against which Parties can claims be directed?
d) What is the scope of Claimant's claim? Recovery of pre-development expenditures? other cost or damage items? Lucrum cessans?
a) Would exclusivity, as it was required by claimant, violate Russian antitrust laws/procurement lows? In 1994/95/96? In 2007?
b) Should Strategic Partners/PSP have been Specifically invited to take part in the tendering process?
c) Should Strategic Partners/PSP or Claimant saw sponte have participated in the tendering process?
d) Could Claimant thereby, or through other precautions, have mitigated his losses?
• Claimant would be given the possibility to (in detail) quantify his monetary claims, and
• would have to furnish evidence regarding the pre-development costs and other costs or damages for which he seeks a reimbursement;
• moreover, currency issues and matters of interest would have to be addressed (dies a quo and ad quern, applicable Interest rates, simple interest, compound interest and, if compounded, on what basis).
Issue 1: Proper Performance by Claimant and the EBRD Offer
1 Regarding the LORD offer, is there a significant discrepancy between basic terms of the Founders' Agreement ("FA"), and the EBRD offer?
2 What about, for instance.
(i) the increased amount Of the loan.
(ii) the Interest terms.
(ii) the removal of majority for the Russian Parties of 63 4% to a majority of the Foreign Parties/EBRD, by the required transfers of 21.5%
(iv) pledging of the shares in favour of EBRD.
(v) transfer of management functions to Aeroports de Paris?
3 Hence: Have the Foreign Parties properly fulfilled their "primary obligation" by providing the EBRD offer as it was made’
4 Were the Russian Parties bound to accept whatever financing offer would be presented? Or were they free to reject it, or lot it lapse time-wise?
Issue 2: What if the EBRD-Offer, For Good Reasons, Had to be Considered Unacceptable for the Russian Parties?
5 Were the Russian Parties still bound to the FA, even though the Foreign Parties could not - according to the Russian Parties' arguments - present an acceptable financing commitment?
6 In this context: can the Russian Parties invoke the exceptio non (rite) adimpleti contractus? Is this defence, in Russian law, also available in the ambit of corporate law (as opposed to the "traditional" ambit of this Roman law maxim in contract law)?
7 If indeed the Russian Parties were well-founded not to take the EBRD-offer further: Could the Foreign Parties continue to claim to be part of the Investment Project, and derive benefits there under (for instance based on the 29.7% equity share and profit share), even though, possibly and eventually, the Russian Parties would have had to find financing through entirely different sources, without the Foreign Parties' or Mr Sax assistance, or ultimately through the City's or the State budget?
In other words: Was the FA still binding on them, or could they repudiate the Investment Contract altogether?
8 If the Investment Contract remained to be binding; to what extent did the FA contain further binding provisions?
9 If not; Did Respondents' have the right to repudiate the Investment Contract, or to tacitly terminate it, respectively to terminate it trough inactivity of the Parties?
* And did they do so?
10 At what moment in' time should Claimant have realized the disinterest of the Russian Parties, or a unilateral refusal to further support the project?
11 Claimant, after 1999, tried to keep the project on track, or to revitalize is, but no fresh momentum could be found; was the FA terminated already in the first half of 1999, as discussed fey Professor Belov?
12 What is the effect of Mr Karpov's letter of 16 April 2003 (CX-69)?
Issue 3: Claim for Reimbursement of Pre-Development Expenditures
13 SPH and/or Claimant want to very considerable expense for the planning of the NIPT, lined Up consultants, prepared numerous documents, for which Claimant now seeks reimbursement - and Mr Rowson stated in para 26 that he was advised that the expenditures "are reimbursable under various agreements prepared by the Parties.
What Is the documentary basis for this statement, in Claimant's view?
14 In 1995 and beyond: was it discussed among the shareholders that such expenditures would be incurred for and on behalf of IAT Pulkovo (or its shareholders), and not only on behalf of the Foreign Parties or Mr Sax personally?
15 And if this was discussed: Was there ever an agreement - at the time when entering into the Founders' Agreement ("FA"), or any time thereafter - that these costs are reimbursable to the Foreign Parties/Claimant, either through IAT Pulkovo or otherwise through the Other Founders?
16 How do we have to understand that the Foreign Parties agreed to FA 6.3, on the face of that provision waiving costs before entering into the FA, when on the other hand - as per Mr Rawson's report - already prior to December 1994 very significant costs exceeding US$; 3.3 million seem to have been incurred which, despite the terms of FA 6.3, are now claimed as part of Claimant’s pre-development advance claim?
17 Following up from Q 14 above: In the framework of negotiations leading the conclusion of the Fa, did the Foreign Parties and/or Claimant indicate the fact (and magnitude) of the expenditures already incurred and likely or expected to be incurred in the time to conic, particularly in connection with the securing of a financing commitment?
18 More particularly, after the conclusion of the FA, and during the further "life" under the FA and as shareholders in IAT Pulkovo:
Was the nature and magnitude of further spending during 1995 to 1998 ever discussed with the Russian Parties and the Board of IAT Pulkovo, and was =t approved?
19 Far instance, were all Parties to the FA and shareholders of IAT Pulkovo, and IAT Pulkovo itself as the corporate entity, made aware of the charging (or ultimately intended charging) by the Foreign Parties/Claimant) for the following costs and expenditures incurred by the Foreign Parties:
(i) the charging of several millions for consultants
(ii) the charging of advisory costs paid or to be paid to DMG, OPIC, Unipart capital and MIGA of US$ 1.5 million,
(iii) the charging of approx. US$ 2 million for salaries to employees of Sax (Holdings) Limited,
(iv) the charging of the salary for Mr Carl A Sax of over US$ 1 million,
(v) the charging for Claimant's and STVs office overheads,
(vi) the charging of US$ 1 million for design and engineering, and
(vii) the charging of over US$ 4 million for "transfer agreements", for transferring interests of individual shareholders to Strategic Partners.
20 If not: why was this not disclosed, discussed upfront, with the view towards seeking an agreement how to deal with such costs?
21 In the fr&rnework of the liability decision to be made by the Tribunal: how should the Tribunal decide liability and recoverability in principle for any one/each one of the items as per Q 19 (i) to (vii) now claimed in this arbitration?
22 When incurring those pre-development expenses; Could the Foreign Parties or Sax act on behalf of IAT Pulkovo, and bind IAT Pulkovo thereby, as Claimant asserts?
Did Mr Sax have a proper corporate authority to act for IAT Pulkovo, or a mandate ?
23 Or could Mr Sax only act on behalf of the Foreign Parties respectively himself, absent the required unanimous decision under FA Chapter 12,7, as this was argued by Respondents?
24 In this context. Was Mr Sax ever correctly appointed as Vice President of IAT Pulkovo, and registered as such, ss he claims, and as this had been foreseen in FA 13.3?
* If not: why not?
25 Mow did the Foreign Parties and/or Mr Sax commercially assess their continued spending under the perspectives of the - as it scams - relatively easy exit clause according to FA 8.4?
26 Is FA 8.4 applicable in our context, as Respondents' maintain, or inapplicable, as Claimant maintains?
27 IF there had been no agreement that these pre development costs should ultimately be borne by IAT Pulkovo or Respondents, on what basis could those costs rind their way into the EBRD financing offer, as port of the loan?
And on what basis could the Foreign Parties expect that this will be acceptable to the Russian Parties?
Has this been discussed, agreed?
Issue 4: Claim for a 4.5% Developer Fee
28 What Is the legal/contractual basis for this claim?
29 Mow was it negotiated/agreed? Do we have a signed document?
Issue 5: Termination of IAT Pulkovo
30 Was IAT Pulkovo properly administered even beyond 1998 and ultimately properly liquidated?
31 If not: Would an incorrect administration or liquidation of IAT Pulkovo give rise to a justified Claim or Claimant?
32 If so, for whet kind of claims?
33 Is there a violation of international law? Was there an act akin to expropriation?
Issue 6: Statute: of Limitation for Monetary Claims
34 How can we understand Claimant's rationale for not submitting the pre-development expense claim forthwith or rather promptly, as expenditures were being incurred, or in any event immediately when the EBRD offer lapsed in 1998, if there had been an agreement that they are reimbursable?
35 Would it be unreasonable to think that Claimant, a very well experienced lawyer, must have been aware of the statute of limitation, end a 3 year statute arguably must have been familiar to fern, since this is the statute of limitation according to many if not most US State lew legislations.
36 Regarding Claimants monetary claims: when did a violation of rights occur, falling under Article 200.1 Russian CC?
37 Respectively, when could or should Claimant have presented his claims for pre-development expenses, under Article 200.2 Russian CC?
38 Are some or all of Claimant's monetary claims for pre-development expenses time-barred?
39 If not: on what basis does Claimant have a valid claim in principle (subject to the analysis of the quantum in a final stage of this arbitration)?
40 And how to deal with interest (which may be more significant than the capital amount), interest rate, simple, compound (and compounding basis)?
Issue 7: Claim for Re-instatement as an Investor
41 Does Claimant have standing On the basis of CX-66, for claiming that he should have been selected as the developer for the AT in 2007?
42 What was transferred/assigned to Claimant under CX-66, having regard to (the probably universal, but 2'000 year old Roman notion of) "nemo plus juris transfer protest quam ipse habet"?
43 The issue might not really be answered by English law (governing CX-66), but by Russian law, since the transfer/assignment: would have to deploy certain effects for IAT Pulkovo. Views/comments?
44 On the same issue: what could be transferred as a stock Interest, having regard to the strict Transfer restrictions as per the Charter and the FA?
45 Re-thinking the Tribunal's earlier preliminary decision as per the 24th Order: Can Mr Sax stand "into the shoes" of the initial Party?
Or was the Tribunal's intuitu personae reflection correct, in the sense that the participation in the project as an investor and developer is not "inter-changeable'' or transferable from SPH/PSP to an individual (Mr Sax), even though at the time Mid-1990s Mr Sax might have been the driving force behind SPH/PSP?
46 Regarding Mr Sax' claim that, in 2007, he should have been elected as the developer/invcstor for the Alternative Terminal
• Is it of significance that - during the 1990s, SPH and Mr Sax were apparently significantly engaged in numerous airport developments, and were active around the globe (as can be seen from Mr Sax first witness statement, CWS-1, identifying numerous airport development projects in which strategic partners were involved, such as in Moscow/Seremetjevo, Vietnam, Gibraltar, Senegal, the Philippines, Guatemala., Congo, Ecuador, Indonesia, Honduras, Pakistan, Armenia, Jamaica and Uruguay - none of which however materialized, see Transcript of 16 December 2011, p, 93),
• whereas there seems to be no further record of Mr Sex involvement since 1998 to date (but for Mr Sax to correct If this is wrong).
47 Why did Mr Sax not participate in the tender process for the Alternative Terminal?
48 How could Mr Sax have fulfilled the (very heavy) pre-qualification criteria?
49 Was Mr Sax aware that procurement laws in Russia changed?
Was he entitled to expect that laws in Russia would rot be changed, and would remain stabilized on the basis as they were in 1995?
And would a claim for exclusivity, as requested by Claimant, he contrary to Russian antitrust law?
Issue 8: Cost Decision
The Tribunal may he minded to make a cost decision within its determination on liability, irrespective of whether or not the case will proceed to a final Quantum Stage.
For that purpose, the Tribunal is likely to request the Parties to file their cost submissions within about 2 weeks after the Stockholm Hearings, respectively within 2 weeks after the exchange of any post-hearing briefs (if any; for discussion).
The format and level of detail of the cost submissions must be discussed basically at the Hearing, as we want to avoid to receive a one-sheet summary of costs from one side, and a full leaver-arch file of detailed invoices etc from the other side.
In this context, however, some issues arise which may also be discussed at the Hearing:
50 Is Charter Section 20.10 applicable, as Claimant asserts, or inapplicable, as Respondents assert?
51 Does it derogate the Tribunal's authority and level of appreciation under the UNCITRAL Rules?
52 If Section 20.10 is applicable' how to understand better the provision on costs in Charter Section 20,10, referring to an arbitration "in accordance with this Chapter 19"?
53 What would be the yardstick for measuring bad faith or gross negligence or willful misconduct, in connection with a claim for costs?'
In the Chairman's view, as explained in the email, It would be procedurally unwise to discard these filings (while the Tribunal's earlier decision not to consider the legal expert report prepared by Professor E.A. Sukhanov filed by Respondents if Professor Sukhanov without good cause did not present himself at the Hearings for cross-examination - when cross-examination of him had been requested by Claimant's counsel - was a "dear-cut" and rather obvious decision, mandated by deeply rooted notions of due process; the two situations, therefore, could not be seen as being of a similar nature and procedural impact/relevance).
• Claimant: Mr Carl A Sax (as Party and witness)
Andrew J. Durkovic, counsel
Vladimir V. Gladyshev, counsel
Professor Oxana M. Oleynik, as legal export, present on 18 and 19 October 2011
Christer Hakansson, counsel, partly only
Romle Tager QC, as legal expert on English law, present during 20 October 2011
Professor Tai-Heng Cheng, as legal expert on international law, present from 18 to 20 October 2011
Peter Forbes (Director of Alan Stratford and Associates), as expert, present on 18 and 19 October 2011
Ian Rowson, as expert, present on 18 and 19 October 2011
• For Respondent 1 + 2: Professor Oleg Skvortsov, counsel
Leonid Kropotov, counsel
Ms Maria Onikienko, counsel
Josh Wong, counsel
Claes Rainer, counsel, partly present
Elizaveta Reyvakh, as interpreter
Maria Smirnova, representative of Respondent 2
Natalia Nazarova, representative of Respondent 2
Mikhail Lvovich Karpov, as witness
Professor William E. Butler, as expert, present on 20 October 2011
Professor V. A. Belov, as legal expert, present on 20 October 2011
Andrew Fletcher QC, as legal expert on English law, present during 20 October 2011
• Respondents 3-5: no appearances
• Tribunal: Advokat Per Runeland
Professor Andrey Bushev
* Court reporter: Mrs Susan McIntyre, Reporting International London, firstname.lastname@example.org
• First Day, Tuesday 18 Oct 2011: Opening by the Tribunal. Discussion of the further program. Claimant's counsel presented and filed two time-charts in colors showing the time-line of the development of the project from its first stages in 1991 to 2007; these time-charts are appended hereto as Appendices 1 and 2. The entire rest of the day was devoted to direct examination and cross-examination of Mr Carl A Sax The examination of Mr Karpov as well as the examination of Claimant's economic experts Peter Forbes and Jan Rowson (initially planned to be heard on the first day), had to be postponed.
• Second Day, Wednesday 19 Oct 2011: Peter Forbes and Ian Row-son, both of Alan Stratford (on the NIPT Rase Case Scenario and the claim for reimbursement of pre-development expenditures, as per their expert reports of April 2011 (CWS-9); thereafter followed by the examination of Respondents' legal experts Professor William Sutler and Professor V.A. Belov, followed by Claimant's legal expert. Professor Oxana Mikhailovna Oleynik.
• Third Day, Thursday 20 Oct 2011: Andrew Fletcher QC and Romie Tager QC, in expert witness conferencing; a bundle on the leading English cases on contract interpretation was submitted, their examination - mostly by the Tribunal - was followed by the examination of Mikhail L. Karpov as witness; Mr Karpov brought with him the Minutes of a seminar of 16 July 1998, in Russian language (an overnight translation thereof was prepared by Leonid Kropotov, and was filed on 21 October 2011 as RX-55), the testimony of Mr Karpov was interrupted in the late afternoon of 20 October 2011 so as to allow the hearing of the testimony of Professor Dr Tal-Heng Cheng on aspects of international law; he delivered a voluminous folder with a collection of rases and materials as references to his (interesting and eloquent) oral presentation between 17h00 and 18h35.
• Fourth Day, Friday 21 October 2011: Opening address by Maria Smirnova, delegate of Respondent 2, followed by continuation of the examination of Mr Karpov. Further statements and examination of Mr Sax; in addition, Mr Sax extensively discussed the Minutes referred to by Mr Karpov (RX-55); by agreement, and due to lack of further time, counsel preferred not to deliver oral dosing arguments; closing of the Hearings in the afternoon of 21 October 2012.
The Chairman : The Chairman: Now, for the record, a very important and serious question. You know this Tribunal has a prime duty; the prime duty is to treat the parties equally, with equality, and to give each party a sufficient time and opportunity to be heard. These are the two prime duties of this Arbitral Tribunal. I now would like to ask, Claimant first and then Respondents, whether ar least on the two prime duties there are any complaints to the proceedings wo had or complaints regarding this Arbitral Tribunal. Can I ask you, any complaint, Andrew?
Mr Durkovic : No complaint at all, and we express our appreciation to all three arbitrators for their fine work and for their patience and for listening to things that perhaps they already understand and putting up with the repetition sometimes and the length of things. Very, vary well done. It Is actually quite an honor to be here with such distinguished arbitrators on the panel. Also our appreciation to the other side. It has been very cordial, thank you; it has been a pleasure working on the other side of the case.
The Chairman : Thank you so much.
Mr Kropotov: No complaints. Thank you to the Tribunal, and we can support what Andrew said in that respect and in respect of the Tribunal.
The Chairman : Thank you. I forgot something very important. Elizabeth, thank you so much for your translation it was wonderful. You were a perfect translator.20
• within 14 days: joint proposals of counsel regarding (i) the size of contemporaneous Post-Hearing Briefs and (ii) the format/level of detail of the subsequent contemporaneous cost submissions;
• by Friday 20 January 2012, filing of contemporaneous Post-Hearing Briefs;
• by Monday 20 February 2012, filing of contemporaneous cost submissions.
On the same day, the Chairman forwarded the transcripts to all other recipients of the Tribunal's communications, in particular to Respondents 4 and 5.
• to also state their views with regard to a grace period of 30 days after notification of the Award, and
• to make their views known as to the rate of simple or compounded post-award default interest.
Thereafter, as stated in the Order, the proceedings - as far as they relate to the liability phase - would be closed.
• rather be minded to look at the quite apparent intentions evidenced by the wording of CX-66, in the sense that, short of being able to transfer the shares as such27, the parties quite obviously intended to provide that Claimant Mr Sax can, to the greatest extent legally/contractuatly possible, "stand into the shoes of SPS/SP" (term as used by the Tribunal in the examination)28, and further:
• that - with such basic understanding of the Intention evidenced by the text - the decisive question would only be to explore to what extent such agreement (made under English law) would deploy valid effects in Russia, i.e. vis-a-vis IAT Pulkovo and its other stockholders.
• which question makes it abundantly dear that the latter Issues will - to the largest extent - be governed by Russian law, and not by English law.29
• the right to be compensated for expenditures properly incurred for and on behalf of the company (if any),
• the right to cash receivables sold to the stockholder,
• the right as a stockholder to exercise voting rights,30
• the right to receive corporate Information,
• the right to take part in stockholders meetings,
• the right to be paid dividends if and when declared, and
• ultimately the right to receive the liquidation proceeds or the liquidation surplus (if any) upon winding up of the company.
"the permissibility of the assignment of a claim, the relations between the new creditor and the debtor, the conditions under which this claim may be made to the debtor by the new creditor, and also the question of proper performance of the obligation by the debtor, shall be determined according to the law that is applicable to the claim that is the subject of the assignment."
• Since by means of CX-66/CX-59 only claims could be transferred, but not as such the position as a shareholder, SPS remained a shareholder of IAT Pulkovo, and remained a party to the Founders' Agreement;
• To the extent that the Founders' Agreement fore-shadowed that SPS Will be the developer of the Project (as argued by Claimant), SPS - and not Claimant - remained eligible for such task;
• however, SPS can/could, even in advance of earning any remuneration as a developer36, assign such future remuneration to Claimant Mr Sax;
• likewise, as regards the position as an investor and 29.7% shareholder of IAT Pulkovo, it is clear that the shareholding as such could not validly be transferred to Claimant (for lack of consent by the other shareholders, lack of satisfying their rights of first refusal, and for tack of proper issuance of the shares; hence, it is dear that SPS remained the shareholder in IAT Pulkovo even after December 2002;
• however, as it is normally possible that a shareholder can, for instance, be committed to assign future dividends or liquidation proceeds to another party (for instance to a creditor who had granted a loan to the shareholder), it would likewise seem possible for SPS to assign all such future benefits to Claimant;
• In both cases, the debtor of such assignments vis-a-vis would be SPS, and it is SPS which - under CX-66/CX-59 - would be liable to effectuate those payments, not Respondents or IAT Pulkovo;
• however, as ft is Claimant's case that SPS was unlow fully "thrown out-of the Project, and was not further considered after 1999 and beyond. Claimant suffered an indirect loss 37, a loss for which damages might be Claimed;
• such indirect damage is a receivable in the sense as it is claimed by Claimant.
• The reimbursement of the pre-development expenses.
• The alleged 4.5% developer fee and
• The 29.7%. monetized Interest in the future operational profits of the NIPT and/or the AIPT
"A party (here Respondents) which had been validly addressed as a Respondent in arbitral proceedings, is under a duty to notify the Arbitral Tribunal end the other Parties of any changes of its corporate name and structure as well as of its changed address for allowing a valid service of communications. A failure to do so cannot later on, or in any subsequent (enforcement-) proceedings, serve ss an argument that the Party had not been validly kept informed of the further arbitral proceedings. - For this simple reason, Claimant's concern is not well-grounded."
"....quite unthinkable that, in any subsequent/resulting enforcement proceedings, one or the other of the Respondent Parties would invoke that it had not been properly kept informed on the present arbitral proceedings and any of the numerous procedural steps, or invoke that the company name or service address for communication was wrong, or invoke that a particular service Address should have peen used as opposed to the business address, or invoke that any of its legal counsel were at any given moment in time not properly mandated by Respondents 1 and 2, or would invoke that the Power-of-Attorney, executed by the first Deputy Director Mr O.A, Ljapustin was invalid for some formal internal flaws or lack of authority."
"Any of the above defenses, or defenses of a similar nature, whether raised in these proceedings or in any subsequent proceedings or enforcement proceedings, would look "so bad" and would seem to be so dearly nonmeritorious by any standards that the present Arbitral Tribunal finds it unnecessary and unwarranted to burden the present proceedings with continuing queries of the present nature."
"A party (here; Respondents) which over a period of time knowingly and without intervention accepts to be represented by counsel/outslde counsel cannot later on, or in any subsequent (enforcement-) proceed lugs, deny the validity of such representation - whatever legal system applies, For this simple reason, Claimant's concern is not well-grounded."
A footnote mentioned:
"This notion is so clear and obvious that no legal authorities need to be cited, indeed, any citation could only dilute the clarity of the Tribunal's dictum."
• (i) that Respondents 1 and 2, purported to be represented by counsel, had indeed validly mandated all of their legal representatives, and that
• (ii) all Respondents were at all times validly kept informed on the proceedings, and had all appropriate opportunities to make their case known to the Tribunal.
• (iii) In particular, the Tribunal addressed special invitations in its Orders for all of the Respondents to delegate an in-house counsel or member of the management to be present during the Hearings, so as to get their own impressions on the appropriateness and correctness of the proceedings.
• (iv) And the Stockholm Liability Hearings were attended by two representatives of Respondent 2, i.e. Maria Smirnova and Natalia Nazarova, with the former addressing the Tribunal at the last day of the Hearings;40
• (v) Mrs Smirnova, in particular, explicitly confirmed the following:
"First of all, being a representative of the City Property Management Committee I would like to emphasize that the legal position represented by DLA Piper during the proceedings is totally supported by and agreed with the Committee, and of course wo tan see that all the claims set forth In the claim of Mr Sax are groundless, but I would like to elucidate (or) a bit different aspect...41
The Tribunal is entirely satisfied that Claimant as well as Respondents 1 and 2 were at all times properly mandated by their lawyers purporting to have been given such mandate.
Moreover, the Tribunal is satisfied that all the Respondents (including Respondents (3), 4 and 5) were at all times sufficiently and correctly kept informed on the proceedings, and at all times had the possibility to make their views known to the Tribunal.
• the Foreign Parties' financing obligation,
• coupled with the 2/3 Russian to 1/3 foreign participation in the joint stock company and,
• on the other hand, absence of a provision In the sense that expenditures as may be Incurred by the Foreign Parties could be invoiced to the Russian Parties, or could otherwise be recovered from the joint venture company.
• the repartition of the shareholding, is now 63.7% for the Russian Parties, and 36.3% for the Foreign Parties,
• there is no provision for the reimbursement, by Respondents or by EAT Pulkovo, of expenditures as may be Incurred by the Foreign Parties In connection with the tasks they have assumed to provide a financing commitment; to the contrary:
• Section 6.3 of the Founders' Agreement provides: "Each Founder agrees to pay its own expenditures related to the Company's formation incurred prior to the Company's registration;"45
• Section 8.4 of the Founders' Agreement (already referred to above) then spells out what should happen at the end : it deals with damages as may be suffered by the parties who had "funded the establishment of the Company and implementation of the provisions of Article VIII" and provides that each such Founder "shall accept these damages as its own, and shaft not transfer responsibility for them to other Founders" (emphasis added) -- a provision which, as the text says, is broadly worded, covering not only the funding, by any of the Founders, oF the establishment or IAT Pulkovo, but moreover whatever had been done For the implementation; and as regards the Foreign Parties, the wording suggests a conclusion that it also covers all their expenditures incurred in the context of Section 8.1, i.e. in the context of their efforts to obtain the debt-Financing.
• Further important elements are the tight transfer restrictions as per Article XI, and
• The Dispute Resolution clause is set out in Article XII.
"will be up to US$ 100 million, including capitalized deferred construction expenses. The Foreign Parties will use their best efforts to seek debt financing for the Company from Independent banks in the amount or US$ 60 million".
"It is understood under the financing documents that the Company will be the borrower and PSP will be responsible for guaranteeing the obligations of the Company to the banks. No other Founder will bear responsibility for the obligations of the Company under the financing documents "
"all surrounding circumstances shall be taken into consideration, including negotiations and correspondence which preceded the contract, practice established in the mutual relations of the parties, business custom, and subsequent conduct of the parties."
• the repartitioning of the stockholders' participation quotas,
• the maximum amount of the loan financing,
• matters regarding the bearing of costs and expenses incurred by the Parties,
• the exit clause of Section 8.4,
• matters of representation of the joint-venture company IAT Pulkovo etc.
• the hold-harmless provision in Section 19 and its relation to Section 20
no such details or other sources of information (which could have shed a light on those aspects that were particularly significant or important to the Parties) were provided by either side (neither preparatory drafts and their revisions, nor any notes on discussions/negotialions).
However, a simple review (i) of the Investment Contract and (ii) of the further files submitted by the Parties in these proceedings, shows that, significantly for the present dispute,
• none of them evidences or provides for an explicit Written authority, granted or to be granted to SPS or Mr Carl A Sax personally, to represent IAT Pulkovo or the other shareholders/Respondents vis-a-vis any third parties,
• none of them evidences or provides for the passing of a Resolution of the Board of Directors, following up on Chapter 13 of the Charter, appointing Mr Carl A Sax as Co-President or Vice-President of IAT Pulkovo, let alone with sole signing authority on behalf of IAT Pulkovo, and
• more particularly: none of the documents submitted in these proceedings provides for an authority, which allegedly had been granted to SPS or Mr Carl A Sax personally, to deal with and negotiate on behalf of IAT Pulkovo or the other shareholders/Respondents with financial institutions such as DMG and EBRD;46
• moreover, no contractual provision contains a straightforward obligation for the other shareholders/Respondents to tel quel accept a (or indeed any) financing proposal that may be submitted to them by SPS or Claimant;47
• no document was made known in these proceedings which purported to grant an authority or mandate to SPS or Mr Carl A Sax personally to unilaterally appoint any professionals or consultants or other service providers or advisers on behalf of the Company, or at the expense of either IAT Pulkovo or Respondents.48
• Articles 17, 35, 46 and 55 of the Russian Constitution
• Article 61 of the Russian CC on the liquidation of a legal person,
• Article 128.1 and 128.2 Russian CC on the power of representation, and Article 185 and 187 regarding powers of attorney,
• Article 21 of the Law on State Registration,
• Articles 420 Russian CC in connection with Articles 309 and 310 Russian CC,
• Article 307 Russian CC on contractual rights and obligations,
• Article 421 Russian CC, cited by Claimant in connection with a mixture of provisions creating mutual obligations, CM-84 para 6,
• Article 328.1 and 328.2 Russian CC on reciprocal obligations,
• Article 450.2 and 450.3 Russian CC regarding out of court unilateral withdrawal from a contract; Article 405.2 Russian CC cited in conjunction with and Art 153 and Article 158.1 and 158.2 Russian CC,
• Article 15 CC on the right to compensation for damages suffered,
• Article 401 Russian CC and the mirroring provision for tort of Article 1064 Russian CC,
• Article 183 Russian CC on the conclusion of a transaction by an unauthorized person,
• Article 393 Russian CC on the liability for damages in the case of a breach of obligations,
• Article 388.1 Russian CC regarding the assignment of rights and the exception clause in Art, 388.2 Russian CC,
• Art 391.1 Russian CC regarding the assignment of a debt,
• Articles 196, 200 and 208 Russian CC regarding the Statute of limitations,
• Article 69 Russian CC on Joint Stock Companies.
• Law No. 1545-1 of 4 July 1991, Articles 1-3, 6-8, 15, which was operative at the time when the Founders' Agreement was concluded in 1995 (CX-106), in particular Art. 7 (RX-33),
• Law No. 160-FZ of 26 July 1999, Article 2, 4-7, 10, 20 (which - Claimant explained - is the law which currently in force, CX-132).
• Law No. 1488 of 26 June 1991 Concerning Investment Activities in the RSFSR,
• St. Petersburg Investor Protection Laws of 1998 (CX-130)
• Russian Law on Protection of Foreign Investments, Articles 2,5, 6 and 7, regarding investor protection and the transfer of rights,
• Law of RSFSR On Competition and Restriction of Monopolistic Activities in Commodity Markets, of 22 March 1991 (RX-33),
• Federal Law on Competition, dated 26 July 2006 (RX-34), currently in force.
It is, for the purpose of this Award, therefore deemed most appropriate to review the Issues 1-7 one by one of the Questions, and to conclude each Chapter with short answers; Issue B wiil be addressed in the Cost Section.
1 Regarding the EBRD offer is there a significant discrepancy between basic terms or the Founders' Agreement CPA"), and the EBRD offer?
2 What about, for Instance,
(i) the increased amount of the loan,
(ii) the interest terms,
(iii) the removal of majority for the Russian Parties of 63.4% to a majority of the Foreign Parties/EBRD, by the required transfers of 21,5%
(iv) pledging of the shares in favor of EBRD,
(v) transfer of management Functions to Aeroports de Paris?
3 Hence: Have the foreign Parties property fulfilled their "primary obligation", by providing the EBRD financing offer as it was made?
4 Were the Russian Parties bound to accept whatever financing otter would be presented? Or were they free to reject it, or let It lapse time-wise?
• the Foreign Parties properly complied with their "primary obligation" (CM-66 para. 2) to secure the financing for the NIPT, and
• the terms of the financing had been agreed by the Parties to the Investment Contract (CM-66, para, 4; Mr Sax in CWS-6, paras, 24-57), and
• the Investment Contract included firm obligations of the Parties.51
• Furthermore, Che amount of the financing needed was assessed by DMG/EBRD, and the Founders' Agreement contemplated that the amount of financing might increase;
• Interest terms had not been specified in the Founders' Agreement, and the EBRD indicated a commercial pricing52;
• regarding the removal of the Russian 2/3-majority, Claimant calculated that the Russian Parties even after the exercising of the DMG- and EBRD-options would still control over 50% in IAT Pulkovo;
• EBRD'S request regarding the pledging of the shares of IAT Pulkovo, according to Claimant's testimony, "was commercially reasonable, by definition";53
• The further EBRD requirement that the management functions should he assigned to a Western provider (i.e. Aeroports de Parts) was also necessary for the project to qualify as pertaining to the private sector;
• Mr Sax underlined the latter aspect at the Hearings; "EBRD required a Non-Russian management to qualify for Pulkovo-3 as a private sector project... with regard to compliance, 1 believe that the private sector criteria of EBRD were commercially reasonable and I know that they were agreed to by SEP.. "54
• Even If the EBRD proposal had to be considered unacceptable by the Russian Parties, they were still bound by the Founders' Agreement; yet, according to Claimant, the Russian Parties could have properly withdrawn from it, or could have negotiated an exit scenario; neither was done.
• The exceptio non (rite) adimpieti contractus Is not available to the Russian Parties, and Article 328 CC does not provide a basis.
• Even if the Russian Parties were well-founded not to take the EBRD offer further, PSP could rightfully continue to claim to be part of the Investment Project which was not terminated In accordance with procedures available under Russian law, and PSP's performance was moreover accepted by the Russian Parties.55
• The provisions of the Founders' Agreement remained binding and there was no right to repudiate the Investment Contract, or to tacitly terminate It.
• The disinterest of the Russian Parties was only realised on 2 October 2007 when Claimant, was advised Chat the City of St. Petersburg intended to develop the N1PT/AJTP without the participation of Claimant and/or PSP.
• In Mr Karpov's letter of 16 April 2003 CX-69), Claimant finds evidence that the Russian Parties confirmed fulfillment of Claimant's primary obligation, that the Founders' Agreement was still in effect and that any dissolution required the consent of all shareholders.56
• Regarding the question whether SPS or Claimant properly fulfilled the primary obligation regarding the providing of a financing offer, Claimant’s answer is a dear "yes".
"I think your question is relevant if the profitability of the project Is In question. However, if the profitability of the project is all excessive that all of the parties, including the Russian Parties, are making more money than they have ever made before in the entire history of the Russian Federation, then in fact whether it costs 75 million or 150 million or 200 million is irrelevant "
" Mr Sax : If we said at the time that you get only 51%, then unless we were able to put the money on the table, they would not have signed. With the money on the table, yes, they would have signed at 50,1%, but don't think that the negotiations at that time -- I understand the question that you are asking, but I can’t honestly answer the question. Again, I will say the 66% and one-third different was a discussion; it was not a thoroughly contested item..."
"in the event the financiers ask for shares, that we agree, the Founders' agree, to dilute our shares pro rata. There was also an agreement -- oral -- between myself and the Russians that die Russian shares would nor fall below 50.1%"62
Mr. Sax : "Now was the EBRD 1.5% the exact number contemplated when the Founders' Agreement was signed? No. Was it contemplated that they would ask for a share Interest? Yes. Was the DMG number of 20% contemplated at the time the Founders' Agreement was signed? No. Was it contemplated that they would ask for a Share interest' Yes, because we didn't know the number Did I tell my partner DMG at the time that they were being greedy’ Yes, Did the Russians say that DMG was being greedy? Yes. Would I agree today that they were being greedy? Yes, But it is what it is, because in 1998 there were a lack of financiers available in Russia and if you did not go to DMG or IFC or OPIC, quite frankly you couldn't find senior debt financing, and If you didn’t deal with somebody like DMG or Credit Suisse or someone like that you couldn't get subordinated debt or equity or mezzanine financing or whatever you want to call it at the time.
So to directly respond to your question: the Russians knew. They didn't like the 20% and neither did I. They may not have liked the 1.5%, but they knew it was a "falt accompli", quite frankly, at the time that the EBRD asked for it because there was not an alternative lender of EBRD stature. And even if you take the numbers and you work the numbers out the Russians never fell below choir 50.1% threshold that they were interested in maintaining, even with the dilution of the EBRD and DMG."64
• failed to accept the terms of the EBRD financing proposal,
• failed to implement numerous steps towards implementation of the Project (starting with failures to obtain governmental permissions, failure to build an apron as well as access roads, failure to provide for a correct management and administration of IAT Pulkovo, and
• inter alia also failed to Issue the IAT Pulkovo share certificates.
"... continuously treated the investment Contract as valid and enforceable until 2 October 2007 when Claimant was advised that the City of St. Petersburg would develop an international passenger terminal at Pulkovo Airport without claimant's participation".67
"(i) Assign different consultants and advisors and execute contracts with them, (ii) agree on specific terms and conditions of debt financing, (iii) incur multi-million expenses, and (iv) spend money for any other arrangements either related or not related to the Investment Project, The Claimant was not a representative of the Respondent and was not entitled to act on their behalf and spend any money- Therefore, any actions of the Claimant in the course of attracting financing were mode on his own, at his expense and without any consent or approval of other shareholders of iat Pulkovo,"
• Claimant was required to provide "the guarantee of obtaining financing"'68 which he failed to do;
• the time limit for obtaining the financing was not met: the deadline for obtaining financing had been established in Section 8.1 (c) and 8.4 of the Founders' Agreement and expired on 31 December 1995, and no agreement is In place according to which an extension had been granted;
• the financial terms proposed by EBRD were commercially unacceptable;
• the EBRD moreover only Issued a proposal which as such was not a financial commitment, nor a guarantee to provide financing;
• Claimant never had the power to negotiate on behalf of IAT Pulkovo or its shareholders, and in any event any and all commitments or agreements would have had to be signed off by both, Mr Demchenko and the Claimant; the Founders' Agreement nowhere envisages an authority given to Claimant to represent any of the shareholders of IAT Pulkovo;
• the two documents filed in support of an alleged authority, CX-14 and CX-15, are incomplete extracts and do not constitute sufficient evidence of an alleged authority;
• Claimant should have worked together with the Chairman of the Board, Mr Boris G Demchenko, and documents required to be countersigned by him;
• Claimant even failed to show evidence that he had been appointed Vice-Chairman of IAT Pulkovo; under Russian law there is no such special position within a Board of Directors of a Joint stock company such as a Vice Chairman; Claimant may only have been entitled to act for IAT Pulkovo If he hod been given a power of attorney, and Claimant himself does not assert that such power of attorney existed;69
• furthermore, under Article 12.7 of the Charter, an approval of the Board of Directors Is required for the execution of any commitment exceeding US$ 10'000, and Article 11.2 requires an unanimous approval for the construction budgets or commercial budgets and for the business plan;
• moreover, the Russian Federal Law on Joint Stock Companies, in Articles 78/79, requires a Board approval for large scale transactions, or approval by the Shareholders' Meeting;70
• the EBRD proposal contained a long list of conditions precedent which EBRD required to be fulfilled;
• Respondents had never agreed to unconditionally accept any and all of the terms of financing which might he proposed by any member, and Claimant himself recognized this;
• the fact that Respondents continued their cooperation with the Claimant, giving him a chance to fulfill his commitment, does not mean that the Respondents had agreed to renegotiated the terms for obtaining the financing;
• in fact, the terms proposed by EBRD could not be approved for commercial reasons, particularly due to significant discrepancies and con traditions between the proposal and the basic terms laid down in the Founders' Agreement;
• the amount of the loan was increased by a multiple of three in comparison to what was established in the Founders' Agreement, which meant that the cost of the Investment Project also increased by a multiple of three;
• the interest rates were substantially higher than those agreed in 1995 when the cost of the loan had been estimated at 8.5% to 9.5% p.a., while EBRD's proposal indicated an interest rate of 13%71.
• It was never envisaged that all assets of IAT Pulkovo and the shares in IAT Pulkovo owned by the Parties should he pledged in favour of EBRD, neither the Founders’ Agreement nor the Charter foreshadowed such a pledging which, however, was required by the EBRD proposal;
• Claimant's comment that EBRD's request regarding the pledge, in the sense that "it was commercially reasonable", is of no avail;
• the transfer of the management functions in relation to the International Passenger Terminal to Aeroport de Paris had also not been covered by any provisions in the Founders' Agreement or by the Charter, and this is another requirement to which the Russian Parties could never agree;
• the partial transformation of the pre-development expenses Into a loan has also never been agreed, neither in the Founders’ Agreement nor in the Charter;
• the proposition that Claimant should be owed a development fee in the amount of 4.5% of the Terminal's development costs has also never been agreed;
• the transfer of a 1.5% stock Interest in IAT Pulkovo to EBRD on the financial closing and a further transfer of a 20% stock interest in IAT Pulkovo to DMG upon the financial closing were likewise never agreed and entirely contradicted Section 14.3 of the Founders' Agreement, and Mr Karpov in this respect testified: "The Russian Parties did not even want to hear about redistribution of shares"72;
• Mr Sax himself admitted that he also considered the requested surrender of a 21.5% shareholding as too high, with reference to the Transcript of 18 October 2011, pages 166/167;
• for all these reasons and contradictions of the proposed terms to what had been agreed by the Parties to the Investment Project, Respondents or IAT Pulkovo could not be expected to take such a proposal forward.73
"...in any case was factually terminated at the end of 1998 - first half of 1999."
"Bearing all of the aforesaid in mind, it should be noted that the Claimant has not fulfilled its main and sole function under the Founders' Agreement and in the whole Investment project: Obtaining of financing. Furthermore, everything the Claimant managed to Obtain from the financial institution, he ob twined with an enormous delay which was in material contradiction with the Founders' Agreement, and actually ruined the Project."77
"why Pulkovo did not close in 1998.... I blame only two people: No 1 the then Governor of the City of St. Petersburg, Vladimir Yakovlev who, quite candidly, for his personal reasons wanted to usurp the Americans' position for fns own personal reasons, and no.2, Governor Valentina Matvienko who Wanted at the time Deripaska's company.... to, again, replace the Americans as the developer of Puikovo-2"79
"Mr Wong: You have a rationale to it and you say It’s commercially reasonable, but I think what I say is that it was not unreasonable for my clients to look at what was in front of them and think: Wow, this Is different. We are talking three times the money, We are talking a reduction in our shareholding and other matters as well. I would invite you to accept that, putting you in the shoes of my client, it Is not unreasonable for them to look at what you proposed and think: This is way off from what wo expected, and ft was not unreasonable for my clients to say: Look, we can’t accept this."
Mr Sax: I think it was, quite candidly, unreasonable, and I think if your clients did not accept it, they had bad advice -- and I'll tell you why; it's very simple EBRD and BAG were two of the premiere financial Institutions in the world in Russia at that time. Forget Cart, Cart Is nobody, PSP is nobody, SP is nobody, but DMG and EBRD are somebody (omissis) They were getting a completed Terminal without putting out any money. They were getting a substantial cash-flow. They were getting the first PPP as a project like this in Russia and/or the world. And what happened"? Okay, they decided not to do It. And if they would have done It, they wouldn't have to wait 15 years or 13 year for the next project."82
"EBRD's counsel wanted some ridiculous defect cured by incorporating a new company and signing a new Founders’ Agreement.... But the bottom line is that the intervening event, the financial crisis and the delays caused by the Russians, prohibited those changes."83