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Order on CGHA's Application for Interim Relief

This Order is issued in response to a request for interim relief submitted by Claimant ("CGHA’s Application for Interim Relief" or the "Application") by letter of 20 August 2014 seeking, pursuant to Article 28 of the ICC Rules of Arbitration in force as of 1 January 2012 (the "ICC Rules"), an urgent order that the First Respondent:

(a) return the hotel known as the Royal Mansour Hotel in Casablanca, Morocco (the "Hotel") to the Claimant with immediate effect;

(b) account for all payments made by it since 31 December 2012 (the date of the first alleged breach of its rental payment obligations under the Management Agreement CGHA entered into on 23 November 1989 (the "ManagementAgreement") with the First Respondent, Trust House Forte Morocco SARL(now known as Woodman Maroc SARL), ("Woodman") as manager of the Hotel and with the Second Respondent, Trust House Forte (UK) Limited (now known as Travelodge Hotels Limited) ("Travelodge") as guarantor); and

(c) refrain from making any payments to any third party (including under the operating agreement (the "Operating Agreement") allegedly entered into between CGHA and its former ultimate parent company Starwood (M) Hotels Inc.) pending the Arbitral Tribunal’s award on liability, save with the consent of the Arbitral Tribunal.

On 21 August 2014, the Arbitral Tribunal, inter alia, invited the Parties to provide their comments as to whether, under the circumstances, the Arbitral Tribunal should grant the interim relief sought by Claimant, it being specified that, in view of the alleged urgency of the matter, such comments if any ought to be submitted as soon as possible and no later than 26 August 2014, after which date the Arbitral Tribunal may take any step it deems appropriate.
On 26 August 2014, the Second Respondent made comments limited to issues related to the Application for an award on costs filed by the Second Respondent following Claimant’s discontinuance of the claims it had initially brought against it ("Travelodge’s Application forCosts"), - the subject matter of the Arbitral Tribunal’s Order of 10 September 2014 stating that any issue which goes beyond Travelodge’s Application for Costs are not matters which concern the Second Respondent and, accordingly, not matters on which it can, or should, comment. The same day Claimant submitted a letter and seven exhibits in support of its Application for Interim Relief ("CGHA’s Submissions") which the President of the Arbitral Tribunal forwarded to the First Respondent by letter of 27 August 2014.
In the same letter of 27 August 2014, the Arbitral Tribunal convened a hearing for CGHA s Application for Interim Relief to be heard by telephone conference on Monday 1 September 2011 at 12 (noon), London Time, and granted the Parties a further time-limit until 30 August 2014 to reply to the Application.
On 28 August 2014, the Claimant and the Second Respondent confirmed their participation in the conference call.
On 1 September 2014, the Claimant was heard on the merits of the Application by the Arbitral Tribunal in the presence of Counsels for the Second Respondent. The First Respondent, having been duly notified by the President of the Arbitral Tribunal of the Application on 21 August 2014 (letter received on 25 August 2014) and of the date and time of the hearing on 27 August 2014 (letter received on 28 August 2014), did not participate.
Referring to the Arbitral Tribunal’s letter of 4 September 2014, Claimant provided on 16 September 2014 (i) a draft order sought by Claimant, (ii) a draft affidavit of Ms. Penelope Jane Madden confirming the facts set out in the Application and in CGHA’s Submissions and updating the Arbitral Tribunal on correspondence with the First Respondent since 4 September 2014, (iii) copies of letters from the First Respondent to Maître Alain Chedal of Landwell et Associés of 11 and 12 September 2014 and Mr. Chedal’s response of 16 September 2014 (which enclosed the copy of the order that the Claimant proposed to be made by the Arbitral Tribunal).
On 17 September 2014, Claimant forwarded a sworn copy the affidavit referred to in paragraph 7 and its exhibit (the "Affidavit").

The Arbitral Tribunal’s Decision

In examining CGHA’s Application for Interim Relief, the Arbitral Tribunal considered the laws of the place of arbitration, the Parties’ agreement and the ICC Rules. The Respondents did not challenge the Arbitral Tribunal’s power to order the relief requested, nor did they argue that the relief sought should or should not be granted.
CGHA relies on Article 28 (1) of the ICC Rules which provides: "Unless the parties have otherwise agreed, as soon as the file has been transmitted to it, the Arbitral Tribunal may, at the request of a party, order any interim or conservatory measure it deems appropriate. The Arbitral Tribunal may make the granting of any such measure subject to appropriate security being furnished by the requesting party. Any such measure shall take the form of an order, giving reasons, or of an award, as the Tribunal considers appropriate." Thus, the Arbitral Tribunal has a wide discretion in determining the appropriate relief as it may order interim measures it deems proper and subject them to appropriate security, including in an order giving reasons.
Neither the laws of the place of arbitration nor the Parties’ agreement limit the Arbitral Tribunal’s discretion. The Management Agreement contains no restriction in regards to interim measures. There is no mandatory provision of the laws of the place of arbitration, including the English Arbitration Act 1996, which would limit the power of the Arbitral Tribunal to grant the relief sought by Claimant.
Interim and conservatory measures are generally intended to protect the status quo between the Parties, preserve evidence and the rights and interests of the parties involved in an arbitration.
In international commercial arbitration practice, it is generally accepted that, without prejudging the merits of the case, an arbitral tribunal may grant interim measures if the applicant shows a likelihood of success on the merits, a certain degree of urgency and an irreparable or substantial harm that would be suffered if the measure is not granted which is not outweighed by an equivalent harm to the party against which the relief is sought.
The basis for the relief sought in the Application is that, on a balance of interests, Claimant would suffer a clear and unacceptable risk to its property or of not recovering any of the monies claimed as fees owed to it for the use of the premises of the Hotel or damages as a compensation for alleged breach of the Management Agreement in the event that Claimant were to prevail at the end of the Arbitration.
It appears from CGHA’s Submissions and the Affidavit that on 19 June 2014, First Respondent’s ultimate shareholder transferred the entire issued share capital of First Respondent’s sole shareholder, Starman (Maroc) Sarl, to Maquay Investments Ltd, a company incorporated in England on 7 May 2014 (Exhibit 1 to the Application), and that Starman (Maroc) Sarl was renamed Iona Maroc Sarl before being placed into liquidation on 15 July 2014 (Exhibit 3 to the Application). It is not disputed that from 31 December 2012, the First Respondent has ceased to pay the fees for its occupation of the Hotel while receiving proceeds from its operation under the Management Agreement. Claimant has shown sufficient evidence that, despite its failure to pay the fees owed under the Management Agreement, the First Respondent may have made, and still is about to make, payments to the profit of its former ultimate shareholder under an operating agreement which it allegedly entered into with Starwood (M) Hotels Inc.
Against this background, the Arbitral Tribunal accepts that the First Respondent might not be in a position to satisfy an award for fees in arrears or damages should Claimant succeed on the merits of its claims and that there is a serious threat that the First Respondent’s assets be diverted to the profit of its former ultimate shareholder and to the detriment of Claimant.
Thus, the Arbitral Tribunal is prima facie satisfied that, although the First Respondent acknowledged that it was in a difficult financial situation to justify its non payment of the fees for the use of the Hotel even before the Arbitration started (Exhibit C 73), the fact that it is now owned by a new entity in liquidation (defeasance structure) and threatened to be liquidated is sufficient to meet the urgency requirement and the requirement that the measures sought would prevent Claimant to suffer a substantial harm which would not be readily compensated by an award of damages, would the Claimant succeed on the merits of its claims.
The Arbitral Tribunal also notes that the First Respondent did not oppose the Application although it was given the opportunity to do so. As noted in paragraphs 2 to 4 above the Arbitral Tribunal notified Woodman’s statutory representative of the Application, invited him to comment and informed him of the date of the Hearing. Nevertheless, the First Respondent did not seize any of the several occasions offered to it to participate in the proceedings and oppose the Application, which gives credit to the statement of Iona Maroc Sarl’s Liquidator relied upon by Claimant that the First Respondent will not participate in the Arbitration and that it would not be in a position to satisfy any judgment or award for costs.
The particular situation in this case justifies an order for the return of the Hotel to its owner which, under other circumstances, the Arbitral Tribunal might not have permitted. Although the Arbitral Tribunal considers that given the nature of the order sought, it should act with the utmost caution, it is satisfied that the balance of advantages plainly satisfies the grant of relief, and the First Respondent has not appeared to seek to argue to the contrary. As drastic as the measure would appear, it seeks to avoid a possible increase of the First Respondent’s liability if the matters falling to be determined in the Arbitration are settled in favour of Claimant. The First Respondent should however be granted a reasonable time to comply with the order.
The Arbitral Tribunal is also concerned that an order for the return of the Hotel under Claimant’s custody and possession could possibly induce liabilities toward the parties and appropriate provisions should be made in this respect.
Furthermore, Claimant has shown sufficient evidence that there may exist or arise a risk of diversion of assets justifying that the First Respondent accounts for all payments made by it since 31 December 2012 (the date of the first alleged breach of its rental payment obligations under the Management Agreement) and refrain from making any payments to any third party (including under the Operating Agreement) pending the Arbitral Tribunal’s award on liability, save with the consent of the Arbitral Tribunal.
FOR THESE REASONS, having examined the Parties’ submissions and heard Counsel for Claimant in the presence of Counsel for the Second Respondent, the First Respondent having been duly called as indicated in paragraph 6,

UPON considering the undertakings of the Claimant set out in Schedule A, given to the Arbitral Tribunal and for the benefit of the First Respondent and upon reading the Affidavit referred to in paragraph 8,

WHEREAS, unless otherwise defined, capitalized terms in this Order shall have the meanings set out in the Management Agreement,


(a) Within 31 days of the date of this Order, the First Respondent shall hand back the possession, operation and business of the Hotel to the Claimant together with all furniture, fixtures and equipment including kitchen equipment, carpets, curtains, wall covering and other similar movable assets; Loose Equipment and Stocks (other than stationery and similar printed materials bearing the First Respondent’s name or any other names or trade marks then used by the First Respondent in its business) as may then be in existence in relation to the Hotel’s business (the "Handover Date").

(b) Within 14 days of the Handover Date, the First Respondent shall (a) provide to the Claimant a full financial statement, including the closing balance sheet and profit and loss account of the business as at the Handover Date, and (β) account to the Claimant for all payments of whatsoever nature made by the First Respondent since 31 December 2012.

(c) Within 30 days of the Handover Date, the Claimant and the First Respondent shall (a) agree on and provide to the Arbitral Tribunal (or in the absence of agreement the Claimant shall provide to the Arbitral Tribunal) an inventory of Stocks as contemplated by Article 16.1 of the Management Agreement as well as any receivables or cash pertaining to the First Respondents’ management period, and (P) provide to the Arbitral Tribunal a joint Statement of Condition, provided that if the Claimant and the First Respondent cannot agree such a statement, each of them shall provide its own Statement of Condition.

(d) Subject to the provisions of sub-paragraph (e) below, the First Respondent shall take all necessary steps to terminate or assign as at the Handover Date to the Claimant (subject to the Claimant's consent to any assignment) all contracts entered into by the First Respondent with third parties relating to the Hotel, save that all contracts with any member of the Starwood Group shall be terminated and shall not be assigned. Any obligation of the First Respondent that has accrued prior to the Handover Date or that has not been assigned to the Claimant as at the Handover Date shall remain the responsibility and liability of the First Respondent.

(e) The Claimant and the First Respondent shall take all necessary steps to assign by law all existing contracts of employment with the First Respondent relating to the Hotel to the Claimant or to any duly appointed assignee taking over the management of the Hotel (as notified by the Claimant). For the avoidance of doubt, this provision shall not apply to any employees employed or contracted by the Starwood Group or any other third party involved in the operation and management.

(f) The Claimant and the First Respondent shall take all practical measures needed to effect an orderly handover of the Hotel’s business, including with respect to the transition of hotel guest and reservation data.

(g) Subject to and until further determination by the Arbitral Tribunal, the Management Agreement shall be deemed to have been terminated no later than the Handover Date.

(h) Other than as provided therein, this Order shall not affect any rights, remedies, obligations or liabilities of the Parties, including the right to claim damages for any beach of the Management Agreement.

(i) The First Respondent shall desist from making any payments to any party (including under the Operating Agreement between Woodman Maroc Sarl and Starwood (M) Hotels Inc) until the Arbitral Tribunal has issued its final award on liability, save that payments may be made: (α) with the express consent of the Arbitral Tribunal pursuant to an express request for permission to pay notified to the Arbitral Tribunal and the Claimant; or (β) to discharge the First Respondent’s liability to pay reasonable sums for legal advice received or to discharge its liability to pay employees’ wages or utilities’ charges accrued prior to the Handover Date.

(j) The costs of the Application shall be determined by the Arbitral Tribunal in the Final Award

This Order does not to in any way predetermine any of the issues to be decided in the Final Award after the Parties will have had a full opportunity to present their cases and it is without prejudice to any other order the Arbitral Tribunal may issue subsequently, as well as to any rights and obligations of the Parties which may be ascertained during the proceedings.
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