"Any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be finally resolved by arbitration in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) in force as at the date of this Agreement, as modified by the rest of this Section. The place of arbitration shall be Hong Kong. The appointing authority shall be the Hong Kong International Arbitration Centre ("HKIAC"). The language of the arbitration shall be English and the tribunal shall consist of one arbitrator to be appointed by HKIAC. The sole arbitrator shall preferably have experience in handling China cross border financing disputes and the HKIAC shall take this preference into account when making the appointment"
[i] The Statements of Case were developed by the Claimants’ R&DCCL (2 August 2013; I/11), the Respondents’ Particulars of their Counterclaim for Loss and Damage (2 August 2013; I/13), followed on 30 August by the Respondents’ RJ (I/12). The Claimants also issued a Response to the Particulars of Loss and Damage in relation to the Counterclaim on 30 August 2013 (I/14).
[ii] As directed by Procedural Order No. 2, the parties endeavoured to agree a List of Issues. They were partially successful and a provisional list was agreed on 19 September 2013 together with a list of "Facts and Matters Not in Issue". At the same time they agreed that expert evidence should be confined to "accounting evidence" but were unable to agree the issues to be addressed by the experts - (I/13/78-82). On 25 September 2013 both parties put forward individual lists of non-agreed issues (I/13/89-95). After further correspondence on the issues a modified list was put forward by the Claimants cross referred to the Statements of Case. Apart from a direction about the scope of expert evidence expressed in the Tribunal’s email of 27 February 2014 (I/13/171-172), matters were not further advanced by the time that Mr Yuen ceased to act for the Respondents.
[iii] In October 2013 the Claimants and the Respondents each made applications by Redfern Schedule for the discovery of further documentation by the other side. Those applications, in so far as they were contested, were the subject of rulings on 22 November 2013 and the documents ordered to be served were served by each side on 16 December 2013.
[iv] Witness statements of fact for the Claimants from Mr Hsu (F/l) and Mr Lam (F/7) of Intel and Dr Larsen (F/4) formerly of DT dated 29 January 2014, and for the Respondents from Mr Huang (F/9) and R5 (Mr Edwin Ming-Chen Chiu) dated 30 January were served by the parties. A round of supplemental statements for the Claimants from Mr Hsu (F/3) dated 28 February 2014 and Dr Larsen (F/5 and F/6) dated 21 and 26 February 2014, and for the Respondents from Mr Huang (F/10) dated 28 February 2014 was also served.
[v] Meanwhile, in October 2013, the Claimants purported to exercise a different Put Option, provided for in the 2nd IRA at s. 8.3(b), and when the Founders and the Company did not pay for the Preferred Shares purportedly put to them, made consequential calls on the Guarantors. On 31 January 2014 the Claimants made an application to amend their SC to add a claim based on these events. The Respondents by Mr Yuen did not consent to the application but made adverse representations about it on 10 February 2014. On 15 February 2014 the Tribunal ruled on the application and permitted the amendment (I/9). The Tribunal amended the timetable with provisional directions to accommodate the need for further documentary or witness evidence arising out of the amendment. The Amended SC was formally served on 21 February 2014 (A/9) with supporting documents (B2A/1-10). The Respondents served an Amended D&CCL on 7 March 2014 (Al/10). The uncontested facts and the legal nature of the defence to the second Put Notice Claim rendered it unnecessary to serve amended witness statements or for the parties to seek to amend the R&DCCL or the RJ. Nor was further discovery of documents required by any party.
[vi] The Claimants served an expert report from Mr Zirlen dated 11 April 2014 with extensive exhibits.
[i] That the hearing should proceed in the absence of the Respondents pursuant to the 1976 UNCITRAL RULES Article 28.2 on the basis that the Tribunal was satisfied that the Respondents had been duly notified of the hearing. The inference the Tribunal draws from the events subsequent to 14 April 2014 is that the Respondents deliberately withdrew from their participation in the proceedings. That conclusion does not, however, give rise to any adverse inference against the Respondents in relation to resolving the issues in dispute in the arbitration - (Tr 1/6/19 -1/7/15).
[ii] That in light of the fact that the Respondents’ witnesses of fact had not been expressly required by the Claimants to attend the hearing for cross examination on their statements, and having regard to Article 4.7 and 4.8 of the 2010 IBA Rules, the Tribunal would proceed on the basis that the Respondents’ witness statements and the documents they produced through those statements were admitted as evidence in the arbitration- (Tr 1/7/16- 1/8/15).
"The most valuable asset is their ability to aggregate spectrum. "(G/2/4)
"The Company and each Founder covenants and agrees that it shall in itself, and shall procure that each Group Company shall, commencing on the date of this Agreement, and for so long as any Investor holds any Series A Preferred Shares, Series B Preferred Shares or Conversion Shares deliver the following to such Investor with respect to the Group Companies".
s.3.1(a)(i): Annually, and not later than 90 days after the end of each fiscal year (in fact the year end was 31 December),
annual audited consolidated financial statements for the Group Companies, in English, audited by a "Big 4" accounting firm in accordance with accounting standards approved by the Board of AI;
annual unaudited financial statements for each Group Company individually.
s.3.1(a)(ii): Quarterly, and not later than 25 days after the end of each fiscal quarter,
unaudited consolidated quarterly financial statements of the Group Companies
unaudited quarterly financial statements for each Group Company individually
in both cases with a comparison to the operating plan and budget, in English or translated into English, and in accordance with the approved accounting standard.
s.3.1(a)(iii): Monthly, and not later than 15 days after the end of each month,
unaudited consolidated monthly financial statements and management accounts of the Group Companies
unaudited monthly financial statements and management accounts for each Group Company individually
in both cases in English (or translated into English) and in accordance with the approved accounting standard.
s.3.1(a)(iv): Monthly, not later than 15 days after the end of each month
an itemized statement of all transactions regardless of monetary value within the category of transactions subject to the approval of the board of any Group Company, including lending, borrowing, purchases, capital expenditure, release or waiver of contractual rights, or related party transactions referred to in Article 72(b) of the Memorandum and Articles.
s.3.1(a)(v): Not later than 90 days prior to the end of each fiscal year
an annual budget and strategic plan for the following year for each Group Company and/or the Group Companies as a whole, in English.
[i] at Article 72(b)(2): any purchase or sale by any Group Company of any assets cither not in the ordinary course of business or not in the most recent business plan or whose value exceeds US$ lm in a single transaction or US$ 5m in the aggregate in any fiscal quarter,
[ii] at Article 72(b)(6): any transaction or series involving any Group Company and any "Connected Individual" (a defined term which included Mr Huang as a director of Group Companies and Tonghe as an entity controlled by him) either not in the ordinary course of business or in the most recent business plan or in which value given or received exceeded US$10,000 in a single transaction or US$ 50,000 in aggregate during any fiscal quarter;
[in] at Article 72(b)(10): establishing any new subsidiary or branch of any Group Company; and
[iv] at Article 72(b)(l5): any changes in the registered capital or total investment amount of a PRC Subsidiary or Group Company or the transfer of any equity interests in such a company.
"8.3 Conditions for Exercise of Put Option. The Put Option may be exercised:
(a) starting on the date one (1) year after 13 February 2008 for a period of one (1) year, if a Group Company is in material breach (as determined by the Investors holding more than sixty-six and two-third percent (66 2/3%) of all Preferred Share Votes) of any provision under any of the Structure Documents or Transaction Documents"; or
(b) otherwise, starting on the date five (5) years after 13 February 2008 for a period of one (1) year."
A material breach of the 2nd IRA is capable of giving rise to a Put under s.8.3(a) because the 2nd IRA is a "Transaction Document".
1. Were there breaches of Sections 3.1 (a)(i), (ii), (iii), (iv), and/or (v) of the 2nd IRA?
2. Was the Claimants’ exercise on 8 August 2011 of the Put Option effective. Specifically,
[a] Was the amendment to the 2nd IRA extending the expiry date of the original exercise period valid?
[b] If there were breaches of Sections 3.1 (a)(i), (ii), (iii), (iv) and/or (v), whether such breaches were "material" for the purposes of Section 8.3(a) of the 2nd IRA?
3. What is the proper interpretation of "material" breach?
4. Did the Respondents provide the Claimants with sufficient information and documents so that there were no "material breaches" of Sections 3.1 (a)(i), (ii), (iii), (iv) and/or (v) of the 2nd IRA?
5. Was the exercise of the Put Option (or the determination that there was a material breach) unreasonable and mala fide or made for an improper or collateral purpose?
6. Whether the Claimants have acquiesced to the form of provision of financial information provided by the Group Companies so as to bar their exercise of the Put Option on 8 August 2011?
7. Did the Respondents make any clear or unequivocal representation regarding the validity and/or their acceptance of the Notice?
8. If so, did the Claimants suffer any detriment and/or prejudice by acting in reliance on the representations after the exercise of the Put Option?
9. If so, are the Respondents estopped from claiming that the Put Option Notice was invalid?
10. Whether the Claimants can rely on estoppel to create a new right to exercise the Put Option?
11. Are the Respondents liable jointly and severally as follows:-
[a] As to AI to pay the Original Subscription Price under the Put Option;
[b] As to (the Founders), to pay the Put Option Price under the Put Option; and
[c] as to the (Guarantors), to pay the Original Subscription Price under the Guarantee?
12. Did the Claimants commit a repudiatory breach of the 2nd IRA by reason of a mala fide determination of "material breach" of the 2nd IRA and an exercise of the Put Option for an improper purpose?
13. Have the Respondents suffered loss in relation to the value and benefit of the network equipment listed in the Particulars of Counterclaim for Loss and Damage, as a result of the Samsung Arbitral Award and/or loss of profits generated from the 2nd IRA and, if so, was such loss as is established caused by the matters complained of?
14. Is such loss recoverable as a matter of law?
ISSUES IN THE ARBITRATION
1. Whether the Claimants’ investment into the Company is a strategic investment (as opposed to financial investment which is exclusively for earning return on investment and the operational profits generated by the Company) with the goal of seeding the WiMAX technology in China in the long run in order to generate long term and steady return?
2. Whether the primary objectives of the Claimants are to acquire basic telecommunication service licences in China and to set up a network platform so as to pave the way for the deployment of WiMAX across different provinces in China?
As explained in paragraphs 101-106 above no issues arise about the nature, timing, form, and service of the Put Option Notice, the Founders and Al’s non-payment, the service of the demand on the Guarantors and their non-payment of the sums demanded. The shareholdings of the Claimants, the Original Subscription Price and the formula for calculation the Put Option Price are all admitted facts - (I/13/81 items 9-11) - and apply equally to an exercise of the option under s.8.3(b) as to one under (a). Subject to the issues described in paragraph 114 below the Claimants are therefore entitled to recover the Put Option Price and the Original Subscription Price from the Respondents under s.8.3(b) of the 2nd IRA.
If the Claimants did commit a repudiatory breach of the 2nd IRA by reason of a mala fide determination of "material breach" of the 2nd IRA and or an exercise of the Put Option for an improper purpose (paragraph 108 above at issue 12):
1. Did the Respondents accept that repudiatory breach such that the 2nd IRA was brought to an end on 2 July 2013? (Amended D&CCL 75C, 85 & R&DCCL 66);
2. If the answer to 1. is YES, does that fact render the October 2013 exercise of the Put Option ineffective or invalid? (Amended D&CCL 75 A, 75 D, 87A & R&DCCL 66).
(i) They rely on a series of cases culminating in the decision of the Court of Appeal in England in Socimer International Bank Limited v Standard Bank London Ltd  EWCA Civ 116 per Rix LJ at paragraph 66, for the proposition that the determination of a material breach must be made reasonably and in good faith - (D&CCL 33). It is not clear whether the Respondents accept that "reasonably" in that context means something other than objectively reasonable. The way the matter is expressed at the conclusion in D&CCL 62 is ambiguous.
(ii) They rely on the case of Equitable Life Assurance Society v Hyman  1 AC 408 at 460 for the proposition, in the speech of Lord Cooke, that "no legal discretion however widely worded...can be exercised for purposes contrary to those of the instrument by which it is conferred".
2. Was the Claimants* exercise on 8 August 2011 of the Put Option effective. Specifically, [b] If there were breaches of Sections 3.1(a)(i), (ii), (iii), (iv) and/or (v), whether such breaches were "material" for the purposes of Section 8.3(a) of the 2nd IRA?
3. What is the proper interpretation of "material" breach?
4. Did the Respondents provide the Claimants with sufficient information and documents so that there were no "material breaches" of Sections 3.1 (a)(i), (ii), (iii), (iv) and/or (v) of the 2nd IRA?
(i) They point out that, over the whole period of the 2nd IRA, financial statements were never provided in fully consolidated form but were always presented in a way which reflected the fact that there were two separate groups in Airway; AI and AS on one hand and AC and its subsidiaries on the other. There was no common accounting standard adopted across the whole group and they explain the lack of consolidated accounting by the fact that AI and AS had no direct control over the VIE.
(ii) They rely upon the investors’ delay in exercising the Put and argue that, had the lack of information led to real prejudice to the investors, they would have exercised the Put Option earlier.
(iii) They point out that in May 2009 the investors agreed to forego any audited consolidated financial statements for the Group for the 2008 year, whether prepared by a "Big Four" accounting firm or not.
(iv) They refer to the 19/20 January meeting with DT and the discussion at that meeting about the separate accounting systems. They refer to DT templates "tailored for the Group" which they used from October 2010.
(v) Mr Huang’s evidence at Huang/1/39 deals with this topic.
[a] He says that financial statements were always provided in unconsolidated form and, in light of the fact that the group had grown significantly and was expending most of its funds on equipment and securing licences it was unrealistic for it to engage a Big Four accounting firm to prepare another set of financial statements for the group as a whole. The investors, he said, accepted that between May 2008 and at least October 2010 as pointed out in the D&CCL.
[b] He refers to a Board meeting in September 2007 - i.e. prior to the Series B investment and the 2nd IRA - at which the separate auditing, by PRC based firms, of AC and AS was approved.
[c] He refers to the use, with the approval of investors, of the DT templates.
(vi) At section IV of Mr Huang’s second statement he says that the change to a PRC auditor for AI and AS for the 2011 year was explained to investors on many occasions and was justified by the PRC firm’s lower audit fee and their relatively speedy delivery of audited accounts. He says that in March 2009 enquiries of Big Four accounting firms by the chairman of Airway’s audit committee resulted in advice that it was impractical to consolidated financial statements of the whole Group because of the lack of shareholding control over AC on the part of Al and AS. And Mr Huang says that before the departure of Cadol Cheung - i.e. before the summer of 2009 -the latter told Mr Huang that Intel had many companies in their portfolio which did not perform their information obligations and that Intel’s response to them would be to try to compromise.
(i) They contend that the financial information they supplied (which is listed at D&CCL 48 and is agreed (I/13/81 item 13)) was sufficient to give to the investors "a fair and informed view of the financial performance and position of the Group Companies" (D&CCL 47).
(ii) They rely upon the fact that the information they supplied in the form of the DT templates was information tailored by the investors (D&CCL 48 (d) and (g)).
(iii) As to the problem that the lack of consolidated financial statements for the Group obscured the performance of the Group by making it impossible to identify true third party transactions from inter-group company transactions, they say that the audited financial statements that were provided identified such transactions as "Related Party" transactions and enabled the true position to be ascertained in a simple way by deduction of the related party transactions from the total (D&CCL 49 &50).
(iv) The Respondents say that it is misleading and inaccurate for the Claimants to say that they were unclear which operating entities were included in the financial statements of AC and to complain that its various subsidiaries results were aggregated together because it was known that most of the operating entities were set up to hold licences "with only limited business activities, if any". Only the major six entities in Beijing, Shanghai, Wuhan, Shandong, Guangdong, and Hainan were engaged in more business activities. The remainder hardly operated any businesses" and the cash in their accounts "were often, if not always, of a limited amount". (D&CCL 52 & 53).
(i) As to acquiescence: They denied that they acquiesced in the provision of financial information in a form different to that required by the 2nd IRA. They contend that neither the lack of an approved accounting standard nor a lack of control by AI and AS over the VIE justified a failure to provide consolidated financial information. They rely upon the February 2010 exercise of the Put Option as demonstrating that no inference of acquiescence can be drawn from the Claimants reaction to the inadequate financial information. They say that even if non-consolidated audited financial statements for AI and AS on one hand and AC and its subsidiaries on the other were accepted for the 2008 year, that did not apply to subsequent years. They rely upon exchanges between the investors and AI in 2010 as showing that provision of financial information in the form of the DT templates was not accepted as sufficient for the investors purposes (R&DCCL 35-39).
[ii] As to adequate information: The Claimants say that the materiality of the financial information required was enhanced by the fact that there were a large number of intercompany transactions which were atypical for a VIE structure; that such transactions increased the potential for misallocation or misuse of funds; and that cash in the group was diminishing but could not be accurately traced -(R&DCCL 31). They say that the financial information was confusing such that the investors could not determine how much money was being spent or earned as a whole. They said they were compelled to make enquiries about matters which should have been reported to them and could not get proper answers to questions even when they asked. Unconsolidated audited reports were inadequate but none of the audited reports for AC, even taken as a separate group, was carried out by a Big Four accounting firm. Use of the "related party" in the audited reports they were supplied with did not enable the true position on consolidated accounts to be determined. As to AC and its subsidiaries, the Claimants say that they never agreed to the limited information provided by the Respondents in respect of some but not all the subsidiaries and argue that it is not appropriate for the management, who are the very people whose actions are to be monitored, to be deciding that some entities should be excluded from the financial statements. The risk of misappropriation existed wherever the investors’ funds were to be found. (R&DCCL 39-47).
(i) This is the first transaction which was not disclosed as it should have been. It came to light because, in November 2009, Daiwa "heard" that 51% of a subsidiary of AC had been sold for 32m RMB. It was thought, mistakenly, that the subsidiary concerned was Beijing Airway. The investors devised a strategy to ask questions about figures in the accounts which would discover information about the transaction but avoid compromising Daiwa’s source in the company. (B2/24/826-7; Hsu/1/119; Larsen/1/81).
(ii) In response to their enquiry they were initially told that in September 2009 51% of a subsidiary had been transferred to a third party for 32m RMB -(B2/26). Later, at the end of December after further enquiry, the subsidiary was named as BAT. Intel were prompted to ask where BAT fitted into the Group (Dl/8). This was the first occasion on which BAT’s involvement was revealed to the investors -(Hsu/1/121-122). Intel’s enquiry about the identity of the third party purchaser was not answered.
(iii) Daiwa’s investment adviser, Mr Zou of BDA, met Mr Huang to discuss this transaction on about 29 December 2009. Mr Huang gave him an explanation about that the transaction involved an asset swap but was not very forthcoming about it. Mr Zou concluded "I have to say this is monkey business" -(B2/28/842).
(iv) The BAT transaction was referred to in the investors’ letter of 13 January 2010 which threatened a determination of material breach (B2/29).
(v) At the meeting with DT on 19/20 January 2010, an explanation was given to DT about this transaction (Cl/10/184-5; Cl/17/373) which appears to be essentially the same as that contained in Mr Huang’s witness statement (Huang/2/17). It is not easy to understand. It appears to be the case, however, that BAT’s shares were transferred to a third party Wuhan Century Jincheng Company in the course of the transaction.
(i) In late February 2010 Daiwa told Intel that it had "got information" that Airway had invested the equivalent of about US$23m in two PRC companies in December 2009 (B2/32-33). Daiwa’s information was that 84m RMB had been invested into a digital television company and 76m RMB in an airport related project
(ii) On 8 March 2010, a few days after the revocation of the February 2010 Put Option Notice, Daiwa raised the matter with Peng Yang as a failure by AI to follow due process in getting approvals for important business activities. Daiwa described it as a serious matter. Peng Yang agreed (B2/36).
(iii) In March Daiwa and Intel requested information about the transactions from management-(D1/17; Hsu/1/133(a)).
(iv) At the April Board meeting of AI, management "introduced" the investments as Chutian TV and Sinosky. The Board materials described the former as an investment which "aims to control the area digital TV network resource" (Cl/8/148) and the latter as leading Airway "into the air wireless communications industry" (Cl/8/149-150). It was agreed at the meeting that the new CFO would submit materials and analysis about the investments to the board and preferred shareholders (B2/39/905).
(vi) Ms Xu was not appointed as CFO until later in the year and, in the meantime, no information about these investments was provided to investors.
(vii) DT’s senior business analyst, Bin Xi, came across information on the internet referring to Mr Huang in an article about the arrest of other officers from Chutian Digital allegedly involved in insider trading. The article named Mr Huang as Vice-President of Chutian Digital. DT was concerned, carried out research into publically available information, and produced their analysis on 4 July 2007. This showed that a subsidiary of AC, then described as Airway Wuhan but actually Airway Hubei, had bought 30m shares in Chutian Digital at a cost of 2.8RMB per share in February 2010 which it then sold in April 2010 at a price of 1.72RMB per share booking a loss equivalent to about US$ 3m. At the same time Tonghe, also under the control of Mr Huang, sold shares in Chutian Digital booking a profit of 188,767m RMB (though not by sale to Airway Hubei) (B2.40; Larsen/1/121,122, and 125).
(viii) Further questions were asked of management in July about Chutian Digital and some incomplete information was received from Peng Yang about it (Larsen/1/123-124; B2/41, B2/42, B2/43).
(ix) In July Daiwa "heard" that Mr Huang was thinking of cancelling the investment (DI/26) and DT confirmed that Mr Huang had committed to cover the loss sustained "since overall with his investments into Chutian he made a profit". This caused further concern to DT since it demonstrated Mr Huang’s "portfolio view and the limits of control all shareholders have" (B2/44). In the documents supplied by Peng Yang this portfolio approach had been confirmed (B2/42/924-925).
(x) At the 27 September 2010 Board meeting of AI the agenda referred to Chutian Digital thus: "Try our best to take back the assignment funds ASAP" (B2/46/966) and the minutes provided that the CFO would follow up with a report.
(xi) On 1 November 2011 Ms Xu said that 51.6m RMB of the investment had been returned. On 20 January 2011 she said that 84m RMB had now been recovered. This information is difficult to understand and to reconcile with the original transaction where Airway Hubei sold the shares for a total of 51.6m RMB in April 2010 (Hsu/1/140).
(x) The Respondents say that the transaction was "already disclosed" in the 2009 Audited consolidated financial statements for AC (D&CCL 55(b). However those statements are dated 16 May 2010 (Cl/14/349(iii) and so, far from providing prior disclosure to investors, came only after the whole transaction was unwound. They refer to the investment in Chutian Digital (which they say followed an agreement in December 2009) but not to the disposal of the shares at a loss because that occurred in the following accounting period (Cl/14/349(xviii).
(xi) In relation to prior notice of the Chutian Digital transaction, the Respondents rely upon a reference to Chutian Digital in the Board materials prepared for the 27 October 2009 AI Board Meeting - (Cl/7/82). That information does not refer to the actual investment proposal. The draft minutes of that meeting put in evidence by the Respondents do not record any discussion about the proposal let alone a Board resolution about it (Cl/18/380-382).
(xii) Mr Huang’s evidence about Chutian Digital does not suggest that the investors were given any prior notice, let alone that they approved this transaction. He does, however, focus on rebutting the suggestion that he made a secret profit in the transaction (Huang/l/39(viii); Huang/2/21-22). He refers to an agreement between Tonghe and Airway Hubei which was produced, for the first time so far as the investors are concerned, with the D&CCL. It is dated 30 April 2010 and makes Tonghe responsible to reimburse Airway Hubei’s loss on the transaction within 30 days of the agreement. The transaction is described as if the investments made and losses sustained were in "dollars" such that the loss to be reimbursed is $32.4m. That appears to be a mistake for RMB (CI/15/352). With Mr Huang’s statement he also produced a bank transfer receipt evidencing Tonghe’s reimbursement of Airway Hubei’s losses. This document, apparently a bank record of payment, shows a payment by Tonghe to Airway Hubei of 32.4m RMB on 30 December 2010. The Tribunal does not base its decision on this issue on any finding about a secret profit in this or the other undisclosed transaction. The question it is concerned with relates to the gravity of the breach of the information about transactions which should have been, but were not, reported to investors. But it is to be observed that the agreement with Tonghe and this record of payment does not seem to bear much relationship to what the investors were told was happening in the September 2010 Board agenda or the subsequent reports by Ms Xu.
(xiii) This investment was also followed up by investors with questions after the April 2010 Board meeting. They had no information about the investment at all. It now appears that it occurred in December 2009 and involved a purchase by an AC company of 19m shares from Tonghe (Cl/14/349(xviii). As soon as the investors probed the transaction, Daiwa heard that Mr Huang was intending to cancel this investment. At the September Board meeting the agenda item for Sinosky also referred to exiting the investment. It said "Drop out and reallocate the main investment resources on the Yangzi River" (B2/ 46/966).
(xiv) Ms Xu was not able to give any helpful information thereafter. In September she said she could not, herself, answer the questions asked but would refer to Mr Huang (B2/49/1022); in October she said that Mr Huang had promised that it would be "settled down " by the end of the year (DI/30/157; in late December she promised to follow up and report (B2/51/1028); and in January 2011 she repeated that offer (B2/52). No further information was forthcoming.
(xv) The D&CCL refers only to the 13 April 2010 Board meeting. Mr Huang does not offer any evidence about it.
(i) From at least March 2009 there was discussion in the Board of AI about management’s proposal to establish the company that became AHS when ultimately incorporated in January 2010 (G/43/1347; Huang/l/39(vi)).
(ii) In the Board Meeting of 27 October 2009 the Board discussed the agenda item "The necessity for establishing China Airway" (Cl/7/107). This meeting is relied upon by the Respondents as evidencing the Claimants prior knowledge of the intention to set up AHS (D&CCL 56 (a) and (b); Huang/l/39(vi)).
(iii) The draft minutes produced by the Respondents record the following discussion: "The management team introduced the planning of establish China Airway and analyzed the significant and necessity for China Airway establishment. Directors have great difference on whether to establish China Airway and how to establish it, they suggested employing professional organisation to give law opinion on this issue and discuss it later" (CI/18/382).
(iv) On 13 December 2009 Dr Larsen wrote to Mr Huang in relation to this item in the minutes of the company: "re Establishment of Airway China: Airway management got the task to present a concept paper to the shareholders for their assessment since the structure and proposed set-up may impact both the shareholdings and rights of all shareholders. The board cannot decide on this important matter without a prior assessment by the shareholder companies' lawyers " (original emphasis) (Dl/6).
(v) It was as a result of enquiries in May (DI/22, Dl/14/114, DI/24/121) and July 2010 (DI/26) that investors discovered that AHS had been set up and that AC had transferred about 160m RMB to it. Daiwa’s email of 14 July 2010 (DI/26) continued "I think (AHS) is a vehicle to restructure Airway group.. I asked Ethabell (of Airway) what this is for, but she does not know anything about it. I have no idea what Mr Huang is planning to do
(vi) In the Board materials for the 27 September 2010 AI Board meeting given to the investors AHS was shown in the structure and alongside it was a reference to "Prime Asset injection "(B2/46/967). This appears to be a reference to the designated "Core Companies" identified in the agenda as part of the "Development Strategy Introduction "(B2/46/959).
(vii) There is no reference to the matter being discussed in the draft minutes of the meeting (B2/45). After the meeting, on 30 September, Ethabell Zhang sent the directors an attachment to the Board meeting power point. The corporate structure attached showed AHS as the 100% owner of the "Core Companies" and that Tonghe had acquired a 49% interest in AHS (B2/48/997). This was not previously known to the investors. Daiwa commented that Mr Huang had been restructuring without a board resolution or shareholders approval "to make the shareholder’s share limited up to 51% of only Beijing, Shanghai, and Hubei businesses ". Mr Hsu said "this just shows that Mr Huang does not differentiate between Airway and Tonghe which is very troubling" (B2/47).
(ix) In the D&CCL it is suggested that Tonghe held part of AHS "to fulfil a statutory requirement in China... to have two directors" (D&CCL 56(c)). That is not an explanation that is supported by any evidence. It is not admitted by the Claimants (R&DCCL 50(e)(ii)) but it is not obvious, in any event, how it justifies a 49% holding in Airways key businesses by Tonghe.
11. Are the Respondents liable jointly and severally as follows:-
[a] As to AI to pay the Original Subscription Price under the Put Option:
[b] As to (the Founders), to pay the Put Option Price under the Put Option: and
[c] As to the (Guarantors), to pay the Original Subscription Price under the Guarantee?
(i) AI and R7 and R8 a joint and several liability to pay the Original Subscription Price to the Claimants as follows: US$ 5,400,000 to IC; US$ 20,000,000 to ID; and US$ 30,000,000 to DT (Issue 11 (a) and (c)); and
(b) The Founders (Mr Huang and R3, R4, R5, and R6) a joint and several liability to pay the Put Option Price to the Claimants (Issue 11(b)).
(i) for IC, US$ 17,963,674.90 (US$5,400,000 + 15% annually compounded from 4 November 2005);
(ii) for ID, US$ 48,399,391.47 (US$ 20,000,000 +15% annually compounded from 13 February 2008)
(iii) for DT, US$ 72,599,087.20 (US$ 30,000,000 +15% annually compounded from 13 February 2008).
"Interest is payable on money awarded by an arbitral tribunal from the date of the award at the judgment rate, except when the award otherwise provides."
(i) IC: Principal - US$ 5,400,000: daily rate of interest - US$ 1,183.56
(ii) ID: Principal - US$ 20,000,000: daily rate of interest - US$ 4,383.56
(iii) DT: Principal - US$ 30,000,000: daily rate of interest - US$ 6,575.34.
"Unless otherwise agreed by the parties, an arbitral tribunal may, in the arbitral proceedings before it, award simple or compound interest from the dates, at the rates, and with the rests that the tribunal considers appropriate, subject to section 80, for any period ending not later than the date of payment -
(a) On money awarded by the tribunal in the arbitral proceedings..".
[i] R2 (Mr Huang) - Place of Business: 6/F, 981 Pudong Avenue, Pudong, Shanghai, PRC;
[ii] R3 - Residence: 3420 Fay Ave, Culver City, CA 90232, USA;
[iii] R5 - Residence: 2654 Gayley Place, San Jose, CA 95135, USA;
[iv] R6 - no current information but last known Business address: 5/F, Hubei Provincial Communications Authority Complex, No 789 Luoyu Road, Donghu Development Zone, Wuhan, Hubei Province, PRC;
[v] R7 (AC) - now dissolved but last known Business address: 5/F, Hubei Provincial Communications Authority Complex, No 789 Luoyu Road, Donghu Development Zone, Wuhan, Hubei Province, PRC;
[vi] R8 (AS) - Business address: Room 17,16/F Block A, Guanggu International Building, No 456 Luoyu Road, Donghu Development Zone, Wuhan, Hubei Province, PRC.
(i) That the First Respondent (AI) and the Seventh and Eighth Respondents are jointly and severally liable to and do pay
(a) to the First Claimant (IC) the sum of US$ 5,400,000 together with simple interest from the date of this Award until payment at the Judgment Rate from time to time: currently 8% and accruing at a daily rate of US$ 1,183.56;
(b) to the Second Claimant (ID) the sum of US$ 20,000,000 together with simple interest from the date of this Award until payment at the Judgment Rate from time to time: currently 8% and accruing at a daily rate of US$ 4,383.56;
(c) to the Third Claimant (DT) the sum of US$ 30,000,000 together with simple interest from the date of this Award until payment at the Judgment Rate from time to time: currently 8% and accruing at a daily rate of US$ 6,575.34:
(ii) That the Second (Mr Huang), the Third, Fourth, Fifth, and Sixth Respondents are jointly and severally liable to and do pay
(a) to the First Claimant (IC) the sum of US$ 17, 963,674.90 together with compound interest at the rate of 15% per annum with annual rests first compounded at 4 November 2014 and annually thereafter until the date of payment;
(b) to the Second Claimant (ID) the sum of US$ 48,399,391.47 together with compound interest at the rate of 15% per annum with annual rests first compounded at 13 February 2015 and annually thereafter until the date of payment;
(c) to the Third Claimant (DT) the sum of US$ 72,599,087.20 together with compound interest at the rate of 15% per annum with annual rests first compounded at 13 February 2015 and annually thereafter until the date of payment:
(iii) Provided always that the Claimants do not receive in total more than the sums respectively due to each of them in paragraph 297 (ii) (a), (b), and (c) above.
(iv) That the Respondents’ Counterclaims are dismissed.
(v) That the Respondents are jointly and severally liable to pay within 28 days from the date of this Award the legal costs and expenses of the Claimants in the sum of HK$ 16,750,000.
[vi] That the Respondents are jointly and severally liable to reimburse to the Claimants, within 28 days from the date of final payment of the costs of the delivery of the award to the Respondents, the whole costs of the arbitration after taking credit for their contribution to the deposit of HKD 154,000 referred to in paragraph 276 above.