9The Arbitral Tribunal has considered the following:
The names and further details of the Parties and their representatives in these proceedings are as named on the first two pages of this Award-
Likewise, the Arbitrators, their nomination and their addresses are as shown on the first page of this Award.
Claimant Dr Carl A Sax, a US citizen, lawyer and entrepreneur, described himself as a developer who had created and led partnerships corporations engaged in the development, construction, ownership, syndication and management of income-producing properties for more than 20 years and who was, in the 1990s, the Senior Vice President and General Counsel of Atlantic Coast Airlines.
In his written witness statement of 15 October 2010 (CWS-1), Mr Sax referred to 14 airport projects around the globe in which Strategic Partners (Holdings) Limited (CI) ("SPH") and Mr Sax personally (as the Vice Chairman) were involved in proposed developments; these included projects in Russia, Vietnam, Gibraltar, the Philippines, Guatemala, Congo, Ecuador, Indonesia, Honduras, Armenia, Jamaica and Uruguay.
In the EBRD Memorandum, CX-23, Mr Sax was described, as "the principal legal advisor and negotiator for the American sponsors; he is the leading force behind the Project; he was formerly an associate at Dewey Ballantine LLP, and subsequently worked in the in-house legal departments of United Express and Continental Airlines, giving him a wide range of contacts in the international airline business."
10Mr Sax bases the claims submitted in this arbitration on a purchase agreement between Strategic Partners (Holdings) Limited (Cayman Islands) (SPH) and its 100% subsidiary Pulkovo (Strategic Partners) Limited (Cyprus) (PSP), as sellers/transferors/assignors, and Mr Carl A. Sax as purchaser/transferree/assignee, dated 17 December 2002 (CX-66/CX-59), under which Mr Sax became the assignee of a
"US$ 20+ million pre-development expense receivable from IAT Pulkovo" and a purchaser and transferee of a 29.7% stock-interest in IAT Pulkovo.
Strategic Partners (Holdings) Limited (SPH), ad described in the EBRD Memorandum, CX-23, is a limited liability company with a capital of US$ 10'000.--, created by the STV Group as well as numerous other shareholders, including Sax (Holdings) Ltd, with a share of 28.82%, and STV International, AIG, DMG, several junior lenders, Charles Bauccio, TF Comeau & Assoc., AvPride Petroleum, Quantum Investments, and seven further shareholders. SPH was created for developing and eventually carrying out airport investments world-wide, whereby SPH would be the provider of know-how.
SPBD Investment Ltd. is a Cyprus company incorporated in 1991, acting as a consultant and liaison for investors developing projects in Russia and FSU countries, owned by CEBM, Inc. (New Jersey) whose principals were described being Russian American individuals, Mark and Lena Zilberquit, and Valentina Lifton. CX-23, EBRD Memorandum p. 51.
STV Group is a US architecture, designer and engineering company, and shareholder of SPH. Head-quartered in New York, STV was described as having a staff of about 1'000 persons. CX-23, EBRD Memorandum page 49.
Respondent 1 is the City of St. Petersburg, and Respondent 2 is the Property Management of the City of St. Petersburg, an agency of Respondent 1, established as a separate corporate body.
Respondent 3, State Enterprise "Pulkovo", "SEP", was described as being the owner of the assets at Pulkovo Airport and the entity directing the flow of air traffic; on 9 June 2006, a Decree was passed permitting the privatization of State Enterprise Pulkovo. CX-145, On 1 March 2007, it was converted into
11an open joint-stock company, thus named (OJSO) "Airport Pulkovo"; on informatlon, the Russian Federation became the owner (CX-83).
As Claimant explained, the Pulkovo-Airport was transferred to the City of St. Petersberg, by Presidential Decree signed by President Putin on 25 September 2007.
Respondent 4, OJSC Aviation Company "Rossiya" and Respondent 5 OSO Airport Pulkovo are legal succesors 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.
Respondents 3 to 5 did not file substantive submissions in these proceedings; they cooperated in so far as the nomination of Respondents' arbitrator is concerned, and Respondent 5 filed a letter dated 29 September 2009 in which it declared to be in agreement with the Statement of Defense filed by Respondents 1 and 2. However, at all times Respondents 3 to 5 have been kept abreast of the proceedings, were always served with the documents on file and the Tribunal's Orders, and were repeatedly specially invited and encouraged by the Tribunal to actively participate in the proceedings or, at least, to delegate a representative or management member to the hearings.
In addition to the regular communications to all Respondents emanating from the Tribunal and from Claimant, Claimant filed special Notice Letters to Respondents 4 and 5 (CM-83) notifying them of the Stockholm Liability Hearing taking place during the four days from 18 to 21 October 2011 at the Strandvägen 7A Conference Center.
*****
12
This Arbitration involves certain claims by Claimant Mr Sax (as assignee and successor-in-interest of PSP and SPH, according to a Purchase Agreement dated 17 December 2002, CX-66, and a Bill of Sale CX-59), against the Respondents, for breach of various agreements relating to the development of a New International Passenger Terminal ("NIPT") at the St. Petersburg's "Pulkovo" International Airport.
The following paragraphs summarize the history largely on the basis of Claimant's Submissions and from Claimant's point of view. Several elements of Claimant's chronology and characterizations - as hereinafter reflected - have been disputed by Respondents and, to the extent necessary for the Tribunal's decisions, are discussed in further parts of this Award. Moreover, the following account only references some - but by no means all - of the steps, letters, contracts, meetings, or other milestones in the history of the relationship between Parties.
As will be further noted within the chronology of the proceedings, Claimant - at the Stockholm Liability Hearing 18 to 21 October 2011 - submitted two graphic time-line charts reflecting the steps which Claimant referred to in numerous written submissions filed in this arbitration; these two charts provide a good overview of Claimant's case and, therefore, are incorporated in this Award as a part of the chronological development of the Investment Project, without such incorporation amounting to an acceptance, by the Tribunal, of the allegations made by Claimant in connection with the steps reflected in the time-line of the charts. See the following two pages.
1314
15In December 1991, Claimant Mr Carl A. Sax, as he explained, travelled to St. Petersburg in order to discuss the lease of aircraft. In the discussions with representatives of the Office of the Mayor and the St. Petersburg City Council, Claimant, as he explained, was asked to form and invite a consortium of Western companies for exploring the redevelopment of Pulkovo Airport and, in particular, for the development of a New International Passenger Terminal which later became known as Pulkovo-3.
Mr Sax states that, in January 1992, he had received a "mandate letter" from the City of St. Petersburg authorizing him to form and invite a consortium of Western Companies for the purpose of exploring the development of an international passenger terminal for the Pulkovo airport. The mandate letter was not filed; upon inquiry of the Tribunal, Claimant replied at the Stockholm Hearings that he had been unable to trace that letter.
Based on such mandate, Mr Sax, in 1992/1993, stated to have met with representatives of the City of St. Petersburg and representatives of several Western companies, including American International Group, Aéroports de Paris, STV Group, Inc., Butler Aviation, Morgan Grenfell & Co., Ltd. in several cities including St. Petersburg, Paris, London, Washington and New York, for the purpose of discussing the development of Pulkovo-3.
During those meetings (which took place with, among others, Vladimir V. Putin, who at the time was the Vice Mayor of the City of St. Petersburg, and the acting Mayor Anatoly A. Sobchak), the request earlier addressed to Mr Sax to form a consortium of Western companies was renewed on behalf of the City of St. Petersburg.
On 16 March 1994, Strategic Partners, Inc., USA, ("SP") represented by Mr Sax as its Senior Vice President, SPBD, Inc. represented by it President Mark A. Zilberquit, the Office of the Mayor of St. Petersburg (represented by Vice
16Mayor and Chairman of the External Affairs Committee, Vladimir V. Putin), the Department of Aviation of the Ministry of Transportation of the Russian Federation, jointly represented by Yuri I. Baranov (Chief of Infrastructure Development Division of the Department of Aviation, Moscow) and by Yuri A. Balakin (General Director of Northwestern Directorate of Civil Aviation, St. Petersburg), and the Air Enterprise Pulkovo (represented by Boris G. Demchenko, General Director), entered into an Agreement (the
"Protocol of Agreement", CX-2) under which the Parties agreed to jointly redevelop the St. Petersburg's Pulkovo International Airport, by developing Pulkovo-3. - To the extent necessary, further details regarding this Protocol of Agreement shall be referred to in a further Chapter of this Award.
On 19 March 1995, (i) the City of St. Petersburg (represented by the Property Management Committee, the latter represented by M.B. Manevitch, Committee Chairman and A.V. Vorontsov, Chief of Agency), (ii) the State Enterprise Pulkovo (represented by B.G. Demchenko, Director General, and G.S. Naprienko Deputy Director General) and (iii) PSP (represented by Mr Sax, Executive Vice President), entered into a Founders' Agreement (CX-6) for the purpose creating a special purpose company - IAT Pulkovo - for jointly developing the New International Passenger Terminal ("NIPT"), and by signing the Charter of IAT Pulkovo (CX-5).
On 1 May 1996, IAT Pulkovo (represented by Boris G. Demchenko, Mr Sax (of PSP) and the City of St. Petersburg (represented by the Property Management Committee, the latter represented by V.M. Urkovits, the head of the Real Estate Transaction Execution Department) entered into the Ground Lease, thereby leasing the land plot on which the New International Passenger Terminal was to be developed (CX-17). The Ground lease provided, in part, for a term of 45 years and an option to renew the Lease for an additional 45 years.
From 1995 through 1997, Claimant, through the offices of STV Group, Inc., in conjunction with other providers, prepared studies for the conceptual design drawings for New International Passenger Terminal.
17Moreover, during that period, Claimant retained various consultants including The MDA Group (U.K), Alan Stratford & Associates Air Transport Planning Consultants Ltd., Techecon Ltd. and Sir William Hacrow & Partners Ltd., for providing consulting services to review the design of the project structure, the project costs and the financing for the New International Passenger Terminal. These consultants were retained in order to obtain funding for the project which, initially, was sought from Overseas Private Investment Corporation (OPIC) and Deutsche Morgan Grenfell & Co. (DMG), and thereafter from the European Bank of Reconstruction and Development (EBRD).
It is Claimant's case in these proceedings that all of these steps, including the mandating of numerous third party providers, were undertaken for and on behalf of IAT Pulkovo.
Moreover, according to Claimant, the working on the Pulkovo project included the approval, in May 1995, of the design and the financing structure for the New International Passenger Terminal by Alan Stratford & Associates Air Transport Planning Consultants Ltd., followed, in August 1995, by letters of the Lenaeroprojekt Institute regarding required governmental consents (CX-10), and a letter by Oleg Kharchenko (Chief Architect of the City of St. Petersburg) consenting to the location and design of the New International Passenger Terminal (CX-9).
Furthermore, Claimant explains that 25 agencies of the City of St. Petersburg also approved the location and design of the New International Passenger Terminal (CX-20, 21 and 22).
On 13 December 1995, Avia Invest, on behalf of the Department of Aviation of the Ministry of Transportation of the Russian Federation, also delivered a letter to IAT Pulkovo, preliminarily approving the design of the New International Passenger Terminal (CX-8).
On 13 February 1996, Aéroports de Paris, at the request of the EBRD, approved the design (CX-11).
18On 1 March 1996, IAT Pulkovo requested that the International Air Transport Association (IATA) approve the design, rates and charges of the New International Passenger Terminal. The 1996 IAT Pulkovo presentation to IATA included a reference to the development fee as an expense factor of the project costs (CX-18).
On 10 April 1996, Coopers & Lybrand prepared a Valuation Analysis for the EBRD and DMG (CX-12).
On 2 May 1996, according to Claimant, EBRD delivered its financing letter to IAT Pulkovo regarding the provision of senior debt financing required for the development of the New International Passenger Terminal.
On 8 May 1996, DMG delivered its financing letter to IAT Pulkovo, agreeing to underwrite that portion of the senior debt financing which was not provided by EBRD (CX-19).
On 11 June 1996, DMG delivered its financing letter to IAT Pulkovo, agreeing to underwrite the subordinated financing.
On 26 June 1996, Strategic Partners advised the State Enterprise Pulkovo that IATA had agreed to the Rates and Charges for the New International Passenger Terminal (CX-13).
On 3 July and 26 August 1996, OPIC delivered its financing letters to IAT Pulkovo regarding its participation with the EBRD for the purpose of providing a senior debt financing for the development of the New International Passenger Terminal.
In September 1996, IAT Pulkovo delivered to its participants and lenders the final revised conceptual plans for the New International Passenger Terminal (CX-16).
19On 27 September 1996, the Federal Aviation Service of the Russian Federation advised the EBRD that State Enterprise Pulkovo would be able to comply with certain of its obligations to permit the development of the New International Passenger Terminal. A similar letter was addressed on 4 October 1996 by JSC "Pulkovo Aerodromstro".
On 10 October 1996, the State Enterprise Pulkovo advised EBRD that it would be able to comply with certain of its obligations to permit the development of the New International Passenger Terminal.
On 15 October 1996, according to Claimant, the Board of Directors of IAT Pulkovo approved, in principle, the EBRD, OPIC and DMG financing offers, and - in Claimant's words - authorized and empowered Claimant Mr Carl Sax to negotiate, in the name of IAT Pulkovo, definitive documents with the EBRD, OPIC, DMG and other parties, and to execute and deliver these documents together with Boris G. Demchenko (Chairman of IAT Pulkovo), (CX-14).
In 1997, EBRD delivered its International Airport Terminal Pulkovo Operations Committee Final Review. CX-23. As stated by Claimant, this Review inter alia referenced a development fee as well pre-closing services as a shareholder contribution to capital. Furthermore, it referenced the Pre-Development Advance, a portion of which was to be rolled-over into a US$ 5 million PSP Standby Loan. The 1997 EBRD Review also referenced the
20agreements of the City of St. Petersburg to complete the access road and utilities (CX-23).
On 14 January 1997, Claimant advised Respondents that the EBRD will submit the financing proposal to its Credit Committee. Furthermore, Claimant advised Respondents that he had fulfilled the financing requirement under the Charter and the Founders' Agreement, that all outstanding issues would be resolved by Claimant and Respondents as to expedite the financial closing (CX-31).
On 14 March 1997, Strategic Partners advised Respondents by letter that six items critical for the successful completion had not been timely completed by Respondents (CX-32).
On 18 March 1997, the Russian Security Committee approved the design of Pulkovo-3 (CX-30, document in the Russian language only).
On 16 April 1997, STV International, at Claimant's request, provided a document package relating to the project (CX-26).
In May 1997, the City of St. Petersburg and State Enterprise Pulkovo were advised in a fax memorandum of SP that IAT Pulkovo was positioned to obtain final EBRD Credit Committee approval upon resolution of three issues:
-
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.
21
-
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).
On 7 May 1997, Claimant advised Alexei L. Kudrin (Vice Minister, Ministry of Finance) by letter that there were three issues to be addressed for completing the financing (CX-33). Mr Kudrin was further updated by a letter dated 29 May 1997 (CX-34).
Complying with the requirement for the financing to be provided by EBRD and DMG, the City of St. Petersburg agreed to finance the construction of access roadways and utilities, and State Enterprise Pulkovo agreed to finance the construction of an apron.
In June 1997, the MDA Group performed a satisfactory risk assessment for the construction of the New International Passenger Terminal (CX-35).
On 25 July 1997, EBRD advised Mr Sax that the EBRD's Operation Committee had given its approval, and that the EBRD believed that financial closing could take place by year-end (CX-28).
On the same day, 25 July 1997, the President of EBRD advised Governor Yakovlev that the EBRD's Operation Committee had given its approval (CX-29).
On 28 August 1997, EBRD, in a letter addressed to Claimant, informed him that the Bank's Board of Directors had approved the Project on 27 August 1997, indicating further that
"the parties to the Project must now finalize the negotiations, placement of debt and the Project Documentation, following which it will be possible to sign the loan." A time-limit as such was not given; the letter said that the Bank hopes
"to complete this work by year end". Claimant was further advised that all aspects of the Project
"must remain substantially in line with what has been presented to the Bank's Board of Directors" (CX-27).
On 15 January 1998, DMG delivered its IAT Pulkovo Financial Model to the participants and lenders of IAT Pulkovo (CX-42, CX-40).
22On 20 February 1998, SP delivered its IAT Pulkovo Business Plan to the participants and lenders of IAT Pulkovo (CX-41).
On 8 June 1998, the EBRD established an internal Memorandum which indicates that the Board basically approved the BOT-Project with project costs of US$ 187 million and an EBRD loan of US$ 120 million, indicating further that negotiations of the technical agreements with the Western parties are substantially complete, but that progress towards a closing of the operation is hampered by a number of elements, one being the sporadic presence of SP in Russia, another being the slow review process of the documentation by the City of St. Petersburg and the Airport, and the third being the fact that the Ministry of Finance had indicated that the Project Company would have to apply for the Specified Events Guarantee through the channels that are used for full sovereign guarantees, a process which might take 6 months+ (CX-36).
On 8 July 1998, SP submitted a draft Independent Accountants' Report (CX-44) to Mr Sax.
On 15 July 1998, Strategic Partners advised the Governor Vladimir A. Yakovlev that EBRD had approved the financing allready on 25 August 1997, that since then various parties had been working towards financial closing, that basically a new version of the Charter had been drafted, subject to the final agreement of the City of St. Petersburg, and that various participants, including the EBRD and DMG, had become concerned that the City of St. Petersburg had not taken all steps required to close the financing on an expedited basis, and that in fact the City of St. Petersburg was delaying the closing as a result of certain unspecified considerations (CX-43).
On 16 July 1998, on proposal of Mr Sax, a seminar preceding the shareholders meeting took place at which the EBRD proposal was discussed, RX-54.
23On 17 July 1998, SP commented on a Report regarding the separation of Pulkovo-3 as an independent enterprise (CX-38). In its Memorandum, SP suggested a revision of the Report in several respects.
In August 1998, according to Claimant, the financing proposal required to permit the construction of the New International Passenger Terminal failed to close "as a result of the delay of the City of St. Petersburg and State Enterprise Pulkovo in approving and executing the required documentation before the August 1998 Financial Crisis" (CM-2, para. 63). In this context, Claimant repeated earlier allegations that the City of St. Petersburg and State Enterprise Pulkovo were unable to pay for the construction of the access roadways, the utilities and the apron.
According to Claimant, on 17 February 1999, the Board of Directors of IAT Pulkovo approved the creation of a Working Commission to address the the matters required to recommence the stalled development of the New International Passenger Terminal (CX-46).
In July 1999, the Working Commission agreed to finalize negotiations for the development of the New Internationial Terminal (CX-47).
In the further course of 1999, SP, PSP and inter alia, Skanska BOT AB entered into a Development Agreement fur the purpose of restructuring certain financial and technical aspects (CX-48).
On 13 October 1999, Claimant informed the IATA of the intention to reanimate the Pulkovo-3 Project, raising questions to the level of charges for international passengers. His query was answered by a fax of IATA dated 14 October 1999 (CX-45).
On 16 February 2000, the recently formed Consortium with Skanska BOT et al wrote a letter to Mr Sax withdrawing from the Consortium and Develop-
24ment Agreement, since it had not been possible
"to produce a bankable Development Plan for the Project" (CX-51, without signatures).
On 29 February 2000, Claimant advised State Enterprise Pulkovo that the proposed gallery extension to Pulkovo-2 (i.e., the then existing international passenger Terminal) might be adverse to the interests of IAT Pulkovo and its shareholders, but that he might be inclined to favourably consider entering into a sub-lease for the requested land at an acceptable rental rate, and if the construction of the proposed gallery was structured as the initial phase of Pulkovo-3 (CX-49).
On 15 November 2000, SP addressed a letter to Mr Anatoly A. Aleksashin, Vice Governor of the City of St. Petersburg, describing the services which Strategic Partners performed in respect of the Pulkovo-3 Project, stating therein that
"unfortunately, final negotiations to permit approval of financing for Pulkovo-3 by IAT Pulkovo were interrupted by the August 1998 Russia Federation Financial Crisis". The letter further expressed the firm belief in the viability of Pulkovo-3 and, in order to reactivate the Project, Strategic Partners submitted a draft Protocol of Agreement regarding the development, financing and operating of Pulkovo-3 and the acquisition, financing and operation of Pulkovo-2, with the hope that the City of St. Petersburg and the Russian Federation would confirm their interest in concluding the negotiations regarding Pulkovo-2 and Pulkovo-3 (CX-54, with Protocol of Agreement CX-55 and Protocol Agreement among Shareholders, CX-56).
On 6 December 2000, the letter was acknowledged by Mr A.A. Mercianov, Vice Chairman of the Committee for Economic and Industrial Policy of the City of St. Petersburg, apologizing for the problems in realizing the previously achieved agreements and understandings which were caused by the Financial Crisis of 1998, and requesting Claimant to provide a working proposal for realizing the Project considering the new financial, economic and political situation in the Russian Federation (CX-53).
25The letter was followed up by a further letter addressed to Mr Sax dated 28 December 2000, acknowledging receipt of the letter of 15 November 2000 and the draft Memorandum and Agreement, and the readiness was expressed to recommend to the other shareholders to sign the Memorandum, and proposing to hold a meeting
"in the second half of the year of 2001" (CX-52).
On 21 June 2001, Mr N. Karpov on behalf of Pulkovo Aviation Enterprise addressed a letter to Mr Sax enclosing a copy of the letter from Mr Trubin (Chief of the Department of the Investment Projects of KUGI) which indicated that IAT Pulkovo "lost the right for this (sic!) long ago". Mr Karpov requested an answer to the question whether Mr Sax agreed to discontinue the activity of the Stock Company IAT "Pulkovo" "on the voluntary basis as it is determined in Article 17.1a of the Charter of the Closed Stock Company "IAT Pulkovo" dated 29.05.1995" (CX-58).
On 26 June 2001, Claimant Mr Sax replied: "Contrary to your assertion, IAT Pulkovo has not lost the right for this lease long ago. In fact, we will be wire-transferring the required lease payment later this week. Accordingly, we do not agree to discontinue the activity of IAT Pulkovo on a voluntary basis. In addition, we will strenuously contest any effort to either discontinue the activities of IAT Pulkovo or terminate the Lease Agreement for the land under Pulkovo-3." (CX-57).
In a "To Whom It May Concern" dated 27 June 2002, SP state that it had recently come to its attention that the State Unitary Enterprise Pulkovo and perhaps the City of St. Petersburg had undertaken the expansion of the existing international terminal (Pulkovo-2) in contravention of the current Lease Agreement for Pulkovo-3 and without regard to our many years of effort and multi-million Dollar investment, suggesting that a meeting should take place to discuss possible remedies. It is unclear to whom this document was in fact sent (CX-64).
On 21 August 2002, Mr Michael Karpov addressed a fax to SP with a letter from Mr Romanenko of KUGI, alleging overdue payments and fines in an
26amount of 483'592.92 Rubles. The letter was answered by SP on 2 September 2002 (CX-65).
Further correspondence exchanged on 18 October 2002, 4 November 2002, 19 November 2002 and 21 November 2002 (CX-61, CX-62, CX-63, CX-60).
On 17 December 2002, Mr Sax became the successor-in-interest to Strategic Partners and PSP's 29.7% stock-interest in IAT Pulkovo, the Pre-Development Advance and, as a developer of the New International Passenger Terminal, the Development Fee, by execution of a Purchase Agreement and delivery of a Bill of Sale (CX-66 and CX-59).
On 4 February 2003, the Arbitrazh Court of the City of St. Petersburg declined the Property Management Committee's claim for the dissolution of the Ground Lease. CX-72.
On 8 March 2003, a proposal for the development of Pulkovo-3 was put together (CX-74). It is not apparent from this document to whom this presentation was made. Claimant explained, however, that the presentation was made to the Presidential Administration of the City of St. Petersburg.
On 16 April 2003, State Enterprise Pulkovo, by letter of Mr M Karpov, confirmed that the Arbitrazh Court of St. Petersburg declined the Property Management Committee's claim for dissolution of the Ground Lease Agreement, "and implicitly requested that SP agree to a voluntary dissolution of IAT Pulkovo". Mr Sax was also informed by Mr Karpov that it was necessary to come to a final decision regarding the further operation of IAT Pulkovo, indicating further that three shareholders ("FSUAE Pulkovo, KUGI and Grassi") agreed to discontinue the activity of the Stock IAT "Pulkovo" on a voluntary basis (CX-69).
27In May 2003, SP addressed a letter to Michael Karpov, advising
inter alia that the shareholders of IAT Pulkovo must vote for voluntary termination and that State Enterprise Pulkovo, as a result of the expansion of Pulkovo-2, was in breach of the Founders' Agreement, the Charter and the Ground Lease (CX-71).
On 21 November 2003, the State Enterprise Pulkovo advised Claimant of KUGI's request (addressed to Mr Sax and Mr Demchenko) that payment must be made in respect of the Ground Lease, failing which KUGI would initiate court proceedings for collecting the payment and would initiate "the dissolution procedure of the Lend (sic!) lease Agreement to the court". (CX-70).
On 8 June 2004, the Federal Court dismissed the appeal of the Property Management Committee (Respondent 2), and refused to terminate the Ground Lease (CX-76).
On 30 September 2005, Pulkovo Airport and Pulkovo Airlines were divided into two separate entities (CX-83).
On 9 October 2006, the Federal State Unitary Enterprise State Transport Company Russia was registered in St. Petersburg, as the successor of Pulkovo Airlines, and on 29 October 2006, the latter and STC Russia started to fly under a common flag under the name of the merged entitiy, i.e. The State Transportation Airline "Rossiya" (Respondent 4). CM-2 para. 108.
On 1 March 2007, Pulkovo Airport was converted into a joint-stock company named OJSC Airport Pulkovo, and the Russian Federation became the owner of Pulkovo Airport.
On 14 September 2007, Grimshaw & Partners, Ltd. won the New International Passenger Terminal design competition (CX-98).
On 25 September 2007, President V.V. Putin, by Presidential Decree, authorized the transfer of Pulkovo Airport to the City of St. Petersburg as the sole shareholder of Airport Pulkovo, OJSC, effective 29 December 2007 (CX-83).
28Two days later, on 27 September 2007, a Presidential decree authorized the transfer of Pulkovo Airport to the City ot St. Petersburg, which became the sole shareholder of Airport Pulkovo, effective 29 December 2007.
On 2 October 2007, Respondents, through Governor Matvienko and Dr Zilberquit advised Claimant Mr Sax that the City of St. Petersburg intended to develop the New International Passenger Terminal without Claimant's participaton (CM-2, para. 113).
On 3 October 2007, Respondent 1 - by Governmental Decree No. 1265 - authorized a strategic investment project for developlng the Pulkovo Airport and an action plan for the construction of an alternative international passenger terminal. CX-151.
On 16 October 2007, the shares of Airport Pulkovo OJSC were transferred to the City of St. Petersburg, by Governmental Decree No. 1432-IR.
On 14 January 2008, Paul A. Curran of Kaye Scholer LLP addressed a letter to Open Stock Company Airport "Pulkovo", attn Director General advising that Claimant Mr Sax is the owner of a 29.7% interest in International Airport Terminal "Pulkovo" (a Russian joint stock company) and moreover that Mr Sax
"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, 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 of Pulkovo-3, of a 29.7% 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 letter closed with a paragraph inviting open bona fide negotiations, and mentioning the intention to bring arbitration proceedings under the terms of the Founder's Agreement and the Charter, both dated 19 May 1996 (CX-84).
29On 24 January 2008, Claimant filed the
Request for Arbitration, initiating the present arbitral proceedings.
On 21 April 2008, about three months after the present proceedings were initiated, Respondents published a Tender Notice for a USD 1.5 billion tender for a 30-year concession to rebuild, expand and operate Pulkovo Airport, which included the instruction of the Alternative International Passenger Terminal. CM-49, para. 76, CX-81, 95, 100, 101.
Around the same time, IAT Pulkovo, which was meant to be the investment vehicle under the Investment Contract, was liquidated. In Claimant's view
"Respondents maliciously liquidated the corporate vehicle for investment in order to: (a) assert a defense, (b) deprive Claimant of a corporate vehicle, in attempt to prevent reinstatement, and (c) deny claimant justice both within the Russian judicial system and within this Arbitral Proceeding." (CM-49, para. 102).
According to Claimant, the liquidation was done in an extraordinary summary procedure, without a judicial authorization as per Article 61 of the Russian Civil Code, adopting a procedure exclusively applicable to abandoned companies (CM-3 paras 79-109; CM-49, paras. 87-97), without proper notice to the public, and therefore without providing an opportunity to the public to assert claims (with reference to the 2008 Gazette of State Registration, CX-160). Moreover Claimant also refers to Section 17.1 and 18.1 of the 1995 Charter which, for a termination or liquidation, requires a unanimous vote at a Stockholders' Meeting, and a ruling to terminate the Company by a competent court. CM-49, para. 109.
The liquidation, in Claimant's view, therefore constitutes a violation of customary international law as well as a violation of Russian and St. Petersburg Investor Protection Laws (CM-49, paras. 111 - 130), entitling Claimant to damages (CM-49, paras. 131 - 159).
30On 29 September 2008, Claimant filed a Request for Injunctive Relief with the St. Petersburg Arbitrazh Court, seeking injunctive relief to enjoin Respondents from continuing with the Tender for the reconstruction of Pulkovo Airport, or any actions designed to advance the Tender, until Claimant's contractual right to participate in the development of the New International Passenger Terminal is adjudicated through the arbitral proceedings (CX-91).
On 3 October 2008, the St. Petersburg Arbitrazh Court denied Claimant's request for injunctive relief for procedural reasons, explaining that an application for injunctive relief must be filed together with the claim, or during the proceedings. However, as at that moment, as the Court stated, no arbitral proceedings were in place, Claimant's application was dismissed.
On 31 October 2008, Claimant appealed the decision (CX-78).
On 10 December 2008, the Appellate Court issued an interim order (CX-88).
On 10 February 2009, the Appellate Court denied Claimant's request for injunctive relief (CX-93).
*****
31
Section 12.1 of the Founders' Agreement refers to the disputes resolution mechanism of the Charter. It reads as follows:
ARTICLE XII - 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.
The Charter, in Chapter 20, sets forth the method and procedures for such arbitration as follows:
Chapter 20: DISPUTE RESOLUTION
20.1 Generally, all disputes and conflicts that may arise out of or in connection with this Charter and the Founder's 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 shall be in accordance with the UNCITRAL Arbitration Rules as in effect on the date of the arbitration, except that in the event of any conflict between those Rules and arbitration provisions of this Charter,
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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 of the Arbitrator he 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 the 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
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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 after having numbered any remaining names on the list in 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 in accordance with this Chapter 19, unless there shall be a determination by the panel that, in connection with the matter that is subject to arbitration, a party has acted in bad 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.
The last provision in the above dispute resolution section, Chapter 20.10, deals with the allocation of costs for disputes arising under Chapter 19. Chapter 19 provides for an indemnification as follows:
Chapter 19: INDEMNIFICATION
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19.1 The Company shall indemnify any Director and officer (including the Chairman, Vice-Chairman and Co-President) 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 environmental conditions. The Company shall comply with published, readily accessible environmental regulations and shall adopt operating methods which comply with environmental and safety standards.
Regarding the applicable law, Chapter 21.1 of the Charter provides as follows:
"This Charter shall be governed by appropriate Russian law, treaties and international law."
The Founders' Agreement does not contain a choice of law clause.
Claimant argues that, due to the connexity, the choice of law provision of Chapter 21.1. of the Charter should also be deemed applicable for the Founders' Agreement.
*****
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Claimant, in his Request for Arbitration dated 24 January 2008 (CM-1), stated his claim as follows:
"Claimant has been damaged in an amount to be proved at the Hearing of this matter but believed to be in excess of USD 50 million. In addition, in the event that Clalmant's 29,7% interest in IAT "Pulkovo" is not reinstated in the entity which will develop "Pulkovo"-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, in his Statement of Dispute and Claims filed on 22 June 2009, CM-2, para. 162, enlarged his claim to reach a monetary value of US$ 212'500'000, plus a claim for reinstatement as the project developer for the Alternative/New International Passenger Terminal at Pukovo Airport.
In CM-49, filed by Claimant on 15 October 2010, the prayers for relief were further restated and expanded as follows:
"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:
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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$ 150,000,000.
(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 Date 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 not less than US$ 150,000,000, does not waive his claim, as set forth in the Request for Arbitration, for reinstatement (the "Claim for 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
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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."
In his Memorial CM-66, para. 120, Claimant increased the value of his monetary claim (total of principal amount claimed) to an amount between US$ 350'485'672 and US$ 459'653'668, plus interest and legal expenses, arbitration costs; literally (in CM-66, para. 120), Claimant claims:
38
"the pre-development advance claim which is calculated to range between US$ 37'185'672 and US$ 146'353'668, 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 be calculated, plus all legal expenses and other expenses related to this Arbitration."
On 22 April 2011, in CM-68, para. 2, Claimant further amended his claims as follows:
-
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
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b) The 29.7% Interest Claim upon completion of the Alternative International Passenger Terminal: US$ 294'500'000
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c) The 4.5% Development Fee Claim (based on the cost of the Alternative International Passenger Terminal: US$ 18'800'000
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d) Expenses (including legal fees) of the Arbitral Tribunal, to be awarded/allocated amongst Claimant and Respondents in the ratio 29.7% and 70.3%, and
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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 Terminal, conditioned on the Tribunal's imposition on Respondents of conditions precedent and subsequent, acceptable to Claimant, to avoid an illusory award of reinstatement.
In Claimant's Post-Hearing Brief filed on 20 January 2012, Claimant stated that he no longer seeks specific performance of PSP's right to be the developer of the alternative international passenger terminal (AIPT), but maintains the claim for his entitlement to be paid a developer fee, which claim had been transferred to Claimant on the basis of the Purchase Agreement and Bill of Sale.
In a further paragraph, Claimant stated that he seeks specific performance only insofar as to grant him an equity position in the AIPT that is financially
39equivalent to PSP's 29.7% interest in IAT Pulkovo; alternatively, he seeks the monetized value in damages of that interest.
The Tribunal notes that CM-85 does not contain any further discussion on the development expenses and some further aspects which were extensively reviewed during the Hearings. The Tribunal, however, understood from the opening paragraphs of the PH-Brief that all earlier factual and legal arguments are to be considered incorporated by reference into the PH-Brief, and that the silence to discuss some further aspects cannot be taken as a waiver on an admission.
The several claims, as had been submitted by Claimant in these proceedings, in particular in CM-68 and CM-85, may be classified as follows:
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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.
For the purpose of the further review discussion in the present Award, the Tribunal distinguishes four categories of claims:
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First, Claimant's monetary claim as a creditor for reimbursement of pre-development expenditures incurred (essentially in the 1990s), plus the related interest claim;
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Second, Claimant's monetary claim for a 4.5% developer fee;
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Third, Claimant's investor-claim for the (new) Alternative International Passenger Terminal, or the monetary value ascribed thereto;
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Fourth, Claimant's claim for recovering arbitration costs.
The Tribunal observes that the first three categories of claims above are derived from, and are based, on the ground of the Parties investment relationships and the bundle of obligations resulting therefrom. The overall legal relationships consists of multifold aspects grounding in norms of civil law, contract law, matters governing joint ventures, corporate governance, and security laws. All of them are closely interlinked and can hardly be separated one from the other without detriment to the essence of the relationships among the Parties and the their primary interest, which was the cooperation for mutual benefits in their investment activity. In this respect the Tribunal looked into the dispute from the investment law perspective.
Respondents 1 and 2, in their Statement of Defense filed on 20 September 2009, deny all of the claims in full; literally on page 5:
"The Respondents deny, in full, all claims made by the Claimant (para. 162 ad 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:
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(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 or 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 he 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."
In their Rejoinder, as well as in subsequent submissions and the PH-Brief filed on 20 January 2012 (1-RM-37/2-RM-43), Respondents 1 and 2 reiterated their requests.
Respondents 3, 4 and 5 did not present substantiated submissions or denials in respect of Claimant's substantive claims, it being however noted that there are a few letters/emails on file, essentially in regard to the nomination of Respondents' Arbitrator. The Tribunal has reasons to believe that none of the Respondents agrees with the claim; Respondents' silence - indeed in con-
42formity with well established practice in international arbitration - cannot be taken as an admission of the facts and legal arguments presented by Claimant; all claims, therefore, must be considered in their entirety by all of the Respondents.
Respondents 3, 4 and 5 were, however, throughout the process kept informed on every step of the proceedings; several Orders of this Tribunal were delivered to them by international courier service; moreover, the Tribunal's numerous emails were properly received. Prior to the Hearings, the Tribunal particularly invited Respondents 3 to 5 to take part in the Hearings, be it only by delegating a "silent listener" for observing the regularity of the process.
*****
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On 14 January 2008, Paul A. Curran of Kaye Scholer LLP, on behalf of Claimant Mr Carl A. Sax, addressed a Notice of Arbitration to Respondents.
On 24 January 2008, Claimant's Request for Arbitration was flied (CM-1).
On 5 August 2008, the Stockholm Chamber of Commerce appointed Dr Marc Blessing to serve as the Chairman.
On 28 August 2008, the Tribunal issued its 1st Order regarding the constitution of the Arbitral Tribunal, legal representation, submissions on file and organizing numerous procedural aspects for the upcoming proceedings. Furthermore, a deposit in the amount of EUR 400'000.- was requested, payable by each side in the sum of EUR 200'000.--.
On 3 October 2008, the Tribunal issued its 2nd Order dealing with Claimant's application for a suspension of the arbitral proceedings. In view of that application, the Tribunal lowered the requested deposit to EUR 100'000.--, payable by Claimant and suspended any payment from Respondents. The Order was delivered to all five Respondents by special courier service, and delivery documents are on file.
On 16 October 2008, Director General Murov of Respondent 5 sent a letter to the Tribunal, correcting the designation of the 5th Respondent.
On 13 November 2008, the Tribunal issued its 3rd Order concerning matters of suspension and reiterating the request for funding by Claimant.
On 15 December 2008, the Tribunal issued its 5th Order, dealing with Claimant's of further time-extension for paying the deposit. It indicated that the Arbitrators intend to charge for their services on a time-spent basis, at a rate of EUR 500 per hour.
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On 30 January 2009, Mr Wallace on behalf of Claimant informed the Tribunal that Claimant Mr Sax wishes to voluntarily withdraw the Request for Arbitration on a without prejudice basis.
This request gave rise to several Submissions by the Respondents dated 5, 20 and 26 February 2009, and in a Submission of 11 March 2009 (RM-7) filed on behalf of Respondents 1 and 2 the Tribunal was requested not to terminate the proceedings but instead to rule on the claims as presented in the Request for Arbitration, and to reject those claims, making reference to Section 28 of the Swedish Arbitration Act and Article 34 of the UNCITRAL Arbitration Rules.
In a further Submission dated 13 March 2009, Respondent 5 also requested that the Arbitration should proceed. At the same time, Respondent 5 informed the Tribunal that Respondent 3 had subsequently been reorganized and had ceased to exist already in 2006, with Respondents 4 and 5 being the legal successors of Respondent 3.
On 19 March 2009, the Tribunal issued its 6th Order, noting the several submissions, and organizing a telephone conference to take place on 2 April 2009.
On 2 April 2009, a telephone conference took place, with the participation of Mr Carl A. Sax, counsel to Respondents 1 and 2 and a representative of Respondent 5. Respondents 3 and 4 did not participate, nor did Professor Valery A. Musin dial into the telephone conference. It was dlscussed that Mr Sax intended to withdraw his claims, however on a without prejudice basis; such withdrawal, however, was rejected by Respondents' counsel, requesting the Tribunal to render a declaratory award stating that Claimant's claims are invalid. Mr Sax replied that he will be unable to fund the costs of the proceedings. After further discussion, it was decided that the Tribunal will have to ask Respondents to fund the deposit, and the Arbitrators' remuneration on the basis of the hourly rate was mentioned and agreed by those participating in the telephone conference.
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On 6 April 2009, the Tribunal issued its 1st Order, providing a detailed account of the telephone conference of 2nd April 2009. Inter alia, Claimant was specifically asked to properly document his locus standi under the relevant contracts or as a legal successor-in-interest to the initial parties. The Order also scheduled the next steps in the proceedings. A deposit in the amount of EUR 250'000 was requested, and the Arbitrators' rate was confirmed one again.
On 26 June 2009, Claimant filed a second challenge against Professor Valery A. Musin.
On 20 September 2009, Respondents 1 and 2 filed the detailed Statement of Defense (1-RM-2, 2-RM-8).
On 28 September 2009, the Tribunal issued its 8th Order, inter alia dealing with the impact of the challenge against Professor Musin, and granting a time-limit to Claimant for filing his Detailed Reply by 4 December 2009.
On 1 December 2009, Claimant filed a letter to the Tribunal indicating the appointment of the new legal counsel taking over his representation and asking for an extension of the time-limit for filing the detailed reply until 4 March 2010. On the same date, Claimant filed a further challenge against Professor Musin addressed to the Stockholm Chamber of Commerce.
On 3 December 2009, the Tribunal issued its 9th Order noting the appointment of new counsel, requesting properly signed Powers-of-Attorney, directing that the arbitral proceedings should not be stayed during the pendency of the challenge against Professor Musin, and dealing with the request for extension. Moreover, the time-table of the proceedings so far and a detailed time-table for the further proceedings in 2010 was set out in the Order, as well as a request for Claimant to pay his share towards securing arbitration costs by effectuating a payment of EUR 250'000 to the Chairman's special account.
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On 14 December 2009, Dean Peroff of Amsterdam & Peroff submitted a new Power of Attorney, executed by Mr Carl A Sax on 9 December 2009, valid for one year.
On 4 January 2010, Claimant filed a Request for Interim Measures.
On 5 January 2010, the Tribunal issued 10th Order.
On 12 January 2010, the Tribunal issued its 11th Order.
On 25 January 2010, Claimant filed further comments regarding interim relief, together with additional requests.
On 27 January 2010, the Tribunal issued its 12th Order.
On 26 February 2010, the Arbitration Institute of the Stockholm Chamber of Commerce decided to sustain Claimant's challenge of Professor Musin.
On 2 March 2010, the Tribunal issued its 13th Order regarding the way forward.
Subsequently, Respondents named Professor Alexei A. Kostin, Vice-President of the International Commercial Arbitration Court at the Russian Chamber of Commerce and Industry as Arbitrator. However, Claimant Mr Sax objected to such nomination causing Professor Kostin to voluntarily resign from office on 16 April 2010. Subsequently, Respondents 1 and 2 nominated Professor Andrey Bushev to serve as Arbitrator. Professor Bushev his nomination.
On 30 April 2010, Claimant filed his second Request for Interim Relief.
On 17 May 2010, the Tribunal issued its 14th Order, taking note of the appointment of Professor Bushev by Respondents 1, 2 and 5, and requiring a further confirmation on behalf of Respondents 3 and 4. Furthermore, Respondents were given a time-limit to comment on Claimant's Second Request for Interim Relief until 31 May 2010 and, under the same date, to file the detailed Rejoinder. Finally, the Tribunal proposed either an organizational meeting in Moscow on 8 June 2010 (at the occasion of an international arbitration
47conference in Moscow, which was attended by the two non Russian Arbitrators), or the holding of a telephone conference on one of several proposed dates in June 2010.
On 28 May 2010, the Tribunal issued its 15th Order.
On 17 June 2010, the Tribunal issued its 16th Order regarding further matters of the telephone conference and regarding the organization of a Hearing, upon request of Claimant, for dealing with his motions for interim relief.
On 26 July 2010, Claimant's counsel notified the Tribunal of a further challenge, addressed to the Arbitration Institute of the Stockholm Chamber of Commerce, concerning Professor Andrey Bushev.
On 5 August 2010, the Tribunal issued its 17th Order, once again containing a detailed procedural time-table.
On 19 August 2010, Respondents commented on the challenge, followed-up by further submissions on the Claimant on 29/30 August 2010.
On 16 September 2010, the Stockholm Chamber of Commerce issued its Decision rejecting Claimant's challenge of Professor Bushev.
On 17 September 2010, the Tribunal issued its 18th Order dealing with the proper constitution of the Tribunal, the mode of communications and notices emanating from the Tribunal and the further time-table and practical matters in view of a two-day Hearing to be held for dealing with Claimant's requests for interim measures as well as for dealing with several documentary requests.
On 22 September 2010, Claimant filed a consolidated Request for Interim Relief.
On 27 Septemper 2010, Claimant filed a motion for an Order for Sanctions, absent proper appearances by Respondents.
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On 29 September 2010, the Tribunal issued its 19th Order dealing with matters of valid representation and setting further time-limits.
On 19 October 2010, the Chairman invited Claimant's counsel to comply with the Tribunal's suggestions, contained in the 1st Order of 28 August 2008, regarding the consecutive numbering of Claimant's Memorials/Submissions/letters (to be marked as "CM-__), and the consecutive numbering of Claimant's Exhibits with "CX-__" and Witness Statements/Expert Reports, to be numbered "CWS-__".
On 5 November 2010, the Tribunal issued its 20th Order, addressing numerous submissions filed by the Parties in October 2010. It dealt with the proper standing of Respondents and their representation by counsel. Furthermore, the Tribunal rejected Claimant's request submitted by CM-48 (para. 28), wherein Claimant urged the Tribunal that it should deem "all of Claimant's allegations against Respondents 3, 4 and 5" as having been admitted, and precluding them from presenting any further evidence before this Tribunal. The Tribunal stated that such a deemed admission (i) disregards the deeply-rooted practice in international arbitration, (ii) is contrary to the Swedish Arbitration Act and some 60 or more arbitration acts following the UNCITRAL Model Law, and (iii) not reflected in any of the arbitration rules of the major arbitral institutions, nor (iv) compatible with the UNClTRAL Arbitratlon Rules governing the present proceedings.
Regarding the nomination of Professor Bushev, the Tribunal noted that he had been validly nominated by Respondents 1, 2, 4 and 5, concluding that, since Respondent 3 no longer appears to be a Party, any doubts as to the proper composition of the Tribunal appear to be removed. The Order further addressed the mode of communications from the Tribunal to the Parties and addressed numerous matters in preparation for the Hearing on interim measures, documentary matters and procedure, fixed to take place in Zürich on 16 and 17 December 2010.
On 19 November 2010, the Chairman issued an e-mail requesting clarification regarding Claimant's requests and prayers for relief. Moreover, in re-
49spect of the Hearing on interim measures focusing on Claimant's reinstatement claim, the Chairman listed 23 discrete issues which, in his view, should be addressed at the Hearings in connection with Claimant's requests for interim relief.
On 24 November 2010, the Tribunal issued its 21st Order referring to Respondents' Submission of 8 November 2010, Claimant's Submission of 15 November 2010, further Submissions by Respondents dated 15 November 2010 and updated Schedules submitted on 18 November 2010. The Order invited counsel to take part in a further telephone conference and addressed several procedural matters. As an Annex to the Order, the Tribunal included the Chairman's e-mail of 19 November 2010.
On 29 November 2010, an organizational telephone conference took place.
On the same date, 29 November 2010, the Tribunal issued its 22nd Order which contained a detailed shortlist of topics for discussion, examinations and pleadings at the occasion of the Hearing on interim relief scheduled to take place on 16/17 December 2010.
The list contained the following 30 issues:
"Locus standi, Jurisdiction, Valid Representation
1
Claimants locus 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
Claimants locus standi to make claims as an investor under the Investment Contract (as opposed to his locus standi as 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 to 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 50claim against IAT Pulkovo, and that the liability of other shareholders was specifically excluded).
4
Are the Respondents properly 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 the shortcoming of Claimant respectively Strategic Partners/PSP?
11
Did Respondents breach their obligations?
12
Were PSP and/or the Claimant ever granted exclusivity?
13
Would exclusivity violate Russian antitrust laws? In 1995/96? In 2007? Under Article 7 of the 1991-Law? Article 15 of the 2006 law?
14
Was the Project "up and alive" even during the years of the late 1990s to 2007, or was it conclusively/tacitly (although not through formal notice) abandoned? Was - at same 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 behaviour or otherwise?
51
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 his predecessors not raise the monetary claims (e.g. for expenditures incurred in 1995 onwards) earlier, for instance in 1998, or at least in subsequent years?
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 (AT): is the AT the kind of project which had been envisaged in 1995/1996, or is it an "aliud" (a Latin term) i.e. so different that one must consider it as being a new project?
21
What is the status of the AT development?
22
Can it still be stopped and put on ice?
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 - re-instating 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?
52Would Claimant's position be reparable by a simple award of damages (provided the legal and factual prerequisite would be satisfied)?
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?
Finally: Documentary issues to be discussed: (a) Documents requested by Claimant, (b) Documents requested by Respondents 1 and 2."
On 8 December 2010, the Tribunal issued its 23rd Order dealing with several matters regarding the structuring of the Hearing and noting Claimant's CM-53 and CM-54, containing the preferred structuring for the Hearings.
On 14 December 2010, filed CM-55 regarding powers-of-attorney and legal succession, supported by a legal Opinion of Professor Oksana M. Oleymik.
On 15 December 2010, Claimant filed CM-56, 57 and 58.
On 16/17 December 2010, Hearings on matters of interim relief and documentary requests were held in the Chairman's offices in Zurich, attended by Mr Carl A. Sax personally, accompanied by his lawyers Andrew J. Durkovic and Vladimir V. Gladyshev, and further accompanied by the expert Peter Forbes of Alan Stratford & Associates Ltd. On behalf of Respondents 1 and 2, the Hearing was attended by Professor Oleg Skvortsov, Leonid Kropotov, Viktor Tulsanov, Pavel Borissenko, Josh Wong and Claes Rainer. The Hearings were verbatim transcribed by a reporter of Merrill Legal Solutions.
On 21 January 2011, Claimant filed the Post-Hearing Brief in support of his consolidated request for interim measures of protection (CM-60).
On the same date, Claimant filed a further Request for Production of Documents and Information (CM-61).
On 21 January 2011, Respondents 1 and 2 filed their Post-Hearing Brief regarding Interim Measures.
53
On 4 February 2011, Claimant filed a further Request for the Production of Documents and Information (CM-62).
On 8 February 2011, the Tribunal issued its Decision on Interim Relief, as per the Tribunal's 24th Order. The Tribunal's Decision reflected the claims so far submitted by the Parties, their detailed requests regarding interim relief, the legal framework and the numerous issues which the Tribunal had to consider in the context of a decision on urgent interim relief. Details regarding this section of the 24th Order are reflected in a later Chapter of this Award; see the next Chapter F below.
54
Although the present arbitration had been initiated by a letter of Claimant's then counsel Paul A. Curren dated 14 January 2008, followed by the Request for Arbitration dated 24 January 2008 (CM-1), Claimant only submitted a detailed request for interim measures in January 2010.
An immediate in-depth examination of Claimant's requests, however, had to be deferred due to Claimant's challenges to Respondents' nominated Arbitrator, since the Tribunal considered it inappropriate to render decisions on interim relief unless and until its proper constitution has been established.
After the decision made by the Stockholm Chamber of Commerce under the date of 16 September 2010 regarding dismissal of the challenge against Professor Bushev, the Tribunal, in its 18th Order of 17 September 2010, suggested that Claimant may update and consolidate his Requests for Interim Relief, facilitating an in-depth review at the Hearing in Zürich, schedules to take place on 16/17 December 2010.
Claimant did so by filing CM-45 titled "Claimant's Consolidated Request for Interim Measures of Protection" dated 22 September 2010 and in its further Submission CM-50, filed on 15 October 2010 in response to comments submitted by Respondents 1 and 2.
Claimant's requests ("Interim Request") as per para. 11 of CM-50 read as follows:
"(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:
55
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 to take such action 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 be 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 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 for specific performance in the Arbitral Proceeding, and strike paragraphs 378-384 of Respondents' Statement of Defence.
(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 proceeding speedily with the construction of the AT, which is clearly incompatible with the pendency of this Arbitral Proceeding."
With a view to providing some guidance to counsel of both sides as to the main areas which the Tribunal would wish to review together with the Parties at the Zürich-Hearing, the Tribunal prepared a short-list of 30 issues to be discussed in the context of properly analyzing his requests for interim meas-
56ures. This short-list was contained in the Tribunal's 22nd Order, issued on 29 November 2010. The short-list has been reflected above in Chapter E of this Award.
Claimant argued his case regarding his Interim Requests in further written Submissions, and extensively argued his case orally at the occasion of the Hearing in Zurich held on 16/17 December 2010.
Respondents 1 and 2 denied all of the requests.
In respect of Respondents 3, 4 and 5, the Tribunal has not seen any comments in respect of the Interim Requests. The Tribunal takes them as being denied by all Respondents.
In its 24th Order, para. 130, the Tribunal ruled as follows:
"The Tribunal concludes, for the purpose of the 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."
The Tribunal - in reaching its aforementioned conclusion - considered the following aspects - which are literally incorporated herein regarding Claimant's locus standi:
Quote:
57Essentially, Claimant's substantive claims submitted in the framework of the present Arbitration stand on two different legs, one being for some monetary compensation/damages, and the second being his claim for specific performance in the sense that he should be reinstated as the investor for the Pulkovo Airport Project (the latter with a number of conditions precedent and subsequent and acceptable to Claimant (see hereto Claimant's requests in Chapter B above).
Claimant's interim requests (as recited in Chapter C above) all refer to reinstatement claim.
The distinction between the two legs of Claimant's claim is important and triggers significantly different legal issues. In fact: While a claim for some reimbursement of expenditures and a claim for damages may well have arisen (or may validly have been assigned to Claimant by Pulkovo (Strategic Partners) Ltd., (Cyprus) as the party to the Founders' Agreement and the Charter, which matter however does not need to be discussed or decided herein, it is a fundamentally different matter whether Claimant, as an individual, could validly "stand into the shoes" of the initial party to the underlying contracts (respectively the Investment Contract, as the Claimant characterizes the contracts), and thereby claim to be given the position as a succeeding investor, succeeding to Strategic Partners.
The Tribunal will, therefore, have to analyse whether Pulkovo (Strategic Partners) Ltd. could, with valid effects vis-Ã -vis the other parties of the Founders' Agreement and the Charter, assign and transfer its position as an investor to Mr Carl A. Sax as an individual. It is noted that the sale and transfer was made pursuant to a tripartite Sales Agreement, CX-66, dated 17 December 2002, signed by Mr Carl A Sax on behalf of Pulkovo (Strategic Partners) Ltd., futher signed by Mr Carl A Sax in his personal name, relating to the sale of a 29.7% stock interest in IAT Pulkovo, and the assignment of a "$20+-million pre-development expense receivable". The sale is further evidenced by a Bill of Sale, signed by the sellers/assignors Pulkovo (Strategic Partners) Ltd, and Strategic partners (Holdings) Ltd, signed under the same date by Mr Carl A Sax, signing for both (CX-59).
The Tribunal had specifically raised this rather obvious intuitu personae - issue in its communications to counsel for their preparations for the December 2010 - Hearings.
[Note: some 15 pages of text of the 24th Order are not reflected here, as they essentially dealt with the basic requirements for obtaining interim relief according to the
58
1976 UNCITRAL rules, the 2010 UNCITRAL Rules and the Swedish Arbitration Act and the criteria of the availability ratione materiae, 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.]
The issue of Claimant's locus standi is the single most important and most critical element to be considered here and this most critical element, therefore, had been clearly flagged out to the Parties and their counsel prior to the Hearings. In succinct form, the most relevant aspects are as follows:
In January 1992, Mr Sax, as per his allegations in CM-2, para. 3 ss., received a "mandate letter" inviting him to form a consortium of Western companies for the purpose of discussing the development of the Pulkovo Airport.
Based on such mandate, Claimant, in 1992/93, together with a number of Western companies, met with representatives of the City of St. Petersburg for the purpose of discussing the development of the Pulkovo Airport.
During those meetings with representatives of the City of St. Petersburg (Vladimir V. Putin, at that time Vice-Mayor of the City, and Mayor Anatoly A. Sobchak), the City of St. Petersburg requested Mr Sax to form a consortium of Western companies for the purpose of developing Pulkovo-3.
Thereupon, on 16 March 1994, the company named "Strategic Partners, Incorporated, USA", represented by Claimant Mr Sax, entered into Agreement (which in these proceedings was referred to as the "Protocol of Agreement") under which the Parties agreed to jointly redevelop the St. Petersburg Pulkovo International Airport, by developing Pulkovo-3 (CX-2). The Agreement was signed by Vladimir V. Putin in his (then) capacity as the Vice-Mayor of the City of St. Petersburg.
The Protocol of Agreement relates to the financing and construction of Pulkovo airport facilities and provided for the establishment of a joint stock company.
While the Protocol of Agreement was entered into in the name of a US company ("Strategic Partners, Incorporated, USA"), Claimant - according to his witness statement CWS-1 of 15 October 2010, para. 11 - formed a Cayman Island company bearing the same name, i.e. Strategic Partners (Holdings) Limited ("SPHL"), in which Claimant - according to his statement - at all material times held a minimum of 25% of the shares, and in which he served as Vice Chairman and Director.
59Furthermore, according to his supplemental witness statement (CWS-5 pages 3/4), Claimant Mr Sax, in 1995,
"assembled one of the first consortia to offer airport 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."
In parallel, or about the same time, SPHL (Strategic Partners (Holdings) Limited), which Mr Sax described as a consortium, formed - for the purpose of implementing the Pulkovo project - a wholly-owned subsidiary, i.e. Pulkovo (Strategic Partners) Limited, Cyprus (CM-2 para. 12).
Subsequently, PSP (represented by Mr Carl A. Sax as Executive Vice President and General Counsel) together with four further parties, entered into the Founders' Agreement (CX-6) dated 19 May 1995, and JSC International Airport "Pulkovo" was formed (by the Parties referred to as "IAT Pulkovo").
Likewise, the Charter of JSC International Airport "Pulkovo", equally dated 19 May 1995, was signed by the five founders, among them PSP, again represented by Carl A. Sax as Executive Vice-President.
Claimant refers to the Founders' Agreement and the Charter for creating IAT Pulkovo (as the corporate vehicle) as the "Investment Contract" (CM-49, para. 34).
The investor, therefore, as regards the project lined up in 1994/95 was the Cypriot subsidiary of Strategic Partners whose shareholders and/or participants included the companies as referred to by Mr Carl Sax in his witness statement (see above), all of them known as significant players.
The significance of SPHL's then held position as a major player for airport developments was further emphasized by Claimant, by referring to an impressive list of SPHL's then (1996 to 1999) involvements in the development of numerous international airports and airport terminals, including projects in Russia for (i) Moscow's Se-
60remetjevo 3, and (ii) airports in Vietnam, (iii) Gibraltar, (iv) the Philippines, (v) Guatemala, (vi) Congo, (vii) Ecuador, (viii) Indonesia, (ix) Honduras, (x) Pakistan, (xi) Armenia, (xii) Jamaica and (xiii) Uruguay.
The more precise involvements in these projects mentioned in CWS-1, however, have not been ascertained in the present proceedings, and the Tribunal was not made aware of, for instance, current projects where SPHL (or Claimant personally) plays a significant role as an developer. Claimant, at the December 2010 Hearings, simply mentioned that he, when reinstated as an investor, would without difficulty be able to put together a new and significant international consortium for realizing the Pulkovo project.
The above are some of the parameters which the Tribunal has to consider in respect of its reflections on Claimant's locus standi. The Tribunal's reflections are as follows.
It is within the nature of such an investment contract that the contract is concluded with each one of the parties having regard to the parties' individual standing, abilities, capabilities or resources. The contractual relationship, thus, is formed intuitu personae (for using this Latin term of art).
A natural consequence of this understanding of the contractual relationship is that the individual party as such is not exchangeable or interchangeable, unless all other parties would agree; more particularly, obligations assumed by one party cannot, without the agreement of all other parties, be "assigned" to a new party.
While the above certainly holds true as a gerneral conclusion, quite irrespective of any legal system applicable, this understanding - in the present case - is moreover clearly apparent from, and reflected in, the Charter (CX-5), Chapter 16, and in the Founders' Agreement, Article XI (CX-6).
Chapter 16 of the Charter and Article XI of the Founders' Agreement reflect the intuitu personae notion under the title "Transfer of Shares". According to those provisions, it is clear that the right to transfer shares is restricted in very explicit terms and pro-
61visions and,
inter alia, requires an "acquisition proposal", with an offering procedure which is in detail laid down in Clause 16.4. The provisions are very detailed and run over some 5 pages, all of which indicate the importance which the Parties attributed to the matter. Absent a compliance, it would seem clear that a valid transfer of the position as a shareholder and investor could not take place.
Thus, PSP - absent compliance with Chapter 16 of the Charter and Article XI of the Founders' Agreement - was precluded from transferring its shareholding to Claimant Mr Sax. An effective transfer was moreover not possible, because the shares in IAT Pulkovo were never formally issued, and thus could not be validly registered in the personal name of Mr Carl A Sax.
Claimant - in the framework of the present Arbitration - described himself as being the "successor-in-interest" of PSP, based on the assignment between PSP and Mr Sax of 17 December 2002. The relevant document was submitted as CX-66, as referred to above. Respondents 1 and 2 dispute the validity of such an assignment as regards the position as a shareholder or investor, emphasizing that the shares of IAT Pulkovo had never been issued and, therefore, could not validly be transferred.
The above situation leads to a rather obvious conclusion in the sense that - absent a formal approval by all Parties of the Charter and the Founders' Agreement - PSP could not validly transfer its position as an investor in IAT Pulkovo, and Claimant Mr Sax could not validly assume and take over the function from PSP as a party to the contractual relationship formed in 1994/1995. Such approval, however, did not occur.
Therefore, as regards the position as an investor/shareholder, the Assignment as per CX-66 can not produce a valid effect recognizable under the applicable Russian Law. Only purely monetary interests or claims may be considered assignable without consent of the other investors/shareholders.
Under the intuitu personae notion, one may also say that it was
-
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 time (as described by Mr Sax in his witness statement, CWS-5, pages 3/4, specificially referred to above), and the numerous projects then worked on (also referred to above, projects numbered (i) to (xiii),
62
-
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 position to put together a consortium which would match any required standard for a requisite qualification to realize the Alternative Terminal Project.
Hence, the Contract-party which had been accepted to become an investors in the 1990s, i.e. Strategic Partner respectively PSP, on the one side, and Claimant as an individual entrepreneur on the other side, are different "pairs of shoes".
At the Hearing, Claimant, in his impressive enthusiasm (greatly respected by the Tribunal), affirmed that in 2007 - had his continued right to be the investor for a new Airport Terminal been respected - he would, within weeks, have been able to put together a new and strong consortium (possibly better than Northern Capital Gateway); see the excerpted dialogue above.
Yet, such an affirmation, impressive as it is, can hardly be sufficient for the Russian Parties to rely on.
More significantly, Claimant had made no tangible steps to take part in the 2007 tender, nor has he put together such a consortium which could have fulfilled the pretendering qualifications.
To summarize the Tribunal's reflections: For two essential reasons, the Tribunal has signifcant difficulty to affirm Claimant's locus standi as an investor:
-
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; and 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 a 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 to- 63gether 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.
Between 1994/95 and 2007, the "world" has changed - this trifle statement raises a legal question not argued by the Parties, but nevertheless worth mentioning as an obiter dictum:
Claimant, in his testimony on 16 December 2010 at the Hearing, mentioned that he (respectively Strategic Partners), in 1994/1995, were accepted without a tendering procedure, and he stated that - when planning for the Alternative Terminal in 2007 - the Russian Parties should simply have called him, and should have accepted him without submitting the project to a public tender, arguing implicitly that legally/contractually the Russian Parties were still bound by the initial agreement reached in 1995.
This raises an interesting issue:
-
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 stabiliziation-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, and in specific areas of business more rapidly than in others.
64
-
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.
This obiter dictum supports the Trlbunal's conclusion that Claimant's claim - in the sense that he was contractually and legally entitled to be the foreign investor in connection with the 2007 Alternative Terminal, without subjecting himself to a tendering procedure - is unconvincing.
To sum up: 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 as-
65signed 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."
unquote
It is clear that the above decision only reflected the Tribunal's provisional view for the purpose of an interim procedurale decision, and that therefore the locus standi of Claimant as regards his reinstatement claim remained open for further better submissions by the Parties and reconsideratlon by the Tribunal, and in fact was further reviewed at the Stockholm Hearings.
Claimant, in his PH-Brief filed on 20 January 2012, recognized the Tribunal's concern regarding the reinstatement claim, by amending his request to a purely monetary claim.
*****
66
In a second part of the 24th Order, the Tribunal listed Claimant's extensive documentary requests, noting that they go far beyond the standards of the 1999 IBA Rules (and the 2010 IBA Rules) on the Taking of Evidence in International Commercial Arbitration. -- Hence, all requests were, for the time being, denied.
In further parts of the 24th Order, the Tribunal dealt with several further matters including the applicability of the Tribunal's determination to the remaining Respondents, the cost implications (to be decided in the Final Award), and the organization of the further proceedings.
In the latter respect, the Tribunal suggested a bifurcatlon in the sense that, first, the issues on liability would be considered, in which context the Tribunal identified eight main issues - quite in the sense of a "road-map" - which should be addressed by counsel in up-coming written and moral proceedings, and in respect of which detailed liability Hearings need to be scheduled.
This "road-map" listed the following issues:
quote
Issue 1: Did Strategic Partners/PSP fulfill its promised tasks correctly, by providing the financing as contemplated, (i) timely or within a conceded stretch of the time-window? And (ii) in a manner which should have been accepted by Respondents and IAT Pulkovo?
a) If yes: what are the consequences?
67b) 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?
Issue 2: Did the Protocol, the Founders' Agreement and the Charter at all impose binding obligations?
Issue 3: Was the Project not realized in the 1990s
a) due to shortcomings of Respondents?
b) Were they committed in a binding manner, and if so, did they breach their contractual obligations?
Issue 4: Was the project still-born after 1997 or any time thereafter, or tacitly abandoned?
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?
Issue 5: If the answers to the two above questions is yes: what are the consequences?
a) Does this trigger a liability in a principle vis-à-vis Claimant? Of which Parties?
b) Is liability excluded due to Section 8.4 of the Founders' Agreement?
c) If not: liability for disbursements only, or disbursements and loss of expected profits?
68
Issue 6: If no: consequences? Would Claimant still have a valid claim in principle for recovering costs? And what is the impact of the section 8.4 of the Founders' Agreement?
Issue 7: To the extent a monetary claim of Claimant appears justified in principle and would not be cut by Section 8.4:
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?
Issue 8: Where Respondents committed to exclusively deal with Strategic Partners/PSP, and was there a commitment - e.g. still valid in 2007 - that the Alternative Terminal must be realized with them, and not with any third party?
a) Would exclusivity, as it was required by Claimant, violate Russian antitrust laws/procurement laws? 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 sua sponte have participated in the tendering process?
d) Could Claimant thereby, or through other precautions, have mitigated his losses?
Further, the 24th Order indicated that, in the case liability would have to be affirmed by this Tribunal, the Tribunal would open the quantum phase in which
-
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;
69
-
moreover, currency issues and matters of interest would have to be addressed (dies a quo and ad quem, applicable interest rates, simple interest, compound interest and, if compounded, on what basis).
The Order, finally, addressed the further procedure up to a liability Hearing, and invited comments from counsel on the further procedure as proposed by the Tribunal.
In a joint Submission dated 4 March 2011, counsel to both sides basically agreed to the Tribunal's proposals regarding the further proceedings, with a primary focus on liability issues to be cleared first, thereafter - if necessary - followed by a quantum phase.
On 18 March 2011, the Tribunal issued its 25th Order essentially dealing with Claimant's CM-63/64 in which the Claimant voiced concerns regarding the enforceablity of this Tribunal's Final Award in case one of the Respondent Parties would raise an objection in the sense that it had not been properly notified of the present arbitral proceedings, or that it had not validly been represented.
On 28 March 2011, the Tribunal issued its 26th Order indicating the dates and venue and practical matters for the liability Hearings scheduled to take place on 18-21 October 2011 in Stockholm.
On 22 April 2011, Claimant filed its Memorials CM-65, CM-66 (hereinafter sometimes referred to as the "C-Liability Brief"), CM-67 and CM-68, followed by CM-69 on 27 April 2011, including Mr Sax' witness statement CWS-6 and four expert opinions. In CM-69, Claimant requested assistance from the Tribunal by issuing an Order that Respondent 1 provide the official address of Respondent 4.
On 2 July 2011, Respondents 1 and 2 filed their written Submission on Liability ("R-Liability Brief"), including Mr Karpov's witness statement and four expert opinions
70
On 21 July 2011, the Tribunal issued its 27th Order, providing proposals and directions for the Liability Hearing in Stockholm, and proposing a further telephone conference, after having received the joint proposals of the Parties regarding the schedule/structuring of the Liability Hearings.
The Order also addressed the financial status of the advances and interim payments, and included an estimated budget for the further work likely to be necessary for the further steps in this arbitration, followed by a request for further deposits payable by each side.
On 5 August 2011, Claimant filed CM-70, requesting leave to address a comment in Andrew Fletcher's opinion according which, under English law, the Purchase Agreement (CX-66) does not transfer to Claimant any rights to profits from the Investment Project.
On 9 August 2011, issued its 28th Order, noting the availabilities of the witnesses and the experts at the upcoming Liability Hearing, noting the likely prevention of Professor Sukhanov, yet requesting further particulars as to the reasons for his alleged unavailability prior to making a decision whether or not his expert opinion should be disregarded. The Tribunal also granted a 30 day time-limit for Claimant to address the conclusion in Andrew Fletcher's opinion. In the same Order, the Tribunal denied Claimant's request contained in CM-69, and dealt with CM-71 which was filed on the same day.
On 16 August 2011, Claimant filed CM-72, applying for an extension of time until 16 September 2011 to address the opinion of Andrew Fletcher QC; furthermore, in CM-73, Claimant requested to disallow Professor E.A. Shukanov's Opinion (RWS-5).
On 19 August 2011, the Tribunal issued its 29th Order, granting the time extension requested by Claimant, and on the other hand indicating that Professor Sukhanov's Opinion, filed by Respondents, would have to be disregarded, if he would not be available for oral examination at the October-Hearings, since the alleged importance and eminence of Professor Sukhanov cannot be accepted as a "valid reason" for exceptionally accepting his expert opinion on the record.
71
On 25 August 2011, Claimant's counsel filed CM-74, requesting the production of Respondents' counsel's instruction letter to Andrew Fletcher QC, as referred to in the latter's expert opinion RWS-4.
On 24 August 2011, Claimant filed CM-75, with a renewed motion that the Tribunal requests Respondents 1 and 2 "to confirm DLA Piper's continued authority to act on their behalf". - The Tribunal reverted to the request in its 31st Order, paras. 26 and 27.
On 26 August 2011, the Tribunal issued its 30th order.
On 30 August 2011, Claimant's counsel transmitted the email correspondence between counsel regarding the Hearing Schedule for the Stockholm Hearings in respect of matters on which they could not agree.
In reaction thereto, the Chairman circulated an email reflecting his own proposal for the structuring of the Hearing.
In the afternoon of the same day, the telephone conference took place, dealing with Respondents' application for extending the time-limit regarding the additional advance, and thereafter dealing with the Parties' desiderata regarding the Hearings in Stockholm and further practical aspects. Essentially, both sides agreed to the Hearing Schedule as it had been proposed by the Chairman. Respondents' counsel Josh Wong inquired whether the Tribunal will once again submit a list of issues to be addressed during the Stockholm Hearings.
The essentials of the discussion are reflected in the Tribunal's 31st Order of 31 August 2011, transmitted to the Parties on 2 September 2011. The Order also dealt with Claimant's CM-74 and CM-75. At the same time, the Tribunal condensed its preparatory work by reflecting on, and putting together, a short-list of key-issues, including a series of more particular questions.
On 2 September 2011, the Tribunal - having condensed the numerous questions in a Questionnaire with 53 questions, grouped under 8 Key-Issues - communicated its 32nd Order, accompanied by a caveat that the Question-
72naire did not claim to be complete, and that more and other factual elements and legal issues might have to be addressed during the Hearings. The Questionnaire is reproduced herein below; it will also serve as the topical list of matters which this Tribunal - for the purpose of reaching its decisions - had to consider.
Issue 1: Proper Performance by Claimant and the EBRD Offer
1
Regarding the EBRD 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,
(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 favour of EBRD,
(v)
transfer of management functions to Aeroports de Paris?
3
Hence: Have the Foreign Parties properly fulfilled their "primary obligetion", 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 let 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 73ambit 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 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?
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 by 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 went 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 74that he was advised that the ependitures "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 Rowson'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 come, 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 it approved?
19
For 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 STV's 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 framework 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, as he claims, and as this had been foreseen in FA 13.3?
25
How did the Foreign Parties and/or Mr Sax commercially assess their continued spending under the perspectives of the - as it seems - 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 find their way into the EBRD financing offer, as part 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
How 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 of Claimant?
32
If so, for what 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
77
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, and a 3 year statute arguably must have been familiar to him, since this is the statute of limitation according to many if not most US State law 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 transferre potest 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?
78
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/investor 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 Sax 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 not be changed, and would remain stabilized on the basis as they were in 1995?
And would a claim for exclusivity, as requested by Claimant, be contrary to Russian antitrust law?
79
Issue 8: Cost Decision
Introduction:
The Tribunal may be 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?"
On 17 September 2011, Claimant's counsel filed CM-76, a brief responding to issues arising out of the expert witness statement of Andrew Fletcher QC, supported by CX-256 and an expert opinion on English Law prepared by Romie Tager QC (CWS-10), dated 14 September 2011, and a supplemental witness statement of Mr Carl A Sax (CWS-11), dated 16 September 2011.
80
On 20 September 2011, Respondents filed 1-RM-33/2-RM-39, requesting the Tribunal to disregard the Claimant's CM-76 and the supplemental witness statement of Mr Sax as having been filed without first having obtained leave from the Tribunal.
On 18 September 2011, Claimant filed CM-77, a renewed motion for a jurisdictional ruling as to Respondents 3, 4 and 5, referring to the Tribunal's Orders No. 25 paras. 36-39 and No. 28 para. 9, to which no suit was given by Respondents. Claimant requests the Tribunal to rule that Respondents had "full opportunity to present their case to the Arbitral Tribunal".
On 22 September 2011, by CM-78, Claimant commented on Respondents request to exclude CM-76 and CWS-11, maintaining that Claimant's responses were proper and did not constitute a bad faith conduct and that, on the contrary, the Fletcher Opinion should be excluded from the files in its entirety.
On 28 September 2011, the Chairman sent out an email explaining his views regarding the admissibility of CM-76 and CWS-11, concluding that - although these filings had not had the prior authorization of the Tribunal - they should nevertheless not be struck from the files, and that they might be discussed at the Hearings, to the extent necessary. The same should apply to the legal opinion filed by Andrew Fletcher QC.
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 "clear-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).
81
On 29 September 2011, Respondents' counsel requested leave from the Tribunal to submit short written comments in response to CM-76, CWS-10 and CWS-11 in advance of the Hearings.
On the same day, Claimant's counsel agreed to Mr Kropotov's request, proposing however that, prior to the Hearings, any written submission be filed no later than by 13 October 2011.
On 30 September 2011, the Tribunal confirmed its agreement to the foregoing by email.
On 5 October 2011, Respondents filed 1-RM-34/2-RM-40, with brief comments regarding Claimant Mr Sax's witness statement (C-WS-11), and questioning its credibility.
On 6 October 2011, Claimant filed CM-79, addressing matters of Mr Sax' testimony.
On 10 October 2011, Claimant filed CM-80, suggesting an expert conferencing with the two English law experts, and opposing Respondents' intention to file a further opinion addressing Mr Tager's opinion.
On 10 October 2011, the Tribunal issued its 33rd Order, addressing the matters raised in CM-80, suggesting the preparation of a joint report of the experts on points of agreement and disagreement or, alternatively, the filing of a short rebuttal opinion by Andrew Fletcher QC; the Tribunal also suggested that the experts might meet in Stockholm just prior to their joint examination.
On 12 October 2011, Respondents filed 1-RM-35/2-RM-41 regarding "without prejudice" meetings of the two English law experts Andrew Fletcher QC and Romie Tager QC.
On 13 October 2011, Claimant filed a Pre-Hearing Brief elaborating on further aspects of the Investment Contract, the alleged illegal expropriation, and commenting on Respondents arguments, CM-84.
82CM-84 was accompanied by an Appendix 1, containing detailed responses to the issues and the questions 1 to 53 raised in the Tribunal's 32nd Order. Hereinafter
APP-CM-84.
Further, on 13 October 2011, Respondents filed 1-RM-36/2-RM-42, containing Respondents skeleton brief on liability issues on the 53 questions raised by the Tribunal.
In a separate document, Respondents' counsel addressed several Russian law aspects, essentially in response to Claimant's CM-76.
Furthermore, Respondents filed a supplemental opinion by Andrew Fletcher QC, dated 12 October 2011 (RWS-7), containing comments to the opinion submitted by the Claimant's expert Romie Tager QC (CWS-10).
On 17 October 2011, the two English law experts Andrew Fletcher QC and Romie Tager QC filed a joint Memorandum on matters of English law on which they agreed and disagreed.
From 17 to 21 October 2011, the Liabilty Hearings were held at the Strndvägen 7A Conference Center in Stockholm. The following persons participated:
| - Claimant: |
Mr Carl A Sax (as Party and witness) |
| |
Andrew J Durkovic, counsel |
| |
Vladimir V. Gladyshev, counsel |
| |
Professor Oxana M Oleynik, as legal expert, present on 18 and 19 October 2011 |
| |
Christer Hakansson, counsel, partly only |
| |
Romie 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 |
83
| |
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 Kroptov, 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 |
- Respondent 3-5: |
no appearances |
| - Tribunal: |
Advokat Per Runeland |
| |
Professor Andrey Bushev |
| |
Marc Blessing |
| - Court reporter: |
Mrs Susan McIntyre, Reporting International |
London,
rptgintl@dircon.co.uk
84The Parties and witnesses/experts - in agreement with the Parties and their counsel - were heard as follows:
-
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 Rowson, both of Alan Stratford (on the NIPT Base 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 Butler 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 Tai-Heng Cheng on aspects of international law; he delivered a voluminous folder with a collection of cases and materials as references to his (interesting and eloquent) oral presentation between 17h00 and 18h35.
85
-
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 additon, Mr Sax etensively 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 closing arguments; closing of the Hearings in the afternoon of 21 October 2012.
On the last day, 21 October 2011, the Parties and their counsel, with words of thanks, affirmed the correctness of the proceedings, and voiced no criticism regarding due process, fairness of the procedure, their right to be heard and equal treatment. The statements were recorded as follows:
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 at least on the two prime duties there are any complaints to the proceedings we 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, very 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.
86
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.
Moreover, on the last day, the further procedure and time-table was discussed, in particular the size of Post-Hearing Briefs and the level of detail for the cost submissions, coupled with the suggestion that counsel may wish to come up with a joint proposal. The following steps were thereupon agreed:
-
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.
The Tribunal indicated its intention to notify its Award within March 2012.
On 10 November 2011, Susan McIntyre delivered the verbatim transcripts to the Members of the Arbitral Tribunal and the Counsel who attended the Stockholm Hearings; in total 904 pages plus 107 pages of indices.
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.
On 16 November 2011, the Tribunal issued its 34th Order, reflecting the sequence of examinations at the Stockholm Hearings. Furthermore, the 34th Order confirmed the further procedural milestones as they had been agreed in Stockholm, i.e. 20 January 2012 for the simultaneous filing of Post Hearing Memorials and 20 February 2012 for the simultaneous filing of Cost Submissions, whereupon the present arbitral proceedings, as far as relating to lia-
87bility, will be considered closed, with no further filings being admitted into the record except upon specific leave by the Tribunal.
In connection with these two further filings due 20 January 2012 and 20 February 2012, the Tribunal invited counsel to communicate internally in respect of (i) the length of the Post Hearing Memorials and (ii) the format and level of detail and further issues (compensability of Party costs, interest, currency, payment terms) for the preparation of the Cost Submissions.
The 34th Order also informed the Parties of a further draw-down from the deposit in the total amount of EUR 202'860.--, covering interim fees of the Arbitrators on time-spent basis, travel disbursements, Conference Center charges and charges of the verbatim reporter.
On 12 December 2011, Respondents' counsel transferred the further advance of EUR 100'000.-- to the Tribunal's separate account.
On 20 January 2012, Claimant filed the Post-Hearing Brief CM-85, together with an updated index of Claimant's Submissions CM-1 to CM-85, and an updated index of Claimant's exhibits CX-1 to CX-262. Claimant's PH-Brief essentially focuses on the validity of the Investment Contract, its breach by Respondents under the standards of Russian and international law amounting to an unlawful expropriation and, consequently, the liability for the full quantum of damages, including interest and sanctions.
On the same day, also Respondents 1 and 2 filed their Post-Hearing Brief 1-RM-37/2-RM-43.
On 30 January 2012, Claimant filed CM-86 which discussed a number of issues which counsel to both sides had not been able to solve in respect of the format and contents of their cost submissions due to be filed in February 2012.
On 31 January 2012, the Tribunal issued its 35th Order, suggesting to organize a telephone conference on either 6, 7 or 8 February 2012. After review of
88counsel's availability, the telephone conference was fixed to take place on Tuesday 7 February 2012, at 15h30 Zürich time.
On 7 February 2012, a telephone conference took place attended by Claimant's counsel Andrew Durkovic (partly), Vladimir Gladyshev and Repondents' counsel Leonid Kropotov and the members of the Tribunal for discussing the different views reflected in CM-86 in respect of cost-related issues.
Inter alia, the Tribunal discussed the time for payment and any post-award interest which might be due and payable in respect of the Tribunal's cost decisions. Regarding payment terms, Mr Leonid Kropotov on behalf of Respondents urged that any payment should only become due after 1 January 2013, because - as he explained - there is no allowance in the City's budget for the current year; Mr Durkovic on behalf of Claimant disagreed and stressed that a payment for reimbursement of Party costs will be due as of the day of notification of the Arbitral Award.
On this query, the Tribunal indicated that it could be minded to grant a grace period of 30 days for a party to reimburse arbitration costs to the other party, but that - certainly - the Tribunal could not endorse Mr Kroptov's proposal. Applying a 30-day grace period would mean that default interest on the outstanding payment would only start to run as from the 31st day onwards on a simple (not compounded) interest basis. It may be noted that Claimant's counsel, in CM-87 para. 7, agreed to the application of such a grace period.
As for the interest rate, there was discussion whether it should be determined by looking at the lex causae, or whether some other basis would be more appropriate.
On 20 February 2012, Respondents filed the Cost Submissions 1-RM-38/2-RM-44.
On the same day, also Claimant filed the cost submission, CM-87, together with a spread-sheet and the updated indices of CMs and Cxs. As far as the interest rate is concerned, Claimant's counsel requests that any sum
89awarded to Claimant but unpaid during the grace period shall bear interest at the rate of
21.58% per annum, charged on a monthly compounded basis. Claimant's submission
inter alia also contains the Engagement Letter signed between Amsterdam & Peroff and Claimant Mr Sax, providing for stage payments and a 10% success fee. CX-265 and Exhibits.
The discussion of these cost-filings will follow in the Cost Section at the end of this Award.
On 21 February 2012, the Tribunal asked Respondents' counsel for clarification of the claim for recovery of counsel fees, which was answered by return mail of Mr Kropotov.
On 22 February 2012, the Tribunal issued its 36th Order, granting each side an opportunity to comment on the other side's cost submissions by 27 Februrary 2012, and inviting further comments from Respondents "in case this Tribunal was to decide on some reimbursement of costs to Respondents", in particular
-
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.
On 27 February 2012, Respondents replied by 1-RM-39/2-RM-45 regarding reimbursement to Claimant, proposing "to set the term for cost-reimbursement as one year after the communication of the Award; the reason for such a long term is that St. Petersburg City is a public subject with rigid and long-lasting planning procedures ..." and further stated that they would agree to apply the LIBOR rate for 3 months deposits, as a rate which would not depend on the winning party. Respondents "see no grounds to ap-
90
ply interest rate for personal loans in the State of Florida and any further "insentivised" increase of the rate".
In addition, Respondents commented on Claimants cost statement by remarking that only some general indications are given regarding the Swedish and Russian counsel, but "no words about the services", further remarking that travel expenditures to Madrid, Valencia, Portofino etc. are included with no evident relation to this Arbitration, and the same would apply to the fees and expenses of several experts from whom no expert reports had been received.
The Arbitrators deliberated the issues throughout the proceedings and met again in Stockholm during the week of 5 March 2012 for oral deliberation sessions.
*****
91
The present investment dispute is governed by an undisputedly valid arbitration agreement reflected on Chapter C above. In these proceedings, neither Party has ever raised a concern or a plea that a State court rather than the present Arbitral Tribunal should exercise jurisdiction to hear the claims and to adjudicate the present dispute, and both, Claimant as well as the Respondents 1 and 2, have actively participated in these proceedings.
The Tribunal reiterates that in the case at hand the Parties relationship is that of an investment, and is based on a complex mix of numerous legal norms, none of which prevails, and which must be analyzed in a close link with others. Thus the position of the investor and stockholder is to be considered along with, and in context of, the rights and obligations arising under the Investment Contract as a whole.
The Tribunal, therefore, affirms its subject-matter jurisdiction.
Pursuant to a Purchase Agreement dated 17 December 2002, filed as CX-66, and pursuant to a Bill of Sale of even date (CX-59), Claimant Mr Sax as buyer in his own name acquired from PSP (also represented by Mr Sax) and SP (also represented by Mr Sax) as sellers, a 29.7% "stock interest" in IAT Pulkovo, as well as a US$ 20+ million pre-development expense receivable from IAT Pulkovo.
According to Article 14 of the Purchase Agreement, a registration of the transfer of the stock-interest was envisaged, but never took place.
92The Agreement is governed by, and to be interpreted and enforced with, the laws of England and Wales.
The validity and legal effects of CX-66/CX-59 are disputed by Respondents, particularly in respect of the effects or meaning of the transfer of the "stockinterest". Respondents maintain that no assets other than receivables were transferred, but not the rights and obligations under the Founders' Agreement. Therefore, Respondents argue, Claimant neither became a party to the Founders Agreement, nor did he become entitled to any profits there under. R-Liab Brief para 54/55, Fletcher Opinion RWS-4 paras 73-82.
Respondents further recall that in any event PSP was not entitled to sell its shares without prior approval from all other parties, nor could they be sold, since they had never formally been issued. Claimant, therefore, never became a party to the Investment Project, and thus is "definitely not entitled to file the 29.7% Interest Claim, Development Fee Claim ... and Claim for Reinstatement". 1-RM-32/2-RM-38 para. 62.
Claimant's expert, Romie Tager QC, disagreed with several conclusions; CWS-10.
Prior to the Stockholm Hearings, the two English law experts Andrew Fletcher QC (expert for Respondents) and Romie Tager QC (for Claimant) rendered highly detailed expert opinions on the meaning to be given to the term "stockinterest", which - both experts agreed - is not a recognized term of art.
Prior to the Hearings, the two experts met on 17 October 2011 and, thereupon, filed a joint opinion on points of their mutual agreement, and points on which they disagree. They constituted a file containing the Minutes of their Joint Meeting as well as copies of the leading authorities/court cases on which they relied.
93Both experts, Fletcher and Tamie, were examined at the Stockholm Hearing, first through examinations by counsel, and subsequently through questions put to them by the Arbitral Tribunal in an expert conferencing mode.
Under a strict view, Mr Fletcher explained (and taking guidance from the Lord Hoffmann interpretation principles as reflected in the leading English-law case on contract interpretation, i.e. the Chartbook Case, Claimant - for lack of recognized title - acquired nothing.
Mr Tager, while agreeing that "Chartbrook is probably the most important case", disagreed.
In the PH-Brief, Claimant further addressed the issue in some more detail, inter alia referring to Article 7 of the Russian Foreign Investor Law of 9 July 1999 which deals with an investor's right "in accordance with an agreement" to "transfer rights and obligations ... to another person in accordance with the civil legislation of the Russian Federation". Hence, Claimant argues, the Purchase Agreement and Bill of Sale in conjunction with the guarantees reflected in Article 5 of Russia's Foreign Investment Law gave Claimant the right to obtain damages equal to the pre-development advances plus interest, damages connected to the developer fee and an equity participation equivalent to PSP's 29.7% interest in IAT Pulkovo.
Respondents, in their PH Brief, again denied the validity of the assignment.
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