As the general contractor in a construction project in a Middle Eastern State (B), the Respondent, a European company, subcontracted certain works required for the project to the Claimant, a North African company. The FIDIC Conditions of Subcontract for Works of Civil Engineering Construction, 1st edition 1994, parts I and II (general and particular conditions), 'were applicable' to the subcontract and Swiss law was the governing substantive law. During the project dissatisfaction was expressed by the Respondent and the Employer with the quality and progress of the Claimant's work. Revised production schedules were issued but were a source of further contention between the parties. Negotiations were undertaken to terminate the subcontract with each party laying the blame upon the other. The Respondent finally issued a notice of termination based on FIDIC Clause 18 (c), (d), (e) and (g), called the Claimant's performance bond and advance payment guarantee and requested the Claimant to leave the site. While withdrawing from the site, the Claimant initiated arbitration proceedings, alleging that the subcontract had been unjustifiably terminated and seeking payment of the work it had done and damages for costs and losses that it alleged were due to the Respondent's bad management.En tant qu'entrepreneur principal d'un projet de construction dans un État du Moyen-Orient (B), la défenderesse, une société européenne, avait sous-traité à la demanderesse, une société nord-africaine, certains travaux nécessaires au projet. Les Conditions de contrat de sous-traitance applicables aux marchés de travaux de génie civil de la FIDIC, 1re édition 1994, parties I et II (conditions générales et particulières), « étaient applicables » au contrat de sous-traitance, qui était régi au fond par la loi suisse. Au cours de la réalisation du projet, la défenderesse et le maître de l'ouvrage se sont déclarés mécontents de la qualité et de l'avancement du travail de la demanderesse. Des programmes d'exécution révisés ont été établis, mais ont été une source de contentieux supplémentaire entre les parties. Des négociations ont été entamées en vue de résilier le contrat de sous-traitance, chacune des parties blâmant l'autre. La défenderesse a finalement donné une notification de résiliation fondée sur la clause FIDIC 18 (c), (d), (e) et (g), fait appel aux garanties de bonne exécution et de restitution d'acompte fournies par la demanderesse et prié cette dernière de quitter le chantier. Tout en obtempérant, la demanderesse, estimant que le contrat de sous-traitance avait été abusivement résilié, a engagé une procédure d'arbitrage afin d'obtenir le paiement des travaux qu'elle avait exécutés ainsi que des dommages-intérêts pour les frais et les pertes dus selon elle à la mauvaise gestion de la défenderesse.En su calidad de contratista general en un proyecto de construcción en un Estado del Oriente Medio (B), el demandado, una empresa europea, subcontrató al demandante, una empresa norteafricana, para realizar algunas de los trabajos necesarios para el proyecto. Las condiciones para subcontratar trabajos de construcción de ingeniería civil de la FIDIC (1ª edición, 1994), partes I y II (condiciones generales y particulares), «eran aplicables» al subcontrato y la ley material aplicable era la ley suiza. Durante el proyecto, el demandado y el empleador manifestaron su insatisfacción en relación con la calidad y el avance de los trabajos del demandante. Se elaboraron nuevos calendarios de producción modificados, pero estos representaron una nueva fuente de controversia entre las partes. Asimismo, se entablaron negociaciones para rescindir el subcontrato en las que cada una de las partes atribuía la culpa a otra parte. El demandado finalmente emitió una notificación de rescisión basada en la cláusula 18 (c), (d), (e) y (g) de la FIDIC, pidió la garantía de buena ejecución del demandante y la garantía por anticipos y solicitó que el demandante abandonara la obra. Al retirarse de la obra, el demandante inició procedimientos de arbitraje alegando que el subcontrato había sido rescindido de forma injustificada y reclamando el pago del trabajo realizado y una indemnización por costes y perjuicios que, según alegó, se debían a la mala gestión del demandado.

'1. The principle of termination

427. The first basic option the Arbitral Tribunal has to deal with is the basis for the termination of the Subcontract by [Respondent]. The Parties' positions are clear and can be summarized as follows:

428. According to [Claimant], Respondent has terminated the Subcontract without cause pursuant to Article 377 CO and is therefore liable for the damages incurred by [Claimant]. [Claimant] does not have to assume the damage incurred by Respondent.

429. According to [Respondent], the Subcontract was terminated for cause pursuant to the FIDIC Conditions, and [Claimant] is liable for the damage incurred by [Respondent]; [Respondent] is not liable for the damage allegedly incurred by [Claimant].

. . . . . . . . .

1.2 The general positions of the parties

1.2.1 [Respondent]'s position

442. In short, [Respondent's] position can be summarized as follows:

443. [Respondent]'s termination of the Subcontract was done in two steps: By letter of December 3, 1999, [Respondent] withdr[e]w several parts from [Claimant]'s scope of works . . .; later, by letter of December 20, 1999, [Respondent] terminated the entire contractual relationship . . .

444. [Respondent]'s part-termination of December 3, 1999 was based on Clause 18.3 of the FIDIC Conditions. [Respondent]'s termination of December 20, 1999 was based on Clauses 18.1 (c) and (d) of the FIDIC Conditions, whereby [Respondent] pointed out, that-in its view-Clauses 18.1 (e) and (g) would also give sufficient grounds for termination . . .

. . . . . . . . .

453. According to [Respondent], the issue of the termination of the Subcontract is exclusively ruled by Clause 18 of the FIDIC Conditions. The Subcontract would show no gap in this respect . . . [Respondent] sustains that all the conditions provided for in Clause 18.1 of the FIDIC Conditions were met and that it thus validly terminated the Subcontract . . .

. . . . . . . . .

1.2.2 [Claimant]'s position

456. In short, [Claimant]'s position can be summarized as follows:

457. According to [Claimant], Clause 18.1 of the Subcontract needs to be completed and interpreted in light of the relevant provisions of Swiss law, i.e. Articles 366(370 and 377 CO . . .

458. [Respondent] has the burden of proving the causes of termination it is relying on (Art. 8 Swiss Civil Code [= SCC]). Thus, [Respondent] has the burden of proving that the conditions of those provisions are fulfilled, i.e. that there was sufficient cause for termination under the conditions they lay down. If [Respondent] fails to meet that burden of proof, the termination is deemed to be without cause under Swiss law, with the consequence that Article 377 CO applies instead and [Claimant] is entitled to be fully indemnified . . .

459. According to [Claimant], [Respondent] has failed to prove that any of the cumulative conditions of Clause 18 of the FIDIC Conditions in relation with Article 366 CO are fulfilled . . .

460. According to [Claimant], and referring to the letter of termination of December 3, 1999, Clause 18.3 of the FIDIC Conditions is silent concerning the conditions under which the Main Contractor can withdraw part of the works from the Subcontractor. Therefore, the answer must be sought by interpreting and completing it in light of Swiss law. According to [Claimant], the relevant provision of Swiss law is Article 366 II CO, which is based on the principle that if defects need to be remedied by a third party it is only the defective works that should be withdrawn from the Contractor and not the remaining works. However, by letter of December 3, 1999, [Respondent] would have done exactly the opposite since it has withdrawn from [Claimant] the entire parcel of remaining works. Moreover [Respondent] failed to prove that any of the causes it was invoking existed . . .

461. According to [Claimant], and referring to the letter of termination of December 20, 1999, Clause 18.1 (c) of the FIDIC Conditions is very similar to Article 366 I CO, since both provide for termination under certain conditions if the work is either commenced late or delayed. Thus, if Clause 18.1 (c) of the FIDIC Conditions is unclear or silent in any respect, it must be completed in the light of Article 366 I CO . . .

462. According to [Claimant], there cannot be any failure in commencing the works, as-in December 1999-the works had already been underway for nearly two years . . . As to the alleged failure in proceeding with the works, Clause 18.1 (c) and Article 366 I CO would provide for following cumulative conditions . . .

463. 1) A delay caused by [Claimant] would prevent the timely completion of the entire works;

464. 2) [Respondent] did not cause part of the delay that would prevent the timely completion of the works;

465. 3) [Respondent] put [Claimant] on notice to overcome the delay in question;

466. 4) [Claimant] refused to take the necessary measures.

467. However, according to [Claimant], none of these conditions are met.

. . . . . . . . .

471. In summary, according to [Claimant], the delays are attributable to [Respondent]'s own failure in respect to the management of site, the design, the earthworks and the site handovers as well as the instructions, and which constitute the cause of the delays and difficulties [Respondent] is attempting to attribute to [Claimant] . . . As a consequence thereof, [Respondent] would be barred under Swiss law (Art. 91 CO and 366 I CO, "sans la faute du maître") from attributing to [Claimant] any related delays . . .

472. [Claimant] further alleges that Clause 18.1 (d) reflects the idea of Article 366 II CO . . ., which provides for following cumulative conditions . . .:

473. 1) Termination must be grounded on defects invoked by [Respondent] before the delivery of the works, which in this case means before termination;

474. 2) The defects in question were serious enough to certainly prevent the delivery of the entire works;

475. 3) [Respondent] put [Claimant] on notice to remedy the specific defects in question;

476. 4) The notice period was reasonable;

477. 5) [Claimant] refused or neglected to remedy the specific defects in question.

478. However, here again, [Claimant] brings forward that none of these conditions are met.

479. 1) The defects were allegedly invoked too late, because after-the-fact based on [witnesses]'s Report . . .

480. 2) No taking-over inspections nor procedures took place before the termination of the Subcontract in December 1999. [Witness]'s reports on which [Respondent] is relying today cannot constitute the basis of its termination of the Subcontract because they are subsequent to the termination . . . Moreover, [Respondent] served no notice of defects on [Claimant] on the basis of [witness]'s reports and [Claimant] received them for the first time with [Respondent]'s Answer and Counterclaim . . . [Respondent] would therefore be barred from making any claims in relation to the defects alleged therein . . .

481. 3) Termination is an extreme measure only to be taken when no other alternative is possible . . . The defects, which fall within three categories: strength of concrete, work out of tolerance, and quality of surface finishes, may not justify a termination . . .

482. 4) None of the other miscellaneous notices [Respondent] is invoking are relevant because they either do not relate to proven defects or relate to minor issues or concern defective works which were repaired . . .

483. 5) [Respondent] has not established that [Claimant] neglected to undertake any repairs that were requested and justified . . .

484. As to litera (e) and (g) of Clause 18.1, [Claimant] sustains that [Respondent] cannot today rely thereon if it chose not to do so in December 1999 . . . Moreover, Clause 18.1 (g) could not in good faith be interpreted as giving a right to terminate without full compensation to the subcontractor. In other words, subparagraph (g) must be deemed to give the main contractor the same rights and obligations as Article 377 CO . . .

485. Consequently, the conditions of Article 366 CO not being met, [Respondent] would be liable under Article 377 CO for the unpaid works, the variations and the additional costs ("le travail fait"), for [Claimant]'s expenses ("perte éprouvée") and for lost profit ("gain manqué") . . .

1.3 The basic rules

486. Before exploring in detail the grounds invoked by [Respondent] and, more generally, the other causes which can lead to termination of contracts, it is worth making a number of general remarks:

1.3.1 The burden of proof

487. The first issue concerns the burden of proof. The following points must be distinguished:

488. The burden of proof lies with the Employer, in casu [Respondent], when it claims to be entitled to terminate the Contract for cause. Under Swiss law, the Employer has the right to take unilateral action to terminate the contract, even without cause according to Article 377 CO. But in exchange of [sic] this nearly unrestricted right to terminate contracts for convenience, the Employer is generally required to totally indemnify the Contractor. If [Respondent] considers that it was entitled to terminate the Contract for cause, which would exempt it from any compensation to [Claimant], it is required to prove its right. This issue is disputed amongst the legal authors, but the above interpretation must prevail . . . for being in accordance with the general principles on the allocation of the burden of proof (see mainly Art. 8 SCC) which requires that the terminating party must prove the facts which justify the termination.

489. One must however add that when the Contractor, in casu [Claimant], wishes to terminate or at least suspend the contract, he is required to demonstrate that it [sic] has sufficient grounds to do so. This assertion is also based on the general principles.

490. For the Arbitral Tribunal, the burden of proving that termination was based on sufficient grounds is to be assumed by [Respondent], which also bears the risk of the failure of such proof. However, the burden of proof is shifted to [Claimant] to prove that it was entitled to suspend the works.

1.3.2 The principle of termination for cause

491. The issue of whether the Employer (here: [Respondent]) or the Contractor (here: [Claimant]) may terminate the construction contract for cause ("justes motifs") is undisputed. This right exists in Swiss law for all long-term contracts. Although the Swiss Federal Court did not decide in a recent case on the question of the termination for cause in respect of construction contracts, it categorically admitted in a more recent decision that this right was a general principle concerning all contracts . . . This solution must prevail as it takes into consideration the necessary limits which must be drawn to any long-term contractual relationship; a long-term contract shall not survive whenever the occurrence of certain circumstances make its continuation impossible or unsustainable.

492. In any event, the options for termination are in casu expressly set forth in Clause 18 of the FIDIC Conditions contained in the Subcontract. It is generally admitted that the Parties may contractually define the causes which can be deemed to be possible grounds for termination, regardless of their conformity to the grounds recognized by case law. The court must only ensure that at least one of these conditions has been established in order to consider it as a proper termination for cause.

493. One must however recall that grounds for default cannot be easily admitted . . . Termination has a great impact on the Parties and is as such an exception to the principle of contractual fidelity. For this reason, it presupposes that certain substantial conditions must be fulfilled because a proper termination for cause deprives the Contractor of any compensation or allocation for damage and the Employer from the possibility to seek the full completion of the construction work.

494. For the Arbitral Tribunal, Respondent has the burden of proving that all the conditions provided for in the FIDIC Conditions, or subsidiarily other conditions allowing contract termination, are fulfilled; however, insofar as Claimant seeks an exemption from its own liability, it must prove the facts which ground its claim.

. . . . . . . . .

2. Discussion of termination

2.1 Termination grounded on Clause 18.1 (c) of the FIDIC Conditions

. . . . . . . . .

541. It is undisputable that the handover of the building site occurred with great delay and partly in an uncertain manner. There is no doubt that Claimant was able to access to [sic] the site areas or at least part of them, but the conditions in which the accomplishment of the handover was made were such that they affected the conduct and the management of the construction site. This element had without doubt an impact on the delays which occurred during the works and for this reason cannot be attributed to Claimant's responsibility. On the other hand, one must also see that these delays were not caused by Respondent, but by the Employer itself who was responsible for the site handovers; however, as stated above, Respondent must be held responsible for this late handover . . . In this respect, it is reminded that the Arbitral Tribunal does not have to decide on the internal allocation of the responsibilities.

542. It is also undisputable that important delays occurred in the handover of the drawings. The procedure provided by the Subcontract was relatively formalistic and, as pointed out by the Expert, one can admit that the Subcontractor was often in a position to start the work before reception of the last approval of the plans. And yet, for all that, even under this reserve, Respondent encountered serious difficulties in the preparation of the plans. This fact cannot be attributed to Claimant and most probably these problems were caused by the failures of the local offices entrusted by Respondent. But once again, this does not exonerate Respondent from its responsibility . . . It should however be kept in mind that the Arbitral Tribunal does not have to decide on the internal allocation of the liabilities.

543. It is finally also undisputable that the Subcontractor is mainly liable for the failures noted by the Expert, not only in the resources and equipment provided on site, but also in the progress of the works. The explanations provided by Claimant on this issue did not convince the Arbitral Tribunal. Furthermore, the Respondent's defects alleged by Claimant do not exonerate Claimant from its failures.

544. It is essential to note that both Parties had no other choice but to modify, on a common agreement, the contractual Time Schedule on several occasions; this must be interpreted as a common intention to forget the past and secure the future. It is true that even the last schedule could not be complied with, due to the low rate of progress in casting concrete during the last months preceding termination. This may be mainly attributed to Claimant, but its attitude can also be explained by the extreme duration of the works caused by both Parties and by the financial problems linked to these very difficulties on the site.

2.1.4 Conclusion

545. As a result of the above, the Arbitral Tribunal considers that although Claimant is liable for part of the delays which occurred during the course of construction, this element is not a sufficient ground, in consideration of Respondent's own failures and delays, for terminating the Subcontract for default by the Subcontractor pursuant to Clause 18 (c) of the FIDIC Conditions.

2.2 Termination grounded on Clause 18.1 (d) of the FIDIC Conditions

. . . . . . . . .

554. The defects caused by the Subcontractor during the construction work are in themselves not a sufficient ground for terminating the Subcontract for cause. Generally, the Contractor, in casu [Claimant], is invited to remedy the default during the work and in case of defective works, the applicable rules bestow upon the Employer many types of action. The termination remedy is usually reserved for substantial and material breaches-close to non-performance-of the contract; the Contractor must have been given by the Employer, in casu [Respondent], an opportunity to correct or "cure" the default or breach of contract, and the former must have clearly refused or appeared to be unable to do so. Additionally, the Employer must notify the other party of its default and allow a specified period of days to elapse before terminating the Contract . . .

555. On the basis of the documents produced by the Parties, it is difficult for the Arbitral Tribunal to reconstruct the history of events as they happened on the construction site, and assess, even with the Expert's assistance, the nature and the extent of the defects. In any event, such a task is no longer possible in consideration of the amount of time which has passed since the completion of the project. Although the existence of defaults is apparently not contested by the Parties, this does not suffice in itself. This is true especially as the Parties have diverging opinions on the quality requirements expected by the Employer, and as even the experts disagreed on these requirements. Under these circumstances, it seems difficult to consider these defects, should they be evidenced, as sufficient in themselves to ground a termination of the Subcontract.

556. It is also true that the Contractor repeatedly expressed to the Subcontractor its dissatisfaction about the quality of its work and general attitude. On the basis of the proceedings, the Arbitral Tribunal is convinced that the construction work was done in difficult and peculiar conditions, not to mention that work had commenced in bad conditions due to the late site handovers. Therefore, the Arbitral Tribunal considers that the reproaches made to the Subcontractor are not sufficient to explain the difficulties occurred during the course of construction.

2.2.4 Conclusion

557. As a result of the above, the Arbitral Tribunal considers that, although Claimant is liable for part of the defects in the performance of the work, this element is not a sufficient ground for terminating the Subcontract for cause pursuant to Clause 18 (d) of the FIDIC Conditions.

2.3 Termination grounded on Clause 18.1 (e) of the FIDIC Conditions

. . . . . . . . .

575. Clause 18.1 (e) of the FIDIC Conditions is a more general provision since it concerns all sorts of contract violations which may justify the Contractor's action to terminate the Subcontract. The Arbitral Tribunal will not discuss again the reproaches made by Respondent that have already been discussed above. It notes however that a plurality of different causes may be deemed to be a ground for termination.

576. For the Arbitral Tribunal, the relationship between the Parties reached a dramatic point during the two months preceding the notice of termination. The reproaches and threats made by each Party to the other was [sic] a bad omen for their future relationship. One can understand the Contractor's desire to do everything to "save" the Subcontract and avoid its termination, which is a severe measure which may have serious consequences for all the parties, including the terminating party. Due to the pressure exercised by the Site Management, Respondent's interventions became more and more frequent and firm, to the extent that Respondent finally gave to Claimant ultimatums which were almost unrealistic.

577. It is also true that [Claimant] showed serious doubts as to its willingness to continue the Contract. The situation between the Parties worsened, so did the relationships between their representatives working on the construction site. In this respect, it is certain that Claimant's decision to file an action against [Respondent] in the [State B] Courts was to be understood as a "declaration of war", so true is it that such an action practically made the continuation of the Parties' cooperation impossible. As mentioned by Respondent, although this measure was in itself admissible, it was contrary to the spirit of the Contract and its mechanism of dispute resolution. However, in the Arbitral Tribunal's opinion, this event is not a sufficient ground for termination, considering all the events which occurred in the context of the developments and of the deterioration of the situation in the previous months. It shows nevertheless that the relationship between the Parties had reached a point of no-return. The Arbitral Tribunal will take this element into consideration at a later stage in its reasoning.

2.3.4 Conclusion

578. As a result of the above, the Arbitral Tribunal considers that although Claimant is liable for part of the additional problems worsening the relationship between the Parties, this element is not a sufficient ground for terminating the Subcontract for cause in accordance with Clause 18.1 (e) of the FIDIC Conditions.

2.4 Termination grounded on Clause 18.1 (g) of the FIDIC Conditions

. . . . . . . . .

583. It is not disputed that the Site Management instructed the Contractor to terminate [Claimant]'s employment for its repeated failures . . . In the Arbitral Tribunal's opinion, this action is acceptable only if it is immediately and directly followed by the termination of the Subcontract. In casu, [Respondent,] who was put under pressure by [the Engineer], first attempted to have [Claimant] remedy the defects; this proves that Respondent did not hold [the Engineer]'s instruction as a coercive measure, failing which it would have immediately terminated the Subcontract. This is particularly true for the Engineer's instructions of May and August 1999, as Respondent made again several attempts to have Claimant remedy the defects.

584. The Arbitral Tribunal does not consider it necessary to decide on the consequences of a termination for this particular cause. As noted above, this measure is severe and allows the Contractor to keep the control over the subcontractors and the right to terminate them, without indemnity. Although [the Engineer]'s instructions do not seem, for the above-mentioned reasons, to be a sufficient ground for termination, they are deemed to be considered as an additional indication to have Claimant assume part of the consequences of the termination.

2.4.4 Conclusion

585. As a result of the above, the Arbitral Tribunal considers that, although Respondent was instructed by [the Engineer] to terminate the Subcontract, it renounced to [sic] immediately resort to this measure and, for this reason, [the Engineer]'s instruction cannot be considered as a sufficient ground for the termination by [Respondent] of [Claimant]'s employment according to Clause 18.1 (g) of the FIDIC Conditions.

2.5 Termination based on another cause

. . . . . . . . .

593. For the Arbitral Tribunal, it is obvious that the Parties have the right to reserve in advance the rules governing the termination of their contract. It is exactly what the Parties have done in the present case since they included Clause 18 of the FIDIC Conditions in their Contract. These contractual clauses overrule the legal provisions dealing with an identical situation. In casu, Clause 18 of the FIDIC Conditions replaces and partly modifies the two subclauses of Article 366 CO, which are no longer applicable . . .

594. However, since the Contractor cannot ground the termination of the Contract on any of the causes set forth in Clause 18 of the FIDIC Conditions, then Article 377 CO applies and [Respondent] will be considered to have used its unconditional right to terminate the Contract for convenience; contrary to Respondent's assertion, Article 377 CO is not absorbed by Clause 18 (g) of the FIDIC Conditions, although the latter seems to be favourable to the terminating party: The situation which is underlying Clause 18 (g) is different from the one on which Article 377 CO is focused, because Clause 18 (g) is a type of termination for cause, whereas, under Article 377 CO, the Employer exercises its unconditional right to terminate the agreement without cause.

595. As a particularity, Article 377 CO obliges the terminating Employer to indemnify the Contractor not only for all the usable work completed to date of termination but also for the lost profits.

596. Although the Arbitral Tribunal admits this principle, it considers that its application should not automatically result in a full indemnity.

597. This principle cannot be strictly applied to large and complex contracts such as the Subcontract signed between [Respondent] and [Claimant]. As generally admitted, the legal rules should be applied as suppletive rules but on condition that they correspond to the spirit of the Contract. Accordingly, it would be contrary to the general spirit of the Subcontract to consider that the terminating Party should be liable for the total damage, without taking into consideration the other Party's liabilities for part of the misperformance of the contract.1

598. Although this issue is still disputed amongst the legal authors,2 the court may, according to the Swiss general conception of law, reduce the damage when liabilities are shared between the parties. This principle, provided for in torts law by Article 43 and 44 CO and also applicable in contract law (see Art. 99 al. 3 CO), should be extended to all cases. The "everything or nothing" formula is unsatisfactory and does not reflect the complexity of contracts, for instance in construction law.

599. This theory is also confirmed by the fact that the Employer's right to terminate a construction contract for cause is now generally recognized by Swiss law. In this case, the Employer is not liable for any damage but it may under certain circumstances seek damages from the Contractor. This proves the existence of intermediary situations where the ordinary mechanism of liability must be softened.

600. For this reason, the Arbitral Tribunal holds that although the Contractor terminated the Contract under Article 377 CO, it is entitled to reduce the damage claimed by the Subcontractor, this in order to take into consideration the Subontractor's shared responsibility in the deterioration of the relationship between the Parties.

. . . . . . . . .

3. Decision as to the costs of the arbitration

3.1 Preliminary remarks

1290. The costs of the arbitration shall include the fees of the arbitrators and take note of the Arbitral Tribunal expenses and the ICC administrative expenses as well as the fees and expenses of any experts appointed by the Arbitral Tribunal and the reasonable legal and other costs incurred by the Parties for the arbitration (Article 31 al. 1 ICC Rules3).

1291. The ICC Court of Arbitration shall fix the fees of the arbitrators and the ICC administrative expenses (Article 31 al. 1 ICC Rules) and shall take note of the Arbitral Tribunal's expenses. The Arbitral Tribunal has the authority to fix all other fees, costs and expenses (Art. 31 al. 2 ICC Rules).

1292. In addition, the Arbitral Tribunal has to decide which of the Parties shall bear the costs of the arbitration or in what proportion they shall be borne by the Parties (Art. 31 al. 3 ICC Rules). Consequently, the Terms of Reference . . . mention . . . that the Arbitral Tribunal shall determine all "issues with respect to the amount and the allotment of the costs of arbitration, including reasonable legal and other costs incurred by the Parties for the arbitration".

1293. In accordance with basic principles of Swiss procedural rules, which are to be applied in this arbitration, the Arbitral Tribunal will, in principle, apply the rule of "costs follow the event" (or "loser-pays rule"). However, the Arbitral Tribunal reserves full discretion as to how strictly this rule will be applied to the case at hand.

3.2 Findings of the Arbitral Tribunal

. . . . . . . . .

1304. Although the ICC Rules do not contain a definition of the "other costs incurred" by the Parties, it has become more and more accepted over the years that "other costs" may also include the costs which a party incurred for in-house staff specifically appointed to prepare and support proceedings before an arbitral tribunal. In the case at hand, however, the evidence on record does not enable the Arbitral Tribunal to accept the full amount of salaries claimed. The Arbitral Tribunal is neither in a position to find out how much time the above-mentioned persons effectively dedicated to the preparation and support of the proceedings, nor to review whether the salaries claimed correspond to their employment agreements. On the other hand, the Arbitral Tribunal is aware that those persons in fact played a considerable role on [Claimant]'s side. All in all, the Arbitral Tribunal finds it appropriate to cut the total amount . . . down to 50% . . .

1306. In view of the total amount in dispute . . ., the complexity of the case and the time spent, the Arbitral Tribunal finds that the aforementioned amount . . . represents reasonable legal and other costs incurred by [Claimant] in terms of Article 31 al. 1 ICC Rules.

1307. Based on the total amount in dispute, the Arbitral Tribunal determined that [Claimant] succeeds by 2/3, [Respondent] only by 1/3. The Arbitral Tribunal reminds, however, that a part of [Claimant]'s legal and other costs was spent on a request for interim measures which was dismissed . . . In addition, the Arbitral Tribunal takes into account that [Respondent] incurred legal and other costs amounting to a total which is considerably higher than that of [Claimant]. As a result, the Arbitral Tribunal finds it appropriate that [Respondent] shall compensate [Claimant] for 50% of its legal and other costs.'

1
Decision of the Swiss Court (ATF) 117 II 273, item 4b; ZK-Bühler, Art. 377 CO n. 42; P. Gauch, Werkvertrag, n. 554.

2
For further reference, among others, ZK-Bühler, Art. 377 CO n. 41; P. Gauch, Werkvertrag, n. 554.

3
Editor's note: this and the following references are to the 1998 version of the ICC Rules of Arbitration.