Two companies, Respondents (also referred to collectively as Respondent), entered into a share purchase agreement to acquire Claimant's interest in a line of business in several countries. The agreement, which was governed by French law, provided for the transfer of the shares at two different closing dates. The purchase price, payable in two equal instalments, was subject to adjustment depending on (i) the final adjusted consolidated net equity of the business at the first closing, (ii) Respondents' recalculation of the gross margins with respect to certain contracts entered into by the business under Claimant's control prior to the first closing, and (iii) the financial income of the business during a defined time period. Sections 3 and 4 of the agreement provided for the appointment of an 'international recognized firm of independent public accountants' to resolve any disputes over the consolidated net equity or other adjustments that the parties could not resolve amicably. The first closing took place as agreed, but Respondents failed to make the second closing payment. Claimant requested a finding that Respondents had breached the agreement, that it was no longer possible to establish the adjusted consolidated net equity, that Respondents' request for the appointment of an expert should be rejected, and that Respondents were not entitled to reserve their right to claim damages in the future. In its first partial award, the arbitral tribunal considered three preliminary issues: whether an expert should be appointed; whether, if no request was made for the appointment of an expert to resolve disputes over adjustments, Claimant should be considered to have accepted those adjustments; and whether Respondents could reserve their rights to claim damages. In its second partial award, the arbitral tribunal ruled on the first two preliminary issues raised in its first partial award: whether an expert should be appointed; and whether, if no request was made for the appointment of an expert to resolve disputes over adjustments, Claimant should be considered to have accepted those adjustments. In its third partial award the arbitral tribunal addressed the issue of the date on which the balance sheet of the companies in the target business should have been closed by Respondents and submitted to Claimant pursuant to Section 3 of their agreement (cut-off date).

Deux sociétés, les défenderesses (également désignées collectivement comme la défenderesse), avaient conclu une convention de cession d'actions avec la demanderesse, afin d'acquérir sa participation dans une branche d'activité présente dans plusieurs pays. La convention, régie par la loi française, prévoyait la cession des titres à deux dates de réalisation différentes. Le prix d'achat, payable en deux versements égaux, était soumis à ajustement en fonction (i) de la valeur nette finale de l'activité, consolidée et ajustée, à la première date de réalisation, (ii) du recalcul par les défenderesses du montant des marges brutes relatives à certains contrats conclus avant la première date de réalisation par la branche sous le contrôle de la demanderesse, et (iii) du revenu financier de l'activité au cours d'une période définie. Les sections 3 et 4 de la convention prévoyaient la nomination d'un « cabinet internationalement reconnu d'experts-comptables indépendants » afin de régler tout différend portant sur la valeur nette consolidée ou sur d'autres ajustements que les parties ne parviendraient pas à résoudre à l'amiable. La première réalisation s'est déroulée comme convenu, mais les défenderesses se sont abstenues d'effectuer le paiement prévu à la seconde réalisation. La demanderesse réclamait qu'il soit constaté que les défenderesses avaient rompu le contrat, qu'il n'était plus possible d'établir la valeur nette consolidée ajustée, que la demande de nomination d'un expert des défenderesses devait être rejetée et que les défenderesses n'étaient pas autorisées à se réserver le droit de réclamer ultérieurement des dommages-intérêts. Dans sa première sentence partielle, le tribunal arbitral a examiné trois questions préliminaires : Un expert devait-il être nommé ? Si aucune demande de nomination d'expert n'avait été faite en vue de régler les différends relatifs aux ajustements, la demanderesse devait-elle être considérée comme ayant accepté ces ajustements ? Les défenderesses pouvaient-elles se réserver le droit de réclamer des dommages-intérêts ? Dans sa deuxième sentence partielle, le tribunal arbitral s'est prononcé sur les deux premières questions préliminaires soulevées dans sa première sentence partielle : un expert devait-il être nommé et, si aucune demande de nomination d'expert n'avait été faite en vue de régler les différends relatifs aux ajustements, la demanderesse devait-elle être considérée comme ayant accepté ces ajustements ? Dans sa troisième sentence partielle, le tribunal arbitral a examiné la question de la date à laquelle le bilan des sociétés de la branche cible aurait dû être clôturé par les défenderesses et communiqué à la demanderesse conformément à la section 3 de leur convention (date limite).

Dos empresas, los demandados (también denominados colectivamente «demandado») celebraron un acuerdo de adquisición de acciones para comprar la participación del demandante en una línea de negocio en varios países. El acuerdo, que estaba regido por la ley francesa, preveía la transferencia de las acciones en dos fechas de cierre diferentes. El precio de venta, pagadero en dos tramos iguales, podía modificarse en función de (i) el patrimonio neto consolidado, ajustado y final del negocio en el primer cierre, (ii) el nuevo cálculo de los demandados de los márgenes brutos en lo que respecta a determinados contratos celebrados antes del primer cierre por el negocio controlado por el demandante, y (iii) los ingresos financieros de la empresa durante un periodo de tiempo definido. Las secciones 3 y 4 del acuerdo establecían la designación de una «empresa internacional independiente y reconocida de auditores de cuentas» para resolver cualquier controversia relacionada con el patrimonio neto consolidado o cualquier ajuste que las partes no pudieran resolver de mutuo acuerdo. El primer cierre tuvo lugar según lo acordado, pero los demandados no realizaron el pago correspondiente al segundo cierre. El demandante solicitó un dictamen estableciendo que los demandados habían incumplido el acuerdo, que ya no era posible determinar el patrimonio neto consolidado ajustado, que la petición de los demandados de designar a un perito debía ser rechazada y que los demandados no estaban facultados para reservarse el derecho a reclamar daños y perjuicios en el futuro. En su primer laudo parcial, el tribunal arbitral examinó tres cuestiones preliminares: si debía designarse o no a un perito; si, de no haber ninguna solicitud para designar a un perito para resolver las controversias sobre los ajustes, debía considerarse que el demandante había aceptado los ajustes y si los demandados podían reservarse el derecho a reclamar daños y perjuicios. En su segundo laudo parcial, el tribunal arbitral se pronunció sobre las dos primeras cuestiones preliminares planteadas en su primer laudo parcial: si debía designarse o no a un perito y si, de no haber ninguna solicitud para designar a un perito para resolver las controversias sobre los ajustes, debía considerarse que el demandante había aceptado los ajustes. En su tercer laudo parcial, el tribunal arbitral abordó la cuestión de la fecha en la que los demandados deberían haber cerrado el balance de las empresas en el negocio objetivo y habérselo enviado al demandante de conformidad con la sección 3 del acuerdo (fecha límite).

First Partial Award

'VII. Considerations on the first two preliminary issues

7.1 One part of the dispute for this phase of the arbitration proceedings between the Parties revolves around the Expert Proceedings referred to in Section 3 and Section 4 respectively of the Agreement and, more specifically . . . on the questions:

(i) Should an expert be appointed as requested by Respondents for various items in dispute, but then by the Arbitral Tribunal in the light of the agreement reached thereon between the Parties?

(ii) Should a ruling be given that, in the absence of a request to appoint an expert to resolve the dispute on the adjustments pursuant to Section 4 of the Agreement, Claimant is deemed to agree upon such adjustments?

7.2 Section 3 of the Agreement provides, in so far as relevant, as follows:

Price Adjustments for Adjusted Consolidated Net Equity

Preparation of First Closing Date Balance Sheet

Buyer shall deliver to Seller as soon as reasonably practicable (but not later than sixty (60) days after the First Closing Date), the consolidated balance sheet of the Business as at the First Closing Date prepared in a manner consistent with French generally accepted accounting principles ("French GAAP") as applied by the Seller at March 31, 1999, and audited by both Buyer's and Seller's Auditors ("First Closing Date Balance Sheet"), provided that for pension accruals (i) in Germany US-GAAP shall be applied and (ii) in France the accounting principles that were applied by Seller in the 1998/1999 Business Financial Statements shall be applied, in each case in the same manner and using the same accounting principles as applied by Seller at March 31, 1999.

All amounts, whether assets or liabilities, with respect to non-French Companies, used in the preparation of or reflected in the First Closing Date Balance Statement will be derived from the balance sheets of each such Company prepared in accordance with [Claimant]'s accounting principles as attached in Annex D-ter and as stated in its audited Consolidated Financial Statements and the Notes thereto as at March 31, 1999 and for the year then ended (the "[Claimant] 1998/1999 Financial Statements").

From and after the First Closing Date, Buyer will permit Seller's Auditors all reasonable access to the books, records, management and employees of the Companies to enable Seller's Auditors to verify the accuracy of and audit the First Closing Date Balance Sheet.

Review of First Closing Date Balance Sheet

1. In the event that Seller and Buyer cannot agree, after reasonable good faith efforts to amicably resolve any dispute, on the amount of consolidated net equity of the Business (excluding goodwill but, for the avoidance of doubt, including deferred taxes) (the "Adjusted Consolidated Net Equity"), as reflected on the First Closing Date Balance Sheet, within (30) days following delivery thereof by Seller, any remaining dispute shall be resolved by an internationally recognized firm of independent public accountants which shall then have no existing or prospective relationship with Seller or Buyer or their Affiliates, as shall be agreed upon by Seller and Buyer. If Seller and Buyer are unable to agree upon other accounting firm within five (5) days after the expiration of such 30 day period, or the jointly selected firm declines to act, then Seller and Buyer shall each have the right to request the President of the Tribunal de Commerce of Paris to appoint an expert (such expert, in either case, to be referred to as the "Expert").

2. The Expert shall examine all work papers and other documents, data and information utilized in connection with the preparation of the First Closing Date Balance Sheet but the scope of its engagement will be limited to (1) resolving those items as to which Seller and Buyer disagree, (2) determining whether such items were properly determined, calculated and reflected on the First Closing Date Balance Sheet in a manner consistent with French GAAP as applied by Seller and (3) calculating, on the basis of the resolutions and determinations referred to above, the Adjusted Consolidated Net Equity. The decision of the Expert shall be delivered in a written report addressed to Seller and buyer and Guarantor and shall be binding, final and conclusive upon the Parties pursuant to article 1843-4 of the French Civil Code.

3. Upon the agreement of the Parties or decision of the Expert as to the Adjusted Consolidated Net Equity (as so agreed upon or determined, as the case may be), shall be deemed the Final Adjusted Consolidated Net Equity (the "Final Adjusted Consolidated Net Equity"). The underlying First Closing Date Balance Sheet (as agreed upon by the Parties or determined by the Expert) which was used to determine the Final Adjusted Consolidated Net Equity is referred to herein as the "Closing Statement".

4. Each Party shall bear the fees, costs and expenses of its own accountants and half of the fees, costs and expenses of the Expert.

Price Adjustment

1. At any time at least ten Business Days prior to the First Closing Date, Buyer may give written notice to Seller that Buyer elects that Seller not transfer to Buyer the employees of the Subsidiary . . . (UK) (the "UK Subsidiary"). Upon receipt of such notice, Seller shall take all necessary action at Seller's expense in order that such employees will not be employed by the UK Subsidiary as of the First Closing and that Buyer will not thereafter have any liability or obligation with respect to such employees. In any event, Seller may cause the UK Subsidiary to distribute to Seller or one of its Affiliates (other than the Companies) on the day preceding the First Closing Date, an amount equal to the operating income of the UK Subsidiary from April 1, 1999 to the first Closing Date.

2. If the Final Adjusted Consolidated Net Equity, as determined in accordance with Section 3.2 is lower than Euro 5.9 million excluding goodwill . . . Seller will pay to Buyer the amount of the difference within ten (10) Business Days following such determination.

7.3 Section 4 of the Agreement provides for a number of other adjustments to the Purchase Price related to . . .

7.4 All these other adjustments were to be valued, calculated or recalculated as the case might be, by Buyer in the manner as indicated in the subsections and to be reviewed by Seller. Section 4.6 reads as follows.

Any amounts payable by Seller to Buyer or by Buyer to Seller as a result of the provisions of the foregoing Sections 4.1 through 4.5 shall be agreed upon by the Parties and audited by Seller's Auditor and Buyer's Auditor.

Seller and Seller's Auditor shall accordingly have the right to request, receive and review the various calculations of the respective gross margins and Financial Income referred to in Sections 4.1 through 4.5 hereof and shall have access to the working papers and other information relating to such calculations as Seller may reasonably request.

In the event that Seller or Seller's Auditor disputes any of such calculations, Seller should advise Buyer of such dispute within 30 days after receipt of the calculations, and

at Seller's request, the dispute shall be submitted to an Expert selected as provided in Section 3.2. The Expert shall examine all work papers and other documents, data and information utilized in connection with the calculations, but the scope of its engagement will be limited to (i) determining whether the calculations in dispute were properly determined and made using the same methodology and accounting principles applied on a consistent basis applied by Seller at March 31, 1999, and (2) determining the accuracy of such calculations. The decision of the Expert should be delivered in a written report addressed to Seller and shall be binding, final and conclusive upon the Parties.

Each Party shall bear the fees, costs and expenses of its own accountants and shall share equally the fees, costs and expenses of the Expert.

7.5 Section 4 further had provisions with respect to other adjustments (on Schedule 4.1 Contracts, on Conditions to Adjustment Payments and on Payment of Adjustments). In Section 4.7, it was provided that the aggregate amounts payable by the Buyer to the Seller or by the Seller to the Buyer pursuant to any of the Sections 4.1 through 4.5 shall in no event exceed Euro 7 million, with certain nuances thereon in the latter case as set out in Section 4.7 (iii).

7.6 It is an established fact that no expert has been appointed as foreseen in Sections 3 and 4 of the Agreement. However, the Parties differ in their views as to why such an appointment did not take place, and what the consequences thereof should be.

7.7 With respect to Section 3 of the Agreement, the Parties agree that, within the sixty days following First Closing, [Respondent] provided balance sheets and financial information - but unaudited-to [Claimant]'s auditors for the subsidiaries in Mexico, Spain, France, the US, Italy, UK and Germany.

7.8 However, [Respondent] did not provide, within 60 days after the First Closing Date, a Consolidated Balance Sheet of the Business as at such date, in the manner as foreseen in the Agreement.

7.9 The Parties blame each other, in many respects, for the delay that has occurred in the implementation of what was provided for in Sections 3 and 4, for the reasons for that delay and for what eventually resulted or not.

. . . . . . . . .

X. The opinion of the Arbitral Tribunal

10.1 With respect to the first two Preliminary Issues, it is clear that, in Sections 3 and 4 of the Agreement, the Parties agreed on a mechanism for-in summary-establishing a) the Closing Statement and the Final Adjusted Consolidated Net Equity as defined and worked out in Section 3 of the Agreement and b) the adjustments referred to in Section 4 of the Agreement.

10.2 It must have been the intention of the Parties to have this mechanism operating and the results thereof known within a rather short period of time and without too many obstacles. It is clear that this has not worked out as contemplated by the Parties.

10.3 The Parties have blamed each other for this outcome and for the fact that the said intention was not realised and each Party has argued-in summary-that the other Party should bear the consequences thereof.

10.4 These consequences have notably been expressed in terms of a forfeiture or loss of rights. [Claimant] has argued that [Respondent], with respect to the mechanism provided for in Section 3, has forfeited its rights to have an expert appointed pursuant thereto. With respect to Section 4, [Respondent] has argued that [Claimant] has lost the right to ask for the appointment of an expert pursuant thereto.

10.5 With respect to Section 3, it is clear that the Agreement does not explicitly provide for any forfeiture of rights in case the mechanism as provided for in this Section does not work out as contemplated by the Parties. However, under the applicable French law, such forfeiture can also occur due to the nature of a contract-as such and/or as an implicit provision thereof-, as a consequence of the conduct of a party or as a combination of those elements. Such elements as the time that has been taken by the implementation of this provision of Section 3, the reasons therefor and the way in which the Parties have conducted themselves can play an important role in this respect. The same is true-mutatis mutandis-for the question what rights the Parties do or do not have, in the situation at hand, under Section 4 of the Agreement.

10.6 On the basis of the available evidence, no firm conclusion can be reached if any Party has forfeited or otherwise lost any right under Section 3 and/or Section 4 on the basis of the said elements. The Arbitral Tribunal feels unable to decide hereon without the assistance of an expert for the accounting issues at stake. Notably, the Tribunal feels unable to judge, without the guidance of an expert, if and in how far the conduct of either Party in the process may or may not entail that such Party cannot invoke anymore a right to which, on the face, it would be entitled under Section 3 or Section 4.

10.7 The Arbitral Tribunal finds no relevant provision in the applicable substantive or procedural law which would render the appointment of an expert, in order to assist the Tribunal on questions broadly referred to here before under 10.5, impossible. These questions will have to be worked out in Terms of Reference for such an expert.

10.8 The Arbitral Tribunal is not of the opinion that certain legal issues, such as notably raised by the Claimant, should be resolved first.

10.9 The Tribunal appreciates Claimant's position that, in principle, only certain financial information that was relevant on a certain date or on certain dates can be taken into account. But if and in how far that should be so for the case at hand cannot be decided at this point in time for the reasons mentioned here before-a.o. because Claimant relates its approach in this connection on an alleged breach of contract, notably of Section 3, by [Respondent] which, in the view of the Tribunal, cannot be ruled upon at this point in time for such reasons. Claimant's position-and Respondent's view thereon-will also be part of the questions to the expert to be appointed by the Tribunal-hereafter: "the Tribunal's Expert".

10.10 With respect to [a contract at issue], it is true that the question if that contract had been awarded on the relevant date-at First Closing in Claimant's view-is a pure legal question. But in order to establish this, further evidence may be required and it would not be in the interest of efficient proceedings if this would hold up the investigation of the other aspects which the Arbitral Tribunal wishes to be performed. Besides, it can be considered if the further investigation of this question could take place simultaneously with the said investigation. The Tribunal will consult with the Parties thereon.

10.11 With respect to what Claimant qualifies as [Respondent]'s bad faith provisions, the Arbitral Tribunal is of the opinion that this question-and the yardstick proposed by Claimant for such provisions-should form part of the questions to be investigated by the Tribunal's Expert. Also, questions related to the amount involved in the said provisions made by [Respondent] may be relevant in this context and this could be a question not only of legal judgment but also of accounting principles.

10.12 It is not inconceivable that certain issues will crop up, in the course of the Tribunal's Expert's investigations, which are of such a legal nature that the Tribunal should rule thereon rather than the Tribunal's Expert. But, in the first place, such issues can be flagged by the Tribunal's Expert during his investigation and this can be covered in the Terms of Reference for the Expert. Second, the Arbitral Tribunal will always have the ultimate control on the results of the Tribunal's Expert's investigations.

10.13 The appointment of the Tribunal's Expert should take place after consultation with the Parties. The Terms of Reference for the Tribunal's Expert shall be established equally after consultation with the Parties and the Expert. In establishing the Terms of Reference, the Parties' material intention as evidenced by the Agreement should be followed as closely as possible. In the process of establishing those Terms of Reference, it will, whenever necessary, be further decided what will be the borderline of the Tribunal's Expert's investigation, and if there are certain legal questions which need to be ruled upon before or, maybe, in parallel with the further process in work of the Tribunal's Expert.

10.14 The Terms of Reference for the Tribunal's expert will, in any event, include the following questions:

- what are the reasons that the system as foreseen by the Parties in Sections 3 and 4 of their Agreement has not worked out as contemplated by the Parties.

- are those reasons, insofar as this is within the realm of the Expert's expertise, for the account of Claimant, or Respondent or-maybe-both Parties?

- Further, the Expert should advise the Tribunal on the Main Issues and the Relief Requested by both Parties . . .

10.15 These considerations entail that it cannot be decided at this point in time if an expert should be appointed in the manner as foreseen in Sections 3 and 4 of the Agreement to carry out the assessment as foreseen in those provisions. Whether such an appointment could and should take place in the future has to be decided at a later point in time.

10.16 With respect to the 3rd Preliminary Issue, the Tribunal is of the opinion that Respondents cannot further reserve their right to claim damages in a general way. It is not in the interest of efficient arbitration proceedings not to quantify as early as possible the amount(s) that a party asserts it is entitled to. Respondents should specify the amount of Net Equity Value that, in their view, they are entitled to. For damages in the strict sense Respondents may reserve the right to quantify same later if no quantification is indeed possible at this point in time. They should however, as far as possible, indicate which sort of damages they intend to claim and on what ground(s).'

Second Partial Award

'6.7.1. With respect to the auditing, the Preliminary Expert has said the following:¹

a) This question is more difficult to answer, as from the signing of the Agreement the word "audited" has been used although no audit could have taken place. An audit is performed with a view to providing an opinion on the accounts or on certain part of the accounts. Such an opinion can be a positive opinion from the auditors, attesting that the financial information gives a true and fair view of the state of affairs of the audited business, or a negative opinion, following what is called a limited review.

b) In this specific case, as is normally the case when auditors work on closing accounts, neither of the Parties mandated their auditors to perform an audit, or a limited review, but rather to perform some agreed-upon procedures (i.e. procedures agreed upon between each party and its audit team but not agreed upon between the two parties).

c) During the meeting . . . in presence of the Arbitral Tribunal, both parties admitted that it was their intention for the purpose of this transaction to ask their respective audit teams to perform certain agreed upon procedures. Also, engagement letters signed between [the parties and their auditors] relate to agreed upon procedures. . .

d) As a consequence, given the nature of the assignment which was given by each of the parties to its auditors, it was obvious that the consolidated First Closing Date Balance Sheet could not be audited, and that the auditors could therefore not express an opinion thereon. Nevertheless, it was also clear from the engagement letters, that each team of auditors would provide its client with a report summarising the issues it had encountered when completing its assignment. In this specific case, such a report would carry on the consolidated figures as presented in the First Closing Date Balance Sheet. Contrary to audit opinions, such a report is free-form.

6.7.2. However, it usually includes the following elements:

(i) A reference and/or a copy of the engagement letter;

(ii) An indication of the basis of preparation of the accounts (which accounting principles, at which date);

(iii) A description of the key issues which were identified and a description of the rationale for an adjustment, if any.

e) It is the Preliminary Expert's experience in such transactions that agreed-upon procedure reports are either exchanged between the parties, or that the conclusions of such agreed-upon procedures reports are exchanged in order to assess whether the adjustments proposed by one or/and the other party have certain validity. This exchange of conclusions of the auditors' reports is generally one of the first steps of the negotiating process of the adjustments, as it enables the Parties to understand the position of the other party.

f) To the Preliminary Expert's knowledge no such exchange of the auditors' reports or conclusions on the work performed by the auditors in respect to the First Closing Date Balance Sheet occurred prior to the proceedings of this arbitration.

. . . . . . . . .

7. Considerations of the Tribunal with respect to Section 3 of the Agreement

7.1 . . . the Tribunal must now consider if, on the facts in the case at hand, as follows from the available evidence, the conclusion should be that [Respondent] has-in summary-forfeited its rights under Section 3 of the Agreement, notably its right to have an expert appointed as requested by [Respondent]. . . .

7.2. The Tribunal answers this question in the negative.

7.3. As has been set out at 3.9 above the criteria, under French law, for the question whether a party can or cannot exercise a right pursuant to a contract is-in summary-whether it exercises that right in bad faith or not.

7.4. Therefore, the Tribunal has to consider whether a ruling as requested by [Claimant] that [Respondent]'s request to appoint an expert under Section 3 should be denied because [Respondent]'s request was made in bad faith. This might be the case if [Respondent] would make such a request, and it would be impossible to make a First Closing Date Balance Sheet at this point in time, reflecting the situation at the time when the First Closing Date Balance Sheet should have been made. However, as has been mentioned . . . the Preliminary Expert has concluded that it is still possible to make such a First Closing Date Balance Sheet. Thus, it would be an excessive decision to deny [Respondent] the right to still ask for the appointment of such an expert.

7.5. [Claimant] has argued that there is bad faith on [Respondent]'s side both in its failure to deliver the First Closing Date Balance Sheet in the manner and within the time limit that were agreed between the Parties and in the fact that the delay was used by [Respondent] to make a number of improper adjustments.

7.6. The Arbitral Tribunal is of the opinion that, at this point in time, there is no or at least insufficient evidence to that effect. But even if this were different, such bad faith is, in the opinion of the Arbitral Tribunal, irrelevant in this context in the light of French law. In the opinion of the Arbitral Tribunal, bad faith on [Respondent]'s side could be relevant in this context only if [Respondent] would request the appointment of an expert knowing that it would be impossible to make a First Closing Date Balance Sheet at this point in time. But that, as mentioned, is not the case.

7.7. In this light, any further consideration by the Tribunal on the delay, on [Respondent]'s side, to produce the First Closing Date Balance Sheet and the reasons for that might be superfluous. However, since the Parties have argued extensively about this issue, and as the issue is relevant for the questions what adjustments-if any-should in principle be allowed in the First Closing Date Balance Sheet, the Arbitral Tribunal wishes to consider this question.

7.8. The facts, on the basis of the available evidence, are as follows:

a) The First Closing occurred on February 17, 2000.

b) Section 3 of the Agreement provided that [Respondent] (as the Buyer) should deliver to [Claimant] (the Seller) as soon as reasonably practical but not later than 60 days after this First Closing Date the First Closing Date Balance Sheet on the basis and in the manner as further provided in Section 3. Thus, this First Closing Date Balance Sheet should have been delivered not later than 17 April 2000.

c) However, the Parties agreed that, as certain problems were encountered in Brazil-notably: it appeared that certain relevant financial data were missing-the closing of the accounts of the Brazilian subsidiary would be extended by 30 days after the closing of the Brazilian accounts and the delivery thereof to [Respondent]. They also agreed that the date for the delivery of the First Closing Date Balance Sheet would be extended accordingly.

d) The closing and delivery of the Brazilian accounts took place, according to [Claimant], on 28 May 2000. Thus, the date foreseen in Section 3 would move from 17 April 2000 to 27 June 2000.

7.9. Consequently, on June 27, 2000, the First Closing Date Balance Sheet should have been delivered on that new date. However, [Respondent] submits-in essence-that it was prevented from delivering the First Closing Date Balance Sheet prior to 26 February 2001.

7.10. As mentioned before, the Arbitral Tribunal rejects this. The Preliminary Expert has determined that, under consideration of all circumstances, [Respondent] could have delivered the First Closing Date Balance Sheet by the end of July 2000. The Arbitral Tribunal accepts the Preliminary Expert's assessment and considers that, despite the earlier agreed date of June 27, 2000, [Respondent] could not have delivered the First Closing Date Balance Sheet prior to end of July 2000.

7.11. The Tribunal is of the opinion that the delay after this-a further period of +/- seven months-is for the account of [Respondent], unless [Claimant] has accepted this delay or waived its right with respect thereto.

7.12. In this context, it is of importance to stress the relevance of a timely delivery of First Closing Date Balance Sheet.

Following a closing, the seller loses control over the transferred business generally, including seller's personnel, and becomes vulnerable to actions undertaken by the purchaser. Short periods for the delivery of a closing balance sheet are then important for the seller, reducing his risk to see the purchaser book excessive provisions/adjustments using his understanding developed by extended hindsight despite the fact that such adjustments are made purportedly as at closing date. A purchaser delaying the delivery of a closing balance increases seller's risk as it may become increasingly difficult to assess what proper adjustments would have been booked if the contractually agreed period for submission of the closing balance sheet had been respected.

7.13. Consequently, after the point in time when a closing date balance sheet should be delivered, the purchaser should not be allowed to make any further adjustments. Such date can be considered as the "cut-off date". The question if adjustments made by the purchaser in a closing date balance sheet at the cut-off date are justified or not is another question.

7.14. Since the First Closing Date Balance Sheet in the case at hand could have been delivered as of the end of July 2000, that point in time should be considered as the cut-off date in the sense as just mentioned for that Balance Sheet.

7.15. It could be argued that not the delivery date of the Consolidated Balance Sheet should be considered as the proper cut-off date, but the dates that should be considered as the proper cut off dates for the Closing Balance Sheets for the subsidiaries at issue-the US subsidiaries and the Brazilian subsidiary.

7.16. However, the Arbitral Tribunal is inclined, under the circumstances of the case, to take as the proper cut-off date the date on which the (Consolidated) First Closing Date Balance Sheet could and should have been delivered. First, the Preliminary Expert has not fixed any specific cut-off date for any of the accounts. He refers to early May for the US subsidiaries, to early July for the Brazilian subsidiaries and to the end of July for the First Closing Date Balance Sheet . . . Second, the Arbitral Tribunal would be prepared to consider that, after the closing of the individual accounts and in preparing the consolidated accounts, certain corrections to adjustments made or to be made in the individual accounts could still be accepted. The Arbitral Tribunal wishes to consult further hereon-and on the precise date on which the First Closing Date Balance Sheet could and should have been delivered-with the Parties and the Final Expert. However, the date on which the (Consolidated) First Closing Date Balance Sheet could and should have been delivered is in principle, and under the reservation of particular circumstances, the cut-off date after which no further adjustments can be accepted.

7.17. All this would be different if it would follow from the available evidence that [Claimant] had accepted a delay in the delivery of the First Closing Date Balance Sheet (and/or of the individual closing balance sheets of the said subsidiaries) or should be deemed to have waived its rights in this respect. This is not the case.

7.18. The Parties were in continuous contact throughout the entire period between July 2000 and February 2001, discussing various issues and even cooperating to a certain extent. The mere existence of these contacts and/or cooperation cannot be seen as a waiver and/or acceptance of a late delivery by [Claimant], as [Claimant] has continuously urged [Respondent] to deliver the First Closing Date Balance Sheet and objected to the delay. Consequently, [Claimant]'s continued discussions and co-operation with [Respondent] cannot be held against it as acceptance of the delay or a waiver, as this would amount to draw an adverse conclusion against a party which-particularly in the light of the circumstances following First Closing-clearly had the duty to cooperate and mitigate possible damages.

7.19. On November 7, 2000, [Respondent] submitted a net worth calculation which does not represent a balance sheet as defined under the Preliminary Expert's minimum requirements.

7.20. [Claimant] indicated to [Respondent] that this document was not the First Closing Date Balance Sheet in the sense of Section 3.1 of the Agreement, a point conceded by [Respondent]. Consequently, neither the issuance of this document nor the discussion among the Parties concerning the figures presented therein represents a waiver or acceptance of the non-production of the First Closing Date Balance Sheet.

7.21. The First Closing Date Balance Sheet was finally delivered on February 26, 2001 and objected to by [Claimant].

7.22. Under those circumstances, the delay until that date is for [Respondent]'s account.

7.23. Another question is whether [Claimant]'s objection that the document of February 26, 2001, delivered by [Respondent], is not the First Closing Date Balance Sheet is valid. This, in the opinion of the Arbitral Tribunal, is not so.

7.24. The Expert's findings on the First Closing Date Balance Sheet are-in summary-that with the exception of the audit, the document of February 26, 2001 meets the contractual requirements.

7.25. With respect to the auditing of that document, it is now established that an auditing as referred to in Section 3 of the Agreement never took place-in which connection the Tribunal endorses the interpretation of what "auditing" means in this respect as set out in the Final Report . . .

7.26. In the Tribunal's view, the Parties have a shared responsibility in this respect. Neither Party apparently pursued, pursuant to the respective engagement letters, the respective reports that each team of auditors should provide. Also, the appointment of one and the same firm for Seller's and Buyer's "audit", which apparently complicated a proper follow-up, is the shared responsibility of both Parties.

7.27. However, this does not change the fact that [Respondent]'s late delivery of the First Closing Date Balance Sheet as such is for [Respondent]'s account. This can be considered as a breach of [Respondent]'s contractual obligation vis-à-vis [Claimant], even if-at this point in time-there is no or at least insufficient evidence for bad faith on [Respondent]'s part. The Arbitral Tribunal will consider at a later point in time which consequences-if any-this should have.

7.28. As mentioned herebefore, [Claimant] has argued that the delay that occurred was due to bad faith on [Respondent]'s behalf. The Arbitral Tribunal is of the opinion that, at this stage, there is no or at least insufficient evidence to this effect. And the Arbitral Tribunal considers this also not relevant to the extent that, insofar as this assertion by [Claimant] relates to adjustments made by [Respondent] after what has been referred to as the cut-off date, the Tribunal is of the opinion for the reasons given here before that those adjustments cannot be taken into account anyway.

7.29. Insofar as [Claimant] asserts that certain adjustments made by [Respondent] before the cut-off dates are made in bad faith, the Arbitral Tribunal also doubts whether this argument can have any practical impact: if a Final Expert is appointed to make a First Closing Date Balance Sheet, the adjustments will be considered in that context and the question will be answered what adjustments-if any-are acceptable-both as to the principle and as to the proper amount.

7.30. In other words, even assuming that the delay in the delivery of the First Closing Date Balance Sheet was owing to [Respondent]'s bad faith and that [Respondent] in bad faith entered excessive adjustments to reduce the net equity of the . . . Business, to the extent that they are acceptable, the consequence would be that these adjustments should be reduced to duly justified amounts. To then deprive [Respondent] of its right to such a purchase price adjustment and, consequently, to request the appointment of an expert, as it was formulated by [Claimant] in its memorial, would be a penalty not needed for the effective protection of [Claimant] against alleged bad faith.

7.31. The conclusion is that, in the light of the facts as follow from the available evidence, [Respondent] has not forfeited its right under Section 3 of the Agreement to a purchase price adjustment and, consequently, to request the appointment of an expert-the "Final Expert".

8. Considerations of the Tribunal with respect to Section 4 of the Agreement

8.1. Also the question whether [Claimant] is deemed to agree upon the adjustments made by [Respondent] under Section 4 of the Agreement, in the absence of a request to appoint an expert, is answered in the negative by the Tribunal. . . .

8.2. [Respondent] asserted, in this respect, that it submitted its calculation as a basis required for the calculations under this Section on November 7, 2000. [Claimant] submits that [Respondent]'s calculations fail to satisfy any of the requirements of this Section, so that there is no obligation to seek the appointment of an expert or to agree to the calculations. [Respondent] submits that an audit was not an obligation for [Respondent] and that a mutual audit was impossible because [Claimant] refused to co-operate. [Respondent] also submits that [Claimant] has chosen to disregard the possibility, given to it under Section 4.6 of the Agreement, to request and review the relevant documents.

8.3. Further, according to [Respondent], only [Claimant] can request the appointment of an expert in this respect. [Claimant] has always refused to do so. If [Claimant] would continue to do so, [Respondent]'s calculations should be deemed to have been accepted. [Respondent] does not consider it justified to grant [Claimant] an additional time for consideration if it wishes an expert to be appointed in this regard or not. [Claimant] has denied this and reiterates that, for the reasons mentioned, there is no obligation for [Claimant] to seek the appointment of an expert or to agree on the calculations.

8.4. The Tribunal notes first of all that the interpretation by the Preliminary Expert of the Sections 4.1 to 4.4 adjustments . . . has not been disputed by the Parties with the exception of the risk of a "double punishment". The Tribunal shares this interpretation, and shall deal further with these elements, including the risk of a double punishment in the next phase of the proceedings.

8.5. In the light of the Preliminary Expert's findings on the calculations to be made by [Respondent] . . ., the Tribunal concludes that [Claimant] cannot be deemed to have waived or forfeited any right under Section 4 for the appointment of an expert or to have agreed to any calculations made by [Respondent].

8.6. On the calculations required under Section 4.1 and 4.3, the Preliminary Expert finds that the finalization of the First Closing Date Balance Sheet was a condition to such calculations. As the Arbitral Tribunal has found that the fact that the First Closing Date Balance Sheet was not established in time was only in part caused by [Claimant]-in summary: until end July 2000, the further delay being for [Respondent]'s account-it cannot be said that the fact that these two calculations were not submitted in accordance with the Agreement should come for the risk of [Claimant]. And, consequently, the fact that no agreement was reached on those calculations cannot come for the risk of [Claimant] either.

8.7. In the light of the Preliminary Expert's findings, this reasoning cannot be applied, strictly, to the calculations to be supplied under Section 4.2 and 4.4. The Arbitral Tribunal considers it wrong to make this strict distinction. First, one can ask the question if such a strict distinction should be made as a proper contractual interpretation of the Agreement. The Arbitral Tribunal answers this question in the negative. On the available evidence, the Tribunal finds that the Parties have treated the adjustments to be made pursuant to Section 4 as a whole, without a very sharp distinction between the adjustments to be made under Section 4.1, 4.2, 4.3 and/or 4.4. Further, as follows from the Preliminary Expert's answers . . ., the calculations submitted by [Respondent] did not meet other important requirements of Section 4, such as-notably-the "auditing" of such calculations by [Respondent]'s auditors .

8.8. The Tribunal also notes that the Claimant has timely, pursuant to Section 4.6 disputed the calculations submitted by the Respondents.

8.9. For those reasons, [Claimant] can still exercise its right to have an expert appointed under Section 4. However, this exercise of [Claimant]'s right cannot be postponed indefinitely. Under its duty to rule on the disputes between the Parties, the Arbitral Tribunal must also rule on the disputes that have arisen with regard to Section 4. If [Claimant] would not exercise this right within a reasonable period of time after this Award-which can be put at 4 weeks after the notification of the Award to it-the Arbitral Tribunal would take it that [Claimant] does not wish to have such an expert appointed at its request and the Arbitral Tribunal shall decide what the consequences will be.

8.10. After such request, the Tribunal sees two possibilities. One is that the Respondents revise their calculations under Section 4 in the light of the findings of the Preliminary Expert and that thereafter, if a dispute remains, such dispute is referred to the Final Expert. The other is that the Final Expert to be appointed determines the amount of the adjustments to be made under Section 4 without prior recalculations by the Respondent.

8.11. For Section 3 and for Section 4, it is important that late adjustments are excluded. As has been mentioned before, the Arbitral Tribunal shares [Claimant]'s view that there should be a "cut-off date" after which no (further) adjustments can be made. This has to be established before the Final Expert can usefully start his work.

8.12. As mentioned before, the Arbitral Tribunal wants to be guided further by the Parties as to what the precise proper cut-off date is. In this context, it is to be noted that different dates have been mentioned, also by the Claimant, e.g. when the Tribunal compares the dates mentioned in the Claimant's letter of 19 May 2004 to dates mentioned earlier by the Claimant.

8.13. In its covering letter to its Second Memorial of 19 May 2004, the Claimant submitted that, if the Arbitral Tribunal were to decide that French law precludes the forfeiture of a contractual right, the Arbitral Tribunal could and should still exclude the massive adjustments that [Respondent] made in bad faith to the accounts of the . . . Business.

8.14. As the Tribunal does not conclude that French law excludes the forfeiture of rights, the Claimant's arguments in its covering letter to its Second Memorial of 19 May need not be dealt with. In any event, these arguments should be denied. First, the Arbitral Tribunal refers to its observation herebefore in Chapter 7. Further, the Preliminary Expert has concluded that most of the adjustments referred to by the Claimant in this context were correct in principle. The Preliminary Expert's conclusion that they were not correct on the magnitude does not entail that these adjustments should be excluded categorically but that they should be further looked into with a view to establishing their correct magnitude.

8.15. On the assumption that the Claimant will request the appointment of an expert, with respect to the Section 4 adjustments the Arbitral Tribunal wishes to consult with the Parties on the possibilities referred to at 8.10 above before any further decision is given.'

Third Partial Award

'2. Considerations of the tribunal with regard to the cut-off date

2.1 In the Second Award the Tribunal has inter alia said the following on this issue:

7.12 . . . it is of importance to stress the relevance of a timely delivery of First Closing Date Balance Sheet.

Following a closing, the seller loses control over the transferred business generally, including seller's personnel, and becomes vulnerable to actions undertaken by the purchaser. Short periods for the delivery of a closing balance sheet are then important for the seller, reducing his risk to see the purchaser book excessive provisions/adjustments using his understanding developed by extended hindsight despite the fact that such adjustments are made purportedly as at closing date. A purchaser delaying the delivery of a closing balance increases seller's risk as it may become increasingly difficult to assess what proper adjustments would have been booked if the contractually agreed period for submission of the closing balance sheet had been respected.

7.13 Consequently, after the point in time when a closing date balance sheet should be delivered, the purchaser should not be allowed to make any further adjustments. Such date can be considered as the "cut-off date". The question if adjustments made by the purchaser in a closing date balance sheet at the cut-off date are justified or not is another question.

7.14 Since the First Closing Date Balance Sheet in the case at hand could have been delivered as of the end of July 2000, that point in time should be considered as the cut-off date in the sense as just mentioned for that Balance Sheet.

7.15 It could be argued that not the delivery date of the Consolidated Balance Sheet should be considered as the proper cut-off date, but the dates that should be considered as the proper cut-off dates for the Closing Balance Sheets for the subsidiaries at issue-the US subsidiaries and the Brazilian subsidiary.

7.16 However, the Arbitral Tribunal is inclined, under the circumstances of the case, to take as the proper cut-off date the date on which the (Consolidated) First Closing Date Balance Sheet could and should have been delivered. First, the Preliminary Expert has not fixed any specific cut-off date for any of the accounts. He refers to early May for the US subsidiaries, to early July for the Brazilian subsidiaries and to the end of July for the First Closing Date Balance Sheet . . . Second, the Arbitral Tribunal would be prepared to consider that, after the closing of the individual accounts and in preparing the consolidated accounts, certain corrections to adjustments made or to be made in the individual accounts could still be accepted. The Arbitral Tribunal wishes to consult further hereon-and on the precise date on which the First Closing Date Balance Sheet could and should have been delivered-with the Parties and the Final Expert. However, the date on which the (Consolidated) First Closing Date Balance Sheet could and should have been delivered is in principle, and under the reservation of particular circumstances, the cut-off date after which no further adjustments can be accepted.

2.2 On further consideration, the Tribunal has come to a different conclusion than its preliminary view as thus expressed in the Second Award. The Tribunal agrees with [Respondent] that, in Section 3.1 of the Agreement, no reference is made to the Closing Balance Sheets of the individual companies or subsidiaries of [Claimant's] . . . Business but only to a consolidated balance sheet, viz. the First Closing Date Balance Sheet. However, the Tribunal agrees with [Claimant] that such consolidated balance sheet indeed presupposes the earlier establishment of closing balance sheets for the individual subsidiaries.

2.3 The Tribunal then takes into account what it considered earlier:

- The legitimate interest of a seller to have closing date balance sheet(s) of the business which was sold by it established as soon as possible and

- The fact that after such closing date no further adjustments should be accepted as mentioned by the Tribunal earlier.

2.4 If one would take the date on which the consolidated balance sheet is or could have been established as the decisive cut-off date, this means that the period on which other adjustments can be made for certain subsidiaries is unnecessarily prolonged. In the case at hand this is true in particular for those subsidiaries where, in the establishment of their closing balance sheets, no or comparatively little delay has occurred. It appears from a letter written by [Respondent] to [Claimant] on 19 May 2000 . . . that the audited financial statements for the subsidiaries in France, Germany, Italy, Spain and the UK were submitted on 21 April 2000 and, for the subsidiary in Mexico, on 16 May. This was later than as agreed by the Parties in Section 3.1 of the Agreement but in any event some months before the First Closing Date Balance Sheet could have been finalized (the end of July, as established in the Tribunal's Second Award). Accepting this latter date as the cut-off date would thus entail that also for such subsidiaries a period would be created of two to three months during which further adjustments could and/or should be considered to be made. This, in the view of the Tribunal on reconsideration, would not be a fair result.

2.5 Also in the light of the discussion at the hearing . . ., the Tribunal is of the opinion that the following dates should be considered as the appropriate cut-off dates for the various subsidiaries of the . . . Business:

- For the subsidiaries in France, Germany, Italy, Spain and the UK: 21 April 2000;

- For the subsidiary in Mexico: 16 May 2000;

- For the subsidiary in the US: 5 May 2000;

- For the subsidiary in Brazil: 15 July 2000.'

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1
Final Report at 2.7.2, nr. 596 f.f.

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