The Respondents, a European consortium, entered into negotiations with a view to purchasing the majority stake held by the Claimants, all European companies, in an airline (1) in State X. The Respondents included banks and financial institutions (some owned by State X) as well as a non-EU airline (2) and its parent company, which was at the same time negotiating the purchase of a stake in a third airline (3), also in State X. The former negotiations led to a promissory sale and purchase agreement, which was governed by State X law and subject to the following conditions precedent: (i) merger clearance by the EU authorities and (ii) airline 1's continuing eligibility to operate as an airline under EU legislation despite having 42% of its capital owned by a non-EU airline. The first of these conditions was not met as the EU Commission feared an infringement of EU competition rules. Consequently, the buyers withdrew from the contemplated transaction and withdrew the notification made to the EU competition authorities. The dispute between the parties concerned which of them bore responsibility for obtaining EU merger clearance. Claimants argued this responsibility lay with Respondents, who had been insufficiently diligent. Respondents rejected this accusation and argued that the lack of EU merger clearance made their agreement inoperative. Claimants accordingly requested that Respondents be ordered to perform the promissory agreement or, failing that, pay damages for not fulfilling their obligations. In addition to rejecting these claims, Respondents challenged the arbitral tribunal's jurisdiction to rule on issues of pre-contractual liability.

Les défenderesses, qui constituaient un consortium européen, ont engagé des négociations en vue d'acquérir la participation majoritaire détenue par les demanderesses, toutes des sociétés européennes, dans une compagnie aérienne (1) établie dans l'État X. Les défenderesses comprenaient des banques et des institutions financières (dont certaines étaient détenues par l'État X) ainsi qu'une compagnie aérienne ne faisant pas partie de l'Union européenne (2) et sa société mère, qui négociait en même temps l'acquisition d'une participation dans une troisième compagnie aérienne (3), également établie dans l'État X. Les premières négociations ont abouti à une promesse de vente, régie par la loi de l'État X et soumise aux conditions suspensives suivantes : (i) autorisation de la fusion par les autorités de l'UE et (ii) maintien de l'aptitude de la compagnie aérienne à fonctionner dans le cadre de la législation de l'UE malgré la détention de 42 % de son capital par une compagnie aérienne n'appartenant pas à l'UE. La première de ces conditions n'a pas été remplie car la Commission européenne a craint une violation des règles de concurrence de l'UE. Les acheteurs ont donc renoncé à la transaction envisagée et ont retiré la notification faite aux autorités de la concurrence de l'UE. Le différend opposant les parties portait sur la question de savoir qui était responsable de l'obtention de l'autorisation de la fusion par l'UE. Les demanderesses soutenaient que cette responsabilité incombait aux défenderesses, qui n'avaient pas fait preuve de la diligence requise. Les défenderesses rejetaient l'accusation et arguaient que l'absence d'autorisation de l'UE rendait l'accord inopérant. Les demanderesses réclamaient en conséquence qu'il soit ordonné aux défenderesses d'exécuter la promesse de vente ou, à défaut, de payer des dommages-intérêts pour non-respect de leurs obligations. Les défenderesses s'opposaient à ces demandes et contestaient la compétence du tribunal arbitral en matière de responsabilité précontractuelle.

Los demandados, un consorcio europeo, entablaron negociaciones para adquirir la participación mayoritaria de los demandantes, exclusivamente empresas europeas, en una compañía aérea (1) en el Estado X. Entre los demandados se encontraban bancos y entidades financieras (de los cuales algunos son propiedad del Estado X), así como una compañía aérea (2) que no formaba parte de la UE y su empresa matriz, que al mismo tiempo estaba negociando la adquisición de una participación en una tercera compañía aérea (3), también situada en el Estado X. Las primeras negociaciones condujeron a un contrato de promesa de compraventa regido por la ley del Estado X y sujeto a las siguientes condiciones suspensivas: (i) la autorización de la fusión por parte de las autoridades de la UE y (ii) la continuación de la elegibilidad de la compañía aérea 1 para funcionar como compañía aérea según la legislación de la UE a pesar de que el 42 % de su capital pertenecía a una compañía aérea que no formaba parte de la UE. La primera de estas condiciones no se cumplió debido a que la Comisión de la UE temió una violación de las normas de competencia de la UE. En consecuencia, los compradores renunciaron a la transacción prevista y retiraron la notificación hecha a las autoridades de competencia de la UE. La controversia entre las partes trataba sobre cuál de ellos tenía la responsabilidad de obtener la autorización de la fusión por parte de la UE. Los demandantes alegaron que esta responsabilidad recaía en los demandados, que no habían sido suficientemente diligentes. Los demandados rechazaron esta acusación y afirmaron que la ausencia de autorización de la fusión por parte de la UE había dejado el contrato sin efecto. Por consiguiente, los demandantes solicitaron que a los demandados se les ordenara cumplir el contrato de promesa o, en su defecto, pagar los daños y perjuicios por no cumplir sus obligaciones. Además de rechazar estas alegaciones, los demandados impugnaron la competencia del tribunal arbitral para pronunciarse sobre asuntos de responsabilidad precontractual.

'(a) Jurisdiction regarding Claimants' pre-contractual liability claims

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378.... Claimants maintain that if, contrary to Claimants' view, the Tribunal does not consider that the Promissory Agreement was extended beyond [the date on which the Respondents allege that the Promissory Agreement automatically expired owing to non-fulfilment of the conditions precedent], then Respondents have violated the principle of good faith in the negotiation of a new agreement and are therefore liable for damages pursuant to [the applicable law].

379. In their Post-Hearing Pleadings Claimants made clear that such claims are directed only against Respondents 1 and 2 and concern their behaviour regarding the... Faxes [purporting to extend the Promissory Agreement].

380. Respondents-who deny such breaches-argue that the Tribunal has no jurisdiction in this regard because Claimants' (subsidiary) claims are based on the hypothesis that the Promissory Agreement has expired. Consequently, since [at the time of the Faxes] no binding Agreement and therefore no arbitration clause existed any longer, Respondents take the view that the Tribunal lacks jurisdiction over Respondents' alleged misconduct in the negotiation of a new agreement.

381. According to Claimants, the Tribunal's jurisdiction encompasses their pre-contractual liability claims, amongst other, because of the broad wording of the arbitration clause in dispute which expressly covers all disputes arising out of or in connection with the Promissory Agreement. Claimants submit that the restrictive interpretation of the arbitration clause alleged by Respondents on the ground that such clauses are an exception to the competence of regular courts, may have applied forty or fifty years ago, but not any longer.

382. In further support of their jurisdiction exceptio, Respondents 1 and 2 submit that the fact that the draft amendment of the Promissory Agreement contained a new arbitration clause would prove that the arbitration clause in the original Promissory Agreement was considered by the parties as no longer applicable after [the alleged date of automatic expiry].

383. In analysing these controversial views the Tribunal finds that even if the Promissory Agreement had expired on [the alleged date of automatic expiry], Claimants' pre-contractual liability claims nevertheless fall under the arbitration clause of the Promissory Agreement: Firstly, because of the wording of the arbitration clause in dispute which indeed has a broad scope of applicability covering not only all disputes arising out of, but also "in connection with" the Agreement. Secondly, because the... Faxes [purporting to extend the Promissory Agreement] relate to the extension and amendment of the Promissory Agreement, which clearly confirms their connection with such Agreement even if it had already expired. And thirdly, because it is a generally recognised principle in international arbitration that an Arbitral Tribunal shall not cease to have jurisdiction by reason of any claim that the contract is terminated or even null and void (the principle of the autonomy of the arbitration agreement, which is contained in Article 6(4) of the ICC Rules; see for example Schwarz/Derains, A Guide to the New ICC Rules of Arbitration, 1989, p. 104).

384. Further, the Tribunal does not share Respondents' view that the proposed new arbitration clause in the draft amendment to the Promissory Agreement proves the opposite. Quite the contrary, this fact confirms the parties' continued intention to arbitrate any possible disputes between them on the transaction in question rather than bringing them to court.

385. There can be no doubt that the Tribunal has jurisdiction in relation to Claimants' claims regarding Respondent 1 and 2's alleged misconduct in the negotiation regarding an amendment of the extended Promissory Agreement... However, this jurisdiction issue is not ultimately relevant, since the Tribunal shall conclude in this Award that the Promissory Agreement was renewed...

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(b) The legal nature of the Promissory Agreement

(i) The Promissory Agreement is a true promissory contract

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402. In examining this issue, the Tribunal shall first analyse the wording of the Promissory Agreement. There is common ground between all the parties' legal experts that the wording chosen by the parties is not decisive per se as qualification criterion... but there is also common ground that the wording is not irrelevant... especially if the parties to the agreement are professional parties and assisted by legal counsel in the negotiation and the wording of the agreement....

403. Here, the parties themselves, assisted by experienced counsel, named the Agreement "Promissory Agreement for Purchase and Sale"... This term is also used before and after the recitals in the Agreement as well as in the... Faxes regarding the extension and/or amendment of the Agreement. Moreover,

- Section 1.2 expressly stipulates that the parties, respectively "promise" to sell or purchase the Shares of [airline 1], rather than stating that the parties actually sell or purchase such Shares;

- Section 1.3 uses the future form when making reference to the purchase ("will purchase") and

- Sections 1.5 and 1.6 deal with the possible breach of certain Buyers' "obligation to purchase".

404. In addition, it follows from Section 1.1 and Section 2.3 of the Promissory Agreement, respectively, that the transfer of title of the [airline 1] Shares was to occur and the purchase price to become due only on the Closing Date, provided that all the conditions precedent were met by then.

405. Thus the wording of the Agreement makes clear that a further (definitive) contract would have been signed at Closing.

406. Further, Section 9 provides that the Agreement is subject to specific performance under [the applicable law], which relates to promissory contracts.

407. All this suggests that the Agreement is what it is called. It is hardly conceivable that the parties, which are large companies and some of them state-owned, assisted by experienced counsel, would call the Agreement a Promissory Agreement and adopt the above wording if, in reality, they had wanted to sign a sale and purchase contract... And this conclusion in the Tribunal's opinion is not contradicted by the fact that the parties of the Promissory Agreement are designated as "Seller" and "Buyer", respectively, since this obviously is a contractual designation, adopted to simplify the agreement.

408. It should also be taken into account that Claimants' counsel at the time... had no doubt that he was negotiating a promissory contract since he clearly testified: "Of course, we are talking about a promissory contract." He also stated that the designation "Promissory Agreement" was chosen to make things easier regarding the EU Commission...

409. Under the given circumstances, it also made sense for the parties to enter into a true promissory contract. Indeed, considering that the transaction contemplated in the Promissory Agreement constituted a concentration operation falling within the scope of Art. 1 of the EU Merger Control Regulation, the parties were not in a position to enter into and execute a final contract, one that could have been immediately brought into effect and give rise to the title of transfer to the [airline 1] Shares, because pursuant to Article 7(5) of said Regulation the validity of carrying out the transaction was dependent on the EU Commission's authorisation pursuant to Articles 6(1)(b), 8(2) or 10(6) thereof. Consequently, even though they could have entered into a purchase and sale contract conditioned on the approval, it appears perfectly logical in this situation that they adopted the contractual type of a promissory contract.

410. As to the opinion expressed by [a lawyer acting as witness for the Claimants], the Tribunal finds with all due respect that the qualification of the agreement under review as a final sale and purchase contract is not conclusive. It is clear enough from the wording of the Promissory Agreement that the parties did not intend to transfer the legal title immediately and without another contract to be performed later. Instead they expressly stipulated that the ultimate purchase and sale, including the transfer of title, would occur on the Closing Date as set forth in Section 3.1, i.e. within 5 business days after the conditions precedent in Section 6 had been satisfied and following a notification by Buyers to the Sellers indicating the date, time and place for the transfer of title, and in return for the delivery by the Seller to each Buyer of an order of transfer document. Thus, it is clear that further declarations of intent and actions by the parties were necessary to consummate the final sale and purchase of the Shares and effect the transfer of title.

411. In conclusion, both the wording of the Agreement and its logic suggest that the Promissory Agreement is a true promissory contract, intended by the parties as such.

(ii) The Promissory Agreement was not a "done deal"

412. Against this background, it also appears that Claimants' theory of the "done deal" is not conclusive. It may very well be that this was what Claimants were aiming at and that they instructed their negotiators to see to it that the contract would be final and irreversible, as was stated by some of Claimants' witnesses...

413. The fact, however, remains, that the Promissory Agreement as negotiated was not so irreversible as Claimants may have wished or believed: First, the Promissory Agreement provided for various conditions precedent which depended to a large extent on external factors which the parties could not entirely control. Second, it provides for an expiry date in the event that not all the conditions precedent were met by such date. Third, the Promissory Agreement stipulates specific exit events, such as Sections 5.4 (Material Adverse Change in case of material breaches of the representations and warranties) and 6.1.1 (Material Adverse Change in the context of the merger approval). Taking all this into account, one must conclude that the Promissory Agreement was not a completely irreversible and final contract.

414. Claimants have further argued that, after the signing of the Promissory Agreement, the parties clearly confirmed their understanding of this deal being final and irreversible in that they acted as if this was the case. In particular, they submit that the evidence showed that [airline 1] had given up its previous intensive competition with [airline 3] in compliance with Claimants' attitude towards [airline 3] and instead entered into the Memorandum of Understanding with [airline 3], joined the [frequent flyer programme], and subordinated themselves in many other ways to the policy and instructions of Respondents 1 and 2. According to Claimants, all these harmonisation and integration steps clearly indicated that the parties themselves regarded the transaction as final and irreversible.

415. In response, Respondents argue that they never gave such instructions to [airline 1] and that it was [airline 1]'s own choice to opt for certain of the plans which Respondents 1 and 2 had made available to them, such as the pooled fuel and insurance arrangements outside the [frequent flyer programme]. Their witnesses also pointed out that certain of these advantages are available and in fact subscribed to by airlines which are not even part of [frequent flyer programme].

416. In evaluating these contradictory views, the Tribunal observes that legally this so-called "management subordination" issue is not ultimately relevant. At best, and if considered as proven which in the Tribunal's view is quite doubtful, this conduct by the parties would suggest that they had little or no doubt that "the transaction would go through". Such subjective perception, however, cannot override the fact that objectively the Agreement depended on events beyond the parties' control.

417. Consequently the Tribunal holds that Claimants' theory that the Promissory Agreement was a done deal, in the sense of a final and irreversible sale and purchase contract, is not conclusive.

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(e) Dealings with the EU Commission

470. To evaluate the performance of the Promissory Agreement in connection with the obtaining of the regulatory approvals, it is first necessary to analyse the parties' respective duties in this regard, before examining whether the Buyers acted with the required degree of diligence.

(i) Extent of the Buyers' contractual obligations

471. There can be no doubt that the Buyers were required to use their best efforts to obtain the merger clearance required under Section 6.1.1 of the Promissory Agreement. Although the Agreement does not expressly so provide, such obligation of the parties flows from the general rule of good faith [under the applicable law]. Indeed, it is not disputed that the Buyers had to make every effort to ensure the prompt, diligent and efficient handling of the merger clearance process....

472. Section 6.1.1 of the Promissory Agreement provides that the EU Commission "shall have declared the transactions contemplated by this agreement compatible with the common market under [the EU Merger Control Regulation], or issued a favorable decision subject to conditions or undertakings, provided that such conditions or undertakings do not have a Material Adverse Effect". This provision shows that the parties anticipated that a favourable decision by the Commission under the EU Merger Control Regulation could be subject to conditions or undertakings, as is indeed often the case in practice. It would also suggest that the parties agreed to accept such conditions or undertakings, as long as they did not have a Material Adverse Effect. A Material Adverse Effect is defined in Section 5.1.4 as meaning "any damage exceeding the amount of...". So that the Buyers were in any event not obliged to accept conditions or give undertakings to the EU Commission which involved more than this amount in order to obtain the merger clearance.

473. Claimants maintain that the non-satisfaction of this condition precedent was due to the Buyers' default. They complain about the way Respondents notified the transaction to the EU Commission, accusing them of unnecessary delay and that, by failing to offer remedies and undertakings to adjust the transaction to the Commission's requirements, they acted with negligence. Since by such default, Respondents caused the non-fulfilment of the condition precedent, according to Claimants they are entitled to damages pursuant to Section 6.3 in fine.

474. The EU Merger Control Regulation requires the EU Commission to prohibit transactions which create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the common market or a substantial part thereof (Art. 8(3) in conjunction with Art. 2(3)). In cases such as this, where the EU Commission determines that it has serious doubts as to the compatibility of a concentration, a Phase II proceeding must then be undertaken (Art. 6(1)(c)). During the Phase II proceeding, which must be concluded within 4 months, the MTF [European Commission's Merger Task Force] seeks the views of the industry and customers and may request further information from the parties. In the course of this process, the EU Commission issues a Statement of Objections to the parties, who then have the right to make a written reply and the opportunity, if they wish, to present their case at an oral hearing. At the end of the Phase II procedure, the EU Commission reaches its final decision either prohibiting the deal or clearing the deal (with or without conditions). The parties may then appeal to the Court of First Instance for a judicial review of the final decision (Art. 16).

475. In the present case, the objections raised by the EU Commission to the transaction resulted from the involvement of... State-owned entities, i.e. Respondents 3 and 4. The Commission's assessment of the transaction, as set out in the Serious Doubts Letter... was that "the main effect on competition is caused by the creation of a link between [airline 1] and [airline 3] and between [airline 1] and [airline 4]... since [airline 3] and [airline 4] are controlled by [State X] and since the operation will give [State X] a joint controlling interest in [airline 1] (through [two of the Respondent parties])"....

476. One obvious way of overcoming these objections would have been to exclude these parties from the transaction. Indeed Claimants consider this formed part of the obligations on the Buyers within the scope of their commitment to accommodate the transaction to the Commission's requirements. According to Respondents, there was however no obligation in the Agreement for the Buyers to alter the composition of the consortium in order to overcome any problems concerning merger control. Nor would this be a reasonable demand from Claimants, especially since they were aware at the time the Agreement was signed that the [State X] owned both [airline 3] and [airline 4].

.........

478. The question remains, however, whether the Buyers could be required to restructure the transaction so as to remove the State-owned entities, even without an express provision in the Agreement to that effect. Such obligation could result from the general principle of good faith which the parties have to respect when performing contracts [under the applicable law].

479. The following considerations could speak in favour of such an obligation: First, even though they are not merely formal parties, the Buyers other than [Respondent 1/airline 2] are still to a certain degree "second-ranking" parties, given that their failure to perform the Agreement would not entail any consequences for them, as a result of the guarantee given by [Respondent 1/airline 2] in Section 1.5 of the Promissory Agreement. Second, this lower ranking as compared to [Respondent 1/airline 2] is reinforced by the mechanism under Section 6.1.2 of the Promissory Agreement, by which the other Buyers could ultimately be requested to withdraw from the Agreement.

480. On the other hand, even if their ranking as parties may appear lower, the other Buyers nevertheless are true contracting parties with all the rights and obligations pertaining to a 'Buyer' as defined in the Promissory Agreement, as the Tribunal has already observed in connection with the interpretation of these Sections. Further, it must be noted that even in the two contractual provisions where the replacement of the Buyers other than [Respondent 1/airline 2] was envisaged, namely Sections 1.5 and 6.1.2, such replacement was only possible as a result of the Buyers not performing their obligations.

481. In the scenario under review the situation is quite different: The objections expressed by the EU Commission under the EU Merger Control Regulation are not the result of any fault or negligence by the other Buyers, or from their failure to perform the Agreement. Rather it is the mere participation of those parties, being who they were, in the Promissory Agreement that caused those objections. To require the other Buyers to withdraw from the Agreement under these circumstances, without any contractual provision to this effect, would in the Tribunal's view overstretch any possible application of the principles of good faith.

482. One should also add that Respondents have argued and furnished evidence... that [State X] claimed that participating in the Agreement was for it a matter of national interest. Considering this argument, one may wonder why [State X] then accepted the mechanism in Section 6.1.2, because this could have resulted in its replacement. However, the evidence has shown that the risk of losing [airline 1]'s EU carrier status was more a theoretical one, which may explain why Respondents 3 and 4 did not object to this mechanism.

483. Consequently, one must respect that Respondents 3 and 4, as well as Respondents 5 and 6, had their own legitimate motivation for participating in the Promissory Agreement and that they cannot therefore simply be required to accept their replacement. Likewise, it was important for [Respondent 1/airline 2] to purchase [airline 1] together with [State X], given the link with the [airline 3] deal. This motivation also must be respected, particularly since Claimants were aware of the link and had accepted the involvement of Respondents 3 and 4 in the transaction. It is one thing to change the contents or adjust the structure of an agreement, but quite another to change the parties.

484. In conclusion, the obligation on Respondents to use their best efforts regarding the merger clearance does not extend to a general obligation to restructure the deal so as to exclude some or all of the other members of the consortium.

(ii) The required diligence

485. Claimants allege that Respondents failed to use their best efforts to obtain the merger clearance....

486. In reply, Respondents deny that they were negligent and submit that even if there was some delay, this did not cause the non-fulfilment of the condition precedent.

487. The Tribunal has investigated in detail the actions of Respondents in attempting to obtain the merger clearance and finds as follows:

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492. The Tribunal shares [Respondents' witness's] opinion that it was reasonable for the Respondents to have adopted the course of action they did, although it is of the view that this may not have been the only possible approach which could have been taken. Accordingly, no allegation of negligence can be sustained against Respondents for following the advice of their legal counsel.

493.... Commission officials raised serious competition concerns and indicated that clearance would very likely only be given if the parties offered viable undertakings. However, due to the structural link between [airline 1] and [airline 3] created by the participation of [State X] in both companies, they took the view that route-related commitments would not alleviate their competition concerns. This meant that undertakings to give up slots and/or routes, which had been accepted in the past, were no longer considered sufficient.

494. The Tribunal does not share Claimants' view that it is always possible to find suitable and adequate commitments to satisfy the MTF, since that would imply that no merger notification should ever be rejected. Even during these proceedings, Claimants were not able to suggest any commitments which would have been acceptable to the MTF. The specific nature of this operation was such that, as conceded by the case handler..., there was virtually no solution...

495. The problem was essentially due to the fact that the classic remedies (such as flight code sharing, slot divestiture or frequency reduction) had not been effective in ensuring competition on the markets concerned, in particular as regards new market entrants. It appears that the EU Commission has progressively tightened its merger control policy towards airline mergers and alliances in order to ensure continued competition on all affected routes.

496. [The EU Competition Commissioner] explained the current policy on airline concentrations, and alliances in particular, in a speech given in March 1998 to the Royal Aeronautical Society in London : "National carriers still have very strong positions in their home markets and when two of them decide to enter into a fully-fledged cooperation, the risk of elimination of competition on the routes between the Member States concerned is very high." It is logical to conclude that the Commission would equally scrutinise deals which link the only two national carriers in a particular Member State, such as [airline 3] and [airline 1] here, and especially the effects of such prima facie anti-competitive agreements as the MOU.

497. A Communication on the European Airline Industry issued by the European Commission in May 1999 officially sets out their policy: "In the actual application of competition law to airline alliances the Commission has to bear in mind... also the need to preserve effective competition on all the market concerned.... The Commission strictly applies the competition rules to the different areas of the air transport sector." The Tribunal takes the view that in this present case Respondents cannot be held accountable for the consequences of this policy.

498. In its decision dated August 11, 1999 on the KLM/Alitalia joint venture case, the Commission accepted a total of 10 undertakings aimed at "removing the barriers to... the effective entry of a competitor into the markets in question". The combined effect of the undertakings, which included giving up slots and reducing frequencies at congested airports, would remove the dominant position created by the notified operation.

499. Indeed in the Lufthansa/Austrian Airlines case, the Commission gave a positive decision in July 2002 only after it could establish that competitors were seriously interested in entering the market on certain key routes. It was this factor which allowed the Commission to exempt the cooperation agreement between the parties under Article 81(3) of the Treaty of Rome. The deal could only be accepted on the basis of conditions which significantly reduced the barriers to market entry, including giving up slots, not increasing frequencies, restrictions on fare reductions, allowing participation in frequent flyer programmes and accepting inter-modal agreements with railway companies. It is relevant to note that... the EU Commission was considering this case at the same time as the [airline 1] transaction.

500. Given that Respondents could not be required to exclude the [entities owned by State X] as explained above and that route-related commitments would not be accepted, the only remedy left to alleviate the resulting dominant market position would be the entrance of new competitors in the affected routes. However, the Commission's main requisite for the approval the operation was the actual market entry of a competitor, or at least serious interest as shown by the Austrian Airlines case. Unfortunately in this case, the local market conditions were not sufficiently attractive so that new entrants could be interested. Although efforts and market enquiries were conducted with that purpose, both by the Respondents... and by DG COMP... with their assistance, no potential new entrants willing to operate the affected routes could be identified.

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502. It is also relevant in this connection that Respondents' obligation was limited to giving conditions or undertakings which did not have a Material Adverse Effect. This means that solutions, such as the significant package of commitments given in the subsequent Lufthansa/Austrian Airlines case could not in all likelihood have been imposed on Respondents in this case.

503. It is not disputed that Respondents did not in fact offer any formal commitments, nor was there any offer of commitments in draft form. However, in circumstances such as these where no adequate undertakings were available, it does not follow that by failing to give such commitments Respondents thereby caused DG COMP not to approve the operation, as alleged by Claimants. This result cannot be attributed to Respondents' fault or negligence.

(iii) The issue of delay

504. Claimants further allege that Respondents were, through delay, in breach of their best efforts obligation in not pursuing such notification diligently.

505. In total it took Respondents almost 10 months to notify the transaction on Form CO....

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507. Under Art. 4(1) of the EU Merger Control Regulation, notification is required not more than one week after the conclusion of the agreement, though in practice it is unusual for it to be submitted within this time limit. The length of time which was allowed to elapse before the filing even meant that the transaction was formally notified only after the initial term of the Promissory Agreement had expired, with the consequences described above.

508. The Tribunal finds it difficult to reconcile the time taken to file the notification on form CO in this case with the diligent performance of a best efforts obligation. The Tribunal is also not convinced that this transaction was unusually complex nor that the information requested by the EU Commission was especially time-consuming to collect, as maintained by Respondents in their defence.

509. Nevertheless, the question whether Respondents were in default of their best efforts obligation by reason of delay is not ultimately decisive. The time taken to notify was not the cause why merger control clearance was not obtained. It was not obtained because the EU Commission was of the opinion that the operation was not compatible with the common market. Given also the policy statements by the Commission in March 1998 and May 1999 (see para. 495(496 above) expressing their concerns to ensure continued competition within the common market, there is no indication that a different result would have been obtained had the notification been filed earlier.

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(v) Withdrawal of the notification

511. Claimants also submit that because the Respondents withdrew the notification, they prevented the possibility of discussing remedies and undertakings capable of changing the position taken by the EU Commission.

512. Respondents maintain that the withdrawal of the notification only took place when it was already clear that there was no more room for a compromise with the Commission. The reason Respondents gave for the withdrawal was to prevent a formal prohibition of the transaction, which would have had a negative impact on the clearance of alternative transactions. Claimants on the other hand, have taken the view in this arbitration that Respondents should have waited for a decision by the EU Commission and if this was negative, should have appealed to the Court of First Instance.

513. [The case handler at the EU Commission] confirmed that he had prepared a Statement of Objections..., which otherwise would have been issued to the parties in the next days... According to his witness statement, in this document, the EU Commission explains its preliminary view that the operation is incompatible with the common market. Such a statement does not however entail a definite prohibition.

514. Nevertheless, given the EU Commission's new policy of requiring actual competition on overlapping routes and the absence of potential new entrants, it appears inevitable that the envisaged transaction would be declared incompatible with the common market under Art. 8(3) of the EU Merger Control Regulation. The Tribunal is also inclined to accept Respondents' argument that it would have been significantly more difficult to obtain clearance of a subsequent similar transaction if the EU Commission had published a negative decision on the Promissory Agreement filing. A negative decision would also have affected a decision by the national competition authorities if any new transaction were to be subject to [State X] competition law rather than the EU Merger Control Regulation.

515. [Respondents' counsel]'s evaluation of the situation was that "it was pointless" to continue attempting to obtain clearance and advised Respondents accordingly....

516. At the meetings... attended by representatives of all the parties concerned, Respondents informed Claimants that they intended to withdraw the notification. The witness statements and testimony of the party representatives involved show that Claimants made clear during and after these meetings that they disagreed with this approach... However, there was no evidence of any specific remedies for this transaction which could have overcome the EU Commission's objections.

517. Instead over the next months the parties explored different solutions, such as "parking" the [airline 1] shares with an investment ba[n]k, none of which were found to be satisfactory. Respondents 1 and 2 made clear at this stage... that "no further contractual obligation subsists between the parties". They repeated this position [subsequently]. It must therefore be excluded that the negotiations following the withdrawal of the notification took place within the framework of the prolonged Promissory Agreement.

518. One may question whether Respondents' unilateral withdrawal of the notification despite Claimants' protests was in breach of their duty to perform the Agreement in good faith. Even if the withdrawal was the best solution to avoid the risk of a Statement of Objections, it could be argued further that this was only valid when the withdrawal was made in order to prepare a new notification, which was never made. More generally, it could be argued that Respondents were obliged to pursue the matter to the end including by presenting their case in an oral hearing and, if necessary, appealing to the European Court of First Instance for a judicial review of any negative decision. The unilateral withdrawal of the notification did after all mean that the condition precedent in Section 6.1.1 could not be satisfied, and frustrated the possibility of exploring these remedies.

519. But these arguments are not ultimately conclusive, because it was certain that a Statement of Objections would have been issued, as [the case handler] confirmed, and if [Respondents' counsel], whose reputation in this field is undisputed, considered that there was no solution, then it would be unreasonable to expect Respondents to continue with the Phase II proceeding. In the Tribunal's view, Respondents' obligations came to an end when according to their advisors it was pointless to continue. The problem, which was clearly set out in the Serious Doubts letter..., was a lack of competition to [airline 3] and [airline 1] in their home markets which risked creating dominant positions on certain unprofitable routes. What caused the damages alleged by Claimants was not the conduct of Respondents, but the objective hindrance that the Commission was required by Article 8(3) of the EU Merger Control Regulation in this situation to prohibit the transaction. The conduct of Respondents in withdrawing the notification was thus in any event not the decisive causal link in the legal sense.

520. Therefore, even if the withdrawal were to be considered as a breach of Respondents' obligations, there is no liability on their part since it was clear that the transaction would not have been approved and there was no hope that a legal challenge would be successful.

(vi) Burden of proof

521. The burden of proof that Respondents were in breach of their contractual obligations and that this breach caused the non-satisfaction of a condition precedent to the Promissory Agreement lies on Claimants. Given that Respondents have provided evidence of their efforts to obtain the merger clearance and that any delays which occurred did not affect the decision of the EU Commission, the Tribunal finds that Claimants have not demonstrated with the requisite degree of certainty either that Respondents were in breach of their obligations or that there is a causal link between either whatever delay there may have been or the withdrawal of the notification and the failure to obtain merger clearance.'