'Introduction

1. The Claimants are both subsidiaries of [A], a worldwide hospitality company incorporated under the laws of [a state] in the United States of America, which with its subsidiary companies (all together "the [A] Group") operate and franchise hotels under a variety of brand names, including [the name X]. The First Claimant … is a company incorporated under the laws of [a Caribbean country]. The Second Claimant … is a company incorporated under the laws of [a West European country].

2. The Respondent ("the Owner") is a company incorporated under the laws of [a country in the Middle East]. It is the owner of a hotel in [that country's principal city] now called [X], formerly known as [Y] ("the Hotel").

3. On 19 March 1998 a Hotel Management Agreement was purportedly entered into between [the First Claimant] and the Owner ("the Management Agreement") under which [the First Claimant] was to manage and operate the Hotel.

4. Section 16.06 of the Management Agreement provides, amongst other things, that it:

…is executed pursuant to, and shall be construed under and governed exclusively by, the laws of [the Respondent's country of origin].

5. Section 16.07 of the same provides that:

Except as otherwise specified in this Agreement, any dispute, controversy, or claim arising out of or relating to this Agreement shall be settled by arbitration in accordance with the rules of procedures of the International Chamber of Commerce (or any similar successor rules thereto) as are in force on the date when a notice of arbitration is received. The appointing authority shall be the International Chamber of Commerce. The number of arbitrators shall be one unless a party to the arbitration requests otherwise, in which case there shall be three. The language to be used in the proceedings shall be English. The place of arbitration shall be London, England. The decision of the arbitration board shall be final and binding upon the parties, and such decision shall be enforceable through any courts having jurisdiction. The costs and expenses of arbitration shall be allocated and paid by the parties as determined by the arbitrators.

6. On the same date [A] entered into an International Services Agreement ("the Services Agreement") with the Owner. This contained (so far as material) like choice of law and arbitration provisions (at Sections 7.05 and 7.06 respectively) as the Management Agreement.

7. Also on the same date [B], a corporation organised under the laws of [a state] in the United States of America, ("[B]") entered into a License and Royalty Agreement ("the License Agreement") with the Owner. Again it contained (so far as material) like choice of law and arbitration provisions (at Sections 9.05 and 9.06 respectively) as the Management Agreement.

8. On 1 January 1999, [A] purported to transfer the benefit and the burden of the Services Agreement to [the Second Claimant] and, on the same date, [B] purported to transfer the benefit and the burden of the License Agreement to [the Second Claimant].

9. On 1 September 2008, [the Second Claimant] purported to transfer the benefit and the burden of both the Services Agreement and the License Agreement to [C], a company incorporated under the laws of [a West European country].

10. The Arbitral Tribunal deals with the effect of these purported transfers below.

Proceedings

11. Disputes arose between the parties and by a Request for Arbitration … the Claimants commenced these proceedings.

12. The Claimants were initially represented by … and subsequently by ... The Owner was represented throughout by ...

13. … the Owner served its Response to Request for Arbitration and Counterclaims.

14. … the Secretary General of the Court confirmed … as co-arbitrator on the joint nomination of the Claimants, and … as co-arbitrator on the nomination of the Owner.

15. … the Secretary General of the Court confirmed … as Chairman of the Arbitral Tribunal (hereinafter "the Tribunal" or "we"), on the joint nomination of the two co-arbitrators.

16. … the Claimants served their Reply to the Owner's Counterclaims.

17. … the Owner served its Amended Response to Request for Arbitration and Counterclaims.

18. There were procedural hearings, in person or by conference call … and in the course of the proceedings the Tribunal made various procedural orders and, in particular:

(a) … allowed the Claimants to amend their Request for Arbitration and serve an Amended Request for Arbitration;

(b) … allowed the Owner to amend its counterclaim as pleaded in a Second Amended Response and Counterclaim.

19. … the Claimants made their response to the Owner's Second Amended Response and Counterclaims.

20. Terms of Reference were agreed and signed on behalf of the parties and by the arbitrators … and were transmitted to the Court ... Revised Terms of Reference were agreed and signed on behalf of the parties, and by the arbitrators, … and were transmitted to the Court ...

21. The provisional Procedural Timetable was transmitted to the Court ...

22. … the Court extended the time limit for rendering the Award in this arbitration …

23. … the Claimants made a request for interim measures. After receiving submissions from both sides, … the Tribunal decided to defer determination of this request until the hearing on the merits set for December 2008 had taken place. On … the final day of the first part of the hearing on the merits, the Claimants renewed their application in part. … the Tribunal decided to adhere to the position that it would not make any decision on interim measures until after it had heard the evidence.1

24. … the Claimants notified the Tribunal that [the Second Claimant] had "…assigned all its respective rights and obligations in relation to…" the Services Agreement and the License Agreement to [C], and that [ten years earlier] [the First Claimant] had changed its name to ... They requested, "if necessary or desirable" that, in the title of the arbitration, the name of the First Claimant ([the First Claimant]) be changed to … and that of the Second Claimant … to [C]. After receiving submissions from both sides, … the Arbitral Tribunal decided these questions should be considered at the hearing fixed to begin in December 2008.

25. In accordance with directions given by the Tribunal …, the parties served memorials, reply memorials, witness statements supplementary witness statements, expert reports and supplementary expert reports on each other and the Tribunal.

26. The hearing on the merits took place in London [in] December 2008 … and … February 2009 ... The Claimants were represented by …2 and the Owner was represented by ...

27. The Claimants put before the Tribunal factual witness statements from, and called to give oral evidence:

…, Executive Vice President, Finance-International Lodging for [A];

…, formerly Area Vice President for the Middle East and Africa for [A] until his retirement …;

…, Senior Vice President and Associate General Counsel for [the Second Claimant];

…, Senior Director of [A]'s Reservation Sales, Strategy and Support Services;

…, General Manager of the Hotel from March 1998 until July 1999;

…, Senior Vice-President for Development at [A];

…, head of the Feasibility department for the UK Middle East, Africa and Continental Europe for [A];

…, Assistant Financial Controller at the Hotel;

…, Senior Manager of [A]'s Global Reservation Sales & Customer Care Department for the Middle East and Africa;

…, Senior Vice President for Global Marketing at [A]; and

…, Area Director Finance for the Middle East and Africa for [A].

28. The Claimants put before the Tribunal expert reports, and called to give oral evidence:

…, a partner in the hotel consultancy department of [a firm of accountants and auditors];

…, a partner in the forensic services department of [the same firm];

…, a partner in the Corporate Finance division of [a firm of consultants and auditors]; and

…, the Managing Partner of … a law firm with offices in the [country where the Hotel was situated].

29. The Owner put before the Tribunal factual witness statements from:

…, the Internal Audit Manager for [the company that formerly ran the Hotel];

…, the Director of Operations and Business Development of [that company]; and

…, an attorney and consultant.

Of these, [the first two] were called to give oral evidence.

30. The Owner put before the Tribunal expert reports, and called to give oral evidence:

…, [a provider of legal services]; and

…, a chartered accountant and Managing Director in the Disputes and Investigations team with [a firm of business advisers].

31. After the hearing on the merits … each side served post hearing written submissions and, in addition, the Claimants served a supplemental report of [one of its experts]. … the Claimants served a short reply, and … the Owner served a short response.

The Disputes

32. In 1992 the Owner opened the Hotel (then known as the [Y]) in the [principal city of a Middle East country]. Until 1998 the Owner operated the Hotel itself.

33. After a time, the Owner concluded that the Hotel was not performing as well as it should, and that it would be more successful if it was operated by a major international chain, and re-branded under the chain name.

34. In late 1997 and early 1998, negotiations took place between representatives of the Owner and those of the [A] Group. We deal with these in more detail below, but the upshot was that it was agreed that the Hotel should henceforth be operated by an [A] Group company and re-branded as an [X] Hotel, [X] being a brand that the [A] Group had recently acquired. As was explained to the Owner, the Hotel could not be re-branded as an [A] Hotel because the Group already operated such a hotel in [that city]. This was the … Hotel … and its owners had a contract with the [A] Group preventing the latter from opening another full service hotel in [the city] bearing the [A] name …

35. As already mentioned, as a result of the negotiations, the Owner signed the Management, Services and License Agreements in March 1998. Under the Management Agreement, [the First Claimant] was to manage and operate the Hotel. Under the Services Agreement, [A] was to provide various services to the Owner to promote and support the Hotel. And under the License Agreement, [B] was to licence the Owner to use trademarks so that the Hotel could be branded with the name [X]. Again we deal with the terms of these three Agreements ("the Agreements") in more detail below.

36. The Owner has raised a question as to whether [the First Claimant] existed as a corporate entity at the time the Management Agreement was made, and thus as to whether that Agreement is valid under [the applicable] law. It has also raised an issue as to whether those who signed the Agreements, purporting to act on behalf of various [A] Group entities, were in fact authorised to do so, again raising questions as to the validity of the Agreements. In addition, the Owner disputes the validity of the assignments in 1999 of the Services and License Agreements to [the Second Claimant], and of their further assignment in 2008 to [C].

37. The Claimants say that the Agreements themselves, and the assignments of the Services and License Agreements, were all valid under [the applicable] law, and that in consequence [C] should be substituted for [the Second Claimant] as a claimant.

38. It follows that we have to consider the validity of the Agreements, the validity of the assignments, and the question of whether [C] should be made a claimant in substitution for or in addition to [the Second Claimant]. In addition, we need to determine whether the name of the First Claimant in these proceedings should properly be altered from … to ...

39. Even if they are valid, the Owner says that it was induced to enter into the Agreements by misrepresentations and, in particular, by false representations as to the expected revenues and profits of the Hotel and about the capabilities of [the First Claimant]. The Claimants deny this. Thus the question arises: did the Claimants induce the Owner to enter into the Agreements by misrepresentations and, if so, what if any are the consequences?

40. Once the Agreements had been signed, the name of the Hotel was changed, and Mr …, from the [A] Group, took over as General Manager, followed in July 1999, by Mr … and in January 2002, by Mr …. Thus from March 1998 to date, the Hotel has been operated under the [X] name by (to put it neutrally as between particular corporate entities) the [A] Group.

41. The Owner claims that throughout this period the [A] Group has mismanaged the Hotel and that, as a result, the Hotel has performed far less well than it should and that in consequence the Owner has suffered loss. In particular, it claims that [the First Claimant] has failed to act as a reasonable operator of the Hotel and to preserve and enhance its character, standards and reputation, as required by section 2.04 of the Management Agreement. Indeed, one of the Owner's specific complaints is that [the First Claimant] itself is no more than a brass plate company, and that it has not managed the Hotel at all; this was left to other [A] Group entities which, amongst other things, have diverted business that should have gone to the Hotel to [another hotel operated by the A Group in the city]. The Claimants again deny this, saying that the Hotel has been properly managed in accordance with the terms of the Agreements. Accordingly, it falls for decision whether the Claimants have mismanaged the Hotel so as to breach the Agreements or any relevant provision of [the applicable] law and, if so, whether in consequence the Owner has suffered any recoverable loss.

42. The Owner also claims, and the Claimants deny, that the Claimants, whilst managing and operating the Hotel, have breached the confidentiality provisions contained in section 16.05 of the Management Agreement, section 7.04 of the Services Agreement, and section 9.04 of the License Agreement. Here again, we have to decide whether such breaches have been committed and, if so, with what consequences.

43. The Management Agreement imposes upon [the First Claimant] obligations to keep books and records relating to its management of the Hotel, entitling the Owner to examine them, and requiring [the First Claimant] periodically to provide the Owner with an account of the Hotel's operation. Moreover, according to the Owner, [the applicable] law itself gives the Owner rights to require further information from someone, such as [the First Claimant], acting as its agent.

44. In fact, since the [A] Group took over management of the Hotel, statements detailing the income and expenditure of the Hotel have been provided to the Owner monthly, and annually the Hotel's accounts have been audited by accountants appointed by the Owner. During this period, according to the Owner, the [A] Group has persistently, in both monthly and annual statements, concealed from it the fact and extent of payments made from the Hotel's accounts (and thus the Owner's money) to companies, other than [the First Claimant], in the [A] Group. The Owner complains that it was kept in the dark about these transactions with related companies, the so-called "[W] Invoices", and that all or some of these were unauthorised and improper. Moreover the Owner claims that its request to obtain information and explanations, to which it says it is entitled, about these transactions, and also about payments made under the Services Agreement, have been improperly refused or ignored by the [A] Group. The Owner says that it is entitled to an order for a full and detailed account to be taken of the operation of the Hotel to investigate whether and to what extent improper payments have been made, business has been directed to the [other hotel operated by the A Group in the city], and the Claimants have benefitted from misusing confidential information.

45. The Claimants deny that they concealed the existence or extent of related party transactions from the Owner, assert that all such payments were authorised and proper, and have sought to explain how the system of reimbursement of costs and expenses under the Services Agreement has operated.

46. Thus it also falls for decision whether and, if so, in respect of what matters the Owner is entitled to an accounting from the Claimants.

47. According to the Owner, it first discovered what it says were undisclosed and unauthorised payments to related parties in 2006. Failing to obtain what it considered sufficient explanations, in brief in October 2006, the Owner served notices of default under the both the Management and Services Agreements, in November 2006, it ceased making payments to the Claimants under the Agreements, and in December 2006 it revoked [the First Claimant]'s signature authority in respect of the Hotel bank accounts. In response, in December 2006, and March 2007, notices of breach under the Management Agreement were served on the Owner, in July 2007, the Claimants commenced this arbitration, and [in] March 2009, [the First Claimant] sent the Owner notice of intention to terminate the Agreements. The Claimants say they are entitled to recover the contractual payments under the Agreements that have gone unpaid since November 2006, to a determination by the Arbitral Tribunal that the Agreements are terminated, and to compensation in respect of the unexpired residue of the Agreements. The Owner says that it was entitled to revoke [the First Claimant]'s signature authority and to withhold payments under the Agreements. It also says that the purported termination of the Agreements lies outside the scope of this arbitration and that it is not liable for any future loss.

48. It follows that we must determine whether the Owner is liable to the Claimants in respect of the amounts unpaid since November 2006, and for damages as regards the future; and we must also decide if the issue of termination falls within the ambit of this arbitration and, if so, whether the Agreements have been or should be terminated.

49. As is apparent from what is said above, the issues raised by the Owner by way of defence and counterclaim start earlier in time than those raised by the claims made by the Claimants and, rather than dealing first with the claim and then the counterclaim, we deal with the issues raised by the disputes we have mentioned in what is, so far as practicable, chronological order.

50. Finally, we should record that a good many allegations were made in the Owner's pleadings, and indeed in its prehearing Memorials, which were not pursued, or were not pursued in the same way, at the hearing and in the post hearing written submissions. As far as practicable we deal in this Award with the Owner's case as it was finally put before us.

The Agreements

51. As already mentioned, the disputes giving rise to this arbitration relate to the Management Agreement, the Services Agreement and the Licence Agreement. We summarise the relevant provisions of those Agreements below.

Management Agreement

52. The Management Agreement, so far as material, provides as follows:

2.01 Operation of Hotel

Owner hereby appoints Manager as Owner's exclusive agent to (i) supervise, direct, and control the management and operation of the Hotel beginning as of the Takeover Date and continuing for the remaining Term and (ii) perform pre-takeover activities prior to the Takeover Date. Owner hereby grants to Manager the full scope of authority necessary to perform its obligations under the terms of this Agreement. Manager accepts the appointment and agrees to manage and operate the Hotel during the Term in accordance with the terms and conditions set forth herein. The performance of all activities by Manager hereunder shall be on behalf of and for the account of Owner.

2.02 Delegation of Authority

Except as otherwise specified in this Agreement, the management and operation of the Hotel shall be under the exclusive supervision and control of Manager, and Manager shall be responsible for the management and operation of the Hotel. Except as otherwise specified in this Agreement, Manager shall have discretion and control, free from interference, interruption, or disturbance, in all matters relating to the management and operation of the Hotel, including: charges for rooms and commercial space; credit policies; food and beverage services; employment policies; granting of concessions or leasing of shops and agencies within the Hotel; receipt, holding, and disbursement of funds (including the payment of Deductions from funds available therefor); maintenance of bank accounts; procurement of inventories, supplies and services; promotion and publicity; and such other activities as are specifically provided for elsewhere in this Agreement or are otherwise reasonably necessary for the management and operation of the Hotel. …

…

2.03.B. Manager shall consult Owner when employing third party accountants or other consultants or advisers in connection with the management of the Hotel by Manager.

2.04 Standard of Care

In fulfilling its obligations hereunder, (i) Manager shall act as a reasonable and prudent operator of the Hotel, having regard to the status of the Hotel, and (ii) Manager shall strive to preserve and where applicable enhance the character, standards and reputation of the Hotel.

2.05 [X] Chain Standards

Owner acknowledges that the Hotel's compliance with [X] Chain quality standards is critical to the success of the Hotel and the [X] Chain.

…

3.05 Operation

Manager shall operate the Hotel solely as a hotel in accordance with this Agreement (including all activities and facilities which are customary to such an operation) under standards comparable to those prevailing in the [X] Chain. …

4.01 Term

The term ("Term") of this Agreement shall commence with the Effective Date3 and, unless sooner terminated as herein provided, shall end on the last day of the 20th full Fiscal Year4 after the Takeover Date. This Agreement may be renewed on terms and conditions mutually agreed by the parties.

…

5.01 Management Fee

A. In consideration of services to be performed during the Term, Manager (except as otherwise provided in this Section) shall be paid as its management fee ("Incentive Fee") for each Fiscal Year an amount equal to eight percent (8%) of Net House Profit with respect to such Fiscal Year. The balance of Net House Profit after deducting the Incentive Fee and any other amounts required or permitted pursuant to this Agreement to be paid by Manager on Owner's behalf shall be paid to or as directed by Owner as provided in Section 5.02.

B. During each Fiscal Year of Hotel operations commencing with the Takeover Date, the Incentive Fee for such Fiscal Year is not earned (and is not payable) unless Net House Profit equals or exceeds Owner's Priority for such Fiscal Year. For purposes of clarification if Net House Profit equals or exceeds Owner's Priority, the full amount of the Incentive Fee is earned (and is payable). Net House Profit of any previous Fiscal Year(s) shall not be taken into consideration when the Incentive Fee to which Manager is entitled is calculated for any individual Fiscal Year.5

…

5.02 Accounting and Distribution of Adjusted House Profit

A. Manager shall use its best efforts to submit within 10 days after the close of each Accounting Period6 an interim accounting to Owner for such Accounting Period and in any event such interim accounting shall be submitted within 15 days after the close of each Accounting Period. In the event that Owner requests accounting details not customarily supplied by Manager but available to Manager then such details shall be submitted by Manager within 20 days after the close of each Accounting Period. The interim accounting will show Total Revenue, Deductions, departmental profits, Adjusted House Profit, Net House Profit prepared on the basis of the Uniform System and distributions to Owner and Manager. With each interim accounting, Manager (subject to Manager in its reasonable discretion after consultation with Owner electing to defer distributions to Owner or Manager in order to meet existing or anticipated needs for Working Capital) shall pay any interim Incentive Fee in [currency] due Manager and pay to or as directed by Owner any interim amount due to Owner. Such interim accounting and interim payments shall be subject to the annual accounting (and External Audit) and distributions provided for in Section 5.02 C and D.7

…

C. Within 75 days after the close of each Fiscal Year, Manager shall submit to Owner an annual accounting for such Fiscal Year in accordance with Section 7.01. Such annual accounting shall be controlling over the interim accountings, and any adjustments required by such annual accounting shall be made promptly by the parties such that Adjusted House Profit for the Fiscal Year is distributed according to the following Priority:

1. First, in payment of all Fixed Charges;

2. Second as a distribution to Manager of the Incentive Fee if any;

3. Third, as a distribution of the balance, if any, to Owner.

D. Similarly, the accounting made pursuant to the External Audit shall be controlling over such annual accounting, and any adjustments required by the External Audit shall be made promptly by the parties. …

…

7.01 Books and Records

A. Except as otherwise provided herein, Manager shall keep the books of control and account on the accrual basis and in material respects in accordance with the Uniform System. At reasonable times during Manager's normal business hours, Owner may examine such records.

B. Within 75 days following the close of each Fiscal Year, Manager shall deliver to Owner a reasonably detailed statement, certified as true and correct by the Hotel's chief accounting officer, summarizing the Hotel operations for such Fiscal Year. On delivery of the certified statement to Owner, Manager shall request that an Auditor conduct an External Audit or to otherwise examine or review such certified statement. If Owner requests certain clarifications or otherwise questions such certified statement, Manager shall respond or request the Auditor to respond within 15 days from such request or as soon thereafter as reasonably practical. The Auditor shall be directed to complete such External Audit within 90 days of Manager's request. If neither Owner nor Manager raises an objection to such External Audit within 30 days after it is completed, such External Audit shall be deemed to have been accepted by such parties as correct, and no party shall have any right to question its accuracy. If Owner or Manager timely requests any clarification or otherwise questions any such External Audit, the Auditor shall be instructed to respond within 15 days of such request or as soon thereafter as reasonably practical.

7.02 Hotel Accounts: Expenditures

A. All funds derived from operation of the Hotel shall be deposited by Manager in Hotel bank accounts in a bank designated by Owner and approved by Manager. Withdrawals from the bank accounts may only be made by Manager and shall require two signatures by authorized Hotel Employees. One of the authorized signatories for any withdrawal from such accounts will be of any of the General Manager, the Executive Assistant General Manager - Rooms Division, or the Executive Assistant General Manager - Food and Beverage Division and the other signatory for any withdrawal from such accounts shall be the Financial Controller or (if it is inconvenient for the Financial Controller to sign) the General Manager or such other person from the accounting department of the Hotel as Manager from time to time may designate. For the avoidance of doubt, the General Manager will only constitute one authorized signatory for any withdrawal. Reasonable petty cash funds shall be maintained at the Hotel. The mandate establishing the bank accounts shall have as signatories only Hotel Employees designated by Manager and the mandate shall prohibit Owner from terminating or closing such accounts without the specific written approval of Manager.

…

8.01 [X] Name

After the Takeover Date and during the remaining Term, the Hotel shall be known as an [X] hotel, with such additional identification as may be agreed to by Owner and Manager to provide local identification; however, if the name of the [X] Chain is changed, Manager shall have the right to change the name of the Hotel to conform thereto with the consent of the Owner. The [X] Trademarks in all events shall remain the exclusive property of [a company in the A group], [A], or any of their respective Affiliates.8 Nothing in this Agreement or in the License and Royalty Agreement shall confer on Owner the right to use the [X] Trademarks other than in strict accordance with the terms of this Agreement and the License and Royalty Agreement. …

…

12.01 Events of Default

Subject to Section 11.03, each of the following shall constitute an event of default ("Event of Default") to the extent permitted by applicable law:

…

G. The occurrence of an event of default under the International Services Agreement or the License and Royalty Agreement.

H. The placing of any restrictions on the expenditure by Manager of funds in the Reserve other than as set forth herein;

I. The failure of Owner to complete the renovation, furnishing, and equipping of the Hotel in accordance with Pre-Takeover Addendum projected therein which failure shall continue for a period of 60 days; or

J. The failure of any party to perform, keep, or fulfil any of the other material warranties, covenants, undertakings, obligations, standards or conditions set forth in this Agreement, which failure shall continue for a period of 60 days following notice thereof by the non-defaulting party (or such longer period of time as is necessary to cure such Default if such failure is not susceptible to being cured within 60 days and the defaulting party shall promptly after such notice diligently begin, prosecute, and complete curing such failure).

…

12.02 Right of Termination

Upon the occurrence and during the continuance of an Event of Default, a non-defaulting party may give to a defaulting party notice of its intention to terminate this Agreement upon the expiration of a period of 30 days from the date of such notice, and unless such notice of termination is withdrawn before the expiration of such 30 day period, this Agreement shall terminate upon the expiration of such 30 day period.

…

16.03 Relationship

The relationship of Owner and Manager shall be that of principal and agent, and nothing contained in this Agreement shall be construed to create a partnership or joint venture between them or their successors in interest. Manager's agency established by this Agreement is coupled with an interest and may not be terminated by Owner until the expiration of the Term, except as provided in Article XI and Article XII. Notwithstanding the agency relationship created by this Agreement, except as set forth in Section 16.15, nothing contained herein shall prohibit, limit, or restrict Manager or any of its Affiliates from developing, owning or partially owning, leasing, operating or franchising hotels in addition to the Hotel or from entering into marketing or other arrangements with hotels in the Restricted Areas.9

16.04 Procurement Affiliates

Manager may contract with one or more Procurement Affiliates10 to provide goods or services to the Hotel, provided that the cost of such goods or services are competitive with the cost of comparable goods or services. In determining whether goods or services are comparable, Manager may consider quality, competence of provider, availability, timeliness and reliability of delivery, and other relevant factors. In determining whether such costs are competitive, goods or services may be grouped in reasonable categories. Unless otherwise provided, so long as such costs are competitive, Manager or its Affiliates shall be entitled to a reasonable profit on such goods and services. Within 15 days of the end of each Accounting Period Manager shall inform Owner of any written contract that Manager has entered into with Procurement Affiliates in relation to the Hotel which has a value of US$10,000 (multiplied by Inflation Index) or more.

16.05 Confidentiality

A. The matters set forth in this Agreement are strictly confidential, and, except as otherwise required by law or necessary to enable consultants to fulfil their roles in relation to the Hotel or permitted by this Agreement, each party hereto shall make every effort to ensure that the information contained herein or received pursuant hereto is not disclosed to any Person other than a party hereto (including the press) without the prior consent of the other party.

…

16.13 Waiver

The failure or delay by a party to insist upon strict performance of any provision of this Agreement or to exercise any option, right, or remedy contained in this Agreement shall not constitute a waiver or a relinquishment of such provision, option, right, or remedy for the future. No waiver by a party of any provision of this Agreement shall be deemed to have been made unless expressed in writing and signed by such party.

…

16.15 Territorial Restriction

A. Neither Manager nor any Affiliate shall own, operate or franchise or otherwise license others to operate any first class full-service [X] hotels, other than the Hotel in Restricted Area One during the Term without the consent of Owner.

B. Neither Manager nor any Affiliate shall own, directly operate or franchise or otherwise license others to operate any first class full-service [X] hotels, other than the Hotel in Restricted Area Two during the period from the Effective Date through the tenth (10th) anniversary of the Effective Date without the consent of Owner.

C. Neither Manager nor any Affiliate shall own, directly operate or franchise or otherwise license others to operate any first class full-service [X] hotels, other than the Hotel in Restricted Area Three during the period from the Effective Date through the fifth (5th) anniversary of the Effective Date without the consent of Owner.

D. The provisions set forth in Sections 16.16(A), 16.16(B) and 16.16(C) shall not apply to … (iii) hotels operated under the … [A] brand name …

…

16.18 Entire Agreement

The following constitute the entire agreement between the parties or their respective Affiliates, supersede all prior understandings and writings, and may be changed only by a writing signed by the parties or their respective Affiliates: (i) the [X] Agreements; (ii) any instruments to be executed and delivered pursuant to any of the [X] Agreements; and (iii) any other writings executed by the parties or their respective Affiliates, which writings are stated to be supplemental to or to amend or restate any of the foregoing agreements.11

53. Further, at Exhibit C to the Agreement, there is a Pre-Takeover Memorandum, which provides, so far as material, as follows:

The following provisions supplement the terms and provisions set forth in the Management Agreement governing the rights and obligations of Owner and Manager during the conversion and pre-takeover phase of the Hotel. The rights or obligations of Manager herein may, in Manager's sole discretion, be delegated to … or another Affiliate of Manager or subcontracted for performance by consultants selected by Manager.

1. Renovation

A. Owner at its cost and expense shall renovate, furnish, and equip the Hotel as set forth in the conversion and renovation program attached hereto as Schedule 1 ("Conversion Program") …

…

B. Owner shall:

1. Commence renovation of the Hotel in accordance with the Conversion Program on the Effective Date and thereafter diligently carry out such renovation and Owner shall immediately give priority to those items listed as points a, b, c and d in Phase 1 of the Conversion Program; and

2. Complete:

- Phase 1 of the Conversion Program in accordance with this Addendum within 90 days after the Takeover Date;

- Phase 2 of the Conversion Program in accordance with this Addendum within 12 months after the Takeover Date; and

- Phase 3 of the Conversion Program in accordance with this Addendum within 18 months after the Takeover Date.

Services Agreement

54. The Services Agreement, so far as material, provides as follows:

2.01 International Advertising, Marketing, Promotion, and Sales Program

[A] shall provide or cause its Affiliates to provide the International Advertising, Marketing, Promotion, and Sales Program. A description of [A]'s International Advertising, Marketing, Promotion, and Sales Program for each Fiscal Year shall be furnished to Owner prior to the beginning of such Fiscal Year as part of the Annual Operating Projection described in the Management Agreement. The total reimbursement to [A] by Owner for the costs and expenses associated with the International Advertising, Marketing, Promotion, and Sales Program shall be 1.5% of Total Revenue for each Accounting Period.

2.02. Corporate and Regional Services

[A] shall provide or cause its Affiliates to provide without additional charge to Owner routine corporate and regional services outside of the country in which the Hotel is located for the benefit of the Hotel and the other hotels in the [X] Chain, which services include:

(i) Executive supervision and support from [A] international headquarters and from the appropriate [A] regional office(s), including the supervision and support services of the appropriate regional officials; (ii) general expertise and general technical and operational assistance in areas such as executive supervision, employee relations, strategic planning and policy-making, research and development, energy management, retail shop operation, payroll administration, quality assurance, insurance, life safety, menu planning, food preparation and service, accounting controls, and internal auditing; and (iii) general advice and general consultation on finance, legal, tax, and similar matters.

2.03 Training Programs

A.

1. [A] shall provide or cause one or more of its Affiliates to provide certain core training programs for the benefit of management-level Hotel Employees ("Core Training Programs") at times and locations reasonably designated by [A]. These costs and expenses as of the Effective Date are allocated among [X] Chain hotels by an annual charge (payable in equal instalments each Accounting Period) per management-level Hotel Employee.

2. [A] may from time to time provide or cause any of its Affiliates to provide other training programs (including courses, conferences, seminars, and materials) for the benefit of Hotel Employees ("Other Training Programs") at times and locations reasonably designated by [A]. Prior to any Hotel Employees attending any Other Training Programs, the applicable tuition fees shall be paid to [A].

3. The extent of participation by Hotel Employees in Core Training Programs or Other Training Programs shall be as reasonably required by [A]. All Hotel Employees' travel, room, board, and other expenses and salary and other compensation incurred in connection with Core Training Programs and Other Training Programs shall be paid as a Deduction.

B. In the event that the sum allowed in the Annual Operating Projection for any Fiscal Year for Core Training Programs and Other Training Programs has been exceeded then should [A] during that Fiscal Year enrol a management level Hotel Employee in an external Core Training Program or Other Training Program costing in excess of Ten Thousand United States Dollars (US$10,000) (multiplied by the Inflation Index) [A] must notify Owner.

2.04 Special Chain Services

[A] shall provide or cause one or more of its Affiliates to provide on a central or regional basis to the Hotel and other hotels in the [X] Chain special services and special programs other than those described in Sections 2.01, 2.02 and 2.03, which services and programs are intended to benefit the [X] Chain ("Special Chain Services"), and [A] may require the Hotel to participate in such Special Chain Services. As of the Effective Date, these Special Chain Services include the Frequent Traveler Program. [A] shall give Owner notice as soon as practicable of any new Special Chain Services.

2.05 Reservations System, Property Management System, and Other Systems

1. [A] shall make available or cause one or more of its Affiliates to make available for the benefit of the Hotel the Reservations System, and the Hotel shall be required to use the Reservations System. Costs and expenses of using the Reservations System shall be determined in accordance with Section 2.06.

2. Owner shall purchase and install at its own cost, and not as a Deduction, all Hardware and Software necessary for use at the Hotel to participate in the Reservations System. Any ongoing costs and expenses incurred at the Hotel in maintaining and using the Reservations System shall be Deductions. Any additional costs and expenses necessary to connect the Hotel to the Reservations System (e.g. local connection or modem payments to an independent third party) shall be Deductions.

3. Prior to requiring Owner to make any significant change in the Hotel's reservations system, [A] will consult with Owner.

B.

1. [A] shall make available or cause one or more of its Affiliates to make available to the Hotel the Property Management System, and the Hotel shall be required to use the Property Management System. Costs and expenses of using the Property Management System shall be determined in accordance with Section 2.06.

2. Owner shall purchase and install at its own cost, and not as a Deduction, all hardware and Software reasonably specified by [A] as necessary for the use of the Property Management System at the Hotel. Any ongoing costs and expenses incurred at the Hotel in maintaining and using any existing property management system at the Hotel approved by [A] or the Property Management System shall be Deductions.

3. Prior to requiring Owner to make any significant change in the Hotel's property management system, [A] will consult with Owner.12

…

2.06 Allocation of Other Costs and Expenses

All costs and expenses incurred by [A] and its Affiliates in providing each group of Services described in this Article 2 (other than the costs and expenses associated with the International Advertising, Marketing, Promotion, and Sales Program) shall be allocated to participating [X] Chain hotels on a fair and reasonable basis, which basis may be different for different groups of Services and may change from time to time as reasonably determined by [A] provided, however, that the cost to the Hotel per Reservation Transaction will not exceed US$12.00 (multiplied by the Inflation Index commencing on 1 January, 2000) during the Term. In addition, when [A] and its Affiliates provide services similar to the Services provided hereunder to other lodging brands owned or operated by [A] (such as …), the costs and expenses associated with such common services may be allocated among participating [X] Chain hotels and other participating hotels, provided that such allocation continues to be made on a fair and reasonable basis. There shall be no additional charges for regional corporate services.

2.07 Payment

A. [A] shall be reimbursed within 20 days after the end of each Accounting Period for all amounts reimbursable pursuant to this Agreement for such Accounting Period. [A] shall provide or cause Manager to provide Owner a statement after each Accounting Period summarising the total amount to be reimbursed for the preceding Accounting Period and from the beginning of the Fiscal Year through the end of the preceding Accounting Period.

B. Within 90 days after the close of each Fiscal Year, [A] shall prepare or cause Manager to prepare a cumulative accounting of all costs and expenses of each category of Services described herein. The Fiscal Year accounting shall be controlling over the interim billings. Any adjustments required by the Fiscal Year accounting shall be made promptly by the parties. Similarly, the accounting made pursuant to any External Audit shall be controlling over the Fiscal Year accounting, and any adjustments required by an External Audit shall be made promptly by the parties.13

…

4.01 Events of Default

Each of the following shall constitute an event of default ("Event of Default") to the extent permitted by applicable law:

…

D. The failure of any party to make any payment required to be made pursuant to this Agreement within 30 days after notice that such payment has not been made;

E. The occurrence of an event of default under the Management Agreement;

…

4.02 Right of Termination

Upon the occurrence and during the continuance of an Event of Default, a non-defaulting party may give to a defaulting party notice of its intention to terminate this Agreement upon the expiration of a period of 30 days from the date of such notice, and unless such notice of termination is withdrawn before the expiration of such 30 day period, this Agreement shall terminate upon the expiration of such 30 day period.

4.03 Other Remedies

Unless otherwise provided herein, no right or remedy conferred upon or reserved to a non-defaulting party by this Agreement is intended to be or shall be deemed to be exclusive of any other right or remedy herein or by law or equity provided or permitted, but each such right or remedy shall be cumulative of every other right or remedy. …

…

5.01 Assignment

A. No party shall assign or transfer or permit the assignment or transfer of this Agreement without the prior consent of the other; provided, however, [A] shall have the right without such consent to (i) assign its interest in this Agreement to any of its Affiliates (in which case the assigning [A] shall be relieved of its obligations under this Agreement and the assignee shall be deemed to be [A] for purposes of this Agreement and shall have all rights and assume all obligations of [A] under this Agreement) provided that [A] can reasonably demonstrate that such Affiliate is able to perform the obligations of [A] hereunder in as competent a manner as [A]. [A] will deliver to Owner one copy of the document effecting the assignment (or operative part thereof) signed by [A] and assignee.

…

7.03 Relationship

[A] has been engaged by Owner and is acting solely as an independent contractor, and nothing contained in this agreement shall be construed to create an agency, partnership or joint venture between them or their successors in interest …

7.04 Confidentiality

A. The matters set forth in this Agreement are strictly confidential, and, except as otherwise required by law or necessary to enable consultants to fulfil their roles in relation to the Hotel or permitted by this Agreement, each party hereto shall make every effort to ensure that the information contained herein or received pursuant hereto is not disclosed to any Person other than a party hereto (including the press) without the prior consent of the other party.

55. There are also waiver and entire agreement provisions similar to those in the Management Agreement.

License Agreement

56. The License Agreement, so far as material, provides as follows:

2.01 Grant of License

A. Effective as of the Takeover Date, [B] grants to Owner a non-exclusive right and license within the [territory] to use the [X] Rights only in connection with the Hotel, subject to the terms and conditions of this Agreement and the Management Agreement. Prior to the Takeover Date, Owner shall not be entitled to use the [X] Rights without the prior consent of [B] which consent may be withheld in [B]'s sole discretion.14

….

3.01 Payments

A.1 For the period of time during which the license granted herein is in effect, [B] shall be paid a royalty equal to one and a half percent (1.5%) of Total Revenue for each Accounting Period plus the amount, if any, payable under Section 3.01 A2 below (together "Royalty Payment"). Payments shall be made within 20 days after the end of each Accounting Period on an interim basis and adjusted, if necessary, upon receipt of the annual accounting statement described in the Management Agreement.15

…

6.01 Events of Default

Each of the following shall constitute an event of default ("Event of Default") to the extent permitted by applicable law:

…

D. The failure of any party to make any payment required to be made pursuant to this Agreement within 30 days after notice that such payment has not been made;

E. The occurrence of an event of default under the Management Agreement;

…

7.01 Assignment

A. No party shall assign or transfer or permit the assignment or transfer of this Agreement without the prior consent of the other; provided, however, that [B] shall have the right without such consent to assign its interest in this Agreement to any of its Affiliates (in which case [B] shall be relieved of its obligations under this Agreement and the assignee shall be deemed to be [B] for purposes of this Agreement and shall have all rights and assume all obligations of [B] under this Agreement) provided that [B] can reasonably demonstrate that such Affiliate has the ability to license the [X] Trademarks and is otherwise able to perform the obligations of [B] hereunder in as competent a manner as [B]. [B] will deliver to Owner one copy of the document effecting the assignment (or the operative part thereof) signed by [B] and assignee.

…

9.03 Relationship

The relationship of Owner and [B] shall be that of licensee and licensor, and nothing contained in this Agreement shall be construed to create an agency, partnership or joint venture between them or their successors in interest …

57. There are also waiver and entire agreement provisions similar to those in the Management Agreement.

Payments to [A]

58. It follows from the above that [A] Group companies are entitled to receive each year under the Agreements:

(a) an Incentive Fee of 8 per cent of Net House Profit, should that profit exceed [amount]: Management Agreement, section 5.01;

(b) reimbursement in respect of costs and expenses associated with the International Advertising, Marketing, Promotion and Sales Program of 1.5 per cent of Total Revenue ("the Marketing Charge"): Services Agreement, section 2.01; and

(c) a royalty payment (sometimes known as the "base fee") of between 1.5 per cent and 2 per cent of Total Revenue: License Agreement, section 3.01.

59. In addition, [A] Group companies are entitled to charge for certain services: see the Services Agreement, sections 2.03-2.06 and the permissible Deductions set out in the Management Agreement, section 1.01.

Validity of Agreements

60. The Management Agreement was signed on 19 March 1998. The person signing it, purporting to act on behalf of [the First Claimant], was [A's Senior Vice-President for Development]. On the same day he also signed the Services Agreement, purporting to act on behalf of [A], and the License Agreement, purporting to act on behalf of [B].

61. The Owner asserts that, insofar as the evidence shows that [the First Claimant] was not properly formed at the time of the execution of the Management Agreement, or that [A's Senior Vice-President for Development] lacked the requisite authority to sign it, then that agreement was invalid …

62. Thus two initial questions arise in relation to the validity of the Agreements. First, did [the First Claimant] exist as a corporation at the time the Management Agreement was signed? Secondly, was [A's Senior Vice-President for Development] authorised to act on behalf of [the First Claimant], [A], and [B] when he signed, respectively, the Management Agreement, the Services Agreement, and the License Agreement?

Did [the First Claimant] exist?

63. The Tribunal has seen a copy of a certificate of incorporation … recording that [the First Claimant] was registered as an exempted company on [date] … We have also seen a copy of a certificate from the Secretary of [the First Claimant] evidencing that a meeting of the company took place on [the same date] at which directors were elected …

64. Accordingly, the Tribunal is satisfied that, at the time the Management Agreement was signed [three days after registration], [the First Claimant] was a company validly incorporated under [local law]. There is no suggestion it was created for a fraudulent or other unlawful purpose.

Was [A's Senior Vice-President for Development]authorised to act as agent?

65. The Tribunal has seen copies of resolutions of the Board of Directors of [the First Claimant] passed by the directors elected [on the day of the company's incorporation] and effective from that date which, amongst other things, appointed … as a Vice President and … as an Assistant Secretary of the company …

66. We have also seen a copy of resolutions consented to in writing by the persons who were the directors of [the First Claimant] on [on the day following incorporation] resolving to enter into the Management Agreement and to grant a power of attorney to [A's Senior Vice-President for Development] and [the Second Claimant's Senior Vice-President and Associate General Counsel] authorising and empowering them, "to act…in the name of the Corporation to…execute…all agreements…appropriate or necessary for effectively…carrying out transactions relating to the operation of a first class hotel in [the city]…" …

67. The difficulty with this document is that it refers to the signatories as being, "…all of the members of the Board of Directors of [the First Claimant] (the "Corporation"), a [US] corporation…" [The First Claimant], of course, was and is a [Caribbean] company, not a [US] corporation.

68. The same day ([day after incorporation]), however, [the] Vice-President of [the First Claimant], signed a power of attorney on behalf of that company authorising [A's Senior Vice-President for Development] and [the Second Claimant's Senior Vice-President and Associate General Counsel] jointly and severally to be [the First Claimant]'s attorney and, amongst other things, to execute the Management Agreement. The document accurately described [the First Claimant] as, "a corporation organised under the laws of [a Caribbean country]". Moreover, on the same date [an] Assistant Secretary of [the First Claimant] certified that [the First Claimant's Vice-President] was authorised to execute the power of attorney for [the First Claimant] …

69. In the circumstances it is quite clear to the Tribunal that a mistake was made in the description of [the First Claimant] in the resolutions signed on [the day after incorporation], but that nonetheless [the First Claimant] did authorise [A's Senior Vice-President for Development] to enter into the Management Agreement. In our judgment the power of attorney of [the day after the company's incorporation] was valid, and empowered [A's Senior Vice-President for Development] to do this.

70. [A's Senior Vice-President for Development]'s authority to sign the Services Agreement and the License Agreement is not so seriously challenged. For the avoidance of doubt, however, the Tribunal is satisfied that he was authorised to sign the Services Agreement on behalf of [A], by a power of attorney dated [two days after the company's incorporation] … and to sign the License Agreement on behalf of [B], by a power of attorney also dated [two days after the company's incorporation] …

Registration in [the Middle Eastern city where the Hotel was situated]

71. Although the point is not pursued in the Owner's Closing Memorandum, its legal expert witness … suggested that the Agreements were invalid because none of the Claimant companies had registered branches [locally] in accordance with [local law].

72. The Tribunal, however, accepts the evidence of [the Claimants' legal expert] that, in the case of a hotel operated in [the Middle Eastern city] by an international chain, the only relevant requirements of [local] law are that the hotel owner (and not the operator) should have a tourism license to operate the hotel. We also accept his opinion that even if the Claimants were in breach of registration requirements (which they were not) that would not invalidate the Agreements. As to the former point, it is clear from [the expert]'s evidence that this is current practice in [the city] … and as to the latter point, we think that this emerges from a fair reading of the provisions cited by [the Owner's legal expert] himself … which say nothing about invalidating contracts.

Conclusion

73. Each of the Claimant companies existed at the time that the Agreements were made; [A's Senior Vice-President for Development] was duly authorised to sign each agreement on behalf of the relevant Claimant making it; and the fact that branches of the Claimants were not registered [locally] is not relevant to the validity of the Agreements. Accordingly the Tribunal finds that there is no basis for suggesting that the Agreements are invalid under [applicable law].

Name of First Claimant

74. As recorded above, the Claimants have requested that, in the title of the arbitration, the name of the First Claimant should be changed to reflect a change of company name that took place in 1998.

75. The Tribunal has seen a copy of a certificate of incorporation on change of name … recording that [the First Claimant] changed its name and was registered as ... It is clear, therefore, that since then the proper name of the First Claimant has been ...

76. It follows that the appropriate way in which to identify the First Claimant in these proceedings is as, "[current name] (formerly [former name])", and at the end of this Award we make an order to that effect, which we reflect in the title at the beginning of the Award.

Assignments

77. The Owner challenges the validity of the purported transfers of the benefit and the burden of the Services Agreement and the License Agreement first to [the Second Claimant], and subsequently to [C].16

Assignments to [the Second Claimant]

78. [In] January 1999, a letter was sent to the Owner, signed on behalf of [A] and of [B], notifying it that they had "assigned all of their respective rights and obligations" under, respectively, the Services Agreement and the License Agreement to [the Second Claimant], which had "agreed to assume the performance of all of the terms, covenants and conditions of the Agreements." … The letter enclosed a copy of an "Assignment and Assumption Agreement" made between, amongst others, [A], [B] and [the Second Claimant].

79. Under section 5.01 of the Services Agreement, [A] was entitled to make such a transfer to an affiliated company (which [the Second Claimant] was) without the consent of the Owner, "provided that [A] can reasonably demonstrate that such Affiliate is able to perform the obligations of [A] hereunder in as competent a manner as [A]."

80. The language is ambiguous as to whether this means that [A] is obliged to demonstrate the affiliate's competence in some way at the time the assignment is notified to the Owner, or only that it should be able to do so if requested. The fact, however, that the section goes on to require [A] simply to, "deliver to Owner one copy of the document effecting the assignment (or operative part thereof) signed by [A] and assignee," and nothing else, suggests that it means the latter.

81. In any event, the Owner did not question the validity of the purported assignment at the time, and made payments to [the Second Claimant] from then until December 2006 … So, whatever the demonstration requirement, it is now far too late for the Owner to dispute the validity of the assignment to [the Second Claimant] …

82. There is similar language in section 7.01 of the License Agreement and, as in the case of the Services Agreement, the Owner did not challenge the purported assignment before these proceedings began. Again, even if there were grounds for a challenge in 1999, it is far too late now.

83. In any event, in the Tribunal's view, demonstrations of the competence of the assignees were only required if requested by the Owner. It is not suggested that such requests were made in 1999. Accordingly the assignments to [the Second Claimant] were valid in any event.

84. We deal with the Owner's criticisms of [the Second Claimant]'s capacity to carry out its duties under these agreements below.

Assignments to [C]

85. [In] August 2008, over a year after this arbitration had commenced, [A] sent a letter to the Owner to inform it that:

…pursuant to the enclosed Assignment and Assumption Agreement, [the Second Claimant] has assigned the agreements described therein related to the above referenced hotel…to [C], an indirectly wholly owned subsidiary of [A] effective as of September 1, 2008.

[The Second Claimant] hereby confirms that [C] is willing and able to perform the obligations of [the Second Claimant] under the Assigned Agreements, including the ability to license the [X] trademarks under the [License Agreement]. Enclosed please find documentation evidencing [C]'s ability to so perform under the Assigned Agreements. …

86. As recorded above, on 6 September 2008, the Claimants notified the Tribunal of these purported assignments and, requested:

…that, if necessary or desirable, the ICC Secretariat change…in the case caption…the Second Claimant's name … to [[C]]."

87. The first thing that the Tribunal needs to note is that what we are concerned with here is not the change of name of an existing party, but the replacement of one legal entity by another as a party to this arbitration.

88. The Owner opposes the substitution of the basis, amongst other things, that:

Claimants have utterly failed to provide any evidence that [C] is capable of performing [A]'s duties and obligations pursuant to the Services Agreement.

Its reasons for challenging the purported assignment of the License Agreement (other than suggesting that it had not previously been validly assigned to [the Second Claimant] in the first place) are rather more obscure.

89. Be that as it may, the Claimants have requested that the change should be made "if necessary or desirable." [The Second Claimant] was certainly a party to the Agreements, and to the arbitration provisions that they contain, at the time the arbitration was started and is thus properly a party to the arbitration. Moreover [the Second Claimant] and [C] are (necessarily in view of the terms of the assignment provisions) members of the same group of companies. No reason has been advanced why any award needs to be made in favour of (or against) [C] rather than [the Second Claimant], other than the bare fact of an assignment during an already pending arbitration. Any sums recovered as a result of this arbitration by [the Second Claimant] can, if appropriate, be transferred to [C] without difficulty within the group. In our judgment it is neither necessary nor desirable to substitute [C] for [the Second Claimant] as a party to this arbitration.

Misrepresentation

90. The Owner alleges that the Claimants presented [the First Claimant] as a fully functioning company that would market the [X] name and compete effectively with all other brands of hotels, including other [A] brands. This, it says, was false: [the First Claimant] has never existed as an operational company, and all the marketing and other services for the Hotel were actually provided by other entities in the [A] Group. There never was a true "[X]" Corporation that would champion the interests of the [X] brand, and the Hotel in particular, as against all competing hotels, including other [A] branded hotels.17

91. The Owner also alleges that it was deliberately provided with only five-year projections of performance, despite the fact that ten-year projections had been prepared. This was done, it says, because the second five years of the ten-year projection showed a marked decrease in the performance of the Hotel so that, with inflation taken into account, the Hotel was projected to lose money in the second five-year period. The Owner says that this was done intentionally, because the [A] Group was concerned that, if the Owner knew the second half of the projections, it would not enter into the Agreements; this would cost the [A] Group the opportunity to place a hotel bearing its newly acquired [X] brand name in [the city], and deny it the opportunity to collect fees from the Hotel without any risk or having to make any investment of its own.18

92. In addition, the Owner claims that there was a false representation to the effect that [A's Senior Vice-President for Development] was authorised to execute the Agreements on behalf of [the First Claimant].19 Any such representation would only, relevantly, have concerned the Management Agreement (which was the only contract to which [the First Claimant] was a party) and, for the reasons already given, the Tribunal finds that, in that respect, any such representation was true.

Evidence

93. The Owner thus alleges that it was misled by the Claimants into making the Agreements. The Owner, of course, is a company. As such it can only have knowledge and act through human agents. For a company to be misled, and thereby be induced to act to its disadvantage, some human agent or agents must be misled, and induced to act to the disadvantage of the company.

94. In the present case, however, the Owner has called no witness who participated in the negotiations leading to the making of the Agreements to say something such as: "I was led to believe such and such a thing by the Claimants; because of that belief, I entered into the Agreements on behalf of the Owner (or caused the Owner to enter into them); the thing I was led to believe was not true; had I not been misled I would have acted differently."

95. The absence of any such witness appears to [be] the Owner's own choice as, we understand, some of those who formed the senior management of the Owner at the time the Agreements were made and participated in negotiating them, are still there.

96. We fully accept that it is not impossible to succeed in making good a case of misrepresentation without calling such a witness. It may be possible to prove what was represented without evidence from the representee: for example if it was in writing. The circumstances may make it obvious that the representee must have believed, and acted upon, the representation, and would have acted differently had it not been made. But it is clearly much more difficult to prove a case of misrepresentation without evidence from someone who is supposed to have received, and acted upon, the representation complained of.

Representations about [X]

97. Before considering this allegation, some background is required. The [A] Group operates chains of hotels with a number of different brand names. Apart from hotels bearing the name "[A]" of different types, it also, for example, operates [another brand name] hotels. Prior to 1997, a company [in] Hong Kong owned companies that managed and operated hotels under, respectively, the "[Z]" brand name and the "[X]" brand name. In April 1997, [that company] sold those companies to the [A] Group. Thereafter, although various corporate entities may have been used (for fiscal and other reasons) by the Group in connection with operating the [X] brand, in substance the [A] Group used the same management team and support staff worldwide to manage and operate [A], [X] (and [Z]) hotels, and a separate structure to manage and operate [other] hotels.

98. In 1997 and 1998, at the time the Agreements were negotiated and made, there were [X] Hotels in the Far East and Europe, but none as yet in the Middle East. The negotiations themselves were initiated by the Owner when, in about September 1997, … its Vice President of Operations, approached [A]'s Area Vice-President for the Middle East and Africa, to discuss the possibility of converting what was then the [Y] Hotel into an [A] hotel … Discussions followed in which [A's Area Vice-President] made clear that the brand name "[A]" was not available for another hotel in [the city], but that the name "[X]" could be used instead.

99. These negotiations were carried out mainly by [A's Senior Vice-President for Development] and [A's Area Vice-President] on the [A] side, and mainly by [the Chairman of the Y group of hotels], [the Vice-President for Operations] and … the Owner's Director of Finance for the Owner.

100. The Owner puts its case this way (at pages 19 and 20) of its Closing Memorandum:

The Owner had every reason to expect that someone would be responsible for promoting the [X] brand as against all others, including [A]'s other brands. This would be crucial for any hotel owner, as multiple witnesses noted that they viewed all other hotels, including those managed by [A], as competitors …

Owner's expectations were formed by its other experience with [A]-affiliated management, namely in regard to [another hotel in the city]. As conceded by [officers of the parties], the [the company that operates that hotel] maintains its own separate organisation and separate marketing arm which is not run out of the same general marketing office as the rest of the [A] brands. … It was therefore understandable that Owner would assume that a similar arrangement would exist for [the First Claimant]. Had someone somewhere been responsible for advocating that [X] hotels got their fair share of the marketing and bookings against all competing hotels, including other [As], this Hotel might not have been so unprofitable for so many years. Some of the steady profits enjoyed without interruption by the [the other hotel operated by A] down the street might have even found their way to this Hotel.

101. In fact, there is not the slightest evidence that the Owner had any such expectations, or that the Claimants (or anyone acting on behalf of the [A] Group in the course of the negotiations that led to the Agreements) ever said anything that might give rise to such expectations. Certainly no-one who participated in negotiating the Agreements on behalf of the Owner has given evidence to us to say he was led to believe the [X] branded hotels would be operated and managed separately from other [A]-branded hotels. Nor is there any evidence that the Owner expected, or had any reason to expect, that [the First Claimant], the [Caribbean] company which was its counterparty on the Management Agreement, was a freestanding organisation capable, independently of the rest of the [A] Group, of managing and operating the Hotel or the [X] chain.

102. Quite the contrary: it is clear that the Owner was concerned to have its hotel managed by the [A] Group, not some entity dealing separately with those hotels branded "[X]". We reach this conclusion for the following reasons.

(a) We accept [A's Area Vice-President]'s evidence that [the Owner's Vice-President of Operations] told him that, "…what he was particularly after was the affiliation with [A]; that [A] would be looking after [X]";20 and that [the Owner's Vice-President of Operations] knew that [A's Area Vice-President] "…would be the one with my area team looking after the hotel".21 In short, [the Owner's Vice-President of Operations] knew perfectly well that the Hotel would be operated under the supervision of the same team that supervised hotels carrying other brand names, in particular "[A]". As [A's Senior Vice-President for Development] put it (and we accept), the [Owner] "wanted and knew they were getting [A]."22

(b) Shortly after the Agreements were made, the following press release was issued on behalf of the Owner.

Mr. …, Vice President of Operations at [Y] confirmed that Mr. …, Chairman of [Y] has signed the final contract with [A] for The [Y] Hotel to become the first [X] Hotel in the [country]. …

[Y] has a long-standing relationship with the [X] Hotel Group due to the existing license agreement with the [Z] Hotel over the past 15 years. [Z], [X] and [other] Hotels were acquired by [A] less than one year ago and ever since [Y] pursued a strategic alliance to rebrand The [Y] Hotel and become part of this outstanding International Hospitality chain. …

This indicates that the Owner in fact expected the Hotel to form part of a single [A] chain, albeit under the [X] brand.

(c) Under section 2.01 of the Services Agreement, it was expressly provided that the Hotel and other hotels in the [X] chain, were to be supervised by [A] or its affiliates. There was no mention of an entity specifically dedicated to looking after the [X] chain.

(d) The fact that the management of the Hotel was being supervised by the same team as supervised the [the other hotel operated by A in the city] (and other [A] hotels in the Middle East) must have become apparent very soon after the Agreements were made. Yet there is no evidence of any complaint being made at the time that this was not what the Owner had expected.

103. In short, the Tribunal finds on the facts that the Owner's claim that it was misled into believing that [the First Claimant] was a company able to manage and operate the [X] chain generally, and the Hotel in particular, separately from other hotels managed and operated by the [A] Group, and in particular "[A]" branded hotels is entirely without foundation.

104. Related complaints to the effect that [the Second Claimant], "…does not employ any individual with responsibility to promote and protect the [X] brand name to the exclusion of all other hotel brands, including other brands owned and controlled by [A]",23 are also without substance. The Services Agreement makes clear that, whoever is the [A] Group party, the services themselves may be performed by an affiliated company; and the License Agreement only requires the [A] Group party to be entitled to license the use of the rights and trademarks covered by the agreement, and [the Second Claimant]'s entitlement to do that has not been questioned.

Projections

105. Whenever the [A] Group is interested in developing a new project, the Feasibility Department carries out a feasibility analysis, including a ten-year projection, of how the project might perform in the future … This is part of the process leading, ultimately, to a decision by the Group's Hotel Development Committee whether to proceed with the project. The proposal to manage the Hotel [at issue in the present case] was no exception.

106. Around December 1997 [A's Senior Vice-President for Development] asked [the head of the feasibility department] to prepare ten-year pro forma projections for the Hotel. To do this, she carried out what she calls a full Market Review … The projections themselves went through several iterations, including a version produced after the Agreements had been signed.

107. It is not in dispute that hotel owners, although they have no contractual right to see such projections, frequently ask to be shown them during discussions about bringing their hotels under the management of the [A] Group, and that such requests are normally complied with. Nor is it in dispute that in this case, in February 1998, the Owner … asked for and was given projections prior to making the Agreements. The Owner, however, says that it was only shown projections for the first five years ahead, that the [A] Group concealed from it the projections for the succeeding five years because (when properly adjusted for inflation) they showed a net decline in income for the Owner.24 The Claimants dispute this.25 An earlier allegation, that the projections had been deliberately inflated, was not pursued.26

108. The dispute that remains raises the initial factual question: what projections did the Owner in fact receive early in 1998?

109. In his oral evidence [A's Area Vice-President] testified that the projections he provided to the Owner were ten-year projections, in local currency only, the same or similar to those marked "Draft" appearing in Bundle 13(c), at the sixth and seventh pages of tab 132, and not, as he had suggested in paragraph 24 of his first witness statement, the five year projection at Bundle 13(c), tab 10 …

110. [A's Area Vice-President]'s reasons for believing this were that the five-year projection included calculations in dollars, which he would only have seen after the Hotel Development Committee had finally approved of the project; that he had only shown the Owner projections in [local currency], not in dollars; and that he recollected giving ten-year projections.

111. [A's Senior Vice-President for Development] thought owners were normally given five-year projections;27 [A's head of feasibility] thought it more common for ten-year projections to be shown to owners.28

112. The Owner produced from its files copies of five-year projections; but after so long an interval that is not conclusive of what was disclosed by the [A] Group in 1998.

113. Again the Tribunal is faced with the problem that no witness who participated in the negotiations on behalf of the Owner appeared to say what projections the negotiators did or did not see.

114. Having heard [A's Area Vice-President], the Tribunal concludes that he probably did give, or at least show, to the Owner's representatives the ten-year projections in [local currency] in the iteration available in mid-February 1998; and we are quite satisfied that even if he did not (and we think he did), he did not deliberately conceal the projections for the second five-year period from the Owner in order to mislead it.

115. Moreover, whatever projections were disclosed, we have received no evidence to show that the Owner relied on them in deciding whether, and on what terms, to enter into the Agreement. The … family [that] owned the Owner and their advisers were experienced and sophisticated hotel operators. They owned other hotels in [the same city], one of which carried the [Z] brand. They did not ask to see the [A] Group's projections until February 1998, two months after the principal terms that were later included in the Agreements had been largely settled in a letter of intent signed [in] December 1997 … We find it difficult to believe that they did not make, and rely on, their own projections; moreover whichever copy of the projections the Owner saw, it will have borne on the front the warning (which appears on both Bundle 13(c), tab 10 and tab 132):

The foregoing projected cashflow results reflect conditions which are expected to exist during the indicated period. Some assumptions and estimates inevitably will not be accurate and unanticipated events may occur. Therefore, actual results will vary and such variations may be material.

In these circumstances we cannot simply assume, without evidence, that the projections shown to the Owner on behalf of the [A] Group (and thus on behalf of the Claimants) influenced the Owner one way or another.

116. In short we do not think that the ten-year projections were concealed from the Owner; nor are we satisfied that whatever projections were disclosed affected how the Owner acted.

[Applicable] law

117. Since the Tribunal has found that there were no misrepresentations, it does not have to deal with the Claimants assertion that, as a matter of [local] law, to succeed the Owner would have to prove intentional deception on the part of the Claimants causing gross unfairness to the Owner, and that the only remedy for a proved misrepresentation is nullification of the contract, as misrepresentation is not intended to serve on its own as a ground for compensation.29

Conclusion

118. For the reasons set out above the Tribunal rejects the Owner's claim that it was induced to make the Agreements by misrepresentations made by the Claimants.

Mismanagement

119. The Owner contends that [the First Claimant]:

….breached Section 2.04 of the Management Agreement … in that it failed to act as a reasonable and prudent operator of the Hotel, having regard to the status of the Hotel, and in so far as it failed to strive to preserve and where applicable enhance the character, standards, and reputation of the Hotel. [The First Claimant] also breached its duty as agent, a relationship created by Section 16.03 of the Management Agreement, in so far as it breached the duties of an agent under the [applicable law]. The evidence of these breaches is the extremely poor operational results of the Hotel, which indicate negligent and inadequate management of the Hotel, as well as failure to put Respondent's interest ahead of Claimant's interests, as is required of an agent. The loss that was caused to the Respondent as a result is the difference between the revenues generated by hotels in the direct competitive set of this Hotel and the actual revenues generated by this Hotel.30

120. The points that appear to go to this claim are linked and cumulative, but can conveniently be summarised under the following general headings:

(a) [the First Claimant] was not a real functioning management company, dedicated to the advancement of "[X]" branded hotels in general, and the Hotel in particular; that it and the [A] Group as a whole were not equipped or prepared to market, promote or run the [X] brand or the Hotel effectively; and that both the first two General Managers appointed by [the First Claimant], and the area and regional management and supervision provided by the [A] Group, were inadequate;

(b) it was to the advantage of the [A] Group as a whole to favour the [other hotel operated by A in the city] over the Hotel, and that accordingly the two hotels and the general [A] reservation system … were managed in such a way as to divert lucrative business from the Hotel to the [other hotel], or otherwise to advantage the latter over the former;

(c) the Claimants were extracting hidden fees and charges from the Hotel so that it suffered not only from receiving poor revenues, but also from making excessive expenditure.

(d) overall the Claimants' mismanagement of the Hotel is self-evident from its markedly worse performance in comparison to the [local] hotel market as a whole, and to comparable hotels in that market in particular.

121. In the course of considering these points, the Tribunal will also need to consider the counter-allegations made by the Claimants that the performance of the Hotel was adversely affected by, amongst other things:

(a) a sudden and severe market downturn that struck just as [the First Claimant] had taken over;

(b) the poor reputation of the Hotel dating from when it was [under its former name]; and

(c) the Owner's failure to comply with its obligations to renovate and make other investments in the Hotel.

Standard of care

122. [The First Claimant] was appointed the "Owner's exclusive agent to…supervise, direct, and control the management of the Hotel": Management Agreement, section 2.01.

123. It is not in dispute that the contractual standard of care required of [the First Claimant] is that contained in section 2.04 of the Management Agreement (set out above), and in particular to act, "as a reasonable and prudent operator of the Hotel".

124. The Owner suggests that, beyond this, [the First Claimant]'s status as its agent (see sections 2.01 and 16.03 of the Management Agreement, set out above) carries with it a concurrent obligation of care as agent under [applicable] law.

125. The only such duty, however, to which we have been referred by the Owner is that contained in [a provision of statutory law] ("the Civil Code") which requires that an agent exercise the standard of care "of a reasonable person" ([the Owner's legal expert]'s translation) or "the ordinary man" ([the Claimants' legal expert]'s translation): …

126. According to [the Claimants' legal expert] (whose evidence on this point we accept) the standard of care required by [applicable] law of an agent might be either "ordinary" or "prudent", according to circumstances: the latter being the more exacting standard; in the present case the standard is that of the prudent hotel operator because that is what the Management Agreement expressly provides for … In these circumstances it seems to us clear that [the relevant statutory provisions]31 add nothing to the contractual obligation imposed on [the First Claimant] by section 2.04 of the Agreement.

Inadequacy of [the First Claimant]

127. We have already rejected the Owner's claim that it expected [the First Claimant] to provide it with management, supervision and support unique to the "[X]" chain and independent from that given to other "[A]" branded hotels. Nor do the Agreements impose on the Claimants any such obligation.

128. Indeed, so far as the services to be provided under the Services Agreement are concerned, sections 2.01-2.06 each make clear that they are to be provided by [A] or "its Affiliates".32 So it was clear from the start that such services (which include executive supervision and support) might be provided by other members of the [A] Group.

129. We turn then to particular allegations of inadequate management, which we will address without prejudice to the general allegation of under-performance dealt with below. The evidence the Owner relies on in support of its allegations came from [the] Director of Operations and Business Development of [the company that formerly ran the Hotel], a company under common control with the Owner, which he joined in September 2000, more than two years after the [A] Group took over management of the Hotel, and … an attorney and consultant, "with experience in the evaluation and resolution of problems with distressed hotels",33 retained by the Owner in 2006.

130. The Owner complains about inadequate strategic supervision and support, and about the competence and experience of [the two former General Managers of the Hotel]. There is no such complaint about the current General Manager ...

131. The Tribunal is satisfied that these allegations are ill-founded.

(a) [The first of the three General Managers] did not lack relevant experience. At the time of his appointment he not only had considerable experience of running hotels, but also considerable experience of doing so in the Middle East, having previously managed an [A] Hotel in [another Middle Eastern country] … He also had much experience of preparing budgets … In our view he was well qualified to manage the Hotel.

(b) Steps were taken to give the Hotel a distinctive "[X]" brand character. One of the first things that happened after [the first General Manager] took over was that he and the staff of the Hotel received, over several days, indoctrination in the particular ethos and ways of [X] Hotels from a … veteran of the chain from the time before it was acquired by [A] … And [the General Manager] described to us what he did to try to relaunch the Hotel as an "[X]"-branded enterprise.

(c) [The General Manager] did discuss strategic planning for the Hotel with the [A] area team, including … the Area Vice-President …

(d) He also brought in new and experienced Directors of Marketing and of Sales … and a Revenue Manager …

(e) [The Director of Operations and Business Development of the company that formerly ran the Hotel] complains that room rates were set too low … but [the General Manager] says that (especially during the recession in the hotel trade in [the city] that struck soon after he took over as General Manager), it was sensible to maintain high levels of occupancy by setting rates attractive to the Hotel's traditional main clientele, wholesalers from [neighbouring countries] (that is, business from wholesalers who sell blocks of accommodation to travel agents) …, and airline crew, even though the long-term aim of the Hotel was to attract higher priced corporate business (that is business from companies for their employees).34 Indeed it is clear that there were clashes at the time between [the General Manager] and the Owner about the fact that he was reducing rates … Whether [the General Manager] was right or wrong about this, however, it does not seem to us that, in the circumstances that then prevailed, his strategy could be said to be imprudent.

(f) [The next General Manager] did not give evidence to us. He served as director of food and beverage at the Hotel whilst [his predecessor] was General Manager. The allegations against [the second General Manager] are very similar to those of [his predecessor] and, having rejected the latter, we are not satisfied that there is any substance in the former. We accept [A's Area Vice-President]'s evidence that [the second General Manager] was qualified and did the job well …

132. It would be possible to go on exhaustively identifying and dealing with the many individual criticisms of the Claimants' management of the Hotel dotted through [the aforementioned Director of Operations and Business Development]'s and [the attorney and consultant]'s witness statements, [the former]'s oral evidence, and indeed the Owner's Memorials. For present purposes, however, this is unnecessary as the matter can be dealt with more broadly. At paragraph 21 of his first witness statement [the aforementioned Director of Operations and Business Development] alleges that, between 1998 and 2002 there was, "virtually no competent on-site management by the brand company". Having seen and heard [the General Manager] and [A's Area Vice-President], we are satisfied that is not the case. Nor do we think that there was inadequate supervision and support from [A] Group's area or regional management.

Favouring the [other hotel operated by A in the city]

133. It does not appear now to be in dispute that, overall, the [other hotel operated by A in the city] was and is perceived to be a better (or higher class) establishment than the Hotel. Nonetheless, it also does not seem to be in dispute that the potential markets for guests of the two hotels overlap. [The General Manager], for example, was clear that even if the [other hotel] was only "secondary competition", he would take business from it if he could.35

134. In its pre-hearing First Memorial, the Owner complained that [A's Senior Vice-President for Development], when recommending the projected arrangements to manage the Hotel in a memorandum … to [A] Group's Hotel Development Committee, did so on the basis (unknown to the Owner) that the Hotel would no longer compete with the [other hotel operated by A in the city], and that a price differential would be maintained, pricing rooms at the Hotel consistently lower than those at the [other hotel], instead of increasing the Hotel's prices so as to compete with the [other hotel].36

135. This point, however, fell away when it became clear that [the aforementioned Director of Operations and Business Development] himself believed that, generally speaking, such a differential should be maintained. Indeed one of his complaints against the Claimants was that in 2000, on the internet and [A's reservation system], the Hotel was quoting the same rate as the [other hotel].37

136. It also became clear that (as indicated above) the [A] Group's obligation to the owners of the [other hotel] was only to refrain from branding any other full service hotel in [the city] with the name "[A]": no further consent from them was required, or obtained, to operate a hotel branded with the name "[X]".38

137. The Owner says that the [A] Group as a whole had a motive for preferring the [other hotel] to succeed rather than the Hotel. The [other hotel] generated more revenue, and performed more successfully than the Hotel; and because of a more favourable Management Agreement, the percentage of that revenue going to the [A] Group was higher than the percentage of the Hotel's revenue going to [the First Claimant].39

138. It is, however, clear from the evidence that individual General Managers of the Hotel had no incentive to do anything that would favour the [other hotel] over their own hotel as their remuneration was in part tied to the successful performance of the Hotel.40 Indeed their incentive was to do the reverse.

139. Evidence was put forward by the Owner to suggest that the [A] Group was deliberately using [A's reservation system] to steer business to the [other hotel]. [The aforementioned Director of Operations and Business Development] says he complained of this to [A's Area Vice-President] in 2001;41 though when [the aforementioned Director of Operations and Business Development] was asked whether he was suggesting that the [A] Group were manipulating [A's reservation system] so that customers looking for a room in [the city] were steered to the [other hotel] instead of [another hotel], he said he was not. He was simply saying that [X] (and [Z]) were not being sold adequately.42

140. [A's Area Vice-President] says that he did not receive such a complaint from [the aforementioned Director of Operations and Business Development], but he did receive one from [a representative of the Owner] via [the second General Manager].43 More important than who spoke to whom, is the substance of the complaint: it was that, when called with an inquiry about available rooms in [the city], the [A] central reservations agent mentioned only the [other hotel], and when told it was too expensive, replied that there were no other [A] hotels in [the city].

141. The Tribunal heard from [a person] who joined the [A] Group as a Reservation Sales Agent in February 2001 and, after various promotions, has since December 2006 been Senior Manager of [A]'s Global Reservation Sales and Customer Care Department for the Middle East and Africa. He could not, of course, say that every call to every agent about hotel room availability in [the city] had been satisfactorily handled; but he did satisfy us that the system in place, at least during his time from February 2001, was designed to ensure that a customer seeking a hotel room in [the city] would, if he did not indicate a hotel of choice, be offered the Hotel as well as other [A] Group managed properties; and that if such a customer chose another hotel which turned out to be unavailable or too expensive, the agent would seek to sell him a room elsewhere, including at the Hotel. Agents are incentivised by bonus payments, and these are based on, amongst other things, how many sales they make and on cross-selling (that is, persuading an enquirer whose first choice hotel is unavailable to take a room in another [A] operated hotel). Moreover, [the aforesaid person] made clear that there were independent quality controls to make sure that agents are carrying out their functions properly.44

142. [The attorney and consultant called as a witness by the Owner], [in] her witness statement, suggests that the Hotel's performance was hobbled because the [A] Group was bound by an obligation not to compete with the [other hotel operated by A in the city] and, for that reason, manipulated rates or otherwise acted to ensure that the Hotel did not compete effectively with the [other hotel]. As we have already noted, there was no such obligation. Moreover, the Hotel did, at least to some extent, compete with the [other hotel]. But the [other hotel] was, as [the aforementioned Director of Operations and Business Development] himself says, "a higher class" hotel than the Hotel45 and it is therefore not surprising if its performance differs from that of the Hotel with which it is not really comparable.

143. In our judgment there is simply no basis for believing that the [A] Group (that is the Claimants or any of their affiliates) has manipulated the [A] reservation system, or the rates charged by the Hotel, or has otherwise conducted its business, so as to favour the [other hotel] at the expense of the Hotel.

144. For the avoidance of doubt, we take the same view of the suggestion that the [A] Group may have disproportionately directed travellers redeeming [A] frequent travel awards towards the Hotel, so compelling it to take an undue number of guests at discounted rates …

Hidden payments

145. We deal below with the question whether fees and charges have been paid to [A] Group companies from the Hotel's accounts without being properly disclosed to the Owner, and with whether all payments made on behalf of the Hotel have been properly accounted for. At this stage, we are only concerned with whether the financial effect of these allegedly concealed payments has, or could have, contributed to the level of performance of the Hotel about which the Owner complains.

146. The answer to that is clearly no. The reason is this. In most cases, the complaint is not that the services covered by the … Invoices should not have been bought and paid for at all, but that the payments, and the identity of the persons to whom they were paid, should have been disclosed to the Owner. In terms of amount, the cases where it is said that nothing should have been paid at all, or that significantly less should have been paid, are immaterial in relation to the overall income and expenditure of the Hotel. Moreover, so far as the Marketing Charge is concerned, it is fixed by the Services Agreement. The Owner can (and does) complain that it has not been properly told what it is getting for its money; but it is a charge the Owner agreed, and was always expecting, to pay; it was not a secret drain on the Hotel's ability to compete.

The Claimants' counter-allegations

147. Before turning to the Owner's last point, which looks to the overall performance of the Hotel in comparison with its competitors, we go to the reasons the Claimants have advanced to suggest why the Hotel's performance was poor, and worse than anticipated in the projections made by [the department head] and her colleagues in the [A] Feasibility Department.

148. According to [A's Area Vice-President]:

The single greatest cause of the Hotel's underperformance for several years was the downturn of the hotel market in [the city] immediately following the conversion.46

149. On the evidence we have seen that is, in a sense, correct. It explains in large part why the Hotel for the first few years performed less well than the [A] Group had anticipated at the time the Feasibility Department made its projections. It is, however, not relevant to the question of how the Hotel performed relative to other competing hotels in [the city] also affected by the same downturn.

150. [The first General Manager] has told us, and we accept, that at the time the Claimants took it over, the Hotel was in need of renovation. It had been open for six years and parts of it were quite run down. Its existing management was also in need of reorganisation and improvement, as were certain departments and facilities.47 It had also suffered from repeated changes in its senior management.48

151. But even if, which we accept, the Hotel suffered from a poor reputation gained as a result of previous mismanagement, leaving aside the question of the state of the fabric, that would not explain poor performance after its takeover by the [A] Group, at least not for very long. A major point of re-branding was to start again with a new name and a new senior management. The [A] Group knew the state and reputation of [the former brand name]; that was one of the things it was supposed to change. So we do not think that it assists the Claimants to blame previous mismanagement.

152. This brings us to the physical fabric of the Hotel. The Conversion Program, which the Owner was required to carry out pursuant to Exhibit C to the Management Agreement (see above) was divided into three phases: the first to be carried out within three months of [the First Claimant]'s takeover of the Hotel, the second within one year, and the third within eighteen months.

153. The Claimants say (correctly) that the second and third phases, which involved considerable investment, renovating both guest rooms and public areas of the Hotel, were not carried out within the times laid down, and in respect of some items were not completed for several years.49 We accept that this delay in carrying out the promised renovations cannot have helped the Hotel's competitive position as regards other, more recently built or more recently renovated, rival hotels. Though, of course, it is only relevant for the period until the renovations were completed in about 2002.

154. The Conversion Program also required the Owner to install [A's reservation system] immediately, and this was done. The [A] Group also had a standard computer-based property management system ... Such a system allows individual rooms to be allocated to the best advantage of a hotel, and helps to avoid under and over booking. Schedule 1 to the Management Agreement (which contains the Conversion Program) says, in relation to the Owner's existing system, that [the First Claimant] "will advise Owner of any upgrading, modifications or replacement that Owner will need to carry out to ensure full compatibility with the systems". It is unclear whether this language was intended to allow [the First Claimant] to require the Owner to replace the existing system with [A's standard computer-based property management system].50 In any event, it does not appear that any more was ever said than that such a change would be desirable; and it was not in fact installed until 2002.51

155. [The first General Manager] clearly thought that installation of [A's standard computer-based property management system] would have helped him;52 and [the Senior Director of A's reservation services] explained to us in detail the benefits connecting [the system] (and its successor system …) to [A's reservation system] (and its successor system).

156. We are, however, unpersuaded. As [A's Area Vice-President] pointed out in his evidence, even [A's reservation] system itself was of limited significance for the Hotel until visa restrictions were lifted …,53 by which time [A's standard computer-based property management system] had already been installed.

Comparative performance

157. The Owner's case rests on two pillars. First it says that there is a:

… consistent gap of [amount] in [average revenue per available room per night] between the performance of the Hotel and the performance of the market. The Hotel in 2007 is in the same position relative to the market as it was in 1997, never gaining ground despite the introduction of all of [A]'s resources.54

158. This point is founded on chart 13 produced by the Claimants' expert witness [from a firm of consultants and auditors].

159. Secondly, the Owner points out that the Hotel's average revenue per available room per night consistently falls below that of the Hotel's "primary competitive set", that is the group of six hotels in [the city] identified by [A's Senior Vice-President for Development]'s memorandum to the Hotel Development Committee in February 1998 as the Hotel's primary competitors.55

160. A great deal of time and energy has been devoted to this point; in particular to considering whether the correct comparators are being used. For present purposes, however, the Tribunal is prepared to assume that the Owner is right, and that the performance of the Hotel relative both to the [local] hotel market generally, and to its immediate competitors in particular, has stayed pretty well the same since early 1998, and, moreover, that its average revenue per available room per night has consistently been lower by "somewhat more than [amount]" than its rivals. Does this demonstrate that the [A] Group, and more particularly [the First Claimant], has failed to comply with its obligations under section 2.04 of the Management Agreement?

161. The short answer to that, in the Tribunal's opinion, is that it does not. All sorts of factors may be responsible for the Hotel's relative lack of success. Moreover, as [the witness from the firm of consultants and auditors]'s evidence indicated, it is in fact extremely difficult to assess the extent to which the Hotel did perform poorly in relative terms.56 In the absence of any identifiable, particular, substantial breach of section 2.04, we find it impossible to conclude that failure to comply with that section can simply be inferred because other, competing hotels have fared better.

Conclusion

162. For the reasons set out above the Tribunal rejects the Owner's claim that, in breach of section 2.04 of the Management Agreement and of [applicable] law, [the First Claimant] mismanaged the Hotel.

Breach of confidence

163. It is not in dispute that the [A] Group has disclosed information about occupancy rates and revenue per available room per night concerning the Hotel to third party benchmarking companies ...57 These organisations collect such information from as many hotels as possible in order to produce regional surveys of the industry.58 The information disclosed came from figures and materials provided by the Hotel's staff to [the First Claimant] (that is, in practice, to [A] Group's area and regional and managements).

164. It is also not in dispute that the [A] Group, as a matter of course, has used similar information when evaluating the feasibility of other hotel projects.59

165. The Owner says that these constitute breaches of section 16.05A of the Management Agreement, section 7.04 of the Services Agreement, and section 9.04 of the License Agreement (see above), in that the Claimants have given confidential information about the Hotel to third parties, and have used the Hotel's sensitive data internally (that is, within the [A] Group) to evaluate and develop new properties.60

166. The Owner says that each of the sections mentioned requires the Claimants to "make every effort to ensure that the information received pursuant" to the relevant Agreement "is not disclosed to any Person other than a party hereto (including the press) without the prior consent of the other party." The Owner says that the information disclosed was received pursuant to the Agreements, and disclosure of it to other parties whether outside or inside the [A] Group breaks the Agreements.

167. Before going any further, it seems clear to the Tribunal that, in reality, the allegation here relates solely to [the First Claimant]. The only agreement pursuant to which information of this sort will have been received by a [A] Group company is the Management Agreement. Moreover in our view, contrary to the contentions of the Claimants,61 information of this sort which was received by [A] Group area and regional management was received pursuant to the Management Agreement, as it was received in order to enable [the First Claimant] to carry out its functions of supervising, directing and controlling the management and operation of the Hotel: see section 2.01.

168. However, having regard to what we have already said above in the section on Representations about [X], we regard it as completely unreal to suggest that the dissemination and use of this information within the [A] Group constitutes an actionable breach of contract. All the evidence shows that the Owner saw itself as dealing with, and the Hotel as being managed and operated by, the [A] Group, and not just a single freestanding [Caribbean] company. In our judgment, therefore, the Owner cannot complain that the information provided by the hotel went to, and was used by, the [A] Group as a whole.

169. Disclosure to parties outside the [A] Group is a different matter. The Owner never consented to this under section 16.05,62 and the Claimants have not demonstrated that the Owner knew of and acquiesced in such a practice. We do not accept the Claimants' "everybody does it" argument.63 Nor does the fact that there are confidentiality agreements with the benchmarking companies, and that it is difficult (though apparently not impossible) to disaggregate the information about the Hotel from the general figures appearing in the benchmark surveys, prevent there having been a breach of contract. Handing over information to third parties is not making "every effort to ensure" that such information is not disclosed.

170. It is, however, clear that the [A] Group was and is not paid for this information. In return for disclosing information about "all our hotels worldwide" to benchmarking companies, those companies provide the Group with their reports (which contain similar information about thousands of other hotels) without payment.64 Whilst, however, this is clearly of benefit to the Group, it is obvious that the contribution made by information relating to the Hotel alone to the Group's ability to receive this benefit is very small.

171. In terms of damages, it does not seem to us that the Owner can have suffered any loss as a result of this breach of the management agreement: it is therefore only entitled to nominal damages. In terms of a benefit for which [the First Claimant] ought to account, it seems to us to be negligible.

Duty to account

Introduction

172. As appears in greater detail below, the Owner claims it is entitled to an account in respect of various aspects of the business which the Claimants have been carrying out on behalf of the Owner.

173. These claims are of essentially two types. First, there are requests for information and documents from the Claimants about matters within the knowledge of the [A] Group which, the Owner alleges, may have caused the Owner loss, or involved the Group making gains at the Owner's expense: for example, organising business so as to favour the [other hotel operated by A in the city] over the Hotel, or misusing confidential information derived from the Hotel. Secondly, there is the demand that the Claimants explain and justify payments that have been made to them from the Hotel's accounts whilst under [the First Claimant]'s control, and charges that have been sought since. Here we are principally concerned with the [W] Invoices, and the 1.5 per cent of Total Revenue payable under section 2.01 of the Services Agreement; and the essence of the Respondent's case is that the Claimants, through their control of the Hotel's bank account, have used the Owner's money to make unauthorised or excessive payments which were concealed from the Owner or have otherwise not been properly accounted for.

174. The claims for an account were originally made by the Owner as part of the amendment of its Response and Counterclaim allowed by the Tribunal ...65 When allowing that amendment, the Tribunal made clear that, before an account would be ordered, what the Owner had to do was to establish that ordering the taking of an account would be justified: that is, it would have to satisfy the Tribunal, not only of the existence of a legal relationship entitling it to claim an account, but also that there was sufficient reason to believe that taking an account would benefit the Owner.66

175. In the present case, any legal obligation to account must be derived either from the Agreements themselves, or from [applicable] law. Accordingly we look first at the Agreements and then at [the applicable] law before considering the Claimants' obligations to account.

Contractual position

176. So far as [the First Claimant] is concerned, sections 5, 7 and 16.04 of the Management Agreement impose upon it certain express contractual obligations to account to the Owner, and we will deal with these below. Moreover, under section 16.03, the relationship between the parties under that Agreement is one of principal and agent. Thus (subject, so far as [the applicable] law allows, to the terms of the Agreement itself) [the First Claimant] owes the Owner any relevant duties imposed by [the applicable] law on an agent, including duties to account. In this context we note that sections 16.03 (read with section 16.15) and 16.04 of Management Agreement expressly permit [the First Claimant] and its affiliates to operate competing hotels, and to profit from providing goods and services to the Hotel.

177. The position of [the Second Claimant] is different. Under section 2.07B of the Services Agreement, it owes certain express contractual obligations to account to the Owner. But section 7.03 of that Agreement makes clear that their relationship is not one of agency; so none of the accounting duties of an agent under [the applicable] law apply.

178. The License Agreement contains no relevant accounting obligations and, again, by section 9.03 says in terms that the relationship between the parties is not one of agency. Thus [the Second Claimant] has no obligation to account to the Owner, whether under the Agreement itself, or under [the applicable] law.

[The applicable] law

179. The Tribunal accepts the view of [the Claimants' legal expert] that the Agreements are transactions to which [applicable commercial law] ("the Commercial Code") applies. All the parties are "merchants" as defined by … the Code, and the activities undertaken pursuant to the Agreements are commercial activities, as contemplated by [the Code] … We reject [the Owner's legal expert]'s views to the contrary as inconsistent with what the Commercial Code says.

180. The agency relationship created by the Management Agreement is a commercial agency, under … the Commercial Code … and we agree with [the Claimants' legal expert] that, in the eyes of [the applicable] law, the relationship between [the First Claimant] and the Owner is what he calls an ad hoc agency, as it does not fall within any of the specified categories of agency dealt with in … the Commercial Code …

181. Under … the Commercial Code, when applying [the applicable] law to any issue, the Tribunal should first look to the agreement entered into between the parties;67 if that is silent, it should look to the Commercial Code; and failing that (omitting sources of law that are irrelevant to this case) it should look to the Civil Code … In short, as [the Claimants' legal expert] said during his oral evidence, where the contract between the parties covers a point, then the contract prevails … We also agree with him that sections 16.03 and 16.04 of the Management Agreement (to which we have referred above) are not inconsistent with [the applicable] law … and therefore prevail over what would otherwise be the position.

182. So far as the present dispute is concerned, the main potentially relevant provision of the Commercial Code relating to giving an account is ... This provides:

The agent shall submit to the principal on the agreed date or on the date fixed by the custom or by their previous dealing an account of the business carried out for the principal's account. Said account shall be in conformity with the reality; if false information has been intentionally included therein, the principal may reject the relevant transactions related to this information and shall be further entitled to damages. The agent shall not receive any fee for the said transaction.68

In our view, the inclusion of "false information" must cover a case in which the intentional omission of information has the effect of making the information that is given materially false.

183. The equivalent provision of the Civil Code (if it applied) would be .... It provides:

The Agent shall be obliged to provide his principal with the necessary information as to the results achieved in the carrying out of his agency and to provide him with an account thereof.69

In the Tribunal's view, this does not add anything to [the provision] of the Commercial Code.

Obligations to account

184. As we have already noted, [the Second Claimant]'s obligation to account is solely that contained in section 2.07B of the Services Agreement. It has no such obligation under the License Agreement. Moreover under the Services Agreement [the Second Claimant] is entitled to cause the Manager ([the First Claimant]) to prepare the required accounting.

185. Unlike [the Second Claimant], [the First Claimant] is an agent, and so far as it is concerned two issues arise. First, what is the nature and extent of its contractual obligation to account? Secondly, does it have any, and if so what, obligation to account under [the applicable] law more extensive than that contained in the Management Agreement?

186. For present purposes, we are concerned with both the system of interim accounting laid down in section 5.02A and with the annual accounting provided for at section 5.02C and D and section 7.01 of the Management Agreement.

187. The interim accounting system requires [the First Claimant], as manager, to submit an interim accounting to the Owner not less than 15 days after the close of each Accounting Period, such a period being a calendar month.70 The interim accounting has to show Total Revenue, Deductions, departmental profits, Adjusted House Profit, Net House Profit and be prepared on the basis of the Uniform System. Every interim accounting, however, and every interim payment made on the basis of such an accounting, is expressly "subject to the annual accounting (and External Audit)".

188. So far as the annual accounting is concerned, [the First Claimant]'s principal obligation is, within 75 days following the close of the Fiscal Year, to:

deliver to Owner a reasonably detailed statement, certified as true and correct by the Hotel's chief accounting officer, summarizing the Hotel operations for such Fiscal Year.71

189. That certified statement is then subject to audit by an internationally recognised accounting firm engaged by the Owner to audit the Hotel books and records.72 The annual certified statement, whether before or after audit, is not itself a financial statement of [the Owner]. The Hotel forms part only of the business of the Owner. Once audited, however, the information contained in the certified statement goes into the financial statements of the Owner.

190. Section 7.01B goes on to provide that, if there is no objection within 30 days after completion of the External Auditors' audit of the certified statement, it:

… shall be deemed to have been accepted by [the Owner and the Manager] as correct, and no party shall have any right to question its accuracy.

In relation to matters in respect of which an objection has been raised within the time limit, acceptance only takes place when the objection is resolved.

191. By section 7.01C, annual accounting (i.e. the certified statement) prevails ("shall be controlling") over the interim accounting; and by section 7.01D, the audited annual accounting (i.e. the certified statements as audited) prevails (again, "shall be controlling") over the unaudited annual accounting; and at each stage adjustments are made accordingly.

192. In the Tribunal's judgment, the requirement that [the First Claimant] should provide monthly an interim accounting, and annually a certified statement for audit by the Owner's External Auditor, are the contractual methods whereby it fulfils its obligation as an agent to account to its principal. On this point the Agreement prevails. Similarly, the primacy of the certified statement as audited over prior accountings, and the contractual prohibition on re-opening the statement once the 30 day time limit from the completion of the audit has expired,73 are matters binding on the parties. Once time expires, and the Fiscal Year in question is contractually closed, there is no room for any further adjustment of payments between the parties, save as required by the audited statement itself. Again, the Agreement prevails and, subject to one point, neither … the Commercial Code, nor … the Civil Code add anything to this.74

193. The one relevant proviso is this. If the certified statement, which constitutes the account, intentionally contains false information, i.e. there is fraud, and that false information is not discovered during the course of the audit, then the second limb of [the relevant provision] of the Commercial Code can be invoked by the Owner even after the contractual time limit has expired.75

194. In addition, we accept [the Claimants' legal expert]'s evidence that, under [the applicable] law, a principal can request the Court to require his agent to provide information or documents, even though the principal has no contractual right to obtain them, if the principal can show "a prima facie case" of fraud on the part of the agent to which they are relevant.76

195. In short, once the External Audit of the annual accounting has been completed, and thirty days have passed,77 it is not open to either party to challenge its accuracy unless it can show reasonable grounds to suspect fraud. Likewise, the Owner is not entitled to information or documents to which it would not otherwise be entitled unless it can show a prima facie case of fraud.

196. It follows that the Tribunal does not accept that the Claimants are bound to answer questions raised by the Owner, outside the framework of sections 5 and 7 of the Management Agreement, just because the Owner raises them, or just because the Owner alleges improper behaviour on the part of the Claimants. We make no comment, of course, on whether commercially it is wise in those circumstances to refuse to answer such questions, or only to answer them partially.

197. In addition, when considering the question of possible fraud, it is important to note that, under section 7.01A of the Management Agreement, the Owner is entitled to examine the Manager's books of control and account at any reasonable time during business hours.

198. To sum up, once a Fiscal Year is closed, the contractual scheme precludes the owner (absent fraud) from challenging the correctness of the audited certified statement or requiring the Claimant to give any further account.

199. The Tribunal now turns to the items in respect of which the Owner claims an accounting.

Mismanagement and conflict of interest

200. The Owner, at Appendix A to its Closing Memorandum, proposes an accounting order that helpfully sets out the matters in respect of which it claims an account.

201. The first item in this Appendix is entitled, "Claimants' Role in the Delivery of Services to the Hotel". This arises out of the Owner's complaint that [the First Claimant] did not itself operate or manage, or supervise the management and operation of, the Hotel pursuant to the Management Agreement, and that [the Second Claimant] did not itself provide, or cause to be provided, the services covered by the Services Agreement.

202. The second item is headed, "Damage to Respondent Arising from the Abdication of Management and Control of the Hotel to [A]". This follows on from the first item, alleging that the Hotel and its affairs were in reality under the control of [A], and that the latter also managed and operated a competing hotel … and that:

Respondent is entitled to receive an accounting of the operation of the Hotel vis-a-vis the operation of the [competing hotel], as to each aspect of operation in which the party, person or entity in control of both hotels could direct the burden of a cost, charge or obligation on to the Hotel or could direct the benefit of revenue or opportunity away from the Hotel and towards the [other hotel] in the period 1998 to date.78

203. As the Tribunal has already held, the Owner never expected the Hotel to be operated or managed, or its operation and management to be supervised, by [the First Claimant] as an independent entity. It expected, and indeed wished, this to be done by the [A] Group. The identity of the corporate entities involved was immaterial. Indeed, sections 16.03 and 16.15 of the Management Agreement make it quite clear that [the First Claimant] itself, or any affiliate of it, was entitled to operate the [other hotel in the city operated by A]. Which [A] Group company provided services under the Services Agreement is also immaterial; and in this case the Owner's initial counterparty was [A] itself.

204. Accordingly, the Owner cannot complain that the Hotel was operated, managed and supervised by [A] Group staff, or that supervision was carried out by the same people as supervised the operation and management of the [other hotel in the city operated by A].

205. Moreover we have already found that there is no basis for believing that the [A] Group has conducted its business so as to favour the [other hotel] at the expense of the Hotel.

206. The Owner's claims here are for information and documents outside the scope of the accounting provisions of the Agreements. It follows from what we have already said that we have found no sign that the Claimants (or anyone in the [A] Group) have behaved fraudulently in relation to these matters.

207. For these reasons the Tribunal rejects the claim for an account in respect of the first and second items mentioned in Appendix A to the Owner's Closing Memorandum.

Breach of confidence

208. The third item in the Appendix seeks an account to establish the Owner's damages allegedly caused by the Claimants' misuse of confidential information.

209. The Tribunal has already rejected altogether the Owner's complaint concerning the [A] Group's use of information from the Hotel; and so far as disclosure outside the Group is concerned, the Tribunal has concluded that this has not caused the Owner any loss. Again we have been shown no evidence of fraudulent behaviour on the part of the Claimants (or anyone in the [A] Group). Accordingly, we also reject this item of the claim for an account.

[W] Invoices

210. Sections 2.03 to 2.05 of the Services Agreement provide for [A] (and thus, subsequently, [the Second Claimant]) to provide, or cause its affiliates to provide, various services to the Hotel. The Agreement contemplates that these are to be paid for by the Hotel, that is out of the Hotel's accounts from the Owner's money. In practice, at least prior to December 2006, this was arranged by the staff of the Hotel acting under the directions of the Hotel's General Manager and Director of Finance.

211. Every four weeks the Hotel received an invoice for services provided by members of the [A] Group (that is, affiliates of [A] or, subsequently, of [the Second Claimant]). This is known within the [A] Group as a "[W] Invoice". [The forensic expert called by the Claimants] describes this process at paragraphs 6.11 to 6.12 of his report as follows:

6.11 [A] prepares its annual audited financial statements to the end of December each year and its accounting year consists of 13 periods of 4 weeks each. Accordingly the [W] Invoice is prepared and addressed to the Hotel once every 4 weeks. The [W] Invoice does not attempt to recover (other than for the costs associated with the employment of expatriate managers) the actual costs incurred by [A] in each 4 week accounting period in providing services to each hotel managed by it. Rather, towards the end of one accounting year [A] will prepare budgets for each service provided to hotels. For those costs that are recoverable under the terms of the International Services Agreement, [A] will determine how the estimated total annual expense will be apportioned between each hotel on a fair and reasonable basis.

6.12 To correct under or over recoveries of its costs [A] conducts "true-up" exercises towards the end of each accounting year for each service recoverable under the terms of the International Services Agreement. The true-up exercise involves [A] estimating the extent of the under or over recovery for each service and adjusting the charge for service in the [W] Invoice in the 13th four-week accounting period in each year to eliminate the under or over recovery. Because the true-up itself involves some estimation of costs and events occurring in the remaining period to the year end, there is likely to still be some under or over recovery at the year end. This year end under or over recovery is carried forward to the next year and adjusted in that year's true-up. In some cases, where during the accounting year it is found that the amounts charged to hotels for providing a service differ markedly from the actual costs, the true-up may be performed before the 13th 4-week accounting period and the reimbursement charged to hotels going forward adjusted to minimise the year end true-up.

212. [The forensic expert] helpfully analyses the costs recovered under [W] Invoices, at paragraph 6.3 of his report, into the following categories: central reservations, guest relations, insurance and loss prevention, marketing, [A] rewards, regional team expenses, systems related, third party services, training and human resources, and miscellaneous. Over the period from 1998 to 2007 inclusive, the Hotel was charged [amount] under [W] Invoices. During the same period, the total operating costs of the Hotel amounted to [amount]. So the [W] Invoices covered approximately 3 per cent of the total operating costs of the Hotel during the period.

213. According to [A's Area Director Finance]:

54. The [W] Invoices are generated each month (every 28 days) by [A]'s Billing Department at our financial shared services operation ... These charges (reimbursable costs for programs and services) on the invoice go through rigorous and multiple reviews by various accounting departments before they are included on an invoice. Each property's director of finance receives from [the Billing Department] (via electronic notification) a reimbursable invoice that includes various charges, including [A] Rewards, Human Resources and training charges, travel agent commissions paid on behalf of the property and any other property-specific charges under chain services. The director of finance reviews the charges, makes sure they are correct and if there are any questions, he or she requests adjustments or clarifications from the respective departments within [A] via an electronic issue resolution process. If there are no questions related to the Invoice, the director of finance creates a journal entry and posts the [W] Invoice into a general ledger and within fifteen days, should pay the Invoice. The process became electronic beginning in 2005. This practice and procedure as related to the [W] Invoices has been followed by [A] in the course of operating the Hotel.79

214. All these costs formed part of the costs and expenses contained in each monthly interim accounting, and each annual certified statement provided by [the First Claimant] (or others in the [A] Group on its behalf) to the Owner and (in the case of the certified statement) audited by the External Auditor. It does not appear to be in dispute that the payments were all accounted for, in the sense that the total amounts shown took account of them.80 What is said is that these payments were subsumed within larger items, and that they were not individually or otherwise adequately identified. Thus the Owner says it did not realise that these payments to [A] Group companies, pursuant to the [W] Invoices, were being made, and formed part of the payments made by the Hotel.

215. Given, therefore, that all these costs were covered from year to year by the annual certified statement, audited by the External Auditor, then in every case where the thirty days from the completion of the audit has expired, there can be no question of ordering any further accounting. For the reasons already given, the only adjustments possible after that time are those required by the audited statement itself. These costs, therefore, have been sufficiently accounted for the purposes of both the Management Agreement and the Services Agreement, and each Fiscal Year in this position is closed. Moreover, it makes no difference even if the accounting in relation to services provided under the Services Agreement was, in any year, less detailed than required by section 2.07B of that agreement. It is quite clear that once the time for objections provided for by section 7.01B of the Management Agreement has expired, the parties are bound by the annual certified statement, as audited by the External Auditor: the External Audit provided for in section 2.07B of the Services Agreement is the same audit is that provided for in section 7.01B of the Management Agreement.

216. There is of course a proviso to this. Things are different if there are reasonable grounds to suspect that the accounting provided by the Claimants intentionally included false information: i.e., that the Claimants have acted fraudulently. But unless that is the case (an issue that we address below), in the Tribunal's view there is no room under the Management Agreement or the Services Agreement to order any further accounting in respect of items covered by the [W] Invoices.

217. In any case where time has not expired under section 7.01B of the Management Agreement, the Owner does not need any order from this Tribunal. The annual accounting is still open and the owner is entitled to its right to raise its questions and objections under that section of the Agreement.

218. In the light of how the Owner puts its case,81 two questions need to be addressed. First, even without re-opening any Fiscal Years that are contractually closed, were there any payments that were unauthorised or excessive? We deal with that question in the next three sub-sections. Secondly, are there any other grounds on which to suspect fraud on the part of the Claimants so as to justify re-opening Fiscal Years that are contractually closed, or requiring in respect of any Years the furnishing of more information than is provided for in the Agreements? That is a point to which we will return after dealing with whether, on the evidence now available, the payments made pursuant to the [W] Invoices, or the Marketing Charge, were unauthorised or excessive.

Payments to [A] Group companies

219. The Owner complains that payments made to [A] Group companies either were, or may have been, unauthorised or excessive. With one exception, however, these payments are, on their face, all for services covered by the Services Agreement. Without re-opening closed years, therefore, the Owner cannot satisfy the Arbitral Tribunal that any of these were either unauthorised or excessive, and the Tribunal has no reason to believe that they were.82

220. The exception is regional charges. Section 2.02 of the Services Agreement makes clear that "Corporate and Regional Services" as described therein are to be provided, "without additional charge to the Owner".83 It is, however, plain that some charges have been made over the years for regional services: the Claimants admit to [amount] worth in their [W] Invoice Analysis (1998-2007).84

221. The difficulty for the Owner is that it is also clear from the Agreements that some services provided at a regional level can properly be charged for. For example, the "Deductions" authorised by the Management Agreement include costs that may be incurred at a regional level: indeed item (10) expressly refers to the costs and expenses of regional personnel. So it is not self-evidence that items that the Owner can demonstrate relate to services provided regionally are necessarily unauthorised or excessive. In relation to closed years, that could only be established by re-opening them, which (absent fraud) the Owner cannot do.

222. As far as open years are concerned, whether payments were unauthorised or excessive are matters that can be raised (so far as the Agreements permit it) under the contractual procedure.

Payments to third parties

223. The Owner also complains that, through the [W] Invoices, it was paying for services ostensibly provided by independent third party suppliers, but in circumstances where, unknown to the Owner, the supplier paid a "kickback" to the [A] Group. The Owner identifies specifically [a company] which provides audio-visual services and equipment and [another company], though suspects there may be others.85

224. [The First Claimant], however, is entitled under section 16.04 of the Management Agreement to enter into such arrangements, and to make a reasonable profit from them,86 provided that the costs of the goods or services supplied are competitive with a costs of comparable goods or services (and there is no indication that they were not).

225. Moreover, although the language of clause 16.04 is obscure, it appears that it is only for goods or services procured for the Hotel under such a contract of a value of US$10,000 (multiplied for inflation) or more for an Accounting Period (i.e., a calendar month) - which it does not appear can be the case - that specific disclosure is required.

226. In the Tribunal's judgment, subject to the issue of concealment, (which we deal with below) there is nothing in this allegation. We do not accept that such payments were either unauthorised or excessive.

Marketing Charge

227. The Marketing Charge is described in section 2.01 of the Services Agreement as reimbursement for the costs and expenses associated with advertising, marketing, promotion and sales carried out by [A] (subsequently [the Second Claimant]) and its affiliates. The description "reimbursement" is not entirely apt, as that suggests payments to [the Second Claimant] to cover sums previously spent by [the Second Claimant] or its affiliates. In fact, as the Arbitral Tribunal understands it, all participating hotels contribute a fixed percentage of their revenue to a notional fund which is used to pay for the services mentioned. We say "notional" because it is clear from [the Claimants' forensic expert]'s evidence that contributions are paid into more than one account, and may be commingled with other funds … It is plain that the monies are actually spent by companies within the [A] Group other than [the Second Claimant]. The Owner, however, cannot complain of this, as the Services Agreement expressly provides for affiliates of (now) [the Second Claimant] to provide the relevant services.

228. The mechanics of how the contributions made by participating hotels are used to pay for such services is far less clear. The explanation we received in evidence from [A's Executive Vice-President] was unintelligible.87 Fortunately, this does not matter for present purposes as, whatever the precise mechanics, the Tribunal accepts [A's Executive Vice-President]'s evidence that:

...The amounts collected from the participating hotels are spent exclusively on the International Marketing Program. Before 2004, when the amount collected from participating hotels was not substantially different from the amount spent, the balance was rolled over into the next year's fund. However, since 2004, amounts collected which are in excess of amounts spent (even where insubstantial) are refunded to the hotels in the following fiscal year after accounting. If the amount collected in the International Marketing Fund is less than the amount spent on the International Marketing Program, [A] does not collect any additional monies from the participating hotels, nor does it charge the hotels interest.88

229. We also accept, as we were told by [A's Senior Vice-President for Global Marketing], that the (notional) fund to which the Hotel contributed is used to market and promote the [X] brand.89

230. The Marketing Charge appeared as a separate item in each year's audited certified statement, described as "Marketing Fees" and was (again in each year) expressly referred to in the notes under the heading "Entitlements of the Operator" and the heading "Related party transactions".90

231. The Owner knew that it had to pay, and was paying, the Marketing Charge, and we are satisfied that the sums paid have been used for the purposes specified. So it was not concealed, or unauthorised, or (in our view) excessive; and it was accounted for. For the avoidance of doubt, we should make it clear that, in so far as some of what was paid may have been used to meet relevant overheads of [A] Group Companies, we see nothing improper in that.

Owner's expectations

232. We return now to the question of concealment and whether there are reasonable grounds to suspect that the accounting provided by the Claimants intentionally included false information.

233. It is clear from the Agreements themselves that the Owner always anticipated that it would have to pay charges for services provided by members of the [A] Group in respect of most of the matters covered by the [W] Invoices. The definition of "Deductions" in the Management Agreement includes:

6) the fees and expenses of technical, operational and other consultants, experts, and advisors for specialized services in connection with non-routine Hotel work, including their out-of-pocket expenses;

(7) the handling and service charges imposed by third parties (including Affiliates of Manager or [A]) for international procurement;

…

(9) amounts charged or allocated pursuant to the International Services Agreement;

(10) travel, living, and other out-of-pocket costs and expenses of corporate and regional personnel of Manager and any of its Affiliates visiting the Hotel on specific Hotel business, …

(11) the operating costs and expenses of computer systems and communication lines used by the Hotel;

(12) the costs and expenses of the operational insurance described in Section 9.02 [which includes general liability insurance, employer's liability, and fidelity bond insurance].91

234. Moreover, the Services Agreement expressly provides that the Owner will pay for such things as training programs for Hotel employees, [A]'s Frequent Traveller Program, and the International Reservation System ... Indeed the Owner negotiated its own maximum rate for each reservation transaction, which is reflected in section 2.06; and the system of allocating the costs of services that the Hotel shares with other hotels operated by the [A] Group is laid down in the Agreement.

235. These were all matters, therefore, which the Owner expected to be charged to the account of the Hotel to pay members of the [A] Group or, in some cases, third parties.

236. What the Owner was not to be charged for is the "routine corporate and regional services" outside [the city] described in section 2.02, and again referred to at the end of section 2.06 of the Services Agreement.

Monthly statements

237. It is not in dispute that, throughout the currency of the Agreements, the Owner has been sent monthly reports about the performance of the Hotel. These are quite substantial documents, including a summary profit and loss statement and much detailed accounting information.92 There is, however, a dispute between the parties as to whether they contained specific reference to the [W] Invoices and their payment.

238. According to the Claimants, the monthly reports included a receivables/payables sheet with a line item entitled, "[W] Invoices". Indeed we have been shown examples, said to come from the Claimants' records, of monthly reports containing such a sheet. However, [the person] who is currently the Area Director of Finance for the Middle East and Africa for [A], and who is the Claimants' principal witness of fact on this matter, did not mention the existence of the sheets until his third witness statement.

239. [A's Area Director Finance]'s account is supported by [the Hotel's Assistant Financial Controller], who has worked in the Hotel's accounting department since 1996, and is now Assistant Financial Controller. He explained the process for preparing the monthly report. The report was supposed to include an "[A] Receivables/Payables Disclosure" mentioning amongst other things, the monthly [W] Invoice; and he said that, as far as he was aware, the package sent to the Owner every month included such a sheet referring expressly to the [W] Invoice, at least until the format for reporting changed in March 2005; he also confirmed that the sheets form part of the copies of the report held in the Hotel's own records.93 [The Assistant Financial Controller] was not, however, the person who actually sent the monthly reports to the Owner; that was done by someone else after the covering "rent letter" had been signed by the Director of Finance and the General Manager.

240. The Owner says it never received the receivables/payables sheets: they did not form part of the regular package of information contained in the monthly reports; and the Owner has produced from its records the monthly reports it says it received, only one of which (for November 2001) contains a copy of a receivables/payable sheet expressly mentioning a [W] Invoice by name: and in that case the amount recorded as payable under the item is "$0".

241. The Arbitral Tribunal is therefore faced with a mystery. At least up to March 2005 the monthly reports were supposed to include a page referring expressly to the existence of a [W] Invoice or Invoices payable in the month under report; the copies in the records of the Hotel include such a page; those in the records of the Owner (with one exception) do not. The invoices in question covered costs (for example, for central reservations) that the Owner expected to pay; and the total figures shown on the monthly reports included the sums payable under such invoices. We will return to this point later in our conclusions.

Audited annual statements

242. In each of the Hotel's audited financial statements, there are notes purporting to disclose: "transactions with related parties, i.e. the owner, operator, and senior management of the hotel and companies of which they are principal owners".94

243. It does not appear to be in dispute, however, that international accounting standards95 did not require a related party transaction note to be included for accounting periods ending before 1 January 2005.96 Nevertheless, the note was there, and in the Arbitral Tribunal's view, if it was there, it should have been accurate; and the preparation of these financial statements, and thus of the notes, was the responsibility of the Hotel's management, [the First Claimant].97

244. In fact, from 1998 to 2005 inclusive, the notes were not accurate in that, although they disclosed other related party transactions, they did not disclose the payments pursuant to the [W] Invoices. In addition, for 2005 the note did not comply with international accounting standards, and the correct position for 2005 had to be made clear in the 2006 accounts.

245. Again, there is a mystery. These payments were included in the amounts that went to make up the Hotel's financial statements; but they were not identified and disclosed as part of the related party transactions.

246. [A's Area Director Finance]'s evidence is that the External Auditor had access to the [W] Invoices98 in the course of its audit. Though his evidence that the Auditor actually examined them is second-hand.99

247. However, as [the Owner's expert accountant] noted, the payments made pursuant to the [W] Invoices in each year were material, and indeed "were substantial compared to the other [A] charges, such as the Royalty and Marketing Fees".100 In those circumstances, it seems inconceivable that the External Auditor … did not examine these payments and the invoices supporting them.

248. Indeed this point goes further, because as [the Claimants' forensic expert] pointed out, there is evidence to suggest that, although the Management Agreement contemplated that [the First Claimant] would produce a financial statement to be audited by the External Auditor, in practice the annual statements were not only audited, but were prepared, by [the External Auditor], from information provided by Hotel staff.101

Owner's investigations

249. The performance of the Hotel under the management of the [A] Group never seems to have fully lived up to the Owner's expectations, and by 2006 it had clearly become thoroughly dissatisfied. In October 2006 the Owner retained [an attorney and consultant] "to assist it in examining the causes of the poor performance of" the Hotel.102

250. In her witness statement she explains how she and the Owner tracked down and identified the payments paid pursuant to the [W] Invoices, and also investigated the nature, and value to the Hotel, of the Marketing Charge.

From mid-September through October we attempted to obtain more information about the charges and to determine why charges had been made in apparent breach of the Agreements. Owner's questions were ignored. Consequently, Notices of Default were issued in early October 2006.103

251. The Notices of Default mentioned were dated 10 October 2006. One, under the Management Agreement, was sent to both [A] and [the First Claimant] … The other, under the Services Agreement, was sent to [A] … These accused the recipients of a considerable number of allegedly improper acts and omissions, many of which have already been rejected above, and some of which (in particular one, alleging that the Owner had been deprived of the true and faithful services of its auditor) have not been pursued in this arbitration.

252. [The Owner's attorney/consultant] also details the investigation she and the Owner made following the Notices of Default up to the commencement of this arbitration, into (amongst other things) the charges covered by the [W] Invoices, and into the Management Charge.

Conclusion

253. The main question in this part of the arbitration is not whether the Owner is entitled to require [the First Claimant] and [the Second Claimant] to account to it for the monies paid from the Hotel to them or their affiliates. Those companies are contractually obliged to account to the Owner under, respectively, the Management Agreement and the Services Agreement. The question is, as regards contractually closed years, is the Owner entitled to any more than it has already received? The answer, as we have already made clear, depends on whether there are reasonable grounds to suspect fraud on the part of [the First Claimant] or [the Second Claimant]: that is, to suspect that they have intentionally included false information in what they have told the Owner, or otherwise behaved fraudulently.

254. The Arbitral Tribunal has already rejected the suggestion that the Owner's allegations about mismanagement, conflict of interest or breach of confidence justify any further accounting, and we need say no more about these points. We take the same view in relation to the Marketing Charge, which was both authorised and disclosed.

255. As to fraud, and in particular fraudulent concealment, in relation to the payments made pursuant to the [W] Invoices the two important things to consider are the monthly statements and the annual statements. As regards the monthly statements, we accept that (save in one case) the statements actually received by the Owner did not contain the page that referred expressly to the [W] Invoices. As regards the annual statements, it is not in dispute that, until 2006, the notes did not accurately list related party transactions.

256. These points would be suspicious were it not for the context. First, the payments that were not disclosed were ones that the Owner expected to make. Indeed the Hotel could not have been run without, for example, access to the [A] central reservation system, the use of which was mandatory under section 2.05A.1 of the Services Agreement, and in respect of which the Owner had gone out of its way to negotiate the transaction price limit contained in section 2.06 of that Agreement.104 The Owner, and companies in the same ownership or control, own other hotels. Its management is sophisticated and experienced in the hotel business.105 If it is surprising that the Owner was not given a monthly breakdown identifying the costs covered by the [W] Invoices, it is equally surprising the Owner did not ask what those costs were. More to the point, it is difficult to see why the Claimants should try to conceal the details of payments which they knew the Owner must be aware were being made.

257. Secondly, kept at the Hotel were copies of the monthly statements that did include the page referring expressly to the [W] Invoices. The Owner could have required to see these records at any reasonable time during business hours.106 And, again more to the point, these records, the [W] Invoices themselves, and the entries in the accounting records of the Hotel reflecting their payment, were all open to the External Auditor (appointed by the Owner) for each Annual External Audit.

258. Whether or not [the External Auditor] actually looked at these materials (and we are quite sure that they did, otherwise a proper audit would not have been possible) it is, to put it at the lowest, highly improbable that a hotel manager would, over a period of years, try to conceal from the owner details of payments to which the owner's own external auditor had access for the purposes of every annual audit, unless of course (which is not alleged in this arbitration, and for which there would appear to be no motive) the auditor itself was a party to the concealment.

259. In our opinion, what happened in this case bears all hallmarks of mistake and (particularly in the case of the notes disclosing related party transactions) incompetence, not intentional concealment. Nor do we see anything that supports the suggestion of fraud in [the Owner's attorney/consultant]'s account of seeking information from the [A] Group. By this stage there was no love lost between the Group and the Owner (or between the Group and [the Owner's attorney/consultant]). Though it may well be that the Group would have saved itself problems if it had been more open and consistent in its answer, and generally more helpful.

260. In short, the Arbitral Tribunal concludes that the Owner has not shown reasonable grounds to suggest fraud on the part of [the First Claimant] or [the Second Claimant] or, a fortiori, a prima facie case of fraud.

261. It follows that, in relation to contractually closed years, the Owner is not entitled to any further accounting from [the First Claimant] or [the Second Claimant]. In respect of subsequent years, the Owner is entitled to the rights conferred by section 7.01B, but no more.

262. The evidence we have makes clear that the Fiscal Years 1998 to 2006 inclusive must be closed. It is, however, unclear whether that is so for 2007, as no signed audit opinion appears for that year.107

Owner's breaches of contract

263. As already mentioned, and is not in dispute on 4 December 2006, the Owner instructed the Hotel's bank to delete all designated [A] Group employees as authorised signatories from the Hotel's operating account … This constituted, on the face of it, a clear breach of both section 2.02 and section 7.02 of the Management Agreement (see above). The Manager ([the First Claimant]) is supposed to have control over bank accounts, and the signatories are supposed to be designated by it. Moreover the practical effect of this was to prevent the Manager causing the monthly payments to be made to the Claimants on behalf of the Owner.

264. Indeed, it is not in dispute that the Owner has, since December 2006, made no payments to the Claimants under section 5 of the Management Agreement, section 2 of the Services Agreement, or section 3 of the License Agreement.108 The total amount of monthly invoices outstanding, as at the end of January 2009, was ...109

265. The Owner's justification for preventing, and not making, payment is summarised at Point IV of its Closing Memorandum.

[The applicable] law holds that Claimants' failure to disclose and account for the related party transactions in the [W] Invoices requires disgorgement of the fees they collected pursuant to the Management and Services Agreements, and a waiver of any such fees that they claim they have not been paid.

[A provision of the applicable commercial law] states that the agent shall not be entitled to fees for any transaction, to the extent that the accounting for that transaction contains "false information". Fees to the Claimants are generated in two ways: (1) to the extent that [X] is entitled to fees pursuant to the Management Agreement, for undertaking the management of the Hotels; and (2) payment of the [W] Invoices and other service fees to [the Second Claimant] pursuant to the Services Agreement.

Owner has, pursuant to the Agreements and the audit process, asked Claimant to account for the related party transactions. Pursuant to the yearly management representation letters signed by the Hotel…, as well as Section 2.07 of the Services Agreement, both [X] and [the Second Claimant] agreed to do so. However, as we now know, neither [X] nor [the Second Claimant] fulfilled its obligation. Thus, [X] was not and is not entitled to collect any fees for abrogating its duties, and [the Second Claimant] was not and is not entitled to collect service-related fees to the extent they were falsely accounted for …

The Owner continues, a little later on:

Claimant [the Second Claimant]'s incontrovertible failure to account under Section 2.07(B) of the Service Agreement renders its request for any unpaid fees waived, and means any such fees already paid must be disgorged to Owner …

266. The justification for withdrawing signatory authority on the Hotel's accounts appears earlier in the Owner's Closing Memorandum. The Owner says that, under [the relevant provision of the] Civil Code, where parties to a contract owe each other mutual obligations, "either of the contracting parties may refuse to fulfil its obligations unless the other party fulfils what it undertook to perform.110

The Owner says that [the First Claimant] was in breach of contract by making unauthorised or excessive payments, and by concealing its breaches and presenting false financial statements. This not only suspended the Owner's duty to pay, but also (as we understand the argument) entitled the Owner to withdraw signatory authority.111

[Applicable] law

267. The Arbitral Tribunal has already discussed [the aforementioned provision of commercial law] above. It applies where false information has been intentionally included by an agent in his account to his principal.

268. So far as [the aforementioned provision] of the Civil Code is concerned, [the parties' legal experts] ended little apart. In [the Claimants legal expert]'s opinion, the provision, "does not absolve a party automatically from performing its obligation". If the party in breach, "has performed the main part of its obligations and where the non-performed part of the obligation is small", then a court or tribunal may find non-performance by the other party is not justified.112 To like effect [the Owner's legal expert] agreed in the course of his evidence that whether non-payment by the party not in breach was justified would depend on the extent of non-performance by the party in breach.113

License Agreement

269. It is apparent from the justifications quoted above that the Owner suggests no legitimate grounds for non-payment of the royalties due to [the Second Claimant] under the License Agreement. [The Second Claimant] has committed no breach of that, and the Owner has had the benefit of the use of the [X] name, and associated rights, during the period of non-payment from December 2006 until now.

270. That being so, the Tribunal is satisfied that [the Second Claimant] is entitled to recover from the Owner the royalty payments that have fallen due and not been paid in respect of every accounting period since then up to the end of February 2009, subject, where relevant, to possible adjustment as explained below.114

Management and Services Agreements

271. We have already decided that there are no reasonable grounds to suggest that false information was intentionally included (including by omission) in the accounts provided by the Claimants to the Owner. Accordingly, the Respondent cannot rely on [the aforementioned provision] of the Commercial Code.

272. So far as breaches of contract by [the First Claimant] and [the Second Claimant] are concerned, we have not accepted almost all of the owner's allegations. Insofar as the annual audited certified statements were inadequate (in particular the notes on related party transactions), by the time Owner started to breach its obligations in December 2006, it was precluded from questioning the accuracy of all such statements up to and including that for 2005. So even though the 2005 audited certified statement contained an incorrect list of related party transactions, the Owner was deemed to have accepted it as correct. The next audited certified statement was that for 2006, which was accurate in relation to related party transactions, albeit it did not provide a full breakdown of payments to group companies.

273. In our judgment the Owner has had no, or at least no sufficient, justification for preventing the payment of monthly invoices under these Agreements, or for not making them itself.

Conclusion

274. For these reasons, in our judgment the Respondent is obliged to pay to [the First Claimant] under the Management Agreement, and to [the Second Claimant] under the Services and License Agreements, the sums due (including under the [W] Invoices) in respect of all monthly accounting periods from November 2006 until 31 January 2009.115 The sums in question are [amount] under the Management Agreement; [amount] (in respect of Marketing Charges) and [amount] (in respect of [W] Invoices) under the Services Agreement; and [amount] under the License Agreement.116 Because, however, the Arbitral Tribunal does not have the figures for February 2009, and there will in any event have to be a further award, the sums (if any) due in respect of that month will be dealt with then.

275. Further, as pointed out above, Fiscal Year 2007 may still be contractually open, as may be Fiscal Year 2008; and Fiscal Year 2009 has not yet ended. Where years are still open, the Claimants are entitled to recover unpaid monthly payments as set out above, but such payments may be subject to adjustment in due course in accordance with section 5.02D of the Management Agreement, 2.07B of the Services Agreement, or 3.01 of the License Agreement. The orders for payment made at the end of this Partial Award are without prejudice to, and reflect, this fact.

Termination of the Agreements

276. [In] December, 2006, [the First Claimant]'s lawyers notified the Owner that it regarded the revocation of signature authority over the Hotel's bank account as a breach of section 7.02A of the Management Agreement and as a default, and demanded that the revocation be reversed …

277. [In] March, 2007, [A] notified the Owner that the latter had failed to make payments under the Management Agreement, the License Agreement, and the Services Agreement, and that revocation of signature of authority breached sections 2.02 and 7.02 of the Management Agreement.

278. [In] March 2009, after the second part of the hearing on the merits in this arbitration, [the First Claimant] (under its current name …) sent a letter to the Owner ("the termination notice") referring to the two previous notices, and recording that the signature authority of its designated employees had not been restored. The notice also said that the Owner had, since those notices, continued to fail to make any payments under the Agreements which, the notice asserted, constituted an Event of Default. The notice went on to say:

In view of the foregoing, pursuant to Section 12.02 of [the Management Agreement] [the First Claimant] hereby gives "notice of its intention to terminate" [the Management Agreement] "upon the expiration of a period of 30 days from the date" hereof. Unless withdrawn, the [Management Agreement] shall terminate upon the expiration of thirty (30) days from the date of this notice. In accordance with [the applicable] law, such termination shall be confirmed upon the issuance of a declaration of termination of the [Management Agreement] by the Arbitral Tribunal in [this arbitration].

Finally, for the avoidance of doubt, please note that pursuant to Section 5.01B of the [License Agreement] and Section 3.01B of the [Services Agreement], the termination of the [Management Agreement] terminates the [License Agreement and the Services Agreement].

279. In their Post-Hearing Brief, the Claimants … rely on the termination notice as having been effective to terminate the Management Agreement, the Services Agreement and the License Agreement once such termination is "confirmed upon issuance of a declaration of termination of the [Management Agreement] by the Tribunal in its final award in this arbitration".

280. The Owner's Closing Memorandum, however, says this:

As both [the termination notice] and the purported date of the termination of the Agreements fall outside the close of evidence in this proceeding, as well as the Terms of Reference, this Tribunal is not in a position to consider (a) whether this letter constitutes proper notice pursuant to the Agreements; (b) whether the purported termination is legal, (c) what the ramifications of this termination would mean for the parties; (d) whether Claimants, or for that matter Owner, are due any monies as a result; or (e) any other question.

In short, any issues raised by this letter cannot be addressed in this proceeding and must await determination, if at all, in the context of a separate future proceeding …

281. To this the Claimants replied …, asserting inter alia that the termination notice was proper and effective; that the proceedings were not yet closed; and that they had made clear at the February 2009 hearing that they would be sending such a notice and that the Respondent should have objected then.

282. The first point to consider is whether the termination notice (and, if it is valid, its consequences) come within the scope of this arbitration. Now it is true that one of the issues listed in the Terms of Reference … is:

Have the Agreements been terminated and, if so, has any, and if so what loss been caused to the Claimants for which the Respondent is liable?

283. That issue, however, arises out of the claim made by the Claimants …, namely:

A declaration that, as a result of the Respondent's breaches of the Agreements, the Agreements are terminated.

284. A claim that the Agreements have been terminated as a result of the Respondent's alleged breaches is a different claim from one that they have been, or should be declared to have been, terminated by, or pursuant to, a purported contractual notice, even where that notice is founded on alleged events of default said to be constituted by the same alleged breaches; and a claim based on the termination notice might involve termination of the Agreements on a date different to that which would apply to a termination on the original basis.

285. Article 19 of the ICC Rules of Arbitration provides that:

After the Terms of Reference have been signed or approved by the Court, no party shall make new claims or counterclaims which fall outside the limits of the Terms of Reference unless it has been authorised to do so by the Arbitral Tribunal, which shall consider the nature of such new claims or counterclaims, the stage of the arbitration and other relevant circumstances.

286. For the reasons given in paragraphs 282-284 above, we think that this is a new claim. That, however, is not the end of the matter. As the Claimants have pointed out, these proceedings have not yet been declared closed. It is in principle open to the Claimants, if they so choose, to apply for authorisation to make this new claim. The Arbitral Tribunal has formed no view as [to] whether such an application would be granted, as it would have to hear from both parties if such an application is made. If it is made and granted, the Arbitral Tribunal will have to decide the question of whether the Agreements have been, or should be declared to have been, terminated by, or pursuant to, the termination notice, and whether the Claimants are entitled to any, and if so what, other relief (including damages). If such an application is not made, or not granted, the Tribunal will have to decide the remaining issues in the arbitration without regard to the effect (if any) of the termination notice.

287. Thus until we know whether such an application is to be made, and if made, until we decide whether it should be granted, we decide nothing in this Partial Award about whether the Agreements have been terminated, or should be declared to have been terminated, whether the Claimants (or the Respondent) are entitled to any contractual or other payments or damages in respect of, or calculated or awarded by reference to, periods from the end of February 2009 up to the expiry of the termination notice, or thereafter, and in particular whether the Claimants are entitled to any, and if so what, damages to reflect revenues lost during the unexpired term of the Agreements.

Directions and Costs

288. In the circumstances, at the same time that this Partial Award is issued, the Arbitral Tribunal will give directions to enable the outstanding issues to be dealt with, together with the questions of interest and costs. As to costs, the parties should proceed, as regards the matters decided in it, on the basis of the decisions made in this Partial Award and, as regards matters that remain to be determined, on the basis that either party may be successful. Any costs that were allegedly wasted as a result of the Claimants' inspection of the Owner's records on site in [the city] should be separately identified.117

289. For the avoidance of doubt, in this Award the footnotes form part of the Award.

Disposition

290. For the REASONS set out above, we [the members of the Tribunal], having carefully considered all the evidence and submissions made by the parties, hereby award and order:

(1) That [current name of the First Claimant] should be substituted for [its former name] as the name of the First Claimant in the title of this arbitration;

(2) Subject to sub-paragraph (6) below, that the Owner shall pay to [the First Claimant] the sum of … in respect of the sums due to the latter under the Management Agreement from 1 December 2006 to 31 January 2009;

(3) Subject to sub-paragraph (6) below, that the Owner shall pay to [the Second Claimant] the sums of … and … in respect of the sums due to the latter under the Services Agreement from 1 November 2006 to 31 January 2009;

(4) Subject to sub-paragraph (6) below, that the Owner shall pay to [the Second Claimant] the sum of … in respect of the sums due to the latter under the License Agreement from 1 December 2006 to 31 January 2009;

(5) Subject to sub-paragraph (6) below, the Owner's counterclaims are dismissed;

(6) The sums ordered to be paid in sub-paragraphs (2)-(4) of this paragraph 290 are payable forthwith, but payment thereof shall be without prejudice to the rights of the parties to subsequent adjustment, and payment and repayment between them accordingly, in accordance with section 5.02D of the Management Agreement, section 2.07B of the Services Agreement, or section 3.01 of the Licence Agreement, as regards any Fiscal Year that is still contractually open;

And we hereby declare:

(7) That Fiscal Years 1998 to 2006 inclusive are contractually closed;

(8) Pursuant to article 22.1 of the ICC Rules of Arbitration, that these proceedings are closed as regards the matters determined by this First Partial Award;

(9) That this First Partial Award is final in respect of the matters it determines;

(10) That all other matters in dispute between the parties in this arbitration are reserved.'

1
It should be noted that the hearing on the merits was not bound to result in a Final Award, and the application for interim measures might well still be live after it had concluded.

2
Who, as we understand it, were authorised to represent all interested, or potentially interested, [A] Group entities, namely [the First Claimant], [the Second Claimant] and [C].

3
The Effective Date was 19 March 1998, and the Takeover Date was shortly thereafter.

4
Each Fiscal Year (except for a partial year at the beginning or end of the Term) is a calendar year.

5
For the first ten years of the agreement's duration, the Owner's Priority was to be [amount], and thereafter [amount]. "Net House Profit" is calculated by reference to "Adjusted House Profit", which in turn is calculated by reference to "Total Revenue", which covers all revenues and receipts, determined on an accrual basis, derived from the operation of the Hotel. For present purposes the detailed definition of these capitalised terms is immaterial.

6
Accounting Periods are the calendar months of a year: see section 1.01A.

7
Deductions include amounts charged or allocated pursuant to the Services Agreement. External Audit means the audit conducted by the internationally recognised accounting firm engaged by the Owner as auditor to audit the Hotel books and records for any Fiscal Year in accordance with the local corporate laws and international accounting standards and auditing practices. The "Uniform System" referred to is the Uniform System of Accounts for Hotels as published and revised from time to time by the Hotel Association of New York City, Inc. (See section 1.01.)

8
In this Agreement, an "Affiliate" of a company means any person who controls or is controlled by that company, or is under common control with that company: similar definitions apply mutatis mutandis in the other Agreements.

9
The Restricted Areas are shown on a plan attached to the Agreement, and include the site of [the other hotel operated by the A Group in the city], which is expressly identified on the plan.

10
A Procurement Affiliate includes any person supplying goods or services to the Hotel that also has a contractual relationship with [the First Claimant] or its Affiliates.

11
The "[X] Agreements" are defined as the Management Agreement, the Services Agreement and the License Agreement.

12
The "Property Management System" means any such system used by [A] Chain hotels (see section 1.01).

13
External Audit has the same meaning as in the Management Agreement, as do other capitalised terms (not otherwise defined in the Service Agreement): see section 1.02H.

14
The "[X] Rights" include the right to use the name "[X]" and related trademarks.

15
The section goes on to provide that the royalty rate may increase progressively up to 2% of Total Revenue, as that revenue rises to [amount].

16
The Owner's reasons are summarised in its Closing Memorandum ...

17
See Owner's Closing Memorandum ...

18
See Owner's Closing Memorandum ...

19
See Owner's Closing Memorandum ...

20
Transcript, Day 2 ...

21
Transcript, Day 2 ...

22
[A's Senior Vice-President for Development], first witness statement … see also [A's Area Vice-President]'s first witness statement … and his second witness statement ...

23
Owner's First Memorial …; see also Owner's Reply Memorial …, and Owner's Closing Memorandum ....

24
Owner's Closing Memorandum ...

25
Claimants' Post-Hearing Brief ...

26
If it had been, having heard [the head of the feasibility department] and [A's Area Vice-President] the Tribunal would have rejected it.

27
Transcript, Day 1 ...

28
Transcript, Day 1 ...

29
Claimants' Post-Hearing Brief ...

30
Owner's Closing Memorandum ...

31
Assuming they apply ..

32
Defined by section 1.02H of the Services Agreement, read with section 1.01 of the Management Agreement, as a person controlling, controlled by, or in common control with another person.

33
[Her] witness statement ...

34
[The General Manager]'s first witness statement ...

35
Transcript, Day 3 ...

36
Owner's First Memorial ...

37
[Y's Director of Operations and Business Development]'s first witness statement …

38
Transcript, Day 2 ...

39
Transcript, Day 2, pages 186-187; see Owner's Closing Memorandum, pages 20-22.

40
Transcript, Day 2 ...

41
[Y's Director of Operations and Business Development]'s first witness statement ...

42
Transcript, Day 5 ...

43
Transcript, Day 2 ...

44
Transcript, Day 2 ...

45
[The Director of Operations and Business Development]'s first witness statement ...

46
[A's Area Vice-President]'s first witness statement ... In oral evidence he said that the downturn started in the second quarter of 1998: Transcript, Day 2 ... See also Transcript, Day 2 ... According to [a witness called by the Claimants from a firm of consultants and auditors], one of the factors leading to the downturn in the hotel market was that growth in [the city] slowed significantly in 1998 and 1999, picked up in 2000, but slowed again in late 2001 and 2002 ...

47
[The General Manager]'s witness statement ...

48
See, for example, Transcript, Day 2 ...

49
See, for example, [the General Manager]'s witness statement ...

50
Though section 2.05B of the Services Agreement does appear to require it.

51
Transcript, Day 5 ...

52
Transcript, Day 3 … and his witness statement ...

53
Transcript, Day 2 ...

54
Owner's Closing Memorandum ...

55
Owner's Closing Memorandum ...

56
Transcript, Day 3 ...

57
See Claimant's Reply on the Merits … and Bundle 13(e), Tab 237.

58
An example of a benchmark survey appears at Bundle 13(e), Tab 82.

59
Transcript, Day 1 ...

60
Owner's Closing Memorandum ...

61
Claimant's Post-Hearing Brief ...

62
Nor can the Claimants rely on section 2.03B (see above) as, if the Benchmarking Companies can be described as consultants (which we doubt), the Claimants did not consult the Owner about employing them.

63
See Claimants' Post-Hearing Brief ...

64
Transcript, Day 1 ...

65
See paragraph 18(b) above.

66
See letter from the Tribunal to the parties dated ...

67
Unless in conflict with mandatory provisions of commercial law, or contrary to public order or morals.

68
Translation [in the Claimants' legal expert]'s second report.

69
Translation [in the Owner's legal expert]'s first report.

70
See section 1.01 of the Management Agreement.

71
See section 7.01B of the Management Agreement.

72
Section 7.01B provides for such audits to take place at the request of the Manager. Making such a request is mandatory and the External Audit took place each year and was carried out by ...

73
And, as regards any matter in respect of which an objection has been raised, once that objection has been resolved.

74
Transcript, Day 7 ...

75
Transcript, Day 7 ...

76
Transcript, Day 7 ...

77
Or, as regards any matter in respect of which an objection has been raised within the time limit, that objection has been resolved.

78
Owner's Closing Memorandum ...

79
[A's Area Director Finance]'s Second Witness Statement ....

80
See Joint Statement of the Expert Accountants ...

81
See paragraph 173 above.

82
This is tacitly admitted by Owner in the Appendix to its Closing Memorandum, where it describes all but one of the categories in issue as, "potentially permitted" or "not capable of determination at this time".

83
See also the last sentence of section 2.06.

84
Sent with their Post-Hearing Brief.

85
This is most clearly set out at the Respondent's First Memorial ...

86
Although the Claimants assert that the [A] Group has made no profit from its relationship with [the company that provides audio-visual services and equipment]: see the Claimants' First Memorial ...

87
Transcript, Day 4 ...

88
Paragraph 30.

89
See [A's Senior Vice-President for Global Marketing]'s witness statement …; and Transcript Day 6 ...

90
See Exhibit 1 to [the Claimants' forensic expert]'s report of 17 November 2008. For present purposes we do not need to go into the question of how far additional information about annual plans for the marketing programme, and about its annual revenue and expenses reached, or were accessible, to the Owner: see [A's Senior Vice-President for Global Marketing]'s witness statement … and Transcript, Day 6 …: see paragraphs [215] above.

91
See also section 16.04 referred to above.

92
See for example, … the affidavit of [A's Area Director Finance] …

93
[The Assistant Financial Controller]'s affidavit …; and Transcript, Day 5 ...

94
See the report of [the Owner's expert accountant].

95
See footnote [5] above.

96
See Joint Statement of the Expert Accountants ...

97
Indeed every year the Hotel's management signed a letter of representation to the External Auditor confirming, inter alia, the accuracy of the note: Transcript Day 8 ...

98
[A's Area Director Finance]'s affidavit …; his Third Witness Statement ...

99
[A's Area Director Finance]'s Second Witness Statement …; Transcript, Day 4 ...

100
[The Owner's expert accountant's] Report ...

101
Transcript, Day 8 …

102
[The attorney/consultant]'s witness statement ...

103
[The attorney/consultant]'s witness statement ...

104
[A's Senior Vice-President for Development]'s first witness statement ...

105
See, for example, Transcript Day 5 …; and [A's Senior Vice-President for Development]'s first witness statement ...

106
See section 7.01A of the Management Agreement.

107
See Exhibit 1 to [the Claimants' forensic expert]'s report ...

108
Save for a "nominal payment" in January 2007: see Amended Request for Arbitration ...

109
See the supplemental report of [the hotels consultant called as an expert by the Claimants] ... There is a slightly higher figure in the Hotel's management accounts; but as regards Fiscal Years that are open, it will be possible to arrive at the proper figure through the process of adjustment provided for in the Agreements.

110
Owner's Closing Memorandum ...

111
Owner's Closing Memorandum ...

112
[The Claimants' legal expert]'s first report ...

113
Transcript, Day 7 ...

114
For the reasons set out in the section on Termination of the Agreements, we do not deal in this Partial Award with liabilities (if any) in respect of periods, or calculated by reference to periods, after February 2009.

115
For the reasons set out in the section on Termination of the Agreements, we do not deal in this Partial Award with liabilities (if any) in respect of periods, or calculated by reference to periods, after February 2009. Only [W] Invoices are outstanding for November 2006.

116
See the supplemental report of [the hotels consultant called as an expert by the Claimants].

117
This is a matter about which the Owner makes particular complaint [in] its Closing Memorandum.