'Introduction

1. [In] November, 2009 the Arbitral Tribunal ("the Tribunal") issued a First Partial Award in this arbitration ... ("the First Partial Award").

2. [In] April 2010 the Tribunal issued an Addendum making certain corrections to the First Partial Award ... References hereafter to the First Partial Award are references to that Award as corrected by the Addendum.

3. Descriptions of the parties and the names and addresses of their respective counsel, and of the arbitrators are set out in the First Partial Award as follows (and remain the same): ...

4. The First Partial Award also contains an account of the proceedings in this arbitration, the disputes between the parties and of the Tribunal s findings and decisions in relation to those disputes; for that reason the entire First Partial Award is to be treated as incorporated by reference into this Award.

5. Further, in this Award we use the same abbreviations and defined terms as are used in the First Partial Award ... We will also continue to refer to the Respondent as "the Owner".

6. The First Partial Award (at paragraphs 276 to 287) left over for subsequent decision whether the Agreements have been or should be terminated and if so (or if not) with what consequences ("the Termination Issues") together with the questions of interest and costs: see paragraphs 276 to 288 of the First Partial Award.

7. This Second Partial Award deals with the Termination Issues and interest together with certain related matters concerning the production of further documents.

Proceedings

8. On 16 November, 2009, the Tribunal gave direction to the parties to enable the matters left outstanding by the First Partial Award (including interest and costs) to be determined. In particular we directed:

(1) That if the Claimants wish to make a claim that the Agreements have been or should be terminated by virtue of or pursuant to the termination notice dated 12 March 2009, they should apply to make that claim not later than 14 days from the date that the First Partial Award is notified to the parties;

(2) That if the Claimants make such an application, the Respondent may respond to it within 14 days of its being made;

(3) That the parties should notify the Arbitral Tribunal, and each other:

(a) of any contractual sums they say are due from one to another under any of the Agreements since 1 February 2009;

...

(c) of any interest they claim, setting out succinctly their grounds for claiming such interest,

not later than 14 days from the date that the First Partial Award is notified to the parties.

(4) That if any claim is made pursuant to the foregoing paragraph the other party may respond to it within 14 days of its being made.

9. Pursuant to those directions (as amended in relation to the times within which steps had to be taken):

(a) ... the Claimants submitted a Response to the Tribunal's letter ... and an Application for Authorization to make an Ancillary Claim for Termination of the Agreements;

(b) ... the Owner submitted its Opposition to the Claimants Application for Authorization to make an Ancillary Claim for Termination of the Agreements;

(c) ... the Claimants submitted a reply; and

(d) ... the Owner submitted a rejoinder.

10. [In] February, 2010, the Tribunal notified the parties of its decision in relation to the Claimant's application as follows:

3. The Claimants application is made under Article 19 of the ICC Rules of Arbitration and is to add a new claim for termination of the Agreements based on [the First Claimant]'s purported termination notice dated 12 March 2009 ("the New Claim").

4. The Arbitral Tribunal notes that the proceedings in this arbitration have been closed only as regards the matters determined by the First Partial Award.

5. The Arbitral Tribunal has concluded that considerations of efficiency dictate that it should authorise the bringing of the New Claim in this arbitration. The New Claim arises out of matters that already form the subject matter of this arbitration and it ought to be considered together with the Claimants' existing claim that the Tribunal is entitled, under [the applicable] law, to declare the Agreements terminated on the ground that they have been, and continue to be, breached by the Respondent.

6. It follows from this that the parties must have the opportunity to make submissions, and provide further evidence, to the Arbitral Tribunal on the question whether the Termination Notice was, or should be treated by the Tribunal as being, valid to terminate the Agreements and, if so, with what consequences.

7. Such submissions and evidence should be limited to the issues mentioned in paragraphs 286 and 287 of the First Partial Award. Though, in addition, having regard to paragraph 274 as well as paragraph 287 of the First Partial Award, the Arbitral Tribunal would be grateful to be given a breakdown of the Claimants contractual claims for each monthly accounting period starting in February 2009, rather than the list of invoices contained in Appendix A to the Claimants Response to the Tribunal's Letter ...

8. The Arbitral Tribunal therefore hereby directs:

(1) that the Claimants shall serve any such submissions and evidence not later than ...;

(2) that the Respondent should serve any such submissions and evidence in response not later than ...; and

(3) that the Claimant shall serve any such submissions and evidence in reply not later than ...

9. It is premature to consider whether the Arbitral Tribunal will itself conclude that a further oral hearing is desirable; however the Tribunal draws the attention of the parties to Article 20.2 of the ICC Rules of Rules of Arbitration.

11. Pursuant to those directions (as subsequently amended):

(a) ... the Claimants served a Submission of Further Evidence in support of their Ancillary Claim for Termination of the Agreements; a breakdown of their contractual claims from February 2009 to January 2010, with interest; a breakdown of the amounts owed in interest on the sum awarded to the Claimants in the First Partial Award; and the third report of [the Claimants' legal expert];

(b) ... the Owner served its Supplemental Memorandum in Opposition; a report by ... a barrister employed as a consultant ...; and a witness statement by ... the Director of Finance for [the] company retained by the Owner to oversee the operations of the Hotel; and

(c) the Claimants served their Reply Submissions and a letter from [their legal expert].

12. ... the Tribunal wrote to the parties asking them to address an issue relating to the quantification and mitigation of damages.1

13. In consequence:

(a) the Claimants served further submissions;

(b) ... the Owner served further submissions in response, a second report ... and other materials; and

(c) ... the Claimants replied.

14. In addition ... the Owner made further submissions by letter.

15. In parallel with the matters mentioned, the Owner has made a request that there be further production of documents ("the Production Application"). The Owner made the Production Application on 11 March 2010; the Claimants responded on 1 April 2010; and the Owner replied on 9 April 2010. The Owner says that the documents requested are required in order to enable it (and the Tribunal) to deal with the Termination Issues.

16. As recorded in the First Partial Award there has already been a hearing on the merits ... at which evidence and submissions relevant to the Termination Issues (amongst others) were heard. None of the parties has requested that there be a further oral hearing and the Tribunal has concluded that no further oral hearing is necessary to decide either the Termination Issues or the Production Application. The Tribunal hereby declares the proceedings closed except in relation to matters not determined in the First Partial Award or in this award. The Tribunal further records that the ICC International Court of Arbitration has from time to time extended the time limit for rendering the Final Award in this arbitration ...

The Agreements

17. A number of provisions of the Agreements are set out at paragraphs 52 to 59 of the First Partial Award. We repeat some of the more relevant ones below. In addition to those, we need to mention here a number of further provisions.

Management Agreement

18. Section 4 of the Management Agreement provides, so far as material, as follows:

4.02 Transition Procedures

Upon Termination the following actions shall be taken:

A. Manager shall, within 90 days after such expiration or termination, prepare and deliver to Owner a final accounting statement with respect to the Hotel, as more particularly described in Section 7.01 and including a statement of any sums due from Owner to Manager pursuant to this Agreement and the other [X] Agreements, dated as of the date of Termination. Within 30 days of the receipt by Owner of such final accounting statement, Owner and Manager shall make whatever cash adjustments are necessary pursuant to such final statement. The cost of preparing such final accounting statement shall be a Deduction. If Owner elects to have an External Audit performed as of the date of Termination, within 30 days of the receipt by Owner and Manager of such External Audit, Owner and Manager shall make whatever cash adjustments are necessary pursuant to such External Audit. If certain adjustments cannot be made because of unavailable information at the time of the final accounting or final External Audit, Owner and Manager shall make the necessary cash adjustments when such information becomes available; in all events, all accounts shall be deemed final 180 days after Termination.

B. Manager shall release and transfer to Owner or any other Person designated by Owner any of Owner's funds which are held or otherwise controlled by Manager with

Respect to the Hotel (except for funds to be administered pursuant to Sections 9.04C and 10.01G or otherwise in accordance with this Agreement).

C. Manager shall make available [to] Owner such books and records regarding the Hotel (including those from prior years, subject to Manager's need to retain copies of such books and records) as shall be needed by Owner to prepare the accounting statements for the Hotel for the year in which Termination occurs and for any subsequent year. Such books and records shall not include (i) employee records which must remain confidential under applicable law or which relate to employees of Manager or (ii) any Intellectual Property.

D. Manager shall to the extent permitted by law assign to Owner or to the new manager all operating licenses permits, and other instruments which have been issued in Managers name. If Manager has expended any of its own funds in the acquisition or renewal of any such licenses permits, or other instruments, Owners shall reimburse Manager therefor if Owner has not already done so.

E. Various other actions shall be taken, as described in this Agreement, including the actions described in Sections 8.01, 8.02, 8.03 B, 9.04 C and 10.01 G.

F. Manager shall peacefully vacate and surrender the Hotel to Owner. The provisions of this Section shall survive Termination.

19. Moreover the definition of "Fiscal Year" in section 1 (which is also adopted in section 1.02H of the Services Agreement and in section 1.02H of the Licence Agreement) provides that if a termination takes place during the course of a calendar year the partial year from 1 January until termination constitutes "a separate last Fiscal Year".

20. Section 12.01 of the Management Agreement provides, so far as material, as follows.

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:

...

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;

...

J. The failure of any party to perform, keep, or fulfil 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.

Services Agreement

21. Section 2.07 D of the Services Agreement provides as follows.

Upon Termination, all amounts accruing prior to the date of such Termination shall become immediately due and payable.

22. Section 3-01B of the Services Agreement provides as follows.

Notwithstanding the provisions stated in Section 3.01A, this Agreement is coterminous with the Management Agreement. If the Management Agreement is terminated this Agreement shall be immediately and automatically terminated, and if the Management Agreement is renewed or extended, this Agreement shall be immediately and automatically renewed or extended.

Licence Agreement

23. Section 3.01 D of the Licence Agreement provides as follows:

Upon Termination, royalty payments with respect to Total Revenue accruing prior to the date of such Termination shall become due and payable within 30 days of receipt by Owner of the final accounting statement under Section 4.02 of the Management Agreement.

24. Section 5.01B of the Licence Agreement is in substantially similar terms to Section 3.01B of the Services Agreement.

Termination

25. The Claimants claim that the Agreements have been, or should be, terminated on two different bases.

26. First the Claimants rely on [a provision in the local] Civil Code which, they assert, entitles them to apply to the Tribunal to declare the Agreements terminated on the ground of the Owner's breach thereof ("the declaration claim").

27. Secondly, they rely on the termination provisions of the Agreements themselves, and on a termination notice dated 12 March 2009 ("the Termination Notice"), which they served on the Owner ("the notice claim"). The Claimants accept, however, that to be effective the notice has to be confirmed by a court or arbitral tribunal.

28. The declaration claim first appeared [in] the Claimants Amended Request for Arbitration,2 though at that stage its legal basis was not as clear as it has since become.

29. As already recorded, the notice claim was only admitted (under Article 19 of the ICC Rules of Arbitration) [in] February 2010, and relates to a notice given during the pendency of the proceedings.

30. However the notice claim, if successful, would have the effect of terminating the Agreements from the date the notice expired, whereas the declaration claim (though made earlier) would, if successful, have the effect of terminating them from the date of our Award. It is therefore convenient to consider the notice claim first as that, if successful, would produce the earlier termination of the Agreements.

The Termination Notice

31. By a letter dated ... December 2006 ... the Owner was notified that the latter was in breach of Section 7.02(A) of the Management Agreement by revoking the signature authority of the [A] Group employees who were designated signatories of the Hotel's operating account, and that this constituted an Event of Default under Section 12.01 of that agreement.

32. By a letter dated ... March 2007 ... the Owner was notified that it was in breach of its obligations to make payments under each of the Agreements.

33. By the Termination Notice [the First Claimant] notified the Owner as follows.

Our representative notified you by letter dated December ... 2006 ("First Notice") that you were in breach of Section 7.02(A) of [the Management Agreement], dated ..., by and between [the Owner] and [the First Claimant] decision [sic] to revoke the signature authority of the designated Hotel Employees from the [X] Hotel's Operating Account ... Further the First Notice informed you that your breach of Section 7.01(A) constituted an Event of Default under Section 12.01 of [the Management Agreement].

By letter of March ... 2007 ("Second Notice"), we further notified you that you were in breach of your obligations to make payments owing under [the Management Agreement] as well as under [the Licence Agreement] and [the Services Agreement], each dated ... (collectively with [the Management Agreement] the "Agreements"). The Second Notice also reiterated the terms of the First Notice with respect to your breach of Sections 2.02 and 7.02 of [the Management Agreement], and again reserved all rights of our company and our affiliates under all three Agreements.

Since the date of the First Notice, you have failed to reinstate the signature authority of the designated Hotel Employees under [the Management Agreement]. Moreover, the amounts owing under the Agreements have continued to accrue since the date of the Second Notice. As of today's date you have failed to make any payments for any of the amounts owing under the Agreements. In accordance with Section 12.01(D) of [the Management Agreement], the failure to make any payment required to be made under [the Management Agreement] within 30 days after notice that such payment has not been made constitutes an Event of Default.

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 the present case].

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

[Applicable] law

34. [The relevant provisions] of the Civil Code (in [the Claimants' legal expert]'s translation ... say this:

[1] If the contract is valid and binding, it shall not be permissible for either of the contracting parties to resile from it nor to vary or rescind it, save by mutual consent or an order of the court.

[2] The parties may agree that a contract is automatically terminated without having to seek a judicial order upon failure of fulfilment of the obligations arising therefrom. However such an agreement shall not exempt the parties thereto from giving notice of said termination unless both contracting parties agree expressly on exemption therefrom.

[3] In contracts binding on both parties if one of the parties does not do what he is obliged to do under the contract, the other party may, after giving notice to the obligor, require that the contract be performed or cancelled.

The judge may order the obligor to perform the contract forthwith or may defer performance to a specified time and he may also order that the contract be cancelled and compensation paid if appropriate.

35. In addition [another provision] (in [the] translation [of a barrister whose report was produced by the Owner])… says this:

If faskh ensues or is effected, the contracting parties shall be restored to the position they were in prior to the contract and if this is impossible compensation shall be awarded.

36. It is common ground that the Agreements do not provide for automatic termination without the need for a judicial order.

37. According to [the Claimants' legal expert], the consequence of [provision 2 above] is that, where (as here) a contract does not provide for automatic termination without the need for a judicial order then there is stiII a "need for a declaration of termination by the courts or the arbitral tribunal, as the case may be".3

38. Nonetheless, in [the Claimants' legal expert]'s view, where the contract provides for termination by notice, although to be effective such notice requires to be confirmed by a court or tribunal, once confirmed it takes effect from the date the notice expired, not from the date of judicial confirmation.4 As to whether a court or tribunal should confirm a notice, in his view the Tribunal has the authority and the duty to declare the Agreements terminated if it is satisfied that the Claimants have established that Events of Default occurred and have not been cured.5

39. [The Claimants' legal expert] concludes:

... in view of the circumstances prevailing in the present dispute, a court or a tribunal is empowered under [provision 2 above] to (i) confirm the Agreements were validly terminated and to (ii) award contractual damages as appropriate to the extent that the defaulting parties contractual liability has been engaged by its contractual default up to the date of the award. This will, no doubt, include compensation for damages caused to the Claimants for services rendered and benefits provided under the Agreements up to the date of the award, including the Claimants' management and other fees. This is in addition to any damages awarded for future lost profits.6

40. Where the contract provides for termination by notice, [the Claimants' legal expert] does not think that [provision 3 above] applies, as in his view that article is concerned with cases where the innocent party gives a notice to cure, and the defaulting party fails to comply.7

41. In the view of [the barrister whose report was produced by the Owner], [provisions 2 and 3 above] are concerned with dissolution of contracts, and can only be applied where there is: "an entire reversing of everything the parties have done pursuant to the contract8 in accordance with [provision 4 above].

42. Moreover, he doubts whether [provision 2] applies at all, as it appears to be his view that this only operates where the contract says that there is no need for a decision by the court.9 Though [the barrister] seems to be addressing an argument that a provision excluding the requirement for judicial confirmation of a termination might be something that could be implied: this is not argument that the Claimants are making.

43. Where [provision 3] is invoked according to [the barrister] the court has a discretion, and good faith and proportionality are important factors in its exercise.10 Moreover, the three Agreements must each be considered separately.11

44. As to damages, [the barrister] says that: "a tribunal must ensure that the aggrieved party does not profit from the breach".12

45. The Owner (relying on [the barrister]) says that [provisions 2 and 3] can only be invoked where the parties can be restored to the positions they were in before the contract was made. It argues that restoration of the parties to their position before the Agreements were made is impossible.13 Moreover it submits that: "[Provision 2] only applies to a very limited category of contracts in which the parties have specifically agreed to exclude judicial or arbitral review".14 The Agreements, it says, do not fall into this category.

46. As to [provision 3], according to the Owner termination cannot be ordered without a full investigation of whether the Claimants and the Owner have each acted in good or bad faith. All the circumstances must be considered, including the Claimants conduct since the hearing. The Owner must not be penalized, and the Claimants must not profit from termination.15 The Owner concludes:

The Agreements specifically declare that the parties have the right to arbitral review of any dispute thus rendering [provision 2] inappropriate here.

Termination under [provision 3] may be available under the doctrine of [#ITALIC_START#]faskh[#ITALIC_END#] but, before deciding any resolution, the Tribunal must review all the facts and circumstances of the situation of the parties, including the demonstration of good faith (or lack thereof) by the parties. The effects on both parties must also be ascertained to make sure that no inequitable punishment or benefit will result from termination. In order to fairly hear and assess these issues the Tribunal must defer further consideration of Claimants' Application, grant Respondent the additional information it seeks and allow it present its evidence in a further submission.16

47. The Claimants point out in their Reply Submissions … that [provision 4] expressly recognizes that restoration of the parties to their pre-contract positions may be impossible, and that in such a case compensation should be awarded. Moreover such will be the case where (as here) contracts are to be performed over a period of time, and not all at once ...

48. [The Claimants' legal expert], in his letter of …, says that whether the Code is dealing with "dissolution" or "termination" is mere semantics. He also rejects the suggestion that [provision 2] does not cover agreed termination provisions which do not exclude resort to the Courts.

The notice claim

49. The Tribunal is quite satisfied that under the [applicable] law ... parties to a contract are entitled to agree that the contract may be terminated (whether for cause, or otherwise) on notice. Such a contract may expressly provide for termination to take effect automatically, without recourse to the courts. If it does not, then the court or an arbitral tribunal must confirm the termination, although once confirmed it will take effect from the expiry of the notice. In all this we accept [the Claimants' legal expert]'s evidence. If (which is by no means clear) [the barrister whose report was produced by the Owner] thinks otherwise, then we reject his view.

50. Moreover we also entirely reject the Owner's argument that, in a case such as this, a further detailed investigation into the merits of the case is required before a court or tribunal can decide whether to confirm termination. Where termination is for (alleged) breach of contract, and the contract itself provides that, if there is such a breach, the injured party is entitled to terminate by notice, then the only necessary factual investigation (apart from into questions of compensation) is into whether the alleged breach is proved to have taken place and has not been waived, and whether the termination procedure has been properly followed.

51. Likewise, where the termination of a contract is expressly made contingent on the termination of another contract, the only relevant question is whether the latter contract has properly been terminated.

52. Though of course, even if the conditions for termination are found to have been proved, there still has to be a factual investigation into what, if any, compensation is payable.

53. In the present case, the Tribunal has already found the Owner to be in breach of the Management Agreement in relation to the operation of the Hotel's operating account, and in breach of all three Agreements in relation to contractual payments.17 None of those breaches was cured before the making of the First Partial Award. Moreover, control over the Hotel's operating account has never been restored to [the First Claimant].

54. The Tribunal is therefore satisfied that it should confirm the termination of the Management Agreement with effect from the expiry of the Termination Notice on 11 April 2009.

55. The basis on which the Termination Notice says that the Services and Licence Agreements will terminate is not their breach, but the fact that by their express terms, they are coterminous with the Management Agreement. That is, as noted above at paragraphs 23 and 24, correct. It would therefore make no sense for the Tribunal to confirm the termination of the Management Agreement without also confirming the termination of the Services Agreement and of the Licence Agreement; and, accordingly, the Tribunal confirms their termination, again with effect from 11 April 2009.

56. In these circumstances it is unnecessary for the Tribunal to consider the declaration claim.

Contractual payments

57. In the First Partial Award the Tribunal ordered the Owner to pay sums due under the Management Agreement from 1 December 2006 until 31 January 2009, under the Services Agreement from 1 November 2006 until 31 January 2009; and under the Licence Agreement from 1 December 2006 until 31 January 2009.

58. The consequence of the Tribunal's decision to confirm the termination of each of the Agreements with effect from 11 April 2009 is that the Agreements each ended then, as did the simple contractual obligation to pay any sums provided for by their terms. Accordingly the last Fiscal Year was the period 1 January to 11 April 2009. For periods after that, we are concerned with compensation.

59. So far as February, March and April 2009 are concerned, on the basis of the figures given by the Claimants at Exhibit A to their submission ..., the amounts owing are these:

Services Agreement

.........

Licence Agreement

.........

60. For April 2009 we have apportioned the Marketing Charge and the royalty payment, attributing one third to the period prior to termination. The April figure for [W] Invoices is a refund, and we have included it in its entirety as we infer that it relates to payments made before April 2009.

61. In the Tribunal's judgment, the Owner is obliged to pay sums listed in paragraph 59 above, and will so order. Though these sums will be subject to the possibility of subsequent adjustment as mentioned at paragraphs 275 and 290(6) of the First Partial Award, and indeed to the operation of section 4.02 of the Management Agreement (Transition Procedures). In short, they constitute presently enforceable debts owed by the Owner to [the Second Claimant], but once paid there may later be retrospective adjustment.

Compensation - introduction

62. Having decided to confirm the termination of the Agreements, the Tribunal must now consider to what (if any) compensation for termination the Claimants are entitled in circumstances where the reason the Agreements were terminated was the Owners breach of (in particular) the Management Agreement.

[Applicable] Law

63. The Tribunal has already referred to much of the law that is relevant.18 The Tribunal is satisfied on the evidence, that under [the applicable] law, where a court or tribunal confirms the termination of a contract where termination was based on a breach of that contract, it may compensate the injured party for losses it has suffered up to the date of termination, and for losses it has suffered or may suffer thereafter in respect of the unexpired residue of the contract. Indeed the contrary was not suggested.

64. The question has arisen whether under [the applicable] law the injured party has any obligation, similar to that at common law, to mitigate his loss. In his Second Report, [the barrister whose report was reproduced by the Owner] says that, although there is no free-standing duty to mitigate under [the applicable] law, courts assess loss on the basis that claimants are required to make a reasonable effort to avert any detriment that would otherwise flow from the wrong they have suffered. Loss suffered as a result of a claimant's failure to make such an effort is treated as not caused by the wrong.

65. The Claimants, in their submissions ..., stress that claimants do not have a legal obligation under [the applicable] law to mitigate damages ... However, they accept that: "there is ... an implied obligation on the part of a creditor (Claimants in this case) to limit losses to the extent that it can manage to do by employing 'reasonable effort'".19

66. The Tribunal will proceed, therefore, on the basis that loss that could be avoided by the Claimants using reasonable effort is not recoverable under [the applicable] law.

67. Each Claimant is entitled to compensation for the loss of the unexpired residue of each Agreement to which it was a party. However two different periods fall to be considered. First there is the period from termination to the date of this Award; and secondly there is the unexpired residue of the Agreements thereafter.

From termination to Award

68. As matters have turned out, there has been an interval of over a year between the expiry of the Termination Notice, and the confirmation of termination of the three Agreements. During that interval [the First Claimant] has continued to manage and operate the Hotel, and the Owner has had the benefit of the services provided for under the Services Agreement, and the use of the trademarks licensed under the Licence Agreement. This is so, even though the effect of the Tribunal's decision is that retrospectively it can now be seen that, at the commencement of this period, the Management Agreement, the Services Agreement, and the Licence Agreement all came to an end.

69. In their Submissions ... the Claimants suggest that they are entitled to contractual sums during this interval ... This, however, cannot be right. Contractual debts under the Agreements cannot have arisen since the Agreements terminated, even though confirmation by the Tribunal of that termination is retrospective. If the Agreements terminated in April, 2009, then what the Claimants are entitled to in respect of any loss they have suffered since then is compensation. This is what we understand [the Claimants' legal expert] to mean by: "compensation for damages caused to the Claimants for services rendered and benefits provided under the Agreements up to the date of the award".

70. However the Tribunal has no difficulty in concluding that any compensation awarded to the Claimants must reflect the services and facilities (including the use of trademarks) that they have provided to the Owner during this interval. Moreover, even though they will be provided after the date of this Award, such compensation should include the cost20 of providing services and facilities during any period after this Award necessarily required for the handover of the Hotel back to the Owner.

71. According to the Claimants, had the Agreements remained in force from April 2009 until January 2010, contractual payments would have totalled ... under the Services Agreement, and ... under the Licence Agreement.21

72. In addition the Claimants say that under section 5.01 of the Management Agreement they would have been entitled to Incentive Fees totalling ... that would have accrued in November and December 2009.

73. Moreover from February 2010, until the making of this Award the Owner will have received the benefit of services from [the Second Claimant], and the use of trademarks, for which it would have had to pay if the Agreements remained in force, and which (in the case of the services) have cost [the Second Claimant] money to provide.22

74. Of course, had the Agreements remained in force, monthly payments (though contractually due) would have been potentially subject to later adjustment, as pointed out in paragraph 275 of the First Partial Award.

75. Moreover it is clear from [the] statement [of the Director of Finance of the company retained by the Owner to oversee the operations of the Hotel] that the Owner has complaints about the way in which the [A] Group has managed the Hotel in 2009 and 2010.

76. Any compensation to the Claimants in respect of the interval between April 2009 and the date of this Award ought to reflect (as near as may be) what would have been the position if the Agreements had carried on to that date and then terminated.

77. Accordingly we have concluded that this part of the case (compensation for the period 11 April 2009 to the date of this Award) will have to be (unless agreed by the parties) dealt with as part of our next award.23

78. There is one linked point we should mention for the benefit of the parties. Where the Agreements are terminated by notice, under [the applicable] law it is likely to be the case that only after the notice has expired will it be discovered whether the notice was effective to terminate the Agreements. As a practical matter, the times for accounting that run from the end of the last Fiscal Year and from termination must therefore run from the date of the decision confirming termination, not the date of the expiry of the notice, otherwise the contractual accounting machinery would be unworkable. It would, of course, be open to the parties to agree to deal with the question of what the Claimants should be paid in respect of the period between 11 April 2009 and the date of this Award by using that machinery, rather than as a further step in this arbitration.

Post Award compensation

79. The question then arises: what (if any) compensation should the Claimants receive for the remainder of the unexpired residue of each of the Agreements which, if they had not been terminated, would have run until 2018? That is what (if any) compensation should the Claimants receive in respect of the period from the date of this Award until 2018?

The parties' cases

80. In their Post-Hearing Brief ... the Claimants asserted that they are entitled to "an amount between ... (discounted by [a hotel consultant who gave expert evidence on behalf of the Claimants] so as to represent a 'high risk' investment) and ... (discounted by [the hotel consultant] so as to represent a 'risk fee' investment)". This was, of course, based on assessing future losses from February 2009 not from the date of this Award.

81. In their Submission ... the Claimants reaffirmed their reliance on [the hotel consultant]'s figures ...

82. On 13 May 2010, the Tribunal wrote to the parties to tell them that it had met and considered their respective submissions up to that date. The Tribunal pointed out that one effect of a decision terminating, or confirming termination, of the

Agreements would be to release the First Claimant from the restrictions contained in section 16.15 of the Management Agreement,24 thereby allowing the Claimants to franchise another hotel with the [X] name and mitigate their loss. The Tribunal asked the parties why such refranchising could not be expected to take place within 12 or 18 months of the Hotel ceasing to bear the [X] name, and asked for submissions on this point.

83. In their Submissions ... the Claimants point out, correctly, that the only surviving restriction upon them relates to "Restricted Area One" ... They also point out, equally correctly, that "refranchising" is the wrong expression; the [A] Group does not operate a franchising system in [the city]. The correct term is "branding".

84. In relation to the restricted area, the Claimants say:

as the Tribunal will recall from testimony at the hearing, and as it recognised in its First Partial Award, [A] operates hotels worldwide under several different brands and market segments. There is nothing in the Management Agreement that would prevent [A] from flagging a property with one of the other brand names other than [X] in Restricted Area One. While [the First Claimant] arguably could establish another [X] flag in this area, as a practical manner, given market circumstances, it would not pursue this course of action.

85. According to the Claimants, finding and re-flagging a suitable alternative hotel is a lengthy and complex process. The time taken to agree terms with the Owner in this case (seven months) was unusually short, and occurred in circumstances where the Owner approached the [A] Group. Moreover it is necessary to avoid interfering with existing contracts between hotel owners and other chains; and finding a suitable replacement hotel not already attached "would be a significant challenge". They say "the market is brand-saturated and affords little opportunity for property-conversion expansion". A replacement hotel could not be expected "to be making mature returns in less than five or six years".

86. In its submissions ... the Owner asserts that the Claimants have already arranged to transfer the business of the Hotel to two new hotels in [the city], though for the benefit of [the Second Claimant] rather than [the First Claimant]. Indeed the Owner is much exercised by the question of whether [the Second Claimant], rather than [the Second Claimant], is the true beneficiary of all rights (including the right to manage) relating to the [X] brand name; and its submission contains a good deal of discussion, and speculation, about the structure of the [A] Group, and who benefits from what. Much of this appears to be further argument in support of the Owner's request for further production of documents.

87. As to the two new Renaissance hotels that the Owner expects to be opened, it is not clear if either is in [the locality covered by Restricted Area One], although the Owner complains that, in anticipation of their opening, the [A] Group changed the Hotel's name on the [A] website (until the Owner protested) so as to reduce its profile as the [X] hotel in [the city]. It also accuses the Claimants of stripping the Hotel of experienced staff.

Discussion - [the hotel consultant]'s evidence

88. As is apparent from paragraphs 81 and 82 above, the Claimants case as to its alleged future lost profits is based largely on the expert evidence of [the hotel consultant who gave expert evidence on their behalf] in his first report ..., his oral evidence ..., in his supplemental report ..., and in his letter ...25

89. [The consultant] bases his assessment of the Claimants future losses on [the First Claimant]'s loss of Incentive Fees and on [the Second Claimant]'s loss of royalty payments.26 He correctly identifies the payments under the Services Agreement as not intended to generate profits for the [A] Group.27

90. As recorded at paragraph 58 of the First Partial Award, [the First Claimant] is entitled to an incentive fee equivalent to 8 per cent of Net House Profit in each fiscal year provided that this profit exceeds (relevantly for present purposes) [amount]; and [the Second Claimant] is entitled to a royalty payment equal to between 1.5 and 2% of Total Revenue for each Accounting Period ... The Tribunal accepts that these represent profit to [the First Claimant] and [the Second Claimant], and that the Claimants make no savings to be set against their loss as a result of the termination of the Agreements.

91. In his first report, [the consultant] projects future losses from 1 July 2008 until 31 March 2018 and then discounts them back to present value. In his supplemental report, his projection is from February 2009 to March 2018.

92. In his first report he predicted that in 2009 the Incentive Fee and the royalty payments would together total [amount] ...

93. In his supplemental report he revised the figures for the 11 months from February 200928 to total fees of [amount] ...

94. However, had there been no termination, the total fees (according to the Claimants) would in fact have been [a lower figure].29

95. In the circumstances, if it were relevant, the Tribunal would be somewhat reluctant to rely on [the consultant]'s predictive powers to quantify the Claimants' losses.

96. In any event, his evidence presupposes that the Claimants will continue to suffer losses for the unexpired residue of the Agreements as a result of their termination for breach.

97. The Owner, however, is not liable for loss that could be avoided by the Claimants using reasonable effort, and so the first question in considering the extent of their recoverable loss is whether, and if so when, with reasonable effort they would be able to find a replacement for the Hotel.

98. As already mentioned the Owner is much exercised by the possibility that any replacement for the Hotel will benefit some of the other companies to the [A] Group, not [the First Claimant]. In our judgment, however, this concern is misconceived. It is not open to the Claimants to increase what would otherwise be the losses suffered by [the First Claimant] (or [the Second Claimant] for that matter) by arranging (or by the group to which they belong arranging) a replacement hotel to be managed, or serviced, by other group entities. The question, "Could [the First Claimant] with reasonable exertion find and open a replacement for the Hotel in [the locality] and, if so, when?" cannot be evaded by arguing that [the First Claimant] would not be able to do that, because any new hotel would in fact be managed and operated by some other group company, or because the group would reduce or avoid the loss in some other way.

99. In the present case the Claimants have been seeking to terminate the Agreements since they amended their Request for Arbitration in March 2008; and, as already recorded, in March 2009 they served the Termination Notice.

100. Although they knew that, under [the applicable] law, only a decision by the Tribunal would bring about an effective termination of the Agreements, the Claimants have plainly been hoping and arguing for such a decision for well over two years. Without having to take into account the Owner's allegations that the [A] Group has in fact been putting in place particular replacement arrangements, it is quite inconceivable that parties in the position of the Claimants would not have plans ready to deal with the very contingency that they have been seeking to bring about, namely the termination of the Agreements. A party in their position using reasonable efforts to avoid loss to itself would not wait to see what decision the Tribunal arrived at before at least planning for the consequences of termination. This is particularly so as regards the time since the First Partial Award in which the Tribunal found the Owner to be in breach of the Agreements.

101. For these reasons, the Tribunal is satisfied that the Claimants could and should, using reasonable effort, be able to find and bring fully into operation a replacement hotel in the [locality] within fifteen months of the date of this Award; and whether or not the outlook for [the city] is as forecast by [the hotel consultant], then [the First Claimant] and [the Second Claimant] (or whichever [A] Group companies are involved) will make the same or similar profits from the replacement hotel as they would have made from the Hotel.30

102. It follows that post-Award compensation will be limited to fifteen months loss of Incentive Fees for [the First Claimant], and of royalty payments for [the Second Claimant].

103. For 2009, the Incentive Fee (according to the Claimants, and before any year-end adjustments) would have been about [amount]. For the same twelve months the royalty fees (again according to the Claimants, and before any year-end adjustments) would have been about [amount] ...

104. Based on those figures the Tribunal assesses [the First Claimant]'s loss (at the rate of ... per year) at [amount] and [the Second Claimant]'s loss (at the rate of ... per year) at [amount]. These amounts reflect losses that will be suffered almost immediately and therefore do not require any discounting.

The production application

105. In its application ... the Owner asked the Tribunal to revisit requests for the production of documents that the Tribunal had previously denied. In particular, the Owner was concerned to obtain more information about the role of [A].31 The application related to three areas: lost future profits; mitigation and future loss; and [the External Auditor].

Loss of future profits

106. The Owner points out that [the hotel consultant]'s calculations are of "Projective future losses to [A]". Accordingly the Owner seeks information, and evidence, about any loss [A] might allegedly suffer, and how that loss might be mitigated.

107. So far as the Tribunal is concerned, however [the hotel consultant] may have described his calculations, what matters is the position of the Claimants. What happens within the [A] Group to the Incentive Fees and the royalty payments that they receive from the Owner is not in the present case relevant to what we have to decide.

108. Accordingly the Tribunal is not satisfied that what the Owner seeks is relevant or material to the issues to be decided in this award.

Mitigation and future loss

109. The Owner is concerned about the ways in which the [A] Group may directly or indirectly make up for revenues lost once the Hotel ceases to be operated and managed by [the First Claimant].

110. It is true that it is possible that, after [the First Claimant] ceases to manage and operate the Hotel on publication of this Award, other hotels operated and managed by members of the [A] Group may compete with the Hotel and take guests who might otherwise have stayed at the Hotel. This, however, has nothing to do with mitigation, and such successful competition cannot be treated as reducing the Claimants' losses. On any view it would be far too remote and speculative.

111. Accordingly the Tribunal is not satisfied that what the Owner seeks is relevant or material to the issues to be decided in this award.

[The External Auditor]

112. The Owner points out that the Tribunal noted in the First Partial Award that Fiscal Year 2007 might still be open (as might subsequent years) and that when documents on auditing issues were previously sought, the Tribunal said that it was not satisfied that they were relevant or material "as matters currently stand" or that it would wait to see what documents the Claimants relied on. The Owner also asserts:

There is also an open issue as to whether [the External Auditor]'s audits were in fact independent and binding on Respondent or whether claimants or [A] interfered in the auditing process.

113. There is of course no such open issue in this arbitration. The position is dealt with at paragraphs 184 to 199, 253 to 262 and 290(7) of the First Partial Award. No allegations have been pleaded against [the External Auditor] in this arbitration and the Tribunal has found that there are no reasonable grounds to suggest fraud on the part of [the First Claimant] or [the Second Claimant].

114. The Owner is not entitled to any further accounting from [the First Claimant] or in respect of contractually closed years. The position in relation to open years (if any, other than 2010) is explained at paragraphs 217 and 275 of the First Partial Award. The contractual procedures for such years have, so far as the Tribunal is aware, not been completed. If accounting and post-year-end adjustment for those years gives rise to disputes, that will be in the future. It is not a matter for this Tribunal.

115. Accordingly the Tribunal is not satisfied that the documents and other evidence that the Owner seeks are relevant or material to the issues to be determined in this award.

Conclusion

116. For the reasons given above the Tribunal would not be assisted by production of the documents sought by the Owner.

Interest

117. The First Partial Award left the question of interest on sums recovered by the Claimants for later determination.32 We deal with that question now.

Parties' cases

118. In their Post-Hearing Brief ... the Claimants seek "the highest lawful interest permitted, both pre- and post-award" ... The Claimants' Submissions ... make clear that what they are claiming is interest at 12 per cent. [The Claimants' legal expert], in his Third Report, says this.

32. It is established practice of the [local] courts (and applies by analogy to the powers of an arbitration tribunal) to award 12% simple interest per annum. This practice of the courts has proven to be entirely independent of whether the interest is applied to an award of damages resulting from the termination of an agreement pursuant to [the aforementioned provision 2 or 3] of the Civil Code. In other words, in my opinion, the Claimants are entitled to a rate of 12% simple interest regardless of whether the Tribunal orders termination under [the aforementioned provision 3] of the Civil Code or on the basis of the termination notice served by the Claimants ...

33. The award of interest is entirely in the courts' or tribunal's discretion.

119. The Owner deals with interest as part of its Reply Submissions on the production of documents ... It says that the Claimants have provided no evidence to justify a 12 per cent rate. It also says that the Tribunal should seek information as to the rates that the Claimants themselves pay to, or charge, the Owner, and that the [A] Group accounts for little or no interest on monies it takes from hotel owners generally to pay for the [A] rewards programme or for marketing purposes ...

Discussion

120. [The Claimants' legal expert]'s evidence makes clear that, under [the applicable] law, an award of interest by a court or tribunal is a matter of discretion. The Tribunal understands this to imply that, under [the applicable] law interest is a matter of procedural, and not substantive law, as is also the case under English law. As this is a Tribunal sitting in London, the relevant procedural law is Section 49 of the English Arbitration Act 1996, not [the applicable substantive] law. Though both laws, it appears, confer wide discretion on the Tribunal.

121. In the Tribunal 's judgment, the justice of the case requires that the Claimants should receive compensation for being kept out of their money in respect of the sums awarded by paragraphs 290(2), (3), and (4) of the First Partial Award and in paragraphs 130(2) and (3) of this Second Partial Award. This is so, even if some or all of the individual amounts making up these sums may be subject to subsequent adjustment as mentioned in paragraphs 275 and 290(6) of the First Partial Award. This is because they became due and owing under the terms of the Agreements even though susceptible to subsequent adjustment. In all these cases, both pre- and post-Award interest should be payable.

122. In the case of the sums awarded by paragraphs 130(4) and (5) of this Second Partial Award post-Award interest should be payable.

Pre-Award interest

123. Under the Management Agreement, any interim Incentive Fee was due with the interim accounting which itself was supposed to take place not later than 15 days after the end of the relevant (monthly) Accounting Period.33 The Marketing Charge, and any other charges under the Services Agreement were due to be paid within 20 days after the end of the relevant (monthly) Accounting Period,34 as were royalty payments under the Licence Agreement.35 Despite this, in the Tribunal's judgment, it would be reasonable and just for interest to run in the case of each relevant unpaid sum from the day 30 days after the end of the Accounting Period to which it relates until the date of the relevant award ordering its payment. Thus a sum payable in respect of (for example) April 2007 should carry interest at the rate of 5 per cent from 30 May 2007 until 12 November 2009 (the date of the First Partial Award).

124. For most of the time in respect of which interest is payable, inter-bank interest rates have been low and for this reason, in the Tribunal s judgment, the rate of interest that should be applied is simple interest at 5 per cent per annum.

125. So far as the sums awarded in the First Partial Award are concerned, as paragraph 274 of that Award makes clear,36 the four sums of [amount] (Incentive Fees), [amount] (Marketing Charges), [amount] ([W] Invoices), and [amount] (royalty payments) are in each case the total of the individual amounts set out in the table at paragraph 2.2 of [the hotel consultant]'s supplemental report ...

126. On the basis of the figures in that table ... the total amount of such interest payable to [the First Claimant] is [amount], and to [the Second Claimant] is [amount]. The Tribunal's calculations are shown at annex 1 to this Award.

127. So far as the principal sums awarded in this Award are concerned, paragraph 59 above makes clear to which monthly Accounting Periods the individual amounts making them up are attributable; and a sum payable in respect of (for example) February 2009 would carry interest at the rate of 5 per cent from 30 March 2009 until the date of this Second Partial Award.37

128. The total amount of such interest is ... The Tribunal's calculations are shown of annex 2 to this Award.

Post-Award interest

129. The Tribunal will award simple interest at 5 per cent (accruing daily) on the unpaid balance of the sums awarded both by the First Partial Award, and by this Second Partial Award. So far as the sums awarded in paragraph 290(2), (3) and (4) of the First Partial Award are concerned, such interest shall run in relation to the unpaid balance of any such sum from the date of that Award until the date it was or is paid. So far as the sums awarded in paragraphs 130(2), (3), (4), and (5) of this Second Partial Award are concerned, such interest shall run in relation to the unpaid balance of any such sum from the date of this Award until payment.

Disposition

130. 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 it is confirmed and declared that each of the Agreements terminated on the expiry of the notice given by the Termination Notice, that is on 11 April 2009;

(2) That the Owner do pay to [the Second Claimant] the sum of ... in respect of sums due to the latter under the Services Agreement from 1 February 2009 to 11 April 2009, with simple interest at the rate of 5 per cent per annum (accruing daily) on the outstanding balance thereof from the date of this Award until payment;

(3) That the Owner do pay to [the Second Claimant] the sum of ... in respect of sums due to the latter under the Licence Agreement from 1 February, 2009 to 11 April, 2009, with simple interest at the rate of 5 per cent per annum (accruing daily) on the outstanding balance thereof from the date of this Award until payment;

(4) That the Owner do pay to [the Second Claimant] the sum of ... by way of interest up to the date of this Award in respect of the sums ordered to be paid in sub-paragraphs (2) and (3) of this paragraph 130;

(5) That the Owner do pay to [the First Claimant] by way of compensation for post-Award losses the sum of ..., with simple interest at the rate of 5 per cent per annum (accruing daily) on the outstanding balance thereof from the date of this Award until payment;

(6) That the Owner do pay to [the Second Claimant] by way of compensation for post-Award losses the sum of ..., with simple interest at the rate of 5 per cent per annum (accruing daily) on the outstanding balance thereof from the date of this Award until payment;

(7) The sums ordered to be paid in sub-paragraphs (2) and (3) of this paragraph 130 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;

(8) That the Owner do pay to [the First Claimant] the sum of ... by way of interest in respect of the amounts making up the sum awarded under paragraph 290(2) of the First Partial Award up to the date of that Award; and simple interest shall be payable at the rate of 5 per cent per annum (accruing daily) on the sum awarded under payment 290(2) of the First Partial Award from the date of that First Partial Award until payment.

(9) That the Owner do pay to [the Second Claimant] the sum of ... by way of interest in respect of the amounts making up the sums awarded under paragraph 290(3) and (4) of the First Partial Award up to the date of that Award; and simple interest shall be payable at the rate of 5 per cent per annum (accruing daily) on the sums awarded under paragraphs 290(3) and (4) of the First Partial Award from the date of that First Partial Award until payment;

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

(11) That all other matters in dispute between the parties in this arbitration (including compensation for losses suffered by the Claimant between 11 April 2009 and the date of this Second Partial Award and costs) are reserved.'

1
See paragraph 82 below.

2
See paragraph 18(a) of the First Partial Award.

3
Third Report …; Transcript Day 6 …

4
Third Report … In oral evidence he suggested that termination took effect from when notice was given: a view he resiled from in his Third Report, and which the Tribunal accepts is incorrect: see Transcript, Day 6 …

5
Third Report …

6
Third Report …

7
Transcript, Day 6 …;Third Report …

8
First Report …

9
First Report …

10
First Report …

11
First Report …

12
First Report … At least, that is what [the barrister] says in the signed version of his First Report attached to the Owner's Reply Submission on the production of documents … As the Claimants point out at footnote 1 to their Submissions …, the (unsigned) version attached to the Owner's Supplemental Memorandum … said rather more

13
Respondent's Supplementary Memorandum …

14
Respondent's Supplementary Memorandum …

15
Respondent's Supplementary Memorandum …

16
Respondent's Supplementary Memorandum …

17
First Partial Award, paragraphs 263-275.

18
See paragraphs 34-48 above.

19
See also the evidence of [the Claimants' legal expert] at Transcript, Day 7 …

20
But no element of profit as that will be dealt with as part of Post Award Compensation.

21
That is, the fees listed in Exhibit A to the Claimants' Submissions …, after deducting those mentioned in paragraph 59 above.

22
Whether [the First Claimant] has lost Incentive Fees for 2010, is a matter we take into account as part of post Award compensation.

23
As costs could not be dealt with in this Award, a further award is inevitable in any event.

24
See paragraph 52 of the First Partial Award.

25
Attached to the Claimants' reply … mentioned at paragraph 9 above.

26
First report …

27
First report …

28
Thus excluding January 2009, for which (as regards the royalty payment) results were known …

29
See Exhibit A to the Claimants' Submission …, which shows Royalty Fees (i.e. royalty payments) from February to December 2009 of …, and Incentive Fees from January to December 2009 of …, plus the royalty payment for January of …

30
Of course the Claimants (or rather, in reality the [A] Group) may choose to replace the income-producing capacity represented by the Hotel in some other way than with a replacement [X] hotel in [the locality]: but that is a matter for them.

31
See paragraph 1 of the First Partial Award.

32
See paragraph 288.

33
See Section 5.02 of the Management Agreement.

34
See Section 2.07A of the Services Agreement.

35
See Section 3.01A1 of the Licence Agreement.

36
See footnote [116] thereto.

37
For the avoidance of doubt the first sum … due under the Licence Agreement counts as a sum payable in February 2009.