'1. The Claimant ... ("Claimant" or "Manager") is a company organized and existing under the laws of Australia engaged in business in the marketing, travel and hospitality industries. ... The Claimant has its registered offices [in] Australia.

2. The Respondent ... ("Respondent" or "Owner") is a Chinese company organized and existing under the laws of the People's Republic of China ("PRC") ...

[Parties' representatives]

5. This arbitration arose out of the "Management Agreement" dated ... 2004 ("Management Agreement") entered into between the Respondent, as Owner and the Claimant, as Manager for the management of the hotel owned by the Owner [in China] ("the Hotel").

6. Article 23.3 of the Management Agreement provides for ICC arbitration as follows:

(a) All disputes arising from or relating to this Agreement between the parties will be submitted to the International Chamber of Commerce ("ICC"). The arbitration shall be under the Rules of Arbitration of the International Chamber of Commerce ("Rules") and shall be administered by the ICC. Any award rendered by the arbitration tribunal shall be final and binding upon each party. The arbitration shall be conducted in English and Chinese with three (3) arbitrators, one arbitrator selected by Manager, one selected by Owner and the chairperson selected by the ICC. The arbitration hearing shall take place in Hong Kong.

(b) The arbitrators must be either experienced in the practice of hotel or franchise law, or experienced hotel consultants, who have no material social, business or professional relationship with any party, and at least two of them must not be citizens of the People's Republic of China and all of them must be fluent in the Chinese and English languages.

(c) The arbitration tribunal shall determine how the expenses of the arbitration are to be allocated between the parties and whether either party is entitled to recover any other costs expended with respect to its participation in the proceedings.

(d) The hearings shall be conducted and all written materials shall be presented in English and Chinese.

(e) The arbitrators will issue their decision within thirty (30) days of the close of hearings. The decision will be by majority of vote, issued in writing, contain findings of fact and reasons for the decision, and signed. The arbitrators' decision will be final, conclusive and binding upon the parties and may be enforced in any court having jurisdiction.

(f) The arbitrators will: (i) determine whether this agreement to arbitrate is binding, and whether a particular dispute is subject to arbitration under this agreement; (ii) take measures to protect trade secret and Confidential and Proprietary System Information; and (iii) have no power to award punitive damages except in those cases allowed by a particular Legal Requirement.

7. Pursuant to Article 4 of the ICC Rules of Arbitration, the Claimant submitted its Request for Arbitration to the ICC [in] 2008. The ICC received the same on [the same date].

8. [Composition of arbitral tribunal]

9. The ICC Court of Arbitration ... fixed Hong Kong SAR, China as the place of arbitration in accordance with Article 14.1 of the Rules.1

10. In accordance with Article 23.3 of the Management Agreement:

a) The languages of the arbitration are English and Chinese.

b) The award will be made in English and Chinese.

11. Following the determination of the seat of the arbitration as Hong Kong, the Tribunal determined that the applicable law of the arbitration (lex arbitri) shall be Hong Kong law.

12. PRC law (statutory or otherwise) is the agreed applicable law of the Management Agreement and the relationship between the parties.

13. With regard to Article 23.3(f) of the Management Agreement, the parties did not challenge the binding force of the agreement. There was no allegation that any of the disputes submitted before the Tribunal fell outside the scope of the reference. None of the parties requested the Tribunal for any specific measures to protect trade secrets and confidential and proprietary system information.

14. The Terms of Reference ("TOR") herein was settled ... and duly signed by the Tribunal and the parties. It was transmitted to the ICC Court of Arbitration ...

15. The parties then engaged in a period of exchange and disclosure of documents, witness statements, expert reports and written submissions. These were substantially accomplished by early June 2009 and the Tribunal proceeded to hear the substantive issues in this matter.

16. [Oral hearing - list of persons who attended.]

17. The following witnesses gave evidence in person ...

18. Each of the witnesses had earlier tendered written statements. All of the statements tendered were directed to stand as the evidence-in-chief of the respective witnesses. All documents were delivered in hard copies as well as uploaded electronically on a dedicated FTP site created by the Tribunal for ease of transfer and access by the parties.

19. Pursuant to Article 23.3(d) of the Management Agreement, the proceedings were conducted in both English and Chinese through interpreters. ... The proceedings were transcribed in English and Chinese and instantaneous "Live Note" facility was made available.

20. In the course of the hearing, the parties agreed and confirmed that -

a) Notwithstanding Article 23.3(e) of the of the Management Agreement, the award in this matter may be made within the time set by the ICC Rules or such time as the ICC Court may extend …; and

b) They do not object to [two of the arbitrators] continuing as arbitrators in this arbitration notwithstanding that they had previously sat as arbitrators in a separate arbitration involving the Claimant as a party …

21. Pursuant to Article 22(1) of the Rules, the Tribunal declared the proceedings closed [in] October 2009.

22. The ICC Court of Arbitration ... extended the time for the Tribunal to issue its award to 30 November 2009.

The claims and counterclaims

23. The parties had prior to the execution of the Management Agreement entered into a Hotel Development Services Agreement dated ... 2004 ("HSDA") … under which the Owner agreed to design and construct the Hotel in accordance with [Claimant's] brand and standard and for the Manager to provide certain technical services to the Owner for that purpose.

24. Under the Management Agreement which was subsequently executed on ... 2004, the Manager was appointed as the exclusive agent to use reasonable due diligence, skill and care in a professional manner to operate the Hotel for which the Manager will be paid Management Fees comprising a Base Management Fee (see Article 11.1(a)), a Royalty Fee (see Article 11.1(b)), a Reservation Charge (see Article 11.1(c)) and an Incentive Fee (see Article 11.1 (d)). Such fees are payable in US Dollars in immediately available funds.

25. The initial operating term of the Management Agreement was to begin from the Opening Date, and would expire at the end of the month in which the tenth (10th) annual anniversary of the Opening Date fell viz. an aggregate of 10 years.

26. Disputes arose between the parties ... in ... 2005 regarding the non-payment of Incentive Fees which the Claimant claimed to be due. This soon led to other differences including those relating to rent due from the Claimant to the Owner for the use of office space by the Claimant's affiliates, and allegations that the Claimant had been overpaid for Base Management and Royalty Fees.

27. Article 18.2(a) of the Management defines "material default" to include -

(A) Failure to pay any past due fees or other amounts owed to Manager or its Affiliates when due. The cure period for this default is fifteen (15) days after Owner's receipt of the notice.

28. [In] 2008, the Claimant by letter to the Respondent gave notice to terminate the Management Agreement under Article 18.2 thereof, subject to Respondent's right to cure, on the grounds that the Respondent had failed to pay substantial past amounts due or other amounts owed to the Claimant, thereby constituting an event of "material default" within the meaning of Article 18.2(a). In that notice the Respondent was given until 30 June 2008 to cure the breach. As no payment was received on 30 June 2008, the Claimant asserted that the Management Agreement was properly terminated as of 1 July 2008.

29. The Claimant's claims as set out in paragraph 25 of the TOR, as revised per their calculations submitted just prior to the hearing and in their closing submissions, can be summarized as follows:

30. Taking into account the claim for rental which the Claimant had conceded, the Claimant's claim now amounts in aggregate to ... This figure does not include interest and costs. The Respondent did not dispute the [USD sum] as owing to the Claimant.

31. The Respondent's counterclaims as set out in paragraph 37 of the TOR, as revised per their calculations submitted just prior to the hearing and in their closing submissions, can be summarized as follows:

The issues

32. The substantive issues in this arbitration as set out in paragraph 39 of the TOR are:

a) On a proper construction of the Management Agreement, what is the proper meaning attributable to the term "Opening Date" of the Hotel?

b) Whether the Opening Date of the Hotel occurred before or after 31 December 2005.

c) If the Opening Date occurred before 31 December 2005,

(i) whether the Manager met the RevPAR targets set out in Article 11.1(d)(i) of the Management Agreement; and

(ii) ascertain the amount (if any) payable.

d) If the Opening Date occurred after 31 December 2005, to ascertain the amount of Incentive Fee based on the Gross Operating Profit.

e) Whether the Owner was entitled to withhold or off-set the Management Fees payable to the Manager of ... for the period from April 2008 to 30 June 2008.

f) Whether the Manager had properly terminated the Management Agreement in accordance with Article 18.2.

g) If the Manager had properly terminated the Management Agreement, to ascertain the damage incurred by way of lost profits payable to the Manager.

h) If the Manager had wrongfully terminated the Management Agreement, to ascertain the damages suffered by the Owner.

i) Whether the Owner is entitled to continuing use of the Chinese character ... as part of the name of the Hotel following the termination of the Management Agreement.

j) If the Owner is not so entitled, to ascertain the appropriate remedies for its wrongful use.

k) Whether there was an overpayment of the Base Management Fee and Royalty Fee:

(i) Whether the computation of Base Management Fees and the Royalty Fees on a "daily Gross Revenues" basis was proper or correct.

(ii) If not, to ascertain the proper amount payable and the amount overpaid (if any).

l) If there was any sum overpaid, whether the claim (or any part thereof) for repayment was time-barred under PRC law or irrecoverable by reason of the lack of good faith on the part of the Owner.

m) Whether the outstanding rental ... owing from the Manager's affiliate to the Owner is payable by the Manager.

33. The Claimant had through its written and oral submissions confirmed that it is prepared to give full credit for the outstanding rental ... owing from the Claimant's affiliate to the Respondent (as set out at paragraph 39(l) of the TOR) and thus the issue requires no decision from the Tribunal.

Findings and reasons of the Arbitral Tribunal

On a proper construction of the Management Agreement, what is the proper meaning attributable to the term "Opening Date" of the Hotel?

34. This issue impacts the Respondent's liability to pay for Incentive Fees and sets the parameters for ascertaining the amount of such fees payable under the Management Agreement.

35. Article 11.1(d) of the Management Agreement provides for the payment of the Incentive Fee to be calculated and paid on the following basis:

i. If the Opening Date occurs on or before December 31, 2005, the Incentive Fee will be determined based on the Hotel's actual RevPAR (average daily total occupancy multiplied by the daily average room rate) performance measured against the average RevPAR of a Competitive Set of hotels in [the same city].

ii. If the Opening Date occurs after December 31, 2005, the Incentive Fee will be calculated at 6% of the Gross Operating Profit for the term of the Management Agreement, without any RevPAR test.

36. Article 1 of the Management Agreement defines "Soft Opening Date" and "Opening Date" as follows:

"Soft Opening Date": The date before the Opening Date that the Manager and Owner agree to open the Hotel for business but with less than all the guest rooms or less than all food, beverage, and banquet facilities and public spaces completed or available.

"Opening Date": The date, after the Soft Opening Date if any, on which the Hotel fully opens for business as a System Hotel under the Hotel Development Services Agreement. For future Construction, it is the date that any portion of the Hotel that has been closed or unavailable for use will open and be available for use. When there is no Soft Opening Date, any reference in this Agreement to the Soft Opening Date means the Opening Date.

37. It is the Claimant's case that the Opening Date of the Hotel occurs only when "all guest rooms, food, beverage and banquet facilities and public spaces are completed and available, with the Hotel thereby being fully open for business".

38. The Respondent however takes the position that the Opening Date of the Hotel occurs as soon as the Hotel "fully opens for business as a System Hotel under the Hotel Development Services Agreement". The term "System Hotel" is defined in Article 1 of the Management Agreement as:

a hotel that uses the Primary Marks and operates [under the hotel name] pursuant to a written agreement with Manager or [Claimant]

39. In the Respondent's reading the term "fully opens for business as a System Hotel" as defined in the HDSA does not require that "all guest rooms, food, beverage and banquet facilities and public spaces are completed and available" so long as "all of its functional areas are fully available for business as a System Hotel".

40. This issue is simply a question of contractual interpretation. Both parties rely on the words of the Management Agreement but each emphasizing words that support their respective positions.

41. In the Tribunal's view, the definitions of "Soft Opening Date" and "Opening Date" in the Management Agreement indicate that the parties had contemplated a progressive opening of the Hotel. This means that the Hotel may start business as soon as parties agree that sufficient rooms and facilities are available for it to start business via a "Soft Opening". The definition of "Opening Date" however does not require parties to agree to a date but is intended to occur based on the achievement of certain criteria.

42. The Tribunal agrees with the Claimant that the term "fully opens" must necessarily mean that "all guest rooms, food, beverage and banquet facilities and public spaces are completed and available". This in the Tribunal's view is the logical transition from the condition of the Hotel at "Soft Opening" when the facilities are not fully completed to the condition when it is and fully ready for business.

43. The Tribunal therefore holds that on a proper construction of the Management Agreement the "Opening Date" occurs on the happening of all of the following events viz.:

• when it "opens for business" [under the hotel name]

• when the Claimant manages it pursuant to the Management Agreement; and

• when "all guest rooms, food, beverage and banquet facilities and public spaces are completed and available".

Whether the Opening Date of the Hotel occurred before or after 31 December 2005.

44. It was not disputed that the Hotel first opened its doors for business sometime in October 2005. ...

45. The parties however could not agree as to when the Hotel "fully opens for business as a System Hotel".

46. The Claimant asserts that the "Soft Opening" of the Hotel occurred ... when the Hotel opened for business with:

a) Only 172 guest rooms (out of a total of 511) completed and available for sale (and of which only 24 were of the [hotel name] brand standards).

b) The following food, beverage and banquet facilities were uncompleted or unavailable: ...

c) The following public spaces were uncompleted or unavailable: Ballroom, Meeting Rooms, Business Centre, Gym, Spa, Swimming Pool, ... Club Lounge.

47. It is the Claimant's case that the Hotel's Opening Date occurred only ... when all the 511 guest rooms and food, beverage and banquet facilities were completed and available.

48. It is the Respondent's case that the Hotel fully opened for business and the Claimant managed the Hotel in all aspects and operated the Hotel under the brand of [the hotel name] before December 31, 2005.

49. Although the Respondent had accepted that there was a "Soft Opening" [in] October 2005 ..., the Respondent's Chairman in his oral testimony appeared to suggest that the parties had decided not to proceed with a "soft opening" ...

50. The Respondent's main contention is that the parties had reached a common understanding on the Opening Date of the Hotel. In this regard the Respondent relied on:

a) The Claimant's press release ... to the public on its official website [in] November 2005. The Claimant expressly pointed out in the news release that the Hotel opened on [that date]. This press release and all subsequent media reports ... as well as foreign media published the Hotel's opening with no mention of it being a "Soft Opening". Apart from this announcement, there was no subsequent announcement as to the "opening" of the Hotel.

b) The Respondent's 2006 Annual Plan submitted by the Claimant in which the revenue forecast was made based on the availability of all 511 rooms for the whole of 2006. This in the Respondent's view meant that so far as the Claimant was concerned they had accepted that the Hotel was fully opened before 31 December 2005.

51. The actual physical status of the Hotel in November-December 2005 as described by the Claimant was highly disputed by the Respondent.

52. The Respondent's [witness 1] testified that he believed that the Hotel was opened [in] October 2005 when the first paying guests checked in. He however added that the Opening Date was agreed with the Claimants to be ... November 2005 when the public announcement was made. This in his view was the written confirmation by the parties of the agreed Opening Date. The [latter date] was suggested by the Claimants to which he had no objection: …

53. [The witness] also disagreed with the Claimant's suggestion that not all the Hotel's rooms and facilities were ready in November 2005. To his mind, the Hotel's rooms were all ready and usable before the end of December 2005. He disagreed with the Financial Performance record for November 2005 ... which reflected the number of available room nights for the month as 5,155 giving an indication that only 171 rooms were then available. He said in cross-examination that in his recollection there were by December 2005 at least 370 rooms ready. [The witness] suggested that it was a business tactic of the Claimant and the hotel industry to declare a lesser number of rooms available so as to show a higher occupancy rate.

54. The Respondent's [witness 2] in his witness statement described the status of the Hotel as at ... October 2005 as he knew it, to be substantially complete. He also referred to the Project Quality Evaluation Report ("Evaluation Report") issued by ... on ... November 2005 who had concluded that -

on site quality control materials are normally complete; the subsections of the project is 100% qualified; safety and functional examination items are all qualified and relevant records are complete; the impression quality is qualified by the eye. The main structure of the building is awarded excellent quality structure project ..., and the installation project is awarded excellent quality project ... As per GB50300-2001, the Uniform Acceptance Criterion for Construction of Building Project, the quality of this project is rated as qualified.

55. The Evaluation Report also described the condition of the various rooms and facilities as having met the required standards. In ... his 2nd Statement [witness 2] summarized their observations as follows:

By the end of 2005, all 511 guest rooms of the Hotel were completed. … In Section III "Fit-out Project" of the Evaluation Report, the supervisor described the fit-out materials and fit-out of various parts of the Hotel including garage, warehouse and facility rooms at underground floor 1 to 3, hotel lobby and private room area at floor 1 to floor 6, office area at floor 7 to floor 24, gym at floor 25 and floor 26, standard guest rooms at floor 28 to floor 46, facility floors at floor 27 and floor 47, the presidential suites and superior suites at floor 48 to floor 52.

56. In cross-examination, [the witness] reiterated his view as stated in his written witness statements. He disagreed with [another witness's] evidence ... that as of ... March 2006 there were only 179 rooms "Rentable", 100 rooms "Only rentable if overbooked" and 232 rooms "Not rentable". He believed that many of the "Not rentable" rooms were in fact rented out. A closer look into the chart exhibited ... shows that it bears a date of [March 2009]. The Tribunal cannot therefore be certain if this chart reflected the room status situation in March 2006.

57. In the Hotel's monthly Management Reports for November 2005 and December 2005 the number of rooms available was stated to be 200. Of significance were the remarks in the reports regarding the various facilities ...

58. In the memorandum ... recording a meeting ... held on ... February 2006 to discuss the status of the hotel construction, it was recorded that [a discussion took place on the status of the hotel construction, incomplete works and defects, and the relationship between the Owner's representative and the hotel management].

59. The memorandum recorded numerous aspects of work that required to be completed including:

• Complete construction and ID fit out of levels 49-52 Suites;

• Rectify all Guests Rooms, Suites, Guest Corridors and Lift Lobbies to rating 1 status;

• Rectify all defects and complete works in the ... Lounge including providing FF&E, Computers and other equipment specified;

• Rectify defects and supply missing FF&E, Audio Visual and Lighting in all Public Areas;

• Rectify M&E defects including water purification system, HVAC balance and heating;

• Renovate all Guest Lift Cars to equivalent of Disabled Access Guest Car Park Lift Car plus addition of pendant lighting, signage and rear hand rail;

• Install complete audio visual system and improved lighting system on the Ballroom;

• Complete the ... fire suppression system installation in all areas (total 13 systems);

• Purchase all OS&E items that were not purchased at the time of pre-opening;

• Rectify all swimming Pool defects including tiling, leaks, acrylic polishing and filtration system rectified to enable a minimum of 4 changes of water per day;

• Rectify fire control panel and system defects and automate system as per original specifications.

60. The Tribunal can accept that for a project of such a size, minor defects and rectifications could be expected as part and parcel of the transition towards the full and proper functioning of the building. In this regard however, it should be noted that the trigger event for the Hotel to be "fully opened" is not the substantial completion of the physical structures of the building but that the Hotel was to be "fully opened for business and the Claimant managed the Hotel in all aspects" bearing the meaning as the Tribunal has found above. Based on the reports and the Tribunal's understanding of the evidence adduced at the hearing, the state of the Hotel as at the end of December 2005 could not, in the Tribunal's view, be considered to have met the conditions to enable the Opening Date to occur.

61. The Tribunal therefore finds that the Opening Date of the Hotel occurred after 31 December 2005.

If the Opening Date occurred before 31 December 2005, whether the Manager met the RevPAR targets set in Article 11.1(d)(i) of the Management Agreement; and (ii) ascertain the amount (if any) payable.

62. As the Opening Date occurred after 31 December 2005, this issue is no longer relevant.

If the Opening Date occurred after 31 December 2005, to ascertain the amount of Incentive Fee based on the Gross Operating Profit.

63. It follows from the Tribunal's finding above that the Incentive Fee payable under the Management Agreement is to be "calculated at 6% of the Gross Operating Profit ("GOP") for the term of the Agreement, without any RevPAR test" in accordance with Clause 11.1(d)(ii).

64. The Management Agreement defines "Gross Operating Profits", "Gross Revenues" and "Expenses and Permitted Deductions" as follows:

Gross Operating Profit. Gross Revenue minus Expenses and Permitted Deductions.

Gross Revenues. All consideration, whether by cash, credit, in kind or otherwise, derived directly or indirectly from the Operation of the Hotel, as finally determined on an accrual basis in accordance with the Uniform System consistently applied, but specifically including the following:

Expenses and Permitted deductions. The expenses and deductions attributable to all Operation Departments and the Undistributed Opening Expenses as those terms are used and defined in the Uniform System, but only as they relate to the Operation of the Hotel.

65. The Tribunal notes that the Base Management Fee and Royalty Fee are not part of the "Expenses and Permitted Deductions" for ascertaining the GOP.

66. The Claimant has through its group Chief Financial Officer ... given evidence on the financial status of the Hotel's operations from the beginning of operations in October 2005 to June 2008. His evidence is that during the initial months up to April 2006, the Hotel operated at a loss. The Claimant is therefore not claiming any Incentive Fee for that period.

67. As from May 2006 however, the Hotel began to generate some profits. The Claimant relies on the Statement of Financial Performance Summary set out in the Monthly Management Reports from May 2006 to June 2008 to support the GOP figures from which the Incentive Fee is to be calculated. These Financial Statements appear to conform to the agreed monthly statements required of the Claimant under Clause 8.2 of the Management Agreement, which requires a profit and loss statement by department, showing the results of the Hotel's operations for such month and the fiscal year-to-date figures, a comparison of the current month and year-to-date results with previous months and previous year-to-date results.

68. ... Respondent's Finance Manager testified that the Statement of Financial Performance Summary set out in the Monthly Management Reports ought not to be relied upon for calculation of the fees payable to the Claimant as they were not invoices issued by the Claimant.

69. [The Finance Manager] took the view that the Claimant made 'major mistakes' in their invoices, by including breakfast costs in Gross Room Revenue, and not deducting taxes paid, costs of the Respondent's representative on site as well as costs for rental of Hotel's vehicles. These, in her view, inflated the Hotel's GOP ... While [she] suggested that the impact on the GOP is "not insignificant" ..., the documents tendered in support (... Profit and Loss Variance Analysis) do not assist the Tribunal in ascertaining the degree or extent of impact on GOP. As for the invoices tendered by [Claimant's Chief Financial Officer], [she] said that they "were not the invoices provided by the Claimant to the Respondent in July 2007, but (were) the revised invoices re-issued by the Claimant after Respondent pointed out the mistakes".

70. Despite [Respondent's Finance Manager's] views on the GOP figures, the Respondent had tendered the "Amounts of Compensation Manager shall Pay to Owners and Evidence" dated 30 April 2009 ("Owners' Counterclaim Evidence") to support their calculation for the compensation they are seeking by way of counterclaim. The Tribunal notes that in Exhibit 2 of the Owner's Counterclaim Evidence, the Respondent had disclosed the annual Statement of Financial Performance for the years 2006, 2007 and 2008. A comparison of the GOP figures reflected in these annual Statements with those tendered on behalf of the Claimant in their monthly Reports and invoices appear to be almost identical. ...

71. In arriving at the GOP figure for May 2006, the Claimant had taken into account the losses incurred prior to May 2006 resulting in a May 2006 GOP figure of ... and not the actual GOP for the month of May 2006 of [a higher amount] as indicated in the Respondent's document. This is consistent with the Clause 11.4 of the Management Agreement which calls for annual reconciliation of the figures payable from the Respondent to the Claimant and for any overpayment to be refunded.

72. It follows therefore that the Incentive Fee payable to the Claimant from May 2006 to June 2008 should to be quantified utilizing the monthly GOP figures extracted from the annual Statements tendered by the Respondent (save for the correction to the May 2006 figure).

73. The Incentive Fee payable by the Respondent to the Claimant up to the date of termination of the Management Agreement in July 2008 as arrived at above amounts to ... In addition, the Respondent has also conceded that a sum of ... is due to the Claimant as Management Fees for the relevant period. These amounts should therefore be credited in favour of the Claimant.

Whether the Owner was entitled to withhold or off-set the Management Fees payable to the Manager ... for the period from April 2008 to 30 June 2008.

74. The parties' counsel have both accepted that set-off is permissible under PRC law. The Respondent acknowledges through its counsel's submissions that the amount of Management Fee due to the Claimant amounted only to ... and as such had withheld this to set-off against such sums that may be due to the Respondent. This figure is far short of the Incentive Fee found due to the Claimant and there is therefore no issue of withholding of payment. The Respondent is however entitled to set off any amounts found due to it against any amount due to the Claimant.

Whether the Manager had properly terminated the Management Agreement in accordance with Article 18.2.

75. Following the Tribunal's ruling that the Opening Date of the Hotel fell after 31 December 2005, and that the Claimant is entitled to the payment of Incentive Fees as from May 2006, the Respondent's failure to make such payment to the Claimant constitutes a "material default" under Clause 18.2(a) of the Management Agreement.

76. The Claimant by its letter dated 5 June 2008 gave notice of default giving the Respondent until 30 June 2008 to cure the breach, a period of more than 15 days required under Clause 18.2(a). As no payment was received on 30 June 2008, the Claimant was entitled to and did terminate the Management Agreement on 1 July 2008.

If the Manager had properly terminated the Management Agreement, to ascertain the damage incurred by way of lost profits payable to the Manager.

77. The initial Operating Term Management Agreement was for 10 years commencing from the Opening Date of the Hotel. The Claimant therefore claims to be entitled to lost profits arising from the early termination from July 2008 until February 2017. Essentially the Claimant claims for the fees, viz. Base Management Fees, Royalty Fees, Reservations charges and Incentive Fees, it would otherwise earn under the Management Agreement but for the early termination due to the Respondent's default. The amounts of these fees are directly linked to the performance of the Hotel, which is dependent on market conditions that could affect occupancy rates and F&B sales of the Hotel.

78. The Claimant had filed a report by [a consultant] in support of a claim for lost profits as a result of early termination of the Management Agreement following the Respondent's default. [The consultant] was also examined as a witness during the hearing.

79. [The consultant] did a comparative study of the Hotel's 2006, 2007 and 2008 occupancy rate and average daily rate ("ADR") to that of a Competitive Set of hotels (as defined in the Management Agreement) ... during the same period. From this study, he estimated the Hotel's relative competitiveness in its ability to capture market share ("penetration") of occupancy and ADR.

80. In his view, given the current financial situation, a slack market is expected to affect room demand and occupancy over the next few years. Although an increase in room demand is expected in 2010 due mainly to [a local event], more than 30 hotels are also expected to be completed during the period up to 2011 bolstering the room supply by up to 37% in 2010. Taking into considering these factors, he worked out a 5-year projection of room occupancy of the Hotel and ADR as follows:

81. From these figures, the gross revenue for the Hotel could then be arrived and deducting therefrom the departmental expenses and associated operating expenses, he estimated the GOP of the Hotel for the years 2009 to 2013 ...

82. [The consultant] believed that from 2013, the Hotel's performance would have stabilised and should be able to maintain a GOP based on 51% of the gross revenue.

83. The figures for gross room revenue and gross revenue beyond 2013 are arrived at based on a 5% annual growth rate consistent with the projected 5% ADR growth and a GOP for the years beyond 2013 based on 51% of total revenue.

84. [The consultant] then calculated the likely fees that are payable to the Claimant under the Management Agreement and arrived at the figure of ... as being the fees that would have been due to the Claimant if the full term of the Management Contract had been performed. Adopting a cash-flow discount using a range of 12% to 14% he estimated that the fees that the Claimant ought to receive should range from ... to ....

85. [The consultant] also considered the time period within which the Claimant would be able to find a replacement property similar in size and quality that could be operated in [the same city], generating equivalent fee income for the Claimant. He based this time frame on the average development time for the existing ... luxury hotels ... from the signing of the management agreement until the opening date which he worked out to average 3.2 years. Taking into consideration the loss of a "first movers" advantage, and a "tarnished" image following the termination of the Management Agreement with the Respondent, he suggested that the Claimant would find it more difficult to develop a replacement property. In his view it could take between 4.7 years to 7.7 years to accomplish this. On this basis, he estimates that until the Claimant gets a replacement property to manage within that period, the Claimant would suffer a loss of profit of between ... to ...

86. The Claimant in their final submission therefore claimed the sum of ... being the mid-point between these figures.

87. The Respondent criticized [the consultant] for considering only the income streams flowing from the Hotel without taking into account the operating costs that the Claimant would have incurred during the same period. Respondent also pointed out that the "Reservations Charge" which the Claimant was entitled to under Clause 11 of the Management Agreement is a "cost" item to the Claimant and should also be taken into consideration. Respondent's counsel suggested that [the consultant's] projections of the hotel industry in [the city in question] generally and of the Hotel in particular were over-optimistic.

88. [The consultant] explained in cross-examination that he had accepted the Claimant's counsel's explanation that there are no associated operating costs to the Claimant when these fees are being earned. This is because the Claimant is essentially receiving Management Fees with all operating expenses and costs being borne by the Respondent. He noted that even with a large network of hotels under management, the Claimant would incur no material cost by reason of adding the Hotel under their management ... As regards the "Reservation Charge", [the consultant] reiterated that this is a revenue receivable by the Claimant from the Respondent and that there is no additional cost involved in adding the room reservations for the Hotel to their worldwide reservation service ... Finally, [the consultant] maintained that his report held good because he made the report in March 2009 and reviewed it again prior to the oral hearing in June 2009. The situation had not changed radically. He maintained that his projections are consistent with the overall market in [the city in question] and had taken into consideration the financial crisis, [an] epidemic and the fall in tourist arrivals ...

89. The Tribunal does not have much difficulty in accepting the general approach adopted by [the consultant] in his analysis of the GOP of the Hotel from 2008-2013 and the basis for his projections for the years beyond 2013. The Tribunal however does not accept that the Claimant would require more time than that which the hotel managers of other luxury chains had experienced in China of between 2.3 to 4.3 years (averaging 3.2 years). In fact the Claimant had other properties under their management ... In the Tribunal's view it is more accurate to use the actual time taken in respect of this Hotel from the time of signing of the Management Agreement [in] August 2004 to the opening of the Hotel. Even accepting the Claimant's date of February 2007 as the Opening Date, the time lapse would only be at the most 2.5 years. Adding a "tarnished image factor" the longest justifiable time delay in seeking another replacement property to manage to mitigate their loss would in the Tribunal's view be no longer than 3 years. The Tribunal is therefore prepared to award loss of profits due to the Claimant attributable to the early termination of the Management Agreement for a period of 3 years, viz. from July 2008 to June 2011.

90. [The consultant] has very helpfully set out his calculations for the projected loss of fee income that could be received by the Manager for the years from 2008 to 2011 and discounted them by 12% to 14%. In his computation, he has calculated the Base Management Fee and the Royalty Fee on the basis of 1.34% and 0.66% respectively of the "Gross Revenue". As will be explained below (see paragraph 107) the Tribunal accepts the Respondent's submission that the Base Management Fee and the Royalty Fee should be calculated on the basis of the "daily Gross Revenue" and as such the fees receivable by the Claimant ought to have been adjusted as follows ...

91. Applying a 14% discount factor on a straight line basis, the Tribunal holds that the Claimant would be adequately compensated with the sum of ... for the loss of profit by reason of the Respondent's breach leading to a termination of the Management Agreement.

If the Manager had wrongfully terminated the Management Agreement, to ascertain the damages suffered by the Owner.

92. As the Tribunal has found that the Claimant was not wrongful in terminating the Management Agreement, this issue no longer arises.

Whether the Owner is entitled to continuing use of the Chinese character ... as part of the name of the Hotel following the termination of the Management Agreement.

93. Article 19 .1(b) of the Management Agreement provides as follows:

19.1 Owner's Obligations

Upon the expiration or termination of this Agreement, Owner will immediately do the following, without limitation: …

(b) Not use the Marks or the System and not represent the Hotel to the public or hold it out as a System Hotel or a former System Hotel. Owner will accomplish this by, without limitation, removing, returning or destroying, as reasonably instructed by Manager: (i) all Operating Manuals, any Confidential and Proprietary System Information, Marketing materials and all other printed materials containing the Marks; (ii) all interior and exterior signs, OS&E and FF&E bearing the Primary Marks; and (iii) anything else that might result in customers continuing to identify the Hotel as a System Hotel. Owner will cover up anything bearing the Primary Marks or otherwise identified as being associated with the System that cannot reasonably be removed on or before the expiration or termination date, until it can be removed, but no later than sixty (60) days after the termination or expiration date.

94. The term "Marks" has been defined in Article 1 of the Management Agreement:

Marks. The trademarks and service marks that are registered (or for which an application for registration has been filed) with the Trademark Office, State Administration for Industry and Commerce, People's Republic of China as identified in Schedule 14.3 ("Primary Marks") and all other trademarks, service marks, trade names, copyrights, insignia, emblems, slogans, logos, commercial symbols, signs, designs, trade dress and all other visual identification, whether in English or any other language, by which the System and System Hotels are identified and publicized, including the goodwill associated with all of them.

95. The Respondent did not dispute that it was obliged to cease using the Marks and any reference to the [hotel name] system. In fact they said that they had, following the termination, ceased using the registered trademarks set out in Schedule 14.3 of the Management Agreement and had removed all logos with the mark "[hotel name]" in the public areas and within the guest rooms (including POS machines, message system and cabled televisions system), and amended all printed materials for customers and changed all guest room articles with the logo ...

96. However the Respondent said that it had for the purposes of operating the Hotel ... lawfully registered a branch office under the PRC law with the [local] Administration of Industry and Commerce using the enterprise name ... Accordingly following the termination of the Management Agreement, the Respondent had continued to use the registered branch enterprise name on the Hotel but had not made any reference to [the hotel name] at all. There is therefore no infringement of Article 19 of the Management Agreement.

97. [A witness] during his oral examination drew attention to the fact that the hotel is now known [under a different name] as can be seen from the photographs ... although the Chinese name of the Hotel was retained using the traditional character of ... instead of the registered trade mark of ... [simplified character].

98. The Tribunal does not accept that the registered branch name of the Respondent could justify their continuing use of the Marks or such names as would suggest that the Hotel is still or was associated with the Claimant. The Tribunal is also not satisfied that there is any differentiation between the traditional Chinese characters of ... and the simplified characters of ... Both these terms would have been understood by anyone familiar with the language to associate it with the [Owner's] brand of hotels in China.

99. Proper compliance with Article 19.1 in the Tribunal's view requires that the Respondent desist from using both terms … as part of the Hotel's name and in the Hotel's signages.

If the Owner is not so entitled, to ascertain the appropriate remedies for its wrongful use.

100. The Claimant seeks an injunction against the Respondent from continuing use of the Mark as well as damages based on the formula for Royalty Fees from date of termination until the Respondent ceases to use the Mark. The Claimant had suggested that from 1 September 2008, the sum of ... per month as an appropriate measure of damages (on the conservative side) until the wrongful use ceases.

101. The Tribunal agrees that injunctive relief is proper but will allow the Respondent time of up to 30 days from the date of this Final Award to comply with the same. The Respondent should take immediate steps to ensure that it does not represent the Hotel or hold it out as [a hotel under Claimant's brand name or formerly so] and accomplish the same within 30 days of this Final Award at the latest.

102. The Tribunal will also allow damages based on the formula for Royalty Fees from 1 July 2008 until the Respondent ceases to use the [aforementioned Chinese] characters ... However based on the Tribunal's view of how the Royalty Fee is to be calculated (as explained in paragraphs 107-109 below), the figure should approximate only ... (being the average monthly Royalty Fees for the 18 months period from July 2008 to end 2009 i.e. total Royalty fees for the period of ... divided by 18 months). The Respondent should therefore pay damages at ... for each month of wrongful use of the marks from 1 July 2008 until it ceases to do so.

Whether there was an overpayment of the Base Management Fee and Royalty Fee.

Whether the computation of Base Management Fees and the Royalty Fees on a "daily Gross Revenues" basis was proper or correct.

If not, to ascertain the proper amount payable and the amount overpaid (if any).

103. As these questions relate to the manner the Base Management Fee and the Royalty Fee ought to be computed, they are for convenience treated together.

104. Article 11.1 of the Management Agreement requires the Respondent to pay to the Claimant on a monthly basis Management Fees comprising several components including the Base Management Fee and the Royalty Fee. It is the Respondent's case that the Claimant had during the period been paid excess amounts in respect of these two components of the Management Fees during the period from November 2005 until August 2007.

105. The Respondent points out that Article 11.1 expressly provides for the Basic Management Fee to be "1.34% of the daily gross revenue" and that the Royalty Fee shall be "0.66% of the daily gross revenue". In the Respondent's view this means that these fees ought to be computed on the average daily gross revenue of the Hotel during one month and by multiplying it by the percentages stipulated. What the Claimant did however was to compute using the total gross revenue of the Hotel during one month and then by multiplying it by the respective percentages.

106. The Claimant submits that the method of computation suggested by the Respondent makes no commercial sense as the Claimant would be paid only some ... (a sum it described as "absurdly small") over 2½ years instead of ... In the Claimant's view, the term "daily" ought to be read to mean "every day's gross revenue", viz. total gross revenue.

107. The Tribunal notes however that the term "daily" is not used to qualify the Incentive Fee and other fee components referred to in Article 11.1. To equate it to mean "total" would be to ignore the deliberate insertion of the word. Between the two propositions, the majority of the Tribunal finds the argument of the Respondent in this regard more plausible. The Base Management and Royalty Fees form only part of the constituent parts of the Management Fees that the Claimant would be receiving. These two components when taken alone would form a small portion only of the entire Management Fee. The aggregate of the component fees is however not a sum that could be properly described as "absurdly small".

108. The Respondent had presented its re-computation of the Base Management Fee and the Royalty Fee (see the computation found in Annex 2 of "Amounts of Compensation Claimant shall pay to Respondent and Evidence") and showed that there was an overpayment of ... due from the Claimant to the Owner. The Claimant did not dispute this revised computation.

109. The majority of the Tribunal therefore finds that:

• There was overpayment of Base Management and Royalty Fee.

• Computation of such fees shall be based on the daily gross revenue and not the total gross revenue.

• The Respondent had overpaid the Claimant the sum of ...

If there was any sum overpaid, whether the claim (or any part thereof) for repayment is time-barred under PRC law or irrecoverable by reason of the lack of good faith on the part of the Owner.

110. The Claimant raised in its Reply that even if there was overpayment of Base Management and Royalty Fees the same was accepted by the parties over two years and ought to be seen as reflective of an implicit agreement between the parties. As such the Respondent ought not to be allowed to renege on the arrangement.

111. The Claimant also referred to the issue of time limitation of 2 years for claims of such a nature under Article 135 of the PRC General Principles of Civil Law to argue that those fees for the months paid before 27 September 2006 are in any event time-barred. The Claimant however did not pursue this argument much further.

112. In the majority of the Tribunal's view no issue of time limitation accrues to the benefit of the Claimant as the Tribunal accepts that the Respondent was operating under a mistake that the computations submitted by the Claimant were at all times correct until they realized the mistake sometime in August 2007.

113. The Claimant also sought to suggest that the Respondent only resiled [recte: relied] on this method of computation following an arbitral decision on the same issue in another arbitration and suggested that in doing so the Respondent acted in bad faith. The majority of the Tribunal sees little merit in this argument. The Respondent is entitled to redress if it had acted under a mistaken belief as to its obligations under the Management Agreement. The fact that it had come to such a realization following the decision of a court or another arbitral tribunal's decision cannot be a bar to addressing its proper rights.

114. The majority of the Tribunal therefore finds that the overpaid amount of ... is lawfully recoverable and must be returned to the Respondent.

Whether the outstanding rental ... owing from the Manager's affiliate to the Owner is payable by the Manager

115. The Claimant having agreed that the outstanding office rental of ... was due and payable to the Respondent, the Tribunal will accordingly order that the same shall be paid by the Claimant to the Respondent.

Summary of decisions on the claims and counterclaims

116. The Tribunal's decisions on the parties' claims and counterclaims may be summarized as follows:

117. There is accordingly a balance of ... due from the Respondent to the Claimant together with ... per month from 1 July 2008 until the Respondent finally ceases use of the Marks.

118. In accordance with Clause 11.10 of the Management Agreement, payment of the all fees and amounts due to the Claimant are to be converted into US Dollars at the date of payment. Based on the current RMB-US$ exchange rate ... the equivalent of ... is ... The principal amount due to the Claimant from the Respondent is therefore ...

Interest

119. The parties each claim to be entitled to interest on all amounts due in their favour.

120. Article 11.8 of the Management Agreement provides for interest on sums due at the rate of 9% p.a. or at the highest rate permitted by law. None of the parties have suggested that there is any other rate which the Tribunal should consider as appropriate.

121. The Claimant has asked that interest run from the date the amounts fell due until the date of payment. As the fees due from the Respondent and the overpayments made to the Claimant are largely set-off against the other leaving the bulk of the balance payable to the Claimant consisting primarily of the damages for lost profits, the Tribunal will allow simple interest at 9% per annum to run only from 1 July 2008 on the sum of ... until the date of full payment by the Respondent.

Costs

122. The costs of the arbitration which include the fees and expenses of the Tribunal and the ICC administrative costs are to be fixed by the ICC Court, in accordance with Article 31(1) of the ICC Rules.

123. Article 31(3) of the ICC Rules however empowers the Tribunal to decide which of the parties shall bear them or in what proportion they shall be borne by the parties.

124. The parties have each asked for legal and other costs relating to this arbitration and the award to be paid by the other.

125. The Tribunal will adhere to the usual practice that costs should follow the outcome of the arbitration. The real issue is how success should be determined in these circumstances.

126. The Claimant has succeeded only in part of its substantive claims. In terms of quantum the Claimant succeeds only for [approximately a quarter of the amount of its claims]. The Respondent too succeeded in part only of its counterclaim, viz. [approximately one fifteenth of the amount of its counterclaim]. In terms of the various heads of claims advanced by the Claimant it could be said to have "succeeded" in all 4 heads of claim (excluding 2 conceded claims). It has also succeeded in the principal issue of that [sic] the Opening Date of the Hotel occurred before or after 31 December 2005. The Respondent succeeded in its claim for overpayment of the Base Management and Royalty Fees but failed in most of all the other heads of claim. The amount awarded in favour of the Claimant is in aggregate more than that awarded to the Respondent resulting in a net amount payable to the Claimant. The Tribunal therefore holds that the Claimant is substantially the successful party in this arbitration and Respondent ought to bear all the costs of this arbitration and the legal fees and expenses incurred by the Claimant.

127. The parties have paid the advance on costs to the ICC totalling ... as follows:

By Claimant - [half of said amount]

By Respondent - [half of said amount]

128. ... the ICC Court of Arbitration has fixed the costs of arbitration at ... (being ... for the ICC's administrative expenses; ... for the Tribunal's fees and ... for expenses). The Respondent shall bear the whole of these costs. The Respondent must accordingly reimburse the sum of [half of the advance] to the Claimant being the advance on costs paid by the Claimant to the ICC.

129. The parties have at the Tribunal's request submitted the legal costs and expenses they had incurred in this arbitration. The Claimant submitted a claim for ... in legal fees (representing a total of 1,138 billing hours) and ... being disbursements incurred for the experts, travel and accommodation expenses of its witnesses from Asia and the United States. The Respondent submitted its claim of ... (representing a total of 1,108 billing hours) and other disbursement fees account for ... These figures exclude the fees paid to the ICC.

130. It is clear that each of the legal teams spent about the same number of hours in preparing and attending to all the necessary work required of them in these proceedings. In the Tribunal's view the time spent and attention given by both the teams were commensurate with the severity and complexity this case deserves. The Tribunal is also conscious that both teams had to deal with voluminous documents and evidence in both the Chinese and English languages and had done so most professionally. In these circumstances, there is no reason for the Tribunal not to allow recovery of costs in full to the successful party.

131. Accordingly, the legal costs of the Claimant amounting to ... (legal fees) and ... (disbursements) incurred shall be borne by the Respondent. The Respondent shall bear its own legal costs and expenses.

Now, for the reasons given above,

We hereby award, adjudge and direct that:

I. The Respondent shall pay to the Claimant … together with and … per month from 1 July 2008 until the Respondent finally ceases use of the Marks … in full and final settlement of all the claims of the Claimant.

II. The Respondent shall also pay to the Claimant interest on the sums awarded in paragraph I at the rate of 9% per annum from 1 July 2008 until full payment thereof is received by the Claimant.

III. The Respondent shall forthwith take steps to, and in any event within 30 days from the date hereof, cease and desist:

• using the simplified Chinese characters …and the traditional Chinese characters … as part of the name of the hotel which is the subject of this arbitration; and

• representing to any person that the said hotel [is or was formerly a hotel under Claimant's brand name];

• and shall ensure that its staff, officers, employees, affiliates, agents and other persons under its control shall cease and desist from all such conduct.

IV. The Respondent shall bear and pay the Claimant's costs and expenses incurred in this arbitration which we fix at … (legal fees) and … (disbursements).

V. … the ICC Court of Arbitration has fixed the costs of arbitration at … (being … for the ICC's administrative expenses… for the Tribunal's fees and … for expenses). The Respondent shall bear these costs. The Respondent must accordingly reimburse the sum of … to the Claimant being the advance on costs paid by the Claimant to the ICC.

VI. All other claims and counterclaims are accordingly rejected.'

1
Editor's note: this and subsequent references are to the 1998 ICC Rules of Arbitration.