'I. Introduction

1. In this arbitration the Claimant contends that as a result of various breaches of an agreement for the management of [a] Hotel in … Nigeria committed by the Respondent, the Claimant was entitled to terminate the Management Agreement and is entitled now to recover various sums which had accrued due to it, as well as compensation for loss of the profits which it would have earned if the agreement had continued. The Respondent denies liability to the Claimant, and further contends that this arbitral tribunal has no jurisdiction. Without prejudice to that denial of jurisdiction, the Respondent counterclaims damages for losses which it says that it has suffered as a result of breaches of the Management Agreement by the Claimant.

The Claimant

2. The Claimant … is a company organised and existing under the laws of [a West European country]. … It is part of the [A] group which operates an international chain of hotels. Since November 2005 the Claimant's parent company has been a company called [B].

3. The Claimant is represented in the arbitration by ...

The Respondent

4. The Respondent … is a company duly incorporated and existing under the laws of the Federal Republic of Nigeria. It is the owner of the hotel which was formerly known as the …, but is now known as … [When incorporated] 99.49% of [the Respondent's] shares were owned by the Government of Nigeria and by state agencies. However, [subsequently] 90% of the shares in the Respondent were sold to [C], a company promoted by a local businessman, [Mr D].

5. The Respondent is represented in the arbitration by ...

The Management Agreement

6. … the parties entered into a Management Agreement relating to the … hotel which the Respondent was in the process of building in ... Nigeria, and which it wished to be completed, furnished, equipped, decorated and operated under the standards of and as part of the [A] international chain of hotels operated and managed by the Claimant. The Claimant was referred to in the agreement as [A] and the Respondent was referred to as the "Owner".

The arbitration clause

7. The Management Agreement contained the following clause providing for the settlement of disputes by arbitration and for the applicable law of the agreement:

Section 9.6 - Settlement of disputes and applicable law

9.6.1 In the event of a dispute resulting from the interpretation, the performance or notice of termination of this Agreement, the Owner and [A] shall use their best efforts to settle it amicably. In the event that one or both of the Parties to this Agreement decide to refer the dispute to arbitration, said arbitration proceedings shall take place in London before the International Chamber of Commerce, by one or more arbitrators appointed in accordance with its rules. Such proceedings shall be conducted in the English language. It is agreed between the Parties that during any controversy, claim, disagreement or dispute [A] shall remain in possession of the Hotel and both Parties shall continue to fulfil their obligations under this Agreement until the dispute is finally settled (within the limits of the Initial Term or the Extended Term as provided under Sections 8.1 and 8.2).

9.6.2 This Agreement shall be construed, interpreted and applied in accordance with the laws of Nigeria.

8. Thus the place of arbitration is London, as provided in the arbitration clause set out above and confirmed in the Terms of Reference signed by the parties and by the tribunal which are referred to below.

II. Procedural history

9. As already noted, and as explained further below, a dispute arose between the parties which the Claimant has referred to arbitration. The Claimant's Request for Arbitration dated 17 November 2009 was received by the ICC Secretariat on 19 November 2009 and accordingly the arbitration was commenced on that date in accordance with Article 4(2) of the ICC Rules of Arbitration.¹

10. The arbitration clause set out above does not specify the number of arbitrators to form the tribunal, but the parties subsequently agreed that there should be a tribunal of three arbitrators. On 30 November 2009 the Claimant nominated [Arbitrator 1] to serve as a co­arbitrator.

11. The Respondent's Answer, in which it gave notice that it intended to challenge the validity and enforceability of the arbitration clause, was filed on 29 December 2009. In its Answer, the Respondent nominated [Arbitrator 2] to serve as a co-arbitrator.

12. At its session of 28 January 2010 the Court decided, in accordance with Article 6(2) of the ICC Rules, that the arbitration should proceed.

13. At its session of 4 February 2010 the Court confirmed the appointment of the two co­arbitrators nominated by the parties and invited the United Kingdom National Committee to propose a person to act as Chairman of the Arbitral Tribunal. The UK National Committee proposed [Arbitrator 3], who was duly appointed by the Court at its session of 18 February 2010, thereby completing the constitution of the Arbitral Tribunal. On 19 February 2010 the file was transmitted to the Arbitral Tribunal in accordance with Article 13 of the ICC Rules.

14. On 17 March 2010 we issued Procedural Order No. 1 which established the timetable for the arbitration. We determined that the oral hearing … would deal with both the merits and the Respondent's jurisdictional objection, in part because of the possibility of a factual overlap between allegations going to jurisdiction and allegations going to the merits. The Respondent did not object to this course.

15. We have subsequently issued further procedural orders as necessary as the arbitration has progressed.

16. In accordance with Article 18 of the ICC Rules we drew up Terms of Reference which were signed by the parties and the members of the tribunal, and were transmitted to the Court ... The Terms of Reference included the following provisions:

1. The arbitration will be conducted in accordance with the Rules of Arbitration of the International Chamber of Commerce in force as from 1 January 1998 ("the Rules").

2. The curial law applicable to the arbitration is English law and the mandatory provisions of Part I of the United Kingdom Arbitration Act 1996 ("the Act") will apply.

3. In respect of any matter not provided for by the Rules or by the mandatory provisions of the Act, the arbitration will be conducted in accordance with such directions as may be given by the Tribunal in its discretion.

4. …

5. …

6. The governing law of the Management Agreement is the law of Nigeria.

17. In accordance with the procedural orders which we have issued, the parties have served written submissions and witness statements together with the documents relied upon by them, and have had the opportunity to request further disclosure of documents as necessary. The written submissions served by the parties, including those already mentioned, are shown in the table below:

………

18. … an oral hearing took place in London at which each party made submissions and cross-examined factual and expert witnesses tendered by the other party.

19. At the completion of the hearing we were satisfied that both parties had had a reasonable opportunity to present their respective cases, and accordingly we declared the proceedings closed in accordance with Article 22 of the ICC Rules, save in relation to two matters. The first such issue concerned costs. The second issue concerned the Claimant's claim for debts alleged to have accrued due at the date of termination of the Management Agreement, where we allowed the Respondent an opportunity to comment on invoices produced by the Claimant at the hearing.

20. Following the hearing, the parties made further written submissions about costs and about the Claimant's invoices as indicated in the table above. In addition we gave the parties an opportunity to comment on certain authorities which had come to our attention in the course of preparing this award, but which had not been mentioned at the hearing. On 11 January 2011 we declared that the proceedings would be finally closed in accordance with Article 22 of the ICC Rules upon the service of the Respondent's submissions regarding the Claimant's invoices on 21 January 2011. However, because these submissions when served raised a number of new and detailed points, we gave the Claimant an opportunity to respond to them pursuant to Article 22(1) of the Rules after closure of the proceedings, which the Claimant did.

21. Pursuant to Article 24(2) of the ICC Rules, the Court has extended the time limit for rendering the Final Award from time to time ...

III. Jurisdiction

The Respondent's jurisdictional challenges

22. The Respondent has challenged the validity and enforceability of the arbitration clause in the Management Agreement on three grounds:

a) First, it contends that the arbitration clause is invalid and unenforceable because it contravenes section 36(1) and (3) of the 1999 Constitution of the Federal Republic of Nigeria.

b) Second, it contends that the Claimant was carrying on business in Nigeria, or had the intention to do so, in contravention of section 54(1) and (2) of the Companies & Allied Matters Act (C. 20 Laws of the Federation of Nigeria) 1990, and that in consequence the arbitration clause is void.

c) Thirdly, the Respondent contended at one time that not all of the matters raised in the Claimant's Request were within the scope of the arbitration clause in the Management Agreement. However, this last contention was not pursued. We are satisfied that all of the matters raised in the Request are within the scope of the arbitration clause, but we need say nothing further about this point.

The procedure for ruling on jurisdiction

23. As noted above, we determined that the oral hearing would deal with the Respondent's jurisdictional objection as well as with the merits of the dispute. The Respondent did not object to this course initially, but as the hearing approached it suggested that we should rule on its jurisdictional objection before proceeding to hear the evidence concerning the merits. However, we determined that we would give our decision on jurisdiction as part of our award on the merits. We now do so.

24. This procedure is recognised in section 31 of the United Kingdom Arbitration Act 1996, which is a mandatory provision of the Act (see section 4 and Schedule 1). Therefore it applies to this arbitration, as acknowledged by the parties in the Terms of Reference.

25. Section 30(1) of the 1996 Act provides that an arbitral tribunal may rule on its own substantive jurisdiction and explains what is meant by that term as follows:

Unless otherwise agreed by the parties, the arbitral tribunal may rule on its own substantive jurisdiction, that is, as to -

1. whether there is a valid arbitration agreement,

2. whether the tribunal is properly constituted, and

3. what matters have been submitted to arbitration in accordance with the arbitration agreement.

26. There is no agreement otherwise in this case. On the contrary Article 6(2) of the ICC Rules provides that, once the Court has decided that an arbitration shall proceed, as it has in this case, "any decision as to the jurisdiction of the Arbitral Tribunal shall be taken by the Arbitral Tribunal itself".

27. Section 31(4) of the 1996 Act sets out the procedure which may be followed in such a case:

Where an objection is duly taken to the tribunal's substantive jurisdiction and the tribunal has power to rule on its own jurisdiction, it may -

1. rule on the matter in an award as to jurisdiction, or

2. deal with the objection in its award on the merits.

28. Accordingly we have power to deal with the Respondent's objections in this award on the merits and have decided to do so. We consider each of the Respondent's remaining challenges in turn.

Section 36 of the 1999 Constitution of Nigeria

29. Section 36 provides as follows:

(1) In the determination of his civil rights and obligations, including any question or determination by or against any government or authority, a person shall be entitled to a fair hearing within a reasonable time by a court or other tribunal established by law and constituted in such manner as to secure its independence and impartiality. ...

(3) The proceedings of a court or the proceedings of any tribunal relating to the matters mentioned in subsection (1) of this section (including the announcement of the decisions of the court or tribunal) shall be held in public.

30. The Respondent's argument, in outline, is that:

a) An arbitral tribunal is not a court; nor is it a tribunal established by law.

b) Arbitral proceedings are not generally held in public; in particular, in the case of arbitration in accordance with the ICC Rules, Article 21(3) expressly provides that:

Save with the approval of the Arbitral Tribunal and the parties, persons not involved in the proceedings shall not be admitted.

c) The proceedings of an arbitration tribunal therefore contravene the provisions of section 36 of the Nigerian Constitution, as such a tribunal is not established by law and its proceedings are not held in public.

d) Decisions of the Supreme Court of Nigeria establish that proceedings which contravene section 36 are a nullity.

e) The same decisions establish that the requirements of section 36 cannot be waived by the parties.

f) Consequently the fact that the parties have agreed on arbitration is irrelevant, since it is not open to them to agree on a dispute resolution procedure which does not conform with section 36.

31. These are very far-reaching submissions. If they are correct, they mean that it is impossible for parties to arbitrate under Nigerian federal law, since an arbitral tribunal will never qualify as "a court or other tribunal established by law" under such law. Moreover, even if this obstacle could somehow be overcome (as it may be in regard to arbitrations conducted under State Law, such as the Lagos Court of Arbitration Law, Law No. 8 of 2009 and the Lagos State Arbitration Law, Law No. 10 of 2009), it would be impossible to arbitrate unless the proceedings were held in public and the award was a public document, thereby depriving the parties of the privacy and confidentiality which are among the hallmarks of international arbitration and the reasons why business people choose arbitration in preference to litigation.

32. We have no doubt that the Respondent's submissions are unsound.

33. First, we do not accept that Nigerian law is the applicable law to determine this objection. Although clause 9.6.2 of the Management Agreement provides that the agreement is subject to Nigerian law, it does not necessarily follow that the agreement to arbitrate is also subject to Nigerian law. It is well established that an agreement to arbitrate contained in an arbitration clause constitutes a separate agreement from the underlying agreement of which it forms part, and that it is not necessarily governed by the same law as the law which applies to the underlying agreement. As discussed below, the separability of an arbitration agreement is recognised in section 7 of the UK Arbitration Act 1996.

34. In this case the arbitration agreement provides for arbitration in London and is implicitly governed by English law. This was recognised, correctly in our view, in the Terms of Reference signed by the parties which acknowledged that "the curial law applicable to the arbitration is English law". It is not suggested that the arbitration clause is invalid or unenforceable as a matter of English law, and clearly it is not. English law contains provisions to the same effect as section 36 of the Nigerian Constitution, namely Article 6 of the European Convention on Human Rights, incorporated into English law by the Human Rights Act 1998. English arbitration law contains provisions which give effect to the Convention guarantee of a fair hearing within a reasonable time by an independent tribunal, and (in the absence of any duress, undue influence or mistake affecting the arbitration clause) it is open to the parties to waive the other requirements of Article 6 such as a public hearing and public judgment, which they do agree to waive by agreeing to arbitration: Stratford v. Football Association Ltd [2007] EWCA Civ 238, [2007] 2 Lloyd's Rep 31. (We note that the Court of Appeal in this case was prepared to assume, but did not decide, that an arbitral tribunal is not a tribunal "established by law" within the meaning of Article 6, but held that this requirement could also be waived.)

35. The Respondent submits that Nigerian law is the applicable law because the Management Agreement was executed in Nigeria. However, we reject that submission. The place of execution of the agreement cannot detract from the clear choice of English law as the law applicable to the arbitration clause.

36. A similar issue arose in Tamil Nadu Electricity Board v. St-Cms Electric Company Private Ltd [2007] EWHC 1713 (Comm) where the governing law of the underlying agreement was Indian law, but the arbitration clause was governed by English law and the chosen seat of the arbitration was in London. It was suggested that the arbitral tribunal had no jurisdiction because, as a matter of Indian law, the dispute could only be decided by an Indian tribunal or Indian statutory body. Cooke J held at § 35 that this was irrelevant. The arbitrability of the dispute was to be decided according to English law:

As to the first suggestion, Indian law is expressly excluded from the separate arbitration agreement. Furthermore, it is nothing to the point if, under Indian law, the proper law of the PPA, the dispute in question cannot be decided other than by an Indian tribunal, or Indian statutory body, according to Indian law. That is an irrelevance to an English court, the court of the seat of the arbitration, dealing with an arbitration provision specifically governed by English law. Whether or not a foreign court would insist on its own jurisdiction or the jurisdiction of a statutory tribunal in India in matters of this kind is an irrelevance. This is made plain from the decisions in Akai v. Peoples Insurance Co. [1988] 1 Lloyd's Rep 90 at pages 98-100, OTA Africa v. Magic Sportswear [2005] 2 Lloyd's Rep 170 at pages 177-179 and C v. D [2007] EWHC 1541 (Comm) at paragraph 56. The parties have agreed to arbitration in accordance with English law and it is by that law alone that the ambit of the arbitration provision can be determined, as a matter of construction. To delve into the proper law of the PPA to seek for any provision mandatorily applicable by that law to the issue of jurisdiction, is impermissible.

37. The same reasoning applies here.

38. Accordingly, applying English law, which is the relevant applicable law, we hold that the arbitration clause is valid and enforceable.

39. Alternatively, we would if necessary reach the same conclusion applying Nigerian law. Like the English Court of Appeal in Stretford we are prepared to assume (but do not decide) that an arbitral tribunal is not a "tribunal established by law", and as already noted arbitration proceedings generally and ICC arbitrations in particular are not held in public. However, Nigerian law is not materially different from English law as established by the Stretford case already referred to. It is open to the parties to choose to have their disputes determined by arbitration instead of court proceedings, but that choice does not involve any giving up of the right to a fair hearing before an independent tribunal. The Nigerian Constitution - and therefore the section 36 guarantee - is construed broadly in order to give effect to its underlying purpose. Furthermore, Nigerian law, like English law, contains provisions which have the effect of ensuring that the constitutional guarantee of a fair hearing is implemented when parties voluntarily choose arbitration as a means to resolve their disputes. Other ancillary aspects of section 36, such as the right to a hearing in public, are capable of being waived by a choice of arbitration, at any rate in cases such as the present case where there is no overriding public interest to consider.

40. The decisions of the Supreme Court of Nigeria relied on by the Respondent, namely Nigeria-Arab Bank Ltd v. Barri Engineering Nigeria Ltd [1995] 8 NWLR 257, Menakaya v. Menakaya [2001] 16 NWLR 203, and Ziideeh v. Rivers State Civil Service Commission (2007) 3 NWLR 554 do not compel any different conclusion. They demonstrate that (subject to some exceptions) court cases which are not held in public, or in which the judgment is not delivered in public, are a nullity because they do not conform with section 36, and that the requirement of publicity in such cases cannot be waived by the parties because of the public interest in the public administration of justice in Nigerian courts. In other words, when there are court proceedings the entirety of those proceedings must take place in public because there is a public interest in play. However, these cases have nothing whatever to do with arbitration, and do not begin to address the question whether an agreement to arbitrate in private before a consensually appointed tribunal is contrary to the Constitution. That is a very different question from the question with which these decisions of the Nigerian Supreme Court were concerned. Moreover the earlier decision of the Supreme Court in Ariori v. Elemo [1983] 1 SCNLR 1 demonstrates that in some circumstances waiver of fundamental rights, including aspects of the right to a hearing within a reasonable time, is possible, at any rate when the right in question exists for the sole benefit of a private individual and not for the benefit of the public. Such reasoning suggests that there is no constitutional prohibition on parties agreeing to arbitrate disputes instead of taking them to court.

41. As the Claimant observes, Nigerian law recognises customary, commercial and investment arbitrations. Section 53 of the Nigerian Arbitration & Conciliation Act 1990 provides that parties to an international commercial agreement may agree in writing that disputes in relation to the agreement shall be referred to arbitration, while section 5(1) of the same Act gives the court power to stay proceedings commenced in breach of an agreement to arbitrate. Nigerian courts regularly apply this section. In M.V. Lupex v. N.0.C. & S. Ltd (2003) 15 NWLR (Pt 844) 469 at 488 the Nigerian Supreme Court stayed proceedings commenced in breach of an agreement to arbitrate, noting that "the court should not be seen to encourage the breach of a valid arbitration agreement particularly if it has an international flavour", because arbitration had "become a prime method of settling international commercial disputes". The Court concluded that "where parties have chosen to determine for themselves that they would refer any of their dispute to arbitration instead of resorting to regular courts a prima facie duty is cast upon the courts to act upon their agreement". It seems to us that this is a binding decision as a matter of Nigerian law that arbitration agreements are (at any rate prima facie) valid and enforceable. It is true that no argument was addressed in the Lupex case to the effect that arbitration is contrary to section 36 of the Nigerian Constitution, but we cannot accept that a valid objection was overlooked in this and in the many other cases in which Nigerian courts have given effect to the country's obligations under the New York Convention. For Nigerian law to hold that arbitration is unconstitutional would be a damaging and backward step.

42. This position is further confirmed by the decision of the Nigerian Supreme Court in Agu v. lkiwebe [1991] 3 NWLR 385, which held that a customary arbitration (in which a dispute is referred to the family head or to community elders for a compromise solution which is then accepted by the parties) is recognized by Nigerian law and is not in conflict with the Constitution so that it is capable of creating res judicata.

Section 54 of the Companies & Allied Matters Act

43. Section 54 provides as follows:

(1) Subject to sections 56 to 59 of this Act, every foreign company which before or after the commencement of this Act was incorporated outside Nigeria, and having the intention of carrying on business in Nigeria, shall take all steps necessary to obtain incorporation as a separate entity in Nigeria for that purpose, but until so incorporated, the foreign company shall not carry on business in Nigeria or exercise any of the powers of a registered company and shall not have a place of business or an address for service of documents or processes in Nigeria for any purpose other than the receipt of notices and other documents, as matters preliminary to incorporation under this Act.

(2) Any act of the company in contravention of subsection (1) of this section shall be void.

44. The Respondent's contention is as follows:

a) Entry into the Management Agreement and performance of its obligations thereunder required the Claimant to carry on business in Nigeria.

b) Accordingly, since the Claimant intended to do these things, it had an intention to carry on business in Nigeria and therefore was required to be incorporated as a separate entity in Nigeria.

c) Since the Claimant did not obtain such incorporation, it could neither perform acts which amounted to carrying on business in Nigeria nor exercise the powers of a registered company, one such power being the power to enter into legally binding contracts, as all such acts were rendered void by subsection (2) of section 54.

d) Consequently the Management Agreement, including the agreement to arbitrate contained therein, is void.

45. To the extent that this contention goes to jurisdiction as distinct from the merits, we can deal with it shortly. Once again the separate nature of an arbitration clause is important. Section 7 of the UK Arbitration Act 1996 provides that:

Unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to form part of another agreement (whether or not in writing) shall not be regarded as invalid, non-existent or ineffective because that other agreement is invalid, or did not come into existence or has become ineffective, and it shall for that purpose be treated as a distinct agreement.

46. There is no agreement otherwise in this case, and accordingly this section applies.

47. The effect of section 7 is that even if the Management Agreement were found to be void pursuant to section 54 of the Nigerian Companies & Allied Matters Act, the arbitration agreement which forms part of that agreement would not itself be regarded as void. This principle of separability has been confirmed and explained by the leading decision of the House of Lords in Fiona Trust & Holding Corp. v. Privalov [2007] UKHL 40, [2008] 1 Lloyd's Rep 254. Lord Hoffmann said:

The principle of separability enacted in section 7 means that the invalidity or rescission of the main contract does not necessarily entail the invalidity or rescission of the arbitration agreement. The arbitration agreement must be treated as a "distinct agreement" and can be void or voidable only on grounds which relate directly to the arbitration agreement.

Lord Hope of Craighead explained this further:

The doctrine of separability requires direct impeachment of the arbitration agreement before it can be set aside. This is an exacting test. The argument must be based on facts which are specific to the arbitration agreement. Allegations that are parasitical to a challenge to the validity of the main agreement will not do.

48. The Respondents' allegations in this case as summarised above do not directly relate to or impeach the arbitration agreement contained in clause 9.6.1 of the Management Agreement. Whatever may be the position so far as the Management Agreement (in the words of section 7, 'the main contract'') is concerned, neither the entry into an agreement to arbitrate in London nor the performance of that agreement is capable of amounting to carrying on business in Nigeria. It follows that, even if the Claimant's entry into the Management Agreement or performance of its obligations thereunder was contrary to section 54, that does not in any way invalidate the arbitration clause in the agreement

49. The Respondent relies on the principle recognised in Ralli Brothers v. Campania Naviera SA [1920] 2 KB 287 that a contract (whether lawful by its governing law or not) is invalid or at least would not be enforced by an English court, insofar as performance of it is unlawful by the law of the country where the contract has to be performed. However, in accordance with section 7 of the UK Arbitration Act, it is necessary to apply this principle by reference to the separate arbitration agreement and not by reference to the underlying contract of which that agreement forms part. Performance of the agreement to arbitrate where the chosen seat is London takes place in London and there is no necessity for such performance to take place in Nigeria. Accordingly this principle cannot assist the Respondent. We note that essentially the same argument in reliance on the Ralli Brothers principle as made by the Respondent in this case was rejected by Cooke J at § 48 of his judgment in the Tamil Nadu case cited above:

The question then is as to what element of performance, illegal by the law of India, has, under the PPA, to be effected in India itself, as opposed to anywhere else, whether on TNEB's case or a proper view of the PPA. Under the terms of Article 15, the arbitration is to be held in London, England, which is therefore the seat of the arbitration. Participation in that form of dispute resolution will therefore occur here, in this jurisdiction, and no question of compulsory performance of the arbitration agreement arises in India, certainly up to the point where the award is issued.

50. Accordingly we reject the Respondent's challenge to our jurisdiction based on section 54. This section may, however, be relevant to the merits and we therefore revisit it in that context below.

51. We conclude, therefore, that the Respondent's jurisdictional challenges are unfounded and that we have jurisdiction to determine this dispute. We proceed to the merits.

IV. The Management Agreement

52. The Management Agreement was concluded on [in] 2003. A separate Technical Services Agreement was entered into at the same time. At that time the Respondent was in the process of building the hotel, which was described in the recitals to the Management Agreement as a hotel which would consist of approximately 577 keyable rooms and suites. The recitals went on to record that the Respondent wished the hotel to be completed, furnished, equipped, decorated and operated under the standards of the Claimant's international chain of … high quality hotels, and that the Respondent wished to have the benefit of the Claimant's trade name, service mark and trademark and to benefit from its marketing, reservation and management resources, and that the Respondent wished the Claimant to perform on its behalf the pre-opening of the hotel and thereafter the marketing and management of the hotel during the term of the Management Agreement.

53. In this Section of our award we describe the principal terms of the Management Agreement. We shall deal with some of the terms which are directly relevant to the issues before us after we have explained the nature of those issues.

54. The term of the agreement was defined by Article 8. It included an "Initial Term" and an "Extended Term". It is the Initial Term which is relevant. Article 8.1 provided:

The Initial Term of this Agreement shall begin on the date of the execution and shall remain in force thereafter for a period of ten (10) full Fiscal Years after the Opening Date of the Hotel.

55. The precise "Opening Date" of the hotel is not clear, but it is common ground that the hotel did open, albeit not fully completed. The effect of the definition of "Fiscal Year'' in Article 1 of the agreement is that whatever the precise date, the Initial Term would have expired on 31 December 2014 if the Management Agreement had not been terminated prematurely.

56. Article 2.2 described the configuration of the hotel, which was to consist of 577 keyable rooms including suites, two meeting rooms, five restaurants and bars, a shopping arcade, parking spaces, leisure facilities including an outdoor swimming pool, sauna and other sports facilities, a convention centre/ballroom, a nightclub, a business centre and nine rentable offices or meeting rooms. Article 2.3.1 provided that the hotel would be furnished, equipped and decorated in compliance with agreed standards, while Article 2.3.2 provided that the Respondent would engage and retain at its own expense such architects, contractors, interior designers and other specialists and consultants as might be necessary or desirable. Article 2.4.2 provided that the hotel would be built at the Respondent's exclusive expense - an expense which was estimated in the agreement at [amount]. Thus it was the Respondent's obligation to complete the hotel, as described in Article 2, that is to say with 577 rooms or suites and the specified facilities, to the required high specification, at its own expense.

57. It was also the Respondent's obligation to provide working capital for the operation of the hotel throughout the term of the agreement. Article 3.4.1 provided:

The Owner shall initially and throughout the Term of this Agreement provide working capital sufficient to ensure the uninterrupted and efficient operation of the hotel.

58. Article 4 listed the Claimant's obligations under the Management Agreement. It was to "undertake on behalf and for the account of the Owner those duties coming within the scope of the management and marketing of the Hotel" and to "operate the Hotel in strict accordance with the standards of efficient management prevailing in the hotels of [A]".

59. Specifically, the Claimant's obligations included the following:

a) Article 4.3.1 - to "provide the Hotel, directly or through regional offices" with assistance in relation to a variety of matters - annual plan drafting, analysis of financial and marketing reports, inspection by specialists in hotel management, and participation in group purchasing.

b) Article 4.3.2 - to assist "directly or through its regional corporate office" the General Manager and executive staff of the hotel in establishing the annual marketing plan.

c) Article 4.3.3 - to assist "through its regional sales offices the Hotel's sales staff for specific marketing action intended for the territories under the responsibility of such offices".

d) Article 4.4.1 and 4.5.1 - to integrate the hotel into the Claimant's reservation system and its advertising and promotion campaigns.

60. Article 4.6.1 set out the Claimant's obligation to "perform on behalf and for the account of the Owner all appropriate and necessary management services" including (a) general organisation of the hotel, (b) personnel management including selection, hiring, training, assignment, transfer or dismissal of the General Manager and all the hotel personnel (although with the exception of the General Manager who was to be seconded to the hotel, these were to be employed by the Respondent); (c) control of the collection, receipt and distribution of all income derived from the operation of the hotel, and (d) determination of the purchasing policy of the hotel.

61. Article 4.6.2 provided that the Claimant would "keep for the benefit of the Owner a complete record of all transactions in connection with the operation of the Hotel", and that all accounting documents would be made available to the Respondent or its representatives for examination and audit, although this was to be done with as little disturbance to the operations of the hotel as possible.

62. Article 4.6.3 provided that each year the Claimant would submit an annual plan to the Respondent for the ensuing year, including an estimated profit and loss statement, marketing policies and a recommended budget, which the parties would then discuss with a view to reaching mutual agreement, while Article 4.6.4 provided that each month the Claimant would deliver a profit and loss statement showing the results of the hotel for the preceding month, with an externally audited balance sheet and profit and loss statement to be provided not later than three months after the end of each year.

63. The Respondent's obligations were set out principally in Article 5. The Respondent undertook, by Article 5.1(a), "not to give any instructions to employees or staff at the Hotel in contradiction to [A]'s instructions without the prior approval of [A]" and, by Article 5.1(b), "to allow [A] to carry out the management services specified under this Agreement unimpeded and not to act in any way to disrupt or prejudice the provision of the management services provided under this Agreement or the commercial operation and management of the Hotel".

64. Article 7 contains the principal financial provisions of the Management Agreement. Article 7.1 provided that the Claimant would open and operate two bank accounts, including an operating account "into which shall be deposited all monies provided as working capital and all monies derived from the operation of the Hotel and from which shall be withdrawn all the expenses of the Hotel, and all amounts due to the Owner and to [A]". The signatories for these accounts were to be employees of the hotel nominated by the Claimant, with the Respondent having "no signatory rights whatsoever". Thus the Claimant was to have control of income and expenditure but, as was expressly stated, all expenses incurred in carrying out the operation and management of the hotel would be borne by the Respondent.

65. Article 7.2 entitled the Claimant to charge and receive monthly … during the term of the management agreement a "basic management fee" equal to 2% of the "Total Revenue" of the hotel. The expression "Total Revenue" was defined in Article 1.8 as all receipts resulting directly or indirectly from the operation of the hotel. Thus the basic management fee was calculated upon revenue and did not depend upon profitability.

66. In addition, the Claimant was entitled by Article 7.3 to charge and receive monthly … during the term of the management agreement an "incentive management fee" equal to 5% of Gross Operating Profit, an expression defined in Art 1.11 as the excess of Total Revenue over Operating Expenses, together with an "additional incentive management fee" equal to a further 3% of Gross Operating Profit if sufficient funds were available after debt service each year.

67. Under Article 7.4, the Respondent was required to contribute monthly an amount equal to 2% of Total Revenue of the hotel as its share of the cost of advertising and promotion undertaken for the common benefit of the [A]-branded hotels.

68. Article 7.5 provided for the payment to the Respondent monthly of the balance of the Gross Operating profit after deduction of (among other things) the fees due to the Claimant and the working capital required by Article 3.4.

69. In addition to the arbitration clause already set out, Article 9 included terms relating to the privatisation of the hotel, force majeure and termination of the Management Agreement which we consider further below. Article 9.8 provided:

Section 9.8 - Relationship between the Parties

9.8.2 The Owner acknowledges that this Agreement is a management service contract, which is irrevocable by the Owner except as herein set forth. ...

9.8.4 The Parties agree that subject to limitations, which may be contained in this Agreement, [A] shall have full control and discretion in the management and operation of the Hotel and in the performance of its services hereunder. [A] shall be responsible to the Owner for the faithful and diligent performance of its obligations in a good and professional manner and [A] will endeavour to fulfil its obligations under this Agreement to the best of its knowledge and ability. It is understood that the executive staff and other employees of the Owner will under ordinary circumstances perform the undertakings of [A] contained in this Agreement, except in those instances where [A] employees carry out such obligations pursuant to Section 4.3 and Sub-Section 4.6.5. It is therefore agreed that [A] shall not be liable to the Owner or others for the failure to perform any duty hereunder to the extent that such failure is due to the act or omission of the employees of the Hotel, provided however that [A] has used the required diligence in the hiring, supervision, training and discharge of the executive staff.

70. Article 9.9(a) provided that the Claimant should not be liable to the Respondent for (among other things) any indirect or consequential loss.

V. The facts

71. For the most part the main primary facts were not in issue between the parties, although there was substantial dispute about their legal significance. Be that as it may, we find the facts as follows.

Before privatisation

72. In October 2003 the Claimant recruited [Mr E] as the first General Manager of the hotel. Mr [E] was responsible for the management of the hotel during the pre-opening phase ... During this initial period the Respondent paid working capital into the hotel's bank account as required.

73. However, [after the first few months], it became more difficult for the Claimant to persuade the Respondent to provide working capital on time or at all. As a result the hotel was never completed and the contractors stopped work with only about 218 rooms completed by April 2005 rather than the 577 rooms contemplated by the Management Agreement. The swimming pool was not completed, nor were other recreational facilities which the hotel was supposed to have according to the Management Agreement.

74. Nevertheless, the hotel did open at some point on or before 1 January 2005 and the Claimant undertook its management in accordance with the Management Agreement.

75. In November 2005 the Claimant was acquired by [B], a company based in the United States of America which also operated or managed other international hotel chains.

76. Some further work continued to be done on the hotel after the opening. Although never completed to the standard contemplated by the Management Agreement, the hotel did operate under the Claimant's management without undue difficulty. However, it was loss­making in 2004 and 2005, and made only a modest profit in 2006. According to the evidence of [Mr F], who was the General Manager between September 2006 and January 2007, work was continuing in September 2006 to increase the number of functional rooms, but the number of such rooms never exceeded 253. It does not appear that the Respondent's failure to complete the hotel with the 577 available rooms contemplated by the Management Agreement was ever a matter of complaint by the Claimant. It was Mr [F]'s evidence, which we accept, that at any rate until the acquisition of the Respondent by [C] in … 2006, the Claimant had no problems performing its obligations under the Management Agreement and there was sufficient working capital to operate the hotel and to continue the work.

After privatisation

77. However, in … 2006 the position changed significantly. Until that time, as already noted, the Respondent was a government owned entity, with 92.55% of its shares owned directly by the Federal Government of Nigeria and with other state-owned entities also owning shares in the Respondent. In … 2005 the Government had given notice of its intention to dispose of at least 51% of the shares in the Respondent in accordance with its policy of privatisation pursuant to the Public Enterprises (Privatisation & Commercialisation) Act 2004 and had invited expressions of interest from potential investors, noting in that invitation that the hotel was managed by the Claimant. This led to the sale … of 90% of the shareholding in the Respondent to [C] ... The managing director and principal of [C] was [Mr D].

78. The sale was carried out pursuant to a Share Sale & Purchase Agreement … By clause 6.1.11 of this agreement [the seller] warranted and represented that the Management Agreement between the Claimant and the Respondent was still subsisting. Clause 7.9 of the agreement provided that [the purchaser, C]:

shall assume the liabilities of the Company [i.e. the Respondent] from the date of Completion. In the event that there are liabilities arising post-completion from the Management Agreement such liabilities shall be assumed by the Purchaser.

79. The agreement also required the purchaser, [C], to implement as far as possible a "Post Acquisition Plan" which was attached to the agreement. This plan acknowledged that the weaknesses of the hotel included its non-completion and lack of facilities, and referred to "the seemingly comatose project" which [C] intended to transform "into a vibrant beehive of activities as a testimony to the expediency of Privatisation''. This was to be accomplished by carrying out a review of the Management Agreement with the Claimant; by a change in the culture and attitude to work as a result of the transfer of the hotel from the public to the private sector; by [C]'s investment of [money] "to complete the furnishing of the hotel and the provision of ancillary services to a five-star deluxe status", to be completed within nine months, which it was anticipated would increase the maximum attainable market share of the hotel from 5% to 13% of the [local] market; by a marketing initiative, which would include marketing through [A] hotels in Nigeria and worldwide; and by a comprehensive audit of financial control and management in order to ensure value for money. However, the plan also provided:

In the event that the Management agreement with [A] subsists, points will accrue for guests stay in line with the hotel chain's Global Reward System.

80. Thus there was at least some ambiguity in the plan as to whether the Management Agreement with the Claimant would continue. While some provisions assumed that it would, indeed that it was an important part of the Respondent's plan for the success of the hotel to take full advantage of its position as part of the [A] chain, other provisions contemplated at least the possibility that the agreement might not continue.

81. In the event [C] very quickly decided, following its purchase of this controlling stake, that it would take over the management of the hotel itself and would bring the Claimant's management to an end. Mr [D] informed the Claimant of this decision [in] 2006. When the General Manager, Mr [F], protested that there was a Management Agreement in place, Mr [D] said that he did not care.

82. This was followed ... by Mr [D] visiting the hotel accompanied by members of the local police and forcing the General Manager to sign documents transferring funds in the hotel's bank account to a new account … under Mr [D]'s control and revoking the General Manager's signature authority on the hotel's bank account. Subsequently, … Mr [D] insisted that all receipts of the hotel be paid into the [new] bank account. At the same time he brought in his own finance team to run the hotel's finance department without reference to the Claimant and refused to authorise expenditure by the General Manager.

83. The combined result of these steps was to deprive the Claimant of any access to finance, thus starving the hotel of funds to pay staff and suppliers, which meant that the General Manager … was unable to provide an adequate service to hotel guests. There were no funds available to provide refunds when necessary to guests who had paid in advance. Suppliers, for example of food and drink, went unpaid and refused to supply. The physical condition of the hotel deteriorated and it failed an inspection by the fire service. Mr [D] also sacked a number of staff and caused existing tenants to be evicted from the lobby area of the hotel.

84. In all this Mr [D] made no secret of his dissatisfaction with the Management Agreement. He told the two [successive] General Managers that there was no contract existing between the Claimant and the Respondent and accused the Claimant of having stolen from the hotel account by taking payment of the fees due to it under the agreement.

85. As a result, from early 2007 Mr [D] controlled virtually every aspect of the operation of the hotel. All this was done pursuant to Mr [D]'s avowed policy, explained to the hotel management including the General Manager at a meeting …, that the hotel should be managed locally by Nigerians, rather than by foreigners such as the Claimant.

Termination of the Management Agreement

86. The Claimant protested at this action. By a letter dated …, the Claimant (or [B] its parent company - there is an issue about this which we deal with below) gave the Respondent notice of default under the Management Agreement and invited it to cure various alleged breaches of the agreement identified in its letter.

87. A second notice of default dated … was given to the Respondent, specifying an additional material breach of the Management Agreement which the Claimant invited the Respondent to cure.

88. The Respondent did not comply with these requests to cure the breaches complained of or otherwise change its policy. Accordingly, … the Claimant sent a letter to the Respondent in which it accepted what it described as the Respondent's uncured material breaches of the Management Agreement as a repudiation of the agreement and terminated the agreement ...

89. [A few days prior to termination] Mr [D] called a press conference at which he announced the termination of the Claimant's management of the hotel. He made clear that he had no wish for the Claimant's management to continue and referred to the Claimant's "unfettered access to the hotel's till" as "a major barrier to growth".

90. At the same press conference Mr [D] announced his intention to complete the remaining unfinished rooms, although in the event this never happened. We accept the evidence of the Claimant's expert … that the hotel still has only 253 rooms completed and that since mid-2007 the condition of the hotel has deteriorated further.

VI. The issues

The Claimant's submissions

91. It is the Claimant's case that the Respondent committed various material breaches of the Management Agreement, some of which constituted express events of default under the Agreement; that as a result, the Claimant was entitled to and did give the Respondent notice of default by its letters dated …; and that as a result of the Respondent's failure to cure those breaches or any of them, the Claimant was entitled to accept the Respondent's uncured material breaches of the Management Agreement as a repudiation of the Agreement and to terminate it, which it did by its letter dated ... It says that, in consequence, the Respondent is liable to pay it [amount] as an unpaid debt which had accrued due at the date of termination of the Management Agreement and a further [amount] as damages for loss of future income which would have been earned during the unexpired period of the Initial Term of the Management Agreement. The Claimant claims declaratory and monetary relief accordingly, together with interest and costs.

The Respondent's submissions

92. As noted above in the context of jurisdiction, the Respondent says that the Management Agreement is void pursuant to section 54 of the Companies & Allied Matters Act as it constitutes an agreement for the carrying on of business in Nigeria by the Claimant, which was not incorporated in Nigeria.

93. Alternatively, it says that the Government's sale of its shares pursuant to its policy of privatisation was an act carried out in its sovereign capacity as the Government of Nigeria and that this constituted an act of force majeure which had the effect of excusing each party from performing all or any of its obligations under the Management Agreement. As a further variant on this submission, it contends that on a proper construction of Article 9.1.2 of the Management Agreement, once the Respondent was privatised the Respondent's undertaking not to enter into any commitment that would negatively affect the Claimant's operation of the hotel was extinguished, with the result that the Respondent could now engage in acts deriving from privatisation regardless of their negative impact on the Claimant. Subject to these submissions, the Respondent does not dispute that its conduct after privatisation constituted a breach or breaches of the Management Agreement. Its case is that this conduct was not wrongful because of the effect of privatisation on the performance of the parties' obligations under the Management Agreement.

94. However, even if it is wrong about this, the Respondent does not accept that the Claimant terminated the Management Agreement validly. It has three points here. First, it says that the notices of default and the notice of termination were not given by the Claimant but by its parent company [B], which is a stranger to the agreement, and further that the Claimant failed to give the Respondent notice of its acquisition by [B] as required by Article 9.5.1 of the agreement. Second, it says that the breaches of the Management Agreement relied on by the Claimant did not constitute events of default which entitled the Claimant to terminate the agreement. Third, it says that the termination procedure set out in the Management Agreement was not properly followed.

95. Further, the Respondent says that in any event the Claimant was in material and fundamental breach of the Management Agreement by ceasing to operate the hotel and withdrawing all its services from 30 June 2007, which it says was contrary to the final sentence of Article 9.6.1 of the agreement and has the effect of barring the Claimant from any claim for damages for future loss of earnings.

96. As to the quantum of the claim, the Respondent denies that there were any accrued sums due to the Claimant and submits that the Claimant's calculation of future losses is highly speculative and has been carried out on a wrong basis.

97. As well as resisting the Claimant's claim, the Respondent contends that it was the Claimant which was in breach of the Management Agreement in numerous respects, as a result of which the Respondent counterclaims damages equivalent to [amounts], together with general damages of [amount], plus costs.

The issues

98. In the light of the parties' submissions summarised above, including the respects in which they have developed since the Terms of Reference were drawn up, we formulated the issues for our decision as follows and the parties adopted this formulation:

a) Is non-compliance with section 54 of the Companies & Allied Matters Act a defence to the claims of the Claimant, and if so, is the defence defeated by any term of the agreement or rule of law?

b) Did the November 2006 privatisation of the Respondent have the effect of excusing the Respondent from performing its obligations under the Management Agreement?

c) If not, was the Respondent in breach of the Management Agreement and if so in what respects?

d) Did the Claimant validly terminate the Management Agreement?

e) Is the Claimant entitled to recover the sum of [amount] or any part thereof as an unpaid debt due under the Management Agreement?

f) To what if any damages is the Claimant entitled as compensation for loss of future earnings during the balance of the Initial Term of the Management Agreement?

g) Was the Claimant in breach of the Management Agreement?

h) If so, to what if any damages is the Respondent entitled?

i) What order if any should be made in respect of interest on any sums awarded?

j) What order should be made in respect of costs?

VII. Section 54 of the Companies & Allied Matters Act

99. It will be recalled that section 54 provides as follows:

(1) Subject to sections 56 to 59 of this Act, every foreign company which before or after the commencement of this Act was incorporated outside Nigeria, and having the intention of carrying on business in Nigeria, shall take all steps necessary to obtain incorporation as a separate entity in Nigeria for that purpose, but until so incorporated, the foreign company shall not carry on business in Nigeria or exercise any of the powers of a registered company and shall not have a place of business or an address for service of documents or processes in Nigeria for any purpose other than the receipt of notices and other documents, as matters preliminary to incorporation under this Act.

(2) Any act of the company in contravention of subsection (1) of this section shall be void.

100. Section 55 provides that it is a criminal offence for a foreign company to act in contravention of section 54:

If any foreign company fails to comply with the requirements of section 54 of this Act in so far as they may apply to the company, the company shall be guilty of an offence and liable on conviction to a fine of not less than Naira 2,500; and every officer or agent of the company who knowingly and wilfully authorises or permits the default or failure to comply shall, whether or not the company is also convicted of any offence, be liable on conviction to a fine of not less than Naira 250 and where the offence is a continuing one to a further fine of Naira 25 for every day during which the default continues.

101. We accept the Respondent's submissions, summarised at § 44 above, that the Claimant had the intention to do the things which it was required to do to perform the Management Agreement, and that the prohibition on exercising the powers of a registered company includes a prohibition on the company entering into legally binding contracts. Therefore the critical question is whether entry into the Management Agreement and/or the performance of its obligations thereunder required the Claimant to do things which amounted to carrying on business in Nigeria. If it did, the Claimant had the intention to carry on business in Nigeria, in which case the effect of section 54 is to render the Management Agreement void as a matter of Nigerian law and thus to defeat the Claimant's claims for sums allegedly due under the agreement and for damages incurred as a result of its wrongful termination. That would be so however surprising such a conclusion may be in circumstances where the agreement was performed for several years without objection and was apparently scrutinised by Government lawyers as well as by [C] as part of the due diligence exercise carried out on privatisation of the Respondent.

102. The Companies & Allied Matters Act itself contains no definition of what is meant by "carry on business in Nigeria", but case law has approved the definition contained in the 5th edition of Black's Law Dictionary which is as follows (see Ritz Pumpenfabrik GmbH & Co AG v. Techno Continental Engineers Nigeria Ltd (1999) 4 NWLR 298):

To carry on business means to conduct, prosecute or continue a particular vocation or business as a continuous operation or permanent occupation. The repetition of acts may be sufficient. It also means to hold oneself out to others as engaged in the selling of goods or services.

103. Four further considerations are important in considering the meaning of section 54. The first is that because the section creates a criminal offence, it should so far as possible be narrowly construed. Thus conduct should not lightly be regarded as amounting to the carrying on of business in Nigeria, especially if that would render a company and its officers liable to criminal sanctions in circumstances where such sanctions could not reasonably have been expected. The second is that, as the Nigerian courts have recognised, a wide construction of "carrying on business in Nigeria" in section 54 may lead to injustice, to the detriment not only of the parties concerned but also to Nigerian business in general. Thus in Watanmal (Singapore) Pte Ltd v. Liz Olofin & Co. Plc. [1998] 1 NWLR 311 the Court of Appeal (Lagos Division) was concerned not to adopt an approach to section 54 which (in the words of Pats-Acholonu JCA) would "turn our companies doing business with foreign companies abroad into potential advance fee fraudsters", and would mean that "it is goodbye to business in Nigeria". Third, in relation to illegality more generally, in Onwuchekwa v. Nigeria Deposit Insurance Corporation [2002] 21 WRN 165 the Supreme Court endorsed a restrictive approach to a defence of illegality in order to ensure, in the words of Ayoola JSC at 179, that the defence should not occasion "such an injustice as to be contrary to another aspect of public policy which is that a citizen should not without just cause be deprived of his entitlements". In that case the Supreme Court held that the courts were bound to imply qualifications into a statutory provision concerning exchange control in order to avoid what it regarded as the absurd consequences of a literal construction. Similar reasoning applies here. Accordingly an unduly rigorous or literal construction of section 54 is not appropriate. (We add that we accept the Respondent's submission that, when a breach of section 54 is established, the section itself provides for the consequences of that breach, to which a court or tribunal must give effect; but the case nevertheless demonstrates that the serious consequences of a finding of breach may legitimately be taken into account in determining as a matter of construction what it is that the section prohibits). Fourth, it is for the party (in this case the Respondent) alleging that business is being carried on in Nigeria contrary to the section to prove its case by clear evidence.

104. In the light of these considerations, it appears that the concept of carrying on business in Nigeria involves at least the following factors. First, a company carrying on business in Nigeria is likely to be visible as such to others with which it has dealings. That is inherent in the idea of a holding out of the company to others as engaged in the selling of goods or services. Secondly, it is necessary that the business carried on should be the business of the company concerned, as distinct from some other business. Thirdly, there must be at least some degree of continuity or permanence. Lastly, there should be clear evidence of these matters.

105. We do not accept that the mere conclusion of the Management Agreement constituted the carrying on of business in Nigeria. Whilst it did amount to the exercise of the power of a registered company, such an exercise of power is not voided by section 54 if the threshold finding is not made that the Claimant had the intention to carry on business in Nigeria. By concluding the Management Agreement the Claimant undertook certain obligations, but the assumption of those contractual obligations did not itself amount to carrying on a business in Nigeria. Accordingly the fact that the Claimant had the intention to execute the Management Agreement in Nigeria does not in itself mean that it had the intention to carry on business in Nigeria. Rather the question is whether the performance of the obligations which the Claimant undertook, and which it did have the intention to perform, constituted the carrying on of such a business. That depends primarily upon the extent to which the obligations which the Claimant undertook were to be performed in Nigeria.

106. Most of the Claimant's obligations under the Management Agreement were to be performed (and were in fact performed) outside Nigeria. Thus the assistance provided by the Claimant with the preparation of an annual plan for the hotel, the Claimant's analysis of financial and marketing reports, the marketing of the hotel, and its integration into the Claimant's reservation system and advertising campaigns for the [A] chain were all to be carried out by the Claimant's regional and other offices outside Nigeria. Clearly this conduct did not amount to carrying on business in Nigeria.

107. The conduct of the Claimant which the Respondent principally relies upon as constituting the performance of obligations within Nigeria consists of the employment by the Claimant of personnel engaged in the management of the hotel who were located in Nigeria and the operation in Nigeria of the hotel's bank accounts. However, as Article 4.6.1 of the Management Agreement made clear, although the Claimant had responsibility for the selection of all personnel, those personnel (with the exception of the General Manager) were to be employed by the Respondent and not by the Claimant, although they would take their instructions from the General Manager. Further, as Article 7 demonstrates, the signatories on the hotel bank accounts were to be employees of the Respondents, albeit nominated by the Claimant and with the account under the ultimate control of the General Manager. Subject to the role of the General Manager which we consider next, these matters do not constitute the carrying on by the Claimant of business in Nigeria.

108. Ultimately, in our view, the question whether the Claimant was carrying on business in Nigeria revolves around the position of the General Manager. The General Manager was recruited by the Claimant from outside Nigeria and was seconded to the Respondent in [Nigeria]. The Respondent had the right to approve his hiring, but approval could not be unreasonably withheld. There was some debate about whether the General Manager was employed by the Claimant or the Respondent, but we do not regard this question as decisive. In reality the employment position of the General Manager was something of a hybrid, as the letter of engagement of Mr [F] (which we take as typical) indicates. For some purposes this letter treated him as being employed by the Respondent (it described him as being engaged "on behalf of the local employing unit", a reference to the Respondent) while for other purposes such as his membership of various employee benefit and incentive schemes he was treated as an employee of the Claimant or its parent company [B]. The General Manager was resident in Nigeria at the hotel and reported to the Respondent's monthly board meeting there. However, as Article 4.6.1(b) provided, the General Manager was to be "under [A]'s exclusive control and supervision" although paid by the Respondent.

109. We do not regard the fact the General Manager was located at the hotel as providing the Claimant with a visible presence in Nigeria. He was simply one individual on secondment. Although no doubt the General Manager would have had an office at the hotel, there was no evidence to show that this was or would have been regarded by others as an office of the Claimant as distinct from the Respondent as the owner of the hotel. Further, there was no evidence that anyone dealing with the hotel would have regarded the General Manager as representing the Claimant as distinct from Respondent, or as being in a different position from other employees at the hotel all of whom were in fact employed by the Respondent. Nor was there any evidence to suggest that supplies for the hotel ordered by the General Manager were in fact ordered or would have been regarded as ordered on behalf of the Claimant as distinct from the Respondent. There is no evidence causing any reason to doubt that the hotel's dealings with customers and suppliers within Nigeria, although no doubt also using the [A] name by which the hotel was known, were carried on in the name and on behalf of the Respondent.

110. In these circumstances we are not satisfied that the Claimant had a sufficient presence in Nigeria, or that the Claimant was sufficiently visible to third parties, or was held out by itself or others as supplying goods or services in Nigeria, to constitute the carrying on by the Claimant of business in Nigeria within the meaning of section 54. Rather it was the Respondent who was carrying on business in Nigeria, with assistance from the Claimant and in particular from the General Manager seconded to the Respondent. We acknowledge that the position is finely balanced, but in the end, bearing in mind the considerations set out above which necessitate giving a relatively narrow construction to section 54 and the burden of proof on the Respondent to prove its case of carrying on business in Nigeria by evidence, we conclude that section 54 does not provide the Respondent with a defence.

111. This conclusion makes it unnecessary to consider a further argument by the Claimant to the effect that, if the Claimant was contravening section 54, the Respondent was thereby in breach of various terms of the Management Agreement. If (contrary to our view) the effect of section 54 when applied to the facts of this case had been to render the whole Management Agreement void, there might have been a logical difficulty for the Claimant to rely on terms of a void agreement to avoid the effect of section 54. As it is, however, it is unnecessary to explore this point further.

VIII. The effect of privatisation

The Respondent's case

112. The Management Agreement contained provisions dealing with force majeure as well as one specific reference to privatisation. Article 1.15 defined force majeure as follows:

Force Majeure shall constitute, without limitation, the following : ... act of Government in its sovereign capacity.

113. The consequences of force majeure were dealt with in Article 9.2:

Section 9.2 - Suspension of obligations - Force Majeure

Neither Party shall be liable and neither Party shall be considered as having failed to meet its obligations because of a failure to perform all or any part of them, such as they are stipulated in this Agreement, in the event that such default is due to an occurrence of Force Majeure.

114. The clause referring specifically to privatisation was Article 9.1.2:

Section 9.1 - Title to the Hotel

9.1.2 For the Term of this Agreement, as defined above, the Owner agrees : ... (c) not to enter into any commitment which would be likely to negatively affect the operation of the Hotel by [A] (without prejudice to Owner's right to privatisation of the Hotel); ...

115. In the light of these provisions, the Respondent puts its case in two ways. First it says that the Government's sale of its shares pursuant to its policy of privatisation was an act carried out in its sovereign capacity as the Government of Nigeria because the sale was carried out in accordance with statutory powers conferred upon the Government by the Public Enterprises (Privatisation & Commercialisation) Act 2004. Therefore, says the Respondent, the privatisation constituted an act of force majeure which had the effect of excusing each party from performing all or any of its obligations under the Management Agreement. Second, the Respondent relies on Article 9.1.2(c) and contends that the effect of the words "without prejudice to Owner's right to privatisation of the Hotel" is that in the event of privatisation the Respondent's undertaking not to enter into any commitment that would negatively affect the Claimant's operation of the hotel was extinguished, with the result that the Respondent could now engage in acts deriving from privatisation regardless of their negative impact on the Claimant. It says that the Post Acquisition Plan attached to the Share Sale & Purchase Agreement … demonstrates that privatisation would result in a review of the Management Agreement, the result of which might be that the agreement would not continue.

116. The Claimant disputes this analysis. It denies that the share sale by the Government was carried out in its sovereign capacity, saying that the sale was just like any other sale of shares and did not affect the Respondent's liability under the Management Agreement. It relies upon the separate and distinct personality of shareholders from the company in which they own their shares and points to the fact that a company's contractual obligations do not change by the mere fact that a change in its membership occurs. It draws attention to those clauses of the Share Sale & Purchase Agreement which warrant the continuing existence of the Management Agreement and provide for the purchaser, [C], to assume the liabilities of the Respondent including liabilities arising from the Management Agreement. It says that the conduct of the Respondent following [C]'s acquisition of the shares was not the necessary result of privatisation, but was the Respondent's (or its shareholder's) own commercial choice, and therefore was not on any view "due to an occurrence of Force Majeure".

Force Majeure

117. We do not regard the Government's sale of its shares in the Respondent to [C] as an "act of Government in its sovereign capacity" within the meaning of the definition of force majeure in Article 1.15 of the Management Agreement. The definition clearly contemplates a distinction between those acts of the Government which are carried out in a sovereign capacity and those which are not. In our view the distinction corresponds broadly to the distinction (recognised in Nigerian law) which exists in the law of state immunity between sovereign acts (acta jure imperii) and the kind of acts which although done by a government may also in principle be performed by a private person (acta jure gestionis). The Respondent as the owner of a hotel in … Nigeria was and is an ordinary commercial entity with a separate corporate personality, whose shares happened to be owned by the Government. The fact that the sale was carried out pursuant to statutory powers as a result of a policy of privatisation does not affect the essentially private and commercial nature of the act in question, namely a transfer of shares from one owner to another. It is striking that the Government chose to proceed by means of an agreement, the Share Sale & Purchase Agreement, taking effect in private law rather than directly by legislation or other act which only a sovereign government could perform.

118. This view of the matter is to some extent confirmed by the terms of the Share Sale & Purchase Agreement and the Post Acquisition Plan attached. Clearly the Claimant was not a party to this agreement, and therefore can derive no contractual benefit nor be subject to any burden from it. Nevertheless in principle the agreement is capable of shedding light on the nature of the Government's act in selling the shares and the capacity in which it did so. It seems to us that the nature of the act was that it was a straightforward sale of shares, and that the capacity in which the Government acted was as the owner of the shares who happened also to be the Government, rather than being an act in its sovereign capacity which only a government could have performed. Further, the Share Sale & Purchase Agreement recognised the existence of the Management Agreement with the Claimant and contemplated that this represented a benefit to the purchaser of the shares albeit also involving some liability. While the Post Acquisition Plan contemplated the possibility that the Management Agreement might not continue, there was nothing in the Share Sale & Purchase Agreement to suggest that the termination of the Management Agreement was a necessary consequence of the privatisation or that, if it did occur, it was to occur as an act of sovereign governmental policy as distinct from a commercial decision by the Respondent and its new owner. This is in fact exactly what occurred. It was not the Government's sovereign decision to terminate the Management Agreement, but the commercial decision of the Respondent's new owner because of Mr [D]'s own preference that the hotel should henceforth be run by Nigerians of his choosing without foreign involvement. There is no evidence that this decision was in any way dictated by the Government. Nor was there anything in the Share Sale & Purchase Agreement to suggest that any such termination was to take place without liability on the part of the Respondent to pay whatever compensation might be appropriate in accordance with the terms of the Management Agreement, or otherwise to shelter the Respondent from the legal consequences of such action as its new owner might cause it to take.

119. Accordingly the Respondent's first way of putting its case in relation to the privatisation of the Respondent fails on two grounds. First, there was no "act of Government in its sovereign capacity". Secondly, however, even if the shares in the Respondent were sold by the government acting in its sovereign capacity, the breaches of the Management Agreement by the Respondent with which we deal in the next section of this award were not "due to" (or caused by) such governmental action but were the result of the free commercial choice of the Respondent's new shareholder.

Without prejudice to the Respondent's right to privatisation

120. As for the Respondent's second way of putting its case on privatisation, Article 9.1.2(c) makes clear that the prohibition on the Respondent entering into commitments likely to affect negatively the operation of the hotel by the Claimant does not prevent the privatisation of the hotel (or, more accurately, of the shares held by the Government in the Respondent as the owner of the hotel). However, it does not mean that the Respondent or its new private sector owner was entitled to disregard the Management Agreement once the Respondent was privatised. If that had been intended, much clearer language would have been required than is contained in Article 9.1.2(c).

121. We conclude, therefore, that the privatisation of the Respondent did not have the effect of excusing the Respondent from performing its obligations under the Management Agreement.

IX. Breach(es) by the Respondent

122. It appears to have been the view of Mr [D] that, following [C]'s purchase of a 90% interest in the Respondent's share capital, [C] and the Respondent were entitled to disregard the Respondent's existing contractual obligations under the Management Agreement and that the Claimant's management of the hotel should be brought to an end. We have held that this view was mistaken. It is therefore not surprising that the conduct of the Respondent after [the purchase] included the commission of a number of breaches of the agreement.

123. The breaches alleged by the Claimant are those set out in the two notices of default ... These were as follows:

a) failure by the Respondent to provide working capital sufficient to ensure the uninterrupted and efficient operation of the hotel, contrary to Article 3.4.1 of the Management Agreement;

b) the appointment by the Respondent of a Financial Controller of its choice, contrary to Article 4.6.1(b);

c) denial of the Claimant's right to determine the purchasing policy for the hotel, contrary to Article 4.6.1(d);

d) preventing the Claimant from carrying out the management services specified under the Management Agreement unimpeded, and disrupting or prejudicing the provision of those services and the commercial operation and management of the hotel, contrary to Article 5.1(b);

e) establishing Mr [D] as a signatory on the hotel's bank accounts and imposing a limit on withdrawals, which could be made by other signatories, contrary to Article 7.1(d)

f) failing to pay the fees and other sums due to the Claimant, contrary to Articles 4.3.4, 7.2, 7.3, 7.4 and 7.6; and

g) selecting personnel for the Respondent, contrary to Article 4.6.1(b).

124. We are satisfied that the Respondent was in breach of the Management Agreement in each of these respects. Moreover, in the circumstances which we have described above in which the Respondent's course of action was taken pursuant to an avowed policy of taking over the control and management of the hotel for itself and bringing the relationship with the Claimant to an end, these breaches individually and collectively also constituted a repudiation of the agreement. The circumstances in which they were committed demonstrated an intention by the Respondent no longer to be bound by its obligations under the agreement.

X. Termination of the Management Agreement

Was notice given by the Claimant?

125. Even if the Respondent was in breach, as we have found that it was, it does not accept that the Claimant terminated the Management Agreement validly. Its first point in this connection is that the notices of default … and the notice of termination … were not given by the Claimant but by its parent company [B], which is a stranger to the agreement, so that those notices were of no effect. It adds that the Claimant failed to give the Respondent notice of its acquisition by [B] as required by

Article 9.5.1 of the agreement.

126. We can dispose of this latter point shortly. Article 9.5.1 provided:

[A] shall have the right to assign and transfer its rights and obligations under the terms of this agreement (provided written notice is given to the Owner), to any Affiliate enjoying the benefits of the Chain in the same degree as [A]. Similarly, in the event that [A] should be merged or consolidated into any other corporation, or all of its assets acquired by any other corporation, then its rights and obligations under this Agreement shall be automatically transferred to such corporation. However, it is understood that such corporation shall undertake to operate the Hotel to the same standards prevailing in the [A] Chain of hotels.

127. The acquisition of the shares in the Claimant by [B] was not an assignment or transfer of the Claimant's rights and obligations under the Management Agreement. Accordingly the requirement of written notice to the Respondent in the first sentence of this clause did not apply. Nor was that acquisition a merger or consolidation within the meaning of the second sentence. Likewise, it did not involve any acquisition of the assets of the Claimant by [B] - the assets of the Claimant did not include its shares, which is what [B] acquired. At all times the Claimant remained the party to the Management Agreement. Therefore the Respondent's reliance on Article 9.5.1 is misplaced. In any event Mr [D] attended a presentation about the Claimant …, shortly after the privatisation, and must have known from that time on that the Claimant was a [B] company.

128. It is true that the notices of default and the termination notice were sent on the notepaper of [B], but that notepaper also included the [A] logo, as well as the logos of other hotel chains managed by the [B] group, and the printed address on the notepaper was the Claimant's. The notices referred to the Management Agreement and made clear that they were intended to constitute notices of default and of termination respectively under that agreement. We accept the Claimant's submission that it was sufficient to constitute a valid notice under the agreement that the notice should make clear to the reasonable recipient of the notice that it was a notice under the agreement sent on behalf of the Claimant. This the notices undoubtedly did, and we have no doubt that the Respondent understood them in this way. We therefore reject the Respondent's submission based on the form of the notices.

Did the breaches entitle the Claimant to give notice of default?

129. Secondly, the Respondent says that the breaches of the Management Agreement relied on by the Claimant did not constitute events of default which entitled the Claimant to terminate the agreement. The argument here is that the expression "in the event of default" in Article 9.3.1 refers only to what is described as "an event of default" in Article 9.3.2, and that any breach or breaches which the Respondent may have committed did not fall within the list there set out.

130. Article 9.3.1 provided:

In the event of default by one of the Parties in the performance of its obligations under this Agreement , and should the request for the performance of the obligation sent by registered mail with return receipt requested remain without effect after sixty (60) days or, if such default cannot be cured within sixty (60) days, after such additional period as shall be deemed reasonable to cure such default, provided that the defaulting Party has proceeded and continues to proceed to cure such default, then the other Party will have the right, without prejudice to any other right or remedy, to terminate this Agreement without further notice or indemnity, by giving written notice to the other Party by registered mail with return receipt requested.

131. Article 9.3.2 provided:

Each of the following failures by the Owner or [A] shall constitute an event of default:

(a) failure by the Owner to make available any amount due to [A] under this Agreement for any reason whatsoever, at the end of a sixty (60) day period after such payment has become due and payable; ...

The remaining events of default listed need not be set out. They comprised failures by the Claimant to perform certain of its obligations, or early termination of a Technical Services Agreement entered into between the parties on the same day as the Management Agreement.

132. We are prepared to assume that the Respondent is correct in its submission that the expression "in the event of default' in Article 9.3.1 is indeed limited to the specific events of default listed in Article 9.3.2. Even so, however, this does not avail the Respondent, for three reasons. The first is that the breaches of which the Claimant gave notice included a failure by the Respondent to make available amounts due to the Claimant which were already overdue by 60 days at the date of the Claimant's notice. Accordingly there was an "event of default" within Article 9.3.2(a).

133. The second is that Article 9.3.4 provided the Claimant with a right to terminate which did not require 60 days' notice to be given. It provided as follows:

[A] may at all times terminate this Agreement if Owner does not provide sufficient funds for the proper maintenance and renovation of the Hotel, thereby causing a lack of compliance with applicable [A] standards regarding fire detection and protection equipment, health and safety, quality standards, standards of service and other distinctive characteristics of [A] hotels.

134. On the facts which we have found, set out above, the Claimant was entitled to terminate pursuant to this provision.

135. Thirdly, the right to terminate pursuant to Article 9.3.1 was expressly "without prejudice to any other right or remedy". Accordingly the Claimant was entitled to terminate the Management Agreement for repudiation at common law and to claim damages for such repudiation.

Did the Claimant follow the correct procedure for termination?

136. The Respondent's final argument in relation to termination is that the Claimant did not correctly follow the termination procedure set out in Article 9.3 of the Management Agreement. However, we reject this argument. The Claimant did follow the procedure set out in Article 9.3.1, but in view of our conclusions that the Claimant was also entitled to terminate without giving the notice prescribed by Article 9.3.1 because of the Respondent's breach of Article 9.3.4 and its repudiation at common law, it would not have mattered if it had not done so.

137. We conclude, therefore, that the Claimant was entitled to terminate the Management Agreement and that it duly did so. The Respondent did not suggest any reason why, if we were to reach this conclusion, we should not make appropriate declarations. In our view we ought to do so in order to leave no doubt as to what we have decided.

XI. The Claimant's claim for accrued debts

138. The Claimant is therefore entitled to recover sums which had accrued due at the date of termination, 30 June 2007. This is so both at common law and pursuant to the express provisions of Article 9.3.10, which provided as follows:

If this Agreement is terminated [A] shall be entitled (in addition to any rights or remedies available to it at law or in equity) to all sums, charges and fees which it is entitled to receive under this Agreement ...

139. The Claimant maintains that the amount which had accrued due at the termination date was [amount]. The parties addressed detailed written submissions after the hearing regarding the invoices which the Claimant relies upon in support of this claim. Having examined the parties' submissions and the invoices themselves, we are satisfied that the claim is well-founded, save that the Claimant now admits that invoices totalling [amount] are claimed in error. Accordingly the claim must be reduced by this amount and therefore succeeds in the sum of [amount].

140. The Respondent objected that the Claimant had not pleaded this claim as a claim in debt, and that it could not maintain the claim as a claim for damages. We reject this objection. The claim was clearly treated as a claim in debt. However, if there had been any ambiguity in the Claimant's pleading, contrary to our view, its position was made abundantly clear at the hearing. Since there could have been no possible prejudice to the Respondent, we would if necessary have allowed the Claimant to amend its pleadings to make the position even clearer. As it is, however, this was unnecessary.

XII. Compensation for loss of future earnings

The Claimant's case

141. In principle the Claimant is also entitled to recover damages from the Respondent for repudiation of the Management Agreement, such damages consisting of the profits which the Claimant would have earned if the Management Agreement had continued for the remainder of the Initial Term, that is to say until 31 December 2014. We deal below with the Respondent's argument that the Claimant is not entitled to recover such damages because it was in breach of the final sentence of Article 9.6.1. Suffice to say for the moment that we reject this argument.

142. In support of its claim for such loss of profits the Claimant relies upon the expert report of … an expert in the African and in particular the Nigerian hotel industry, with particular expertise in preparing financial projections to determine the financial viability of new and existing hotels. [The expert] prepared detailed figures to illustrate what the Claimant's earnings would have been likely to be if the Management Agreement had continued. We found his evidence to be of assistance. The Respondent relied on the evidence of [the] managing director of a company providing management, consulting and technology services to the hospitality and tourism industry in Nigeria. [That] evidence was also of assistance, although it was less useful than it might have been because he confined himself to challenging the assumptions and figures put forward by [the expert], without advancing any positive case as to the profits which the Claimant could have expected to achieve.

143. The profits which the Claimant has lost as a result of the premature termination of the Management Agreement consist of the income which would have accrued to the Claimant during the balance of the Initial Term, less the costs which the Claimant would have incurred in earning that income and which as a result of the termination of the agreement it will no longer incur. It is therefore necessary to consider what that income would probably have been, and what costs the Claimant would have incurred in earning it.

144. [The expert] identified four sources of income for the Claimant under the Management Agreement. These were (1) the basic management fee consisting of 2% of hotel revenue and representing about 25% of the Claimant's total income from the agreement; (2) the incentive management fee consisting of 5% of Gross Operating Profit and representing about 30% of the Claimant's total income, (3) the additional incentive management fee consisting of a further 3% of Gross Operating Profit in the event that funds were available after debt service, representing about 20% of the Claimant's total income and (4) the Respondent's contribution to the marketing of the [A] chain consisting of 2% of hotel revenue and representing about 25% of the Claimant's total income. He calculated that the total income from these four sources from 1 July 2007 to 31 December 2014 would have amounted to [amount]. He then discounted this figure to a 2007 present value figure using a discount rate of 12%, arriving at a total claim figure of [amount].

145. These calculations involve a number of assumptions, or projections based on [the expert's] opinion, including the following:

a) that from 1 January 2009 the hotel would have been completed with 577 available rooms;

b) that the room occupancy rate would rise from 50% in 2007 to just under 70% by 2014;

c) that the average daily room rate achieved by the hotel would increase from [amount] in 2007 to [three times that amount] in 2014;

d) that Gross Operating Profits would rise from 44% of hotel revenue in 2007 to 54.3% of revenue by 2011 and would remain at that level for the balance of the period;

e) that the Naira inflation rate over the period would average 8%;

f) that the exchange rate would be constant at Naira 150 to the US dollar between 2010 and 2014; and

g) that 12% represents a reasonable discount rate.

The number of available rooms

146. While most of these assumptions are impossible to test against hard evidence as they involve a degree of speculation, albeit informed speculation, about the future, the assumption that the hotel had 577 available rooms falls into a different category, raising as it does essentially a legal issue. Moreover, this assumption is of critical importance to the calculation as a whole, as it has a major impact on revenue and involves important economies of scale affecting profitability. If the correct basis for calculation is 253 rooms, the number of rooms actually available in 2007 and still today, the whole basis of [the expert]'s calculation would be undermined and the Claimant would not have put forward any reliable basis on which damages could be calculated.

147. The Claimant's case is that the Respondent's obligation under the Management Agreement was to complete the hotel with 577 rooms and other facilities, and to do so to a high standard, albeit that in fact the Respondent never did complete the hotel and the facilities which were opened did not achieve that high standard either during the period of the Claimant's management or subsequently. Consequently, says the Claimant, it is entitled to damages based upon what the Respondent was obliged to do, even if in fact the Respondent's performance prior to termination fell short of its contractual obligations and it has failed to invest in the hotel since the termination of the Management Agreement. It follows also that the actual performance of the hotel either under the Claimant's management before mid-2007 or under the Respondent's management since then is not a reliable guide to the way in which the hotel would have performed under the Claimant's management if it had been properly completed. The Respondent disputes this analysis and relies upon the fact that even now the hotel still has only 253 available rooms as a fundamental flaw in the Claimant's calculation of its damages. In fact the hotel never had more than 253 available rooms and has never been completed as envisaged in the Management Agreement, while its facilities and condition have deteriorated since mid-2007.

148. We accept the Claimant's case on this point. While it may be that the Claimant had acquiesced in the non-completion of the hotel up to mid-2007 when the Management Agreement was terminated, so that it could not have claimed damages based on earnings which it ought to have achieved if the hotel had been completed before that date, the Management Agreement nevertheless provided the Claimant with the right to manage a hotel of 577 available rooms completed to the high standard set out in the agreement. The Claimant had not by its acquiescence up to mid-2007 lost the right to insist on the Respondent performing its obligations properly for the future. Moreover, at the time of the privatisation it appears to have been [C]'s intention to invest substantially in completing the hotel, in the manner explained in the Post Acquisition Plan attached to the Share Sale & Purchase Agreement. The Claimant would have been entitled to give the Respondent reasonable notice that it was required to complete the hotel as provided in the Management Agreement and the Respondent would have been obliged to do so within a reasonable time. The Claimant's calculation of its damages assumes only that the hotel would have been completed by 1 January 2009, thus allowing 18 months for the completion of work to have taken place after the date of termination. If the agreement had continued, a period of 18 months and with notice being given in mid-2007 would have been reasonable. The Post Acquisition Plan itself envisaged completion of the hotel within a period of nine months. Accordingly, we accept the principle that the Claimant's calculation of its damages should be based on 577 rooms being available from 1 January 2009.

The Claimant's earnings

149. However, this would have required substantial investment by the Respondent, as indeed was envisaged by the Post Acquisition Plan, which would have substantially increased the debt repayments which the Respondent would have had to make over the remaining period of the Initial Term. It is not possible on the evidence available to us to quantify these payments, which were not taken into account by [the expert], but they do cast considerable doubt on the Claimant's entitlement to the additional incentive management fee which was payable on Gross Operating Profits only after debt repayments had been taken into account. The Claimant has not attempted to calculate what impact such debt repayments would have had, and we conclude that it has therefore failed to prove that the Respondent would have been obliged to make any payment of an additional incentive management fee to the Claimant. Accordingly we disallow the additional incentive management fee element of the Claimant's earnings calculated by [the expert]. This has the effect of reducing the Claimant's earnings calculated by [the expert] by about 20%.

150. As for the other assumptions and projections set out above, they appear broadly speaking to be not unreasonable, although they are inevitably highly uncertain - in part because they are predictions of what will happen in the future when the future is always difficult to predict, and in part because they are made by reference to a hypothetical hotel which never has existed and never will, namely a 577 room hotel completed to the standard required by the Management Agreement and managed by the Claimant. In these circumstances we approach the figures put forward by the Claimant through [the expert] bearing in mind (1) the burden of proof on the Claimant to prove its damages, (2) the absence of any contrary figures from the Respondent, (3) the expertise of [the expert] which broadly speaking we accept, and (4) the inevitable uncertainty of his projections. Taking these matters into account it is necessary to adopt a broad approach, as indeed the Claimant encouraged us to do. We conclude that it is necessary to discount the figures put forward by [the expert] in respect of the basic management fee, incentive management fee and contribution to marketing expenses (which together represent about 80% of the total claim) by one third. This results in a total figure for these three sources of revenue, discounted to a mid-2007 value, of approximately [amount]. It is not practicable, in our view, to attempt any greater precision.

The Claimant's expenses

151. That leaves for consideration the question of what expenses the Claimant would have had to incur in order to generate this revenue and the extent to which these expenses have not in fact been incurred and will not be incurred as a result of the termination of the Management Agreement. There was little or no evidence about this, the question not being addressed by [the expert] or by any of the Claimant's witnesses. The Respondent submits, citing the English case of Tele2 International Card Co SA v. Post Office Ltd [2009] EWCA Civ 9, that in such circumstances the claim must fail entirely as the Claimant has failed to prove any loss. In some cases such a conclusion will be necessary. However, this case does not lay down a rule of law, but merely shows that such a conclusion will sometimes be open on the facts. In the circumstances of this case we accept in principle the Claimant's submissions that the nature of its business is such that most of its expenses in operating the [A] chain as a whole will be incurred anyway. They will either be fixed costs which are not affected by the loss of one hotel from the chain, or to the extent that they are variable costs, saved variable costs as a result of not having to manage this particular hotel are likely to be relatively modest. Nevertheless it remains for the Claimant to prove its damages and, to the extent that it has not done so, it cannot reasonably expect an award in its favour. Taking these considerations into account, we conclude that it is appropriate to award as damages for loss of profits 60% of the revenue which the Claimant would have earned if the Management Agreement had continued for the balance of the Initial Term. This results in a damages award of [amount]. This is necessarily a fairly arbitrary figure, but it would be wrong and unjust, in our view, to award a lesser figure or even to make no award at all. If (as may well be the case) it represents an excessive reduction, that is the result of the fact that the Claimant has not fully addressed in its evidence a matter on which it bears the burden of proof.

Conclusion on damages

152. We find, therefore, that the Claimant has suffered damages consisting of loss of profits in the sum of [the aforementioned amount] which it is entitled to recover from the Respondent.

XIII. Was the Claimant in breach?

153. The Respondent contends that it was the Claimant which was in breach of the Management Agreement in numerous respects. The alleged breaches on which the Respondent relies fall into two broad categories. First, it relies upon a series of miscellaneous breaches allegedly committed during the Claimant's period of management, including failure to obtain the Respondent's approval for the hiring of the General Manager and Financial Controller, failing to maintain proper records or submit annual plans and accounts, failing to make payments due to the Respondent, giving free rooms to the Claimant's friends and associates, incurring unauthorised expenditure and entering into inappropriate or unauthorised contracts. However, there was no evidence to support any of these allegations, the only evidence adduced by the Respondent consisting of a witness statement from an employee who had only joined the Respondent in October 2010 and had no personal knowledge whatever of the matters about which he purported to give evidence. We found that evidence of no assistance. Such evidence as there was suggested that there was no substance in the Respondent's allegations. We conclude that the Respondent has failed to prove any of these breaches upon which it relied.

154. Secondly the Respondent alleges that, upon the termination of the Management Agreement, the Claimant walked away from its obligations, contrary to the final sentence of Article 9.6.1, which provided as follows:

It is agreed between the Parties that during any controversy, claim, disagreement or dispute [A] shall remain in possession of the Hotel and both parties shall continue to fulfil their obligations under this Agreement until the dispute is finally settled (within the limits of the Initial Term or the Extended Term as provided under Sections 8.1 and 8.2).

155. In circumstances where the Respondent was preventing the Claimant from performing its obligations under the Management Agreement and made no suggestion that the Claimant should continue as the manager of the hotel, this allegation is frankly absurd. The Respondent made quite clear that it wanted the Claimant's management to cease immediately. The final sentence of Article 9.6.1 has no application to such a case. We reject the suggestion that the Claimant was in breach of this provision.

XIV. The Respondent's damages

156. Our conclusion that the Respondent has failed to prove any breach of the Management Agreement by the Claimant means that it is not strictly necessary to consider whether the Respondent suffered any and if so what damages. However, we record that the Respondent made no attempt to prove that it had suffered any damage as a result of the alleged breaches upon which it relies. We find that it did not. For the same reason it is unnecessary to consider the Claimant's submission that the damages claimed by the Respondent constituted indirect or consequential loss and were therefore irrecoverable pursuant to Article 9.9(a) of the Management Agreement.

XV. Interest

157. An arbitral tribunal has power to award interest when the seat of the arbitration is in London pursuant to section 49 of the UK Arbitration Act 1996, which provides as follows:

(3) The tribunal may award simple or compound interest from such dates, at such rates and with such rests as it considers meets the justice of the case -

(a) on the whole or part of any amount awarded by the tribunal, in respect of any period up to the date of the award; ...

(4) The tribunal may award simple or compound interest from the date of the award (or any later date) until payment, at such rates and with such rests as it considers meets the justice of the case, on the outstanding amount of any award (including any award of interest under subsection (3) and any award as to costs).

158. Accordingly we have power to award interest in this case pursuant to this section. We reject the Respondent's submission that the power to award interest is governed by Nigerian law as the proper law of the Management Agreement.

159. The Claimant invited us to award simple interest at a rate of 8% per annum from 1 July 2007 on any sums awarded by way of debt and damages, and to award interest on any costs awarded at the same rate from the date of our award, in each case with interest to run until payment. The Respondent did not suggest that any other rate would be appropriate. We accept the Claimant's submission on this issue.

XVI. Costs

160. Article 31 of the ICC Rules provides that the costs of the arbitration shall include the fees and expenses of the arbitrators and the ICC administrative expenses fixed by the Court, together with the reasonable legal and other costs incurred by the parties and that the arbitral tribunal shall decide which of the parties shall bear these costs or in what proportion they shall be borne by the parties.

161. The parties agreed that liability for costs should follow the event. The Claimant is the successful party and is therefore entitled to recover its costs from the Respondent. We do not consider that it is necessary or appropriate to make any reduction in the costs recoverable by the Claimant to take account of the fact that its damages claim has not succeeded in the full amount claimed.

162. At its session of 10 March 2011 the Court fixed the fees and expenses of the arbitrators in the sum of [amount] and the ICC administrative expenses in the sum of [amount], making a total of [amount]. These costs must be borne by the Respondent. Accordingly, the Respondent must reimburse the share of the advance on costs already paid by the Claimant, namely [amount].

163. The legal and other costs claimed by the Claimant (not including its share of the advance on costs) amount to [amount]. By way of comparison, the Respondent's equivalent figure is [a much higher amount]. We determine that the amount claimed by the Claimant is reasonable and that the Claimant is entitled to recover this sum from the Respondent.

XVII. Formal award

164. For the reasons set out above we award, order and declare as follows:

a) We have jurisdiction to determine the parties' claims and counterclaims herein.

b) The Respondent committed material and repudiatory breaches of the Management Agreement ...

c) The Claimant was entitled to terminate the Management Agreement in consequence of such breaches and duly did so.

d) The Respondent must pay to the Claimant the sum of [amount] (consisting of [amount] as unpaid debt and [amount] as damages) together with simple interest thereon at the rate of 8% per annum from 1 July 2007 until payment.

e) The Respondent's counterclaim fails and is dismissed.

f) The Respondent must pay to the Claimant the sum of [amount] in respect of costs (consisting of its reasonable legal and other costs in the sum of [amount] plus [amount] being the Claimant's share of the advance on costs paid to the ICC pursuant to Article 30 of the ICC Rules) together with simple interest thereon at the rate of 8% per annum from the date of this award until payment.

g) All other claims and counterclaims are rejected.

165. This is our final award.'

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

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