'A. The Parties

(Article 18(1)(a) of the ICC Rules)

1. The Claimant … is a limited liability company organised under the laws of [a US state]. …

2. [Claimant] is a wholly owned subsidiary of [a European company], and is in the business, among other things, of designing, manufacturing, repairing and maintaining gas turbine engines and related equipment. The engines are used in a variety of marine and industrial applications, including marine vessels.

3. [Claimant] is represented in this arbitration by …

4. The Respondent … is a … shipyard incorporated in [a European country].

5. [Respondent] is wholly owned by the … group and is represented by …

B. The Arbitration Agreement and Appointment of the Tribunal

6. Disputes and claims have arisen out of an Amended and Restated Sub-Contract (the "Agreement") made on 21 October 2002 between the Parties whereby [Claimant] (described therein as "the Sub-Contractor") was to supply to [Respondent] (described therein as "the Contractor") two Gas Turbine Propulsion Module Systems ("GTPMS'') containing four gas turbine engines … and two main reduction gear boxes (''MRG") for two … ships, together with services and associated support on the terms stated in the Agreement (CX 1).

7. [Claimant] and [Respondent], described together as "the Parties", agreed that any dispute arising in connection with the Agreement should be settled by arbitration in accordance with the following express provisions:

25. Disputes and Applicable Law

25.1. Pursuant to the provisions of Article 6 of the United Nations Convention on Contracts for the International Sale of Goods, 11 April 1980, said Convention is excluded from transactions between Contractor and Sub-Contractor under this Agreement. The Contractor and the Sub-Contractor expressly agree in recognition of their rights as specified in Article 7 of the Convention on the Law Application to Contracts for the International Sale of Goods, 30 October 1985, that the laws governing the construction and interpretation of this Agreement shall be governed by [the law of country X in Europe].

25.2. All Disputes arising in connection with the present Sub-Contract shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules. The place of arbitration shall be New York City. The language to be used in the arbitral proceedings shall be English.

25.3. The fact that a dispute has been referred to judicial settlement does not entitle the Sub-Contractor to suspend the Sub-Contract Work or in any other respect fail to fulfil its obligations.

8. As described hereafter, disputes have arisen which were referred to arbitration in accordance with the Rules specified in Clause 25.2 of the Agreement. As the Parties did not agree on the number of arbitrators, the ICC International Court of Arbitration ("the Court") decided at its session of 27 August, 2009 that their disputes would be submitted to a three-member Arbitral Tribunal.

[Constitution of the Arbitral Tribunal]

C. Background and Summary of Claims

Background

12. ln October 1995, [Respondent] … concluded an agreement ("the [A] agreement") with [a company A], which represented [country X's] Armed Forces … for the supply of a number of war … ships to [A]. Following amendments to the [A] agreement the final number of ships to be delivered by [Respondent] to [A] was fixed at five and came to be referred to as [Z] ships. An extract from the [A] agreement reveals a provision giving [A] an extensive right of use over all technical documentation that comes to light at [A] or [Respondent] while carrying out the [A] agreement together with a right for [A] to produce and disseminate copies of such documentation ...

13. On 24 September 1996, [Respondent] entered into a Sub-Contract with [company B] to supply 4 GTPMS for four [Z] ships, including associated support, services, training and spare parts with an option to supply up to six additional GTPMS ... In the fifth recital to this sub-contract, [Respondent] acknowledged that [B] and/or its sub­contractors own all technical data and intellectual property associated with the supplies and services to be provided under it except as provided in Clause 4. That clause, but not the recital, is reproduced word for word in the Agreement.

14. The Agreement refers to the above mentioned sub-contract as the "Prior Contract" (Recital A) or the "Prior sub-contract'' (Recital D) and as mentioned hereafter there are several provisions in that sub-contract which have been reproduced in the Agreement without amendment. For example, Annex A, which contains the Technical specifications, is the same and bears the same revised date "1996-09-24" as the sub-contract.

15. Other provisions in the sub-contract, which are identical or almost identical to those in the Agreement and which are relevant to the dispute between the Parties, are Clauses 2 (scope of sub-contract), 13.8 (systematical defect), 20 (intellectual property rights) and 22 (licence and reproduction right).

16. In May 1999, [B] informed [Respondent] that it and [company C] were proposing to establish a Joint Venture Company which became [Claimant], and to assign and transfer to that company all of [B]'s rights and obligations under the Sub-Contract of September 1996. [Respondent] consented to the assignment ... As a result of this assignment [Claimant] was from the time of its formation to supply all GTPMS to [Respondent], although that situation changed as mentioned hereafter.

17. On 30 June 1999, [C] and [B] concluded their agreement to establish [Claimant] and agreed that upon its formation [Claimant] would receive from [B] a licence to use certain technology for defined purposes.

18. As of the same date (30 June 1999), [B] entered into a Technology Licence Agreement with [Claimant] whereby [B] granted to [Claimant], upon the terms and conditions of that agreement, a royalty-free non-exclusive, non-transferable right and licence, without right to sub-license, to use the Licensed Technology supplied under that agreement for the purpose of making, having made, using, selling and further developing in the world certain engines, including [those to be supplied under the Agreement]. [B] also granted [Claimant] the right to make available to sub-contractor that portion of the licensed technology necessary to make those engines provided that [Claimant] and the sub-contractor entered into a written agreement that bound the sub­contractor to certain obligations, including the return of the technology at [Claimant]'s request (section 3). By section 7 of that agreement, [Claimant] bound itself to certain restrictions on disclosure of the technology …

I9. At about the same time, [B] acquired [D] and the merged companies became known as … [D].

20. On 29 October 2000, [Claimant] entered into a Technical Assistance Agreement with [E] of [country Y]. [E] was said to have a continuing requirement to repair, overhaul, convert, maintain and service [Claimant] gas turbine engines owned and operated by the [country Y defence force] for its … program. For that purpose, [Claimant] granted [E] a non-exclusive, non-assignable, non-divisible licence to use technical information and know-how supplied by [Claimant] (Article 1). Subject to certain limitations, [Claimant] agreed to supply [E] with a standard package relating to those engines (Article 2) and to provide level I and II maintenance training for which training manuals would be provided (Article 4).

21. On 11 July 2001, [C] apparently entered into an agreement with [A] regarding the service of GTPMS. A copy of that agreement was not produced in the course of the arbitration, but it was referred to in [a] witness statement … and the agreement was apparently terminated on 3 May 2004 …

22. On 29 June 2002, [D] entered into an agreement with [Claimant] and others. That agreement is stated to be an amended and restated version of the Technology Licence Agreement of June 1999 referred to in paragraph 18 above. Pursuant to section 2 of the amended Licence Agreement of June 2002, [D] granted to [Claimant] upon the terms and conditions set forth herein a royalty-free non-exclusive, non-transferable right and licence to use Licensed Technology, including … marine engines, and to supply that technology under that agreement for the purpose of marketing, selling further developing, installing, servicing, maintaining , repairing and overhauling Licensed Products in the Field of Use, which included marine applications. Further subject to the restrictions and terms set forth in that agreement, [Claimant] was authorized to sublicense the Overhaul and Standard Practice Manuals for use solely in connection with granting rights to third parties to repair and overhaul Engines, including … marine engines …

23. In the 2002 Licence Agreement, [D] agreed not to grant a Licence, without [Claimant]'s prior written approval, to any third parties to use the Licensed Technology or Licensed Patents for the purpose of marketing, selling etc. in the same Field of Use, and agreed not to use the Licensed Technology for the same purpose (section 10).

24. On 21 October 2002, [Respondent] entered into one agreement with [D] … and another agreement with [Claimant] ... Both agreements are entitled an "Amended and Re-stated Sub-Contract" and most of the clauses are identical. Pursuant to those sub-contracts, [D] was to supply five GTPMS and [Respondent] was to supply the other two. The dispute with which this arbitration is concerned relates to the sub-contract with [Claimant], which is referred to in this Award as the

"Agreement". The relevant terms of the Agreement are discussed in this Award.

25. On 5 February 2007, [Respondent] and [Claimant] concluded a Field Services Agreement whereby [Claimant] would perform certain services for [Respondent] in fulfilment of part of the latter's obligation under a master maintenance contract with [A] ... The field services were expected to include maintenance, repair and modifications not related to warranty issues under subcontract (such as the Agreement) for the provision of gas turbines or gear boxes to [A] (Article 2.1.1). The Field Services Agreement, which expired on 30 June, 2008, specified the documentation to be furnished by [Claimant] and used to perform the work (Article 2.1.3 and list of enclosures) for the overhaul of the GTPMS in the … class of ships. That documentation included manuals referred to in Annex to the Agreement.

26. On 5 March 2007, [Claimant] entered into a Maintenance Contract with [A] by which [Claimant] agreed to carry out overhauls, repairs, modifications, defect investigation and listing of the GTPMS and on-call field services as and when required. For the performance of that work, it was agreed that the documentation to be used was as set out in the list of enclosures attached to that maintenance contract. With one addition, the list corresponds to the enclosures list in the Field Services Agreement. The Maintenance Contract also expired on 30 June 2008 and was not renewed.

Summary of Claims

27. [Claimant] makes two principal claims, which arise out of the Agreement. In the first, [Claimant] alleges that [Respondent] breached its intellectual property rights by providing data to [A] without restriction and/or safeguards. The nature of the breach and the relief sought are referred to under the heading "Intellectual property rights".

28. In its second principal claim, [Claimant] alleges that [Respondent] breached the Agreement by drawing down on a performance bond issued by [Claimant]. That claim and the relief sought are referred to under the heading "Performance bond".

29. [Respondent] denies both of [Claimant]'s claims and says that it was entitled to payment from the performance bond because of [Claimant]'s breaches of contract The defences to those claims are referred to under each of the respective headings mentioned in the two preceding paragraphs.

30. [Respondent] also makes a counterclaim in which it alleges that [Claimant] breached the Agreement by supplying defective GTPMS and in particular defective MRG and manuals. [Respondent] also claims that [Claimant] overcharged for parts and generally provided a poor service. That counterclaim, the relief sought and [Claimant]'s defence to them, appear under the heading ''Counterclaim''.

31. Each Party also claims an award that the costs of the arbitration and legal costs and expenses incurred should be paid by the other Party.

D. Proceedings

………

E. The Agreement

Introduction

67. The background to the Agreement is summarized in Section C of this Award. That background is particularly relevant for two reasons. First, the Agreement is expressed to be an "Amended and Restored [sic] Sub-Contract". Second, Clause 25.1 of the Agreement, which is quoted in full in paragraph 7 of this Award, provides that [country X] law shall govern "the construction and interpretation of this Agreement". The claims and defences advanced by the Parties require the Tribunal to construe and interpret the Agreement, and, according to [country X] law, the relevant background to an agreement such as this is admissible for that purpose.

68. The Parties rely on several provisions of the Agreement for their claims, but before turning to them, it is appropriate to refer to the scope of the Agreement as described in Clause 2.

Scope

69. Under the heading "Scope of Sub-Contract", Clause 2 specifies what [Claimant], as the "Sub-Contractor", is (or was) required to supply to [Respondent], referred to as the "Contractor", pursuant and subject to the terms and conditions of the Agreement. The material parts of that clause are quoted below:

Clause 2.1

The Sub-Contractor, at its own risk and expense and for the consideration stated, shall furnish all labour, materials, supplies and equipment and perform all work necessary to provide by manufacture or otherwise and deliver to the Contractor at the specified place of delivery the Supplies (including any development, drawings, technical assistance, ILS, including ILS for ShipSets that are [D] Supplies) and other items and data specified in the Sub­Contract) in accordance with the specifications referred to herein and with the requirements hereof and will assume all responsibility and do all things to be done by the Sub-Contractor by this Sub-Contract.

Clause 2.2

The Sub-Contractor shall for the Sub-Contract Price and in accordance with the terms and conditions set forth in this Sub-Contract

- Provide the Supplies, associated requirements services and documentation in accordance with the Technical Specifications; ...

Perform all other obligations provided for under the Sub-Contract.

Clause 2.6

The Sub-Contractor shall be responsible for any discrepancies, errors, or omissions in the drawings and information supplied by it, provided that such discrepancies, errors, or omissions are not due to inaccurate drawings or information furnished to the Sub-Contractor by the Contractor. The Sub­Contractor shall at its own expense carry out any alterations or remedial work necessitated by reason of such discrepancies, errors or omissions and modify the drawings and information accordingly.

Clause 2.7

The Sub-Contractor shall be liable and responsible for the work [o]f its Sub­

subcontractors to the same extent as for its own works.

Clause 2.8

Each equipment including the associated items are defined in Annex A shall be identical for all Shipsets and the Sub-Contractor shall ensure complete interchangeability.

70. It will be apparent from the above that various terms in the Agreement were defined. Insofar as necessary for a determination of the claims, reference is made in the relevant part of this Award to those defined terms. For the purpose of this introductory section, it needs only be said that in addition to supplying the two sets of GTPMS referred to in Annex D to the Agreement, which are the subject of [Respondent]'s counterclaim addressed in section G of this Award, [Claimant] was required to provide [A], though [Respondent] "information required to operate, repair, maintain and support the supplies" (Clause 22.1 of the Agreement). [Claimant]'s claim to intellectual property, which is described in the next section (F) to this Award, relates to that information.

Guarantee and consideration

71. The "consideration" referred to in Clause 2.1 quoted above is expressed elsewhere in the Agreement. Thus, Clause 5 provides for payment to [Claimant] of the "Sub-Contract Price" (as defined) and Clause 6 provides terms of payment. Those clauses are not in dispute. There are, however, several express terms of the Agreement, which require special attention by the Tribunal. One such term is contained in Clause 7, which required [Claimant] to provide a Performance Guaranty (as defined) for a certain period. [Claimant]'s second claim in the arbitration seeks to recover monies drawn down by [Respondent] under that guarantee. That claim and the associated provisions of the Agreement are the subject of Section H of this Award.

Termination

72. The Tribunal enquired of the Parties whether they agreed that the Agreement was in full force and effect. The Respondent replied as follows:

The Agreement remains in full force and effect. No party has invoked or fulfilled the Agreement's specified grounds for termination. See Agreement, cl. 17. Accordingly, [Claimant] remains under an obligation, inter alia, to keep "all information required to operate, repair, maintain and support the Supplies and the [D] Supplies in an accurate and up to date form." ld., cl. 22.1; see also id., cls. 2, 12, 31, Annex H.5(c).

73. The Claimant replied to the Tribunal's enquiry as follows:

In the Terms of Reference, [Claimant] sought relief from the Tribunal that "[Claimant] has no further obligations to supply intellectual property to [Respondent] under the Agreement as a consequence of [Respondent]'s breaches." Terms of Reference, 33 (2). [Claimant] continues to maintain this position and most recently reiterated it in its filing on 3 December 2010 in response to [Respondent]'s Revised Second Request for Production of Documents.

[Claimant] contends that [Respondent]'s breaches of the Agreement, particularly as they relate to the protection of [Claimant]'s intellectual property, relieve [Claimant] of the obligation to continue delivering its intellectual property to [Respondent]. [Claimant] has demanded a return of the documents supplied under the Agreement and has disclaimed any obligation to provide further documentation, which [Respondent] has acknowledged at least as to Level III documents. See ABD [Agreed Document Bundle] I.2.69, I.2.83. Termination is effective in accordance with these and other notices and the filing of the arbitration claim. [Claimant] requests that the Tribunal address this request for relief together with [Claimant]'s other requests for relief.

74. The Agreement does not specify a date for its termination. Instead, it provides for supply of certain equipment and ongoing support, subject to terms and conditions, which are examined in the next section of this Award. The Agreement does contain an express provision for termination in Clause 17, which begins as follows:

17.1. If either Party is in default according to Clause 16 in the performance of this Sub-Contract, the non-defaulting Party shall give due notice to the defaulting Party and the defaulting Party shall reply on the notice within fifteen (15) Days ...

No notice of termination has been given by either Party.

75. The issue of termination only arises in this arbitration in connection with [Claimant]'s demand for the return of documents and, and [Claimant]'s claim to relief that it has no further obligation to supply intellectual property under the Agreement. Those claims, and the issue of termination, are addressed at the end of the next section of this Award.

F. Intellectual Property Rights

Introduction

76. This section of the Award addresses [Claimant]'s claim that [Respondent] breached intellectual property rights in information provided to [A] through [Respondent] pursuant to the Agreement. As mentioned hereafter, [Claimant] seeks declarations, an order and damages for the alleged breach, which [Respondent] opposes.

77. The Agreement expresses a requirement for [Claimant] to provide "ongoing support, documentation services, training, and spare parts associated" with two supplies of GTPMS for two [Z] ships (Recitals E and F).

78. Under the heading "Integrated Logistic Support'', Clause 19 of the Agreement identifies the documents and spare parts to be provided by [Claimant] under the Agreement. With regard to documents, the Agreement specifies that [Claimant] will provide [Respondent] with "all Operation, Servicing, Maintenance and Overhaul documentation according to Annex H" of the Agreement (Clause 19.1.1). Annex H contains in section A1 a list of the documentation which [Claimant] agreed to supply, and in respect of which [Claimant] claims intellectual property rights.

Intellectual property

79. Under the heading "Intellectual Property Rights", the material part of Clause 20.1 of the Agreement reads as follows:

Unless otherwise specifically agreed herein or from time to time agreed in writing, the Contractor or its Sub-Contractors or other relevant proprietors shall retain ownership of any and all Intellectual Property rights to any and all information in a material form produced or provided by it or them respectively under this Sub-Contractor in relation thereto including, but not limited to, any documentation referred to under Clause 20.2 below.

The following sub-Clause refers to specific documentation that is to remain the exclusive property of its respective proprietor (Clause 22.2).

80. The material part of Clause 20.3 as edited reads:

The copyright and all other rights in or of the drawings, materials, designs and all other documents provided by [Claimant] to [Respondent] or its sub­contractors or customers shall always remain vested in [Claimant] or other relevant proprietors as the case may be

A corresponding provision preserves the copyright in material provided by [Respondent].

Restriction

81. Clause 20 goes on to say that without prior consent in writing, none of the documents referred to in that clause "may be utilised or copied or communicated to any third Party by the receiving Party or agents for any purpose whatsoever other than on need-to-know basis for the operation, maintenance or repair or otherwise for the intended use under the [Agreement] as the case may be" (Clause 20.4).

Licence

82. Under the heading "Granting of Licence and Reproduction Rights", Clause 22 of the Agreement reads as follows:

Clause 22.1

The Sub-Contractor shall provide to [A] through the Contractor under this Sub-Contract all information required to operate, repair, maintain and support the Supplies and the [D] Supplier in an accurate and up to date form.

Clause 22.2

Subject to Clause 22.3, the Sub-Contractor hereby grants without charge a royalty-free, irrevocable, non-exclusive, non-transferable licence to apply, use or reproduce for the services of [A] all information provided under this Sub-Contract or the [D] Sub-Contract which is proprietary to the Sub­Contractor. In this Clause 22.2, the words "use" shall be limited to the purposes of operating, repairing, maintaining and supporting the Supplies and the [D] Supplier.

Clause 22.3

Where the licence rights cannot lawfully be granted by the Sub-Contractor, the Sub-Contractor shall promptly advise the Contractor in writing and use its best endeavours to obtain for [A] similar rights to those referred to in Clause

22.2 from the relevant proprietors of such rights. The Sub-Contractor shall

also promptly advise [A] through the Contractor in writing of any failure to obtain such rights for [A].

Clause 22.4

Under the Sub-Contract the Contractor shall take all reasonable steps to ensure that any proprietary information provided from the Sub-Contractor shall only be applied, used or reproduced by [A] for purposes other than the services of [A], after prior mutual agreement with the Sub-Contractor or other relevant proprietors of such rights.

Clause 22.5

For the purposes of the obligations under this Clause 22, the word

"information" means information as defined in Clause 22.1 and the words "services of [A]" exclude competitive reprocurement activities of [A] and establishing second sources of supply in competition with the Sub­Contractor or its Sub-Contractors.

83. For completeness, reference should also be made to Clause 4 of the Agreement, which under the heading "Transfer of Title/Passing of Risk" includes the following provision:

Clause 4.1

The Supplies, excluding drawings, software and other intellectual property specifically developed under this subcontract, shall become the property of the Contractor on delivery in accordance with Clause 3.2 hereof. For that intellectual property developed during the term of and with the funding specifically designated in this Sub-Contract for customising the engine gearbox for the [Z ship], Contractor shall receive an unlimited, non-monetary, non-exclusive licence.

Clause 3.2 provides for delivery to [Respondent].

Summary of claim

84. The following is a summary of the claim as it appears in [Claimant]'s initial submission ("CIS"), in its response ("CR'') to [Respondent]' Statement of Defence and Counterclaim, and in [Claimant]'s post-hearing submission ("CPHS"). The evidence and submissions on [country X] law relied on by [Claimant] are referred to later in this section of the Award.

85. [Claimant] says that in early 2001, it began supplying proprietary information to [Respondent] (CIS, 12) presumably under the Prior Contract as assigned in September 1999. That supply continued under the Agreement, which was concluded in October 2002.

86. [Claimant] says that it purchased a licence to data manuals etc. from [D] (CR, 81), which is the principal basis for its claim to the "proprietary rights" in the data supplied to [Respondent]. [Claimant] relies on the express terms of the Agreement, which states that [Claimant] (or other relevant proprietors) "shall retain ownership of any and all Intellectual Property rights" (Clause 20.1). [Claimant] adds that, as a result of the merger Clauses 42.1 and 42.3, the Agreement is the entire agreement of the Parties and supersedes all prior agreement and representations (CPHS, 55).

87. What [Claimant] describes as a "representative list'' [of] the manuals supplied to [Respondent] appears on pages 1 and 2 of Annex H to the Agreement (CIS, 12). [Claimant] says that these manuals are extremely valuable proprietary information and trade secrets of [Claimant], and that the Parties recognized and agreed that the manuals would remain the property of [Claimant] and be treated separately from the Supplies (CPHS, 38). [Claimant] denies that information in the manuals is freely available (CR, 82 to 84), particularly in the level III manuals (CR 86).

88. [Claimant] says that Clause 22 of the Agreement deals specifically and exclusively with the use of its manual (CPHS, 59). The licence granted by that clause is limited to the "use'' (as defined) and reproduction of information required to "operate, repair, maintain and support" the vessels (CR, 13) and that information could not be transferred to any other party (CR, 16). The licence does not apply to "new supplies", that is parts or whole GTPMS (CR, 14) or to "competitive reprocurement activities of [A] and establishing second sources of supply in competition with [Claimant]" (CR, 17 and 18). Significantly, [Claimant] says that the limited licence so granted is not transferable (CPHS, 61).

89. [Claimant] rejects [Respondent]'s argument that the limitations in Clause 22.5 apply only to using the manuals to manufacture "spare parts". This interpretation is said to be illogical and contrary to the Agreement (CPHS, 67 and 69). If the Parties had intended the clause to apply only [to] "spare parts", they would have drafted the provision differently. Instead, they agreed to two separate limitations on the licence (CPHS, 70).

90. [Claimant] also says that Clause 4.1 of the Agreement does not apply to the manuals, as [Respondent] claims. The manuals are not part of the supplies to which that clause refers. The second part of that clause refers to intellectual property developed during the term of Agreement with specially designated funding for customising the gearbox (CPHS, 72-74).

91. According to [Claimant], [A] has rejected any intention to abide by the restrictions in Clause 22 (CR, 31 to 35), apparently because its contract with [Respondent] (the [A] agreement) does not contain such restrictions (RX, 11). [Claimant] relies on [Respondent]'s e-mails of 17 June 2008 (CX, 50) and 9 March 2009 (CX, 8).

92. [Claimant] says that [Respondent] has breached its obligations and commitments to protect [Claimant]'s proprietary data by, among other things: (i) transmitting the data to [A] without restriction and without safeguards; (ii) failing to identify [Claimant] data as data for which [A] does not have the right of use (a designation permitted under the [A]/[Respondent] contract); (iii) failing to include reciprocal limited use provisions in the [A]/ [Respondent] contract mirroring those in that contract; and (iv) failing to obtain [A]'s commitment that it will not use [Claimant] proprietary data outside of the limited parameters authorized in the Agreement.

93. [Claimant] contends that [Respondent]'s conduct, as described in the previous paragraph, constitutes a material breach of the Agreement which entitled [Claimant] to damages. ln addition to breaches of the Agreement, [Claimant] contends that [Respondent]'s conduct violated the statutory provisions mentioned in the next two paragraphs.

94. [Claimant] says that confidential and proprietary information constitutes, and was known by [Respondent] to constitute, trade secrets under [country's X's law on the protection of trade secrets] (the "Trade Secrets Act"). [Claimant] goes on to say that the unauthorized disclosure of those trade secrets has and will cause damage to [Claimant] and place it at a competitive disadvantage, and constitutes a violation of the Trade Secrets Act.

95. [Claimant] also argues that the proprietary and confidential information that it transmitted to [Respondent] is copyrighted information protected by [country X's law on copyright] (the "Copyright Act"). [Claimant] says that [Respondent] was aware that the information provided by [Claimant] was protected under the Copyright Act. Accordingly, [Respondent] breached the Copyright Act and caused damage to [Claimant] by misusing and failing to safeguard [Claimant]'s copyrighted material as described.

96. [Claimant] claims damages of "at least [amount] for breach of its IP rights (CIS, 62 to 66). The claim is made up as follows:

(i) Costs of "proprietary data" - [amount]

(ii) Expense of updating it so far - [amount]

(iii) Estimate of cost of future updates - [amount]

(iv) Estimated loss of profit - [amount]

A further breakdown year by year appears in exhibit CX 20. The damages claimed under the Trade Secret Act are not quantified.

97. [Claimant] also seeks the following further relief:

(i) a declaration that [Respondent] is in material breach of the Agreement for failure to safeguard and protect the proprietary information provided by [Claimant];

(ii) an Order in the form of a declaration or injunction that [Claimant] has no further obligation to deliver documents specified in Annex H(a) of the Agreement in any format to [Respondent] and/or [A] and has no obligation to provide supplemental or updated documents or information including as set forth in Annex HB 5 c of the Agreement;

(iii) an Order enjoining [Respondent] from further disseminating [Claimant]'s proprietary material; and

(iv) an Order requiring [Respondent] to return to [Claimant] all documents in its possession, custody or control falling within Annex H, section A of the Agreement and all copies thereof including electronic and hard copies.

Items (ii) and (iv) are taken from [Claimant]'s response to the Tribunal's list of issues.

Summary of defence

98. The following is a summary of the defence as it appears in [Respondent]'s Statement of Defence and Counterclaim (''SDC"), Rejoinder and post-hearing submissions ("RPHS"). The evidence and submissions on [country X] law on which [Respondent] relies are referred to later in this section of the Award.

99. [Respondent] argues that to succeed with its IP claims, [Claimant] has to prove four elements: (a) that [Claimant] owned exclusive rights to specific, identifiable intellectual property; (b) that [Respondent] has breached or violated those rights; (c) that [Respondent]'s alleged violation caused demonstrable harm to [Claimant]; and (d) that [Claimant] has suffered quantifiable damages as a result. [Respondent] says that [Claimant] has failed to carry its burden on each of those elements (RPHS, 4).

100. [Respondent] denies that [Claimant] has any intellectual property rights or other proprietary rights in information contained in documents provided to [Respondent] under the Agreement (SDC, 32 and 33 and Rejoinder, 7 and 10 to 16). [Respondent] says that it is [D] who is the owner of any rights to the ... engines (SDC, 34, Rejoinder 8 and RX, 62) and that [Claimant] has not specified those parts of the documents that are said to be proprietary (Rejoinder, 10 and RPHS, 5).

101. [Respondent] affirms that Clause 22 of the Agreement constitutes a licence to use, apply or reproduce all information necessary to operate, repair, maintain and support the GTPMS delivered by [Claimant] and [D] (SD, 45), and says that this licence was given against a background that [Claimant] would supply [A], through [Respondent], that information. [Respondent] denies that the licence was limited to [A]'s internal use (SDC, 47 to 56 and Rejoinder 24 to 33); only the purpose was limited (Rejoinder, 33).

102. [Respondent] says that [Claimant] has failed to show that an unauthorized use or distribution of any GTPMS manuals (or any other lP violation) has occurred. Clause 22.1 of the Agreement requires [Respondent] to give the manuals to [A], and there is no allegation that [Respondent] has given the manuals to any party other than [A]. A distribution that is specifically authorized under the Agreement cannot form the basis for a breach of contract claim, a copyright claim, or a trade secrets claim. Moreover, to the extent [Claimant]'s true concern is that [A] will distribute the manuals to third parties, it is undisputed that [A] (which is not a party to the contract or this arbitration) has not shared the manuals with any third parties except for one occasion in 2000 (i.e. its 2000 maintenance contract solicitation process), and it has expressly represented that it will not do so outside the scope of the licence in the [Claimant] Agreement, in the future (RPHS, 6).

103. In any event, the use of the manuals that [A] contemplates - distribution, with appropriate confidentiality restrictions, to potential bidders for a GTPMS maintenance contract - is specifically permitted by the [Claimant] Agreement. As noted above, Clause 20.4 expressly permits the sharing of any documents received from [Claimant] with "any third Party" and "[w]ithout prior consent in writing", so long as it is on a "need-to-know basis for the operation, maintenance or repair" of the GTPMS units or another "intended use" under the Agreement (Clause 20.4). In addition, Clause 22.2 grants an irrevocable non-exclusive licence for the purpose of "operating repairing, maintaining and supporting" the GTPMS units. Both independently and taken together, these clauses indicate that the manuals can be shared with third parties for maintenance and repair purposes, including in a competitive bid for a maintenance contract (RPHS 7).

104. [Respondent] argues that Clause 22.5, on which [Claimant] relies, excludes the use of [Claimant]-supplied manuals for "competitive reprocurement" and for "establishing second sources of supply" in competition with [Claimant]. But [Respondent] says that by its express terms, Clause 22.5 only applies "[f]or the purposes of the obligations under this Clause 22"; it has no application to Clause 20.4 and the permissible uses thereunder. Further Clause 22.5 addresses "reprocurement" of what the Agreement initially procures (i.e. supply, not servicing) and the possible establishment of second "sources of supply", not maintenance and servicing. To read the provision more expansively is not commercially reasonable; creates a conflict between what Clauses 20.4 and 22.2 permit and what Clause 22.5 forbids; and ignores the established fact that by its own admission, [Claimant] was initially "not in a position" to provide servicing and later expressly agreed to a servicing contract with [A] of limited duration (RPHS, 8).

105. [Respondent] says that it is common ground that the Agreement did not give [Claimant] any right to maintain or service [A]'s GTPMS units. Nor did [Claimant] object when [A] distributed the manuals in connection with a maintenance contract solicitation in 2000 (RPHS, 9).

106. [Respondent] goes on to say that Clause 22.4 also shows that [Respondent]'s conduct has not violated any of [Claimant's] rights. That clause requires [Respondent] to take "all reasonable steps to ensure that any proprietary information provided from [Claimant] shall only be applied, used, or reproduced, by [A] for purposes other than the services of [A], after prior mutual agreement with" [Claimant]. This clause is said to be the only affirmative obligation [Respondent] undertook with respect to protecting [Claimant]'s proprietary information vis-à-vis third parties. [Respondent] argues that it more than satisfied this obligation when, among other things, it notified [A] of the actual, restrictive language of Clause 22 in 2000 and again in 2008 (RPHS, 10).

107. Further, [Respondent] says that [Claimant] gave [A] copies of the same manuals and materials at issue independently and without restriction, in connection with the 2007 [Claimant]-[A] maintenance contract - a contract directly with [A] to which [Respondent] was not a party (RPHS, 12).

108. [Respondent] also denies that [Claimant] has suffered any damages and/or that any loss was caused by actions or omissions of [Respondent] (SDC, 80 to 91). [Claimant] has failed to identify a single contract lost as a result of anything done or not done by [Respondent] (RPHS, 11). In any event, [Claimant]'s loss of profit claim is also said by [Respondent] to be excluded by Clause 41 of the Agreement (SOC, 76 to 79).

109. [Respondent] also says that [Claimant] has not discharged its burden of proving compensable or quantifiable damages. It is said that [Respondent] has "provided nothing (other than brief, summary tables and calculations, prepared specifically for this litigation) to justify its damages calculations, its alleged profit margins, or its discount rates - much less, its claimed right under [country X] law to recover lost profits and the entire cost of acquiring and developing its alleged intellectual property. According to [Respondent], even the summary tables [Claimant] has provided are wholly inadequate to establish, with any degree of certainty, the quantity of damages [Claimant] allegedly has suffered. [Claimant]'s summary of the amount of its expenditures to update "technical publications", for example, does not attempt to break down how much of its alleged expenditures were spent on maintenance manuals (as opposed to other types of documentation), for the [engines] (as opposed to one of the other engines in [Claimant]'s inventory). In short, its damages calculations are entirely speculative and without foundation in law or fact (RPHS, 13).

110. [Respondent] doubts that the documents supplied by [Claimant] contain trade secrets within the meaning given in the [country X] Trade Secrets Act (SDC, 93 to 95). In any event, [Respondent] denies that it "willfully or negligently" disclosed a trade secret that could possibly make it liable under Section 6 of the Act (SDC, 96). [Respondent] also says that there is no causal link between the alleged violation of the Act and the alleged damage (SDC, 97).

111. [Respondent] also challenges [Claimant]'s claim under the [country X] Copyright Act because it says that (i) [Claimant] is not the author of the documents (SDC, 101), (ii) copyright does not apply to the information allegedly protected and (iii) damages are limited to loss of profit for the sale of documents and no such damages has been suffered (SDC, 101 to 103).

112. [Respondent] requests the Tribunal to dismiss [Claimant]'s IP claims and to declare that for the purposes of Clause 22 of the Agreement, the words "services of the [A]" shall include maintenance, repair and support of the Supplies by [A] or any third party contractor retained by [A] to perform such maintenance, repair and support. [Respondent] further requests that the Tribunal order [Claimant] to comply, on a prompt and ongoing basis, with its obligation under Clause 22.1 to provide "all information required to operate repair, maintain and support" its supplies "in an accurate and up to date form", including via updates to the GTPMS manuals. [Respondent] has pleaded a breach of Clause 22.1 (ABD Ex. A.5.21, para 1), and [Claimant] has admitted that it has not provided [Respondent] with all updates to the manuals (Tr. 1090:16-24· Tr. 822 10-14).

Issues

113. The principal issue between the Parties in respect of the Intellectual Property dispute is whether [Respondent] has breached Clause 22.4 of the Agreement by failing to take reasonable steps to ensure that "proprietary information" provided by [Claimant] pursuant to the Agreement has or will not be used for purposes other than "the services of [A]" without [Claimant]'s consent. That issue raised several sub-issues which the Tribunal identified and to which each Party responded in writing prior to the Hearing.

Discussion

114. Having identified the issues relating to the intellectual property dispute, it is useful to begin this discussion by considering the effect of Clause 42 of the Agreement, which for obvious reasons is referred to as the "merger clause" in the Parties' submissions.

Merger clause

115. Under the heading "Entire Agreement", Clause 42 reads in material part as follows:

Clause 42.1

The terms and conditions of this Sub-Contract and Annexes A-N annexed hereto shall comprise the entire agreement of the Parties and shall wholly supersede all prior oral or written agreements, representations, writings, correspondence, memoranda or other documents.

Clause 42.4

This Sub-Contract together with the [D] Sub-Contract constitutes an amendment and restatement of the Prior Sub-Contract, and the Prior Sub­Contract shall be of no further force and effect. Sub-Contractor shall not have any liability under or in connection with the [D] Sub-Contract, nor shall Sub-Contractor have any liability under the Prior Sub-Contract for any failure of performance by [D].

116. Under the applicable law, the meaning to be derived from the plain contract language shall be presumed to correspond to the common intention of the Parties. Thus, the effect of Clause 42 is that the plain wording of the Agreement cannot be contradicted or supplemented by evidence of prior statements or agreements. At least, the parties shall be presumed to have intended to exclude such possibility.

[Country X] law on this point corresponds to the general principle laid down in UNIDROIT Principles of International Commercial Contracts, UNIDROIT 2010 (UPICC) Art. 2.1.17 as refined in Ole Lando and Hugh Beale (ed.), Principles of European Contract Law prepared by the Commission on European Contract Law Part 1 and II, Kluwer 2000 (PECL) Art. 2:105. However, prior statements and other sources extrinsic to an agreement may be relied upon to interpret the writing in order to establish what the common intention was or must be deemed to have been. This means that the Tribunal may consider extrinsic evidence as far as the common intention of the parties cannot be determined by the plain wording of the Agreement.

117. The various clauses of the Agreement must be understood in the light of the Agreement as a whole and it is to be presumed that all elements of the Agreement are intended to work as a system. Furthermore, those elements will be understood to have a meaning and a purpose. Hence, an interpretation that gives meaning to the contract language will be preferred before an interpretation that would deprive the contract language of a meaning ...

[Claimant]'s claim

118. The claim of [Claimant] gives rise to the following fundamental questions:

(i) Has [Claimant] established that under the Agreement it has provided any information that is proprietary to [Claimant]?

(ii) If yes, did the Parties intend that [Respondent] was to be liable to [Claimant] for any failure to ensure limited use of information not only of information that is proprietary to [Claimant] but also of information that is proprietary to [D]?

(iii) If yes, what are the limits for [A]'s use? and

(iv) Has [A] due to any omission on the side of [Respondent] exceeded these limits?

All these questions to a large extent relate to the proper interpretation of the Agreement. They are addressed in turn below.

Proprietary information of [Claimant]

119. Having determined how the Agreement, including Clause 22.4, must be interpreted, the Tribunal turns to consider the meaning of the expression "proprietary information" in that clause. Unlike the term "Intellectual Property" that expression is not defined in the Agreement.

120. The Tribunal finds that the word "proprietary" must be understood to relate to information that is owned by someone in the sense that no other person can use it without the owner's permission - unless that person develops the same information by himself.

121. [Claimant] submits that the information includes all the operation, maintenance and overhaul documentation specified in Section A of Annex H to the Agreement. [Respondent] submits that these documents contain generally available information.

122. The Tribunal need not examine whether any particular information item is considered publicly available in the sense that it cannot be proprietary to anyone. It suffices to say that the documentation specified in Section A of Annex H to the Agreement as a compilation at least with regard to Level III service may be proprietary to [Claimant] or [D].

123. It is apparent that a non-exclusive licensee to information cannot in the ordinary sense of the word claim to be the proprietor of the information. He must tolerate that the licensor may choose to give the same user rights to any third party.

124. This understanding of the word "proprietary" leads to the conclusion that [Claimant] cannot claim that the information that [Claimant] received from [D] under the [D] Licence Agreement is proprietary to [Claimant].

125. The question then is whether [Claimant] has provided any information to [Respondent] beyond the information that [Claimant] has received under its non-exclusive licence. The Tribunal finds that, in order for it to succeed on its Intellectual Property claim, [Claimant] must at a minimum establish that it has provided such information.

126. [Claimant] has not managed to prove this beyond the contested assertion that it has provided [Respondent] with two manuals which apparently have been updated by [Claimant] based on information seemingly originating from [D].

127. The updates, which may be proprietary to [Claimant], were identified shortly before the end of the Hearing and made subject to the Confidentiality Agreement concluded in the course of the proceedings. [Respondent] has denied that these updates had been provided to it before the hearing.

128. The Tribunal finds that the uncertainties as to whether the updates were provided to [Respondent] or not are too great to allow any definite conclusion as to whether [Respondent] has in fact received the information, and, if so, when. For the purpose of the following analysis, however, the Tribunal is prepared to assume that [Respondent] did receive the updates and that they contained information proprietary to [Claimant].

Proprietary information of [D]

129. Reverting to the wording of Clause 22.4 of the Agreement, it is obvious that [Respondent]'s obligations only extend to "information provided from [Claimant]". Thus, [Claimant] cannot under the Agreement base its claims on any failure to protect information that [Respondent] received from [D] under the [D] Agreement.

130. The Agreement and the [D] Agreement are nearly identical. Each agreement contains an undertaking by [Claimant] or [D] to provide [Respondent] with documents containing information according to Annex H. Annex H of both agreements is identical.

131. It has not been submitted that [D] failed to provide [Respondent] with the information set forth in Annex H. Apparently, [Claimant] has provided the same information to [Respondent].

132. Clause 22.4 relates to "any proprietary information". Semantically this means information that is proprietary to anybody, which suggests that Clause 22.4 may give rise to an obligation towards [Claimant] to protect the information in Annex H irrespective of whether it is proprietary to [Claimant] or [D] as long as it is provided by [Claimant].

133. Given that [Respondent] has undertaken the same obligation towards [D] under Clause 22.4 of the [D] Agreement, it follows that by failing to protect information proprietary to [D] in a case where the information was provided by both licensors, [Respondent] can be in breach of both agreements.

134. The question arises whether such a regime can have been intended by the Parties.

135. Given that [Claimant] as [D]'s non-exclusive licensee may have an interest to limit the possibilities that [Respondent] and/or [A] would divulge the information to unauthorised third parties, [Claimant] can be presumed to have had an interest to find a way to act against [Respondent] in case [D] as the proprietor would be passive or tardy in its actions.

136. The conclusion that Clause 22.4 in the Agreement gives rise to a liability for [Respondent] towards [Claimant] for any failure to protect [D] proprietary information communicated by [Claimant] is hence supported by the wording of the Agreement as well as by a reasonable interpretation.

137. The Tribunal will proceed in its analysis based on this conclusion.

Limits of use

138. [Respondent] submits, and on the basis of the evidence of [a witness] that subsequent to the Agreement [A] expressly declared that it accepts the limitations of use of the information provided by [Claimant] and specified in Clause 22 of the Agreement. However [Claimant] on one side and [Respondent] and [A] on the other side differ in their interpretation of the expression "for the services of [A]".

139. In order to resolve this dispute, an examination is required of what the Parties intended with the expression "for the services of [A]".

140. The expression is clarified in Clause 22.5: "[T]he words services of [A]" exclude competitive reprocurement activities of [A] and establishing second sources of supply in competition with [Claimant] or its Sub-Contractors."

141. The first problem to be resolved lies in the fact that the Parties have different views as to whether the exclusion in Clause 22.5 concerns the use of the information for service and support supplied by third parties as [Claimant] maintains or whether the exclusion is concerned with procurement of the "Supplies'' (as defined in the Agreement) as [Respondent] maintains.

142. Accordingly, it is not possible to establish whether the Parties had any common intention as regards the expression. Under the applicable law, the expression must therefore have to be interpreted by an objective reasonability test departing from the plain semantic wording taking into account the nature and purpose of the Agreement as well as any subsequent events.

143. Pursuant to Clause 22.1 [Claimant] undertakes to deliver all information required to operate, repair, maintain and support the [Claimant] Supplies and the [D] Supplies to [A] through [Respondent]. The licence is set forth in Art. 22.2, which is repeated below with revised definitions:

Subject to Clause 22.3 [Claimant] hereby grants without charge a royalty-free, irrevocable, non-exclusive, non-transferable licence to apply, use, or reproduce, for the services of [A] all information provided under this [Agreement or the [D] [Agreement], which is proprietary to [Claimant]. In this Clause 22.2, the words (sic) 'use' shall be limited to the purposes of operating, repairing, maintaining and supporting the Supplies and the [D] Supplies.

144. Thus, it must reasonably be concluded that the parties intended that the licence should be for the benefit of [A] and [Claimant] was to allow [A] to put the information to use for the purpose of repairing, maintaining and supporting the Supplies and the [D] Supplies.

145. It may be mentioned in passing that Clause 22.2 does not say who is to be the licensee. The reference to Clause 22.3 however seems to support the view that the licensee was to be [A]: "Where the licence rights cannot lawfully be granted, [Claimant] shall ... use its best endeavours to obtain for [A] similar rights to those referred to in Clause 22.2 from the relevant proprietors." The possibility that the intended licensee was to be [Respondent] and that [Respondent] was to sub-license or transfer its rights to [A] seems to be contradicted by Clause 22.2 since it is explicitly stipulated that the licence is "non-transferable".

146. Having examined the terms of Clause 22, the Tribunal turns to consider Clause 20.4, which may also be usefully requoted:

Without prior consent in writing, none of the above documents may be utilised or copied or communicated to any third Party by the receiving Party or any of its personnel or servants or agents for any purpose whatsoever other than on need-to-know basis for the operation, maintenance or repair or otherwise for the intended use under the Sub-Contract, as the case may be.

147. Construing that clause in the context of the Agreement as a whole, the Tribunal finds that the parties must have intended that [A] - as the receiver of the information in Annex H - was to abide by the same restrictions as regards copying and communication to third parties. Clause 20.4, read e-contrario, would then also mean that [Respondent] and/or [A] could copy or communicate the information to third parties for the intended use under the Agreement.

148. This limited right would hardly serve any purpose unless the Parties foresaw that [A] might have a need to rely on third parties for the operation, maintenance or repair of the hardware to the extent that such services were not to be provided by [Claimant] under the Agreement (cf. Clause 13.7 (ii)). This possibility must have been in the contemplation of the Parties, because, as the Tribunal finds on the evidence, that they knew that [A] did not have its own repair yard ...

149. The Agreement is said to include certain elements of associated ongoing support ... services, training and spare parts as regards the Supplies and the [D] Supplies (see Recitals E and F). [Claimant] has however not committed to render any services after Delivery except repair and replacement of defective parts under the warranty provisions in Clause 13 and the delivery of spare parts under Clause 19.2. Such further services were the subject of a prior agreement between the Parties, namely, the Field Service Agreement of 5 February 2002 which was concluded for the period through 30 June 2008 (H.1.14).

150. Thus, it appears that the Agreement does not deal at all with maintenance and repair and that such services were subject to separate legal relationship and to another arbitration agreement.

151. Given this, the Tribunal finds that the expression "for the services of [A]" should be understood to include service and maintenance without regard to whether [A] produced the services in-house or whether it acquired the services from [Claimant] or another a [sic] third-party service provider. The limitation in Clause 22.4 and particularly the expression "reprocurement" shall be understood to relate to new procurement of the Supplies (including spare parts) as defined in the Agreement.

152. In reaching this conclusion, the Tribunal has had regard to the communication between the Parties in May and June 2008. The communication can be understood as a conveyance by [Respondent] to [A] of [Claimant]'s position with regard to Clause 22.4. Furthermore, the communication took place between [Respondent] and [A] and shows a strong desire on [Respondent]'s side to be kept out of any discussions between [Claimant] and [A]. [Claimant] cannot reasonably invoke the correspondence and say that it has relied on it as an acceptance by [Respondent] of [Claimant]'s position.

Reasonable steps

153. On the assumption already stated that [Claimant] did provide information updated by [Claimant] that originated from [D], and on the basis of the Tribunal's interpretation of the expression "for the services of [A]", the Tribunal turns to consider whether [Respondent] took reasonable steps to ensure that the information was not misused. In other words, has [Claimant] proved that [Respondent] breached clause 22.4 of the Agreement?

154. It is undisputed that [Respondent] has an obligation under Clause 22.4 of the Agreement, which is repeated hereafter with revised definitions:

Under the [Agreement, [Respondent]] shall take all reasonable steps to ensure that any proprietary information provided from [Claimant] shall only be applied, used, or reproduced, by [A] for purposes other than the services of [A], after prior mutual agreement with [Claimant] or other relevant proprietors of such rights.

155. The Tribunal will start its analysis based on the finding that reasonable persons of the same kind as the Parties would understand Clause 22.4 to mean that the licensee ([Claimant]) would take reasonable steps to see to it that his customer ([A]), to which it is intended to pass on the information, accepts to use any proprietary information that is issued by the licensor ([Claimant]) only for "the services" of the customer, unless the customer has permission by the proprietor to use it for other purposes.

156. In the present case, [Respondent] had entered into the [A] agreement with [A] in October 1995, i.e. seven years before the Agreement. The [A] agreement did not contain any such limitation on [A]'s right to use information that [Respondent] provided to it (K.1.166 Clause 26.1 and 26.2).

157. In 1996, as mentioned in Section C of this Award, [Respondent] entered into a Sub­Contract with [B] for the delivery of GTPMS units for the ... vessels (H.1.2). That Sub-Contract contains a Clause 22.4 identical to the one found in the Agreement.

158. [Respondent] must have realised that Clause 22.4 in the Sub-Contract imposed a duty on it to take reasonable steps to seek to modify the [A] agreement so that the limitation of [A]'s user rights was mirrored in the [A] agreement.

159. Since Clause 42.4 stipulates that the Agreement is a restatement of the Sub-Contract between [Respondent] and [B] (re-named [D]) of 24 September 1996, which was assigned to [Claimant] on 30 September 1999, and the obligation upon [Respondent] to protect the information is the same, the obligation under the Agreement must be considered to apply also to any proprietary information communicated by [D] under the prior and assigned agreement.

160. When it was decided to establish [Claimant] in 1999, [D] agreed to transfer to [Claimant] certain technology and a Licence Agreement was concluded between the two companies in June of that year. In June 2002, that Agreement was amended and re­stated, and [Claimant] claims that its right to intellectual property and/or proprietary information relevant to the dispute with [Respondent] derives from the June 2002 version of the Technological Licence Agreement. That Agreement was concluded four months before the Agreement was signed by the Parties to this arbitration.

161. According to the June 2002 Agreement, [D] granted to [Claimant] upon the terms and conditions contained therein a royalty-free non-exclusive non-transferable right and licence to use the defined Licensed Technology for certain purposes including maintaining, repairing and overhauling the Licence to Products (section 2). Those Products included, among others, the marine engines ... [Claimant] was also authorised by [D] to sub-license the overhaul and standard practice manuals for use solely in connection with granting rights to third parties to repair and overhaul engines including the [engines in question] (section 2 (a) of the June 2002 Agreement).

162. As a result of the [D] grant made in the June 2002 Agreement, [Claimant] was able to grant [Respondent] the Licence contained in Clause 22.2 of the Agreement and to indemnify [Respondent] against any infringement of intellectual property rights (Clause 21). The Licence granted to [Respondent] is expressed to extend to "information provided under the Agreement or the [D] sub-contract which is proprietary to [Claimant]" (Clause 22.2). According to [Claimant], that information included all the operation maintenance and overhaul documentation specified in section A of the annex H to the Agreement, which it agreed to supply to [Respondent] by Clause 19.1.1.

163. In the course of the arbitration, [a witness] gave evidence, which the Tribunal accepts, that [Respondent] did inform [A] about Clause 20.4, 22.1, 22.2 and 22.5 in the [D] Agreement following an inquiry by [A] (I.1.12). Apparently, [A] did not object to the limitations pursuant to said provisions, which are identical to the same clauses in the Agreement. This information is sufficient to clarify the limitations on use that [A] was to observe. The fact that Clause 22.4 was omitted does not change this conclusion. Clause 22.4 regards the obligations of [Respondent] towards [Claimant] and beyond that only clarifies that [A] may not exceed the limits of the licence.

164. In any event, in 2008 [Respondent] provided [A] with Clause 22 of the Agreement in its entirety. At that point the Parties and [A] were debating the interpretation of Clause 22.5 and particularly the question whether [A] could disclose the manuals to third-party service providers within the limits of its licence (I.1.48 and I.2.55).

165. It is undisputed that [Respondent] did not put a legend on or mark the documents received from [B]/[D] or [Claimant] to show that the documents were confidential. The Tribunal notes that [Claimant] apparently did not put a legend on the documents that [Respondent] was to pass on to [A]. In such circumstances, Clause 22.4 cannot be interpreted as giving rise to an obligation for [Respondent] to mark the documents of [B]/[D] or [Claimant]. At least the issuer of the documents should have made clear to [Respondent] that the documents must be marked accordingly.

166. As already mentioned in this section of the Award, the Tribunal accepts [Respondent]'s submission that subsequent to the Agreement [A] expressly declared that it accepts the limitations set forth in Clause 22.4.

167. The Tribunal notes that in 2000 [A] distributed the manuals to third-party service providers in a bidding process. [Claimant] knew about this and did not object. This circumstance is of relevance as regards the interpretation of the Agreement being a restatement of the 1996 Agreement between [Respondent] and [B]/[D]. Due to its failure to clarify the interpretation, [Claimant] has to bear the risk of that occurrence.

168. From the above, it follows that [Claimant] has not shown that [A], due to any failure on the side of [Respondent], has exceeded the limits for the use of proprietary information set in Clause 22.4.

Statutory provisions (Introduction)

169. The Tribunal has found that [Claimant] has not established that [A] exceeded the limits set by [Claimant] for use of any proprietary information licensed to [Respondent]. From this, it follows that [Respondent] (and [A]) are deemed to have acted within the scope of the licence in the Agreement.

170. From this finding it also follows that that [Claimant] cannot claim that [Respondent] is infringing the copyright that [Claimant] may have to any documents containing information that is proprietary to [Claimant] or that [Respondent] is infringing any copyright that [D] may have in documents containing information that [Claimant] has licensed to [Respondent]. Neither can [Claimant] claim that [Respondent] has violated the Trade Secrets Act.

Copyright

171. The fact that [Claimant] does not have proprietary rights to any information communicated under [D] Licence Agreement does not mean however that [Claimant] cannot claim that a party to which it has communicated the Licensed Technology has breached an agreement with [Claimant] and thereby is liable to copyright infringement as an alternative to breach of contract. In the former case, the non­exclusive licensee bases his claims on non-contractual grounds; in the latter alternative case on contractual grounds.

172. It may be that [Claimant], as a non-exclusive licensee of [D], claims that [Respondent] is infringing copyright to documents containing information that [D] licensed to [Claimant]. In this case, [Respondent] asserts as a defence, that it has received a licence from [D] to the very same documents that [D] Iicensed to [Claimant] and that it has acted within the scope of its licence from [D].

173. In either case, for an infringement claim to be successful, the Tribunal needs to be satisfied that [Respondent]'s use of the documents is in breach of the Agreement or in breach of the [D] Agreement. Although a non-contractual matter, the parties agree that this Tribunal has a mandate to consider it.

174. As far as a licensee wishes to pursue an infringement claim under the Copyright Act, it must show that its rights as a licensee is affected by the alleged infringement.

175. The rights of a non-exclusive licensee can only rarely be affected by an infringer - who in this respect may be seen as licensee who enjoys a royalty-free licence from the copyright holder.

176. [Claimant] has not explained how its position as a non-exclusive licensee under the [D] Licence Agreement is affected by any use by [Respondent] and/or [A] of documents to which [D] has copyright.

177. The copyright infringement claim will thus be considered only as regards any unauthorised use of [Claimant]'s copyright, and, as the Tribunal has found, there has been no unauthorised use.

Trade secrets

178. As regards [Claimant]'s standing to claim that [Respondent] has misused information and is liable under the Trade Secrets Act, [Claimant] can only make a claim against [Respondent] under the Act if [Claimant] can show that it has divulged the trade secret in confidence to [Respondent]. In the present case, [Respondent] accepted certain obligations before receiving any information from [Claimant] respective [D]. The question whether [Respondent] has misused any such information and hence can be liable under the Trade Secret Act coincides with the question whether [Respondent] has breached any such obligations towards [Claimant] so that the remedies under the Act become available to [Claimant].

179. As in the case of copyright infringement, the claim under the Trade Secrets Act will be considered only as regards any unauthorised use, which, in this case, means unauthorized use of trade secrets communicated by [Claimant] to [Respondent] in confidence. Although [Claimant] does not assert that it bases its claims in this regard on the Agreement, the Parties agree that this Tribunal has a mandate to consider the claims under the present arbitration agreement. The claim under the Trade Secrets Act must, however, be rejected, since, as the Tribunal has found, there has been no unauthorised use of trade secrets.

[Claimant]'s continuing obligations

180. [Respondent] seeks a declaration that [Claimant] is obliged to provide [A] through [Respondent] with continuously updated information required to operate, maintain and support the Supplies under the Agreement, as long as the equipment is in service, not less than 25 years (RPHS, 242). By contrast, [Claimant] seeks an injunction or declaration that [Claimant] has no further such obligation, that [Respondent] must not disseminate [Claimant]'s proprietary material and that [Respondent] is required to return to [Claimant] all documents in its possession, custody or control falling within Annex H, Clause A of the Agreement (CPHS, 146).

181. In paragraph 74 of this Award, the Tribunal referred to the provision for terminating the Agreement in Clause 17, and noted that neither Party had given a notice in accordance with that clause. The Tribunal also recorded the responses of the Parties to the Tribunal's enquiry as to whether it was agreed that the Agreement remained in full force and effect. In short, [Respondent] asserted that the Agreement continues in effect, but [Claimant] argued that its obligations under the Agreement have been relieved by [Respondent]'s breaches of the Agreement "particularly as they relate to the protection of [Claimant]'s intellectual property" (see paragraphs 72 and 73 of this Award).

182. The Tribunal has found earlier in this section of the Award that [Claimant] has not shown that [Respondent] has breached Clause 22.4 of the Agreement or that [Respondent] has infringed any copyright or trade secrets of [Claimant]. Thus, the particular reason given by [Claimant] for release of [recte: from] its obligations under the Agreement has not been established.

183. Clause 22 of the Agreement is quoted in full in paragraph 82 of this Award. In view of what is said in the preceding paragraphs of this Award, it is reasonable to conclude that the mutual obligations specified in that clause are still in effect.

184. Clause 22.1 of the Agreement requires [Claimant] to provide [A] through [Respondent] with certain information in an accurate and up to date form. The Parties disagree about whether this obligation was fulfilled by [Claimant] before [Respondent] drew down on the Performance Bond. However, this disagreement was not a central feature of the arbitration, and very little evidence was adduced by either Party in respect of it. The Parties were diverted by [Claimant]'s intellectual property claim and [Respondent]'s defective supplies claim. Further, the issue of the continued force of the Agreement after the Tribunal raised the question was not pursued by either Party.

Conclusions

185. Turning to the relief sought by each Party, the Tribunal finds no grounds on which to order an injunction as requested in the alternative by [Claimant]. The requests for declarations are not so easily decided however. As already mentioned, it appears that the mutual obligations specified in Clause 22 are still in effect. The Tribunal has a discretion to make declaratory orders, but whether and how that discretion should be exercised needs careful consideration.

186. The declaration sought by [Respondent] may have far-reaching consequences. Before granting it, the Tribunal would have preferred to hear full argument by each side on the scope and extent of the obligation in Clause 22.1 of the Agreement. That would have enabled the Tribunal to

(i) give meaning to words and phrases such as "continuously" (e.g. monthly?)

"updated information" (what and in which form?);

(ii) enquire what equipment that was still in service, required the information

so defined; and

(iii) decide whether such information was appropriate to all or only some of the equipment as that equipment aged.

The Tribunal does not consider that it received from the Parties the necessary information to address those important matters. In the circumstances, the Tribunal has decided not to grant the declaration sought by [Respondent].

187. For rather similar reasons, the Tribunal declines to make the declaration sought by [Claimant]. Further, even if [Respondent] may have been in breach of its obligations under Clause 22.4 before it made [A] aware of the limitation in May or June 2008 and [A] declared that it intended to abide by said limitations, [Respondent] is no longer in breach of the Agreement.

188. The finding that [Respondent] and [A] have acted within the scope of the licence leads to the conclusion that [Claimant] cannot base its claims on any violation of statutory provisions.

189. The Tribunal therefore rejects [Claimant]'s claim for the declaration referred to in paragraph 97(i) of the Award. As a consequence thereof, the Tribunal does not grant the other relief claimed by [Claimant] as set out in paragraphs 97 (ii) to (iv) inclusive.

190. It is not necessary for the Tribunal to consider [Claimant]'s claim to damages because it has failed to prove that [Respondent] breached the Agreement or that it suffered any loss as a result of [Respondent]'s omission prior to mid-2008. Insofar as is necessary, the claim to damages is dismissed.

G. Counterclaim

Introduction

191. This section is headed "Counterclaim" because, it is concerned principally with [Respondent]'s claim that MRGs supplied by [Claimant] were defective as described hereafter. [Respondent] claims damages in the sum of [amount] in respect of this claim (SOC, 225). However [Respondent] gives [Claimant] credit for the amount received from [bank] in respect of the performance bond issued by [Claimant], which reduces the damages claim (RX, 61) to [amount] (SDC, 225).

192. [Claimant] denies the Counterclaim and seeks to recover the amount of the bond. [Claimant]'s claim in respect of the bond is addressed in the next section of this Award H. The determination of [Respondent]'s counterclaim is relevant to the issue whether the bond was properly called, because it is also expressed as a defence to [Claimant]'s claim to recover the amount of the bond. This explains the order of the Tribunal's treatment of the two claims.

Summary of Counterclaim

193. [Respondent]'s case is based principally on the express terms of the Agreement, which [Respondent] claims entitles it to delivery of MRGs conforming to the Agreement, including the Technical Specifications (RPHS, 145).

194. In particular, [Respondent] relies on Clause 13 of the Agreement, which warrants that the MRGs will conform to the Technical Specifications and be free from defects in material and workmanship. [Respondent] also relies on Clause 2.7 of the Agreement whereby [Claimant] is responsible for the performance of its subcontractors "to the same extent as for its own works" (RPHS, 148). Those clauses are quoted in full later in this section of the Award.

195. As has already been mentioned, under the Agreement [Claimant] supplied four MRGs numbered 11 to 14 inclusive. The other MRGs numbered 1 to 10 were supplied by [D] under a separate agreement, which is not the subject matter of this arbitration. The MRGs supplied by [Claimant] and [D] were manufactured by sub-contractors, namely [F] or [G]. [Respondent] says that, although two different sub-contractors were used to manufacture the MRGs, all of the MRGs were built using the same design and assembly procedures (RPHS, 148 and 169).

196. [Respondent] says that there have been several catastrophic failures in the MRGs supplied by [Claimant] and [D]. [A] is withholding a substantial amount of money for the defects in the MRG (SDC, 159)

197. Following investigations, [expert 1] concluded in February 2009 that the most likely root cause of the defects was a misalignment of the bearings, which [Respondent] says is a design issue (SOC, 155 and 175 to 178). Since then, [F] has investigated the failure and produced a report in December 2009. After receipt of that report, [Respondent] submitted a report of [expert 1], which is referred in the Tribunal's analysis of this claim.

198. [Respondent] admits that most of the failures have occurred on MRGs supplied by [D], but it says that at least one of the gears supplied by [Claimant] (MRG 13) showed signs of excessive wear due to misalignment whilst under warranty (SDC 210 and 211). Further, there was a failure in the bearings of an aft bull gear supplied by [Claimant], which was installed on the same [ship].

199. [Respondent] denies that it was agreed that [Claimant] would have no responsibility for [D] gearboxes (Rejoinder 176). Further, until the Agreement was made in October 2002, [Respondent] says that [Claimant] was responsible for deliveries made by [B] as a result of the 1999 assignment (Rejoinder, 176). In any event, [Respondent] says that a defect that has occurred in [D] gearboxes caused by faulty design "must be considered to exist also in the [Claimant] gearboxes, which have identical design" (Rejoinder 177).

200. [Respondent] says that Clauses 13.8 and 13.9 of the Agreement do not bar a claim for damages because those clauses are "not applicable for the systematical defects at issue, as the defects constitute breaches of the Technical Specification" (Rejoinder 178 to 180 and 186). [Claimant]'s interpretation would also contravene section 36 of the [country X] Contracts Act (Rejoinder 181 to 190).

Summary of defence

201. [Claimant] says that to succeed with the Counterclaim and/or to justify drawing down of its performance bond, [Respondent] has to prove the existence of a systematical defect in [Claimant]'s gearboxes, which it has failed to do (Reply, 88). [Claimant] addresses each of the defects referred to in paragraphs 197 and 198 above (Reply, 91 to 142). [Claimant] also says that its warranties have expired (ClS, 93 and 94).

202. [Claimant] emphasises that only two pinion shaft thrust bearings have failed and both occurred on [D] gearboxes for which [Claimant] is not responsible (Reply 91 and 92 and refers to Clause 42.4 of the Agreement). [Claimant] adds that [Respondent] has failed to co-operate in the pinion gear (and other) investigations despite [Claimant]'s good faith efforts (Reply, 98 to 1 09). [Claimant] suggests that the use of the [Respondent]-designed auto-throttle system could be causing this failure (CIS, 116 and Reply, 116 and 117) by fatiguing the gears (see 1 RSC, 118).

203. [Claimant] relies in particular on the terms of Clause 13, which it says limits its responsibility and the remedy available for any breach of warranty (Clause 13.2), excludes liability for any defect attributable to any part not supplied by [Claimant] (Clause 13.7), establishes a procedure and remedy for a systematical defect (Clauses 13.8 and 13.9) and sets other conditions and limits on its liability (Clause 13.10 and 13.11).

204. [Claimant] challenges the findings of [expert 1] and the commentary of Dr ... and relies on the report of [expert 2] and evidence of [another witness] as well as on [F]'s conclusion (Reply, 115 to 130).

205. As for the alleged defect in the bull gear, [Claimant] says that only two have failed (one from [D] and one from [Claimant]), and that they failed at the same time on the same vessel under extreme operating conditions, which does not constitute a systematical defect (Reply, 133). Further, no agreement was reached on the existence of such a defect as required by Clause 13.8 of the Agreement (Reply, 132), and according to [Respondent]'s expert, [expert 1], the cause of the failure is still under investigation.

206. [Claimant] dismissed [Respondent]'s allegations in respect of the rotary seals (Reply, 137) and the FADEC (Reply 140 to 142). Moreover, [Respondent] claim in respect of FADEC is said by [Claimant] to be untimely and barred (Reply, 139).

207. [Claimant] denies [Respondent]'s claim to damages, which is said to be unsupported and speculative (Reply, 143).

Issues

208. The principal issue between the Parties in respect of [Respondent]'s counterclaim is whether [Claimant] supplied GTPMS (or more specifically MRGs) that complied with the Technical Specifications and/or met the performance requirements set out in the Agreement, including interchangeability and/or were free from defects. That issue raised several sub-issues which the Tribunal identified and to which each Party responded in writing prior to the Hearing.

Discussion (Introduction)

209. Having identified the issues, this discussion will begin with a brief account of the GTPMS and MRGs supplied by [Claimant] and [D] followed by a summary of the events that are alleged to have occurred and which give rise to [Respondent]'s counterclaim. It will proceed to refer to the express terms of the Agreement, which, [Respondent] says, has been breached by [Claimant] followed by a commentary on the evidence, including, in particular the expert evidence adduced by each Party. The analysis will end with the Tribunal's conclusion.

The supplies

210. A GTPMS consists of two gas turbines, one Main Reduction Gearbox (MRG), two Full Authority Digital Engine Controls (FADECs), one Main Reduction Gearbox Control (MRGC), and one Local Operating Panel (LOP). The MRG also has certain rotary seals. Each gas turbine is connected to the MRG. The MRG converts the speed from the gas turbines to a lower speed, which is transmitted to a water jet propulsor by a shafting system which ultimately propels the ... ship or vessel with power from the gas turbines.

211. The FADEC is a digital controller that controls and monitors the performance of the engine. There is one per turbine. The MRGC performs a similar function for the MRG. The LOP is connected to FADEC and the MRGC and is the interface among the two and the control system for the vessel.

212. The rotary seals are situated at the diesel input shaft and their purpose is to properly lubricate the diesel input shaft into the MRG.

213. As noted above, the MRG operates through a system of shafts. There are three such shafts which rotate at different speeds: the power from the gas turbines runs the quill shaft which is located inside the pinion shaft. The input speed is geared down twice and the output shaft drives the water jet propulsor. These shafts contain bearings.

214. There are two pinion shaft thrust bearings per MRG. In the MRGs, the pinion thrust shaft bearings are used for the carrying of the axial and radial loads that bear on the pinion shaft and for adjusting the gear tooth contact pattern between the pinion gear and the intermediate shaft gear.

215. The output shaft also has bearings - bull gear aft bearings, which are in operation even when the vessel is not in use.

The events

216. Beginning in 2002, a total of 14 MRGs were supplied pursuant to the Agreement and the [D] sub-contract. [D] supplied numbers 1 to 10 and [Claimant] supplied MRG numbers 11 to 14. Numbers 1 to 8 were installed as planned on the following vessels: [list of four vessels]

217. On 26 June 2006 a pinion shaft thrust bearing failure occurred in MRG 2 on the [vessel 1], and on 13 November 2007 a pinion shaft thrust bearing failure occurred in MRG 8 on [vessel 4]]. Both gears were supplied under the [D] sub­contract but one was manufactured by [G] and the other by [F] (RPHS, 164).

218. It was originally intended that MRGs 9 and 10 would be installed on another vessel, [vessel 5], but in the event one of the gears supplied by [Claimant] and numbered 13 was installed on [vessel 5] instead of MRG 9, which was supplied by [D].

219. While testing for further pinion shaft thrust bearing on [vessel 5], a failure to the bull gear bearing occurred on 8 December 2008 in each of the MRGs 10 and 13 on that vessel.

220. The remaining [D] gear (MRG 9) and three gears supplied by [Claimant] have not been installed ... but have been kept as spares. No tests have yet been made on the spares.

221. Although [Respondent] claimed that there had been numerous defects and breakdowns in the GTPMS, they advanced four serious ones for the Tribunal's consideration. Of those four the most serious related to the MRGs whose bearings were said to be misaligned. The next most serious were the two failures of the bull aft gear. The other two alleged deficiencies to the FADEC and Rotary seals were not pursued at the Hearing.

222. [Respondent] acknowledges that [Claimant] is only responsible for the gearboxes that it supplied, namely, MRGs 11 12 13 and 14 (see response to Tribunal's question about the supplies of gearboxes by [D] before October 2002), but [Respondent] says that all gearboxes for the [class of] GTPMS are required to be interchangeable, so evidence of defect in any gearbox may be probative of defect in all, depending on the nature of the defect. As the misalignment found by [expert 1] (and acknowledged by [F] but not accepted by [expert 2]) is said to be a design defect, [Respondent] says that it follows that the gearboxes supplied by [Claimant] have a systematical defect. However, although [Respondent] claimed that the warranty was breached, [Respondent] says that its claim does not depend on establishing a breach of warranty; therefore, it is not necessary to prove that the defect is systematical.

223. Each Party submitted statements of witnesses of fact and expert reports in support of their respective cases as specified below. Submissions were also made on [country X] law.

224. [Respondent] submitted the expert reports of [expert 1] (misalignment) and Prof ... (autopilot). Their reports are referred to later in this section of the Award.

225. [Respondent] also relies on the witness statements of ...

226. [Claimant] submitted an expert opinion of [expert 2] and also relies on the witness statements of ...

227. At the Hearing, each of those witnesses were questioned by the Parties' representatives and the Tribunal.

Express terms

228. Following this introduction, it is appropriate to turn to the relevant provisions of the Agreement. Those that bear on the Counterclaim are set forth below:

Clause 2.7

The Sub-Contractor shall be liable and responsible for the work if its Sub­subcontractors to the same extent as for its own works.

Clause 13 - Warranty

The Contractor and Sub-Contractor agree that the warranty period shall apply to the GTPMS (5 and 6) delivered under this Sub-contract. The warranty for all other supplies shall be as described in the Sub-Contract Clause 13.4. ...

Clause 13.1

The Sub-Contractor warrants that the Supplies delivered hereunder, at time of delivery, conforms to the Technical Specification, with amendments, agreed to in writing, and are free from defects in material and workmanship. These warranties shall run to the Contractor, its successors, assigns and customers.

Clause 13.2

The responsibility of Sub-Contractor hereunder, and the sole and exclusive remedy of Contractor, its successors, assigns and customers for a breach of any warranty hereunder, is limited to correction or replacement by Sub-Contractor at its plant of any worldwide service facility identified by Sub-Contractor, without charge of any product or part that is not in accordance with this warranty and is returned to Sub-Contractor at such facility, provided, however,

(i) Sub-Contractor must be notified in writing of the defect or non-conformity within sixty (60) days after the date first discovered and the product or part so returned within sixty (60) days of that notification; and

(ii) Sub-Contractor shall not be responsible for costs of removal and reinstallation.

Clause 13.3

Sub-Contractor shall have the right to determine whether returned products or parts shall be corrected or replaced.

Clause 13.4

Except as otherwise agreed, Sub-Contractor's responsibility under these warranties shall commence with the Estimated SAT Dates and shall continue for a maximum warranty period of fourteen (14) months, or twenty four (24) months after the delivery date of the Supplies to the Contractor or after 1.000 operative hours for the engine and 23.000 hours for the MRG, whichever is earlier. Any Supplies or parts thereof repaired or replaced under these warranties shall also be subject to the provisions of this Clause 13 to the same extent as Supplies originally delivered, but only for the unexpired portion of the original time period remaining in effect after such repair or replacement. However, the warranty period shall be extended for the period of repair when the GTPMS is out of service due to the fault analysis but in no case shall the warranty period be extended beyond an additional twelve (12) months.

Clause 13.7

The warranties will not apply if the Supplies or any parts thereof have been subjected to:

(i) Any maintenance, overhaul, installation, storage, operation, use, handling or environment which is improper or not in accordance with Sub­Contractor's instructions; or

(ii) Any alteration, modification or repair by anyone other than Sub­Contractor; or

(iii) Any accident, misuse, neglect or negligence after delivery by Sub­

Contractor; or

(iv) Any foreign object damage (FOD). Normal wear and tear and the need for periodic overhaul and maintenance shall not constitute a failure or malfunction under these warranties. The warranty shall not apply to any supplies to the extent that the defect or non-conformity is attributable to any part not supplied by the Sub-Contractor.

Clause 13.8

If during the warranty period, a systematical defect is discovered, the Parties mutually agree to resolve the problem for which neither party may necessarily be responsible for [sic] assuming that, in fact, the Sub-Contractor has complied with the Technical Specification. The parties will jointly and mutually decide if the systematical defect exists, could reasonably be expected to result in a failure if uncorrected, and would preclude safe operations and procedures. The parties will mutually and jointly agree that the remedy is technically and economically feasible and practicable.

Clause 13.9

In the event a mutual and joint decision is reached that a systematical defect does exist, the Sub-Contractor will replace and/or repair the Supplies at no charge or expense to the Contractor. The Contractor will make every reasonable effort to provide the Sub-Contractor with access to the Supplies requiring repair or remedial action.

Clause 13.10

Sub-Contractor's obligations under these warranties are conditioned on Contractor's obligation to maintain records which will accurately reflect operating time and maintenance performed on the Supplies and establish the nature of any unsatisfactory condition of the Supplies. Sub-Contractor, at its request, shall be given access to such records for substantiating warranty claims.

Clause 13.11

All other warranties, whether expressed or implied, are hereby excluded and disclaimed to the extent they exceed the warranties granted herein. In no event shall Sub-Contractor be liable for consequential or incidental damages.

Clause 42.4

This Sub-Contract together with the [D] Sub-Contract constitutes an amendment and restatement of the Prior Sub-Contract, and the Prior Sub-Contract shall be of no further force and effect. Sub-Contractor shall not have any liability under or in connection with the [D] Sub-Contract, nor shall Sub-Contractor have any liability under the Prior Sub-Contract for any failure of performance by [D].

Commentary

229. As already mentioned, [Respondent]'s claim relating to a failure in the FADEX and in the rotary seal have not been pursued. Thus, [Respondent]'s Post-Hearing Memorial, which was submitted on 15 April 2011, focuses only on the pinion shaft bearings and the bull gear aft bull bearings. Accordingly, [Respondent] now bases its Counterclaim on (i) certain failures of the pinion shaft thrust bearing, and (ii) certain failures of the bull gear aft bearings. Each one is considered in turn.

Pinion thrust bearings

230. In support of its case regarding the failure [of] the pinion shaft thrust bearings, [Respondent] points to incidents on 26 June 2006 on MRG No. 2 on [vessel 1] and on 13 November 2007 on MRG No. 8 on [vessel 4].

231. After the second failure occurred, the parties initiated an investigation. The investigation initially focused on a sprayed white metal used on the bearings. From February 2008 to around September 2008, the investigation focused on the white metal bonding issue. Ultimately, however, [F] and [expert 1] determined that the white metal bonding was not a cause of the failures.

232. Following this, testing was performed on [vessel 5], which had one [Claimant] MRG, in December 2008. The [vessel 5] testing revealed that all of the pinion shaft thrust bearings functioned acceptably.

233. Following the [vessel 5] testing, [Respondent], [F], [D] and [Claimant] agreed to conduct additional testing on [vessel 2], which also revealed that the pinion bearings were functioning in an acceptable manner.

234. As already mentioned, [expert 1] was retained by [Respondent] to form a view on the main root causes or causes of the failures of the high-speed pinion thrust bearings.

235. ln his second more comprehensive report, [expert 1] began by noting that the failed bearings were too badly damaged by heat, which melted part of them, to provide any useful diagnosis. Thus, an analysis was made of the bearings that had not severely failed but according to [expert 1] had shown signs of overheating. The bearings in question were from MRG No. 1 ([vessel 1] starboard) and gearbox MRG No. 2 ([vessel 1] port). Based on his analysis of those bearings, [expert 1] concluded that they showed clear signs of misalignment and it was likely that the failed bearings failed primarily as a result of misalignment. Misalignment means that the bearing assembly and the shaft are not exactly lined up, but that the shaft is tilted slightly relative to the bearing. The result is that some of the pads in the pinion thrust shaft bearing carry a disproportionate load relative to others with the effect of overheating, uneven wear, deformation and metal fatigue. While [expert 1] acknowledged that some misalignment is inevitable, he concluded that the misalignment displayed in the bearings he examined was outside of the acceptable range and that this was a major contributor to the failure that had occurred on [vessel 1] and [vessel 4].

236. [Expert 1] further opined that the matters affecting bearing misalignment are all essentially design-related issues, which are the same for all of the gearboxes, whether supplied by [D] or [Claimant].

237. [Claimant] relied on [expert 2]'s report and the report by [F] with respect to the pinion thrust bearings.

238. [Expert 2], who had been employed by [G], offered a different view to [expert 1] regarding the failure of the pinion shaft thrust bearings. According to [expert 2], the main cause of the failure was the result of [Respondent]'s use of an auto­throttle system.

239. [Claimant]'s contractual obligation was to provide GTPMSs to [Respondent] in accordance with the agreed upon Technical Specifications. The parties negotiated and approved detailed Technical Specifications and it is undisputed that [Respondent] did not identify the auto-throttle system in the Technical Specifications. [Expert 1] accepted that if he were designing a gearbox he would want to know that an auto-pilot system would be in use and the specific torque and speed effects it imposed on the gearboxes.

240. [Respondent] supplied and installed "auto-throttle" or "speed control" equipment on the ... vessels. [Respondent]'s auto-throttle system, Iike manual throttle operation, makes power demands on the GTPMS units. When engaged, the auto-throttle regulates vessel speed by monitoring actual speed and then signaling for increased or decreased engine power.

241. The auto-throttle can cause rapid changes in engine speed. Changes in power demands by the auto-throttle are quickly transferred into changes in engine speed through the gearbox. [Expert 2] opined that the auto-throttle caused cyclical speed variations dramatically different from those in the Technical Specifications and caused the power turbine shaft speed, and consequently power levels affecting the thrust bearing, to change significantly in short periods of time. The effect of the rapid changes in power, [expert 2] opined, is to cause torque spikes which in turn cause high angle fatigue. In [expert 2]'s view, the auto-throttle was a contributing cause.

242. As mentioned above, shortly after the second failure of a pinion thrust bearing, the Parties conducted tests on [vessel 5], which revealed that all the pinion shaft thrust bearings functioned within acceptable limits, and a further test on the pinion bearings on [vessel 2] revealed no visible damage and concluded that the gearboxes performed within appropriate levels. [Respondent] had installed temperature sensors on the vessels as a further safety measure, whose readings were available in these tests.

243. In addition, [F] performed an extensive gearbox analysis which found "no fundamental operational or manufacturing errors".

Aft bull bearings

244. [Respondent] main evidence regarding the failure of the bull aft gear bearings rests on an incident in December 2008 during an inspection of MRGs No. 10 and 13 as part of the sea trial of [vessel 5]. The aft bull bearing failed when the [vessel 5] engine was accelerated to full load without any warm-up period.

245. The Technical Specifications contemplated the possibility of such acceleration. However, [a witness] testified that [a representative] of [Respondent] had stated at the time of the failure, that it would be inappropriate to take an engine from no load to full load in one rapid throttle movement, and that he had instructed the crew not to perform that operation.

246. It is undisputed that MRG 13, an ARG delivered by [Claimant], was under the warranty set forth in Clause 13.1 until at least 11 May 2009 - prior to the failure of the aft bull bearing in that MRG in December 2008.

247. This warranty limits [Claimant]'s obligation to failures in ''material or workmanship" and provided in Clause 13.2 and 13.2 that [Respondent]'s sole and exclusive remedy was the repair or replacement of the units at [Claimant]'s option.

Discussion

248. Certain issues regarding the Counterclaim are not seriously disputed.

249. First, although the GTPMSs in question were not manufactured by [Claimant], but by subcontractors, [F] and [G], it is not seriously disputed that this fact alone does not relieve [Claimant] from liability to [Respondent] since, under Clause 2.7 of the Agreement, [Claimant] is "liable and responsible for the work of its Sub­subcontractors to the same extent as for its own works".

250. Second, even if there were defects in GTPMSs supplied by [D], it is not seriously disputed that, under Clause 42.4 of the Agreement, [Claimant] is not responsible for "any failure of performance by [D]". While [Respondent] supports its case against [Claimant] by submitting evidence concerning GTPMSs supplied by [D] it is not seeking to hold [Claimant] liable for the performance of [D] but is relying of defects in the [D]-supplied GTPMSs as evidence of defects in the GTPMSs supplied by [Claimant] on the theory that all the GTPMSs shared the same design.

251. Having carefully considered the expert testimony, and other evidence adduced in this arbitration, the Tribunal finds the following facts relevant to that determination:

- No [Claimant] pinion bearings have ever failed at any time.

- The test results on the [Claimant] gearbox on [vessel 5] do not demonstrate any defect in the pinion bearings.

- The pinion shaft thrust bearing design incorporates a thrust mechanism which permits the shaft to be adjusted to improve gear contact pattern and/or thrust face adjustment.

- Certain [D] gearboxes were adjusted by [Respondent] [for misalignment] and have functioned within acceptable limits following performance.

- Only two bull aft [bearings] gears have failed and both failed under very specific conditions - going from no power to full throttle operation.

- The relevant warranty expired in May 2009.

252. The Tribunal turns to consider whether [Respondent] has met its burden of establishing that [Claimant] breached the warranty contained in Clause 13 of the Agreement. That requires [Respondent] to prove on the balance of probabilities that before the warranty period expired, the MRG 13 supplied by [Claimant] was defective or failed to confirm to the Technical Specifications.

253. [Respondent] asserts that Clauses 13.1 and 13.8 contain overlapping obligations on the part of [Claimant]; it argues that, in principle, a defect could exist in the GTPMSs that could result in a breach of section 13.1 and a breach of section 13.8. [Claimant] takes a different position. In its view, section 13.1 and section 13.8 are mutually exclusive and were designed to address situations [sic]. Section 13.1, [Claimant] asserts, is designed to provide a warranty to the effect that "at the time of delivery" (i) "conform to the Technical Specifications" and (ii) "are free from defects in material and workmanship." Section 13.8, [Claimant] claims, is designed to address design effects - and places some constraints on its liability for design defects.

254. It is not necessary for the Tribunal to decide this issue of construction. Even if the Tribunal were to accept [Respondent] assertion, it would not avail [Respondent]. On the basis of the findings made in paragraph 165 above, [Respondent] fails to discharge its burden of proof. In particular, [Respondent] has failed to establish:

(i) Why the adjustments made to the gears resolved any problem of misalignment that may have existed in the pinion bearings of the MRG 13; and

(ii) That in the absence of a completed investigation, the bull aft bearings are defective or fail to conform to the Technical Specifications.

Conclusion

255. As [Respondent] has failed to establish a breach of Contract by [Claimant], the Counterclaim must fail and the Tribunal declines to grant the relief claimed by [Respondent] in respect of that counterclaim.

H. The Performance Bond

Introduction

256. [Claimant] issued a performance bond covering its obligations pursuant to Clause 7 of the Agreement in the amount ... One-half of this amount applied to GTPMS 5 and the other half to GTPMS 6. According to [Claimant], the performance bond was to be reduced proportionately 30 days after the warranty expired on each individual GTPMS unit. lt is common ground that apart from the MRG 13, which was supplied with GTPM 5 and was installed on [vessel 5], the other three gears supplied by [Claimant] have been retained by [A] as spares and have not been tested for defects. The Counterclaim made in respect of the MRG 13 is addressed by the Tribunal in the previous section of this Award.

Summary of claim

257. [Claimant] says that because the performance bond secures its obligations under the Agreement, the bond cannot be drawn down unless [Claimant] has breached the Agreement and refused to remedy any breach (CIS, 96). [Claimant] goes on to say that its warranty obligation on GTPMS 6 expired on 11 September 2007, so that the performance bond should have been reduced to [amount] one month later (CIS, 99).

258. According to [Claimant], the bond should have expired in full on 11 June 2009 following the expiry of the warranty in respect of GTPMS 5, but as a gesture of good faith, [Claimant] agreed to extend the warranty to 30 September 2009 in view of an investigation into [D] gearboxes (CIS, 112). Nevertheless, on 28 April 2009, [Respondent] claimed payment in full from [the bank] (CX, 31).

259. [Claimant] says that at the time [Respondent] claimed payment under the bond, [Claimant] was co-operating to determine if a systematized defect had occurred pursuant to Clause 13.8 (CIS, 123). In the event of a systematical defect, the Parties were obliged to jointly and mutually agree upon a remedy that was technically and economically feasible and practical. The Parties did not reach any agreement that a defect existed, much less an agreement on any necessary or appropriate remedy (CIS, 137).

260. [Respondent]'s claim of a systematical defect was premature. When [Respondent] drew down on the performance bond, an investigation (in which [Respondent] was participating) was ongoing, and the draw down was wrongful (CIS, 143).

261. Since that time, [Respondent] has failed to demonstrate that a systematical defect exists, and [Claimant] claims an award for [amount] plus interest from 29 April 2009 (CIS, 158)

Summary of defence

262. [Respondent] agrees that it drew down the full amount of the bond, which was issued in the agreed form and payable on first demand (SDC, 226-227) and was given for [Claimant]'s performance of the Agreement as a whole (SDC, 229). [Respondent] says that it properly made a demand for payment to [the bank] which apparently considered the requirement for payment to have been fulfilled and paid the full amount to [Respondent] (SDC, 228).

263. As already mentioned, [Respondent] counterclaimed for an amount in excess of the total of the bonds and [Respondent] set off that counterclaim against [Claimant]'s claim (SDC, 225).

Issues

264. The principal issue between the Parties in respect of the Performance Bond dispute is whether [Respondent] should repay with interest the sum received from [the bank]. That issue raised several sub-issues, which the Tribunal identified and to which each Party responded in writing prior to the Hearing. Having done so, the Tribunal proceeds to discuss what remains to be decided.

Discussion

265. In his first witness statement, [a witness] provides the facts leading up to the calling of the bond (paragraphs 76 to 83) and exhibits as CX 31 [Respondent]'s letter to [the bank] dated 28 April 2009. In her first witness statement, [another witness] justifies the calling of the bond (paragraphs 29 to 31), and in her second statement she comments on one aspect of [the former witness]'s statement (paragraphs 20 and 21). The draw down and receipt by [Respondent] in the amount claimed is not denied, and credit for the full sum is given in the Counterclaim.

266. As the Counterclaim failed, there is no basis for [Respondent] withholding the amount received from [the bank]. Further [Respondent] can offer no justification why it would have made a claim under the bond in the first place or retained the sum paid from the drawn down to the resent date.

267. Accordingly, in addition to repaying the principal amount received, [Respondent] should also pay interest. It is common ground between the parties that the appropriate rate of interest is that specified in Section 6 of the [country X] Interest Act ... [Claimant]'s claim to interest is based on that rate (CPHS, 318 and Exhibit 2). [Respondent] has not contested that interest should run from 29 April 2009.

268. Exhibit 2 to [Claimant]'s post-hearing submission provided a detailed calculation of the interest at the agreed rate from 29 April 2009 to 15 April 2011, which totals [amount]. [Claimant] also calculated the per diem rate, which would apply thereafter, namely [amount]. Having reviewed those calculations, the Tribunal has decided to award interest as claimed.

Conclusion

269. The principal sum claimed, namely ... is recoverable by [Claimant] from [Respondent] plus interest amounting to ... calculated from the date of receipt by [Respondent] to 15 April 2011. Thereafter, interest is payable at the same rate until payment, viz [amount] per day.

I. Costs

270. Under Article 31 of the ICC Arbitration Rules, the Tribunal has the authority to decide which of the Parties should bear costs or in what proportion the costs should be borne by them. Here, each Party seeks an award in its favour for the costs of this arbitration, including attorneys' fees. The Tribunal's questions and the responses of the Parties are reproduced below.

271. [Claimant] claims the recovery of payments made to the ICC towards the Advance on costs amounting to ... together with legal fees amounting to ... and expenses totalling ... (Exhibit l to CPHS). [Respondent] also claims costs totalling ... as specified in appendix B to its post-hearing memorial, on which [Claimant] expressed certain reservations.

272. Prior to the Hearing, the Tribunal asked the Parties:

(i) How should the costs of the arbitration be borne? and

(ii) Should either Party contribute to the legal costs of the other?

273. [Claimant] responded simply that all costs fees and expenses should be charged to [Respondent], and repeated this request in its post-hearing submission (paragraph 319).

274. [Respondent] pointed out that the Agreement does not address the issue of arbitral costs, but went on to say that the ICC Rules vest discretion in the Tribunal to award. In its post-hearing memorial, Appendix B, [Respondent] developed that response and referred to practice as well as New York law and [country X] law in support of its claim that [Claimant] should pay its legal and other costs of the arbitration.

275. [Respondent] also made a specific claim to [amount], being 50% of the costs (labour and out-of-pocket disbursements) for the preparation of the Agreed Bundle of Documents. A breakdown of that claim was provided.

Discussion

276. The ICC Rules of Arbitration distinguish between costs of the arbitration (i.e. the fees and expenses of the arbitrators and the administrative charges of the ICC) and the legal costs of the parties (i.e. the attorney fees, costs and expenses incurred by each party) in the conduct of the arbitration. The Tribunal has considered both types of costs, because both are claimed by the Parties.

277. It should be mentioned that there is nothing in the Federal Arbitration Act of the USA relevant to costs to be awarded in international arbitrations. The law, which applies in New York, is that if, as here, the rules under which the proceedings are being conducted authorize the Tribunal to award fees, then the Tribunal may do so.

278. In this case. [Claimant]'s principal claim has failed and [Respondent]'s counterclaim has failed. However, [Claimant] has succeeded with its claim to recover from [Respondent] the monies drawn down from the Performance Bond. To that limited extent, [Claimant] is a successful party, and the Tribunal is satisfied from how the proceedings have been conducted that unless this arbitration had been pursued [Claimant] would not have received those monies. In the opinion of the Tribunal, that justifies an award to [Claimant] of the costs of the arbitration, which the ICC Court of Arbitration has fixed at [amount].

279. However the legal costs and expenses incurred by [Claimant] in connection with the Performance Bond claim have to be weighed against those incurred to pursue its unsuccessful Intellectual Property claim. That is apparent from the submissions of [Claimant] and the evidence adduced. As [Respondent] correctly observed, the ICC Rules of Arbitration (Article 31) gives the Tribunal a discretion in respect of costs. In the exercise of that discretion, the Tribunal has decided that each Party should bear its own attorneys' fees, costs and expenses. Accordingly, it is not necessary for the Tribunal to assess them.

Conclusion

280. For the reasons stated, the Tribunal decides that [Respondent] must pay the costs of the arbitration fixed by the ICC Court of Arbitration and reimburse [Claimant] for the advances made by [Claimant] to those costs. However, each Party must bear its own attorneys' fees costs and expenses.

J. Disposition

281. For the reasons stated, the Tribunal awards and orders that:

(i) [Respondent] pay to [Claimant] the sum of ... being the principal amount received by [Respondent] from [the bank].

(ii) [Respondent] also pay to [Claimant] the sum of ... being interest on the principal sum referred to in (i) above from the date on which [Respondent] received that sum to 15 April 2011 and pay thereafter the sum of ... per day from 16 April 2011 until payment; and

(iii) [Respondent] bear the sum of ... being the costs of the arbitration and reimburse [Claimant] for the sum of ... advanced towards those costs.

282. All other claims are dismissed.'

---